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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Goodwin Plc | LSE:GDWN | London | Ordinary Share | GB0003781050 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -40.00 | -0.57% | 7,020.00 | 6,940.00 | 7,020.00 | 7,080.00 | 6,920.00 | 6,920.00 | 2,851 | 16:35:28 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Engineering Services | 185.74M | 15.9M | 2.1178 | 32.86 | 522.67M |
From May 2019 to May 2024
TIDMGDWN
RNS Number : 8454V
Goodwin PLC
26 July 2018
PRELIMINARY ANNOUNCMENT
Goodwin PLC today announces its preliminary results for the year ended 30th April 2018.
CHAIRMAN'S STATEMENT
We are pleased to report a 44% increase in pre-tax profits to GBP13.30 million (2017: GBP9.24 million) on revenues of GBP125 million (2017: GBP132 million). The Directors propose an increased dividend of 83.473p (2017: 42.348p) for the reasons outlined under the heading 'Changes to Dividend Policy' in the text below.
The Refractory Division's trading profits have risen from GBP4.2 million at April 2016 to GBP7.5 million at April 2018, excluding its sale of land in India which realised an additional GBP1.6 million of pre-tax profit. The success of our Indian operations has meant that for some time we have been operating out of much larger, bespoke built, freehold premises and during the year the right opportunity arose for us to dispose of our redundant original freehold investment in the country. Without the land sale, the Group pre-tax profits have risen 26% year on year and with the land sale included there has been a 44% increase in the reported Group pre-tax profits. Again excluding the land sale, the Refractory Division's growth in pre-tax profits over the past two years equates to a compound growth rate of 34% per annum and has been most welcome at a time when capital expenditure in the oil and gas industry has been so constricted. The ten refractory engineering companies of which seven are overseas in India, China, Thailand and Brazil have the benefit of seeing much higher in-country GDP growth each year than is experienced in Europe and the USA.
Our Refractory Engineering Division increased its contribution to Group performance by achieving an average increase in turnover last financial year of 12% and an increase in trading profitability of 27%. This was assisted by the demise of our historic jewellery investment casting moulding powder competitor Kerr who had been the global leader in the period 1960 to 2000 but last year ceased trading jewellery investment casting powders. Whilst the diversification of the Group makes it harder to manage, it does permit the Group to avoid massive performance troughs such as could have been caused by the oil and gas industry decline over the past three and a half years.
In the Mechanical Engineering Division we are pleased to report that our three largest engineering companies - Goodwin International Ltd., Noreva GmbH and Goodwin Steel Castings Ltd. - through their focussed efforts over the past four years are now being rewarded with substantial orders that are coming from areas other than oil and gas, which will improve the Group's profitability in this new financial year.
When the oil and gas industry starts re-investing and the mining industry does likewise especially in copper production due to the need for the installation of electric car charging points worldwide, we would expect the profit generation of the Mechanical Engineering Division and the Refractory Division to remain around 50%/50% over the next two years with growth in profitability in both divisions.
A further point of interest is that for the first time ever the pre tax profits from our overseas companies (excluding the land sale) equalled those from our UK companies. Going forward as the oil and gas markets recover, we would expect this to move towards 60% of profits arising from our UK trading companies and 40% coming from our overseas companies.
It would be inappropriate not to make mention of how very difficult the last two financial years have been for the foundry, Goodwin Steel Castings. Indeed for all foundries worldwide other than those addressing the automotive industry and the aerospace industry, it has been a very challenging three years. Many foundries worldwide have either closed or merged in this period.
At Goodwin we have taken the opportunity over the past eighteen months to reposition the foundry such that we can address more efficiently very large high integrity castings for nuclear fuel reprocessing and for military boat building programmes in the USA, the UK and other overseas countries.
This investment in larger and more sophisticated plant combined with the design and manufacture of high performance materials during this very quiet period simply would not have been possible if the foundry had been as busy as it had been for the prior profitable twenty years.
As an indication that this decision to invest in the foundry was justified, we are pleased to announce that in June 2018, Goodwin Steel Castings won a contract for castings to be cast over the next four years for the US Navy at a value of $19.5 million. We expect this contract to be the first of many going forward for the specialized steel that is required and that Goodwin over a four year period obtained US Navy approval to manufacture last financial year.
Easat Radar Systems similarly had a very difficult year last financial year with project delays associated with contract changes to the scope of work, but again Easat has won a major programme for sixteen primary radar antennas for civilian airports. There is also another significant military programme that will likely be won in the next twelve months.
The Company's business metabolism is divided between growth, maintenance and investment in innovation.
Growth this year, compared to last, is 44% on profit, gross profit margin from 25.6% to 28.6%, return on capital employed from 8.4% to 12.3%, cash generation as net cash flow from operating activities from GBP5.285 million to GBP31.099 million and order input to individual companies from GBP138 million to GBP150 million.
Maintenance can be described as a decrease in gearing from 31% to 11%, intangible fixed assets increased from GBP18.2 million to GBP21.1 million, fixed assets additions per year up from GBP7.6 million to GBP9.4 million, net debt down from GBP28 million to GBP11million, return on investment up from 6.8% to 8.5%.
Our investment in innovation can be described in terms of people, products and markets. Sales per employee increased from GBP114,000 to GBP120,000 and we have a high percentage of employees (45%) in the 22 to 40 age range reflecting more apprentices having graduated and continuing to do so. We have travelled to 26 countries to obtain new business mostly outside of Europe. Much effort has been put into gaining new approvals for products, the manufacturing of which has started thanks to the past years' research and development and capital investment. Investor valuation of these new products will in time be determined by the financial results but assessing the potential market size and competitiveness combined with their intellectual property rights and the employee skill base shown on our websites gives a current view of the potential. US Energy Information Administration has forecast world energy demand will increase from 2015 to 2040 by 28%. Our axial valve and radar developments, our high integrity alloy castings for defence and civil nuclear together with refractories to tackle lithium battery fires remain works in progress that are part of our investment for the future.
The capital expenditure within the oil and gas industry in the financial year just completed has remained low as the major oil and gas companies have been rebuilding their balance sheets with the price of oil now between US$70 and US$80 per barrel. With energy consumption rising at 2.3 % per year and the oil surpluses having virtually disappeared, it is now possible that the activity in the oil, gas and LNG markets will start increasing in early 2019 rather than 2020 as we had earlier thought. We are well placed to take advantage of any increase in demand from these markets.
In our last year's Annual Report Statement and at the interim half year report, mention was made of substantial effort being made to improve the cash flow. We are pleased to say that as at the 30th April 2018, the Group cash flow has improved by GBP17 million over the past twelve months and this is after paying the dividend, corporation tax and some GBP9 million of capital investment.
Whilst all companies have focused on improving their cash flow, one must remember that the pre-tax profit reported of GBP13.30 million is after having deducted non cash charges of GBP6.4 million for depreciation/amortisation adjustments. The Group gearing as at the 30th April 2018 was just 11%. It is for this reason and with our vision for the future that the Board feels confident that the alteration of the dividend policy is safe and viable now and going forward.
We would like to take the opportunity of thanking all our employees, managers and Directors both in the UK and overseas for working so hard to achieve these improved trading results which it is likely will improve again in the new financial year, especially so as the order intake as we write is 16% increased as compared to the same time last year.
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26th July, 2018 J.W. Goodwin
Chairman
Alternative performance measures mentioned above are defined in note 6.
OBJECTIVES, STRATEGY AND BUSINESS MODEL
The Group's main OBJECTIVE is to have a sustainable long-term engineering based business with good potential for profitable growth while providing a fair return to our shareholders.
The Board's STRATEGY to achieve this is:
-- to supply a range of technically advanced products to growth markets in the mechanical engineering and refractory engineering segments in which we have built up a global reputation for engineering excellence, quality, efficiency, reliability, price and delivery;
-- to manufacture advanced technical products profitably, efficiently and economically;
-- to maintain an ongoing programme of investment in plant, facilities, sales and marketing, research and development with a view to increasing efficiency, reducing costs, increasing performance, delivering better products for our customers, expanding our global customer base and keeping us at the forefront of technology within our markets, whilst at all times taking appropriate steps to ensure the health and safety of our employees and customers;
-- to control our working capital and investment programme to ensure a safe level of gearing;
-- to maintain a strong capital base to retain investor, customer, creditor and market confidence and so help sustain future development of the business;
-- to support a local presence and a local workforce in order to stay close to our customers; -- to invest in training and development of skills for the Group's future.
BUSINESS MODEL
The Group's focus is on manufacturing within two sectors, mechanical engineering and refractory engineering, and through this division of our manufacturing activities, the Group benefits from market diversity. Further details of our business and products are shown on our website www.goodwin.co.uk/2018
Mechanical Engineering
The Group designs, manufactures and sells a wide range of dual plate valves, axial nozzle check valves and axial piston control and isolation valves to serve the oil, petrochemical, gas, LNG and water markets. We generate value by creating leading edge technology designs, globally sourcing the best quality raw material at good prices, manufacturing in highly efficient facilities using up to date technology to provide very reliable products to the required specification, at competitive prices and with timely deliveries.
Our mechanical engineering markets also include high alloy castings, machining and general engineering products which typically form part of large construction projects such as power generation plants, oil refineries, high integrity offshore structural components and bridges. The Group through its foundry, Goodwin Steel Castings, has the capability to pour high performance alloy castings up to 35 tonnes, radiograph and also finish CNC machine and fabricate them at the foundry's sister company, Goodwin International. This capability is targeting the defence industry and nuclear fuel processing as well as the oil and gas industry.
Goodwin International, the largest company in the mechanical engineering division, designs and manufactures dual plate, axial nozzle valves and axial piston valves and also undertakes specialised CNC machining and fabrication work. Goodwin International also has a division that is focussed on manufacturing / machining high precision, high integrity components that are utilised in nuclear propulsion systems and nuclear fuel reprocessing and handling systems. Noreva GmbH also designs, manufactures and sells axial nozzle valves. Both Goodwin International and Noreva purchase the majority of the value of their sand mould castings from Goodwin Steel Castings and this vertical integration gives rise to competitive benefits, increased efficiencies and timely deliveries.
At Goodwin Pumps India we manufacture a superior range of submersible slurry pumps for end users in India, China, Brazil, Australia and Africa. Easat Radar Systems designs and builds bespoke high-performance radar antenna systems for the global market of major defence contractors, civil aviation authorities and border security agencies. We create value on these by innovative design, assembly and testing in our own facilities using bought in or engineered in-house components.
Refractory Engineering
Within the refractory engineering division, Goodwin Refractory Services (GRS) primarily generates gross margin from designing, manufacturing and selling investment casting powders and waxes to the jewellery casting industry. GRS also manufactures and sells investment casting powders to the tyre mould and aerospace industries. The refractory division has eight other investment powder manufacturing companies located in China, India, Thailand and Brazil which sell the casting powders directly and through distributors to the jewellery casting industry.
These companies are vertically integrated with another of our UK companies, Hoben International, which manufactures cristobalite which it sells to the nine casting powder manufacturing companies as well as producing ground silica that also goes into casting powders. Hoben International now also manufactures different grades of perlite.
The other UK refractory company is Dupré Minerals which focuses on producing exfoliated vermiculite that is used in insulation, brake linings and fire protection products, including technical textiles that can withstand exposure to high temperatures and for lithium battery fire extinguishers. Dupré also sells consumable refractories to the shell moulding casting industry.
Changes to Dividend Policy
The Directors have been analysing the current and historic business performance and whilst over the prior three years to the financial year that has just been completed there had been a fall off in Group profitability associated with the vast contraction in capital expenditure in the oil, gas and mining markets we consider this is only temporary.
Twenty five years ago in 1992, the majority of Group sales were associated with products made under licence for which our manufacturing companies paid licence fees to our licensors and our sales territory was limited to Europe in the main by our licensors. By the mid 1990s Goodwin had designed and developed our own range of products that were technically and commercially competitive, many of which we patented and that our Group companies could sell world wide, especially to the developing markets where annual growth rates of GDP were very much higher than Europe.
In the 1980s and early 1990s much of our trading profit was repatriated to our licensors as licence fees. Since the mid 1990s the Group has not manufactured and sold products under licence. Now with a global sales activity, we have in comparison to former years saved significant amounts of cash and increased profits as we no longer pay these manufacturing licence fees. Also since the mid 1990s the Group spent considerable money in developing our global sales network, especially in the Pacific Basin, and also started undertaking large engineering projects.
The transformation described above applies to Goodwin International, Goodwin Steel Castings, Goodwin Refractory Services and Noreva GmbH, all of whom have a number of patents. Easat Radar Systems has also benefitted from the process.
Today the Group primarily manufactures its own products that it sells direct to market in 96 different countries.
In the early 1980s following Goodwin having extracted itself from profitably making radial tyre building machinery when there was a permanent drop in consumption of tyres per car associated with the radial tyre that lasted twice as long as the cross ply tyre, Goodwin started making pumps and valves under licences from two USA companies. Between the early 1980s to the mid 1990s when Goodwin made pumps and valves under USA licences Goodwin struggled to make significant profits due to the licence fees paid on the then new products - pumps and valves which we manufactured and sold into competitive markets.
For the past twenty years the Group has made significant profits that grew at the rate of about 20% per year compound (except in the three years prior to the financial year just completed due to the recent oil and gas industry contraction). The majority of these profits made in this 20 year period, more than 75% after paying tax, had been reinvested into designing and developing new products and expanding our global markets for our mechanical and refractory engineering companies. Money was also spent on buying high efficiency and technologically advanced manufacturing plant and machinery, training our people, setting up overseas sales organisations and companies and/or in buying complementary or competitive companies.
For our major product ranges whether it be dual plate check valves, nozzle valves, axial piston valves, radar antenna systems, high integrity alloy castings, investment casting powders, vermiculite products, cristobalite, our product offerings are now in the top three in the world and most are number one.
It is for this reason and having re-invested over GBP130 million pounds of our post-tax profits in the subsidiary companies and on acquisitions over the past twenty years, the company is in a more robust state.
The Board has now concluded that it is appropriate to modify the dividend policy going forward until further notice. Historically averaging it over the past twenty years, the dividend, as a percentage of post-tax profits plus depreciation and amortisation, has been 20%, it is now planned to increase this figure to 38% starting for the year just completed subject to shareholders voting in favour of this at the AGM on 3rd October 2018.
Conversely our investment into designing and developing new products for our mechanical and refractory engineering companies, buying high efficiency and technologically advanced manufacturing plant and machinery, setting up overseas sales organisations and companies and/or in buying complementary or competitive companies which has cost on average 70% of post-tax profits plus depreciation and amortisation over the past twenty years, we plan to limit this activity to a maximum on a three year rolling annual average of 55% of post-tax profits plus depreciation and amortisation.
CONSOLIDATED INCOME STATEMENT
for the year ended 30th April, 2018
2018 2017
GBP'000 GBP'000
CONTINUING OPERATIONS
Revenue 124,811 131,587
Cost of sales (89,143) (97,836)
GROSS PROFIT 35,668 33,751
Distribution expenses (3,359) (3,486)
Administrative expenses (18,729) (20,317)
OPERATING PROFIT 13,580 9,948
Financial expenses (590) (873)
Share of profit of associate companies 310 169
PROFIT BEFORE TAXATION 13,300 9,244
Tax on profit (3,865) (2,487)
PROFIT AFTER TAXATION 9,435 6,757
ATTRIBUTABLE TO:
Equity holders of the parent 8,504 6,082
Non-controlling interests 931 675
PROFIT FOR THE YEAR 9,435 6,757
BASIC AND DILUTED EARNINGS PER ORDINARY
SHARE 118.11p 84.47p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30th April, 2018
2018 2017
GBP'000 GBP'000
PROFIT FOR THE YEAR 9,435 6,757
OTHER COMPREHENSIVE INCOME / (EXPENSE)
ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY
TO THE INCOME STATEMENT:
Foreign exchange translation differences (152) 3,619
Effective portion of changes in fair value
of cash flow hedges (294) (6,526)
Change in fair value of cash flow hedges transferred
to the
income statement 5,108 2,142
Tax charge on items that may be reclassified
subsequently to the
income statement (818) 738
OTHER COMPREHENSIVE INCOME /(EXPENSE) FOR THE
YEAR, NET OF INCOME TAX 3,844 (27)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 13,279 6,730
ATTRIBUTABLE TO:
Equity holders of the parent 12,245 5,654
Non-controlling interests 1,034 1,076
13,279 6,730
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30th April, 2018
Total
attributable
Cash to equity
flow Share-based holders
Share Translation hedge payments Retained of the Non-controlling Total
capital reserve reserve reserve earnings parent interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
YEARED 30TH
APRIL, 2018
Balance at 1st
May, 2017 720 2,154 (4,240) 601 90,201 89,436 4,225 93,661
Total
comprehensive
income:
Profit - - - - 8,504 8,504 931 9,435
Other
comprehensive
income:
Foreign
exchange
translation
differences - (275) - - - (275) 123 (152)
Net movements
on cash flow
hedges - - 4,016 - - 4,016 (20) 3,996
TOTAL
COMPREHENSIVE
INCOME FOR THE
YEAR - (275) 4,016 - 8,504 12,245 1,034 13,279
Equity-settled
share-based
payment
transactions - - - 1,024 - 1,024 - 1,024
Dividends paid - - - - (3,137) (3,137) - (3,137)
BALANCE AT 30TH
APRIL, 2018 720 1,879 (224) 1,625 95,568 99,568 5,259 104,827
YEARED 30TH
APRIL, 2017
Balance at 1st
May, 2016 720 (1,041) (594) - 87,209 86,294 3,823 90,117
Total
comprehensive
income:
Profit - - - - 6,082 6,082 675 6,757
Other
comprehensive
income:
Foreign
exchange
translation
differences - 3,218 - - - 3,218 401 3,619
Net movements
on cash flow
hedges - - (3,646) - - (3,646) - (3,646)
TOTAL
COMPREHENSIVE
INCOME FOR THE
YEAR - 3,218 (3,646) - 6,082 5,654 1,076 6,730
Transactions
with owners of
the Company
recognised
directly in
equity - (23) - 21 (2) 1 (1)
Equity-settled
share-based
payment
transactions - - - 601 - 601 - 601
Dividends paid - - - - (3,111) (3,111) (675) (3,786)
BALANCE AT 30TH
APRIL, 2017 720 2,154 (4,240) 601 90,201 89,436 4,225 93,661
CONSOLIDATED BALANCE SHEET
at 30th April, 2018
2018 2017
GBP'000 GBP'000
NON-CURRENT ASSETS
Property, plant and equipment 69,154 65,739
Investment in associates 1,963 2,045
Intangible assets 21,138 18,240
Trade and other receivables 728 -
92,983 86,024
CURRENT ASSETS
Inventories 28,850 37,657
Trade and other receivables 27,960 26,338
Derivative financial assets 364 1,756
Cash and cash equivalents 7,485 5,172
64,659 70,923
TOTAL ASSETS 157,642 156,947
CURRENT LIABILITIES
Interest-bearing loans and borrowings 12,468 9,542
Trade and other payables 26,891 22,454
Deferred consideration 500 500
Derivative financial liabilities 1,535 2,492
Liabilities for current tax 1,174 1,592
Warranty provision 184 90
42,752 36,670
NON-CURRENT LIABILITIES
Interest-bearing loans and borrowings 5,775 23,675
Warranty provision 329 305
Deferred tax liabilities 3,959 2,636
10,063 26,616
TOTAL LIABILITIES 52,815 63,286
NET ASSETS 104,827 93,661
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF
THE PARENT
Share capital 720 720
Translation reserve 1,879 2,154
Share-based payments reserve 1,625 601
Cash flow hedge reserve (224) (4,240)
Retained earnings 95,568 90,201
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS
OF THE PARENT 99,568 89,436
NON-CONTROLLING INTERESTS 5,259 4,225
TOTAL EQUITY 104,827 93,661
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30th April, 2018
2018 2018 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000
CASH FLOW FROM OPERATING ACTIVTIES
Profit from continuing operations
after tax 9,435 6,757
Adjustments for:
Depreciation 5,243 5,597
Amortisation of intangible assets 1,138 938
Financial expenses 590 873
Foreign exchange losses / (gains) 277 (696)
(Profit) / loss on sale of property,
plant and equipment (1,568) 52
Share of profit of associate companies (310) (169)
Equity-settled share-based provisions 1,024 601
Tax expense 3,865 2,487
OPERATING PROFIT BEFORE CHANGES
IN WORKING CAPITAL AND PROVISIONS 19,694 16,440
(Increase) / decrease in trade
and other receivables (2,625) 8,721
Decrease / (increase) in inventories 8,801 (1,014)
Increase / (decrease) in trade
and other payables (excluding payments
on account) 2,213 (5,086)
Decrease / (increase) in cash flow
hedge balances 5,249 (4,359)
Increase / (decrease) in payments
on account 2,224 (5,825)
CASH GENERATED FROM OPERATIONS 35,556 8,877
Interest paid (665) (802)
Corporation tax paid (3,703) (2,675)
Interest element of finance lease
obligations (89) (115)
NET CASH FROM OPERATING ACTIVITIES 31,099 5,285
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of property,
plant and equipment 1,888 237
Acquisition of intangible assets (378) (149)
Acquisition of property, plant
and equipment (9,010) (7,411)
Development expenditure capitalised (3,334) (791)
Dividends received from associate
companies 441 -
NET CASH OUTFLOW FROM INVESTING
ACTIVITIES (10,393) (8,114)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of capital element of finance
lease obligations (865) (930)
Dividends paid (3,137) (3,111)
Dividends paid to non-controlling
interests - (675)
Proceeds from loans and committed
facilities - 5,871
Repayment of loans and committed
facilities (12,044) (44)
NET CASH (OUTFLOW) / INFLOW FROM
FINANCING ACTIVITIES (16,046) 1,111
NET INCREASE / (DECREASE) IN CASH
AND CASH EQUIVALENTS 4,660 (1,718)
Cash and cash equivalents at beginning
of year (1,483) (413)
Effect of exchange rate fluctuations
on cash held (277) 648
CASH AND CASH EQUIVALENTS AT OF YEAR 2,900 (1,483)
PRINCIPAL RISKS AND UNCERTAINTIES
The Group's operations expose it to a variety of risks and uncertainties. These risks are no different to previous years and they are not expected to change substantially in the foreseeable future. The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The key risks are discussed below.
Market risk: The Group provides a range of products and services, and there is a risk that the demand for these products and services will vary from time to time because of competitor action or economic cycles or international trade friction or even wars. As shown in note 2 to the financial statements, the Group operates across a range of geographical regions, and its turnover is split across the UK, Europe, USA, the Pacific Basin and the rest of the world. This spread reduces risk in any one territory. Similarly, the Group operates in both mechanical engineering and refractory engineering sectors, mitigating the risk of a downturn in any one product area as was seen over the past two financial years. The potential risk of the loss of any key customer is limited as, typically, no single customer accounts for more than 10% of turnover. As described in the Business Model, the Group generates significant sales not only from the worldwide energy markets but also from nuclear propulsion systems, military ship building and the jewellery consumer market that our investment casting powder companies indirectly supply through the supply of investment casting moulding powders, waxes and silicone rubber. As we have recently seen in the oil, gas and metal/ore mining markets, these markets suffered short-term declines, but over the medium to long-term the growing worldwide demand for energy and metal especially copper will ensure these markets remain buoyant.
Technical risk: The Group develops and launches new products as part of its strategy to enhance the long-term value of the Group. Such development projects carry business risks, including reputational risk, abortive expenditure and potential customer claims which may have a material impact on the Group. The potential risk here is seen as manageable given the Group is developing products in areas in which it is knowledgeable and new products are tested prior to their release into the market.
Product failure/Contractual risk: The risks that the Group supplies products that fail or are not manufactured to specification are risks that all manufacturing companies are exposed to but we try to minimise these risks through the use of highly skilled personnel operating within robust quality control system environments, using third party accreditations where appropriate. With regard to the risk of failure in relation to new products coming on line, the additional risks here are minimised at the research and development stage, where prototype testing and the deployment of a robust closed loop product performance quality control system provides feed back to the design department for the products we manufacture and sell. The risk of not meeting safety expectations, or causing significant adverse impacts to customers or the environment, is countered by the combination of the controls mentioned within this section and the purchase of product liability insurance. The risk of product obsolescence is countered by research and development investment.
Health and safety: The Group's operations involve the typical health and safety hazards inherent in manufacturing and business operations. The Group is subject to numerous laws and regulations relating to health and safety around the world. Hazards are managed by carrying out risk assessments and introducing appropriate controls, as well as attending safety training courses.
Acquisitions: The Group's growth plan over recent years has included a number of acquisitions. There is the risk that these, or future acquisitions, fail to provide the planned value. This risk is mitigated through financial and technical due diligence during the acquisition process and the Group's inherent knowledge of the markets they operate in.
Financial risk: The principal financial risks faced by the Group are changes in market prices (interest rates, foreign exchange rates and commodity prices). Detailed information on the financial risk management objectives and policies is set out in note 20 to the financial statements to be published shortly. The Group has in place risk management policies that seek to limit the adverse effects on the financial performance of the Group by using various instruments and techniques, including credit insurance, stage payments, forward foreign exchange contracts, secured and unsecured credit lines, and interest rate swaps.
Regulatory compliance: The Group's operations are subject to a wide range of laws and regulations. Both within Goodwin PLC and its subsidiaries, the Directors and Senior Managers within the companies make best endeavours to ensure we comply with the relevant laws and regulations.
Assessment of principal risks: Changes and likely impact:
As part of the Board's risk management and control of principal risks, areas of monitoring and expert advice undertaken are reported upon by the Audit Committee in the Directors Report and Accounts to be published shortly.
FORWARD-LOOKING STATEMENTS
The Group Strategic Report contains forward-looking type statements and information based on current expectations, and assumptions and forecasts made by the Group. These expectations and assumptions are subject to various known and unknown risks, uncertainties and other factors, which could lead to substantial differences between the actual future results, financial performance and the estimates and historical results given in this report. Many of these factors are outside the Group's control. The Group accepts no liability to publicly revise or update these forward-looking statements or adjust them for future events or developments, whether as a result of new information, future events or otherwise, except to the extent legally required.
Responsibility statement of the Directors in respect of the annual financial report
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole; and
-- the Group Strategic Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.
Board of Directors:
J. W. Goodwin, Chairman
R. S. Goodwin, Managing Director
J. Connolly, Director
M. S. Goodwin, Director
S. R. Goodwin, Director
S. C. Birks, Director
B. R. E. Goodwin, Director
T. J. W. Goodwin, Director
J. E. Kelly, Non-Executive Director
Accounting policies
Goodwin PLC (the "Company") is incorporated in England and Wales.
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group") and equity account the Group's interest in associates.
The Group's financial statements have been approved by the Directors and prepared in accordance with International Financial Reporting Standards as adopted by the European Union (EU).
The Accounting Policies are included in Note 1 of the Accounts to be published shortly.
New IFRS standards and interpretations adopted during 2018
In 2018 the following amendments had been endorsed by the EU, became effective and therefore were adopted by the Group:
-- Amendments to IAS 12 - Recognition of Deferred Tax Assets for unrealised losses (effective for annual periods beginning on or after 1st January, 2017)
-- Amendments to IAS 7 - Disclosure initiative (effective for annual periods beginning on or after 1st January, 2017)
-- Annual Improvements to IFRSs - 2014-2016 Cycle - minor amendments to IFRS 12 (effective for annual periods beginning on or after 1st January, 2017)
The adoption of these standards and amendments has not had a material impact on the Group's financial statements.
The financial information previously set out does not constitute the Company's statutory accounts for the years ended 30th April, 2018 or 2017 but is derived from those accounts. Statutory accounts for 2017 have been delivered to the Registrar of Companies, and those for 2018 will be delivered in due course. The auditors have reported on those accounts; their report was:
i. unqualified;
ii. did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report; and
iii. did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.
Copies of the 2018 accounts are expected to be posted to shareholders within the next three weeks and will also be available on the Company's website: www.goodwin.co.uk and from the Company's Registered Office: Ivy House Foundry, Hanley, Stoke-on-Trent ST1 3NR.
Note 1
Segmental Information
Products and services from which reportable segments derive their revenues
For the purposes of management reporting to the chief operating decision maker, the Board of Directors, the Group is organised into two reportable operating divisions: mechanical engineering and refractory engineering. Segment assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis. In accordance with the requirements of IFRS 8 the Group's reportable segments, based on information reported to the Group's Board of Directors for the purposes of resource allocation and assessment of segment performance are as follows:
o Mechanical Engineering - casting, valve, antenna and pump manufacture and general engineering
o Refractory Engineering - powder manufacture and mineral processing
Information regarding the Group's operating segments is reported below. Associates are included in Refractory Engineering.
Revenue
Revenue from goods and services was GBP116,812,000 and revenue from construction contracts was GBP7,999,000.
Mechanical Refractory
Engineering Engineering Sub Total
Year ended 30th April 2018 2017 2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External sales 80,661 91,335 44,150 40,252 124,811 131,587
Inter-segment sales 18,839 29,084 8,354 6,522 27,193 35,606
Total revenue 99,500 120,419 52,504 46,774 152,004 167,193
Reconciliation to consolidated
revenue:
Inter-segment sales (27,193) (35,606)
Consolidated revenue
for the year
y
yyyearyear 124,811 131,587
year
Mechanical Refractory
Engineering Engineering Sub Total
Year ended 30th April 2018 2017 2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Profits
Operating profit including
share of associates 8,282 6,982 9,130 5,933 17,412 12,915
% of total operating
profit including share
of associates 48% 54% 52% 46% 100% 100%
Group centre (2,498) (2,197)
LTIP - non cash provision (1,024) (601)
Group finance expenses (590) (873)
Consolidated profit
before tax for the
year 13,300 9,244
Tax (3,865) (2,487)
Consolidated profit after tax for
the year 9,435 6,757
Segmental total Segmental total Segmental net
assets liabilities assets
Year ended 30th April 2018 2017 2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental net assets
Mechanical Engineering 79,835 80,968 50,113 65,036 29,722 15,932
Refractory Engineering 39,534 41,717 19,905 23,321 19,629 18,396
Sub total reportable
segment 119,369 122,685 70,018 88,357 49,351 34,328
Goodwin PLC net assets 66,715 71,944
Elimination of Goodwin PLC
investments (20,950) (22,084)
Goodwill 9,711 9,473
Consolidated total net assets 104,827 93,661
Segmental property, plant and equipment (PPE) capital expenditure
2018 2017
GBP'000 GBP'000
Goodwin PLC 6,880 5,070
Mechanical Engineering 2,176 1,611
Refractory Engineering 360 918
9,416 7,599
Segmental depreciation, amortisation and impairment
2018 2017
GBP'000 GBP'000
Goodwin PLC 2,144 2,258
Mechanical Engineering 2,629 2,607
Refractory Engineering 1,608 1,670
6,381 6,535
For the purposes of monitoring segment performance and allocating resources between segments, the Group's Board of Directors monitors the tangible and financial assets attributable to each segment. All assets and liabilities are allocated to reportable segments with the exception of those held by the parent Company, Goodwin PLC, and those held as consolidation adjustments.
Geographical segments
The Group operates in the following principal locations.
In presenting the information on geographical segments, revenue is based on the location of its customers and assets on the location of the assets.
Year ended 30th April, 2018 Year ended 30 April, 2017
PPE PPE
Operational Non-current Capital Operational Non-current Capital
Revenue net assets assets expenditure Revenue net assets assets expenditure
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK 27,829 70,558 76,325 8,301 24,034 63,451 69,693 6,504
Rest of
Europe 31,246 12,477 3,281 772 29,712 10,213 2,271 466
USA 3,742 - - - 6,574 - - -
Pacific
Basin 23,052 14,785 8,003 154 33,095 14,012 7,459 210
Rest of
World 38,942 7,007 5,374 189 38,172 5,985 6,601 419
Total 124,811 104,827 92,983 9,416 131,587 93,661 86,024 7,599
Note 2
Intangible Assets
During the year, the Group added to its portfolio of intangible assets. The main additions are GBP142,000 on the development of a new fire extinguisher project in Dupre Minerals, GBP270,000 on refractory development projects in Goodwin Refractory Services, GBP489,000 on the development of a new valve range by Goodwin International and GBP2,318,000 on the development of radar equipment within Easat Radar Systems and NRPL Aero.
Note 3
Dividends
The directors propose the payment of an ordinary dividend of 83.473p per share (2017: ordinary dividend of 42.348p). If approved by shareholders, the ordinary dividend will be paid on 5th October, 2018 to shareholders on the register at the close of business on 7th September, 2018.
Note 4
Earnings per share
The earnings per ordinary share has been calculated on profit for the year attributable to ordinary shareholders of GBP8,504,000 (2017: GBP6,082,000) and by reference to the 7,200,000 ordinary shares in issue throughout both years.
There is a share option scheme in place for the Directors of the Company under the Company's Long Term Investment Plan (LTIP), based on the Company exceeding a target growth in the total shareholder return of the Company over the period from 1st May, 2016 to 30th April, 2019. Under the LTIP, as at 30th April, 2018, there would be no share options accruing to the Directors under the LTIP and so there is no difference between the basic and fully diluted earnings per share of the Company in the current and prior year.
Note 5
Annual General Meeting
The Annual General Meeting will be held at 10.30 a.m. on 3rd October, 2018 at Crewe Hall, Weston Road, Crewe, Cheshire CW1 6UZ.
Note 6
Alternative Performance Measures
Measure 2018 2017
Operating profit (GBP'000) 13,580 9,948
Capital employed (GBP'000) 110,826 117,981
Return on capital employed (%) 12.3 8.4
Net debt (GBP'000) 11,258 28,545
Deferred consideration 500 500
Net debt excluding deferred consideration
(GBP'000) 10,758 28,045
Net assets attributable to equity
holders of the parent(GBP'000 99,568 89,436
Gearing (%) 10.8 31.4
Net profit attributable to equity
holders of the parent (GBP'000) 8,504 6,082
Net assets attributable to equity
holders of the parent(GBP'000) 99,568 89,436
Return on investment (%) 8.5 6.8
Revenue (GBP'000) 124,811 131,587
Average number of employees 1,042 1,154
Sales per employee (GBP'000) 120 114
Refractory division - operating
profit including share of associates
(GBP'000) 9,130 5,933
Profit on sale of land (1,606) -
Refractory division trading profit
(GBP'000) 7,524 5,933
Annual post tax profit (GBP'000) 9,435 6,757
Depreciation (GBP'000) 5,243 5,597
Amortisation (GBP'000) 1,138 938
Annual post tax profit before depreciation
and amortisation (GBP'000) 15,816 13,292
END
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