TIDMGDWN
RNS Number : 9852V
Goodwin PLC
13 August 2020
PRELIMINARY ANNOUNCEMENT
Goodwin PLC today announces its preliminary results for the year
ended 30th April 2020.
CHAIRMAN'S STATEMENT
The pre-tax profit for the Group for the twelve month period
ending 30th April 2020, was GBP12.1 million (2019: GBP16.4
million), a decrease of 26% on a revenue of GBP145 million (2019:
GBP127 million) which is 14% up on the figures reported for the
same period last financial year. The Directors propose a reduced
dividend of 81.71p (2019: 96.21p). As with the majority of
companies around the world, Covid-19 has stalled our progress in
the last quarter of the financial year, and we have seen a slower
start to the new financial year than we would have expected without
the pandemic. Despite this and the disruption due to trade
frictions between the USA and China, the underlying progression of
the business remains robust and resilient.
At the time of writing, the Group's current workload stands at
GBP183 million which is 11% ahead of last year's Group record
figure of GBP165 million (2019: GBP165 million, 2018: GBP82
million, 2017: GBP76 million). Whilst the current workload figure
contains the first element of the supply agreement announced to the
Stock Exchange on 22nd June 2020, this supply agreement for the
manufacture and machining of storage boxes to assist with nuclear
waste clean-up accounts for less than 2% of the GBP183 million and
excludes the amount of orders that are expected to be placed in the
future once the mobilisation phase is complete. Armed with this
workload, the Group retains a high degree of confidence in the
future versus the looming uncertainty for many businesses this
coming year.
Within the Mechanical Engineering Division, margins continue to
be squeezed on our petrochemical work and this is likely to persist
during the current financial year given the low oil price. In order
to counteract this I am able to give the assurance that our
diligently fostered and growing workload contains substantial
amounts of non-petrochemical work commanding respectable margins in
areas such as national defence capability and projects of national
importance. The critical nature of this ongoing work was
highlighted by 'key worker' notices being issued to certain of the
Group's operations immediately upon the onset of the pandemic.
Whilst these projects are in their infancy, they will start to ramp
up over the next 6 to 12 months.
Goodwin Steel Castings has had another difficult year. This is
largely attributable to the performance of two contracts where we
are currently in dispute with our customers. Any favourable
resolution will be booked in the current financial year once
resolved. Going forward the casting of nuclear waste containment
boxes in relation to Goodwin International's supply agreement will
provide a significant base load for our foundry. However, with
projects of this nature they take time to get mobilised, so in this
current financial year it is unlikely this contract alone will be
transformational, but it will be beneficial in future years. This
with their other work for shipbuilding components in specialist
alloys for the USA, that only a few alloy steel foundries in the
world are qualified to produce, along with specialist nuclear power
generation application castings means that our foundry has
transitioned away from what used to be business reliant on the
petrochemical industries. The business key market re-alignment is
still transitional, but the Directors can see that with the markets
it is addressing and the projects it is working on that there is a
long term, bright and profitable future for Goodwin Steel
Castings.
Similarly Easat Radar Systems is now focusing on complete radar
system supply contracts, with a product suite and offering that is
competitive internationally. Two complete systems will be sent to
Thailand during this year, and there is a requirement for
significant airport infrastructure in developing countries over the
coming years, which our competitive product offering is tailored to
meet. Over the past twelve months, Easat completed a substantial
amount of business, such that it reduced its unacceptable working
capital investment by some GBP4 million which has helped with the
Group cash flow.
The Refractory Engineering Division achieved operating profits
of GBP7 million in the year, (2019: GBP8 million), representing 47%
of the Group's operating profit despite its customers' consumer
products being affected most by Covid-19 in the last quarter.
Moving forward, although the construction and industrial customers'
activity is returning, uncertainty remains with regard to the
medium term outlook especially for our customers' luxury products,
for which they use our investment powders, waxes and silicone
rubbers.
During the financial year, the Group successfully acquired the
globally recognised Castaldo silicone rubber and wax division,
including the trade name and associated trademarks. For the past 75
years Castaldo has been at the centre of the worldwide jewellery
casting industry and this acquisition will further increase the
Group's global market share within the moulding rubber and
injection wax business by aligning higher value complementary sales
activities with the existing business activities. By utilising the
distribution network and global presence within our Refractory
Engineering Division it is forecast that significant revenue growth
can be achieved over and above the Castaldo division sales levels
seen pre-acquisition. The manufacturing of the product lines is
being relocated to Thailand which will also increase the gross
margin of the acquired product lines.
Post year end the Group has also seized the opportunity to
purchase a 2.5 acre manufacturing site and mineral processing
assets for GBP770,000 that is complementary to our existing
minerals processing business that is running at near full capacity.
The purchase was concluded within seven days, and the Directors
believe that the site was acquired at substantially less than its
true market value. In addition, we believe that within a few months
we will be able to start to generate profits by utilising the
assets acquired.
Across both Divisions, our intangibles have grown in recent
years due to multiple product development activities and
acquisitions. A number of these major activities will be completed
and taken to market within the current financial year leaving us
with products that can be sold for many years to come; many of
these new products are covered by international patent protection.
This is not to say that there will be no new product development
programmes as activities here have just been scaled back, focusing
as always on areas that we anticipate may yield good future
prospects.
In line with the Group's strategy the Board has worked hard to
control its working capital and ensure a safe level of gearing.
This is transparently seen at an operational level delivering
strong cash generation in the year of GBP22.5 million, up GBP7.6
million from the previous year. As a result of a reduced level of
investment in the year, I am pleased to report the Group's net debt
stands at a modest GBP19 million, equating to a gearing percentage
of 18% versus 20% last year.
Following a productive ten year relationship with Lloyds Bank
PLC, and with our five year facility set to mature in December
2020, we put the facilities out for competitive tender. On a
like-for-like basis in terms of available facility and once all
costs in relation to the facility had been evaluated Lloyds were no
longer as competitive in relation to other offers we received. I
can confirm that the Board has now signed a new facility agreement
with Santander UK plc for the same quantum but on improved terms,
including a higher proportion that will be committed for a five
year period. In addition, a GBP10 million revolving credit facility
(RCF) set to expire in October 2020 is also in the final stages of
being renegotiated ultimately providing the Group with long term
facilities totalling over GBP50 million, in addition to the GBP30
million secured as an additional committed credit line through the
Bank of England Covid Corporate Financing Facility (CCFF), which
was taken out as an insurance policy should any possible extreme
Covid-19 event occur and is repayable in April 2021.
Auditor rotation is now mandated by regulation meaning that the
year ended 30th April, 2020 will be KPMG's last year performing the
Group audit having worked with us for the prior 56 years (Peat,
Marwick, Mitchell & Co. in the earlier years). The Board would
like to express its gratitude for the work performed over this
period. Following a competitive tender process, the Audit Committee
and the Board propose that RSM UK Group LLP be appointed as the new
Group auditor, commencing responsibility for auditing the Group for
the financial year beginning 1st May 2020.
Despite my optimism, at the time of writing, it is necessary
that we remain acutely aware of the external environment with
Covid-19, as until an effective vaccination programme is rolled
out, the likelihood of more flare-ups and lockdowns across the
globe seems inevitable. However, with the Group's underpinnings, in
terms of its order book, its cash flow and excellent workforce,
from a business point of view Covid-19 will likely be nothing more
than a bump in the road of the Group's progression when we look
back at it in a few years' time.
Since the start of the pandemic our workforce has been
outstanding. The Group immediately set out a policy to protect its
employees, and they in turn have responded and looked after the
Group's interests. This has involved working in many cases even
harder in order to achieve the same outcomes due to the restrictive
and new working practices that were necessarily imposed for
everyone's wellbeing.
The Board is once again indebted to our Directors, managers and
employees around the world for their efforts in keeping the Group
operational during this difficult Covid-19 period and for their
devotion to the Group's long-term performance. Had the Group not
kept on manufacturing over the four month period between March and
the end of June, the Group's profitability and cash flow would have
deteriorated substantially. We have all been working in uncharted
territory because of this, and I am immensely proud of how every
single employee within the Group has adapted and worked within this
challenging new environment.
13th August, 2020 T.J.W. Goodwin
Chairman
Alternative performance measures mentioned above are defined in
Note 7.
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.
-- to manage the environmental and social impacts of our
business to support its long-term sustainability.
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, our overseas business
facilities and our global sales and marketing activities, the Group
benefits from market diversity. Further details of our business and
products are shown on our website www.goodwin.co.uk
Mechanical Engineering
The Group specialises in supplying industrial goods, generally
on a project basis, more often than not involving the complementary
skillset of other group companies to deliver the requirement. The
projects normally involve international procurement, high integrity
castings, forgings or wrought high alloy steels, precision CNC
machining, complex welding and fabrication, and other operations as
are required. In addition to specialist projects the group,
manufactures and sells a wide range of dual plate check valves,
axial nozzle check valves and axial piston control and isolation
valves to serve the oil, petrochemical, gas, liquefied natural gas
(LNG), mining, nuclear power generation, nuclear waste treatment
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, chemical plants, nuclear waste
treatment plants, 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
decommissioning, the oil and gas industry, as well as large, global
projects requiring high integrity machined castings.
Goodwin International, the largest company in the mechanical
engineering division, not only designs and manufactures dual plate
check valves, axial nozzle check valves and axial piston control
and isolation valves but also undertakes specialised CNC machining
and fabrication work for nuclear decommissioning projects. Goodwin
International also has a division that is focussed on manufacturing
/ machining high precision, high integrity components for naval
marine vessels. Noreva GmbH also designs, manufactures and sells
axial nozzle check valves. Both Goodwin International and Noreva
purchase the majority of the value of their sand mould castings
from Goodwin Steel Castings for their ranges of check valves 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, Brazil, Australia
and Africa. Easat Radar Systems (Easat) and its subsidiary, NRPL,
design and build bespoke high-performance radar antenna systems for
the global market of major defence contractors, civil aviation
authorities and border security agencies. Easat has a sister
company, Easat Radar Systems India, that also manufactures, sells
and maintains radar systems for air traffic control. 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 value 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 Engineering Division has five other
investment powder manufacturing companies located in China, India
and Thailand which sell the casting powders directly and through
distributors to the jewellery casting industry and also directly to
tyre mould and aerospace industries.
These companies are vertically integrated with another of our UK
companies, Hoben International, which manufactures cristobalite,
which it sells to the six casting powder manufacturing companies as
well as producing ground silica that also goes into casting powders
and other UK uses of silica such as wind turbine blade manufacture.
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 precision casting industry.
Dupre has designed, patented and is now selling a range of fire
extinguishers and an extinguishing agent for lithium battery fires
that utilises a vermiculite dispersion as the fire extinguishing
agent.
GOODWIN PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
for the year ended 30th April, 2020
2020 2019
GBP'000 GBP'000
CONTINUING OPERATIONS
Revenue 144,512 127,046
Cost of sales (109,743) (86,414)
GROSS PROFIT 34,769 40,632
Other income 690 -
Distribution expenses (2,792) (3,016)
Administrative expenses (19,809) (21,205)
OPERATING PROFIT 12,858 16,411
Financial expenses (809) (234)
Share of profit of associate companies 66 233
PROFIT BEFORE TAXATION 12,115 16,410
Tax on profit (3,775) (3,963)
PROFIT AFTER TAXATION 8,340 12,447
ATTRIBUTABLE TO:
Equity holders of the parent 7,866 11,505
Non-controlling interests 474 942
PROFIT FOR THE YEAR 8,340 12,447
BASIC EARNINGS PER ORDINARY SHARE 107.93p 159.79p
DILUTED EARNINGS PER ORDINARY SHARE 103.31p 149.65p
GOODWIN PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30th April, 2020
2020 2019
GBP'000 GBP'000
PROFIT FOR THE YEAR 8,340 12,447
OTHER COMPREHENSIVE EXPENSE
ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO
PROFIT OR LOSS:
Foreign exchange translation differences (1,007) (383)
Goodwill arising from purchase of non-controlling
interest in subsidiaries (72) (772)
Effective portion of changes in fair value of
cash flow hedges (355) (644)
Change in fair value of cash flow hedges transferred
to profit or loss 522 180
Effective portion of changes in fair value of
cost of hedging (843) (489)
Change in fair value of cost of hedging transferred
to profit or loss 395 49
Tax credit on items that may be reclassified subsequently
to profit or loss 77 154
OTHER COMPREHENSIVE EXPENSE FOR THE YEAR, NET
OF INCOME TAX (1,283) (1,905)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 7,057 10,542
ATTRIBUTABLE TO:
Equity holders of the parent 6,587 9,528
Non-controlling interests 470 1,014
7,057 10,542
GOODWIN PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30th April, 2020
Total
attributable
Cash to equity
Share-based flow Cost holders
Share Translation payments hedge of hedging Retained of the Non-controlling Total
capital reserve reserve reserve reserve earnings parent interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
YEARED
30TH APRIL,
2020
Balance at
1st May, 2019 720 1,044 4,991 (573) (426) 99,409 105,165 4,126 109,291
Total
comprehensive
income:
Profit - - - - - 7,866 7,866 474 8,340
Other
comprehensive
income:
Foreign exchange
translation
differences - (964) - - - - (964) (43) (1,007)
Goodwill arising
from purchase
of NCI interest
in subsidiaries - - - - - (72) (72) - (72)
Net movements
on cash flow
hedges - - - 74 (317) - (243) 39 (204)
TOTAL
COMPREHENSIVE
INCOME FOR
THE YEAR - (964) - 74 (317) 7,794 6,587 470 7,057
Issue of shares 16 - - - - - 16 - 16
Tax on
equity-settled
share-based
payment
transactions - - 253 - - - 253 - 253
Dividends paid - - - - - (6,927) (6,927) - (6,927)
Acquisition
of NCI without
a change in
control - - - - - - - (11) (11)
Disposal of
subsidiary - (77) - - - - (77) - (77)
Reclassification 358 - - - (358) - - -
BALANCE AT
30TH APRIL,
2020 736 361 5,244 (499) (743) 99,918 105,017 4,585 109,602
GOODWIN PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
for the year ended 30th April, 2020
Total
attributable
Cash to equity
Share-based flow Cost holders
Share Translation payments hedge of hedging Retained of the Non-controlling Total
capital reserve reserve reserve reserve earnings parent interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
YEARED
30TH APRIL,
2019
Balance at
1st May, 2018 720 1,879 1,625 (224) - 95,568 99,568 5,259 104,827
Adjustment
on initial
application
of IFRS 9 (net
of tax) - - - 52 (52) - - - -
Adjustment
on initial
application
of IFRS 15
(net of tax) (684) (684) (350) (1,034)
ADJUSTED
BALANCE
AT 1ST MAY,
2018 720 1,879 1,625 (172) (52) 94,884 98,884 4,909 103,793
Total
comprehensive
income:
Profit - - - - - 11,505 11,505 942 12,447
Other
comprehensive
income:
Foreign
exchange
translation
differences - (430) - - - - (430) 47 (383)
Goodwill
arising
from purchase
of NCI
interest
in
subsidiaries - (180) - - - (592) (772) - (772)
Net movements
on cash flow
hedges - - - (401) (374) - (775) 25 (750)
TOTAL
COMPREHENSIVE
INCOME FOR
THE YEAR - (610) - (401) (374) 10,913 9,528 1,014 10,542
Equity-settled
share-based
payment
transactions - - 1,220 - - - 1,220 - 1,220
Tax on
equity-settled
share-based
payment
transactions - - 2,146 - - - 2,146 - 2,146
Dividends paid - - - - - (6,126) (6,126) (451) (6,577)
Acquisition
of NCI without
a change in
control - - - - - - - (1,750) (1,750)
Disposal of
equity
investments - (225) - - - - (225) - (225)
Acquisition
of subsidiary
with NCI - - - - - - 142 142
Capital
contribution - - - - - (262) (262) 262 -
BALANCE AT
30TH APRIL,
2019 720 1,044 4,991 (573) (426) 99,409 105,165 4,126 109,291
GOODWIN PLC
CONSOLIDATED BALANCE SHEET
at 30th April, 2020
2020 2019
GBP'000 GBP'000
NON-CURRENT ASSETS
Property, plant and equipment 69,626 74,106
Right-of-use assets 5,343 -
Investment in associates 816 739
Intangible assets 24,695 22,354
Derivative financial assets 749 -
Other financial assets at amortised cost 252 505
101,481 97,704
CURRENT ASSETS
Inventories 44,887 50,524
Contract assets 6,558 3,698
Trade receivables and other financial assets 24,486 24,964
Other receivables 4,566 2,715
Derivative financial assets 456 195
Cash and cash equivalents 9,840 9,640
90,793 91,736
TOTAL ASSETS 192,274 189,440
CURRENT LIABILITIES
Bank overdrafts and interest-bearing loans 13,141 9,259
Lease liabilities 1,483 939
Contract liabilities 18,965 18,002
Trade payables and other financial liabilities 23,485 20,570
Other payables 3,298 4,771
Deferred consideration - 204
Derivative financial liabilities 1,071 1,693
Liabilities for current tax 1,873 2,356
Warranty provision 160 261
63,476 58,055
NON-CURRENT LIABILITIES
Interest-bearing loans 14,260 19,322
Lease liabilities 1,339 1,164
Derivative financial liabilities 202 -
Warranty provision 324 232
Deferred tax liabilities 3,071 1,376
19,196 22,094
TOTAL LIABILITIES 82,672 80,149
NET ASSETS 109,602 109,291
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Share capital 736 720
Translation reserve 361 1,044
Share-based payments reserve 5,244 4,991
Cash flow hedge reserve (499) (573)
Cost of hedging reserve (743) (426)
Retained earnings 99,918 99,409
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 105,017 105,165
NON-CONTROLLING INTERESTS 4,585 4,126
TOTAL EQUITY 109,602 109,291
GOODWIN PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30th April, 2020
2020 2020 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
CASH FLOW FROM OPERATING ACTIVTIES
Profit from continuing operations
after tax 8,340 12,447
Adjustments for:
Depreciation of property, plant
and equipment 5,874 5,571
Depreciation of right of use assets 827 248
Amortisation and impairment of intangible
assets 1,328 1,312
Financial expenses 809 234
Foreign exchange losses 203 66
Loss on sale of property, plant
and equipment 52 13
Profit on disposal of subsidiary (172) -
Share of profit of associate companies (66) (233)
Equity-settled share-based provision - 1,220
Tax expense 3,775 3,963
OPERATING PROFIT BEFORE CHANGES
IN WORKING CAPITAL AND PROVISIONS 20,970 24,841
Decrease / (increase) in inventories 4,748 (11,816)
(Increase) / decrease in contract
assets (2,863) 1,361
Decrease / (increase) in trade and
other receivables (2,549) (4,288)
Increase in contract liabilities 874 3,401
Increase in trade and other payables 2,310 1,965
Increase in unhedged derivative
balances (980) (579)
CASH GENERATED FROM OPERATIONS 22,510 14,885
Interest paid (747) (524)
Interest element of finance lease
obligations (41) (64)
Interest element of operating lease
obligations (56) -
Corporation tax paid (2,493) (3,093)
NET CASH FROM OPERATING ACTIVITIES 19,173 11,204
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of property,
plant and equipment 139 142
Acquisition of property, plant and
equipment (6,062) (11,451)
Additional investment in existing
subsidiaries (83) (2,668)
Acquisition of controlling interest
in associates net of cash acquired - (425)
Acquisition of intangible assets (1,855) (315)
Development expenditure capitalised (1,105) (1,500)
Dividends received from associate
companies - 1,254
NET CASH OUTFLOW FROM INVESTING
ACTIVITIES (8,966) (14,963)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of capital element of finance
lease liabilities (954) (911)
Payment of capital element of operating
lease liabilities (509) -
Issue of shares 16 -
Proceeds from new finance leases 102 424
Dividends paid (6,927) (6,126)
Dividends paid to non-controlling
interests - (451)
Net proceeds from loans and committed
facilities 7,556 8,337
NET CASH (OUTFLOW) / INFLOW FROM
FINANCING ACTIVITIES (716) 1,273
NET INCREASE / (DECREASE) IN CASH
AND CASH EQUIVALENTS 9,491 (2,486)
Cash and cash equivalents at beginning
of year 493 2,900
Effect of exchange rate fluctuations
on cash held (535) 79
CASH AND CASH EQUIVALENTS AT OF YEAR 9,449 493
PRINCIPAL RISKS AND UNCERTAINTIES
The Group's operations expose it to a variety of risks and
uncertainties. 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. And whilst the risk of a health
crisis and black swan events are not new risks, Covid-19 has been
identified as a new principal risk to the Group, as discussed
below.
Covid-19 risk: The Covid-19 pandemic has already had an
unprecedented bearing on businesses and economic activity across
the world. The Group very early on (1st March, 2020), in advance of
any UK government guidelines coming out, developed a policy of
paying any employee or one whose household member exhibiting
Covid-19 symptoms to isolate at home for 14 days and at the same
time set up all manufacturing and office working activities such
that 2 metre social distancing was maintained. Hand sanitisers and
warning labels were positioned by all opening doors and many had,
where possible, self-disinfecting handles fitted. Daily reporting
by location was introduced with any persons, who came into contact
with a symptomatic person, being mandated to take two weeks paid
isolation. Amongst our UK work force of 775 people we had 7
confirmed cases of Covid-19 two of whom were hospitalised but both
have recovered and are now back at work.
In the UK all factories have continuously run since the 6th
January, 2020 and, as has been seen, dispatch and revenue levels
increased for the year ending 30th April, 2020. Three overseas
factories in China and India were subject to mandatory lockdown for
6 to 8 weeks, but these factories are all now back up and
running.
The enduring principal risk of Covid-19 is that consumption of
jewellery in the retail shops has been very much affected world-
wide with our sales volumes of our investment jewellery casting
powders being down in all parts of the world. With retail shops and
airports now starting to reopen there is evidence that the drop in
luxury goods being purchased from our customers is starting to
recover, but it is difficult to predict the 12 month effect to 30th
April, 2021.
The workload in our Mechanical Engineering companies is good and
we expect them to remain busy through to the end of April 2021, as
mentioned in the Chairman's Statement, much of this work is for
naval vessels, and for nuclear waste reprocessing along with
delivering four radar systems and large valves for the potable
water industry.
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 1 to the financial statements to be
published shortly, 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 three 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 naval marine applications, military ship building,
vermiculite and perlite to the insulating and fire prevention
industry and the jewellery consumer market that our investment
casting powder companies indirectly supply through the supply of
investment casting moulding powders, waxes, silicone rubber and air
traffic control systems.
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.
Supply chain and equipment risk: Failure of a major supplier or
essential item of equipment presents a constant risk of disruption
to the manufacturing in progress. Where reasonably possible,
management mitigates and controls the risk with the use of dual
sourcing, continual maintenance programmes, and by carrying
adequate levels of stocks and spares to reduce any disruption.
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 28 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.
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 on pages 25 to 27.
The Board's assessment of the impact of Brexit on the Group
Brexit is not seen as a significant issue to the Group. We
envisage minimal overall effect in the long-term within our trading
companies, as the majority of our trade has little direct
interaction within Europe. A significant proportion of our reported
revenue to Europe, as set out within note 4 to the financial
statements to be published shortly, relates to bespoke capital
contracts that typically are installed into projects not within the
EU, despite the customer being resident in the EU. Our UK imports
are not required on a just in time basis nor are they reliant on EU
suppliers. Raw materials are primarily sourced from vendors outside
of the EU due to cost-effectiveness, with EU suppliers being a dual
source for the supply of critical items.
The Brexit related sensitivity or scenario testing has not
indicated that there are any impairment, viability or going concern
issues.
Furthermore, the Group remains focused on and has a growing
proportion of its workload consisting of the supply of niche
UK-based capabilities into long-term, strategically critical
programmes located in the UK and the US where both countries remain
committed to playing a key role in domestic and global
security.
Nonetheless, the Board continually monitors and assesses the
potential risks of Brexit, by regularly consulting on the matter
with the Group's management, suppliers, customers and reviewing and
considering the diverse opinions, written by many commentators.
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
Directors Report and Accounts
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 or loss
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 Directors' 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:
T. J. W. Goodwin, Chairman
M. S. Goodwin, Managing Director, Mechanical Engineering
Division
S. R. Goodwin, Managing Director, Refractory Engineering
Division
J. Connolly, Director
S. C. Birks, Director
B. R. E. 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 2020
In 2020 the following amendments had been endorsed by the EU,
became effective and were, therefore, mandated to be adopted by the
Group:
-- IFRS 16 - Leases (effective for annual periods beginning on or after 1st January, 2019)
-- Amendments to IFRS 9 - Prepayment Features with Negative
Compensation (effective for annual periods beginning on or after
1st January, 2019)
-- IFRIC Interpretation 23 - Uncertainty over Income Tax
Treatments (effective for annual periods beginning on or after 1st
January, 2019)
-- Amendments to IAS 28 - Long-term Interests in Associates and
Joint Ventures (effective for annual periods beginning on or after
1st January, 2019)
-- Annual Improvements to IFRSs - 2015-2017 Cycle - minor
amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23 (effective for
annual periods beginning on or after 1st January, 2019)
The adoption of IFRS 16 is discussed in Note 3 of the Accounts
to be published shortly. The implementation of all the other
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,
2012 or 2019 but is derived from those accounts. Statutory accounts
for 2019 have been delivered to the Registrar of Companies, and
those for 2020 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 2020 accounts are expected to be posted to
shareholders within the next 10 days 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:
-- Mechanical Engineering - casting, valve, antenna and pump
manufacture and general engineering
-- Refractory Engineering - powder manufacture and mineral processing
Information regarding the Group's operating segments is reported
below. Associates are included in Refractory Engineering.
Revenue
Mechanical Refractory
Engineering Engineering Sub Total
Year ended 30th April 2020 2019 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External sales 100,078 82,375 44,434 44,671 144,512 127,046
Inter-segment sales 25,821 21,714 8,361 8,726 34,182 30,440
Total revenue 125,899 104,089 52,795 53,397 178,694 157,486
Reconciliation to consolidated
revenue:
Inter-segment sales (34,182) (30,440)
Consolidated revenue
for the year 144,512 127,406
Mechanical Refractory
Engineering Engineering Sub Total
Year ended 30th April 2020 2019 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Profits
Operating profit including
share of associates 8,065 11,932 7,034 8,070 15,099 20,002
% of total operating
profit including share
of associates 53% 60% 47% 40% 100% 100%
Group centre (2,175) (2,138)
LTIP - non cash provision - (1,220)
Group finance expenses (809) (234)
Consolidated profit
before tax for the
year 12,115 16,410
Tax (3,775) (3,963)
Consolidated profit after tax for the
year 8,340 12,447
Segmental total Segmental total Segmental net
assets liabilities assets
Year ended 30th April 2020 2019 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental net assets
Mechanical Engineering 95,193 97,862 72,207 72,520 22,986 25,342
Refractory Engineering 41,962 43,950 22,850 25,541 19,112 18,409
Sub total reportable
segment 137,155 141,812 95,057 98,061 42,098 43,751
Goodwin PLC net assets 83,415 81,249
Elimination of Goodwin PLC
investments (25,801) (25,374)
Goodwill 9,890 9,665
Consolidated total net assets 109,602 109,291
Segmental property, plant and equipment (PPE) capital
expenditure
2020 2019
GBP'000 GBP'000
Goodwin PLC 2,824 3,602
Mechanical Engineering 2,511 6,461
Refractory Engineering 633 616
5,968 10,679
Segmental depreciation, amortisation and impairment
2020 2019
GBP'000 GBP'000
Goodwin PLC 3,642 2,367
Mechanical Engineering 2,466 3,175
Refractory Engineering 1,921 1,589
8,029 7,131
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, Year ended 30th April, 2019
2020
Operational Non-current PPE Capital Operational Non-current PPE 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 39,609 76,467 84,198 5,148 27,934 74,780 80,300 6,044
Rest of
Europe 20,004 8,346 3,439 173 24,205 7,035 3,605 2,300
USA 12,749 - - - 8,100 - - -
Pacific
Basin 34,844 13,513 7,132 81 28,956 14,779 6,855 84
Rest of
World 37,306 11,276 6,712 566 37,851 12,697 6,944 2,251
Total 144,512 109,602 101,481 5,968 127,046 109,291 97,704 10,679
Of the GBP20,004,000 (April 2019: GBP24,205,000) sales to the
rest of Europe, GBP5,975,000 (April 2019: GBP6,721,000), relate to
the German-domiciled subsidiary, Noreva GmbH.
The following tables provide an analysis of revenue by
geographical market and by product line.
Geographical market
Year ended 30th April, Year ended 30th April, 2019
2020
Mechanical Refractory Mechanical Refractory
Engineering Engineering Total Engineering Engineering Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK 29,187 10,422 39,609 16,877 11,057 27,934
Rest of Europe 13,088 6,916 20,004 16,282 7,923 24,205
USA 12,664 85 12,749 8,017 83 8,100
Pacific Basin 16,361 18,483 34,844 12,848 16,108 28,956
Rest of World 28,778 8,528 37,306 28,351 9,500 37,851
Total 100,078 44,434 144,512 82,375 44,671 127,046
Product lines
Year ended 30th April, Year ended 30th April, 2019
2020
Mechanical Refractory Mechanical Refractory
Engineering Engineering Total Engineering Engineering Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Standard products
and consumables 9,545 44,434 53,979 7,785 44,671 52,456
Minimum period
contracts 4,143 - 4,143 4,996 - 4,996
Bespoke products
- over time 60,963 - 60,963 34,538 - 34,538
Bespoke products
- point in time 25,427 - 25,427 35,056 - 35,056
Total 100,078 44,434 144,512 82,375 44,671 127,046
Note 2
Intangible Assets
During the year, the Group added to its portfolio of intangible
assets.
On 23rd December, 2019, Goodwin PLC successfully acquired the
globally recognised Castaldo silicone rubber and wax division,
including the intellectual property, trade name and associated
trademarks. For the past 75 years Castaldo has been at the centre
of the worldwide jewellery casting industry and the recent
acquisition will further increase the Group's global market share
within the moulding rubber and injection wax business.
Note 3
Dividends
The Directors propose the payment of an ordinary dividend of
81.71p per share (2019: ordinary dividend of 96.21p ). If approved
by shareholders, the ordinary dividend will be paid on 9th October,
2020 to shareholders on the register at the close of business on
11th September, 2020.
Note 4
Earnings per share
The calculation of the basic earnings per ordinary share is
based on the number of ordinary shares in issue. For all periods up
to and including 30th April, 2019 this amounted to 7,200,000 shares
and with effect from the 16th October 2019 this has increased to
7,363,200 shares. The weighted average number of ordinary shares in
issue during the year ended 30th April, 2020 was 7,288,289. The
relevant profits attributable to ordinary shareholders were
GBP7,866,000 ( 2019 : GBP11,505,000).
There is a share option scheme in place for the Directors of the
Company under the Company's Equity Long Term Incentive 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 scheme, a maximum of 489,600
share options vested at 1st May, 2019, of which 163,200 were
exercised during the current period. The total number of ordinary
shares used as the denominator for the diluted earnings per share
is 7,613,654 ( 2019 : 7,688,056).
Note 5
Going concern
The Directors, after having reviewed the projections and
possible challenges that may lie ahead, believe that, armed at the
time of writing with GBP74.5 million of committed facility
(including GBP30 million CCFF funds, which are repayable within one
year (see notes 28 and 31 of the financial statements to be
published shortly), there is a reasonable expectation that the
Group has adequate resources to continue in operational existence
for at least twelve months from the date of approval of these
financial statements, and have continued to adopt the going concern
basis in preparing the financial statements.
Furthermore, we are pleased to report that the Group has
recently completed the refinancing of one of its significant
facilities which was due to retire by 31st December, 2020. In terms
of total debt quantum, the refinancing has given the Group the same
funding availability but with proportionally more of the facility
moving to committed five year funding. The Group is also in the
final stages of renegotiating a GBP10 million revolving credit
facility which expires in October 2020. The Directors do not see an
issue in renewing these facilities.
The Directors have, as part of this going concern assessment,
specifically considered the impact of Covid-19 on the Group's
operations and in particular have developed a series of in-depth
financial models covering at least twelve months following the
approval of the financial statements. The models show the base case
(our reasonable expectation in light of Covid-19), with an
alternative scenario that stress tests this base case model for
severe but plausible downside outcomes. Within the base case model,
the Directors have considered the current trading conditions and
assumed similar activity levels within the Mechanical Engineering
Division as a result of its workload and assumed the Refractory
activity levels may be reduced due to it being more exposed to the
global downturn. We forecast that after 30th April 2021 activity
levels will return to those seen prior to Covid-19 and growth will
return.
Within our severe but plausible downside model, it is
demonstrable that the Group has sufficient funds to cover the
Group's and the Company's commitments during the forecast period
and is forecast to be within its financial covenants. The model
also incorporates various assumptions including the assumption of a
series of customer failures and the failure of a major supplier
within the refractory division, the inability to achieve CV-19 cost
reduction targets and the impact of further lockdowns that last
three to six months in Europe, China, India and Brazil. The failure
of a major supplier is modelled to result in three months of
business interruption. These assumptions, whilst plausible, are
considered extreme in the Board's view.
As referred to elsewhere in these financial statements, the
Mechanical Engineering Division currently has a record order book
and whilst we have down rated our expectations within this division
within in our forecasts we would emphasise that our factories
largely remained open during the height of the first phase lockdown
and we are not seeing any issues regarding the suspension of works
on these orders. Whilst the Refractory Engineering Division would
be exposed to events such as a second lockdown, as a
well-diversified Group, our severe but plausible downside model
clearly demonstrates we are well set to absorb the impact of a
protracted Covid-19 resolution.
Consequently, the Directors are confident that the Group and
Company will have sufficient funds to continue to meet their
liabilities as they fall due for at least 12 months from the date
of approval of the financial statements and therefore have prepared
the financial statements on a going concern basis.
Note 6
Annual General Meeting
The Annual General Meeting will be held at 10.30 a.m. on 7th
October, 2020 at Crewe Hall, Weston Road, Crewe, Cheshire CW1
6UZ.
Note 7
Alternative performance measures
Measure 2020 2019
Gross profit (GBP'000) 34,769 40,632
Revenue (GBP'000) 144,512 127,046
Gross profit as percentage
of revenue (%) 24.1 32.0
Operating profit (GBP'000) 12,858 16,411
Capital employed (GBP'000) 123,834 126,413
Return on capital employed
(%) 10.4 13.0
Net debt (GBP'000) 18,817 21,248
Deferred consideration (GBP'000) - 204
Net debt excluding deferred
consideration (GBP'000) 18,817 21,044
Net assets attributable
to equity holders of the
parent(GBP'000) 105,017 105,165
Gearing (%) 17.9 20.0
Net profit attributable
to equity holders of the
parent (GBP'000) 7,866 11,505
Net assets attributable
to equity holders of the
parent(GBP'000) 105,017 105,165
Return on investment (%) 7.5 10.9
Revenue (GBP'000) 144,512 127,046
Average number of employees 1,190 1,082
Sales per employee (GBP'000) 121 117
Annual post tax profit (GBP'000) 8,340 12,447
Depreciation owned assets
(GBP'000) 5,874 5,571
Depreciation finance leased
assets 290 248
Amortisation (GBP'000) 1,328 1,312
Annual post tax profit +
depreciation +
amortisation (GBP'000) 15,832 19,578
Annual pre-tax profit (GBP'000) 12,115 16,410
Impact of IFRS 16 implementation 28 -
Impact of IFRS 15 implementation - (1,682)
Like-for-like annual pre
tax profit (GBP'000) 12,143 14,728
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FFFIVTSIFLII
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