Final Results

RNS Number : 2296I

Goodwin PLC

11 August 2021

 

PRELIMINARY ANNOUNCEMENT

Goodwin PLC today announces its preliminary results for the year ended 30th April 20201.

CHAIRMAN'S STATEMENT

The pre-tax profit for the Group for the twelve month period ended 30th April 2021, was £16.5 million (2020: £12.1 million), an increase of 36% on a revenue of £131 million (2020: £145 million). The Directors propose an increased dividend of 102.24p (2020: 81.71p) per share.

In what has been another year of unique challenges, I am delighted that excellent progress has been made particularly during the second half of the year in many areas with the Group's workload as at the time of writing remaining healthy at £165 million (2020: £183 million). 

Despite the placement of large capital projects having slowed as expected due to the world having to adapt to new working arrangements, headway has been made within the Mechanical Engineering Division on the nuclear propulsion engineering products and the nuclear waste containment box supply agreement.  The performance achieved in the year is a reflection of the Group's strength through diversification, supplying a wide range of customers, countries and markets.  Following the Group's decisive actions last financial year with the global onset of Covid-19, the Group protected its workforce and ensured our manufacturing facilities continued to operate. In doing so, we placed ourselves in a strong position to tackle the headwinds that were faced during the year ended 30th April, 2021. 

Whilst Covid-19 has been the most recent global 'Black Swan' event, it is coupled with another shockwave sweeping the globe, namely the pace of the uptake of greener energy with the oil majors now rapidly investing in green energy products rather than new oilfields.  So when looking at the Mechanical Engineering Division, our steel foundry, Goodwin Steel Castings Limited, has faced a difficult year due to the accelerated decline of capital flows into oil projects. Whilst it has progressed well with transitioning its business away from the oil industry, it has also been hindered by Covid-19 delaying documentation approvals that would have enabled the foundry to achieve higher levels of casting activity in the year within its new targeted markets. 

Looking forward, Goodwin Steel Castings should soon start to accelerate the production of 30 tonne cast nuclear waste boxes, the initial castings of which are being successfully delivered to Goodwin International Limited for machining, painting and assembly. The foundry is also having good success winning work for naval vessels both in the UK and the USA, all for long running programmes that will span decades to come in an area where there are significant time barriers to entry for other foundries.

Profitability in our submersible pump businesses in India, Australia, Africa and Brazil has materially improved, a reflection of the four companies maturing and the global metal prices having dramatically recovered. They have all performed admirably by carrying out more servicing for existing customers on the sizeable global fleet of Goodwin pumps now deployed. The submersible pump companies in the financial year just completed generated 14% of the Group pre-tax profitability. With minerals pricing across the board generally being high, our target customers that use our pumps are profitable and are expected to continue with their delayed capital expenditure in the new financial year.

Goodwin International has had another successful year with a good mix of business, supplying a growing range of capabilities to their valve, nuclear waste, naval propulsion and ship construction customers. Within the year a new 1.5 acre facility, with multiple 100 tonne overhead cranes and a new radiography bay, has become operational and has started to fill up with work already on order.

Valve sales to the oil industry in the last financial year represented 43% of activity for Goodwin International and in this new financial year, whilst Goodwin International's overall sales output remains extremely robust as they have orders on hand, the valve activity for the oil industry is expected to drop to less than 33% of activity as the manufacture relating to nuclear waste products, propulsion, and naval hull components is rapidly increasing.

Easat Radar Systems' recovery to profitability has also been impacted due to the severe decline in global air traffic associated with Covid-19, starving many airports of cash.  Whilst market expectations forecast that air traffic levels are to return to their historic 2019 levels by 2022 / 2023, infrastructure surveillance projects continue to be planned and Easat has a growing pipeline of opportunities with the bids being submitted substantially increasing in size and therefore margin potential.

The Board has high expectations for Easat Radar Systems as it moves away from selling only the mechanical parts of a radar system.  Since the integration with NRPL, based in Finland, in 2015, followed by a period of design enhancements to their transceivers and interrogators, we are now marketing and selling complete air traffic control and coastal surveillance systems inclusive of the air traffic control systems and screens, recorded radios and runway lighting control to guide planes on the tarmac should the customer so desire. The sales value of a complete system is in excess of ten times that of the original mechanical components that were previously manufactured, and, now, with our vertically integrated product offering, we have a system that not only performs excellently but is internationally competitive. The major area of growth for Easat over the coming years will be in the Far East, where in the year, despite the travel restrictions and national lockdown, Easat has successfully commissioned two of the three turnkey radar systems for which it had orders.

Whilst Goodwin Steel Castings and Easat Radar Systems have not recently been firing on all cylinders, the Board firmly believes that both businesses will become profitable again moving forward with the transitions they have both been through. 

Within the Refractory Engineering Division, increased levels of consumer spending in the second half of the year on luxury goods, horticulture and construction, as a consequence of Covid-19 restrictions redirecting consumer spending away from entertainment, hospitality and travel towards these sectors, has resulted in strong performance, making up for the low activity levels in the first half of the financial year due to the onset of Covid-19.  Business levels remain strong with continued high levels of pent-up consumer spending. The Division achieved a record pre-tax profit of £9.3 million (2020: £7 million), equating to 46% of the Group profitability.

Customer acceptance trials of the patented Silica Free Investment Powder, X-Sil, are underway and it is hoped that regular sales will start within the year ahead, further increasing the Group's market share within the industry sector.

Sales of the patented AVD Lith-EX lithium battery fire extinguishers and vermiculite-containing fluids continue to gain momentum with industry sectors, insurance companies and accreditation bodies waking up to the need and requirement for products and standards that specify their use on lithium battery fires which other extinguishing agents do not effectively extinguish.

 

Key industry sectors adopting the products include electric car manufacturers, car repair workshops, battery manufacturers, battery recyclers, energy storage systems, e-mobility manufacturers, e-mobility storage and repair, marine and military.

Sales of patented Soluform concrete bag work doubled within the year with good prospects for future growth with the use of the product in large scale projects such as HS2 and Thames Tideway Tunnel, along with many other projects for the formation of headwalls, culverts, scour protection, retaining walls and bridge pier protection. 

As at 30th April, 2021, the Group finished the year with a net debt and gearing of £17.4 million and 15.4% respectively, as calculated in note 26 (d) to the financial statements to be published shortly.  The strength of the Group's cash generation was a result of staying operational throughout the pandemic, which meant that the Group has been able to stay within its funding headroom without the need to approach our financial lenders for additional facilities. Furthermore, the Group has not needed to cancel any capital expenditure projects; raise additional funds from shareholders; nor has it any outstanding deferral of tax payments with HMRC. The CCFF loan that was drawn down as an insurance policy during the financial year and referred to in the previous Chairman's Statement, was fully repaid on 26th April, 2021.

Armed with a strong balance sheet and a renewed set of bank facilities we are well placed to benefit from the recovery of the global economy and deliver strong returns on the capital that has been invested to date.  The Board remains confident of the Group's ability to continue to develop new and existing activities that will deliver additional sustainable growth in the long-term.

The Board is once again indebted to our Directors, managers and employees around the world for their unwavering efforts in keeping the Group operational, controlling cost and delivering what can only be described as an extraordinary Group result in the year of Covid-19 just completed.

11th August, 2021	T.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, competitive 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 product range and 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 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 nuclear waste treatment plants, high integrity offshore structural components and bridges, chemical plants, oil refineries and naval vessels.

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 Limited, 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 Limited for their ranges of check valves and this vertical integration gives rise to competitive benefits, increased efficiencies and timely deliveries.

At Goodwin Pumps India Private Limited we manufacture a superior range of submersible slurry pumps for end users in India, Brazil, Australia and Africa. Easat Radar Systems Limited and its subsidiary, NRPL Aero Oy, 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 Private Limited, 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 Limited (GRS) primarily generates value from designing, manufacturing and selling investment casting powders, rubbers 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 consumable investment casting products 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 Limited, 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 manufactures different grades of perlite, and a patented range of biodegradable bags, known as Soluform, for the placement of concrete in or around rivers and other construction applications.

The other UK refractory company is Dupré Minerals Limited 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, 2021

			2021	2020
			£'000	£'000
CONTINUING OPERATIONS
Revenue			131,231	144,512
Cost of sales			(92,230)	(109,743)
GROSS PROFIT			39,001	34,769
Other income			763	690
Distribution expenses			(2,988)	(2,792)
Administrative expenses			(19,682)	(19,809)
OPERATING PROFIT			17,094	12,858
Finance costs (net)			(640)	(809)
Share of profit of associate company			60	66
PROFIT BEFORE TAXATION			16,514	12,115
Tax on profit			(3,508)	(3,775)
PROFIT AFTER TAXATION			13,006	8,340
ATTRIBUTABLE TO:
Equity holders of the parent			12,494	7,866
Non-controlling interests			512	474
PROFIT FOR THE YEAR			13,006	8,340
BASIC EARNINGS PER ORDINARY SHARE			167.82p	107.93p
DILUTED EARNINGS PER ORDINARY SHARE			164.23p	103.31p

GOODWIN PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30th April, 2021

	2021	2020
	£'000	£'000
PROFIT FOR THE YEAR	13,006	8,340
OTHER COMPREHENSIVE INCOME / (EXPENSE)
ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS:
Goodwill arising from purchase of non-controlling interest in subsidiaries	-	(72)
ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS:
Foreign exchange translation differences	(1,371)	(1,007)
Effective portion of changes in fair value of cash flow hedges	1,296	(355)
Ineffectiveness in cash flow hedges transferred to profit or loss	(657)	-
Change in fair value of cash flow hedges transferred to profit or loss	1,932	522
Effective portion of changes in fair value of cost of hedging	(37)	(843)
Ineffectiveness in cost of hedging transferred to profit or loss	631	-
Change in fair value of cost of hedging transferred to profit or loss	381	395
Tax (charge) / credit on items that may be reclassified subsequently to profit or loss	(673)	77
OTHER COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR, NET OF INCOME TAX	1,502	(1,283)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	14,508	7,057
PROFIT FOR THE YEAR ATTRIBUTABLE TO:
Equity holders of the parent	14,081	6,587
Non-controlling interests	427	470
	14,508	7,057

GOODWIN PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30th April, 2021

	Share capital	Translation reserve	Share-based payments reserve	Cash flow hedge reserve	Cost of hedging reserve	Retained earnings	Total attributable to equity holders of the parent	Non-controlling interests	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
YEAR ENDED 30TH APRIL, 2021
Balance at 1st May, 2020	736	361	5,244	(499)	(743)	99,918	105,017	4,585	109,602
Total comprehensive income:
Profit for the year	-	-	-	-	-	12,494	12,494	512	13,006
Other comprehensive income:
Foreign exchange translation differences	-	(1,255)	-	-	-	-	(1,255)	(116)	(1,371)
Effective portion of changes in fair value	-	-	-	1,252	(42)	-	1,210	49	1,259
Ineffectiveness transferred to profit or loss	-	-	-	(617)	596	-	(21)	(5)	(26)
Change in fair value transferred to profit or loss	-	-	-	1,957	362	-	2,319	(6)	2,313
Tax	-	-	-	(492)	(174)	-	(666)	(7)	(673)
TOTAL COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR	-	(1,255)	-	2,100	742	12,494	14,081	427	14,508
Transactions with owners:
Issue of shares	17	-	-	-	-	-	17	-	17
Dividends paid	-	-	-	-	-	(6,016)	(6,016)	(125)	(6,141)
Recycling of translation reserve on disposal of subsidiary	-	42	-	-	-	-	42	-	42
BALANCE AT 30TH APRIL, 2021	753	(852)	5,244	1,601	(1)	106,396	113,141	4,887	118,028
	Share capital	Translation reserve	Share-based payments reserve	Cash flow hedge reserve	Cost of hedging reserve	Retained earnings	Total attributable to equity holders of the parent	Non-controlling interests	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
YEAR ENDED 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 for the year	-	-	-	-	-	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)
Effective portion of changes in fair value	-	-	-	(446)	(802)	-	(1,248)	50	(1,198)
Change in fair value transferred to profit or loss	-	-	-	522	398	-	920	(3)	917
Tax	-	-	-	(2)	87	-	85	(8)	77
TOTAL COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR	-	(964)	-	74	(317)	7,794	6,587	470	7,057
Transactions with owners
Issue of shares	16	-	-	-	-	-	16	-	16
Dividends paid	-	-	-	-	-	(6,927)	(6,927)	-	(6,927)
Tax on equity-settled share-based payment transactions	-	-	253	-	-	-	253	-	253
Acquisition of NCI without a change in control	-	-	-	-	-	-	-	(11)	(11)
Recycling of translation reserve on 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 BALANCE SHEET

at 30th April, 2021

			2021	2020
			£'000	£'000
NON-CURRENT ASSETS
Property, plant and equipment			77,063	69,626
Right-of-use assets			3,691	5,343
Investment in associate			829	816
Intangible assets			24,813	24,695
Derivative financial assets			191	749
Other financial assets at amortised cost			-	252
			106,587	101,481
CURRENT ASSETS
Inventories			34,547	44,887
Contract assets			15,844	6,558
Trade receivables and other financial assets			20,540	24,486
Other receivables			5,627	4,566
Derivative financial assets			4,106	456
Cash and cash equivalents			15,160	9,840
			95,824	90,793
TOTAL ASSETS			202,411	192,274
CURRENT LIABILITIES
Borrowings			1,607	14,624
Contract liabilities			14,332	18,965
Trade payables and other financial liabilities			21,730	23,485
Other payables			4,025	3,298
Derivative financial liabilities			2,016	1,071
Liabilities for current tax			1,174	1,873
Provisions for liabilities and charges			608	160
			45,492	63,476
NON-CURRENT LIABILITIES
Borrowings			33,066	15,599
Derivative financial liabilities			-	202
Provisions for liabilities and charges			251	324
Deferred tax liabilities			5,574	3,071
			38,891	19,196
TOTAL LIABILITIES			84,383	82,672
NET ASSETS			118,028	109,602
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Share capital			753	736
Translation reserve			(852)	361
Share-based payments reserve			5,244	5,244
Cash flow hedge reserve			1,601	(499)
Cost of hedging reserve			(1)	(743)
Retained earnings			106,396	99,918
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT			113,141	105,017
NON-CONTROLLING INTERESTS			4,887	4,585
TOTAL EQUITY			118,028	109,602

GOODWIN PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 30th April, 2021

	2021	2021	2020	2020
	£'000	£'000	£'000	£'000
CASH FLOW FROM OPERATING ACTIVITIES
Profit from continuing operations after tax		13,006		8,340
Adjustments for:
Depreciation of property, plant and equipment		5,696		5,874
Depreciation of right of use assets		972		827
Amortisation and impairment of intangible assets		1,566		1,328
Finance costs (net)		640		809
Foreign exchange losses		292		203
(Profit) / loss on sale of property, plant and equipment		(745)		52
Profit on disposal of subsidiary		(32)		(172)
Share of profit of associate company		(60)		(66)
Tax expense		3,508		3,775
OPERATING PROFIT BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS		24,843		20,970
Decrease in inventories		10,344		4,748
Increase in contract assets		(9,242)		(2,863)
Decrease / (increase) in trade and other receivables		2,885		(2,549)
(Decrease) / increase in contract liabilities		(4,428)		874
Increase in trade and other payables		1,047		2,310
Increase in unhedged derivative balances		(438)		(980)
CASH GENERATED FROM OPERATIONS		25,011		22,510
Interest paid		(734)		(844)
Corporation tax paid		(3,068)		(2,493)
NET CASH INFLOW FROM OPERATING ACTIVITIES		21,209		19,173
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment	1,958		139
Acquisition of property, plant and equipment	(11,738)		(6,062)
Additional investment in existing subsidiaries	-		(83)
Acquisition of intangible assets	(719)		(1,855)
Development expenditure capitalised	(1,420)		(1,105)
NET CASH OUTFLOW FROM INVESTING ACTIVITIES		(11,919)		(8,966)
CASH FLOWS FROM FINANCING ACTIVITIES
Issue of shares	17		16
Payment of capital element of lease liabilities	(1,635)		(1,463)
Dividends paid	(6,016)		(6,927)
Dividends paid to non-controlling interests	(125)		-
Proceeds from new loans	35,048		7,658
Repayment of loans and committed facilities	(30,772)		-
NET CASH OUTFLOW FROM FINANCING ACTIVITIES		(3,483)		(716)
NET INCREASE IN CASH AND CASH EQUIVALENTS		5,807		9,491
Cash and cash equivalents at beginning of year		9,449		493
Effect of exchange rate fluctuations on cash held		(96)		(535)
CASH AND CASH EQUIVALENTS AT END OF YEAR		15,160		9,449

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. 

Covid-19 risk:   The Covid-19 pandemic   continues to have a global impact in varying degrees affecting the population, travel, supply chains, and the global marketplace.  The spread temporarily impacted market demand for certain of our products in the first half of the financial year just completed, as well as delaying the placement of larger capital orders by our customers.  We have also been contending with increased costs and shipping times from our overseas suppliers which have also been exacerbated by the grounding of the "Ever Green" container ship in the Suez Canal which whilst afloat has only just docked.  It is being suggested that the combination of Covid-19 and the Ever Green incident will result in shipping costs and times being disrupted for at least another two years. The intercountry supply chain may face difficulties in the short to medium term in timely and economically fulfilling our requirements due to the stretched international shipping network, but fortunately we have so far been able to work around these issues.  During the year the Group continued to dynamically adapt as circumstances changed to protect the wellbeing of the workforce and to ensure facilities remained operational and able to satisfy the orders in hand, which maintained the Group's financial strength.

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 3 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 annual turnover.

As described in the Business Model, and to emphasize the Group's spread of market risk, the mechanical engineering division generates significant sales not only from valves it supplies to oil, gas, chemical and water markets, but increasingly significant amounts from other areas such as nuclear new build and decommissioning, naval propulsion marine applications, and ship hull components. With the submersible pumps that are supplied to the mining industries and radar systems that are supplied for civil and defence applications it is clear that the mechanical engineering is now well diversified. Within the refractory engineering division, we manufacture and sell vermiculite and perlite products to the insulating, horticulture and fire prevention industries and our investment casting powder companies indirectly sell to the jewellery consumer market through the supply of investment casting moulding powders, waxes, silicone and natural rubber and so again we see a good spread of business within this division.

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 26 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.  As reported elsewhere within these financial statements the Company on 2nd July 2021 has acted to mitigate the possible impact of higher interest rates by taking out an interest rate swap derivative fixing £30 million of notional debt at less than 1% versus the variable inter-bank lending rate (SONIA) for a period of ten years.

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.

IT security: The Group performs regular and remote off site backups of its IT systems, from time to time engaging external companies to test and report any weaknesses and deficiencies found to enable solutions to be put in place to mitigate and minimise the risk of an IT security breach.

Brexit:  As envisaged and disclosed in previous annual reports Brexit has not been seen as a significant issue to the Group, the previously identified risks have been managed or mitigated and the Board no longer consider this as a significant uncertainty

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

B. R. E. Goodwin, Director

N. Brown, 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 accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

The Accounting Policies are included in Note 1 of the Accounts to be published shortly.

New IFRS standards and interpretations adopted during 2021

In 2021   the following amendments had been endorsed by the EU, became effective and were, therefore, mandated to be adopted by the Group:

· Amendments to IFRS 9, IAS39 and IFRS 7 - Interest rate benchmark reform phase 1 (effective for annual periods beginning on or after 1st January 2020)

· Amendments to IFRS 3 - Definition of a business (effective for annual periods beginning on or after 1st January 2020)

· Amendments to IAS 1 and IAS 8 - Definition of material (effective for annual periods beginning on or after 1st January 2020)

· Amendments to References to the Conceptual Framework in IFRS Standards (effective for annual periods beginning on or after 1st January 2020)

The implementation 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, 2021 or 2020 but is derived from those accounts. Statutory accounts for 2020 have been delivered to the Registrar of Companies, and those for 2021 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 2021 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. Associates are included in Refractory Engineering.

In accordance with the requirements of IFRS 8 i nformation regarding the Group's operating segments is reported below. 

	Mechanical Engineering		Refractory Engineering		Sub Total
Year ended 30th April	2021	2020	2021	2020	2021	2020
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue
External sales	86,616	100,078	44,615	44,434	131,231	144,512
Inter-segment sales	20,871	25,821	11,526	8,361	32,397	34,182
Total revenue	107,487	125,899	56,141	52,795	163,628	178,694
Reconciliation to consolidated revenue:
Inter-segment sales					(32,397)	(34,182)
Consolidated revenue for the year					131,231	144,512
	Mechanical Engineering		Refractory Engineering		Sub Total
Year ended 30th April	2021	2020	2021	2020	2021	2020
	£'000	£'000	£'000	£'000	£'000	£'000
Profits
Operating profit  including share of associates	10,823	8,065	9,340	7,034	20,163	15,099
% of  total operating profit  including share of associates	54%	53%	46%	47%	100%	100%
Group centre					(3,009)	(2,175)
Group finance expenses					(640)	(809)
Consolidated profit before tax for the year					16,514	12,115
Tax					(3,508)	(3,775)
Consolidated profit after tax for the year					13,006	8,340

	Segmental total assets		Segmental total liabilities		Segmental net assets
Year ended 30th April	2021	2020	2021	2020	2021	2020
	£'000	£'000	£'000	£'000	£'000	£'000
Segmental net assets
Mechanical Engineering	92,929	95,193	66,909	72,207	26,020	22,986
Refractory Engineering	44,114	41,962	20,591	22,850	23,523	19,112
Sub total reportable segment	137,043	137,155	87,500	95,057	49,543	42,098
Goodwin PLC net assets					83,998	83,415
Elimination of Goodwin PLC investments					(25,392)	(25,801)
Goodwill					9,879	9,890
Consolidated total net assets					118,028	109,602

Segmental capital expenditure

	Property, plant and equipment		Right-of-use assets			Intangible assets			Total
Year ended 30th April	2021	2020	2021		2020	2021	2020		2021	2020
	£'000	£'000	£'000		£'000	£'000	£'000		£'000	£'000
Goodwin PLC	5,315	2,824	1,180		-	151	2,333		6,646	5,157
Mechanical Engineering	4,952	2,511	1,146		156	1,123	613		7,221	3,280
Refractory Engineering	1,570	633	74		1,033	456	633		2,100	2,299
						1	3,573,5799
	11,837	5,968	2,400		1,189	1,730	3,579		15,967	10,736
								2021			2020

Segmental depreciation, amortisation and impairment

	Depreciation		Amortisation and impairment		Total
Year ended 30th April	2021	2020	2021	2020	2021	2020
	£'000	£'000	£'000	£'000	£'000	£'000
Goodwin PLC	2,970	2,934	1,106	708	4,076	3,642
Mechanical Engineering	2,346	2,369	20	97	2,366	2,466
Refractory Engineering	1,352	1,398	440	523	1,792	1,921
	6,668	6,701	1,566	1,328	8,234	8,029

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, 2021				Year ended 30th April, 2020
	Revenue	Operational net assets	Non-current assets	Capital expenditure	Revenue	Operational net assets	Non-current assets	Capital expenditure
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
UK	39,755	81,982	89,944	13,634	39,609	76,467	84,198	8,681
Rest of Europe	21,473	8,309	3,264	279	20,004	8,346	3,439	207
USA	8,027	-	-	-	12,749	-	-	-
Pacific Basin	28,255	13,708	6,499	719	34,844	13,513	7,132	1,248
Rest of World	33,721	14,029	6,880	1,335	37,306	11,276	6,712	600
Total	131,231	118,028	106,587	15,967	144,512	109,602	101,481	10,736

Of the £21,473,000 (April 2020 : £20,004,000 ) sales to the rest of Europe, £8,366,000 (April 2020 : £5,975,000 ), relate to the European sales of our 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, 2021				Year ended 30th April, 2020
		Mechanical Engineering	Refractory Engineering	Total	Mechanical Engineering	Refractory Engineering	Total
		£'000	£'000	£'000	£'000	£'000	£'000
UK		28,258	11,497	39,755	29,187	10,422	39,609
Rest of Europe		15,123	6,350	21,473	13,088	6,916	20,004
USA		7,596	431	8,027	12,664	85	12,749
Pacific Basin		10,899	17,356	28,255	16,361	18,483	34,844
Rest of World		24,740	8,981	33,721	28,778	8,528	37,306
Total		86,616	44,615	131,231	100,078	44,434	144,512

Product lines

	Year ended 30th April, 2021				Year ended 30th April, 2020
		Mechanical Engineering	Refractory Engineering	Total	Mechanical Engineering	Refractory Engineering	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Standard products and consumables		10,630	44,615	55,245	9,545	44,434	53,979
Bespoke products - point in time		11,203	-	11,203	25,427	-	25,427
Point in time revenue		21,833	44,615	66,448	34,972	44,434	79,406
Minimum period contracts		3,306	-	3,306	4,143	-	4,143
Bespoke products - over time		61,477	-	61,477	60,963	-	60,963
Over time revenue		64,783	-	64,783	65,106	-	65,106
Total revenue		86,616	44,615	131,231	100,078	44,434	144,512

Note 2

Dividends

The Directors propose the payment of an ordinary dividend of 102.24p   per share (2020: ordinary dividend of 81.71p ).  If approved by shareholders, the ordinary dividend will be paid on 8th October, 2021 to shareholders on the register at the close of business on 17^th September, 2021.

Note 3

Earnings per share

	Number of ordinary shares
	2021	2020
Ordinary shares in issue
Balance at 1st May, 2020 (1st May, 2019 )	7,363,200	7,200,000
Shares issued in the year	163,200	163,200
	7,526,400	7,363,200
Outstanding ordinary share options	163,200	326,400
Total ordinary shares (issued and options)	7,689,600	7,689,600
Weighted average number of ordinary shares in issue	7,445,024	7,288,289
Weighted average number of outstanding ordinary share options	162,651	325,365
Denominator used for diluted earnings per share calculation	7,607,675	7,613,654
	2021	2020
	£'000	£'000
Relevant profits attributable to ordinary shareholders	12,494	7,866

Note 4

Going concern

The Directors, after having reviewed the projections and possible challenges that may lie ahead, believe that, 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.

During April 2021, the Company repaid in full the £30 million drawn down from the Bank of England's CCFF scheme and having completed the refinancing of £10 million referred to within 30th April, 2020 accounts, currently has at its disposal £50.5 million of Bank facilities, £44.5 million of which are vested in long term committed facilities.

The Directors have, as part of this going concern assessment, considered the ongoing impact of Covid-19 on the Group's operations. We are now more than 18 months on from the onset of Covid-19 and whilst we experienced a slow down in the Refractory Engineering segment of the business during March 2020 to August 2020, since then most of the entities in this division are seeing record levels of activity. As predicted when writing within the 30th April, 2020 going concern assessment, there has been little Covid-19 impact on the Mechanical Engineering segment of the business. Whilst we have and are still seeing temporary impacts on our overseas pump company operations, we are thankfully seeing minimal impact on Group activities as a result of the virus pandemic.

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 financial commitments during the forecast period whilst remaining compliant with its financial covenants. The downside model factors in adverse circumstances such as the loss of a major customer and a new Covid-19 impact on our Refractory Engineering segment.

Since the end of the financial year, the Company has entered into a ten year interest rate swap agreement which fixes our variable interest rate on borrowings at less than 1% for the entire period. The Directors see no shortage of investment opportunities in the coming years and so, given the historical low level of interest rates, we deemed it prudent to remove the impact of higher interest rates from our risk modelling.

Whilst our carrying values of trade debtors and contract assets are significant, we see little risk here in terms of recovery. We credit insure our debtors and pre credit risk (work in progress) and for significant contracts where credit insurance is not available, we ensure, where possible, that these contracts are backed by letters of credit or cash positive milestone payments.

As discussed elsewhere within these accounts, the Mechanical Engineering order book remains very high and the Refractory Engineering segment is buoyant.

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 twelve months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.

Note 5

Annual General Meeting

The Annual General Meeting will be held at 10.30 a.m. on 6th October, 2021 at Crewe Hall, Weston Road, Crewe, Cheshire CW1 6UZ.

Note 6

Alternative performance measures

Measure	2021	2020
Gross profit (£'000)	39,001	34,769
Revenue (£'000)	131,231	144,512
Gross profit as percentage of revenue (%)	29.7	24.1
Operating profit (£'000)	17,094	12,858
Capital employed (£'000)	130,572	123,834
Return on capital employed (%)	13.1	10.4
Net debt (£'000)	17,431	18,817
Net assets attributable to equity holders of the parent(£'000)	113,141	105,017
Gearing (%)	15.4	17.9
Net profit attributable to equity holders of the parent (£'000)	12,494	7,866
Net assets attributable to equity holders of the parent(£'000)	113,141	105,017
Return on investment (%)	11.0	7.5
Revenue (£'000)	131,231	144,512
Average number of employees	1,129	1,190
Sales per employee (£'000)	116	121
Annual post tax profit (£'000)	13,006	8,340
Depreciation owned assets (£'000)	5,696	5,874
Depreciation right-of-use assets (£'000)	972	827
Amortisation and impairment (£'000)	1,566	1,328
Exclude operating lease depreciation (£'000)	(550)	(537)
Annual post tax profit + depreciation + amortisation (£'000)	20,690		15,832

END

 

END

 

 

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