Preliminary results for the year ended 30 Apr 2023

Goodwin PLC

08 August 2023

 

GOODWIN PLC

PRELIMINARY ANNOUNCEMENT FOR RELEASE ON 8TH AUGUST 2023

Goodwin PLC today announces its preliminary results for the year ended 30th April, 2023.

CHAIRMAN'S STATEMENT

The "Trading" pre-tax profit for the Group for the twelve month period ended 30th April, 2023, was £18.9 million (2022: £17.2 million) an increase of 10% on revenue of £186 million (2022: £144 million).  Trading profit for this purpose is defined as the Group pre-tax reported profit of £22.1 million less the positive impact of our interest rate swap, having increased in value by a further £3.2 million.  The £3.2 million movement relates to the 30th April, 2023 valuation of our £30 million interest rate swap derivative that expires in August 2031, whereby we have fixed our interest rate on £30 million of debt for ten years at less than 1% for a ten year term.  We described in the Chairman's statement within last year's Annual Report why the movements in valuation of the interest rate swap shall be excluded, as well as being excluded for dividend purposes.

The Directors propose an increased dividend of 115p (2022: 107.80p) per share.

For the financial year ending on 30th April 2023, the Group has demonstrated substantial progression in its transformation, particularly noted in the handling of increased workload.  There was a significant 68% increase in order intake compared to the last year, predominantly at Goodwin Steel Castings Limited and Goodwin International Limited, contributing to the start of the rebound of our Mechanical Engineering Division, which had experienced challenges in recent years.  As of the date of the current report, the Group's cumulative future orders stand at £271 million.

Mechanical Engineering Division

Whilst there has been some resurgence for petrochemical valves for new LNG projects around the world, due to energy uncertainty from current world events, assisting our valve manufacturing companies, it is the combined package that our foundry, Goodwin Steel Castings and the precision project engineering facility Goodwin International offers, which has led to the largest part of new orders shown in the Group workload, with them being primarily for the nuclear decommissioning and naval markets.

Due to the work that these two businesses have excelled at, whilst diversifying away from their mainstay of petrochemical-based work a decade ago, be it discrete orders or orders that combine the skillset of the organisations, the future looks bright.  The programmes of work, that are actively ramping up now, are being exploited to win more and more of the same, supporting projects that will still be ongoing in a decade's time.

A lot of this work has only been possible as a result of the significant investment into Goodwin Steel Castings over recent years.  We focused on what needed to be done to become one of the West's large casting suppliers of choice for large technically advanced castings that we are manufacturing now.  These investments look set to repay the faith the Board had in the company and, after a long drought, they should now meaningfully contribute to the Group's performance going forward.

The supply of heavy duty submersible pumps, primarily to the mining industry, is 19% up on last year.  The pump companies in India, Brazil, Australia and South Africa continue to convert customers from competitors' pumps that are not as reliable and robust as the Goodwin pump, which is specifically designed for the most demanding applications.  In the year, a new hydraulically powered variant of our submersible slurry pump that can be mounted directly on 10 - 30 tonne excavators, driven by the excavator's hydraulics, was launched.  The addition of this hydraulic pump opens up a new market area (Heavy Construction) in terms of customers and applications that will complement the natural growth that is expected for the electrically driven pumps.  It will be a distributor-based market with the pump being marketed as an excavator accessory, thus allowing all the existing pump companies, that are profitable, to bolt on a complementary product with minimal increases in overheads, all for applications that do not compete with our existing pump business.

Duvelco, the Group's latest and largest investment into a new business area, which will facilitate the production of high operational temperature polyimide polymer resins, is on course to be completed in line with our previously disclosed timeline.  Commercial operation of our initial plant is expected to occur prior to June 2024.  As soon as production material is available, the team will look to commence gaining sales traction and break into this new market sector for the Group.

It has been a good year with real progress being made. The Division has adeptly navigated contract and customer management challenges across all sectors, with the overall divisional profitability up 33% on an increased turnover of 41%.

Refractory Engineering Division

In the year there have been two major notable successes.  The first major achievement has occurred at Brassington in Derbyshire, where the team at Hoben International Limited (Hoben) has successfully installed and commissioned a second calciner.  The calciner supplies one of the key raw materials for the investment casting powder, and as such, the installation not only enables the Division to continue to grow, but has provided the Division with a level of business continuity that we never had the benefit of before.  In order to increase capacity to accommodate continued growth in ground silica sales, a third ball mill is in the process of being installed and is planned to be commissioned before the end of the calendar year.

The second success relates to Dupré Minerals Limited (Dupré), which supplies a range of refractory products that typically contain vermiculite.  During the year the Company has achieved record trading profits by increasing its profitability by over 50%.  The Company has maximised its position through the supply of its traditional products as well as growing its newer products.  The energy crisis brought on by the Ukraine conflict has led to a surge in the number of wood stoves being installed, for which Dupré supplies the internal vermiculite insulation boards. 

In addition to the supply of boards, Dupré's internally developed product, known as AVD that address the burning issues surrounding lithium-ion battery fires has taken a step forward.  The momentum in sales is starting to provide a respectable contribution to the Group's profits.  AVD extinguishing agent and fire extinguishers are now being sold in over forty-five countries with additional distributors being appointed in new territories on a regular basis.  In recent weeks, Underwriters Laboratory (UL) certification for component recognition of AVD as an extinguishing agent and certification of a six litre fire extinguisher containing AVD to UL8 has now been obtained.  This is a significant milestone for opening up sales into the USA and other global markets that require UL Certification and it has been pleasing to see that the order input via multiple sources for AVD in the first two months of this financial year was equal to more than the last half of 2023.  Expansion of the AVD manufacturing capacity is planned in the coming year.

Sales of jewellery investment powder, moulding rubber and injection waxes have remained strong within the year.  Final customer approvals for X-Sil respirable silica free investment powder are in their final stages at key reference customers in the USA and Europe.  This has been a long process which should start to generate sales in the coming year.  India remains the key growth country for jewellery production around the world and in order to increase production capacity for both investment powder and injection wax production in India a newly constructed larger production facility will be completed and commissioned within the current financial year.

Carbon Reduction Activities

Over the course of the year, the Group has continued working on its carbon neutral program and has spent a further £2 million on renewables, specifically solar panels where the power generated will be utilised on site.  In total, the Group has now completed sixteen of the twenty-two individual electricity projects that were initially targeted, which includes the installation of 5.7 MWp of solar panels.  The results of this will reduce the Group's electricity purchased from the national grid by over 24.7% per year, amounting to savings of over £1 million per year, providing a reduction of 1,365 tonnes equivalent of carbon dioxide (CO₂) per year.  As noted in last year's Annual Report, the remaining projects are being held up by the District Network Operator.  Once this permission, along with planning permission where required, has been obtained there is potential to install a further 10MW of solar panels across our sites.  Over half of this will be based at Hoben in Derbyshire where we intend to also apply for planning for two 2.5MW wind turbines.  The power generated from these installations will be fully utilised by the Group and will not be exported back to the grid.

Two other major components of the carbon neutral program are the conversion of our 4MW / hr natural gas burners on both calciners at Hoben to hydrogen and offsetting our CO₂ footprint, that cannot be eliminated in its entirety without ceasing operation.  Despite two unsuccessful grant applications to BEIS to mitigate the very high cost of the electrolysis machine required to make onsite green hydrogen, we are continuing to pursue government support, as the Group's carbon neutral target heavily depends on finding an alternative to burning natural gas.  However, for all other gas processes that cannot be converted, the company has purchased a new 1,180 acre plot of land that is ideally suited for planting 560,000 broad leaf trees.  The planting scheme will be one of the largest in the UK and over the next fifty-five years will offset an average of 2,168 tonnes of CO₂ per year, which, for example, covers 100% of the CO₂ emissions that are generated at the foundry from burning natural gas, as well as being able to offset other subsidiary gas burning processes.

Cashflow

The significant increase in order input and the downpayments associated with these orders, coupled with the not insignificant levels of non-cash depreciation charges (£8 million) that occur annually, provided the Group with a very strong cash generation in the year ended 30th April, 2023.  Notwithstanding the £23 million of capital expenditure that has occurred in the year, the Group's net debt reduced to finish at £33 million which equates to a modest gearing of 26.3%.  The major areas of expenditure relate to the second calciner, Duvelco polymer production plant and extending the melt shop at the foundry to enable a greater level of production capacity.  Furthermore, the initial costs in relation to a new 7,690 sq m building in India, for which the Board had approved the investment, due to both the refractory and pump businesses reaching capacity within the existing facility, were also incurred in the year ending 30th April 2023.

With the growth that is expected in the years to come, the Group has recently renewed a £10 million revolving credit facility.  This is as well as securing an additional £25 million of committed banking facilities on effectively a four year term, as a prudent policy to ensure that guaranteed facilities and the appropriate level of headroom is available to the Group, should it ever be required.  The total value of our facilities now available to fund the Group is £75.5 million, of which at the year end we were only utilising 48%.

In line with the activity, the Group's employee numbers are starting to increase.  Our apprenticeship programme continues to insulate the Group from the skills shortages that exist in the local area.  To date, a total of three hundred apprentices have completed the course at the Training Centre, with the vast majority of them now working within the subsidiaries and the Group's twelfth cohort of thirty apprentices will be starting in September 2023.

In March 2023, John Connolly, who had been the Group Chief Accountant and a Director of Goodwin PLC for sixteen years, retired.  He had worked for the Goodwin Group for over twenty-seven years and the Board takes the opportunity of thanking him for his hard work and loyalty over the years, which helped move the Group forward.  We wish him much happiness in his retirement.  We are also pleased to report that Adam Deeth has been brought on board as a highly capable replacement for the Group Chief Accountant role. 

We are once again extremely grateful to our UK and overseas directors, managers and employees for their hard work in driving forward the performance of the Group.

	T.J.W. Goodwin
	Chairman

Alternative performance measures mentioned above are defined in Note 2 of the financial statements to be published shortly.

OBJECTIVES, STRATEGY AND BUSINESS MODEL

The Group's main OBJECTIVE and PURPOSE 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 VALUES of engineering excellence, quality, efficiency, reliability, competitive price and delivery contribute to the delivery of its strategy.

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 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 precision engineered solutions and industrial goods into critical applications, generally on a project basis, more often than not involving the complementary skill set of other group companies to deliver the requirement.  The projects normally involve international procurement, high integrity castings, forgings or wrought high alloy steels, carbon fibre composite structures, 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.  These solutions and products typically form part of large construction projects, including the construction of naval vessels, nuclear waste treatment, nuclear power generation, liquefied natural gas (LNG), gas, oil, petrochemical, mining, 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.

The Group through its foundry, Goodwin Steel Castings Limited, 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 Limited.  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 Limited also has a division that is focused 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  Limited and Noreva GmbH 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 surveillance systems for the global market of major defence contractors, civil aviation authorities and coastal border security agencies.  Easat has a sister company, Easat Radar Systems India Private Limited, that also manufactures, sells and maintains radar systems.  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) generates value primarily from designing, manufacturing and selling investment casting powders, injection moulding rubbers and waxes to the jewellery casting industry.  GRS also manufactures and sells these products 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 Limited (Hoben), 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.  Hoben now also manufactures different grades of perlite, and a patented range of biodegradable bags, known as Soluform, for use inside traditional hessian / jute bags for the placement of concrete in or around rivers.

The other UK refractory company is Dupré Minerals Limited (Dupré) 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.  Dupré also sells consumable refractories to the shell moulding precision casting industry.  Dupré has designed, patented and is now selling a range of fire extinguishers and an extinguishing agent for lithium-ion battery fires that utilises a vermiculite dispersion as the fire extinguishing agent.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

for the year ended 30th April, 2023

		2023	2022
		£'000	£'000
CONTINUING OPERATIONS
Revenue		185,742	144,108
Cost of sales		(139,521)	(101,404)
GROSS PROFIT		46,221	42,704
Distribution expenses		(3,741)	(3,743)
Administrative expenses		(22,167)	(20,654)
OPERATING PROFIT		20,313	18,307
Finance costs (net)		(1,438)	(1,169)
Share of profit of associate company		65	63
PROFIT BEFORE TAXATION AND MOVEMENT IN FAIR VALUE OF INTEREST RATE SWAP		18,940	17,201
Additional year-on-year unrealised gain on 10 year interest rate swap derivative		3,189	2,740
PROFIT BEFORE TAXATION		22,129	19,941
Tax on profit		(5,616)	(6,321)
PROFIT AFTER TAXATION		16,513	13,620
ATTRIBUTABLE TO:
Equity holders of the parent		15,904	12,980
Non-controlling interests		609	640
PROFIT FOR THE YEAR		16,513	13,620
BASIC EARNINGS PER ORDINARY SHARE (in pence)		206.81p	169.14p
DILUTED EARNINGS PER ORDINARY SHARE (in pence)		206.81p	169.14p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30th April, 2023

	2023	2022
	£'000	£'000
PROFIT FOR THE YEAR	16,513	13,620
OTHER COMPREHENSIVE INCOME / (EXPENSE)
ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS:
Foreign exchange translation differences	(1,412)	1,493
Effective portion of changes in fair value of cash flow hedges	3,741	(3,834)
Ineffectiveness in cash flow hedges transferred to profit or loss	518	(339)
Change in fair value of cash flow hedges realised in the profit or loss	1,308	(1,432)
Effective portion of changes in fair value of cost of hedging	(1,447)	275
Ineffectiveness in cost of hedging transferred to profit or loss	(76)	(23)
Change in fair value of cost of hedging realised in the to profit or loss	33	(75)
Tax (charge) / credit on items that may be reclassified subsequently to profit or loss	(919)	1,114
OTHER COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR, NET OF INCOME TAX	1,746	(2,821)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	18,259	10,799
ATTRIBUTABLE TO:
Equity holders of the parent	17,726	10,089
Non-controlling interests	533	710
	18,259	10,799

GOODWIN PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30th April, 2023

	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, 2023
Balance at 1st May, 2022	769	463	5,244	(2,746)	140	111,440	115,310	4,433	119,743
Total comprehensive income:
Profit for the year	‒	‒	‒	‒	‒	15,904	15,904	609	16,513
Other comprehensive income:
Foreign exchange translation differences	‒	(1,312)	‒	‒	‒	‒	(1,312)	(100)	(1,412)
Effective portion of changes in fair value	‒	‒	‒	3,741	(1,447)	‒	2,294	‒	2,294
Ineffectiveness transferred to profit or loss	‒	‒	‒	518	(76)	‒	442	‒	442
Change in fair value transferred to profit or loss	‒	‒	‒	1,274	40	‒	1,314	27	1,341
Tax	‒	‒	‒	(1,283)	367	‒	(916)	(3)	(919)
TOTAL COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR	‒	(1,312)	‒	4,250	(1,116)	15,904	17,726	533	18,259
Transactions with owners:
Dividends paid	‒	‒	‒	‒	‒	(8,289)	(8,289)	(556)	(8,845)
BALANCE AT 30TH APRIL, 2023	769	(849)	5,244	1,504	(976)	119,055	124,747	4,410	129,157

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30th April, 2022

	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, 2022
Balance at 1st May, 2020	753	(852)	5,244	1,601	(1)	106,396	113,141	4,887	118,028
Total comprehensive income:
Profit for the year	‒	‒	‒	‒	‒	12,980	12,980	640	13,620
Other comprehensive income:
Foreign exchange translation differences	‒	1,315	‒	‒	‒	‒	1,315	178	1,493
Effective portion of changes in fair value	‒	‒	‒	(3,790)	275	‒	(3,515)	(44)	(3,559)
Ineffectiveness transferred to profit or loss	‒	‒	‒	(333)	(23)	‒	(356)	(6)	(362)
Change in fair value transferred to profit or loss	‒	‒	‒	(1,359)	(64)	‒	(1,423)	(84)	(1,507)
Tax	‒	‒	‒	1,135	(47)	‒	1,088	26	1,114
TOTAL COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR	‒	1,315	‒	(4,347)	141	12,980	10,089	710	10,799
Transactions with owners:
Issue of shares	16	‒	‒	‒	‒	‒	16	‒	16
Acquisition of NCI without a change in control	‒	‒	‒	‒	‒	(74)	(74)	(356)	(430)
Dividends paid	‒	‒	‒	‒	‒	(7,862)	(7,862)	(808)	(8,670)
BALANCE AT 30TH APRIL, 2022	769	463	5,244	(2,746)	140	111,440	115,310	4,433	119,743

CONSOLIDATED BALANCE SHEET

at 30th April, 2023

		2023	2022
		£'000	£'000
NON-CURRENT ASSETS
Property, plant and equipment		101,243	87,594
Right-of-use assets		6,763	6,191
Investment in associate		964	896
Intangible assets		25,448	24,817
Long-term trade receivables		‒	1,191
Derivative financial assets		5,932	2,741
		140,350	123,430
CURRENT ASSETS
Inventories		47,955	40,364
Contract assets		16,257	12,331
Trade and other receivables		34,589	28,647
Corporation tax receivable		1,337	1,347
Derivative financial assets		2,684	1,211
Cash and cash equivalents		19,661	11,651
		122,483	95,551
TOTAL ASSETS		262,833	218,981
CURRENT LIABILITIES
Borrowings		6,729	2,764
Contract liabilities		32,747	14,749
Trade and other payables		31,765	27,260
Derivative financial liabilities		2,383	2,393
Liabilities for current tax		921	1,886
Provisions for liabilities and charges		266	205
		74,811	49,257
NON-CURRENT LIABILITIES
Borrowings		47,256	40,376
Derivative financial liabilities		‒	1,643
Provisions for liabilities and charges		246	251
Deferred tax liabilities		11,363	7,711
		58,865	49,981
TOTAL LIABILITIES		133,676	99,238
NET ASSETS		129,157	119,743
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Share capital		769	769
Translation reserve		(849)	463
Share-based payments reserve		5,244	5,244
Cash flow hedge reserve		1,504	(2,746)
Cost of hedging reserve		(976)	140
Retained earnings		119,055	111,440
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT		124,747	115,310
NON-CONTROLLING INTERESTS		4,410	4,433
TOTAL EQUITY		129,157	119,743

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 30th April, 2023

		2023	2022
		£'000	£'000
CASH FLOW FROM OPERATING ACTIVITIES
Profit from continuing operations after tax		16,513	13,620
Adjustments for:
Depreciation of property, plant and equipment		6,272	6,202
Depreciation of right of use assets		1,198	1,192
Amortisation and impairment of intangible assets		1,257	1,572
Finance costs (net)		1,438	1,169
Currency (gains) / losses net of unhedged derivative movements		1,213	(1,535)
Loss / (profit) on sale of property, plant and equipment		134	(18)
Unrealised gain on 10 year interest rate swap derivative		(3,189)	(2,740)
Share of profit of associate company		(65)	(63)
UK tax incentive credit on research and development		(610)	(675)
Tax expense		5,616	6,321
OPERATING CASH FLOW BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS		29,777	25,045
(Increase) in inventories		(8,377)	(5,175)
(Increase) / decrease in contract assets		(3,804)	3,498
(Increase) in trade and other receivables		(5,304)	(3,341)
Increase in contract liabilities		17,954	472
Increase in trade and other payables		4,072	804
CASH GENERATED FROM OPERATIONS		34,318	21,303
Interest received		75	157
Interest paid		(2,015)	(1,415)
Corporation tax paid		(3,251)	(2,051)
NET CASH INFLOW FROM OPERATING ACTIVITIES		29,127	17,994
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment		218	341
Acquisition of property, plant and equipment		(18,871)	(16,215)
Additional investment in existing subsidiaries		‒	(430)
Acquisition of intangible assets		(675)	(282)
Development expenditure capitalised		(1,196)	(1,505)
NET CASH OUTFLOW FROM INVESTING ACTIVITIES		(20,524)	(18,091)
CASH FLOW FROM FINANCING ACTIVITIES
Issue of shares		‒	16
Payment of capital element of lease liabilities		(1,874)	(1,153)
Dividends paid		(8,289)	(7,862)
Dividends paid to non-controlling interests		(556)	(808)
Proceeds from new loans		11,500	6,702
Repayment of loans and committed facilities		(1,181)	(683)
Change in bank overdrafts		119	‒
NET CASH OUTFLOW FROM FINANCING ACTIVITIES		(281)	(3,788)
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS		8,322	(3,885)
Cash and cash equivalents at beginning of year		11,651	15,160
Effect of exchange rate fluctuations on cash held		(312)	376
CASH AND CASH EQUIVALENTS AT END OF YEAR		19,661	11,651

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 the Company faced, including those that would threaten its business model, future performance, solvency or liquidity.

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 of 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.

Operating in many territories helps spread market risk.  Similarly, the Group operates in both Mechanical Engineering and Refractory Engineering sectors, mitigating the impact of a downturn in any one product area as has been seen in recent financial years.

The potential risk of the loss of any key customer is limited as no single customer accounts for more than 10% of annual turnover.

As described in the Business Model, the Group generates significant sales from nuclear new build and decommissioning, naval propulsion marine applications and ship hull components, as well as from valves it supplies to LNG, oil, chemical and water markets.  The Mechanical Engineering Division also sells submersible pumps that are supplied to the mining industries and radar systems that are used for civil and defence applications.  The Refractory Engineering Division sells vermiculite and perlite to the insulating and fire prevention industry 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.

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 as far as possible 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 feedback 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 an essential item of equipment presents a constant risk of disruption to the manufacturing in progress, especially in these times of high inflation associated with the conflict in Ukraine.  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).  As reported elsewhere within these financial statements, the Company, on 2nd July ,2021, signed a contract to mitigate the impact of interest rate risk by taking out an interest rate swap derivative fixing £30 million of notional debt at less than 1% versus the variable SONIA rate for a period of ten years, commencing 1st September, 2021.  Detailed information on the financial risk management objectives and policies is set out in note 28 of 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.  The Group ensures that high ethical standards and values are adopted, specifically with regards to anti-corruption, anti-bribery and human rights.  During the year, the Group has carried out enhanced sanctions training and updated internal policies to reflect the associated risks.

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.  The Group is in the process of re-evaluating the need to invest further in this area over the next twelve months.

Energy and Climate Change:  The recent geopolitical tensions, with the current conflict in Ukraine, combined with the UK Government's energy policy over the last few years to reduce carbon emissions has left the country exposed to the fragile global energy system which has driven significant increases in the cost of power. Following the impact this has had on the Group earlier on in the year, the Group has amended its strategy to manage the risk through hedging strategies, incorporating price escalation clauses into the longer term contracts, aided by the coming on stream of increasing levels of low cost solar power around the Group.  Furthermore, the Group has successfully completed sixteen of the twenty-two individual electricity projects that were initially targeted, which include the installation of 5.7 MW of solar panels.  The results of this will reduce the Group's electricity purchased from the national grid by over 24.7% per year, amounting to savings of over £1 million per year as compared to buying electricity from the grid.

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.

Directors' statement pursuant to the Disclosure and Transparency Rules

Each of the Directors, whose names are listed below, confirm that to the best of each person's knowledge: 

a.             the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole; and 

b.            the Strategic Report contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. 

Directors

The Directors of the Company who have served during the year are set out below.

M.S. Goodwin

S.R. Goodwin

T.J.W. Goodwin

J. Connolly (retired 31st March,2023)

B.R.E. Goodwin

N. Brown

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 parent Company financial statements present information about the Company as a separate entity and not about its Group.

The Group's financial statements have been prepared in accordance with UK adopted International Accounting Standards (IAS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under UK adopted IFRS.

The Company has elected to prepare its financial statements in accordance with Financial Reporting Standard (FRS) 101 issued in the UK. These are presented on pages 104 to 114 of the financial statements to be published shortly.

The accounting policies set out below have been applied consistently to all periods presented in these Group financial statements.

Judgements made by the Directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a possible significant risk of material adjustment in the next year are discussed in note 2 of the financial statements to be published shortly.

New IFRS standards and interpretations adopted during 2022 / 2023

The IASB and IFRIC issued the following amendment:

·      Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and Annual Improvements 2018-2020 - (effective for periods commencing on or after 1st January, 2022).

The implementation of these 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, 2023 or 2022 but is derived from those accounts. Statutory accounts for 2022 have been delivered to the Registrar of Companies, and those for 2023 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 2023 accounts are expected to be posted to shareholders within the next two weeks and will also be available on the Company's website: www.goodwin.co.uk and from the Company's Registered Office:  Ivy House Foundry, Hanley, Stoke-on-Trent ST1 3NR. 

Note 1

Segmental information

Products and services from which reportable segments derive their revenues

For reporting to the chief operating decision maker, the Board of Directors, and as outlined in the Business Model section of the Strategic Report on page 3 of the financial statements to be published shortly, the Group is organised into two reportable operating segments according to the different products and services provided by the Mechanical Engineering and Refractory Engineering Divisions. Segment assets and liabilities include items directly attributable to segments as well as group centre balances which can be allocated on a reasonable basis. Associates are included in Refractory Engineering.  In accordance with the requirements of IFRS 8, information regarding the Group's operating segments is reported below. 

In previous years the segmental analysis of net assets, capital expenditure and depreciation was based on the legal structure of the Group.  This year, the analysis represents the operational structure of the Group and the prior year comparatives have been updated accordingly.  There are no other reportable segments apart from those identified.

	2023			2022
	Mechanical Engineering	Refractory Engineering	Total	Mechanical Engineering		Refractory Engineering	Total
	£'000	£'000	£'000	£'000		£'000	£'000
Revenue
External sales	123,767	61,975	185,742	87,605		56,503	144,108
Inter-segment sales	23,771	18,365	42,136	17,784		15,523	33,307
Total revenue	147,538	80,340	227,878	105,389		72,026	177,415
Reconciliation to consolidated revenue:
Inter-segment sales			(42,136)				(33,307)
Consolidated revenue for the year			185,742				144,108

	2023		2022
	%	£'000	%	£'000
Profits
Mechanical Engineering	49	12,171	42	9,139
Refractory Engineering	51	12,772	58	12,657
Segment operating profit	100	24,943	100	21,796
Group centre		(4,630)		(3,489)
Group operating profit		20,313		18,307
Finance costs (net)		(1,438)		(1,169)
Share of profit of Refractory associate company		65		63
Profit before taxation and movement in fair value of interest rate swap		18,940		17,201
Unrealised gain on 10 year interest rate swap derivative		3,189		2,740
Profit before tax		22,129		19,941
Tax on profit		(5,616)		(6,321)
Profit after tax		16,513		13,620

	2023	2023	2023	2023	2022	2022	2022	2022
	Group centre	Mechanical Engineering	Refractory Engineering	Total	Group centre	Mechanical Engineering	Refractory Engineering	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Net assets
Total assets	18,644	175,023	69,166	262,833	18,493	141,995	58,493	218,981
Total liabilities	(2,821)	(103,234)	(27,621)	(133,676)	(2,595)	(77,211)	(19,432)	(99,238)
	15,823	71,789	41,545	129,157	15,898	64,784	39,061	119,743

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 some of those held by the parent Company, Goodwin PLC.

	2023				2022
	Group centre	Mechanical Engineering	Refractory Engineering	Total	Group centre	Mechanical Engineering	Refractory Engineering		Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000		£'000
Segmental capital expenditure
Property, plant and equipment	630	15,623	4,928	21,181	1,868	9,596	4,889	16,353
Right-of-use assets	220	1,233	66	1,519	419	2,423	881	3,723
Intangible assets	11	508	1,305	1,824	64	1,121	602	1,787
Total	861	17,364	6,299	24,524	2,351	13,140	6,372	21,863
Segmental depreciation, amortisation and impairment
Depreciation	1,070	4,872	1,528	7,470	1,046	4,643	1,705	7,394
Amortisation and impairment	64	446	747	1,257	123	668	781	1,572
Total	1,134	5,318	2,275	8,727	1,169	5,311	2,486	8,966

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.

	2023				2022
	Revenue	Net assets	Non-current assets	Capital expenditure	Revenue	Net assets	Non-current assets	Capital expenditure
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
UK *	55,867	82,669	114,235	21,533	38,599	77,447	102,254	19,670
Rest of Europe	28,367	10,636	4,224	790	21,388	8,648	3,728	1,009
USA	19,854	‒	‒	‒	14,046	‒	‒	‒
Pacific Basin	34,725	15,982	7,029	330	31,085	15,867	6,703	278
Rest of World	46,929	19,870	8,930	1,871	38,990	17,781	8,004	906
Total	185,742	129,157	134,418	24,524	144,108	119,743	120,689	21,863

* The prior year comparative for non-current assets has been adjusted to remove £2,741,000 of derivative assets.

Note 2

Dividends

The Board proposes to pay a dividend of 115 pence per share, up 7% on the previous year (2022: 107.80p).  The proposed dividend has been calculated using the Group's profit after taxation figure, plus depreciation and amortisation for the year ending 30th April, 2023, after having excluded the non-cash £3.2 million mark to market unrealised gain relating to the 10 year interest rate swap.

The Board proposes to continue to smooth the Group's cash flow by splitting the payment of the proposed ordinary dividends of 115 pence per share into equal instalments of 57.5 pence per share on 6th October, 2023 and on or around 12th April, 2024 to shareholders on the register on 15th September, 2023 and on or around 22nd March, 2024 respectively. 

Note 3

Earnings per share

	2023	2022
	Number	Number
Ordinary shares in issue
Opening shares in issue	7,689,600	7,526,400
Shares issued in the year	‒	163,200
Total ordinary shares (issued and options)	7,689,600	7,689,600
Weighted average number of ordinary shares in issue	7,689,600	7,673,951

	2023		2022
	£'000		£'000
Relevant profits attributable to ordinary shareholders	15,904		12,980
	2023	2022
	pence	pence
Basic earnings per share	206.81	169.14
Diluted earnings per share	206.81	169.14

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.

As at 30th April 2023, the Group's gearing ratio stood at 26.3% (2022: 25.8%) against a substantial shareholders' net worth of £125 million (2022: £115 million).  The retained reserves of the Group put it in a strong position to deal with unforeseen material adverse issues.

The Group has continued to incur high energy costs throughout the financial year, but it has been able to manage the increases in costs.  With the measures already put in place, together with the continued monitoring of the energy costs incurred , we do not see the impact of energy costs giving rise to a going concern issue.  Furthermore, the fact that it is Group policy to manufacture and sell products with high technology and high gross margins assists in insulating the Group from high energy costs.

Within our severe but plausible stress test model, it is demonstrable that the Group has sufficient funds, after the share buy-back transaction, to cover the Group's and the Company's financial commitments during the forecast period whilst remaining compliant with its financial covenants.  The stress test model starts with the forecasts generated by the subsidiary directors and reflects their specific knowledge of the market conditions, strategy and outlook.  Each of these subsidiary level forecasts is then reviewed, challenged and approved by the relevant Group Managing Director who themselves are immersed in each of the businesses.  The stress test model then predicts the impact of a severe but plausible reduction in the pre-tax profit forecast by reducing revenues by 18% without adjusting downwards the capital expenditure programme, maintaining the overheads at their current expected levels and keeping the financing facilities at the same amounts that were in place at year end.  The results of the stress test modelling did not highlight any going concern issues, breaches of covenants or requirements for any further financing facilities.

Whilst our carrying values of trade debtors and contract assets are significant, we see little risk here in terms of recovery.  Where possible, we credit insure the majority of our debtors and our 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 high and the Refractory Engineering segment continues to be 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 29th September, 2023 at Crewe Hall, Weston Road, Crewe, Cheshire, CW1 6UZ. 

Note 6

ALTERNATIVE PERFORMANCE MEASURES

Measure	2023	2022
Gross profit (£'000)	46,221	42,704
Revenue (£'000)	185,742	144,108
Gross profit as percentage of revenue (%)	24.9%	29.6%
Profit before tax (£'000)	22,129	19,941
Unrealised gain on 10 year interest rate swap derivative	(3,189)	(2,740)
Trading profit (£)	18,940,000	17,201,000
Operating profit (£'000)	20,313	18,307
Capital employed (£'000)	157,569	145,095
Return on capital employed (%)	12.9%	12.6%
Net debt (£'000)	32,822	29,785
Net assets attributable to equity holders of the parent(£'000)	124,747	115,310
Gearing (%)	26.3%	25.8%
Net profit attributable to equity holders of the parent (£'000)	15,904	12,980
Net assets attributable to equity holders of the parent(£'000)	124,747	115,310
Return on investment (%)	12.7%	11.3%
Revenue (£'000)	185,742	144,108
Average number of employees	1,144	1,112
Sales per employee (£)	162,362	129,594
Annual post tax profit (£'000)	16,513	13,620
Interest rate SWAP mark to market net of tax @ 19.49% (2022: 19%) (£'000)	(2,567)	(2,219)
Deferred tax rate change (£'000)	‒	2,012
Deferred tax rate difference (£'000)	596	‒
Depreciation owned assets (£'000)	6,272	6,202
Depreciation right-of-use assets (£'000)	1,198	1,192
Amortisation and impairment (£'000)	1,257	1,572
Exclude operating lease depreciation (£'000)	(538)	(508)
Annual post tax profit + depreciation+amortisation (£)	22,731,000	21,871,000

 

END