Preliminary results for the year ended 30 Apr 2024

Goodwin PLC

07 August 2024

 

GOODWIN PLC

PRELIMINARY ANNOUNCEMENT FOR RELEASE ON 7TH AUGUST 2024

Goodwin PLC today announces its preliminary results for the year ended 30th April, 2024.

CHAIRMAN'S STATEMENT

The "Trading" pre-tax profit for the Group for the twelve month period ended 30th April, 2024, was £24.1 million (2023: £18.9 million) an increase of 27% on revenue of £191 million (2023: £186 million).  As has been the case since 2022, the "Trading" pre-tax profit excludes the movement of the mark to market valuation of our interest rate swap. The interest rate swap continues to benefit the Group as it locked in a very preferential borrowing rate of less than 1% up to 2031 on the Group's first £30 million of debt.  Currently, as of the date of writing this report, the Group's cumulative future orders stand at £264 million (August 2023: £271 million)

The Directors propose an increased dividend of 133 pence (2023: 115 pence) per share.

The Group has delivered a strong performance both financially and operationally, enabling completion of investments for future long-term growth, as well as increasing shareholders returns in the year. The continued increase in the performance of the Group in the financial year just ended is a result of the hard work and strategy to break into new markets coming to fruition.  The profits have again taken a step forward as a direct result of the strategic investments that have been made over the last decade, and particularly the supply of mission-critical, high integrity components to the nuclear waste storage industry and key components for the naval propulsion and hull construction markets from the Mechanical Engineering Division.  During the year the Group has, within its traditional markets, which include the supply of valves and submersible pumps for the Mechanical Engineering Division, performed better than the previous year and the Refractory Engineering Division has continued its development of the customer base for the supply of the investment casting powders and ancillary products to the jewellery casting market.

Mechanical Engineering Division

I am pleased to report that the Mechanical Engineering Division has had a progressive year, driven by an increase in activity levels of better quality contracts that have been won in the last few years.  The Division's profitability for the year ended 30th April, 2024 has increased by 55% delivering a pre-tax profit of £18.9 million (2023: £12.2 million).

The increase in the volume of improved margin work has been achieved due to our highly trained and skilled workforce, complimented by the annual addition of new apprentices, giving rise to increased manufacturing capacity.  Furthermore, working a three-shift system across many of its operations has enabled the Division to progressively continue to ramp up activity levels so we can satisfactorily process the order book that for many customers are multi-year programmes.  It is satisfying to note that even with this improvement in divisional activity, there remains room for further growth across all companies, especially as the integration and alignment with our key customers continues to develop and evolve.

The majority of the Division's forward order book relates to advanced solutions for the nuclear waste storage industry and key components for the naval propulsion and hull construction sector.  From the discussions that the sales teams of both Goodwin International and Goodwin Steel Castings have had with their key customers, it is expected that there will be more orders for the same components in the coming years.  Furthermore, a significant proportion of this workload consists of repeat orders for components where we have already overcome many of the manufacturing uncertainties, allowing us to realise future production efficiency gains on these repeat components.

Easat Radar Systems now has a forward order book that should see it return to profitability this coming year.  The pipeline of opportunities continues to grow, with the level of engagement with customers getting stronger as they recognise what Easat is capable of delivering.  Taking a keen interest in what is on the horizon for Easat, I have attended multiple Easat meetings to satisfy myself we have the right contingent planning in place to deliver multiple simultaneous opportunities that are likely to transpire in due course. We cannot influence customer timings, but can only reiterate that the Board continues to have confidence in Easat to deliver respectable results it is capable of in the near future.  

The last major element of capital expenditure for the Group was Duvelco - for the initial polyimide manufacturing facility, which is currently at the final stages of commissioning.  With full production expected to occur in the near future, Duvelco is actively having commercial discussions with established distributors and end users.  In addition to selling the polyimide resin powder, the Group is in the process of making additional investments within its German based subsidiary, Noreva, to directly manufacture the polyimide resin into pressed parts that are already commonly purchased in the high-performance polyimide market.

Refractory Engineering Division

The Refractory Engineering Division has continued to move forwards its profitability, achieving £13.5 million for the year ended 30th April, 2024, compared to £12.8 million in 2023, which represents a 21.3% pre-tax profit margin (2023: 20.7%).  The strengthening of Sterling over the last twelve months, against the overseas subsidiaries' currencies, has reduced the reportable profits and suppressed the true growth performance of the Division.  There has also been a market normalisation of reduced consumer spending post-COVID, but the Division continues to display a strong performance.

Within the year, we have increased production capacity at Ultratec, our southern Chinese investment powder manufacturing facility, to accommodate the growing local customer demand.  During the year, a restructuring and reorganisation operation was carried out in relation to our companies in Thailand, resulting in operational cost savings of approximately half a million pounds per annum post-completion. 

Additionally, we are scheduled to be fully operational this year in the new Indian investment powder manufacturing facility. This 76,000 square feet facility, built over the past two years, will provide much-needed increased capacity to service current market requirements and support significant market growth in India over the next five to ten years. Much of the growth in sales of products to the jewellery casting markets in India is underpinned by domestic consumption, driven by the ever-increasing levels of expendable income available to the population as the country rapidly develops.

Sales of AVD fire extinguishers and extinguishing agents continue to grow, and we are excited about the future of this product line. We have commenced production of specialist lithium fire blankets within our India operations. These blankets, made from vermiculite dispersion-coated e-glass fabrics, have significantly better thermal resistance properties than competitors' products available in the market.  The renovation of the newly acquired and equipped 50,000 square feet facility in the UK is now complete.  It accommodates our larger in-house vermiculite dispersion plant, which produces the material that AVD is made from, as well as the AVD fire extinguisher manufacturing and filling plant.  We are awaiting certification from BSI for the fire extinguisher production line and estimate we will begin filling and selling in-house produced extinguishers in the second half of this financial year.

At Hoben International, we have gained planning approval for a 4.3 MW solar array field adjacent to our manufacturing plant. However, despite being assured by the District Network Operator prior to submitting the planning application that the local transformer and switch had adequate capacity, we have now been told that we cannot have a connection. While frustrated by this outcome, we are committed to finding a solution as soon as possible and will continue to fight for our cause.

Cash flow

As of 30th April, 2024, the Group's net debt has reduced to £42.9 million from the net debt position reported at 31st October, 2023, when it stood at £54.6 million, which corresponds to a gearing ratio of 35.1%, down from 47.8% six months earlier.

The Group has demonstrated strong cash generation capabilities, reducing the net debt position while still incurring £16.42 million of capital expenditures throughout the year and returning £17.5 million to shareholders, including a successful £8.9 million tender offer in May 2023.  Moving forward, the cash generation throughout the Group companies remains robust.  One of the factors during the year that has contributed to the strong cash flows, is management's focus to negotiate and obtain multiple milestone payments on the longer-term contracts allowing us to increase production levels without having to utilise our banking facilities to fund the work in progress.

Furthermore, over the last three years, due to the increased capital expenditure in the UK, the UK companies have obtained a significant cashflow benefit from the first year capital allowance and super deduction schemes that were in place in the UK.  The net effect of these favourable tax provisions has resulted in the UK companies deferring £8.1 million of UK corporation tax that would have been payable.  Further details can be found within note 9 of the financial statements to be published shortly.

The Board's focus for the future remains on improving cash flows and managing working capital efficiently as business activities increase. 

Other than capital expenditure that is fully funded by customers and is cash flow neutral, for the next three to four years the Board's focus is on operational efficiency and obtaining output from the substantial capital investments that have already been made on new product production lines and increases in manufacturing capacity rather than embark on additional capital expenditure.

It is for this reason that moving forward the Group's non-customer funded annual capital expenditure will likely be only about one third of what it has averaged over the past three years. This policy along with the substantial workload should result in continued significant cash generation and the continuation of the dividend policy.  Post year-end, the Group has renewed one of its Revolving Credit Facilities, that was due to expire, for a four-year term.

Over the past decade, the Group has achieved an average dividend growth rate of over 15% per year, returning more than £60 million to shareholders and with the market capitalisation of the Company in the year having risen to £512 million at 30th April, 2024 which is an increase of £221 million over the financial year, the Total Shareholders Return including the dividends paid over the last 20 years is 4,632% (versus FTSE100: 282%).  See the financial statements to be published shortly for full details.  Furthermore, as at the time of writing, the market capitalisation of the Group has continued to rise, leading to Goodwin PLC's inclusion in the FTSE250 index. 

We would like to take the opportunity of thanking all our employees, managers and Directors both in the UK and overseas for working so hard to achieve the latest improved trading results, as well as the long-term performance of the Group to date.

	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 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;

·      engineering activity and investment into the reduction of C02 emissions where it is commercially viable taking into account the long-term effects of CBAM (Carbon Border Adjustment Mechanism);

·      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 propulsion and hull components, nuclear waste storage components, liquefied natural gas (LNG), gas, oil, petrochemical, mining, and water markets.

We generate value by creating leading edge technology designs and manufacturing processes, globally sourcing the best quality raw material at good prices, manufacturing in highly efficient facilities using up to date technology to provide very reliable high performance 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 net in weight, radiograph and also finish CNC machine and fabricate them at the foundry's sister company, Goodwin International Limited.  This capability is targeting the naval 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 and is building a facility to CNC press polyimide components from Duvelco resin.  Both Goodwin International Limited and Noreva GmbH purchase the majority 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, Canada, Peru and Africa. Easat Radar Systems Limited and its subsidiary, Easat Finland 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.  We create value on these by innovative design, assembly and testing in our own facilities using bought in or engineered in-house components.

Duvelco, the newest company within the Mechanical Engineering Division, is a specialist polyimide manufacturer, that will manufacture and sell polyimide resins into an established market that can then be moulded into parts and shapes for the high temperature and critical applications, for which very few polymers can be used.

 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 and sales companies located in China, India and Thailand which sell the casting powders, waxes and moulding rubbers 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 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 and other materials in or around rivers.

Dupré Minerals Limited (Dupré), a refractory company, 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 sells 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, 2024

		2024 *	2023 *
		£'000	£'000
CONTINUING OPERATIONS
Revenue		191,258	185,742
Cost of sales		(113,371)	(116,973)
GROSS PROFIT *		77,887	68,769
Distribution expenses		(9,618)	(9,623)
Administrative expenses		(41,374)	(38,833)
OPERATING PROFIT		26,895	20,313
Finance costs (net)		(2,870)	(1,438)
Share of profit of associate company		69	65
TRADING PROFIT		24,094	18,940
Additional year-on-year unrealised gain on 10 year interest rate swap derivative		113	3,189
PROFIT BEFORE TAXATION		24,207	22,129
Tax on profit		(6,491)	(5,616)
PROFIT AFTER TAXATION		17,716	16,513
ATTRIBUTABLE TO:
Equity holders of the parent		16,902	15,904
Non-controlling interests		814	609
PROFIT FOR THE YEAR		17,716	16,513
BASIC AND DILUTED EARNINGS PER ORDINARY SHARE (in pence)		224.53p	206.81p

* The Board has taken the decision to present the statutory reporting of gross profit to allocate costs, which align more appropriately with the Group's operational structure and how it is calculated within the Group's management accounts, to ensure that the end user of the statutory accounts can review the financial performance of the Group on the same basis as the Board.  For further details please refer to the "Business Diversity and Performance" section and note 5 of the financial statements to be published shortly.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30th April, 2024

	2024	2023
	£'000	£'000
PROFIT FOR THE YEAR	17,716	16,513
OTHER COMPREHENSIVE (EXPENSE) / INCOME
ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS:
Foreign exchange translation differences	(1,935)	(1,412)
Cash flow hedges - effective portion of changes in fair value	(936)	3,741
Cash flow hedges - ineffectiveness transferred to profit or loss	433	518
Cash flow hedges - amounts transferred to profit or loss	(438)	1,308
Cash flow hedges - deferred tax (charge) / credit	85	(1,290)
Cost of hedging - changes in fair value	558	(1,447)
Cost of hedging - ineffectiveness transferred to profit or loss	28	(76)
Cost of hedging - amounts transferred to profit or loss	144	33
Cost of hedging - deferred tax (charge) / credit	(184)	371
OTHER COMPREHENSIVE (EXPENSE) / INCOME FOR THE YEAR, NET OF INCOME TAX	(2,245)	1,746
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	15,471	18,259
ATTRIBUTABLE TO:
Equity holders of the parent	15,039	17,726
Non-controlling interests	432	533
	15,471	18,259

CONSOLIDATED BALANCE SHEET

at 30th April, 2024

		2024	2023
		£'000	£'000
NON-CURRENT ASSETS
Property, plant and equipment		105,337	101,243
Right-of-use assets		11,744	6,763
Investment in associate		828	964
Intangible assets		25,900	25,448
Derivative financial assets		5,716	5,932
		149,525	140,350
CURRENT ASSETS
Inventories		46,809	47,955
Contract assets		22,027	16,257
Trade and other receivables		31,894	34,589
Corporation tax receivable		1,288	1,337
Derivative financial assets		2,007	2,684
Cash and cash equivalents		30,678	19,661
		134,703	122,483
TOTAL ASSETS		284,228	262,833
CURRENT LIABILITIES
Borrowings		14,027	6,729
Contract liabilities *		14,856	32,747
Trade and other payables		30,830	31,765
Derivative financial liabilities		251	2,383
Liabilities for current tax		859	921
Provisions for liabilities and charges		231	266
		61,054	74,811
NON-CURRENT LIABILITIES
Borrowings		61,906	47,256
Contract liabilities		19,268	‒
Derivative financial liabilities		277	‒
Provisions for liabilities and charges		274	246
Deferred tax liabilities		14,799	11,363
		96,524	58,865
TOTAL LIABILITIES		157,578	133,676
NET ASSETS		126,650	129,157
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Share capital		751	769
Translation reserve		(2,391)	(849)
Share-based payments reserve		‒	5,244
Cash flow hedge reserve		633	1,504
Cost of hedging reserve		(426)	(976)
Retained earnings		123,714	119,055
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT		122,281	124,747
NON-CONTROLLING INTERESTS		4,369	4,410
TOTAL EQUITY		126,650	129,157

* Contract liabilities are predominantly advance payments from customers.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30th April, 2024

	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, 2024
Balance at 1st May, 2023	769	(849)	5,244	1,504	(976)	119,055	124,747	4,410	129,157
Total comprehensive income:
Profit for the year	‒	‒	‒	‒	‒	16,902	16,902	814	17,716
Other comprehensive income:
Foreign exchange translation differences	‒	(1,542)	‒	‒	‒	‒	(1,542)	(393)	(1,935)
Effective portion of changes in fair value	‒	‒	‒	(948)	560	‒	(388)	10	(378)
Ineffectiveness transferred to profit or loss	‒	‒	‒	432	28	‒	460	1	461
Amounts reclassified to profit or loss	‒	‒	‒	(438)	144	‒	(294)	‒	(294)
Deferred tax (charge) / credit	‒	‒	‒	83	(182)	‒	(99)	‒	(99)
Other comprehensive income / (expense) for the year	‒	(1,542)	‒	(871)	550	‒	(1,863)	(382)	(2,245)
TOTAL COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR	‒	(1,542)	‒	(871)	550	16,902	15,039	432	15,471
Transfers between reserves *	‒	‒	(5,244)	‒	‒	5,244	‒	‒	‒
Transactions with owners:
Buy back of shares	(18)	‒	‒	‒	‒	(8,851)	(8,869)	‒	(8,869)
Dividends paid	‒	‒	‒	‒	‒	(8,636)	(8,636)	(473)	(9,109)
BALANCE AT 30TH APRIL, 2024	751	(2,391)	‒	633	(426)	123,714	122,281	4,369	126,650

* The balance on the share-based payment reserve has been transferred to retained earnings as all previous share options have vested.

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
Amounts reclassified to profit or loss	‒	‒	‒	1,274	40	‒	1,314	27	1,341
Deferred tax (charge) / credit	‒	‒	‒	(1,283)	367	‒	(916)	(3)	(919)
Other comprehensive income / (expense) for the year	‒	(1,312)	‒	4,250	(1,116)	‒	1,822	(76)	1,746
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 CASH FLOWS

for the year ended 30th April, 2024

		2024	2023
		£'000	£'000
CASH FLOW FROM OPERATING ACTIVITIES
Profit from continuing operations after tax		17,716	16,513
Adjustments for:
Depreciation of property, plant and equipment		6,607	6,272
Depreciation of right of use assets		1,497	1,198
Amortisation and impairment of intangible assets		1,341	1,257
Finance costs (net)		2,870	1,438
Currency (gains) / losses		(1,025)	1,213
Loss / (profit) on sale of property, plant and equipment		(29)	134
Unrealised gain on 10-year interest rate swap derivative		(113)	(3,189)
Share of profit of associate company		(69)	(65)
UK tax incentive credit on research and development		(660)	(610)
Tax expense		6,491	5,616
OPERATING CASH FLOW BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS		34,626	29,777
Decrease / (Increase) in inventories		437	(8,377)
(Increase) in contract assets		(5,849)	(3,804)
Decrease / (increase) in trade and other receivables		2,357	(5,304)
Increase in contract liabilities		1,388	17,954
Increase in trade and other payables		370	4,072
CASH GENERATED FROM OPERATIONS		33,329	34,318
Interest received *		1,399	556
Interest paid *		(5,022)	(2,496)
Corporation tax paid		(2,587)	(3,251)
NET CASH INFLOW FROM OPERATING ACTIVITIES		27,119	29,127
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment		392	218
Acquisition of property, plant and equipment		(15,363)	(18,871)
Acquisition of intangible assets		(582)	(675)
Development expenditure capitalised		(1,456)	(1,196)
Dividend from associate company		131	‒
NET CASH OUTFLOW FROM INVESTING ACTIVITIES		(16,878)	(20,524)
CASH FLOW FROM FINANCING ACTIVITIES
Buy back of shares		(8,869)	‒
Payment of capital element of lease liabilities		(2,910)	(1,874)
Dividends paid		(8,636)	(8,289)
Dividends paid to non-controlling interests		(473)	(556)
Proceeds from new loans		23,098	11,500
Repayment of loans		(1,152)	(1,181)
Change in bank overdrafts		(71)	119
NET CASH OUTFLOW FROM FINANCING ACTIVITIES		987	(281)
NET INCREASE IN CASH AND CASH EQUIVALENTS		11,228	8,322
Cash and cash equivalents at beginning of year		19,661	11,651
Effect of exchange rate fluctuations on cash held		(211)	(312)
CASH AND CASH EQUIVALENTS AT END OF YEAR		30,678	19,661

 * The prior year comparatives have been increased by £481,000 due to the interest received from the interest rate swap in the current year being £1,269,000, as shown in note 8 of the financial statements to be published shortly.

PRINCIPAL RISKS AND UNCERTAINTIES

The Group's operations expose it to a variety of risks and uncertainties.  The Directors confirm that they continue to carry 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 to the 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 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 coastal surveillance and air traffic control 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.  The risk of product obsolescence is countered by research and development investment into new products.

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.

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 during times of high inflation or increased shipping times and costs.  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 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.  Prior to the expiry date of the Revolving Credit Facilities, the Board reviews the current and future requirements of the Group and arranges suitable replacement facilities prior to the current facility expiring.  Post year-end, the Group has renewed one of its Revolving Credit Facilities, that was due to expire, for a four year term.

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 sanctions, anti-corruption, anti-bribery and human rights.  During the year, the Group has carried out additional sanctions training and continued to refine and update its 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.

Energy and Climate Change:  The Group is actively developing and implementing its carbon neutral plan, which helps mitigate the risk of the Group being exposed to the long-term effects of global warming and more specifically the upcoming Carbon Border Adjustment Mechanism (CBAM) taxes that will likely ramp up over the next ten years, in addition to significant increases in the cost of power that are a result of the fragile global energy system.  The Group's methods of mitigation include fixed price energy contracts, incorporating price escalation clauses into the longer term contracts and ultimately reducing the need to purchase energy from the national grid by installing renewal solutions like low cost solar panels.  To date the Group has installed 5.7MW of solar panels worldwide and despite the Distribution Network Operator in the UK restricting future installations, planning has been obtained to install a further 5.3 MW of solar panels.  Additional information on the Group's climate related risks and opportunities can be found within the Environmental section, of the financial statements to be published shortly.

FORWARD-LOOKING STATEMENTS

The Group Strategic Report contains forward-looking type statements and information based on current expectations, and assumptions and forecasts made by the Group.  These expectations and assumptions are subject to various known and unknown risks, uncertainties and other factors, which could lead to substantial differences between the actual future results, financial performance and the estimates and historical results given in this report.  Many of these factors are outside the Group's control.  The Group accepts no liability to publicly revise or update these forward-looking statements or adjust them for future events or developments, whether as a result of new information, future events or otherwise, except to the extent legally required.

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                       Mechanical Divisional Managing Director

S.R. Goodwin                         Refractory Divisional Managing Director

T.J.W. Goodwin                     Chairman

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 Company Law and 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 in the financial statements due 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 due to be published shortly.

New IFRS standards and interpretations adopted during 2023 / 2024

The IASB and IFRIC issued the following amendment:

·      Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies - (effective for periods commencing on or after 1st January 2023).

·      Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors 'Definition of Accounting Estimates' - (effective for periods commencing on or after 1st January 2023).

·      Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction - (effective for periods commencing on or after 1st January 2023).

·      Amendments to IAS 12 Income Taxes: International Tax Reform - Pillar Two Model Rules (effective for periods commencing on or after 1st January 2023).

The implementation of these amendments has not had a material impact on the Group's financial statements

Copies of the 2024 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 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. 

There are no other reportable segments apart from those identified.

	2024			2023
	Mechanical Engineering	Refractory Engineering	Total	Mechanical Engineering	Refractory Engineering	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue
Total revenue	156,944	75,859	232,803	147,538	80,340	227,878
Intra-segment revenue	(28,912)	(12,633)	(41,545)	(23,771)	(18,365)	(42,136)
External revenue	128,032	63,226	191,258	123,767	61,975	185,742
Profit
Segment operating profit	18,861	13,423	32,284	12,171	12,772	24,943
Share of profit  of associate company	‒	69	69	‒	65	65
Segment profit before taxation	18,861	13,492	32,353	12,171	12,837	25,008
Group centre costs			(5,389)			(4,630)
Finance costs (net)			(2,870)			(1,438)
Profit before taxation and movement in fair value of interest rate swap			24,094			18,940
Percentage of segment profit before tax	58%	42%	100%	49%	51%	100%

	2024				2023
	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	17,338	192,608	74,282	284,228	18,644	175,023	69,166	262,833
Total liabilities	(511)	(118,132)	(38,935)	(157,578)	(2,821)	(103,234)	(27,621)	(133,676)
	16,827	74,476	35,347	126,650	15,823	71,789	41,545	129,157

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.

	2024				2023
	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	736	10,102	5,583	16,421	630	15,623	4,928	21,181
Right-of-use assets	180	934	634	1,748	220	1,233	66	1,519
Intangible assets	372	1,209	456	2,037	11	508	1,305	1,824
Total	1,288	12,245	6,673	20,206	861	17,364	6,299	24,524
Segmental depreciation, amortisation and impairment
Depreciation	1,181	4,978	1,945	8,104	1,070	4,872	1,528	7,470
Amortisation and impairment	85	446	810	1,341	64	446	747	1,257
Total	1,266	5,424	2,755	9,445	1,134	5,318	2,275	8,727

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.

	2024				2023
	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	61,595	78,978	117,376	14,887	55,867	82,669	114,235	21,533
Rest of Europe	21,552	6,884	5,132	1,532	28,367	10,636	4,224	790
USA	21,480	‒	‒	‒	19,854	‒	‒	‒
Pacific Basin	42,903	17,374	7,009	692	34,725	15,982	7,029	330
Rest of World	43,728	23,414	14,292	3,095	46,929	19,870	8,930	1,871
Total	191,258	126,650	143,809	20,206	185,742	129,157	134,418	24,524

Note 2

Dividends

The Board proposes to pay a dividend of 133 pence per share, up 16% on the previous year (2023: 115p).  The proposed dividend has been calculated using the Group's profit after taxation figure, plus depreciation and amortisation for the year ended 30th April, 2024, after having excluded the non-cash mark to market unrealised gain relating to the 10-year interest rate swap.

Similar to last year, the Board proposes to continue to smooth the Group's cash flow by splitting the payment of the proposed ordinary dividends of 133 pence per share into equal instalments of 66.5 pence per share on 4th October, 2024 and on or around 11th April, 2025 to shareholders on the register on 13th September, 2024 and on or around 21st March, 2025 respectively. 

Note 3

Earnings per share

	2024	2023
	Number	Number
Ordinary shares in issue
Opening shares in issue	7,689,600	7,689,600
Shares bought back in the year	(180,000)	‒
Total ordinary shares	7,509,600	7,689,600

	2024			2023
	£'000			£'000
Relevant post-tax profits attributable to ordinary shareholders	16,902			15,904
Weighted average number of ordinary shares in issue		7,527,797	7,509,600
		2024	2023
		pence	pence
Basic and diluted earnings per share		224.53	206.81

Note 4

Going concern

The Directors, after having reviewed the Group forecasts and possible challenges that may occur over the short to medium term, are confident that the Group has adequate resources to continue to operate for at least twelve months from the date that these financial statements are approved and have continued to adopt the going concern principle in preparing these financial statements.

As at 30th April 2024, the Group's gearing ratio stood at 35.1% (2023: 26.3%) against a substantial shareholders' net worth of £122 million (2023: £125 million).  The retained reserves of the Group put it in a strong position to deal with any material unforeseen adverse issues that may occur and have an impact on the Group's operations.

As part of the going concern process, the Group forecasts are stress tested by being subject to a number of severe but conceivable financial challenges to ensure that the Group finances remain robust throughout the period being tested.  The stress test model begins with the Group forecasts, that have been consolidated from the individual forecasts generated by the Directors of each of the subsidiaries and reflects their specific knowledge of their business and the markets, within which they operate, to ensure that the forecasts that they produce reflect the market conditions, the business strategy and expected outlook.  Each of these subsidiary level forecasts is then reviewed, challenged and approved by the relevant Divisional Managing Director, who is immersed in each of these businesses and knows and understands each of their markets.  As the Group is so diverse, with two divisions in different sectors and multiple products within each division, several stress test events are used to reduce the pre-tax profit forecasts by reducing revenues and consequently the pre-tax profit. Due to the diversity, it is feasible that one or two events could take place, but it is highly improbable that all the stress test events would occur at the same time.  The stress tests implemented reduced revenues and consequently pre-tax profits, which for these stress tests implemented reduced pre-tax profit by a combined amount of 44%, without reducing the discretionary capital expenditure programme, maintaining overheads at their current expected levels, maintaining the dividend policy and utilising the finance facilities at the same amounts that will be in place twelve months from the signing of these accounts.  The results of the stress test modelling did not highlight any going concern issues, breaches of covenants or requirements for any further financing facilities in addition to those currently in place at year-end.  Post-year-end, the Group has renewed one of its Revolving Credit Facilities, that was due to expire, for a four-year term.

Whilst our carrying values of trade debtors and contract assets are significant, we see little risk here in terms of recovery due to the quality of the customers that the Group contracts with.  Where possible, we credit insure the majority of our trade debtors and our pre-credit risk (work in progress), and for significant contracts where credit insurance is not available we ensure, where possible, that those 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 10.30am on Wednesday, 2nd October, 2024 at Crewe Hall, Weston Road, Crewe, Cheshire, CW1 6UZ.

Note 6

ALTERNATIVE PERFORMANCE MEASURES

Measure	Method of calculation / reference	2024	2023
Gross profit (£'000)	Consolidated statement of profit or loss	77,887	68,769
Revenue (£'000)	Consolidated statement of profit or loss	191,258	185,742
Gross profit as percentage of revenue (%) *	Gross profit / Revenue	40.7%	37.0%
Profit before tax (£'000)	Consolidated statement of profit or loss	24,207	22,129
Unrealised gain on 10 year interest rate swap derivative	Consolidated statement of profit or loss	(113)	(3,189)
Trading profit (£'000)		24,094	18,940
Operating profit (£'000)	Consolidated statement of profit or loss	26,895	20,313
Capital employed (£'000)		165,212	157,569
Return on capital employed (%)	Operating profit / capital employed	16.3%	12.9%
Net debt (£'000)		42,931	32,822
Net assets attributable to equity holders of the parent (£'000)	Consolidated balance sheet	122,281	124,747
Gearing (%)	Net debt / equity, as above	35.1%	26.3%
Net profit attributable to equity holders of the parent (£'000)	Consolidated statement of profit or loss	16,902	15,904
Net assets attributable to equity holders of the parent (£'000)	Consolidated balance sheet	122,281	124,747
Return on investment (%)	Net profit / net assets	13.8%	12.7%
Revenue (£'000)	Consolidated statement of profit or loss	191,258	185,742
Average number of employees		1,225	1,144
Revenue per employee (£'000)	Group revenue / average employees	156,129	162,362
Annual post tax profit (£'000)	Consolidated statement of profit or loss	17,716	16,513
Interest rate SWAP mark to market net of tax @ 25% (2023: 19.49%) (£'000)	Consolidated statement of profit or loss	(85)	(2,576)
Deferred tax rate difference (£'000)		‒	596
Depreciation owned assets (£'000)		6,607	6,272
Depreciation right-of-use assets (£'000)		1,497	1,198
Amortisation and impairment (£'000)		1,341	1,257
Exclude operating lease depreciation (£'000)		(723)	(538)
Annual post tax profit + depreciation + amortisation (£'000)		26,353	22,722

* The gross profit for the previous year has been updated as outlined in note 5 of the financial statements to be published shortly.

 

END