Goodwin Plc - Final Results

CHAIRMAN'S STATEMENT

 

I am pleased to report a like-for-like 11% increase in pre tax profits to £14.7 million (2018: £13.3 million), as detailed in note 3 of the Accounts to be published shortly. Revenue of £127 million (2018: £125 million) is up 1.8% on the figures reported for the same period in the last financial year.  The Directors propose an increased dividend of 96.21p (2018: 83.473p), a 15.3% increase.

 

Furthermore, I am also delighted to confirm that we have seen a significant rise in the level of sales order input within our Mechanical Engineering Division. Whilst some individual elements would not be notifiable the aggregation is significant for the Group. With this exceptional input, I am able to confirm that, at the time of writing, the Group order input since the start of the new financial year stands at £93 million and the total forward order book stands at a record £165 million (July 2018: £85 million), a 94% increase from this time last year, with yet more large long-term contracts, that we have been targeting over the past few years, still to be placed.

 

Due to contractual requirements the Company cannot divulge all successes in relation to the significant increase in order intake. However we can confirm that several orders have multi-year delivery requirements and the Board foresees little risk in executing them, as they utilise the respective companies' core strengths within Goodwin Steel Castings and Goodwin International.

 

Of particular note in the Mechanical Engineering Division, Goodwin Steel Castings has undergone major change, not only in returning to profitability in the year but also completing its extensive upgrade programme that gives it increased weight capability (casting up to 35 tonnes net weight castings in impact-resistant carbon, stainless and duplex stainless steels) and puts it in a unique global position. With the work that they have gone out and won internationally to date, which is now starting to be delivered, they will never again be as reliant on the petrochemical industry. One such multi-million dollar order Goodwin Steel Castings has received is for cast and machined radiation shielding containment vessels for the USA nuclear decommissioning market.

 

Easat Radar Systems reported a loss due to lack of throughput and excessive work in progress (WIP) over the year, combined with contract delays whilst working to finalise an off-the-shelf radar system for a major customer. The final documentation approvals for this are all but complete now, which should allow for a reduction in approximately £5 million of WIP this current year as radar systems are shipped.

 

Over the past decade, Goodwin International has worked closely with world leading valve stockist, RP Valves, who have stocked and re-sold Goodwin dual plate valves. We are pleased to announce that RP Valves has placed a multi-million pound order for axial valves with Goodwin International.  By RP Valves ordering premium specification product in bulk at their risk, only selling single items to customers when they have a requirement, it will increase Goodwin's overall axial valve sales in the future as this will lead to Goodwin product being utilised for MRO (Maintenance, Repair and Operational) work, which seldom happens for axial valves, normally due to the project based nature of the business.

 

Utilising a beneficial twenty year fixed borrowing rate of 1.89%, that was available as a result of the European economic conditions during the year, Noreva took the opportunity to stop renting and purchased the 1.85 acre site that the company is situated on in Mönchengladbach, Germany.

 

Our Refractory Engineering Division has maintained the significant increase in market share in the investment casting powder sector that it gained last financial year when its major competitor Kerr ceased manufacture. Whilst operating profits in April 2019 have risen only 7.2% compared to April 2018, we will start to see sales within the new financial year of the "Silica Free" investment powder technology, for which a patent application was filed in April 2019, with early adopters likely to be the more western countries. This new technology will enable the division to further grow its global market share and help further increase its gross margins in years to come.

 

The global awareness of the risks of lithium battery fires and requirement for a solution continues to grow. Within the year, Dupré Minerals has put in place a manufacturing agreement with a French company that will manufacture AVD fire extinguishers for Europe.

 

During the financial year, Goodwin PLC signed an agreement to purchase a 26% minority interest in Jewelry Plaster (Thailand), converting it into a 75% owned subsidiary. We also acquired a further 24% equity in Ultratec (China) and in SRS QD (China) making these 75% owned subsidiaries. We would like to thank our departing Thai equity partner for his efforts in growing these overseas subsidiaries.

 

Our current working capital as a percentage of revenue is the same as the Group average has been for the last 10 years, resulting in modest gearing of 20% (2018: 11%), despite the high work in progress values within Easat.

 

We continue to retain, train and develop our employees, with a new cohort of 25 apprentices starting in the Goodwin Engineering Training Centre later this year. The Training Centre is now on the UK register of Learning Providers as well as being approved by the necessary exam boards. With these accreditations in place, the apprenticeship levy on the Group's UK wage bill can now start to be offset against its running costs.  We recognise the importance of nurturing talent and bringing highly capable people either through or into the business, as with record low unemployment levels in the UK, we are continuing with our strategy to ensure that we have the right people with the right skill sets to competently execute the work as we grow.

 

The Board would like to thank John Goodwin and Richard Goodwin, following their retirement from the Board, for their achievement in leading the Company over the past twenty-seven years as Chairman and Managing Director respectively. Over this period the Group's annual pre tax profits increased thirty-three fold and benefitted from the addition of seventeen new subsidiaries, fifteen of which are overseas and the majority of which are located in high growth developing countries. Over the three year period ending 30th April, 2019, the overseas companies have contributed in excess of 50% of pre tax profits, thus emphasising their importance to the Group, from what were small beginnings. The Board is pleased that John and Richard's extensive knowledge will not be lost to the Group as they remain members of the Audit Committee.

 

Due to the diversity of the business and the global reach, the Board has decided to split the role of Managing Director between Mechanical Engineering and Refractory Engineering, such that appropriate focus and energy can be applied to continue growing these two important but quite different divisions.

 

Matthew, Simon and I are pleased to have the opportunity to serve as the new Mechanical Engineering Division Managing Director, Refractory Engineering Division Managing Director and Chairman, working with the rest of the Board and Senior Management to carry on driving the Company forwards, for the benefit of all stakeholders. 

 

The Board is once again indebted to our employees and former members of the Board for their devotion to the Group's long-term performance.  It is as a result of their outstanding work ethic that the Group has never before been in such a favourable position.

 

22 August, 2019

T.J.W. Goodwin

 

Chairman

 

Alternative performance measures mentioned above are defined in note 7.

 

 

OBJECTIVES, STRATEGY AND BUSINESS MODEL

 

The Group's main OBJECTIVE is to have a sustainable long-term engineering based business with good potential for profitable growth while providing a fair return to our shareholders.

The Board's STRATEGY to achieve this is:

·    to supply a range of technically advanced products to growth markets in the mechanical engineering and refractory engineering segments in which we have built up a global reputation for engineering excellence, quality, efficiency, reliability, price and delivery;

·    to manufacture advanced technical products profitably, efficiently and economically;

·    to maintain an ongoing programme of investment in plant, facilities, sales and marketing, research and development with a view to increasing efficiency, reducing costs, increasing performance, delivering better products for our customers, expanding our global customer base and keeping us at the forefront of technology within our markets, whilst at all times taking appropriate steps to ensure the health and safety of our employees and customers;

·    to control our working capital and investment programme to ensure a safe level of gearing;

·    to maintain a strong capital base to retain investor, customer, creditor and market confidence and so help sustain future development of the business;

·    to support a local presence and a local workforce in order to stay close to our customers;

·    to invest in training and development of skills for the Group's future.

 

BUSINESS MODEL

 

The Group's focus is on manufacturing within two sectors, mechanical engineering and refractory engineering, and through this division of our manufacturing activities, the Group benefits from market diversity. Further details of our business and products are shown on our website www.goodwin.co.uk/2019

 

Mechanical Engineering

The Group designs, manufactures and sells a wide range of dual plate check valves, axial nozzle check valves and axial piston control and isolation valves to serve the oil, petrochemical, gas, liquefied natural gas (LNG) and water markets. We generate value by creating leading edge technology designs, globally sourcing the best quality raw material at good prices, manufacturing in highly efficient facilities using up to date technology to provide very reliable products to the required specification, at competitive prices and with timely deliveries.

 

Our mechanical engineering markets also include high alloy castings, machining and general engineering products which typically form part of large construction projects such as power generation plants, oil refineries, high integrity offshore structural components and bridges. The Group through its foundry, Goodwin Steel Castings, has the capability to pour high performance alloy castings up to 35 tonnes, radiograph and also finish CNC machine and fabricate them at the foundry's sister company, Goodwin International. This capability is targeting the defence industry and nuclear decommissioning, the oil and gas industry, as well as large, global projects requiring high integrity machined castings. 

 

Goodwin International, the largest company in the mechanical engineering division, not only designs and manufactures dual plate check valves, axial nozzle check valves and axial piston control and isolation valves but also undertakes specialised CNC machining and fabrication work for nuclear decommissioning projects. Goodwin International also has a division that is focussed on manufacturing / machining high precision, high integrity components for naval marine vessels. Noreva GmbH also designs, manufactures and sells axial nozzle check valves. Both Goodwin International and Noreva purchase the majority of the value of their sand mould castings from Goodwin Steel Castings and this vertical integration gives rise to competitive benefits, increased efficiencies and timely deliveries.

 

At Goodwin Pumps India we manufacture a superior range of submersible slurry pumps for end users in India, China, Brazil, Australia and Africa. Easat Radar Systems (Easat) and its subsidiary, NRPL, design and build bespoke high-performance radar antenna systems for the global market of major defence contractors, civil aviation authorities and border security agencies. Easat has a sister company, Easat Radar Systems India, that also manufactures, sells and maintains radar systems for air traffic control.  We create value on these by innovative design, assembly and testing in our own facilities using bought in or engineered in-house components.

 

Refractory Engineering          

Within the refractory engineering division, Goodwin Refractory Services (GRS) primarily generates value from designing, manufacturing and selling investment casting powders waxes and silicon rubber to the jewellery casting industry. GRS also manufactures and sells investment casting powders to the tyre mould and aerospace industries. The refractory engineering division has six other investment powder manufacturing companies located in China, India, Thailand and Brazil which sell the casting powders directly and through distributors to the jewellery casting industry.

 

These companies are vertically integrated with another of our UK companies, Hoben International, which manufactures cristobalite, which it sells to the seven casting powder manufacturing companies as well as producing ground silica that also goes into casting powders. Hoben International now also manufactures different grades of perlite.

 

The other UK refractory company is Dupré Minerals which focuses on producing exfoliated vermiculite that is used in insulation, brake linings and fire protection products, including technical textiles that can withstand exposure to high temperatures and for lithium battery fire extinguishers. Dupré also sells consumable refractories to the shell moulding casting industry.

 

 

 

 

 

GOODWIN PLC

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

for the year ended 30th April, 2019

 

 

 

2019

2018

 

 

£'000

£'000

CONTINUING OPERATIONS

 

 

 

Revenue

 

127,046

124,811

Cost of sales

 

(86,414)

(89,143)

 

 

                 

                 

GROSS PROFIT

 

40,632

35,668

Other income

 

-

1,602

Distribution expenses

 

(3,016)

(3,359)

Administrative expenses

 

(21,205)

(20,331)

 

 

                 

                 

OPERATING PROFIT

 

16,411

13,580

Financial expenses

 

(234)

(590)

Share of profit of associate companies

 

233

310

 

 

                 

                 

PROFIT BEFORE TAXATION

 

16,410

13,300

Tax on profit

 

(3,963)

(3,865)

 

 

                 

                 

PROFIT AFTER TAXATION

 

12,447

9,435

 

 

                 

                 

ATTRIBUTABLE TO:

 

 

 

Equity holders of the parent

 

11,505

8,504

Non-controlling interests

 

942

931

 

 

                 

                 

PROFIT FOR THE YEAR

 

12,447

9,435

 

 

                 

                 

 

 

 

 

BASIC EARNINGS PER ORDINARY SHARE

 

159.79p

118.11p

 

 

                 

                 

DILUTED EARNINGS PER ORDINARY SHARE

 

149.65p

118.11p

 

 

                 

                 

 

 

GOODWIN PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30th April, 2019

 

 

2019

2018

 

£'000

£'000

PROFIT FOR THE YEAR

12,447

9,435

 

 

 

OTHER COMPREHENSIVE (EXPENSE) / INCOME

 

 

ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS:

 

 

Foreign exchange translation differences

(383)

(152)

Goodwill arising from purchase of non-controlling interest in subsidiaries

(772)

-

Effective portion of changes in fair value of cash flow hedges

(644)

(294)

Change in fair value of cash flow hedges transferred to profit or loss

180

5,108

Effective portion of changes in fair value of cost of hedging

(489)

-

Change in fair value of cost of hedging transferred to profit or loss

49

-

Tax credit / (charge) on items that may be reclassified subsequently to profit or loss

154

(818)

 

                 

                 

OTHER COMPREHENSIVE (EXPENSE) / INCOME FOR THE YEAR, NET OF INCOME TAX

(1,905)

3,844

 

                 

                 

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

10,542

13,279

 

                 

                 

ATTRIBUTABLE TO:

 

 

Equity holders of the parent

9,528

12,245

Non-controlling interests

1,014

1,034

 

                 

                 

 

10,542

13,279

 

                 

                 

 

 

GOODWIN PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30th April, 2019

 

 

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, 2019

 

 

 

 

 

 

 

 

 

Balance at 1st May, 2018

720

1,879

1,625

(224)

-

95,568

99,568

5,259

104,827

Adjustment on initial application of IFRS 9 (net of tax)

-

-

-

52

(52)

-

-

-

-

Adjustment on initial application of IFRS 15 (net of tax)

 

 

 

 

 

(684)

(684)

(350)

(1,034)

 

            

            

                 

                 

                 

                 

                 

                 

                 

ADJUSTED BALANCE AT 1ST MAY, 2018

720

1,879

1,625

(172)

(52)

94,884

98,884

4,909

103,793

 

           

            

                 

                 

                 

                 

                 

                 

                 

Total comprehensive income:

 

 

 

 

 

 

 

 

 

Profit

-

-

-

-

-

11,505

11,505

942

12,447

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Foreign exchange translation differences

-

(430)

-

-

-

-

(430)

47

(383)

Goodwill arising from purchase of NCI interest in subsidiaries

-

(180)

-

-

-

(592)

(772)

-

(772)

Net movements on cash flow hedges

-

-

-

(401)

(374)

-

(775)

25

(750)

 

            

            

                 

                 

                 

                 

                 

                 

                 

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

-

(610)

-

(401)

(374)

10,913

9,528

1,014

10,542

Equity-settled share-based payment transactions

-

-

1,220

-

-

-

1,220

-

1,220

Tax on equity-settled share-based payment transactions

-

-

2,146

-

-

-

2,146

-

2,146

Dividends paid

-

-

-

-

-

(6,126)

(6,126)

(451)

(6,577)

Acquisition of NCI without a change in control

-

-

-

-

-

-

-

(1,750)

(1,750)

Disposal of equity investments

-

(225)

-

-

-

-

(225)

-

(225)

Acquisition of subsidiary with NCI

-

 

-

-

-

-

-

142

142

Capital contribution

-

-

-

-

-

(262)

(262)

262

-

 

            

            

                 

                 

                 

                 

                 

                 

                 

BALANCE AT 30TH APRIL, 2019

720

1,044

4,991

(573)

(426)

99,409

105,165

4,126

109,291

 

            

            

                 

                 

                 

                 

                 

                 

                 

 

 

GOODWIN PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

for the year ended 30th April, 2019

 

 

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, 2018

 

 

 

 

 

 

 

 

 

Balance at 1st May, 2017

720

2,154

601

(4,240)

-

90,201

89,436

4,225

93,661

Total comprehensive income:

 

 

 

 

 

 

 

 

 

Profit

-

-

-

-

-

8,504

8,504

931

9,435

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Foreign exchange translation differences

-

(275)

-

-

-

-

(275)

123

(152)

Net movements on cash flow hedges

-

-

-

4,016

-

-

4,016

(20)

3,996

 

            

            

                 

                 

                 

                 

                 

                 

                 

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

-

(275)

-

4,016

-

8,504

12,245

1,034

13,279

Equity-settled share-based payment transactions

-

-

1,024

-

-

-

1,024

-

1,024

Dividends paid

-

-

-

-

-

(3,137)

(3,137)

-

(3,137)

 

            

            

                 

                 

                 

                 

                 

                 

                 

BALANCE AT 30TH APRIL, 2018

720

1,879

1,625

(224)

-

95,568

99,568

5,259

104,827

 

           

            

                 

                 

                 

                 

                 

                 

                 

 

GOODWIN PLC

CONSOLIDATED BALANCE SHEET

at 30th April, 2019

 

 

 

2019

2018

 

 

£'000

£'000

NON-CURRENT ASSETS

 

 

 

Property, plant and equipment

 

74,106

69,154

Investment in associates

 

739

1,963

Intangible assets

 

22,354

21,138

Other financial assets at amortised cost

 

505

728

 

 

                 

                 

 

 

97,704

92,983

 

 

                 

                 

CURRENT ASSETS

 

 

 

Inventories

 

50,524

28,850

Contract assets

 

3,698

6,046

Trade receivables and other financial assets

 

24,964

20,053

Other receivables

 

2,715

1,861

Derivative financial assets

 

195

364

Cash and cash equivalents

 

9,640

7,485

 

 

                 

                 

 

 

91,736

64,659

 

 

                 

                 

TOTAL ASSETS

 

189,440

157,642

 

 

                 

                 

CURRENT LIABILITIES

 

 

 

Interest-bearing loans and borrowings

 

10,198

12,468

Contract liabilities

 

18,002

212

Trade payables and other financial liabilities

 

20,570

17,858

Other payables

 

4,771

8,821

Deferred consideration

 

204

500

Derivative financial liabilities

 

1,693

1,535

Liabilities for current tax

 

2,356

1,174

Warranty provision

 

261

184

 

 

                 

                 

 

 

58,055

42,752

 

 

                 

                 

NON-CURRENT LIABILITIES

 

 

 

Interest-bearing loans and borrowings

 

20,486

5,775

Warranty provision

 

232

329

Deferred tax liabilities

 

1,376

3,959

 

 

                 

                 

 

 

22,094

10,063

 

 

                 

                 

TOTAL LIABILITIES

 

80,149

52,815

 

 

                 

                 

NET ASSETS

 

109,291

104,827

 

 

                 

                 

 

 

 

 

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT

 

 

Share capital

 

720

720

Translation reserve

 

1,044

1,879

Share-based payments reserve

 

4,991

1,625

Cash flow hedge reserve

 

(573)

(224)

Cost of hedging reserve

 

(426)

-

Retained earnings

 

99,409

95,568

 

 

                 

                 

TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT

105,165

99,568

NON-CONTROLLING INTERESTS

 

4,126

5,259

 

 

                 

                 

TOTAL EQUITY

 

109,291

104,827