GOODWIN PLC

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

for the half year ended 31st October 2023

 

CHAIRMAN'S STATEMENT

 

I am pleased to report our half-year results for the first six months ending 31st October 2023. The Group has realised a pre-tax trading profit of £11.2 million, marking a notable 23.1% uplift from the previous year's £9.1 million. This successful outcome is attributed to an increased revenue of £97.6 million. Both of the Group's Divisions have played a significant role in this achievement during the first six months, and we anticipate a continuation of this increased performance for the rest of the financial year, with a current forward order book of £266 million.

 

The Refractory Engineering Division has continued to advance its profitability. Notably, the sales of our internally developed, patent-protected fire extinguishing agent for lithium-ion battery fires, known as AVD, have reached a milestone at the mid-year point, equalling the total sales for the previous financial year.

 

AVD achieved Underwriters Laboratory (UL) certification for component recognition as an extinguishing agent, and a six-litre fire extinguisher containing AVD received UL8 certification. This has opened up substantial opportunities, particularly in the United States, which we anticipate will emerge as a rapidly expanding market for our product, with sales to the USA already starting to grow at a good pace. There is ever-growing interest and adoption that extends way beyond the automotive sector, encompassing a diverse range of applications worldwide. To support this demand, proactive measures have been taken to expand AVD manufacturing capacity. The Group has acquired a 2.5-acre site with a 5,000 square metre industrial building, conveniently located close to Dupré Minerals Limited's primary manufacturing facility in Staffordshire. The site is ready for immediate use with the planned commissioning date of the new, higher-capacity AVD manufacturing line set for April 2024.

 

The new Calciner at Hoben International Limited has proved to be approximately 15% more efficient than the original Calciner due to the strategic design modifications that were incorporated into the initial design. This efficiency improvement has translated into enhanced productivity and energy cost savings. Hoben's sales of Soluform concrete bags continue to grow and there is wider adoption amongst some project engineers who are increasingly favouring it as their product of choice.

 

The Refractory Engineering Division's sales of investment casting powder to the global jewellery casting industry has benefited from the jewellery and brass casting market in China returning to a level of normality and due to the Chinese consumers increasing confidence post COVID.

 

The Mechanical Engineering Division is witnessing the continual progression of activities that was anticipated due to the substantial forward order book.  More to do with timing rather than anything else, the Group's cash position has deteriorated in the first six months of the financial year which is due to the increasing levels of working capital that have been accumulating through the increased activity of the Division. However, whilst we have sufficient facility headroom available we expect this position to improve by the financial year end.

 

There are also a significant number of additional future projects for the Mechanical Engineering Division, for which, at the time of writing, orders have yet to be placed. We anticipate addressing these as they emerge. Reflecting on our active pursuit of major opportunities in the Mechanical Engineering Division over the past three years, it is reassuring to note that none have been lost. However, the slow pace of third party decision making has been a source of frustration. Nevertheless, we are well prepared to capitalise on these opportunities as they arise, whether at Goodwin Steel Castings Limited, Goodwin International Limited or Easat Radar Systems Limited. In all instances, be it technical performance, proven track record or the fact our proposals offer the best value proposition for our customers, globally, we are confident that the existing businesses will continue delivering improved results once we add on some of these new contracts to the existing business activity.

 

Keeping one eye on the future, our patent pending polyimide resin production company, Duvelco Limited, remains on track to have its production plant commissioned and operational by June 2024. All the major capital expenditure has been completed with the majority of any spend left being labour to finish off the wiring, pipework and commissioning. All initial chemicals to make up to 30 tonnes of polymer resin are on site, so there should not be any large increases in working capital affecting the Group's future cash position, as it should become self-funding once operational.

 

After due consideration, from listening to shareholder enquiries at the AGM, we recognise the importance of providing more frequent updates. Considering our Group's diverse and complex operations, we have decided to introduce quarterly trading updates to keep our investors more informed.

 

The Group's overall net debt stands at £54.6 million (31st October 2022: £46.1 million) which equates to a gearing ratio of 47.8% which is in line with the Group's forecasts and due to an end in large amounts of capital expenditure and stabilisation of working capital levels, will fall back towards 30% within the next 18 months.

 

The Board and I want to thank the employees for their continued efforts in pushing the Group performance forward, and wish everyone a very Happy Christmas and a prosperous New Year.

 

 

T.J.W. Goodwin
Chairman	19 December 2023

 

            MANAGEMENT REPORT

 

Financial Highlights

	Unaudited	Unaudited	Audited
	Half Year to	Half Year to	Year ended
	31st October	31st October	30th April
	2023	2022	2023
	£m	£m	£m
Consolidated Results
Revenue	97.6	89.3	185.7
Operating profit	12.5	9.8	20.3
Trading profit *	11.2	9.1	18.9
Unrealised gain on 10 year interest rate swap derivative	0.9	3.1	3.2
Profit before tax	12.1	12.2	22.1
Profit after tax	9.2	9.1	16.5
Capital additions
Property, plant and equipment (PPE) owned	7.0	7.8	21.2
Property, plant and equipment (PPE) right-of-use assets	0.1	1.1	1.5
Operating lease assets (former IAS 17 definition)	‒	(0.2)	(0.4)
Intangible assets	0.4	0.3	1.8
Capital expenditure for KPI purposes	7.5	9.0	24.1
Earnings per share - basic	115.66p	113.93p	206.81p
Earnings per share - diluted	115.66p	113.93p	206.81p

 

* Trading profit is defined as profit before taxation less the movement in fair value of interest rate swap.

Revenue

Revenue of £97.6 million for the six months represents a 9.3% increase from the £89.3 million achieved for the same six month period last year.

Trading profit

Trading profit for the six months of £11.2 million represents a 23.1% increase from the £9.1 million achieved for the same six month period last year. 

Key performance indicators

	Unaudited	Unaudited	Audited
	Half Year to 31st October	Half Year to 31st October	Year ended 30th April
	2023	2022	2023
Trading profit (£'m)	11.2	9.1	18.9
Post tax profit + depreciation + amortisation (£'m) *	12.7	10.5	22.7
Gross profit % of revenue	26.7%	26.5%	24.9%
Trading profit % of revenue	11.5%	10.2%	10.2%
Gearing %	47.8%	40.9%	26.3%
Non cash charges (£'m)
Depreciation	3.9	3.6	7.5
Amortisation and impairment	0.7	0.6	1.3
Total non cash charges	4.6	4.2	8.8

 

Alternative performance measures mentioned above are defined on page 104 of the Group Annual Accounts to 30th April 2023.

* The figure for 31st October 2022 has been restated to show the interest rate swap adjustment net of tax, to be consistent with the other periods.

 

2023/24 Outlook

The Group's increased levels of activity that have occurred in the first half of the year are expected to continue throughout the second half of the year, generating a similar level of profitability as was achieved in the first six months.

Within the Mechanical Engineering Division, whilst it is unlikely to immediately create activity within the factory before the year end, we remain confident that over the next six months Easat Radar Systems  will be announced as the successful bidder of a number of contracts that will create a level of workload for the company that will allow it to generate respectable profits for the next two to three years whilst continuing to compete for more projects that are being tendered.  The reason the Board remains confident is due to the fact that the vast majority of the opportunities that we referenced in a previous statement ("an additional £47 million of firm buy radar systems were quoted") have either been delayed or re-tendered due to the specification of the requirement changing, typically to our advantage due to the company now being able to offer the full suite of surveillance systems.

If a few of the notable contracts that are expected to arrive over the coming months do not get delayed again for the Mechanical Engineering Division, the forward workload will be further increased by the year end.

In the second half of the year, we will also see the completion of the 7,690 square metre new building in India that will substantially increase the manufacturing capacity of both the investment powders and the submersible slurry pump businesses.  These increases will not only enable the Group to benefit from the growing domestic market over the next decade but will also support the growth of the other submersible pump companies in the Group, which for the last three years have grown at an average compound rate of 18% per year, and is expected to continue. Currently the pump companies represent approximately 12% of Group turnover.

Risks and Uncertainties

The Group, mainly through its centralised management structure, makes best endeavours to have in place internal control procedures to identify and manage the key risks and uncertainties affecting the Group.  We would refer you to pages 13 to 14 of the Group Annual Accounts to 30th April 2023 which describe the principal risks and uncertainties, and to note 28, starting on page 81, which describes in detail the key financial risks and uncertainties affecting the business, such as credit risk and foreign exchange risk.

Judging the future relationship of the major currency pairs of the US Dollar, Sterling and the Euro continues to be a challenge.

The Group has mitigated the impact of rising interest rates by fixing the effective base rate at less than 1% for a notional £30 million of debt until August 2031.

Report on Expected Developments

This report describes the expected development of the Group during the year ended 30th April 2024.  The report may contain forward-looking 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 to future events or developments, whether as a result of new information, future events or otherwise, except to the extent legally required.

Going concern

The Group continues to trade profitably by building on the increase in activity seen in the second half of the previous financial year and, with the current order book levels where they are, this should continue and improve in the second half of this financial year and into the next financial year.  The Group has continued with its value added activities and traded throughout this period and previous periods with minimal disruptions to manufacturing activities from the challenges that have been seen over the last few years that have affected many other businesses.  As at 31st October 2023, the Group's net debt stood at £54.6 million (31st October 2022 £46.1 million) as set out in note 16 of these accounts.  Whilst the net debt levels are higher than those recorded at April 2023 and October 2022, they are in line with the Group's forecasts and are expected to reduce over time, as working capital unwinds, along with lower forecasted capital expenditure.  Given the abovementioned, the Directors, after having reviewed the Group projections and possible challenges that may lie ahead, do not see an issue with the continued ability of the Group to meet its financial commitments as they fall due for at least twelve months from the date of these accounts and have drawn up these accounts to reflect that on a going concern basis.

Responsibility statement of the Directors in respect of the half-yearly financial report

The Directors confirm to the best of their knowledge that:

1.   this condensed set of financial statements has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the United Kingdom; and

2.   the Interim Management Report and condensed financial statements include a fair review of the information required by Disclosure and Transparency Rules

·    4.2.7R (being an indication of important events that have occurred during the first six months of the year); and

·    4.2.8R (being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report that could do so).

 

 

T.J.W. Goodwin
Chairman	19 December 2023

 

Condensed Consolidated Statement of Profit or Loss

for the half year to 31st October 2023

 

	Unaudited	Unaudited	Audited
	Half Year to	Half Year to	Year ended
	31st October	31st October	30th April
	2023	2022	2023
	£'000	£'000	£'000
Continuing operations
Revenue	97,584	89,335	185,742
Cost of sales	(71,493)	(65,645)	(139,521)
Gross profit	26,091	23,690	46,221
Distribution expenses	(1,700)	(2,056)	(3,741)
Administrative expenses	(11,872)	(11,801)	(22,167)
Operating profit	12,519	9,833	20,313
Finance costs (net)	(1,351)	(761)	(1,438)
Share of profit of associate company	34	33	65
Profit before taxation and movement in fair value of interest rate swap	11,202	9,105	18,940
Unrealised gain on 10 year interest rate swap derivative	938	3,132	3,189
Profit before taxation	12,140	12,237	22,129
Tax on profit	(2,971)	(3,157)	(5,616)
Profit after taxation	9,169	9,080	16,513
Attributable to:
Equity holders of the parent	8,729	8,761	15,904
Non-controlling interests (NCI)	440	319	609
Profit for the period	9,169	9,080	16,513
Basic earnings per ordinary share (note 13)	115.66p	113.93p	206.81p
Diluted earnings per ordinary share (note 13)	115.66p	113.93p	206.81p

 

Condensed Consolidated Statement of Comprehensive Income

for the half year to 31st October 2023

 

	Unaudited	Unaudited	Audited
	Half Year to	Half Year to	Year ended
	31st October	31st October	30th April
	2023	2022	2023
	£'000	£'000	£'000
Profit for the period	9,169	9,080	16,513
Other comprehensive expense
Items that are or may be reclassified subsequently to the income statements
Foreign exchange translation differences	(218)	(167)	(1,412)
Effective portion of changes in fair value of cash flow hedges	(3,243)	(4,958)	3,741
Ineffective portion of changes in fair value of cash flow hedges	(177)	(92)	518
Change in fair value of cash flow hedges transferred to profit or loss	(242)	949	1,308
Effective portion of changes in fair value of cost of hedging	1,466	96	(1,447)
Ineffective portion of changes in fair value of cost of hedging	9	‒	(76)
Change in fair value of cost of hedging transferred to profit or loss	37	(15)	33
Tax on items that are or may be reclassified subsequently to profit or loss	495	950	(919)
Other comprehensive expense for the period, net of income tax	(1,873)	(3,237)	1,746
Total comprehensive income for the period	7,296	5,843	18,259
Attributable to:
Equity holder of the parent	6,950	5,633	17,726
Non-controlling interests	346	210	533
	7,296	5,843	18,259

 

Condensed Consolidated Statement of Changes in Equity

for the half year to 31st October 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
Half Year to 31st October 2022 (Unaudited)
Balance at 1st May 2022	769	463	5,244	(2,746)	140	111,440	115,310	4,433	119,743
Total comprehensive income:
Profit	‒	‒	‒	‒	‒	8,761	8,761	319	9,080
Other comprehensive income:
Foreign exchange translation differences	‒	(81)	‒	‒	‒	‒	(81)	(86)	(167)
Net movements on cash flow hedges	‒	‒	‒	(3,114)	67	‒	(3,047)	(23)	(3,070)
Total comprehensive income / expense for the period	‒	(81)	‒	(3,114)	67	8,761	5,633	210	5,843
Dividends paid	‒	‒	‒	‒	‒	(4,145)	(4,145)	(380)	(4,525)
Dividends declared *	‒	‒	‒	‒	‒	(4,144)	(4,144)	‒	(4,144)
Balance at 31st October 2022	769	382	5,244	(5,860)	207	111,912	112,654	4,263	116,917

 

* The statement of changes in equity has been restated to reflect the dividends declared .

 

Condensed Consolidated Statement of Changes in Equity

for the half year to 31st October 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 (Audited)
Balance at 1st May 2022	769	463	5,244	(2,746)	140	111,440	115,310	4,433	119,743
Total comprehensive income:
Profit	‒	‒	‒	‒	‒	15,904	15,904	609	16,513
Other comprehensive income:
Foreign exchange translation differences	‒	(1,312)	‒	‒	‒	‒	(1,312)	(100)	(1,412)
Net movements on cash flow hedges	‒	‒	‒	4,250	(1,116)	‒	3,134	24	3,158
Total comprehensive income / expense for the period	‒	(1,312)	‒	4,250	(1,116)	15,904	17,726	533	18,259
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