GOODWIN PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
for the half year ended 31st October 2022
CHAIRMAN’S STATEMENT
The pre-tax trading profit for the Group for the first six month period ending 31st October 2022 was £9.1 million (2021: £7.7 million) on a revenue of £89.3 million.
I am pleased to report that at the time of writing the workload has increased to £242 million (2021: £157 million). This increase relates to the materialisation of some of the major projects that the Mechanical Engineering Division has been pursuing within the military and nuclear waste re-processing markets. It is fortunate that the Mechanical Engineering Division has diversified away from oil and gas into other business streams that will likely avoid the effects of a global recession that are almost certainly going to feature over the next two years. These business streams include US and UK government procured components for military ships and boats, nuclear power, along with nuclear waste storage products.
The first half of the financial year has benefitted from the Refractory Engineering Division continuing to generate excellent results, as well as the pump companies having gone from strength to strength, as the recovery of the global economy following the impact of the Covid-19 pandemic has provided the mining industry with the confidence to proceed with spending again.
The Group’s overall net debt stands at £46.1 million (31st October 2021: £34.8 million) which, whilst temporarily high, equates to a modest gearing of only 39.5%. Within the debt figure is £8.4 million that has been invested in CO 2 emission projects and with the current escalated electricity prices that continue to be prevalent in the UK and Europe, the payback on the solar investments averages at about two years. Whilst cash flow remains a key focus area, with global supply chains generally remaining under stress around the world, the pro-active decision to build up stocks over the past few years has significantly aided the Group’s ability to meet the demand, specifically within the Refractory Division.
Our interest rate swap continues to provide effective protection from inflationary interest on the first £30 million of facility, capping the interest to less than 1% till August 2031. Further to our full explanation as to the accounting for the interest rate swap, which can be read within our Annual Report for the year ending 30th April 2022, the Board has and will continue to focus and report on the trading profit that excludes the profit impact of the interest rate swap valuation. Due to the recent and expected increases to the base interest rate by the Bank of England the Group’s swap increased in value by a further £3.1 million over the course of the first six months of the current financial year.
The work ethic of the Group’s management and employees is world class and the Board wishes to thank all our employees for their unwavering loyalty, devotion and hard work.
| T.J.W. Goodwin | |
| Chairman | 19th December 2022 |
MANAGEMENT REPORT
Financial Highlights
| Unaudited | Unaudited | Audited | |
| Half Year to | Half Year to | Year ended | |
| 31st October | 31st October | 30th April | |
| 2022 | 2021 | 2022 | |
| £ m | £ m | £ m | |
| Consolidated Results | |||
| Revenue | 89.3 | 68.9 | 144.1 |
| Operating profit | 9.8 | 8.2 | 18.3 |
| Trading profit * | 9.1 | 7.7 | 17.2 |
| Unrealised gain on 10 year interest rate swap derivative | 3.1 | ‒ | 2.7 |
| Profit before tax | 12.2 | 7.7 | 19.9 |
| Profit after tax | 9.1 | 6.0 | 13.6 |
| Capital additions | |||
| Property, plant and equipment (PPE) owned | 7.8 | 9.0 | 16.4 |
| Property, plant and equipment (PPE) right-of-use assets | 1.1 | 1.1 | 3.7 |
| Operating lease assets (former IAS 17 definition) | (0.2) | ‒ | (0.1) |
| Intangible assets | 0.3 | 0.6 | 1.8 |
| Capital expenditure for KPI purposes | 9.0 | 10.7 | 21.8 |
| Earnings per share – basic | 113.93 p | 72.12 p | 169.14 p |
| Earnings per share – diluted | 113.93 p | 72.12 p | 169.14 p |
* Trading profit is defined as profit before taxation less the movement in fair value of interest rate swap.
Revenue
Revenue of £ 89,335,000 for the six months represents a n 18.8 % increase from the £ 75,200,000 achieved during the six month period to 30th April 2022 .
Trading profit
Trading profit for the six months of £ 9,105,000 represents a 17.9 % increase from the £7,723,000 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 | |
| 2022 | 2021 | 2022 | |
| Trading profit (£’m) | 9.1 | 7.7 | 17.2 |
| Post tax profit + depreciation + amortisation (£’m) | 9.9 | 9.9 | 21.9 |
| Gross profit % of revenue | 26.5 % | 29.5 % | 29.6 % |
| Trading profit % of revenue | 10.2 % | 11.2 % | 11.9 % |
| Gearing % | 39.5 % | 31.7 % | 25.8 % |
| Non cash charges (£’m) | |||
| Depreciation – owned assets | 3.0 | 2.9 | 6.2 |
| Depreciation – right-of-use assets | 0.6 | 0.5 | 1.2 |
| Amortisation and impairment | 0.6 | 0.7 | 1.6 |
| Total non cash charges | 4.2 | 4.1 | 9.0 |
Alternative performance measures mentioned above are defined on pages 96 and 97 of the Group Annual Accounts to 30th April 2022.
2022/23 Outlook
While there continue s to be some global uncertainties due to the geopolitical environment and rising costs for consumers, the Group’s activity and profitability levels are expected to increase over the next twelve months as a result of the increased work load.
The Mechanical Engineering Division performance is recovering, and with the recent increase in order input the Board expects the activity levels to take a significant step forward in the second half of this financial year, which will provide the Division with a much better start to the next financial year. In the Annual Report to 30th April 2022, we stated that we expected to be able to deliver substantially increased profitability in the year ending April 2023. Since the date of writing that statement a greater degree of uncertainty around the world has evolved with high levels of currency pair fluctuations, the continued conflict in Ukraine and with the Bank of England delivering the biggest interest rate hike in 33 years. This uncertainty is resulting in certain industry sectors hesitating in proceeding boldly with their planned investment projects. For this reason we expect the pre-tax profits in the second half of this financial year to be similar to the first half which would result in a modest increase in annual pre-tax profit rather than a substantial increase.
The Group will benefit over the medium and long term as we near the end of the significant capital investment programmes of installing a second calciner at Hoben International, as well as the upfront costs of installing the high temperature polymer production plant at Duvelco. Thereafter , capital expenditure levels are set to normalise going forwards, as we focus on delivering the orders recently won, as well as the ones still being pursued.
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 risk s and uncertainties affecting the Group. We would refer you to pages 14 to 15 of the Group Annual Accounts to 30th April 2022 which describe the principal risks and uncertainties, and to note 26 , starting on page 75 , which describes in detail the key financial risks and uncertainties affect ing 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 for the next nine years.
Report on Expected Developments
This report describes the expected development of the Group during the year ended 30th April 2023 . 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 profitability by building on the increase in activity seen in the second half of last year and , with the current order book levels as they are , this should continue and improve through this current year and into the next financial year. Where many companies have struggled with increased material and energy prices, disruption in the logistics of the supply chain and the impacts of Covid-19, the Group has continued on throughout and been able to carry on with its value added activities. As at 31st October 2022, the Group net debt stood at £46.1 m illion (31st October 2021: £34.8 m illion ) as set out in note 1 7 of these accounts. Whilst the net debt levels are higher than those recorded at April 2022 and October 2021 the gearing levels at 39.5% remain moderate for a Group of this size. Given the above-mentioned, the Directors do not see an issue with the continued ability of the Group to meet its financial commitments as they fall due and have drawn up these accounts 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 2022 |