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 |