Goodwin PLC today announces its preliminary results for the year ended 30th April, 2023.
CHAIRMAN’S STATEMENT
The “Trading” pre-tax profit for the Group for the twelve month period ended 30th April, 2023, was £18.9 million (2022: £17.2 million) an increase of 10% on revenue of £186 million (2022: £144 million). Trading profit for this purpose is defined as the Group pre-tax reported profit of £22.1 million less the positive impact of our interest rate swap, having increased in value by a further £3.2 million. The £3.2 million movement relates to the 30th April, 2023 valuation of our £30 million interest rate swap derivative that expires in August 2031, whereby we have fixed our interest rate on £30 million of debt for ten years at less than 1% for a ten year term. We described in the Chairman’s statement within last year’s Annual Report why the movements in valuation of the interest rate swap shall be excluded, as well as being excluded for dividend purposes.
The Directors propose an increased dividend of 115p (2022: 107.80p) per share.
For the financial year ending on 30th April 2023, the Group has demonstrated substantial progression in its transformation, particularly noted in the handling of increased workload. There was a significant 68% increase in order intake compared to the last year, predominantly at Goodwin Steel Castings Limited and Goodwin International Limited, contributing to the start of the rebound of our Mechanical Engineering Division, which had experienced challenges in recent years. As of the date of the current report, the Group’s cumulative future orders stand at £271 million.
Mechanical Engineering Division
Whilst there has been some resurgence for petrochemical valves for new LNG projects around the world, due to energy uncertainty from current world events, assisting our valve manufacturing companies, it is the combined package that our foundry, Goodwin Steel Castings and the precision project engineering facility Goodwin International offers, which has led to the largest part of new orders shown in the Group workload, with them being primarily for the nuclear decommissioning and naval markets.
Due to the work that these two businesses have excelled at, whilst diversifying away from their mainstay of petrochemical-based work a decade ago, be it discrete orders or orders that combine the skillset of the organisations, the future looks bright. The programmes of work, that are actively ramping up now, are being exploited to win more and more of the same, supporting projects that will still be ongoing in a decade’s time.
A lot of this work has only been possible as a result of the significant investment into Goodwin Steel Castings over recent years. We focused on what needed to be done to become one of the West’s large casting suppliers of choice for large technically advanced castings that we are manufacturing now. These investments look set to repay the faith the Board had in the company and, after a long drought, they should now meaningfully contribute to the Group’s performance going forward.
The supply of heavy duty submersible pumps, primarily to the mining industry, is 19% up on last year. The pump companies in India, Brazil, Australia and South Africa continue to convert customers from competitors’ pumps that are not as reliable and robust as the Goodwin pump, which is specifically designed for the most demanding applications. In the year, a new hydraulically powered variant of our submersible slurry pump that can be mounted directly on 10 – 30 tonne excavators, driven by the excavator’s hydraulics, was launched. The addition of this hydraulic pump opens up a new market area (Heavy Construction) in terms of customers and applications that will complement the natural growth that is expected for the electrically driven pumps. It will be a distributor-based market with the pump being marketed as an excavator accessory, thus allowing all the existing pump companies, that are profitable, to bolt on a complementary product with minimal increases in overheads, all for applications that do not compete with our existing pump business.
Duvelco, the Group’s latest and largest investment into a new business area, which will facilitate the production of high operational temperature polyimide polymer resins, is on course to be completed in line with our previously disclosed timeline. Commercial operation of our initial plant is expected to occur prior to June 2024. As soon as production material is available, the team will look to commence gaining sales traction and break into this new market sector for the Group.
It has been a good year with real progress being made. The Division has adeptly navigated contract and customer management challenges across all sectors, with the overall divisional profitability up 33% on an increased turnover of 41%.
Refractory Engineering Division
In the year there have been two major notable successes. The first major achievement has occurred at Brassington in Derbyshire, where the team at Hoben International Limited (Hoben) has successfully installed and commissioned a second calciner. The calciner supplies one of the key raw materials for the investment casting powder, and as such, the installation not only enables the Division to continue to grow, but has provided the Division with a level of business continuity that we never had the benefit of before. In order to increase capacity to accommodate continued growth in ground silica sales, a third ball mill is in the process of being installed and is planned to be commissioned before the end of the calendar year.
The second success relates to Dupré Minerals Limited (Dupré), which supplies a range of refractory products that typically contain vermiculite. During the year the Company has achieved record trading profits by increasing its profitability by over 50%. The Company has maximised its position through the supply of its traditional products as well as growing its newer products. The energy crisis brought on by the Ukraine conflict has led to a surge in the number of wood stoves being installed, for which Dupré supplies the internal vermiculite insulation boards.
In addition to the supply of boards, Dupré’s internally developed product, known as AVD that address the burning issues surrounding lithium-ion battery fires has taken a step forward. The momentum in sales is starting to provide a respectable contribution to the Group’s profits. AVD extinguishing agent and fire extinguishers are now being sold in over forty-five countries with additional distributors being appointed in new territories on a regular basis. In recent weeks, Underwriters Laboratory (UL) certification for component recognition of AVD as an extinguishing agent and certification of a six litre fire extinguisher containing AVD to UL8 has now been obtained. This is a significant milestone for opening up sales into the USA and other global markets that require UL Certification and it has been pleasing to see that the order input via multiple sources for AVD in the first two months of this financial year was equal to more than the last half of 2023. Expansion of the AVD manufacturing capacity is planned in the coming year.
Sales of jewellery investment powder, moulding rubber and injection waxes have remained strong within the year. Final customer approvals for X-Sil respirable silica free investment powder are in their final stages at key reference customers in the USA and Europe. This has been a long process which should start to generate sales in the coming year. India remains the key growth country for jewellery production around the world and in order to increase production capacity for both investment powder and injection wax production in India a newly constructed larger production facility will be completed and commissioned within the current financial year.
Carbon Reduction Activities
Over the course of the year, the Group has continued working on its carbon neutral program and has spent a further £2 million on renewables, specifically solar panels where the power generated will be utilised on site. In total, the Group has now completed sixteen of the twenty-two individual electricity projects that were initially targeted, which includes the installation of 5.7 MWp of solar panels. The results of this will reduce the Group’s electricity purchased from the national grid by over 24.7% per year, amounting to savings of over £1 million per year, providing a reduction of 1,365 tonnes equivalent of carbon dioxide (CO2) per year. As noted in last year’s Annual Report, the remaining projects are being held up by the District Network Operator. Once this permission, along with planning permission where required, has been obtained there is potential to install a further 10MW of solar panels across our sites. Over half of this will be based at Hoben in Derbyshire where we intend to also apply for planning for two 2.5MW wind turbines. The power generated from these installations will be fully utilised by the Group and will not be exported back to the grid.
Two other major components of the carbon neutral program are the conversion of our 4MW / hr natural gas burners on both calciners at Hoben to hydrogen and offsetting our CO2 footprint, that cannot be eliminated in its entirety without ceasing operation. Despite two unsuccessful grant applications to BEIS to mitigate the very high cost of the electrolysis machine required to make onsite green hydrogen, we are continuing to pursue government support, as the Group’s carbon neutral target heavily depends on finding an alternative to burning natural gas. However, for all other gas processes that cannot be converted, the company has purchased a new 1,180 acre plot of land that is ideally suited for planting 560,000 broad leaf trees. The planting scheme will be one of the largest in the UK and over the next fifty-five years will offset an average of 2,168 tonnes of CO2 per year, which, for example, covers 100% of the CO2 emissions that are generated at the foundry from burning natural gas, as well as being able to offset other subsidiary gas burning processes.
Cashflow
The significant increase in order input and the downpayments associated with these orders, coupled with the not insignificant levels of non-cash depreciation charges (£8 million) that occur annually, provided the Group with a very strong cash generation in the year ended 30th April, 2023. Notwithstanding the £23 million of capital expenditure that has occurred in the year, the Group’s net debt reduced to finish at £33 million which equates to a modest gearing of 26.3%. The major areas of expenditure relate to the second calciner, Duvelco polymer production plant and extending the melt shop at the foundry to enable a greater level of production capacity. Furthermore, the initial costs in relation to a new 7,690 sq m building in India, for which the Board had approved the investment, due to both the refractory and pump businesses reaching capacity within the existing facility, were also incurred in the year ending 30th April 2023.
With the growth that is expected in the years to come, the Group has recently renewed a £10 million revolving credit facility. This is as well as securing an additional £25 million of committed banking facilities on effectively a four year term, as a prudent policy to ensure that guaranteed facilities and the appropriate level of headroom is available to the Group, should it ever be required. The total value of our facilities now available to fund the Group is £75.5 million, of which at the year end we were only utilising 48%.
In line with the activity, the Group’s employee numbers are starting to increase. Our apprenticeship programme continues to insulate the Group from the skills shortages that exist in the local area. To date, a total of three hundred apprentices have completed the course at the Training Centre, with the vast majority of them now working within the subsidiaries and the Group’s twelfth cohort of thirty apprentices will be starting in September 2023.
In March 2023, John Connolly, who had been the Group Chief Accountant and a Director of Goodwin PLC for sixteen years, retired. He had worked for the Goodwin Group for over twenty-seven years and the Board takes the opportunity of thanking him for his hard work and loyalty over the years, which helped move the Group forward. We wish him much happiness in his retirement. We are also pleased to report that Adam Deeth has been brought on board as a highly capable replacement for the Group Chief Accountant role.
We are once again extremely grateful to our UK and overseas directors, managers and employees for their hard work in driving forward the performance of the Group.
| T.J.W. Goodwin | |
| Chairman |
Alternative performance measures mentioned above are defined in Note 2 of the financial statements to be published shortly.