Goodwin Regulatory News (GDWN)

PRELIMINARY ANNOUNCEMENT

Goodwin PLC today announces its preliminary results for the year ended 30th April, 2022.

CHAIRMANS STATEMENT

The "Trading" pre-tax profit for the Group for the twelve month period ended 30th April, 2022, was £17.2 million (2021: £16.5 million) an increase of 4% despite the Group having to contend with £3.8 million of additional energy costs versus the prior year. The revenue was £144 million (2021: £131 million).

Trading profit for this purpose is defined as the Group pre-tax reported profit of £19.9 million less the impact of our £2.74 million interest rate swap valuation. The £2.74 million relates to the 30th April, 2022 valuation of our £30 million debt interest rate swap derivative that expires in August 2031 whereby we have fixed our interest rate for ten years at less than 1% for the full term. In our view, this derivative is an effective hedge and should not go through the profit and loss account. The Board's view was that it was highly probable that we would still have 25% gearing in ten years' time, having secured the interest rate swap to fix interest rates at less than 1% on £30 million debt for this period. Our auditor was unconvinced that it could meet the highly probable criteria and that other requirements under IFRS9 for hedge accounting were not met. The reason the Board considers the level of debt to be highly probable is due to the Board having a responsibility to invest in a responsible manner to grow the business for all the stakeholders. The Board has, however, complied with the auditor's view and has shown the £2.74 million unrealised mark to market gain within the profit before taxation figure. As the £2.74 million gain is a non-cash item, it has been excluded for dividend purposes.  The Directors propose an increased dividend of 107.80p (2021: 102.24p) per share.

Given that we believe turnover and profitability are projected to rise in future years, the level of dividend payments in line with the current policy is also set to rise. In view of this, coupled with the significant capital expenditure needed to fund the Duvelco activity, the Directors are of the opinion that it will be of long-term benefit for the Group to ease pressures on the Group cash flows by paying the current and future dividends bi-annually. It is proposed that dividend payments will be made in equal instalments on 7th October, 2022 and 12th April, 2023.

Refractory Engineering Division

The increase in Group profits achieved in the year having just ended can largely be attributed to the growing Refractory Engineering Division activity, whose year-on-year operating profits have grown a further 37% following the 40% growth that was achieved in the prior year. The Division has continued to maximise its position with sales of jewellery casting consumable products (investment casting powder, waxes, natural and silicone rubbers) and to construction markets that have seen a surge in activity globally.

The Division has also benefited from strong demand for its newer products, AVD being Dupré Minerals' vermiculite-based solution for lithium-ion battery fires that is still in its product life cycle infancy, and has delivered in excess of 100% year-on-year growth, along with Castaldo rubber, which has achieved 45% year-on-year growth. 

The challenges faced by companies from the ongoing global supply chain and energy market disruption have been well reported in the news over the past year and the Refractory Division has acted dynamically to ensure cost increases are passed on to our customers to ensure the impact to our margin is minimised. Whilst the success of the Division has been seen across all companies, special mention should be made of our jewellery investment casting powder companies in China and in India having generated record profits in the year, even though the domestic market in China is still depressed due to the prolonged lockdowns and travel restrictions.

Mechanical Engineering Division

Whilst not always being outwardly visible, the Mechanical Engineering Division has had a very difficult seven years. Over this period the product offerings pretty much across all the companies have had to evolve to the changing conditions in the markets from which the companies generate their turnover and gross margin.

The fact that the companies within the Division have managed to evolve is a credit to them and their management teams. Contending with huge energy and commodity increases within the year has not been straightforward. The metal pricing volatility has been extreme at its highs with nickel trebling in price and iron more than doubling in price at times. As a matter of course, our long term contracts have variation clauses to adjust for annual inflationary costs. However, the volatility of metals and energy costs has been so extreme that these clauses have proved to be totally ineffective. Therefore, across the board every contract where this could have posed significant issues has been successfully re-negotiated with our customers. If we were not a high quality, critical supplier to our customers, then this could have been more problematic, but that is not the case.

Despite the decline of the workload in our traditional markets over the prior years associated with the demise of our product sales to the non green oil and coal sectors, our re-aligned business offerings are more in demand than they ever have been, which is seen by the growing workload that customers are booking up to be delivered now years in advance. With the confidence of a solid and growing forward order book the tide has turned; all things being equal, the next few years should see the Mechanical Engineering Division returning to its former glory with even higher levels of turnover than at the peak of the oil and gas industry in 2014.

Notably within the year, expanding on the nuclear decommissioning front, Goodwin International Limited has successfully tendered and been awarded 50% of the initial phase of the multi year multi million pound Sellafield Hybrid 2, 63 Can Racks as reported on the OJEU website in October last year. Gaining initial process and documentation approvals to proceed with manufacture will take time, but once ramped up, the initial production rate will be 20 racks per year, with 80 racks currently committed. Our customer has the option within the contract to make further commitment(s) of up to an additional 160 racks, as well as increasing the demand to 40 racks per year.

It is also pleasing to report that in addition to Goodwin Steel Castings Limited having completed its transition away from a reliance on the oil and gas market, the company has also managed to successfully settle the two commercial disputes that were referenced in my Chairman's Statement of year ending 30th April, 2020. Part of the settlement is reflected in these results, with the balance being realised in the current financial year.

On top of its base load, with the excellent work done at getting on to new programmes, Goodwin Steel Castings Limited will build on its workload and expect to finish the current year with forward order levels in excess of the levels the Group experienced when it was really busy a decade ago. However, it will not be for oil and coal industries as it was previously; it will be for nuclear decommissioning; or nuclear power station castings; or surface ship and aircraft carrier castings as well as submarine hull castings.

With these successes, and the hard work and perseverance of the Group in achieving a positive conclusion to prior years' contractual claims we have been pursuing; the successful re-negotiation of multiple contracts for unforeseeable energy and raw materials pricing volatility whilst at the same time growing, it has resulted in an excellent Group workload of £175 million as at the time of writing. It is pleasing to report that the bulk of the increased workload relates to contracts to supply products that the Group has successfully and consistently delivered before, and is a workload figure that is likely to grow over the coming years even with the knowledge that the Group is likely to achieve record activity levels within this current year.

What is not visible yet in the workload figure is an appropriate workload for Easat Radar Systems Limited. Once up to speed (which still may be another year away) the Board and I believe there will be a workload for Easat, the likes of which readers of their accounts for the past thirty years have never seen.  Easat order input has been hampered by lack of cash generation at civilian airports globally, and military airports being starved of cash as a result of Covid-19 over the past two years hampering their purchasing decisions. However, it would appear that the radar market is starting to wake up again. We have considerably more firm buy quotations due for decision in the next six months, and, in order to give a flavour of what we are seeing, in the week following the latest ATM Madrid exhibition in June 2022, an additional £47 million of firm buy radar systems were quoted.

Energy

As initially reported in our 31st October, 2021 Interim Statement, over the course of the year the most significant headwind that the Group has faced has been the increased energy costs. Nonetheless, the Group managed to deliver the more than respectable profits reported above, after having incurred a total of £3.8 million of additional energy costs due to price increases versus the year ended 30th April, 2021.  Goodwin Steel Castings Limited and Hoben International Limited were the most affected due to their energy intensive operations, melting metal and high temperature treatment of refractories. However, now armed with a multitude of short and long-term hedges in place the Group is set to deliver substantially higher profitability in the current year, partly as a result of not having to absorb the price volatility of the energy markets that have been seen over the past twelve months, irrespective of the improving performance.

Green Investments

We recognise the importance of adopting a strategy to transition to lower carbon manufacturing. We have put in place a separate £10 million finance line to fund a range of 'green' investments which were approved at the beginning of the financial year ended 30th April, 2022. A total of 4.8 MWp of solar panels have been installed and commissioned as at the time of writing. Each individual system has been designed specifically to match the power demand at each facility, subject to available roof space. The payback of each system varies dependent on the size and roof configuration and all were between three and six years; however, that payback was calculated prior to energy costs more than doubling, so at current market prices the payback time has halved from the original plan, with all the solar systems having an insurance backed 20 year minimum lifespan. There are other solar projects and plant control modification projects that, subject to us obtaining the agreement from the Electricity Supplier ( District Network Operator ), for the former we expect to bring on line over the next two years. This will provide a further 7.8 MWp of green electricity generation and so further reduce our consumption. Over the course of the year a total of £8.2 million has been invested in green projects.

We are also looking at schemes that would reduce our carbon footprint in instances where we cannot reduce or eliminate CO2 production without ceasing the operation in its entirety. Typically this is where we utilise natural gas in a process, and it is not economically viable or possible to change the process.  I look forward to updating you further on this in twelve months' time. 

Capital expenditure / cash flow

With the Group's intrinsically strong cash flows, the Group's net debt stands in line with the Board's expectations at £29.8 million as at 30th April, 2022, which is a £2 million improvement since the half year despite having proceeded with our substantial investment programme. As mentioned earlier we are making full use of the ten year duration £30 million interest swap that was executed at the height of Covid-19 in light of our planned activities, whereby the SONIA interest chargeable to the Company is capped at less than 1% on £30 million of borrowings.

The headline investments that the Board has authorised and the Group has been getting on with are four fold, and whilst these activities all commenced in year ended 30th April, 2022, due to the timescales the latter three are still in the course of construction.

Firstly nearly £10 million relates to green investments, with the majority being spent on CO2 offsetting projects.

Secondly, due to the outstanding performance of the Refractory Engineering Division in growing sales by winning market share so impressively, for both capacity and business continuity requirements, as we are running dangerously close to full capacity, authorisation has been given to spend £4.5 million installing a second calciner at Hoben International Limited, as without it, we would have two problems. We would be limiting the Refractory Division the opportunity to grow further investment powder sales, and in the eventuality of a breakdown we would struggle to ever catch up with the demand again, and would lose market share to competitors who could deliver product to keep our customers operational. This was why the Board deemed this a necessary investment as it is underpinning substantial Group profitability.

Thirdly, for Goodwin Steel Castings Limited, despite allocating a significant amount of Group capital expenditure on infrastructure there in recent years, to enable the foundry to deliver what will be required of the foundry, there have been additional planning applications approved and work commenced on additional casting pit space which will allow further increased activity. Such modifications would likely be impossible to carry out in a couple of years' time with the envisaged activity levels there.

Finally for Duvelco Limited, part of the Mechanical Engineering Division, which was incorporated in January 2020. Over the Company's 139 years existence to date, as well as designing or buying bolt on complimentary products and companies, it has occasionally branched out into totally new product lines whilst utilising skill-sets within the organisation. After working on this idea for some time, Duvelco Limited was set up as a business to channel the Company's ambition to become a specialist polymer manufacturer, one that we hope will truly excel over the coming decades. We will manufacture high performance polyimide polymer resins that can be moulded into parts and shapes for high temperature and critical applications that very few polymers can be used for.

With the development work that was done before and since the incorporation of Duvelco Limited, utilising a bespoke pilot scale plant the team designed, we have developed the product and a process that will allow us to deliver a higher performing directly comparable polyimide polymer than the market leader. With an annual addressable, and growing, market size bigger than any product that the Group has supplied to before, the Board believes that, with limited existing market competition, a very high technology barrier, coupled with the fact we have a patent pending process that gives us markedly better high temperature performance than anybody else for directly comparable chemistry product, this should hopefully give Duvelco Limited, as a market invader, good prospects of long term success, so that one day it should be a major contributor to Group profitability.

The initial, custom designed and bespoke plant the Group is building should be coming into operation in the first half of the calendar year 2024, after which we will start growing the sales internationally as we have done with our other products over the years. Our initial investment inclusive of R&D costs and working capital for materials is forecast to come in at £12.5 million; from this we would have an initial annual capacity in excess of £40 million of material. The reason I have elaborated about this is because costs are being incurred now, and it will be a long time until the plant will be in commission. With the effort being put into this by the Group, it should deliver a new niche market, high technology product to the Group with a long life cycle ahead of it, thus providing the Group with long-term benefit, which the Board believes is in the best interest of all stakeholders.

For both Hoben International Limited and Duvelco Limited, most supplier purchase orders were placed in Q3 Financial Year 2022, giving suppliers large down payments to have fixed price contracts. If the start of placing orders for either project had been delayed by several months the prices would have been significantly more with labour and materials increasing, as we ourselves have experienced and have had to mitigate and manage. The Board estimates that by getting on with the projects and contracting when we did, the saving versus starting either project today is in excess of 25%. 

As contracts within the Mechanical Engineering Division become larger and span longer periods, the engineering companies are being targeted to ensure contracts incorporate down payments / stage payments to allow their execution with as neutral overall cash flow status as can be obtained over the life of a contract, so that work in progress does not consume a disproportionate amount of cash as we get busier.

With the profitability, positive outlook and strong understanding of the various subsidiaries' cash flows the Board believes it is appropriate to continue to follow the Group's investment plans and pay the proposed dividend that is in line with the dividend policy with 50% being paid on 7th October, 2022 and 50% on 12th April, 2023.

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, which will likely improve again in the new financial year with the strong foundations that have been put in place in many areas around the Group.

3rd August 2022

T.J.W Goodwin

Chairman

Alternative performance measures mentioned above are defined in Note 6.

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, competitive 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;

· to manage the environmental and social impacts of our business to support its long-term sustainability.

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, our overseas business facilities and our global sales and marketing activities, the Group benefits from market diversity. Further details of our business and products are shown on our website www.goodwin.co.uk

Mechanical Engineering

The Group specialises in supplying precision engineered solutions and industrial goods into critical applications, generally on a project basis, more often than not involving the complementary skill set of other group companies to deliver the requirement. The projects normally involve international procurement, high integrity castings, forgings or wrought high alloy steels, carbon fibre composite structures, precision CNC machining, complex welding and fabrication, and other operations as are required. In addition to specialist projects, the Group manufactures and sells a wide range of dual plate check valves, axial nozzle check valves and axial piston control and isolation valves. These solutions and products typically form part of large construction projects, including the construction of naval vessels, nuclear waste treatment, nuclear power generation, liquefied natural gas (LNG), gas, oil, petrochemical, mining, 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.

The Group through its foundry, Goodwin Steel Castings Limited, 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 Limited. 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 Limited, 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 Limited also has a division that is focused 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 Limited and Noreva GmbH purchase the majority of the value of their sand mould castings from Goodwin Steel Castings Limited for their ranges of check valves and this vertical integration gives rise to competitive benefits, increased efficiencies and timely deliveries.

At Goodwin Pumps India Private Limited we manufacture a superior range of submersible slurry pumps for end users in India, Brazil, Australia and Africa. Easat Radar Systems Limited and its subsidiary, NRPL Aero Oy, design and build bespoke high-performance radar surveillance systems for the global market of major defence contractors, civil aviation authorities and coastal border security agencies. Easat has a sister company, Easat Radar Systems India Private Limited, 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 Limited (GRS) generates value primarily from designing, manufacturing and selling investment casting powders, injection moulding rubbers and waxes to the jewellery casting industry. GRS also manufactures and sells these products to the tyre mould and aerospace industries. The Refractory Engineering Division has five other investment powder manufacturing companies located in China, India and Thailand which sell the casting powders directly and through distributors to the jewellery casting industry and also directly to tyre mould and aerospace industries.

These companies are vertically integrated with another of our UK companies, Hoben International Limited, which manufactures cristobalite, which it sells to the six casting powder manufacturing companies as well as producing ground silica that also goes into casting powders and other UK uses of silica. Hoben now also manufactures different grades of perlite, and a patented range of biodegradable bags, known as Soluform, for use inside traditional hessian / jute bags for the placement of concrete in or around rivers.

The other UK refractory company is Dupré Minerals Limited (Dupré) 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-ion battery fire extinguishers. Dupré also sells consumable refractories to the shell moulding precision casting industry. Dupré has designed, patented and is now selling a range of fire extinguishers and an extinguishing agent for lithium-ion battery fires that utilises a vermiculite dispersion as the fire extinguishing agent.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

for the year ended 30th April, 2022

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30th April, 2022

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30th April, 2022

GOODWIN PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

for the year ended 30th April, 2021

CONSOLIDATED BALANCE SHEET

at 30th April, 2022

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 30th April, 2022

PRINCIPAL RISKS AND UNCERTAINTIES

The Group's operations expose it to a variety of risks and uncertainties. The Directors confirm that they have carried out a robust assessment of the principal risks the Company faced, including those that would threaten its business model, future performance, solvency or liquidity.

Market risk: The Group provides a range of products and services, and there is a risk that the demand for these products and services will vary from time to time because of competitor action or economic cycles or international trade friction or even wars. As shown in note 3 to the financial statements to be published shortly, the Group operates across a range of geographical regions, and its turnover is split across the UK, Europe, USA, the Pacific Basin and the Rest of the World.

Operating in many territories helps spread market risk. Similarly, the Group operates in both Mechanical Engineering and Refractory Engineering sectors, mitigating the impact of a downturn in any one product area as has been seen in recent financial years.

The potential risk of the loss of any key customer is limited as, typically, no single customer accounts for more than 10% of annual turnover.

As described in the Business Model, the Group generates significant sales not only from valves it supplies to LNG, oil, chemical and water markets, but increasingly significant amounts from nuclear new build and decommissioning, naval propulsion marine applications and ship hull components.  The Mechanical Engineering Division also supplies submersible pumps that are supplied to the mining industries and radar systems that are supplied for civil and defence applications.  The Refractory Engineering Division sells vermiculite and perlite to the insulating and fire prevention industry and our investment casting powder companies indirectly selling to the jewellery consumer market through the supply of investment casting moulding powders, waxes, silicone and natural rubber.

Technical risk:  The Group develops and launches new products as part of its strategy to enhance the long-term value of the Group. Such development projects carry business risks, including reputational risk, abortive expenditure and potential customer claims which may have a material impact on the Group. The potential risk here is seen as manageable given the Group is developing products in areas in which it is knowledgeable and new products are tested as far as possible prior to their release into the market.

Product failure / Contractual risk: The risks that the Group supplies products that fail or are not manufactured to specification are risks that all manufacturing companies are exposed to but we try to minimise these risks through the use of highly skilled personnel operating within robust quality control system environments, using third party accreditations where appropriate. With regard to the risk of failure in relation to new products coming on line, the additional risks here are minimised at the research and development stage, where prototype testing and the deployment of a robust closed loop product performance quality control system provides feedback to the design department for the products we manufacture and sell. The risk of not meeting safety expectations, or causing significant adverse impacts to customers or the environment, is countered by the combination of the controls mentioned within this section and the purchase of product liability insurance. The risk of product obsolescence is countered by research and development investment.

Supply chain and equipment risk: Failure of a major supplier or essential item of equipment presents a constant risk of disruption to the manufacturing in progress, especially in these post Covid-19 pandemic times. Where reasonably possible, management mitigates and controls the risk with the use of dual sourcing, continual maintenance programmes, and by carrying adequate levels of stocks and spares to reduce any disruption.

Health and safety:  The Group's operations involve the typical health and safety hazards inherent in manufacturing and business operations. The Group is subject to numerous laws and regulations relating to health and safety around the world. Hazards are managed by carrying out risk assessments and introducing appropriate controls, as well as attending safety training courses.

Acquisitions:  The Group's growth plan over recent years has included a number of acquisitions. There is the risk that these, or future acquisitions, fail to provide the planned value. This risk is mitigated through financial and technical due diligence during the acquisition process and the Group's inherent knowledge of the markets they operate in.

Financial risk:  The principal financial risks faced by the Group are changes in market prices (interest rates, foreign exchange rates and commodity prices). As reported elsewhere within these financial statements, the Company, on 2nd July ,2021, signed a contract to mitigate the impact of interest rate risk by taking out an interest rate swap derivative fixing £30 million of notional debt at less than 1% versus the variable SONIA rate for a period of ten years, commencing 1st September, 2021. Detailed information on the financial risk management objectives and policies is set out in note 26 to the financial statements to be published shortly. The Group has in place risk management policies that seek to limit the adverse effects on the financial performance of the Group by using various instruments and techniques, including credit insurance, stage payments, forward foreign exchange contracts, secured and unsecured credit lines.

Regulatory compliance: The Group's operations are subject to a wide range of laws and regulations. Both within Goodwin PLC and its subsidiaries, the Directors and Senior Managers within the companies make best endeavours to ensure we comply with the relevant laws and regulations.

IT security: The Group performs regular and remote off site backups of its IT systems, from time to time engaging external companies to test and report any weaknesses and deficiencies found to enable solutions to be put in place to mitigate and minimise the risk of an IT security breach. The Group is in the process of re-evaluating the need to invest further in this area over the next 12 months, but for security reasons we will not be disclosing the details of what we do.

Covid-19 risk:  The Covid-19 pandemic continues to have a global impact in varying degrees that has been seen during the year through labour shortages, supply chain disruption, shipping availability and inflationary pressures. The impact of labour shortages has been eased by the strength of our employee retention and our apprentice school continuing to feed the Group's requirements with eager engineers. The supply chain issues have been mitigated by the Group's ability to dynamically acquire and hold appropriate levels of stock so as to avoid disruption to the manufacturing processes. Furthermore, the continuation of the post lock down exceptionally high activity levels within the Refractory Division, in addition to the significant workload within the Mechanical Division have meant that the Group has continued to operate as normal across all of its 23 sites around the world for the past twenty-four months.

Energy: The recent geopolitical tensions, with the current conflict in Ukraine, combined with the UK Government's energy policy over the last few years to reduce carbon emissions has left the country exposed to the fragile global energy system which has driven significant increases in the cost of power. Following the impact this has had on the Group earlier on in the year, the Group has amended its strategy to manage the risk through hedging strategies, incorporating price escalation clauses into the longer term contracts, aided by the coming on stream of increasing levels of low cost solar power around the Group. We also have two significant programmes of enhancing the control of plant and utilising more inverter drives around the Group, which within 24 months should save an additional 6% of the Group's electricity and gas consumption.

FORWARD-LOOKING STATEMENTS

The Group Strategic Report contains forward-looking type 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 for future events or developments, whether as a result of new information, future events or otherwise, except to the extent legally required.

Directors' statement pursuant to the Disclosure and Transparency Rules

Each of the Directors, whose names are listed below, confirm that to the best of each person's knowledge: 

a. the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole; and 

b. the Strategic Report contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. 

Directors

The Directors of the Company who have served during the year are set out below.

M.S. Goodwin

S.R. Goodwin

T.J.W. Goodwin

J. Connolly

B.R.E. Goodwin

N. Brown

J.E. Kelly (Non-Executive Director)

Accounting policies

Goodwin PLC (the "Company") is incorporated in England and Wales.

The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group") and equity account the Group's interest in associates. The parent Company financial statements present information about the Company as a separate entity and not about its Group.

The Group's financial statements have been prepared in accordance with UK adopted International Accounting Standards (IAS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under UK adopted IFRS.

The financial statements for the year ended 30th April, 2021 were prepared in accordance with international

accounting standards in conformity with the requirements of the Companies Act 2006 and IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. There is no difference for the Group in applying each of these accounting frameworks or on the recognition, measurement or disclosure in the period reported as a result of the change in framework. 

The Company has elected to prepare its financial statements in accordance with Financial Reporting Standard (FRS) 101 issued in the UK. These are presented on pages 95 to 107 to the financial statements to be published shortly.

The accounting policies set out below have been applied consistently to all periods presented in these Group financial statements.

Judgements made by the Directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 2 of to the financial statements to be published shortly.

New IFRS standards and interpretations adopted during 2021 / 2022

The IASB and IFRIC issued the following amendments:

· Amendments to IFRS 9, IAS39, IFRS 7, IFRS 4 and IFRS 16 - Interest rate benchmark reform phase 2, which is effective for annual periods beginning on or after 1st January, 2021.

· Amendment to IFRS 16 'Leases' - Covid 19 rent concession extensions, which is effective for annual periods beginning on or after 1st June, 2020

The implementation of these amendments has not had a material impact on the Group's financial statements

The financial information previously set out does not constitute the Company's statutory accounts for the years ended 30th April, 2022 or 2021 but is derived from those accounts. Statutory accounts for 2021 have been delivered to the Registrar of Companies, and those for 2022 will be delivered in due course. The auditors have reported on those accounts; their report was:

i. unqualified;

ii. did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report; and

iii. did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

Copies of the 2022 accounts are expected to be posted to shareholders within the next two weeks and will also be available on the Company's website: www.goodwin.co.uk and from the Company's Registered Office: Ivy House Foundry, Hanley, Stoke-on-Trent ST1 3NR.

Note 1

Segmental information

Products and services from which reportable segments derive their revenues

For the purposes of management reporting to the chief operating decision maker, the Board of Directors, the Group is organised into two reportable operating divisions: mechanical engineering and refractory engineering. Segment assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis. Associates are included in refractory engineering. In accordance with the requirements of IFRS 8, information regarding the Group's operating segments is reported below. 

Geographical segments

The Group operates in the following principal locations. In presenting the information on geographical segments, revenue is based on the location of its customers and assets on the location of the assets.

Note 2

Dividends

The Board proposes to pay a dividend of 107.80 pence per share, up 5% on the previous year (2021: 102.24p). The proposed dividend has been calculated using the Group's profit after taxation figure, plus depreciation and amortisation for the year ending 30th April 2022.

The Board proposes to smooth the Group's cash flow by splitting the payment of the proposed ordinary dividends of 107.80 pence per share into equal instalments of 53.9 pence per share on 7th October, 2022 and on or around 12th April, 2023 to shareholders on the register on 16th September, 2022 and on or around 24th March, 2023 respectively. 

Note 3

Earnings per share

Note 4

Going concern

The Directors, after having reviewed the projections and possible challenges that may lie ahead, believe that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for at least twelve months from the date of approval of these financial statements, and have continued to adopt the going concern basis in preparing the financial statements.

As at 30th April 2022, the Group's gearing ratio stood at 25.8% (2021: 15.4%) against a substantial shareholders' net worth of £115 million (2021: £113 million).  The retained reserves of the Group put it in a strong position to deal with unforeseen material adverse issues.

In previous years we have reported on the potential impact of Covid-19 and its limited impact on the business. As you might expect given our previous comments, our pandemic risk profile is low and whilst there are minor Covid-19 impacts we do not see the pandemic as a cause for concern for the Group moving forwards.

The reported results for the year are after having incurred what have been unprecedented increases in energy costs. Whilst the Group is not complacent and there is work to be done here, we do not see the impact of energy costs giving rise to a going concern issue.

Within our severe but plausible stress test model, it is demonstrable that the Group has sufficient funds to cover the Group's and the Company's financial commitments during the forecast period whilst remaining compliant with its financial covenants. The stress test model starts with the forecasts generated by the subsidiary directors and reflects their specific knowledge of the market conditions, strategy and outlook. Each of these subsidiary level forecasts is then reviewed, challenged and approved by the relevant Group Managing Director who themselves are immersed in each of the businesses. The stress test model then predicts the impact of a severe but plausible reduction in the pre-tax profit forecast without pulling back on our capital expenditure forecast. The results of the stress test modelling did not highlight any going concern issues.

Whilst our carrying values of trade debtors and contract assets are significant, we see little risk here in terms of recovery. Where possible, we credit insure the majority of our debtors and our pre credit risk (work in progress), and for significant contracts where credit insurance is not available, we ensure, where possible, that these contracts are backed by letters of credit or cash positive milestone payments. 

As discussed elsewhere within these accounts, the Mechanical Engineering order book remains high and the Refractory Engineering segment continues to be buoyant.

The Directors are confident that the Group and Company will have sufficient funds to continue to meet their liabilities as they fall due for at least twelve months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.

Note 5

Annual General Meeting

The Annual General Meeting will be held at 10.30 a.m. on 5th October, 2022 at Crewe Hall, Weston Road, Crewe, Cheshire CW1 6UZ.

Note 6

ALTERNATIVE PERFORMANCE MEASURES

END