Goodwin Regulatory News (GDWN)

GOODWIN PLC

PRELIMINARY ANNOUNCEMENT

Goodwin PLC today announces its preliminary results for the year to 30th April 2011.

Chairman's statement

I am pleased to report the results for the Group for the twelve month period ending 30th April 2011. The pre-tax profits were £8.2 million (2010: £13.3 million), a decrease of 38% on a revenue of £92.9 million (2010: £93.0 million) which is marginally down on the figures reported for the same period last financial year. The Directors propose a dividend of 29.166p (2010: 27.777p).

Whilst the reported profit before tax is down by 38% as compared to last year, the gross margin earned, £25.4 million, was only lower by 9%. Part of the £5.1 million drop in pre tax profit relates to increased overheads of the Group associated with Group companies having hired some 50 additional managers in our 22 companies worldwide to assist with the aspired growth over the next five years. The combined cost of hiring and employing these additional people over the last 12 months amounted to just over £2.0 million, and these additional management people will enhance future growth opportunities where the returns should far exceed the investment costs.

Significant amounts of money have been spent on R & D, together with higher than expected non capitalised costs of setting up computerised financial and management accounting systems in Brazil where much of the available software is unable to keep pace with the government tax regulation changes.

On the more positive side, the Refractories Engineering segment of the Group where we have seven overseas companies in China, India, Thailand & Brazil, along with our pump company in India, did particularly well this year and achieved an average of 24% pre-tax profit growth contributing over £4.2 million to Group profits in the year just completed.

In the Engineering segment our two valve companies, Goodwin International Ltd. and Noreva GmbH, had a more difficult year. For the past three years they have recorded excellent results, but with a keenness to not lose market share during the downturn over the past 18 months in the petrochemical business, they took on many smaller contracts that overloaded their administration systems. This coupled with the requirement for even more documentation resulted in them being unable to maintain their previous levels of profitability. Our company in Germany also had a very difficult contract. With more efficient computerised costing systems now commissioned in both companies and with the business levels in the petrochemical industry returning to normal, we have good reason to believe that their performance should now improve. The Group order work load as at 30th April 2011 was good and stood at £64 million which represents about seven months work.

During the year Andrew Baylay, Director and General Manager of Dupré Minerals, and Simon Goodwin, Director and General Manager of Goodwin Refractory Services, were appointed to the Board of Goodwin PLC to better represent the Refractories Engineering segment of the Group.

With our focus on growing our activity in the rapidly developing economies, we are in the process of adding a further 120,000 square feet of manufacturing space overseas such that we are suitably prepared to meet the rapidly growing market demands. We expect to see more than double the business growth rate over the next ten years in these parts of the world as compared to Europe and the USA.

R & D in Goodwin Steel Castings has resulted in a patent being granted to the company for its unique way of producing very large super nickel castings capable of operating at higher temperatures in advanced ultra super critical fossil fuelled power stations. These will soon become the norm due to their increased operational efficiency, thus resulting in reduced CO2 emissions per megawatt of electricity generated.

R & D in Easat Antennas has seen the introduction of turnkey projects for both ground movement radar and primary radar systems.

A key performance indicator remains the generation of profits from diverse growing markets without systemic dependency. With our 10 overseas manufacturing companies our ability to trade within each country regardless of currency exchange has improved. As mentioned earlier in this report, significant profit is now starting to flow from our overseas operations where greater levels of natural growth are expected.

At our annual international business conference for all General Managers and senior managers, many of whom travel from our overseas subsidiaries, best practice is exchanged and new strategies are targeted. This rigorous performance monitoring and comparison leads to Group targets being agreed and set which include Health & Safety, risk reduction, social responsibility and energy reduction targets as well as the more conventional profit targets. These are then overseen by the Board who continue to review governance on a country by country basis.

Since the Board released the block on activity growth in March 2010 following signs that a large part of the world economy was coming out of recession, the pressure on cash flow has increased especially as it continues to be difficult to obtain contract stage payments even from the wealthiest customers who are still trying to conserve their cash flow. The Group's gearing whilst higher than we would like, remains relatively low at 38%, but this reflects the investment in R & D in the UK and the development costs of our overseas companies.

The decision to increase the dividend by 5% to £2.1 million this year is an indication of the Board's confidence in the future performance of the Group.

We remain indebted to our employees in the UK and overseas who through their hard work continue to take the Group forward.

Consolidated income statement

for the year ended 30th April 2011

* Following a review by the directors, certain items of expenditure have been reclassified in the consolidated income statement and the prior year comparative restated accordingly. See note 1 to the financial statements to be published shortly for further details. The reported profit before taxation for the year ended 30th April 2010 is unaffected by this reclassification.

Consolidated statement of comprehensive income

for the year ended 30th April 2011

Consolidated statement of changes in equity

for the year ended 30th April 2011

Consolidated balance sheet

at 30th April 2011

Consolidated cash flow statement

for the year ended 30th April 2011

Risks and Uncertainties

The Group's operations expose it to a variety of risks and uncertainties, including:

Market risk: The Group provides a range of products and services, and there is a risk that the demand for these services will vary from time to time because of competitor action or economic cycles. As shown in Note 2 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, North America, the Pacific Basin and the rest of the world. This spread reduces risk in any one territory. Similarly, the Group operates in both mechanical and refractory engineering sectors, mitigating the risk of a downturn in any one product area. The potential risk of the loss of any key customer is limited as, typically, no single customer accounts for more than 10% of turnover.

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 small given the Group is developing products in areas in which it is knowledgeable and new products are extensively tested prior to their release into the market.

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.

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 extensive financial and technical due diligence during the acquisition process and the Group's 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), credit risks and liquidity. 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 and interest rate caps and swaps. Further information on the financial risk management objectives and policies is set out in note 19 to the financial statements to be published shortly.

Responsibility statements of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge:

·; The financial statements to be published shortly, 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

·; The Directors' Report to be published shortly 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.

JW Goodwin, Chairman

RS Goodwin, Managing Director

FA Gaffney, Director

J Connolly, Director

MS Goodwin, Director

AJ Baylay, Director

SR Goodwin, Director

RESULTS FOR THE YEAR ENDED 30TH APRIL 2011

NOTES

1. As required, the Group's financial statements have been prepared and approved in accordance with International Financial Reporting Standards as adopted by the EU (IFRS) and the above accounts have been prepared on this basis. The comparative results for the year ended 30th April 2010 have also been prepared on this basis.

2. Segmental information.

In accordance with the requirements of IFRS 8 the Group's reportable segments, based on information reported to the Group's Board of Directors for the purposes of resource allocation and assessment segment performance are as follows:

Engineering - casting, machining and general engineering design

Refractories Engineering - powder manufacture and mineral processing

Information regarding the Group's operating segments is reported below. 

* Following a review by the directors, certain items of expenditure have been reclassified in the prior year consolidated income statement, see note 1 to the financial statements to be published shortly for further details, and certain administration, finance and treasury costs for the prior year have been reclassified in the above segmental analysis to ensure consistency in treatment between the subsidiaries in the Group and comparability with the current year's segmental figures.

For the purposes of monitoring segment performance and allocating resources between segments, the Group's Board of Directors monitors the tangible and financial assets attributable to each segment. All assets are allocated to reportable segments with the exception of those held by the parent Company ('PLC').

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.

3. The Directors propose the payment of an ordinary dividend of 29.166p per ordinary share (2010: ordinary dividend of 27.777p). The proposed dividend will be paid on 14th October 2011 to shareholders on the register at the close of business on 16th September 2011.

4. The earnings per ordinary share has been calculated on profit after taxation for the year attributable to equity holders of the parent of £3,628,000 (2010: £8,507,000) and by reference to the 7,200,000 ordinary shares in issue throughout both years. The company has no share options or other diluting instruments and accordingly there is no difference in the calculation of diluted earnings per share.

5. The Annual General Meeting will be held at 10.30 a.m. on 12th October 2011 at Crewe Hall, Weston Road, Crewe, Cheshire CW1 6UZ.

6. Copies of the 2011 accounts are expected to be posted to shareholders at the end of week commencing 22nd August 2011 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.

7. The financial information set out above does not constitute the company's statutory accounts for the years ended 30th April 2011 or 2010 but is derived from those accounts. Statutory accounts for 2010 have been delivered to the registrar of companies, and those for 2011 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) had nothing to report by exception under the Companies Act 2006.

END