TIDMGDWN
RNS Number : 8183K
Goodwin PLC
18 December 2018
GOODWIN PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
for the half year ended 31st October 2018
CHAIRMAN'S STATEMENT
I am pleased to report that the pre-tax profit for the Group for
the six month period ending 31st October 2018 was GBP7.8 million
(2017 GBP6.1 million) an increase of 28% from a revenue of GBP67.5
million, which increased by 9%.
The current work load as at 31st October 2018 stands at GBP99
million, as compared to GBP84 million twelve months ago. The Group
order book continues to improve not only in quantity but also in
quality of earnings, both on the Mechanical Engineering side of the
business and the Refractory Engineering side. The oil and gas order
input is stable and the increase on the Mechanical Engineering side
of the business relates to the new markets this division has been
targeting, such as naval shipbuilding and nuclear waste
reprocessing.
The order backlog represents about eight months of activity at
current activity levels. Prior to the end of the first half of the
calendar year 2019 the Group expects to win some substantial orders
that will allow the Group activity level to take a step
forward.
We recently replaced an existing Barclays' long term (5 year)
banking agreement by moving to HSBC. HSBC is now one of our two
main bankers along with Lloyds. The package was on better
terms.
Our Group employee numbers have started growing again and this
is complemented by another group of 25 apprentices having started
in September 2018. Our best weapon in times of shortage of skilled
labour has always been to train our own people through our own
in-house apprenticeship schemes.
J. W. Goodwin
Chairman 18th December 2018
Management report
Financial Highlights
Unaudited Unaudited Audited Year
Half Year Half Year Ended
to to
31st October 31st October 30th April
2018 2017 2018
GBP'm GBP'm GBP'm
Consolidated Results
Revenue 67.5 61.9 124.8
Operating profit 7.8 6.4 13.6
Profit before tax 7.8 6.1 13.3
Profit after tax 5.7 4.5 9.4
------------------------------ ------------- ------------- -------------
Capital Expenditure 5.7 4.0 9.4
------------------------------ ------------- ------------- -------------
Earnings per share - basic 74.90p 58.38p 118.11p
------------------------------ ------------- ------------- -------------
Earnings per share - diluted 73.44p 58.38p 118.11p
Turnover
Sales revenue of GBP67,548,000 for the half year represents a 9%
increase from the GBP61,893,000 achieved during the same period
last year.
Profit Before Tax
Profit before tax for the six months of GBP7,804,000 is up 28%
from the GBP6,108,000 achieved for the same six month period last
year.
Key performance indicators
The key performance indicators for the business are listed
below:
Unaudited Unaudited Audited Year
Half Year Half Year Ended
to to
31st October 31st October 30th April
2018 2017 2018
Gross profit as a % of turnover 29.5 27.7 28.6
Profit before tax (in GBP
millions) 7.8 6.1 13.3
Gearing % (excluding deferred
consideration) 12.0 29.4 10.8
Depreciation (in GBP millions) 2.8 2.6 5.2
Amortisation (in GBP millions) 0.5 0.6 1.1
Equity-settled share-based
provision (in GBP millions) 0.5 0.5 1.0
------------------------------------ ------------- ------------- -------------
Non cash charges (in GBP millions) 3.8 3.7 7.3
------------------------------------ ------------- ------------- -------------
Profit before tax (in GBP
millions) 7.8 6.1 13.3
Other income (in GBP millions) - (1.6) (1.6)
------------------------------------ ------------- ------------- -------------
Trading profit (in GBP millions) 7.8 4.5 11.7
------------------------------------ ------------- ------------- -------------
Alternative performance measures mentioned above are defined in
note 29 on page 68 of the Group Annual accounts to 30th April
2018.
2019/20 Outlook
The Group activity and profitability levels are expected to
increase over the next twelve months associated with the increased
work load. Whilst the Group's pre-tax profitability in the first
six months of the current financial year increased by 28% as stated
in this half year's Chairman's Statement, the trading profit in
this period actually increased by 73% compared to the same period
last financial year. This was a reflection of improving quality of
orders, whereas last year there was a GBP1.6 million gain from
selling the first Indian factory land site which we had purchased
in 2003.
Whilst we have an increased work load, we expect the second half
year pre-tax profits of this financial year to be similar to the
first half of this financial year as it will take about six months
to ramp up the activity levels and take the new work through first
piece sample approvals. However, subject to significant new
business being won, we expect 2019 / 2020 to be busier and more
profitable than the current financial year.
Our activities in India continue to grow in this buoyant large
economy and, to accommodate further growth of our pump and
investment casting powder manufacturing activities there, we have
in this first half of the year purchased 2.6 more acres of land
adjacent to our 4 acre site to accommodate the further anticipated
growth over the next three years.
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 risks and uncertainties affecting
the Group. We would refer you to page 11 of the Group Annual
Accounts to 30th April 2018 which describes the principal risks and
uncertainties, and to note 20 (page 58) which describes in detail
the key financial risks and uncertainties affecting 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.
Report on Expected Developments
This report describes the expected developments of the Group
during the year ended 30th April 2019. 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
Within the 30th April 2018 Chairman's Statement reference was
made to an improvement in cash flow of GBP17 million and a gearing
level of 11% as at the year end. Despite the increased dividend
payment of GBP6 million and a further GBP5.7 million of capital
expenditure during the first half of this financial year, the net
debt as reported in note 12 has deteriorated only by a modest
GBP946,000. There are essentially two aspects to the cash
management performance in the first half of this financial
year:
1) The continued focus on controlling our investment in working capital.
2) The increased levels of profitability. As can be seen from
the first half year results, the post-tax profits at GBP5.7 million
are significantly ahead of the GBP4.5 million reported for the same
period last year and also pro-rata as against the post-tax profit
figure for the year to 30th April 2018. Adding back the Group's
non-cash charges of GBP3.8 million (October 2017 GBP3.7 million,
year to 30th April 2018 GBP7.3 million) gives a feel for the
cash-generating potential of the Group.
The Group's bank facilities, in terms of quantum, are materially
unchanged from those reported within the full year accounts. We
would refer you in particular to Note 20.b) on page 59 of those
accounts where you can see that our unutilised facilities are
significant. During December 2018, a 5-year revolving credit
facility for GBP10 million expired (along with a bond line and an
FX line). The Company has successfully negotiated the like-for-like
replacement of these facilities with a new 5-year agreement on
improved terms. The practical impact is that GBP5 million of debt
under the old facility is shown as a current liability repayable
within one year in these accounts for the period ended 31st October
2018. Any outstanding amount related to these new facilities will
be reported as a non-current liability for the financial year ended
30th April 2019.
Given the profitability of the Group, the modest gearing levels
and the bank facilities available to it, the Directors have
concluded that drawing up the accounts on a going concern basis is
appropriate.
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 European Union and that 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 financial
year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the
remaining 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).
J. W. Goodwin
Chairman 18th December
2018
Condensed Consolidated Statement of Profit or Loss
for the half year to 31st October 2018
Unaudited Unaudited Audited
Half Year Half Year Year Ended
to to
31st October 31st October 30th April
2018 2017 2018
GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 67,548 61,893 124,811
Cost of sales (47,608) (44,758) (89,143)
Gross profit 19,940 17,135 35,668
Other income - 1,602 1,602
Distribution expenses (1,564) (1,881) (3,359)
Administrative expenses (10,539) (10,494) (20,331)
Operating profit 7,837 6,362 13,580
Financial expenses (303) (419) (590)
Share of profit of associate companies 270 165 310
Profit before taxation 7,804 6,108 13,300
Tax on profit (2,076) (1,656) (3,865)
Profit after taxation 5,728 4,452 9,435
Attributable to:
Equity holders of the parent 5,393 4,203 8,504
Non-controlling interests 335 249 931
Profit for the period 5,728 4,452 9,435
Basic earnings per ordinary share
(Note 11) 74.90p 58.38p 118.11p
Diluted earnings per ordinary share
(Note 11) 73.44p 58.38p 118.11p
Condensed Consolidated Statement of Comprehensive Income
for the half year to 31st October 2018
Unaudited Unaudited Audited
Half Year Half Year Year Ended
to to
31st October 31st October 30th April
2018 2017 2018
GBP'000 GBP'000 GBP'000
Profit for the period 5,728 4,452 9,435
Other comprehensive income / (expense)
Items that are or may be reclassified
subsequently to the income statement
Foreign exchange translation differences (259) 258 (152)
Effective portion of changes in
fair value of cash flow hedges (3,023) (196) (294)
Change in fair value of cash flow
hedges transferred to the income
statement - 932 5,108
Hedging forward points adjustment 595 - -
Tax on items that are or may be
reclassified subsequently to the
income statement 413 (125) (818)
Other comprehensive income / (expense)
for the period, net of income tax (2,274) 869 3,844
Total comprehensive income for
the period 3,454 5,321 13,279
Attributable to:
Equity holders of the parent 3,183 5,151 12,245
Non-controlling interests 271 170 1,034
3,454 5,321 13,279
Condensed Consolidated Statement of Changes in Equity
for the half year to 31st October 2018
Total
attribut-able
Cash to equity
Share-based flow Cost holders
Share Translat-ion payments hedge of hedging Retained of the Non-controll-ing Total
capital reserve reserve reserve reserve earnings parent interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Half year
to 31st October
2018
(Unaudited)
Balance at
1st May 2018 720 1,879 1,625 (23) (201) 95,568 99,568 5,259 104,827
Adjustment
on initial
application
of IFRS 15
(net of tax) - - - - - 285 285 (56) 229
Adjusted balance
at 1st May
2018 720 1,879 1,625 (23) (201) 95,853 99,853 5,203 105,056
Total
comprehensive
income:
Profit - - - - 5,393 5,393 335 5,728
Other
comprehensive
income:
Foreign exchange
translation
differences - (211) - - - (211) (48) (259)
Net movements
on cash flow
hedges - - - (2,594) 595 - (1,999) (16) (2,015)
Total
comprehensive
income for
the period - (211) - (2,594) 595 5,393 3,183 271 3,454
Equity-settled
share-based
payment
transactions - - 523 - - - 523 - 523
Dividends
paid - - - - - (6,074) (6,074) (451) (6,525)
Balance at
31st October
2018 720 1,668 2,148 (2,617) 394 95,172 97,485 5,023 102,508
Condensed Consolidated Statement of Changes in Equity
for the half year to 31st October 2018
Total
attribut-able
Cash to equity
Share-based flow Cost holders
Share Translat-ion payments hedge of hedging Retained of the Non-controll-ing Total
capital reserve reserve reserve reserve earnings parent interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Half year
to 31st October,
2017
(Unaudited)
Balance at
1st May, 2017 720 2,154 601 (4,240) - 90,201 89,436 4,225 93,661
Total
comprehensive
income:
Profit - - - - - 4,203 4,203 249 4,452
Other
comprehensive
income:
Foreign exchange
translation
differences - 194 - - - - 194 64 258
Net movements
on cash flow
hedges - - - 754 - - 754 (143) 611
Total
comprehensive
income for
the period - 194 - 754 - 4,203 5,151 170 5,321
Equity-settled
share-based
payment
transactions - - 515 - - - 515 - 515
Dividends
paid - - - - - (3,137) (3,137) - (3,137)
Balance at
31st October
2017 720 2,348 1,116 (3,486) - 91,267 91,965 4,395 96,360
Total
attribut-able
Cash to equity
Share-based flow Cost holders
Share Translat-ion payments hedge of hedging Retained of the Non-controll-ing Total
capital reserve reserve reserve reserve earnings parent interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Year ended
30th April,
2018
Balance
at 1st
May, 2017 720 2,154 601 (4,240) - 90,201 89,436 4,225 93,661
Total comprehensive
income:
Profit - - - - - 8,504 8,504 931 9,435
Other comprehensive
income:
Foreign
exchange
translation
differences - (275) - - - - (275) 123 (152)
Net movements
on cash
flow hedges - - - 4,016 - - 4,016 (20) 3,996
Total comprehensive
income
for the
period - (275) - 4,016 - 8,504 12,245 1,034 13,279
Equity-settled
share-based
payment
transactions - - 1,024 - - - 1,024 - 1,024
Dividends
paid - - - - - (3,137) (3,137) - (3,137)
Balance
at 30th
April,
2018 -
before
restatement 720 1,879 1,625 (224) - 95,568 99,568 5,259 104,827
Adjustment
on initial
application
of IFRS 9
(net of tax) - - - 201 (201) - - - -
Adjusted
balance
at 1st May,
2018 720 1,879 1,625 (23) (201) 95,568 99,568 5,259 104,827
Condensed Consolidated Statement of Financial Position
as at 31st October 2018
Unaudited Unaudited Audited
as at as at as at
31st October 31st October 30th April
2018 2017 2018 (restated)
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and equipment 71,713 66,792 69,154
Investment in associates 2,290 2,229 1,963
Intangible assets 21,308 18,603 21,138
Other financial assets at amortised
cost 564 - 728
95,875 87,624 92,983
Current assets
Inventories 33,916 35,473 28,850
Contract assets 6,527 - 6,046
Trade and other receivables 24,118 29,688 21,914
Derivative financial assets 24 556 364
Cash and cash equivalents 7,577 7,813 7,485
72,162 73,530 64,659
Total assets 168,037 161,154 157,642
Current liabilities
Bank overdrafts 3,654 9,737 4,585
Interest-bearing loans and borrowings 5,990 3,918 7,883
Contract liabilities 1,570 - 212
Payments on account 8,935 6,654 5,532
Trade and other payables 24,539 15,308 21,147
Deferred consideration 500 500 500
Liabilities for current tax 2,388 2,043 1,174
Derivative financial liabilities 4,240 2,228 1,535
Warranty provision 99 88 184
51,915 40,476 42,752
Non-current liabilities
Interest-bearing loans and borrowings 9,637 21,198 5,775
Warranty provision 439 337 329
Deferred tax liabilities 3,538 2,783 3,959
13,614 24,318 10,063
Total liabilities 65,529 64,794 52,815
Net assets 102,508 96,360 104,827
Equity attributable to equity holders
of the parent
Share capital 720 720 720
Translation reserve 1,668 2,348 1,879
Share-based payments reserve 2,148 1,116 1,625
Cash flow hedge reserve (2,617) (3,486) (23)
Cost of hedging reserve 394 - (201)
Retained earnings 95,172 91,267 95,568
Total equity attributable to equity
holders of the parent 97,485 91,965 99,568
Non-controlling interests 5,023 4,395 5,259
Total equity 102,508 96,360 104,827
Condensed Consolidated Statement of Cash Flows
for the half year ended 31st October 2018
Unaudited Unaudited Audited
Half Year Half Year Year ended
to 31st October to 31st 30th April
2018 October 2018
2017
GBP'000 GBP'000 GBP'000
Cash flow from operating activities
Profit from continuing operations after
tax 5,728 4,452 9,435
Adjustments for:
Depreciation 2,764 2,644 5,243
Amortisation of intangible assets 549 552 1,138
Financial expenses 303 419 590
Foreign exchange (gains) / losses (127) 192 277
Profit on sale of property, plant and
equipment (11) (1,610) (1,568)
Share of profit of associate companies (270) (165) (310)
Equity-settled share-based provision 523 515 1,024
Tax expense 2,076 1,656 3,865
Operating profit before changes in
working capital and provisions 11,535 8,655 19,694
Increase in trade and other receivables (2,175) (3,194) (8,671)
(Increase) / decrease in inventories (2,442) 2,343 8,801
(Increase) / decrease in contract assets (1,389) - 6,046
Increase / (decrease) in trade and
other payables (excluding payments
on account) 3,005 (1,760) 2,001
Increase / (decrease) in contract liabilities (1,604) - 212
Decrease in cash flow hedge balances 617 548 5,249
Increase in payments on account 5,913 3,094 2,224
Cash inflow from operations 13,460 9,686 35,556
Interest paid (193) (383) (665)
Corporation tax paid (906) (1,254) (3,703)
Interest element of finance lease obligations (32) (45) (89)
Net cash from operating activities 12,329 8,004 31,099
Cash flow from investing activities
Proceeds from sale of property, plant
and equipment 93 1,811 1,888
Acquisition of intangible assets (232) (354) (378)
Acquisition of property, plant and
equipment (5,652) (4,850) (9,010)
Development expenditure capitalised (469) (355) (3,334)
Dividends received from associate companies - - 441
Net cash outflow from investing activities (6,260) (3,748) (10,393)
Cash flows from financing activities
Payment of capital element of finance
lease obligations (455) (429) (865)
Dividends paid (6,074) (3,137) (3,137)
Dividends paid to non-controlling interests (451) - -
Proceeds from loans and committed facilities 4,000 - -
Repayment of loans and committed facilities (2,023) (1,023) (12,044)
Net cash outflow from financing activities (5,003) (4,589) (16,046)
Net increase / (decrease) in cash and
cash equivalents 1,066 (333) 4,660
Cash and cash equivalents at beginning
of year 2,900 (1,483) (1,483)
Effect of exchange rate fluctuations
on cash held (43) (108) (277)
Closing cash and cash equivalents 3,923 (1,924) 2,900
Notes
to the Condensed Consolidated Financial Statements
1. Reporting entity
Goodwin PLC (the "Company") is a company incorporated in England
and Wales. The unaudited condensed consolidated interim financial
statements of the Company as at and for the six months ended 31st
October 2018 comprise the Company, its subsidiaries, and the
Group's interests in associates (together referred to as the
"Group").
The audited consolidated financial statements of the Group as at
and for the year ended 30th April 2018 are available upon request
from the Company's registered office at Ivy House Foundry, Hanley,
Stoke-on-Trent, ST1 3NR or via the Company's web site:
www.goodwin.co.uk.
2. Statement of compliance
These unaudited condensed consolidated interim financial
statements have been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted in the EU. They do not include all
of the information required for full annual financial statements,
and should be read in conjunction with the audited consolidated
financial statements of the Group as at and for the year ended 30th
April 2018.
The comparative figures for the financial year ended 30th April
2018 are extracts and not the full Group's statutory accounts for
that financial year. Those accounts have been reported on by the
Company's auditors and delivered to the Registrar of Companies. The
report of the auditors 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) did not
contain a statement under section 498(2) or (3) of the Companies
Act 2006.
The Audit Committee has reviewed these unaudited condensed
consolidated interim financial statements and has advised the Board
of Directors that, taken as a whole, they are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Group's half year performance. These
unaudited condensed consolidated interim financial statements were
approved by the Board of Directors on 18th December 2018.
3. Significant accounting policies
The accounting policies applied by the Group in these unaudited
condensed consolidated financial statements are the same as those
applied by the Group in its audited consolidated financial
statements as at and for the year ended 30th April 2018, with the
exception of IFRS 15 revenue recognition (see note 5) and IFRS 9
Financial Instruments. The changes in accounting policies are to be
reflected in the Group's consolidated financial statements as at
and for the year ending 30 April 2019.
The following standards and amendments became effective and
therefore were adopted by the Group.
-- IFRS 9 - Financial Instruments (effective for annual periods
beginning on or after 1st January 2018)
-- IFRS 15 - Revenue from Contracts with Customers (effective
for annual periods beginning on or after 1st January 2018)
-- IFRS 15 - Clarifications (effective for annual periods
beginning on or after 1st January 2018)
-- Annual Improvements to IFRSs - 2014-2016 Cycle - minor
amendments to IFRS 1 and IAS 28 (effective for annual periods
beginning on or after 1st January 2018)
-- Amendments to IFRS 2 - Classification and Measurement of
Share-based Payment Transactions (effective for annual periods
beginning on or after 1st January 2018)
-- Amendments to IAS 40 - Transfers of Investment Property
(effective for annual periods beginning on or after 1st January
2018)
-- IFRIC Interpretation 22 - Foreign Currency Transactions and
Advance Consideration (effective for annual periods beginning on or
after 1st January 2018)
-- Amendments to IFRS 4 - Applying IFRS 9 Financial Instruments
with IFRS 4 Insurance Contracts (effective for annual periods
beginning on or after 1st January 2018)
The impact of IFRS 15 Revenue from Contracts with Customers,
which replaces IAS 18 Revenue, IAS11 Construction Contracts and
related interpretations, is outlined in note 5 below. The Group has
considered the impact on profit, earnings per share and net assets
in future periods, of the other new standards and interpretations
referred to above (including IFRS 9), and with the exception of
IFRS 15 none of the above standards or interpretations is expected
to have a material impact.
New IFRS standards, amendments and interpretations not
adopted
The IASB and IFRIC have issued additional standards and
amendments which are effective for periods starting after the date
of these financial statements. The following standards and
amendments have not yet been adopted by the Group:
-- Amendments to IFRS 9 - Prepayment Features with Negative
Compensation (effective for annual periods beginning on or after
1st January 2019)
-- IFRS 16 - Leases (effective for annual periods beginning on
or after 1st January 2019)
-- IFRIC Interpretation 23 - Uncertainty over Income Tax
Treatments (effective for annual periods beginning on or after 1st
January 2019)
-- Amendments to IAS 28 - Long term Interests in Associates and
Joint Ventures (effective for annual periods beginning on or after
1st January 2019)
-- Annual Improvements to IFRSs - 2015-2017 Cycle - minor
amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23 (effective for
annual periods beginning on or after 1st January 2019)
-- Amendments to IAS 19 - Plan Amendment, Curtailment or
Settlement (effective for annual periods beginning on or after 1st
January 2019)
4. Accounting estimates and judgements
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these unaudited consolidated interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
audited consolidated financial statements as at and for the year
ended 30th April 2018, with the exception of revenue recognition
(see note 5).
In terms of revenue recognition under IFRS 15 there is a
requirement to recognise revenue and profit on contracts where the
customer effectively assumes ownership and control of the goods as
the contract progresses. When reviewing these contracts, management
prudently estimates both the percentage completion of the works and
the profit within the contract when arriving at the appropriate
amount of revenue to be taken in the period.
The tax charge in the period is based on management's estimate
of the weighted average annual income tax rate expected for the
full financial year applied to the pre-tax income of the interim
period, and the impact of any disallowed costs.
5. Changes in significant accounting policies
Except as described below, the accounting policies applied in these
interim financial statements are the same as those applied in the
Group's consolidated financial statements as at and for the year
ended 30th April 2018.
The changes in accounting policies are also expected to be reflected
in the Group's consolidated financial statements as at and for the
year ending 30th April 2019.
The Group has initially adopted IFRS 15 Revenue from Contracts with
Customers from 1st May 2018. A number of other new standards (including
IFRS 9 Financial Instruments) are effective from 1st May 2018 but
they are not expected to have a material effect on the Group's financial
statements.
The main impacts of initially applying IFRS 15 are the following:
- earlier recognition of revenue from some short and long term engineered
product contracts
- earlier recognition of revenue from the unbundling of minimum
period contracts
- reduction in recognition of revenue from some long term engineered
product contracts
IFRS 15 establishes a comprehensive framework for determining whether,
how much and when revenue is recognised. It replaces IAS 18 Revenue,
IAS 11 Construction Contracts and related interpretations.
The Group has adopted IFRS 15 using the cumulative effect method
(without practical expedients), with the effect of initially applying
this standard recognised at the date of initial application (i.e.
1st May 2018). Accordingly, the information presented for the half
year to 31st October 2017 and for the year ended 30th April 2018
has not been restated - i.e. it is presented, as previously reported,
under IAS 18, IAS 11 and related interpretations.
The following table summarises the impact, net of tax, of transition
to IFRS 15 on retained earnings and non-controlling interests at
1st May 2018.
GBP'000
Minimum Period Contracts for the Provision of Goods
and Services 76
Short Term Engineered Bespoke Products - Performance
Obligations Satisfied Over Time 566
Short term Engineered Bespoke Products - Performance
Obligations Satisfied at a Point in Time (359)
Less related tax (54)
Impact on total equity at 1 May 2018 229
Equity attributable to equity holders of the parent 285
Non-controlling interests (56)
229
The following tables summarise the impacts of adopting IFRS 15
on the Group's interim statement of financial position as at 31st
October 2018 and its interim statement of profit or loss and other
comprehensive income for the six months then ended for each of the
line items affected. There was no material impact on the Group's
interim statement of cash flows for the six month period ended 31st
October 2018.
Impact on the condensed interim consolidated statement of profit
or loss
Without the
adoption
As reported Adjustments of IFRS 15
GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 67,548 (4,890) 62,658
Cost of sales (47,608) 4,699 (42,909)
Gross profit 19,940 (191) 19,749
Distribution expenses (1,564) - (1,564)
Administrative expenses (10,539) - (10,539)
Operating profit 7,837 (191) 7,646
Financial expenses (303) - (303)
Share of profit of associate companies 270 - 270
Profit before taxation 7,804 (191) 7,613
Tax on profit (2,076) 36 (2,040)
Profit after taxation 5,728 (155) 5,573
Attributable to:
Equity holders of the parent 5,393 (167) 5,226
Non-controlling interests 335 12 347
Profit for the period 5,728 (155) 5,573
Impact on the condensed interim consolidated statement of
financial position
Without the
adoption
As reported Adjustments of IFRS 15
GBP'000 GBP'000 GBP'000
Non-current assets 95,875 - 95,875
Current assets
Inventories 33,916 1,602 35,518
Contract assets 6,527 (1,246) 5,281
Trade and other receivables 24,118 (29) 24,089
Derivative financial assets 24 - 24
Cash and cash equivalents 7,577 - 7,577
72,162 327 72,489
Total assets 168,037 327 168,364
Current liabilities
Bank overdrafts 3,654 - 3,654
Interest-bearing loans and borrowings 5,990 - 5,990
Contract liabilities 1,570 2,168 3,738
Payments on account 8,935 (1,505) 7,430
Trade and other payables 24,539 (144) 24,395
Deferred consideration 500 - 508
Liabilities for current tax 2,388 - 2,380
Derivative financial liabilities 4,240 - 4,240
Warranty provision 99 - 99
51,915 519 52,434
Non-current liabilities
Interest-bearing loans and borrowings 9,637 - 9,637
Warranty provision 439 - 439
Deferred tax liabilities 3,538 (37) 3,501
13,614 (37) 13,577
Total liabilities 65,529 482 66,011
Net assets 102,508 (155) 102,353
Equity attributable to equity holders
of the parent
Share capital 720 - 720
Translation reserve 1,668 - 1,668
Share-based payments reserve 2,148 - 2,148
Cash flow hedge reserve (2,617) - (2,617)
Cost of hedging reserve 394 - 394
Retained earnings 95,172 (167) 95,005
Total equity attributable to equity holders
of the parent 97,485 (167) 97,318
Non-controlling interests 5,023 12 5,035
Total equity 102,508 (155) 102,353
IFRS 15 stipulates that revenue is to be recognised when a
customer obtains control of the goods or services i.e. upon the
satisfaction of a performance obligation. Judgement is required to
determine the timing of the transfer of control, and whether it is
at a point in time or over time. Where a contract contains several
performance obligations then the contract is unbundled and each
performance obligation is dealt with separately. Warranties do not
feature as a separate revenue stream. The Group's warranties are
assurance based and not sold separately within contracts. The
details of the new significant accounting policies and the nature
of the changes to previous accounting policies in relation to the
Group's various goods and services are set out below.
Standard Inventory Product Lines and Consumables
This typically applies to the whole of the Group's Refractories
Engineering segment and the sale of slurry pumps within the
Mechanical Engineering segment. The revenue here relates to
standard products manufactured for sale. The performance obligation
is satisfied and revenue taken at the point when customers obtain
control of the goods in accordance with the International
Commercial (INCO) terms agreed or via a bill and hold arrangement.
For this revenue stream the treatment under IAS 18 and IFRS 15 is
essentially the same in the profit and loss account and the balance
sheet. The Group is not significantly impacted by standard products
sold on a sale or return basis.
Minimum Period Contracts for the Provision of Goods and
Services
This relates predominantly to the supply of broadband and
related services under minimum term contracts. Performance
obligations are satisfied over time and revenue is recognised
equally over the term of the contract. Within these contracts it is
often the case that the service contract also contains hardware /
software as part of the monthly payments. Under IAS 18, any such
hardware / software was amortised over the term of the contract.
Under IFRS 15, these contracts are unbundled with the fair value of
the hardware / software taken as revenue in month 1 by the creation
of a contract asset, thus leaving the true service element to be
taken as revenue over the term of the contract. Prepayments under
IFRS 15 are therefore reduced due to the taking of the sale of
goods in month 1.
Short Term Engineered Bespoke Products - Performance Obligations
Satisfied Over Time
This typically applies to the Group's Mechanical Engineering
Segment and covers sales orders deliverable within 12 months which
are customer bespoke and permit the Group Subsidiary to claim
profit earned to date if the customer were to trigger the profit
based cancel for convenience clause within the contract. In such
cases, the performance obligations are treated as satisfied over
time (i.e. as the contract progresses) and revenue taken is taken
based on the percentage completion of the contract by the creation
of a contract asset. Under IAS 18 revenue was not taken until the
goods were despatched and until then were accounted for as work in
progress (cost and overhead recovery only) and so work in progress
under IFRS 15 is reduced and replaced by a contract asset which
includes profit. Measuring progress requires judgement as to the
stage of completion of each job, and the production of forecasts,
which contain allowances for technical risks and inherent
uncertainties.
Short term Engineered Bespoke Products - Performance Obligations
Satisfied at a Point in Time
This typically applies to the Group's Mechanical Engineering
Segment and covers sales orders deliverable within 12 months which
are customer bespoke but only permit the Group Subsidiary to claim
for costs in the event the customer triggers the cost based cancel
for convenience clause within the contract. In such cases, the
performance obligation is deemed to be met and revenue taken as
order lines are shipped in accordance with the relevant shipping
terms or via a bill and hold arrangement. For this revenue stream
the treatment under IAS 18 and IFRS 15 is essentially the same.
Long term contracts - Performance Obligations Satisfied Over
Time
This applies to the Group's Mechanical Engineering Segment and
relates to sales orders with a contract period in excess of 12
months where the cancel for convenience clause in the contract
permits the recovery of profit. Revenue is taken on a percentage
complete basis by the creation of a contract asset. Such contracts
were previously accounted for under IAS 11 and for this revenue
stream the treatment under IAS 11 and IFRS 15 is essentially the
same. Measuring progress requires judgement as to the stage of
completion of each job, and the production of forecasts, which
contain allowances for technical risks and inherent
uncertainties.
Long-term contracts - Performance Obligations Satisfied at a
Point in Time
This applies to the Group's Mechanical Engineering Segment and
relates to sales orders with a contract period lasting more than 12
months where the cancel for convenience clause in the contract only
allows for the recovery of costs. Performance obligations in these
contracts are satisfied and revenue taken either on the delivery of
individual units or against vesting certificates issued in favour
of the customer. Such contracts were previously accounted for under
IAS 11 where revenue and profit was taken on a percentage complete
basis. Under IFRS 15, the contract asset balance is eliminated and
is replaced by work in progress at cost plus overheads.
6. Operating Segments
Products and services from which reportable segments derive
their revenues
The Group has applied IFRS 15 initially at 1st May 2018;
information presented for the half year to 31st October 2017 and
for the year ended 30th April 2018 has not been restated but is
presented, as previously reported, under IAS 18, IAS 11 and related
interpretations. IFRS 9 has also been applied initially at 1st May
2018. Prior periods have not been restated in accordance with the
classification and measurement requirements of IFRS 9, because the
Group has applied the exemption outlined in paragraph 7.2.15 of
IFRS 9.
In accordance with the requirements of IFRS 8 "Operating
Segments" the Group's reportable segments based on information
reported to the Group's Board of Directors for the purposes of
resource allocation and assessment of segment performance are as
follows:
-- Mechanical Engineering - casting, machining and general engineering
-- Refractory Engineering - powder manufacture and mineral processing
Information regarding the Group's operating segments is reported
in the following tables.
Segment Revenue
Mechanical Engineering Refractory Engineering Sub Total
Unaudited Unaudited Unaudited Unaudited
Half Half Audited Half Half Audited
Unaudited Unaudited Year Year Year Year Year Year
Half Year Half Year Audited Ended Ended Ended Ended Ended Ended
Ended Ended Year Ended 31st 31st 30th 31st 31st 30th
31st October 31st October 30th April October October April October October April
2018 2017 2018 2018 2017 2018 2018 2017 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External
sales 45,052 39,779 80,661 22,496 22,114 44,150 67,548 61,893 124,811
Inter-segment
sales 10,591 10,189 18,839 4,423 4,350 8,354 15,014 14,539 27,193
Total revenue 55,643 49,968 99,500 26,919 26,464 52,504 82,562 76,432 152,004
Reconciliation to consolidated
revenues:
Inter-segment
sales (15,014) (14,539) (27,193)
Consolidated revenue for
the period 67,548 61,893 124,811
Segment profits
Mechanical Engineering Refractory Engineering Sub Total
Unaudited Unaudited Unaudited Unaudited
Half Half Audited Half Half Audited
Unaudited Unaudited Year Year Year Year Year Year
Half Year Half Year Audited Ended Ended Ended Ended Ended Ended
Ended Ended Year Ended 31st 31st 30th 31st 31st 30th
31st October 31st October 30th April October October April October October April
2018 2017 2018 2018 2017 2018 2018 2017 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Profits
Segment
result
including
associates 4,541 2,733 8,282 4,854 5,313 9,130 9,395 8,046 17,412
Group administration costs (765) (1,004) (2,498)
LTIP equity plan provision (523) (515) (1,024)
Group finance and treasury
costs (303) (419) (590)
Consolidated profit before
tax for the period 7,804 6,108 13,300
Tax (2,076) (1,656) (3,865)
Consolidated profit after
tax for the period 5,728 4,452 9,435
Segment Assets and Liabilities
Segmental total assets Segmental total liabilities Segmental net assets
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Half Half Audited Half Half Audited Half Half Audited
Year Year Year Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended Ended
31st 31st 30th 31st 31st 30th 31st 31st 30th
October October April October October April October October April
2018 2017 2018 2018 2017 2018 2018 2017 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Mechanical
Engineering 96,710 85,793 79,835 64,674 66,798 50,113 32,036 18,995 29,722
Refractory
Engineering 40,207 45,425 39,534 19,859 24,527 19,905 20,348 20,898 19,629
Sub total
reportable
segment 136,917 131,218 119,369 84,533 91,325 70,018 52,384 39,893 49,351
Goodwin PLC (the Company)
net assets 61,369 68,841 66,715
Elimination of Goodwin
PLC investments (20,960) (22,084) (20,950)
Goodwill 9,715 9,710 9,711
Consolidated total net
assets 102,508 96,360 104,827
Segmental property, plant and equipment (PPE)
capital expenditure
Goodwin PLC 2,408 3,049 6,880
Mechanical Engineering 3,039 687 2,176
Refractory Engineering 225 267 360
5,672 4,003 9,416
7. Geographical segments
Half Year Ended 31st October Half Year Ended 31st October
2018 2017
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Revenue Operational Non-current PPE capital Revenue Operational Non-current PPE capital
assets assets expenditure assets assets expenditure
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK 14,991 68,263 77,896 3,195 13,698 63,870 71,656 3,610
Rest of
Europe 17,503 12,120 3,724 535 14,674 10,483 2,276 136
USA 2,138 - - - 2,544 - - -
Pacific
Basin 14,762 15,064 7,888 17 11,709 14,635 7,505 116
Rest of
World 18,154 7,061 6,367 1,925 19,268 7,372 6,187 141
Total 67,548 102,508 95,875 5,672 61,893 96,360 87,624 4,003
Year Ended 30th April 2018
Audited Audited Audited Audited
Revenue Operational Non-current PPE capital
assets assets expenditure
GBP'000 GBP'000 GBP'000 GBP'000
UK 27,829 70,558 76,325 8,301
Rest of
Europe 31,246 12,477 3,281 772
USA 3,742 - - -
Pacific
Basin 23,052 14,785 8,003 154
Rest of
World 38,942 7,007 5,374 189
Total 124,811 104,827 92,983 9,416
8. Revenue
The Group's revenue is derived from contracts with customers.
The nature and effect, on the Group's interim financial statements,
of applying IFRS15 for the first time are outlined in note 5.
The following tables provide an analysis of revenue by
geographical market and by product line.
Mechanical Refractory
Engineering Engineering Total
GBP'000 GBP'000 GBP'000
Primary Geographical markets
Unaudited half year ended 31st October
2018
UK 9,160 5,831 14,991
Rest of Europe 13,497 4,006 17,503
USA 2,097 41 2,138
Pacific Basin 6,570 8,192 14,762
Rest of World 13,728 4,426 18,154
Total 45,052 22,496 67,548
Mechanical Refractory
Engineering Engineering Total
GBP'000 GBP'000 GBP'000
Primary Geographical markets
Unaudited half year ended 31st October
2017
UK 7,912 5,786 13,698
Rest of Europe 10,799 3,875 14,674
USA 2,469 75 2,544
Pacific Basin 3,989 7,720 11,709
Rest of World 14,610 4,658 19,268
Total 39,779 22,114 61,893
Product lines
Unaudited half year ended 31st October
2018
Standard products and consumables 4,317 22,496 26,813
Minimum period contracts for goods
and services 1,446 - 1,446
Bespoke engineered products - over
time 2,556 - 2,556
Bespoke engineered products - point
in time 27,958 - 27,958
Long term contracts - over time 407 - 407
Long term contracts - point in time 8,368 - 8,368
Total 45,052 22,496 67,548
Unaudited half year ended 31st October
2017
Standard products and consumables 2,833 22,114 24,947
Minimum period contracts for goods
and services 1,503 - 1,503
Bespoke engineered products - over
time 778 - 778
Bespoke engineered products - point
in time 29,378 - 29,378
Long term contracts - over time 792 - 792
Long term contracts - point in time 4,495 - 4,495
Total 39,779 22,114 61,893
Contract balances
The following table presents information about receivables,
contract assets and liabilities from contracts with customers.
Unaudited Unaudited
as at as at
31st October 1 May 2018
2018
GBP'000 GBP'000
Receivables - included in "Trade and other receivables" 19,449 18,375
Contract assets 6,527 5,138
Contract liabilities (1,570) (3,207)
Net book value at the end of the period 24,406 20,306
The Group has recognised the cumulative effect of applying IFRS
15 for the first time as an adjustment to the opening balance at
1st May 2018. Contract assets and liabilities as at 30th April 2018
have been adjusted, in this table only, to reflect the impact of
IFRS 15.
The contract assets represent the Group's rights to
consideration for work completed but not invoiced at the reporting
date for bespoke products and long term contracts. Contract assets
are transferred to receivables when the rights to consideration
become unconditional. This is generally when the Group invoices the
customer. Where progress billings exceed the recognised profits
(less losses), the balances are disclosed as contract
liabilities.
Of the contract liabilities recognised at the beginning of the
period, revenue of GBP1,646,000 has been recognised in the half
year ended 31st October 2018.
No revenue has been recognised in the half year ended 31st
October 2018 from performance obligations, which were satisfied (or
partially satisfied) in previous periods.
The Group has applied the practical expedient in IFRS 15,
paragraph 121, and has not disclosed the remaining performance
obligations for contracts which have an original expected duration
of one year or less. The aggregate amount of the transaction price
allocated to the performance obligations for longer term contracts,
which are unsatisfied (or partially unsatisfied) as at the end of
the reporting period is GBP26,490,000. The longest of these
contracts is due to be completed in 2023.
The Group's revenue is not significantly impacted by seasonal /
cyclical events.
9. Other income
Other income deals with the profit on the sale of land in India
in the half year to 31st October 2017.
10. Dividends
The Directors do not propose the payment of an interim
dividend.
Unaudited Unaudited Audited
Half Year Half Year Year Ended
to to
31st October 31st October 30th April
2018 2017 2018
GBP'000 GBP'000 GBP'000
Equity Dividends Paid:
Ordinary dividends paid during the 6,010 - -
period in respect of the year ended
30th April 2018 (83.473p per share)
Ordinary dividends paid during the
period in respect of the year ended
30th April 2017 (42.348p per share) - 3,049 3,049
Dividends paid to minority shareholders
in Noreva GmbH 64 88 88
Total dividends paid during the period 6,074 3,137 3,137
11. Earnings Per Share
The calculation of the basic earnings per ordinary share is
based on the number of ordinary shares in issue during all periods
of 7,200,000, and on the profit for the six months attributable to
ordinary shareholders of GBP5,393,000 (six months to 31st October
2017: GBP4,203,000).
There is a share option scheme in place for the Directors of the
Company under the Company's Equity Long Term Investment Plan
(LTIP), based on the Company exceeding a target growth in the total
shareholder return of the Company over the period from 1st May 2016
to 30th April 2019. Under the LTIP, as at 31st October 2018 and
based on the share price at that date, a total of 144,000 shares
would have accrued to the Directors under the LTIP which net of the
option price payable would dilute the number of shares by 143,433.
The diluted earnings per share has been based on 7,343,433 shares
and the same profits attributable to shareholders as set out in the
previous paragraph.
12. Capital Management, Issuance and Repayment of Debt
At 31st October 2018 the capital utilised was GBP109,689,000 as
shown below:
Unaudited Unaudited Audited
as at as at as at
31st October 31st October 30th April
2018 2017 2018
GBP'000 GBP'000 GBP'000
Cash and cash equivalents (7,577) (7,813) (7,485)
Finance leases 2,539 2,984 2,548
Bank loans and committed facilities 13,088 22,132 11,110
Bank overdrafts 3,654 9,737 4,585
Deferred consideration 500 500 500
Net debt 12,204 27,540 11,258
Total equity attributable to equity
holders of the parent 97,485 91,965 99,568
Capital 109,689 119,505 110,826
13. Property, Plant and Equipment
Unaudited Unaudited
as at as at
31st October 31st October
2018 2017
GBP'000 GBP'000
Net book value at the beginning of the period 69,154 65,739
Additions 5,672 4,003
Disposals (at net book value) (82) (201)
Depreciation (2,764) (2,644)
Exchange adjustment (267) (105)
Net book value at the end of the period 71,713 66,792
14. Intangible assets
Unaudited Unaudited
as at as at
31st October 31st October
2018 2017
GBP'000 GBP'000
Net book value at the beginning of the period 21,138 18,240
Additions 701 709
Amortisation (549) (552)
Exchange adjustment 18 206
Net book value at the end of the period 21,308 18,603
15. Total Financial Assets and Financial Liabilities
The following table sets out the Group's accounting
classification of its financial assets and financial liabilities,
and their carrying amounts at 31st October 2018. The carrying
amount is a reasonable approximation of fair value for all
financial assets and financial liabilities.
Total carrying
Fair value amount /
- hedging Amortised Other financial fair value
instruments FVTPL cost liabilities amount
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial assets
measured at fair
value
Forward exchange
contracts used
for hedging 24 - - - 24
Other forward
exchange contracts - - - - -
24 - - - 24
Financial assets
not measured
at fair value
Trade and other
receivables - - 21,251 - 21,251
Cash and cash
equivalents - - 7,577 - 7,577
- - 28,828 - 28,828
Financial liabilities
measured at fair
value
Forward exchange
contracts used
for hedging 2,745 - - - 2,745
Other forward
exchange contracts - 1,495 - - 1,495
Contingent consideration - - - 500 500
2,745 1,495 - 500 4,740
Financial liabilities
not measured
at fair value
Bank overdrafts - - - 3,654 3,654
Bank loans - - - 13,088 13,088
Finance lease
liabilities - - - 2,539 2,539
Trade and other
payables - - - 20,084 20,084
- - - 39,365 39,365
The forward exchange contract assets and liabilities fair values
in the above table are derived using Level 2 inputs as defined by
IFRS 7 as detailed in the paragraph below. All other financial
assets and liabilities fair values are determined using Level 3
inputs. As can be seen from the above table the fair value of these
contracts amount to less than 5% of the Group net asset value.
IFRS 7 requires that the classification of financial instruments
at fair value be determined by reference to the source of inputs
used to derive the fair value. This classification uses the
following three-level hierarchy: Level 1 - quoted prices
(unadjusted) in active markets for identical assets or liabilities;
Level 2 - inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); Level 3
- inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR GMMMZGRNGRZM
(END) Dow Jones Newswires
December 18, 2018 05:18 ET (10:18 GMT)
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