REG - Goodwin PLC - Half-year Report
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 £7.8 million (2017 £6.1 million) an increase of 28% from a revenue of £67.5 million, which increased by 9%.
The current work load as at 31st October 2018 stands at £99 million, as compared to £84 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 Half Year to
Unaudited Half Year to
Audited Year Ended
31st October
31st October
30th April
2018
2017
2018
£'m
£'m
£'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 £67,548,000 for the half year represents a 9% increase from the £61,893,000 achieved during the same period last year.
Profit Before Tax
Profit before tax for the six months of £7,804,000 is up 28% from the £6,108,000 achieved for the same six month period last year.
Key performance indicators
The key performance indicators for the business are listed below:
Unaudited Half Year to
Unaudited Half Year to
Audited Year Ended
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 £ millions)
7.8
6.1
13.3
Gearing % (excluding deferred consideration)
12.0
29.4
10.8
Depreciation (in £ millions)
2.8
2.6
5.2
Amortisation (in £ millions)
0.5
0.6
1.1
Equity-settled share-based provision (in £ millions)
0.5
0.5
1.0
Non cash charges (in £ millions)
3.8
3.7
7.3
Profit before tax (in £ millions)
7.8
6.1
13.3
Other income (in £ millions)
-
(1.6)
(1.6)
Trading profit (in £ 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 £1.6 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 £17 million and a gearing level of 11% as at the year end. Despite the increased dividend payment of £6 million and a further £5.7 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 £946,000. 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 £5.7 million are significantly ahead of the £4.5 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 £3.8 million (October 2017 £3.7 million, year to 30th April 2018 £7.3 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 £10 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 £5 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 to
Half Year to
Year Ended
31st October
31st October
30th April
2018
2017
2018
£'000
£'000
£'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 to
Half Year to
Year Ended
31st October
31st October
30th April
2018
2017
2018
£'000
£'000
£'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
Share capital
Translat-ion reserve
Share-based payments reserve
Cash flow hedge reserve
Cost of hedging reserve
Retained earnings
Total attribut-able to equity holders of the parent
Non-controll-ing interests
Total equity
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'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
Share capital
Translat-ion reserve
Share-based payments reserve
Cash flow hedge reserve
Cost of hedging reserve
Retained earnings
Total attribut-able to equity holders of the parent
Non-controll-ing interests
Total equity
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'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
Share capital
Translat-ion reserve
Share-based payments reserve
Cash flow hedge reserve
Cost of hedging reserve
Retained earnings
Total attribut-able to equity holders of the parent
Non-controll-ing interests
Total equity
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'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 2018
31st October 2017
30th April 2018 (restated)
£'000
£'000
£'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 to 31st October 2018
Half Year to 31st October 2017
Year ended 30th April 2018
£'000
£'000
£'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.
£'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
As reported
Adjustments
Without the adoption of IFRS 15
£'000
£'000
£'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
As reported
Adjustments
Without the adoption of IFRS 15
£'000
£'000
£'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 Half Year Ended 31st October 2018
Unaudited Half Year Ended 31st October 2017
Audited Year Ended 30th April 2018
Unaudited Half Year Ended 31st October 2018
Unaudited Half Year Ended 31st October 2017
Audited Year Ended 30th April 2018
Unaudited Half Year Ended 31st October 2018
Unaudited Half Year Ended 31st October 2017
Audited Year Ended 30th April 2018
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'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 Half Year Ended 31st October 2018
Unaudited Half Year Ended 31st October 2017
Audited Year Ended 30th April 2018
Unaudited Half Year Ended 31st October 2018
Unaudited Half Year Ended 31st October 2017
Audited Year Ended 30th April 2018
Unaudited Half Year Ended 31st October 2018
Unaudited Half Year Ended 31st October 2017
Audited Year Ended 30th April 2018
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'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 Half Year Ended 31st October 2018
Unaudited Half Year Ended 31st October 2017
Audited Year Ended 30th April 2018
Unaudited Half Year Ended 31st October 2018
Unaudited Half Year Ended 31st October 2017
Audited Year Ended 30th April 2018
Unaudited Half Year Ended 31st October 2018
Unaudited Half Year Ended 31st October 2017
Audited Year Ended 30th April 2018
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'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 2018
Half Year Ended 31st October 2017
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Unaudited
Revenue
Operational assets
Non-current assets
PPE capital expenditure
Revenue
Operational assets
Non-current assets
PPE capital expenditure
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'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 assets
Non-current assets
PPE capital expenditure
£'000
£'000
£'000
£'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 Engineering
Refractory Engineering
Total
£'000
£'000
£'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 Engineering
Refractory Engineering
Total
£'000
£'000
£'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 2018
1 May 2018
£'000
£'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 £1,646,000 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 £26,490,000. 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 to
Half Year to
Year Ended
31st October 2018
31st October 2017
30th April 2018
£'000
£'000
£'000
Equity Dividends Paid:
Ordinary dividends paid during the period in respect of the year ended 30th April 2018 (83.473p per share)
6,010
-
-
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 £5,393,000 (six months to 31st October 2017: £4,203,000).
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 £109,689,000 as shown below:
Unaudited
Unaudited
Audited
as at
as at
as at
31st October 2018
31st October 2017
30th April 2018
£'000
£'000
£'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 2018
31st October 2017
£'000
£'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 2018
31st October 2017
£'000
£'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.
Fair value - hedging instruments
FVTPL
Amortised cost
Other financial liabilities
Total carrying amount / fair value amount
£'000
£'000
£'000
£'000
£'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.ENDIR GMMMZGRNGRZM
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