REG - Goodwin PLC - Half-year Report
20/12/2023 07:00
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RNS Number : 3793X Goodwin PLC 20 December 2023
GOODWIN PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
for the half year ended 31st October 2023
CHAIRMAN'S STATEMENT
I am pleased to report our half-year results for the first six months ending
31st October 2023. The Group has realised a pre-tax trading profit of £11.2
million, marking a notable 23.1% uplift from the previous year's £9.1
million. This successful outcome is attributed to an increased revenue of
£97.6 million. Both of the Group's Divisions have played a significant role
in this achievement during the first six months, and we anticipate a
continuation of this increased performance for the rest of the financial year,
with a current forward order book of £266 million.
The Refractory Engineering Division has continued to advance its
profitability. Notably, the sales of our internally developed,
patent-protected fire extinguishing agent for lithium-ion battery fires, known
as AVD, have reached a milestone at the mid-year point, equalling the total
sales for the previous financial year.
AVD achieved Underwriters Laboratory (UL) certification for component
recognition as an extinguishing agent, and a six-litre fire extinguisher
containing AVD received UL8 certification. This has opened up substantial
opportunities, particularly in the United States, which we anticipate will
emerge as a rapidly expanding market for our product, with sales to the USA
already starting to grow at a good pace. There is ever-growing interest and
adoption that extends way beyond the automotive sector, encompassing a diverse
range of applications worldwide. To support this demand, proactive measures
have been taken to expand AVD manufacturing capacity. The Group has acquired a
2.5-acre site with a 5,000 square metre industrial building, conveniently
located close to Dupré Minerals Limited's primary manufacturing facility in
Staffordshire. The site is ready for immediate use with the planned
commissioning date of the new, higher-capacity AVD manufacturing line set for
April 2024.
The new Calciner at Hoben International Limited has proved to be approximately
15% more efficient than the original Calciner due to the strategic design
modifications that were incorporated into the initial design. This efficiency
improvement has translated into enhanced productivity and energy cost savings.
Hoben's sales of Soluform concrete bags continue to grow and there is wider
adoption amongst some project engineers who are increasingly favouring it as
their product of choice.
The Refractory Engineering Division's sales of investment casting powder to
the global jewellery casting industry has benefited from the jewellery and
brass casting market in China returning to a level of normality and due to the
Chinese consumers increasing confidence post COVID.
The Mechanical Engineering Division is witnessing the continual progression of
activities that was anticipated due to the substantial forward order book.
More to do with timing rather than anything else, the Group's cash position
has deteriorated in the first six months of the financial year which is due to
the increasing levels of working capital that have been accumulating through
the increased activity of the Division. However, whilst we have sufficient
facility headroom available we expect this position to improve by the
financial year end.
There are also a significant number of additional future projects for the
Mechanical Engineering Division, for which, at the time of writing, orders
have yet to be placed. We anticipate addressing these as they emerge.
Reflecting on our active pursuit of major opportunities in the Mechanical
Engineering Division over the past three years, it is reassuring to note that
none have been lost. However, the slow pace of third party decision making has
been a source of frustration. Nevertheless, we are well prepared to capitalise
on these opportunities as they arise, whether at Goodwin Steel Castings
Limited, Goodwin International Limited or Easat Radar Systems Limited. In all
instances, be it technical performance, proven track record or the fact our
proposals offer the best value proposition for our customers, globally, we are
confident that the existing businesses will continue delivering improved
results once we add on some of these new contracts to the existing business
activity.
Keeping one eye on the future, our patent pending polyimide resin production
company, Duvelco Limited, remains on track to have its production plant
commissioned and operational by June 2024. All the major capital expenditure
has been completed with the majority of any spend left being labour to finish
off the wiring, pipework and commissioning. All initial chemicals to make up
to 30 tonnes of polymer resin are on site, so there should not be any large
increases in working capital affecting the Group's future cash position, as it
should become self-funding once operational.
After due consideration, from listening to shareholder enquiries at the AGM,
we recognise the importance of providing more frequent updates. Considering
our Group's diverse and complex operations, we have decided to introduce
quarterly trading updates to keep our investors more informed.
The Group's overall net debt stands at £54.6 million (31st October 2022:
£46.1 million) which equates to a gearing ratio of 47.8% which is in line
with the Group's forecasts and due to an end in large amounts of capital
expenditure and stabilisation of working capital levels, will fall back
towards 30% within the next 18 months.
The Board and I want to thank the employees for their continued efforts in
pushing the Group performance forward, and wish everyone a very Happy
Christmas and a prosperous New Year.
T.J.W. Goodwin
Chairman 19 December 2023
MANAGEMENT REPORT
Financial Highlights
Unaudited Unaudited Audited
Half Year to Half Year to Year ended
31st October 31st October 30th April
2023 2022 2023
£m £m £m
Consolidated Results
Revenue 97.6 89.3 185.7
Operating profit 12.5 9.8 20.3
Trading profit * 11.2 9.1 18.9
Unrealised gain on 10 year interest rate swap derivative 0.9 3.1 3.2
Profit before tax 12.1 12.2 22.1
Profit after tax 9.2 9.1 16.5
Capital additions
Property, plant and equipment (PPE) owned 7.0 7.8 21.2
Property, plant and equipment (PPE) right-of-use assets 0.1 1.1 1.5
Operating lease assets (former IAS 17 definition) ‒ (0.2) (0.4)
Intangible assets 0.4 0.3 1.8
Capital expenditure for KPI purposes 7.5 9.0 24.1
Earnings per share - basic 115.66p 113.93p 206.81p
Earnings per share - diluted 115.66p 113.93p 206.81p
* Trading profit is defined as profit before taxation less the movement in
fair value of interest rate swap.
Revenue
Revenue of £97.6 million for the six months represents a 9.3% increase from
the £89.3 million achieved for the same six month period last year.
Trading profit
Trading profit for the six months of £11.2 million represents a 23.1%
increase from the £9.1 million achieved for the same six month period last
year.
Key performance indicators
Unaudited Unaudited Audited
Half Year to 31st October Half Year to 31st October Year ended 30th April
2023 2022 2023
Trading profit (£'m) 11.2 9.1 18.9
Post tax profit + depreciation + amortisation (£'m) * 12.7 10.5 22.7
Gross profit % of revenue 26.7% 26.5% 24.9%
Trading profit % of revenue 11.5% 10.2% 10.2%
Gearing % 47.8% 40.9% 26.3%
Non cash charges (£'m)
Depreciation 3.9 3.6 7.5
Amortisation and impairment 0.7 0.6 1.3
Total non cash charges 4.6 4.2 8.8
Alternative performance measures mentioned above are defined on page 104 of
the Group Annual Accounts to 30th April 2023.
* The figure for 31st October 2022 has been restated to show the interest rate
swap adjustment net of tax, to be consistent with the other periods.
2023/24 Outlook
The Group's increased levels of activity that have occurred in the first half
of the year are expected to continue throughout the second half of the year,
generating a similar level of profitability as was achieved in the first six
months.
Within the Mechanical Engineering Division, whilst it is unlikely to
immediately create activity within the factory before the year end, we remain
confident that over the next six months Easat Radar Systems will be
announced as the successful bidder of a number of contracts that will create a
level of workload for the company that will allow it to generate respectable
profits for the next two to three years whilst continuing to compete for more
projects that are being tendered. The reason the Board remains confident is
due to the fact that the vast majority of the opportunities that we referenced
in a previous statement ("an additional £47 million of firm buy radar systems
were quoted") have either been delayed or re-tendered due to the specification
of the requirement changing, typically to our advantage due to the company now
being able to offer the full suite of surveillance systems.
If a few of the notable contracts that are expected to arrive over the coming
months do not get delayed again for the Mechanical Engineering Division, the
forward workload will be further increased by the year end.
In the second half of the year, we will also see the completion of the 7,690
square metre new building in India that will substantially increase the
manufacturing capacity of both the investment powders and the submersible
slurry pump businesses. These increases will not only enable the Group to
benefit from the growing domestic market over the next decade but will also
support the growth of the other submersible pump companies in the Group, which
for the last three years have grown at an average compound rate of 18% per
year, and is expected to continue. Currently the pump companies represent
approximately 12% of Group turnover.
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
pages 13 to 14 of the Group Annual Accounts to 30th April 2023 which describe
the principal risks and uncertainties, and to note 28, starting on page 81,
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.
The Group has mitigated the impact of rising interest rates by fixing the
effective base rate at less than 1% for a notional £30 million of debt until
August 2031.
Report on Expected Developments
This report describes the expected development of the Group during the year
ended 30th April 2024. 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
The Group continues to trade profitably by building on the increase in
activity seen in the second half of the previous financial year and, with the
current order book levels where they are, this should continue and improve in
the second half of this financial year and into the next financial year. The
Group has continued with its value added activities and traded throughout this
period and previous periods with minimal disruptions to manufacturing
activities from the challenges that have been seen over the last few years
that have affected many other businesses. As at 31st October 2023, the
Group's net debt stood at £54.6 million (31st October 2022 £46.1 million) as
set out in note 16 of these accounts. Whilst the net debt levels are higher
than those recorded at April 2023 and October 2022, they are in line with the
Group's forecasts and are expected to reduce over time, as working capital
unwinds, along with lower forecasted capital expenditure. Given the
abovementioned, the Directors, after having reviewed the Group projections and
possible challenges that may lie ahead, do not see an issue with the continued
ability of the Group to meet its financial commitments as they fall due for at
least twelve months from the date of these accounts and have drawn up these
accounts to reflect that on a going concern basis.
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 United Kingdom; and
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 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).
T.J.W. Goodwin
Chairman 19 December 2023
Condensed Consolidated Statement of Profit or Loss
for the half year to 31st October 2023
Unaudited Unaudited Audited
Half Year to Half Year to Year ended
31st October 31st October 30th April
2023 2022 2023
£'000 £'000 £'000
Continuing operations
Revenue 97,584 89,335 185,742
Cost of sales (71,493) (65,645) (139,521)
Gross profit 26,091 23,690 46,221
Distribution expenses (1,700) (2,056) (3,741)
Administrative expenses (11,872) (11,801) (22,167)
Operating profit 12,519 9,833 20,313
Finance costs (net) (1,351) (761) (1,438)
Share of profit of associate company 34 33 65
Profit before taxation and movement in fair value of interest rate swap 11,202 9,105 18,940
Unrealised gain on 10 year interest rate swap derivative 938 3,132 3,189
Profit before taxation 12,140 12,237 22,129
Tax on profit (2,971) (3,157) (5,616)
Profit after taxation 9,169 9,080 16,513
Attributable to:
Equity holders of the parent 8,729 8,761 15,904
Non-controlling interests (NCI) 440 319 609
Profit for the period 9,169 9,080 16,513
Basic earnings per ordinary share (note 13) 115.66p 113.93p 206.81p
Diluted earnings per ordinary share (note 13) 115.66p 113.93p 206.81p
Condensed Consolidated Statement of Comprehensive Income
for the half year to 31st October 2023
Unaudited Unaudited Audited
Half Year to Half Year to Year ended
31st October 31st October 30th April
2023 2022 2023
£'000 £'000 £'000
Profit for the period 9,169 9,080 16,513
Other comprehensive expense
Items that are or may be reclassified subsequently to the income statements
Foreign exchange translation differences (218) (167) (1,412)
Effective portion of changes in fair value of cash flow hedges (3,243) (4,958) 3,741
Ineffective portion of changes in fair value of cash flow hedges (177) (92) 518
Change in fair value of cash flow hedges transferred to profit or loss (242) 949 1,308
Effective portion of changes in fair value of cost of hedging 1,466 96 (1,447)
Ineffective portion of changes in fair value of cost of hedging 9 ‒ (76)
Change in fair value of cost of hedging transferred to profit or loss 37 (15) 33
Tax on items that are or may be reclassified subsequently to profit or loss 495 950 (919)
Other comprehensive expense for the period, net of income tax (1,873) (3,237) 1,746
Total comprehensive income for the period 7,296 5,843 18,259
Attributable to:
Equity holder of the parent 6,950 5,633 17,726
Non-controlling interests 346 210 533
7,296 5,843 18,259
Condensed Consolidated Statement of Changes in Equity
for the half year to 31st October 2023
Share capital Translation reserve Share-based payments reserve Cash flow hedge reserve Cost of hedging reserve Retained earnings Total attributable to equity holders of the parent Non-controlling interests Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Half Year to 31st October 2022
(Unaudited)
Balance at 1st May 2022 769 463 5,244 (2,746) 140 111,440 115,310 4,433 119,743
Total comprehensive income:
Profit ‒ ‒ ‒ ‒ ‒ 8,761 8,761 319 9,080
Other comprehensive income:
Foreign exchange translation differences ‒ (81) ‒ ‒ ‒ ‒ (81) (86) (167)
Net movements on cash flow hedges ‒ ‒ ‒ (3,114) 67 ‒ (3,047) (23) (3,070)
Total comprehensive income / expense for the period ‒ (81) ‒ (3,114) 67 8,761 5,633 210 5,843
Dividends paid ‒ ‒ ‒ ‒ ‒ (4,145) (4,145) (380) (4,525)
Dividends declared * ‒ ‒ ‒ ‒ ‒ (4,144) (4,144) ‒ (4,144)
Balance at 31st October 2022 769 382 5,244 (5,860) 207 111,912 112,654 4,263 116,917
* The statement of changes in equity has been restated to reflect the
dividends declared .
Condensed Consolidated Statement of Changes in Equity
for the half year to 31st October 2023
Share capital Translation reserve Share-based payments reserve Cash flow hedge reserve Cost of hedging reserve Retained earnings Total attributable to equity holders of the parent Non-controlling interests Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Year ended 30th April 2023
(Audited)
Balance at 1st May 2022 769 463 5,244 (2,746) 140 111,440 115,310 4,433 119,743
Total comprehensive income:
Profit ‒ ‒ ‒ ‒ ‒ 15,904 15,904 609 16,513
Other comprehensive income:
Foreign exchange translation differences ‒ (1,312) ‒ ‒ ‒ ‒ (1,312) (100) (1,412)
Net movements on cash flow hedges ‒ ‒ ‒ 4,250 (1,116) ‒ 3,134 24 3,158
Total comprehensive income / expense for the period ‒ (1,312) ‒ 4,250 (1,116) 15,904 17,726 533 18,259
Dividends paid ‒ ‒ ‒ ‒ ‒ (8,289) (8,289) (556) (8,845)
Balance at 30th April 2023 769 (849) 5,244 1,504 (976) 119,055 124,747 4,410 129,157
Condensed Consolidated Balance Sheet
Unaudited Unaudited Audited
as at 31st as at 31st as at 30th
October 2023 October 2022 April 2023
£'000 £'000 £'000
Restated *
Non-current assets
Property, plant and equipment 99,623 92,104 101,243
Right-of-use assets 11,344 6,956 6,763
Investment in associates 978 912 964
Intangible assets 25,126 24,380 25,448
Derivative financial assets 5,644 5,446 5,932
142,715 129,798 140,350
Current assets
Inventories 48,835 43,323 47,955
Contract assets 19,808 17,811 16,257
Trade and other financial assets 36,737 30,341 29,757
Corporation tax receivable 418 1,339 1,337
Other receivables 5,796 5,984 4,775
Deferred tax asset 119 59 57
Derivative financial assets 1,577 2,105 2,684
Cash and cash equivalents 13,404 8,604 19,661
126,694 109,566 122,483
Total assets 269,409 239,364 262,833
Current liabilities
Bank overdrafts and interest-bearing liabilities 13,942 3,318 6,729
Contract liabilities ** 31,412 19,462 32,747
Trade payables and other financial liabilities 23,065 18,722 25,164
Other payables 6,873 6,266 6,601
Dividends payable 4,318 4,144 ‒
Derivative financial liabilities 2,121 4,984 2,383
Liabilities for current tax 2,009 1,194 921
Provisions for liabilities and charges 229 206 266
83,969 58,296 74,811
Non-current liabilities
Interest-bearing liabilities 55,357 53,042 47,256
Derivative financial liabilities 108 2,326 ‒
Provisions for liabilities and charges 304 333 246
Deferred tax liabilities 10,983 8,450 11,363
66,752 64,151 58,865
Total liabilities 150,721 122,447 133,676
Net assets 118,688 116,917 129,157
Equity attributable to equity holders of the parent
Share capital 751 769 769
Translation reserve (957) 382 (849)
Share-based payments reserve 5,244 5,244 5,244
Cash flow hedge reserve (1,298) (5,860) 1,504
Cost of hedging reserve 155 207 (976)
Retained earnings 110,297 111,912 119,055
Total equity attributable to equity holders of the parent 114,192 112,654 124,747
Non-controlling interests 4,496 4,263 4,410
Total equity 118,688 116,917 129,157
* The balance sheet has been restated to reflect the dividends payable at 31st
October 2022.
** Contract liabilities include advance payments from customers of
£30,462,000 (31(st) October 2022: £18,627,000), with the balance of
£950,000 (31(st) October 2022: £835,000) being costs accrued for contracts.
Condensed Consolidated Statement of Cash Flows
for the half year ended 31st October 2023
Unaudited Unaudited Audited
Half Year to Half Year to Year ended
31st October 31st October 30th April
2023 2022 2023
£'000 £'000 £'000
Cash flow from operating activities
Profit from continuing operations after tax 9,169 9,080 16,513
Adjustments for:
Depreciation of property, plant and equipment 3,153 2,965 6,272
Depreciation of right-of-use assets 717 642 1,198
Amortisation and impairment of intangible assets 654 610 1,257
Finance costs (net) 1,351 761 1,438
Foreign exchange losses / (gains) 267 (1,965) 1,213
Loss / (profit) on sale of property, plant and equipment (27) 7 134
Unrealised gain on 10 year interest rate swap derivative (938) (3,132) (3,189)
Share of profit of associate companies (34) (33) (65)
UK tax incentive credit on research and development ‒ ‒ (610)
Tax expense 2,971 3,157 5,616
Cash generated from operating activities before changes in working capital and 17,283 12,092 29,777
provisions
Increase in inventories (980) (3,112) (8,377)
Increase in contract assets (3,572) (5,461) (3,804)
Increase in trade and other receivables (8,213) (5,426) (5,304)
(Decrease) / increase in contract liabilities (1,325) 4,720 17,954
(Decrease) / increase in trade and other payables (1,364) (2,488) 4,072
Cash inflow from operations 1,829 325 34,318
Interest paid (1,629) (763) (1,940)
Corporation tax paid (885) (2,196) (3,251)
Net cash from operating activities (685) (2,634) 29,127
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 196 39 218
Acquisition of property, plant and equipment (2,385) (6,796) (18,871)
Acquisition of intangible assets (91) (143) (675)
Development expenditure capitalised (307) (166) (1,196)
Net cash outflow from investing activities (2,587) (7,066) (20,524)
Cash flows from financing activities
Buy back of shares (8,869) ‒ ‒
Payment of capital element of lease obligations (1,325) (882) (1,874)
Dividends paid (4,318) (4,145) (8,289)
Dividends paid to non-controlling interests (260) (380) (556)
Proceeds from new loans and committed facilities 12,500 13,000 11,500
Repayment of loans and committed facilities (613) (868) (1,181)
Change in bank overdrafts (119) ‒ 119
Net cash (outflow) / inflow from financing activities (3,004) 6,725 (281)
Net (decrease) / increase in cash and cash equivalents (6,276) (2,975) 8,322
Cash and cash equivalents at beginning of year 19,661 11,651 11,651
Effect of exchange rate fluctuations on cash held 19 (72) (312)
Closing cash and cash equivalents 13,404 8,604 19,661
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 2023 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 2023 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 United Kingdom. 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 2023.
The comparative figures for the financial year ended 30th April 2023 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 19 December 2023.
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 2023, except where accounting standards have been amended and the
Group has adopted these amendments during the current period.
The following amendments, which have become effective for the current
reporting period, and therefore have been adopted by the Group, are not
expected to have a significant impact on the Group's financial statements.
· Amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2: Disclosure of Accounting Policies - (effective for
periods commencing on or after 1st January 2023).
· Amendments to IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors 'Definition of Accounting Estimates' - (effective for
periods commencing on or after 1st January 2023).
· Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and
Liabilities arising from a Single Transaction - (effective for periods
commencing on or after 1st January 2023).
· Amendments to IAS 12 Income Taxes: International Tax Reform - Pillar
Two Model Rules (effective for periods commencing on or after 1st January
2023).
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 amendments have not yet been adopted by the Group:
· Amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current and Classification of
Liabilities as Current or Non-current - Deferral of Effective Date -
(effective for periods commencing on or after 1st January 2024).
· Amendments to IAS 1 Presentation of Financial Statements: Non-current
liabilities with covenants - (effective for periods commencing on or after 1st
January 2024).
The Group does not expect the above amendments to have a material impact on
profit, earnings per share and net assets in future periods.
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 2023.
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. Operating Segments
For reporting to the chief operating decision maker, the Board of Directors,
the Group is organised into two reportable operating segments, according to
the different products and services provided by the Mechanical Engineering and
Refractory Engineering Divisions. Segment assets and liabilities include
items directly attributable to segments as well as group centre balances,
which can be allocated on a reasonable basis. Associates are included in
Refractory Engineering. In accordance with the requirements of IFRS 8,
information regarding the Group's operating segments is reported below.
In previous years, the segmental analysis of net assets, capital expenditure
and depreciation was based on the legal structure of the Group. As the
analysis from 30(th) April 2023 has been prepared on the basis of the
operational structure of the Group, the comparative figures for 31(st) October
2022 have been restated accordingly.
6. Operating segment revenue
Unaudited Unaudited Audited
Half Year to 31st October 2023 Half Year to 31st October 2022 Year ended 30th April 2023
Mechanical Refractory Total Mechanical Refractory Total Mechanical Refractory Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Total revenue 80,549 38,657 119,206 70,276 40,039 110,315 147,538 80,340 227,878
Inter-segment revenue (14,723) (6,899) (21,622) (12,226) (8,754) (20,980) (23,771) (18,365) (42,136)
External revenue 65,826 31,758 97,584 58,050 31,285 89,335 123,767 61,975 185,742
7. Operating segment profit
Unaudited Unaudited Audited
Half year to 31st October 2023 Half year to 31st October 2022 Year ended 30th April 2023
% £'000 % £'000 % £'000
Mechanical Engineering 52 7,719 47 5,809 49 12,171
Refractory Engineering 48 7,146 53 6,525 51 12,772
Segment operating profit 100 14,865 100 12,334 100 24,943
Group centre (2,346) (2,501) (4,630)
Group operating profit 12,519 9,833 20,313
Group finance costs (net) (1,351) (761) (1,438)
Share of profit of Refractory associate company 34 33 65
Profit before taxation and movement in fair value of interest rate swap 11,202 9,105 18,940
Unrealised gain on 10 Year Interest rate swap 938 3,132 3,189
Profit before tax 12,140 12,237 22,129
Tax (2,971) (3,157) (5,616)
Profit after tax 9,169 9,080 16,513
8. Operating segment assets and liabilities
Unaudited Unaudited
Half Year to 31st October 2023 Half Year to 31 October 2022
Mechanical Refractory Group Centre Total Mechanical Refractory Group Centre Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Net assets
Total assets 187,155 61,843 20,411 269,409 159,760 60,908 18,696 239,364
Total liabilities (121,959) (23,149) (5,613) (150,721) (98,900) (18,013) (5,534) (122,447)
Total 65,196 38,694 14,798 118,688 60,860 42,895 13,162 116,917
Audited
Year ended 30 April 2023
Mechanical Refractory Group Centre Mechanical
Net assets
Total assets 175,023 69,166 18,644 262,833
Total liabilities (103,234) (27,621) (2,821) (133,676)
Total 71,789 41,545 15,823 129,157
9. Operating segment capital expenditure, depreciation and amortisation
Unaudited Unaudited
Half Year to 31st October 2023 Half Year to 31st October 2022
Mechanical Refractory Group centre Total Mechanical Refractory Group centre Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Capital expenditure on:
Property, plant and equipment 5,420 1,019 494 6,933 5,567 2,144 115 7,826
Right-of-use assets ‒ 34 34 68 976 66 62 1,104
Intangible assets 381 17 ‒ 398 208 45 9 262
Total capital expenditure 5,801 1,070 528 7,399 6,751 2,255 186 9,192
Depreciation 2,445 858 567 3,870 2,338 761 508 3,607
Amortisation 225 408 21 654 221 359 30 610
Total 2,670 1,266 588 4,524 2,559 1,120 538 4,217
Audited
Year ended 30th April 2023
Mechanical Refractory Group centre Total
£'000 £'000 £'000 £'000
Capital expenditure on
Property, plant and equipment 15,623 4,928 630 21,181
Right-of-use assets 1,233 66 220 1,519
Intangible assets 508 1,305 11 1,824
Total capital expenditure 17,364 6,299 861 24,524
Depreciation - property, plant and equipment 4,872 1,528 1,070 7,470
Amortisation 446 747 64 1,257
Total 5,318 2,275 1,134 8,727
10. Geographical segments
Unaudited Unaudited
Half Year to 31st October 2023 Half Year to 31st October 2022
Revenue Net assets Non-current assets Capital expenditure Revenue Net assets Non-current assets Capital expenditure
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
UK 34,171 73,302 115,763 5,130 25,108 71,240 102,487 7,957
Rest of Europe 10,526 6,530 4,258 330 13,360 9,096 3,981 385
USA 9,458 ‒ ‒ ‒ 7,807 ‒ ‒ ‒
Pacific Basin 21,865 16,378 6,656 199 18,349 16,993 7,395 119
Rest of World 21,564 22,478 10,394 1,740 24,711 19,588 10,489 731
Total 97,584 118,688 137,071 7,399 89,335 116,917 124,352 9,192
Audited
Year ended 30th April 2023
Revenue Net assets Non-current assets Capital expenditure
£'000 £'000 £'000 £'000
UK 55,867 82,669 114,235 21,533
Rest of Europe 28,367 10,636 4,224 790
USA 19,854 ‒ ‒ ‒
Pacific Basin 34,725 15,982 7,029 330
Rest of World 46,929 19,870 8,930 1,871
Total 185,742 129,157 134,418 24,524
11. Revenue
The Group's revenue is derived from contracts with customers. The following
tables provide an analysis of revenue by geographical market and by product
line.
Unaudited Unaudited Audited
Half Year to 31st October 2023 Half Year to 31st October 2022 Year ended 30th April 2023
Mechanical Refractory Total Mechanical Refractory Total Mechanical Refractory Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Primary geographical markets
UK 25,594 8,577 34,171 17,916 7,193 25,109 41,112 14,755 55,867
Rest of Europe 6,478 4,048 10,526 9,322 4,038 13,360 21,269 7,098 28,367
USA 9,069 389 9,458 7,400 407 7,807 19,141 713 19,854
Pacific Basin 10,082 11,783 21,865 5,885 12,464 18,349 12,253 22,472 34,725
Rest of World 14,603 6,961 21,564 17,527 7,183 24,710 29,992 16,937 46,929
Total 65,826 31,758 97,584 58,050 31,285 89,335 123,767 61,975 185,742
Product lines
Standard products and consumables 7,043 31,758 38,801 7,222 31,285 38,507 13,767 61,975 75,742
Bespoke engineered products - point in time 8,377 ‒ 8,377 17,468 ‒ 17,468 30,002 ‒ 30,002
Total point in time revenue 15,420 31,758 47,178 24,690 31,285 55,975 43,769 61,975 105,744
Minimum period contracts for goods and services 2,840 ‒ 2,840 2,252 ‒ 2,252 4,335 ‒ 4,335
Bespoke engineered products - over time 47,566 ‒ 47,566 31,108 ‒ 31,108 75,663 ‒ 75,663
Total over time revenue 50,406 ‒ 50,406 33,360 ‒ 33,360 79,998 ‒ 79,998
Total revenue 65,826 31,758 97,584 58,050 31,285 89,335 123,767 61,975 185,742
12. Dividends
The Directors do not propose the payments of an interim dividend.
Unaudited Unaudited Audited
Half Year to Half Year to Year ended
31st October 31st October 30th April
2023 2022 2023
£'000 £'000 £'000
Equity dividends paid during the period:
Ordinary dividends paid in respect of the year ended 30th April 2023 4,318 ‒ ‒
Ordinary dividends paid in respect of the year ended 30th April 2022 ‒ 4,145 8,289
Total 4,318 4,145 8,289
As noted in the Group Annual Accounts to 30th April 2023, the dividend
payments for the year ended 30th April 2023 are being paid in two equal
instalments, with the second payment due in April 2024.
13. Earnings per share
Unaudited Unaudited Audited
as at as at as at
31st October 31st October 30th April
2023 2022 2023
Number of ordinary shares
Ordinary shares in issue
Opening balance 7,689,600 7,689,600 7,689,600
Shares bought back in the period (180,000) ‒ ‒
Closing balance 7,509,600 7,689,600 7,689,600
Weighted average number of ordinary shares in issue 7,546,774 7,689,600 7,689,600
£'000
Relevant profits attributable to shareholders 8,729 8,761 15,904
The Company bought back 180,000 of its ordinary shares on 7th June 2023 and
cancelled them off the register, following a tender offer to its shareholders.
14. Property, plant and equipment and intangible assets
Unaudited Unaudited
Half Year to 31st October 2023 Half Year to 31st October 2022
Property, plant and equipment Right-of-use assets Intangible assets Property, plant and equipment Right-of-use assets Intangible assets
£'000 £'000 £'000 £'000 £'000 £'000
Net book value at the beginning of the period 101,243 6,763 25,448 87,594 6,191 24,817
Additions 6,933 68 398 7,826 1,104 262
Disposals (at net book value) (169) ‒ ‒ (46) ‒ ‒
Transfers (5,242) 5,242 ‒ (306) 306 ‒
Depreciation (3,153) (717) ‒ (2,965) (642) ‒
Amortisation ‒ ‒ (654) ‒ ‒ (610)
Exchange adjustment 11 (12) (66) 1 (3) (89)
Net book value at the end of the period 99,623 11,344 25,126 92,104 6,956 24,380
The depreciation on right-of-use assets maybe be analysed as follows:
Unaudited Unaudited
Half Year to 31st October Half Year to 31st October
2023 2022
£'000 £'000
Finance leases (former IAS 17 definition) 439 365
Operating leases (former IAS 17 definition) 278 277
717 642
15. Interest-bearing liabilities
Unaudited Unaudited Audited
as at as at as at
31st October 31st October 30th April
2023 2022 2023
£'000 £'000 £'000
Bank overdrafts ‒ ‒ 119
Bank loans - repayable by instalments 1,072 1,058 1,154
Bank loans - rolling credit facilities 10,000 ‒ 3,500
Lease liabilities 2,870 2,260 1,956
Due within one year 13,942 3,318 6,729
Bank loans - repayable by instalments 6,443 7,367 6,985
Bank loans - rolling credit facilities 42,000 41,000 36,000
Lease liabilities 6,914 4,675 4,271
Due after more than one year 55,357 53,042 47,256
Bank overdrafts ‒ ‒ 119
Bank loans - repayable by instalments 7,515 8,425 8,139
Bank loans - rolling credit facilities 52,000 41,000 39,500
Lease liabilities 9,784 6,935 6,227
Total 69,299 56,360 53,985
Former IAS 17 analysis of lease liabilities
Finance leases 8,510 5,306 4,725
Operating leases 1,274 1,629 1,502
9,784 6,935 6,227
16. Capital management
As at 31st October 2023 the capital utilised was £168,813,000, as shown
below:
Unaudited Unaudited Audited
As at As at As at
31st October 2023 31st October 2022 30th April
2023
Note £'000 £'000 £'000
Cash and cash equivalents (13,404) (8,604) (19,661)
Bank overdrafts 15 ‒ ‒ 119
Bank loans and committed facilities 15 59,515 49,425 47,639
Lease liabilities 15 9,784 6,935 6,227
Net debt in accordance with IFRS 16 55,895 47,756 34,324
Operating lease debt (former IAS 17 definition) 15 (1,274) (1,629) (1,502)
Relevant net debt for KPI purposes 54,621 46,127 32,822
Total equity attributable to equity holders of the parent 114,192 112,654 124,747
Capital 168,813 158,781 157,569
17. 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 2023. The carrying amount is a reasonable approximation of fair
value for all financial assets and financial liabilities.
Fair value hedging instruments Fair value through profit and loss Amortised cost Total carrying amount / fair value amount
£'000 £'000 £'000 £'000
Financial assets measured at fair value
Forward exchange contracts used for hedging 335 ‒ ‒ 335
Other forward exchange contracts ‒ 19 ‒ 19
Interest rate swap ‒ 6,867 ‒ 6,867
335 6,886 ‒ 7,221
Financial assets not measured at fair value
Cash and cash equivalents ‒ ‒ 13,404 13,404
Contract assets ‒ ‒ 19,808 19,808
Trade receivables and other financial assets ‒ ‒ 36,737 36,737
Corporation tax receivable ‒ ‒ 418 418
‒ ‒ 70,367 70,367
Financial liabilities measured at fair value
Forward exchange contracts used for hedging 1,528 ‒ ‒ 1,528
Other forward exchange contracts ‒ 701 ‒ 701
1,528 701 ‒ 2,229
Financial liabilities not measured at fair value
Bank loans ‒ ‒ 59,515 59,515
Lease liabilities ‒ ‒ 9,784 9,784
Contract liabilities ‒ ‒ 31,412 31,412
Trade payables and other financial liabilities ‒ ‒ 23,065 23,065
Corporation tax payable ‒ ‒ 2,009 2,009
‒ ‒ 125,785 125,785
The interest rate SWAP and 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.
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).
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