Interim Results
Goodwin PLC
21 December 2007
GOODWIN PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 OCTOBER 2007
CHAIRMAN'S STATEMENT
I am pleased to report that the pre-tax profits for the Group for the six month
period ending 31st October 2007 were £4.37 million (2006: £2.83 Million), an
increase of 54% on a revenue of £34.96 million which is up 15 % on the same
period last financial year.
The order books of all Group companies remain buoyant and it would be
surprising if the current level of activity were to drop in the second half of
the year. The Group's continued investment in terms of time and money in order
to develop manufacturing and sales operations in the rapidly expanding Pacific
Basin countries is progressively resulting in a larger proportion of Group
profits emanating from this region and the Board considers this effort will
position the Group well in future years.
Goodwin Steel Castings continues to win multi million dollar orders for valves
and components for use in high efficiency electrical power generating plant, be
it in China, India or the USA.
Goodwin International, having recently expanded its range of check valves to
include the nozzle check valve to complement its dual plate check valve, and
with its new sister company in Germany, Noreva GmbH, is expected yet again this
year to win record levels of orders from the oil, gas and LNG industries world
wide which have an impressive five year investment programme to keep pace with
the increasing world demand.
The Refractory Engineering Division with manufacturing units in the UK,
Thailand, China and India continues to expand and we are starting now to see
economies of scale benefits, especially with our new UK vermiculite facility
which is scheduled to be fully commissioned in January 2008.
Internet Central has engineered a hardware/software platform that provides a
stable leading edge technology voice over internet protocal (VOIP) telephone
exchange system that is now being sold through a growing number of distribution
channels, which should enable this company to continue its growth in turnover
and profitability.
The Board continues to investigate opportunities of achieving additional growth
in terms of turnover and profitability but it remains Board policy that the
Group should finance any such growth from its own profit streams and that
expansion would be in areas where our experience and core skills can be
discerningly utilised.
The Group continues to invest and carry out research into products that will
result in reduced environmental pollution. This is especially the case for
products that are needed to improve the efficiency of coal and gas fired power
stations which represent over 65 % of world power generating capacity.
John W Goodwin
Chairman
21st December 2007
Management report
During the six months to 31st October 2007 the Group has manufactured products
for customers whose markets are very much driven by environmental needs.
The Group has continued to invest in research with a view to protecting its
niche market in the power generation industry. The emphasis is firmly placed on
researching and supplying products which when incorporated into our customers'
plants give the benefit of reduced CO2 emissions.
Within the oil, gas and LNG industries the last six months have seen dramatic
rises in fuel costs and this has created more investment opportunities and a
greater need for the valves we manufacture. The Group's investment in
vermiculite, used in many insulating applications has been significant and with
the imminent commissioning of our new facility in the UK, we hope to be in a
good position to meet an encouraging demand stimulated by the much higher
energy costs and grants for energy saving. This new £2 million facility will be
commissioned in January 2008.
The incidence of flooding seems to be rising and during the period one
particular flood in South Yorkshire and another to the north of Birmingham
knocked out the internet connectivity for thousands of users. This really
brought home the dependency on the internet for communications by both business
and domestic users. In addition to this BT made clear their plans for
converting existing telephone exchanges away from ISDN and advertised the
technology changes coming using voice over internet protocol (VOIP) for the
21st century. Our internet company has led the way locally for providing
multiple resilient internet connectivity (having initially thought about denial
of access to areas in the event of a disaster such as bird flu). The result
was that many customers who lost connectivity through flooding had alternative
backup routes provided by Internet Central, which has also launched a leading
telephone exchange for VOIP in the last 6 months.
Our overseas subsidiaries have been growing at rates in excess of the GDP
growth rates in their domestic economies. During the period there have been no
exceptional or material adverse events and no changes to composition of the
Group.
Two intellectual property infringement cases have been pursued via litigation
and have been successful. The Group will continue to actively protect its
intellectual property.
Financial Highlights
Unaudited Unaudited Audited
Half year to Half year to Year ended
31st October 31st October 30th April
2007 2006 2007
Consolidated Results £m £m £m
Sales Revenue 34.96 30.51 65.31
Operating Profit 4.84 3.11 7.76
Profit before tax 4.37 2.83 7.04
Profit after tax 3.04 1.95 4.84
----- ----- -----
Capital Expenditure 1.72 1.81 2.68
Net debt* 9.00 7.12 8.99
* Bank and lease borrowings less
cash on hand
----- ----- -----
Earnings per share (Basic and Diluted) 40.42p 26.40p 65.1p
Revenue: up by 15%
Sales revenue was £34.96 million, which represents a 15% increase over the
£30.51 million achieved during the same period last year. The Group's markets
showed healthy overall trends during the first half of 2007 driven by
significant revenue growth in almost all the Group's segments. We are pleased
to report that our newly acquired subsidiary, Noreva GmbH, is performing well.
As can be seen from the segmental analysis, the geographical spread shows a
more balanced input from territories throughout the world.
Operating Profit: up by 56%
The operating profit for the 6 months of £4.84 million represents an increase
of 56% over the £3.11 million achieved during the 6 months to 31st October
2006. Increased gross margins and control of overhead costs have combined to
generate the significant improvement in the operating profit.
Net Debt
Despite the sustained growth in the Group's turnover and the significant
investment made by the Group (both fixed assets and external acquisitions) the
overall level of debt remains modest in relation to the net assets of the
Group. As reported in the Group's full year accounts, the directors consider
that the market value of the Group's freehold land and buildings is in excess
of the values disclosed in the Group balance sheet.
Report on Expected Developments
This report describes the expected developments of the Group during the year
ended 30th April 2008. 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.
2008 Outlook
The outlook remains buoyant and we remain enthusiastic about our products and
our markets. It is hoped that Government policy on carbon emissions in steel
making will not jeopardise the tremendous contribution our Group is making in
the UK to the world wide reduction of carbon emissions from power stations.
We are concerned about the planning and electricity availability in the UK and
long term we believe in the urgent need for nuclear power. Now the Government
has announced its intent to allocate specific sites, we intend to continue our
representation and learning within this field to provide an indigenous
component supply capability. The Group already has supplied components into
this industry.
Despite the continuing weakness of the US Dollar the Group currently sees no
reason to expect a deterioration in performance during the second half of the
financial year.
Responsibility statement of the directors in respect of the half-yearly
financial report
The directors confirm to the best of their knowledge that 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 the Interim Management Report and condensed financial
statements include a fair review of the information required by Disclosure and
Transparency Rules 4.2.7 and 4.2.8 of the United Kingdom's Financial Service
Authority.
J.W. Goodwin
Chairman
21st December 2007
Condensed consolidated interim income statement
for the half year ended October 2007
Unaudited Unaudited Audited
Half year to Half year to Year ended
31st October 31st October 30th April
2007 2006 2007
£000 £000 £000
Continuing operations
Revenue 34,958 30,509 65,314
Cost of sales (25,395) (23,117) (50,135)
------ ------ ------
Gross profit 9,563 7,392 15,179
Distribution costs (1,401) (935) (1,903)
Administrative expenses (3,320) (3,349) (5,518)
------ ------ ------
Operating profit 4,842 3,108 7,758
Financial expenses (474) (280) (716)
------ ------ ------
Profit before taxation 4,368 2,828 7,042
Tax on profit (1,328) (874) (2,198)
------ ------ ------
Profit after taxation 3,040 1,954 4,844
====== ====== ======
Attributable to:
Equity holders of the parent 2,910 1,901 4,687
Minority interest 130 53 157
------ ------ ------
Profit for the period 3,040 1,954 4,844
====== ====== ======
Basic and diluted earnings per ordinary
share 40.42p 26.40p 65.10p
Condensed consolidated interim statement of recognised income and expense
for the half year ended 31st October 2007
Unaudited Unaudited Audited
Half year to Half year to Year ended
31st October 31st October 30th April
2007 2006 2007
£000 £000 £000
Foreign exchange translation
differences (11) (47) 9
Effective portion of changes in fair
value of cash flow hedges 917 390 589
Change in fair value of cash flow
hedges transferred to profit or loss (94) (780) (935)
Tax recognised on income and expenses
recognised directly in equity (211) 117 104
----- ----- -----
Net income and expense recognised
directly in equity 601 (320) (233)
Profit for the period 3,040 1,954 4,844
----- ----- -----
Total recognised income and expense 3,641 1,634 4,611
===== ===== =====
Total recognised income and expense for
the period is attributable to:
Equity holders of the parent 3,511 1,581 4,454
Minority interest 130 53 157
----- ----- -----
3,641 1,634 4,611
===== ===== =====
Condensed consolidated interim balance sheet
at 31st October 2007
Unaudited Unaudited Audited
Half Year to Half Year to Year ended
31st October 31st October 30 April
2006 2007 2007
£000 £000 £000
Non-current assets
Property, plant and equipment 14,188 12,097 13,305
Intangible assets 4,815 327 5,050
------ ------ ------
19,003 12,424 18,355
------ ------ ------
Current assets
Inventories 14,405 12,512 14,367
Financial assets 20,862 15,216 17,186
Cash and cash equivalents 470 514 412
------ ------ ------
35,737 28,242 31,965
------ ------ ------
Total assets 54,740 40,666 50,320
------ ------ ------
Current liabilities
Bank overdraft 2,922 6,564 2,493
Other interest-bearing loans and
borrowings 5,622 396 5,626
Trade and other payables 16,994 12,532 16,598
Tax payable 1,276 707 1,303
------ ------ ------
26,814 20,199 26,020
------ ------ ------
Non-current liabilities
Other interest-bearing loans and
borrowings 959 677 1,280
Deferred consideration 1,558 - 1,509
Deferred tax liabilities 1,652 1,429 1,395
------ ------ ------
4,169 2,106 4,184
------ ------ ------
Total liabilities 30,983 22,305 30,204
------ ------ ------
Net assets 23,757 18,361 20,116
====== ====== ======
Equity attributable to equity holders
of the parent
Share capital 720 720 720
Translation reserve 22 (23) 33
Cash flow hedge reserve 1,296 653 684
Retained earnings 21,120 16,524 18,210
------ ------ ------
23,158 17,874 19,647
Minority interest 599 487 469
------ ------ ------
Total equity 23,757 18,361 20,116
====== ====== ======
Condensed consolidated interim cash flow statement
for the half year ended 31st October 2007
Unaudited Unaudited Audited
Half Year to Half Year to Year ended
31st October 31st October 30th April
2006 2007 2007
£000 £000 £000
Cash flow from operating activities
Profit for the year 3,040 1,954 4,844
Adjustments for:
Depreciation 843 767 1,495
Amortisation of intangible assets 235 26 101
Financial expense 474 280 716
Loss on sale of property, plant and
equipment 2 8 9
Tax expense 1,328 874 2,198
------ ------ ------
Operating profit before changes in
working capital and provisions 5,922 3,909 9,363
Increase in trade and other
receivables (3,073) (1,966) (2,910)
Decrease / (Increase) in inventories 15 (2,242) (1,736)
(Decrease)/increase in trade and other
payables (excluding payments on account) (1,215) 457 (597)
Increase/(decrease) in payments on 1,811 (537) 1,793
account
------ ------ ------
Cash generated from operations 3,460 (379) 5,913
Interest paid (439) (261) (657)
Corporation tax paid (1,309) (920) (1,768)
Interest element of finance lease
obligations (35) (19) (59)
------ ------ ------
Net cash from operating activities 1,677 (1,579) 3,429
------ ------ ------
Cash flow from investing activities
Proceeds from sale of property, plant
and equipment 5 7 25
Acquisition of property, plant and
equipment (1,721) (1,287) (2,403)
Acquisition of customer list - - (880)
Acquisition of subsidiary net of cash
acquired - - (2,739)
------ ------ ------
Net cash from investing activities (1,716) (1,280) (5,997)
------ ------ ------
Cash flows from financing activities
Payment of capital element of finance
lease obligations (328) (156) (382)
Dividends paid - - (1,100)
Proceeds of new loans - - 5,000
------ ------ ------
Net cash from financing activities (328) (156) 3,518
Net (decrease) / increase in cash and
cash equivalents (367) (3,015) 950
Opening cash and cash equivalents (2,081) (3,024) (3,024)
Effect of exchange rate fluctuations
on cash held (4) (11) (7)
------ ------- ------
Closing cash and cash equivalents (2,452) (6,050) (2,081)
====== ======= ======
Notes
to the condensed consolidated interim financial statements
1 Reporting entity
Goodwin PLC (the 'Company') is a company incorporated in the UK. The condensed
consolidated interim financial statements of the Company as at and for the six
months ended 31st October 2007 comprise the Company and its subsidiaries
(together referred to as the 'Group').
The consolidated financial statements of the Group as at and for the year ended
30th April 2007 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 condensed consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standard (IFRS) 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 consolidated financial statements of the Group as
at and for the year ended 30th April 2007.
The financial information for the six months ended 31st October 2007 and the
comparative figures for the six months ended 31st October 2006 have not been
audited or reviewed. The summarised financial information in respect of the
year ended 30th April 2007 is not the Company's statutory accounts for that
financial year. Those accounts, which were prepared under IFRS as adopted in
the EU, have been delivered to the Registrar of Companies. The report of the
auditor was (i) unqualified; (ii) did no 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 237(2) or section
237(3) of the Companies Act 1985.
These condensed consolidated interim financial statements were approved by the
Board of Directors on 21st December 2007.
3 Significant accounting policies
Except as described below, the accounting policies applied by the Group in
these condensed consolidated financial statements are the same as those applied
by the Group in its consolidated financial statements as at and for the year
ended 30th April 2007.
IAS 34 states the tax measurement basis may depart from the basis adopted in
the year end accounts. In accordance with IAS 34, the interim tax charge shown
in these condensed accounts is based on the estimated full year tax rate for
the year ended 30th April 2008 of 29.84% for corporation tax, with deferred tax
being provided at a rate of 28%.
4 Estimates
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 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 consolidated financial statements as at and for the year ended 30th
April 2007.
5 Segmental analysis
Segment information is presented in respect of the Group's business and
geographic segments. The primary format business segment is based on the
Group's management and internal reporting structure.
Business segment
The Group has one significant primary trading activity that of mechanical and
refractory engineering so no further analysis is provided.
Geographical segment
Half year ended Half year ended Year ended
31st October 31st October 30th April
2007 2006 2007
Revenue Operat Capital Revenue Operat Capital Revenue Operat Capital
ional expend ional expend ional expend
assets iture assets iture assets iture
£000 £000 £000 £000 £000 £000 £000 £000 £000
UK 8,717 20,904 1,638 6,280 16,909 1,497 12,754 18,020 2,786
Rest
of
Europe 9,146 1,038 - 2,112 72 - 9,911 545 -
USA 2,854 - - 1,162 - - 4,544 - -
Pacific
Basin 6,350 1,075 48 14,129 672 161 27,466 868 203
Rest
of
world 7,891 740 35 6,826 708 154 10,639 683 153
Total 34,958 23,757 1,721 30,509 18,361 1,812 65,314 20,116 3,142
The Group is managed as one business but operates in the above principal
locations. In presenting the information on geographical segments, revenue is
based on the location of its customers and assets on the location of the
assets.
6 Dividends
The directors do not propose the payment of an interim dividend.
Half year ended Half year ended Year ended
31st October 31st October 30th April
2007 2006 2007
£000 £000 £000
Equity dividends:
Paid dividend
(April 2006: 15.278p per share) - - 1,100
Proposed dividend
(April 2007: 18.403p per share) - - 1,325
====== ====== =====
7 Earnings per share
The calculation of the 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 period attributable to ordinary shareholders of £2,910,000 (31st October
2006: £1,901,000). The company has no share options or diluting earnings per
share.
8 Significant acquisition of plant, property and equipment
As referred to in the Management Report, the Group is nearing the completion of
its new vermiculite plant. In the six month period to 31st October 2007, the
capital expenditure on this activity has been £912,000.
END
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