Half-year Report

Source: RNS
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

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)

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 (31st October 2022: £18,627,000), with the balance of £950,000 (31st 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 provisions

17,283

12,092

29,777

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 30th April 2023 has been prepared on the basis of the operational structure of the Group, the comparative figures for 31st 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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