Goodwin
Annual Report 2020

Plain-text annual report

459559_2020 Annual Report A4 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 1 INDEX Notice of Annual General Meeting Notes to Notice of Annual General Meeting GROUP STRATEGIC REPORT Chairman’s Statement Summary of Consolidated Statement of Profit or Loss and Statement of Comprehensive Income Objectives, Strategy and Business Model Principal Risks and Uncertainties Corporate Social Responsibility DIRECTORS’ REPORTS Report of the Directors Corporate Governance Report Audit Committee Report Directors’ Remuneration Policy and Report Statement of Directors’ responsibilities in respect of the Annual Report and the Financial Statements AUDITOR’S REPORT Independent Auditor’s Report to the Members of Goodwin PLC FINANCIAL STATEMENTS Consolidated Statement of Profit or Loss Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Balance Sheet Consolidated Statement of Cash Flows FIVE YEAR FINANCIAL SUMMARY 1 2 3 6 7 11 14 17 20 22 25 31 32 42 43 44 46 47 98 FINANCIAL HIGHLIGHTS Accounting policies 48 Earnings per share 62 Related parties 84 Alternative performance measures 86 Estimates and judgements 55 Revenue 60 Capital and reserves 75 Financial expenses 61 Right-of-use assets 64 Capital commitments 83 Financial risk management 75 Subsequent events 83 Cash and cash equivalents 72 Guarantees and contingencies 83 Segmental information 58 Changes in accounting policies 56 Intangible assets 70 Staff numbers and costs 61 Company statements 87 Interest bearing loans 72 Taxation 62 Deferred consideration 74 Investment in subsidiaries 66 Trade assets 72 Deferred tax 74 Inventories 72 Trade liabilities 73 Dividend policy 10 Property, plant and equipment 63 Warranty provision 74 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 3 GOODWIN PLC www.goodwin.co.uk Registered in England and Wales, Number 305907 Established 1883 T. J. W. Goodwin (Chairman) Directors: M. S. Goodwin (Managing Director) Mechanical Engineeering Division S. R. Goodwin (Managing Director) Refractory Engineering Division J. Connolly S. C. Birks B. R. E. Goodwin J. E. Kelly (Non-Executive Director) Secretary and registered office: Mrs. J. L. Martin, L.L.B., A.C.I.S. Ivy House Foundry, Hanley, Stoke-on-Trent, ST1 3NR Registrar and share transfer office: Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ Auditor: KPMG LLP, One Snowhill, Snow Hill Queensway, Birmingham, B4 6GH NOTICE IS HEREBY GIVEN that the EIGHTY-FIFTH ANNUAL GENERAL MEETING of the Company will be held at 10.30am on Wednesday, 7th October, 2020 at Crewe Hall, Weston Road, Crewe, Cheshire CW1 6UZ, for the purpose of considering and, if thought fit, passing the following resolutions which are proposed as ordinary resolutions. 1. 2. 3. 4. To receive the Directors’ Reports and the audited financial statements for the year ended 30th April, 2020. To approve the payment of the proposed ordinary dividend on the ordinary shares. To approve the Directors' Remuneration Report (excluding the Directors’ Remuneration Policy) for the year ended 30th April, 2020, as stated on pages 27 to 30 of the Directors' Report. To approve the appointment of RSM UK Group LLP as auditor and to authorise the Directors to determine their remuneration. By Order of the Board J. L. Martin Secretary Registered Office: Ivy House Foundry, Hanley, Stoke-on-Trent 13th August, 2020 1 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 4 NOTES TO NOTICE OF ANNUAL GENERAL MEETING: 1. Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the meeting. A shareholder may appoint more than one proxy in relation to the Annual General Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. A proxy need not be a shareholder of the Company. A proxy form which may be used to make such appointment and give proxy instructions accompanies this notice. 2. To be valid any proxy form or other instrument appointing a proxy must be received by post, by scanned copy sent to proxies@goodwingroup.com or (during normal business hours only) by hand at Ivy House Foundry, Hanley, Stoke-on-Trent, ST1 3NR no later than 10.30am on 5th October, 2020. 3. The return of a completed proxy form or other such instrument will not prevent a shareholder attending the Annual General Meeting and voting in person if he/she wishes to do so. 4. Any person to whom this notice is sent, who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights (a “Nominated Person”) may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights. 5. The statement of the rights of shareholders in relation to the appointment of proxies in paragraphs 1 and 2 above does not apply to Nominated Persons. The rights described in these paragraphs can only be exercised by shareholders of the Company. 6. To be entitled to attend and vote at the Annual General Meeting (and for the purpose of the determination by the Company of the votes they may cast), shareholders must be registered in the Register of Members of the Company at 10.30am on 5th October, 2020 (or, in the event of any adjournment, 10.30am on the date which is two days before the time of the adjourned meeting). Changes to the Register of Members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting. 7. As at 12th August, 2020 (being the last business day prior to the publication of this Notice) the Company’s issued share capital consists of 7,363,200 ordinary shares, carrying one vote each. Therefore, the total voting rights in the Company as at 13th August, 2020 are 7,363,200. 8. Shareholders should note that it is possible that, pursuant to requests made by shareholders of the Company under section 527 of the Companies Act 2006, the Company may be required to publish on a website a statement setting out any matter relating to: (i) the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the Annual General Meeting; or (ii) any circumstance connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual accounts and reports were laid in accordance with section 437 of the Companies Act 2006. The Company may not require the shareholders requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Companies Act 2006. Where the Company is required to place a statement on a website under section 527 of the Companies Act 2006, it must forward the statement to the Company’s auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the Annual General Meeting includes any statement that the Company has been required under section 527 of the Companies Act 2006 to publish on a website. 9. In order to facilitate voting by corporate representatives at the meeting, arrangements will be put in place at the meeting so that (i) if a corporate shareholder has appointed the chairman of the meeting as its corporate representative with instructions to vote on a poll in accordance with the directions of all of the other corporate representatives for that shareholder at the meeting, then on a poll those corporate representatives will give voting directions to the chairman and the chairman will vote (or withhold a vote) as corporate representative in accordance with those directions; and (ii) if more than one corporate representative for the same corporate shareholder attends the meeting but the corporate shareholder has not appointed the chairman of the meeting as its corporate representative, a designated corporate representative will be nominated, from those corporate representatives who attend, who will vote on a poll and the other corporate representatives will give voting directions to that designated corporate representative. Corporate shareholders are referred to the guidance issued by The Chartered Governance Institute on proxies and corporate representatives (www.icsa.org.uk) for further details of this procedure. The guidance includes a sample form of representation letter if the chairman is being appointed as described in (i) above. 10. None of the Directors has a service contract with the Company. 11. If approved by shareholders the ordinary dividends will be paid to shareholders on 9th October, 2020. 2 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 5 GROUP STRATEGIC REPORT GOODWIN PLC CHAIRMAN’S STATEMENT The pre-tax profit for the Group for the twelve month period ending 30th April 2020, was £12.1 million (2019: £16.4 million), a decrease of 26% on a revenue of £145 million (2019: £127 million) which is 14% up on the figures reported for the same period last financial year. The Directors propose a reduced dividend of 81.71p (2019: 96.21p). As with the majority of companies around the world, Covid-19 has stalled our progress in the last quarter of the financial year, and we have seen a slower start to the new financial year than we would have expected without the pandemic. Despite this and the disruption due to trade frictions between the USA and China, the underlying progression of the business remains robust and resilient. At the time of writing, the Group’s current workload stands at £183 million which is 11% ahead of last year’s Group record figure of £165 million (2019: £165 million, 2018: £82 million, 2017: £76 million). Whilst the current workload figure contains the first element of the supply agreement announced to the London Stock Exchange on 22nd June, 2020, this supply agreement for the manufacture and machining of storage boxes to assist with nuclear waste clean-up accounts for less than 2% of the £183 million and excludes the amount of orders that are expected to be placed in the future once the mobilisation phase is complete. Armed with this workload, the Group retains a high degree of confidence in the future versus the looming uncertainty for many businesses this coming year. Within the Mechanical Engineering Division, margins continue to be squeezed on our petrochemical work and this is likely to persist during the current financial year given the low oil price. In order to counteract this I am able to give the assurance that our diligently fostered and growing workload contains substantial amounts of non-petrochemical work commanding respectable margins in areas such as national defence capability and projects of national importance. The critical nature of this ongoing work was highlighted by ‘key worker’ notices being issued to certain of the Group’s operations immediately upon the onset of the pandemic. Whilst these projects are in their infancy, they will start to ramp up over the next six to twelve months. Goodwin Steel Castings has had another difficult year. This is largely attributable to the performance of two contracts where we are currently in dispute with our customers. Any favourable resolution will be booked in the current financial year once resolved. Going forward the casting of nuclear waste containment boxes in relation to Goodwin International’s supply agreement will provide a significant base load for our foundry. However, with projects of this nature they take time to get mobilised, so in this current financial year it is unlikely this contract alone will be transformational, but it will be beneficial in future years. This with their other work for shipbuilding components in specialist alloys for the USA, that only a few alloy steel foundries in the world are qualified to produce, along with specialist nuclear power generation application castings means that our foundry has transitioned away from what used to be business reliant on the petrochemical industries. The business key market re-alignment is still transitional, but the Directors can see that with the markets it is addressing and the projects it is working on that there is a long-term, bright and profitable future for Goodwin Steel Castings. Similarly Easat Radar Systems is now focusing on complete radar system supply contracts, with a product suite and an offering that is competitive internationally. Two complete systems will be sent to Thailand during this year, and there is a requirement for significant airport infrastructure in developing countries over the coming years, which our competitive product offering is tailored to meet. Over the past twelve months, Easat completed a substantial amount of business, such that it reduced its unacceptable working capital investment by some £4 million which has helped with the Group cash flow. 3 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 6 GROUP STRATEGIC REPORT CHAIRMAN’S STATEMENT (continued) The Refractory Engineering Division achieved operating profits of £7 million in the year, (2019: £8 million), representing 47% of the Group’s operating profit despite its customers’ consumer products being affected most by Covid-19 in the last quarter. Moving forward, although the construction and industrial customers’ activity is returning, uncertainty remains with regard to the medium term outlook especially for our customers’ luxury products, for which they use our investment powders, waxes and silicone rubbers. During the financial year, the Group successfully acquired the globally recognised Castaldo silicone rubber and wax division, including the trade name and associated trademarks. For the past 75 years, Castaldo has been at the centre of the worldwide jewellery casting industry and this acquisition will further increase the Group’s global market share within the moulding rubber and injection wax business by aligning higher value complementary sales activities with the existing business activities. By utilising the distribution network and global presence within our Refractory Engineering Division it is forecast that significant revenue growth can be achieved over and above the Castaldo division sales levels seen pre-acquisition. The manufacturing of the product lines is being relocated to Thailand which will also increase the gross margin of the acquired product lines. Post year end the Group has also seized the opportunity to purchase a 2.5 acre manufacturing site and mineral processing assets for £770,000 that is complementary to our existing minerals processing business that is running at near full capacity. The purchase was concluded within seven days, and the Directors believe that the site was acquired at substantially less than its true market value. In addition, we believe that within a few months we will be able to start to generate profits by utilising the assets acquired. Across both Divisions, our intangibles have grown in recent years due to multiple product development activities and acquisitions. A number of these major activities will be completed and taken to market within the current financial year leaving us with products that can be sold for many years to come; many of these new products are covered by international patent protection. This is not to say that there will be no new product development programmes as activities here have just been scaled back, focusing as always on areas that we anticipate may yield good future prospects. In line with the Group’s strategy the Board has worked hard to control its working capital and ensure a safe level of gearing. This is transparently seen at an operational level delivering strong cash generation in the year of £22.5 million, up £7.6 million from the previous year. As a result of a reduced level of investment in the year, I am pleased to report the Group’s net debt stands at a modest £19 million, equating to a gearing percentage of 18% versus 20% last year. Following a productive ten year relationship with Lloyds Bank PLC, and with our five year facility set to mature in December 2020, we put the facilities out for competitive tender. On a like-for-like basis, in terms of available facility and once all costs in relation to the facility had been evaluated, Lloyds were no longer as competitive in relation to other offers we received. I can confirm that the Board has now signed a new facility agreement with Santander UK plc for the same quantum but on improved terms, including a higher proportion that will be committed for a five year period. In addition, a £10 million revolving credit facility (RCF) set to expire in October 2020 is also in the final stages of being renegotiated ultimately providing the Group with long-term facilities totalling over £50 million, in addition to the £30 million secured as an additional committed credit line through the Bank of England Covid Corporate Financing Facility (CCFF), which was taken out as an insurance policy should any possible extreme Covid-19 event occur and is repayable in April 2021. Auditor rotation is now mandated by regulation meaning that the year ended 30th April, 2020 will be KPMG’s last year performing the Group audit having worked with us for the 4 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 7 GROUP STRATEGIC REPORT CHAIRMAN’S STATEMENT (continued) prior 56 years (Peat, Marwick, Mitchell & Co. in the earlier years). The Board would like to express its gratitude for the work performed over this period. Following a competitive tender process, the Audit Committee and the Board propose that RSM UK Group LLP be appointed as the new Group auditor, commencing responsibility for auditing the Group for the financial year beginning 1st May, 2020. Despite my optimism, at the time of writing, it is necessary that we remain acutely aware of the external environment with Covid-19, as until an effective vaccination programme is rolled out, the likelihood of more flare-ups and lockdowns across the globe seems inevitable. However, with the Group’s underpinnings, in terms of its order book, its cash flow and excellent workforce from a business point of view, Covid-19 will likely be nothing more than a bump in the road of the Group’s progression when we look back at it in a few years’ time. Since the start of the pandemic our workforce has been outstanding. The Group immediately set out a policy to protect its employees, and they in turn have responded and looked after the Group’s interests. This has involved working in many cases even harder in order to achieve the same outcomes due to the restrictive and new working practices that were necessarily imposed for everyone’s wellbeing. The Board is once again indebted to our Directors, managers and employees around the world for their efforts in keeping the Group operational during this difficult Covid-19 period and for their devotion to the Group’s long-term performance. Had the Group not kept on manufacturing over the four month period between March and the end of June, the Group’s profitability and cash flow would have deteriorated substantially. We have all been working in uncharted territory because of this, and I am immensely proud of how every single employee within the Group has adapted and worked within this challenging new environment. 13th August, 2020 T. J. W. Goodwin Chairman Alternative performance measures mentioned above are defined in note 36 on page 86. 5 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 8 GROUP STRATEGIC REPORT GOODWIN PLC CONSOLIDATED STATEMENT OF PROFIT OR LOSS for the year ended 30th April, 2020 CONTINUING OPERATIONS Revenue … … … … … … … … … … … … … … … … … … … Cost of sales GROSS PROFIT… … … … … … … … … … Other income … … … … … … … … … Distribution expenses … … … … … … … … … … … … … … … Administrative expenses OPERATING PROFIT … … … … … … … … … … … … … … … … … Financial expenses Share of profit of associate companies … … … … … PROFIT BEFORE TAXATION … … … … … … … Tax on profit … … … … … … … … … PROFIT AFTER TAXATION… … … … … … … … ATTRIBUTABLE TO: Equity holders of the parent … … … … … … … … … … … … … … Non-controlling interests PROFIT FOR THE YEAR … … … … … … … … BASIC EARNINGS PER ORDINARY SHARE … … … … DILUTED EARNINGS PER ORDINARY SHARE … … … … Notes 4, 5 6 8 15 6 9 10 10 2020 £’000 144,512 (109,743) 34,769 690 (2,792) (19,809) 2019 £’000 127,046 (86,414) 40,632 - (3,016) (21,205) 12,858 16,411 (809) 66 12,115 (3,775) 8,340 7,866 474 8,340 (234) 233 16,410 (3,963) 12,447 11,505 942 12,447 107.93p 159.79p 103.31p 149.65p CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 30th April, 2020 PROFIT FOR THE YEAR … … … … … … … … … OTHER COMPREHENSIVE EXPENSE ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS: Foreign exchange translation differences … … … … … … … Goodwill arising from purchase of minority interest in subsidiaries … … Effective portion of changes in fair value of cash flow hedges … Change in fair value of cash flow hedges transferred to profit or loss … … Effective portion of changes in fair value of cost of hedging Change in fair value of cost of hedging transferred to profit or loss … … Tax credit / (charge) on items that may be reclassified subsequently to profit or loss … … … … … … … … … … 2020 £’000 8,340 2019 £’000 12,447 (1,007) (72) (355) 522 (843) 395 77 (383) (772) (644) 180 (489) 49 154 OTHER COMPREHENSIVE EXPENSE FOR THE YEAR, NET OF INCOME TAX… … … … … … … … … … (1,283) (1,905) TOTAL COMPREHENSIVE INCOME FOR THE YEAR … … … … 7,057 10,542 ATTRIBUTABLE TO: Equity holders of the parent … … … … … … … … … … … … … … … … Non-controlling interests 6,587 470 7,057 9,528 1,014 10,542 The full financial statements and accompanying notes are on pages 42 to 98. 6 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 9 GROUP STRATEGIC REPORT OBJECTIVES, STRATEGY AND BUSINESS MODEL The Group’s main OBJECTIVE is to have a sustainable long-term engineering based business with good potential for profitable growth while providing a fair return to our shareholders. The Board’s STRATEGY to achieve this is: • to supply a range of technically advanced products to growth markets in the mechanical engineering and refractory engineering segments in which we have built up a global reputation for engineering excellence, quality, efficiency, reliability, price and delivery; • to manufacture advanced technical products profitably, efficiently and economically; • to maintain an ongoing programme of investment in plant, facilities, sales and marketing, research and development with a view to increasing efficiency, reducing costs, increasing performance, delivering better products for our customers, expanding our global customer base and keeping us at the forefront of technology within our markets, whilst at all times taking appropriate steps to ensure the health and safety of our employees and customers; • to control our working capital and investment programme to ensure a safe level of gearing; • to maintain a strong capital base to retain investor, customer, creditor and market confidence and so help sustain future development of the business; • to support a local presence and a local workforce in order to stay close to our customers; • to invest in training and development of skills for the Group’s future. • to manage the environmental and social impacts of our business to support its long-term sustainability. BUSINESS MODEL The Group’s focus is on manufacturing within two sectors, mechanical engineering and refractory engineering, and through this division of our manufacturing activities, our overseas business facilities and our global sales and marketing activities, the Group benefits from market diversity. Further details of our business and products are shown on our website www.goodwin.co.uk. Mechanical Engineering The Group specialises in supplying industrial goods, generally on a project basis, more often than not involving the complementary skillset of other Group companies to deliver the requirement. The projects normally involve international procurement, high integrity castings, forgings or wrought high alloy steels, precision CNC machining, complex welding and fabrication, and other operations as are required. In addition to specialist projects, the Group manufactures and sells a wide range of dual plate check valves, axial nozzle check valves and axial piston control and isolation valves to serve the oil, petrochemical, gas, liquefied natural gas (LNG), mining, nuclear power generation, nuclear waste treatment and water markets. We generate value by creating leading edge technology designs, globally sourcing the best quality raw material at good prices, manufacturing in highly efficient facilities using up to date technology to provide very reliable products to the required specification, at competitive prices and with timely deliveries. Our mechanical engineering markets also include high alloy castings, machining and general engineering products which typically form part of large construction projects such as power generation plants, oil refineries, chemical plants, nuclear waste treatment plants, high integrity offshore structural components and bridges. The Group through its foundry, Goodwin Steel Castings, has the capability to pour high performance alloy castings up to 35 tonnes, radiograph and also finish CNC machine and fabricate them at the foundry’s sister company, Goodwin International. This capability is targeting the defence industry and nuclear decommissioning, the oil and gas industry, as well as large, global projects requiring high integrity machined castings. Goodwin International, the largest company in the Mechanical Engineering Division, not only designs and manufactures dual plate check valves, axial nozzle check valves and axial piston control and isolation valves but also undertakes specialised CNC machining and fabrication work for nuclear decommissioning projects. Goodwin International also has a division that is focused on manufacturing / machining high precision, high integrity components for naval marine vessels. Noreva GmbH also designs, manufactures and sells axial nozzle check valves. Both Goodwin International and Noreva purchase the majority of the value of their sand mould castings from Goodwin Steel Castings for their ranges of check valves and this vertical integration gives rise to competitive benefits, increased efficiencies and timely deliveries. 7 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 10 GROUP STRATEGIC REPORT OBJECTIVES, STRATEGY AND BUSINESS MODEL (continued) At Goodwin Pumps India we manufacture a superior range of submersible slurry pumps for end users in India, Brazil, Australia and Africa. Easat Radar Systems (Easat) and its subsidiary, NRPL, design and build bespoke high-performance radar antenna systems for the global market of major defence contractors, civil aviation authorities and border security agencies. Easat has a sister company, Easat Radar Systems India, that also manufactures, sells and maintains radar systems for air traffic control. We create value on these by innovative design, assembly and testing in our own facilities using bought in or engineered in-house components. Refractory Engineering Within the Refractory Engineering Division, Goodwin Refractory Services (GRS) primarily generates value from designing, manufacturing and selling investment casting powders and waxes to the jewellery casting industry. GRS also manufactures and sells investment casting powders to the tyre mould and aerospace industries. The Refractory Engineering Division has five other investment powder manufacturing companies located in China, India and Thailand which sell the casting powders directly and through distributors to the jewellery casting industry and also directly to tyre mould and aerospace industries. These companies are vertically integrated with another of our UK companies, Hoben International, which manufactures cristobalite, which it sells to the six casting powder manufacturing companies as well as producing ground silica that also goes into casting powders and other UK uses of silica such as wind turbine blade manufacture. Hoben International now also manufactures different grades of perlite. The other UK refractory company is Dupré Minerals which focuses on producing exfoliated vermiculite that is used in insulation, brake linings and fire protection products, including technical textiles that can withstand exposure to high temperatures and for lithium battery fire extinguishers. Dupré also sells consumable refractories to the shell moulding precision casting industry. Dupré has designed, patented and is now selling a range of fire extinguishers and an extinguishing agent for lithium battery fires that utilises a vermiculite dispersion as the fire extinguishing agent. BUSINESS DIVERSITY AND PERFORMANCE As can be seen in note 4 to these financial statements, in the year to 30th April, 2020 the Mechanical Engineering Division generated 53% of the Group’s operating profit and the Refractory Engineering Division generated 47%. The split between the divisions remains largely unchanged due to the Refractory Engineering Division having been impacted by Covid-19 especially in our Indian, Thai and Chinese factories in the last quarter where there were mandatory shut downs, thus generating a similar performance as last year, rather than the division outperforming its previous performance as originally expected. Furthermore whilst the Mechanical Engineering Division revenue increased by 21%, its operating profits reduced by 32% which is a feature of the difficult contracts encountered in the year, as covered in the Chairman’s Statement. As a result and with parts of the global economy continuing to be put in lockdown we expect the diversification to change to a 65:35 split in favour of the Mechanical Engineering Division. During the course of the year the Group supplied goods to over 90 countries and from the geographical segmentation report on page 59 of these Accounts it can be seen that the revenue is fairly evenly spread between the Pacific Basin Countries, UK and Rest of World. The Group turnover to the rest of Europe equates to 14% of overall turnover and less than 10% relates to trade between the UK and the EU. The Board is of the opinion that the Mechanical Engineering and Refractory Engineering products that we sell from the UK to Europe will not be significantly affected by any increases in transit delays of even up to two weeks. As the shipments are generally only once or twice per month and, be it by our customers carrying slightly more stock and / or by extending the lead time of the assembling and testing, the finished products takes weeks not days to manufacture. 8 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 11 GROUP STRATEGIC REPORT OBJECTIVES, STRATEGY AND BUSINESS MODEL (continued) KEY PERFORMANCE INDICATORS The key performance indicators for the business are listed below: Gross profit as a % of turnover Profit before tax (in £ millions) Gearing % (excluding deferred consideration) Sales per employee per year (in £’000) Dividends proposed (in £ millions) * See note 36 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 29.9 27.3 28.5 31.9 34.3 32.5 27.8 25.6 28.6 32.0 24.1 13.3 8.1 12.3 20.3 24.1 20.1 12.3 9.2 13.3 14.7* 12.1 2% 22% 26% 23% 5% 12% 26% 31% 11% 20% 18% 112.4 105.5 113.7 125.7 124.1 111.8 105.4 114.0 119.8 117.4 121.4 2.0 2.1 2.3 3.8 3.0 3.0 3.0 3.0 6.0 6.9 6.0 Alternative performance measures mentioned above are defined in note 36 on page 86. The alternative performance measures are important to management and the readers of the Annual Report in assessing the Group’s performance and benchmarking it within its respective industries. IFRS 16 has not had a significant impact on either the profit or loss or the net assets of the Group. For this reason, the Alternative Performance Measures in note 36 are considered to have been prepared on a consistent basis. 9 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 12 GROUP STRATEGIC REPORT OBJECTIVES, STRATEGY AND BUSINESS MODEL (continued) DIVIDEND POLICY Covid-19 has stalled the progress of our Group, but with our agreed targeted limits of gearing at 30%, capital expenditure limited to a maximum of 55% of post tax profits plus depreciation and amortisation on a three year rolling annual average and dividends limited to 38% of (post tax profits + depreciation + amortisation) in place, the cash flow currently remains good. The dividend is automatically reduced by £911,000 to 81.71 pence per share (2019: 96.21 pence). This self adjusting system results in a reduction in dividend of 15% per share. As illustrated in the Chairman’s Statement and the Stategic Report, there are many positives occuring in the Group to counter balance Covid-19 and it is not considered necessary to have a dramatic modification to the Dividend Policy. 10 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 13 GROUP STRATEGIC REPORT PRINCIPAL RISKS AND UNCERTAINTIES The Group's operations expose it to a variety of risks and uncertainties. The Directors confirm that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. Whilst the risk of a health crisis and black swan events are not new risks, Covid-19 has been identified as a new principal risk to the Group, as discussed below. Covid-19 risk: The Covid-19 pandemic has already had an unprecedented bearing on businesses and economic activity across the world. The Group very early on (1st March, 2020) in advance of any UK government guidelines coming out developed a policy of paying any employee or one whose household member exhibits Covid-19 symptoms to isolate at home for 14 days and at the same time set up all manufacturing and office working activities such that 2 metre social distancing was maintained. Hand sanitisers and warning labels were positioned by all opening doors and many had, where possible self-disinfecting handles fitted. Daily reporting by location was introduced with any persons, who came into contact with a symptomatic person, being mandated to take two weeks paid isolation. Amongst our UK work force of 775 people we had 7 confirmed cases of Covid-19, two of whom were hospitalised, but both have recovered and are now back at work. In the UK, all factories have continuously run since the 6th January, 2020 and, as has been seen dispatch and revenue levels increased for the year ending 30th April, 2020. Three overseas factories in China and India were subject to mandatory lockdown for six to eight weeks, but these factories are all now back up and running. The enduring principal risk of Covid-19 is that the consumption of jewellery in the retail shops has been very much affected world-wide with our sales volumes of our investment jewellery casting powders being down in all parts of the world. With retail shops and airports now starting to reopen there is evidence that the drop in luxury goods being purchased from our customers is starting to recover, but it is difficult to predict the 12 month effect to 30th April, 2021. The workload in our Mechanical Engineering companies is good and we expect them to remain busy through to the end of April 2021. As mentioned in the Chairman’s Statement, much of this work is for naval vessels, and for nuclear waste reprocessing along with delivering four radar systems and large valves for the potable water industry. Market risk: The Group provides a range of products and services, and there is a risk that the demand for these products and services will vary from time to time because of competitor action or economic cycles or international trade friction or even wars. As shown in note 4 to the financial statements, the Group operates across a range of geographical regions, and its turnover is split across the UK, Europe, USA, the Pacific Basin and the Rest of the World. This spread reduces risk in any one territory. Similarly, the Group operates in both mechanical engineering and refractory engineering sectors, mitigating the risk of a downturn in any one product area as was seen over the past three financial years. The potential risk of the loss of any key customer is limited as, typically, no single customer accounts for more than 10% of turnover. As described in the Business Model, the Group generates significant sales not only from the worldwide energy markets but also from naval marine applications, military ship building, vermiculite and perlite to the insulating and fire prevention industry and the jewellery consumer market that our investment casting powder companies indirectly supply through the supply of investment casting moulding powders, waxes, silicone rubber and air traffic control systems. Technical risk: The Group develops and launches new products as part of its strategy to enhance the long-term value of the Group. Such development projects carry business risks, including reputational risk, abortive expenditure and potential customer claims which may have a material impact on the Group. The potential risk here is seen as manageable given the Group is developing products in areas in which it is knowledgeable and new products are tested prior to their release into the market. Product failure/Contractual risk: The risks that the Group supplies products that fail or are not manufactured to specification are risks that all manufacturing companies are exposed to but we try to minimise these risks through the use of highly skilled personnel operating within robust quality control system environments, using third party accreditations where appropriate. With regard to the risk of failure in relation to new products coming on line, the additional risks here are minimised at the research and development stage, where prototype testing and the deployment of a robust closed loop product performance quality control system provides feed back to the design department for the products we manufacture and sell. The risk of not meeting safety expectations, or causing significant adverse impacts to customers or the environment, is countered by the combination of the controls mentioned within this section and the purchase of product liability insurance. The risk of product obsolescence is countered by research and development investment. Supply chain and equipment risk: Failure of a major supplier or essential item of equipment presents a constant risk of disruption to the manufacturing in progress. Where reasonably possible, management mitigates and controls the risk with the use of dual sourcing, continual maintenance programmes, and by carrying adequate levels of stocks and spares to reduce any disruption. Health and safety: The Group’s operations involve the typical health and safety hazards inherent in manufacturing and business operations. The Group is subject to numerous laws and regulations relating to health and safety around the world. Hazards are managed by carrying out risk assessments and introducing appropriate controls, as well as attending safety training courses. 11 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 14 GROUP STRATEGIC REPORT PRINCIPAL RISKS AND UNCERTAINTIES (continued) Acquisitions: The Group’s growth plan over recent years has included a number of acquisitions. There is the risk that these, or future acquisitions, fail to provide the planned value. This risk is mitigated through financial and technical due diligence during the acquisition process and the Group’s inherent knowledge of the markets they operate in. Financial risk: The principal financial risks faced by the Group are changes in market prices (interest rates, foreign exchange rates and commodity prices). Detailed information on the financial risk management objectives and policies is set out in note 28 to the financial statements. The Group has in place risk management policies that seek to limit the adverse effects on the financial performance of the Group by using various instruments and techniques, including credit insurance, stage payments, forward foreign exchange contracts, secured and unsecured credit lines. Regulatory compliance: The Group’s operations are subject to a wide range of laws and regulations. Both within Goodwin PLC and its subsidiaries, the Directors and Senior Managers within the companies make best endeavours to ensure we comply with the relevant laws and regulations. Assessment of principal risks: Changes and likely impact: As part of the Board’s risk management and control of principal risks, areas of monitoring and expert advice undertaken are reported upon by the Audit Committee on pages 22 to 24. The Board’s assessment of the impact of Brexit on the Group Brexit is not seen as a significant issue to the Group. We envisage minimal overall effect in the long-term within our trading companies, as the majority of our trade has little direct interaction within Europe. A significant proportion of our reported revenue to Europe, as set out within note 4, relates to bespoke capital contracts that typically are installed into projects not within the EU, despite the customer being resident in the EU. Our UK imports are not required on a just in time basis nor are they reliant on EU suppliers. Raw materials are primarily sourced from vendors outside of the EU due to cost-effectiveness, with EU suppliers being a dual source for the supply of critical items. The Brexit related sensitivity or scenario testing has not indicated that there are any impairment, viability or going concern issues. Furthermore, the Group remains focused on and has a growing proportion of its workload consisting of the supply of niche UK-based capabilities into long-term, strategically critical programmes located in the UK and the US where both countries remain committed to playing a key role in domestic and global security. Nonetheless, the Board continually monitors and assesses the potential risks of Brexit, by regularly consulting on the matter with the Group’s management, suppliers, customers and reviewing and considering the diverse opinions, written by many commentators. Specific Risks Potential Risks Supply Chain Friction Explanation of the Board’s assessment of the potential impact Mitigation / Management The majority of products supplied into Europe are consumables. Whilst customs issues may cause some delays the goods supplied are relatively low value and customers would build up stocks. We also have the ability to supply these products from Thailand, China, India or Brazil should the need arise to circumnavigate any possible issues. For products supplied from Europe to our UK subsidiaries, in all cases we have a viable non-EU dual source option. Effect of changes in import / export taxes With the Group’s widespread customer base and local manufacturing structure, if World Trade Organisation (WTO) tariffs are imposed the impact is not anticipated to be material to the Group’s results. We expect that any increased costs will likely be offset by the further devaluation of the pound Sterling (the positive impact on sales prices would exceed the impact of adverse movements in the cost base), where our imports generally represent 35% of our total costs to manufacture in the UK. 12 The Group has built flexibility to respond to changes in the operating environment by assessing supplier readiness, investigating alternative domestic supply, globally dual sourcing and increasing logistics options. Most products are only supplied / delivered once or twice per month to each customer. Management of customers’ expectations and contract negotiation to protect against incremental costs and potential contractual delays. Over the next seven years we expect that the UK / US trading relationship tariffs will be a far higher agenda item than the UK’s rela- tionship with Europe. 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 15 GROUP STRATEGIC REPORT PRINCIPAL RISKS AND UNCERTAINTIES (continued) The Board’s assessment of the impact of Brexit on the Group (continued) General Risks Potential Risks Macro Economic Explanation of the Board’s assessment of the potential impact Mitigation / Management In the event of a no deal Brexit, further currency devaluation will only aid the Group’s global competiveness and increase the reported net worth and the Sterling value of dividend receivables from the overseas companies. It is the Group’s policy to hedge material transaction based currency exchange exposures. Movement of Labour The Group is not dependent on low skilled labour and it will not be affected by its shortage in the event that the movement of EU citizens is restricted. We continue with our 25 per year apprentice hiring programme, which has local accolade. Regulatory and Policy With the Group’s product offerings and the commencement of major UK and US programmes, the Board considers the Group is well protected against regulatory change and the loss of market access upon which other businesses may be reliant. N/A Tax Financing The Group does not rely on double taxation treaties and cash flow impacts as a result of potential changes in VAT are insignificant. Regular assessment and sensitivity testing. Liquidity risks are mitigated with the use of three independent banks, committed facilities, and staggered renewal dates (see note 28). The Board has assessed the Company’s banks’ health and continually monitors their Brexit exposure and strategy. The Brexit related sensitivity or scenario testing has not indicated that there are any impairment, viability or going concern issues. 13 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 16 GROUP STRATEGIC REPORT Environment CORPORATE SOCIAL RESPONSIBILITY The Group continues to seek to achieve high standards in the management of environmental matters. We recognise the impact our operations may have on the environment and seek to minimise or eliminate adverse effects. In the year the Board has commenced an initiative to “Balance and Reduce” the CO2 generated by the Group’s activities. To help generate a sustainable plan, third party assistance is being sought that will provide a framework as to how the Group will grow in a carbon neutral manner and set targets for the forthcoming years to reduce our current emissions. The initiative is likely to include: - the transition of company vehicles to electric - incentivising the workforce to use electric vehicles - a mandate that all future investments are to be carbon balanced, where appropriate. Greenhouse Gas (“GHG”) emissions In line with the latest UK reporting requirements, the sites reporting GHG data are the same as those consolidated in the Group’s financial statements, and we have included all material qualifying emissions around the Group for the years to 30th April, 2020 and 30th April, 2019. We have used the reporting guidance set out by the new SECR (Streamlined Energy and Carbon Reporting) requirements and used the methodology set out therein, to report our Scope 1 and Scope 2 emissions. Overseas electricity factors have been taken from the latest IEA ©OECD/IEA documentation, covering both OECD and non OECD countries. The reported CO2 emissions are detailed below: Scope 1 – direct emissions (from Company facilities and vehicles) Scope 2 – indirect emissions (from electricity purchased for own use) Total Scope 1 and Scope 2 emissions Intensity – emissions of total CO2 equivalent reported above per £1 million of Group revenue 2020 Tonnes of CO2e 2019 Tonnes of CO2e 38,494 6,882 45,376 313 39,351 7,144 46,495 372 Energy Consumption (kWh) resulting in the above reported emissions 76,786,289 Not reported Proportion of emissions arising from UK operations % 97% Not reported Our overall emissions have marginally reduced in the year, which will partly be as a result of the Covid-19 impacting our activity in the latter months of the reported period. In the year the Group met its target to reduce all space heating and lighting by 5% by 2020, new metrics and targets will be set in the current year as a result of the new “Balance and Reduce” initiative. Donations The Company made no political donations during the year (2019: £nil). Donations by the Group for charitable purposes amounted to £54,262 (2019: £65,015). The majority of these were made to local communities within the Group’s operating environments. Employee consultation The Group takes seriously its responsibilities to employees and, as a policy, provides employees systematically with information on matters of concern to them. It is also the policy of the Group to consult where appropriate, on an annual basis, with employees or their representatives so that their views may be taken into account in making decisions likely to affect their interests. Employment of disabled persons The policy of the Group is to offer the same opportunity to disabled people, and those who become disabled, as to all others in respect of recruitment and career advancement, provided their disability does not prevent them from carrying out the duties required of them in accordance with the requirements of the Equality Act 2010. Health and Safety The Group acknowledges that many of its manufacturing processes and some materials that it handles and sells are hazardous. We have a total of 18 people whose full time efforts are dedicated to : A) Risk analyses B) Writing safe operating and maintenance procedures C) Ensuring our packing, material handling, customer safety data we provide to customers is fit for purpose. D) Analysing near misses, accidents and failures to ensure appropriate action is taken to make the operating environment at our factories and offices become safer. E) Training within the subsidiaries. 14 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 17 GROUP STRATEGIC REPORT CORPORATE SOCIAL RESPONSIBILITY (continued) Community issues During the year the Company has continued to communicate to all employees our culture of responsibility and support for local communities where possible. Ethics and Sustainability We are committed to conducting business responsibly and ethically. We endeavour to ensure that our staff, suppliers and business partners adopt the same or similar high ethical standards and values. This applies, but is not limited to human rights, modern slavery, ant-bribery and corruption. Continual training is carried out to all relevant staff and a variety of third party evaluation services are used on an ongoing basis for agents and other business relationships. We visit major suppliers and write letters in line with the United Nations Global Compact voluntary initiative. The letters invite our major suppliers to adopt, implement and evidence adequate compliance policies. This is all enhanced by an anonymous whistle-blowing system. Diversity Policy The Group is committed to ensuring that everyone should have the same opportunities for employment and promotion based on ability, qualifications and suitability for the work in question. The Group invests in training and development of skills for the Group’s future and has a long-term aim that the composition of our workforce should reflect that of the community it serves. Our Diversity Policy is implemented through training and development, recruitment, our business culture and the Board’s Strategy. The following tables set out the breakdown of our average number of employees and Board members by gender and age: Breakdown by gender Year ended 30th April, 2020 Main Board and Company Secretary Senior Management Employees Total Breakdown by age Year ended 30th April, 2020 Main Board and Company Secretary Senior Management Employees Total Age 16 to 21 0 0 94 94 % 0 0 8 8 Male 6 71 893 970 Age 22 to 40 6 12 530 548 % 75 92 81 82 Female 2 6 212 220 % 25 8 19 18 Age 41 to 65 1 63 461 525 % 75 16 48 46 % 13 82 42 44 Age Over 65 1 2 20 23 % 12 2 2 2 Total 8 77 1,105 1,190 Total 8 77 1,105 1,190 S.172 Statement Duty to promote the long-term sustainability through stakeholder engagement Under Section 172 of the Companies Act 2006, the Directors have a duty to promote the success of the Company over the long-term for the benefit of shareholders as a whole, having regard to a range of other key stakeholders and interests. The Directors must have regard (amongst other matters) to: The likely consequence of any decision in the long-term The Board considers the long-term consequences of the decisions it makes, focusing on the interests of relevant stakeholders as appropriate. Strategy considerations include commercial decisions (bidding for new business), reviewing current and future geographical and technology markets and investment into the workforce. The primary capital allocations decisions include R&D and dividend payments. The interests of the Group’s employees The Board considers the most effective form of engagement and communication with its employees for its size and complexity is by way of informal daily discussions between the employees, the Senior Management and Board members who walk the floor. This is further supported by team meetings, training, and an honest and open culture. The need to foster the Group’s business relationships with suppliers, customers and others The Board considers market trends regularly and reviews their likely long-term implications. Through regular site visits and discussions with the procurement departments the Board acquires a first-hand understanding of its business relationships. 15 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 18 GROUP STRATEGIC REPORT CORPORATE SOCIAL RESPONSIBILITY (continued) S.172 Statement (continued) The need to foster the Group’s business relationships with suppliers, customers and others (continued) Engagement is ensured from the initial tender processes to embedded sales and engineering project meetings and reinforced by an open door culture, whilst actively seeking feedback. The Board is made up of six Executive Directors who are actively involved with the day to day business and management of the subsidiaries thereby allowing a good understanding of key members of the supply chain and also ensuring a fair purchase culture. The impact of the Groups’s operations on the community and the environment The Board encourages its sites to support their local communities through charitable activities and initiatives to support the local area within which they operate. An environmental initiative was commenced in the year to obtain the necessary knowledge and resource to help balance and reduce the CO2 emitted as a result of the Group’s activities. Engagement occurs through collaboration with local schools where engineering and ’Women in Engineering’ is promoted. Furthermore, regular dialogue is maintained with the local councils and charities. The desirability of the Group maintaining a reputation for high standards of business conduct The Board takes seriously the Group’s obligation to maintain high standards of business conduct and assessed compliance. During the year the Board has commenced a review of its code of conduct and how it can be implemented in a more effective manner. The need to act fairly as between members of the Company The Company has one class of ordinary shares, which have the same rights as regards voting, distributions and on a liquidation. Management are also significant shareholders in the Company, holding approximately 52.95% of the register. In accordance with LR6.5.4R, there is a controlling shareholder agreement in place. On this basis the Board feels that the Executive Directors are fully aligned with shareholders. Shareholders engagement occurs through the Annual Report, regulatory disclosures, our website and the Annual General Meeting. FORWARD-LOOKING STATEMENTS The Group Strategic Report contains forward-looking type 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 for future events or developments, whether as a result of new information, future events or otherwise, except to the extent legally required. The Group Strategic Report was approved by the Board on 13th August, 2020 and is signed on its behalf by: T. J. W. Goodwin Director M. S. Goodwin Director S. R. Goodwin Director 16 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 19 DIRECTORS’ REPORTS REPORT OF THE DIRECTORS The Directors have pleasure in presenting their reports and audited financial statements for the year ended 30th April, 2020. The Directors have presented their Group Strategic Report on pages 3 to 16. The Group Strategic Report is intended to be an analysis of the development and performance of Goodwin PLC and contains a description of the principal risks and uncertainties facing the Group and an indication of likely future developments. The Chairman’s Statement is part of the Group Strategic Report of the Directors for the year and provides the financial review, including some of the key performance indicators and future trends of the business. Also included in the Group Strategic Report for the year are the Group’s Objectives, Strategy and Business Model on page 7, the Principal Risks and Uncertainties on page 11, and the Corporate Social Responsibility Report on pages 14 to 16. The Board considers that the Chairman’s Statement, the Group Strategic Report, the Directors’ Reports and the Financial Statements, taken as a whole, are fair, balanced and understandable and that they provide the information considered appropriate for shareholders to assess the Group’s position and performance during the financial year and at the year end, and to assess the business model and strategy. Proposed ordinary dividends The Directors recommend that an ordinary dividend of 81.71p per share (2019: 96.21p) be paid to shareholders on the register at the close of business on 11th September, 2020. If approved by shareholders, the ordinary dividend will be paid to shareholders on 9th October, 2020. See comments on page 10 regarding the Dividend Policy. Directors The Directors of the Company who have served during the year are set out below. M. S. Goodwin S. R. Goodwin T. J. W. Goodwin J. Connolly S. C. Birks B. R. E. Goodwin J. E. Kelly (Non-Executive Director) The Chairman and the Managing Directors do not retire by rotation. No Director has a service agreement with the Company, nor any beneficial interest in the share capital of any subsidiary undertaking. The Chairman does not have any other significant external appointments. Shareholdings The Company has been notified that as at 10th August, 2020, the following had an interest in 3% or more of the issued share capital of the Company: J. W. and R. S. Goodwin 2,129,153 shares (28.92%), J. W. and R. S. Goodwin 1,393,562 shares (18.93%). These shares are registered in the names of J. M. Securities Limited and J. M. Securities (No. 3) Limited respectively. J. H. Ridley 501,709 shares (6.81%), Rulegale Nominees (JAMSCLT) 416,915 shares (5.66%). In line with LR 9.2.2AB R, relating to Controlling Shareholders, the Company confirms that a written and legally binding agreement is in place, which complies with the provisions set out in LR 6.5.4 R. Share capital The Company’s issued share capital comprises a single class of share capital which is divided into ordinary shares of 10p each. Information concerning the issued share capital in the Company is set out in note 27 to the financial statements on page 75. All of the Company’s shares are ranked equally and the rights and obligations attaching to the Company’s shares are set out in the Company's Articles of Association, copies of which can be obtained from Companies House in England and Wales or by writing to the Company Secretary. There are no restrictions on the voting rights of shares and there are no restrictions in their transfer other than: • certain restrictions as may from time to time be imposed by laws and regulations (for example, insider trading laws); and • pursuant to the Market Abuse Regulation whereby Directors of the Company require approval to deal in the Company’s shares. Additionally, the Company is not aware of any agreements between shareholders of the Company that may result in restrictions on the transfer of ordinary shares or voting rights. Following the passing of a Resolution at the Company’s Annual General Meeting on 5th October, 2016 to approve an Equity Long Term Incentive Plan (“LTIP”) for the Executive Directors, the Directors have statutory authority to issue shares in connection with the exercise of options granted under the LTIP. The Directors have not been given authority to issue any shares of the Company other than in respect of the LTIP nor have they been given authority to buy back any shares. The LTIP earn-out for each of the eight Directors, who were eligible under the scheme, when it was approved, is 61,200 shares each and these are exercisable within five years from 1st May, 2019. Details of the options exercised during the year are reported in the Annual Directors’ Remuneration Report on page 30. 17 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 20 DIRECTORS’ REPORTS REPORT OF THE DIRECTORS (continued) Research and development The Group invests significantly in research and development. The more material investments during the year included the development of high yield steels for high integrity boat hull manufacturers and axial flow control valve designs. Change in control The Group’s committed loan facilities include a change of control clause, which states that a change of control of the parent Company will be classed as an event of default and would enable the providers at their discretion to withdraw the facilities. Shareholder relations All shareholders are encouraged to participate in the Company’s Annual General Meeting. No shareholder meeting has been called to discuss any business other than ordinary business at the Annual General Meeting. The Board complies with the recommendations of the UK Corporate Governance Code that the notice of the Annual General Meeting and related papers should be sent to shareholders at least twenty working days before the meeting. The Directors attend the Annual General Meeting. The Chairman and other members of the Board and the Chair of the Audit Committee and Audit Committee members will be available to answer questions at the forthcoming Annual General Meeting. In addition, proxy votes will be counted and the results announced after any vote on a show of hands. The Chairman ensures that the views of shareholders are communicated to the Board as a whole, ensuring that Directors develop an understanding of the views of shareholders. Any individual requests for information from shareholders are dealt with by the Chairman, and where any such requests are subject to restraint in that any disclosure would give rise to share price sensitive information, then the requests would be declined, or referred to the Board for release to all shareholders through the Stock Exchange. Going concern The Directors, after having reviewed the projections and possible challenges that may lie ahead, believe that, armed at the time of writing with £74.5 million of committed facility (including £30 million CCFF funds, which are repayable within one year (see notes 28 and 31), there is a reasonable expectation that the Group has adequate resources to continue in operational existence for at least twelve months from the date of approval of these financial statements, and have continued to adopt the going concern basis in preparing the financial statements. Furthermore, we are pleased to report that the Group has recently completed the refinancing of one of its significant facilities which was due to retire by 31st December, 2020. In terms of total debt quantum, the refinancing has given the Group the same funding availability but with proportionally more of the facility moving to committed five year funding. The Group is also in the final stages of renegotiating a £10 million revolving credit facility which expires in October 2020. The Directors do not see an issue in renewing these facilities. The Directors have, as part of this going concern assessment, specifically considered the impact of Covid-19 on the Group’s operations and in particular have developed a series of in-depth financial models covering at least twelve months following the approval of the financial statements. The models show the base case (our reasonable expectation in light of Covid-19), with an alternative scenario that stress tests this base case model for severe but plausible downside outcomes. Within the base case model, the Directors have considered the current trading conditions and assumed similar activity levels within the Mechanical Engineering Division as a result of its workload and assumed the Refractory activity levels may be reduced due to it being more exposed to the global downturn. We forecast that after 30th April, 2021 activity levels will return to those seen prior to Covid-19 and growth will return. Within our severe but plausible downside model, it is demonstrable that the Group has sufficient funds to cover the Group’s and the Company’s commitments during the forecast period and is forecast to be within its financial covenants. The model also incorporates various assumptions including the assumption of a series of customer failures and the failure of a major supplier within the refractory division, the inability to achieve Covid-19 cost reduction targets and the impact of further lockdowns that last three to six months in Europe, China, India and Brazil. The failure of a major supplier is modelled to result in three months of business interruption. These assumptions, whilst plausible, are considered extreme in the Board’s view. As referred to elsewhere in these financial statements, the Mechanical Engineering Division currently has a record order book and whilst we have down rated our expectations within this division in our forecasts we would emphasise that our factories largely remained open during the height of the first phase lockdown and we are not seeing any issues regarding the suspension of works on these orders. Whilst the Refractory Engineering Division would be exposed to events such as a second lockdown, as a well-diversified Group, our severe but plausible downside model clearly demonstrates we are well set to absorb the impact of a protracted Covid-19 resolution. Consequently, the Directors are confident that the Group and the Company will have sufficient funds to continue to meet their liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis. Viability Statement In accordance with provision 31 of the Governance Code the Directors have assessed the Group’s viability over a three year period to 30th April, 2023. 18 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 21 DIRECTORS’ REPORTS REPORT OF THE DIRECTORS (continued) Viability Statement (continued) While the Board has no reason to believe that the Group will not be viable over a longer period, the Board believes that a three year review period is prudent, and provides the readers of the report with a sensible degree of confidence. Following the severe but plausible modelling, disclosed in the above Going Concern note, and given the Group’s current financial position, and specifically its modest gearing levels allied to committed long-term financing lines with unutilised headroom, we see ourselves as well placed to deal with adverse events – Covid-19 or otherwise. With the significant operational workload within the Mechanical Engineering segment underpinning performance in the short to medium term, the Directors’ are therefore able to confirm that they have a reasonable expectation that the Group will be able to continue in operation and remain viable over this extended three year period. Auditor In accordance with Section 489 of the Companies Act 2006 and the recommendation of the Board of Directors, a resolution is to be proposed at the Annual General Meeting for the appointment of RSM UK Group LLP as auditor of the Company. Approved by the Board of Directors and signed on its behalf by: T. J. W. Goodwin Chairman 13th August, 2020 19 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 22 DIRECTORS’ REPORTS CORPORATE GOVERNANCE REPORT Introduction The Board comprises six Directors and an independent Non-Executive Director; the Audit Committee comprises the Non-Executive Director, who is the Audit Committee Chair, and three other members, the previous Chairman, the previous Managing Director and the previous Company Secretary, all of whom had held these positions for twenty-seven years and have very substantial knowledge and experience of the diversified Group’s people, product ranges and the very diversified overseas markets in which the Group operates. The Board and the Audit Committee fulfil the roles required for effective corporate governance and the Board considers that it has the right governance to execute its strategy to achieve its objectives. The Board has always felt that it should be recognised that what may be appropriate for the larger company may not necessarily be so for the smaller company, a point raised previously in the Cadbury Code of Best Practice. Whilst conscious of its non-compliance with certain aspects of the revised Code as detailed below, we do not believe that at this stage in the Group’s development and circumstances it is appropriate to change its own operational or governance structure with the sole objective of achieving compliance with the revised Code given that the Board’s current corporate governance strategy has been accepted by a large majority of its shareholders. For the past five years the Company has had one Non-Executive Director who is also the Chair of the Audit Committee, which has three other members as described above. This is not in full compliance with the revised Code, but for a small company, due to the limits of time, availability and cost, the Board considers this as an optimum compromise that is beneficial to shareholders and the Group’s long-term interests. For specific independent expertise the Board engages independent consultants. Compliance statement under the UK Corporate Governance Code 2018 The Company is required to report on compliance throughout the year. In relation to all of the provisions except those mentioned below, the Company complied throughout the period. As noted in the introduction above, the Group does not comply with aspects of the Code’s requirements under provisions 11 and 13 and provision 12 in terms of having a senior independent Director. Since 14th April, 2015 a Non-Executive Director with the role of Chair of the Audit Committee has been appointed. The Group does not have a Remuneration Committee or a Nominations Committee as required under provisions 32 and 33 and 17. The roles of the Chairman in running the Board and the Managing Directors in running the Group’s businesses are well understood. It is not considered necessary to have written job descriptions. This is contrary to provision 14. The Chairman and Managing Directors do not retire by rotation, which is contrary to provision 18 of the Code. The Board During the year, the Board met formally twelve times, and details of attendees at these meetings are set out below: M. S. Goodwin … … … … 12 out of 12 attended S. R. Goodwin … … … … 12 out of 12 attended T. J. W. Goodwin … … … … 12 out of 12 attended J. Connolly … … … … … 12 out of 12 attended S. C. Birks … … … … … 11 out of 12 attended B. R. E. Goodwin … … … … 12 out of 12 attended J. E. Kelly … … … … … 10 out of 12 attended The Chairman and Managing Directors do not retire by rotation. With this exception, all Directors retire at the first Annual General Meeting after their initial appointment and then by rotation at least every three years, which is contrary to provision 18 of the Code. The Board retains full responsibility for the direction and control of the Group and, whilst there is no formal schedule of matters reserved for the Board, all acquisitions and disposals of assets, investments and material capital-related projects are, as a matter of course, specifically reserved for Board decision. The Board meets regularly with an agenda to discuss corporate strategy; to formulate and monitor the progress of business plans for all subsidiaries and to identify, evaluate and manage the business risks faced. The management philosophy of the Group is to operate its subsidiaries on an autonomous basis, subject to overall supervision and evaluation by the Board, with formally defined areas of responsibility and delegation of authority. The Group has formal lines of reporting in place with subsidiary management meeting with the Board on a regular basis. Regular informal meetings are also held to enable all members of the Board to discuss relevant issues with local management and staff at the business units. The Audit Committee The Audit Committee is made up of the following: J.E. Kelly (Chair), J.W. Goodwin, R.S. Goodwin and P. Ashley and the Audit Committee reports to the Board. The Audit Committee has met formally eight times since the issue of the Annual Report for the year ended 30th April, 2019, with all members attending each meeting. The responsibility of the Audit Committee is explained in the Audit Committee Report on pages 22 to 24. The Audit Committee takes into account the Company’s corporate Mission Statement, Objectives and Strategy, and reviews investor correspondence and comments, regulatory changes, current issues and market trends. The Audit Committee uses expert opinion where considered appropriate. Board evaluation The Managing Directors, Chairman and Audit Committee address the development and training needs of the Board as a whole. An evaluation of the effectiveness and performance of the Board and the Directors of subsidiaries has 20 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 23 DIRECTORS’ REPORTS CORPORATE GOVERNANCE REPORT (continued) been carried out by the Managing Directors, Chairman and Audit Committee, by way of personal discussions and individual performance evaluation. All Directors have reasonable access to the Company Secretary and to independent professional advice at the Company’s expense. External audit The external auditor is appointed annually at the Annual General Meeting. The Board, following review and recommendations received from the Audit Committee, considers the appointment of the auditor, and assesses on an annual basis the qualification, expertise, cost, independence and objectivity of the external auditor. In addition, the Audit Committee monitors the level of non-audit services provided to the Group by the external auditor to ensure that their independence is not compromised. Disclosure of information to auditor The Directors who held office at the date of approval of this Corporate Governance Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and each Director has taken all the steps that he or she ought to have taken as a director to make himself or herself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. Internal control and risk management The Board has overall responsibility for the Group’s systems of internal controls and risk management which are designed to manage rather than eliminate risk and provide reasonable reassurance against material misstatement or loss. The Board has primary responsibility for controlling: operational risks; financial risks including funding and capital spend; compliance risks; and political risks. The Audit Committee has been delegated responsibility for corporate reporting, financial risk management and to regularly review the effectiveness of the Group’s internal controls together with consideration of any reports from the external auditor. The Audit Committee Report is on pages 22 to 24. Except as noted within this Corporate Governance Report, the Board confirms that the internal control systems comply with the UK Corporate Governance Code. The Group’s main systems of internal controls includes regular visits and discussions between Board Directors and subsidiary management, head of legal, health and safety committee and the Group internal auditor, on all aspects of the business including financial reporting, risk reporting and compliance reporting. In addition, there is Board representation with Goodwin PLC Directors on the boards of the subsidiaries. Any concerns are reported to the members of the Audit Committee and to the Board. The Group maintains a risk register, has business continuity programmes and has insurance programmes that are all regularly reviewed. These procedures have been in place throughout the year and are ongoing to endeavour to ensure accordance with the FRC publication ‘Risk Management, Internal Control and Related Financial and Business Reporting'. The Board considers that the close involvement of Board Directors in all areas of the day to day operations of the Group’s business, including considering reports from management and discussions with senior personnel throughout the Group, represents the most effective control over its financial and business risks system, by providing an ongoing process for identifying, evaluating and managing the principal risks faced by the Group. In particular, authority is limited to Board Directors in key risk areas such as treasury management, capital expenditure and other investment decisions. The close involvement of Board Directors in the day-to-day operations of the business ensures that the Board has the financial and non-financial controls under constant review and so it is not currently considered that formal Board reviews of these controls would provide any additional benefit in terms of the effectiveness of the Group’s internal control systems. The Board recognises the importance of an effective internal audit function to assist with the management and review of internal controls and business risk. The Group internal auditor continues to make good progress reviewing internal controls, procedures and accounting systems, though this became more difficult towards the end of the financial year due to the worldwide Covid-19 pandemic. The Board of Directors and Senior Management will continue to have close involvement on a day-to-day operational basis and the scope and results of internal audit work to be performed will be kept under review in the coming year. The Board considers that certain functions are best carried out by independent external bodies with specific expertise, who then report to the Board directly or through the Audit Committee. The Board confirms that it has not been advised of any material failures or weaknesses in the Group’s internal control systems. Approved by the Board of Directors and signed on its behalf by: T. J. W. Goodwin Chairman 13th August, 2020 21 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 24 DIRECTORS’ REPORTS AUDIT COMMITTEE REPORT The key role of the Audit Committee is to provide confidence in the integrity of the Group’s financial risk management, internal financial controls and corporate reporting. The Audit Committee, as empowered by the Group’s Board of Directors, has responsibility for: 1. Reviewing and checking the Group’s full year and half year Accounts and the Annual Report, as presented to the Audit Committee, to ensure that they are, in their view, fair, appropriate, representative of the Group’s performance and that they provide the information necessary for shareholders to assess the Group's performance. 2. Reviewing the Group’s financial and non-financial internal controls and risk management systems and commenting on whether they are relevant and effective. 3. Making recommendations to the Group’s Board of Directors on the appointment and remuneration of the Group’s external auditor; ensuring independence of the auditor; the effectiveness of the audit process; and that the Group receives value for money from the audit. 4. Reviewing comments and feedback brought to its attention by Directors or other employees of the Group. 5. Reviewing the Group’s “whistle-blowing” procedures and reviewing any significant reports. 6. Reviewing the scope of work for the internal audit function and the resultant reports. 7. Reviewing significant accounting estimates and judgements relating to the financial statements with the external auditor and members of the Board. The Audit Committee discharges each of its above responsibilities as follows: 1. Examining the integrity of the Group’s Annual Report and half year Interim Report: The Chair of the Audit Committee is an independent Non-Executive Director. The other members of the committee either are persons with experience in the Group’s typical products and or markets or have historical knowledge of the business and activities of the Group. Regular meetings are held between members of the Audit Committee, Directors of Goodwin PLC and its subsidiaries, General Managers and Senior Management of the UK subsidiaries. Members of the Audit Committee are involved in regular discussions with the Directors, General Managers and Senior Management of each subsidiary where the positions taken on subjective financial matters are discussed. Each overseas subsidiary is normally visited at least once during the year by a member of the Audit Committee, and / or by a Main Board Director, for meetings with the General Managers and Senior Management with reports sent back to the Audit Committee. However, in the current circumstances of flight and self-quarantining restrictions, this has not been possible since March 2020 but extensive use of Zoom has enabled regular meetings to continue with our overseas factories. Any areas where the Audit Committee feels that the positions taken within any particular subsidiary are either inappropriate or merit further discussion are documented for further discussion by the Board of Directors of Goodwin PLC. For the half year Interim Report, the Audit Committee reviews the financial and non-financial content, including the Chairman’s Statement, and reviews the financial statements and qualitative notes of the financial statements, to help ensure that they are balanced, relevant, appropriately compliant with relevant accounting standards/ legislation, and are consistent and complete. The Audit Committee reports to the Board of Directors their views as to whether the half year Interim Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s half year performance. The figures in the half year Interim Report are not audited, but the external auditor is given sight of these before publication. For the full year Annual Report, the Audit Committee reviews the financial and non-financial content of the Group Strategic Report, including the Chairman’s Statement; the Corporate Governance Report; the Directors’ Report; the Directors’ Remuneration Policy and Report; and reviews the financial statements and the qualitative notes to the financial statements to examine whether the content is balanced, relevant, appropriately compliant with relevant accounting standards / legislation, and are consistent and complete. The Audit Committee has discussed the full year Annual Report and their views with the Group external auditor. The Audit Committee confirmed to the Board that in its opinion the proposed Annual Report for the year ended 30th April, 2020 appropriately represents the Group’s trading position and, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s full year performance, its position at the year end, and its objectives, strategy and business model. 2. Helping to ensure the Group carries effective and relevant financial and non-financial internal controls and financial risk management systems: To assess the effectiveness of systems for internal financial controls, financial reporting and financial risk management, the Audit Committee reviews reports from Main Board Directors on the Group’s subsidiaries; reviews reports from the Group Chief Accountant; reviews reports from General Managers of the Group’s subsidiaries; reviews quarterly financial reports; reviews reports from internal and external audit; requests and reviews reports from independent external consultants; and reviews the Group’s risk register, business continuity programmes and levels of insurance. 22 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 25 DIRECTORS’ REPORTS AUDIT COMMITTEE REPORT (continued) 2020 Audit Committee Risk Programme The terms of reference for the Audit Committee and how it discharges its duties have been presented to the Board and ratified. Risk Management: As a method of adding formality to the management of risk within all Group companies, Steven Birks, a Goodwin PLC Director, continues to mentor each subsidiary in enhancing their risk analysis and controls, and reports to the Audit Committee on this task. Having focussed initially on overseas companies, all subsidiaries in the Group are now included in the mentoring and areas being scrutinised in detail, other than risks individual to each company, are: a) having appropriate limits of contract liability b) having appropriate levels and types of insurance c) ensuring appropriate control of cash flow d) ensuring health and safety continues to be given priority and that there is a progressive plan for improvement e) ensuring product development and life cycles are managed relative to the global market f) ensuring that the provision of trained and skilled manpower is appropriately matched to the requirements of each company g) risk analysis and preventative measures associated with the installation and commissioning of new plant, modified plant and new processes. The Audit Committee continues to review the effectiveness of Know Your Customer (KYC), credit insurance, political risk insurance and contract terms and conditions. Gallagher have carried out a review of insurance policies in place at the overseas subsidiaries and it is an ongoing task to consider their comments on any areas of concern. Market risk This remains as stated last year and, upon review, no customer accounts for more than 10% of the annual Group turnover. The country and sector dependency for the year is shown by the charts on the Company website, www.goodwin.co.uk. Technical risk The performance of new products issued to market always has a degree of risk until a multi-year track record has been attained. This statement relates to all Group companies in both the Mechanical and Refractory Engineering Divisions. Product failure/contract risk This has been reviewed and is unchanged from that previously stated. Financial risk This has been reviewed and is as stated last year with the perceived increased volatility in exchange rates and the possibility of high foreign exchange hedging costs for forward long-term contracts. Regulatory compliance The Audit Committee continues to monitor regulatory compliance, training and competency. The Committee is aware of the recently enacted Climate Change Act 2008 (2050 Target Amendment) Order 2019 and is reviewing its impact on the Group. Human Resources The age profile of senior managers and perceived skill gaps within each Group company continue to be reviewed by the Audit Committee. However, due to the current Covid-19 situation no major recruitment initiatives are taking place. During the year the Audit Committee continued to monitor the risks posed affecting information security and the steps taken to minimise these. The Audit Committee also reviews and comments to the Board on major capital purchases or company acquisi- tions being proposed by the Board of a unit or linked value greater than £2 million. Gross proposed or actual capital expenditure of all Group companies is also reviewed to help ensure the Board is aware of how such ex- penditure will affect the limits agreed to be in place at the time. The Audit Committee has confirmed its view to the Board that in its opinion, the Group carries relevant internal controls and risk management systems appropriate to minimise the perceived risks of the Group’s business. 3. The Group’s external auditor KPMG LLP has been the Group’s auditor for more than twenty years. In line with the recent changes in legislation with regards to auditor appointments, the Company has now obtained competitive tenders for its audit services, and has appointed RSM UK Group LLP as its Auditor for the year ending 30th April, 2021 and going forward subject to shareholders’ approval at the Annual General Meeting. The Audit Committee followed the guidance set out in the FRC notes on best practice when considering the tenders and recommended this appointment. 23 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 26 DIRECTORS’ REPORTS AUDIT COMMITTEE REPORT (continued) KPMG LLP did not provide non-audit services to the Group during the year. The Company has, for many years now, used a different accountancy practice to that of the statutory auditor for its UK tax services, which further enhances both objectivity and independence. The Audit Committee has met formally with the Group’s external auditor, KPMG LLP, to discuss the full year Annual Report, and has met with and discussed matters with them as part of the audit process during the current financial year being reported on. No material concerns were raised during these meetings or discussions. The Audit Committee was satisfied with the external auditor’s independence and the effectiveness of the audit process. As detailed above, the Audit Committee has recommended to the Board to propose a Resolution to confirm the appointment of new Auditors, RSM UK Group LLP, as the external auditor at the Annual General Meeting on 7th October, 2020. 4. Reviewing comments and feedback There is regular contact with Directors and employees where open and frank discussion is encouraged. Shareholders who have asked to visit the Company have done so. 5. Whistle-blowing Procedures The Group has a whistle-blowing policy in place whereby employees can report any suspected misconduct or concerns, either anonymously on a dedicated telephone line, or to the Chairman, the Company Secretary or the external auditor. Such calls are investigated and are reported to the Audit Committee. The Audit Committee has confirmed to the Board that the Group’s whistle-blowing policy and procedures are appropriate. 6. Internal Audit The scope of internal audit has been set by the Audit Committee and the results reviewed. The internal audit function operates a random rotation policy which prioritises based on materiality and endeavours to cover all Group subsidiaries at least once within a three year cycle either via the Group Internal Auditor or by the respective Group Managing Directors. Due to Coronavirus, internal audits of our overseas subsidiaries have been and are frustrated, but the larger profit earning overseas subsidiaries, Noreva, Gold Star India and Goodwin Pumps India, have been subject to full statutory audit by KPMG Germany and India respectively. KPMG UK have this year also commissioned KPMG Thailand to perform testing on key balances at Siam Casting Powders as part of their overall Group coverage for the year end 30th April, 2020 audit. It is intended that next year in country RSM UK Group LLP auditors will carry out similar audits and testing of the larger overseas subsidiaries. 7. Covid-19 The Audit Committee considered the likely outcome as far as it could be determined of Covid-19, the measures put in place in the first week of March 2020 both for our UK companies and also recommendations for our overseas subsidiaries. The emphasis, other than keeping workers appropriately distanced as well as applying hand washing/sterilising stations, sending people home should they or a family member in their household exhibit Covid-19 symptoms, was to keep the factories producing, earning gross margin and conserving cash flow thereby remaining well within the agreed banking facilities. 8. Accounting estimates and judgements relating to the Financial Statements The Audit Committee reviewed what it considered to be the accounting estimates and judgement areas within the Group Annual Report for the year ended 30th April, 2020. The Audit Committee also took account of the findings of KPMG LLP in relation to their external audit work for the year. In particular, the Audit Committee considered the following principal risk area: The requirements of IFRS 15, have been considered by the Audit Committee. This is seen as a key estimate / judgement area for the Audit Committee. Under certain circumstances, IFRS 15 mandates that revenue and profit be recognised in the profit and loss account before the goods are actually shipped, which may lead to corrections in subsequent periods. This impacts on companies within our Mechanical Engineering segment where we have bespoke contracts which carry termination for convenience clauses inclusive of profit in the event of a customer contract cancellation. The consequence here is that the Standard mandates that we take profit on our work in progress and show the result as revenue despite the goods not being shipped. The Audit Committee’s key concern here is the risk that estimates and judgements made in good faith at the balance sheet date may lead to adjustments in subsequent periods. J. E. Kelly Chair of the Audit Committee 13th August, 2020 24 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 27 DIRECTORS’ REPORTS DIRECTORS’ REMUNERATION POLICY AND REPORT This report includes the Group’s Remuneration Policy for Directors and sets out the Annual Directors’ Remuneration Report. Group’s Remuneration Policy for Directors The Group’s policy in respect of Directors’ remuneration is to provide individual packages which are determined having due regard to the Group’s current and projected profitability, the employee’s specific areas of responsibility and performance, their related knowledge and experience in the Group’s specific fields of operation, the external labour market and their personal circumstances whereby a package to remunerate and motivate the individual so as to best serve the Group is set. Individual salaries are also indirectly linked up and down to the time allocated and perceived effort by the Director to the Group’s business. Many Directors, as indeed employees, put in hours of work way beyond what could be requested and such personal devotion to duty by a Director is rewarded without formulae. All Board members have access to independent advice when considered appropriate. In forming its policy, consideration has been given to the UK Corporate Governance Code best practice provisions on remuneration policy, service contracts and compensation and has considered the remuneration levels of Directors of comparative companies. The remuneration policy for other employees is broadly based on principles consistent with the policy for Directors. Salary reviews take into account Group performance as well as subsidiary performance, local pay and market conditions. Whilst being aware of the requirements to show in graph form the breakdown of base pay, bonus pay, pension and long-term benefits, the Group is unable to comply with this requirement as Directors are not paid in accordance with any specific performance criteria or KPIs. Directors are paid based on their level of activity within the Group, their knowledge and experience of the Group’s activities or similar, the performance of the Group versus market opportunity whilst also considering the Director’s personal circumstances and the salary needed to ensure continuity of employment. This in itself may result in decreases or increases in Director salary within any year as illustrated in the matrix below. Operation Maximum Reviewed annually at the anniversary of the previous salary adjustment for the individual Director. Generally in line with inflation and the wage/salary increase awarded to employees, but this is not rigid. Performance Targets The Group’s performance, good or bad, may result in the salary being flexed. Changes for 2019/2020 The Managing Director sets the base increase in salaries. For the period May 2019 to April 2020, the increase was generally 2.4%. Following review of the half year and year end results of the Company. 60% of salary N/A No exceptional bonuses were paid this year. Element of Pay Salary Bonus Purpose and Link to Strategy Reflects the Directors’ level of activity and achievement within the Group, their knowledge and experience of the Company’s activities or similar, the performance of the Group versus market opportunity, whilst also considering the salary needed to ensure continuity of employment. No bonus strategy or incentive is agreed or contractual with any Director. Should any be awarded, it is discretionary and generally between 0% and 25%, but with a maximum of 60%, as determined by the Managing Directors and audited by the Chairman. 25 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 28 DIRECTORS’ REPORTS DIRECTORS’ REMUNERATION POLICY AND REPORT (continued) Group’s Remuneration Policy for Directors (continued) Element of Pay Pensions Other benefits Purpose and Link to Strategy All Directors have 3% added to their gross remuneration which, by nature of salary sacrifice, is put into a pension scheme where they have direct dealings with the selected investment fund provider. Fully expensed car or cash alternative, health insurance or other services. Operation Maximum Performance Targets Changes for 2019/2020 Monthly payments Currently 3% of gross remuneration N/A N/A N/A N/A No changes. This policy was adopted in October 2013 for the Directors and entire UK workforce. See details of the Directors’ emoluments on pages 29 and 30. We believe the above meets the requirement of Schedule 8, Companies Act 2006, regarding the changes in 2019 / 2020. The Policy and Report is signed by the Chairman and the Managing Directors. In any company there are specific individual circumstances that on occasions will merit special treatment in a given year for a Director either to keep or look after the person, indeed no different than we may do for an employee. In the matrix of remuneration for Directors you will note the Company has given itself flexibility to deal with specific circumstances which may not even be able to be made public for confidentiality reasons of which there are many. However, bearing in mind the performance of the Company over the past twenty years and more and that the Directors’ salaries are anything but excessive versus the norm of other PLCs, this is the Board’s policy. For reference the TSR of Goodwin PLC versus the FTSE 100 and the FTSE 350 is shown below for not only the last five but also the last ten years and the last twenty years. TSR for last 5 Years … … … TSR for last 10 Years … … … TSR for last 20 Years … … … Goodwin 3.5% 137.8% 6,865% FTSE 100 3.7% 55.4% 90.9% FTSE 350 4.4% 62.2% 115.4% The TSR achieved by the Company over the past five years is below the average of the FTSE 100 and FTSE 350. This has been a feature of exceedingly high growth in the period more than five years ago and the effect of the global contraction of capital expenditure in the oil, gas and mining industries over the past three years. Over the past three years the Directors have worked hard to reduce our reliance on the oil and gas market, so in the next three years the oil and gas market will have a less significant impact on the business. The TSR for the last ten years and the last twenty years still far outstrips the performance of the FTSE 100 and the FTSE 350. As is required by the Listing Rules, we show in graph form both the salary of the Managing Director of Goodwin PLC and the TSR over the past ten years. We, however, do not list out the salary of the Financial Director of Goodwin PLC versus the TSR as in Goodwin PLC we have a Group Chief Accountant (J. Connolly) who carries out 75% of the duties of a Financial Director and who is also a Director of Goodwin PLC, but we do not have what would generally be known as a Financial Director. This is for the reason that certain decisions that outsiders might consider are the sole responsibility of the Financial Director are not. In Goodwin PLC it is a team effort and such decisions are made not only by the Group Chief Accountant but also by the Managing Directors and the Chairman. The Company put the Remuneration Policy to the vote of the Annual General Meeting in 2019 when it was passed by 93.68% of those who voted. The Company will be putting the Remuneration Policy to the vote again in 2022 which is three years from the last vote, as is required by the Listing Rules. For confidentiality and flexibility reasons, the Board policy is not to disclose exit/termination payments to Directors but the policy is to remain within the law, to fairly compensate good leavers and minimise payments to bad leavers. In the last ten years, the Company has managed to avoid paying any termination payments to bad leavers. It is, however, Board policy to limit termination payments to a maximum of 100% of gross annual salary and should such amount be exceeded than it will be reported in the Annual Report giving the reason why. The Company takes seriously its responsibility for ensuring a fair deal between employees, shareholders, customers and the local community and maintaining an appropriate balance. The Company does not use or pay any external advisors or consultants for remuneration or incentive policy. Shareholder engagement is by nature of the Annual Report, the Annual General Meeting and the votes therein. 26 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 29 DIRECTORS’ REPORTS DIRECTORS REMUNERATION POLICY AND REPORT (continued) Annual Directors’ Remuneration Report This report is submitted in accordance with the Directors’ Remuneration Report Regulations. Consideration by the Directors of matters relating to Directors’ remuneration The Company’s Remuneration Policy for Directors is set by the Board as a whole and is described in pages 25 to 26. The Policy has been followed in the financial year to 30th April, 2020 and will be followed in the next financial year. The Board of Directors are also the key management personnel as defined in IAS 24. Service contracts None of the Directors has a service contract. A Director may resign at any time by notice in writing to the Board. There are no set minimum notice periods but all Directors other than the Chairman and Managing Directors are subject to retirement by rotation and as employees also have notice periods in accordance with law. No compensation as of right is payable to Directors on leaving office. Relative importance of spend on pay The table below shows shareholder distributions and total employee expenditure, and the percentage change in both: Ordinary dividends proposed in respect of the year … … … … … Total employee costs Average employee numbers … … … … … … … … … 2020 £’000 6,016 … … … … … … … … … 44,241 1,190 2019 £’000 6,927 41,189 1,082 % (13.2)% 7.4% 10.0% Approval of the Company’s Annual Directors’ Remuneration Report An ordinary resolution for the approval of the Annual Directors’ Remuneration Report will be put to shareholders at the forthcoming Annual General Meeting. The Annual Directors’ Remuneration Report presented in the accounts to 30th April, 2019 was put to the shareholders at last year’s Annual General Meeting on 2nd October, 2019. The Annual Directors’ Remuneration Report was accepted with 93.69% of proxy votes cast in favour. Total shareholder return – unaudited The following graphs compare the Group’s total shareholder return over the ten and twenty years ended 30th April, 2020 with various FTSE indices. The graphs also show the change in the earnings of the previous Managing Director for the periods up to 30th April, 2019. The base earnings figure used in the graphs for 30th April, 2020 is the amount each Managing Director earned in the year. 2016 £’000 2017 £’000 2018 £’000 2019 £’000 2020 £’000 369 368 385 397 310 Total payroll costs have increased by 7.4% which is a reflection of the average employee numbers having increased by 108 (10%) over the course of the year. During the year, the base increase awarded to employees in the UK companies was 2.4%. The following graphs have not been audited. 27 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 30 DIRECTORS REMUNERATION POLICY AND REPORT (continued) Annual Directors’ Remuneration Report (continued) DIRECTORS’ REPORTS The increase in the Goodwin PLC share price since 2000 plus dividends re-invested would mean that £1.00 invested in 2000 by the 30th April, 2020 would be worth £69.65. The increase in the share price since 2010 plus dividends re-invested would mean that £1.00 invested in 2010 would at 30th April, 2020 be worth £2.38. 28 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 31 DIRECTORS’ REPORTS DIRECTORS REMUNERATION POLICY AND REPORT (continued) Annual Directors’ Remuneration Report (continued) The auditors are required to report on the following information contained in this section of the Annual Directors’ Remuneration Report. Directors’ interests in the share capital of the Company as well as Audit Committee members / ex Directors – audited The interests of the Directors in the share capital of the Company at the beginning and end of the financial year were as follows: Number of 10p ordinary shares 30th April 30th April 2019 2020 Beneficial M. S. Goodwin … … … … … S. R. Goodwin … … … … … T. J . W. Goodwin… … … … … J. Connolly … … … … … … … … … … S. C. Birks B. R. E. Goodwin … … … … … J. W. Goodwin* … … … … … R. S. Goodwin* … … … … … J. W. Goodwin and R.S. Goodwin* … … J. W. Goodwin and R.S. Goodwin* … … … … … … … … … … … … 64,034 82,247 112,868 7,622 200 42,501 40,986 11,656 2,129,153 1,393,592 62,653 80,866 118,487 1,222 200 30,120 31,586 2,256 2,129,153 1,361,486 Non-beneficial J. W. Goodwin* and E. M. Goodwin … … 14,166 14,166 There have been no changes in the Directors’ interests between 30th April, 2020 and 13th August, 2020. * Audit committee member but not Director Details of individual emoluments and compensation – audited The following parts of the Remuneration Report are subject to audit. Single Total Figure Table Year ended 30th April, 2020 Salary M. S. Goodwin … … … … … … … S. R. Goodwin … … … … … … … T. J. W. Goodwin … … … … … … … J. Connolly… … … … … … … … S. C. Birks … … … … … … … … B. R. E. Goodwin … … … … … … … J. E. Kelly … … … … … … … … 2020 £’000 275 275 177 199 117 140 - Benefits Non-Exec in kind Director’s fees 2020 £‘000 - - - - - - 63 2020 £’000 25 25 11 36 25 11 - Pension contrib- utions 2020 £’000 10 10 6 6 4 5 - Total 2020 £’000 310 310 194 241 146 156 63 Total … … … … … … … … 1,183 133 63 41 1,420 Single Total Figure Table Year ended 30th April, 2019 Salary Benefits in kind 2019 £’000 J. W. Goodwin … … … … … 337 R. S. Goodwin … … … … … 339 J. Connolly … … … … … … 204 M. S. Goodwin … … … … … 219 S. R. Goodwin … … … … … 210 S. C. Birks … … … … … … 116 B. R. E. Goodwin … … … … … 123 T. J. W. Goodwin … … … … … 132 - J. E. Kelly … … … … … … Total … … … … … … 1,680 2019 £’000 49 47 29 25 16 23 11 11 - 211 29 Non-Exec Director’s fees 2019 £’000 - - - - - - - - 52 Pension contrib- utions 2019 £’000 11 11 6 7 7 4 4 4 - Sub- total 2019 £’000 397 397 239 251 233 143 138 147 52 LTIP* Total 2019 £’000 1,940 1,940 1,940 1,940 1,940 1,940 1,940 1,940 - 2019 £’000 2,337 2,337 2,179 2,191 2,173 2,083 2,078 2,087 52 52 54 1,997 15,520 17,517 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 32 DIRECTORS’ REPORTS DIRECTORS REMUNERATION POLICY AND REPORT (continued) Annual Directors’ Remuneration Report (continued) Details of individual emoluments and compensation – audited (continued) * The LTIP column relates to the vesting of the 2016 Equity Long Term Incentive Plan award on 1st May, 2019, based on the ten year performance ended 30th April, 2019. As required by reporting rules, the values in the April 2019 column are calculated on the actual value of vesting of the performance award in April 2019, using the average share price of £31.70 on the 30th April, 2019 and an opening share price on 1st May, 2019 of £32.38. The value attributed for each Director cannot be taken all in year one, and by the rules of the LTIP scheme, any Director must take the value over a three to five year period, with no more than one third of the value taken in any one calendar year. Benefits in kind consist of the provision of a fully expensed car, a cash alternative scheme, healthcare insurance or other services. Equity Long Term Incentive plan (LTIP) – Vested Share Options – audited Awarded Under the Long-Term Incentive Plan (LTIP) for the Executive Directors, that was approved at the Annual General Meeting on 5th October, 2016, the 2016 LTIP target was partially met, vesting 85% of the awards granted, entitling each of the sitting eight Directors to 61,200 shares (17 x 3,600 = 61,200). Exercised In the year ending 30th April, 2020 each Director exercised 20,400 share options, increasing the total share capital by 163,200 to 7,363,200. The value awarded for each Director cannot be taken all in year one, and by the rules of the LTIP scheme, any Director must take the value over a three to five year period, with no more than one third of the value taken in any one calendar year. The aggregate share options remaining to be exercised amount to 326,400. The Company has no follow-on LTIP incentive plans in place or proposed. Pay Ratio of Managing Directors This year, for the first time, in accordance with the Pay Ratio Regulations we are disclosing the comparison of our Managing Directors’ pay with that of our average UK employees. It was felt appropriate that the Managing Directors’ pay was used in the comparison as we do not have what is generally known as a Chief Executive Officer. For the year ending 30th April, 2020 the pay for both the Managing Directors in the Single Total Pay Figure table is the same. If the figures are different in any subsequent year, the higher of the two figures will be used in the ratio pay comparison section. We have opted for Option A of the pay ratio regulations as this is the preferred option under the regulations and also provides the most accurate data. The table below shows our Managing Directors’ pay ratio at the 25th, median and 75th percentile of our UK employees as at 30th April, 2020: Financial Year 2020 ratios MD Mechanical Engineering M. S. Goodwin MD Refractory Engineering S. R. Goodwin Method 25th percentile pay ratio Median pay ratio 75th percentile pay ratio 2020 total pay £’000 310 310 25 Option A 12:1 10:1 32 7:1 45 Notes: 1. Total pay has been calculated for each employee and, where applicable, prorated to calculate full-time equivalent pay. It includes payments that are taxable plus any employer pension contributions. 2. We offer competitive and fair rates of pay for all our UK employees taking into account personal circumstances. Total pension entitlements – unaudited In line with the Government’s requirements the Group administers a pension scheme for all UK employees including Directors. Under this Auto Enrolment Pension arrangement each Director has an amount of 3% of gross remuneration paid into a pension scheme where they have direct dealings with the selected investment fund provider. The employee also contributes a minimum of 4% of remuneration to his / her fund. The pension contributions are to defined contribution pension schemes which are independent of the Company. The Company has no obligations to make any payments in relation to pensions when a Director leaves service by nature of removal from office, resignation or retirement. The Annual Directors’ Remuneration Report was approved by the Board on 13th August, 2020 and is signed on its behalf by: T. J. W. Goodwin Director M. S. Goodwin Director S. R. Goodwin Director 30 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 33 DIRECTORS’ REPORTS STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law and have elected to prepare the parent Company financial statements in accordance with UK Accounting Standards, including FRS 101 Reduced Disclosure Framework. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable, relevant, reliable and prudent; • for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU; • for the parent Company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the parent Company financial statements; • assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and • use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that complies with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Responsibility statement of the Directors in respect of the Directors’ Report and Accounts We confirm that to the best of our knowledge: • the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and • the Group Strategic Report includes a fair review of the development and performance of the business and the position of the Issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. We consider the Directors Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. T. J. W. Goodwin Director M. S. Goodwin Director S. R. Goodwin Director 13th August, 2020 31 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 34 INDEPENDENT AUDITOR’S REPORT to the members of Goodwin PLC 32 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 35 33 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 36 34 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 37 35 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 38 36 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 39 37 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 40 38 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 41 39 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 42 40 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 43 41 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 44 FINANCIAL STATEMENTS GOODWIN PLC CONSOLIDATED STATEMENT OF PROFIT OR LOSS for the year ended 30th April, 2020 CONTINUING OPERATIONS Revenue … … … … … … … … … … 4, 5 144,512 Cost of sales … … … … … … … … … (109,743) Notes 2020 £’000 GROSS PROFIT… … … … … … … … … … Other income … … … … … … … … … 6 Distribution expenses … … … … … … … … Administrative expenses … … … … … … … 34,769 690 (2,792) (19,809) 2019 £’000 127,046 (86,414) 40,632 - (3,016) (21,205) OPERATING PROFIT … … … … … … … … … 12,858 16,411 Financial expenses … … … … … … … … Share of profit of associate companies … … … … … PROFIT BEFORE TAXATION … … … … … … … Tax on profit … … … … … … … … … 8 15 6 9 (809) 66 (234) 233 12,115 (3,775) 16,410 (3,963) PROFIT AFTER TAXATION… … … … … … … … 8,340 12,447 ATTRIBUTABLE TO: Equity holders of the parent … … … … … … … Non-controlling interests … … … … … … … 7,866 474 11,505 942 PROFIT FOR THE YEAR … … … … … … … … 8,340 12,447 BASIC EARNINGS PER ORDINARY SHARE … … … … DILUTED EARNINGS PER ORDINARY SHARE … … … … 10 10 107.93p 159.79p 103.31p 149.65p The notes on pages 48 to 98 form part of these financial statements. 42 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 45 FINANCIAL STATEMENTS GOODWIN PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 30th April, 2020 PROFIT FOR THE YEAR … … … … … … … … … 2020 £’000 8,340 2019 £’000 12,447 OTHER COMPREHENSIVE EXPENSE ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS: Foreign exchange translation differences … … … … … … (1,007) Goodwill arising from purchase of non-controlling interest in subsidiaries Effective portion of changes in fair value of cash flow hedges … … Change in fair value of cash flow hedges transferred to profit or loss … Effective portion of changes in fair value of cost of hedging … … … Change in fair value of cost of hedging transferred to profit or loss … … Tax credit on items that may be reclassified subsequently to profit or loss (72) (355) 522 (843) 395 77 (383) (772) (644) 180 (489) 49 154 OTHER COMPREHENSIVE EXPENSE FOR THE YEAR, NET OF INCOME TAX … … … … … … … … … … (1,283) (1,905) TOTAL COMPREHENSIVE INCOME FOR THE YEAR … … … … 7,057 10,542 ATTRIBUTABLE TO: Equity holders of the parent … … … … … … … … Non-controlling interests … … … … … … … … 6,587 470 7,057 9,528 1,014 10,542 The notes on pages 48 to 98 form part of these financial statements. 43 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 46 FINANCIAL STATEMENTS GOODWIN PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 30th April, 2020 Share- Trans- based lation payment reserve £’000 reserve £’000 Share capital £’000 Cash flow Cost of hedge hedging Retained reserve earnings £’000 reserve £’000 £’000 Total attributable to equity Non- holders of controlling interests the parent £’000 £’000 Total equity £’000 YEAR ENDED 30TH APRIL, 2020 Balance at 1st May, 2019 … 720 1,044 4,991 (573) (426) 99,409 105,165 4,126 109,291 Total comprehensive income: Profit … … … … Other comprehensive income: Foreign exchange translation differences … … … Goodwill arising from purchase of NCI interest in subsidiaries Net movements on cash flow hedges … … … … TOTAL COMPREHENSIVE INCOME FOR THE YEAR - - - - - Issue of shares … … … 16 Tax on equity-settled share-based payment transactions … Dividends paid … … … Acquisition of NCI without a change of control … … Disposal of subsidiary … Reclassification … … - - - - - - (964) - - (964) - - - - (77) 358 - - - - - - 253 - - - - - - - - - - 7,866 7,866 474 8,340 - (964) (43) (1,007) (72) (72) - (72) 74 (317) - (243) 39 (204) 74 (317) 7,794 6,587 470 7,057 - - - - - - - - - - - - - - 16 253 (6,927) (6,927) - - - 16 253 (6,927) - - (358) - (77) - (11) - - (11) (77) - BALANCE AT 30TH APRIL, 2020 736 361 5,244 (499) (743) 99,918 105,017 4,585 109,602 The notes on pages 48 to 98 form part of these financial statements. 44 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 47 FINANCIAL STATEMENTS GOODWIN PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 30th April, 2020 Share- Trans- based lation payment reserve £’000 reserve £’000 Share capital £’000 Cash flow Cost of hedge hedging Retained reserve earnings £’000 reserve £’000 £’000 Total attributable to equity Non- holders of controlling interests the parent £’000 £’000 Total equity £’000 YEAR ENDED 30TH APRIL, 2019 Balance at 1st May, 2018 … 720 1,879 1,625 (224) - 95,568 99,568 5,259 104,827 Adjustment on initial application of IFRS 9 (net of tax) … Adjustment on initial application of IFRS 15 (net of tax) … ADJUSTED BALANCE AT 1ST MAY, 2018 Total comprehensive income: Profit … … … … Other comprehensive income: Foreign exchange translation differences … … … Goodwill arising from purchase of NCI interest in subsidiaries Net movements on cash flow hedges … … … … TOTAL COMPREHENSIVE INCOME FOR THE YEAR Equity-settled share-based payment transactions … Tax on equity-settled share-based payment transactions … Dividends paid … … … Acquisition of NCI without a change of control … … Disposal of equity investments … … Acquisition of subsidiary with NCI … … … Capital contribution … … BALANCE AT 30TH APRIL, 2019 - - - - - - 52 - (52) - - - - - (684) (684) (350) (1,034) 720 1,879 1,625 (172) (52) 94,884 98,884 4,909 103,793 - - - - - - - - - - - - - (430) (180) - (610) - - - (225) - - - - - - 1,220 2,146 - - - - - 11,505 11,505 942 12,447 - - - - - - - (430) (592) (772) 47 - 25 (383) (772) (750) (401) (374) - (775) (401) (374) 10,913 9,528 1,014 10,542 - - - - - - - - - - - - - - - - (6,126) - - - (262) 1,220 2,146 (6,126) - - 1,220 2,146 (451) (6,577) - (1,750) (1,750) (225) - (262) - (225) 142 262 142 - 720 1,044 4,991 (573) (426) 99,409 105,165 4,126 109,291 The notes on pages 48 to 98 form part of these financial statements. 45 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 48 GOODWIN PLC CONSOLIDATED BALANCE SHEET at 30th April, 2020 NON-CURRENT ASSETS … … … … … … … Property, plant and equipment … … … … … … … … Right-of-use assets Investment in associates … … … … … … … … Intangible assets… … … … … … … … … … Derivative financial assets … … … … … … … … Other financial assets at amortised cost … … … … … … CURRENT ASSETS Inventories… … … … … … … … … … … Contract assets … … … … … … … … … … Trade receivables and other financial assets … … … … … … … … … … … … … … Other receivables Derivative financial assets … … … … … … … … Cash and cash equivalents … … … … … … … … FINANCIAL STATEMENTS Notes 12 13 15 16 28 18 17 5 18 19 28 20 2020 £’000 69,626 5,343 816 24,695 749 252 101,481 44,887 6,558 24,486 4,566 456 9,840 90,793 2019 £’000 74,106 - 739 22,354 - 505 97,704 50,524 3,698 24,964 2,715 195 9,640 91,736 TOTAL ASSETS … … … … … … … … … … 192,274 189,440 CURRENT LIABILITIES Bank overdrafts and interest-bearing loans … … … … … Lease liabilities … … … … … … … … … … Contract liabilities … … … … … … … … … Trade payables and other financial liabilities … … … … … Other payables … … … … … … … … … … Deferred consideration… … … … … … … … … Derivative financial liabilities … … … … … … … … Liabilities for current tax … … … … … … … … Warranty provision … … … … … … … … … NON-CURRENT LIABILITIES Interest-bearing loans … … … … … … … … … Lease liabilities … … … … … … … … … … Derivative financial liabilities … … … … … … … … Warranty provision … … … … … … … … … Deferred tax liabilities … … … … … … … … … TOTAL LIABILITIES… … … … … … … … … … 21 13 5 22 23 24 28 25 21 13 28 25 26 13,141 1,483 18,965 23,485 3,298 - 1,071 1,873 160 63,476 14,260 1,339 202 324 3,071 19,196 82,672 9,259 939 18,002 20,570 4,771 204 1,693 2,356 261 58,055 19,322 1,164 - 232 1,376 22,094 80,149 NET ASSETS … … … … … … … … … … … 109,602 109,291 EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT Share capital … … … … … … … … … … Translation reserve … … … … … … … … … Share-based payments reserve … … … … … … … … … … … … … … … Cash flow hedge reserve … … … … … … … … Cost of hedging reserve … … … … … … … … … Retained earnings 27 736 361 5,244 (499) (743) 99,918 720 1,044 4,991 (573) (426) 99,409 TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 105,017 105,165 NON-CONTROLLING INTERESTS … … … … … … … 4,585 4,126 TOTAL EQUITY … … … … … … … … … … 109,602 109,291 These financial statements were approved by the Board of Directors on 13th August, 2020, and signed on its behalf by: T. J. W. Goodwin Director Company Registration Number: 305907 M. S. Goodwin Director S. R. Goodwin Director The notes on pages 48 to 98 form part of these financial statements. 46 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 49 FINANCIAL STATEMENTS GOODWIN PLC CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 30th April, 2020 2020 £’000 2020 £’000 2019 £’000 2019 £’000 CASH FLOW FROM OPERATING ACTIVITIES Profit from continuing operations after tax … … … … Adjustments for: Depreciation of property, plant and equipment … … … Depreciation of right-of-use assets … … … … … Amortisation and impairment of intangible assets … … … … … … … … … Financial expenses Foreign exchange losses … … … … … … Loss on sale of property, plant and equipment … … … Profit on disposal of subsidiary … … … … … Share of profit of associate companies … … … … Equity-settled share-based provision … … … … … … … … … … … … Tax expense OPERATING PROFIT BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS Decrease / (increase) in inventories … … … … … (Increase) / decrease in contract assets … … … … Increase in trade and other receivables … … … … Increase in contract liabilities … … … … … … Increase in trade and other payables… … … … … Increase in unhedged derivative balances … … … … CASH GENERATED FROM OPERATIONS Interest paid … … … … … … … … Interest element of finance lease obligations … … … Interest element of operating lease obligations … … … Corporation tax paid … … … … … … … NET CASH FROM OPERATING ACTIVITIES … … … 8,340 5,874 827 1,328 809 203 52 (172) (66) - 3,775 20,970 4,748 (2,863) (2,549) 874 2,310 (980) 22,510 (747) (41) (56) (2,493) 19,173 12,447 5,571 248 1,312 234 66 13 - (233) 1,220 3,963 24,841 (11,816) 1,361 (4,288) 3,401 1,965 (579) 14,885 (524) (64) - (3,093) 11,204 CASH FLOW FROM INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment … Acquisition of property, plant and equipment … … … Additional investment in existing subsidiaries … … … Acquisition of controlling interest in associates net of cash acquired… … … … … … … … … … … … … Acquisition of intangible asset Development expenditure capitalised … … … … Dividends received from associate companies … … … 139 (6,062) (83) - (1,855) (1,105) - 142 (11,451) (2,668) (425) (315) (1,500) 1,254 NET CASH OUTFLOW FROM INVESTING ACTIVITIES … … (8,966) (14,963) CASH FLOWS FROM FINANCING ACTIVITIES … Payment of capital element of finance lease obligations Payment of capital element of operating lease liabilities … Issue of shares … … … … … … … … Proceeds from new finance leases … … … … … Dividends paid … … … … … … … … … … … Dividends paid to non-controlling interests … … Net proceeds from loans and committed facilities (954) (509) 16 102 (6,927) - 7,556 (911) - - 424 (6,126) (451) 8,337 NET CASH (OUTFLOW) / INFLOW FROM FINANCING ACTIVITIES NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year … … … … … Effect of exchange rate fluctuations on cash held CASH AND CASH EQUIVALENTS AT END OF YEAR (see note 20) The notes on pages 48 to 98 form part of these financial statements. (716) 9,491 493 (535) 9,449 1,273 (2,486) 2,900 79 493 47 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 50 NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policies Goodwin PLC (the “Company”) is incorporated in England and Wales. The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the “Group”) and equity account the Group’s interest in associates. The parent Company financial statements present information about the Company as a separate entity and not about its Group. The Group’s financial statements have been approved by the Directors and prepared in accordance with International Financial Reporting Standards as adopted by the European Union (EU). The Company has elected to prepare its financial statements in accordance with Financial Reporting Standard (FRS) 101 issued in the UK. These are presented on pages 87 to 98. The accounting policies set out below have been applied consistently to all periods presented in these Group financial statements, with the exception of leases. The Group’s new policy for leases is outlined below and the impact of the change is explained in note 3. Judgements made by the Directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 2. With the current level of order input, the opportunity for continued profitability remains good for the next twelve months. The impact of working capital requirements on our banking facilities given the expected level of activity and capital spend commitments will continue to be monitored and managed. After reviewing the situation, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for twelve months from the date of approval of these financial statements and have continued to adopt the going concern basis in preparing the financial statements. Going concern and viability of the Group are discussed in detail within the Report of the Directors on pages 18 to 19 within these financial statements. New IFRS standards and interpretations adopted during 2020 In 2020 the following amendments had been endorsed by the EU, became effective and were, therefore, mandated to be adopted by the Group: • • IFRS 16 - Leases (effective for annual periods beginning on or after 1st January, 2019) Amendments to IFRS 9 – Prepayment Features with Negative Compensation (effective for annual periods beginning on or after 1st January, 2019) IFRIC Interpretation 23 – Uncertainty over Income Tax Treatments (effective for annual periods beginning on or after 1st January, 2019) Amendments to IAS 28 – Long-term Interests in Associates and Joint Ventures (effective for annual periods beginning on or after 1st January, 2019) Annual Improvements to IFRSs – 2015-2017 Cycle – minor amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23 (effective for annual periods beginning on or after 1st January, 2019) • • • The adoption of IFRS 16 is discussed in note 3. The implementation of all the other standards and amendments has not had a material impact on the Group’s financial statements. Measurement convention The financial statements are rounded to the nearest thousand pounds. The financial statements are based on the historical cost basis except where the measurement of balances at fair value is required as below. Going concern The Directors, after having reviewed the projections and possible challenges that may lie ahead, believe that, armed at the time of writing with £74.5 million of committed facility (including £30 million CCFF funds, which are repayable within one year (see notes 28 and 31), there is a reasonable expectation that the Group has adequate resources to continue in operational existence for at least twelve months from the date of approval of these financial statements, and have continued to adopt the going concern basis in preparing the financial statements. Furthermore, we are pleased to report that the Group has recently completed the refinancing of one of its significant facilities which was due to retire by 31st December, 2020. In terms of total debt quantum, the refinancing has given the Group the same funding availability but with proportionally more of the facility moving to committed five year funding. The Group is also in the final stages of renegotiating a £10 million revolving credit facility which expires in October 2020. The Directors do not see an issue in renewing these facilities. The Directors have, as part of this going concern assessment, specifically considered the impact of Covid-19 on the Group’s operations and in particular have developed a series of in-depth financial models covering at least twelve months following the approval of the financial statements. The models show the base case (our reasonable expectation in light of Covid-19), with an alternative scenario that stress tests this base case model for severe but plausible downside outcomes. Within the base case model, the Directors have considered the current trading conditions and assumed similar activity levels within the Mechanical Division as a result of its workload and assumed the Refractory activity levels may be reduced due to it being more exposed to the global downturn. We forecast that after 30th April, 2021 activity levels will return to those seen prior to Covid-19 and growth will return. Within our severe but plausible downside model, it is demonstrable that the Group has sufficient funds to cover the Group’s and the Company’s commitments during the forecast period and is forecast to be within its 48 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 51 NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policies (continued) Going concern (continued) financial covenants. The model also incorporates various assumptions including the assumption of a series of customer failures and the failure of a major supplier within the refractory division, the inability to achieve Covid-19 cost reduction targets and the impact of further lockdowns that last three to six months in Europe, China, India and Brazil. The failure of a major supplier is modelled to result in three months of business interruption. These assumptions, whilst plausible, are considered extreme in the Board’s view. As referred to elsewhere in these financial statements, the Mechanical Engineering Division currently has a record order book and whilst we have down rated our expectations within this division in our forecasts we would emphasise that our factories largely remained open during the height of the first phase lockdown and we are not seeing any issues regarding the suspension of works on these orders. Whilst the Refractory Engineering Division would be exposed to events such as a second lockdown, as a well-diversified Group, our severe but plausible downside model clearly demonstrates we are well set to absorb the impact of a protracted Covid-19 resolution. Consequently, the Directors are confident that the Group and the Company will have sufficient funds to continue to meet their liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis. Basis of consolidation Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity. Associates are accounted for using the equity method and are initially recognised at cost. The Group's investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group's share of the total recognised income and expense and equity movements of equity accounted investees, from the date that significant influence commences until the date that significant influence ceases. When the Group's share of losses exceeds its interest in an equity accounted investee, the Group's carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an investee. Foreign currency Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of profit or loss within operating profit. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to Sterling at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an average rate for the period where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from the translation of foreign operations are taken directly to the translation reserve. They are released into the statement of profit or loss upon disposal of the foreign operation. Financial instruments Measurement Trade receivables, which do not contain a significant financing component, are measured, initially, at the transaction price. All other financial assets and liabilities are measured at fair value, on initial recognition. Non-derivative financial assets are measured subsequently at amortised cost if the objective is to hold them to collect contractual cash flows and their contractual terms include cash flows on specified dates, which are payments of principal and interest. Principal non-derivative financial assets and liabilities Trade receivables Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are recognised initially at the amount of consideration that is unconditional. 49 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 52 NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policies (continued) Financial instruments (continued) Principal non-derivative financial assets and liabilities (continued) Trade receivables (continued) Trade receivables are held with the intention of collecting the contractual cash flows and are measured subsequently, therefore, at amortised cost. Other receivables Other receivables principally comprise short-term tax balances and a loan to an associate company. Interest is charged at commercial rates on long-term balances. After being recognised initially at fair value, other receivables are measured, subsequently, at amortised cost. The carrying amount of other receivables is considered to be a reasonable approximation of their fair value. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand, together with cash deposits with an original maturity of three months or less. Included with cash and cash equivalents, for the cash flow statement only, are bank overdrafts, which are repayable on demand and form an integral part of the Group’s cash management. Bank borrowings Interest-bearing bank loans and overdrafts are measured initially at their fair value less attributable transaction costs. They are carried, subsequently, at amortised cost and finance charges are recognised in the statement of profit or loss over the contract term, using an effective rate of interest. Trade and other payables Trade and other payables are recognised initially at fair value, and are subsequently reported at amortised cost. Impairment The Group has elected to measure loss allowances for trade receivables and contract assets at an amount equal to lifetime expected credit losses (ECLs). Specific impairments are made when there is a known impairment need against trade receivables and contract assets. When estimating ECLs, the Group assesses reasonable, relevant and supportable information, which does not require undue cost or effort to produce. This includes quantitative and qualitative information and analysis, incorporating historical experience, informed credit assessments and forward-looking information. Loss allowances are deducted from the gross carrying amount of the assets. Where material, impairment losses related to trade and other receivables, including contract assets, are disclosed separately in the statement of profit or loss. Derivative financial assets and liabilities Derivative financial assets and liabilities are recognised at fair value. The fair value of forward exchange contracts is equal to the present value of the difference between the contractual forward price and the current forward price for the residual maturity of the contract adjusted for counterparty credit risk. The recognition of the gain or loss on re-measuring to fair value those forward exchange contracts, which are used for hedging, is outlined below; for other forward exchange contracts, the gain or loss is recognised in the profit or loss. Fair value derivation 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). The fair value of derivative financial assets and liabilities is derived using level 2 inputs. Cash flow hedges Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in the hedging reserve. Under the new general hedge accounting model in IFRS 9, our hedge relationships are aligned with our risk management objectives and strategy, resulting in a more qualitative and forward-looking approach in ensuring hedge effectiveness. For cash flow hedges, the associated cumulative gain or loss on the relevant derivative financial instrument is removed from equity and recognised in the statement of profit or loss in the same period or periods during which the hedged forecast transaction affects the statement of profit or loss. Any identified ineffective portion of the hedge is recognised immediately in the statement of profit or loss. Only the change in spot rate is designated as the hedging instrument, with the change in fair value relating to forward points being reported separately as deferred costs of hedging within other comprehensive income as permitted by IFRS 9. Given under IAS39 the cash flow hedge accounting utilised the forward point inclusive rate, there is no significant impact on the accounts resulting from adopting the IFRS 9 general hedge accounting model. 50 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 53 NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policies (continued) Cash flow hedges (continued) When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the cash flow hedge transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised in the statement of profit or loss immediately. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance leases. Leased assets acquired by way of finance lease are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. Lease payments are accounted for as described below. Depreciation is charged to the statement of profit or loss over the estimated useful lives of each part of an item of property, plant and equipment on the following bases: Freehold land … … … … … Freehold buildings … … … … Leasehold property … … … … Plant and machinery … … … … Motor vehicles … … … … … Tooling … … … … … … Fixtures and fittings … … … … Assets in the course of construction are not depreciated. Nil 2% to 4% on reducing balance or cost over period of lease 5% to 25% on reducing balance or cost 15% or 25% on reducing balance over estimated production life 15% to 25% on reducing balance or cost Intangible assets and goodwill All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of businesses. In respect of business acquisitions that have occurred since 1st May, 2006, goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets and contingent liabilities acquired. For acquisitions prior to the adoption of Revised IFRS 3 “Business Combinations” (1st May, 2010), cost includes directly attributable acquisition costs. For acquisitions after this date, such costs are charged to the statement of profit or loss. Identifiable intangibles are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment. In respect of acquisitions prior to 1st May, 2006, goodwill is included at transition date on the basis of its deemed cost, which represents the amount recorded under UK GAAP which was broadly comparable save that only separable intangibles were recognised and goodwill was amortised. On transition, amortisation of goodwill has ceased as required by IFRS 1. Negative goodwill arising on an acquisition is recognised immediately in the statement of profit or loss. Goodwill or negative goodwill resulting from increasing the percentage ownership of an existing subsidiary is dealt with in other comprehensive income. Expenditure on research activities is recognised in the statement of profit or loss as an expense as incurred. Expenditure on development activities is capitalised if the product or process is technically and commercially feasible and the Group has sufficient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other development expenditure is recognised in the statement of profit or loss as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the statement of profit or loss on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows: • Capitalised development costs Minimum expected order unit intake or minimum product life • Manufacturing rights 6 - 15 years • Brand names and intellectual property 3 - 15 years • Customer lists • Order book • Distribution rights • Software and licences • Non-compete agreements 10 years 1 year 25 years 3 - 4 years 15 years 51 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 54 NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policies (continued) Impairment of intangibles The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. Recoverable amount is the greater of an asset’s or cash-generating unit’s fair value less costs to sell or value in use. For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the statement of profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use were tested for impairment as at 1st May, 2006, the date of transition to Adopted IFRSs, even though no indication of impairment existed. Reversals of impairment An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Inventories Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in, first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity. Government grants Government grants relating to income are recognised in the statement of profit or loss as a deduction from the expenses that they are intended to compensate. Government grants relating to assets are recognised in the balance sheet as a deduction in the carrying amount of the asset. Depreciation is charged on the value of the asset less the associated grant. Amounts of grants received are shown in note 6. Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Warranty provisions The Group carries a warranty provision where applicable. The warranties are committed at contract placement stage and typically, where given to a customer, the warranty has a duration of between 1 and 3 years. At the expiry of the warranty period, to the extent not utilised the warranty provision is then released back into the statement of profit or loss. The warranties are generally passive in nature confirming that the goods comply with contractual specifications and given the incidence of product failure is low, the warranties have no tangible customer value. Revenue Revenue is recognised when a customer obtains control of the goods or services i.e. upon the satisfaction of a performance obligation. Judgement is required to determine the timing of the transfer of control, and whether it is at a point in time or over time. Where a contract contains several performance obligations then the contract is unbundled and each performance obligation is dealt with separately. Standard inventory product lines and consumables Typically applies to the whole of the Group’s Refractory Engineering segment and the sale of slurry pumps within the Mechanical Engineering segment. The revenue here relates to standard products manufactured for sale. The performance obligation is satisfied and revenue taken at the point when customers obtain control of the goods in accordance with the International Commercial (INCO) terms agreed or via a bill and hold arrangement. 52 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 55 NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policies (continued) Revenue (continued) Minimum period contracts for the provision of goods and services Predominantly the supply of broadband and related services under minimum term contracts. Performance obligations are satisfied over time and revenue is recognised equally over the term of the contract Engineered bespoke products – performance obligations satisfied over time Typically applies to the Group’s Mechanical Engineering segment and covers sales orders which are customer bespoke, but permit the Group subsidiary to claim profit earned to date if the customer were to trigger the cancel for convenience clause within the contract. In such cases, the performance obligations are treated as satisfied over time (i.e. as the contract progresses) and revenue is taken based on the percentage completion of the contract by the creation of a contract asset. Work in progress is eliminated and replaced by a contract asset. Measuring progress requires judgement as to the stage of completion of each job, and the production of forecasts, which contain allowances for technical risks and inherent uncertainties. Engineered bespoke products – performance obligations satisfied at a point in time Typically applies to the Group’s Mechanical Engineering segment and covers sales orders which are customer bespoke, but permit the Group subsidiary to claim only for costs in the event the customer triggers the cancel for convenience clause within the contract. In such cases, the performance obligation is deemed to be met and revenue taken as order lines are shipped in accordance with the relevant shipping terms or via a bill and hold arrangement. The incremental costs of obtaining a contract are recognised as an expense, as occurred, when the contract period is less than one year. Contract assets represent the Group’s rights to consideration for work completed but not invoiced at the reporting date for bespoke products contracts. Contract assets are transferred to receivables when the rights to consideration become unconditional, which is generally when the Group invoices the customer. Where payments are received in advance and exceed the costs incurred in constructing the asset together with forecast margin earned, the balances are disclosed as contract liabilities. Leases The Group’s accounting policy on leases up to April 2019 was as follows: Operating lease payments Payments made under operating leases are recognised in the statement of profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in the statement of profit or loss as an integral part of the total lease expense. Finance lease payments Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. This policy has been amended in accordance with IFRS 16, and the new policy is outlined below. Definition of a lease A contract is a lease or contains a lease if it transfers the right to use an identified asset over the contract term, in exchange for payment. In determining whether a contract gives the Group the right to use an asset, the Group assesses whether: • • • Lease term The lease term is the non-cancellable period of a lease, and options to extend the lease or terminate it, where it is probable that the Group will exercise the available options. At the start of a lease, the Group makes a judgement about whether it is reasonably certain to exercise the options, and reassesses this judgement at every reporting period. Contracts, where the original lease term has expired, with assets continuing to be leased on a short-term rolling basis of a few months, are treated as short-term leases. Lease balances A right-of-use asset and a lease liability are calculated at the beginning of a lease. The right-of-use asset is measured initially at cost, being the opening lease liability, adjusted for any lease payments made by the start of the lease, adjusted for any initial direct costs, which have been incurred. The lease liability is measured initially at the present value of the lease payments, which are outstanding at the start date, discounted at either the rate implicit in the lease or the Group’s incremental borrowing rate. With the exception of leases containing an option to purchase, the Group uses its incremental borrowing rate as the discount rate. Lease liabilities are measured at amortised cost, using the effective rate, and adjusted as required for any subsequent change to the lease terms. the contract involves the use of an identified asset; the Group has the right to obtain substantially all of the economic benefit of using the asset; and the Group has the right to direct the use of the asset by deciding how the asset is employed. 53 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 56 NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policies (continued) Leases (continued) Lease balances (continued) The right-of-use asset is depreciated on a straight-line basis over the lease term, or from the start date of the lease to the end of the useful life of the right-of-use asset as appropriate. The method of calculating the estimated useful lives of the right-of-use assets and testing for impairment is the same as that for property, plant and equipment. Recognition exemptions Payments for short-term leases, lasting twelve months or less, without a purchase option continue to be reported an as operating expense on a straight-line basis over the term of the lease. The cost of leasing low-value items will continue to be reported as an operating expense over the life of the lease. Lease portfolios The Group has leases for the following types of assets: Land and buildings – the Group leases a number of factory buildings, warehouses and office buildings. Plant and equipment – a number of significant items of plant, such as CNC machines, have been leased under contracts with an option to buy the asset at the end of the lease term. The Group also leases a small number of motor vehicles. For motor vehicles the Group has applied the practical expedient in paragraph 15 of IFRS 16, whereby non-lease components have not been separated from lease components, such that lease costs and service costs are treated as a single lease component. Printers and photocopiers – the Group has applied the recognition exemption for low-value assets to these leases. Financial expenses Financial expenses comprise interest payable, interest on finance leases using the effective interest method and the unwinding of the discount on provisions. Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a substantial time to be prepared for use are capitalised as part of the cost of that asset. Interest income and interest payable is recognised in the statement of profit or loss as it accrues. Employment costs Pension costs The Group contributes to a defined contribution pension scheme for UK employees under an Auto Enrolment Pension arrangement as required by Government legislation. The assets of the scheme are held in independently administered funds. Group pension costs are charged to the statement of profit or loss in the year for which contributions are payable. Contributions to the schemes are made on a monthly basis and at the end of the financial year there were one month’s contributions outstanding, which were paid in the following month. Termination costs Employee termination costs are expended in the profit and loss figures in a year as soon as the expense is known and is certain. Share-based payment transactions Share-based payments arrangements, in which the Group receives goods or services as consideration for its own equity instruments, are accounted for as equity-settled share-based payment transactions regardless of how the equity instruments are obtained by the Group. The grant date fair value of share-based payment awards granted to employees is recognised as an expense, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the awards. The fair value of the awards is measured using an option valuation model, taking into account the terms and conditions upon which the awards were granted. Taxation Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the statement of profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. 54 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 57 1. Accounting policies (continued) NOTES TO THE FINANCIAL STATEMENTS New IFRS standards, amendments and interpretations not adopted The IASB and IFRIC have issued additional standards and amendments which are effective for periods starting after the date of these financial statements. The following standards and amendments have not yet been adopted by the Group: • Amendments to IFRS 3 – Definition of a business (effective for annual periods beginning on or after 1st January, 2020) Amendments to IAS 1 and IAS 8 – Definition of material (effective for annual periods beginning on or after 1st January, 2020) Amendments to References to the Conceptual Framework in IFRS Standards (effective for annual periods beginning on or after 1st January 2020) • • The Group has considered the impact of these new standards and interpretations in future periods on profit, earnings per share and net assets. None of the other standards or interpretations is expected to have a material impact. 2. Accounting estimates and judgements The Group makes judgements and estimates in applying the Group’s accounting policies, to prepare the financial statements. The Directors do not believe there have been any key judgements exercised during the period, but see the following as the key estimates considered. Key estimates IFRS 15 Revenue Recognition The Directors consider that a key estimate, which may have a material impact on the financial statements, is in relation to IFRS 15 and, in particular, where we are mandated to account on a revenue over time basis on some of our mechanical engineering work in progress contracts. When reviewing the terms of contracts with customers, judgement is required to assess the number of performance obligations within the contracts and when to recognise contract provisions. For contracts where revenue is recognised over time, there is a need to estimate the costs to complete on these contracts. The costs to complete estimates can be complex, as they need to consider several variable factors such as the impact of delays, cost overruns and also any variations to contract. Once complete, these estimates then drive the amount of revenue recognised. The estimates are prepared and reviewed by management with suitable experience and qualifications, and who endeavour to ensure the revenue mandated to be recognised prior to the completion of the contract is not overstated, based on possible technical risks and inherent uncertainties. Whilst cost to complete estimates are based on management’s best knowledge at the time, it is clear, due to the very nature of an estimate that the eventual outcomes may differ due to unforeseen events. The advanced stage of completion of a number of contracts reduces the risk of unforeseen events arising, however, if a series of unforeseen events did arise it could potentially lead to a materially different outcome on the contracts. Determination of the basis for amortising capitalised development costs The Group carries different classes of intangible assets on its balance sheet, which include goodwill, rights, brand names and development costs. Development costs are amortised on a straight-line basis, which commences when the Group benefits from the cash inflows. A key estimate is required in determining the useful economic life for which each asset is to be fully amortised over, current timeframes range from 15 to 25 years. In accordance with IAS 38, the basis on which development assets are amortised is assessed annually. Estimation uncertainty lies within the anticipated market life and the estimated future revenue and margins. These estimates may depend upon the outcome of future events and may need to be revised as circumstances change. Apart from above, the Group does not have any key assumptions concerning the future, or other key sources of estimation uncertainty in the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Key judgements The Board does not consider there to be any key judgements. Other estimates / judgements Other than as reported above, the Directors do not consider there to be any key estimates or judgements in preparing the financial statements. The estimates and judgements outlined below formed the main areas of focus for the Directors throughout the year. Inventory provisions The Group's Directors in conjunction with senior management in the subsidiaries regularly review the recoverability of their stated raw material and work in progress balances, paying particular attention to net realisable value and stock obsolescence issues. The estimates are in relation to costs to complete and the expected level of future sales orders for slow moving stocks. Where it is judged that a provision is deemed necessary the appropriate adjustments are made in the relevant subsidiary's books at the time a shortfall is identified. 55 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 58 NOTES TO THE FINANCIAL STATEMENTS 2. Accounting estimates and judgements (continued) Other estimates / judgements (continued) Trade receivable provisions Whilst trade debtors are insured wherever possible, the Directors are able to exercise judgement in relation to non-credit insured contracts as set out in note 28 (a). The Group Directors, in conjunction with the subsidiary credit controllers, closely monitor the adherence to payment terms across all accounts (whether insured or not) and make provision for any losses that are likely to materialise. There is a requirement under IFRS 9 to consider the statistical likelihood of a bad debt based off previous experience. Historically, the Group’s bad debt write offs have been negligible and the Group results are not impacted by this requirement for a statistically based provision. 3. Changes in significant accounting policies IFRS 16 Leases Transition IFRS 16 has been implemented using the modified retrospective approach, because it does not require a full restatement of comparatives, but the cumulative opening impact is posted to reserves on the transition date. For leases, which were previously classified as finance leases under IAS 17, the carrying amount of the right-of-use asset and lease liability on transition is the same as the carrying amount of the lease asset and lease liability calculated in accordance with IAS17. A right-of-use asset and lease liability are now recognised for leases considered to be operating leases in accordance with IAS 17. As it is not possible to calculate the rate implicit in these leases, the lease liabilities are calculated as the present value of the remaining lease payments, discounted using the Group’s estimated incremental borrowing rate (IBR). Right-of-use assets are reported as the same value as the lease liability, adjusted for any lease prepayments or accruals, at the transition date. Practical expedients The following practical expedients have been applied at the IFRS application date. • • • There has been no re-assessment of leases treated as finance leases under IAS 17 as at 30th April, 2019. A single discount rate has been applied for similar leases. Long-term leases, which expire within twelve months of the transition date, have been treated as short-term leases, with no right-of-use asset and lease liability being calculated. Initial direct costs have been excluded when measuring the right-of-use asset at the transition date. • Reconciliation of lease liabilities Operating lease commitments at 30th April, 2019 … … … Impact of discounting minimum lease payments … … … Short-term leases … … … … … … … … Low value leases … … … … … … … … Other reconciling items … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … Additional lease liability at 1st May, 2019 The IFRS 16 impact on the statement of profit or loss for the year ended 30th April, 2020 is as follows: Under IFRS 16 Operating profit … … … … … … … … Financial expenses… … … … … … … … … … … … … … … … … … Impact on profit before tax Previously, under IAS 17 Reported as operating lease expenses within operating profit £’000 1,369 (58) (188) (51) (30) 1,042 £’000 537 56 593 621 56 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 59 NOTES TO THE FINANCIAL STATEMENTS 3. Changes in significant accounting policies (continued) IFRS 16 Leases (continued) The IFRS 16 impact on the balance sheet as at 30th April, 2020 is as follows: Property, plant and equipment … … … … … … Right-of-use assets … … … … … … … … Lease liabilities … … … … … … … … IFRS 16 69,626 5,343 (2,822) IFRS 16 adjustments 3,805 (5,343) 1,566 IAS 17 73,431 - (1,256) Total 72,147 28 72,175 As outlined above, IFRS 16 has not had a significant impact on either the profit or loss or the net assets of the Company. For this reason, the Alternative Performance Measures in note 36 are considered to have been prepared on a consistent basis. Accounting estimates and judgments The Group’s contracts are such that the terms are generally very clear in establishing whether they are or contain leases, and consequently, significant judgements have not been required in assessing the contracts. The Group’s incremental borrowing rates have been estimated separately for each country, in which leases are held, with rates ranging from 2.0% to 9.0%. 57 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 60 NOTES TO THE FINANCIAL STATEMENTS 4. Segmental information Products and services from which reportable segments derive their revenues For the purposes of management reporting to the chief operating decision maker, the Board of Directors, the Group is organised into two reportable operating divisions: mechanical engineering and refractory engineering. Segment assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis. In accordance with the requirements of IFRS 8 the Group's reportable segments, based on information reported to the Group's Board of Directors for the purposes of resource allocation and assessment of segment performance are as follows: • Mechanical Engineering • Refractory Engineering Information regarding the Group’s operating segments is reported below. Associates are included in Refractory Engineering. - casting, valve, antenna and pump manufacture and general engineering - powder manufacture and mineral processing Revenue Year Ended 30th April Revenue Mechanical Engineering Refractory Engineering Sub Total 2020 £’000 2019 £’000 2020 £’000 2019 £’000 2020 £’000 2019 £’000 External sales … … … … 100,078 Inter-segment sales … … … 25,821 82,375 21,714 44,434 44,671 144,512 127,046 8,361 8,726 34,182 30,440 Total revenue … … … … 125,899 104,089 52,795 53,397 178,694 157,486 Reconciliation to consolidated revenue: Inter-segment sales … … … Consolidated revenue for the year Year Ended 30th April Profits Operating profit including share (34,182) (30,440) 144,512 127,406 Mechanical Engineering Refractory Engineering Sub Total 2020 £’000 2019 £’000 2020 £’000 2019 £’000 2020 £’000 2019 £’000 of associates … … … … 8,065 11,932 7,034 8,070 15,099 20,002 % of total operating profit including share of associates … … … Group centre … … … … LTIP – non cash provision … … Group finance expenses … … Consolidated profit before tax for the year … … … Tax … … … … … Consolidated profit after tax for the year … … … 53% 60% 47% 40% 100% 100% (2,175) - (809) (2,138) (1,220) (234) 12,115 16,410 (3,775) (3,963) 8,340 12,447 58 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 61 NOTES TO THE FINANCIAL STATEMENTS 4. Segmental information (continued) Year Ended 30th April Segmental net assets Segmental total assets 2020 £’000 2019 £’000 Segmental total liabilities 2020 £’000 2019 £’000 Segmental net assets 2020 £’000 2019 £’000 Mechanical Engineering … … Refractory Engineering … … 95,193 41,962 97,862 43,950 72,207 22,850 72,520 25,541 22,986 19,112 25,342 18,409 Sub total reportable segment … 137,155 141,812 95,057 98,061 42,098 43,751 Goodwin PLC net assets … … Elimination of Goodwin PLC investments Goodwill … … … … Consolidated total net assets … Segmental property, plant and equipment (PPE) capital expenditure Goodwin PLC … … … … … … … … … … … … Mechanical Engineering … … … … … … … … … … … … … … … … … … … … Refractory Engineering Segmental depreciation, amortisation and impairment Goodwin PLC … … … … … … … … … … … … Mechanical Engineering … … … … … … … … … … … … … … … … … … … … Refractory Engineering 83,415 (25,801) 9,890 81,249 (25,374) 9,665 109,602 109,291 2020 £’000 2,824 2,511 633 2019 £’000 3,602 6,461 616 5,968 10,679 2020 £’000 3,642 2,466 1,921 2019 £’000 2,367 3,175 1,589 8,029 7,131 For the purposes of monitoring segment performance and allocating resources between segments, the Group’s Board of Directors monitors the tangible and financial assets attributable to each segment. All assets and liabilities are allocated to reportable segments with the exception of those held by the parent Company, Goodwin PLC, and those held as consolidation adjustments. Geographical segments The Group operates in the following 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. Year ended 30th April, 2020 Year ended 30th April, 2019 Revenue £’000 39,609 20,004 12,749 34,844 37,306 UK Rest of Europe USA Pacific Basin Rest of World Opera- tional net assets £’000 Non- PPE Capital current expendi- ture £’000 assets £’000 76,467 84,198 8,346 3,439 - 13,513 11,276 - 7,132 6,712 5,148 173 - 81 566 Opera- tional net assets £’000 74,780 7,035 - 14,779 12,697 Non- current assets £’000 80,300 3,605 - 6,855 6,944 Revenue £’000 27,934 24,205 8,100 28,956 37,851 Total 144,512 109,602 101,481 5,968 127,046 109,291 97,704 PPE Capital expendi- ture £’000 6,044 2,300 - 84 2,251 10,679 Of the £20,004,000 (April 2019: £24,205,000) sales to the rest of Europe, £5,975,000 (April 2019: £6,721,000), relate to the German-domiciled subsidiary, Noreva GmbH. 59 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 62 NOTES TO THE FINANCIAL STATEMENTS 5. Revenue The following tables provide an analysis of revenue by geographical market and by product line. Geographical market Year ended 30th April, 2020 Year ended 30th April, 2019 Mechanical Refractory Engineering Engineering £’000 £’000 Mechanical Refractory Total Engineering Engineering £’000 £’000 £’000 Total £’000 27,934 24,205 8,100 28,956 37,851 Total £’000 52,456 4,996 34,538 35,056 UK Rest of Europe USA Pacific Basin Rest of World Total Product lines 29,187 13,088 12,664 16,361 28,778 10,422 39,609 6,916 20,004 85 12,749 18,483 34,844 8,528 37,306 100,078 44,434 144,512 16,877 16,282 8,017 12,848 28,351 82,375 11,057 7,923 83 16,108 9,500 44,671 127,046 Year ended 30th April, 2020 Year ended 30th April, 2019 Mechanical Refractory Engineering Engineering £’000 £’000 Mechanical Refractory Total Engineering Engineering £’000 £’000 £’000 Standard products and consumables 9,545 4,143 Minimum period contracts 44,434 - 53,979 4,143 7,785 4,996 44,671 - Bespoke products – over time Bespoke products – point in time Total 60,963 25,427 100,078 60,963 34,538 - - - - 44,434 144,512 44,671 127,046 25,427 35,056 82,375 Contract balances The following table presents information about receivables, contract assets and liabilities from contracts with customers. 2020 £’000 2019 £’000 … … … … Trade receivables (note 18) … … … … … Contract assets … … … … … … … … … … … Contract liabilities … … … … … … … … … … … 23,589 6,558 (18,965) 23,279 3,698 (18,002) Net book value at the end of the period … … … … … … … … 11,182 8,975 Of the contract liabilities recognised at the beginning of the period, revenue of £25,761,000 (2019: £4,124,000) has been recognised. Revenue of £Nil (2019: £Nil) has been recognised from performance obligations, which were satisfied (or partially satisfied) in previous periods. The Group has applied the practical expedient in IFRS 15, paragraph 121, and has not disclosed the remaining performance obligations for contracts which have an original expected duration of one year or less. The aggregate amount of the transaction price allocated to the performance obligations for longer-term contracts, which are unsatisfied (or partially unsatisfied) as at the end of the reporting period is £65,171,000 (2019: £72,914,000). The longest of these contracts is due to be completed in 2023. Incremental costs of obtaining contracts lasting less than one year, are recognised as an expense, when incurred, in accordance with the practical expedient in IFRS 15, paragraph 94. The impairment charge for contract assets was £2,218,000 (2019: £846,000). The Group’s revenue is not significantly impacted by seasonal or cyclical events. 60 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 63 NOTES TO THE FINANCIAL STATEMENTS 6. Expenses and auditor’s remuneration Included in profit before taxation are the following: Charged / (credited) to the statement of profit or loss Insurance claim proceeds … … … … … … … … … Write back of deferred consideration … … … … … … … … Depreciation: Owned assets … … … … … … … … … … … Right-of-use assets – formerly finance leases … … … … … Right-of-use assets – formerly operating leases … … … … … Amortisation of intangible assets … … … … … … … … Loss on sale of other tangible fixed assets … … … … … … … … … … … … … … … Profit on disposal of subsidiary … … … … … Research and development expensed as incurred Impairment of trade receivables charged to the statement of profit or loss … Foreign exchange losses / (gains) … … … … … … … … Fees receivable by the auditor and the auditor’s associates in respect of: Audit of these financial statements … … … … … … … Audit of the financial statements of subsidiaries … … … … … Other non–audit related services: Other assurance services … … … … … … … … … Share-based provisions … … … … … … … … … … Government grants received against research and development, 2020 £’000 (690) (204) 5,874 290 537 1,328 52 (172) 306 49 485 120 271 - - 2019 £’000 - - 5,571 248 - 1,312 13 - 823 38 (551) 120 222 4 1,220 infrastructure spend and training costs … … … … … … (14) (1,323) 7. Staff numbers and costs The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows: Number of employees 2019 2020 Works personnel … … … … … … … … … … … 1,139 Administration staff … … … … … … … … … … The aggregate payroll costs of these persons were as follows: Wages and salaries … … … … … … … … … … Social security costs… … … … … … … … … … Other pension costs … … … … … … … … … … 51 1,190 2020 £’000 38,633 4,027 1,581 44,241 1,032 50 1,082 2019 £’000 36,008 3,711 1,470 41,189 Details of the Directors’ remuneration can be found within the Directors Remuneration Report on page 29. The emoluments of the highest paid Director were £310,000 (2019: £397,000). The number of Directors, who were mem- bers of a defined contribution pension scheme, was 6 (2019: 8). A charge of £Nil for the LTIP (2019: £1,220,000) has been recognised in the year, but not included in the above table. Further information is contained in note 35. 8. Financial expenses Interest expense on finance leases … … … … … … … … Interest expense on right-of-use assets … … … … … … … Net interest expense on bank loans and overdrafts … … … … … Capitalised interest on fixed asset projects … … … … … … … Gain on previously held interest in equity associates (see note 14) … … … Financial expenses … … … … … … … … … … 2020 £’000 41 56 752 (40) - 809 2019 £’000 64 - 527 (132) (225) 234 61 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 64 NOTES TO THE FINANCIAL STATEMENTS 9. Taxation Recognised in the statement of profit or loss Current tax expense Current year … … … … … … … … … … … Over provision in prior years … … … … … … … … Deferred tax expense Origination and reversal of temporary differences – current year Origination and reversal of temporary differences – over provision … … in prior years … … Origination and reversal of temporary differences – rate change to prior year Total tax expense … … … … … … … … … … … Reconciliation of effective tax rate 2020 £’000 1,985 (62) 1,923 1,531 (50) 371 1,852 3,775 2020 £’000 Profit before taxation … … … … … … … … … … 12,115 Tax using the UK corporation tax rate of 19.00% (2019: 19.00%) … … … … … … … … … … … … … Non-taxable income … … … … … … … … … Non-deductible expenses Overseas intercompany profits … … … … … … … … Other permanent timing differences … … … … … … … … Over provision in prior years … … … … … … … … … Losses not recognised … … … … … … … … … … Rate change to prior year … … … … … … … … … Withholding tax unrelieved … … … … … … … … … Difference in overseas tax rates … … … … … … … … Difference between corporation and deferred tax rates … … … … … Effect of equity accounting for associates … … … … … … … 2,302 (57) 116 - 214 (112) 114 371 36 805 - (14) Total tax expense … … … … … … … … … … … 3,775 2019 £’000 4,100 (55) 4,045 186 (268) - (82) 3,963 2019 £’000 16,410 3,118 (79) 55 163 198 (323) 114 - 177 606 9 (75) 3,963 Where subsidiary companies have incurred losses in the year, which are unlikely to be relieved against future profits in the next twelve months, deferred tax assets are not recognised. Withholding tax unrelieved represents withholding tax deducted on dividends from overseas subsidiaries and associates. Deferred tax recognised directly in equity The following amounts are included in the consolidated statement of comprehensive income: Cash flow hedge deferred tax credit … … … … … … … … 10. Earnings per share 2020 £’000 77 2019 £’000 154 The calculation of the basic earnings per ordinary share is based on the number of ordinary shares in issue. For all periods up to and including 30th April, 2019 this amounted to 7,200,000 shares and with effect from the 16th October, 2019 this has increased to 7,363,200 shares. The weighted average number of ordinary shares in issue during the year ended 30th April, 2020 was 7,288,289. The relevant profits attributable to ordinary shareholders were £7,866,000 (2019: £11,505,000). There is a share option scheme in place for the Directors of the Company under the Company’s Equity Long Term Incentive Plan (LTIP), based on the Company exceeding a target growth in the total shareholder return of the Company over the period from 1st May, 2016 to 30th April, 2019. Under the scheme, a maximum of 489,600 share options vested at 1st May, 2019, of which 163,200 were exercised during the current period. The total number of ordinary shares used as the denominator for the diluted earnings per share is 7,613,654 (2019: 7,688,056). 62 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:55 Page 65 NOTES TO THE FINANCIAL STATEMENTS 11. Dividends Paid ordinary dividends during the year in respect of prior years 96.21p (2018: 83.473p) per qualifying ordinary share … … … … … Dividends paid to minority shareholders in Noreva GmbH … … … … Total dividends … … … … … … … … … … … 2020 £’000 6,927 - 6,927 2019 £’000 6,010 116 6,126 After the balance sheet date an ordinary dividend of 81.71p per qualifying ordinary share was proposed by the Directors (2019: Ordinary dividend of 96.21p). The proposed current year ordinary dividend of £6,016,000 has not been provided for within these financial statements (2019: Proposed ordinary dividend of £6,927,000 was not provided for within the comparative figures). Noreva had been an 87.5% owned subsidiary, which was treated as a 100% owned subsidiary, because there were both put and call options in place for the remaining 12.5%. During the previous year, the Group paid for the remaining 12.5% shareholding in Noreva. 12. Property, plant and equipment Cost Land and Plant and buildings equipment £’000 £’000 Fixtures and fittings £’000 Assets in course of construc- tion £’000 Balance at 1st May, 2018 … … … Additions … … … … … … Additions - company acquisitions … … Reclassification … … … … … Disposals … … … … … … Exchange adjustment … … … … 30,417 4,467 411 6,638 (15) (110) 71,832 3,834 285 2,223 (1,452) (194) 3,819 213 62 (50) (91) (4) 11,397 2,165 - (8,811) - 16 Total £’000 117,465 10,679 758 - (1,558) (292) Balance at 30th April, 2019 … … 41,808 76,528 3,949 4,767 127,052 Balance at 1st May, 2019 … … … Additions … … … … … … Reclassification … … … … … Disposals … … … … … … Transfer of right-to-use assets on transition to IFRS 16… … … … Exchange adjustment … … … … 41,808 206 91 (34) - (400) 76,528 3,843 5,173 (1,632) (4,648) (305) 3,949 158 (744) (68) - (17) 4,767 1,761 (4,520) - 127,052 5,968 - (1,734) - (2) (4,648) (724) Balance at 30th April, 2020 … … 41,671 78,959 3,278 2,006 125,914 Depreciation Balance at 1st May, 2018 … … … Charged in year … … … … … Depreciation - company acquisitions … Reclassification … … … … … Disposals … … … … … … Exchange adjustment … … … … 5,821 1,088 195 (47) - (22) 39,956 4,410 122 76 (1,312) (105) 2,534 321 32 (29) (91) (3) Balance at 30th April, 2019 … … 7,035 43,147 2,764 Balance at 1st May, 2019 … … … Charged in year … … … … … Reclassification … … … … … Disposals … … … … … … Transfer of right-to-use assets on transition to IFRS 16… … … … Exchange adjustment … … … … 7,035 1,209 36 (2) - (128) 43,147 4,425 595 (1,498) (693) (177) 2,764 240 (631) (43) - 9 Balance at 30th April, 2020 … … 8,150 45,799 2,339 - - - - - - - - - - - - - - 48,311 5,819 349 - (1,403) (130) 52,946 52,946 5,874 - (1,543) (693) (296) 56,288 Net book value At 1st May, 2018 … … … … 24,596 31,876 At 30th April, 2018 and 1st May, 2019 … 34,773 33,381 At 30th April, 2020 … … … 33,521 33,160 1,285 1,185 939 11,397 4,767 69,154 74,106 2,006 69,626 63 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 66 NOTES TO THE FINANCIAL STATEMENTS 12. Property, plant and equipment (continued) Plant and machinery During the year the Group expended £5,968,000 on fixed assets. The focus here has been within the Mechanical Engineering segment and to develop further the infrastructure and capabilities at both Goodwin International and Goodwin Steel Castings to deal with their increased workloads. Leased plant and machinery is reported within right-of-use assets in note 13. Assets in the course of construction of £2,006,000 (2019: £4,767,000) comprise £1,345,000 (2019: £181,000) in relation to land and buildings and £661,000 (2019: £4,586,000) for plant and machinery. Government grants related to tangible fixed assets Additions to fixed assets are after deducting grants receivable of £Nil (2019: £Nil). Security There is a charge over Noreva GmbH’s land and buildings of €1.6 million to secure a bank loan repayable by instalments and a bank loan of £4.7 million is secured against three furnaces (see note 21). 13. Right-of-use assets and lease liabilities Right-of-use assets Land and buildings (formerly operating leases) £’000 Plant and equipment (formerly finance leases) £’000 Plant and equipment (formerly operating leases) £’000 Total £’000 Cost Balance recognised on transition to IFRS 16 Opening balance transfer from property, plant and equipment … … … … Additions … … … … … … Exchange adjustment … … … … Balance at 30th April, 2020 Depreciation Opening balance transfer from property, plant and equipment … … … … Charged in year … … … … … Exchange adjustment … … … … Balance at 30th April, 2020 942 - 1,013 (18) 1,937 - 506 (6) 500 - 100 1,042 4,648 144 (5) 4,787 693 290 (1) 982 - 32 - 4,648 1,189 (23) 132 6,856 - 31 - 31 693 827 (7) 1,513 Net book value at 30th April, 2020 1,437 3,805 101 5,343 Lease liabilities Non-current liabilities … … … … Current liabilities … … … … … £’000 Formerly finance leases 264 992 2020 £’000 Formerly operating leases 1,075 491 Total 1,256 1,566 The right-of-use assets secure lease obligations (see note 21). £’000 Total 1,339 1,483 2,822 2019 £’000 Total 1,164 939 2,103 64 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 67 NOTES TO THE FINANCIAL STATEMENTS 13. Right-of-use assets and lease liabilities (continued) Lease liabilities (continued) Reconciliation of liabilities arising from leasing activities Opening balance 1st May 2019 £’000 2,103 - IFRS 16 leases £’000 - 2,087 Formerly finance leases Formerly operating leases Total 2,103 2,087 Cash flows Cash flows – lease Foreign Closing balance exchange 30th April 2020 £’000 payments movement £’000 £’000 – new leases £’000 102 - 102 (954) (509) (1,463) 5 (12) (7) 1,256 1,566 2,822 Opening balance Change in bank 1st May 2018 overdrafts £’000 £’000 Company acquisition £’000 Closing balance 30th Cash flows movement April 2019 £’000 Foreign exchange £’000 £’000 Finance leases … … 2,548 - 42 (487) - 2,103 The contractual undiscounted cash flows are payable as follows: 2020 2019 Minimum lease payments £’000 Interest Principal £’000 £’000 Minimum lease payments £’000 Interest £’000 Principal £’000 Formerly finance leases Less than one year … … … One to five years … … … Formerly operating leases Less than one year … … … One to five years … … … 1,016 271 1,287 536 1,139 1,675 24 7 31 45 64 109 992 264 1,256 491 1,075 1,566 980 1,184 2,164 - - - Amounts recognised in profit or loss Interest on liabilities – formerly finance leases … … … … … … Interest on liabilities – formerly operating leases… … … … … … Expenses relating to short-term leases … … … … … … … Expenses relating to leases of low-value assets … … … … … … 41 20 61 - - - 2020 £’000 41 56 121 20 238 939 1,164 2,103 - - - 2019 £’000 64 - 126 18 208 65 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 68 NOTES TO THE FINANCIAL STATEMENTS 14. Investments in subsidiaries The Group has the following principal subsidiaries. Non-principal subsidiaries are listed in note 32: Registered Country of address* Incorporation Class of shares held % held Subsidiaries: Mechanical Engineering: Goodwin Steel Castings Limited … … … Goodwin International Limited … … … … Easat Radar Systems Limited … … … … Goodwin Korea Company Limited … … … Goodwin Pumps India Private Limited … … Goodwin Shanghai Company Limited … … … Noreva GmbH … … … … … … Goodwin (Shanxi) Pump Company Limited … … Goodwin Indústria e Comércio de Bombas 8 Submersas Ltda … … … … … … 1 Internet Central Limited … … … … … 9 Goodwin Submersible Pumps Australia Pty. Limited Metal Proving Services Limited … … … … 1 NRPL Aero Oy … … … … … … 10 Goodwin Submersible Pumps Africa Pty. Limited … 15 1 1 1 3 4 5 6 7 Refractory Engineering: 1 Goodwin Refractory Services Limited … … … 1 Dupré Minerals Limited … … … … … 2 Hoben International Limited … … … … Gold Star Powders Private Limited … … … 4 Siam Casting Powders Limited … … … … 11 Ultratec Jewelry Supplies Limited … … … 12 13 SRS (Qingdao) Casting Materials Company Limited 8 Gold Star Brazil Limited … … … … … Jewelry Plaster Limited … … … … … 14 100 England and Wales Ordinary 100 England and Wales Ordinary 77 England and Wales Ordinary 95 Ordinary South Korea 100 Ordinary India Ordinary China 100 Ordinary 100 Germany 100 Ordinary China Brazil Ordinary England and Wales Ordinary Australia Ordinary England and Wales Ordinary Ordinary Finland Ordinary South Africa 100 82 100 100 77 100 100 England and Wales Ordinary 100 England and Wales Ordinary 100 England and Wales Ordinary 100 Ordinary India 58 Ordinary Thailand 76 Ordinary China 76 Ordinary China 100 Ordinary Brazil Ordinary/Preference 75 Thailand *The registered address for each company can be found in note 34. All of the above companies are included as part of the consolidated accounts and are involved in mechanical and refractory engineering. Acquisition of subsidiaries On 26th April, 2019, the Group acquired 25% of Asian Industrial Investment Casting Powders Private Limited (Asian Industrial), increasing its interest from 50% to 75%, and increasing its control of the company. The Group had an existing shareholding of 49% in Jewelry Plaster Limited (Jewelry Plaster), which owns 100% of Jewelry Wax Limited, and by acquiring a further 26% shareholding, increased its total ownership to 75% and obtained control of the company. In the current year, the Group acquired the remaining 25% of Asian Industrial. Consideration The consideration in April 2019 for the Asian Industrial shares was £40,000 in cash. The remaining 25% was acquired for £83,000. For the Jewelry Plaster shares, the Group paid £777,000 in cash. The fair value of the contingent consideration payable, based on the pre-tax profits of Jewelry Plaster for the financial year to 30th April, 2020, was £204,000. The pre-tax profits of Jewelry Plaster for the financial year to 30th April, 2020 were £100,000. As the contingent consideration is therefore not payable, £204,000 has been recognised as income in the profit and loss. Acquisition-related costs The legal fees incurred in the previous year in relation to the acquisition were £10,000, and have been reported within administrative expenses. 66 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 69 NOTES TO THE FINANCIAL STATEMENTS 14. Investments in subsidiaries (continued) Identifiable assets acquired and liabilities assumed The table below analyses the total identifiable net assets of Asian Industrial and Jewelry Plaster acquired in April 2019. The net assets of Asian Industrial are not shown separately because the value is insignificant. … … … … … … … … … … … Property, plant and equipment Investments … … … … … … … … … … … … … … Intangibles … … … … … … … … … … … … … … … Inventories … … … … … … … … … … … … … … … Trade and other financial assets … … … … … … … … … … … Non-financial assets … … … … … … … … … … … … … Cash and cash equivalents … … … … … … … … … … … … Short-term interest-bearing loans and borrowings … … … … … … … … Trade and other financial liabilities … … … … … … … … … … … Non-financial liabilities … … … … … … … … … … … … … … … … … … … … … Long-term interest-bearing loans and borrowings Total identifiable net assets acquired Goodwill The goodwill arising from the acquisitions has been recognised as follows: Asian Industrial cash consideration … … … … … … … … … … … Jewelry Plaster cash consideration … … … … … … … … … … … Jewelry Plaster contingent consideration … … … … … … … … … … Fair value of pre-existing interest in Asian Industrial and Jewelry Plaster (note 15) … … … Fair value of identifiable net assets … … … … … … … … … … … … … … … … … … … … … … … Non-controlling interests Goodwill £’000 409 354 803 803 1,339 91 392 (11) (2,623) (159) (31) 1,367 £’000 40 777 204 279 (1,367) 142 75 The non-controlling interests have been calculated as the proportionate share of the identifiable net assets of Asian Industrial and Jewelry Plaster. The pre-existing equity interest in Asian Industrial and Jewelry Plaster was stated at fair value before the acquisition of the additional shares. No further fair value adjustments have been made to the value of identifiable net assets, and there has been no gain or loss on re-measuring to fair value the Group’s existing associate investments, at the date of acquisition. However, the translation reserve at the date of acquisition has been realised and an unrealised gain previously recognised in OCI has been reported within financial expenses (see note 8). NCI – Non-controlling interests The following subsidiaries each have non-controlling interests: Registered Country of address* Incorporation Class of shares held % held by NCI Mechanical Engineering: Easat Radar Systems Limited … … … … 1 Goodwin Korea Company Limited … … … 3 Internet Central Limited … … … … … 1 NRPL Aero Oy … … … … … … 10 Refractory Engineering: Jewelry Plaster Limited … … … … … 14 Jewelry Wax Limited … … … … … 14 Siam Casting Powders Limited … … … … 11 SRS Guangzhou Limited … … … … … 12 SRS (Qingdao) Casting Materials Company Limited 13 Shenzhen King-Top Modern Hi-Tech Company Limited 16 Ultratec Jewelry Supplies Limited … … … 12 Ying Tai (UK) Limited … … … … … 1 England and Wales Ordinary South Korea Ordinary England and Wales Ordinary Ordinary Finland Ordinary Thailand Ordinary Thailand Ordinary Thailand Ordinary China Ordinary China Ordinary China China Ordinary England and Wales Ordinary 23 5 18 23 25 25 42 25 25 25 25 25 67 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 70 NOTES TO THE FINANCIAL STATEMENTS 14. Investments in subsidiaries (continued) Acquisition of NCI In April 2019, the Group acquired an additional 24.5% in Ultratec, which owns Shenzhen King-Top Modern Hi-Tech Company, and a further shareholding of 24.5% in Ying Tai (UK), which owns SRS Guangzhou and SRS (Qingdao) Casting Materials Company. Through its acquisition of additonal shares in Jewelery Plaster, the Group acquired a further 2.3% stake in Siam Casting Powders. Ultratec Group £’000 Carrying value of NCI acquired … … … … … 859 Ying Tai (UK) Group £’000 800 Siam Casting Powders £’000 91 Total £’000 1,750 Consideration paid to NCI … … … … … … (1,765) (403) (354) (2,522) Goodwill arising from purchase of NCI in subsidiaries … (906) 397 (263) (772) The decrease in equity attributable to owners of the Company comprised a decrease in retained earnings of £592,000 and a decrease of £180,000 in the translation reserve. The financial information on subsidiaries with non-controlling interests has been aggregated, analysing the data by segment, as the entities in each segment have similar characteristics and risk profiles. Year Ended 30th April Profit / (loss) allocation to non-controlling interests … … … … … Dividends paid to non-controlling interests … … … … … Accumulated reserves held by non-controlling interests … … Mechanical Engineering 2020 £’000 2019 £’000 (262) - 91 - Refractory Engineering 2020 £’000 2019 £’000 Total 2020 £’000 2019 £’000 736 - 851 451 474 - 942 451 458 678 4,127 3,448 4,585 4,126 The summarised financial information below represents the amounts in the financial statements of the subsidiaries, before any intercompany eliminations, and does not reflect the Group’s share of those amounts. The results for the year of both Jewelry Plaster and Asian Industrial are shown within share of profit of associate companies, on the basis that the effective acquisition date was 26th April, 2019. Year Ended 30th April Non-current assets … … … Mechanical Engineering 2020 £’000 2,985 2019 £’000 2,291 Current assets … … … 20,550 21,717 Refractory Engineering 2020 £’000 12,236 12,671 2019 £’000 9,554 13,827 Total 2020 £’000 15,221 33,221 2019 £’000 11,845 35,544 Current liabilities … … … (17,170) (17,723) (7,082) (8,079) (24,252) (25,802) Non-current liabilities … … (2,939) (1,874) (728) (29) (3,667) (1,903) Total net assets of companies with non-controlling interests Revenue of companies with non-controlling interests … … Profit / (loss) for the year of companies with non-controlling interests … Total comprehensive income of companies with non-controlling interests 3,426 4,411 17,097 15,273 20,523 19,684 19,835 12,294 18,764 15,796 38,599 28,090 (1,177) 1,333 2,851 1,844 1,674 3,177 (985) 1,475 2,647 1,933 1,662 3,408 68 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 71 NOTES TO THE FINANCIAL STATEMENTS 15. Investments in associates The Group’s share of profit after tax in its associates for the year ended 30th April, 2020 was £66,000 (2019: £233,000). Summary financial information of the Group’s share of associates is as follows: Balance at 1st May, 2019 (1st May, 2018) … … … … … … … Profit before tax … … … … … … … … … … … Tax … … … … … … … … … … … … … Dividend … … … … … … … … … … … … Exchange adjustment … … … … … … … … … … Disposal … … … … … … … … … … … … Balance at 30th April… … … … … … … … … … Assets … … … … … … … … … … … … Liabilities … … … … … … … … … … … … 2020 £’000 739 80 (14) - 11 - 816 1,076 (260) 816 2019 £’000 1,963 298 (65) (1,254) 76 (279) 739 1,112 (373) 739 On 26th April 2019, the Group increased its ownership and control of Asian Industrial and Jewelry Plaster. The Group’s pre-existing interest in these two companies was reported as a disposal in the prior year. Details of the acquisitions are included in note 14. Summarised financial information of the Group’s share of the individually material associate, Jewelry Plaster, is shown below. The figures for 2019 reflect trading for the full year, before the Group increased its control of the company. On 26th April, 2019, 25.5% of Jewelry Plaster was acquired by Goodwin PLC, thus moving this company from an associate company to a subsidiary company. In accordance with the revised status the figures for 2020 are zero. Revenue … … … … … … … … … … … … Profit after tax … … … … … … … … … … … 2020 £’000 - - 2019 £’000 1,406 148 69 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 72 NOTES TO THE FINANCIAL STATEMENTS 16. Intangible assets Brand names and intellectual property £’000 Goodwill £’000 Cost Balance at 1st May, 2018 … Additions… … … … Additions – company acquisition Disposals… … … … … Exchange adjustment 10,050 75 - - (117) 6,974 799 - (19) (80) Order book £’000 162 - - - (3) Manufact- Software Develop- ment costs £’000 and Licences £’000 uring rights £’000 Total £’000 5,117 201 - - - 708 115 4 (135) (8) 5,844 1,500 - - (31) 28,855 2,690 4 (154) (239) Balance at 30th April, 2019 10,008 7,674 159 5,318 684 7,313 31,156 Balance at 1st May, 2019 … Additions… … … … … … Reclassification Disposals… … … … … Exchange adjustment 10,008 161 - - 64 7,674 1,936 - - 62 159 - - - 2 5,318 102 - - - 684 275 357 (116) (25) 7,313 1,105 - - 8 31,156 3,579 357 (116) 111 Balance at 30th April, 2020 10,233 9,672 161 5,420 1,175 8,426 35,087 Amortisation and impairment Balance at 1st May, 2018 … Amortisation for the year … Disposals… … … … … Exchange adjustment 339 - - 4 4,983 514 (19) (67) 162 - - (3) 1,536 309 - - Balance at 30th April, 2019 343 5,411 159 1,845 Balance at 1st May, 2019 … Amortisation for the year … … … Reclassification Disposals… … … … … Exchange adjustment 343 - - - - 5,411 439 - - 34 159 - - - 2 1,845 382 - - - Balance at 30th April, 2020 343 5,884 161 2,227 281 219 (135) - 365 365 220 357 (116) (16) 810 416 270 - (7) 7,717 1,312 (154) (73) 679 8,802 679 287 - - 1 8,802 1,328 357 (116) 21 967 10,392 Net book value At 1st May, 2018… … … 9,711 1,991 At 30th April, 2019 and 1st May, 2019 … … 9,665 2,263 At 30th April, 2020 … 9,890 3,788 - - - 3,581 427 5,428 21,138 3,473 3,193 319 365 6,634 22,354 7,459 24,695 Customer lists are included within brand names and intellectual property or within manufacturing rights, depending on the nature of the acquisition; non-compete agreements are disclosed within manufacturing rights. During the year, the Group added to its portfolio of intangible assets. On 23rd December, 2019, Goodwin PLC successfully acquired the globally recognised Castaldo silicone rubber and wax division, including the intellectual property, trade name and associated trademarks. For the past 75 years Castaldo has been at the centre of the worldwide jewellery casting industry and the recent acquisition will further increase the Group’s global market share within the moulding rubber and injection wax business. Identifiable assets acquired The table below analyses the total identifiable Castaldo assets acquired during the year. Property, plant and equipment … … … … … … … … Brand name and registered trademarks … … … … … … … … … … … … … … … … … … Customer list Recipe intellectual property … … … … … … … … … … … … … … … … … Total identifiable net assets acquired £’000 38 1,301 77 558 1,974 70 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 73 NOTES TO THE FINANCIAL STATEMENTS 16. Intangible assets (continued) Consideration The consideration for the net assets acquired is as follows: Cash consideration paid … … … … … … … … … Cash consideration to be paid … … … … … … … … … … … … … Total cash consideration Acquisition costs … … … … … … … … … … … … … £’000 1,517 457 1,974 23 Amortisation and impairment charges The amortisation charge of £1,328,000 (2019: £1,312,000) is recognised in cost of sales in the statement of profit or loss. Impairment testing for cash-generating units containing goodwill The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. For the purpose of impairment testing, goodwill is allocated to the relevant subsidiary which is the lowest level within the Group at which the goodwill is monitored for internal management purposes. The aggregate carrying amounts of goodwill allocated to each unit are: 2020 £’000 4,744 3,346 1,260 540 2019 £’000 4,688 3,346 1,245 386 … … … … … … … … … … Noreva GmbH Goodwin Refractory Services Holdings Limited … … … … … NRPL Aero Oy… … … … … … … … … … … Other … … … … … … … … … … … … 9,890 9,665 An impairment test is a comparison of the carrying value of the assets of a cash-generating unit (“CGU”) to their recoverable amount, based on a value-in-use calculation. Recoverable amount is the greater of value-in-use and market value. Where the recoverable amount is less than the carrying value an impairment results. During the year each CGU containing goodwill was separately assessed and tested for impairment. As part of testing goodwill for impairment detailed forecasts of operating cash flows for the next five years are used, which are based on approved budgets and plans by the Board. The forecasts represent the best estimate of future performance of the CGU based on past performance and expectations for the market development of the CGU. A number of key assumptions are used as part of impairment testing. These key assumptions, such as the CGU’s position within its relevant market; its ability to generate profitable orders within that market; expected growth rates both in the market and geographically, are made by management who also take into account past experience and knowledge of forecast future performance together with other relevant external sources of information. The projections use various growth rates consistent with the profit forecasts of the CGU for the first five years, with growth rates of typically 0% to 15% thereafter, extrapolated over the minimum expected life span of the unit. The forecasts are then discounted at an appropriate pre-tax weighted average cost of capital rate considering the perceived levels of risk, ranging between 10% and 20% (2019: between 19% and 21%) for the Mechanical Engineering Division and 13% to 21% (2019: between 14% and 22%) for the Refractory Engineering Division. Further sensitivity tests are then performed reducing the discounted cash flows by 10% and also increasing the discount rate by a range of up to 10% to confirm there is no need to consider further a need for impairment. The estimates and assumptions made in connection with the impairment testing could differ from future actual results of operations and cash flows. A reasonably likely variation in the assumptions would not give rise to an impairment. However, future events could cause the Group to conclude that impairment indicators exist and that the asset values associated with a given operation have become impaired. 71 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 74 NOTES TO THE FINANCIAL STATEMENTS 17. Inventories Raw materials and consumables … … … … … … … … Work in progress … … … … … … … … … … … Finished goods … … … … … … … … … … … 2020 £’000 18,717 17,334 8,836 44,887 2019 £’000 15,576 23,324 11,624 50,524 The amount of inventory impaired during the year was £2,745,000 (2019: £2,550,000). The comparative for the prior year has been amended to incorporate the impairment charge for all inventory classifications. The Group carries provisions against inventories as follows: Raw materials and consumables … … … … … … … … Work in progress … … … … … … … … … … … Finished goods … … … … … … … … … … … 18. Trade and other financial assets Balances due within one year Trade receivables … … … … … … … … … … Other financial assets … … … … … … … … … … … 2020 £’000 301 532 417 1,250 2020 £’000 23,589 897 24,486 2019 £’000 253 829 337 1,419 2019 £’000 23,279 1,685 24,964 The Group has a long-term receivable balance due from an associate company, which is repayable within five years. The balance, which is due after more than one year is disclosed within non-current assets, with the balance due within one year, of £255,000 (2019: £240,000) being reported within other current financial assets. Interest is charged at a commercial rate. Balances due after more than one year Other receivables … … … … … … … … … … … 19. Other receivables Advance payments to suppliers … … … … … … … … Prepayments and other non-financial assets … … … … … … Corporation tax receivable … … … … … … … … … … … … … … … … … Deferred tax asset (see note 26) 20. Cash and cash equivalents Cash and cash equivalents per balance sheet … … … … … … Bank overdrafts … … … … … … … … … … … Cash and cash equivalents per cash flow statement … … … … … 2020 £’000 252 2020 £’000 1,640 2,582 284 60 4,566 2020 £’000 9,840 (391) 9,449 2019 £’000 505 2019 £’000 565 1,911 176 63 2,715 2019 £’000 9,640 (9,147) 493 21. Interest-bearing loans and borrowings This note provides information about the contractual terms of the Group’s interest-bearing bank loans and borrowings. The bank loans repayable by instalment are secured against a property in Germany and furnaces in the UK (see note 12). For more information about the Group’s exposure to interest rate and foreign currency risk, see note 28. Non-current liabilities 2020 £’000 Bank loans and committed facilities … … … … … … … … 14,260 Current liabilities Bank loans and committed facilities … … … … … … … … Bank overdrafts … … … … … … … … … … … 12,750 391 13,141 2019 £’000 19,322 112 9,147 9,259 72 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 75 NOTES TO THE FINANCIAL STATEMENTS 21. Interest-bearing loans and borrowings (continued) Reconciliation of liabilities arising from financing activities Opening balance Change in bank 1st May 2019 overdrafts Cash flows movement £’000 £’000 £’000 £’000 Foreign Closing balance exchange 30th April 2020 £’000 Bank overdrafts used for cash management … … … Bank loans … … … … … Bank loans repayable 9,147 18,000 (8,756) - by instalments … … … … 1,434 - 28,581 (8,756) Opening balance 1st May 2018 £’000 4,585 11,000 110 Change in bank overdrafts £’000 4,562 - - 15,695 4,562 Bank overdrafts used for cash management … … … Bank loans … … … … … Bank loans repayable by instalments … … … … Bank loans repayable by instalments Bank loans are payable as follows: - 3,000 4,556 7,556 - - 20 20 391 21,000 6,010 27,401 Closing balance 30th Cash flows movement April 2019 £’000 Foreign exchange £’000 £’000 - 7,000 1,337 8,337 - - (13) (13) 9,147 18,000 1,434 28,581 2020 2019 Interest £’000 Principal £’000 26 91 149 266 2020 £’000 112 298 1,024 1,434 2019 £’000 17,012 1,701 1,857 Less than one year … … … Between one and five years … … … More than five years Minimum loan payments £’000 912 3,547 2,289 6,748 Interest Principal £’000 £’000 162 419 157 738 750 3,128 2,132 6,010 Minimum loan payments £’000 138 389 1,173 1,700 22. Trade and other financial liabilities Trade payables … … … … … … … … … … … Other financial liabilities… … … … … … … … … … Other taxation and social security costs … … … … … … … … 19,238 1,688 … 2,559 … 23. Other payables Accrued expenses… … … … … … … … … … … Advance payments from customers … … … … … … … … … … 23,485 20,570 2020 £’000 3,212 86 3,298 2019 £’000 4,300 471 4,771 73 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 76 NOTES TO THE FINANCIAL STATEMENTS 24. Deferred consideration Deferred consideration on acquisitions … … … … … … … … 2020 £’000 - 2019 £’000 204 At 30th April, 2019, the balance related to the acquisition of Jewelry Plaster (see note 14). As at 30th April, 2020, the balance has been written back due to performance criteria not being met. 25. Warranty provision Balance at 1st May, 2019 (1st May, 2018) … … … … … … … Generated … … … … … … … … … … … … Credited to the statement of profit or loss … … … … … … … Exchange adjustment … … … … … … … … … … Balance at 30th April… … … … … … … … … … Warranty due within one year … … … … … … … … … Warranty due after one year … … … … … … … … … Balance at 30th April… … … … … … … … … … 2020 £’000 493 251 (265) 5 484 160 324 484 2019 £’000 513 166 (176) (10) 493 261 232 493 Provisions for warranties relate to products sold and generally cover a period of between 1 and 3 years. 26. Deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Assets Liabilities Property, plant and equipment … … … Intangible assets … … … … … … Derivative financial instruments … … … Share-based payments reserve … … … Other temporary differences … … … … 2020 £’000 221 286 241 1,888 192 2,828 2019 £’000 - - 252 2,630 125 3,007 Deferred tax asset (see note 19) … … … … … … … … Deferred tax liability … … … … … … … … … … 2020 £’000 (3,765) (1,898) (98) - (78) (5,839) 2020 £’000 60 (3,071) (3,011) Property, plant and Intangible Derivative financial assets instruments £’000 £’000 equipment £’000 Share- based payments Other temporary reserve differences £’000 £’000 2019 £’000 (3,014) (1,306) - - - (4,320) 2019 £’000 63 (1,376) (1,313) Total £’000 Balance at 1st May, 2018 (2,661) (1,510) 199 - 40 (3,932) … Impact of IFRS 15 Recognised in profit or loss … … Recognised in equity … Exchange adjustment - (347) - (6) - 175 - 29 - - (101) 484 154 2,146 - - 214 (129) - - 214 82 2,300 23 Balance at 30th April, 2019 (3,014) (1,306) 252 2,630 125 (1,313) Recognised in profit or loss … … Recognised in equity … Exchange adjustment (546) - 16 (115) (161) (30) (186) (995) 77 253 - - (10) - (1) (1,852) 169 (15) Balance at 30th April, 2020 (3,544) (1,612) 143 1,888 114 (3,011) 74 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 77 NOTES TO THE FINANCIAL STATEMENTS 26. Deferred tax assets and liabilities (continued) Within the current and previous year, the Group has no material tax losses where a deferred tax asset has been recognised. As at 30th April, 2020, the Group has not recognised £511,000 of deferred tax assets in relation to the accumulated losses (2019: £690,000) within overseas subsidiaries. On 11th March, 2020, it was announced that the UK corporation tax rate would remain at 19% on 1st April, 2020 and would no longer reduce to 17%. This measure was made under a Budget resolution which has statutory effect under the provisions of the Provisional Collection of Taxes Act 1968 and, as such, it is substantively enacted on the passing of the resolution on 17th March, 2020. On this basis the deferred tax liability has been calculated at a rate of 19%. 27. Capital and reserves Share capital Authorised, allotted, called up and fully paid: 7,200,000 ordinary shares of 10p each … … … … … … … … Issue of 163,200 ordinary shares of 10p each … … … … … … … 2020 2019 £’000 £’000 720 16 736 720 - 720 The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. Share-based payments reserve The share-based payments reserve is a non cash-impacting provision, as required by Accounting Standard IFRS 2, relating to the Equity Long Term Incentive Plan, which vested at 1st May, 2019. Further details are included in note 35. Cash flow hedging reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedge instruments related to hedged transactions that have not yet occurred. Deferred tax The aggregate deferred tax relating to items that are recognised in equity is an asset of £1,629,000 (2019: £2,350,000), being £1,348,000 (2019: £2,146,000) in respect of the Equity Long Term Incentive Plan and £281,000 (2019: £204,000) in respect of derivatives. 28. Financial risk management The Group’s operations expose it to a variety of financial risks that include the effects of changes in market prices (interest rates, foreign exchange rates and commodity prices), credit risk and liquidity. The Group has in place risk management policies that seek to limit the adverse effects on the financial performance of the Group by using various instruments and techniques. Risk management policies have been set by the Board and applied by the Group. a) Credit risk The Group’s financial assets are cash and cash equivalents and trade and other receivables, the carrying amounts of which represent the Group’s maximum exposure to credit risk in relation to financial assets. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. The Group’s credit risk is primarily attributable to its trade receivables and is managed through the following processes: i) The majority of orders accepted by Group companies are backed by credit insurance. ii) Some orders are accepted with no credit insurance but with letters of credit. iii) Some orders are accepted with no credit insurance and no letter of credit but with an internal analysis of the customer’s size, creditworthiness, historic profitability and payment record. iv) A few orders (less than 10%) are taken at risk following review by at least two Board members. v) Major orders are normally accompanied by stage payments which go towards mitigating our credit risk. 75 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 78 NOTES TO THE FINANCIAL STATEMENTS 28. Financial risk management (continued) a) Credit risk (continued) Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: Carrying amount Contract assets … … … … … … … … Trade and other financial assets – due after more than one year Trade and other financial assets – due within one year … … Cash at bank and cash equivalents … … … … … Derivative financial assets… … … … … … … Notes 5 18 18 20 28(d) 2020 £’000 6,558 252 24,486 9,840 1,205 42,341 2019 £’000 3,698 505 24,964 9,640 195 39,002 The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was: UK … … … … … … … … … … … … Rest of Europe … … … … … … … … … … USA … … … … … … … … … … … … … … … … … … … … … … Pacific Basin Rest of World … … … … … … … … … … Carrying amount 2020 £’000 5,403 1,947 1,640 5,072 9,527 2019 £’000 4,914 3,732 719 7,994 5,920 23,589 23,279 The ageing of trade receivables and impairments at the reporting date was: Net 2020 £’000 Not past due … … … 14,696 3,067 Past due 1-30 days … … 2,609 Past due 31-90 days… … 3,217 Past due more than 90 days Gross 2020 £’000 14,709 3,083 2,656 3,457 Impairment provision 2020 £’000 (13) (16) (47) (240) Net 2019 £’000 16,956 3,944 1,190 1,189 Gross 2019 £’000 16,956 3,944 1,190 1,470 Impairment provision 2019 £’000 - - - (281) 23,589 23,905 (316) 23,279 23,560 (281) Management believes that there are no significant credit risks remaining with the above net receivables and that the credit quality of customers is good, based on a review of past payment history and the current financial status of the customers. Included in trade receivables are retentions which are job specific and have varying due dates depending on the complexity of the job. These are included in the not past due category. The Group has not renegotiated the terms of any trade receivables and has not pledged any trade receivables as security. The Directors estimate that the fair value of the Group’s trade and other receivables is approximate to their carrying values. An analysis of the provision for impairment of receivables is as follows: Balance at 1st May, 2019 (1st May, 2018) … … … … … … Exchange adjustment … … … … … … … … … Impairment charged through the statement of profit or loss … … … Impairment provision utilised during the year … … … … … At 30th April … … … … … … … … … … 2020 £’000 281 (6) 49 (8) 316 2019 £’000 429 (1) 38 (185) 281 76 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 79 NOTES TO THE FINANCIAL STATEMENTS 28. Financial risk management (continued) b) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. At the year end the Group had the following unutilised bank facilities in respect of which all conditions precedent had been met: Uncommitted 2019 2020 £’000 £’000 Committed 2020 £’000 2019 £’000 Total 2020 £’000 2019 £’000 Unutilised bank facilities … 17,095 7,585 12,000 15,000 29,095 22,585 The Group’s principal borrowing facilities are provided by three banks in the form of borrowings and short- term overdraft facilities. The quantum of borrowing facilities available to the Group is reviewed regularly in light of current working capital requirements and the need for capital investment for the long-term future for the Group. Maturity analysis The table below analyses the Group’s financial liabilities into maturity groupings based on the period outstanding at the balance sheet date up to the contractual maturity date. All figures are contracted gross cash flows that have not been discounted. 2020 Contractual cash flows Within 1 year £’000 1-5 years £’000 5+ years £’000 Non-derivative financial liabilities Bank loans and committed facilities … 12,912 391 Overdrafts … … … … … 1,016 Finance leases … … … … Operating leases … … … … 536 Trade and other financial liabilities … 23,485 12,547 - 271 1,139 - 2,289 - - - - Total £’000 27,748 391 1,287 1,675 23,485 2020 Carrying value Total £’000 27,010 391 1,256 1,566 23,485 Total … … … … … … 38,340 13,957 2,289 54,586 53,708 The 30th April, 2020 bank loans and committed facilities are repayable as follows: £12 million within year end 30th April, 2021 and £9 million within year end 30th April, 2024. The interest rates chargeable on these loans are on a floating basis against LIBOR and UK base rate, with bank margins of less than 2%. There is also a bank loan of £1.3 million repayable by instalments, with the final payment due in the year ended 30th April, 2039. Interest is charged at an effective interest rate of 1.96%, which is fixed for the whole period. Non-derivative financial liabilities Bank loans and committed facilities … Overdrafts … … … … … Finance leases … … … … Trade and other financial liabilities … Deferred considerations on acquisitions Within 1 year £’000 138 9,147 980 20,570 204 Total … … … … … … 31,039 19,573 2019 Contractual cash flows 1-5 years £’000 5+ years £’000 18,389 - 1,184 - - 1,173 - - - - 1,173 2019 Carrying value Total £’000 19,434 9,147 2,103 20,570 204 51,458 Total £’000 19,700 9,147 2,164 20,570 204 51,785 c) Market risk Foreign exchange risk The Group is subject to fluctuations in exchange rates on its net investments overseas and transactional monetary assets and liabilities not denominated in the operating (or “functional”) currency of the operating unit involved. The Group is exposed to fluctuations in several currencies which give rise to the net currency gains and losses recognised in the statement of profit or loss. 77 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 80 NOTES TO THE FINANCIAL STATEMENTS 28. Financial risk management (continued) c) Market risk (continued) Foreign exchange risk (continued) The Group at its discretion is empowered to hedge its estimated annual foreign currency exposure in respect of forecast sales and purchases if the Board deems it appropriate after having taken into account the expected movement in the foreign exchange rates. The Group uses forward exchange contracts to hedge its foreign currency risk. All the foreign exchange contracts have maturities within three years after the balance sheet date. Where necessary, the forward exchange contracts are rolled over at maturity. In respect of other monetary assets and liabilities held in currencies, the Group ensures that the net exposure is eliminated through the use of forward exchange contracts or spot transactions at the time the contractual commitment is in place. Currency profile of financial assets and liabilities: 2020 US Dollar £’000 2019 US Dollar £’000 2020 2019 2020 2019 2020 Euro £’000 Euro £’000 Other £’000 Other £’000 Total £’000 2019 Total £’000 Trade and other receivables Cash and cash equivalents Trade and other payables 4,584 5,076 1,068 1,225 - 59 5,652 6,360 576 (2,412) (2,634) (7,172) 1,786 (35) (272) (9,619) (1,770) (169) (1,185) (603) (1,768) (17) (4,723) (789) 3,390 2,495 (2,751) (6,550) 18 7 657 (4,048) The following significant exchange rates applied during the year: US Dollar … … … … … Euro … … … … … … Average exchange rate 2019 1.3046 1.1353 2020 1.2661 1.1427 Reporting date spot rate 2019 1.3040 1.1633 2020 1.2594 1.1497 Interest rate risk The Group is subject to fluctuations in interest rates on its borrowings and surplus cash. The Group is aware of the financial products available to hedge against adverse movements in interest rates. Formal reviews are undertaken to determine whether such instruments are appropriate for the Group. During the year, no new interest rate swaps or caps were entered into. The table below shows the Group’s financial assets and liabilities split by those bearing fixed and floating rates and those that are non interest-bearing. Fixed rate Floating rate Non interest-bearing Total 2020 £’000 2019 £’000 2020 £’000 2019 £’000 9,640 - 2020 £’000 - 6,558 2019 £’000 - 3,698 2020 £’000 9,840 6,558 - - 9,840 - 746 - - - - - - - - - - - - 24,231 1,205 (18,965) 24,723 195 (18,002) 24,738 1,205 (18,965) - - - (391) - - - (9,147) (23,485) - (1,273) - (20,570) (204) (1,693) - (23,485) - (1,273) (391) 2019 £’000 9,640 3,698 25,469 195 (18,002) (20,570) (204) (1,693) (9,147) Cash and cash equivalents Contract assets Trade and financial assets Derivative assets Contract liabilities Trade and other - - 507 - - - - - - financial liabilities Deferred consideration Derivative liabilities Bank overdrafts Bank loans and committed facilities Finance lease liabilities (5,988) (1,370) (21,022) (18,064) (1,256) (2,103) Operating lease liabilities (1,566) - - - - - - - - - - - (27,010) (19,434) (1,256) (2,103) (1,566) - (8,303) (2,727) (11,573) (17,571) (11,729) (11,853) (31,605) (32,151) 78 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 81 NOTES TO THE FINANCIAL STATEMENTS 28. Financial risk management (continued) d) Capital management The Group’s main objective when managing capital is to safeguard the Group’s ability to continue as a going concern in order to provide returns to shareholders. The Board maintains a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Operations are funded through various shareholders’ funds, bank debt, finance leases and, where appropriate, deferred consideration on acquisitions. The capital structure of the Group reflects the judgement of the Board as to the appropriate balance of funding required. At 30th April, 2020, the capital used was £123.8 million (2019: £126.4 million) as shown in the following table: Cash and cash equivalents … … … … … … (9,840) Finance leases … … … … … … … … 1,256 … … … … 27,010 Bank loans and committed facilities 391 Overdrafts - Deferred consideration … … … … … … … … … … … … … … 2020 £’000 2019 £’000 (9,640) 2,103 19,434 9,147 204 Net debt … … … … … … … … … 18,817 Total equity attributable to equity holders of the parent … 105,017 21,248 105,165 Capital 123,834 126,413 The Group aims to maintain a strong credit rating and headroom whilst optimising return to shareholders through an appropriate balance of debt and equity funding. The Group’s general strategy is to keep the debt to equity ratio below 30%, adjusted where appropriate for the effect of acquisitions. At 30th April, 2020 net debt was £18.8 million (2019: £21.2 million). The gearing ratio, excluding deferred consideration from net debt, is 17.9% (2019: 20%). The Group manages its capital structure and makes adjustments to it with regard to the risks inherent in the business and in light of changes to economic conditions. Working capital is managed in order to generate maximum conversion of profits into cash and cash equivalents. Dividends are paid from current year profits, thereby maintaining equity. The policy for debt is to ensure a smooth debt maturity profile with the objective of ensuring continuity of funding. The repayment profile for the debt is shown in note 28(b). There were no changes in the Group’s approach to capital management during the year. Currency derivatives The Group utilises currency derivatives to hedge future transactions and cash flows. The Group is party to a variety of foreign currency forward contracts in the management of its exchange rate exposures. Forecast transactions The Group classifies its forward exchange contracts hedging forecast transactions as cash flow hedges and states them at fair value. The nominal value of forward exchange contracts used as hedges of forecast transactions at 30th April, 2020, in Sterling terms, was £97 million spread across USD, EUR and THB denominated contracts. The fair value of these contracts at 30th April, 2020 was a liability of £750,000 (being assets totalling £338,000 and liabilities totalling £1,088,000). In addition, a nominal value of £9.4 million of USD denominated forward exchange contracts, which matured before 30th April, 2020, have been carried forward as part of the hedge reserve given that the underlying transactions had not occurred and the hedge was still effective at maturity. The fair value of these at 30th April, 2020 was a liability of £731,000. The Group also had a number of forward contracts not designated as cash flow hedges, and therefore recorded at fair value through the statement of profit or loss. The nominal value of these contracts at 30th April, 2020, in Sterling terms, was £37 million spread across USD and EUR denominated contracts. The fair value of these at 30th April, 2020 was an asset of £682,000 (being assets totalling £867,000, and liabilities totalling £185,000). The nominal value of forward exchange contracts used as hedges of forecast transactions at 30th April, 2019, in Sterling terms, was £53 million spread across USD and EUR denominated contracts. The fair value of these at 30th April, 2019 was a liability of £1,200,000 (being assets totalling £158,000 and liabilities totalling £1,358,000). The Group also had a number of forward contracts not designated as cash flow hedges, and therefore recorded at fair value through the statement of profit or loss. The nominal value of these contracts at 30th April, 2019, in Sterling terms, was £7 million spread across USD and EUR denominated contracts. The fair value of these at 30th April, 2019 was a liability of £298,000 (being assets totalling £37,000, and liabilities totalling £335,000). Recognised assets and liabilities Changes in the fair value of forward exchange contracts that economically hedge monetary assets and liabilities in foreign currencies and for which no hedge accounting is applied are recognised in the statement of profit or loss. Both the changes in fair value of the forward contracts and the foreign exchange gains and losses relating to the monetary items are recognised as part of cost of sales. 79 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 82 NOTES TO THE FINANCIAL STATEMENTS 28. Financial risk management (continued) d) Capital management (continued) Derivative financial instruments The following table sets out the periods when the cash flows are expected to occur and when they are expected to affect profit or loss: Forward exchange contracts / currency swaps Assets not designated in a cash … Assets designated and effective flow hedge relationship … … as cash flow hedging instruments … … Total assets Liabilities not designated in a cash flow hedge relationship … … … Liabilities designated and effective 2020 Carrying amount £’000 Expected Within cash flow 1 year £’000 £’000 Between 1 and 5 years £’000 867 338 867 338 1,205 1,205 223 233 456 644 105 749 (185) (185) (185) - (202) (202) Between 1 and 5 years £’000 21 16 37 (78) (145) (223) as cash flow hedging instruments … … (1,088) (1,088) (886) Total liabilities (1,273) (1,273) (1,071) Forward exchange contracts / currency swaps Assets not designated in a cash … Assets designated and effective flow hedge relationship … … as cash flow hedging instruments … … Total assets Liabilities not designated in a cash flow hedge relationship … … … Liabilities designated and effective as cash flow hedging instruments … … Total liabilities 2019 Carrying amount £’000 Expected Within 1 year cash flow £’000 £’000 37 158 195 37 158 195 16 142 158 (335) (335) (257) (1,358) (1,693) (1,358) (1,213) (1,693) (1,470) 80 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 83 NOTES TO THE FINANCIAL STATEMENTS 28. Financial risk management (continued) d) Capital management (continued) Sensitivity analysis The Group has calculated the following sensitivities based on available data from forward contract markets for the principal foreign currencies in which the Group operates. Given recent fluctuations in rates, it is deemed sensible to provide the quantum for a 1% change in rates to aid understanding. These figures can be extrapolated proportionately to obtain an estimate of the impact of large movements. The Group’s exposure to foreign currency changes for all other foreign currencies is not considered material. Impact on equity 1% increase in US Dollar fx rate against pound Sterling … … … 1% increase in Euro fx rate against pound Sterling … … … … 1% decrease in US Dollar fx rate against pound Sterling … … … 1% decrease in Euro fx rate against pound Sterling … … … … Impact on the statement of profit or loss 2020 £’000 (Profit)/loss 2019 £’000 (Profit)/loss (633) (202) 633 202 (406) (253) 406 253 2020 £’000 (Profit)/loss 2019 £’000 (Profit)/loss 1% increase in US Dollar fx rate against pound Sterling … … … 1% increase in Euro fx rate against pound Sterling … … … … 1% decrease in US Dollar fx rate against pound Sterling … … … 1% decrease in Euro fx rate against pound Sterling … … … … 1% increase in interest rates … … … … … … … (102) (175) 102 175 - (74) 95 74 (95) 235 81 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 84 NOTES TO THE FINANCIAL STATEMENTS 28. Financial risk management (continued) e) Total financial assets and liabilities The table below sets out the Group’s accounting classification of each class of financial assets and liabilities and their fair values at 30th April, 2020 and 30th April, 2019. 30th April, 2020 30th April, 2019 Carrying amount £’000 Fair value £’000 Carrying amount £’000 Fair value £’000 9,840 6,558 23,589 1,149 9,840 6,558 23,589 1,149 9,640 3,698 23,279 2,190 9,640 3,698 23,279 2,190 867 867 37 37 Financial assets At amortised cost Cash and cash equivalents … … … Contract assets … … … … … Trade receivables … … … … … Other receivables… … … … … At fair value through profit and loss Derivative financial assets not designated in a cash flow hedge relationship … … Fair value – hedging instrument Derivative financial assets designated and effective as cash flow hedging instruments 338 338 158 158 Total financial assets… … … … 42,341 42,341 39,002 39,002 30th April, 2020 30th April, 2019 Carrying amount £’000 Fair value £’000 Carrying amount £’000 Fair value £’000 Financial liabilities at amortised cost … … … … Contract liabilities Trade payables … … … … … Other financial liabilities … … … Deferred consideration … … … … Finance lease liabilities … … … … Operating lease liabilities … … … Bank loans and committed facilities… … Bank overdrafts … … … … … 18,965 19,238 4,247 - 1,256 1,566 27,010 391 18,965 19,238 4,247 - 1,256 1,566 27,010 391 18,002 17,012 3,558 204 2,103 - 19,434 9,147 18,002 17,012 3,558 204 2,103 - 19,434 9,147 At fair value through the profit and loss Derivative financial liabilities not designated in a cash flow hedge relationship … … 185 185 335 335 Fair value – hedging instrument Derivative financial liabilities designated and effective as cash flow hedging instruments 1,088 Total financial liabilities … … … 73,946 1,088 73,946 1,358 71,153 1,358 71,153 Derivative financial 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). The Group does not use derivatives for speculative purposes. All transactions in derivative financial instruments are underpinned by firm orders from customers or to suppliers or where there is a high degree of probability that orders will be received. For short-term cash and cash equivalents, trade and other receivables, trade and other financial liabilities, fixed and floating rate borrowings, the fair values are the same as carrying value. 82 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 85 NOTES TO THE FINANCIAL STATEMENTS 29. Capital commitments Contracted capital commitments at 30th April, 2020 for which no provision has been made in these financial statements were £4,154,000 (2019: £392,000). 30. Guarantees and contingencies The table below sets out the number and value of unexpired bank guarantee bonds as at 30th April, 2020 and 30th April, 2019. These guarantee bonds are required as part of the terms and conditions within our mechanical engineering contracts. 219 guarantee and bonds contracts (2019: 265) … … … … … 31. Subsequent events 2020 £’000 11,944 2019 £’000 10,698 After the balance sheet date an ordinary dividend of 81.71p per qualifying ordinary share was proposed by the Directors (2019: Ordinary dividend of 96.21p). The current year proposed ordinary dividend of £6,016,000 has not been provided for within these financial statements (2019: Proposed ordinary dividend of £6,927,000 was not provided for within the comparative figures). On 11th June, 2020 Goodwin PLC drew down £30 million of funding from the Bank of England CCFF scheme. This loan will be repaid in full on 27th April, 2021. On 31st July, 2020 and as a result of a competitive tender exercise, Goodwin PLC replaced its Lloyds Bank PLC revolving credit and overdraft facilities with new facilities from Santander UK plc. As a result of this exercise, the Group now has £24.5 million on a 5 year committed basis (Lloyds £13 million) and £5 million on overdraft (Lloyds £16.5 million) thus giving the Group proportionately more in the way of long-term committed lines. The Group is also in the final stages of renegotiating a £10 million revolving credit facility which expires in October 2020. The Directors do not see an issue in renewing these facilities. Covid-19 continues to impact on the Refractory Engineering segment performance since the end of the current financial year but the Directors remain confident that the impact here will be short lived. On 30th June, 2020 the Group acquired freehold, plant and buildings for a sum of £770,000. This acquisition complements the mixing business activities at Hoben International where the plant is reaching capacity. 32. Non-principal subsidiaries and associates Registered Country of address* Incorporation Class of shares held % held Non-principal Subsidiaries: Asian Industrial Investment Casting 4 Powders Private Limited … … … … … 4 … … Easat Radar Systems India Private Limited 1 Goodwin Engineering Training Company Limited … 4 Goodwin Refractory Services India Private Limited … Duvelco Limited 1 … … … … … … Jewelry Wax Limited … … … … … … 14 GRS Silicone Company Limited … … … … 17 … … … … … 12 SRS Guangzhou Limited 16 Shenzhen King-Top Modern Hi-Tech Company Limited Ordinary India Ordinary India England and Wales Ordinary India Ordinary England and Wales Ordinary Ordinary Thailand Ordinary China Ordinary China Ordinary China Holding Companies: Goodwin Refractory Services Holdings Limited… … Ying Tai (UK) Limited … … … … … … 1 1 England and Wales Ordinary England and Wales Ordinary Non-principal Associates: Tet Goodwin Property Company Limited … … … 11 Thailand Ordinary Dormant companies: Gold Star Powders Limited … … … … … Net Central Limited … … … … … … Sandersfire International Limited … … … … Specialist Refractory Services Limited … … … 1 1 1 1 England and Wales Ordinary England and Wales Ordinary England and Wales Ordinary England and Wales Ordinary *The registered address for each company can be found in note 34. All of the above companies are included as part of the consolidated accounts. 100 100 100 100 100 75 75 75 75 100 75 49 100 100 100 100 83 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 86 NOTES TO THE FINANCIAL STATEMENTS 33. Related parties Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not reported in this note. Year end balances and transactions during the year with the Group’s associate companies are shown below. 2020 2019 £’000 £’000 Jewelry Plaster Limited Revenue … … … … … … Management fee income … … … … … … … … … Interest income … … … … … Dividends … TET Goodwin Property Company Limited Rental cost … Interest income Receivables … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … - - - - 337 24 507 582 36 97 1,254 310 20 745 34. Registered offices of subsidiaries and associates The registered offices of the companies listed in notes 14 and 32 are listed below. Ivy House Foundry, Hanley, Stoke-on-Trent ST1 3NR 1. 2. Brassington, Nr. Matlock, Derbyshire DE4 4HF 3. 13-1, Jungbong-daero, 396 Beon-Gil, Seo-gu, Incheon, South Korea 4. 112/2-5 Chinna Amman Koil Street, Kalavakkam, Thiruporur 603 110, Tamil Nadu, India 5. Suite C, F1, Building #14, Xiya Road No.11, Waigaoqiao Free Trade Zone, 200131, Shanghai, China 6. Hocksteiner Weg 56, D - 41189 Mönchengladbach, Germany 7. Suite 1105, Building 1, Wanguocheng Moma, No.16 Changfeng West Street, Wanbailin District, Taiyuan, Shanxi Province, 30021, China 8. Rua das Margaridas s/n, No 70, Barrio Terra Preta - Mairipora – SP, CEP 07662-025, São Paulo, Brazil 9. Confidential Tax and Business Services, Level 1, 449 Gympie Road, Kedron Qld 4031, Australia 10. Koivupuistontie 34, 01510 Vantaa, Finland 11. 99/9 Moo5 Khlong Yong, Bhudhamontol, Nakhonpathom 73170, Thailand 12. No.73, Jiao Xin Road, Lanhe Town, Nansha District, Guangzhou City, 511480, China 13. 400 metres North from Nan Zhai Committee, Xifuzhen Street, Chengyang District, Qingdao City, 266106, China 14. 238, 3rd Floor, OPG Tech Building Bangkhuntien-Chatalay, Samaedum Sub-district, Bangkhuntien District, Bangkok 10150, Thailand 15. Unit 1 Bridgeway Business Park, Cnr Sam Green Road and Pinnacle Close, Tunney Extension 9, Germiston, Gauteng 1401, South Africa 16. No.2-1, Shanzixia Road, Dakang Community, Yuanshan Street, Longgang District, Shenzhen City, Guangdong Province, China 17. 165 Minsheng Road. Lanhe Town, Nansha District, Guangzhou, China 35. Share-based payment transactions The Group had one share option scheme, the LTIP, the terms of which are outlined in the Directors’ Remuneration Policy and Report on page 30. The scheme has now ended. The non cash-impacting provision for the year, recognised in the statement of profit or loss in respect of share-based payments is £Nil (2019: £1,220,000). Grant date/ Method of Maximum Vesting Contractual life employees settlement number of conditions of options entitled instruments Options granted on Equity 576,000 For every 10% Expiry date: 5th October, 2016 growth in TSR 30th April, 2019 to Executive 28,800 shares Directors will vest Awards entitle each holder to earn up to 1% of the share capital of the Company subject to the performance condition. An award vested and became exercisable over 0.05% of the share capital of the Company for every 10% increase in the TSR of the Company at the end of the three financial years ending on 30th April, 2019 with a base year of 2009 but excluding the growth already achieved up to 30th April, 2016. 84 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 87 NOTES TO THE FINANCIAL STATEMENTS 35. Share-based payment transactions (continued) 2020 2019 Number of share options Outstanding at beginning of year … … … … … … … … - Vested 1st May, 2019 … … … … … … … … 489,600 Exercised during the year … … … … … … … … 163,200 Share price at the date of exercise … … … … … … … … £34.00 Exerciseable at end of year … … … … … … … … 326,400 - - - - - 85 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 88 NOTES TO THE FINANCIAL STATEMENTS 36. Alternative performance measures As outlined in note 3, IFRS 16 has not had a significant impact on either the profit or loss or the net assets of the Group. For this reason, the Alternative Performance Measures are considered to have been prepared on a consistent basis. Measure Method of calculation / reference 2020 2019 Gross profit (£’000) Revenue (£’000) 34,769 Consolidated statement of profit or loss, page 42 Consolidated statement of profit or loss, page 42 144,512 40,632 127,046 Gross profit as percentage of revenue (%) Gross profit / revenue 24.1 32.0 Operating profit (£’000) Capital employed (£’000) Consolidated statement of profit or loss, page 42 Note 28 (d), page 79 12,858 123,834 16,411 126,413 Return on capital employed (%) Operating profit / capital employed 10.4 13.0 18,817 - 21,248 204 18,817 21,044 Net debt (£’000) Deferred consideration (£’000) Note 28 (d), page 79 Note 28 (d), page 79 Net debt excluding deferred consideration (£’000) Net assets attributable to equity holders of the parent (£’000) Consolidated balance sheet, page 46 105,017 105,165 Gearing (%) Net debt (excluding deferred consideration) / equity, as above 17.9 20.0 Net profit attributable to equity holders of the parent (£’000) Net assets attributable to equity holders of the parent (£’000) Consolidated statement of profit or loss, page 42 7,866 11,505 Consolidated balance sheet, page 46 105,017 105,165 Return on investment (%) Net profit / net assets 7.5 10.9 Revenue (£’000) Average number of employees Consolidated statement of profit or loss, page 42 144,512 1,190 Note 7, page 61 127,046 1,082 Sales per employee (£’000) Group revenue / average employees 121 117 Annual post tax profit (£’000) Depreciation owned assets (£’000) Depreciation finance leased assets Amortisation (£’000) Consolidated statement of profit or loss, page 42 Note 6, page 61 Note 6, page 61 Note 6, page 61 8,340 5,874 290 1,328 12,447 5,571 248 1,312 Annual post tax profit + depreciation + amortisation (£’000) 15,832 19,578 Annual pre-tax profit (£’000) Impact of IFRS 16 implementation Impact of IFRS 15 implementation Consolidated statement of profit or loss, page 42 Note 3 page 57 Note 3 page 53 Directors’ Report and Accounts April, 2019 12,115 28 16,410 - - (1,682) Like-for-like annual pre tax profit (£’000) 12,143 14,728 86 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 89 NOTES TO THE FINANCIAL STATEMENTS GOODWIN PLC COMPANY BALANCE SHEET at 30th April, 2020 NON-CURRENT ASSETS Property, plant and equipment … … … … … … Investment properties … … … … … … … Right-of-use assets… … … … … … … … Investments … … … … … … … … … Intangible assets … … … … … … … … CURRENT ASSETS Other receivables … … … … … … … … Deferred tax asset … … … … … … … … Cash at bank and in hand … … … … … … Notes C4 C4 C4 C5 C6 C7 C10 2020 £’000 22,210 24,811 3,202 25,801 15,531 2019 £’000 24,583 24,741 - 25,374 12,877 91,555 87,575 26,383 31,092 - 111 216 87 26,494 31,395 TOTAL ASSETS … … … … … … … … 118,049 118,970 CURRENT LIABILITIES Interest-bearing loans and borrowings … … … … Other payables … … … … … … … … Corporation tax … … … … … … … … NON-CURRENT LIABILITIES Interest-bearing loans and borrowings … … … … Deferred income … … … … … … … … Deferred tax liabilities … … … … … … … C8 C9 C8 C10 13,958 5,515 - 10,750 6,696 332 19,473 17,778 13,009 1,034 1,118 18,856 1,087 - 15,161 19,943 TOTAL LIABILITIES … … … … … … … … 34,634 37,721 NET ASSETS … … … … … … … … … 83,415 81,249 EQUITY Called up share capital … … … … … … … C11 Share-based payments reserve … … … … … Profit and loss account … … … … … … … 736 5,244 77,435 720 4,991 75,538 TOTAL EQUITY … … … … … … … … 83,415 81,249 Profit after tax for the year … … … … … … … 8,824 17,178 These financial statements were approved by the Board of Directors on 13th August, 2020, and signed on its behalf by: T. J. W. Goodwin Director M. S. Goodwin Director S. R. Goodwin Director Company Registration Number: 305907 The notes on pages 89 to 98 form part of these financial statements. 87 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 90 NOTES TO THE FINANCIAL STATEMENTS GOODWIN PLC COMPANY STATEMENT OF CHANGES IN EQUITY for the year ended 30th April, 2020 YEAR ENDED 30TH APRIL, 2020 Balance at 1st May, 2019 Total comprehensive income: Profit … … … … … … … … … … TOTAL COMPREHENSIVE INCOME FOR THE YEAR Issue of shares … … … … … … Other transactions … … … … … Dividends paid … … … … … … Notes Share capital £’000 Share- based payments reserve £’000 Retained earnings £’000 Total equity £’000 C2 720 - - 16 - - 4,991 75,538 81,249 - 8,824 8,824 - - 253 - 8,824 - - (6,927) 8,824 16 253 (6,927) BALANCE AT 30TH APRIL, 2020 736 5,244 77,435 83,415 YEAR ENDED 30TH APRIL, 2019 Balance at 1st May, 2018 Total comprehensive income: Profit … … … … … … … … … … … C2 TOTAL COMPREHENSIVE INCOME FOR THE YEAR Equity-settled share-based payment transactions Tax on equity-settled share-based payment transactions Dividends paid … … … … … … 720 1,625 64,370 66,715 - - - - - - 17,178 17,178 - 1,220 2,146 - 17,178 - - (6,010) 17,178 1,220 2,146 (6,010) BALANCE AT 30TH APRIL, 2019 720 4,991 75,538 81,249 The notes on pages 89 to 98 form part of these financial statements. 88 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 91 C1 Accounting policies NOTES TO THE FINANCIAL STATEMENTS Principal accounting policies These financial statements present information about the Company as an individual undertaking and not about its Group. These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”). Basis of accounting Goodwin PLC (the “Company”) is a company incorporated and domiciled in England and Wales. In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of International Financial Reporting Standards as adopted by the EU (“Adopted IFRSs”), but makes amendments where necessary in order to comply with Companies Act 2006. The Company proposes to continue to adopt the reduced disclosure framework of FRS 101 in its next financial statements. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements. The consolidated financial statements of Goodwin PLC are prepared in accordance with International Financial Reporting Standards and are available to the public and may be obtained from The Company Secretary, Goodwin PLC, Ivy House Foundry, Hanley, Stoke-on-Trent, ST1 3NR. The Company is exempt under S408 (3) Companies Act 2006 from the requirement to present its own profit and loss account. In these financial statements, the Company has applied the exemptions available under FRS101 in respect of the following disclosures: • A cash flow statement and related notes; • Comparative period reconciliations for share capital, tangible fixed assets and intangible assets; • Disclosures in respect of transactions with wholly-owned subsidiaries; • Disclosures in respect of capital management; • The effects of new but not yet effective IFRSs; As the consolidated financial statements of Goodwin PLC include the equivalent disclosures, the Company has also taken the exemptions under FRS101 available in respect of certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial Instrument Disclosures. Judgements made by the Directors, in the application of these accounting policies that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 2 of the Group financial statements. Measurement convention The financial statements have been prepared under the historical cost accounting rules and in accordance with applicable Accounting Standards. Investments in subsidiary undertakings In the Company’s financial statements, investments in subsidiary undertakings are stated at cost less amounts written off for impairment. Foreign currency Transactions in foreign currencies are translated to the respective functional currencies at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of profit or loss within operating profit. Financial instruments Financial assets and financial liabilities are recognised on the Company’s balance sheet when the Company has become a party to the contractual provisions of the instrument. The principal financial assets and liabilities of the Company are as follows: Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand including cash deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose only of the statement of cash flows. Recognition and valuation of equity instruments Equity instruments are stated at par value. For ordinary share capital, the par value is recognised in share capital and the premium in the share premium reserve. Recognition and valuation of financial liabilities Financial liabilities are classified according to the substance of the contractual arrangements into which the Company has entered. 89 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 92 NOTES TO THE FINANCIAL STATEMENTS C1 Accounting policies (continued) Financial instruments (continued) Bank borrowings Interest-bearing bank loans and overdrafts are recorded initially at their fair value less attributable transaction costs. They are subsequently carried at their amortised cost and finance charges and are recognised in the statement of profit or loss over the term of the instrument using an effective rate of interest. Trade and other payables Trade and other payables are recognised initially at fair value and subsequently at amortised cost using the effective interest method where material. Intangible fixed assets and amortisation Manufacturing rights, brand names and customer lists purchased by the Company are amortised to nil by equal annual instalments over their estimated useful lives. Expenditure on development activities is capitalised if the product or process is technically and commercially feasible and the Company has sufficient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Amortisation rates are as follows: Manufacturing rights … … … … … 11 - 15 years Brand names … … … … … … now fully amortised Software and licences Intellectual property rights … … … … 15 years Non-compete agreements … … … … 15 years Capitalised development costs … … … Minimum expected order unit intake or … … … … 4 years minimum product life … … … … … … over estimated production life Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. Depreciation is charged to the statement of profit or loss over the estimated useful lives of each part of an item of property, plant and equipment on the following bases: Freehold land … … … … … … Nil Freehold buildings … … … … … 2% to 4% on reducing balance or cost Plant and machinery … … … … … 5% to 25% on reducing balance or cost Motor vehicles … … … … … … 15% or 25% on reducing balance Tooling Fixtures and fittings … … … … … 15% to 25% on reducing balance Assets in the course of construction are not depreciated. Investment properties Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Investment properties are stated at cost less accumulated depreciation. Depreciation is charged to the statement of profit or loss on a straight-line basis over the estimated useful lives of investment properties which is typically 25 years. Government grants Government grants relating to income are recognised in the statement of profit or loss as a deduction from the expenses that they are intended to compensate. Unamortised government grants relating to assets are recognised in the balance sheet as a deferred creditor. Amortisation of such grants is credited to profit and loss in accordance with the useful lives of the assets to which they relate. Provisions A provision is recognised in the balance sheet when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Leases The Company’s accounting policy on leases up to April 2019 was as follows: Operating lease payments Payments made under operating leases are recognised in the statement of profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in the statement of profit or loss as an integral part of the total lease expense. 90 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 93 C1 NOTES TO THE FINANCIAL STATEMENTS Accounting policies (continued) Leases (continued) Finance lease payments Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. This policy has been amended in accordance with IFRS 16, and the new policy it outlined below. Definition of a lease A contract is a lease or contains a lease if it transfers the right to use an identified asset over the contract term, in exchange for payment. In determining whether a contract gives the Company the right to use an asset, the Company assesses whether: • the contract involves the use of an identified asset; • the Company has the right to obtain substantially all of the economic benefit of using the asset; and • the Company has the right to direct the use of the asset by deciding how the asset is employed. Lease term The lease term is the non-cancellable period of a lease, and options to extend the lease or terminate it, where it is probable that the Company will exercise the available options. At the start of a lease, the Company makes a judgement about whether it is reasonably certain to exercise the options, and reassesses this judgement at every reporting period. Contracts, where the original lease term has expired, with assets continuing to be leased on a short-term rolling basis of a few months, are treated as short-term leases. Lease balances A right-of-use asset and a lease liability are calculated at the beginning of a lease. The right-of-use asset is measured initially at cost, being the opening lease liability, adjusted for any lease payments made by the start of the lease, adjusted for any initial direct costs, which have been incurred. The lease liability is measured initially at the present value of the lease payments, which are outstanding at the start date, discounted at either the rate implicit in the lease or the Company’s incremental borrowing rate. With the exception of leases containing an option to purchase, the Company uses its incremental borrowing rate as the discount rate. Lease liabilities are measured at amortised cost, using the effective rate, and adjusted as required for any subsequent change to the lease terms. The right-of-use asset is depreciated on a straight-line basis over the lease term, or from the start date of the lease to the end of the useful life of the right-of-use asset as appropriate. The method of calculating the estimated useful lives of the right-of-use assets and testing for impairment is the same as that for property, plant and equipment. Recognition exemptions Payments for short-term leases, lasting twelve months or less, without a purchase option continue to be reported an as operating expense on a straight-line basis over the term of the lease. The cost of leasing low-value items will continue to be reported as an operating expense over the life of the lease. Financial expenses Financial expenses comprise interest payable, interest on finance leases using the effective interest method and the unwinding of the discount on provisions. Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a substantial time to be prepared for use are capitalised as part of the cost of that asset. Interest income and interest payable is recognised in the statement of profit or loss as it accrues. Pension costs The Company contributes to a defined contribution pension scheme for employees under an Auto Enrolment Pension arrangement as required by Government legislation. The assets of the scheme are held in independently administered funds. Company pension costs are charged to the statement of profit or loss in the year for which contributions are payable. Contributions to the schemes are made on a monthly basis, and at the end of the financial year there were one month’s contributions outstanding, which were paid in the following month. Taxation Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the statement of profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. 91 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 94 NOTES TO THE FINANCIAL STATEMENTS C1 Accounting policies (continued) Taxation (continued) A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be avail- able against which the asset can be utilised. Share-based payment transactions Share-based payment arrangements, in which the Company receives goods or services as consideration for its own equity instruments, are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Company. The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the awards. The fair value of the awards is measured using an option valuation model, taking into account the terms and conditions upon which the awards were granted. C2 Expenses and auditor’s remuneration Included in the profit / (loss) before taxation are the following: Depreciation … … … … … … … Owned assets … … … … … … … Assets held under finance leases Amortisation of intangible assets … … … … … … … Reversal of impairment of amounts due from Group undertakings … … Impairment of investments in subsidiary companies… … … … … 2020 £’000 2,788 203 708 - - 2019 £’000 2,092 202 137 (4,040) 1,385 Fees receivable by the auditors and the auditor’s associates in respect of: Audit of these financial statements … … … … … … … 45 39 Amounts paid to the Company’s auditor in respect of services to the Company, other than the audit of the Company’s financial statements, have not been disclosed as the information is required instead to be disclosed on a consolidated basis (see note 6 of the Group financial statements). C3 Staff numbers and costs The average number of persons employed by the Company (including Directors) during the year, analysed by category, was as follows: Number of employees 2020 2019 Administration staff … … … … … … … … … … 51 50 2020 2019 £’000 £’000 The aggregate payroll costs of these persons were as follows: Wages and salaries … … … … … … … … … … 3,730 3,723 Social security costs … … … … … … … … … … 469 424 Other pension costs … … … … … … … … … … 98 107 4,297 4,254 Details of the Directors’ remuneration can be found within the Directors’ Remuneration Report on page 29. The emoluments of the highest paid Director were £310,000 (2019: £397,000). The number of Directors who were members of a defined contribution pension scheme was 6 (2019: 8). A charge of £Nil for the LTIP (2019: £1,220,000) has been recognised in the year, but not included in the above table. Further information is contained in note 35 of the Group financial statements. 92 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 95 NOTES TO THE FINANCIAL STATEMENTS C4 Tangible fixed assets Investment properties Property, Plant and Equipment Cost Balance at 1st May, 2019 … … Additions Reclassifications … IFRS 16 classification adjustment … … Disposals … … Intercompany transfers £’000 29,559 124 23 - - 856 Land and Plant and buildings equipment £’000 £’000 Fixtures and Assets in course of fittings construction £’000 £’000 Total £’000 1,166 - - - - - 32,853 897 4,497 (4,045) (47) 197 1,637 68 - - (2) - 4,767 1,735 (4,520) 40,423 2,700 (23) - - - (4,045) (49) 197 Balance at 30th April, 2020 30,562 1,166 34,352 1,703 1,982 39,203 Depreciation Balance at 1st May, 2019 Charged in year … … IFRS 16 classification adjustment - opening Disposals … … Intercompany transfers 4,818 933 - - - 644 20 - - - 14,090 1,737 1,106 98 (640) (32) (28) - (2) - - - - - - 15,840 1,855 (640) (34) (28) Balance at 30th April, 2020 5,751 664 15,127 1,202 - 16,993 Net book value At 30th April, 2019 … At 30th April, 2020 24,741 24,811 522 502 18,763 19,225 531 501 4,767 24,583 1,982 22,210 A bank loan of £4.7 million is secured against three furnaces (see note C8). The Company’s investment properties have been valued, using the cost model, and depreciated over their estimated useful lives – typically 25 years. In the opinion of the Directors, the fair value of the investment properties as at 30th April, 2020 was estimated to be £45 million (2019: £45 million). Fair value for this purpose is based on Level 3 fair value inputs and, specifically, the Directors’ opinion as to the amount for which the property could be exchanged between knowledgeable, willing parties in an arm’s length transaction given a reasonable timeframe in which to conclude such an exchange. Cost Opening IFRS 16 classification adjustment Balance at 30th April, 2020 … … … … … … … … 4,045 Right-of- use assets £’000 Depreciation Opening IFRS 16 classification adjustment Charged in the year … … … … … … … … … … … … … … … … … … … … Balance at 30th April, 2020 Net book value at 30th April, 2020 The right-of-use assets secure lease obligations (see note C8). 93 4,045 640 203 843 3,202 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 96 NOTES TO THE FINANCIAL STATEMENTS C5 Fixed asset investments Shares in associated undertakings £’000 Shares in Group undertakings £’000 Cost Balance at 1st May, 2019 … … … … … … … … … … … … Additions … … … … … … … Disposals Balance at 30th April, 2020 Impairment Balance at 1st May, 2019 … … … … … … … … … … … … Disposals Balance at 30th April, 2020 Net book value At 30th April, 2019 … … … … … … At 30th April, 2020 237 - - 237 - - - 237 237 Total £’000 31,334 505 (125) 31,097 505 (125) 31,477 31,714 5,960 (47) 5,960 (47) 5,913 5,913 25,137 25,374 25,564 25,801 A list of principal subsidiaries and associates is given in note 14 and a list of non-principal subsidiaries and associates is given in note 32 of the Group financial statements. During the year, the Company sold its shareholding in Asian Industrial Investment Casting Powders Private Limited, to Gold Star Powders, India, a fellow group company. The Company acquired 100% of Duvelco Limited, a company incorporated in 2020. C6 Intangible fixed assets Brand names and Manu- Software Develop- ment intellectual facturing costs Total property rights £’000 £’000 £’000 £’000 and Licences £’000 Cost Balance at 1st May, 2019 … … … 5,680 2,145 Additions … … … … … 2,186 102 Intercompany transfers … … … - - 142 147 - 7,758 15,725 175 2,610 752 752 Balance at 30th April, 2020 7,866 2,247 289 8,685 19,087 Amortisation Balance at 1st May, 2019 … … … 880 1,364 Amortisation for the year … … … 240 112 Balance at 30th April, 2020 1,120 1,476 109 24 133 495 2,848 332 708 827 3,556 Net book value At 30th April, 2019 … … … … 4,800 781 33 7,263 12,877 At 30th April, 2020 6,746 771 156 7,858 15,531 During the financial year, Goodwin PLC successfully acquired the globally recognised Castaldo silicone rubber and wax division, including the intellectual property, trade name and associated trademarks. For the past 75 years Castaldo has been at the centre of the worldwide jewellery casting industry and the recent acquisition will further increase the Group’s global market share within the moulding rubber and injection wax business. Details of the acquisition are included in note 16 of the Group financial statements. 94 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 97 NOTES TO THE FINANCIAL STATEMENTS C7 Debtors Interest-bearing Amounts owed by Group undertakings – repayable on demand … … Amounts owed by Group undertakings – repayable within five years … … Non interest-bearing … … Amounts owed by Group undertakings – repayable on demand Amounts owed by Group undertakings – repayable within five years … … Other debtors … … … … … … … … … … … Prepayments and accrued income … … … … … … … Corporation tax receivable… … … … … … … … … 2020 £’000 5,229 2,782 17,095 598 202 439 38 2019 £’000 6,918 3,869 18,735 783 226 561 - 26,383 31,092 C8 Interest-bearing loans and borrowings This note provides information about the contractual terms of the Company’s interest-bearing bank loans and borrowings. For more information about the Group’s exposure to interest rate and foreign currency risk, see note 28 of the Group financial statements. Non-current liabilities Finance lease liabilities … … … … … … … … … … Bank loans and committed facilities … … … … … … … … … … … … … … … Bank loans repayable by instalments 2020 £’000 - 9,000 4,009 13,009 Current liabilities Finance lease liabilities … … … … … … … … … … 859 Bank loans and committed facilities … … … … … … … … 12,000 657 Bank loans repayable by instalments … … … … … … … 442 Bank overdrafts … … … … … … … … … … … 2019 £’000 856 18,000 - 18,856 835 - - 9,915 13,958 10,750 Finance lease liabilities Finance lease liabilities are payable as follows: Less than one year Between one and five years 2020 2019 Minimum lease payments £’000 872 - Interest Principal £’000 859 - £’000 13 - Minimum lease payments £’000 872 869 Interest Principal £’000 835 856 £’000 37 13 872 13 859 1,741 50 1,691 Bank loan repayable by instalments The loan is secured against three furnaces (see note C4). Bank loans are payable as follows: Less than one year Between one and five years More than five years 2020 2019 Minimum loan payments £’000 795 3,180 1,192 Interest Principal £’000 657 2,846 1,163 £’000 138 334 29 Minimum loan payments £’000 - - - Interest Principal £’000 - - - £’000 - - - 5,167 501 4,666 - - - 95 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 98 NOTES TO THE FINANCIAL STATEMENTS C9 Other payables Trade payables… … … … … … … … … … … Amounts owed to Group undertakings – interest-bearing… … … … Amounts owed to Group undertakings – non interest-bearing … … … Other taxation and social security … … … … … … … Accruals and deferred income … … … … … … … … 2020 £’000 1,164 2,535 784 617 415 5,515 C10 Provisions for liabilities Deferred taxation Balance at 1st May, 2019 … … … … … … … … … … … Recognised in the statement of profit or loss … … … … … … … … Recognised in equity … … … … … … … … … … … … 2019 £’000 580 4,947 18 273 878 6,696 2020 £’000 (216) 1,587 (253) Balance at 30th April, 2020… … … … … … … … … … … 1,118 The elements of deferred taxation are as follows: Difference between accumulated depreciation and amortisation and capital allowances … … … … … … … 3,009 Share-based payment reserve … … … … … … … … … (1,888) (3) Other temporary differences … … … … … … … … … 2020 £’000 1,118 2019 £’000 2,418 (2,630) (4) (216) Within the current and previous year, the Company has no unrelieved tax losses. On 11th March, 2020, it was announced that the UK corporation tax rate would remain at 19% on 1st April, 2020 and would no longer reduce to 17%. This measure was made under a Budget resolution which has statutory effect under the provisions of the Provisional Collection of Taxes Act 1968 and, as such, it is substantively enacted on the passing of the resolution on 17th March, 2020. On this basis the deferred tax liability has been calculated at a rate of 19%. C11 Called up share capital Authorised, allotted, called up and fully paid: 7,200,000 ordinary shares of 10p each … … … … … … … Issue of 163,200 ordinary shares of 10p each … … … … … … 2020 £’000 720 16 736 2019 £’000 720 - 720 Details of the share issue are contained in note 35 of the Group financial statements. C12 Contingent liabilities The Company is jointly and severally liable for value added tax due by other members of the Group amounting to £Nil (2019: £Nil). C13 Related Party Transactions The Company has applied the exemptions available under FRS 101 in respect of the disclosure of transactions with wholly-owned subsidiary companies. The Company has transacted with Easat Radar Systems Limited, Internet Central Limited, Jewelry Plaster Limited, NRPL Aero Oy, Siam Casting Powers Limited and Ying Tai (UK) Limited which are not wholly-owned subsidiaries. 96 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 99 NOTES TO THE FINANCIAL STATEMENTS C13 Related Party Transactions (continued) Transactions and balances are summarised below: 2020 £’000 … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … Interest receivable Interest payable Dividend income Management fee income Rental income Transfer of development costs Interest-bearing balances Amounts owed by Group undertakings – repayable on demand … … … 5,229 Amounts owed by Group undertakings – repayable within five years … … 2,782 Interest-bearing balances Amounts owed to Group undertakings – repayable on demand 238 10 - 810 257 - … … … 1,837 2019 £’000 418 13 515 660 123 4,700 6,918 3,569 1,523 Compensation of key management personnel Key management personnel are defined in the Directors’ Remuneration Report on page 27, and their remuneration is disclosed on pages 29 and 30 of the Group financial statements. All the Executive Directors are party to an Equity Long Term Incentive Plan (LTIP). Further details of the LTIP can be found in note 35 of the Group financial statements. C14 Commitments Contracted capital commitments at 30th April, 2020 for which no provision has been made in these financial statements were £Nil (2019: £331,000). C15 Subsequent events After the balance sheet date, ordinary dividends were declared of £6,016,000, which have not been provided for within these financial statements. On 11th June, 2020 Goodwin PLC drew down £30 million of funding from the Bank of England CCFF scheme. This loan will be repaid in full on 27th April, 2021. On 31st July, 2020 and as a result of a competitive tender exercise, Goodwin PLC replaced its Lloyds Bank PLC revolving credit and overdraft facilities with new facilities from Santander UK plc. As a result of this exercise, the Group now has £24.5 million on a 5 year committed basis (Lloyds £13 million) and £5 million on overdraft (Lloyds £16.5 million) thus giving the Group proportionately more in the way of long-term committed lines. The Group is also in the final stages of renegotiating a £10 million revolving credit facility which expires in October 2020. The Directors do not see an issue in renewing these facilities. On 30th June, 2020 the Company acquired freehold, plant and buildings for a sum of £770,000. This acquisition complements the mixing business activities at Hoben International where the plant is reaching capacity. C16 Dividends Paid ordinary dividends during the year in respect of prior years 96.21p (2019: 83.473p) per qualifying ordinary share … … … … 2020 £’000 6,927 2019 £’000 6,010 After the balance sheet date an ordinary dividend of 81.71p per qualifying ordinary share was proposed by the Directors (2019: Ordinary dividend of 96.21p). The proposed current year ordinary dividend of £6,016,000 has not been provided for within these financial statements (2019: Proposed ordinary dividend of £6,927,000 was not provided for). C17 Accounting estimates and judgements The material accounting estimates and judgements for the Company follow that of the Group which have been considered in note 2 of the Group financial statements. C18 Share-based payment transactions Details of the equity-settled share-based payment transactions are disclosed in note 35 of the Group financial statements. 97 59585 Goodwin Directors Report 2020.qxp_Layout 1 19/08/2020 13:56 Page 100 FIVE YEAR FINANCIAL SUMMARY Continuing operations 2016 £’000 2017 £’000 2018 £’000 2019 £’000 2020 £’000 Revenue… … … … … … … … Profit before taxation … … … … … Tax on profit … … … … … … … Profit after taxation … … … … … … 123,539 12,314 (3,376) 8,938 131,587 9,244 (2,487) 6,757 124,811 13,300 (3,865) 9,435 127,046 16,410 (3,963) 12,447 144,512 12,115 (3,775) 8,340 Basic earnings per ordinary share … … … Diluted earnings per ordinary share … … … 122.75p 122.75p 84.47p 84.47p 118.11p 118.11p 159.79p 149.65p 107.93p 103.31p Total equity … … … … … … … 90,117 93,661 104,827 109,291 109,602 98 

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