4 D(cid:1)I(cid:1)R(cid:1)E(cid:1)C(cid:1)T(cid:1)O(cid:1)R(cid:1)S(cid:1) R(cid:1)E(cid:1)P(cid:1)O(cid:1)R T(cid:1) A(cid:1)N(cid:1)D(cid:1) A(cid:1)C(cid:1)C(cid:1)O(cid:1)U(cid:1)N(cid:1)T(cid:1)S(cid:1) 3 Oth(cid:1) A(cid:1)P(cid:1)R(cid:1)I(cid:1)L(cid:1) (cid:19)(cid:1)(cid:17)(cid:1)(cid:19)(cid:1)(cid:18) 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 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 12 14 17 20 22 25 32 33 43 44 45 47 48 97 FINANCIAL HIGHLIGHTS Accounting policies 49 Estimates and judgements 55 Revenue 59 Alternative performance measures 84 Finance costs (net) 61 Right-of-use assets 64 Borrowings 69 Financial risk management 73 Subsequent events 81 Capital and reserves 73 Guarantees and contingencies 81 Segmental information 56 Capital commitments 81 Intangible assets 67 Staff numbers and costs 60 Cash and cash equivalents 69 Investments in subsidiaries 65 Taxation 61 Company statements 85 Inventories 69 Trade assets 69 Deferred tax 72 Property, plant and equipment 63 Trade liabilities 71 Dividend policy 11 Provisions 71 Earnings per share 62 Related parties 82 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 Engineering Division S. R. Goodwin (Managing Director) Refractory Engineering Division J. Connolly N. Brown 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: RSM UK Audit LLP, Festival Way, Festival Park, Stoke-on-Trent, ST1 5BB NOTICE IS HEREBY GIVEN that the EIGHTY-SIXTH ANNUAL GENERAL MEETING of the Company will be held at 10.30am on Wednesday, 6th October, 2021 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. 5. 6. To receive the Directors’ Reports and the audited financial statements for the year ended 30th April, 2021. To approve the payment of the proposed ordinary dividend on the ordinary shares. To re-elect Mr. N. Brown as a Director. To re-elect Mrs. J. E. Kelly as a Non-Executive Director. To approve the Directors' Remuneration Report (excluding the Directors’ Remuneration Policy) for the year ended 30th April, 2021, as stated on pages 27 to 31 of the Directors' Report. To re-appoint RSM UK Audit LLP as auditor and to authorise the Directors to determine their remuneration. By Order of the Board Registered Office: Ivy House Foundry, Hanley, Stoke-on-Trent 11th August, 2021 J. L. Martin Secretary 1 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 4th October, 2021. 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 4th October, 2021 (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 10th August, 2021 (being the last business day prior to the publication of this Notice) the Company’s issued share capital consists of 7,689,600 ordinary shares, carrying one vote each. Therefore, the total voting rights in the Company as at 11th August, 2021 are 7,689,600. 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 8th October, 2021. 2 GROUP STRATEGIC REPORT GOODWIN PLC CHAIRMAN’S STATEMENT The pre-tax profit for the Group for the twelve month period ended 30th April, 2021, was £16.5 million (2020: £12.1 million), an increase of 36% on a revenue of £131 million, (2020: £145 million). The Directors propose an increased dividend of 102.24p (2020: 81.71p) per share. In what has been another year of unique challenges, I am delighted that excellent progress has been made particularly during the second half of the year in many areas with the Group’s workload as at the time of writing remaining healthy at £165 million (2020: £183 million). Despite the placement of large capital projects having slowed as expected due to the world having to adapt to new working arrangements, headway has been made within the Mechanical Engineering Division on the nuclear propulsion engineering products and the nuclear waste containment box supply agreement. The performance achieved in the year is a reflection of the Group’s strength through diversification, supplying a wide range of customers, countries and markets. Following the Group’s decisive actions last financial year with the global onset of Covid-19, the Group protected its workforce and ensured our manufacturing facilities continued to operate. In doing so, we placed ourselves in a strong position to tackle the headwinds that were faced during the year ended 30th April, 2021. Whilst Covid-19 has been the most recent global ‘Black Swan’ event, it is coupled with another shockwave sweeping the globe, namely the pace of the uptake of greener energy with the oil majors now rapidly investing in green energy products rather than new oilfields. So when looking at the Mechanical Engineering Division, our steel foundry, Goodwin Steel Castings Limited has faced a difficult year due to the accelerated decline of capital flows into oil projects. Whilst it has progressed well with transitioning its business away from the oil industry, it has also been hindered by Covid-19 delaying documentation approvals that would have enabled the foundry to achieve higher levels of casting activity in the year within its new targeted markets. Looking forward, Goodwin Steel Castings should soon start to accelerate the production of 30 tonne cast nuclear waste boxes, the initial castings of which are being successfully delivered to Goodwin International Limited for machining, painting and assembly. The foundry is also having good success winning work for naval vessels both in the UK and the USA, all for long running programmes that will span decades to come in an area where there are significant time barriers to entry for other foundries. Profitability in our submersible pump businesses in India, Australia, Africa and Brazil has materially improved, a reflection of the four companies maturing and the global metal prices having dramatically recovered. They have all performed admirably by carrying out more servicing for existing customers on the sizeable global fleet of Goodwin pumps now deployed. The submersible pump companies in the financial year just completed generated 14% of the Group pre-tax profitability. With minerals pricing across the board generally being high, our target customers that use our pumps are profitable and are expected to continue with their delayed capital expenditure in the new financial year. Goodwin International Limited has had another successful year with a good mix of business, supplying a growing range of capabilities to their valve, nuclear waste, naval propulsion and ship construction customers. Within the year a new 1.5 acre facility with multiple 100 tonne overhead cranes and a new radiography bay, has become operational and has started to fill up with work already on order. Valve sales to the oil industry in the last financial year represented 43% of activity for Goodwin International and in this new financial year, whilst Goodwin International’s overall sales output remains extremely robust as they have orders on hand, the valve activity for the oil 3 GROUP STRATEGIC REPORT CHAIRMAN’S STATEMENT (continued) industry is expected to drop to less than 33% of activity as the manufacture relating to nuclear waste products, propulsion, and naval hull components is rapidly increasing. Easat Radar Systems’ recovery to profitability has also been impacted due to the severe decline in global air traffic associated with Covid-19, starving many airports of cash. Whilst market expectations forecast that air traffic levels are to return to their historic 2019 levels by 2022 / 2023, infrastructure surveillance projects continue to be planned and Easat has a growing pipeline of opportunities with the bids being submitted substantially increasing in size and therefore margin potential. The Board has high expectations for Easat Radar Systems as it moves away from selling only the mechanical parts of a radar system. Since the integration with NRPL, based in Finland, in 2015, followed by a period of design enhancements to their transceivers and interrogators, we are now marketing and selling complete air traffic control and coastal surveillance systems inclusive of the air traffic control systems and screens, recorded radios and runway lighting control to guide planes on the tarmac should the customer so desire. The sales value of a complete system is in excess of ten times that of the original mechanical components that were previously manufactured, and now with our vertically integrated product offering we have a system that not only performs excellently but is internationally competitive. The major area of growth for Easat over the coming years will be in the Far East, where in the year, despite the travel restrictions and national lockdown Easat has successfully commissioned two of the three turnkey radar systems for which it had orders. Whilst Goodwin Steel Castings and Easat Radar Systems have not recently been firing on all cylinders, the Board firmly believes that both businesses will become profitable again moving forward with the transitions they have both been through. Within the Refractory Engineering Division, increased levels of consumer spending in the second half of the year on luxury goods, horticulture and construction as a consequence of Covid-19 restrictions redirecting consumer spending away from entertainment, hospitality and travel towards these sectors, has resulted in strong performance, making up for the low activity levels in the first half of the financial year due to the onset of Covid-19. Business levels remain strong with continued high levels of pent-up consumer spending. The Division achieved a record pre-tax profit of £9.3 million (2020: £7 million), equating to 46% of the Group profitability. Customer acceptance trials of the patented Silica Free Investment Powder, X-Sil, are underway and it is hoped that regular sales will start within the year ahead, further increasing the Group’s market share within the industry sector. Sales of the patented AVD Lith-EX lithium battery fire extinguishers and vermiculite- containing fluids continue to gain momentum with industry sectors, insurance companies and accreditation bodies waking up to the need and requirement for products and standards that specify their use on lithium battery fires which other extinguishing agents do not effectively extinguish. Key industry sectors adopting the products include electric car manufacturers, car repair workshops, battery manufacturers, battery recyclers, energy storage systems, e-mobility manufacturers, e-mobility storage and repair, marine and military. Sales of patented Soluform concrete bag work doubled within the year with good prospects for future growth with the use of the product in large scale projects such as HS2 and Thames Tideway Tunnel, along with many other projects for the formation of headwalls, culverts, scour protection, retaining walls and bridge pier protection. As at 30th April 2021, the Group finished the year with a net debt and gearing of £17.4 million and 15.4% respectively, as calculated in note 26 (d). The strength of the Group’s cash 4 GROUP STRATEGIC REPORT CHAIRMAN’S STATEMENT (continued) generation was a result of staying operational throughout the pandemic, which meant that the Group has been able to stay within its funding headroom without the need to approach our financial lenders for additional facilities. Furthermore, the Group has not needed to cancel any capital expenditure projects; raise additional funds from shareholders; nor has it any outstanding deferral of tax payments with HMRC. The CCFF loan, that was drawn down as an insurance policy during the financial year and referred to in the previous Chairman’s Statement, was fully repaid on 26th April, 2021. Armed with a strong balance sheet and a renewed set of bank facilities we are well placed to benefit from the recovery of the global economy and deliver strong returns on the capital that has been invested to date. The Board remains confident of the Group’s ability to continue to develop new and existing activities that will deliver additional sustainable growth in the long term. The Board is once again indebted to our Directors, managers and employees around the world for their unwavering efforts in keeping the Group operational, controlling cost and delivering what can only be described as an extraordinary Group result in the year of Covid-19 just completed. 11th August, 2021 T. J. W. Goodwin Chairman Alternative performance measures mentioned above are defined in note 34 on page 84. 5 GROUP STRATEGIC REPORT GOODWIN PLC CONSOLIDATED STATEMENT OF PROFIT OR LOSS for the year ended 30th April, 2021 Notes 2021 £’000 2020 £’000 CONTINUING OPERATIONS Revenue … … … … … … … … … … 3, 4 131,231 Cost of sales … … … … … … … … … (92,230) GROSS PROFIT… … … … … … … … … … Other income … … … … … … … … … 5 Distribution expenses … … … … … … … … Administrative expenses … … … … … … … 39,001 763 (2,988) (19,682) 144,512 (109,743) 34,769 690 (2,792) (19,809) OPERATING PROFIT … … … … … … … … … 17,094 12,858 Finance costs (net) … … … … … … … … Share of profit of associate company … … … … … PROFIT BEFORE TAXATION … … … … … … … Tax on profit … … … … … … … … … 7 14 5 8 (640) 60 (809) 66 16,514 (3,508) 12,115 (3,775) PROFIT AFTER TAXATION… … … … … … … … 13,006 8,340 ATTRIBUTABLE TO: Equity holders of the parent … … … … … … … Non-controlling interests … … … … … … … 12,494 512 7,866 474 PROFIT FOR THE YEAR … … … … … … … … 13,006 8,340 BASIC EARNINGS PER ORDINARY SHARE … … … … DILUTED EARNINGS PER ORDINARY SHARE … … … … 9 9 167.82p 107.93p 164.23p 103.31p The full financial statements and accompanying notes are on pages 43 to 96. 6 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, competitive 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 product range and 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 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 chemical plants, oil refineries and naval vessels, nuclear waste treatment plants, high integrity offshore structural components and bridges. The Group through its foundry, Goodwin Steel Castings Limited, 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 Limited. This capability industry and nuclear decommissioning, the oil and gas industry, as well as large, global projects requiring high integrity machined castings. is targeting the defence 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 7 GROUP STRATEGIC REPORT OBJECTIVES, STRATEGY AND BUSINESS MODEL (continued) 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. At Goodwin Pumps India Private Limited we manufacture a superior range of submersible slurry pumps for end users in India, Brazil, Australia and Africa. Easat Radar Systems Limited and its subsidiary, NRPL Aero Oy, 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 Private Limited, 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 Limited (GRS) primarily generates value from designing, manufacturing and selling investment casting powders rubbers 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 consumable investment casting products 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 Limited, 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 manufactures different grades of perlite and a patented range of biodegradable bags, known as Soluform, for the placement of concrete in or around rivers and other construction applications. The other UK refractory company is Dupré Minerals Limited 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. 8 OBJECTIVES, STRATEGY AND BUSINESS MODEL (continued) Divisional Split of Operating Profits (£’000) BUSINESS DIVERSITY AND PERFORMANCE GROUP STRATEGIC REPORT £14,000 £12,000 £10,000 £8,000 £6,000 £4,000 £2,000 £0 2 8 9 , 6 3 3 9 , 5 2 8 2 , 8 0 3 1 , 9 2017 2018 2 3 9 , 1 1 0 7 0 , 8 2019 5 6 0 , 8 4 3 0 , 7 2020 3 2 8 , 0 1 0 4 3 , 9 2021 Mechanical Refractory External Sales: Geographical Segmental Analysis 16% 21% 8% 30% 25% United Kingdom Rest of World Pacific Basin Rest of Europe USA End-User Market Sectors: £131m Sales Turnover 10% 23% 36% 31% Jewellery Manufacture, Powders, Heat Resistant Applications, Moulds for Tyres & Industry Power, Defence, Construction, Radar Oil & Gas, LNG, Petrochemical Mining In the year to 30th April, 2021, the Mechanical Engineering Division generated 54% of the Group’s operating profit and the Refractory Engineering Division generated 46%. The split between the divisions remains largely unchanged due to the strong performance of the Refractory Engineering division the second half of the year driven by high levels of consumption of the division’s products in the jewellery, construction and horticultural sectors. This has been aided by the integration of the Castaldo product lines into the product portfolio along with other growing product offerings. in Whilst the Mechanical Engineering division’s revenue decreased by 14%, its pre-tax operating profit improved by 34% as a result of the higher margin contracts for nuclear decommissioning and naval vessel building programmes starting to ramp up as compared to the margins available in the declining oil industry. The upturn in demand seen within the Refractory Engineering end markets coupled with the additional contribution earned by the new and growing product lines such as Castaldo rubber, Soluform concrete bags and AVD fire extinguisher sales has enabled the division to generate the same revenue as the prior year, despite the first three quarters being significantly down on traditional investment casting powder sales. During the course of the year, the divisional global footprint helped mitigate the impact of the ongoing global shipping crisis and improve its reported pre-tax operating margin by 5% whilst also increasing market penetration as competitors that relied on importing product suffered major delays. Geographical segmental analysis, we expect a greater proportion of the foundry revenue to be generated from the US as naval vessel building programmes accelerate in the years ahead. Of the £21,473,000 sales to the rest of Europe, 40% relate to the European sales of our German domiciled subsidiary, Noreva GmbH. 9 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 (£ millions) Gearing % (excluding deferred consideration) Sales per employee per year (£’000) Dividends proposed (in £ millions) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 27.3 28.5 31.9 34.3 32.5 27.8 25.6 28.6 32.0 24.1 29.7 8.1 12.3 20.3 24.1 20.1 12.3 9.2 13.3 14.7 12.1 16.5 22% 26% 23% 5% 12% 26% 31% 11% 20% 18% 15% 106 114 126 124 112 105 114 120 117 121 116 2.1 2.3 3.8 3.0 3.0 3.0 3.0 6.0 6.9 6.0 7.9 Gross Profit as a % of Turnover Profit before Tax (£ million) 35% 30% 25% 20% 15% 10% 5% 0% 3 . 7 2 5 . 8 2 9 . 1 3 3 . 4 3 5 . 2 3 8 . 7 2 6 . 5 2 6 . 8 2 0 . 2 3 1 . 4 2 7 . 9 2 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 25 20 15 10 5 0 1 . 8 3 . 2 1 3 . 0 2 1 . 4 2 1 . 0 2 3 . 2 1 2 . 9 3 . 3 1 7 . 4 1 1 . 2 1 5 . 6 1 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Gearing % (excluding deferred consideration) Sales per employee per year (£’000) 35% 30% 25% 20% 15% 10% 5% 0% 2 2 6 2 3 2 5 2 1 6 2 1 3 1 1 0 2 8 1 5 1 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 130 125 120 115 110 105 100 95 5 0 1 4 1 1 6 2 1 4 2 1 2 1 1 5 0 1 4 1 1 0 2 1 7 1 1 1 2 1 6 1 1 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Dividends (£ million) 9 8 7 6 5 4 3 2 1 0 D E S O P O R P 1 . 2 3 . 2 8 . 3 0 . 3 0 . 3 0 . 3 0 . 3 0 . 6 9 . 6 0 . 6 9 . 7 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 10 The alternative performance measures referred to above are defined in note 34 on page 84. 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. * The calculation of Gross Profit is after taking into account plant depreciation, training, HR, R&D, sales, exhibition and sales travel costs, as well as the material and labour costs. GROUP STRATEGIC REPORT OBJECTIVES, STRATEGY AND BUSINESS MODEL (continued) DIVIDEND AND CAPITAL EXPENDITURE POLICY Based on the Group generating post tax profits plus depreciation and amortisation of £20,690,000 for the year ending 30th April, 2021, up 31% on the previous year, the Board proposes to pay a dividend of 102.24 pence per share (2020: 81.71 pence). The gearing of the Group finished at 15.4% (2020: 17.9%). The Board continues to monitor its capital expenditure to ensure that shareholder funds re-invested into the Company are targeted on activities that should provide long-term benefit to the Company, its employees and its shareholders. Group Annual Post Tax Profit + Depreciation + Amortisation £25m £20m £15m £10m £5m £0m 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 11 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 Company, including those that would threaten its business model, future performance, solvency or liquidity. Covid-19 risk: The Covid-19 pandemic continues to have a global impact in varying degrees affecting the population, travel, supply chains, and the global marketplace. The spread temporarily impacted market demand for certain of our products in the first half of the financial year just completed, as well as delaying the placement of larger capital orders by our customers. We have also been contending with increased costs and shipping times from our overseas suppliers which have also been exacerbated by the grounding of the “Ever Green” container ship in the Suez Canal which whilst afloat has only just docked. It is being suggested that the combination of Covid-19 and the Ever Green incident will result in shipping costs and times being disrupted for at least another two years. The intercountry supply chain may face difficulties in the short to medium term in timely and economically fulfilling our requirements due to the stretched international shipping network, but fortunately we have so far been able to work around these issues. During the year the Group continued to dynamically adapt as circumstances changed to protect the wellbeing of the workforce and to ensure facilities remained operational and able to satisfy the orders in hand, which maintained the Group’s financial strength. 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 3 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 annual turnover. As described in the Business Model, and to emphasise the Group’s spread of market risk, the Mechanical Engineering Division generates significant sales not only from valves it supplies to oil, gas, chemical and water markets, but increasingly significant amounts from other areas such as nuclear new build and decommissioning, naval propulsion marine applications, and ship hull components. With the submersible pumps that are supplied to the mining industries and radar systems that are supplied for civil and defence applications it is clear that the mechanical engineering is now well diversified. Within the Refractory Engineering Division, we manufacture and sell vermiculite and perlite products to the insulating, horticulture and fire prevention industries and our investment casting powder companies indirectly sell to the jewellery consumer market through the supply of investment casting moulding powders, waxes, silicone and natural rubber and so again we see a good spread of business within this division. 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. 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. 12 GROUP STRATEGIC REPORT PRINCIPAL RISKS AND UNCERTAINTIES (continued) 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 26 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. As reported elsewhere within these financial statements the Company, on 2nd July, 2021, has acted to mitigate the possible impact of higher interest rates by taking out an interest rate swap derivative fixing £30 million of notional debt at less than 1% versus the variable inter-bank lending rate (SONIA) for a period of ten years. 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. IT security: The Group performs regular and remote off site backups of its IT systems, from time to time engaging external companies to test and report any weaknesses and deficiencies found to enable solutions to be put in place to mitigate and minimise the risk of an IT security breach. Brexit: As envisaged and disclosed in previous Annual Reports Brexit has not been seen as a significant issue to the Group, the previously identified risks have been managed or mitigated and the Board no longer consider this as a significant uncertainty. 13 GROUP STRATEGIC REPORT CORPORATE SOCIAL RESPONSIBILITY The Board as a whole is responsible for decisions relating to the long-term success of the Company and the way in which their duties have been discharged during the year in terms of the strategic, operational and risk management decisions and these can be found within the Strategic Report on pages 7 to 10. As set out below and in line with Section 172 of the Companies Act 2006, through engagement the interests and views of the Group’s employees and other stakeholders are considered by the Board within its decision making process as well as the impact they have on the environment, our reputation and the surrounding communities. Employees Health and Safety: The Group acknowledges that many of its manufacturing processes and some materials that it handles and sells are hazardous and that providing a safe environment for people at all of our facilities is an unconditional priority for all of those charged with governance, in addition to each member of the workforce. Awareness and training to continually reduce risk and improve safety is a mind-set that is reinforced on a daily basis through the ongoing rollout Group’s “Safety Spectrum” programme. Furthermore in the year the Board regularly updated all employees on the latest situation on Covid-19 and the measures being taken by the business in line with the applicable guidance issued by the Government. We have 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. 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 that are likely to affect their interest and the continual development of the Group. 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. Engagement in the year is further supported through workforce representative meetings, local working groups, team meetings, training, and an honest and open culture. 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. 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. The Group continues to strive to improve the balance of diversity by reviewing gender reporting and implementing our Diversity Policy through training and development, recruitment, our business culture and the Board’s Strategy. The Group’s approach to investing and rewarding its employees can be found within the Corporate Governance Report on page 21 and the Directors’ Remuneration report on pages 25 to 31, as well as being evidenced by our apprentice programme. 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, 2021 Main Board and Company Secretary Senior Management Employees Total Male 6 71 851 928 % 75 88 82 82 Female 2 10 189 201 % 25 12 18 18 Total 8 81 1,040 1,129 14 GROUP STRATEGIC REPORT CORPORATE SOCIAL RESPONSIBILITY (continued) Breakdown by age Year ended 30th April, 2021 Main Board and Company Secretary Senior Management Employees Total Age 16 to 21 0 0 77 77 Age 22 to 40 6 14 472 492 % 75 17 45 44 Age 41 to 65 1 62 474 537 % 0 0 7 7 % 12 77 46 47 Age Over 65 1 5 17 23 % 13 6 2 2 Total 8 81 1,040 1,129 Suppliers, Customers and Regulatory Authorities The Board considers market trends regularly and reviews their likely long-term implications. Our business relationships and procedures are developed over time and are regularly reviewed to ensure as a Group we conduct business responsibly and sustainably. The Board acquires a first-hand understanding of its business relationships through regular dialogue and site visits where appropriate. 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. During the year our engagement with customers, suppliers and other bodies has been supported by Goodwin’s mandatory principles and good practice guidelines have been incorporated and issued within a contract guide handbook. The six Executive Directors of the Board 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. Maintaining High Standards of Business Conduct 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, anti-bribery and corruption and is all enhanced by an anonymous whistle-blowing system. Shareholders Shareholder engagement occurs through the Annual Report, regulatory disclosures, our website and the Annual General Meeting, coupled by supplementary RNS announcements made during the course of the year. The Company has one class of ordinary shares, which have the same rights as regards voting, distributions and on liquidation. Management are also significant shareholders in the Company, holding approximately 53.23% of the register. In accordance with LR6.5, there is a controlling shareholder agreement in place. On this basis the Board feels that the Executive Directors are fully aligned with shareholders. Communities and Environment Communities During the year the Group has continued to communicate to all employees our culture of responsibility and support for local communities where possible. The Board encourages its sites to support their local communities through charitable activities and initiatives to support the local area within which they operate. 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. Donations The Group made no political donations during the year (2020: £nil). Donations by the Group for charitable purposes amounted to £78,000 (2020: £54,000). The majority of these were made to local communities within the Group’s operating environments. Environment Whilst the Group continues to seek to achieve high standards in the management of environmental matters, the Board is aware of the Group’s impact on the environment and the importance of sustainability and is therefore undertaking a methodical in-depth analysis of how it can adapt in the years to come to minimise and / or eliminate its adverse effects on the environment. The results of the work being undertaken will form part of the Group’s “Balance and Reduce” initiative that will set out realistic targets and timeframes in which it will be achieved. The initiative report will be finalised and disclosed within next year’s Annual Report. 15 GROUP STRATEGIC REPORT CORPORATE SOCIAL RESPONSIBILITY (continued) Greenhouse Gas (“GHG”) emissions In line with the GHG reporting guidance set out by SECR (Streamlined Energy and Carbon Reporting) we have used the GHG Reporting Protocol methodology 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: 2021 Tonnes of CO2e Proportion of emissions arising from UK operations % 2020 Tonnes of CO2e Proportion of emissions arising from UK operations % 27,293 98% 38,494 98% 5,176 83% 6,882 82% 32,469 242 45,376 313 69,737,248 76,786,289 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 Energy Consumption (kWh) resulting in the above reported emissions Partly as a result of Covid-19 impacting our activity our overall emissions have marginally reduced in the year. 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 11th August, 2021 and is signed on its behalf by: T. J. W. Goodwin Director M. S. Goodwin Director S. R. Goodwin Director 16 DIRECTORS’ REPORTS REPORT OF THE DIRECTORS The Directors have pleasure in presenting their reports and audited financial statements for the year ended 30th April, 2021. 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, Principal Risks and Uncertainties on page 12, 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 102.24p per share (2020: 81.71p) be paid to shareholders on the register at the close of business on 17th September, 2021. If approved by shareholders, the ordinary dividend will be paid to shareholders on 8th October, 2021. See comments on page 11 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 (retired on 11th December 2020) B. R. E. Goodwin N. Brown (appointed on 11th December 2020) 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 6th August, 2021, 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 (27.69%), J. W. and R. S. Goodwin 1,424,210 shares (18.52%). 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 (6.52%), Rulegale Nominees Limited (JAMSCLT) 428,091 shares (5.57%) and Rulegale Nominees Limited (ISA001) 235,460 shares (3.06%). 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, and has complied with the independence provisions set out in LR 6.5.4 R. The Company confirms that, as far as it is aware, the controlling shareholders have complied with this agreement. 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 25 to the financial statements on page 73. 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 17 DIRECTORS’ REPORTS REPORT OF THE DIRECTORS (continued) Share capital (continued) authority to issue shares of the Company other than in respect of the LTIP nor have they been given any 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 31. Research and development The Group invests significantly in research and development. The more material investments during the year include the biodegradable concrete bags marketed under our brand name Soluform, the manufacturability of complex castings in high yield material grades and production process development for the manufacture of polyimide polymers. In addition to this, further investment has gone into the ‘respirable silica free’ investment casting powder for the global jewellery industry and the Group’s range of axial control valves. 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. Stakeholders 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 where 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. Engagement with the Group’s suppliers, customers and other stakeholders can be found within the Strategic Report on pages 14 and 15. Going concern The Directors, after having reviewed the projections and possible challenges that may lie ahead, believe that 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. During April 2021, the Company repaid in full the £30 million drawn down from the Bank of England’s CCFF scheme and having completed the refinancing of £10 million referred to within the 30th April 2020 accounts, currently has at its disposal £50.5 million of bank facilities, £44.5 million of which are vested in long-term committed facilities. The Directors have, as part of this going concern assessment, considered the ongoing impact of Covid-19 on the Group’s operations. We are now more than eighteen months on from the onset of Covid-19 and whilst we experienced a slow down in the Refractory Engineering segment of the business during March 2020 to August 2020, since then most of the entities in this division are seeing record levels of activity. As predicted when writing the 30th April, 2020 going concern assessment, there has been little Covid-19 impact on the Mechanical Engineering segment of the business. Whilst we have and are still seeing temporary impacts on our overseas pump company operations, we are thankfully seeing minimal impact on Group activities as a result of the virus pandemic. 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 financial commitments during the forecast period whilst remaining compliant with its financial covenants. The downside model factors in adverse circumstances such as unexpected problems on contracts and a further Covid-19 impact on our Refractory Engineering segment. Since the end of the financial year, the Company has entered into a ten year interest rate swap agreement which fixes our variable interest rate on borrowings at less than 1% for the entire period. The Directors see no shortage of investment opportunities in the coming years and so given the historical low level of interest rates, we deemed it prudent to remove the impact of higher interest rates from our risk modelling. Whilst our carrying values of trade debtors and contract assets are significant, we see little risk here in terms of recovery. We credit insure our debtors and pre credit risk (work in progress) and for significant contracts where credit insurance is not available, we ensure, where possible, that these contracts are backed by letters of credit or cash positive milestone payments. As discussed elsewhere within these accounts, the Mechanical Engineering order book remains very high and the Refractory Engineering segment is buoyant. 18 DIRECTORS’ REPORTS REPORT OF THE DIRECTORS (continued) Going concern (continued) The Directors are confident that the Group and Company will have sufficient funds to continue to meet their liabilities as they fall due for at least twelve 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 UK Coporate Governance Code the Directors have assessed the Group’s viability over a three year period to 30th April, 2024. 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. As part of the going concern review process we have considered the impact of plausible adverse events over an extended period (the two years ended 30th April, 2024). The plausible adverse event scenarios have been modelled without adjusting the capital expenditure programme. The results demonstrate that the Group has sufficient facilities in place to deal with these adverse events and given that a large proportion of the future capital expenditure is by definition discretionary, there is further confidence that a downturn will not impact on the Group’s ability to deal with material adverse events. The workload within the Mechanical Engineering segment remains high and so underpinning performance in the short to medium term. This, coupled with our actual trading performance during the height of the pandemic, the Directors are 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. Corporate governance statement The Company’s Corporate Governance Statement is set out on pages 20 to 21 and forms part of the Directors’ Report. Financial Risk Management 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, further details can be found within note 26 on page 73. Subsequent Events On 2nd July, 2021, the Company contracted to convert £30 million of notional debt into a fixed rate of interest of less than 1% versus the floating inter-banking lending rate (SONIA) for a period of ten years. With the level of expected trade and the opportunities open to the Group going forwards, the Directors deemed it prudent to fix its variable lending rate as an insurance policy against escalating interest rates in the light of the current and expected increases in inflation over the ten 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 re-appointment of RSM UK Audit LLP as auditor of the Company. Approved by the Board of Directors and signed on its behalf by: T. J. W. Goodwin Chairman 11th August, 2021 19 DIRECTORS’ REPORTS CORPORATE GOVERNANCE REPORT Introduction The Board comprises six Executive 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 six 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 smaller 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 17, 32, 33 and 41. 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 thirteen times, and details of attendees at these meetings are set out below: M. S. Goodwin … … … … … 13 out of 13 attended S. R. Goodwin … … … … … 13 out of 13 attended T. J. W. Goodwin … … … … … 13 out of 13 attended J. Connolly … … … … … … 13 out of 13 attended S. C. Birks (retired 11th December, 2020) … 8 out of 13 attended B. R. E. Goodwin … … … … … 13 out of 13 attended N. Brown (appointed 11th December, 2020) 6 out of 13 attended J. E. Kelly … … … … … … 11 out of 13 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, but referred to the Audit Committee for comment. 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, 2020, 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. 20 DIRECTORS’ REPORTS CORPORATE GOVERNANCE REPORT (continued) 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 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 include regular visits and discussions between Board Directors and Subsidiary Management, in-house General Counsel, 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 has been difficult during 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 21 11th August, 2021 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. 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 and commenting to the Board on any significant investment plans of the Group. 6. Reviewing the Group’s “whistle-blowing” procedures and reviewing any significant reports. 7. Reviewing the scope of work for the internal audit function and the resultant reports. 8. 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 vast historical knowledge of the business and activities of the Group. This, together with their regular involvement in reviewing the Group’s financial performance and accounts, provides sufficient recent financial experience. 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, 2021 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 DIRECTORS’ REPORTS AUDIT COMMITTEE REPORT (continued) 2021 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 former 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 recently been appointed as brokers for the Group’s UK insurance cover. Previously, they had 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 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 page 9. 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 in previous years 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 continues to review the impact on the Group of the Climate Change Act 2008 (2050 Target Amendment) Order 2019. Human Resources The age profile of Senior Managers and perceived skill gaps within each Group company continue to be reviewed by the Audit Committee. A number of accountancy and business development roles have been filled. Information Technology During the year the Audit Committee continued to monitor the risks posed affecting information security and the steps taken to minimise these. A comprehensive internal audit of the Group’s IT systems was completed during the year. Some risks have been identified and a plan to address those risks is being devised and implemented. Capital expenditure The Audit Committee also reviews and comments to the Board on major capital purchases or company acquisitions 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 maintain awareness of how such expenditure 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 Following shareholder approval at the Annual General Meeting in October 2020, RSM UK Audit LLP (“RSM”) was appointed as the Group’s Auditor for the year ending 30th April, 2021 and going forward. 23 DIRECTORS’ REPORTS 3. The Group’s external auditor (continued) AUDIT COMMITTEE REPORT (continued) RSM did not provide any 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, RSM, 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. The Audit Committee has recommended to the Board to propose a Resolution to confirm the re-appointment of RSM UK Audit LLP, as the external auditor at the Annual General Meeting on 6th October, 2021. 4. Reviewing comments and feedback There is regular contact with Directors and employees where open and frank discussion is encouraged. 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 Chair of the Audit Committee. 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 or members of the Audit Committee. Due to Covid-19, internal audits of our overseas subsidiaries have been and are frustrated, but the larger profit earning overseas subsidiaries, Noreva, Gold Star Powders India, Goodwin Pumps India, and Goodwin Submersible Pumps Africa, have been subject to full statutory audit by RSM Germany, India and South Africa respectively. 7. Covid-19 The Audit Committee has continued to review the likely effects of Covid-19 along with the Board as detailed in the Principal Risks and Uncertainties section on page 12. 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, 2021. The Audit Committee also took account of the findings of RSM in relation to their external audit work for the year. J. E. Kelly Chair of the Audit Committee 11th August, 2021 24 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 changed. Changes for 2020/2021 Directors set the base increase in salaries. For the period May 2020 to April 2021 the increase was generally 2.4%. 60% of salary. Following review of the half year and year end results of the Company. Element of Pay Salary 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 DIRECTORS’ REPORTS DIRECTORS’ REMUNERATION POLICY AND REPORT (continued) Group’s Remuneration Policy for Directors (continued) Element of Pay Purpose and Link to Strategy Operation Maximum Performance Targets Changes for 2019/2020 Pensions Other benefits All Executive 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. 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 2020 / 2021. 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. Total shareholder return – unaudited 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 63.1% 170.3% 6,211.0% FTSE 100 35.9% 68.2% 141.7% FTSE 350 38.7% 78.5% 175.44% As is required by the Listing Rules, we show in graph form both the salary of the Managing Directors 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 then 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 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, 2021 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 … … … … … … … … … 2021 £’000 7,862 … … … … … … … … … 44,873 1,129 2020 £’000 6,016 44,241 1,190 % 31% 1% (5)% 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, 2020 was put to the shareholders at last year’s Annual General Meeting on 7th October, 2020. The Annual Directors’ Remuneration Report was accepted with 99.26% 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, 2021 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 and 30th April, 2021 is the amount earned by each Managing Director. 2017 £’000 2018 £’000 2019 £’000 2020 £’000 2021 £’000 368 385 397 310 355 Total payroll costs, excluding the Managing Director’s salary, have increased by 1%. During the year, the base increase awarded to employees in the UK companies was 2.4%. However, as a result of Covid-19, the total payroll costs disclosed in note 6 are impacted by a 5% reduction in overall employee numbers. The following graphs have not been audited. 27 DIRECTORS’ REPORTS DIRECTORS REMUNERATION POLICY AND REPORT (continued) Annual Directors’ Remuneration Report (continued) Total Shareholder Return (TSR) 10 Years ended 30th April 2021 250 200 150 100 50 0 e g n a h C % e v i t a l u m u C -50 April 2011 April 2012 April 2013 April 2014 April 2015 April 2016 April 2017 April 2018 April 2019 April 2020 April 2021 Total Shareholder Return (TSR) 20 Years ended 30th April 2021 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 e g n a h C % e v i t a l u m u C 0 April 2001 April 2003 April 2005 April 2007 April 2009 April 2011 April 2013 April 2015 April 2017 April 2019 April 2021 Goodwin FTSE 100 FTSE 350 Small Cap Ind & Eng MD Earnings Goodwin FTSE 100 FTSE 350 Small Cap Ind & Eng MD Earnings The increase in the Goodwin PLC share price since 2001 plus dividends re-invested would mean that £1.00 invested in 2001 by the 30th April, 2021 would be worth £63.11. The increase in the share price since 2011 plus dividends re-invested would mean that £1.00 invested in 2011 would at 30th April, 2021 be worth £2.70. 28 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 2020 2021 Beneficial M. S. Goodwin … … … … … S. R. Goodwin … … … … … T. J . W. Goodwin… … … … … J. Connolly … … … … … S. C. Birks (retired 11th December, 2020) … B. R. E. Goodwin … … … … … N. Brown (appointed 11th December, 2020) J. W. Goodwin* … … … … … R. S. Goodwin* … … … … … J. W. Goodwin and R.S. Goodwin* … … J. W. Goodwin and R.S. Goodwin* … … … … … … … … … … … … … 67,072 76,785 120,141 18,322 11,300 55,239 445 61,386 22,756 2,129,153 1,424,210 64,034 82,247 112,868 7,622 200 42,501 - 40,986 11,656 2,129,153 1,393,592 Non-beneficial J. W. Goodwin* and E. M. Goodwin … … 14,166 14,166 * Audit committee member / ex Director. On 28th May, 2021 the last tranche of share options were granted and exercised under the Equity Long-Term Incentive Plan and the following Executive Directors received 20,400 shares each on the 4th June, 2021. Details of the total shares held on 11th August, 2021 are: Mr. M.S. Goodwin 87,472 Mr. S.R. Goodwin 97,185 Mr. T.J.W. Goodwin 140,541 Mr. J. Connolly 38,722 Mr. B.R.E. Goodwin 75,639 There have been no other changes in the Directors’ interests between 30th April, 2021 and 11th August, 2021. 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, 2021 Salary M. S. Goodwin … … … … … … … S. R. Goodwin … … … … … … … T. J. W. Goodwin … … … … … … … J. Connolly… … … … … … … … S. C. Birks (retired 11th December, 2020) … … B. R. E. Goodwin … … … … … … … N. Brown (appointed 11th December, 2020) … … J. E. Kelly … … … … … … … … 2021 £’000 333 333 243 256 64 209 64 - Benefits Non-Exec in kind Director’s fees 2021 £‘000 - - - - - - - 68 2021 £’000 12 12 6 17 13 6 4 - Pension contrib- utions 2021 £’000 10 10 7 8 2 6 2 - Total 2021 £’000 355 355 256 281 79 221 70 68 Total … … … … … … … … 1,502 70 68 45 1,685 29 DIRECTORS’ REPORTS DIRECTORS REMUNERATION POLICY AND REPORT (continued) Annual Directors’ Remuneration Report (continued) Single Total Figure Table Year ended 30th April, 2020 Salary Benefits in kind 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 - Total … … … … … … … … 1,183 2020 £’000 25 25 11 36 25 11 - 133 Non-Exec Director’s fees 2020 £’000 - - - - - - 63 Pension contrib- utions 2020 £’000 10 10 6 6 4 5 - Total total 2020 £’000 310 310 194 241 146 156 63 63 41 1,420 Benefits in kind consist of the provision of a fully expensed car, a cash alternative scheme, healthcare insurance or other services. The employer’s national insurance costs relating to the Directors’ remuneration amounted to £207,000 (2020: £165,000). Pay Comparison – audited For the first time this year in accordance with the new remuneration regulations, we are including in the report a table comparing the annual change of each directors pay with that of the average employee’s pay. This is required over a rolling five year period, but as the requirements came into effect for financial years ending 2021, the table below will only show the comparison from 30th April, 2020. Annual Percentage Change of Average Remuneration of each Director M. S. Goodwin … … … … … … … … S. R. Goodwin … … … … … … … … T. J. W. Goodwin … … … … … … … … J. Connolly … … … … … … … … … S. C. Birks … … … … … … … … … B. R. E. Goodwin … … … … … … … … N. Brown … … … … … … … … … J. E. Kelly … … … … … … … … … … … … … UK Average Employee % Change* … … … … … … … … … 2020 - 2021 £’000 15% 15% 32% 16% N/A 42% N/A 9% 3% … … … … … … … … … Notes: The UK average employee is based on the UK workforce employed by Goodwin PLC as a company and its UK subsidiaries. The average figure has been calculated using a mean 3% of employee pay. The increases greater than the UK average employee percentage change are a reflection of the further development of individual directors in the areas of their new responsibilities. Pay Ratio of Managing Directors 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 is 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 ended 30th April, 2021 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. The tables overleaf show our Managing Directors’ pay ratio at the 25th, median and 75th percentile of our UK employees since 30th April, 2020: 30 DIRECTORS REMUNERATION POLICY AND REPORT (continued) Annual Directors’ Remuneration Report (continued) Pay Ratio of Managing Directors (continued) DIRECTORS’ REPORTS Financial Year 2021 ratios 2020 ratios FTSE SmallCap FTSE 250 Financial Year Method Option A Option A 25th percentile pay ratio Median pay ratio 75th percentile pay ratio 14:1 12:1 17:1 22:1 11:1 10:1 27:1 32:1 8:1 7:1 35:1 61:1 Managing Directors £’000 25th percentile pay £’000 Median pay £’000 75th percentile pay £’000 2021 Total Pay 2020 Total Pay 355 333 26 26 33 33 45 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. 3. 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. 4. The above figures are based on the total pay as at 30th April, 2021. Equity Long-Term Incentive Plan (LTIP) – Vested Share Options – audited 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 in 2019, resulting in 85% of the awards granted vesting, entitling each of the sitting eight Directors to 61,200 shares (17 x 3,600 = 61,200). Exercised During the year ended 30th April, 2021 each Director exercised 20,400 share options, increasing the Company’s total share capital by 163,200 to 7,526,400. The aggregate share options remaining to be exercised as at 30th April, 2021 amounted to 163,200. These were exercised on 28th May, 2021, increasing the share capital by 163,200 to 7,689,600. Whilst the Company has no follow-on LTIP incentive plans in place or proposed, the shares vested as part of the above scheme further align the Executive Directors with the long-term interests of the shareholders, as do their not insignificant shareholdings already held. 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 11th August, 2021 and is signed on its behalf by: T. J. W. Goodwin Director M. S. Goodwin Director S. R. Goodwin Director 31 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 accounting standards in conformity with the requirements of the Companies Act 2006 and are additionally required, under the Listing Rules of the Financial Conduct Authority, to prepare the group financial statements in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The Directors have elected under company law to prepare the parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union • 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 Group and parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and 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 parent Company 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. 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K),%,-)%.#P"91:*),G#61',-)./)*"#%*X#$**9XRR333L+:-L1:GL'NR%'()*1:/:"/91,/)>).)*)"/L#M$)/#("/-:)9*)1,# +1:0/#9%:*#1+#1':#%'()*1:G'KA':=A'=AW@7=AF'B9':FF=A;;' K1..13),G#*$"#:"-100",(%*)1,#1+#*$"#%'()*#-100)**""E#3"#3":"#%991),*"(#>;#*$"#J1%:(#1+#V):"-*1:/#1,# Ci# e%:-$# B@BC# *1# %'()*# *$"# +),%,-)%.# /*%*"0",*/# +1:# *$"# ;"%:# ",("(# ?@# A9:).# B@BC# %,(# /'>/"I'",*# +),%,-)%.#9":)1(/L# M$"#9":)1(#1+#*1*%.#',),*"::'9*"(#-1,/"-'*)&"#%991),*0",*/#)/#1,"#;"%:L# M$"#,1,d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e#ST#A'()*#554E#D*%*'*1:;#A'()*1:# 6$%:*":"(#A--1',*%,*/# K"/*)&%.#!%;# K"/*)&%.#4%:N# D*1N"d1,dM:",*# DMC#`JJ# 42 FINANCIAL STATEMENTS GOODWIN PLC CONSOLIDATED STATEMENT OF PROFIT OR LOSS for the year ended 30th April, 2021 Notes 2021 £’000 2020 £’000 CONTINUING OPERATIONS Revenue … … … … … … … … … … 3, 4 131,231 Cost of sales … … … … … … … … … (92,230) GROSS PROFIT… … … … … … … … … … Other income … … … … … … … … … 5 Distribution expenses … … … … … … … … Administrative expenses … … … … … … … 39,001 763 (2,988) (19,682) 144,512 (109,743) 34,769 690 (2,792) (19,809) OPERATING PROFIT … … … … … … … … … 17,094 12,858 Finance costs (net) … … … … … … … … Share of profit of associate company … … … … … PROFIT BEFORE TAXATION … … … … … … … Tax on profit … … … … … … … … … 7 14 5 8 (640) 60 (809) 66 16,514 (3,508) 12,115 (3,775) PROFIT AFTER TAXATION… … … … … … … … 13,006 8,340 ATTRIBUTABLE TO: Equity holders of the parent … … … … … … … Non-controlling interests … … … … … … … 12,494 512 7,866 474 PROFIT FOR THE YEAR … … … … … … … … 13,006 8,340 BASIC EARNINGS PER ORDINARY SHARE … … … … DILUTED EARNINGS PER ORDINARY SHARE … … … … 9 9 167.82p 107.93p 164.23p 103.31p The notes on pages 49 to 96 form part of these financial statements. 43 FINANCIAL STATEMENTS GOODWIN PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 30th April, 2021 PROFIT FOR THE YEAR … … … … … … … … … 2021 £’000 13,006 2020 £’000 8,340 OTHER COMPREHENSIVE INCOME / (EXPENSE) ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS: Goodwill arising from purchase of non-controlling interest in subsidiaries - (72) ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS: Foreign exchange translation differences … … … … … … … … Effective portion of changes in fair value of cash flow hedges Ineffectiveness in cash flow hedges transferred to profit or loss … … Change in fair value of cash flow hedges transferred to profit or loss … Effective portion of changes in fair value of cost of hedging … … … Ineffectiveness in cost of hedging transferred to profit or loss … … Change in fair value of cost of hedging transferred to profit or loss … … Tax (charge) / credit on items that may be reclassified subsequently (1,371) 1,296 (657) 1,932 (37) 631 381 (1,007) (355) - 522 (843) - 395 to profit or loss … … … … … … … … … … (673) 77 OTHER COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR, NET OF INCOME TAX… … … … … … … … … … 1,502 (1,283) TOTAL COMPREHENSIVE INCOME FOR THE YEAR … … … … 14,508 7,057 ATTRIBUTABLE TO: Equity holders of the parent … … … … … … … … Non-controlling interests … … … … … … … … 14,081 427 14,508 6,587 470 7,057 The notes on pages 49 to 96 form part of these financial statements. 44 FINANCIAL STATEMENTS GOODWIN PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 30th April, 2021 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, 2021 Balance at 1st May, 2020 … 736 361 5,244 (499) (743) 99,918 105,017 4,585 109,602 Total comprehensive income: Profit for the year … … Other comprehensive income: Foreign exchange translation differences … … … Effective portion of changes in fair value Ineffectiveness transferred to profit or loss Change in fair value transferred to profit or loss … … … … Tax … … … … TOTAL COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR Transactions with owners: Issue of shares … … … Dividends paid … … … Recycling of translation reserve on the disposal of subsidiary … … … BALANCE AT 30TH APRIL, 2021 - - - - - - - (1,255) - - - - - (1,255) 17 - - - - 42 - - - - - - - - - - - - - - 1,252 (42) (617) 596 1,957 (492) 362 (174) 12,494 12,494 512 13,006 - - - - - (1,255) (116) (1,371) 1,210 49 1,259 (21) (5) (26) 2,319 (666) (6) (7) 2,313 (673) 2,100 742 12,494 14,081 427 14,508 - - - - - - - 17 - 17 (6,016) (6,016) (125) (6,141) - 42 - 42 753 (852) 5,244 1,601 (1) 106,396 113,141 4,887 118,028 The notes on pages 49 to 96 form part of these financial statements. 45 FINANCIAL STATEMENTS GOODWIN PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) for the year ended 30th April, 2021 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 for the year … … Other comprehensive income: Foreign exchange translation differences … … … Goodwill arising from purchase of NCI interest in subsidiaries … … Effective portion of changes in fair value Change in fair value transferred to profit or loss … … … … Tax … … … … TOTAL COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR Transactions with owners: Dividends paid … … … - - - - - - - - Issue of shares … … … 16 Tax on equity-settled share-based payment transactions … Acquisition of NCI without a change of control … … Recycling of translation reserve on the disposal of subsidiary … … … Reclassification … … - - - - - (964) - - - - (964) - - - - (77) 358 - - - - - - - - - 253 - - - - - - - - - 7,866 7,866 474 8,340 - (964) (43) (1,007) (72) (72) - (72) (446) (802) 522 (2) 398 87 - - - (1,248) 50 (1,198) 920 85 (3) (8) 917 77 74 (317) 7,794 6,587 470 7,057 - - - - - - - - - - - - (6,927) (6,927) - - - - (358) 16 253 - (77) - - - - (6,927) 16 253 (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 49 to 96 form part of these financial statements. 46 GOODWIN PLC CONSOLIDATED BALANCE SHEET at 30th April, 2021 NON-CURRENT ASSETS … … … … … … … Property, plant and equipment … … … … … … … … Right-of-use assets Investment in associate … … … … … … … … 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 11 12 14 15 26 17 16 4 17 18 26 19 2021 £’000 77,063 3,691 829 24,813 191 - 2020 £’000 69,626 5,343 816 24,695 749 252 106,587 101,481 34,547 15,844 20,540 5,627 4,106 15,160 95,824 44,887 6,558 24,486 4,566 456 9,840 90,793 TOTAL ASSETS … … … … … … … … … … 202,411 192,274 CURRENT LIABILITIES … … … … … … … … … … Borrowings Contract liabilities … … … … … … … … … Trade payables and other financial liabilities … … … … … Other payables … … … … … … … … … … Derivative financial liabilities … … … … … … … … … … … … … … … … Liabilities for current tax … … … … … … Provisions for liabilities and charges NON-CURRENT LIABILITIES Borrowings … … … … … … … … … … Derivative financial liabilities … … … … … … … … Provisions for liabilities and charges … … … … … … Deferred tax liabilities … … … … … … … … … TOTAL LIABILITIES… … … … … … … … … … 20 4 21 22 26 23 20 26 23 24 1,607 14,332 21,730 4,025 2,016 1,174 608 45,492 33,066 - 251 5,574 38,891 84,383 14,624 18,965 23,485 3,298 1,071 1,873 160 63,476 15,599 202 324 3,071 19,196 82,672 NET ASSETS … … … … … … … … … … … 118,028 109,602 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 25 753 (852) 5,244 1,601 (1) 106,396 736 361 5,244 (499) (743) 99,918 TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 113,141 105,017 NON-CONTROLLING INTERESTS … … … … … … … 4,887 4,585 TOTAL EQUITY … … … … … … … … … … 118,028 109,602 These financial statements were approved by the Board of Directors on 11th August, 2021, 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 49 to 96 form part of these financial statements. 47 FINANCIAL STATEMENTS GOODWIN PLC CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 30th April, 2021 2021 £’000 2021 £’000 2020 £’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 … … Finance costs (net)… … … … … … … … … … … … … … Foreign exchange losses (Profit) / loss on sale of property, plant and equipment … … … … … … … Profit on disposal of subsidiary Share of profit of associate company … … … … … … … … … … … … Tax expense OPERATING PROFIT BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS Decrease in inventories … … … … … … … Increase in contract assets … … … … … … Decrease / (increase) in trade and other reservables … … (Decrease) / increase in contract liabilities … … … … Increase in trade and other payables… … … … … Increase in unhedged derivative balances … … … … CASH GENERATED FROM OPERATIONS … … … … … … … … Interest paid Corporation tax paid … … … … … … … NET CASH FROM OPERATING ACTIVITIES … … … 13,006 5,696 972 1,566 640 292 (745) (32) (60) 3,508 24,843 10,344 (9,242) 2,885 (4,428) 1,047 (438) 25,011 (734) (3,068) 21,209 2020 £’000 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 (844) (2,493) 19,173 CASH FLOW FROM INVESTING ACTIVITIES 1,958 Proceeds from sale of property, plant and equipment Acquisition of property, plant and equipment … … … (11,738) - Additional investment in existing subsidiaries … … … … … … … … Acquisition of intangible asset (719) (1,420) … … … … Development expenditure capitalised … 139 (6,062) (83) (1,855) (1,105) NET CASH OUTFLOW FROM INVESTING ACTIVITIES … … (11,919) (8,966) CASH FLOWS FROM FINANCING ACTIVITIES 17 Issue of shares … … … … … … … … (1,635) Payment of capital element of lease liabilities … … … (6,016) Dividends paid … … … … … … … … (125) Dividends paid to non-controlling interests … … … Proceeds from new loans… … … … … … … 35,048 Repayment of loans and committed facilities … … … (30,772) 16 (1,463) (6,927) - 7,658 - NET CASH OUTFLOW FROM FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year … … … … … Effect of exchange rate fluctuations on cash held (3,483) 5,807 9,449 (96) CASH AND CASH EQUIVALENTS AT END OF YEAR (see note 19) 15,160 (716) 9,491 493 (535) 9,449 The notes on pages 48 to 96 form part of these financial statements. 48 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 accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in the European Union. 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 85 to 96. The accounting policies set out below have been applied consistently to all periods presented in these Group financial statements. 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 level of order input remaining high, 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 and 19 within these financial statements. New IFRS standards and interpretations adopted during 2021 In 2021 the following amendments had been endorsed by the EU, became effective and were, therefore, mandated to be adopted by the Group: • Amendments to IFRS 9, IAS39 and IFRS 7 – Interest rate benchmark reform phase 1 (effective for annual periods beginning on or after 1st January 2020) 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 implementation of these 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 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. During April 2021, the Company repaid in full the £30 million drawn down from the Bank of England’s CCFF scheme and having completed the refinancing of £10 million referred to within the 30th April, 2020 accounts, currently has at its disposal £50.5 million of Bank facilities, £44.5 million of which are vested in long term committed facilities. The Directors have, as part of this going concern assessment, considered the ongoing impact of Covid-19 on the Group’s operations. We are now more than eighteen months on from the onset of Covid-19 and whilst we experienced a slow down in the Refractory Engineering segment of the business during March 2020 to August 2020, since then most of the entities in this division are seeing record levels of activity. As predicted when writing the 30th April, 2020 going concern assessment, there has been little Covid-19 impact on the Mechanical Engineering segment of the business. Whilst we have and are still seeing temporary impacts on our overseas pump company operations, we are thankfully seeing minimal impact on Group activities as a result of the virus pandemic. 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 financial commitments during the forecast period whilst remaining compliant with its financial covenants. The downside model factors in adverse circumstances such as the loss of a major customer and a new Covid-19 impact on our Refractory Engineering segment. Since the end of the financial year, the Company has entered into a ten year interest rate swap agreement which fixes our variable interest rate on borrowings at less than 1% for the entire period. The Directors see 49 NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policies (continued) Going concern (continued) no shortage of investment opportunities in the coming years and so, given the historical low level of interest rates, we deemed it prudent to remove the impact of higher interest rates from our risk modelling. Whilst our carrying values of trade debtors and contract assets are significant, we see little risk here in terms of recovery. We credit insure our debtors and pre credit risk (work in progress) and for significant contracts where credit insurance is not available, we ensure where possible that these contracts are backed by letters of credit or cash positive milestone payments. As discussed elsewhere within these accounts, the Mechanical Engineering order book remains very high and the Refractory Engineering segment is buoyant. The Directors are confident that the Group and Company will have sufficient funds to continue to meet their liabilities as they fall due for at least twelve 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 The functional and presentational currency of the Group is GBP. 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 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. Trade receivables are held with the intention of collecting the contractual cash flows and are measured subsequently, therefore, at amortised cost. 50 NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policies (continued) Financial instruments (continued) Principal non-derivative financial assets and liabilities (continued) 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. Principal non-derivative financial liabilities 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. As at the year-end, the Group held only currency derivatives, with the valuations based on the period end currency rates, as adjusted for the forward points to maturity, the time value of money and the banks’ assessed credit risk and margin. 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. 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. 51 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, within cost of sales. 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 … … … … • Freehold buildings … … … … • Leasehold property … … … • Plant and machinery … … … • Motor vehicles … … … … • Tooling … … … … … • Other equipment … … … … 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 identifiable net assets 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. 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 - 20 years • Customer lists 2 - 10 years • Order book 1 year • Distribution rights 25 years • Software and licences 3 - 5 years • Non-compete agreements 15 years 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 52 NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policies (continued) Impairment of intangibles (continued) 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. 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. 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. Provisions General 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 recognised 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. 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. 53 NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policies (continued) Revenue (continued) 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, whereby control passes to the customer, once the invoice has been raised. 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 product contracts where, as part of the contract terms, there is a termination for convenience clause which, if invoked, allows the Group company to charge for profit earned to date. 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. 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. Leases 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 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 as an 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 and furnaces, have been leased under contracts with an option to buy the asset at the end of the lease term. The Group also leases 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. 54 NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policies (continued) Financial income and costs Financial expenses comprise interest payable, interest on lease liabilities using the effective interest method together with the amortisation of any facility arrangement fees. 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. New IFRS standards, amendments and interpretations not adopted The IASB and IFRIC have issued additional standards and amendments which are effective for periods starting after the date of these financial statements. The following standards and amendments have not yet been adopted by the Group: • Amendments to IFRS 9, IAS39, IFRS 7, IFRS 4 and IFRS 16 – Interest rate benchmark reform phase 2 (effective for annual periods beginning on or after 1st January 2021) Amendments to IAS 16 – Property, plant and equipment: proceeds before intended use (effective for annual periods beginning on or after 1st January 2022) • The Group has considered the impact of these new standards and interpretations in future periods on profit, earnings per share and net assets and none are expected to result in 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 and judgements 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 55 NOTES TO THE FINANCIAL STATEMENTS 2. Accounting estimates and judgements (continued) Key estimates and judgements (continued) IFRS 15 Revenue Recognition (continued) 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. However, the advanced stage of completion of a number of contracts reduces the risk of unforeseen events arising, and given that the initial position taken on material contracts at the balance sheet date are revisited as part of the post balance sheet review process prior to the financial statements being signed off, we would conclude that the risk of a material impact on the financial statements arising here is low. Determination of the basis for the amortisation / impairment of intangible assets The Group carries different classes of intangible assets on its balance sheet, which include goodwill, manufacturing rights, brand names and development costs. Capitalised intangible costs are amortised on a straight-line basis, which commences when the Group is expected to benefit from cash inflows. A key estimate is required in determining the useful economic life over which each asset is to be amortised, with current timeframes ranging from fifteen to twenty-five years. In arriving at the appropriate timeframe for amortisation, there are essentially two key estimates, namely the product life cycle and the amount of profit generated from the expected income streams. In terms of sensitivity, then, in regard to the intangible assets other than goodwill, if we were to assume assets with estimated useful lives of fifteen years or more were reduced by one third, then the pre tax profit and loss impact on the current year reported figures would be to reduce profits by £481,000 (2020: £656,000). In accordance with IAS 38, the basis on which goodwill / intangible assets are amortised / impaired is assessed annually. Sensitivity as regards goodwill is considered within note 15 to these financial statements. 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. 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. 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 26(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. 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. Associates are included in refractory engineering. In accordance with the requirements of IFRS 8, information regarding the Group’s operating segments is reported on the opposite page. 56 NOTES TO THE FINANCIAL STATEMENTS 3. Segmental information (continued) Products and services from which reportable segments derive their revenues (continued) Year Ended 30th April Revenue Mechanical Engineering Refractory Engineering Sub Total 2021 £’000 2020 £’000 2021 £’000 2020 £’000 2021 £’000 2020 £’000 External sales … … … … 86,616 100,078 Inter-segment sales … … … 20,871 25,821 44,615 11,526 44,434 131,231 144,512 8,361 32,397 34,182 Total revenue … … … … 107,487 125,899 56,141 52,795 163,628 178,694 Reconciliation to consolidated revenue: Inter-segment sales … … … Consolidated revenue for the year Year Ended 30th April Profits Operating profit including share (32,397) (34,182) 131,231 144,512 Mechanical Engineering Refractory Engineering Sub Total 2021 £’000 2020 £’000 2021 £’000 2020 £’000 2021 £’000 2020 £’000 of associates … … … … 10,823 8,065 9,340 7,034 20,163 15,099 % of total operating profit including share of associates … … … Group centre … … … … Group finance expenses … … Consolidated profit before tax for the year … … … Tax … … … … … Consolidated profit after tax for the year … … … Year Ended 30th April Segmental net assets 54% 53% 46% 47% 100% 100% (3,009) (2,175) (640) (809) 16,514 12,115 (3,508) (3,775) 13,006 8,340 Segmental total assets 2021 £’000 2020 £’000 Segmental total liabilities 2021 £’000 2020 £’000 Segmental net assets 2021 £’000 2020 £’000 Mechanical Engineering … … Refractory Engineering … … 92,929 44,114 95,193 41,962 66,909 20,591 72,207 22,850 26,020 23,523 22,986 19,112 Sub total reportable segment … 137,043 137,155 87,500 95,057 49,543 42,098 Goodwin PLC net assets … … Elimination of Goodwin PLC investments Goodwill … … … … Consolidated total net assets … 83,998 (25,392) 9,879 83,415 (25,801) 9,890 118,028 109,602 57 NOTES TO THE FINANCIAL STATEMENTS 3. Segmental information (continued) The investment in associate of £829,000 (2020: £816,000) is reported within the refractory engineering total assets. 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. Segmental capital expenditure Property, plant and equipment Right-of-use assets Intangible assets Total Year Ended 30th April 2021 £’000 Goodwin PLC … … 5,315 2020 £’000 2,824 2021 £’000 1,180 2020 £’000 - 2021 £’000 151 2020 £’000 2,333 2021 £’000 6,646 2020 £’000 5,157 Mechanical Engineering … … 4,952 2,511 1,146 156 1,123 613 7,221 3,280 Refractory Engineering … … 1,570 633 74 1,033 456 633 2,100 2,299 11,837 5,968 2,400 1,189 1,730 3,579 15,967 10,736 Segmental depreciation, amortisation and impairment Year Ended 30th April Goodwin PLC … … … … Mechanical Engineering … … Refractory Engineering … … Depreciation Amortisation and impairment Total 2021 £’000 2,970 2,346 1,352 2020 £’000 2,934 2,369 1,398 2021 £’000 1,106 20 440 2020 £’000 708 97 523 2021 £’000 4,076 2,366 1,792 2020 £’000 3,642 2,466 1,921 6,668 6,701 1,566 1,328 8,234 8,029 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, 2021 Year ended 30th April, 2020 Revenue £’000 39,755 21,473 8,027 28,255 33,721 UK Rest of Europe USA Pacific Basin Rest of World Opera- tional net assets £’000 Non- Capital current expendi- ture £’000 assets £’000 81,982 89,944 13,634 8,309 3,264 - 13,708 14,029 - 6,499 6,880 279 - 719 1,335 Opera- tional net assets £’000 76,467 8,346 - 13,513 11,276 Non- current assets £’000 84,198 3,439 - 7,132 6,712 Capital expendi- ture £’000 8,681 207 - 1,248 600 Revenue £’000 39,609 20,004 12,749 34,844 37,306 Total 131,231 118,028 106,587 15,967 144,512 109,602 101,481 10,736 Of the £21,473,000 (April 2020: £20,004,000) sales to the rest of Europe, £8,366,000 (April 2020: £5,975,000), relate to the European sales of our German-domiciled subsidiary, Noreva GmbH. 58 NOTES TO THE FINANCIAL STATEMENTS 4. Revenue The following tables provide an analysis of revenue by geographical market and by product line. Geographical market Year ended 30th April, 2021 Year ended 30th April, 2020 Mechanical Refractory Engineering Engineering £’000 £’000 Mechanical Refractory Total Engineering Engineering £’000 £’000 £’000 11,497 39,755 6,350 21,473 431 8,027 17,356 28,255 8,981 33,721 29,187 13,088 12,664 16,361 28,778 10,422 6,916 85 18,483 8,528 44,615 131,231 100,078 44,434 144,512 Total £’000 39,609 20,004 12,749 34,844 37,306 UK Rest of Europe USA Pacific Basin Rest of World Total Product lines 28,258 15,123 7,596 10,899 24,740 86,616 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 10,630 44,615 55,245 Bespoke products – point in time 11,203 - 11,203 9,545 25,427 44,434 - Total £’000 53,979 25,427 Point in time revenue 21,833 44,615 66,448 34,972 44,434 79,406 Minimum period contracts Bespoke products – over time Over time revenue 3,306 61,477 64,783 - - - 3,306 61,477 4,143 60,963 64,783 65,106 - - - 4,143 60,963 65,106 Total revenue 86,616 44,615 131,231 100,078 44,434 144,512 The following table presents information about receivables, contract assets and liabilities from contracts with customers. 2021 £’000 2020 £’000 Trade receivables (note 17) … … … … … … … … … … … … … … … … … … … … … Contract assets Contract liabilities … … … … … … … … … … … 19,378 15,844 (14,332) 23,589 6,558 (18,965) Revenue recognised in the year, which was included in the contract liability balance at the beginning of the period, totalled £9,710,000 (2020: £9,495,000). Revenue of £387,000 (2020: £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 shown below. 20,890 11,182 Performance obligations due to be satisfied within one year … … … … Performance obligations due to be satisfied after more than one year … … … 2021 £’000 33,216 14,855 2020 £’000 19,585 45,586 48,071 65,171 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 £2,235,000 (2020: £2,218,000). The Group’s revenue is not significantly impacted by seasonal or cyclical events. The potential risk of the loss of any key customer is limited as, typically, no single customer accounts for more than 10% of annual turnover. 59 NOTES TO THE FINANCIAL STATEMENTS 5. 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 Profit on sale of property … … … … … … … … … Write back of deferred consideration … … … … … … … … Depreciation: Owned assets … … … … … … … … … … … Right-of-use assets (see below) … … … … … … … … Amortisation and impairment of intangible assets … … … … … Loss on sale of other tangible fixed assets … … … … … … … Profit on disposal of subsidiary … … … … … … … … Research expenditure … … … … … … … … … … … Impairment of trade receivables charged to the statement of profit or loss Foreign exchange (gains) / losses … … … … … … … … Mark to market derivative 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 … … … … … Expenses relating to short-term property leases … … … … … … Expenses relating to short-term plant and equipment leases … … … … Expenses relating to leases of low-value assets … … … … … … Government grants received including Covid-19 support … … … … Depreciation on right-of-use assets may be analysed as follows: Right of use assets depreciation – finance leases (IAS 17 definition) … … Right of use assets depreciation – operating leases (IAS 17 definition) … … Depreciation – right of use assets … … … … … … … … 6. Staff numbers and costs 2021 £’000 - (763) - 5,696 972 1,566 18 (32) 4,185 319 (686) (438) 63 188 268 142 14 (1,427) £’000 422 550 972 2020 £’000 (690) - (204) 5,874 827 1,328 52 (172) 306 49 1,465 (980) 120 271 380 121 20 (227) £’000 290 537 827 The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows: Number of employees 2020 2021 Subsidiary employees … … … … … … … … … … Goodwin PLC company employees … … … … … … … … The aggregate payroll costs of these persons were as follows: Wages and salaries … … … … … … … … … … Social security costs… … … … … … … … … … Other pension costs … … … … … … … … … … 1,080 49 1,129 2021 £’000 38,577 4,976 1,320 44,873 1,139 51 1,190 2020 £’000 38,633 4,027 1,581 44,241 Of the total staff costs £31,522,000 (2020: £32,204,000) are reported within cost of sales, and £13,351,000 (2020: £12,037,000) are reported within administrative expenses. Details of the Directors’ remuneration can be found within the Directors Remuneration Report on pages 29 and 30. The emoluments of the highest paid Director were £355,000 (2020: £310,000). The number of Directors, who were members of a defined contribution pension scheme, was 6 (2020: 6). 60 NOTES TO THE FINANCIAL STATEMENTS 2021 £’000 111 95 747 (91) 751 640 2020 £’000 122 97 874 (40) 931 809 £’000 £’000 7. Finance costs (net) Interest income … … … … … … … … … … … Interest expense on lease liabilities … … … … … … … … Interest expenses on bank loans and overdrafts … … … … … … Capitalised interest on fixed asset projects … … … … … … … Interest expense … … … … … … … … … … … Finance costs (net)… … … … … … … … … … … Interest on right-of-use assets may be analysed as follows: Interest on lease liabilities – finance leases (IAS 17 definition) … … … Interest on lease liabilities – operating leases (IAS 17 definition) … … … Interest expense on lease liabilities … … … … … … … … 8. 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 44 51 95 2021 £’000 1,878 (128) 1,750 1,845 (87) - 1,758 3,508 2021 £’000 Profit before taxation … … … … … … … … … … 16,514 Tax using the UK corporation tax rate of 19.00% (2020: 19.00%) … … … … … … … … … … … … … Non-taxable income Non-deductible expenses … … … … … … … … … Other permanent timing differences … … … … … … … … Over provision in prior years … … … … … … … … … Losses not recognised … … … … … … … … … … Share-based payments … … … … … … … … … … Losses utilised where a deferred tax asset was not recognised … … … Rate change to prior year … … … … … … … … … Withholding tax unrelieved … … … … … … … … … … … … … … … … … Difference in overseas tax rates Effect of equity accounting for associate … … … … … … … 3,138 (45) 33 309 (210) 133 59 (115) - 108 113 (15) Total tax expense … … … … … … … … … … … 3,508 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: Cash flow hedge deferred tax (charge) / credit … … … … … … 61 2021 £’000 (673) 2020 £’000 77 41 56 97 2020 £’000 1,985 (62) 1,923 1,531 (50) 371 1,852 3,775 2020 £’000 12,115 2,302 (57) 116 214 (112) 114 - - 371 36 805 (14) 3,775 9. Earnings per share NOTES TO THE FINANCIAL STATEMENTS Number of ordinary shares 2021 £’000 2020 £’000 Ordinary shares in issue Balance at 1st May, 2020 (1st May, 2019) … … … … … … … 7,363,200 7,200,000 Shares issued in the year (note 33) … … … … … … … … 163,200 163,200 7,526,400 7,363,200 Outstanding ordinary share options (note 33) … … … … … 163,200 326,400 Total ordinary shares (issued and options) … … … … … … 7,689,600 7,689,600 Weighted average number of ordinary shares in issue … … … … … 7,445,024 7,288,289 Weighted average number of outstanding ordinary share options … … … 162,651 325,365 Denominator used for diluted earnings per share calculation … … 7,607,675 7,613,654 Relevant profits attributable to ordinary shareholders … … … … … 12,494 2021 £’000 10. Dividends Paid ordinary dividends during the year in respect of prior years 81.71p (2019: 96.21p) per qualifying ordinary share … … … … … 2021 £’000 6,016 2020 £’000 7,866 2020 £’000 6,927 After the balance sheet date an ordinary dividend of 102.24p per qualifying ordinary share was proposed by the Directors (2020: Ordinary dividend of 81.71p). The proposed current year ordinary dividend of £7,862,000 has not been provided for within these financial statements (2020: Proposed ordinary dividend of £6,016,000 was not provided for within the comparative figures). 62 NOTES TO THE FINANCIAL STATEMENTS 11. Property, plant and equipment Cost Land and buildings machinery £’000 Other Plant and equipment ** £’000 £’000 Balance at 1st May, 2019 … … … Additions … … … … … … Reclassification … … … … … Disposals … … … … … … Transfer to right-of-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) Assets in course of construc- tion £’000 4,767 1,761 (4,520) - Total £’000 127,052 5,968 - (1,734) - (2) (4,648) (724) Balance at 30th April, 2020 … … 41,671 78,959 3,278 2,006 125,914 Balance at 1st May, 2020 … … … Additions … … … … … … Reclassification – others … … … Reclassification – ROU* … … … Disposals … … … … … … Exchange adjustment … … … … 41,671 1,397 74 - (641) (503) 78,959 3,906 (3,888) 4,045 (1,221) (222) 3,278 486 4,002 - (747) (64) 2,006 6,048 (188) - (75) (12) 125,914 11,837 - 4,045 (2,684) (801) Balance at 30th April, 2021 … … 41,998 81,579 6,955 7,779 138,311 Depreciation Balance at 1st May, 2019 … … … Charged in year … … … … … Reclassification … … … … … Disposals … … … … … … Transfer to right-of-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 Balance at 1st May, 2020 … … … Charged in year … … … … … Reclassification – others … … … Reclassification – ROU* … … … Disposals … … … … … … Exchange adjustment … … … … 8,150 1,195 - - - (119) 45,799 4,004 (3,032) 1,045 (812) (147) 2,339 497 3,032 - (659) (44) Balance at 30th April, 2021 … … 9,226 46,857 5,165 - - - - - - - - - - - - - - 52,946 5,874 - (1,543) (693) (296) 56,288 56,288 5,696 - 1,045 (1,471) (310) 61,248 Net book value At 1st May, 2019 … … … … 34,773 33,381 At 30th April, 2020 and 1st May, 2020 … 33,521 33,160 1,185 939 4,767 2,006 74,106 69,626 At 30th April, 2021 … … … 32,772 34,722 1,790 7,779 77,063 * This is a transfer from the right-of-use assets category on the settlement of a lease purchase agreement and payment of the option to purchase fee. ** Other equipment comprises motor vehicles, IT hardware and office equipment. Plant and machinery During the year the Group expended £11,837,000 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. Assets in the course of construction of £7,779,000 (2020: £2,006,000) comprise £4,481,000 (2020: £1,345,000) in relation to land and buildings and £3,298,000 (2020: £661,000) for plant and machinery. 63 NOTES TO THE FINANCIAL STATEMENTS 11. Property, plant and equipment (continued) Depreciation Depreciation is reported as follows: Cost of sales Administrative expenses … … … … … … … … … … … … … … … … … … … … 2021 £’000 5,393 303 5,696 2020 £’000 5,557 317 5,874 Security There is a charge over Noreva GmbH’s land and buildings of €1.4 million to secure a bank loan repayable by instalments and at Goodwin PLC a bank loan of £4.0 million is secured against three furnaces located at Goodwin Steel Castings Limited (see note 20). 12. Right-of-use assets Cost Land and buildings £’000 Plant and machinery £’000 Other equipment £’000 Total £’000 - 100 1,042 Balance recognised on transition to IFRS 16 Opening balance transfer from property, plant and equipment … … … … Additions … … … … … … Exchange adjustment … … … … Balance at 30th April, 2020 Balance at 1st May, 2020 … … … Additions … … … … … … Transfer to tangible fixed assets … … Reclassification … … … … … Disposals … … … … … … Exchange adjustment … … … … Balance at 30th April, 2021 Depreciation Opening balance transfer from property, plant and equipment … … … … Charged in year … … … … … Exchange adjustment … … … … Balance at 30th April, 2020 Balance at 1st May, 2020 … … … Charged in year … … … … … Transfer to tangible fixed assets … … Reclassification … … … … … Disposals … … … … … … Exchange adjustment … … … … Balance at 30th April, 2021 Net book value At 1st May, 2019 … … … … … At 30th April, 2020 and 1st May, 2020 … At 30th April, 2021 Depreciation Depreciation is charged as follows: 942 - 1,013 (18) 1,937 1,937 1,079 - - (285) (3) 2,728 - 506 (6) 500 500 499 - - (212) (2) 785 942 1,437 1,943 4,648 144 (5) 4,787 4,787 70 (4,045) (86) (6) 1 721 693 290 (1) 982 982 306 (1,045) (13) (6) - 224 3,955 3,805 497 - 32 - 4,648 1,189 (23) 132 6,856 132 1,251 - 86 - (10) 6,856 2,400 (4,045) - (291) (12) 1,459 4,908 - 31 - 31 31 167 - 13 - (3) 693 827 (7) 1,513 1,513 972 (1,045) - (218) (5) 208 1,217 100 101 4,997 5,343 1,251 3,691 2021 £’000 473 499 972 2020 £’000 321 506 827 Cost of sales Administrative expenses … … … … … … … … … … … … … … … … … … … … Of the £972,000 depreciation, £422,000 relates to finance leases (IAS 17 definition) (2020: £290,000) and £550,000 relates to operating leases (2020: £537,000). 64 NOTES TO THE FINANCIAL STATEMENTS 13. Investments in subsidiaries The Group has the following principal subsidiaries. Non-principal subsidiaries are listed in note 30: 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 Indústria e Comércio de Bombas 8 Submersas Ltda … … … … … … 1 Internet Central Limited … … … … … 9 Goodwin Submersible Pumps Australia Pty. Limited 1 Metal Proving Services Limited … … … … NRPL Aero Oy … … … … … … 10 Goodwin Submersible Pumps Africa Pty. Limited … 15 1 Duvelco Limited … … … … … … 1 1 1 3 4 5 6 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 SRS (Qingdao) Casting Materials Company Limited 13 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 Brazil Ordinary England and Wales Ordinary Australia Ordinary England and Wales Ordinary Ordinary Finland South Africa Ordinary England and Wales Ordinary England and Wales Ordinary England and Wales Ordinary England and Wales Ordinary Ordinary India Ordinary Thailand Ordinary China Ordinary China Ordinary Thailand 100 82 100 100 77 100 100 100 100 100 100 58 75.5 75.5 75 *The registered address for each company can be found in note 32. All of the above companies are included as part of the consolidated accounts and are involved in mechanical and refractory engineering. 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 24.5 24.5 24.5 24.5 24.5 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) allocated to non-controlling interests … … … … … Dividends paid to non-controlling interests … … … … … Accumulated reserves held by non-controlling interests … … Mechanical Engineering Refractory Engineering Total 2021 £’000 2020 £’000 2021 £’000 2020 £’000 2021 £’000 2020 £’000 (283) (262) 795 736 512 474 - - (125) - (125) - 243 458 4,644 4,127 4,887 4,585 65 NOTES TO THE FINANCIAL STATEMENTS 13. Investments in subsidiaries (continued) 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. Year Ended 30th April Non-current assets … … … Mechanical Engineering 2021 £’000 2,954 2020 £’000 2,985 Current assets … … … 13,425 20,550 Refractory Engineering 2021 £’000 12,037 14,529 2020 £’000 12,236 12,671 Total 2021 £’000 14,991 27,954 2020 £’000 15,221 33,221 Current liabilities … … … (13,333) (17,170) (7,071) (7,082) (20,404) (24,252) Non-current liabilities … … (388) (2,939) (511) (728) (899) (3,667) 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 Net cash from operating activities Net cash from investing activities Net cash from financing activities 14. Investment in associate 2,658 3,426 18,984 17,097 21,642 20,523 15,984 19,835 19,269 18,764 35,253 38,599 (918) (1,177) 3,137 2,851 2,219 1,674 (769) 823 (320) (146) (985) 511 (646) (32) 2,733 1,926 (992) (1,037) 2,647 3,977 (1,937) (1,032) 1,964 2,749 (1,312) (1,183) 1,662 4,488 (2,583) (1,064) The Group’s share of profit after tax in its immaterial associate for the year ended 30th April, 2021 was £60,000 (2020: £66,000). Summary financial information of the Group’s share of its associate company is as follows: … … … … … … … … … … Balance at 1st May Profit before tax … … … … … … … … … … … Tax … … … … … … … … … … … … … Exchange adjustment … … … … … … … … … … Balance at 30th April… … … … … … … … … … Assets … … … … … … … … … … … … Liabilities … … … … … … … … … … … … 2021 £’000 816 75 (15) (47) 829 967 (138) 829 2020 £’000 739 80 (14) 11 816 1,076 (260) 816 66 NOTES TO THE FINANCIAL STATEMENTS 15. Intangible assets Cost Balance at 1st May, 2019 … Additions… … … … Reclassification … … Disposals… … … … … Exchange adjustment Brand names and intellectual property £’000 7,674 1,936 - - 62 Goodwill £’000 10,008 161 - - 64 Balance at 30th April, 2020 10,233 9,672 Balance at 1st May, 2020 … Additions… … … … Disposals… … … … … Exchange adjustment 10,233 - - (15) 9,672 18 - (45) Order book £’000 159 - - - 2 161 161 - (161) - Manufact- Software Develop- ment costs £’000 and Licences £’000 uring rights £’000 5,318 102 - - - 684 275 357 (116) (25) 7,313 1,105 - - 8 Total £’000 31,156 3,579 357 (116) 111 5,420 1,175 8,426 35,087 5,420 68 - 5 1,175 224 (11) 3 8,426 1,420 (25) - 35,087 1,730 (197) (52) Balance at 30th April, 2021 10,218 9,645 - 5,493 1,391 9,821 36,568 Amortisation and impairment Balance at 1st May, 2019 … Amortisation for the year … Reclassification … … Disposals… … … … … Exchange adjustment 343 - - - - 5,411 439 - - 34 Balance at 30th April, 2020 343 5,884 Balance at 1st May, 2020 … Amortisation for the year … Impairment … … … Disposals… … … … … Exchange adjustment 343 - - - (4) 5,884 591 - - (12) Balance at 30th April, 2021 339 6,463 Net book value At 1st May, 2019… … … 9,665 2,263 At 30th April, 2020 and 1st May, 2020 … … 9,890 3,788 At 30th April, 2021 … 9,879 3,182 159 - - - 2 161 161 - - (161) - - - - - 1,845 382 - - - 2,227 2,227 334 - - 2 365 220 357 (116) (16) 810 810 240 - (6) 2 679 287 - - 1 8,802 1,328 357 (116) 21 967 10,392 967 381 20 (24) - 10,392 1,546 20 (191) (12) 2,563 1,046 1,344 11,755 3,473 319 6,634 22,354 3,193 2,930 365 345 7,459 24,695 8,477 24,813 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 assets, including the intellectual property, trade name and associated trademarks. For the past 75 years, Castaldo has been at the heart of the worldwide jewellery casting industry by supplying moulding rubber and injection waxes, and the recent acquisition will further increase the Group’s global market share. Identifiable assets acquired The table below analyses the total identifiable Castaldo assets acquired during the year ended 30th April, 2020. 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 67 NOTES TO THE FINANCIAL STATEMENTS 15. Intangible assets (continued) Consideration The consideration for the net assets acquired was as follows: Cash consideration paid in the previous year … … … … … … … … … … … … Cash consideration paid in the current year … … … … Total cash consideration Acquisition costs … … … … … … … … … … … … … £’000 1,517 457 1,974 23 Amortisation and impairment charges The amortisation charge of £1,546,000 (2020: £1,328,000) and impairment charge of £20,000 (2020: £Nil) are reported 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: 2021 £’000 4,742 3,346 1,260 531 2020 £’000 4,744 3,346 1,260 540 Noreva GmbH … … … … … … … … … … Goodwin Refractory Services Holdings Limited … … … … … NRPL Aero Oy… … … … … … … … … … … Other … … … … … … … … … … … … 9,879 9,890 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 fair value less costs of disposal. 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 budgets and plans approved 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 (typically 0% to 15%), with a zero growth rate then assumed for any terminal values. The forecasts are then discounted at an appropriate pre-tax weighted average cost of capital rate considering the perceived levels of risk, ranging between 9.8% and 17.8% (2020: between 10% and 20%) for the Mechanical Engineering Division and 11.4% to 12% (2020: between 13% and 21%) 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. 68 NOTES TO THE FINANCIAL STATEMENTS 16. Inventories Raw materials and consumables … … … … … … … … Work in progress … … … … … … … … … … … Finished goods … … … … … … … … … … … The amount of inventory impaired during the year was £1,427,000 (2020: £2,745,000). The Group carries provisions against inventories as follows: Raw materials and consumables … … … … … … … … Work in progress … … … … … … … … … … … Finished goods … … … … … … … … … … … 17. Trade and other financial assets Balances due within one year Trade receivables … … … … … … … … … … Other financial assets … … … … … … … … … … … 2021 £’000 16,572 9,784 8,191 34,547 2021 £’000 373 493 435 1,301 2021 £’000 19,378 1,162 20,540 2020 £’000 18,717 17,334 8,836 44,887 2020 £’000 301 532 417 1,250 2020 £’000 23,589 897 24,486 The Group had 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 £250,000 (2020: £255,000) being reported within other current financial assets. Interest is charged at a commercial rate. Balances due after more than one year Other receivables … … … … … … … … … … … 18. Other receivables Advance payments to suppliers … … … … … … … … Prepayments and other non-financial assets … … … … … … Corporation tax receivable … … … … … … … … … … … … … … … … … Deferred tax asset (see note 24) 19. Cash and cash equivalents Cash and cash equivalents per balance sheet … … … … … … Bank overdrafts … … … … … … … … … … … 2021 £’000 - 2021 £’000 2,002 2,594 902 129 5,627 2021 £’000 15,160 - Cash and cash equivalents per cash flow statement … … … … … 15,160 2020 £’000 252 2020 £’000 1,640 2,582 284 60 4,566 2020 £’000 9,840 (391) 9,449 20. Borrowings This note provides information about the contractual terms of the Group’s lease liabilities, bank loans and borrowings. The bank loans repayable by instalment are secured against a property in Germany and furnaces in the UK (see note 11). For more information about the Group’s exposure to interest rate and foreign currency risk, see note 26. Non-current liabilities Bank loans – repayable by instalments … … … … … … … Bank loans – rolling credit facilities … … … … … … … … Lease liabilities … … … … … … … … … … … 2021 £’000 4,538 26,000 2,528 33,066 2020 £’000 5,260 9,000 1,339 15,599 69 NOTES TO THE FINANCIAL STATEMENTS 20. Borrowings (continued) Current liabilities Bank overdrafts … … … … … … … … … … … Bank loans – repayable by instalments … … … … … … … Bank loans – rolling credit facilities … … … … … … … … Lease liabilities … … … … … … … … … … … - 761 - 846 1,607 391 750 12,000 1,483 14,624 Reconciliation of liabilities arising from financing activities Opening balance 1st May Change in bank 2020 movements overdrafts £’000 £’000 £’000 Non-cash Foreign Cash exchange flows movement £’000 £’000 - - - 2,195 2,195 (391) - - - - (724) 5,000 (1,635) (391) 2,641 - 13 - (8) 5 Non-cash movements £’000 Change in bank overdrafts £’000 Foreign Cash exchange flows movement £’000 £’000 Closing balance 30th April 2021 £’000 - 5,299 26,000 3,374 34,673 Closing balance 30th April 2020 £’000 - - - 2,087 2,087 (8,756) - - - - 4,556 3,000 (1,361) (8,756) 6,195 - 20 - (7) 13 391 6,010 21,000 2,822 30,223 Bank overdrafts used for cash management … 391 Bank loans – repayable by instalments … … 6,010 Bank loans – rolling credit facilities … … Lease liabilities … … 21,000 2,822 30,223 Opening balance 1st May 2019 £’000 Bank overdrafts used for cash management … 9,147 Bank loans – repayable by instalments … … 1,434 Bank loans – rolling credit facilities … … Lease liabilities … … 18,000 2,103 30,684 Bank loans repayable by instalments Bank loans are payable as follows: Less than one year … … … Between one and five years … … … More than five years 2021 2020 Minimum loan payments £’000 903 3,570 1,406 5,879 Interest Principal £’000 £’000 142 324 114 580 761 3,246 1,292 5,299 Minimum loan payments £’000 912 3,547 2,289 6,748 Interest £’000 Principal £’000 162 419 157 738 750 3,128 2,132 6,010 70 NOTES TO THE FINANCIAL STATEMENTS 20. Borrowings (continued) Lease liabilities The contractual undiscounted cash flows are payable as follows: Less than one year … … … … Between one and five years … … More than five years 2021 2020 Minimum lease payments £’000 938 2,219 454 3,611 Interest Principal £’000 £’000 92 127 18 237 846 2,092 436 3,374 Minimum lease payments £’000 1,552 1,410 - 2,962 Interest £’000 Principal £’000 69 71 - 140 1,483 1,339 - 2,822 Of the total lease liabilities, £1,292,000 (2020: £1,256,000) relate to finance leases (IAS17 definition) and £2,082,000 (2020: £1,566,000) to operating leases (IAS17 definition). 21. Trade and other financial liabilities Trade payables … … … … … … … … … … … Other financial liabilities… … … … … … … … … … Other taxation and social security costs … … … … … … … … 16,791 1,424 … 3,515 … 2021 £’000 2020 £’000 19,238 1,688 2,559 22. Other payables Accrued expenses… … … … … … … … … … … Advance payments from customers … … … … … … … … … … 23. Provisions Balance at 1st May, 2020 (1st May, 2019) … … … … … … … Increase in provision … … … … … … … … … … Release of provision … … … … … … … … … … Provision utilised … … … … … … … … … … … Exchange adjustment … … … … … … … … … … Balance at 30th April… … … … … … … … … … Warranty due within one year … … … … … … … … … Warranty due after one year … … … … … … … … … Balance at 30th April… … … … … … … … … … … … … … … … … … … 21,730 23,485 2021 £’000 3,543 482 4,025 2021 £’000 484 550 (164) (11) - 859 608 251 859 2020 £’000 3,212 86 3,298 2020 £’000 493 251 - (265) 5 484 160 324 484 Provisions include warranties for products sold which generally cover a period of between 1 and 3 years, and other provisions which are due within one year. 71 NOTES TO THE FINANCIAL STATEMENTS 24. 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 … … … … … … 2021 £’000 127 46 58 915 234 1,380 2020 £’000 221 286 241 1,888 192 2,828 Deferred tax asset (see note 18) … … … … … … … … Deferred tax liability … … … … … … … … … … … … 2021 £’000 (4,509) (1,732) (494) - (90) 2020 £’000 (3,765) (1,898) (98) - (78) (6,825) (5,839) 2021 £’000 2020 £’000 129 (5,574) 60 (3,071) (5,445) (3,011) Property, plant and Intangible Derivative financial assets instruments £’000 £’000 equipment £’000 Share- based payments Other temporary reserve differences £’000 £’000 Total £’000 Balance at 1st May, 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) Recognised in profit or loss … … Recognised in equity … Exchange adjustment (866) - 28 (31) - (43) 94 (973) (673) - - - 18 - 12 (1,758) (673) (3) Balance at 30th April, 2021 (4,382) (1,686) (436) 915 144 (5,445) 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, 2021, the Group has not recognised £436,000 (2020: £511,000) of deferred tax assets in relation to the accumulated losses of £2,016,000 (2020: £2,015,000) within subsidiaries. The Finance (No.2) Act 2015 reduced the main rate of UK corporation tax to 19%, effective from 1st April, 2017. A further reduction in the UK corporation tax rate to 17% was expected to come into effect from 1 April, 2020 (as enacted by Finance Act 2016 on 15th September, 2016). However, legislation introduced in the Finance Act 2020 (enacted on 22nd July, 2020) repealed the reduction of the corporation tax, thereby maintaining the current rate of 19%. Deferred taxes on the balance sheet have been measured at 19% which represents the future corporation tax rate that was enacted at the balance sheet date. The UK Budget 2021 announcements on 3rd March, 2021 included measures to support economic recovery as a result of the ongoing Covid-19 pandemic. These included an increase to the UK’s main corporation tax rate to 25%, which is due to be effective from 1st April, 2023. These changes were not substantively enacted at the balance sheet date and hence have not been reflected in the measurement of deferred tax balances at the period end. If the Group’s deferred tax balances at the period end were re-measured at 25% this would result in a deferred tax charge of £1.5 million. 72 NOTES TO THE FINANCIAL STATEMENTS 25. Capital and reserves Share capital Authorised, allotted, called up and fully paid: 7,363,000 (2020: 7,200,000) ordinary shares of 10p each … … … … … Issue of 163,200 ordinary shares of 10p each … … … … … … … 2021 2020 £’000 £’000 736 17 753 720 16 736 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 33. 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 £528,000 (2020: £1,629,000), being an asset of £915,000 (2020: £1,348,000) in respect of the Equity Long Term Incentive Plan and a liability of £387,000 (2020: asset of £281,000) in respect of derivatives. 26. 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; trade and other receivables; contract assets, 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%), with a material value, 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. Whilst the theoretical credit risk would be the actual balances themselves as reported within the table below, this assumes that the credit insurance company is also a credit risk for the invoiced trade debtors and contract assets underwritten by them. Our insurer enjoys a strong credit rating with the likes of Moody’s, S&P and Fitch. As a result, and after having looked back on the Group’s track record of negligible impairment losses on these type of assets over the last 10 years, the Directors are of the opinion that there is no cost / benefit in performing an ECL type loss analysis and so impairment provisions are based on known issues rather than a statistical estimate. 73 NOTES TO THE FINANCIAL STATEMENTS 26. 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 4 17 17 19 26d) 2021 £’000 15,844 - 20,540 15,160 4,297 55,841 2020 £’000 6,558 252 24,486 9,840 1,205 42,341 The maximum exposure to credit risk for trade receivables, before taking into account credit insurance, at the reporting date by geographic region was: UK … … … … … … … … … … … … Rest of Europe … … … … … … … … … … USA … … … … … … … … … … … … Pacific Basin … … … … … … … … … … Rest of World … … … … … … … … … … Carrying amount 2021 £’000 3,874 4,102 775 5,008 5,619 2020 £’000 5,403 1,947 1,640 5,072 9,527 19,378 23,589 The ageing of trade receivables and impairments at the reporting date was: Net 2021 £’000 Not past due … … … 13,446 Past due 1-30 days … … 3,033 Past due 31-90 days… … 1,175 Past due more than 90 days 1,724 Gross 2021 £’000 13,503 3,035 1,189 2,199 Impairment provision 2021 £’000 (57) (2) (14) (475) Net 2020 £’000 14,696 3,067 2,609 3,217 Gross 2020 £’000 14,709 3,083 2,656 3,457 Impairment provision 2020 £’000 (13) (16) (47) (240) 19,378 19,926 (548) 23,589 23,905 (316) 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, 2020 (1st May, 2019) … … … … … … Increase in provision … … … … … … … … … Release of provision … … … … … … … … … Provision utilised during the year … … … … … … … Exchange adjustment … … … … … … … … … At 30th April … … … … … … … … … … 2021 £’000 316 369 (50) (89) 2 548 2020 £’000 281 188 (139) (8) (6) 316 74 NOTES TO THE FINANCIAL STATEMENTS 26. 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 2020 2021 £’000 £’000 Committed 2021 £’000 2020 £’000 Total 2021 £’000 2020 £’000 Unutilised bank facilities … 6,050 17,095 18,500 12,000 24,550 29,095 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. 2021 Contractual cash flows Within 1 year £’000 1-5 years £’000 5+ years £’000 Non-derivative financial liabilities 903 Bank loans and committed facilities … Lease liabilities 938 … … … … Trade and other financial liabilities … 21,730 29,570 2,219 - 1,406 454 - Total £’000 31,879 3,611 21,730 2021 Carrying value Total £’000 31,299 3,374 21,730 Total … … … … … … 23,571 31,789 1,860 57,220 56,403 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%. With effect from 1st September, 2021 the Group has entered into a ten year derivative with HSBC to fix its variable interest rate at less than 1% against a notional £30 million of debt. 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. 2020 Carrying value Total £’000 2020 Contractual cash flows Within 1 year £’000 1-5 years £’000 5+ years £’000 Total £’000 Non-derivative financial liabilities Bank loans and committed facilities … Overdrafts … … … … … Lease liabilities … … … … Trade and other financial liabilities … 12,912 391 1,552 23,485 12,547 - 1,410 - Total … … … … … … 38,340 13,957 2,289 - - - 2,289 27,748 391 2,962 23,485 54,586 27,010 391 2,822 23,485 53,708 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. 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. 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. 75 NOTES TO THE FINANCIAL STATEMENTS 26. Financial risk management (continued) c) Market risk (continued) Foreign exchange risk (continued) 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: 2021 US Dollar £’000 2020 US Dollar £’000 2021 2020 2021 2020 2021 Euro £’000 Euro £’000 Other £’000 Other £’000 Total £’000 2020 Total £’000 Trade and other receivables Cash and cash equivalents Trade and other payables 2,511 4,584 1,513 1,068 - - 4,024 5,652 789 576 (40) (2,634) 454 1,786 1,203 (272) (537) (1,770) (661) (1,185) (763) (1,768) (1,961) (4,723) 2,763 3,390 812 (2,751) (309) 18 3,266 657 The following significant exchange rates applied during the year: US Dollar … … … … … Euro … … … … … … Average exchange rate 2020 1.2661 1.1427 2021 1.3202 1.1222 Reporting date spot rate 2020 1.2594 1.1497 2021 1.3845 1.1500 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 financial year just completed, no new interest rate swaps or caps were entered into. As reported elsewhere in these financial statements the Company on 2nd July, 2021 has mitigated the impact of interest rate risk by taking out an interest rate swap derivative fixing £30 million of notional debt at less than 1% versus the variable inter-bank lending rate (SONIA) for a period of ten years. 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 2021 £’000 2020 £’000 2021 £’000 2020 £’000 2021 £’000 2020 £’000 2021 £’000 - - 250 - - - - - - - 15,160 - 9,840 - - 15,844 - 6,558 15,160 15,844 507 - - - - - - - - - - - - - - 20,290 4,297 (14,332) 24,231 1,205 (18,965) 20,540 4,297 (14,332) - - (391) (21,730) (2,016) - (23,485) (1,273) - (21,730) (2,016) - 2020 £’000 9,840 6,558 24,738 1,205 (18,965) (23,485) (1,273) (391) Cash and cash equivalents Contract assets Trade and financial assets Derivative assets Contract liabilities Trade and other financial liabilities Derivative liabilities Bank overdrafts Bank loans and committed facilities Lease liabilities (5,299) (2,945) (5,988) (2,822) (26,000) (429) (21,022) - - - - - (31,299) (3,374) (27,010) (2,822) (7,994) (8,303) (11,269) (11,573) 2,353 (11,729) (16,910) (31,605) 76 NOTES TO THE FINANCIAL STATEMENTS 26. 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, 2021, the capital used was £130.6 million, (2020: £123.8 million) as shown in the following table: 2021 £’000 Cash and cash equivalents … … … … … … (15,160) Total lease liabilities … … … … … … … 3,374 … … … … 31,299 Bank loans and committed facilities - Overdrafts … … … … … … … … Net debt in accordance with IFRS16 … … … … 19,513 Operating lease debt (IAS17 definition) … … … … (2,082) 2020 £’000 (9,840) 2,822 27,010 391 20,383 (1,566) Relevant net debt for KPI purposes… … … … … 17,431 Total equity attributable to equity holders of the parent … 113,141 18,817 105,017 Capital 130,572 123,834 The Directors, for the purpose of calculating and monitoring the Group’s gearing ratio, do not recognise the value of the capitalised leases where ownership does not ultimately vest with the Group – see note 34. 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, 2021 net debt was £17.4 million (2020: £18.8 million). The gearing ratio is 15.4% (2020: 17.9%). 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 26(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. Foreign currency forward contracts are denominated in the same currency as the highly probable future sales and the hedged ratio is 1:1. Forecast transactions The Group classifies its forward exchange contracts hedging forecast transactions as cash flow hedges and states them at fair value. 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. 77 26. Financial risk management (continued) d) Capital management (continued) Derivative financial instruments Nominal value Carrying amount of hedged item NOTES TO THE FINANCIAL STATEMENTS 2021 Accumulated amount of fair value hedge adjustments included in the carrying amount of the hedged item Change in value used to calculate hedge ineffect- iveness Cash Cost of flow hedging and reserve (net of tax) reserve (net of tax) £’000 Assets £’000 Liabilities £’000 Assets £’000 Liabilities £’000 £’000 £’000 £’000 Cash flow hedges Forward exchange contracts – current Forward exchange contracts – matured 43,945 1,166 (5) 1,166 (5) 1,259 929 14 15,852 904 - 904 904 732 59,797 2,070 (5) 2,070 (5) 2,163 1,661 Analysis of cash flow and cost of hedging reserve Attributable to equity holders of the parent Attributable to non-controlling interests 1,601 60 1,661 - 14 (1) 15 14 Nominal value Carrying amount of hedged item 2020 Accumulated amount of fair value hedge adjustments included in the carrying amount of the hedged item Change in value used to calculate hedge ineffect- iveness Cash Cost of flow hedging reserve and (net of reserve tax) (net of tax) £’000 Assets £’000 Liabilities £’000 Assets £’000 Liabilities £’000 £’000 £’000 £’000 97,107 338 (1,088) 9,400 106,507 - 338 (731) (1,819) - - - (750) (466) 169 (776) (731) (731) (1,481) (1,197) (593) (424) - (776) Cash flow hedges Forward exchange contracts – current Forward exchange contracts – matured Analysis of cash flow and cost of hedging reserve Attributable to equity holders of the parent Attributable to non-controlling interests 78 (499) 75 (424) (743) (33) (776) NOTES TO THE FINANCIAL STATEMENTS 26. Financial risk management (continued) d) Capital management (continued) 2021 2020 Nominal value Carrying amount of unhedged item Nominal value Carrying amount of unhedged item £’000 Assets £’000 Liabilities £’000 £’000 Assets £’000 Liabilities £’000 Forward exchange contracts not designated in a cash flow hedge … … … 28,926 3,131 (2,011) 36,802 867 (185) 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: 2021 Carrying amount £’000 Expected Within cash flow 1 year £’000 £’000 Between 1 and 5 years £’000 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 3,131 1,166 4,297 3,131 3,128 1,166 978 4,297 4,106 flow hedge relationship … … … (2,011) (2,011) (2,011) Liabilities designated and effective as cash flow hedging instruments … … Total liabilities (5) (5) (5) (2,016) (2,016) (2,016) Derivative financial instruments 3 188 191 - - - 2020 Carrying amount £’000 Expected Within 1 year cash flow £’000 £’000 Between 1 and 5 years £’000 867 338 867 338 1,205 1,205 223 233 456 (185) (185) (185) (1,088) (1,273) (1,088) (886) (1,273) (1,071) 644 105 749 - (202) (202) 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 79 NOTES TO THE FINANCIAL STATEMENTS 26. 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 2021 £’000 (Profit)/loss 2020 £’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 … … … … … … … (345) (207) 345 207 (424) (633) (202) 633 202 - Impact on the statement of profit or 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 … … … … 2021 £’000 (Profit)/loss 2020 £’000 (Profit)/loss (177) (96) 177 96 (102) (175) 102 175 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, 2021 and 30th April, 2020. 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 … … 30th April, 2021 30th April, 2020 Carrying amount £’000 Fair value £’000 Carrying amount £’000 Fair value £’000 15,160 15,844 19,378 1,162 15,160 15,844 19,378 1,162 9,840 6,558 23,589 1,149 9,840 6,558 23,589 1,149 3,131 3,131 867 867 Fair value – hedging instrument Derivative financial assets designated and effective as cash flow hedging instruments 1,166 Total financial assets… … … … 55,841 1,166 55,841 338 338 42,341 42,341 80 NOTES TO THE FINANCIAL STATEMENTS 26. Financial risk management (continued) e) Total financial assets and liabilities (continued) 30th April, 2021 30th April, 2020 Carrying amount £’000 Fair value £’000 Carrying amount £’000 Fair value £’000 Financial liabilities at amortised cost … … … … Contract liabilities Trade payables … … … … … Other financial liabilities … … … Lease liabilities … … … … … Bank loans and committed facilities… … Bank overdrafts … … … … … 14,332 16,791 4,939 3,374 31,299 - 14,332 16,791 4,939 3,374 31,299 - 18,965 19,238 4,247 2,822 27,010 391 18,965 19,238 4,247 2,822 27,010 391 At fair value through the profit and loss Derivative financial liabilities not designated in a cash flow hedge relationship … … Fair value – hedging instrument Derivative financial liabilities designated and effective as cash flow hedging instruments 2,011 2,011 185 185 Total financial liabilities … … … 72,751 72,751 5 5 1,088 73,946 1,088 73,946 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. 27. Capital commitments Contracted capital commitments at 30th April, 2021 for which no provision has been made in these financial statements were £488,000 (2020: £4,154,000). 28. Guarantees and contingencies The table below sets out the number and value of unexpired bank guarantee bonds as at 30th April, 2021 and 30th April, 2020. These guarantee bonds are required as part of the terms and conditions within our mechanical engineering contracts. 165 guarantee and bonds contracts (2020: 219) … … … … … 2021 £’000 9,613 2020 £’000 11,944 29. Subsequent events After the balance sheet date an ordinary dividend of 102.24p per qualifying ordinary share was proposed by the Directors (2020: Ordinary dividend of 81.71p). The current year proposed ordinary dividend of £7,862,000 has not been provided for within these financial statements (2020: Proposed ordinary dividend of £6,016,000 was not provided for within the comparative figures). On 2nd July, 2021, the Company contracted to convert £30 million of notional debt in to a fixed rate of interest of less than 1% versus the floating inter-banking rate (SONIA) for a period of ten years. With the level of expected trade and the opportunities open to the Group going forwards, the Directors deemed it prudent to fix its variable lending rate at what is perceived to be a favourable rate over this time frame. 81 NOTES TO THE FINANCIAL STATEMENTS 30. 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 … … … … … 5 Goodwin (Shanxi) Pumps Company Limited … … 8 … … … … … Gold Star Brazil Limited 4 Easat Radar Systems India Private Limited … … 1 Goodwin Engineering Training Company Limited … Goodwin Refractory Services India Private Limited … 4 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 China Ordinary Brazil India Ordinary England and Wales Ordinary Ordinary India 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 Dormant companies: Gold Star Powders Limited … … … … … Net Central Limited … … … … … … Sandersfire International Limited … … … … Specialist Refractory Services Limited … … … 1 1 1 1 Thailand Ordinary 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 32. All of the above companies are included as part of the consolidated accounts. 100 100 100 100 100 100 75 75 75 75 100 75 49 100 100 100 100 31. 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. 2021 2020 £’000 £’000 TET Goodwin Property Company Limited … … … … … Rental cost … Interest income … … … … … Receivable balance … … … … … … … … … … … … … … … … … … … … 311 7 260 337 24 507 32. Registered offices of subsidiaries and associates The registered offices of the companies listed in notes 14 and 30 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. No 39/1-5, Old Mahabalipuram Road, Kalavakkam, Thiruporur Chengalpattu District – 603110, 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 82 NOTES TO THE FINANCIAL STATEMENTS 33. 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 31. The scheme has now ended. 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. Number of share options Vested 1st May, 2019 … … … … … … … … 489,600 489,600 2021 2020 Outstanding at beginning of year … … … … … … … … 326,400 489,600 Exercised during the year … … … … … … … … 163,200 163,200 Share price at the date of exercise … … … … … … … … £30.45 £34.00 Exerciseable at end of year … … … … … … … … 163,200 326,400 83 34. Alternative performance measures NOTES TO THE FINANCIAL STATEMENTS Measure Method of calculation / reference 2021 2020 Gross profit (£’000) Revenue (£’000) Consolidated statement of profit or loss, page 43 39,001 Consolidated statement of profit or loss, page 43 131,231 34,769 144,512 Gross profit as percentage of revenue (%) Gross profit / revenue 29.7 24.1 Operating profit (£’000) Capital employed (£’000) Consolidated statement of profit or loss, page 43 Note 26 (d), page 77 17,094 130,572 12,858 123,834 Return on capital employed (%) Operating profit / capital employed 13.1 10.4 Net debt (£’000) Net assets attributable to equity holders of the parent (£’000) Note 26 (d), page 77 17,431 18,817 Consolidated balance sheet, page 47 113,141 105,017 Gearing (%) Net debt / equity, as above 15.4 17.9 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 43 12,494 7,866 Consolidated balance sheet, page 47 113,141 105,017 Return on investment (%) Net profit / net assets 11.0 7.5 Revenue (£’000) Average number of employees Consolidated statement of profit or loss, page 43 131,231 1,129 Note 6, page 60 144,512 1,190 Sales per employee (£’000) Group revenue / average employees 116 121 Consolidated statement of profit or loss, page 43 Annual post tax profit (£’000) Depreciation owned assets (£’000) Note 5, page 60 Depreciation right-of-use assets (£’000) Note 5, page 60 Amortisation and impairment (£’000) Note 5, page 60 Exclude operating lease depreciation (£’000) Note 5, page 60 13,006 5,696 972 1,566 8,340 5,874 827 1,328 (550) (537) Annual post tax profit + depreciation + amortisation (£’000) 20,690 15,832 84 NOTES TO THE FINANCIAL STATEMENTS GOODWIN PLC COMPANY BALANCE SHEET at 30th April, 2021 NON-CURRENT ASSETS Property, plant and equipment … … … … … … Investment properties … … … … … … … Right-of-use assets… … … … … … … … Investments … … … … … … … … … Intangible assets … … … … … … … … CURRENT ASSETS Other receivables … … … … … … … … Cash at bank and in hand … … … … … … Notes C4 C4 C4 C5 C6 C7 2021 £’000 27,984 23,900 1,077 25,392 15,877 2020 £’000 22,210 24,811 3,202 25,801 15,531 94,230 91,555 28,609 3,783 26,383 111 32,392 26,494 TOTAL ASSETS … … … … … … … … 126,622 118,049 CURRENT LIABILITIES Borrowings … … … … … … … … … Other payables … … … … … … … … Provisions … … … … … … … … … NON-CURRENT LIABILITIES Borrowings … … … … … … … … … Deferred income … … … … … … … … Deferred tax liabilities … … … … … … … C8 C9 C8 C10 920 7,570 300 13,958 5,515 - 8,790 19,473 30,116 981 2,737 13,009 1,034 1,118 33,834 15,161 TOTAL LIABILITIES … … … … … … … … 42,624 34,634 NET ASSETS … … … … … … … … … 83,998 83,415 EQUITY Called up share capital … … … … … … … C11 Share-based payments reserve … … … … … Profit and loss account … … … … … … … 753 5,244 78,001 736 5,244 77,435 TOTAL EQUITY … … … … … … … … 83,998 83,415 Profit after tax for the year … … … … … … … 6,582 8,824 These financial statements were approved by the Board of Directors on 11th August, 2021 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 87 to 96 form part of these financial statements. 85 NOTES TO THE FINANCIAL STATEMENTS GOODWIN PLC COMPANY STATEMENT OF CHANGES IN EQUITY for the year ended 30th April, 2021 YEAR ENDED 30TH APRIL, 2021 Balance at 1st May, 2020 Total comprehensive income: Profit for the year … … … … … … … … … TOTAL COMPREHENSIVE INCOME FOR THE YEAR Issue of shares … … … … … … Dividends paid … … … … … … Share- based payments reserve £’000 Share capital £’000 Retained earnings £’000 Total equity £’000 736 - - 17 - 5,244 77,435 83,415 - - - - 6,582 6,582 6,582 - (6,016) 6,582 17 (6,016) BALANCE AT 30TH APRIL, 2021 753 5,244 78,001 83,998 YEAR ENDED 30TH APRIL, 2020 Balance at 1st May, 2019 Total comprehensive income: Profit for the year … … … … … … … … … TOTAL COMPREHENSIVE INCOME FOR THE YEAR Issue of shares … … … … … … Other transactions … … … … … Dividends paid … … … … … … 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 The notes on pages 87 to 96 form part of these financial statements. 86 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. These financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the 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 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: Principal non-derivative financial assets Other receivables Other receivables principally comprise short-term tax balances and receivables from Group undertakings. 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. A provision for expected credit losses (ECL) is not seen as necessary given that the counterparties here are Group undertakings. The Company is privy to both the accounts and future prospects of its subsidiary and associate companies. Accordingly, impairment provisions are raised where the carrying value of a subsidiary company / associated company cannot be fully supported. 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. 87 NOTES TO THE FINANCIAL STATEMENTS C1 Accounting policies (continued) Financial instruments (continued) 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. Principal non-derivative financial liabilities Financial liabilities are classified according to the substance of the contractual arrangements into which the Company has entered. 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 … … … … … … 20 years Software and licences Intellectual property rights … … … … 15 - 20 years Non-compete agreements … … … … 2 - 15 years Capitalised development costs … … … Minimum expected order unit intake or … … … … 3 - 5 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 Other equipment … … … … … 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 or reducing balance 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. Unamortised government grants relating to property, plant and equipment 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 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: 88 C1 NOTES TO THE FINANCIAL STATEMENTS Accounting policies (continued) Leases (continued) Definition of a lease (continued) • 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 re- ported 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 and interest on finance leases using the effective interest method together with the amortisation of any facility arrangement fees. Borrowing costs that are directly attributable to the acquisition, construction or production of an asset which 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. 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. 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. 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. 89 NOTES TO THE FINANCIAL STATEMENTS C2 Auditor’s remuneration Included in the profit / (loss) before taxation are the following: Fees receivable by the auditors and the auditor’s associates in respect of: Audit of these financial statements … … … … … … … 2021 £’000 2020 £’000 40 45 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 5 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 2021 2020 Administration staff … … … … … … … … … … 49 51 2021 2020 £’000 £’000 The aggregate payroll costs of these persons were as follows: Wages and salaries … … … … … … … … … … 4,055 3,730 Social security costs … … … … … … … … … … 1,902 469 Other pension costs … … … … … … … … … … 99 98 6,056 4,297 Details of the Directors’ remuneration can be found within the Directors’ Remuneration Report on pages 29 and 30. The emoluments of the highest paid Director were £355,000 (2020: £310,000). The number of Directors who were members of a defined contribution pension scheme was 6 (2020: 6). The social security costs include £1.4 million in respect of employer’s national insurance relating to exercised share options under the Executive Directors Long Term Investment Plan. 90 NOTES TO THE FINANCIAL STATEMENTS C4 Tangible fixed assets Investment properties Property, Plant and Equipment Cost Balance at 1st May, 2020 … … Additions Reclass - Other … … Reclass ROU* … … Disposals … … Intercompany transfers £’000 30,562 663 - - (632) - Other Land and Plant and equipment buildings machinery £’000 Assets in course of ** construction £’000 £’000 £’000 1,166 - - - - - 34,352 280 (186) 4,045 (30) (36) 1,703 103 157 - (85) - 1,982 4,320 29 - (75) - Total £’000 39,203 4,703 - 4,045 (190) (36) Balance at 30th April, 2021 30,593 1,166 38,425 1,878 6,256 47,725 Depreciation Balance at 1st May, 2020 Charged in the year … Reclass ROU* … … Reclass other … … Disposals … … Intercompany transfers 5,751 942 - - - - 664 19 - - - - 15,127 1,648 1,045 (133) - (7) 1,202 108 - 133 (65) - - - - - - 16,993 1,775 1,045 - (65) (7) Balance at 30th April, 2021 6,693 683 17,680 1,378 - 19,741 Net book value At 30th April, 2020 … 24,811 502 19,225 At 30th April, 2021 23,900 483 20,745 501 500 1,982 22,210 6,256 27,984 * This is a transfer from the right-of-use assets category on the settlement of a lease purchase agreement and payment of the option to purchase fee. ** Other equipment comprises motor vehicles, IT hardware and office equipment. A bank loan of £4 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, 2021 was estimated to be £47 million (2020: £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. There has not been a valuation by an independent valuer. 91 NOTES TO THE FINANCIAL STATEMENTS C4 Tangible fixed assets (continued) Right-of-use assets Cost Balance at 1st May, 2020 … … … … … Additions … … … … … … … Transfer to tangible fixed … … … … … Plant and machinery £’000 Other equipment £’000 4,045 - (4,045) - 1,181 - Total £’000 4,045 1,181 (4,045) Balance at 30th April, 2021 - 1,181 1,181 Depreciation Balance at 1st May, 2020 … … … … … Charged in the year … … … … … … Transfer to tangible fixed … … … … … Balance at 30th April, 2021 Net book value At 30th April, 2020 … … … … … … At 30th April, 2021 C5 Fixed asset investments Cost Balance at 1st May, 2020 … … … … … … … … … … … … Disposals Balance at 30th April, 2021 Impairment Balance at 1st May, 2020 … … … … … Balance at 30th April, 2021 Net book value At 30th April, 2020 … … … … … … At 30th April, 2021 843 202 (1,045) - 3,202 - - 104 - 104 843 306 (1,045) 104 - 3,202 1,077 1,077 Shares in associated undertakings £’000 Shares in Group undertakings £’000 Total £’000 237 - 237 - - 237 237 31,477 (409) 31,714 (409) 31,068 31,305 5,913 5,913 5,913 5,913 25,564 25,801 25,155 25,392 A list of principal subsidiaries and associates is given in note 13 and a list of non-principal subsidiaries and associates is given in note 30 of the Group financial statements. The disposal in the year is due to the dissolution of Goodwin (Shanxi) Pump Company Limited. 92 NOTES TO THE FINANCIAL STATEMENTS C6 Intangible 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, 2020 … … … 7,866 2,247 Additions … … … … … 18 - Intercompany transfers in … … … - - Intercompany transfers out … … - - Disposals … … … … … - - 289 133 - - (6) 8,685 19,087 - 151 1,409 1,409 (105) (105) (25) (31) Balance at 30th April, 2021 7,884 2,247 416 9,964 20,511 Amortisation Balance at 1st May, 2020 … … … 1,120 1,476 Amortisation for the year … … … 422 121 Impairment charge … … … … - - Disposals … … … … … - - 133 109 - (6) 827 3,556 437 1,089 20 20 (25) (31) Balance at 30th April, 2021 1,542 1,597 236 1,259 4,634 Net book value At 30th April, 2020 … … … … 6,746 771 At 30th April, 2021 6,342 650 156 180 7,858 15,531 8,705 15,877 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… … … … … … … … … 2021 £’000 8,038 - 18,759 602 240 813 157 2020 £’000 5,229 2,782 17,095 598 202 439 38 28,609 26,383 C8 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 26 of the Group financial statements. Non-current liabilities Finance lease liabilities … … … … … … … … … … 757 Bank loans and committed facilities … … … … … … … … 26,000 3,359 Bank loans repayable by instalments … … … … … … … 2021 £’000 2020 £’000 - 9,000 4,009 Current liabilities Finance lease liabilities … … … … … … … … … … Bank loans and committed facilities … … … … … … … … … … … … … … … Bank loans repayable by instalments Bank overdrafts … … … … … … … … … … … 30,116 13,009 230 - 690 - 920 859 12,000 657 442 13,958 93 NOTES TO THE FINANCIAL STATEMENTS C8 Borrowings (continued) Lease liabilities Finance Lease liabilities are payable as follows: Less than one year Between one and five years 2021 2020 Minimum lease payments £’000 264 799 Interest Principal £’000 230 757 £’000 34 42 Minimum lease payments £’000 872 - Interest Principal £’000 859 - £’000 13 - 1,063 76 987 872 13 859 Bank loan repayable by instalments The loan is secured against three furnaces (see note C4). Bank loans are payable as follows: 2021 2020 Minimum loan payments £’000 807 3,208 399 Interest Principal £’000 690 2,964 395 £’000 117 244 4 Minimum loan payments £’000 795 3,180 1,192 Interest Principal £’000 657 2,846 1,163 £’000 138 334 29 4,414 365 4,049 5,167 501 4,666 Less than one year Between one and five years More than five years C9 Other payables 2021 £’000 352 4,596 372 1,890 360 7,570 2020 £’000 1,164 2,535 784 617 415 5,515 2020 £’000 1,118 1,619 2,737 2020 £’000 3,009 (1,888) (3) 1,118 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 … … … … … … … … C10 Provisions for deferred tax Deferred taxation Balance at 1st May, 2020 … … … … … … … … … … … Recognised in the statement of profit or loss … … … … … … … … Balance at 30th April, 2021… … … … … … … … … … … The elements of deferred taxation are as follows: Difference between accumulated depreciation and amortisation and capital allowances … … … … … … … Share-based payment reserve … … … … … … … … … Other temporary differences … … … … … … … … … Within the current and previous year, the Company has no unrelieved tax losses. 2021 £’000 3,656 (915) (4) 2,737 94 NOTES TO THE FINANCIAL STATEMENTS C11 Called up share capital Authorised, allotted, called up and fully paid: … … … … 7,362,200 (2020: 7,200,000) ordinary shares of 10p each Issue of 163,200 ordinary shares of 10p each … … … … … … 2021 £’000 736 17 753 2020 £’000 720 16 736 Details of the share issue are contained in note 33 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 £216,000 (2020: £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, Goodwin Korea Company Limited, Internet Central Limited, Jewelry Plaster Limited, NRPL Aero Oy, Siam Casting Powers Limited, Ultratec Jewelry Supplies Limited and Ying Tai (UK) Limited which are not wholly-owned subsidiaries. Transactions and balances are summarised below: 2021 £’000 … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … Interest receivable Interest payable Dividend income Management fee income Rental income Royalty income Interest-bearing balances Amounts owed by Group undertakings – repayable on demand … … … 8,038 Amounts owed by Group undertakings – repayable within five years - Non interest-bearing balances Amounts owed to Group undertakings – repayable on demand Interest-bearing balances Amounts owed to Group undertakings – repayable on demand 239 11 389 536 213 218 … … … 2,011 … … … 1,631 … … 2020 £’000 238 10 - 810 257 - 5,229 2,782 - 1,837 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 to 30 of the Group financial statements. Some of the Executive Directors are party to an Equity Long Term Incentive Plan (LTIP). Further details of the LTIP can be found in note 33 of the Group financial statements. C14 Commitments Contracted capital commitments at 30th April, 2021 for which no provision has been made in these financial statements were £142,000 (2020: £Nil). C15 Subsequent events After the balance sheet date, ordinary dividends were declared of £7,862,000, which have not been provided for within these financial statements On 2nd July, 2021, the Company contracted to convert £30 million of notional debt in to a fixed rate of less than 1% versus the floating inter-banking lending rate (SONIA) for a period of ten years. With the level of expected trade and the opportunities open to the Group going forwards, the Directors deemed it prudent to fix its variable lending rate at what is perceived to be a favourable rate over this time frame. C16 Dividends Paid ordinary dividends during the year in respect of prior years 81.71p (2020: 96.21p) per qualifying ordinary share… … … … … 2021 £’000 6,016 2020 £’000 6,927 After the balance sheet date an ordinary dividend of 102.24p per qualifying ordinary share was proposed by the Directors (2020: Ordinary dividend of 81.71p). The proposed current year ordinary dividend of £7,862,000 has not been provided for within these financial statements (2020: Proposed ordinary dividend of £6,016,000 was not provided for). 95 NOTES TO THE FINANCIAL STATEMENTS 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 33 of the Group financial statements. 96 FIVE YEAR FINANCIAL SUMMARY Continuing operations 2017 £’000 2018 £’000 2019 £’000 2020 £’000 2021 £’000 Revenue… … … … … … … … … … … … … Profit before taxation Tax on profit … … … … … … … Profit after taxation … … … … … … 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) 8,340 131,231 16,514 (3,508) 13,006 Basic earnings per ordinary share … … … Diluted earnings per ordinary share … … … 84.47p 84.47p 118.11p 118.11p 159.79p 159.79p 107.93p 103.31p 167.82p 164.23p Total equity … … … … … … … 93,661 104,827 109,291 109,602 118,028 97
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