Goodwin have now released their final results for the year ended 2019.
Revenues increased when compared to last year with a £1.7M growth in mechanical engineering revenue and a £521K increase in refractory engineering revenue. Depreciation was up £576K and amortisation increased by £174K but other cost of sales were down £3.5M to give a gross profit £5M higher. There was no profit from the sale of property, plant and equipment, which brought in £1.6M last time and other admin expenses increased by £923K to five an operating profit that was up £2.8M. Finance expenses were down £356K but tax was up £98K to give a profit for the year of £11.5M, a growth of £3M year on year.
When compared to the end point of last year, total assets increased by £31.8M, driven by a £21.7M growth in inventories, a £5M increase in property, plant and equipment, a £4.9M growth in trade receivables, a £2.2M increase in cash and a £1.2M growth in intangible assets, partially offset by a £2.3M decline in contract assets and a £1.2M fall in investments in associates. Total liabilities also increased as a £4.1M decline in other payables and a £2.6M decrease in deferred tax liabilities was more than offset by a £17.8M growth in contract liabilities, a £12.4M increase in borrowings and a £2.7M growth in trade payables. The end result was a net tangible asset level of £87M, a growth of £3.2M year on year.
Before movements in working capital, cash profits increased by £5.1M to £24.8M. There was a cash outflow from working capital and despite interest and tax payments reducing the net cash from operations came in at £11.2M, a decline of £20M year on year. The group spent £11.5M on property, plant and equipment, £2.7M on investments in existing subsidiaries and £1.5M on R&D, although they did get £1.3M in dividends from the associate to give a cash outflow of £3.8M before financing. They then spent £911K on finance lease payments and £6.6M on dividends so had to take out £8.3M in new loans which meant there was a cash outflow of £2.5M for the year and a cash level of £493K at the end of the year.
The operating profit in the Mechanical Engineering division was £11.9M, a growth of £3.7M year on year. Goodwin Steel Castings has undergone a major change, returning to profitability and completing its extensive upgrade programme that increases its casting capability up to 35 tonnes. With the work they have won internationally to date, which is now starting to be delivered, they should never again be as reliant on the petrochemical industry. One such order if for cast and machines radiation shielding containment vessels for the US nuclear decommissioning market.
Easat Radar Systems reported a loss due to lack of throughput and excessive work in progress over the year, combined with contract delays whilst working to finalise an off the shelf radar system for a major customer. The final documentation approvals for this are all but complete now which should allow for a reduction of around £5M work in progress in the current year as radar systems are shipped.
Over the past decade, Goodwin International has worked closely with world leading valve stockist, RP Valves, who have stocked and sold Goodwin dual plate valves. The business has placed a multi-million pound order for axial valves with the group.
The operating profit in the Refractory Engineering division was £8.1M, an increase of £542K when compared to last year. The business has maintained the significant increase in market share in the investment casting powder sector when its major competitor ceased manufacture. In the coming year they will start to see sales of the Silica Free investment powder, for which a patent was filed in April, with early adopters likely to be the more western countries. This new technology will enable the division to further grow its global market share and help increase gross margins in the years to come.
The global awareness of the risks of lithium battery fires and requirement for a solution continues to grow. During the year, Dupre Minerals has put in place a manufacturing agreement with a French company that will manufacture AVD fire extinguishers for Europe.
As of August, the group’s order input since the start of the year has been £93M and the total forward order book stands at £165M, a 94% increase from the same point of last year with yet more long term contracts still to be placed. Several orders have multi-year delivery requirements and there is seen to be little risk in executing them.
During the year, the group signed an agreement to purchase a 26% interest in Jewelry Plaster (Thailand), converting it into a 75% owned subsidiary. They also acquired a further 24% stake in ULtratec (China) and in SRS QD (China) making these 75% owned subsidiaries too.
The group has benefited from the new accounting standards which has boosted pre-tax profit by £1.7M this year. If they were still reporting under the old standards, pre-tax profit would have been £14.7M.
At the current share price the shares are trading on a PE ratio of 22 and a yield of 2.9%, after the dividend was increased by 15%. There are no forecasts available. At the year-end the group had a net debt position of £21.2M compared to £11.3M at the end of last year.
Overall then this has been a good year for the group. Profits were up, net assets increased but the operating cash flow reduced with no free cash generated, although this was due to working capital movements predominantly. The mechanical engineering division is doing well, helped by the turnaround of the castings business, and the refractory engineering business maintained the gains made last year. The Silica free technology seems like something that could provide a further boost. All this good news is priced in though, arguably, as the PE of 22 and yield of 2.9% isn’t great value.