Annual Report • Apr 30, 2015
Annual Report
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DIRECTORS REPORT AND ACCOUNTS 3Oth APRIL 2O15
Independent auditor's report to the members of Goodwin PLC
www.goodwin.co.uk
Registered in England and Wales, Number 305907 Established 1883
Directors:
J. W. Goodwin (Chairman) R. S. Goodwin (Managing Director) J. Connolly M. S. Goodwin S. R. Goodwin S. C. Birks B. R. E. Goodwin T. J. W. Goodwin J. E. Kelly (Non-Executive Director)
Ivy House Foundry, Hanley, P.O. Box No. 82, Stoke-on-Trent, ST1 3NR Bristol, BS99 7NH
Secretary and registered office: Registrar and share transfer office: Mrs. P. Ashley, B.A., A.C.I.S. Computershare Investor Services PLC,
Auditors: KPMG LLP, One Snowhill, Snow Hill Queensway, Birmingham, B4 6GH
NOTICE IS HEREBY GIVEN that the EIGHTIETH ANNUAL GENERAL MEETING of the Company will be held at 10.30 am on Wednesday, 7th October, 2015 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.
By Order of the Board
P. ASHLEY
Registered Office: Secretary Ivy House Foundry, Hanley, Stoke-on-Trent. 24th July, 2015
I am pleased to report that the pre-tax profit for the Group for the twelve month period ending 30th April 2015 was £20.1 million (2014: £24.1 million), a decrease of 16.6% on revenue of £127.0 million, 2.9% lower than last year. The Directors propose an unchanged ordinary dividend of 42.348p.
The gross profit earned of £41 million was lower by 7.9% than for the previous financial year. This deterioration in gross profit and pre-tax profit earned stems from the oil and gas engineering market sector, with order placing activity having substantially contracted in the first quarter of the financial year which resulted in the first quarter order input being 32% down on the same period in the previous year. This situation had, however, progressively recovered by the close of the year such that the order input for the full twelve months was only 19% down as compared to the previous financial year. This lower level of available orders has also resulted in a higher level of competition which has and will impact on our gross margins and pre-tax profits.
The Group order workload as at 30th April 2015 was 22% lower than twelve months earlier and stood at £79 million. This level of workload increased in the first two months of the new financial year such that as at the time of writing this report there is a possibility that the performance in this new financial year will not be as bad as feared.
Whilst the profitability in the mechanical engineering division reduced by 15% last year, this was mitigated by a 37% increase in profits of the refractory engineering division in which we expect to see continued growth in the new financial year. The Group increased its diversity in trading regions and markets with 80% (78.8% in 2014) of sales turnover exported to 81 countries. 45% (2014: 50%) is oil and gas market related.
The strategy of creating value for shareholders through emphasis on sustainability and continually introducing new innovative reliable cost effective engineered products needed by growth markets is demonstrated in that in the last two financial years the Company has registered / applied for five patents in 16 countries. This is the highest number of patents applied for in the Group's history and is a reflection of the amount of time, effort and £3.8 million of gross investment in R&D over the past two years. These are being expedited into production and to market. It is hoped that within the next three years orders for these products will start to be received and that they will command respectable gross margins. The patents that relate to the refractory division are AVD® (aqueous vermiculite dispersions) used in fire extinguishers and Micashield® a fire resistant paint for wood structures and other substrates. The patents in the engineering division are for a new type of axial piston valve and a new type of nozzle check valve and Goodwin Steel Castings has been granted a patent for its new super nickel alloy, G130, developed by the foundry for use in high temperature turbine applications.
During the last financial year Goodwin PLC purchased the 20% minority interest in Gold Star Powders India and also in Goodwin Pumps India for £1.5 million and we thank our Indian partners for their help and support in developing these two overseas subsidiaries over the past twelve and ten years. Goodwin PLC also purchased the 49% minority interest in Gold Star Brazil and we thank our partners for their help and support in developing this overseas subsidiary over the past seven years.
Just prior to the financial year end Goodwin Refractory Services Ltd (GRS) signed an agreement to purchase the technology, customer list and selected other assets from a complementary French casting powder company. This purchase will also be used by the Group's eight other overseas powder manufacturing companies under licence. The product sales into Europe will be supplied from the UK by GRS. This purchase has enhanced the moulding material technology for the casting of tyre moulds and glass within our Group. The tyre mould technology has brought with it associated patent rights with exclusive worldwide rights for use in reclaimable patterns and the lost wax casting industry.
Goodwin International Ltd in the mechanical engineering division has made good progress in developing long term relationships for the machining of large components and this diversification will, we hope, last well into the next decade. Some of the recent machines installed are the latest and most efficient of their type and have orders with workloads allocated for the next two years.
This, backed by our engineering apprentice programme, adds to the Group's long term viability.
Credit insurance policy wordings are being reviewed for effective political risk cover. Last year risks overviewed by the Audit Committee covered insurance policy wordings, asset valuations, bank facility management and IT security. This year work is on-going for data security classification, succession planning, conduct with integrity, and mobile device security. Progress continues.
The Group's net cash generated from operating activities prior to investments amounted to £18 million and the Group's gearing at the year end was 12.3% (2014: 5.6%).
Shareholders' equity has risen from £73.6 million to £82.7 million and, although some markets will remain difficult over the next one or two years, the Board believes investments made and sanctioned will in due course enable the Group to continue with its track record of growth. Key performance indicators and ratios may be found at www.goodwin.co.uk/2015.
We take the opportunity of thanking the employees and the Directors both in our UK and overseas companies for the hard work put in to achieve these Group results.
24th July, 2015 Chairman
J. W. Goodwin
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:
The Group's focus is on manufacturing within two sectors; mechanical engineering and refractory engineering and through this division of our manufacturing activities, the Group benefits from market diversity. Further details of our business and products are shown on our website www.goodwin.co.uk/2015.
The Group produces a wide range of dual plate and axial nozzle check valves to serve the oil, petrochemical, gas, LNG and water markets. We create value by globally sourcing the best quality raw material at good prices, manufacturing in highly efficient facilities using up to date technology to provide the very reliable products to the required specification, at competitive prices and with timely deliveries.
Our mechanical engineering markets also include high alloy castings, machining and general engineering products which typically form part of large construction projects such as power generation plants, oil refineries, high integrity offshore structural components and bridges. The Group through its foundry and CNC machine shop has the capability to pour the castings, radiograph and also finish them in-house. This capability is also targeting the defence industry.
Goodwin International, the largest company in the Mechanical Engineering Division, designs and manufactures dual plate and axial nozzle valves and also undertakes specialised CNC machining and fabrication work. Noreva GmbH also designs and manufactures axial nozzle valves. Both Goodwin International and Noreva purchase the majority of their sand mould castings from Goodwin Steel Castings and this vertical integration gives rise to competitive benefits, increased efficiencies, and timely deliveries.
At Goodwin Pumps India we manufacture a superior range of submersible slurry pumps for end users in India, China, Brazil and Africa. Easat Antennas designs and builds bespoke high-performance radar antennas to the global market of major defence contractors, civil aviation authorities and border security agencies. We create value on these by innovative design and assembly in our own facilities using bought in or engineered in-house components.
Within the Refractory Engineering Division, Goodwin Refractory Services, (GRS), creates value by developing, manufacturing and selling investment casting powders, waxes, silicone rubber and machinery for use in the following operations: jewellery casting, aerospace, tyre moulding, and the compressor wheels for turbochargers. The Division has eight other investment casting powder companies around the world that carry out the same activities as GRS, located in China, India, Thailand and Brazil. These nine companies are vertically integrated with another of our UK refractory companies, Hoben International, which manufactures cristobalite that it sells to the nine group jewellery casting manufacturing companies, as well as producing ground silica which also goes into casting powders.
The other UK refractory company is Dupré Minerals which focuses on producing exfoliated vermiculite that is used in insulation, brake linings and fire protection products including textiles that can withstand high temperatures. Dupré also sells consumables to the shell moulding casting industry.
The Group's operations expose it to a variety of risks and uncertainties, the principal ones being as follows. These risks are no different to previous years, and they are not expected to change substantially in the foreseeable future.
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 2 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. The potential risk of the loss of any key customer is limited as, typically, no single customer accounts for more than 10% of turnover. As described in the Business Model, the Group generates significant sales from the worldwide energy markets. Whilst these markets may suffer short term short declines, over the medium to long term the growing worldwide demand for energy will ensure these markets remain buoyant.
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 R&D 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. The risk of product obsolescence is countered by R&D investment.
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.
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 20 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 and interest rate swaps.
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 comply with the relevant laws and regulations.
Since 2011 we have been reporting on the increase/decrease in our CO2 emissions and this is our second GHG emissions report in line with the UK reporting requirements.
It should be noted that with our super nickel alloy castings, we have been at the forefront of CO2 reduction technology in future electricity generating plants to be built worldwide, some of which will have the planned highest efficiency in the world with 100% CO2 capture. Compared to most other companies, we have invested significant R&D into CO2 reduction with our specialist alloys that will be used in these more efficient power generating plants, and we have received a Government grant for this environmentally important project. So, while not attempting to quantify the effects, to put a true and balanced perspective on the Group's CO2 impact on the environment, consideration should be given to the benefits of the very much reduced CO2 emission levels of the modern turbines and power generation equipment into which some of our technically advanced manufactured products are to be incorporated, resulting in the annual savings in CO2 vastly outweighing the environmental burden imposed at the manufacturing stage. The Group is acutely aware of its CO2 emissions which are kept as low as possible. Goodwin Steel Castings Ltd. contributes significantly to the Group's CO2 equivalent footprint, based on its scope 1 (processing) emissions footprint, which is derived mostly through calculation. Recent legislative changes means Goodwin Steel Castings no longer has a Climate Change Levy Agreement, claiming relief under the introduced metallurgical exemption, and the company continues to seek ways in which to reduce its energy use and greenhouse gas emissions footprint. The Group is looking at the possibility of installing a wind turbine at one of its manufacturing sites which, if implemented, will reduce emissions.
The reported CO2 emissions are detailed below:
The sites reporting GHG data are the same as those consolidated in the Group's financial statements, and we have included all material qualifying emissions around the Group for the years to 30th April 2015 and 30th April 2014. We have used the reporting guidance set out by the Department for Environment, Food & Rural Affairs (DEFRA) environmental reporting guidelines published in June 2013, and used the methodology set out in their July 2013 paper, to report our Scope 1 and Scope 2 emissions, using the latest DEFRA emission factors issued this year:
| 2015 Tonnes of CO2e |
2014 Tonnes of CO2e |
|
|---|---|---|
| Scope 1 – direct emissions (from company facilities and vehicles) | 54,394 | 57,138 |
| Scope 2 – indirect emissions (from electricity purchased for own use) | 10,377 | 10,462 |
| Total Scope 1 and Scope 2 emissions | 64,771 | 67,600 |
| Intensity – emissions of total CO2 equivalent reported above per £1million of Group revenue |
510 | 517 |
The Company made no political donations during the year (2014: £nil).
Donations by the Group for charitable purposes amounted to £84,259 (2014: £114,368).
The Group takes seriously its responsibilities to employees and, as a policy, provides employees systematically with information on matters of concern to them. It is also the policy of the Group to consult where appropriate, on an annual basis, with employees or their representatives so that their views may be taken into account in making decisions likely to affect their interests.
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.
ISO 18001 accreditation is the global standard that we are working towards and our two largest engineering companies employing 634 people have attained accreditation.
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 following table sets out a breakdown of our average number of employees and Board members during 2015 by gender:
| Male | % | Female | % | Total | |
|---|---|---|---|---|---|
| Main Board and Company Secretary | 8 | 80% | 2 | 20% | 10 |
| Senior Management | 120 | 95% | 6 | 5% | 126 |
| Employees | 837 | 84% | 164 | 16% | 1,001 |
| Total | 965 | 85% | 172 | 15% | 1,137 |
The 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 forwardlooking statements or adjust them to future events or developments, whether as a result of new information, future events or otherwise, except to the extent legally required.
The Strategic Report was approved by the Board on 24th July, 2015 and is signed on its behalf by:
Director Director
J. W. Goodwin R. S. Goodwin
The Directors have pleasure in presenting their reports and audited financial statements for the year ended 30th April, 2015.
The Directors have presented their Strategic Report on pages 3 to 8. The 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 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 Strategic Report for the year are the Group's Objectives, Strategy and Business Model on page 5, the Principal Risks and Uncertainties on page 6, and the Corporate Social Responsibility Report on page 7. The Strategic Report includes details of R&D in the Chairman's Statement.
The Board considers that the Chairman's Statement, the 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 performance during the financial year and at the year end, and to assess the business model and strategy.
The Strategic Report was approved by the Board of Directors on 24th July, 2015.
The Directors recommend that an ordinary dividend of 42.348p per share (2014: 42.348p) be paid to shareholders on the register at the close of business on 11th September, 2015. If approved by shareholders, the ordinary dividend will be paid to shareholders on 9th October, 2015.
The Directors of the Company who have served during the year are set out below.
The Directors retiring in accordance with the Articles are Mr. M. S. Goodwin, Mr. T. J. W. Goodwin and Mrs J. E. Kelly who, being eligible, offer themselves for re-election.
No Director has a service agreement with the Company, nor any beneficial interest in the share capital of any subsidiary undertaking.
The Company does not have any share option schemes for employees or directors. No equity sharing or long term incentive plans that would diminish shareholder value will be put in place unless voted upon at an Annual General Meeting.
Andrew Baylay retired on 1st June 2015 after forty years work for the Group and we thank him for his hard work and loyalty.
The Company has been notified that as at 22nd July, 2015 the following had an interest in 3% or more of the issued share capital of the Company:
J. W. and R. S. Goodwin 2,058,631 shares (28.59%), J. W. and R. S. Goodwin 1,285,092 shares (17.85%). These shares are registered in the names of J. M Securities Limited and J. M. Securities (No. 3) Limited respectively. J. H. Ridley 498,472 shares (6.92%), Rulegale Nominees (JAMSCLT) 289,437 shares (4.01%).
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 19 to the financial statements on page 44.
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:
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.
The Directors have not been given the authority to issue or buy back the shares of the Company.
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.
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 will be available to answer questions at the forthcoming Annual General Meeting. In addition, proxy votes will be counted and the results announced after any vote on a show of hands.
The Chairman ensures that the views of shareholders are communicated to the Board as a whole, ensuring that Directors develop an understanding of the views of shareholders. Any individual requests for information from shareholders are dealt with by the Chairman, and where any such requests are subject to restraint in that any disclosure would give rise to share price sensitive information, then the requests would be declined, or referred to the Board for release to all shareholders through the Stock Exchange.
With the current level of order input, the opportunity for continued profitability remains good for the next twelve months. The impact of working capital requirements on our banking facilities given the expected level of activity and capital spend commitments will require close management. After reviewing the situation, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and have continued to adopt the going concern basis in preparing the financial statements.
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 KPMG LLP as auditor of the Company.
Approved by the Board of Directors and signed on its behalf by:
Chairman
J. W. Goodwin 24th July, 2015
Introduction
The Board comprises eight Directors and an independent Non-Executive Director; the Audit Committee comprises the Non-Executive Audit Committee Chairman, two Board Directors and the Company Secretary. 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, it does 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.
Historically and in view of the Group's present size and proven track record, non-executive directors are not generally thought to be appropriate, due to the time and cost likely to be involved and the lack of opportunity for adding significant value to the business. Part of the Board's policy for corporate governance, where considered appropriate, is to engage independent bodies comprising external consultants for independent expert opinion on various matters. However, on 14th April 2015 in order to augment the Company's corporate governance compliance, J. E. Kelly was appointed as a Non-Executive Director and Chairman of the Audit Committee. As before, where it does not comply, the Board is happy to provide its explanations for not doing so on the basis that it believes that such non-compliance is more appropriate to the shareholders' and the Group's long term interests.
Compliance statement under the UK Corporate Governance Code, revised October 2012
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.
The Group does not comply with aspects of the Code's requirements under paragraphs A4, B1, and C3 in terms of having either a senior independent Director. Since 14th April 2015 a Non-Executive Director with the role of Chairman of the Audit Committee has been appointed. The Group does not have a Remuneration Committee or a Nominations Committee as required under paragraphs B2 and D2.
The roles of the Chairman in running the Board and the Managing Director in running the Group's businesses are well understood. It is not considered necessary to have written job descriptions. This is contrary to paragraph A2.1. The Chairman and Managing Director do not retire by rotation, which is contrary to paragraph B7 of the Code.
There is no formal schedule of matters reserved for the Board, which is contrary to paragraph A1.1.
During the year, the Board met formally twenty times, and details of attendees at these meetings are set out below:
| 20 out of 20 attended |
|---|
| 19 out of 20 attended |
| 20 out of 20 attended |
| 20 out of 20 attended |
| 20 out of 20 attended |
| 20 out of 20 attended |
| 20 out of 20 attended |
| 20 out of 20 attended |
| n/a |
| n/a |
The Chairman and Managing Director 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.
The Board retains full responsibility for the direction and control of the Group and, whilst there is no formal schedule of matters reserved for the Board, all acquisitions and disposals of assets, investments and material capital-related projects are, as a matter of course, specifically reserved for Board decision.
The Board meets regularly with an agenda to discuss corporate strategy; to formulate and monitor the progress of business plans for all subsidiaries and to identify, evaluate and manage the business risks faced. The management philosophy of the Group is to operate its subsidiaries on an autonomous basis, subject to overall supervision and evaluation by the Board, with formally defined areas of responsibility and delegation of authority. The Group has formal lines of reporting in place with subsidiary management meeting with the Board on a regular basis. Regular informal meetings are also held to enable all members of the Board to discuss relevant issues with local management and staff at the business units.
The Audit Committee is made up of the following: J. E. Kelly (Chairman), J. W. Goodwin, R. S. Goodwin, and P. Ashley as Company Secretary and the Audit Committee reports to the Board. The Audit Committee has met formally six times since the issue of the Annual Report for the year ended 30th April, 2014, with all members attending each meeting. The responsibility of the Audit Committee is explained in the Audit Committee Report on pages 13 to 15. 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.
The Managing Director and Chairman 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 Director and Chairman, 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.
The external auditor is appointed annually at the Annual General Meeting. The Board, following review and recommendations received from the Audit Committee, considers the re-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.
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 auditors are unaware; and each Director has taken reasonable steps to make himself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
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 13 to 15. Except as noted within this Corporate Governance Report, the Board confirms that the internal control systems comply with the UK Corporate Governance Code.
The Group's main systems of internal controls includes regular visits and discussions between Board Directors and subsidiary management, 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 up to the date of this report and accord with the FRC publication 'Internal Control: Guidance for Directors on the UK Corporate Governance Code'. 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 on-going 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. A new Group internal auditor has been appointed. The Board 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. To maintain the Group's commitment to maintaining strong corporate governance during the year the Group has continued to use an international firm of accountants so that certain key business risk areas are reviewed by those skilled in business continuity and due process. Also during the year, the Board has commissioned external reviews of the Group's data classification and security, succession planning, culture, conduct and levels of authority, mobile device responsibility and energy efficiency by independent experts.
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:
Chairman
J. W. Goodwin 24th July, 2015
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:
The Audit Committee discharges each of its above responsibilities as follows:
The Chairman of the Audit Committee is an independent non-executive Director. The other members are involved in the day to day running of the Group, including regular meetings held between members of the Audit committee, other Directors, General Managers and Senior Management of the UK subsidiaries. Each overseas subsidiary is typically visited during the year by a member of the Audit Committee, or by a Main Board Director, for meetings with the General Managers and Senior Management with reports sent back to the Audit Committee. On a formal basis, members of the Audit Committee are involved in quarterly discussions with the General Managers and Senior Management of each subsidiary where the positions taken on subjective financial matters are discussed. 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.
The Audit Committee reviews the quarterly Interim Management Statements and advises the Board of Directors that they are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's quarterly performance.
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 ensure that they are balanced, relevant, compliant with relevant accounting standards / legislation, and are consistent and complete. The Audit Committee advises the Board of Directors 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 auditors are given sight of these before publication.
For the full year Annual Report, the Audit Committee reviews the financial and non-financial content of the 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 ensure that the content is balanced, relevant, compliant with relevant accounting standards / legislation, and are consistent and complete. The Audit Committee has discussed the full year Annual Report 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, 2015 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 business model and strategy.
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 General Managers of the Group's subsidiaries; reviews monthly financial reports; reviews reports from internal and external audit; reviews reports from independent external consultants; and reviews the Group's risk register, business continuity programmes, and levels of insurance.
During the year, the Group has supplemented its extensive internal knowledge with independent external reports from the following:
During the year we have participated in, reviewed and collated guidance from various forums including:
As part of our continued review on Business Continuity we have set objectives to improve security of intellectual property from loss, theft, fraud, cyber attack or espionage and implemented an Information Classification Policy.
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.
The Audit Committee has met formally with the Group's external auditor, KPMG LLP, to discuss the full year Annual Report, and has met with and discussed matters with them as part of the audit process during the current financial year being reported on. No material concerns were raised during these meetings or discussions. The Audit Committee was satisfied with the external auditor's performance, independence, the effectiveness of the audit process, and the level of audit remuneration, and has recommended to the Board to propose the re-appointment of KPMG LLP as the external auditor at the Annual General Meeting on 7th October, 2015.
There is regular contact with Directors and employees and open and honest discussion is encouraged.
The Group has a whistle blowing policy in place whereby employees can report any suspected misconduct or concerns, either anonymously on a dedicated telephone line, or to the Chairman, the Company Secretary or the external auditors. 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.
During the year, a new Group Internal Auditor has been appointed. The appointee who is a Chartered Accountant comes with 24 years of experience within industry. In addition to reviewing the adequacy of the Group's internal controls and procedures, his initial remit will be to understand and audit the figures within the management accounts of our overseas subsidiaries.
The Audit Committee reviewed what it considered to be the significant judgement areas within the Group annual accounts for the year ended 30th April, 2015. The Audit Committee also took account of the findings of KPMG LLP in relation to their external audit work for the year.
In particular, the Audit Committee considered the following principal risk areas:
Revenue recognition - whether sales recorded in the year were generally in compliance with the IAS 18 revenue recognition standard.
The adequacy of the Group's provisions in relation to its sales contracts (both warranties and net realisable value issues with regard to the year end work in progress).
In addition, the Audit Committee also considered other areas including the adequacy of the Group's debtor impairment reserves and the adequacy of the Group's provision against damaged, slow moving and obsolete stocks.
Following the review and having held discussions with management where appropriate as well as KPMG LLP themselves, the Audit Committee was of the opinion that the significant judgements contained within these Financial Statements were both justified and appropriate.
J. E. Kelly 24th July, 2015 Chairman of the Audit Committee
This report includes the Group's Remuneration Policy for Directors, and sets out the Annual Directors' Remuneration Report.
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.
At present, it is not considered necessary to include a fixed formula performance related element within the remuneration of individual Directors.
The Group's Remuneration Policy applies to existing Directors and will apply to any new Board appointments.
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 new 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.
| Element of Pay |
Purpose and Link to Strategy |
Operation | Maximum | Performance Targets |
Changes for 2014/2015 |
|---|---|---|---|---|---|
| Salary | Reflects the Directors' level of activity 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. |
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. |
The Group's performance, good or bad, may result in the salary being flexed. |
The Managing Director sets the base increase in salaries. For the period May 2014 to April 2015 the increase was 1.6%. |
| Bonus | 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 Director and audited by the Chairman. |
Following review of the half year and year end results of the Company. |
60% of salary. | N/A | No exceptional bonuses were paid this year. |
| Long Term Incentive Plan |
There are no share option schemes or short or long term incentive schemes for Directors. |
N/A | N/A | N/A | N/A |
| Pension | All Directors have 3% added to their gross remuneration which, by nature of salary sacrifice is put into a pension scheme where they have direct dealings with the selected investment fund provider. |
Monthly payments. |
Currently 3% of gross remuneration. |
N/A | This policy was adopted in October 2013 for the Directors and entire UK workforce. |
| Element of Pay |
Purpose and Link to Strategy |
Operation | Maximum | Performance Targets |
Changes for 2013/2014 |
|---|---|---|---|---|---|
| Other benefits | Fully expensed car or cash alternative, health insurance or other services. |
N/A | N/A | N/A | See details of the Directors' emoluments on Page 20. |
| Share Ownership Guidelines |
N/A as no scheme exists. |
N/A | N/A | N/A | N/A |
As will be seen below, the long term ongoing Total Shareholder Return on investment ( TSR ) is more than acceptable, whether it be over five years, ten years or twenty years, but this has been achieved by the Directors and the Company taking long term policy decisions that at the time did not necessarily produce what a short term trader would have wanted in terms of annual profit and dividend. It is for this reason that Goodwin PLC has no desire to put excessive annual bonuses as a prime motivator to its Directors as this so often leads to undiscerning decisions being made that detrimentally affect the long term wealth of a company. Directors' remuneration is designed to promote the long-term success of the Company.
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 20 years and more and that the Director salaries are anything but excessive versus the norm of other PLCs, this is the Board's policy.
The Company has found over the years that this method of managing remuneration, which is principally monitored by the Managing Director and audited by the Chairman, has produced a team of cohesive Directors who have achieved results that surpass the average PLC performance, be it of the FTSE 100 or the FTSE 350, by a large margin. The unacceptable results over the past six years of many supposedly Blue Chip companies run with independent boards with very much incentivised executive directors is something that the Board of Goodwin PLC has no intention of emulating and, as such, whilst Goodwin PLC will try to adopt the Listing Rules in form of presentation, there will be significant areas of omission in the disclosure of remuneration details for the reasons stated above.
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.
| Goodwin | FTSE 100 | FTSE 350 | ||
|---|---|---|---|---|
| TSR for last 5 Years | 130% |
50% | 56% | |
| TSR for last 10 Years | 803% |
110% | 124% | |
| TSR for last 20 Years | 15,967% |
328% | 367% |
As is required by the Listing Rules, we show in graph form both the increase in salary of the Managing Director of Goodwin PLC and the TSR over the past ten years. We however do not list out the salary of the Financial Director of Goodwin PLC versus the TSR as in Goodwin PLC we have a Group Chief Accountant (John 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 Director and the Chairman.
The Company put the Remuneration Policy to the vote of the Annual General Meeting in 2013 and 2014 and will now be doing so every three years, as is required by the Listing Rules.
For confidentiality and flexibility reasons, the Board policy is not to disclose exit/termination payments to Directors but the policy is to remain within the law, to fairly compensate good leavers and minimise payments to bad leavers. In the last ten years the Company has managed to avoid paying any termination payments to bad leavers. It is, however, Board policy to limit termination payments to a maximum of 100% of gross annual salary and should such amount be exceeded than it will be reported in the annual accounts giving the reason why.
It is confirmed that there are and will be no equity sharing or long term incentive plans that will diminish shareholder value unless voted upon at an Annual General Meeting. 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 and Accounts, the Annual General Meeting and the votes therein.
This report is submitted in accordance with the Directors' Remuneration Report Regulations.
The Company's Remuneration Policy for Directors is set by the Board as a whole and is described in pages 16 to 17. The Policy has been followed in the financial year to 30th April, 2015 and will be followed in the next financial year.
The Board of Directors are also the key management personnel as defined in IAS 24.
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 Director 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.
The table below shows shareholder distributions and total employee expenditure, and the percentage change in both
| 2015) | 2014) | ||||||
|---|---|---|---|---|---|---|---|
| £'000) | £'000) | %) | |||||
| Ordinary dividends proposed in respect of the year | 3,049) |
3,049) | 0.0%) | ||||
| Total employee costs | 38,042) |
36,451) | 4.4%) | ||||
| Average employee numbers | 1,137) |
1,054) | 7.9%) |
An ordinary resolution for the approval of the Annual Director's Remuneration Report will be put to shareholders at the forthcoming Annual General Meeting. The Company's Remuneration Policy for Directors and the Annual Directors' Remuneration Report presented in the accounts to 30th April, 2014 were put to the shareholders at last year's Annual General Meeting on 8th October, 2014. With respect to the Company's Remuneration Policy, 99.38% of proxy votes were cast in favour of the policy. The Annual Directors' Remuneration Report was accepted with 96.9% of proxy votes cast in favour.
The following graphs compare the Group's total shareholder return over the ten and twenty years ended 30th April, 2015 with various FTSE indices. The graphs also show the increase in the earnings of the Managing Director for these periods.
The base earnings of the Managing Director during the year has increased by 1.6% from the previous year. The total earnings of the Managing Director for the last five years are:
| 2011 | 2012 | 2013 | 2014 | 2015 |
|---|---|---|---|---|
| £'000 | £'000 | £'000 | £'000 | £'000 |
| 320 | 349 | 385 | 360 | 374 |
In October 2013, the Group followed the UK Government's requirements to set up Auto Enrolment Pension arrangements. Excluding the increased pension payments during this year, the basic average earnings of all employees of the Group as a whole has increased by 1.6% from the previous year.
Annual Directors' Remuneration Report (continued)
The increase in the share price since 1995 plus dividends re-invested would mean that £1.00 invested in 1995 would at 30th April, 2015 be worth £159.67. The increase in the share price since 2005 plus dividends re-invested would mean that £1.00 invested in 2005 would at 30th April, 2015 be worth £8.03.
The auditors are required to report on the following information contained in this section of the Annual Directors' Remuneration Report.
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, | |||
|---|---|---|---|---|
| 2015* | 2014 | |||
| Beneficial | ||||
| J. W. Goodwin | 58,899* |
58,899 | ||
R. S. Goodwin |
24,915* |
24,915 | ||
| J. W. Goodwin and R. S. Goodwin | 2,058,631* |
2,058,631 | ||
| J. W. Goodwin and R. S. Goodwin | 1,285,092* |
1,269,976 | ||
J. Connolly |
722* |
722 | ||
| M. S. Goodwin | 80,373* |
84,152 | ||
S. R. Goodwin |
100,138* |
104,980 | ||
A. J. Baylay |
1,200* |
1,200 | ||
| B. R. E. Goodwin | 44,498* |
47,590 | ||
| T. J. W. Goodwin (appointed 14th April 2015) | 139,200* |
– | ||
| Non beneficial | ||||
| J. W. Goodwin and E. M. Goodwin | 14,166* |
14,166 | ||
On 6th May, 2015, S. C. Birks purchased 200 shares. His total holding is 200 shares. There have been no other changes in the Directors' interests between 30th April, 2015 and 24th July, 2015.
| Single Total Figure Table | Salary 2015 |
Benefits in kind 2015 |
Other money or assets receiv able 2015 |
Pension contrib utions 2015 |
Total 2015 |
Total 2014 |
||||
|---|---|---|---|---|---|---|---|---|---|---|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||
| J. W. Goodwin | 314 | 49 | – | 11 | 374 | 360 | ||||
| R. S. Goodwin | 314 | 49 | – | 11 | 374 | 360 | ||||
| J. Connolly | 232 | 28 | – | 6 | 266 | 258 | ||||
| M. S. Goodwin | 229 | 29 | – | 7 | 265 | 257 | ||||
| S. R. Goodwin | 173 | 14 | – | 5 | 192 | 159 | ||||
| A. J. Baylay | 123 | 19 | – | 3 | 145 | 132 | ||||
| S. C. Birks | 127 | 18 | – | 4 | 149 | 151 | ||||
| B. R. E. Goodwin | 113 | 13 | – | 3 | 129 | 120 | ||||
| T. J. W. Goodwin (appointed 14th April 2015) | 4 | – | – | – | 4 | – | ||||
| J. E. Kelly (appointed 14th April 2015) | – | – | 4 | – | 4 | – | ||||
| Total | 1,629 | 219 | 4 | 50 | 1,902 | 1,797 |
Benefits-in-kind consist of the provision of a fully-expensed motor vehicle, cash alternative scheme, healthcare insurance or other services.
There are no share option schemes or other long term incentive schemes.
In October 2013, the Group followed the Government's requirements to set up 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 pension contributions are to money purchase 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 24th July, 2015 and is signed on its behalf by:
J. W. GOODWIN R. S. GOODWIN Director Director
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 IFRSs as adopted by the EU and applicable law and have elected to prepare the parent Company financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).
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 income statement or profit or loss for that period.
In preparing each of the Group and parent Company financial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Report of the Directors, Corporate Governance Report, Audit Committee Report and Directors' Remuneration Report that comply 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.
We confirm that to the best of our knowledge:
J. W. GOODWIN R. S. GOODWIN Director Director
24th July, 2015
to the Members of
We have audited the financial statements of Goodwin Plc for the year ended 30 April 2015 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Balance Sheets, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the Company Reconciliation of Movements in Shareholders' Funds and the related notes. In our opinion:
In arriving at our audit opinion above on the Group financial statements the risks of material misstatement that had the greatest effect on our Group audit were as follows:
Refer to page 15 (Board report), page 33 (accounting policy) and pages 34 to 36 (financial disclosures)
The risk – The Group's commercial terms agreed with customers determine the point at which revenue can be recognised. As these commercial terms can be complex and vary between components of the Group a detailed review is required by the Group in identifying the appropriate timing of revenue recognition in each case. The most significant risk is that the Group's timing of revenue recognition does not reflect the timing of the transfer of risk and rewards of ownership.
Our response – Our audit procedures included for all significant commercial terms applied by the Group, making our own independent assessment, with reference to the relevant accounting standards, of the appropriate point in time to recognise revenue. Those assessments were compared to the actual accounting treatment applied by the Group for a selection of significant revenue transactions. In doing so, focusing on the periods immediately prior to and after the year end, we obtained customer purchase orders, shipping documentation and sales invoices and identified the commercial terms agreed with the customer before comparing the actual timing of revenue recognition with our expectation.
Refer to page 15 (Board report), page 33 (accounting policy) and page 41 (financial disclosures)
The risk – Certain of the Group's products incorporate the right to return under a pre-agreed warranty policy with its customers. The warranty periods offered vary between the components of the Group and markets (in line with commercial terms agreed with the customer). Determination as to whether to recognise a provision and the amount of the provision to be recognised requires the Group to make judgments and estimates that are inherently subjective, including the likelihood of claims arising, the number of parts affected and the cost of rectification of those parts.
Our response – Our audit procedures included, discussions with the Group as to current and historical quality issues and known or expected warranty claims, corroboration of these discussions through credit notes and reading board minutes and, where available, inspection of customer correspondence regarding known warranty issues. For specific provisions, we assessed the calculation of the provision taking into account available supporting documentation such as customer correspondence and operational management cost estimates. We critically challenged the Group's judgments made in determining the Group's provisions including a comparison of these judgements to historical product return levels. We also considered the adequacy of the Group's disclosures.
The materiality for the Group financial statements as a whole was set at £1.6m, determined with reference to a benchmark of Group profit before taxation of £20.1m, of which it represents 8%.
We report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £80,000, in addition to other identified misstatements that warranted reporting on qualitative grounds.
Of the Group's 29 reporting components, we subjected 12 to audits for Group reporting purposes.
These audits covered 85% of total Group revenue; 82% of underlying Group profit before taxation; and 96% of total Group assets.
The remaining 15% of total Group revenue, 18% of Group profit before tax and 4% of total Group assets is represented by 17 reporting components, none of which individually represented more than 5% of any of total Group revenue, Group profit before tax or total Group assets. For these remaining components, we performed analysis at an aggregated Group level to re-examine our assessment that there were no significant risks of material misstatement within these.
The Group audit team instructed component auditors as to the significant areas to be covered, including the relevant risks detailed above and the information to be reported back. The Group audit team approved the component materialities, which ranged from £0.1m to £1.0m, having regard to the mix of size and risk profile of the Group across the components. The work on 1 of the 12 components was performed by component auditors and the rest by the Group audit team.
Telephone conference meetings were held with all of the component auditors. At these meetings, the findings reported to the Group audit team were discussed in more detail, and any further work required by the Group audit team was then performed by the component auditor.
In our opinion:
Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have identified other information in the annual report that contains a material inconsistency with either that knowledge or the financial statements, a material misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
We have nothing to report in respect of the above responsibilities.
As explained more fully in the Directors' Responsibilities Statement, set out on page 21, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. A description of the scope of an audit of accounts is provided on the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate. This report is made solely to the Company's members as a body and subject to important explanations and disclaimers regarding our responsibilities, published on our website at www.kpmg.com/uk/auditscopeukco2014a, which are incorporated into this report as if set out in full and should be read to provide an understanding of the purpose of this report, the work we have undertaken and the basis of our opinions.
Simon Purkess (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor 24th July, 2015 Chartered Accountants One Snowhill, Snow Hill Queensway, Birmingham, B4 6GH
23
| 2015) | 2014) | |||
|---|---|---|---|---|
| Notes | £'000) | £'000) | ||
| CONTINUING OPERATIONS | ||||
| Revenue |
2 |
127,049) | 130,828) | |
| Cost of sales |
(85,754) | (86,010) | ||
| GROSS PROFIT |
41,295) | 44,818) | ||
| Distribution expenses |
(3,586) | (3,783) | ||
| Administrative expenses |
(17,262) | (16,494) | ||
| OPERATING PROFIT |
20,447) | 24,541) | ||
| Financial expenses |
5 |
(682) | (760) | |
| Share of profit of associate companies | 11 |
288) | 314) | |
| PROFIT BEFORE TAXATION |
2, 3 |
20,053) | 24,095) | |
| Tax on profit |
6 |
(4,601) | (4,448) | |
| PROFIT AFTER TAXATION |
15,452) | 19,647) | ||
| ATTRIBUTABLE TO: | ||||
| Equity holders of the parent |
19 |
15,025) | 19,035) | |
| Non-controlling interests |
427) | 612) | ||
| PROFIT FOR THE YEAR |
15,452) | 19,647) | ||
| BASIC AND DILUTED EARNINGS PER ORDINARY SHARE | 7 |
208.68p) | 264.38p) |
The notes on pages 29 to 58 form part of these financial statements.
| 2015) | 2014) | |
|---|---|---|
| £'000) | £'000) | |
| PROFIT FOR THE YEAR |
15,452) | 19,647) |
| OTHER COMPREHENSIVE EXPENSE | ||
| ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO THE INCOME STATEMENT: |
||
| Foreign exchange translation differences |
(1,176) | (2,270) |
| Effective portion of changes in fair value of cash flow hedges |
2,630) | 2,245) |
| Change in fair value of cash flow hedges transferred to the income statement | (2,197) | 218, |
| Tax charge on items that may be reclassified subsequently to the income | ||
| statement |
(87) | (522) |
| OTHER COMPREHENSIVE EXPENSE FOR THE YEAR, NET OF INCOME TAX |
(830) | (329) |
| TOTAL COMPREHENSIVE INCOME FOR THE YEAR |
14,622) | 19,318) |
| ATTRIBUTABLE TO: | ||
| Equity holders of the parent |
14,024) | 19,244) |
| Non-controlling interests |
598) | 74) |
| 14,622) | 19,318) |
| Share) capital) £'000) |
) ) Trans-) lation) reserve) £'000) |
) ) Cash flow) hedge) reserve) £'000) |
£'000) | Total) attributable) to equity) Retained) holders of) controlling) earnings) the parent) £'000) |
Non-) interests) £'000) |
Total) equity) £'000) |
|
|---|---|---|---|---|---|---|---|
| YEAR ENDED 30TH APRIL, 2015 | |||||||
| Balance at 1st May, 2014 |
720) | (9) | 1,195) | 71,684) | 73,590) | 3,980) | 77,570) |
| Total comprehensive income: | |||||||
| Profit |
–) | –) | –) | 15,025) | 15,025) | 427) | 15,452) |
| Other comprehensive income: | |||||||
| Foreign exchange translation differences |
–) | (1,347) | –) | –) | (1,347) | 171) | (1,176) |
| Net movements on cash flow hedges |
–) | –) | 346) | –) | 346) | –) | 346) |
| TOTAL COMPREHENSIVE INCOME FOR THE YEAR |
–) | (1,347) | 346) | 15,025) | 14,024) | 598) | 14,622) |
| Transactions with owners of the Company recognised directly in equity |
|||||||
| Purchase of non-controlling interests without a change in control |
–) | –) | –) | (1,824) | (1,824) | (709) | (2,533) |
| Dividends paid |
–) | –) | –) | (3,049) | (3,049) | (88) | (3,137) |
| BALANCE AT 30TH APRIL, 2015 | 720) | (1,356) | 1,541) | 81,836) | 82,741) | 3,781) | 86,522) |
| YEAR ENDED 30TH APRIL, 2014 | |||||||
| Balance at 1st May, 2013 |
720) | 1,723) | (746) | 56,657) | 58,354) | 4,173) | 62,527) |
| Total comprehensive income: | |||||||
| Profit |
–) | –) | –) | 19,035) | 19,035) | 612) | 19,647) |
| Other comprehensive income: | |||||||
| Foreign exchange translation differences |
–) | (1,732) | –) | –) | (1,732) | (538) | (2,270) |
| Net movements on cash flow hedges |
–) | –) | 1,941) | –) | 1,941) | –) | 1,941) |
| TOTAL COMPREHENSIVE INCOME FOR THE YEAR |
–) | (1,732) | 1,941) | 19,035) | 19,244) | 74) | 19,318) |
| Transactions with owners of the Company recognised directly in equity |
|||||||
| Purchase of non-controlling interests without a change in control |
–) | –) | –) | (197) | (197) | (44) | (241) |
| Dividends paid |
–) | –) | –) | (3,811) | (3,811) | (223) | (4,034) |
| BALANCE AT 30TH APRIL, 2014 | 720) | (9) | 1,195) | 71,684) | 73,590) | 3,980) | 77,570) |
| Notes | 2015) £'000) |
2014) £'000) |
|||||
|---|---|---|---|---|---|---|---|
| NON-CURRENT ASSETS | |||||||
| Property, plant and equipment | 9 | 55,659) 1,477) |
44,096) | ||||
| Investment in associates | 11 | 1,193) | |||||
| Intangible assets | 10 | 10,865) | 10,634) | ||||
| 68,001) | 55,923) | ||||||
| CURRENT ASSETS | |||||||
| Inventories |
14 | 32,771) | 31,215) | ||||
| Trade and other receivables | 15 | 26,364) | 32,851) | ||||
| Derivative financial assets | 20 | 4,624) | 2,517) | ||||
| Cash and cash equivalents | 16 | 7,732) | 6,233) | ||||
| 71,491) | 72,816) | ||||||
| TOTAL ASSETS |
139,492) | 128,739) | |||||
| CURRENT LIABILITIES | |||||||
| Interest-bearing loans and borrowings | 17 | 277) | 2,391) | ||||
| Trade and other payables | 18 | 26,938) | 33,685) | ||||
| Deferred consideration | 18 | 500) | 500) | ||||
| Derivative financial liabilities | 20 | 2,587) | 1,119) | ||||
| Liabilities for current tax | 1,540) | 2,401) | |||||
| Warranty provision | 12 | 224) | 383) | ||||
| 32,066) | 40,479) | ||||||
| NON-CURRENT LIABILITIES | |||||||
| Interest-bearing loans and borrowings | 17 | 17,149) | 7,485) | ||||
| Warranty provision | 12 | 297) | 336) | ||||
| Deferred tax liabilities | 13 | 3,458) | 2,869) | ||||
| 20,904) | 10,690) | ||||||
| TOTAL LIABILITIES | 52,970) | 51,169) | |||||
| NET ASSETS |
86,522) | 77,570) | |||||
| EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT | |||||||
| Share capital |
19 | 720) | 720) | ||||
| Translation reserve | 19 | (1,356) | (9) | ||||
| Cash flow hedge reserve | 19 | 1,541) | 1,195) | ||||
| Retained earnings | 19 | 81,836) | 71,684) | ||||
| TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT | 82,741) | 73,590) | |||||
| NON-CONTROLLING INTERESTS | 19 | 3,781) | 3,980) | ||||
| TOTAL EQUITY |
86,522) | 77,570) |
These financial statements were approved by the Board of Directors on 24th July, 2015 and signed on its behalf by:
| J. W. GOODWIN | R. S. GOODWIN |
|---|---|
Director Director Company Registration Number: 305907
For the year ended 30th April, 2015
| 2015) | 2015) | 2014) | 2014) | ||
|---|---|---|---|---|---|
| £'000) | £'000) | £'000) | £'000) | ||
| CASH FLOW FROM OPERATING ACTIVITIES | |||||
| Profit from continuing operations after tax |
15,452) | 19,647) | |||
| Adjustments for: Depreciation |
4,903) | 3,415) | |||
| Amortisation of intangible assets |
359) | 703) | |||
| Impairment of intangible assets |
59) | -) | |||
| Financial expenses |
682) | 760) | |||
| Loss on sale of property, plant and equipment | 175) | 13) | |||
| Share of profit of associate companies |
(288) | (314) | |||
| Tax expense |
4,601) | 4,448) | |||
| OPERATING PROFIT BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS | 25,943) | 28,672) | |||
| Decrease in trade and other receivables |
5,192) | 2,484) | |||
| Increase in inventories |
(1,743) | (115) | |||
| (Decrease)/increase in trade and other payables | |||||
| (excluding payments on account) |
(2,292) | 1,835) | |||
| (Decrease)/increase in payments on account | (3,434) | 1,794) | |||
| CASH GENERATED FROM OPERATIONS |
23,666) | 34,670) | |||
| Interest paid |
(705) | (814) | |||
| Corporation tax paid |
(4,904) | (4,688) | |||
| Interest element of finance lease obligations | (28) | (31) | |||
| NET CASH FROM OPERATING ACTIVITIES | 18,029) | 29,137) | |||
| CASH FLOW FROM INVESTING ACTIVITIES | |||||
| Proceeds from sale of property, plant and equipment | 199) |
46) | |||
| Acquisition of intangible assets |
(1,263) |
-) | |||
| Acquisition of property, plant and equipment | (17,401) |
(15,082) | |||
| Purchase of non-controlling interest |
(2,533) |
(241) | |||
| Additional payment for existing subsidiary | (80) |
(45) | |||
| Additional investment in associate companies | (64) |
- | |||
| Dividends received from associate companies | 180) |
201) | |||
| NET CASH OUTFLOW FROM INVESTING ACTIVITIES | (20,962) | (15,121) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||
| Payment of capital element of finance lease obligations | (449) |
(401) | |||
| Dividends paid |
(3,049) |
(3,811) | |||
| Dividends paid to non-controlling interests | (88) |
(223) | |||
| Proceeds from loans and committed facilities | 10,000) |
-) | |||
| Proceeds from finance leases |
–) |
356) | |||
| Repayment of loans and committed facilities | (2,000) |
(8,791) | |||
| Finance fees |
–) |
(56) | |||
| NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES | 4,414) | (12,926) | |||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 1,481) | 1,090) | |||
| Cash and cash equivalents at beginning of year | 6,233) | 5,437) | |||
| Effect of exchange rate fluctuations on cash held | 18) | (294) | |||
| CASH AND CASH EQUIVALENTS AT END OF YEAR (see note 16) | 7,732) | 6,233) |
Goodwin PLC (the "Company") is incorporated in the UK.
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 financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs"). The Company has elected to prepare its parent Company financial statements in accordance with UK GAAP; these are presented on pages 54 to 58.
The accounting policies set out below have, unless otherwise stated, 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 25.
With the current level of order input, the opportunity for continued profitability remains good for the next twelve months. The impact of working capital requirements on our banking facilities given the expected level of activity and capital spend commitments will require close management. After reviewing the situation, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and have continued to adopt the going concern basis in preparing the financial statements.
In 2015 the following amendments had been endorsed by the EU, became effective and therefore were adopted by the Group:
The adoption of these standards and amendments has not had a material impact on the Group's financial statements.
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.
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.
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 income statement 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 this translation of foreign operations are taken directly to the translation reserve. They are released into the income statement upon disposal of the foreign operation.
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group has become a party to the contractual provisions of the instrument. The principal financial assets and liabilities of the Group are as follows:
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 Group's cash management are included as a component of cash and cash equivalents for the purpose only of the statement of cash flows.
Trade receivables do not carry interest and are initially recognised at fair value and are subsequently measured at their amortised cost using the effective interest method where material as reduced by allowances for impairment when there is objective evidence of impairment. A provision for impairment is established when the carrying value of the receivable exceeds the present value of the future cash flow discounted using the original effective interest rate. The carrying value of the receivable is reduced through the use of an impairment account and any impairment loss is recognised in the income statement.
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.
Financial liabilities are classified according to the substance of the contractual arrangements entered into.
Interest bearing bank loans and overdrafts are initially recorded at their fair value less attributable transaction costs. They are subsequently carried at their amortised cost and finance charges and are recognised in the income statement over the term of the instrument using an effective rate of interest. Bank overdrafts that form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose only of the statement of cash flows.
Trade and other payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method where material.
Derivative financial instruments are recognised at fair value. The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness of the swap counterparties. 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. For derivatives that do not form part of a designated hedge relationship, the gain or loss on re-measurement to fair value is recognised immediately in the income statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged (see below).
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. Any ineffective portion of the hedge is recognised immediately in the income statement.
For cash flow hedges, the associated cumulative gain or loss is removed from equity and recognised in the income statement in the same period or periods during which the hedged forecast transaction affects the income statement.
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 hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised in the income statement immediately.
When the forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, the associated cumulative gain or loss is removed from the hedging reserve and is included in the initial cost or other carrying amount of the non-financial asset or liability.
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance leases. Where land and buildings are held under finance leases the accounting treatment of the land is considered separately from that of the buildings. Leased assets acquired by way of finance lease are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. Lease payments are accounted for as described below.
Depreciation is charged to the income statement 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 | ||
| Leasehold property | over period of lease | ||
| Plant and machinery | 10% to 25% on reducing balance or cost | ||
| Motor vehicles | 15% or 25% on reducing balance | ||
| Tooling |
over estimated production life | ||
| Fixtures and fittings | 15% to 25% on reducing balance | ||
Assets in the course of construction are not depreciated.
All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of businesses. In respect of business acquisitions that have occurred since 1st May, 2006, goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets and contingent liabilities acquired. For acquisitions prior to the adoption of Revised IFRS 3 "Business Combinations" (1st May, 2010), cost includes directly attributable acquisition costs. For acquisitions after this date, such costs are charged to the income statement. Identifiable intangibles are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment.
In respect of acquisitions prior to 1st May, 2006, goodwill is included at transition date on the basis of its deemed cost, which represents the amount recorded under UK GAAP which was broadly comparable save that only separable intangibles were recognised and goodwill was amortised. On transition, amortisation of goodwill has ceased as required by IFRS 1.
Negative goodwill arising on an acquisition is recognised immediately in the income statement.
Expenditure on research activities is recognised in the income statement 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 income statement 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 income statement 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:
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 relating to income are recognised in the income statement as a deduction from the expenses that they are intended to compensate.
Government grants relating to assets are recognised in the balance sheet as a deduction in the carrying amount of the asset. Depreciation is charged on the value of the asset less the associated grant.
Amounts of grants received are shown in notes 3 and 9.
Where the Group has, through a put option, an obligation to purchase shares in a subsidiary from a minority interest, a financial liability is recognised for the present value of the estimated consideration payable under the put option and the minority interest is not recognised.
For acquisitions made prior to the adoption of Revised IFRS 3 "Business Combinations" (1st May, 2010) at each reporting date, changes in the carrying amount of the liability arising from variations in the estimated fair value of the purchase consideration (excluding the effect of the unwinding of the discount, which is accounted for as a financial expense) are recognised by adjusting the carrying amount of the goodwill recognised on initial recognition of the business combination. For acquisitions after adoption of Revised IFRS 3, any changes in the liability are recognised in the income statement.
The carrying amounts of the Group's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. Recoverable amount is the greater of an asset's or cash generating unit's fair value less costs to sell or value in use.
For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.
Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash generating units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
Goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use were tested for impairment as at 1st May, 2006, the date of transition to Adopted IFRSs, even though no indication of impairment existed.
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.
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.
The Group carries a warranty provision with respect to one of its product lines. The warranties are negotiated 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 income statement.
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business by subsidiary companies to external customers, net of discounts, VAT and other sales-related taxes. Revenue is reduced for customer returns, rebates and other similar allowances. Revenue from the sale of goods, which represent more than 98% of Group revenue, is recognised in the income statement when:
This is typically on delivery of the products or customer acceptance, however commercial terms of sale vary between subsidiary companies.
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.
Finance lease payments
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Financial expenses comprise interest payable, interest on finance leases using the effective interest method and the unwinding of the discount on provisions. Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a substantial time to be prepared for use, are capitalised as part of the cost of that asset.
Interest income and interest payable is recognised in the income statement as it accrues.
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 income statement 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 was one month's contributions outstanding, which were paid in the following month.
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement 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.
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:
The Group has considered the impact of these new standards and interpretations in future periods on profit, earnings per share and net assets. None of the above standards or interpretations are expected to have a material impact.
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. Financial information for each operating division is also available in a disaggregated form in line with the identified cash generating units. Segment assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis. In accordance with the requirements of IFRS 8 the Group's reportable segments, based on information reported to the Group's Board of Directors for the purposes of resource allocation and assessment of segment performance are as follows:
• Mechanical Engineering – casting, machining and general engineering
• Refractory Engineering – powder manufacture and mineral processing
Information regarding the Group's operating segments is reported below. Associates are included in Refractory Engineering.
| Mechanical Engineering |
Refractory Engineering |
Sub Total | |||||
|---|---|---|---|---|---|---|---|
| Year ended 30th April | 2014) £'000) |
2015) £'000) |
2014) £'000) |
2015) £'000) |
2014) £'000) |
||
| Revenue | |||||||
| External sales |
93,545) | 99,044) | 33,504) | 31,784) | 127,049) | 130,828) | |
| Inter-segment sales |
24,899) | 20,725) | 5,912) | 4,576) | 30,811) | 25,301) | |
| Total revenue |
118,444) | 119,769) | 39,416) | 36,360) | 157,860) | 156,129) | |
| Reconciliation to consolidated revenue: | |||||||
| Inter-segment sales |
) | (30,811) | (25,301) | ||||
| Consolidated revenue for the year | ) | ) | 127,049) | 130,828) |
| Mechanical Engineering |
Refractory Engineering |
Sub Total | ||||||
|---|---|---|---|---|---|---|---|---|
| Year ended 30th April | 2015) £'000) |
2014) £'000) |
2015) £'000) |
2014) £'000) |
2015) £'000) |
2014)) £'000) |
||
| Profits | ||||||||
| Segment result including associates | 16,397) | 19,290) | 5,139) | 3,763) | 21,536) | 23,053) | ||
| Group centre |
) | ) | (801) | 1,802) | ||||
| Group finance expenses |
) | ) | (682) | (760) | ||||
| Consolidated profit before | ||||||||
| tax for the year |
) | ) | 20,053) | 24,095) | ||||
| Tax |
) | ) | (4,601) | (4,448) | ||||
| Consolidated profit after | ||||||||
| tax for the year |
) | ) | 15,452) | 19,647) | ||||
| Segmental total assets |
Segmental total liabilities |
Segmental net assets |
||||||
| Year ended 30th April | 2015) | 2014) | 2015) | 2014) | 2015) | 2014) | ||
| £'000) | £'000) | £'000) | £'000) | £'000) | £'000) | |||
| Segmental net assets | ||||||||
| Mechanical Engineering |
65,635) |
69,717) | 48,082) | 54,254) | 17,553) | 15,463) | ||
| Refractory Engineering |
35,262) |
24,399) | 16,572) | 11,482) | 18,690) | 12,917) | ||
| Sub total reportable segment | 100,897) |
94,116) | 64,654) | 65,736) | 36,243) | 28,380) | ||
| Goodwin PLC net asset |
)) | 69,729) | 58,526) | |||||
| Elimination of Goodwin PLC investments | (24,122) | (17,112) | ||||||
| Goodwill |
) | ) | 7,970) | 8,452) | ||||
| Other consolidation adjustments | ) | ) | (3,298) | (676) | ||||
| Consolidated total net assets | ) | ) | 86,522) | 77,570) | ||||
| Segmental property, plant and equipment (PPE) capital expenditure | ||||||||
| Goodwin PLC |
7,586) | 11,743) | ||||||
| Mechanical Engineering |
4,843) | 2,903) | ||||||
| Refractory Engineering |
4,542) | 833) | ||||||
| 16,971) | 15,479) |
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.
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, 2015 | Year ended 30th April, 2014 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue £'000 |
Opera- tional net assets £'000 |
Non current assets £'000 |
Capital expendi- |
PPE ture £'000 |
Revenue | £'000 | Opera- tional net assets £'000 |
Non current assets £'000 |
PPE Capital expendi- ture £'000 |
||
| UK | 25,415 | 63,150 | 56,658 | 11,876 | 27,684 | 63,355 | 49,891 | 14,143 | |||
| Rest of Europe | 24,680 | 5,921 | 724 | 602 | 25,209 | 5,755 | 130 | 253 | |||
| USA | 13,009 | – | – | – | 16,541 | – | – | – | |||
| Pacific Basin | 39,321 | 12,430 | 5,587 | 3,799 | 36,225 | 7,522 | 1,038 | 217 | |||
| Rest of World | 24,624 | 5,021 | 5,032 | 694 | 25,169 | 938 | 4,864 | 866 | |||
| Total | 127,049 | 86,522 | 68,001 | 16,971 | 130,828 | 77,570 | 55,923 | 15,479 | |||
| 3. Expenses and auditors' remuneration Included in profit before taxation are the following: Charged to the income statement Depreciation: |
2015) £'000) |
2014) £'000) |
|||||||||
| Owned assets | 4,655) | 3,141) | |||||||||
| Assets held under finance lease | 248) | 274) | |||||||||
| Amortisation of intangible assets | 359) | 703) | |||||||||
| Impairment of intangible assets | 59) | –) | |||||||||
| Loss on sale of property, plant and equipment Operating lease rentals: |
175) | 13) | |||||||||
| Rental of premises | 381) | 420) | |||||||||
| Short term plant hire | 143) | 165) | |||||||||
| Research and development expensed as incurred | 1,961) | 1,839) | |||||||||
| Impairment of trade receivables charged to the income statement | 6) | 244) | |||||||||
| Losses on derivatives at fair value through the income statement Fees receivable by the auditors and their associates in respect of: |
–) | 642) | |||||||||
| Audit of these financial statements | 54) | 54) | |||||||||
| Audit of the financial statements of subsidiaries | 63) | 101) | |||||||||
| Other audit related services | –) | 2) | |||||||||
| Other non-audit related services | 37) | –) | |||||||||
| Credited to the income statement | |||||||||||
| Government grants received against R & D, infrastructure spend and training costs | 828) | 1,411 | |||||||||
| Foreign exchange gains) | 1,109) | 322 | |||||||||
| Gains on derivatives at fair value through the income statement | 209) | –) |
The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows:
| Number of employees | ||||||
|---|---|---|---|---|---|---|
| 2014) | 2015) | |||||
| 1,008) | 1,088) | Works personnel |
||||
| 46) | 49) | Administration staff |
||||
| 1,054) | 1,137) | |||||
| 2014) | 2015) | |||||
| £'000) | £'000) | The aggregate payroll costs of these persons were as follows: | ||||
| 32,320) | 33,525) | Wages and salaries |
||||
| 3,649) | 3,685) | Social security costs |
||||
| 482) | 832) | Other pension costs |
||||
| 36,451) | 38,042) |
| 5. Financial expenses | 2015) £'000) |
2014) £'000) |
|---|---|---|
| Interest expense on finance leases |
28) | 31) |
| Interest expense on bank loans and overdrafts |
705) | 814) |
| Capitalised interest on fixed asset projects |
(51) | (85) |
| Financial expenses |
682) | 760) |
| 6. Taxation | ||
| Recognised in the income statement | 2015) | 2014) |
| Current tax expense | £'000) | £'000) |
| Current year |
3,875) | 5,241) |
| Adjustments for prior years |
168) | (575) |
| 4,043) | 4,666) | |
| Deferred tax expense | ||
| Origination and reversal of temporary differences – current year |
562) | (120) |
| Origination and reversal of temporary differences – prior year adjustment |
(4) | 183) |
| Origination and reversal of temporary differences – rate change to prior year | –) | (281) |
| 558) | (218) | |
| Total tax expense |
4,601) | 4,448) |
| Reconciliation of effective tax rate | 2015) £'000) |
2014) £'000) |
| Profit before tax |
20,053) | 24,095) |
| Tax using the UK corporation tax rate of 20.92% (2014: 22.84%) |
4,195) | 5,503) |
| Non-deductible expenses |
143) | 84) |
| Under/(over) provision in prior years |
164) | (392) |
| Research and development tax credit |
–) | (87) |
| Patent box tax credit |
(535) | (776) |
| Losses not utilised |
187) | 211) |
| Rate change to prior year |
(34) | (281) |
| Witholding tax unrelieved |
62) | 43) |
| Differences in overseas tax rates |
473) | 203) |
| Effect of equity accounting for associates |
(54) | (60) |
| Total tax expense |
4,601) | 4,448) |
The Group's total amount of taxes payable in respect of the year ending 30th April, 2015 comprising Corporation Tax, PAYE and National Insurance was £16 million.
The following amounts are included in the consolidated statement of comprehensive income:
| 2015) £'000) |
2014) £'000) |
||||
|---|---|---|---|---|---|
| Cash flow hedge deferred tax charge | 87) |
522) |
The earnings per ordinary share has been calculated on profit for the year attributable to ordinary shareholders of £15,025,000 (2014: £19,035,000) and by reference to the 7,200,000 ordinary shares in issue throughout both years.
The Company has no share options or other diluting interests and accordingly, there is no difference in the calculation of diluted earnings per share.
| 8. Dividends | 2015) | 2014) |
|---|---|---|
| Paid ordinary dividends during the year in respect of prior years 42.348p (2014: 35.290p) per qualifying ordinary share |
£'000) 3,049) |
£'000) 2,541) |
| Paid extraordinary dividends during the year in respect of prior years nil p (2014: 17.645p) per qualifying ordinary share |
–) | 1,270) |
| 3,049) | 3,811) |
After the balance sheet date an ordinary dividend of 42.348p per qualifying ordinary share was proposed by the Directors (2014: Ordinary dividend of 42.348p).
The proposed current year ordinary dividend of £3,049,000 has not been provided for within these Financial Statements (2014: Proposed ordinary dividend of £3,049,000 was not provided for within the comparative figures).
| 9. Property, plant and equipment | Land and) buildings) £'000) |
) Plant and) equipment) £'000) |
Fixtures) and) fittings) £'000) |
Assets in) course of) construc-) tion) £'000) |
Total) £'000) |
|||
|---|---|---|---|---|---|---|---|---|
| Cost | ||||||||
| At 1st May, 2013 Additions Reclassification Disposals Exchange adjustment |
16,911) 6,756) 874) –) (931) |
37,076) 7,569) 2,499) (140) (624) |
2,551) 427) –) –) (33) |
3,373) 727) (3,373) –) –) |
59,911) 15,479) –) (140) (1,588) |
|||
| At 30th April, 2014 | 23,610) | 46,380) | 2,945) | 727) | 73,662) | |||
| At 1st May, 2014 Additions Reclassification Disposals Exchange adjustment |
23,610) 2,913) 562) –) (40) |
46,380) 10,125) 165) (1,234) (380) |
2,945) 875) –) –) (8) |
727) 3,058) (727) –) –) |
73,662) 16,971) –) (1,234) (428) |
|||
| At 30th April, 2015 | 27,045) | 55,056) | 3,812) | 3,058) | 88,971) | |||
| Depreciation | ||||||||
| At 1st May, 2013 Charged in year Disposals Exchange adjustment |
2,210) 295) –) (54) |
22,817) 2,934) (81) (302) |
1,576) 186) –) (15) |
–) –) –) –) |
26,603) 3,415) (81) (371) |
|||
| At 30th April, 2014 | 2,451) | 25,368) | 1,747) | _) | 29,566) | |||
| At 1st May, 2014 Charged in year Disposals Exchange adjustment |
2,451) 646) –) (21) |
25,368) 3,949) (860) (274) |
1,747) 308) –) (2) |
–) –) –) –) |
29,566) 4,903) (860) (297) |
|||
| At 30th April, 2015 | 3,076) | 28,183) | 2,053) | _) | 33,312) | |||
| Net book value | ||||||||
| At 1st May, 2013 | 14,701) | 14,259) | 975) | 3,373) | 33,308) | |||
| At 30th April, 2014 and 1st May, 2014 | 21,159) | 21,012) | 1,198) | 727) | 44,096) | |||
| At 30th April, 2015 | 23,969) | 26,873) | 1,759) | 3,058) | 55,659) |
At 30 April, 2015 the net carrying amount of leased plant and machinery was £1,267,000 (2014: £1,561,000). The leased equipment secures lease obligations (see note 17).
Assets in the course of construction of £3,058,000 (2014: £727,000) includes £638,000 of plant and equipment not commissioned at the year end (2014: £165,000).
Additions to fixing assets are after deducting grants receivable of £841,000 (2014: £887,000).
| Goodwill) £'000) |
Brand) names) £'000) |
book) £'000) |
Brand) Name, Intellec-) tual) Property, Order)Customer) Lists) £'000) |
Manu-) facturing) rights) £'000) |
Develop-) ment) costs) £'000) |
Total) £'000) |
|
|---|---|---|---|---|---|---|---|
| Cost Balance at 1st May, 2013 |
8,547) | 5,341) | 174) | –) | 978) | 201) | 15,241) |
| Additions Exchange adjustment |
45) (140) |
–) (109) |
–) (5) |
–) –) |
–) –) |
–) –) |
45) (254) |
| Balance at 30th April, 2014 |
8,452) | 5,232) | 169) | –) | 978) | 201) 15,032) | |
| Additions Exchange adjustment |
80) (503) |
–) (379) |
–) (17) |
1,263) –) |
–) –) |
–) –) |
1,343) (899) |
| Balance at 30th April, 2015 |
8,029) | 4,853) | 152) | 1,263) | 978) | 201) 15,476) | |
| Amortisation and impairment Balance at 1st May, 2013 Amortisation for the year Exchange adjustment |
–) –) –) |
2,649) 593) (45) |
174) –) (5) |
–) –) –) |
721) 110) –) |
201) –) –) |
3,745) 703) (50) |
| Balance at 30th April, 2014 |
–) | 3,197) | 169) | –) | 831) | 201) | 4,398) |
| Amortisation for the year Impairment for the year Exchange adjustment |
–) 59) –) |
332) –) (188) |
–) –) (17) |
10) –) –) |
17) –) –) |
–) –) –) |
359) 59) (205) |
| Balance at 30th April, 2015 |
59) | 3,341) | 152) | 10) | 848) | 201) | 4,611) |
| Net book value At 1st May, 2013 |
8,547) | 2,692) | –) | –) | 257) | –) | 11,496) |
| At 30th April, 2014 |
8,452) | 2,035) | –) | –) | 147) | –) | 10,634) |
At 30th April, 2015 |
7,970) | 1,512) | –) | 1,253) | 130) | –) 10,865) |
During the year, the Group purchased brand names, intellectual property and customer lists for £1,263,000.
The £80,000 of additions to goodwill relates to increased interest in Noreva GmbH by virtue of a minority dividend paid (2014: £45,000).
The amortisation charge of £359,000 (2014: £703,000) is recognised in cost of sales in the income statement. The £59,000 impairment of goodwill was in relation to JSR Technology Limited and is recognised in cost of sales in the income statement.
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:
| 2015 £'000 |
2014 £'000 |
|||||||
|---|---|---|---|---|---|---|---|---|
| Noreva GmbH | 3,974 | 4,397 | ||||||
| Goodwin Refractory Services Holdings Limited | 3,346 | 3,346 | ||||||
| Other | 650 | 709 | ||||||
| 7,970 | 8,452 |
An impairment test is a comparison of the carrying value of the assets of a cash generating unit ("CGU") to their recoverable amount, based on a value-in-use calculation. Recoverable amount is the greater of value-in-use and market value. Where the recoverable amount is less than the carrying value an impairment results. During the year each CGU containing goodwill was separately assessed and tested for impairment. No impairment of the carrying value of goodwill was indicated by this review.
As part of testing goodwill for impairment detailed forecasts of operating cash flows for the next five years are used, which are based on approved budgets and plans by the Board. The forecasts represent the best estimate of future performance of the CGU based on past performance and expectations for the market development of the CGU.
A number of key assumptions are used as part of impairment testing. These key assumptions, such as the CGU's position within its relevant market; its ability to generate profitable orders within that market; expected growth rates both in the market and geographically, are made by management who also take into account past experience and knowledge of forecast future performance together with other relevant external sources of information.
The projections use various growth rates consistent with the profit forecasts of the CGU for the first three years, and forecasts of 10% for the fourth and fifth years (2014: 15% for five years) extrapolated over the minimum expected life span of the unit. Projections beyond the 5 year detailed forecasts do not assume any growth to be conservative. The forecasts are then discounted at appropriate rates considering the perceived levels of risk, ranging from 12% - 15% (2014: 12% - 15%).
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.
The Group has the following principal subsidiaries and associates, non-principal subsidiaries and associates are listed in note 26:
| Country of | Class of | ||||
|---|---|---|---|---|---|
| Subsidiaries; | incorporation | shares held | % held | ||
| Mechanical Engineering: | |||||
| Goodwin Steel Castings Limited | Great Britain |
Ordinary | 100 | ||
| Goodwin International Limited | Great Britain |
Ordinary | 100 | ||
| Easat Antennas Limited |
Great Britain |
Ordinary | 97 | ||
| Goodwin Korea Co. Limited |
South Korea |
Ordinary | 95 | ||
| Goodwin Pumps India Private Limited | India |
Ordinary | 100 | ||
| Goodwin Shanghai Co. Limited | China |
Ordinary | 100 | ||
| Noreva GmbH |
Germany |
Ordinary | 87.5* | ||
| Goodwin (Shanxi) Pump Company Limited | China |
Ordinary | 100 | ||
| Goodwin Valve and Pump Company Limited | Brazil |
Ordinary | 100 | ||
| Internet Central Limited |
Great Britain |
Ordinary | 82.5 | ||
| Goodwin Submersible Pumps Australia Pty. Limited | Australia |
Ordinary | 100 | ||
| Metal Proving Services Limited | Great Britain |
Ordinary | 100 | ||
| Refractory Engineering: | |||||
| Goodwin Refractory Services Limited | Great Britain |
Ordinary | 100 | ||
| Dupré Minerals Limited |
Great Britain |
Ordinary/Preference | 100 | ||
| Hoben International Limited |
Great Britain |
Ordinary | 100 | ||
| Gold Star Powders India Private Limited | India |
Ordinary | 100 | ||
| Siam Casting Powders Limited | Thailand |
Ordinary | 55 | ||
| Ultratec Jewelry Supplies Limited | China |
Ordinary | 51 | ||
| SRS Guangzhou Limited |
China |
Ordinary | 51 | ||
| SRS (Qingdao) Casting Materials Co Limited | China |
Ordinary | 51 | ||
| Gold Star Brazil Limited |
Brazil |
Ordinary | 100 | ||
| Refractory Associates: | |||||
| Jewelry Plaster Limited |
Thailand |
Ordinary | 49 | ||
*Whilst Noreva is a 87.5% owned subsidiary the company has been treated as a 100% subsidiary by virtue of there being both put and call options in place for the remaining 12.5% of the share capital. Gold Star Brazil Limited (previously 51%), Goodwin Pumps India Limited (previously 80%) and Gold Star Powders India Private Limited (previously 80%) are now 100% owned as the non-controlling interests were purchased during the year.
All of the above companies are included as part of the consolidated accounts and are involved in mechanical and refractory engineering.
The Group's share of profit after tax in its associates for the year ended 30 April, 2015 was £288,000 (2014: £314,000).
Summary financial information of Group share of associates was:
| 2015) £'000) |
2014) £'000) |
||||||
|---|---|---|---|---|---|---|---|
| Balance at 1st May | 1,193) | 1,314) | |||||
Profit before tax |
342) | 374) | |||||
Tax |
(54) | (60) | |||||
Dividend |
(180) | (201) | |||||
| Additional investment | 64) | –) | |||||
| Exchange adjustment | 112) | (234) | |||||
| Balance at 30th April | 1,477) | 1,193) | |||||
| Assets |
2,346) | 1,848) | |||||
| Liabilities |
(869) | (655) | |||||
| 1,477) | 1,193) | ||||||
| ) | 2015) £'000) |
2014) £'000) |
|||||
|---|---|---|---|---|---|---|---|
Revenue |
1,332) |
1,082) | |||||
| Profit after tax | 193) |
287) | |||||
| Non current assets | 300) |
286) | |||||
| Current assets | 938) |
721) | |||||
| Non current liabilities | (3) |
(4) | |||||
| Current liabilities | (294) |
(159) |
| 12. Warranty provision | 2015) £'000) |
2014) £'000) |
||||
|---|---|---|---|---|---|---|
| Balance at 1st May |
719) |
862) | ||||
Generated |
236) |
264) | ||||
| Credited to the income statement | (360) |
(381) | ||||
Exchange adjustment |
(74) |
(26) | ||||
Balance at 30th April |
521) |
719) | ||||
| Warranty due within one year | 224) |
383) | ||||
| Warranty due after one year | 297) |
336) | ||||
Balance at 30th April |
521) |
719) |
Provisions for warranties primarily relate to products sold and generally covers a period of between 1 and 3 years.
Deferred tax assets and liabilities are attributable to the following:
| Assets | Liabilities | |||||||
|---|---|---|---|---|---|---|---|---|
| 2015) £'000) |
2014) £'000) |
2015) £'000) |
2014) £'000) |
|||||
| Property, plant and equipment | –) | –) | (2,550) | (2,133) | ||||
| Derivative financial instruments Intangible assets Other temporary differences |
–) –) –) |
–) –) 152) |
(408) (469) (31) |
(280) (608) –) |
||||
| –) | 152) | (3,458) | (3,021) | |||||
| 2015) £'000) |
2014) £'000) |
|||||||
| Assets Liabilities |
–) (3,458) |
152) (3,021) |
||||||
| (3,458) | (2,869) |
| Property) plant &) £'000) |
Derivative) financial) equipment) instruments) £'000) |
) Intangible) Assets) £'000) |
Other) temporary) differences) £'000) |
) ) Total) £'000) |
||
|---|---|---|---|---|---|---|
| Balance at 1st May, 2013 | (2,081) | 272) | (772) | –) | (2,581) | |
| Recognised in income Recognised in equity Exchange adjustment |
(48) –) (4) |
(30) (522) –) |
144) –) 20) |
152) –) –) |
218) (522) 16) |
|
| Balance at 30th April, 2014 | (2,133) | (280) | (608) | 152) | (2,869) | |
| Recognised in income Recognised in equity Exchange adjustment |
(413) –) (4) |
(41) (87) –) |
79) –) 60) |
(183) –) –) |
(558) (87) 56) |
|
| Balance at 30th April, 2015 | (2,550) | (408) | (469) | (31) | (3,458) |
Within the current and previous year, the Group has no material tax losses where a deferred tax asset has been recognised.
Reductions in the UK corporation tax rate from 23% to 21% (effective from 1st April 2014) and 20% (effective from 1st April 2015) were substantively enacted on 2nd July 2013. In the budget on 8th July 2015, the Chancellor announced additional planned reductions to 18% by 2020. This will reduce the Company's future current tax charge accordingly. The deferred tax liability at 30th April 2015 has been calculated based on the rate of 20% substantively enacted at the balance sheet date.
| 14. Inventories | 2015) £'000) |
2014) £'000) |
||||
|---|---|---|---|---|---|---|
| Raw materials and consumables | 15,782) | 15,449) | ||||
| Work in progress |
13,051) | 11,942) | ||||
| Finished goods |
3,938) | 3,824) | ||||
| 32,771) | 31,215) | |||||
| Amount of inventory write-down | 92( | 398) | ||||
| Reversal of inventory write-down | (137) | (5) |
| 15. Trade and other receivables | 2015) £'000) |
2014) £'000) |
|||||
|---|---|---|---|---|---|---|---|
| Trade receivables Other receivables Prepayments |
23,377) 2,063) 924) |
28,953) 2,606) 1,292) |
|||||
| 26,364) | 32,851) | ||||||
| 16. Cash and cash equivalents | 2015) £'000) |
2014) £'000) |
|||||
| Cash and cash equivalents per balance sheet Bank overdrafts |
7,732) –) |
6,233) –) |
|||||
| Cash and cash equivalents per cash flow statement | 7,732) |
6,233) |
This note provides information about the contractual terms of the Group's interest-bearing bank loans and borrowings. For more information about the Group's exposure to interest rate and foreign currency risk, see note 20.
| Non-current liabilities | 2015) £'000) |
2014) £'000) |
|||
|---|---|---|---|---|---|
| Finance lease liabilities Bank loans and committed facilities |
288) 16,861) |
566) 6,919) |
|||
| Current liabilities | 17,149) | 7,485) | |||
| Finance lease liabilities Bank loans and committed facilities |
277) –) |
448) 1,943) |
|||
| Finance lease liabilities | 277) | 2,391) |
Finance lease liabilities are payable as follows:
| Minimum lease payments £'000 |
2015 Interest £'000 |
Principal £'000 |
Minimum lease payments £'000 |
2014 Interest £'000 |
Principal £'000 |
|
|---|---|---|---|---|---|---|
| Less than one year Between one and five years |
293 300 |
16 12 |
277 288 |
475 595 |
27 29 |
448 566 |
| 593 | 28 | 565 | 1,070 | 56 | 1,014 |
| Current liabilities | 2015 £'000 |
2014 £'000 |
|||
|---|---|---|---|---|---|
| Trade payables Non-trade payables and accrued expenses Other taxation and social security costs |
14,573 6,883 1,802 |
17,152 6,861 2,558 |
|||
| Payments received on account |
3,680 |
7,114 | |||
| 26,938 | 33,685 | ||||
| Deferred consideration on acquisitions | 500 |
500 |
The deferred consideration at 30th April, 2015 and 30th April, 2014 of £500,000 relates to the acquisition of Noreva GmbH.
The liability for deferred consideration is calculated on the basis that the amount is payable on demand.
Reconciliation of movement in capital and reserves ) )Total) )
| Share) capital) £'000) |
) lation) reserve) £'000) |
) Trans-) Cash flow) hedge) reserve) £'000) |
£'000) | attributable) to equity) earnings) the parent) £'000) |
) Non-) Retained) holders of) controlling) interest) £'000) |
Total) equity) £'000) |
|
|---|---|---|---|---|---|---|---|
| Balance at 30th April, 2013 | 720) | 1,723) | (746) | 56,657) | 58,354) | 4,173) | 62,527) |
| Total comprehensive income |
–) | (1,732) | 1,941) | 19,035) | 19,244) | 74) | 19,318) |
| Purchase of non-controlling interests, without a change in control |
–) | –) | –) | (197) | (197) | (44) | (241) |
| Dividends paid |
–) | –) | –) | (3,811) | (3,811) | (223) | (4,034) |
| Balance at 30th April, 2014 | 720) | (9) | 1,195) | 71,684) | 73,590) | 3,980) | 77,570) |
| Total comprehensive income Purchase of non-controlling |
–) | (1,347) | 346) | 15,025) | 14,024) | 598) | 14,622) |
| interests, without a change in control |
–) | –) | –) | (1,824) | (1,824) | (709) | (2,533) |
| Dividends paid |
–) | –) | –) | (3,049) | (3,049) | (88) | (3,137) |
| Balance at 30th April, 2015 | 720) | (1,356) | 1,541) | 81,836) | 82,741) | 3,781) | 86,522) |
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.
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.
The aggregate deferred tax relating to items that are recognised in equity is a liability of £385,000 (2014: liability of £299,000).
| Share capital | 2015 £'000 |
2014 £'000 |
|
|---|---|---|---|
| Authorised, allotted, called up and fully paid: | |||
| 7,200,000 ordinary shares of 10p each |
720 |
720 |
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
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 risks, 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.
The Group's financial assets are cash and cash equivalents and trade and other receivables, the carrying amounts of which represent the Group's maximum exposure to credit risk in relation to financial assets. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
The Group's credit risk is primarily attributable to its trade receivables, and is managed through the following processes:
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
| Carrying amount | ||||||
|---|---|---|---|---|---|---|
| Notes | 2015) £'000) |
2014) £'000) |
||||
15 |
25,440) | 31,559) | ||||
20(e) |
4,624) | 6,233) 2,517) |
||||
| 37,796) | 40,309) | |||||
| 16 | 7,732) |
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
| Carrying amount | |||||||
|---|---|---|---|---|---|---|---|
| 2015) £'000) |
2014) £'000) |
||||||
| UK |
2,688) | 8,104) | |||||
| Rest of Europe | 3,891) | 6,955) | |||||
| USA |
3,157) | 2,114) | |||||
| Pacific Basin | 8,739) | 6,445) | |||||
| Rest of World | 4,902) | 5,335) | |||||
| 23,377) | 28,953) | ||||||
The ageing of trade receivables and impairments at the reporting date were:
| ) Net) 2015) £'000) |
) Gross) 2015) £'000) |
Impairment) provision) 2015) £'000) |
) Net) 2014) £'000) |
) Gross) 2014) £'000) |
Impairment) provision) 2014) £'000) |
|
|---|---|---|---|---|---|---|
| Not past due |
15,876) | 15,876) | –) | 18,912) | 18,912) | –) |
| Past due 1-30 days |
3,626) | 3,626) | –) | 5,834) | 5,834) | –) |
| Past due 31-90 days |
2,430) | 2,430) | –) | 2,819) | 2,819) | –) |
| Past due more than 90 days | 1,445) | 1,957) | (512) | 1,388) | 2,185) | (797) |
| 23,377) | 23,889) | (512) | 28,953) | 29,750) | (797) |
There are no significant credit risks arising from the above assets and management believes 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: | 2015) £'000) |
2014) £'000) |
||||
|---|---|---|---|---|---|---|
| At beginning of year | 797) |
630) | ||||
| Exchange adjustment | 12) |
(34) | ||||
| Impairment charged through the income statement | 6) |
244) | ||||
| Impairment provision utilised during the year | (303) |
(43) | ||||
| At end of year |
512) |
797) |
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) | Committed) | Total) | |||||
|---|---|---|---|---|---|---|---|
| 2015) | 2014) | 2015) | 2014) | 2015) | 2014) | ||
| £'000) | £'000) | £'000) | £'000) | £'000) | £'000) | ||
| Unutilised bank facilities | 28,640) |
22,346) | 5,000) | 15,000) | 33,640) | 37,346) | |
The Group's principal borrowing facilities are provided by 3 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.
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 cashflows that have not been discounted.
| Carrying) | ||||
|---|---|---|---|---|
| value) 2015) |
||||
| 1 year) £'000) |
1-6 years) £'000) |
Total) £'000) |
Total) £'000) |
|
| 16,861) 565) |
||||
| 26,938) | ||||
| 500) | –) | 500) | 500) | |
| 27,731) | 17,300) | 45,031) | 44,864) | |
| Within) –) 293) 26,938) |
2015 17,000) 300) –) |
Contractual cash flows 17,000) 593) 26,938) |
The April 2015 bank loans and committed facilities are repayable: £2,000,000 in 2016, £3,000,000 in 2017, £9,000,000 in 2018 and £3,000,000 in 2020. The interest rates chargeable on these loans are on a floating basis against LIBOR, with bank margins less than 2% margin.
| 2014 Contractual cash flows |
Carrying) value) 2014) Total) £'000) |
|
|---|---|---|
| Within) 1 year) 1-6 years) Total) £'000) £'000) £'000) |
||
| Non-derivative financial liabilities | ||
| Bank loans and committed facilities |
2,000) 7,000) 9,000) |
8,862) |
| Finance leases |
475) 595) 1,070) |
1,014) |
| Trade and other payables |
33,685) –) 33,685) |
33,685) |
| Deferred consideration on acquisition |
500) –) 500) |
500) |
| Total |
36,660) 7,595) 44,255) |
44,061) |
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 income statement.
The Group at its discretion is empowered to hedge its estimated annual foreign currency exposure in respect of forecast sales and purchases if the Board deems it appropriate after having taken into account the expected movement in the foreign exchange rates. The Group uses forward exchange contracts to hedge its foreign currency risk. All the foreign exchange contracts have maturities within two years after the balance sheet date. Where necessary, the forward exchange contracts are rolled over at maturity.
In respect of other monetary assets and liabilities held in currencies, the Group ensures that the net exposure is eliminated through the use of forward exchange contracts or spot transactions at the time the contractual commitment is in place.
Currency profile of financial assets and liabilities
| 2015) | 2014) | 2015) | 2014) | 2015) | 2014) | 2015) | 2014) | |
|---|---|---|---|---|---|---|---|---|
| US) Dollar) £'000) |
US) Dollar) £'000) |
Euro) £'000) |
Euro) £'000) |
Other) £'000) |
Other) £'000) |
Total) £'000) |
Total) £'000) |
|
| Trade and other receivables |
11,599) | 9,691) | 2,421) | 3,549) | –) | –) | 14,020) | 13,240) |
| Cash and cash equivalents |
617) | 952) | 421) | 365) | –) | –) | 1,038) | 1,317) |
| Trade and other payables |
(752) | (243) | (3,784) | (3,369) | (4,969) | (5,964) | (9,505) | (9,576) |
| 11,464) | 10,400) | (942) | 545) | (4,969) | (5,964) | 5,553) | 4,981) |
The following significant exchange rates applied during the year:
| Average Exchange rate |
Reporting date spot rate |
||||||
|---|---|---|---|---|---|---|---|
| 2015) | 2014) | 2015) | 2014) | ||||
| US Dollar Euro |
1.5992) 1.2925) |
1.6016) 1.2097) |
1.533) 1.373) |
1.6886) 1.2180) |
|||
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 ensure against adverse movements in interest rates. Formal reviews are undertaken to determine whether such instruments are appropriate for the Group. During the year, no new interest rate swaps or caps were entered into.
The Group has taken out in previous years £5 million of interest rate protection in the form of swaps which expire in October, 2016.
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 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2015) £'000) |
2014) £'000) |
2015) £'000) |
2014) £'000) |
2015) £'000) |
2014) £'000) |
2015) £'000) |
2014) £'000) |
|||
| Cash and cash equivalents |
–) | –) | 7,732) | 6,233) | –) | –) | 7,732) | 6,233) | ||
| Trade and other receivables |
–) | –) | –) | –) | 30,988) | 35,368) | 30,988) | 35,368) | ||
| Trade and other payables |
–) | –) | –) | –) | (31,565) | (37,662) | (31,565) | (37,662) | ||
| Bank overdrafts | –) | –) | –) | –) | –) | –) | –) | –) | ||
| Bank loans and committed facilities |
–) | –) | (16,861) | (8,862) | –) | –) | (16,861) | (8,862) | ||
| Finance lease liabilities |
(237) | (306) | (328) | (708) | –) | –) | (565) | (1,014) | ||
| (237) | (306) | (9,457) | (3,337) | (577) | (2,294) | (10,271) | (5,937) |
Other receivables and other payables include derivatives.
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 shareholder's 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, 2015, the capital used was £92.9 million, (2014: £77.7 million) as shown in the following table:
| 2015) £'000) |
2014) £'000) |
||||
|---|---|---|---|---|---|
| Cash and cash equivalents | (7,732) | (6,233) | |||
| Finance leases |
565) | 1,014) | |||
| Bank loans and committed facilities | 16,861) | 8,862) | |||
| Deferred consideration | 500) | 500) | |||
| Net debt |
10,194) | 4,143) | |||
| Total equity attributable to equity holders of the parent | 82,741) | 73,590) | |||
| Capital | 92,935) | 77,733) |
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 strategy is to target a debt to equity ratio below 30%, adjusted where appropriate for the effect of acquisitions. At 30th April, 2015 net debt was £10.2 million (2014: £4.1 million). The net debt and debt/equity ratio is expected to increase during the coming year as the approved capital projects are financed.
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 20(b).
There were no changes in the Group's approach to capital management during the year.
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.
The Group classifies its forward exchange contracts hedging forecast transactions as cash flow hedges and states them at fair value.
The nominal value of forward exchange contracts used as hedges of forecast transactions at 30th April, 2015, in sterling terms, was £86.4 million spread across USD, EUR, INR, JPY and BRL denominated contracts. The fair value of these at 30th April, 2015 was an asset of £2,249,000 (being assets totalling £3,576,000, and liabilities totalling £1,327,000). The Group also has a number of forward contracts not designated as cash flow hedges, and therefore recorded at fair value through the income statement. The nominal value of these contracts at 30th April, 2015, in sterling terms, was £12.1 million spread across USD, EUR, and INR denominated contracts. The fair value of these at 30th April, 2015 was an asset of £111,000 (being assets totalling £1,048,000, and liabilities totalling £937,000).
The nominal value of forward exchange contracts used as hedges of forecast transactions at 30th April, 2014, in sterling terms, was £38.9 million spread across USD, EUR, INR and JPY denominated contracts. The fair value of these at 30th April, 2014 was an asset of £1,977,000 (being assets totalling £2,444,000, and liabilities totalling £467,000). The Group also has a number of forward contracts not designated as cash flow hedges, and therefore recorded at fair value through the income statement. The nominal value of these contracts at 30th April, 2014, in sterling terms, was £12.7 million spread across USD, EUR, and INR denominated contracts. The fair value of these at 30th April, 2014 was a liability of £95,000 (being assets totalling £73,000, and liabilities totalling £168,000).
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 income statement. 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 administrative expenses.
The Group uses interest rate swaps contracts to manage its exposure to interest rate movements on its bank borrowings. The nominal value of these contracts at the year end was £5 million (2014: £5 million).
The fair value of swaps entered into at 30th April, 2015 was estimated at £323,000 liability (2014: £484,000 liability). Of these swaps, the fair value of those designated as cash flow hedges at 30th April, 2015 was £323,000 liability (2014: £484,000 liability).
For cash flow hedges 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:
| 2015 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Periods in which cash flows and profits are expected to occur Between) |
|||||||||||
| Carrying) amount) £'000) |
Expected) cash flow) £'000) |
Within) 1 year) £'000) |
1 and) 5 years) £'000) |
Over) 5 years) £'000) |
|||||||
| Forward exchange contracts | |||||||||||
| Assets |
3,576) | 3,576) | 1,653) | 1,923) | –) | ||||||
| Liabilities |
(1,327) | (1,327) | (924) | (403) | –) | ||||||
| Interest rate swaps | |||||||||||
| Liabilities |
(323) | (323) | (226) | (97) | –) | ||||||
| 1,926) | 1,926) | )503) | 1,423) | –) |
| 2014 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Periods in which cash flows and profits are expected to occur Between) |
|||||||||||
| Carrying) amount) £'000) |
Expected) cash flow) £'000) |
Within) 1 year) £'000) |
1 and) 5 years) £'000) |
Over) 5 years) £'000) |
|||||||
| Forward exchange contracts | |||||||||||
| Assets Liabilities |
2,444) (467) |
2,444) (467) |
2,444) (467) |
–) –) |
–) –) |
||||||
| Interest rate swaps | |||||||||||
| Liabilities |
(484) |
(484) | (199) | (285) | –) | ||||||
| 1,493) | 1,493) | 1,778) | (285) | –) | |||||||
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.
| 2015) £'000) |
2014) £'000) |
|---|---|
| (Profit)/loss) | (Profit)/loss) |
(652) (280) 52) 652) 280) (52) |
(414) –) 79) 414) –) (79) |
(80) (40) –) 80) 40) |
(85) (37) 7) 85) 37) (7) |
| –) |
The Group has calculated the following sensitivities based on available data from forward markets for fixed and floating interest rates. Management believe that these reflect the most probable rate movements.
| Impact on equity | 2015) £'000) |
2014) £'000) |
|||
|---|---|---|---|---|---|
| 1% increase in base rate of interest | (75) | (124) | |||
| Impact on the income statement | |||||
| 1% increase in base rate of interest | –) | –) |
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, 2015 and 30th April, 2014.
| 30th April, 2015 | 30th April, 2014 | |||
|---|---|---|---|---|
| Carrying amount £'000 |
Fair value £'000 |
Carrying amount £'000 |
Fair value £'000 |
|
| Financial assets | ||||
| Cash and cash equivalents |
7,732 | 7,732 | 6,233 | 6,233 |
| Receivables | ||||
| Trade receivables |
23,377 | 23,377 | 28,953 | 28,953 |
| Other receivables |
2,063 | 2,063 | 2,606 | 2,606 |
| At fair value through the income statement | ||||
| Derivative financial assets not designated in a cash flow hedge relationship |
1,048 | 1,048 | 73 | 73 |
| Designated cash flow hedge relationships | ||||
| Derivative financial assets designated and effective as cash flow hedging instruments |
3,576 | 3,576 | 2,444 | 2,444 |
| Total financial assets |
37,796 | 37,796 | 40,309 | 40,309 |
| 30th April, 2015 | 30th April, 2014 | ||||
|---|---|---|---|---|---|
| Carrying amount £'000 |
Fair value £'000 |
Carrying amount £'000 |
Fair value £'000 |
||
| Trade payables |
14,573 |
14,573 | 17,152 | 17,152 | |
| Other payables |
8,685 |
8,685 | 9,419 | 9,419 | |
| Deferred consideration |
500 |
500 | 500 | 500 | |
| Finance lease liabilities |
565 |
565 | 1,014 | 1,014 | |
| Bank loans and committed facilities | 16,861 |
16,861 | 8,862 | 8,862 | |
| Corporation tax |
1,540 |
1,540 | 2,401 | 2,401 | |
| At fair value through the income statement | |||||
| Derivative financial liabilities not designated in a cash flow hedge relationship |
937 |
937 | 168 | 168 | |
| Designated cash flow hedge relationships | |||||
| Derivative financial liabilities designated and effective as cash flow hedging instruments |
1,650 | 1,650 | 951 | 951 | |
| Total financial liabilities |
45,311 |
45,311 | 40,467 | 40,467 |
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. All other financial assets and liabilities fair values are determined using Level 3 inputs.
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).
Under IAS 39, all derivative financial instruments not in a hedge relationship are classified as derivatives at fair value through the income statement. 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 certainty that orders will be received.
For short term cash and cash equivalents, trade and other receivables, trade and other payables and floating rate borrowings, the fair values are the same as carrying value. For fixed rate borrowings, forward currency contracts and interest rate instruments fair values have been calculated by discounting the cash flows at prevailing appropriate market rates. Other assets reflect management's estimate of value on an appropriate basis.
Non-cancellable operating lease rentals are payable as follows:
| Land and) buildings) £'000) |
Other) £'000) |
Total) 2015) £'000) |
Total) 2014) £'000) |
|
|---|---|---|---|---|
| Less than one year Between one and five years |
328) 1,151) |
42) 69) |
370) 1,220) |
282) 525) |
| 1,479) | 111) | 1,590) | 807) |
Contracted capital commitments at 30th April, 2015 for which no provision has been made in these financial statements were £4,490,000 (2014: £4,004,000).
| 23.Guarantees and contingencies | Total) £'000) |
Number of) contracts) |
|||||
|---|---|---|---|---|---|---|---|
| Year ended | |||||||
| 30th April, 2015 | 15,455) | 417) | |||||
| 30th April, 2014 | 15,234) | 428) | |||||
The Group has issued bank backed guarantee and bond commitments principally in order to secure its contracts.
After the balance sheet date an ordinary dividend of 42.348p per qualifying ordinary share was proposed by the Directors (2014: Ordinary dividend of 42.348p).
The current year proposed ordinary dividend of £3,049,000 has not been provided for within these Financial Statements (2014: Proposed ordinary dividend of £3,049,000 was not provided for within the comparative figures). Also, after the balance sheet date, the Board of Directors have approved further capital expenditure of £1.13 million.
The Group's Directors review the appropriateness of the carrying values of its non-current and current assets.
With regards to the non-current assets, the Directors consider the value of goodwill reported at the year end and only carry forward goodwill on the basis that it remains unimpaired as demonstrated by the future underlying performance of the subsidiaries or cash generating unit giving rise to the goodwill. If the Directors are not of such a view then the goodwill is impaired immediately.
With regard to plant and equipment, the Directors consider that the depreciation rates applied are sufficient, taking into account both the expected lifespan of the plant and equipment and also the demand in the marketplace for the goods that the plant produces.
With regard to current assets, the Directors look at the carrying values as stated in the balance sheet and make full provision for any assets on which there is a high degree of probability that full conversion of such assets into cash is unlikely.
(b) Warranties
The mechanical engineering segment of the Group operates within capital goods markets. Some of these goods are sold with warranties. The Group's Directors based on past experience and knowledge of the products review the need for provisions that may be required for any rework and provisions are made in the accounts as deemed appropriate.
(c) Revenue Recognition
The Group's Directors are conscious of the stringent requirements of IAS 18 - Revenue which deal with revenue recognition. The Group's sales are made under a wide variety of commercial terms, and so particular effort is needed to ensure that sales are only recognised within the accounts when to do so is in accordance with the accounting standard.
| Country of Incorporation |
Class of shares held |
% held | |
|---|---|---|---|
| Non-principal subsidiaries: | |||
| JSR Technology Limited |
Great Britain |
Ordinary | 75 |
| Perfect Audio Visual Limited |
Great Britain |
Ordinary | 76 |
| Holding companies: | |||
| Goodwin Refractory Services Holdings | |||
| Limited |
Great Britain |
Ordinary | 100 |
| Ying Tai (UK) Limited |
Great Britain |
Ordinary | 51 |
| Non-principal associates: | |||
| Jewelry Wax Limited |
Thailand Ordinary |
49 | |
| Tet Goodwin Property Company Limited | Thailand Ordinary |
49 | |
| Asian Industrial Investment Casting | |||
| Powders Private Limited |
India Ordinary |
40 | |
| Dormant Companies: | |||
| Hoben Davis Limited |
Great Britain |
Ordinary | 100 |
| Gold Star Powders Limited |
Great Britain |
Ordinary | 100 |
| Perfect Audio Visual (NI) Limited |
Great Britain |
Ordinary | 76 |
| Net Central Limited |
Great Britain |
Ordinary | 100 |
| Sandersfire International Limited |
Great Britain |
Ordinary | 100 |
| Specialist Refractory Services Limited | Great Britain |
Ordinary | 100 |
| Tecast Trading (Guangzhou) Limited | China Ordinary |
51 |
All of the above companies are included as part of the consolidated accounts.
| 2015) | 2014) | ||||||
|---|---|---|---|---|---|---|---|
| Note | £'000) | £'000) | |||||
| FIXED ASSETS | |||||||
| Intangible assets | C4 |
404) | 524) | ||||
| Tangible assets | C5 |
35,227) | 29,152) | ||||
| Investments | C6 |
24,122) | 17,112) | ||||
| 59,753) | 46,788) | ||||||
| CURRENT ASSETS | |||||||
| Debtors |
C7 |
38,530) | 31,008) | ||||
| Cash at bank and in hand | 3,171) | 2,568) | |||||
| 41,701) | 33,576) | ||||||
| CREDITORS: amounts falling due within one year | C8 |
(13,966) | (14,052) | ||||
| NET CURRENT ASSETS | 27,735) | 19,524) | |||||
| TOTAL ASSETS LESS CURRENT LIABILITIES | 87,488) | 66,312) | |||||
| CREDITORS: amounts falling due after more than one year | C9 |
(16,926) | (7,174) | ||||
| PROVISIONS FOR LIABILITIES | C10 |
(833) | (612) | ||||
| NET ASSETS |
69,729) | 58,526) | |||||
| CAPITAL AND RESERVES | |||||||
| Called up share capital | C11 |
720) | 720) | ||||
| Hedge reserve | C12 |
(258) | (387) | ||||
| Profit and loss account | C12 |
69,267) | 58,193) | ||||
| TOTAL SHAREHOLDERS' FUNDS | 69,729) | 58,526) |
These financial statements were approved by the board of Directors on 24th July, 2015 and signed on its behalf by:)
J. W. GOODWIN R. S. GOODWIN Director Director
Company Registration Number: 305907
The Company has elected to prepare its financial statements under UK GAAP.
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to these financial statements.
The financial statements have been prepared under the historical cost accounting rules, except for derivatives which are valued at fair value, and in accordance with applicable Accounting Standards.
The Company is exempt under S408(3) Companies Act 2006 from the requirement to present its own profit and loss account.
In accordance with FRS 1, the Company is exempt from preparing its own cash flow statement. In accordance with FRS 8 "Related parties", the Company is exempt from disclosing transactions with its wholly owned subsidiaries.
The Company has adopted the requirements of FRS 29 and has taken the exemption under that standard from disclosure on the grounds that the Group financial statements contain disclosures in compliance with IFRS 7.
In the Company's financial statements, investments in subsidiary undertakings are stated at cost less amounts written off for impairment.
Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange ruling at the balance sheet date and the gains and losses on translation are included in the profit and loss account.
Manufacturing rights, brand names and customer lists purchased by the Company are amortised to nil by equal annual instalments over their useful economic lives, generally their respective unexpired periods, of between 6 and 15 years.
Depreciation is calculated so as to write down the cost of fixed assets to their anticipated residual value over their estimated useful lives. The method of calculation and the annual rates applied are as follows:
| Freehold land | Nil | ||
|---|---|---|---|
| Freehold buildings | 2% to 4% on reducing balance or cost | ||
| Plant and machinery | 10% to 25% on reducing balance or 25% on cost | ||
| Motor vehicles | 15% or 25% on reducing balance | ||
| Fixtures and fittings | 25% on reducing balance | ||
Assets in the course of construction are not depreciated.
Government grants relating to fixed assets are recognised in the balance sheet as an accrual, and are released into the profit and loss account pro-rata to the depreciation on the associated fixed asset.
The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Except where otherwise required by accounting standards, full provision without discounting is made for all timing differences which have arisen but not reversed at the balance sheet date.
The Company does not make a deferred tax provision for the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries. No liability has been recognised in respect of these differences both on the grounds of materiality and because the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.
Temporary differences arising in connection with interests in associates and joint ventures are insignificant.
Where the Company enters into a lease which entails taking substantially all the risks and rewards of ownership of an asset, the lease is treated as a "finance lease". The asset is recorded in the balance sheet as a tangible fixed asset and is depreciated over its estimated useful life, or the term of the lease, whichever is shorter. Future instalments under such leases, net of finance charges, are included with creditors. Rentals payable are apportioned between the finance element, which is charged to the profit and loss account, and the capital element which reduces the outstanding obligation for future instalments.
All other leases are accounted for as "operating leases" and the rental charges are charged to the profit and loss account on a straight line basis over the life of the lease.
The Company uses financial instruments to manage financial risks associated with the Group's underlying business activities and the financing of those business activities. The Company does not undertake any trading in financial instruments.
Derivatives are initially recognised at fair value on the date that the contract is entered into and subsequently re-measured in future periods at their fair value. The method of recognising the resulting change in fair value is dependent on whether the derivative is designated as a hedging instrument.
The fair value of interest rate swaps is the estimated amount that the Company would receive or pay to terminate the swaps at the balance sheet date, taking into account current interest rates and the current credit worthiness of the swap counterparties.
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. Any ineffective portion of the hedge is recognised immediately in the profit and loss account.
For cash flow hedges, the associated cumulative gain or loss is removed from equity and recognised in the profit and loss account in the same period or periods during which the hedged forecast transaction affects the profit and loss account.
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 hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised in the profit and loss account.
When the forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, the associated cumulative gain or loss is removed from the hedging reserve and is included in the initial cost or other carrying amount of the non-financial asset or liability.
The Company's profit for the financial year was £14,123,000 (2014: £18,912,000).
Included in profit before taxation are the following:
| Fees receivable by the auditors and their associates in respect of: | 2015) £'000) |
2014) £'000) |
|||
|---|---|---|---|---|---|
| Audit of these financial statements | 16) |
16) |
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 3 of the Group accounts).
Details of Directors' remuneration are set out in the Directors' Remuneration Report on pages 18 to 20.
| Brand Name) and customer) list) £'000) |
Manufacturing) rights) £'000) |
Intellectual) Property) Rights and) Non-Compete) £'000) |
Total) £'000) |
||
|---|---|---|---|---|---|
| Cost | |||||
| At beginning and end of year | 880) |
827) | 594) | 2,301) | |
| Amortisation | |||||
| At beginning of year | 816) |
367) | 594) | 1,777) | |
| Charged in year | 64) |
56) | –) | 120) | |
| At end of year |
880) |
423) | 594) | 1,897) | |
| Net book value At 30th April, 2015 |
–) |
404) | –) | 404) | |
| At 30th April, 2014 | 64) |
460) | –) | 524) | |
| C5 | Tangible fixed assets | Freehold) land and) buildings) £'000) |
Plant and) machinery) £'000) |
Fixtures) and) fittings) £'000) |
Assets) in course of) construction) £'000) |
Total) £'000) |
|
|---|---|---|---|---|---|---|---|
| Cost | |||||||
| At beginning of year | 19,522) |
16,369) | 1,788) | 727) | 38,406) | ||
| Additions |
2,924) |
5,043) | 504) | –) | 8,471) | ||
| Disposals |
–) |
(319) | –) | –) | (319) | ||
| Transfer |
562) |
165) | –) | (727) | –) | ||
| At end of year |
23,008) |
21,258) | 2,292) | –) | 46,558) | ||
| Depreciation | |||||||
| At beginning of year | 1,880) |
6,090) | 1,284) | –) | 9,254) | ||
| Charge for year | 606) |
1,390) | 146) | –) | 2,142) | ||
| Disposals |
–) |
(65) | –) | –) | (65) | ||
| At end of year |
2,486) |
7,415) | 1,430) | –) | 11,331) | ||
| Net book value | |||||||
| At 30th April, 2015 | 20,522) |
13,843) | 862) | –) | 35,227) | ||
| At 30th April, 2014 | 17,642) |
10,279) | 504) | 727) | 29,152) |
| Shares in) associated) undertakings) |
Shares in) Group) undertakings) |
|||||
|---|---|---|---|---|---|---|
| C6 | Fixed asset investments | £'000) | £'000) | |||
| Cost | ||||||
| At beginning of year |
277) |
16,835) | ||||
| Additions |
–) |
7,247) | ||||
| Cost at end of year |
277) |
24,082) | ||||
| Impairment | ||||||
| At beginning of year |
–) |
–) | ||||
| Impairment during the year | –) |
237) | ||||
| Impairment at end of year | –) |
237) | ||||
| Net book value at end of year | 277) |
23,845) |
During the year, the Company invested £7,247,000 in Group undertakings, and fully impaired an investment of £237,000.
A list of principal subsidiaries and associates is given in note 11, and a list of non-principal subsidiaries and associates is given in note 26, of the Group accounts.
| C7 | Debtors | 2015) £'000) |
2014) £'000) |
||||
|---|---|---|---|---|---|---|---|
| Amounts owed by Group undertakings | 32,720) | 29,227) | |||||
| Intra group derivatives |
1,640) | –) | |||||
| Derivative valuations |
3,929) | 1,645) | |||||
| Prepayments and accrued income | 241) | 136) | |||||
| 38,530) | 31,008) | ||||||
| C8 | Creditors: amounts falling due within one year | 2015) £'000) |
2014) £'000) |
||||
| Bank loans and overdrafts |
–) | 1,943) | |||||
| Amounts owed to Group undertakings | 4,311) | 6,151) | |||||
| Finance lease liabilities |
186) | 353) | |||||
| Other taxation and social security Derivative valuations |
252) 1,963) |
229) 484) |
|||||
| Intra-Group derivatives |
3,929) | 1,645) | |||||
| Deferred consideration on acquisitions | 500) | 500) | |||||
| Accruals and deferred income |
2,825) | 2,747) | |||||
| 13,966) | 14,052) | ||||||
| C9 | Creditors: amounts falling due after more than one year | 2015) £'000) |
2014) £'000) |
||||
| Bank loans Finance lease liabilities |
16,861) 65) |
6,919) 255) |
|||||
| 16,926) | 7,174) | ||||||
| C10 | Provisions for liabilities | ||||||
| Deferred taxation | 2015) £'000) |
||||||
| At beginning of year |
612) | ||||||
| Debit to the profit and loss for the year | 189) | ||||||
| Debit to the hedging reserve for the year | 32) | ||||||
| At end of year |
833) | ||||||
| The elements of deferred taxation are as follows: | |||||||
| 2015) £'000) |
2014) £'000) |
||||||
| Difference between accumulated depreciation and amortisation and capital allowances Taxation on derivative financial instruments |
898) (65) |
709) (97) |
|||||
| 833) | 612) |
| 2015) £'000) |
2014) £'000) |
|||||
|---|---|---|---|---|---|---|
| Authorised, allotted, called up and fully paid: 7,200,000 ordinary shares of 10p each |
720) | 720) | ||||
| C12 | Share capital and reserves | |||||
| Reconciliation of movement in capital and reserves. | ||||||
| Profit) | ||||||
| Share) | Hedge) | and loss) | 2015) | 2014) | ||
| capital) £'000) |
reserve) £'000) |
account) £'000) |
Total) £'000) |
Total) £'000) |
||
| At beginning of year |
720) | (387) | 58,193) | 58,526) | 43,214) | |
| Net movement on cash flow hedges | –) | 129) | –) | 129) | 211) | |
| Profit for the year |
–) | –) | 14,123) | 14,123) | 18,912) | |
| Dividends |
–) | –) | (3,049) | (3,049) | (3,811) | |
| At end of year |
720) | (258) | 69,267) | 69,729) | 58,526) |
The Company is jointly and severally liable for value added tax due by other members of the Group amounting to £Nil (2014: £Nil).
The following material transactions and balances existed between the Company and related party entities not controlled 100% by the Company:
During the year, the Company received from Easat Antennas Limited (a 97% subsidiary of the Company), a dividend of £1,619,000 (2014: Nil), a management charge of £305,000 (2014: £277,585), and the Company provided working capital funding to Easat of £2,658,666 (2014: Easat repaid to the Company £964,902 of working capital). As at 30th April 2015, the Company was owed £2,156,354 by Easat (2014: Easat was owed £807,312 by the Company).
During the year, the Company received from Goodwin Korea Limited (a 95% subsidiary of the Company), a dividend of £706,707 (2014: Nil). As at the end of the year the Company was owed by Goodwin Korea £16,445 (2014: £16,445).
During the year, the Company made a loan to Ying Tai (UK) Limited (a 51% subsidiary of the Company) of £2,535,000 (2014: Nil). As at the end of the year the Company was owed by Ying Tai £2,535,000 (2014: Nil).
Contracted capital commitments at 30th April, 2015 for which no provision has been made in these financial statements were £3,852,000 (2014: £4,004,000).
Apart from the dividends declared (see note C17), no significant events have occurred after the balance sheet date.
| C17 | Dividends | 2015) £'000) |
2014) £'000) |
|---|---|---|---|
| Paid ordinary dividends during the year in respect of prior year 42.348p (2014: 35.290p) per qualifying ordinary share |
3,049) | 2,541) | |
| Paid extraordinary dividends during the year in respect of prior year Nil p (2014: 17.645p) per qualifying ordinary share |
–) | 1,270) | |
| 3,049) | 3,811) | ||
After the balance sheet date an ordinary dividend of 42.348p per qualifying ordinary share was proposed by the Directors (2014: Ordinary dividend of 42.348p).
The proposed current year ordinary dividend of £3,049,000 has not been provided for within these Financial Statements (2014: Proposed ordinary dividend of £3,049,000 was not provided for).
| Continuing operations | (2011) (£'000) |
(2012) (£'000) |
(2013) (£'000) |
(2014) (£'000) |
)2015) )£'000) |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | (92,908) | (107,911) | (126,964) | (130,828) | )127,049) | |||||||
| Profit before taxation | (8,148) | (12,273) | (20,296) | (24,095) | )20,053) | |||||||
| Tax on profit Profit after taxation |
(3,904) (4,244) |
(2,938) (9,335) |
((4,609) (15,687) |
((4,448) (19,647) |
(4,601) )15,452) |
|||||||
| Basic and diluted earnings per ordinary share |
(50.89p) | (124.33p) | (211.76p) | (264.38p) | )208.68p) | |||||||
| Total equity | (45,662) | (48,708) | (62,527) | (77,570) | )86,522) |
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