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Goodwin PLC today announces its preliminary results for the year ended 30th April, 2023.
The "Trading" pre-tax profit for the Group for the twelve month period ended 30th April, 2023, was GBP18.9 million (2022: GBP17.2 million) an increase of 10% on revenue of GBP186 million (2022: GBP144 million) . Trading profit for this purpose is defined as the Group pre - tax reported profit of GBP22.1 million less the positive impact of our interest rate swap , having increased in value by a further GBP3.2 million . The GBP3.2 million movement relates to the 30th April , 2023 valuation of our GBP30 million interest rate swap derivative that expires in August 2031 , whereby we have fixed our interest rate on GBP30 million of debt for ten years at less than 1% for a ten year term. We described in the Chairman's statement within last year ' s A nnual R eport why the movements in valuation of the interest rate swap shall be excluded, as well as being excluded for dividend purposes .
The Directors propose an increased dividend of 115p (2022: 107.80p) per share.
For the financial year en ding on 30th April 2023, the G roup has demonstrated substantial progression in its transformation, particularly noted in the handling of increased workload. There was a significant 68% increase in order intake compared to the last year, predominantly at Goodwin Steel Castings Limited and Goodwin International Limited, contributing to the start of the rebound of our Mechanical Engineering D ivision, which had experienced challenges in recent years. As of the date of the current report, the G roup's cumulative future orders stand at GBP271 million.
Whilst there has been some resurgence for petrochemical valves for new LNG projects around the world , due to energy uncertainty from current world events , assisting our valve manufacturing companies, it is the combined package that our foundry, Goodwin Steel Castings and the precision project engineering facility Goodwin International offers , which has led to the largest part of new orders shown in the G roup workload, with them being primarily for the nuclear decommissioning and naval markets.
Due to the work that these two businesses have excelled at , whilst diversifying away from their mainstay of petrochemical - based work a decade ago, be it discret e orders or orders that combine the skillset of the organisations, the future looks bright. The programmes of work , that are actively ramping up now, are being exploited to win more and more of the same, supporting projects that will still be ongoing in a decade 's time .
A lot of this work has only been possible as a result of the significant investment into Goodwin Steel Castings over recent years. We focused on what needed to be done to become one of the West's large casting supplier s of choice for large technically advanced castings that we are manufacturing now. These investments look set to repay the faith the Board had in the company and , after a long drought , they should now meaningfully contribute to the G roup's performance going forward.
The supply of heavy duty submersible pumps , primarily to the mining industry , is 19% up on last year . T he pump companies in India, Brazil, Australia and South Africa continue to convert customers from competitors ' pumps that are not as reliable and robust as the Goodwin pump, which is specifically designed for the most demanding applications. In the year , a new hydraulically powered variant of our submersible slurry pump that can be mounted directly on 10 - 30 tonne excavators, driven by the excavator ' s hydraulics, was launched. The addition of this hydraulic pump opens up a new market area (Heavy Construction) in terms of customers and applications that will complement the natural growth that is expected for the electrically driven pumps. It will be a distributor - based market with the pump being marketed as an excavator accessory, thus allowing all the existing pump companies , that are profitable , to bolt on a compl e mentary product with minimal increases in overheads, all for applications that do not compete with our existing pump business.
Duvelco, the G roup ' s latest and largest investment into a new business area , which will facilitate the production of high operational temperature polyimide polymer resins , is on course to be completed in line with our previously disclosed timeline. Commercial operation of our initial plant is expected to occur prior to June 2024. As soon as production material is available , the team will look to commence gaining sales traction and break into this new market sector for the G roup.
It has been a good year with real progress being made . T he D ivision has adeptly navigated contract and customer management challenges across all sectors, with the overall divisional profitability up 33% on an increased turnover of 41%.
In the year there have been two major notable successes. The first major achievement has occurred at Brassington in Derbyshire , where the team at Hoben International Limited (Hoben) has successfully installed and commissioned a second calciner. The calciner supplies one of the key raw materials for the investment casting powder, and as such , the installation not only enables the D ivision to continue to grow , but has provided the D ivision with a level of business continuity that we never had the benefit of before. In order to increase capacity to accommodate continued growth in ground silica sales , a thi rd ball mill is in the process of being installed and is planned to be commissioned before the end of the calendar year.
The second success relates to Dupré Minerals Limited ( Dupré ) , wh ich supplies a range of refractory products that typically contain vermiculite. During the year the C ompany has achieved record trading profits by increasing its profitability by over 50% . T he C ompany has maximised its position through the supply of its traditional products as well as growing its newer products. The energy crisis brought on by the Ukraine conflict has led to a surge in the number of wood stoves being installed, for which Dupré supplies the internal vermiculite insulation boards.
In addition to the supply of boards, Dupré's internally developed product, known as AVD that address the burning issues surrounding lithium - ion battery fires has taken a step forward. The m omentum in sales is starting to provide a respectable contribution to the Group's profits. AVD extinguishing agent and fire extinguishers are now being sold in over forty-five countries with additional distributors being appointed in new territories on a regular basis. In recent weeks , Underwriters Laboratory (UL) certification for component recognition of AVD as an extinguishing agent and certification of a six litre fire extinguisher containing AVD to UL8 has now been obtained . T his is a significant milestone for opening up sales into the USA and other global markets that require UL Certification and it has been pleasing to see that the order input via multiple sources for AVD in the first two months of this financial year was equal to more than the last half of 2023. Expansion of the AVD manufacturing capacity is planned in the coming year.
Sales of j ewellery investment powder, moulding rubber and injection waxes have remained strong within the year. Final customer approvals for X-Sil respirable silica free investment powder are in the i r final stages at key reference customers in the USA and Europe . T his has been a long process which should start to generate sales in the coming year. India remains the key growth country for jewellery production around the world and in order to increase production capacity for both investment powder and injection wax production in India a newly constructed larger production facility will be completed and commissioned within the current financial year.
Over the course of the year , the Group has continued working on its carbon neutral program and has spent a further GBP2 m illion on renewables, specifically solar panels where the power generated will be utilised on site. In total , the Group has now completed sixteen of the twenty-two individual electricity projects that were initially targeted, which includes the installation of 5.7 MWp of solar panels. The results of this will reduce the Group ' s electricity purchased from the national grid by over 24.7% per year, amounting to savings of over GBP1 m illion per year , provid ing a reduction of 1,365 tonnes equivalent of carbon dioxide (CO(2) ) per year. As noted in last year ' s A nnual R eport, the remaining projects are being held up by the District Network Operator . O nce this permission , along with planning permission where required , has been obtained there is potential to install a further 10MW of solar panels across our sites. Over half of this will be based at Hoben in Derbyshire where we intend to also apply for planning for two 2.5MW wind turbines . T he power generated from these installations will be fully utilised by the G roup and will not be exported back to the grid.
Two other major components of the carbon neutral program are the conversion of our 4MW / hr natural gas burners on both calciners at Hoben to hydrogen and offsetting our CO(2) footprint , that cannot be eliminated in its entirety without ceasing operation. Despite two unsuccessful grant applications to BEIS to mitigate the very high cost of the electrolysis machine required to make onsite g reen hydrogen , we are continuing to pursue government support, as the Group ' s carbon neutral target heavily depends on finding an alternative to burning natural gas. However, for all other gas processes that cannot be converted , the company has purchased a new 1,180 acre plot of land that is ideally suited for planting 560,000 broad leaf trees. The planting scheme will be one of the largest in the UK and over the next fifty-five years will offset an average of 2,168 tonnes of CO(2) per year, which , for example , covers 100% of the CO(2) emissions that are generated at the foundry from burning natural gas, as well as being able to offset other subsidiary gas burning processes.
The significant increase in order input and the downpayments associated with these orders, coupled with the not insignificant levels of non - cash depreciation charges (GBP8 m illion ) that occur annually, provided the Group with a very strong cash generation in the year end ed 30th April , 2023. Notwithstanding the GBP23 m illion of capital expenditure that has occurred in the year, the Group ' s net debt reduced to finish at GBP33 m illion which equates to a modest gearing of 26.3%. The major areas of expenditure relate to the second calciner, Duvelco polymer production plant and extending the melt shop at the foundry to enable a greater level of production capacity . Furthermore, the initial costs in relation to a new 7,690 sq m building in India , for which the Board had approved the investment, due to both the refractory and pump businesses reaching capacity within the existing facility , were also incurred in the year ending 30th April 2023.
With the growth that is expected in the years to come, the Group has recently renewed a GBP10 m illion revolving credit facility. This is a s well as securing an additional GBP25 m illion of committe d banking facilities on effectively a four year term, as a prudent policy to ensure that guaranteed facilities and the appropriate level of headroom is available to the Group , should it ever be required. The total value of our facilities now available to fund the Group is GBP75 .5 m illion, of which at the year end we were only utilising 48 %.
In line with the activity, the Group ' s employee numbers are starting to increase. Our apprenticeship programme continues to insulate the Group from the skills shortages that exist in the local area. To date , a total of three hundred apprentices have completed the course at the Training Centre, with the vast majority of them now working within the subsidiaries and the Group ' s twelft h cohort of thirty apprentices will be starting in September 2023.
In March 2023 , John Connolly, who had been the Group Chief Accountant and a Director of Goodwin PLC for sixteen years, retired. He had worked for the Goodwin Group for over twenty-seven years and the Board takes the opportunity of thanking him for his hard work and loyalty over the years , which helped move the Group forward. We wish him much happiness in his retirement. We are also pleased to report that Adam Deeth has been brought on board as a highly capable replacement for the Group Chief Accountant role.
We are once again extremely grateful to our UK and overseas directors, managers and employees for their hard work in driving forward the performance of the Group.
Alternative performance measures mentioned above are defined in Note 2 of the financial statements to be published shortly.
The Group's main OBJECTIVE and PURPOSE 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 VALUES of engineering excellence, quality, efficiency, reliability, competitive price and delivery contribute to the delivery of its strategy.
The Board's STRATEGY to achieve this is:
-- to supply a range of technically advanced products to growth markets in the Mechanical Engineering and Refractory Engineering segments in which we have built up a global reputation for engineering excellence, quality, efficiency, reliability, competitive price and delivery;
-- to manufacture advanced technical products profitably, efficiently and economically;
-- to maintain an ongoing programme of investment in plant, facilities, sales and marketing, research and development with a view to increasing efficiency, reducing costs, increasing performance, delivering better products for our customers, expanding our global customer base and keeping us at the forefront of technology within our markets, whilst at all times taking appropriate steps to ensure the health and safety of our employees and customers;
-- to control our working capital and investment programme to ensure a safe level of gearing;
-- to maintain a strong capital base to retain investor, customer, creditor and market confidence and so help sustain future development of the business;
-- to support a local presence and a local workforce in order to stay close to our customers;
-- to invest in training and development of skills for the Group's future;
-- to manage the environmental and social impacts of our business to support its long-term sustainability.
The Group's focus is on manufacturing within two sectors, Mechanical Engineering and Refractory Engineering, and through this division of our manufacturing activities, our overseas business facilities and our global sales and marketing activities, the Group benefits from market diversity. Further details of our business and products are shown on our website www.goodwin.co.uk
The Group specialises in supplying precision engineered solutions and industrial goods into critical applications, generally on a project basis, more often than not involving the complementary skill set of other group companies to deliver the requirement. The projects normally involve international procurement, high integrity castings, forgings or wrought high alloy steels, carbon fibre composite structures, precision CNC machining, complex welding and fabrication, and other operations as are required. In addition to specialist projects, the Group manufactures and sells a wide range of dual plate check valves, axial nozzle check valves and axial piston control and isolation valves. These solutions and products typically form part of large construction projects, including the construction of naval vessels, nuclear waste treatment, nuclear power generation, liquefied natural gas (LNG), gas, oil, petrochemical, mining, and water markets.
We generate value by creating leading edge technology designs, globally sourcing the best quality raw material at good prices, manufacturing in highly efficient facilities using up to date technology to provide very reliable products to the required specification, at competitive prices and with timely deliveries.
The Group through its foundry, Goodwin Steel Castings Limited, has the capability to pour high performance alloy castings up to 35 tonnes, radiograph and also finish CNC machine and fabricate them at the foundry's sister company, Goodwin International Limited. This capability is targeting the defence industry and nuclear decommissioning, the oil and gas industry, as well as large, global projects requiring high integrity machined castings.
Goodwin International Limited, the largest company in the Mechanical Engineering Division, not only designs and manufactures dual plate check valves, axial nozzle check valves and axial piston control and isolation valves but also undertakes specialised CNC machining and fabrication work for nuclear decommissioning projects. Goodwin International Limited also has a division that is focused on manufacturing / machining high precision, high integrity components for naval marine vessels. Noreva GmbH also designs, manufactures and sells axial nozzle check valves. Both Goodwin International Limited and Noreva GmbH purchase the majority of the value of their sand mould castings from Goodwin Steel Castings Limited for their ranges of check valves and this vertical integration gives rise to competitive benefits, increased efficiencies and timely deliveries.
At Goodwin Pumps India Private Limited we manufacture a superior range of submersible slurry pumps for end users in India, Brazil, Australia and Africa. Easat Radar Systems Limited and its subsidiary, NRPL Aero Oy, design and build bespoke high-performance radar surveillance systems for the global market of major defence contractors, civil aviation authorities and coastal border security agencies. Easat has a sister company, Easat Radar Systems India Private Limited, that also manufactures, sells and maintains radar systems. We create value on these by innovative design, assembly and testing in our own facilities using bought in or engineered in-house components.
Within the Refractory Engineering Division, Goodwin Refractory Services Limited (GRS) generates value primarily from designing, manufacturing and selling investment casting powders , injection moulding rubbers and waxes to the jewellery casting industry. GRS also manufactures and sells these products to the tyre mould and aerospace industries. The Refractory Engineering Division has five other investment powder manufacturing companies located in China, India and Thailand which sell the casting powders directly and through distributors to the jewellery casting industry and also directly to tyre mould and aerospace industries.
These companies are vertically integrated with another of our UK companies, Hoben International Limited (Hoben) , which manufactures cristobalite, which it sells to the six casting powder manufacturing companies as well as producing ground silica that also goes into casting powders and other UK uses of silica. Hoben now also manufactures different grades of perlite, and a patented range of biodegradable bags, known as Soluform, for use inside traditional hessian / jute bags for the placement of concrete in or around rivers.
The other UK refractory company is Dupré Minerals Limited ( Dupré ) which focuses on producing exfoliated vermiculite that is used in insulation, brake linings and fire protection products, including technical textiles that can withstand exposure to high temperatures. Dupré also sells consumable refractories to the shell moulding precision casting industry. Dupré has designed, patented and is now selling a range of fire extinguishers and an extinguishing agent for lithium -ion battery fires that utilises a vermiculite dispersion as the fire extinguishing agent.
Revenue 185,742 Cost of sales (139,521) GROSS PROFIT 46,221 Distribution expenses (3,741) Administrative expenses (22,167) OPERATING PROFIT 20,313 Finance costs (net) (1,438) Share of profit of associate company 65 PROFIT BEFORE TAXATION AND MOVEMENT IN FAIR VALUE OF INTEREST RATE SWAP 18,940 Additional year-on-year u nrealised g ain on 10 y ear i nterest r ate s wap d erivative 3,189 PROFIT BEFORE TAXATION 22,129 Tax on profit (5,616) PROFIT AFTER TAXATION 16,513 ATTRIBUTABLE TO: Equity holders of the parent 15,904 Non-controlling interests 609 PROFIT FOR THE YEAR 16,513 BASIC EARNINGS PER ORDINARY SHARE (in pence) 206.81 p DILUTED EARNINGS PER ORDINARY SHARE (in pence) 206.81 p
PROFIT FOR THE YEAR 16,513 OTHER COMPREHENSIVE INCOME / (EXPENSE) ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS: Foreign exchange translation differences (1,412) Effective portion of changes in fair value of cash flow hedges 3,741 Ineffectiveness in cash flow hedges transferred to profit or loss 518 Change in fair value of cash flow hedges realised in the profit or loss 1,308 Effective portion of changes in fair value of cost of hedging (1,447) Ineffectiveness in cost of hedging transferred to profit or loss (76) Change in fair value of cost of hedging realised in the to profit or loss 33 Tax (charge) / credit on items that may be reclassified subsequently to profit or loss (919) OTHER COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR, NET OF INCOME TAX 1,746 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 18,259 ATTRIBUTABLE TO: Equity holders of the parent 17,726 Non-controlling interests 533 18,259
Share Translation Share-based Cash Cost Retained Total Non-controlling Total capital reserve payments flow of earnings attributable interests equity reserve hedge hedging to equity holders of the parent GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 YEARED 30TH APRIL, 2023 Balance at 1st May, 2022 769 463 5,244 (2,746) 140 111,440 115,310 4,433 119,743 Total comprehensive income: Profit for the year -- -- -- -- -- 15,904 15,904 609 16,513 Other comprehensive income: Foreign exchange translation differences -- (1,312) -- -- -- -- (1,312) (100) (1,412) Effective portion of changes in fair value -- -- -- 3,741 (1,447) -- 2,294 -- 2,294 Ineffectiveness transferred to profit or loss -- -- -- 518 (76) -- 442 -- 442 Change in fair value transferred to profit or loss -- -- -- 1,274 40 -- 1,314 27 1,341 Tax -- -- -- (1,283) 367 -- (916) (3) (919) TOTAL COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR -- (1,312) -- 4,250 (1,116) 15,904 17,726 533 18,259 Transactions with owners: Dividends paid -- -- -- -- -- (8,289) (8,289) (556) (8,845) BALANCE AT 30TH APRIL, 2023 769 (849) 5,244 1,504 (976) 119,055 124,747 4,410 129,157
Share Translation Share-based Cash Cost Retained Total Non-controlling Total capital reserve payments flow of earnings attributable interests equity reserve hedge hedging to equity holders of the parent GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 YEARED 30TH APRIL, 2022 Balance at 1st May, 2020 753 (852) 5,244 1,601 (1) 106,396 113,141 4,887 118,028 Total comprehensive income: Profit for the year -- -- -- -- -- 12,980 12,980 640 13,620 Other comprehensive income: Foreign exchange translation differences -- 1,315 -- -- -- -- 1,315 178 1,493 Effective portion of changes in fair value -- -- -- (3,790) 275 -- (3,515) (44) (3,559) Ineffectiveness transferred to profit or loss -- -- -- (333) (23) -- (356) (6) (362) Change in fair value transferred to profit or loss -- -- -- (1,359) (64) -- (1,423) (84) (1,507) Tax -- -- -- 1,135 (47) -- 1,088 26 1,114 TOTAL COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR -- 1,315 -- (4,347) 141 12,980 10,089 710 10,799 Transactions with owners: Issue of shares 16 -- -- -- -- -- 16 -- 16 Acquisition of NCI without a change in control -- -- -- -- -- (74) (74) (356) (430) Dividends paid -- -- -- -- -- (7,862) (7,862) (808) (8,670) BALANCE AT 30TH APRIL, 2022 769 463 5,244 (2,746) 140 111,440 115,310 4,433 119,743
NON-CURRENT ASSETS Property, plant and equipment 101,243 Right-of-use assets 6,763 Investment in associate 964 Intangible assets 25,448 Long-term trade receivables -- Derivative financial assets 5,932 140,350 CURRENT ASSETS Inventories 47,955 Contract assets 16,257 Trade and other receivables 34,589 Corporation tax receivable 1,337 Derivative financial assets 2,684 Cash and cash equivalents 19,661 122,483 TOTAL ASSETS 262,833 CURRENT LIABILITIES Borrowings 6,729 Contract liabilities 32,747 Trade and other payables 31,765 Derivative financial liabilities 2,383 Liabilities for current tax 921 Provisions for liabilities and charges 266 74,811 NON-CURRENT LIABILITIES Borrowings 47,256 Derivative financial liabilities -- Provisions for liabilities and charges 246 Deferred tax liabilities 11,363 58,865 TOTAL LIABILITIES 133,676 NET ASSETS 129,157 EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT Share capital 769 Translation reserve (849) Share-based payments reserve 5,244 Cash flow hedge reserve 1,504 Cost of hedging reserve (976) Retained earnings 119,055 TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 124,747 NON-CONTROLLING INTERESTS 4,410 TOTAL EQUITY 129,157
CASH FLOW FROM OPERATING ACTIVITIES Profit from continuing operations after tax 16,513 Adjustments for: Depreciation of property, plant and equipment 6,272 Depreciation of right of use assets 1,198 Amortisation and impairment of intangible assets 1,257 Finance costs (net) 1,438 Currency (gains) / losses net of unhedged derivative movements 1,213 Loss / (p rofit ) on sale of property, plant and equipment 134 Unrealised gain on 10 year interest rate swap derivative (3,189) Share of profit of associate company (65) UK tax incentive credit on research and development (610) Tax expense 5,616 OPERATING CASH FLOW BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS 29,777 (Increase) in inventories (8,377) (In crease ) / decrease in contract assets (3,804) (I ncrease ) in trade and other receivables (5,304) Increase in contract liabilities 17,954 I ncrease in trade and other payables 4,072 CASH GENERATED FROM OPERATIONS 34,318 Interest received 75 Interest paid (2,015) Corporation tax paid (3,251) NET CASH INFLOW FROM OPERATING ACTIVITIES 29,127 CASH FLOW FROM INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment 218 Acquisition of property, plant and equipment (18,871) Additional investment in existing subsidiaries -- Acquisition of intangible assets (675) Development expenditure capitalised (1,196) NET CASH OUTFLOW FROM INVESTING ACTIVITIES (20,524) CASH FLOW FROM FINANCING ACTIVITIES Issue of shares -- Payment of capital element of lease liabilities (1,874) Dividends paid (8,289) Dividends paid to non-controlling interests (556) Proceeds from new loans 11,500 Repayment of loans and committed facilities (1,181) Change in bank overdrafts 119 NET CASH OUTFLOW FROM FINANCING ACTIVITIES (281) NET INCREASE / (DE CREASE ) IN CASH AND CASH EQUIVALENTS 8,322 Cash and cash equivalents at beginning of year 11,651 Effect of exchange rate fluctuations on cash held (312) CASH AND CASH EQUIVALENTS AT OF YEAR 19,661
The Group's operations expose it to a variety of risks and uncertainties. The Directors confirm that they have carried out a robust assessment of the principal risks the Company faced , including those that would threaten its business model, future performance, solvency or liquidity.
Market risk: The Group provides a range of products and services, and there is a risk that the demand for these products and services will vary from time to time because of competitor action or economic cycles or international trade friction or even wars. As shown in note 3 of the financial statements to be published shortly , 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.
Operating in many territories helps spread market risk. Similarly, the Group operates in both Mechanical Engineering and Refractory Engineering sectors, mitigating the impact of a downturn in any one product area as has been seen in recent financial years.
The potential risk of the loss of any key customer is limited as no single customer accounts for more than 1 0 % of annual turnover.
As described in the Business Model, the Group generates significant sales from nuclear new build and decommissioning, naval propulsion marine applications and ship hull components, as well as from valves it supplies to LNG, oil, chemical and water markets. The Mechanical Engineering Division also sells submersible pumps that are supplied to the mining industries and radar systems that are us ed for civil and defence applications. The Refractory Engineering Division sells vermiculite and perlite to the insulating and fire prevention industry and our investment casting powder companies indirectly sell to the jewellery consumer market through the supply of investment casting moulding powders, waxes, silicone and natural rubber.
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 as far as possible prior to their release into the market.
Product failure / Contractual risk: The risks that the Group supplies products that fail or are not manufactured to specification are risks that all manufacturing companies are exposed to but we try to minimise these risks through the use of highly skilled personnel operating within robust quality control system environments, using third party accreditations where appropriate. With regard to the risk of failure in relation to new products coming on line, the additional risks here are minimised at the research and development stage, where prototype testing and the deployment of a robust closed loop product performance quality control system provides feedback to the design department for the products we manufacture and sell. The risk of not meeting safety expectations, or causing significant adverse impacts to customers or the environment, is countered by the combination of the controls mentioned within this section and the purchase of product liability insurance. The risk of product obsolescence is countered by research and development investment.
Supply chain and equipment risk: Failure of a major supplier or an essential item of equipment presents a constant risk of disruption to the manufacturing in progress, especially in these times of high inflation associated with the conflict in Ukraine . Where reasonably possible, management mitigates and controls the risk with the use of dual sourcing, continual maintenance programmes, and by carrying adequate levels of stocks and spares to reduce any disruption.
Health and safety: The Group's operations involve the typical health and safety hazards inherent in manufacturing and business operations. The Group is subject to numerous laws and regulations relating to health and safety around the world. Hazards are managed by carrying out risk assessments and introducing appropriate controls, as well as attending safety training courses.
Acquisitions: The Group's growth plan over recent years has included a number of acquisitions. There is the risk that these, or future acquisitions, fail to provide the planned value. This risk is mitigated through financial and technical due diligence during the acquisition process and the Group's inherent knowledge of the markets they operate in.
Financial risk: The principal financial risks faced by the Group are changes in market prices (interest rates, foreign exchange rates and commodity prices). As reported elsewhere within these financial statements , the Company , on 2nd July , 2021 , signed a contract to mitigate the impact of interest rate risk by taking out an interest rate swap derivative fixing GBP30 million of notional debt at less than 1% v ersus the variable SONIA rate for a period of ten years , commencing 1st September, 2021 . Detailed information on the financial risk management objectives and policies is set out in note 28 of the financial statements to be published shortly. The Group has in place risk management policies that seek to limit the adverse effects on the financial performance of the Group by using various instruments and techniques, including credit insurance, stage payments, forward foreign exchange contracts, secured and unsecured credit lines.
Regulatory compliance: The Group's operations are subject to a wide range of laws and regulations. Both within Goodwin PLC and its subsidiaries, the Directors and Senior Managers within the companies make best endeavours to ensure we comply with the relevant laws and regulations. The Group ensures that high ethical standards and values are adopted, specifically with regards to anti-corruption, anti-bribery and human rights. During the year, the Group has carried out enhanced sanctions training and updated internal policies to reflect the associated risks.
IT security: The Group performs regular and remote off site backups of its IT systems, from time to time engaging external companies to test and report any weaknesses and deficiencies found to enable solutions to be put in place to mitigate and minimise the risk of an IT security breach. The Group is in the process of re-evaluating the need to invest further in this area over the next twelve months.
Energy and Climate Change : The recent geopolitical tensions, with the current conflict in Ukraine, combined with the UK Government ' s energy policy over the last few years to reduce carbon emissions has left the country exposed to the fragile global energy system which has driven significant increases in the cost of power. Following the impact t his has had on the Group earlier on in the year, the Group has amended its strategy to manage the risk through hedging strategies , incorporating price escalation clauses into the longer term contracts , aided by the coming on stream of increasing levels of low cost solar power around the Group. Furthermore, the Group has successfully completed sixteen of the twenty
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