Soaring overheads hit Goodwin's profits

26th Aug 2011 12:57

Mechanical engineering firm Goodwin lost almost a tenth of its value on Friday morning after full-year results revealed a 38% slump in profits.Pre-tax profit fell from £13.3m to £8.2m, while profit after taxation more than halved to £4.2m. Part of the £5.1m drop in pre tax profit relates to increased overheads of the group, after it spent around £2m hiring and employing some 50 additional managers in 22 of its companies worldwide, as it prepares for a push for growth over the next five years. Significant amounts of money have also been spent on research and development (R&D), which together with higher than expected non- capitalised costs of setting up computerised financial and management accounting systems in Brazil also put a dent in profits. Cash and equivalents at the year end fell from £9.8m to £3.2m. "Since the board released the block on activity growth in March 2010 following signs that a large part of the world economy was coming out of recession, the pressure on cash flow has increased especially as it continues to be difficult to obtain contract stage payments even from the wealthiest customers who are still trying to conserve their cash flow," company chairman John Goodwin said. "The group's gearing whilst higher than we would like, remains relatively low at 38%, but this reflects the investment in R & D in the UK and the development costs of our overseas companies," Goodwin added.The board increased the dividend by 5% to £2.1m, which it was keen to emphasise was an "indication of the board's confidence in the future performance of the group". The share price down 9.94% to 1,191.00p at 12:59.NR