If you want proof that British manufacturing isn’t dead, take a trip to an unassuming stretch of Stoke-on-Trent. There, on the same site it has occupied since Victorian times, sits Goodwin (LSE: GDWN), a heavy engineering group that has become one of the most profitable specialist manufacturers in the country.
It may not be glamorous, but Goodwin produces the components that keep critical national infrastructure running, such as precision-cast nuclear-waste containers for Sellafield, high-integrity parts for naval propulsion systems and specialised valves for the liquefied natural gas (LNG) industry. These are the bits that no one can afford to get wrong; and its excellence in these areas is why Goodwin is so profitable. But following its tremendous run, can investors still afford the shares?
Goodwin is keeping it in the family
Goodwin was founded in 1883 by Ralph Goodwin and, unlike most of its peers, has remained firmly under family control ever since. The modern business is still chaired by a Goodwin, still run by Goodwins, and still majority-owned by the Goodwin family.
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Normally that might raise questions about governance. In Goodwin’s case, it has been its greatest strength. Family ownership has allowed the group to invest patiently over decades, avoiding the usual temptation to juice short-term profits. Instead, it has focused on landing long-horizon contracts where quality and reliability matter more than price. This persistence explains why the business is so well respected in industry. Its decades of excellence give it the kind of reputation that is almost impossible for a newcomer to replicate.
One thing that sets the business apart is a bold strategy to embrace change rather than be hostage to it. Ten years ago, Goodwin looked tied to the oil and gas market. When oil prices collapsed, the company faced a choice: to shrink with the market or reinvent itself. It opted for reinvention. The group pushed aggressively into sectors with high barriers to entry, such as defence, nuclear power and other specialist markets where components require complex metallurgy and spotless quality records.
More striking is what comes next. Management, usually conservative to a fault, now expects pre-tax profits to double to more than £71 million this financial year. The firm has a record £365 million order book to back up that forecast, stretching over many years thanks to nuclear-decommissioning projects and the UK’s next generation of nuclear-powered submarines.
Goodwin’s financial discipline is unusual
Unlike many industrial companies, Goodwin is not a cyclical business that generates modest but unspectacular returns. It has become a high-margin supplier of mission-critical parts to programmes that governments and businesses cannot cancel.
Goodwin’s financial discipline is unusual. Instead of loading up on debt to fund new capacity, it uses what it calls a customer-funded investment model. In practice, this means major capital expenditure is tied directly to long-term customer contracts. The customer commits; Goodwin invests. It’s incredibly conservative and effective. Cash generation has surged. Net debt has collapsed and is heading for zero. The board has responded with a 111% increase to the ordinary dividend, plus a large special dividend for good measure.
In a market where many engineering groups rely on hefty borrowings or dilutive equity raisings to grow, Goodwin stands out. It’s expanding while also deleveraging. Most investors will be focused on that. Yet Goodwin has a second act that could be worth more than the whole group in time. That business is Duvelco, its advanced-materials subsidiary, built around a patented polyimide called Ducoya. This has chemical characteristics that make it ideal in industries such as aerospace, which supports exceptionally high margins as its customers place a premium on proven performance. Supplying these markets requires technical qualification and rigorous testing. This long, complex accreditation process creates exactly the sort of barrier to entry that Goodwin has historically excelled at building.
Goodwin has broken its rule by funding the new pressing facility entirely from its own cash. That’s unusual for a group that normally relies on customer-backed spending. Management clearly believes Ducoya could become a profit engine in its own right. Yet, for all the optimism, the forecasted doubling of profits to £71 million doesn’t include contribution from the subsidiary.
Goodwin is worth the premium
Goodwin’s promotion into the FTSE 250 has put it firmly on the radar of index trackers and mainstream funds. The shares have re-rated sharply and now trade at a clear premium to traditional industrial peers.
Is that a problem? Possibly. This is still a specialist engineering company with limited free float, large exposure to big government projects and a management team that communicates sparingly. Those factors can make the shares volatile. Yet few listed UK manufacturers can point to a multi-decade record of quality with a pipeline of government-backed projects. On top of that, it has a near debt-free balance sheet, rising margins and an exciting advanced-materials subsidiary. The premium multiple reflects this reality.
The shares aren’t cheap, but neither is what you’re buying. For patient investors willing both to tolerate limited liquidity and trust in the family’s long-term stewardship, Goodwin remains one of the few genuinely high-quality industrial compounders left on the London market. If you’re already on board, it’s a strong hold. If you’re not, it’s one to buy on any meaningful pullback.
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