RNS Number : 0275M
CT Automotive Group PLC
19 May 2022
 

19 May 2022

 

CT AUTOMOTIVE GROUP PLC

("CT Automotive", "CT" or the "Group")

 

Results for the year ended 31 December 2021

 

Positive trading into 2022 - well positioned as global vehicle production recovers

 

CT Automotive, a leading designer, developer and supplier of interior components to the global automotive industry, today announces audited results for the year ended 31 December 2021.

 

Scott McKenzie, Chief Executive Officer of CT Automotive, commented:

 

"2021 was a landmark year for CT Automotive as we successfully completed our AIM IPO and achieved a positive trading performance.

 

We have made good progress in 2022 to date, with further new business wins and our new manufacturing plant in Mexico on track to commence operations in early H2. While the global automotive supply chains continue to be disrupted, demand remains strong, and we are seeing customer schedules and visibility improving. The Board remains confident of meeting its expectations for the full year.

 

Looking ahead, we are well placed to build on our strong track record of growth, client relationships and manufacturing excellence as global semiconductor shortages ease and vehicle production volumes recover."

 

 

Financial highlights

 

2021

2020

Change

 

$m

$m

 

Revenue

132.9

109.9

20.9%

Gross profit

29.0

21.3

36.2%

Adjusted EBITDA*

8.8

1.1

700%

Adjusted Profit/(loss) before taxation*

(1.8)

(7.9)

77.2%

Earnings per share

(31.2)p

(44.0)p

29.1%

Net debt

9.5

57.9

83.6%

* Adjusted for non-recurring items

 

·    Strong trading recovery from COVID-19 impacted FY2020

Record revenues of $132.9m

Recovery momentum in H1 partially offset by H2 2021 slowdown in automotive volumes as a result of global shortage of semiconductors

·    Balance sheet significantly strengthened with gross proceeds of $45m raised at IPO

·    Outperformed the global automotive market, driven by Group's above average exposure to Electric Vehicles (EVs)

Operational / post period end highlights

·    Successful AIM IPO on 23 December 2021, enabling investment in the next phase of growth

·    Further optimisation of operations in Production division to manage unpredictable customer production schedules

·    Encouraging performance in Tooling division, reflecting increased utilisation of in-house capabilities

·    Continued strong growth in Electric Vehicles (EVs): 17% of revenue derived from EV platforms, compared to EVs overall market share by volume of c4%

·    Appointment of Global Supply Chain and Commercial Director in March 2022 to support growth

·    Investment in new manufacturing facilities in Mexico - on track to begin production in early H2

 

Current trading and outlook

·    Global vehicle production volumes forecast to recover during 2022 and automotive supply chain issues to resolve fully in 2023

·    Forecast recovery in global automotive volumes reflected across overall CT customer base:

Semi-conductor shortage remains, but visibility is improving which is allowing schedules to increase in reliability

Customer schedules generally show an upward trend on volumes over the next 3 months

Most customers have requested maximum capacity calculations, indicating they are preparing for peak volumes to return

·    The Group has long-term agreements with its customers and is well positioned as volumes recover:

c.97 per cent. of anticipated revenue in 2022 and c.91 per cent. of anticipated revenue in 2023 expected to come from projects which are currently in production, or on which the Group has been chosen as the nominated supplier

·    Board remains confident of meeting its FY 2022 expectations

 

For further information, please contact:

 

CT Automotive                                                                      via. MHP Communications

Simon Phillips, Executive Chairman

Scott McKenzie, Chief Executive Officer

David Wilkinson, Chief Financial Officer

 

MHP Communications (Financial PR)                               Tel: +44 (0)20 3100 8540

Tim Rowntree                                                                         CTAutomotive@mhpc.com

Charlie Barker

Charlie Protheroe

 

Liberum (Nominated Adviser and Broker)                                    Tel: +44 (0)20 3100 2000

Richard Lindley

Benjamin Cryer

 

Notes to editors

 

CT Automotive is engaged in the design, development and manufacture of bespoke automotive interior finishes (for example dashboard panels and fascia finishes) and kinematic assemblies (for example air registers, arm rests, deployable cup holders and storage systems), as well as their associated tooling, for the world's leading automotive original equipment suppliers ("OEMs") and global Tier One manufacturers.

 

The Group is headquartered in the UK with a low-cost manufacturing footprint. Key production facilities are located in Shenzhen and Ganzhou, China complemented by additional manufacturing facilities in Turkey, the Czech Republic and the UK.

 

CT Automotive's operating model enables it to pursue a price leadership strategy, supplying high quality parts to customers at a lower overall landed cost than competitors. This has helped the Group to build a high-quality roster of OEM end customers, both directly and via Tier One suppliers including Faurecia and Marelli. End customers include volume manufacturers, such as Nissan, and luxury car brands such as Bentley and Lamborghini. In addition, the Group supplies electric car manufacturers, including Lucid. It has also recently started working with e.Go Mobile, a German manufacturer which plans to launch a series of small electric vehicles for the budget end of the market.

 

The Group currently supplies component part types to over 47 different models for 19 OEMs. Since its formation, the Group has been the only significant new entrant into the market, which is characterised by high barriers to entry.

 

 

Chair's statement

 

Introduction

I am delighted to present CT Automotive's first set of results as a listed company. This has been one of the most exciting and challenging years at CT, concluding with the successful listing in late December. I am proud of what we have achieved and the position that the Group now holds.

We achieved record revenues, despite the well documented challenges in our end markets, and, with the funding from the IPO, are well placed to capitalise on the growth opportunities ahead as global vehicle production volumes recover in 2022 and beyond.

This would not have been possible without the resilience and collaboration shown by our people in such an extraordinary year. They have consistently risen to whatever challenges they face which fills me with confidence for the future of CT.

As part of the listing, we have strengthened our Board and I would like to welcome Tracey James, Francesca Ecsery and Ray Bench, our three new non-executive directors. In the short time of working with us, they have already added strong insight and improved direction to our Board so I am excited to see this develop over the coming years.

Finally, I'd like to again thank and welcome our new investors who supported us at IPO. With their backing, we look forward to continuing to build on our growth track record.

Business overview

2021 was a year of two halves. The first six months continued the strong recovery trend which started at the end of 2020 following the end of most COVID-related lockdowns, precipitating the ramping up of light vehicle production. However, during this period, automotive supply chain shortages started to arise, most notably semiconductors. Although this didn't directly impact our supply chain, it caused automotive production lines to slow down and at times, come to a halt. Original equipment manufacturers (OEMs) have consequently become more selective about which models to produce to maximise available resources, typically favouring electric vehicles (EVs). Due to our customer mix and the vehicle models we are nominated on, these supply chain issues most significantly impacted the second six months of trading for CT. Nonetheless, we were still able to deliver record revenues ahead of our expectations set out at listing, with revenue of $132.9m, up from $109.9m in 2020.

The listing has allowed the Group to repay various credit facilities including the term loan which arose from the previous management buy-out in 2016. We have maintained our existing working capital facilities in the form of invoice finance and import trade loan facilities. The Group's balance sheet has therefore been significantly strengthened to position the business perfectly for the next phase of growth.

Dividend

As outlined at our listing  in late-December, our focus will be on continuing to invest in the business for future growth, including the set-up of the new plant in Mexico. As a result, the Board is recommending no dividend for the 2021 financial year.

This is in line with our capital allocation policy and reflects our confidence in the growth opportunities we see ahead.

Regulatory and governance

As part of the listing, the Board adopted the QCA Corporate Governance Code and will actively monitor the effectiveness of our governance processes.

As a result of the pandemic and related travel restrictions, all Board meetings continue to be held remotely. Although this has not impacted the effectiveness of the Board, we are hopeful that in-person Board meetings will be possible at some point in 2022. The first evaluation of effectiveness for the Board and committees will be completed in late-2022, following a full year of adoption.

Supporting our people

People and culture remains a core focus at CT. Our growth to this point is driven by the strength and commitment of our people.

Keeping our people safe is a top priority for CT. Health & safety is paramount at all sites, with strict guidelines and regular external audits to ensure best practice processes.

The Board is also in the process of implementing a group-wide employee engagement surveys to ensure honest and regular feedback on any issues or concerns or recommendations. As we strive to constantly innovate and improve, we value the input from our people to achieve this.

Our market

The thoughts of everyone at CT are with the people of Ukraine at this time. We continue to monitor the situation closely which has impacted the European automotive industry. Most notably, some automakers source wire harnesses from Ukraine and have been forced to halt production whilst they re-source supply. For CT, this only impacted one customer for which production restarted within four weeks and is expected to recover the lost volumes across 2022. The short-term impact on global volumes was also offset by increased volumes in the US during that 4-week period.

Looking ahead

This is a very exciting time for CT. As the global supply chain issues continue to ease through 2022, there is unprecedented, pent-up consumer demand within the automotive industry. The supply chain issues within the industry are primarily impacting our customers rather than our direct supply chain as we continue to be able to source our required raw materials. Although there is inflationary pressure mounting, the Group primarily utilises open book pricing models and hence there are mechanisms in place to pass costs through to customers. To support this and the future development of the Group, we employed Stuart Lorraine as our Global Supply Chain and Commercial Director in March 2022. Stuart has a wealth of experience within the industry including previously working at OEMs and has already helped mitigate any margin compression.

In addition, we have already achieved a number of significant new business wins in 2022 and are well progressed in setting up the new plant in Puebla, Mexico with production on track to commence in H2 2022. This progress has been detailed more within the Chief Executive Officer's review.

These factors along with our strong track record of growth, client relationships and manufacturing excellence fill me with confidence that we are well positioned for a strong and extended period of growth.

 

Chief Executive Officer's review

Introduction

2021 was a landmark year for the Group as we successfully navigated a challenging market backdrop, while completing our AIM listing in December and achieving record sales.

The automotive industry has historically been demand-led and hence the just-in-time production processes facilitated the alignment of production schedules with raw materials and parts orders. The pandemic and related lockdowns have caused supply-side issues which re-shaped the global automotive market in 2021 and look set to continue through at least the first half of 2022.

With the pressure to build-back by OEMs around the world mounting and supply chain issues easing to a degree, the industry is set for a significant bounce back.

Operations - production trading

The supply chain issues in 2021, most notably the shortages of semiconductors, caused significant volatility for OEMs. This resulted in a number of customer temporary shutdowns (for example 2-weeks without production) and also reduced output across the industry. Global light vehicle production amounted to 73.4 million vehicles in 2021, up only 3.8% on 2020. So far in 2022, there have been some pandemic-related lockdowns in China. However, these have been restricted to certain areas, primarily Shanghai, and hence our operations have not seen any significant disruptions other than re-sourcing activities which have been completed quickly to ensure continuity of supply.

The Group optimised operations through 2020 and 2021 to better deal with the unpredictable customer production schedules. However, in-line with the experience of manufacturers across the global automotive sector, the "stop-start" production impacted efficiency and created some additional quality costs.

Customer schedules, although still at reduced levels, have started to become more consistent and reliable in Q1 2022, with reduced in-month order cancellations. Such cancellations were most disruptive in Q3 2021 with in-month order reductions running at c.37%. This improved slightly in Q4 2021 to c.27% and has further improved to c.17% in Q1 2022, as expected. There were numerous headwinds impacting light vehicle production across the industry in Q3 2021, most notably the semiconductor shortages and disrupted shipping schedules. These shipping schedules in 2022 have become noticeably more stable.

The nature of our production cycle relies on customer schedules being upheld. This is particularly important for production completed in China and then shipped to the UK, US and Europe. In 2021, there was an increased level of in-month order cancellations due to customer supply chain issues. As a result, this caused issues with overstocking certain product lines in our UK and US distribution centres. In 2022, this has improved as noted above and hence our stock levels are more balanced across the Group and our various locations.

Operations - production tooling

Our in-house toolroom in Shenzhen had a very busy year, running at maximum capacity on new programmes for a variety of products. We are particularly pleased as this reflects the efforts made to increase utilisation of our in-house tooling capabilities rather than outsourcing.

Development has been broadly isolated from supply-chain issues in 2021 and progress has been able to largely continue irrespective of customer shutdowns. The main impact has been a small number of delayed vehicle launches causing minor delays to tooling approvals.

Agility

Agility is one of our core values and has been more important than ever through the last two years. As a high-growth business there are always multiple challenges and fast changes impacting the business. Our people have adopted a culture to: Assess, Adjust, Act - allowing us to respond appropriately to challenges as they arise.

There are many examples of this agility over the last two years, most notably in our working practices including how many of our people have transitioned to working from home and how we have maintained strong communication and relationships with significantly reduced travel (previously a key element in our global business).

This agility is crucial as we continue to adapt to capitalise on market trends such as EVs or design trends such as hidden IP vents or address the impact of tax changes such as the US S301 tariffs.

Expanding in the EV sector

Our design expertise and track record has allowed us to maintain our market position as a supplier for EVs. This can be seen in our customer mix and the vehicles we are nominated on which include both established EV manufacturers and new entrants to the markets. This is supported by our recent nominations on EV cars, including the Nissan Ariya and e.Go Mobile.

The growth in EVs is also driving an increase in the potential value of interior components that the Group can supply per model. In addition, technology advances in autonomous driving have been  most  prevalent  across  EVs  resulting  in  more  'hands-off'  time  and  interaction  with  a  vehicle's interior. EV marques including Lucid and a major global EV OEM, have focused particular attention on their vehicles' interior design, with the Group's highest value of supplied components per vehicle being that within the new Lucid Air.

The trend towards EVs continues to gain momentum across the globe. This has been further enhanced in 2021 with the multiple commitments from OEMs towards full electrification (largely following the COP 26 event in November 2021). We have also seen a trend of customers prioritising EV production lines when chip availability has been restricted. Within the automotive sector, EV sales reached 6.75 million globally in 2021, up 108% on 2020.

Trading performance in Q3 and Q4 2021 was challenging due to the supply chain conditions and reflected by the global light vehicle production, however we attribute our slight overall outperformance of the global market due to the Group's significant exposure to EVs. The Group has above average exposure to the EV segment with 17% of revenue derived from EV platforms, compared to EVs overall market share by volume of 4%.

Setting up a new plant in Puebla, Mexico

Following the introduction of additional import tariffs by the Trump administration on certain goods arriving from China into the USA it has become less economical for the Group to supply components to US based customers directly from China. While the Group has entered into cost sharing agreements with some of its existing customers to mitigate the impact of the tariffs, the Directors do not believe that they would be able to competitively bid for new contracts supplied directly by the Group's Chinese plants while the tariffs remain in force.

In order to continue to supply to customers, including a major EV company in the US, without the imposition of the China tariffs, the Group is setting up a new manufacturing site in Mexico from which it will export to the US. The plant has been identified with a new lease signed and a number of new staff on site from May 2022. This site has in place the required infrastructure including appropriate energy connections, to allow the Group to rapidly deploy machinery. Industrialisation of the plant including shipping the tools from China will proceed across May and July with production on track to start in H2 2022.

CT has developed a low-cost modular factory design (inclusive of fixtures, quality gauges and capital equipment) with production lines built and tested in China prior to shipment, resulting in substantial reductions in capital expenditure. The Directors estimate that capital expenditure of c.$2.5 million will be required to prepare the site for first production. The Group has followed a demand-led expansion program and has secured contracts for delivery from the Mexico plant such that it is expected to be revenue generating immediately upon completion. This new site will allow us to remain competitive, and expand, in the North American market without tariffs and continues to be well-received by our customers.

Outlook

The semiconductor shortages have continued to impact the industry in early 2022 with further short-term disruption also caused by the Ukraine invasion in Europe. Our customer schedules are however becoming more consistent with allows the Group to more effectively plan production schedules and better manage stock levels across the globe. We continue to expect a recovery in global production across 2022, most significantly in H2 2022, as supply issues ease. This recovery timing is largely aligned with public statements made by a number of OEMs and Tier One suppliers.

The current customer trend towards prioritising key models, due to chip restrictions, is leading to EVs and larger models typically being favoured. Although our mix of programmes is powertrain agnostic and includes a mixture of model sizes, this trend typically favours CT with our above-average exposure to EV compared to the market. This is aligned with the existing direction of travel of continued increased demand for EVs and the commitments towards achieving full electrification on new models made by a number of OEMs.

As a result of existing nominations, we anticipate the Group to benefit from increased serial production revenues in 2022 as the OEMs seek to meet the pent-up consumer demand for cars, with the full effect of new launches in 2021 contributing to further growth for CT. Accordingly, we have seen production volumes start to recover in early 2022 and expect this to continue ahead of automotive supply chain issues resolving fully in 2023.

The Group is positioned to recover strongly with c.97% of anticipated revenue in 2022 and c.91% of anticipated revenue in 2023 expected to come from projects which are currently underway or on which the Group is already the nominated supplier. This will be further supported once the new plant in Mexico is operational, allowing us to be more competitive in the North American markets.

 

Chief Financial Officer's review

Our existing manufacturing facilities and highly skilled people fill me with confidence that we can continue to exceed our customer expectations and return to strong growth.

The global automotive market remains challenging following the impact of COVID-19 and the global shortage of semiconductors, but demand remains strong and having completed the AIM listing, CT is now well placed to capitalise on the recovery when it comes and return to historic growth and profitability.

Trading overview

There was a significant drop in global vehicle production in 2020 as a result of the COVID-19 pandemic and the preventative measures that were implemented globally, including national lockdowns that led to factory shutdowns.

Global vehicle production recovered strongly during the latter half of 2020 and this continued into 2021, with significant demand for new vehicles. Accordingly, as global vehicle production recovered, the Group performed strongly, generating revenues of $74.7 million in H1 2021, in spite of some disruption to production caused by a global shortage of semiconductors.

However, in the second half of 2021, the semiconductor shortage increasingly impacted global vehicle production, which was significantly below prior expectations for 2021. While the semiconductor shortage has impacted OEMs unevenly and they have sought to preserve production on key models, the extent of the shortage led to the Group experiencing a significant trading slowdown in the second half of 2021 in-line with wider automotive production declines and as reported at the time of the AIM listing.

As we continue through 2022, production schedules have stabilised, but we have yet to see any significant improvements. That said, our key customers are all anticipating higher production volumes later in the year which we hope will be the start of a longer term recovery.

Revenue increased 21.0% compared to 2020, driven by the completion of some Engineering, Design and Development programmes in the final quarter of 2021, as well an improved performance in serial production.  

Gross margins improved slightly from 2020 but remained lower than expected as a result of lower production volumes in China in Q4, with the completion of some de-stocking also impacting production efficiency. The ongoing disruption being caused mainly by the shortage of semi-conductors continues to impact margins and remain below the Group's target margins in normal trading conditions.

Distribution costs have also increased due to a full 12-month period of increased freight charges following the pandemic and related logistic issues. This has resulted in freight container costs exceeding the container rates quoted to customers. We expect this to normalise over time and have hence negotiated to recover the excess freight costs from customers as much as possible.

These irrecoverable excess freight costs have been classified as non-recurring items for the purpose of alternative performance measures (APMs). Non-recurring items in 2021 also include AIM listing fees, Turkish foreign exchange losses and impacted charges following the divestment of Scomadi.

Administrative expenses (adjusted for non-recurring items) have remained largely flat compared to 2020, reflecting the fact that CT has already scaled up for the growth that was forecast with significant new program launches, prior to the pandemic.

These factors have resulted in adjusted EBITDA of $8.8m and adjusted operating profit of $3.2m, which are both significantly improved from 2020 but margins remain below the levels achievable once the supply chain issues are resolved.

Financing

The financing position of the Group has changed significantly over the last 12 months, most notably from the admission to AIM in December 2021. We continued to utilise the Government-backed CLBILS loan obtained in 2020 and also obtained a further short term loan for $2.5m in January 2021.

Following the decision to list on AIM, the Group raised pre-IPO funding in the form of convertible loan notes for $5.6m, which converted to Ordinary Shares on the date of listing.

The AIM listing in December 2021 raised share issue proceeds of $42.5m which allowed us to pay down multiple credit facilities and inject working capital into the Group to set up for the next phase of growth.

Admission to AIM

I am delighted that we achieved a successful listing in December 2021. I am pleased that our new investors recognised our track record for growth prior to listing and the significant opportunity for future growth as the automotive industry recovers and CT delivers on the existing nominated programmes.

Organic growth

The past two years have been challenging with extreme disruption across the business. The robust nature of our business and low-cost operating model has allowed us to continue throughout to meet all of our customer requirements. The business is now perfectly positioned to capitalise on the recovery of the automotive market in the coming years and achieve our growth ambitions. Our existing manufacturing facilities and highly skilled people fill me with confidence that we can continue to exceed our customer expectations and return to strong growth.

This is further supported by the ongoing set-up of our new plant in Mexico which will further increase our appeal to customers in both North America and South America.

Acquisitions

The Group has consolidated its focus on automotive components in 2021 which included the divestment of our Scomadi minority share prior to admission to AIM. The Scomadi business needed additional investment following the impacts of the pandemic and the Board concluded that our resources were better focused on our own growth.

Following the listing and strengthening of the balance sheet, we are open to acquisition opportunities that may arise. We have significant in-house corporate finance expertise along with trusted advisors who continue to search for businesses that meet our strict acquisition criteria and would be a good strategic fit with our Group.

Post listing actions

The proceeds from listing were intended to provide the Group with capital to execute our growth plans. Most notably, the proceeds have allowed us to fully repay our term loan, CLBILS loan along with other debt within the Group. This strengthened balance sheet position is critical as the Group can now realise the full growth potential and move away from the previously significant debt servicing commitments. Over time, this is expected to unlock free cash flow to fund our growth plans.

The Board previously highlighted the following plans:

Growth plan

Current status

Enlarging the Group's production facilities in Europe and opening a new facility in Mexico

The Mexico facility set-up is underway with local staff currently being recruited and production planned to commence by July 2022.

We are currently looking for new premises within Czech Republic to expand our operations.

Taking on a larger number of new programmes

A number of new programmes have been secured since listing to commence in 2023 and 2024.

The working capital of the Group is expected to increase over time in 2022 as the reduction in debt servicing costs is realised compared to 2021.

Reducing supplier costs by up to c.5%

A number of negotiations have already been successfully completed, particularly in China. Further negotiations are awaiting re-rating from credit agencies which will follow the publication of this Annual Report. These negotiations have been primarily led by the new Global Supply Chain and Commercial Director.

Entry into more strategic partnerships

This continues to be planned across 2022 and 2023.

Increasing research and development expenditure to enhance competitive advantage

This continues to be planned across 2022 and 2023.

 

 

 

 

 

Consolidated statement of profit or loss and other comprehensive income

for the year ended 31 December 2021

 

 

 


2021

2020

(restated*)

 

$'000

$'000




Revenue

132,939

109,899

 

 


Cost of sales

(103,911)

(88,583)


________

________


 


Gross profit

29,028

21,316


 


Distribution expenses

(5,504)

(4,814)

Other operating income

1,478

942

Administrative expenses

(27,391)

(22,600)


 


EBITDA (before non-recurring items)

8,767

1,164

Depreciation

(2,076)

(1,974)

Amortisation

(3,509)

(2,532)

Non-recurring items

(5,571)

(1,814)


 



________

________


 


Operating loss

(2,389)

(5,156)


-


Finance expenses

(4,476)

(3,979)

Share of post-tax losses of equity accounted associates

(579)

(574)


________

________


 


Loss before tax

(7,444)

(9,709)

 

-


Taxation

1,108

1,082


________

________


 


Loss for the year attributable to equity holders of the group

(6,336)

(8,627)


________

________

Other comprehensive income

 


Items that are or may be reclassified subsequently to profit or loss:

 


Foreign currency translation differences - foreign operations

280

703


________

________


 


Other comprehensive income for the year, net of income tax

280

703


________

________


 


Total comprehensive loss for the year

(6,056)

(7,924)

 

________

________

 



Total loss per share



Basic loss per share

(31.2)c

(44.0)c

Diluted loss per share

(31.2)c

(44.0)c

 

                                                         

 

 

 

 

 

Consolidated balance sheet

as at 31 December 2021

 

 

Company number 10451211

2021

2020

(restated*)

 

$'000

$'000

Non-current assets

 


Property, plant and equipment

10,307

9,584

Intangible assets

520

545

Goodwill

2,417

2,417

Right of use assets

6,942

7,549

Deferred tax assets

1,745

308

Investments in equity-accounted associates

-

1,443


________

________


 



21,931

21,846


________

________

Current assets

 


Inventories

39,779

40,223

Tax receivable

1,496

1,417

Trade and other receivables

42,782

44,626

Cash and cash equivalents

13,445

2,156


________

________


 



97,502

88,422


________

 

________

 

Total assets

119,433

110,268


________

________


 


Current liabilities

 


Other interest-bearing loans and borrowings

(22,865)

(37,121)

Trade and other payables

(50,044)

(51,942)

Tax payable

(655)

(778)

Lease liabilities

(2,566)

(2,683)


________

________


 



(76,130)

(92,524)


________

 

________

 

Non-current liabilities

 


Other interest-bearing loans and borrowings

(103)

(22,963)

Provisions

-

-

Lease liabilities

(5,041)

(5,493)

 

________

________


 



(5,144)

(28,456)


________

________


 


Total liabilities

(81,274)

(120,980)


________

________


 


Net assets/(liabilities)

38,159

(10,712)


________

________

Equity attributable to equity holders of the parent

 


Share capital

342

132

Share Premium

54,717

-

Translation reserve

580

300

Merger reserve

(35,812)

(35,812)

Retained earnings

18,332

24,668

 

________

________


 


Total equity/(deficit)

38,159

(10,712)


________

________


 


These financial statements were approved by the Directors on 18 May 2022 and were signed on its behalf by:

 

 

 

David Wilkinson

Director

 

Consolidated statement of changes in equity

for the year ended 31 December 2021

 

 

 

 

Share capital

 

Share Premium

 

Translation reserve

 

Retained earnings

(Restated)

 

Merger reserve

 

Other reserve

 

Total equity

 

$'000

$'000

$'000

$'000

$'000

$'000

$'000

 

1 January 2020

132

 

-

(403)

33,295

(35,812)

 

-

(2,788)

Total comprehensive income for the year






 

Loss for the year (restated)

-

 

-

-

(8,627)

-

 

-

(8,627)

 

Other comprehensive income

-

 

 

-

 

 

703

-

-

 

 

-

703


________

________

________

________

________

________

________

 

Total comprehensive income for the year

(restated)

-

 

 

 

 

-

703

(8,627)

-

 

 

 

 

-

(7,924)


________

________

________

________

________

________

________

Balance at 31 December 2020

(restated)

132

 

 

 

-

300

24,668

(35,812)

 

 

 

-

(10,712)


________

________

________

________

________

________

________









 

1 January 2021

132

 

-

300

24,668

(35,812)

 

-

(10,712)

 
















Contributions by and distributions to shareholders:




 

Reclassification of shareholder loan notes

-

-

-

-

-

9,900

9,900

Conversion of loan notes / Other liabilities into Ordinary Shares

57

 

12,352

-

-

-

(9,900)

2,509

Share issue in relation to IPO

153

-

-

-

 

-

45,076

Equity issue costs

-

(2,558)

-

-

-

-

(2,558)

Total comprehensive income for the year:






 

Loss for the year

-

 

-

-

(6,336)

-

 

-

(6,336)

Other comprehensive income

-

 

 

-

 

 

280

-

-

 

 

-

280

Total comprehensive income for the year

-

 

 

-

280

(6,336)

-

 

-

(6,056)


________

________

________

________

________

________

________

 

Balance at 31 December 2021

342

54,717

580

18,332

(35,812)

 

 

 

-

38,159


_______

________

________

________

________

________

________

 

 

 

Consolidated statement of cash flows
for the year ended 31 December 2021

 

 

 

 

2021

2020

(restated*)

 

 

$'000

$'000

 

 

 

 

Cash flows from operating activities

 

 

 

Loss for the year


(6,336)

(8,627)

Adjustments for:


 


Depreciation and amortisation


5,585

4,506

Impairment of associate


1,627

-

Finance expense


4,476

3,979

Loss on sale of property, plant and equipment


1,084

435

Taxation


(1,108)

(1,082)

Share of post-tax losses of equity accounted associates


579

574



________

________



 




5,907

(215)



 


Decrease in trade and other receivables


1,844

618

Decrease/(Increase) in inventories


444

(3,830)

(Decrease)/Increase in trade and other payables


(1,898)

1,672

(Decrease) in provisions


-

(285)



________

________



 


Tax paid


(529)

(1,190)



________

________



 


Net cash generated from/(used in) operating activities


5,768

(3,230)



________

________

Cash flows from investing activities


 


Purchase of property, plant and equipment


(4,296)

(1,595)

Investments in associates


(201)

(2,017)

Purchase of intangible assets


(421)

(76)



________

________



 


Net cash used in investing activities


(4,918)

(3,688)



________

________

Cash flows from financing activities


 


Proceeds from loan and other facility drawdowns


2,500

11,567

Issue of convertible loan notes


5,600


Share issue (net of transaction costs)


42,370

-

Repayment of lease liabilities


(3,565)

(2,443)

Interest paid


(2,922)

(2,688)

Repayment of other borrowings


-

(2,585)

Repayment of term loan


(16,042)

-

Repayment of CLBILs


(8,351)

-

Repayment of trade loans


(6,092)

-

Repayment of invoice finance


(1,537)

-



________

________



 


Net cash generated from financing activities


11,961

3,851



________

________

Net increase/(decrease) in cash and cash equivalents


12,811

(3,067)

Cash and cash equivalents at beginning of year


(2,677)

(168)

Effect of exchange rate fluctuations on cash held


(327)

558



________

________



 


Cash and cash equivalents at end of year (refer Note 23)


9,807

(2,677)



________

________

*Details of the restatements are presented in Note 27.


 


 




 

Notes forming part of the consolidated financial statements

for the year ended 31 December 2021

 

 

1

Accounting policies

 

This financial information within this announcement does not constitute the Company's statutory accounts within the meaning of Section 434 of the Companies Act 2006. The results for the year ended 31 December 2021 have been extracted from the full accounts of the Group for that year which received an unmodified auditor's report, and which have not yet been delivered to the Registrar of Companies.  The financial information for the year ended 31 December 2020 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The report of the auditor on those filed accounts was unmodified and does not include a statement under section 498(2) or (3) of the Companies Act 2006.

 

This announcement has been prepared in accordance with the recognition and measurement principles of UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with the AIM rules. The financial information included in this announcement does not include all the disclosures required in accounts prepared in accordance with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006 and accordingly it does not itself comply with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006.  The accounting policies used in the preparation of this announcement have remained unchanged from those set out in the statutory accounts for the year ended 31 December 2020. They are also consistent with those in the full accounts for the year ended 31 December 2021, which have yet to be published.

 

The Group will post its annual report and accounts to shareholders in early June 2022, a copy of the annual report and accounts will be available on the company's website.

 

Introduction

 

CT Automotive Group PLC (the "Company") is a Public company listed on AIM incorporated, domiciled and registered in England in the UK. The registered number is 10451211 and the registered address and principal place of business is 1000 Lakeside North Harbour, Western Road, Portsmouth, PO6 3EN.

 

The Company's functional and reporting currency is USD, the Directors elected to set the Company up in this way due to the international nature of the Group and overall reliance on USD; the Group revenue is predominantly received in USD and key long term financing instruments, as well as working capital facilities, are also predominantly denominated in USD.

 

The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group"). The parent company financial statements present information about the Company as an entity and not about its group.

 

The Group financial statements have been prepared and approved by the Directors in accordance UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The Company has elected to prepare its parent company financial statements in accordance with FRS 101.

 

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these consolidated financial statements.

 

There are no judgements or estimates that are deemed to have a significant effect on the financial statements other than those stated in Note 2.

 

Measurement convention

 

The financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments.

 

Going concern

 

The Group's business activities, together with the factors likely to affect its future development, its financial position, financial risk management objectives, and its exposures to price, credit, liquidity and cash flow risk are described in the Strategic report.

 

The financial statements have been prepared on the going concern basis as the Group has prepared detailed forecasts which show that the Group is expected to be able to meet all its liabilities as they fall due over the 12 months from the approval of the financial statements. These forecasts are built up using the individual costings that each part of the Group produces and latest volume forecast. It is acknowledged that COVID-19 and the subsequent impact on supply chains has had a profound impact on the global automotive industry. For CT Automotive Group PLC, this impact was most significant in the second half of 2021 with a number of temporary closures at customer sites however the Group were able to successfully manage production and stock levels throughout to meet our customers' requirements. It is also acknowledged that the recent Ukraine invasion has caused some short term disruption for certain manufacturers in Europe. For CT, this only impacted one customer for which the relevant components previously sourced from Ukraine were re-sourced and production recommended within four weeks. This impact has therefore not been material and does not impact the going concern assessment. 

 

These known supply chain impacts have been factored into the Group's forecast model along with what Management consider to be a prudent view on the recovery for the automotive industry through 2022. This model forecasts to December 2027, covering a period of 67 months from the date of approval of these financial statements. This takes into account the Group's existing banking facilities, being trade loans and invoice financing, and assumes these facilities continue to be available. This assumption is made on the basis that these facilities are committed on a rolling 12-month basis until December 2022 and are structured facilities only available to be drawn against the respective inventory and customer sales invoices. Management expect that these facilities will either continue to be available in their existing or be replaced by similar value facilities. The invoice finance facility has a limit of $15,800,000 with headroom of $4,803,000 as at 31 December 2021. Similarly, the trade loan facility has a limit of $10,400,000 with headroom of $4,948,000 as at 31 December 2021. These limits are not forecast to be exceeded within the forecast period since the Group forecasts to generate sufficient cash reserves to reduce utilisation of these facilities. In the management forecast, the invoice facility is not exceeded until February 2023 and trade loan facility has not exceeded throughout the 12 month period. Beyond February 2023, there is a strong cash reserve position and hence is more likely that the facility will be uplifted.

 

Although Management consider the base case to be appropriately prudent, sensitivity analysis has been performed of the cash flow to model the potential impact should the automotive supply chain issues continue for a prolonged period and hence a slower recovery scenario considered. This assumption carried a 9% decline in annual volumes which is worst case considering the fact that the base forecast is already modelled at a lower growth considering the supplying chain issues in the automotive sector. This scenario is considered to be severe but plausible. The base case forecast and stress test demonstrate that the Group has sufficient headroom within current banking facilities and other financing facilities or alternate cash flow management plans in place across the forecast period. This assessment also reflects the significantly stronger balance sheet of the Group following the AIM listing which repaid all long-term credit facilities, most notably the term loan which included quarterly financial covenants.

 

After making enquiries, considering the uncertainties described above and monitoring the year-to-date performance against budget in 2022, CT Automotive Group PLC is expected to remain in a strong financial position during the forecast period. The Group is confident of being able to trade for a period of at least 12 months from the approval of the financial statements and the Directors have therefore concluded that it is appropriate for the financial statements to be prepared on the going concern basis.

 

Basis of consolidation

 

Subsidiaries

 

Subsidiaries are entities controlled by the Group. 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. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

 

Change in subsidiary ownership and loss of control

 

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

 

Where the Group loses control of a subsidiary, the assets and liabilities are derecognised along with any related non-controlling interests and other components of equity.  Any resulting gain or loss is recognised in profit or loss.  Any interest retained in the former subsidiary is measured at fair value when control is lost.

 

Transactions eliminated on consolidation

 

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

 

Foreign currency

 

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss. Exchange differences arising on the retranslation of the foreign operation are recognised in other comprehensive income and accumulated in the foreign exchange reserve.

 

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group's presentational currency US Dollars 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 year 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 reported as an item of other comprehensive income and accumulated in the translation reserve. When a foreign operation is disposed of, such that control is lost, the entire accumulated amount in the foreign currency translation reserve, is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while still retaining control, the relevant proportion of the accumulated amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate that includes a foreign operation while still retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss.

 

Classification of financial instruments issued by the Group

 

Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:

 

(a) they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and

 

(b) where the instrument will or may be settled in the company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the company's own equity instruments or is a derivative that will be settled by the company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

 

To the extent that this definition is not met, the proceeds of any issues are classified as a financial liability. 

 

Foreign currency

 

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss. Exchange differences arising on the retranslation of the foreign operation are recognised in other comprehensive income and accumulated in the foreign exchange reserve.

 

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group's presentational currency US Dollars 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 year 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 reported as an item of other comprehensive income and accumulated in the translation reserve. When a foreign operation is disposed of, such that control is lost, the entire accumulated amount in the foreign currency translation reserve, is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while still retaining control, the relevant proportion of the accumulated amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate that includes a foreign operation while still retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss.

 

Classification of financial instruments issued by the Group

 

Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:

 

(a) they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and

 

(b) where the instrument will or may be settled in the company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the company's own equity instruments or is a derivative that will be settled by the company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

 

To the extent that this definition is not met, the proceeds of any issues are classified as a financial liability. 



 

 

Non-derivative financial instruments

 

Financial assets and liabilities are recognised when the Group becomes party to the contractual provisions of the instrument.

 

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

 

Trade and other receivables

Trade and other receivables are initially measured at their transaction price. Trade receivables and other receivables are held to collect the contractual cash flows which are solely payments of principal and interest. Therefore, these receivables are subsequently measured at amortised cost using the effective interest rate method.

 

Trade and other payables

Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.

 

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. 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 cash flow statement.

 

Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method.

 

Effective interest rate

The 'effective interest' is calculated using the rate that exactly discounts estimates future cash payments or receipts (considering all contractual terms) through the expected life of the financial asset or financial liability to its carrying amount before any loss allowance.

 

Impairment of financial assets

 

A provision for impairment is established on an expected credit loss model under IFRS 9. The amount of the provision is the difference between the asset's carrying amount and the expected value of the amounts recovered.

 

The probability of default and the expected amounts recoverable are assessed under reasonable and supportable past and forward looking information that is available without undue cost or effort. The expected credit loss is a probability weighted amount determined from a range of outcomes (including assessments made using forward looking information) and takes into account the time value of money.

 

Impairment losses and subsequent reversals of impairment losses are adjusted against the carrying amount of the receivable and recognised in profit or loss.

 

Derivative financial instruments

 

Derivative financial instruments are recognised at fair value.  The gain or loss on remeasurement to fair value is recognised immediately in profit or loss.  The Group utilises derivatives consisting of exchange contracts to reduce foreign currency risk.

 

 

Property, plant and equipment

 

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated 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.

 

Depreciation is charged to the profit and loss account on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:

 


Assets under construction

-

not depreciated


Plant and equipment

-

2-5 years straight line


Furniture, fixtures and equipment

-

2-5 years straight line


Motor vehicles

-

2-5 years straight line

 

Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.

 

Intangible assets and goodwill

 

Goodwill

 

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 equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment in the investee.

 

Research and development

 

Expenditure on research activities is recognised in the profit and loss account as an expense as incurred.

 

Expenditure on development activities is capitalised if the product or process is technically and commercially feasible and the Group intends, has the technical ability and has sufficient resources to complete development, future economic benefits are probable and if the Group can measure reliably the expenditure attributable to the intangible asset during its development. Development activities involve a plan or design for the production of new or substantially improved products or processes. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads and capitalised borrowing costs. Other development expenditure is recognised in the profit and loss account as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and less accumulated impairment losses.

 

Intangible assets (including software)

 

Expenditure on internally generated goodwill and brands is recognised in the profit and loss account as an expense as incurred.

 

Intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and less accumulated impairment losses.

 

Amortisation

 

Amortisation is charged to the profit and loss account on a straight-line basis over the estimated useful lives of intangible assets. Intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:

 


Software

-

1 - 5 years

 

 

Inventories

 

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, production or conversion costs and other costs in 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.

 

Net realisable value is the value that would arise on sale of stock in the normal course of business, minus a reasonable estimation of selling costs.

 

Impairment excluding inventories and deferred tax assets

 

The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each period at the same time.

 

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit"). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units, or ("CGU"). Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

 

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.

 

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if 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.

 

 

Associates

 

Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate.  Associates are initially recognised in the consolidated statement of financial position at cost. Subsequently associates are accounted for using the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the consolidated statement of profit and loss and other comprehensive income (except for losses in excess of the Group's investment in the associate unless there is an obligation to make good those losses).

 

Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate.  The investor's share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value of the associate.

 

Any premium paid for an associate above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the associate. Where there is objective evidence that the investment in an associate has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.

 

Employee benefits

 

Defined contribution plans

 

A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the profit and loss account in the periods during which services are rendered by employees.

 

Short-term benefits

 

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.  A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

 

Convertible loan notes

 

A portion of loans from directors in the form of loan notes and other loans have been reclassified or converted from liability into equity during the financial year consequent to change in the terms and conditions of the loan agreements.

 

The instruments were evaluated for the conditions within IAS 32, namely, (a) the instrument includes no contractual obligation to deliver cash or another financial asset to another entity and (b) the instrument will or may be settled in the issuer's own equity instruments.

 

Provisions

 

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, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.

 

All automotive products are sold with a warranty which mirrors the warranty offered by the OEM to consumers.

 

Due to the thorough quality checking that is undertaken by the customers during assembly, and the low risk nature of the products, it is company's policy to only hold a small provision for warranty claims. This is supported by the historically low value of warranty claims in the past few years which the Directors do not consider to be material.

 

 

Revenue

 

Revenue is measured at the fair value of the consideration received or receivable.  Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:

 

Serial production goods are recognised as sold at a point in time when control is passed to the customer, which depending on the incoterms (a series of pre-defined commercial terms published by the International Chamber of Commerce relating to international commercial law) can be when they are delivered to the customer site or when the customer collects them.

 

Tooling and the provision of associated services is recognised at a point in time when the performance obligations in the contract are satisfied and control is passed to the customer, which is based on the date of issue of the parts submission warrant (PSW) or a similar approval from customers. Monies received from customers in advance of completing the performance obligations are recognised as contracts liabilities as at the balance sheet date and released to revenue when the related performance obligations are satisfied at a point in time.

 

Discounts on the serial production contracts are considered one off and agreed with the customers as part of the negotiation and as per the terms of the contract, they are either paid in advance or otherwise. Discounts paid in advance are recognised as a prepayment and recognised as a debit to revenue in the period in which the related revenue is recognised. All other discounts are recognised as a debit to revenue based on the period in which the related revenues are recognised.

 

Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

 

Government grants

 

Government grants are recognised on the accrual basis and any performance requirements are disclosed as required. Grants of a revenue nature are recognised in the statement of profit and loss in the same period as the related expenditure and recognised gross as other income.

 

During the year, income received from the Coronavirus Job Retention Scheme and similar support in China and Turkey has been accounted for in accordance with the above.

 

As part of the UK government scheme, the Group also received CLBILS loan from accredited lenders during the previous year. The loan was recognised at a fair value equal to its transaction price at inception and amortised thereafter with finance expense being recognised using the effective interest rate. During the first 12 months, the group recognised a finance expense and a corresponding amount of grant income, and this was presented in the same line as finance expense on a net basis.

 

Expenses

 

Finance income and expenses

 

Finance expenses comprise interest payable on borrowings and interest on lease liabilities which are recognised in profit or loss using the effective interest method.

 

Interest income is recognised in profit or loss as it accrues, using the effective interest method.

 

 

Taxation

 

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the profit and loss account 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 or receivable on the taxable income or loss 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.

 

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The group measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.

Deferred tax

 

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 temporary difference can be utilised.

 

Leases

 

Identifying Leases 

 

The Group accounts for a contract, or a portion of a contract, as a lease when it conveys the right to use an asset for a period of time in exchange for consideration. Leases are those contracts that satisfy the following criteria: 

 

(a) There is an identified asset;

(b) The Group obtains substantially all the economic benefits from use of the asset; and

(c) The Group has the right to direct use of the asset. 

 

The Group considers whether the supplier has substantive substitution rights. If the supplier does have those rights, the contract is not identified as giving rise to a lease. 

 

In determining whether the Group obtains substantially all the economic benefits from use of the asset, the Group considers only the economic benefits that arise use of the asset, not those incidental to legal ownership or other potential benefits. 

 

In determining whether the Group has the right to direct use of the asset, the Group considers whether it directs, how and for what purpose the asset is used throughout the period of use. If there are no significant decisions to be made because they are pre-determined due to the nature of the asset, the Group considers whether it was involved in the design of the asset in a way that predetermines how and for what purpose the asset will be used throughout the period of use. If the contract or portion of a contract does not satisfy these criteria, the Group applies other applicable IFRSs rather than IFRS 16. 

 

 

Identifying Leases (continued)

 

All leases are accounted for by recognising a right-of-use asset and a lease liability except for:

·      Leases of low value assets; and

·      Leases with a duration of 12 months or less.

 

These other leases are recognised in the profit and loss account on a straight line basis over the term of the lease.

 

Lease Measurement 

 

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group's incremental borrowing rate on commencement of the lease is used.  Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate.  In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term.  Other variable lease payments are expensed in the period to which they relate. 

 

On initial recognition, the carrying value of the lease liability also includes:

·      amounts expected to be payable under any residual value guarantee;

·      the exercise price of any purchase option granted in favour of the company if it is reasonably certain to exercise that option;

·      any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of a termination option being exercised.

 

Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

·     lease payments made at or before commencement of the lease;

·     initial direct costs incurred; and

·     the amount of any provision recognised where the company is contractually required to dismantle, remove or restore the leased asset

 

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made.  Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.

 

Earnings per share

 

The Group only presents basic earnings per share (EPS) data for its ordinary share on the basis that there are no outstanding instruments that can result in diluted earnings per share to be different with basic earnings per share in 2021 and 2020. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

 

Segment Reporting

 

IFRS 8 'Operating Segments' requires operating segments to be determined based on the Group's internal reporting to the Chief Operating Decision Maker. See Note 7 for the accounting policy and related disclosures for segment reporting.

 

Non-recurring items

 

The group recognises items within the statement of profit or loss statements that are infrequent, unusual and not expected during the regular business operations as non-recurring. These are disclosed as a separate line on the face of statement profit or loss. Refer note 5 for further details on the nature of the non-recurring items.

 

New standards, interpretations and amendments

 

There have been a number of amendments to existing standards which are effective from 1 January 2021 but they do not have material effect on the Group financial statements.

 

There are a number of new standards, amendments to standards and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early. The following amendments are effective for the period beginning 1 January 2022:

·      Onerous Contracts - Costs of fulfilling a Contract (Amendments to IAS 37)

·      Property, Plant and Equipment: Proceeds before intended use (Amendments to IAS 16)

·      Annual improvements to IFRS standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41)

·      References to Conceptual Framework (Amendments to IFRS 3)

 

The following amendments are effective for the period beginning 1 January 2023:

·      Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);

·      Definition of Accounting Estimates (Amendments to IAS 8); and

·      Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).

 

The Group is currently assessing the impact of these amendments and does not expect them to have significant impact on the financial statements.

 

 

 

2

Judgements in applying accounting policies and key sources of estimation uncertainty

 

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experiences may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

In preparing these financial statements, the Directors made the following judgements:

 

Incremental borrowing rate used to measure lease liabilities

 

Where the interest rate implicit in the lease cannot be readily determined, lease liabilities are discounted at the lessee's incremental borrowing rate. This is the rate of interest that the lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. This involves assumptions and estimates, which would affect the carrying value of the lease liabilities and the corresponding right-of-use assets. 

 

To determine the incremental borrowing rate, the Group uses recent third-party financing as a starting point, and adjusts this for conditions specific to the lease such as its term and security. 

 

The Group used an incremental borrowing rate of from 3.25% to 32.5% depending on the specifics of the lease, particularly based on which country the underlying asset is based in.

 

Deferred tax asset recognition

 

The Directors consider that the Deferred Tax Assets are recoverable as their recoverability against future profits is deemed probable. This judgement has been based on assessment of management forecasts which are compiled using secured projects and customer volume estimates. These reflect the Group returning to profitability in the near future.

 

All deferred tax assets have been classified as non-current assets. This is based on the expected utilisation of these assets against the future profits available as projected within management forecasts.

 

 

Other key sources of estimation uncertainty:

 

Stock provision

 

Inventory is carried at the lower of cost and net realisable value. Provisions are made to write down obsolete stocks to net realisable value. The provision is $1,268,000 at 31 December 2021 (2020: $651,000). A difference of 10% in the provision as a percentage of gross inventory would give rise to a difference of +/- $126,800- in gross margin.

 

Goodwill

 

The carrying amount of goodwill at 31 December 2021 was $2,417,000. This is split between Chinatool UK Limited ($1,259,000) and IMS / Chinatool JV, LLC ($1,158,000). As part of the annual impairment testing of these balances, no need for impairment was identified during the year.

 

 

Deferred tax recoverability

 

Estimates are required in assessing whether sufficient future taxable profits will be made in order to recognise the benefit of deferred tax assets accumulated at the Balance Sheet date. In assessing recognised and unrecognised deferred tax assets, the Group has considered its forecast performance in line with the scenarios set out in its going concern analysis and impairment models.

 

Management's forecasts used for the review of the recoverability of deferred tax assets are consistent with those used for going concern analysis and impairment reviews for goodwill and other tangible assets. These are detailed forecasts based on expected customer schedules.

 

The deferred tax asset value recognised is $1,754,000 at 31 December 2021 (2020: $308,000), giving rise to a credit through the statement of profit and loss of $1,437,000 during the year and solely relates to UK based businesses. The forecasts discussed above show that the UK businesses will be profitable from 2023 and the Directors expect to fully recover the deferred tax asset by 31 December 2024.

 

If the period of forecasts review for the recoverability of the deferred tax assets is shortened from 3 to 2 years, the Directors would only expect to recover $709,000 of the deferred tax asset, and therefore would only recognise deferred tax assets at 31 December 2021 of this value.

 

 

 

 

 

3

Revenue

 

 

 

 

2021

2020

 

 

$'000

$'000

 

 

 

 


Disaggregation of revenue

 



An analysis of turnover by type is given below:

 




 



Sale of parts

110,764

87,469


Sale of tooling (including design and development)

22,175

22,430



________

________


Total revenues

 




132,939

109,899



________

________

 

 

All revenue is recognised from goods transferred at a point in time.

 

Contract balances

 

The following table provides information about significant changes during the year in contract assets and contract liabilities from contracts with customers:

 

 

Contract

Contract

 

 

assets

liabilities

 

 

$'000

$'000






Balance as at 1 January 2021

-

(8,336)


 

Revenue recognised that was included in contract liabilities at the beginning of the year

-

10,047


 

Increases due to cash received, excluding amounts recognised as revenue during the year

-

(4,636)


 

Movements due to foreign exchange

-

-



________

________



 



Balance as at 31 December 2021

-

(2,925)



________

________



 



 



 

The contract liabilities included within trade and other payables primarily relate to the advance consideration received from customers on tooling projects.

 

 

 

The contract assets and contract liabilities are recognised into the profit and loss account when the performance obligations of each contract are satisfied which is at the point that the contract is satisfied and control has passed to the customer. As such, the Group does not recognise revenue on any partially satisfied performance obligations.

 

The following table includes revenue expected to be recognised in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the reporting date.

 

 


2022

2023

Total

 

 

$'000

$'000

$'000

 

 

 

 

 

 

Tooling projects

11,961

-

11,961



________

________

________

 

All consideration from contracts with customers are accounted for as contract assets or liabilities and released to the revenue once performance obligation is fulfilled.

 

The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

 

 

4

Other operating income

 



2021

2020



$'000

$'000

 

 

 

 


Government grants

1,458

859


Interest received from bank balances

10

26


Other income

10

57



_______

_______



 




1,478

942



_______

_______

 

The government grant income relates to government support designed to help businesses during the COVID-19 pandemic (e.g. The UK government's Coronavirus Job Retention Scheme and similar support in China and Turkey).

 

 

 

 

 

 

5

Non-recurring items

 


2021

2020


$'000

$'000

 

AIM listing fees

 

1,810

 

-

Turkish foreign exchange losses

1,113

-

Impairment of associate

1,627

-

Irrecoverable excess freight costs

1,021

1,814


_______

_______

Total

 

5,571

 

1,814


_______

_______

 

 

The Directors consider that it is appropriate to remove the non-recurring costs and certain non-trading items discussed below to better allow the reader of the accounts to understand the underlying performance of the Group.

 

The AIM listing completed in December 2021 incurred one-off transaction costs and advisory fees. Costs of $1,810,000 (2020: $nil) have been recognised within administrative expenses in relation to this.

 

In December 2021, the Turkish Lira was significantly depreciated against the US Dollar following unprecedented Government announcements in Turkey. This resulted in the Group incurring one-off unrealised foreign exchange losses of $1,113,000 (2020: $nil) arising in Chinatool Otomotiv San. Tic. Ltd Sti.

 

An impairment review of the loans and shareholdings the Group held in Marin Engineering Limited and Scomadi (Thailand) Co. Ltd. was completed in 2021. These balances were fully impaired before the loan was written off and the shares were transferred to a third party. This resulted in a one-off impairment charge of $1,627,000 (2020:$nil).

 

Global freight costs have temporarily increased significantly following the pandemic and related logistic issues. This has resulted in freight container costs exceeding the container rates quoted to customers. In recognition of this expecting to normalise over time, the Group has negotiated with customers to maximise the recovery of excess freight costs. There is however an element of excess freight costs which is deemed irrecoverable amounting to $1,021,000 (2020: $1,814,000) recognised within distribution expenses.

 

 

6

Expenses and auditors' remuneration

 

 

 

 

 

2021

2020

(Restated)



$'000

$'000


Included in the loss are the following:

 

 



 

 


Finance Expenses

Interest on bank loans and borrowings

 

1,949

 

1,919


Interest on lease liabilities

587

604


Loan note interest

528

692


Amortisation of loan transaction costs

439

-


Other interest charges

973

764



________

________



 




4,476

3,979



________

________






Operating loss is stated after charging:

 



Amortisation

440

290


Depreciation

2,076

1,974


Foreign exchange

1,576

2,478


Amortisation of right-of-use assets

3,069

2,242


Operating lease charges

-

50


Cost of inventories

72,966

45,469



________

________





 

 

Auditor's remuneration

2021

2020



$'000

$'000



 

 


Audit of Group financial statements

158

81


Audit of financial statements of subsidiaries of the company

241

187


Audit-related assurance services

-

4



________

________



 




 






 

 

 

7

Segment information

 

 

 

Operating segments are reported in a manner consistent with internal reporting provided to the Chief Operating Decision Maker (CODM). The CODM has been identified as the management team including the Chief Executive Officer and Chief Financial Officer. The segmental analysis is based on the information that the management team uses internally for the purpose of evaluating the performance of operating segments and determining resource allocation between segments.

 

The Group has 3 strategic divisions which are its reportable segments.

 

The Group has the below main divisions:

1) Tooling - Design, development and sale of tooling for the automotive industry.

2) Production - Manufacturing and distributing serial production kinematic interior parts for the automotive industry.

3) Head office - Manages Group financing and capital management

 

 

The Group evaluates segmental performance on the basis of revenue and profit or loss from operations calculated in accordance with IFRS.

 

Inter-segment sales are priced along the same lines as sales to external customers, with an appropriate discount being applied to encourage use of Group resources at a rate acceptable to local tax authorities. This policy was applied consistently in the current and prior year.

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

Tooling

Production

Head office

Total

 

 

$'000

$'000

$'000

$'000

 

Revenue












Total revenue from customers

22,175

110,764

-

132,939














Depreciation and amortisation

-

(5,585)

-

(5,585)


Finance expense

-

(2,112)

(2,364)

(4,476)



________

________

________

________








Segment Profit / (Loss)

5,260

(2,636)

(9,489)

(6,865)



________

________

________












Share of post-tax loss of equity accounted associates

(579)






_______


Group Loss before tax


(7,444)






_______













 

2021

 

 

 

 

 

 

 

 

 

 

 

 

Tooling

Production

Head office

Total

 

 

$'000

$'000

$'000

$'000

  

 












Additions to non-current assets

-

4,717

-

4,717



_______

_______

_______

_______








Reporting segment assets

6,802

100,091

12,540

119,433



_______

_______

_______

_______














Reportable segment liabilities

3,628

74,119

3,527

81,274



_______

_______

_______

_______

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

Tooling

Production

Head office

Total

 

 

$'000

$'000

$'000

$'000

 

Revenue












Total revenue from customers

22,430

87,469

-

109,899














Depreciation and amortisation

-

(4,506)

-

(4,506)


Finance expense

(41)

(2,050)

(1,888)

(3,979)



________

________

________

________








Segment Profit / (Loss)

4,760

(8,322)

(5,573)

(9,135)



________

________

________












Share of post-tax loss of equity accounted associates

(574)






_______


Group Loss before tax


(9,709)






_______













 

2020

 

 

 

 

 

 

 

 

 

 

 

 

Tooling

Production

Head office

Total

 

 

$'000

$'000

$'000

$'000

  

 












Additions to non-current assets

-

1,666

-

1,666



_______

_______

_______

_______








Reporting segment assets

10,642

97,343

840

108,825



_______

_______

_______



Investment in associates




1,443






_______


 

Total Group assets




 

110,268






_______














Reportable segment liabilities

6,201

76,685

38,094

120,980



_______

_______

_______

_______

 

 

 


External revenue by location of customers

Non-current assets by location of assets

 


2021

2020

2021

2020

 


$'000

$'000

$'000

$'000

 






 

UK

20,840

20,022

4,213

2,423

 

US

29,489

19,278

124

25

 

China

18,289

30,823

16,312

16,253

 

Turkey

9,690

8,156

555

1,132

 

Czech Republic

35,356

18,850

440

396


Brazil

3,074

3,301

-

-


Spain

6,985

7,369

-

-


Thailand

2,187

1,661

-

1,443


Other

7,029

439

287

174



__________

__________

__________

__________









132,939

109,899

21,931

21,846



__________

__________

__________

__________







 

Balances related to goodwill, right of use assets, deferred tax assets and investments in equity-accounted associates that aggregated to $11,717,000 were excluded from the segment disclosures in the financial statements for the year ended 31 December 2020. These have been updated in comparatives above to be consistent with the disclosures for 31 December 2021.

 

Due to the nature of the automotive industry becoming increasingly consolidated with mergers, acquisitions and strategic alliances, the number of customers under separate control is decreasing whilst the size of such customers is increasing.

 

 

Analysis of concentration of customers, top 3 and others:

 

 





In 2021 the Group had 3 major customers representing $42.7m (32%), $43.2m (33%) and $13.3m (10%) of Group revenue.

 

In 2020 the Group had 3 major customers representing $33.6m (31%), $24.6m (22%) and $12.6m (12%) of Group revenue.

 

 

 

8

Taxation

 

 

 

 

 

2021

2020

(Restated)

 

Recognised in profit and loss

$'000

$'000



 



Current tax expense

 



Current year (Including carry back of losses)

179

(750)


Adjustments for prior periods

150

-



________

________



 



Current tax expense/(credit)

329

(750)



________

________



 



Deferred tax credit

 



Origination and reversal of temporary differences

(993)

(332)


Effect of changes in tax rates

(444)

-



________

________



 



Deferred tax credit

(1,437)

(332)



________

________



 



Total tax credit

(1,108)

(1,082)



________

________



 


 


2021

2020

 

 

$'000

$'000

 

Reconciliation of effective tax rate

 




 



Loss for the year

(6,336)

(8,627)


Total tax credit

(1,108)

(1,082)



________

________



 



Loss excluding taxation

(7,444)

(9,709)



________

________






Tax using the UK corporation tax rate of 19% (2020 - 19.00%)

(1,414)

(1,845)


Effect of tax rates in foreign jurisdictions

258

88


Non-taxable income

22

-


Non-deductible expenses

355

559


Adjustments for prior periods

150

-


Tax rate changes

(444)

8


Other differences

(35)

-


Movement in unrecognised deferred tax

-

108



________

________



 



Total tax credit

(1,108)

(1,082)



________

________





 

The UK Government announced in the March 2021 Budget that the main rate corporation tax in the UK will increased from 19% to 25%. This was substantively enacted by the balance sheet date and as a result deferred tax balances at 31 December 2021 have been measured at 25%.

 

Included within tax payable is an IFRIC 23 uncertain tax payable totalling $618,000 (2020: $623,000), which is a result of uncertainty in the tax legislation in a certain jurisdiction.

 

 

 

9

Loss per share

 

 



2021

2020



Number

Number



 

 


Weighted average number of equity shares

20,286,757

19,600,000



 


 


$

$

 


 


 

Earnings, being loss after tax

(6,336,000)

(8,627,000)

 

 

 




Cents

Cents



 



Loss per share

(31.2)  

(44.0)



 




 


 

There are no outstanding instruments that can result in diluted earnings per share to be different with basic earnings per share in 2021 and 2020.

 

The weighted average number of shares outstanding in 2020 has been adjusted to 19,600,000 to reflect the share dilution that occurred on 22 November 2021. Throughout 2020, there were 98,000 shares outstanding with a nominal value of £1 each. On 22 November 2021, these were sub-divided into 19,600,000 shares with a nominal value of £0.005 each. IAS 33 requires that in such events whereby the number of Ordinary Shares is increased without an increase in resources, the number of Ordinary Shares outstanding before the event is adjusted to reflect the event as if it has occurred at the beginning of the earliest period presented.  

 

 

 

 

10

Property, plant and equipment

 

 

 

Plant and

Fixtures

Under

Motor

 

 

 

equipment

and fittings

construction

vehicles

Total

 

 

$'000

$'000

$'000

$'000

$'000

 

Cost

 

 

 

 

 

 

Balance at

1 January 2020

15,339

2,824

93

36

18,292


Additions

1,168

422

-

-

1,590

 

Disposals

(859)

(13)

-

-

(872)


Re-classifications

93

-

(93)

-

-


Effect of movements in foreign exchange

946

90

-

2

1,038



________

________

________

________

________


Balance at

31 December 2020

16,687

3,323

-

38

20,048



________

________

________

________

________



 

 

 

 

 


Balance at

1 January 2021

16,687

3,323

-

38

20,048


Additions

2,213

2,083

-

-

4,296


Disposals

(1,049)

(554)

-

-

(1,603)


Re-classifications

-

-

-

-

-


Effect of movements in foreign exchange

(554)

(166)

-

(4)

(724)



________

________

________

________

________


Balance at

31 December 2021

17,297

4,686

-

34

22,017



________

________

________

________

________


Depreciation







Balance at

1 January 2020

7,029

1,531

-

36

8,596


Depreciation charge for the year

1,579

394

-

1

1,974


Disposals

(347)

(90)

-

-

(437)


Effect of movements in foreign exchange

310

20

-

1

331



________

________

________

________

________


Balance at

31 December 2020

8,571

1,855

-

38

10,464



________

________

________

________

________


Balance at

1 January 2021

8,571

1,855

-

38

10,464


Depreciation charge for the year

717

1,359

-

-

2,076


Disposals

(255)

(336)

-

-

(591)


Effect of movements in foreign exchange

(150)

(85)

-

(4)

(239)



________

________

________

________

________


Balance at

31 December 2021

8,883

2,793

-

34

11,710



________

________

________

________

________


Net book value







At 31 December 2020

8,116

1,468

-

-

9,584



________

________

________

________

________









At 31 December 2021

8,414

1,893

-

-

10,307



________

________

________

________

________

As at 31 December 2021, property, plant and equipment with a carrying value of $10,307,000 (2020 - $9,584,000) was pledged as security for the invoice finance and trade loans.

 

 

11

Leases

 

 

 

 

 

The Group leases buildings and machinery where payments are fixed until the contracts expire. There is no variability in respect of payments and there is not considered to be any significant judgement in relation to the lease terms.

 

Right of use assets

 

 

Land and

Plant and

 

 

 

buildings

machinery

Total

 

 

$000

$000

$000







At 1 January 2020

8,729

85

8,814


Additions

816

225

1,041


Disposal

(82)

-

(82)


Amortisation

(2,166)

(76)

(2,242)


Foreign exchange movement

9

9

18



________

________

________







At 31 December 2020

7,306

243

7,549












At 1 January 2021

7,306

243

7,549


Additions

1,538

911

2,449


Disposal

-

-

-


Amortisation

(2,522)

(547)

(3,069)


Foreign exchange movement

5

8

13



________

________

________






 

At 31 December 2021

6,327

615

6,942



________

________

________

Lease liabilities

 

 

Land and

Plant and

 

 

 

buildings

machinery

Total

 

 

$000

$000

$000







At 1 January 2020

9,084

88

9,172


Additions

816

225

1,041


Disposal

(87)

-

(87)


Finance expense

589

10

599


Foreign exchange movement

42

6

48


Repayments

(2,528)

(69)

(2,597)



________

________

________







At 31 December 2020

7,916

260

8,176












At 1 January 2021

7,916

260

8,176


Additions

1,547

911

2,458


Disposal

-

-

-


Finance expense

541

46

587


Foreign exchange movement

(15)

8

(7)


Repayments

(2,993)

(614)

(3,607)



________

________

________






 

At 31 December 2021

6,996

611

7,607



________

________

________

 

 

 

 

 


The maturity profile of the lease liabilities is as follows:

2021

2020



$'000

$'000



 

 


Under 1 year

2,566

2,683

 

1 - 2 years

1,534

1,666


2 - 5 years

2,594

2,459


More than 5 years

913

1,368



_______

_______



 




7,607

8,176



_______

_______

 

 

 

12

Intangible assets

 

 

 


 

Software

Goodwill

Total



$'000

$'000

$'000



 

 

 


Cost

 

 

 


Balance at 1 January 2020

1,572

2,417

3,989


Additions

76

-

76


Effect of movements in foreign exchange

58

-

58


 

________

________

________


 





Balance at 31 December 2020

1,706

2,417

4,123



________

________

________







Balance at 1 January 2021

1,706

2,417

4,123


Additions

421

-

421


Effect of movements in foreign exchange

(67)

-

(67)



________

________

________







Balance at 31 December 2021

2,060

2,417

4,477



________

________

________







Amortisation and impairment





Balance at 1 January 2020

831

-

831


Amortisation for the year

290

-

290


Effect of movements in foreign exchange

40

-

40



________

________

________







Balance at 31 December 2020

1,161

-

1,161


 

________

________

________


 





Balance at 1 January 2021

1,161

-

1,161


Amortisation for the year

440

-

440


Effect of movements in foreign exchange

(61)

-

(61)


 

________

________

________


 





Balance at 31 December 2021

1,540

-

1,540


 

________

________

________


Net book value





At 31 December 2020

545

2,417

2,962



________

________

________







At 31 December 2021

520

2,417

2,937



________

________

________

 

Amortisation charge

 

The amortisation charge is recognised in the following line items in the profit and loss account:

 



2021

2020



$'000

$'000



 



Administrative expenses

440

290



________

________

 

 

 

Goodwill considered significant in comparison to the Group's total carrying amount of such assets have been allocated to cash generating units or groups of cash generating units as follows:

 



Goodwill



2021

2020



$'000

$'000



 



Chinatool UK Limited

1,259

1,259


IMS / Chinatool JV, LLC

1,158

1,158

 

 

The recoverable amounts of Chinatool UK Limited and IMS / Chinatool JV, LLC have been determined based on a value-in-use calculation. This calculation uses financial forecasts approved by the Directors which cover a 4 year period. These are detailed forecasts based on customer schedules and expected project lifetimes. The detailed forecasts have been reviewed for a 4 year period as this is considered to be the range over which the customer schedules can be relied upon to create detailed forecasts.

 

 In performing these calculations, the future cash flows of Chinatool UK Limited have been discounted at 11% and those of IMS / Chinatool JV, LLC at 12%. The Directors concluded that these discount rates are appropriate having reviewed discount rates applied by competitors in our sector, including businesses who are exposed to similar automotive supply risks and applying a margin to take account of our size, the complexity of our operations and levels of borrowing in the Group.

 

Using the above stated assumptions there is significant headroom between the recoverable amount of goodwill allocated to each CGU. Applying sensitivity analysis to these calculations, a 2% increase to the discount rate applied reduces the headroom, but still allows for in excess of over $10m of headroom on Chinatool UK Limited and over $2m of headroom on IMS / Chinatool JV, LLC.

 

 

13

Inventories

 

 



 

2021

2020

(Restated)



$'000

$'000



 

 


Raw materials and consumables

8,627

8,548

 

Work in progress

6,654

11,884


Finished goods

24,498

19,791



_______

_______







39,779

40,223



_______

_______

 

           

 

The provision for inventories recognised during the year ended 31 December 2021 was $616,000 (2020: $651,000).

 

14

Trade and other receivables

 

 



2021

2020



$'000

$'000



 

 


Trade receivables

26,444

27,576


Other debtors

2,633

1,112

 

Loan receivables

-

543

 


________

________

 


 


 


29,077

29,231

 


 



Prepayments

13,705

15,395



________

________



 



Total trade and other receivables

42,782

44,626



________

________

 

Included within trade and other receivables is $Nil (2020 - $Nil) expected to be recovered in more than 12 months.

 

The loan receivable at 31 December 2020 related to amounts due from Automotive Kinetic Systems Limited, a related party controlled by Simon Phillips. This balance was unsecured, interest-free and had no specific term of repayment but was repayable on demand. This balance was reclassified and converted into equity during the period as detailed within related party disclosure.

 

The carrying value of trade and other receivables classified at amortised cost approximates fair value.

 

The Group does not hold any collateral as security.

 

The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision to trade receivables. The expected loss rates are based on the Group's historical credit losses. Due to the nature of the Group's customers no credit loss provision has been made at year end (2020 - $Nil). The key assumptions used in evaluating the credit loss provision are the historical default ratio of these customers, any known liquidity risks of the customers and based on the information available we have assessed a range of possible outcomes.

 

As at 31 December 2021 trade receivables of $4,270,000 (2020 - $3,641,000) were past due but not impaired. They relate to customers with no default history. The ageing analysis of these receivables is as follows:

 



2021

2020



$'000

$'000



 

 


Not past due

22,174

23,935


Past due 1-90 days

3,498

3,000


Past due more than 90 days

772

641



________

________



 




26,444

27,576



________

________

 

Other classes of financial assets included within trade and other receivables do not contain impaired assets.

 

 

 

15

Other interest-bearing loans and borrowings

 

This note provides information about the contractual terms of the Group and Company's interest-bearing loans and borrowings, which are measured at amortised cost.

 



2021

2020



$'000

$'000



 

 


Non-current liabilities

 


 

Secured bank loans

-

(15,385)


Loan notes

-

(7,426)


Non-current portion of finance lease liabilities

(103)

(152)



________

________



 




(103)

(22,963)



________

________



 



Current liabilities

 



Current portion of secured bank loans

(5,452)

(19,558)


Current portion of finance lease liabilities

(278)

(197)


Unsecured bank overdraft

(3,638)

(4,833)


Invoice finance

Unsecured loans

(10,997)

(2,500)

(12,533)

-



________

________



 




(22,865)

(37,121)



________

________







(22,968)

(60,084)



________

________

 

The secured bank loans are secured by a floating charge over the Group's property, plant and equipment.

 


The currency profile of the Group's loans and borrowings is as follows:

 

 



2021

2020



$'000

$'000



 

 


USD

12,928

50,687


GBP

3,528

381


EUR

6,433

8,668


RMB

79

348



________

________



 




22,968

60,084



________

________

 

 

 

 

 

 

Carrying amount

Carrying amount

 

 

 

 

31 December

31 December

 

 

Nominal interest rate

Contracted

maturity

2021

2020

 

Currency

$'000

$'000


 

 


 


Term loan

USD

5.85%

2023

-

15,603

CLBILs

GBP

5.85%

2023

-

8,190

Loan notes

USD

9.58%

2022

-

7,426

Unsecured loans

USD

10%

2022

2,500

-

Unsecured bank overdraft

GBP

2.5%

2022

3,638

4,833

Trade loans

EUR/USD

4.04%

2022

5,452

11,150

Invoice finance

EUR/USD

3.75%

2022

10,997

12,533





________

________


 

 


 



 

 


22,587

59,735





________

________

 

Terms and debt repayments

 

The Term Loan was repayable over equal instalments to June 2023. Interest was paid quarterly in full. This term loan was fully repaid on 24 December 2021.

 

The CLBILs was repayable over equal instalments to 2023. Interest was paid monthly in full. The CLBILs were fully repaid on 24 December 2021.

 

Half of the loan note interest was serviced quarterly, with the remainder being rolled up. The loan notes were due to be repaid in April 2022. The loan notes were reclassified into equity instruments on 14 September 2021 based on changes in their terms such that they met the IAS 32 definition of equity. See below.

 

The unsecured loans were initially drawn down as a 6 month loan in January 2021. An agreement was reached with the lender to extend repayment to January 2022.

 

The invoice finance facility allows 90% prepayment against eligible invoices up to 120 days old. The invoice financing facility is secured against the debts that it is drawn down on, and the Group's fixed assets.

 

The loan notes outstanding as at 31 December 2020 were due to related parties.

 

All other facilities are on demand facilities and have no set repayment schedules.

 

 

 

The movement of loans notes in the period is as follows:

 

 


Loan notes - liabilities

Loan notes - equity


$'000

$'000


 

 

At 1 January 2021

7,426

-

Accrued interest

528

-

Conversion of shareholder loan notes to equity

(7,954)

9,900

Issue of loan notes to third parties

5,600

-

Conversion of loan notes to Ordinary Shares

(5,600)

(9,900)


________

________




As at 31 December 2021

-

-


________

________

 

The original shareholder loan notes due to Simon Phillips ($7,426,000 at 31 December 2020) were reclassified to equity instruments on 14 September 2021 based on changes in their terms such that they met the IAS 32 definition as equity instruments. At the date of this conversion, $1,946,000 of other shareholder balances due were also reclassified into equity instruments after changes in their terms, in line with IAS 32. On 23 December 2021, the balance of these loan notes ($9,900,000) was set off against $3,694,069 owed by Simon Phillips and entities controlled by Simon Phillips, with the resulting balance owed to him ($6,205,931) being satisfied in full by the issue to him of 3,176,871 new Ordinary Shares.

 

On 20 September 2021, $5,600,000 of new loan notes were issued to unrelated third parties which were classified as a liability as per the terms of the agreement, carrying an interest rate of 10% and due to be repaid on 31 December 2023. On 23 December 2021, these were converted into 5,034,898 Ordinary Shares. These were issued at a 43% discount to the AIM listing placing price.

 

16

Trade and other payables

 

 



2021

2020



$'000

$'000


Current

 

 


Trade payables

24,938

22,758

 

Non-trade payables and accrued expenses

11,419

12,749


Employee social security and taxes

7,388

3,221


Contract liabilities

2,925

8,336


Other payables

3,359

4,878


Provisions for losses on forward contracts

15

-



________

________



 




50,044

51,942



________

________

 

Included within trade and other payables is $Nil (2020 - $Nil) expected to be settled in more than 12 months.

 

All trade and other payables other than employee social security and taxes, contract liabilities and provisions for losses on forward contracts (fair value through profit and loss) are classified as financial liabilities measured at amortised cost. The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value.

 

Included within Other payables at 31 December 2020 were $1,946,000 of balances due to Simon Phillips which were reclassified into Equity Loan Notes on 14 September 2021 and subsequently settled by issue of Ordinary Shares.

 

In addition to the shareholder loan notes, at 23 December 2021 Directors Loan balances of $487,619 were satisfied by the issue of 249,615 Ordinary Shares to the Directors.

 

17

Prior year adjustment

 

During the year, management performed a review of the stock overhead absorption, and identified that, as of 31 December 2020, the Group had not correctly released the overhead absorption recognised within work in progress and finished goods. This resulted in the overhead absorption within inventory being overstated at the year ended 31 December 2020 within Chinatool Automotive Mould Systems Limited. The adjustment to correct this has resulted in an increase to cost of sales of $831,481 for the year ended 31 December 2020 and a reduction in inventory value of $831,481 as at 31 December 2020.

 

This adjustment has increased the loss for the year ended 31 December 2020 by $831,481. The full impact of the restatement across the financial statements is disclosed below:

 


 

Consolidated statement of Profit and Loss and Other Comprehensive Income ($'000)

 

Reported Financial year ended 31 December 2020

 

 

Correction

Restated Financial year ended 31 December 2020


 

Cost of sales

 

87,752

 

831

 

88,583


 

 

 

 




 

Consolidated Balance Sheet ($'000)

Reported as at 31 December 2020

 

Correction

Restated as at 31 December 2020







Inventory

41,054

(831)

40,223



 

 

 



 

Consolidated Statement of Cash Flows ($'000)

 

Reported Financial year ended 31 December 2020

 

 

Correction

Restated Financial year ended 31 December 2020



 

 



Loss for the year

(7,796)

(831)

(8,627)



 

 



(Increase) in inventories

(4,661)

831

(3,830)







 

Notes forming part of the consolidated financial statements ($'000)

 

Reported as at 31 December 2020

 

 

Correction

 

Restated as at 31 December 2020







Cost of inventories

44,638

831

45,469











The Reconciliation of effective tax rate note within the Notes forming part of the Consolidated Financial Statements was also impacted by $158,000 and resulting in the amount of movement in unrecognised deferred tax being $108,000.

 

 

 

 

 

18

Alternative performance measures

 

The Annual Report includes Alternative Performance Measures (APMs) which are considered by Management to better allow the readers of the accounts to understand the underlying performance of the Group. A number of these APMs are used by Management to measure the KPIs of the Group as outlined within the Business Review. The Board also monitors these APMs to assess financial performance throughout the year.

 

The APMs used in the Annual Report include:

 

-     Adjusted EBITDA - calculated as EBITDA adjusted for non-recurring items

-     Adjusted EBITDA margin - calculated as adjusted EBITDA divided by revenue in the year

-     Adjusted operating profit - calculated as Operating profit/(loss) adjusted for non-recurring items

-     Adjusted operating profit margin - calculated as adjusted operating profit divided by revenue in the year

 

EBITDA is calculated based using Operating profit/(loss) before interest, taxes, depreciation and amortisation.

 

 

Adjusted EBITDA and adjusted EBITDA margin

 

 


2021

2020


$'000

$'000

Adjusted EBITDA

8,767

1,164

Non-recurring items

 


-     AIM listing fees

(1,810)

-

-     Turkish foreign exchange losses

(1,113)

-

-     Impairment of associate

(1,627)

-

-     Irrecoverable excess freight costs

(1,021)

(1,814)


_______

_______

 

EBITDA

 

3,196

 

(650)

 


_______

_______

 

Adjusted EBITDA margin

 

6.6%

 

1.1%

 

 

 

 

Adjusted operating profit and adjusted operating profit margin

 

 


2021

2020


$'000

$'000

Adjusted operating profit

3,182

(3,342)

Non-recurring items

 


-     AIM listing fees

(1,810)

-

-     Turkish foreign exchange losses

(1,113)

-

-     Impairment of associate

(1,627)

-

-     Irrecoverable excess freight costs

(1,021)

(1,814)


_______

_______

 

Operating loss

 

(2,389)

 

(5,156)


_______

_______

 

Adjusted operating profit margin

 

2.4%

 

(3.0%)

 

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