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Results for the year ended 31 December 2022

Published: 16/06/2023, 07:00

RNS Number : 9205C

CT Automotive Group PLC

16 June 2023

CT AUTOMOTIVE GROUP PLC

("CT Automotive" or the "Group")

Audited Results for the year ended 31 December 2022

Encouraging trading in 2023 - well positioned as operating conditions stabilise

CT Automotive, a leading designer, developer and supplier of interior components to the global automotive industry, today announces its results for the year ended 31 December 2022 ("FY22").

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

"The Group navigated through a turbulent year and is now on an upward trajectory, with new awards and customer wins. We responded to the challenging operating conditions while focusing on executing our important strategic priorities. This included opening our new facility in Mexico, winning new contracts and making good progress with margin enhancement initiatives.

Trading in FY23 to date has been encouraging as market conditions have improved, with increasing stability and visibility from customers. Meanwhile, our roadmap to drive further efficiencies in the business is on track. While macroeconomic uncertainty remains, the Board remains confident of achieving its expectations for FY23 and delivering significant growth in the medium-term."

Financial headlines

	Audited FY 22	Restated FY 21
	$m	$m
Revenue	124.3	127.8
Gross profit	14.9	25.2
Adjusted EBITDA*	(7.1)	3.3
Adjusted loss before taxation*	(14.5)	(6.8)
Loss before taxation	(18.8)	(12.4)
Earnings per share	(42.9)c	(55.2)c
Net debt	12.2	9.1

* Adjusted for non-recurring items

Note: continuing operations excluding UK discontinued operations

· Group revenue from continuing operations was broadly maintained at FY21 levels

· Strong FY22 production revenues despite volatile and short-term nature of customer orders offsetting reduced tooling revenues

· Profitability impacted by increased production and distribution costs as the Group reacted to maintain service

· Balance sheet strengthened following post period-end fundraise with gross proceeds of $9.6m predominately to support working capital

Operational highlights

· Cost savings programme is progressing as planned

o Commenced in H2 FY22 to improve the profit margin across the Group's operations and further enhanced in the new financial year with roadmap to realise c.9 percentage points profit before tax margin improvement

· Supply chain disruptions and semi-conductors shortages impacted production levels

· New customer wins including Rivian and Vinfast

· New manufacturing plant in Mexico opened and supplying customers

Current trading and outlook

· Encouraging current trading, with strong customer demand and order book

· The Group's manufacturing facilities have recovered from the specific operational challenges experienced in Q4 2022

· Global chip shortage is subsiding with the majority of semiconductor suppliers already reporting or expecting a semiconductor surplus in 2023¹.

· Efficiency initiatives have started to come on stream and are delivering run rate pre tax profit margin of approximately 7.6 per cent, in line with plan

· No change to the Board's expectations for FY23

Notes

1. https://advisory.kpmg.us/articles/2022/global-semiconductor-industry-outlook-2023.html

For further information, please contact:

CT Automotive Simon Phillips, Executive Chairman Scott McKenzie, Chief Executive Officer Anna Brown, Chief Financial Officer	via MHP

MHP (Financial PR) Tim Rowntree Charlie Barker	Tel: +44 (0)7834 623 818 CTAutomotive@mhpgroup.com

Liberum (Nominated Adviser and Broker) Richard Lindley Benjamin Cryer	Tel: +44 (0)20 3100 2000

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 Mexico, Turkey and the Czech Republic.

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 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 is also 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.

Strategic and operational review

Introduction

FY22 presented a series of unforeseen challenges for CT Automotive - both on the supply and demand sides of our business. We responded to the challenging operating conditions while focusing on several key strategic initiatives set out at our IPO in late 2021. This has left the business in a stronger position to deliver on our growth strategy and capitalise on improved market conditions as we move through FY23.

We would like to express our gratitude for the unwavering support from the shareholders, lenders, suppliers, employees and customers during the year. Their backing has been instrumental as we navigated the challenges presented to us.

In particular, we would like to thank our existing and new shareholders who supported us in the recent fundraising which secured c$9.6m of gross proceeds. The net proceeds of the fundraise will predominately be used to strengthen the balance sheet and to provide the Group with flexibility to take advantage of new pipeline opportunities as the business positions for growth. Additionally, a small portion of the net proceeds will be deployed to realise further efficiency savings including through investment in injection moulding production processes and robotics.

Overview

CT Automotive is a leading manufacturer of kinematic parts and decorative finishers for car interiors, supplying some of the world's largest Original Equipment Manufacturers (OEMs). With manufacturing facilities located in low-cost economies, we leverage our strategic presence to provide full service through our efficient distribution centres, creating a streamlined and robust supply chain.

Over the past year, CT Automotive has made further strides in the highly competitive automotive industry.

We further strengthened our market position through significant new wins with existing blue-chip customers such as Nissan, Ford and Lotus and also secured partnerships with new electric vehicle (EV) start-ups such as Rivian.

We successfully opened a new production facility in Puebla, Mexico, in-line with our plans outlined at our IPO in December 2021 and despite the headwinds caused by the global pandemic. This strategic move has allowed us to diversify some of our production away from China, secure an improved supply chain for the Americas and enabled us to offer our customers in the region better pricing.

We are pleased to report that the plant is now fully operational and is performing to plan, after overcoming initial start-up issues during the first few months caused by fluctuations in customer production schedules as a result of supply chain issues detailed below.

During the year our business experienced significant challenges posed by lockdowns in China, which resulted in the enforced closure of our factories for up to 20% of the year. This also strained the supply chain and had a ripple effect on our suppliers, causing significant inefficiencies and production delays. Following the reversal of the zero-Covid policy towards the end of FY22, our manufacturing facilities in China have been able to rapidly return to full production capacity and drive efficiency back into the business.

As previously announced, increased labour, production and utility costs have led to the closure of our UK production facility in Sunderland with the majority of production capacity relocated to other Group sites.

Performance summary

We are pleased to report that our revenues from continued operations remained broadly flat at $124.3m (FY21: $127.8m), despite the challenges experienced over the past year. Although customer demand continued to improve compared to FY21 as the industry recovered from Covid-19, production levels were highly unstable due to wider automotive supply chain disruptions and semi-conductor shortages, which adversely impacted our profitability. Notwithstanding this, we continued to secure significant new development contracts, which underpin our future growth and demonstrate the OEMs' confidence in our capabilities.

Market conditions

The past year presented numerous hurdles for our business: semi-conductor shortages hampering OEM production, China's 'zero-Covid' policy which led to enforced plant closures, surging shipping container prices and general supply chain disruptions. High inflation rates in the UK in the latter part of FY22 caused an increase in energy and materials prices and labour costs and led to the decision to close our UK plant. In addition, the hyperinflationary environment in Turkey drove up energy and material costs and led to wage increases at our local facility. Despite these challenges, we were able to share certain costs with our customers and maintain supply.

In order to better manage potential demand volatility, the Group is investing in improved stock management processes and in increased automation of the key production processes. The new stock management processes are aimed at optimising inventory levels, thereby reducing costs and freeing up cashflow through improved production planning and material management, freight packing optimisation and a more efficient utilisation of production staff. The Directors believe that these improvements will strengthen the Group and improve operations but also better position the Group to mitigate similar adverse events that may occur in the future.

Key achievements

Our new facility in Puebla, Mexico, opened in late 2022 to support local supply to our North American customers and, following initial production delays due to the impact of continued supply chain disruption, production is now ramping up. The timely closure of our Sunderland production facility helped to curtail future production losses in the UK.

During the latter part of FY22 we successfully introduced production line efficiencies, while our new global supply chain office in Pune, India, has already identified and secured significant material cost savings.

Importantly, last year we successfully launched several new interior programs, showcasing the Group's wide range of engineering & design skills for air vent, wrapped panels, interior lighting, console lids and kinetic assemblies. In FY22 CT Automotive delivered a variety of new projects for example, producing sun visors, mirror covers, footwell dividers and armrest hinges for Lotus, air vents and cup holders for Ford and air vents and wrapped panels for Marelli.

Strategic update

Our strategic focus is: on successfully securing new contracts, particularly new EV platforms, and on achieving further cost savings.

New contracts

During FY22 the shift to EV accelerated faster than anticipated. We recognise the need to monitor the transition of legacy automakers to EVs closely and the increasing competition from Chinese OEMs presents a forward threat to European and US OEMs. As the industry navigates through this period of transition, we are well positioned to secure EV platform contracts with existing customers, including Ford and a leading American EV OEM. In addition, with our manufacturing capabilities in China, we are strategically well placed to embrace the fast-growing Chinese EV market and domestic OEMs.

Margin enhancement initiatives

Our emphasis on cost savings is underpinned by a pricing strategy to ensure the very best landed costs to our customers, acknowledging the industry practice that, where applicable, cost increases of materials, labour, freight and in some cases utilities are passed across to our customers.

In the second half of FY22 the Group commenced an efficiency programme to target further cost savings across the Group and to realise an approximately nine percentage point improvement in pre-tax profit margin. The efficiency programme includes proposals to increase the flexibility of the Group's workforce and increasing the agility of the Group in response to elevated variability in customer order volumes. These proposals aim to ensure that the Group maximises its profitability while global automotive volumes continue to recover, and the Directors believe that these actions will ensure that the Group is well placed to further benefit from anticipated increased production volumes going forward.

As part of the efficiency programme, initial preparations are underway to consolidate some of the Group's manufacturing operations in China to Ganzhou, Jiangxi province, benefitting from comparatively lower labour costs. Additionally, the Group's proposed investment in robotics will realise efficiencies in the injection moulding process, with equipment expected to be deployed at the Group's manufacturing facilities in China by Q4 2023, with a short payback period. The combination of increased automation and the consolidation of our manufacturing facilities in Jiangxi would significantly improve our agility and responsiveness.

While the full benefits of these initiatives will be felt in FY24, action already taken to date resulted in a run rate pre-tax profit margin of approximately 7.6%. Action to be taken later in the year is expected to realise a further approximately 3 percentage points of margin, resulting in a run rate pre-tax profit margin by the end of the year of 10.5%.

Focus on quality

The automotive industry is widely recognised for its stringent quality standards, as even a small number of non-conforming parts reaching the customer can result in costly penalties. Consequently, the Group places significant emphasis on maintaining exceptional quality. In addition to delivering optimal cost efficiency to our customers, we prioritise providing them with products of the highest quality. This commitment is upheld through the implementation of rigorous quality checks (QC) throughout the production process and the internal "firewall" quality teams during a "safe launch" period of typically 90 days from the start of production during which 100% of new product is inspected. As a testament to our dedication, CT Automotive China and Turkey plants were recertified under the IATF 16949:2016 standard in FY21, while our plant in Mexico is expecting the certification audit in late FY23, further underpinning our commitment to excellence.

Health and safety

The well-being and safety of our employees take precedence above all else. Recognising that certain operations conducted within our global facilities possess inherent risks that could potentially lead to severe consequences, including fatalities, we maintain strict adherence to robust health and safety protocols. The efficacy of this approach is evident in the Group's global health and safety incident report, which highlights zero occurrences of fatal or severe injuries across all our plants throughout the year. We take immense pride in this accomplishment. More information on this can be found in the Sustainability Report section of the Annual Report.

Board changes

On 13 December 2022, the Group's Chief Financial Officer, David Wilkinson notified the Board of his decision to step down for personal reasons and he left the Group on 28 April 2023. David made a considerable contribution to the development of CT Automotive over 11 years at the company and we wish him well.

After the period-end, on 1 February 2023, we were pleased to announce the appointment of Anna Brown. She was appointed to the Board as an Executive Director of the Company on 28 April 2023, following an orderly handover period. Anna brings substantial listed company and financial experience to the role that will be invaluable as we continue to execute our growth strategy.

As previously announced, the Board intends to appoint a further non-executive director with the individual to be a representative of one of the Company's significant shareholders. A further announcement will be made in due course.

Our people

Throughout what has been a challenging year, one thing has remained consistent, and that has been the resilience and commitment of our people. Day in and day out, all around the globe, the employees at CT Automotive have been dedicated and enthusiastic, their expertise has been vital in driving the business forward. We thank them for their valuable contribution.

Sustainability and Corporate Social Responsibility (CSR)

We remain committed to sustainability and corporate social responsibility. This commitment extends to our operations, our employees and our communities. We are dedicated to continuously improving our environmental footprint, promoting fair and ethical labour practices, and engaging in initiatives that benefit our communities.

Current trading and outlook

Trading in the current year to date has been encouraging, with strong customer demand and order books building. The Group's manufacturing facilities have recovered from the specific operational challenges experienced in Q4 last year:

· The Group has seen a rapid recovery in manufacturing at the Group's facilities in China following the lifting of the Government's zero-Covid policy measures.

· The Group's new facility in Puebla, Mexico is now fully operational.

The cost savings programme launched in the second half of FY22 continues to progress in line with plan. Efficiency initiatives have started to come on stream and are delivering margin improvements.

The Board is encouraged by stabilising order volumes since the start of FY23 and visibility for the year ahead. While macroeconomic uncertainty remains, there are signs that customer schedules are strengthening and OEM automotive supply chain issues are resolving.

As a result, the Board remains confident of achieving its expectations for FY23, supported by the benefit expected from efficiency savings.

We are optimistic about the outlook for the automotive industry. With the scrapping of the zero-Covid policy in China, we anticipate being able to operate normally and return to stable rhythm in our production facilities. With container shipping prices stabilising back to pre-pandemic levels, the Group can take advantage of improved supply chain efficiencies. Additionally, better allocation of semi-conductors and stabilised customer production schedules will contribute to a more predictable operating environment where efficiencies can be leveraged to reduce cost and improve margins.

We will continue to focus on efficiency and optimisation across our global facilities. Our investment in the latest automation technologies will maximise production efficiency and strengthen our competitive position.

As we look to the future, we are optimistic about the resilience and adaptability of CT Automotive. We have a robust strategy in place, and we are well positioned to capitalise on the improved stability of our operating environment and the continued recovery in our global automotive end-markets. Thank you once again for your steadfast support, and we look forward to a year of progress and shared success.

Financial review

Revenue and margins

Total Group revenue from continuing operations was relatively stable with a small decrease of 3% from $127.8m in FY21 to $124.3m in FY22.

Although highly unstable due to supply chain disruptions and semi-conductor shortages, overall demand for interior components remained high. As a result, our production revenue grew by 11% to $117.3m (FY21: $105.6m). Tooling revenue reduced by 68% to $7.0m (FY21: $22.2m) predominately reflecting the timing of completion and its project-based nature.

Gross profit margins were adversely impacted by the increased variability and short-term nature of orders as the Group's customers reacted to available supply elsewhere in their respective supply chains, which in turn increased the Group's production costs as it responded to maintain service. Furthermore, enforcement of the Chinese Government's zero-Covid policy resulted in the temporary closure of some of the Group's manufacturing facilities and those of local suppliers, leading to increased costs as the Group caught up on lost production and expedited delivery of materials from local suppliers, as well as finished goods to customers, at a higher cost. During the year the Group incurred costs that, while part of the underlying results, are not expected to repeat as we return to more stable trading conditions. These costs included c.$5m in connection with higher than forecasted production inefficiencies and expedited air freight costs following lockdowns in China.

The above production challenges, together with completing fewer tooling projects, which typically generate higher margins, led to a decline in gross profit to $14.9m (FY21: $25.2m) and consequently a deterioration in gross profit margin to 12.0% in FY22 from a gross profit margin of 19.7 % in FY21.

Non-recurring items

During FY22 the Group incurred non-recurring costs of $4.3m (FY21: $5.6m). These costs primarily related to pre-opening and start-up costs of $1.7m (FY21: nil) in connection with the new production facility in Mexico, goodwill impairment of $1.2m (FY21: nil) in relation to curtailing our US entity activity as the operations in Mexico came on-stream and $0.7m (FY21: nil) being an accounting adjustment reflecting the impact of hyperinflation in Turkey.

EBITDA and operating result

FY22 underlying EBITDA was a loss of $7.1m (FY21: $3.3m profit) while reported EBITDA was a loss of $11.4m (FY21: $2.3m loss) as a result of significantly lower gross profit and after taking account of distribution expenses of $5.1m (FY21: $5.5m) and administrative expenses of $27.3m (FY21: $28.6m). The Group incurred $3.8m of foreign exchange losses (FY21: $1.5m) due to unfavourable exchange rates movements primarily against US$. These are included in administrative expenses. Depreciation and amortisation charges remained at similar levels for the year at $5.4m (FY21: $5.1m). Therefore, the resulting underlying operating loss was $12.6m (FY21: $1.8m) and reported operating loss was $16.8m (FY21: $7.4m).

Taxation

Despite generating losses before tax of $18.8m (FY21: $12.4m), the Group has recognised a tax charge of $3.1m (FY21: $1.2m tax credit). This is primarily driven by the write off of deferred tax assets previously recognised in the UK entities, resulting in a deferred tax charge of $2.4m (FY21: $1.4m credit).

In addition, the tax charge includes $0.6m (FY21: $0.3m) being a current year tax expense in our manufacturing subsidiaries and a technical provision for a tax uncertainty in a specific jurisdiction as required by IFRIC 23.

Discontinued operations

During FY22 the Group announced the closure of Chinatool Automotive Systems Limited, a production facility in Sunderland, UK, which was impacted by severe labour shortages and inflationary increases in energy costs and wages. Loss for the year attributable to the discontinued operations was $2.8m (FY21: profit of $0.1m).

Prior period adjustments

During the consolidation process, management identified an error with regards to the calculation of the year-end inventory, which related to a number of years. The adjustment relates to the calculation of the provision for unrealised profits resulting from intra Group sales and a corresponding absorption of overheads within inventory. The adjustment resulted in the reduction of inventory, and therefore net assets, by $8.3m at 31 December 2021.

In addition, the Group has identified an error with regards to the transfer of tooling assets from the Group balance sheet to cost of sales upon completion of tooling and sale to the customer in FY21. As at 31 December 2021, the value of property, plant and equipment has been reduced by $2.6m with a corresponding increase in costs of sales in FY22.

Capital structure and interest

After taking into account the impact of prior period adjustments, the Group saw its total asset value decrease to $79.1m (FY21: $108.5m) and net asset value decrease to $2.6m (FY21: $27.3m).

Non-current assets remained broadly flat at $19.9m (FY21: $19.3m), reflecting a $3.8m increase in right of use assets (FY21: $0.6m decrease) offset by a goodwill impairment of $1.2m in relation to curtailing our US entity activity as the operations in Mexico came on-stream and a write down of deferred tax assets by $3.2m.

As at 30 June 2022, the Group recognised on its balance sheet $3.2m (FY21: 1.7m) of deferred tax assets in relation to losses which previously arose in the UK. As at 31 December 2022, the Directors have re-assessed the recoverability of these assets. Based on management forecasts of the taxable profits specifically in relation to the UK statutory entities, we expect these deferred tax assets to be recovered against future taxable profits in the UK in FY24-FY26. The Directors have therefore concluded that sufficient taxable profits arising in the UK to utilise these deferred tax assets would be possible rather than probable and have chosen to derecognise these deferred tax assets in accordance with the technical requirements of IAS12.

During FY22 the Group saw a $29.9m decrease in its current assets. This was primarily driven by a decrease in trade debtor and other receivable balances from $42.8m in FY21 to $26.9m in FY22 and the reduction in cash balances from $13.4m in FY21 to $4.8m in FY22 as the Group switched its customers to shorter payment terms and consumed cash to meet the increased production and distribution costs requirements.

The Group continued to actively manage its working capital by deploying the IPO proceeds, with the help of major customers and by utilising available finance facilities. Net debt as at 31 December 2022 was $12.2m (FY21: $9.1m) and included amounts drawn on the Group's trade loans and invoice finance facilities with HSBC. As at the year end $16.7m of the facilities were utilised (FY21: $16.5m) against total available facilities of c.$22m.

Although higher than originally anticipated due to increased interest rates and utilisation of facilities during the year, when compared to FY21 levels, FY22 net finance costs reduced to $2.0m (FY21: $4.4m). This was due to repayment of $26.2m term loans, unsecured loans and CLBILs at the end of FY21 and early FY22 utilising the proceeds from the IPO.

Post balance sheet events: $9.6m fundraising and changes to share capital

On 27 April 2023 the Group announced a fundraise and achieved total gross proceeds of $9.6m (before transaction costs of $0.5m).

The fundraising completed following the General Meeting on 15 May 2023 and the admission of the new ordinary shares to trading on AIM on 16 May 2023.

The enlarged share capital of the Company following admission increased to 73,597,548 ordinary shares in aggregate.

The net proceeds of the fundraise of $9.1m will predominately be used to strengthen the balance sheet and to provide the Group with flexibility to take advantage of growth opportunities. Additionally, a small portion of the net proceeds will be deployed to realise further efficiency savings including through investment in injection moulding production processes and robotics.

Going concern

The Directors have assessed the Group's business activities and the factors likely to affect future performance in light of the current and anticipated trading conditions. In making their assessment the Directors have reviewed the Group latest budget, current trading, available debt facilities, proceeds from the recent fundraising and considered reasonably possible downside sensitivities in performance and mitigating actions.

The Directors are confident that, after taking into account existing cash and debt facilities available to the Group and the net proceeds of fundraising, the Group has adequate resources in place to continue in operational existence for a period of at least 12 months from the date of approval of the financial statements being to June 2024 and have therefore adopted the going concern basis of accounting in preparing the financial statements. In making their assessment the Directors have considered the key factors listed below:

Fundraising

On 27 April 2023 the Group announced that it undertook a fundraise and achieved total gross proceeds of $9.6m (before transaction costs of $0.5m). The net proceeds of the fundraise of approximately $9.1m will predominately be used to strengthen the balance sheet and to provide the Group with flexibility to take advantage of growth opportunities. Additionally, a small portion of the net proceeds will be deployed to realise further efficiency savings including through investment in injection moulding production processes and robotics.

HSBC facilities

The Group uses HSBC post-despatch trade loans and invoice financing facilities as an additional working capital lever. These facilities have been committed for 12 months since the IPO, however starting from January 2023 the facilities are provided on a rolling 3-months basis, and these are expected to be renewed going forward in light of the current trading and the post year end fundraise. As at 31 December 2022 the amounts drawn on the Group's trade loans and invoice finance facilities were $16.7m (FY21: $16.5m) against a total facility of c.$22m. The Directors believe that should the HSBC facilities be withdrawn, alternative funding options would be available to the Group.

Scenario modelling

As a result of difficult trading conditions and losses incurred during FY22, the Group has carefully considered its future liquidity position. In stress testing the forecast cash flows of the business, the Directors modelled a base case, several downside scenarios, a combined downside scenario and a set of mitigating actions to the downside scenario. The base case was modelled on a prudent basis, assuming flat revenues and using the production schedules and cost estimates. Positive cash headroom is maintained under the base case scenario.

Taking into account the trading conditions which existed during FY22 and outlook, the Directors have identified certain specific key risks to the base case assumptions and have modelled the scenarios as follows:

· Reduction in revenue risk: the entire market is down by 10% due to global economic recession, reflecting a scenario similar to 2008-2009 downturn;

· Increased cost of sales risk: reflecting the impact of inflation in cost of sales by 5% and 10% and inability to recover from customers;

· Stockholding risk: reflecting a scenario caused by disruption in customer schedules and therefore the need to hold more than normal stock levels required in the distribution centers;

· Availability of HSBC facilities: reflecting a withdrawal of HSBC facilities following a 3 months' notice and failure to replace the facilities with equivalent facilities on similar terms in October 2023.

In addition, the directors have modelled the first three risks above into a combined downside scenario and considered several controllable mitigating actions. The principal mitigating actions have been modelled as managing stock levels and payment terms with customers and suppliers. Such mitigating actions are within management's control and the business closely monitors appropriate lead indicators to implement these actions in sufficient time to achieve the required cash preservation impact.

Despite the combined impact of the above downside assumptions, the stress testing model demonstrates that the business is able to maintain a positive cash headroom.

As a result of the above considerations, the Directors consider that the Group has adequate resources in place for at least 12 months form the date of the approval of FY22 financial statements and have therefore adopted the going concern basis of accounting in preparing the financial statements.

Consolidated Statement of Profit or Loss and other Comprehensive Income

For the year ended 31 December 2022

			Restated*
	Notes	2022	2021
		$'000	$'000
Continuing operations:
Revenue	5	124,269	127,784
Cost of sales		(109,407)	(102,539)
Gross profit		14,862	25,245

Distribution expenses		(5,059)	(5,494)
Other operating income	6	650	1,431
Administrative expenses		(27,287)	(28,571)

EBITDA (before non-recurring items)		(7,129)	3,254
Depreciation	8	(4,820)	(4,632)
Amortisation	8	(602)	(440)
Non-recurring items	7	(4,283)	(5,571)
Operating loss	8	(16,834)	(7,389)

Finance income		10	8
Finance expenses		(1,997)	(4,398)
Share of post-tax losses of equity accounted associates		-	(579)

Loss before tax		(18,821)	(12,358)
Taxation (charge) / credit	9	(3,054)	1,152

Loss for the year from continuing operations		(21,875)	(11,206)

Discontinued operations
(Loss) / profit for the year from discontinued operations	10	(2,789)	133

Loss for the year attributable to equity shareholders		(24,664)	(11,073)

Other comprehensive income
Items that are / may be reclassified subsequently to profit or loss:
Foreign currency translation differences - foreign operations		(927)	280

Other comprehensive (loss) / income for the year, net of income tax		(927)	280

Total comprehensive loss for the year		(25,591)	(10,793)

Total loss per share
From continuing operations:
Basic loss per share	11	(42.9)c	(55.2)c
Diluted loss per share	11	(42.9)c	(55.2)c

From continuing and discontinued operations:
Basic loss per share	11	(48.4)c	(54.6)c
Diluted loss per share	11	(48.4)c	(54.6)c

Consolidated Balance Sheet

As at 31 December 2022

Restated*

Notes

2022

2021

2020

$'000

Assets

Non-current assets

Goodwill

1,259

2,417

Intangible assets

528

520

545

Property, plant and equipment

7,302

7,681

9,584

Right of use assets

10,769

6,942

7,549

Investments in associates

1,443

Deferred tax assets

1,745

308

19,858

19,305

21,846

Current assets

Inventories

27,342

31,504

34,058

Tax receivable

227

1,496

1,417

Trade and other receivables

26,880

42,782

44,626

Cash and cash equivalents

4,829

13,445

2,156

59,278

89,227

82,257

Current liabilities

Trade and other payables

(45,924)

(50,029)

(51,942)

Other interest-bearing loans and borrowings

(17,058)

(22,587)

(36,925)

Derivative financial liabilities

(671)

(15)

Corporate tax payable

(771)

(655)

(778)

Lease liabilities

(3,022)

(2,844)

(2,879)

(67,446)

(76,130)

(92,524)

Non-current liabilities

Other interest-bearing loans and borrowings

(22,811)

Derivative financial liabilities

(95)

Deferred tax liabilities

(118)

Lease liabilities

(8,900)

(5,144)

(5,645)

(9,113)

(5,144)

(28,456)

Net assets / (liabilities)

2,577

27,258

(16,877)

Equity attributable to equity holders of the parent

Share capital

342

132

Share premium

54,717

Translation reserve

(347)

580

300

Retained earnings

(16,323)

7,431

18,503

Merger reserve

(35,812)

Total equity / (deficit)

2,577

27,258

(16,877)

The financial statements were approved by the Director and was signed on his behalf by:

Simon Phillips

Director

Consolidated Statement of Changes in Equity

For the year ended 31 December 2022

				Restated*			Restated*
	Share capital	Share premium	Translation reserve	Retained Earnings	Merger reserve	Other reserve	Total equity
	$'000	$'000	$'000	$'000	$'000	$'000	$'000

At 1 January 2021 as previously published	132	-	300	24,668	(35,812)	-	(10,712)
Effect of restatement	-	-	-	(6,165)	-	-	(6,165)
At 1 January 2021 (restated)	132	-	300	18,503	(35,812)	-	(16,877)

Total comprehensive income for the year
Loss for the year (restated)	-	-	-	(11,073)	-	-	(11,073)
Other comprehensive income	-	-	280	-	-	-	280
Total comprehensive income for the year (restated)	-	-	280	(11,073)	-	-	(10,793)

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	44,923	-	-	-	-	45,076
Equity issue costs	-	(2,558)	-	-	-	-	(2,558)

At 31 December 2021 (restated)	342	54,717	580	7,430	(35,812)	-	27,257

Hyperinflationary monetary adjustment relating to 2021	-	-	-	911	-	-	911
Restated at 1 January 2022	342	54,717	580	8,341	(35,812)	-	28,168

Total comprehensive income for the year:
Loss for the year	-	-	-	(24,664)	-	-	(24,664)
Other comprehensive income	-	-	(927)	-	-	-	(927)
Total comprehensive income for the year	-	-	(927)	(24,664)	-	-	(25,591)


At 31 December 2022	342	54,717	(347)	(16,323)	(35,812)	-	2,577

Consolidated Statement of Cash Flows

For the year ended 31 December 2022

		Restated*
	2022	2021
	$'000	$'000
Cash flows from operating activities
Loss from continuing operations	(21,875)	(11,206)
(Loss) / profit from discontinued operations	(2,789)	133
Loss for the year after tax	(24,664)	(11,073)

Adjustments for:
Depreciation	5,345	4,932
Amortisation	602	440
Impairment of goodwill	1,158	-
Impairment of associate	-	1,627
Finance income	(10)	-
Finance expense	2,090	4,474
Net fair value losses recognised in profit or loss	750	-
Impairment of lease assets	429	-
Loss on disposal of property, plant and equipment	825	1,012
Gain on renegotiation of lease	(168)	-
Taxation	3,103	(1,108)
Hyperinflation impact on operating profit	665	-
Share of post-tax losses of equity accounted associates	-	579
	(9,875)	883

Decrease in trade and other receivables	14,786	693
Decrease/(Increase) in inventories	1,104	2,554
(Decrease)/Increase in trade and other payables	(618)	(1,652)
Tax refund / (paid)	145	(529)
Net cash generated from operating activities	5,542	1,949

Cash flows from investing activities
Purchase of intangible assets	(633)	(421)
Purchase of property, plant and equipment	(2,864)	(1,670)
Investments in associates	-	(201)
Interest received	10	-
Net cash used in investing activities	(3,487)	(2,292)

Cash flows from financing activities
(Repayment) / drawdown of loan facilities	(2,500)	2,500
Issue of convertible loan notes	-	5,600
Share issue (net of transaction costs)	-	42,518
Repayment of lease liabilities	(3,607)	(3,565)
Interest paid	(2,090)	(2,922)
Repayment of term loan	-	(15,599)
Repayment of CLBILs	-	(8,143)
Drawdown / (repayment) of trade loans	4,131	(5,698)
Repayment of invoice finance	(3,880)	(1,537)
Net cash (used in) / generated from financing activities	(7,946)	13,154

Net (decrease)/increase in cash and cash equivalents	(5,891)	12,811
Cash and cash equivalents at beginning of year	9,807	(2,677)
Effect of exchange rate fluctuations on cash held	555	(327)
Cash and cash equivalents at end of year.	4,471	9,807

Notes to the consolidated financial statements

1. Accounting Policies

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 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 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 and the financial statements of the foreign operation in Turkey which is subject to hyperinflationary accounting.

Going Concern

The Directors have assessed the Group's business activities and the factors likely to affect future performance in light of the current and anticipated trading conditions. In making their assessment the Directors have reviewed the Group's latest budget, current trading, available debt facilities, proceeds from the recent fundraising and considered reasonably possible downside sensitivities in performance and mitigating actions.

The Directors are confident that, after taking into account existing cash and debt facilities available to the Group and the net proceeds of fundraising, the Group has adequate resources in place to continue in operational existence for a period of at least 12 months from the date of approval of the financial statements being to June 2024. In making their assessment the Directors have considered the key factors listed below:

Fundraising

HSBC facilities

The Group uses HSBC post-dispatch trade loans and invoice financing facilities as an additional working capital lever. These facilities have been committed for 12 months since the IPO, however starting from January 2023 the facilities are provided on a rolling 3-months basis, and these are expected to be renewed going forward in light of the current trading and the post year end fundraise.

As at 31 December 2022 the amounts drawn on the Group's trade loans and invoice finance facilities were $16.7m (FY21: $16.5m) against a total facility of c.$22m. The Directors believe that should the HSBC facilities be withdrawn, alternative funding options would be available to the Group.

Scenario modelling

· Reduction in revenue risk: the entire market is down by 10% due to global economic recession, reflecting a scenario similar to 2008-2009 downturn;

· Increased cost of sales risk: reflecting the impact of inflation in cost of sales by 5% and 10% and inability to recover from customers;

· Stockholding risk: reflecting a scenario caused by disruption in customer schedules and therefore the need to hold more than normal stock levels required in the distribution centers;

· Availability of HSBC facilities: reflecting a withdrawal of HSBC facilities following a 3 months' notice and failure to replace the facilities with equivalent facilities on similar terms.

Despite the combined impact of the above downside assumptions, the stress testing model demonstrates that the business is able to maintain a positive cash headroom.

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.

Discontinued operations

When the Group has sold or terminated a component that represents a separate major line of business or geographical area of operations during the year, or has classified the component as held for sale, its results are presented separately, net of any profit or loss on disposal, in the statement of profit or loss and other comprehensive income, with the comparative amounts restated.

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.

Effective from 1 January 2022, the Group has applied IAS 29, Financial Reporting in Hyperinflationary Economies, for its subsidiary in Turkey, whose functional currency has experienced a cumulative inflation rate of more than 100% over the past three years. Assets, liabilities, the financial position and results of foreign operations in hyperinflationary economies are translated to US Dollar at the exchange rate prevailing at the reporting date. The exchange differences are recognised directly in other comprehensive income and accumulated in the translation reserve in equity. Such translation differences are reclassified to profit or loss only on disposal or partial disposal of the overseas operation. Prior to translating the financial statements of foreign operations, the non-monetary assets and liabilities and comprehensive income (both previously stated at historic cost) are restated to account for changes in the general purchasing power of the local currencies based on the consumer price index published by the Turkish Statistical Institute. The consumer price index for the year ended 31 December 2022 increased by 47.8%. Monetary items are not restated because they are already expressed in terms of the monetary unit current at the end of the reporting period.

Comparative amounts presented in the consolidated financial statements were not restated. Hyperinflationary accounting needs to be applied as if Turkey has always been a hyperinflationary economy therefore as per CT Automotive Group's policy choice, the differences between equity at 31 December 2021 as reported and the equity after restatement of the non-monetary items to the measuring unit current at 31 December 2022 were recognised in retained earnings. The subsequent gains or losses resulting from the restatement of non-monetary assets and liabilities are recorded in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.

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, or other evidence of the commencement of serial production. Monies received from customers in advance of completing the performance obligations are recognised as contract 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 or loss in the same period as the related expenditure and recognised gross as other income.

During the year, the government grant income relates to government support received in China relating to utilities and training subsidies, promotion of foreign trade and COVID-19 recovery.

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.

Non-recurring items

The Group recognises items within the statement of profit or loss 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 the statement of profit or loss. Note 7 provides further details on the nature of the non-recurring items.

Taxation

(a) Current taxation

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

(b) 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.

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.

Intangible assets

Research and development

Expenditure on research activities is recognised in profit or loss 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 profit or loss 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 profit or loss 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 profit or loss 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

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 profit or loss 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.

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 inventories 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 or 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.

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. See Note 19 for full details of classes of interest-bearing borrowings.

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.

Convertible loan notes

A portion of loans from directors in the form of loan notes and other loans as shown within Note 19 have been reclassified or converted from liability into equity during the prior 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.

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 profit or loss 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.

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.

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

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.

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 profit or loss 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

Basic earnings per share ("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. Share options are potentially dilutive, but the Group's loss means any potentially dilutive instruments are anti-dilutive.

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 4 for the accounting policy and related disclosures for segment reporting.

Share-based payments

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight line basis over the vesting period, based on the Group's estimate of the number of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to reserves.

New standards, interpretations and amendments

There have been a number of amendments to existing standards which are effective from 1 January 2022 but they do not have material effect on the Group financial statements.

At the date of approval of the consolidated financial statements, the IASB and IFRS Interpretations Committee have issued standards, interpretations and amendments which are applicable to the Group. For the next reporting period, applicable International Financial Reporting Standards will be those endorsed by the UK Endorsement Board (UKEB).

Whilst these standards and interpretations are not effective for, and have not been applied in the preparation of, these consolidated financial statements, the following could have a material impact on the Group's financial statements going forward:

New/Revised International Financial Reporting Standards		Effective Date: Annual periods beginning on or after:	UKEB adopted
IAS 12	Amendment to IAS 12: Deferred Tax related to Assets and Liabilities arising from a Single Transaction	1 January 2023	Yes
IAS 1	Amendments to IAS 1: Classification of Liabilities as Current or Non-current	1 January 2024	No
IFRS 16	Amendment to IFRS 16: Lease Liability in a Sale and Leaseback	1 January 2024	No

Management anticipates that all relevant pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement.

There are no other standards and interpretations in issue but not yet adopted that the directors anticipate will have a material effect on the reported income or net assets of the Group.

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

As at 30 June 2022, the Directors recognised $3.2m of deferred tax assets in relation to deductible temporary differences arising in the UK. As at 31 December 2022, the Directors have re-assessed the recoverability of these assets. Based on management forecasts of the taxable profits in the UK entities, we expect these deferred tax assets to be recovered against future taxable profits in the UK as follows: $67,000 to be recovered in 2023, $935,000 to be recovered in 2024 and $2,198,000 to be recovered in 2025. As the majority of the deferred tax assets are expected to be recovered in 2024 and 2025, and given the losses of the Group in 2022 were greater than originally forecasted, the Directors concluded that sufficient taxable profits arising in the UK to utilise this deferred tax asset would be possible rather than probable. As a result, the Directors have chosen to derecognise deferred tax assets of $3.2m in accordance with the requirements of IAS12.

Other key sources of estimation uncertainty:

Inventories provision

Inventory is carried at the lower of cost and net realisable value. Provisions are made to write down obsolete inventories to net realisable value. The provision is $1,601,000 at 31 December 2022 (2021: $1,268,000). A difference of 10% in the provision as a percentage of gross inventory would give rise to a difference of +/- $160,100 in gross margin.

Goodwill

The carrying amount of goodwill at 31 December 2022 was $1,259,000 (2021: $2,417,000 which solely relates to Chinatool UK Limited. The goodwill relating to Chinatool UK Limited was subject to annual impairment testing, and no need for impairment was identified during the year. Details of the impairment testing performed and sensitivity analysis performed is set out in Note 12.

During the year ended 31 December 2022, the Group has set up CT Automotive Systems DE Mexico SA DE CV, a new production facility in Mexico aimed at supplying automotive customers in North America. As a result, the future trading activity via the US subsidiary IMS/Chinatool JV, LLC is going to be significantly curtailed. Therefore, goodwill of $1,158,000 relating to IMS/Chinatool JV, LLC was fully impaired during the year ended 31 December 2022.

Hyperinflation

The Group exercises significant judgement in determining the onset of hyperinflation in countries in which it operates and whether the functional currency of its subsidiaries or associates is the currency of a hyperinflationary economy.

Various characteristics of the economic environment of each country are taken into account. These characteristics include, but are not limited to, whether:

· the general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency;

· prices are quoted in a relatively stable foreign currency;

· sales or purchase prices take expected losses of purchasing power during a short credit period into account;

· interest rates, wages and prices are linked to a price index; and

· the cumulative inflation rate over three years is approaching, or exceeds, 100%.

Management exercises judgement as to when a restatement of the financial statements of a Group entity becomes necessary. Following management's assessment, the Group's subsidiary in Turkey has been accounted for as an entity operating in a hyperinflationary economy. The results, cash flows and financial positions of Chinatool Otomotiv Sanayi Tic. Limited Sti. have been expressed in terms of the measuring units current at the reporting date.

The movement in the general price index in the current period was 47.8% (2021: 11.1%).

3. Restatement of prior year

The Group has identified an error with regards to the calculation of year-end inventory on consolidation which relates to a number of years. The error relates to the calculation of provision for unrealised profits resulting from intra group sales.

The earliest period being presented and restated in these consolidated financial statements is the period ended 31 December 2020. As at 31 December 2020, the value of finished goods inventories has been reduced by $6,165,000, with a reduction of retained earnings at this date of $6,165,000.

As at 31 December 2021, the value of finished goods has been reduced by $8,275,000. Cost of sales for year ended 31 December 2021 has increased by $2,110,000.

With regard to tooling projects completed in 2021, an additional $2,626,000 of cost of sales should have been recognised.

As at 31 December 2021, the value of Property, plant and equipment has been reduced by $2,626,000 with a corresponding increase in costs of sales.

Loss per share for the year ended 31 December 2021 has increased to 55 cents per share.

4. 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.

2022	Tooling	Production	Head Office	Total
	$'000	$'000	$'000	$'000
Revenue
Total revenue from customers	6,980	117,289	-	124,269
Depreciation and amortisation	-	(5,422)	-	(5,422)
Finance expense	-	(1,939)	(58)	(1,997)

Segment Profit/(Loss)	1,601	866	(21,288)	(18,821)
Share of post-tax loss of equity accounted associates				-

Group Loss before tax and discontinued operations				(18,821)

2022	Tooling	Production	Head Office	Total
	$'000	$'000	$'000	$'000

Additions to non-current assets	-	3,549	-	3,549

Reporting segment assets	1,517	77,071	548	79,136

Reportable segment liabilities	(4,994)	(70,051)	(1,514)	(76,559)

2021 (restated)	Tooling	Production	Head Office	Total
	$'000	$'000	$'000	$'000
Revenue
Total revenue from customers	22,175	105,609	-	127,784
Depreciation and amortisation	-	(5,072)	-	(5,072)
Finance expense	-	(2,034)	(2,364)	(4,398)

Segment Profit/(Loss)	5,260	(7,550)	(9,489)	(11,779)
Share of post-tax loss of equity accounted associates				(579)

Group Loss before tax and discontinued operations				(12,358)

2021 (restated)	Tooling	Production	Head Office	Total
	$'000	$'000	$'000	$'000

Additions to non-current assets	-	1,879	-	1,879

Reporting segment assets	6,802	89,190	12,540	108,532


Reportable segment liabilities	(3,628)	(74,119)	(3,527)	(81,274)

	External revenue by location of customers		Non-current assets by location of assets
	2022	2021	2022	2021
	$'000	$'000	$'000	$'000

US	27,640	29,489	253	124
UK	16,603	15,685	2,395	4,213
Czech Republic	21,399	35,356	651	440
China	18,415	18,289	12,578	13,686
Turkey	12,806	9,690	1,450	555
Mexico	4,766	2,198	2,390	-
Spain	4,692	6,985	-	-
Brazil	3,567	3,074	-	-
Japan	3,162	1,521	-	-
Thailand	2,378	2,187	-	-
Slovakia	1,051	597	-	-
Italy	986	1,041	-	-
South Africa	960	869	-	-
Germany	727	731	-	-
Other	5,117	72	141	287

	124,269	127,784	19,858	19,305

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 2022 the Group had 3 major customers representing $50.4m (39%), $23.9m (18%) and $20.1m (16%) of Group revenue.

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

5. Revenue

	2022	2021
	$'000	$'000
Disaggregation of revenue
An analysis of revenue by type is given below:
Sale of parts	117,289	105,609
Sale of tooling (including design and development)	6,980	22,175

	124,269	127,784

An analysis of revenue by geographical market is given within Note 4.

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 assets	Contract liabilities
	$'000	$'000

Balance as at 1 January 2022	-	2,925
Revenue recognised that was included in contract liabilities at the beginning of the year	-	(1,016)
Increases due to cash received, excluding amounts recognised as revenue during the year	-	2,248
Movements due to foreign exchange	-	(39)

Balance as at 31 December 2022	-	4,118

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 in profit or loss 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.

	2023	2024	Total
	$'000	$'000	$'000

Tooling projects	10,047	-	10,047

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.

6. Other operating income

	2022	2021
	$'000	$'000

Government grants	546	1,421
Other income	104	10

	650	1,431

The government grant income relates to government support received in China relating to utilities and training subsidies, promotion of foreign trade and COVID-19 recovery.

7. Non-recurring items

	2022	2021
	$'000	$'000

AIM listing fees	31	1,810
Turkish foreign exchange losses	-	1,113
Impairment of associate	-	1,627
Impairment of goodwill	1,158	-
Impact of implementing IAS29	665	-
China housing fund contribution	453	-
Start-up costs in Mexico	1,738	-
Irrecoverable excess freight costs	238	1,021

	4,283	5,571

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 $31,000 (2021: $1,810,000) have been recognised within administrative expenses in relation to this.

In December 2021, the Turkish Lira was significantly depreciated against the USD following unprecedented Government announcements in Turkey. This resulted in the Group incurring one-off unrealised foreign exchange losses of $NIL (2021: $1,113,000) 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 $NIL (2021: $1,627,000).

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 $238,000 (2021: $1,021,000) recognised within distribution expenses.

In respect of the year ended 31 December 2022, the rate of inflation in Turkey reached a level whereby it is considered hyperinflation and as a result the Group has been required to restate the results of Chinatool Otomotiv San. Tic. Ltd Sti in accordance with IAS29. The impact of this restatement is not part of the underlying performance of the business and is therefore considered non-trading.

During the year ended 31 December 2022, the Group's Chinese entities received a backdated demand for Housing Fund contributions (a form of social insurance in China) relating to the period 2010 to 2019. Since 2020 these contributions have been correctly calculated and paid so this backdate charge will not recur.

During the year ended 31 December 2022, the Group opened a new production facility in Mexico and incurred $1,738,000 of pre-opening and start-up costs which the Directors consider to be non-recurring in nature.

Goodwill of $1,158,000 relating to IMS/Chinatool JV, LLC was fully impaired during the year ended 31 December 2022 as the setting up of CT Automotive Systems DE Mexico SA DE CV is expected to curtail future trading through IMS/Chinatool JV, LLC as US sales through the Mexican subsidiary will be subject to lower tariffs. Management expect to move manufacturing and distribution of existing North American projects to Mexico, and are tendering for new North American projects on the basis of manufacturing and distribution from Mexico. Moving manufacturing for these projects from China to Mexico will reduce the exposure to Section 301 tariffs on imports into the US from China and will improve the Group's competitive pricing for North American projects.

8. Expenses and auditors' remuneration

		Restated
	2022	2021
	$'000	$'000
Operating loss is stated after charging:
Amortisation:
- Continuing operations	602	440
Depreciation:
- Continuing operations	1,608	1,697
- Discontinued operations	165	167
Foreign exchange	3,804	1,576
Depreciation of right-of-use assets:
- Continuing operations	3,212	2,935
- Discontinued operations	360	133
Cost of inventories	86,148	75,076

	2022	2021
	$'000	$'000
Auditors' remuneration
Audit of Group financial statements	164	158
Audit of financial statements of subsidiaries of the Company	309	241

9. Taxation

	2022	2021
Recognised in profit or loss	$'000	$'000

Current tax expense
Current year	621	135
Adjustments for prior periods	23	150

Current tax expense	644	285

Deferred tax credit
Origination and reversal of temporary differences	2,438	(993)
Adjustments for prior periods	(88)	-
Effect of changes in tax rates	60	(444)

Deferred tax charge / (credit)	2,410	(1,437)

Total tax charge / (credit)	3,054	(1,152)

	2022	2021
	$'000	$'000
Reconciliation of effective tax rate
Loss for the year	(21,875)	(11,206)
Total tax charge	3,054	(1,152)

Loss excluding taxation	(18,821)	(12,358)

Tax using the UK corporation tax rate of 19% (2021 - 19%)	(3,576)	(2,348)
Effect of tax rates in foreign jurisdictions	1,810	258
Non-taxable income	13	22
Non-deductible expenses	209	1,255
Adjustments for prior periods	1,328	150
Tax rate changes	(590)	(454)
Unrecognised deferred tax assets	3,845	-
Other differences	15	(35)

Total tax charge / (credit)	3,054	(1,152)

The UK Government announced in the March 2021 Budget that the main rate corporation tax in the UK will increase 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 $778,000 (2021: $618,000), which is a result of uncertainty in the tax legislation in a certain jurisdiction.

10. Discontinued operations

On 30 September 2022, the Group made a decision to discontinue Chinatool Automotive Systems Limited.

The results of the discontinued operations, which have been included in the profit for the year, were as follows:

	2022	2021
	$'000	$'000

Revenue	3,958	5,155
Cost of sales	(5,240)	(6,108)
Other income	21	37
Distribution expenses	(110)	(9)
Administrative expenses	(1,276)	1,178
Net finance income / expense	(93)	(76)
(Loss) / profit before tax	(2,740)	177
Attributable tax expense	(49)	(44)

Net (loss) / profit attributable to discontinued operations	(2,789)	133

During the year, Chinatool Automotive Systems Limited incurred a cash outflow of $1,536,000 (2021: cash outflow of $1,580,000) to the Group's net operating cash flows, paid $nil (2021: $543,000) in respect of investing activities and paid $372,000 (2021: $324,000) in respect of financing activities.

Assets and liabilities of Chinatool Automotive Systems have not been classified as held for sale at 31 December 2022 due to their immaterial nature and because all short term assets and liabilities are expected to be either settled or transferred to continuing Group operations. These are included in the respective Group assets and liabilities and are as follows:

	2022
	$'000

Assets
Property, plant and equipment	68
Right of use assets	98
Inventories	219
Trade and other receivables	171
Cash	34
Total assets	590

Liabilities
Trade and other payables	(810)
Overdraft	(153)
Lease liability	(494)
Current tax liability	(46)
Deferred tax liability	(37)
Total liabilities	(1,540)

Net liabilities	(950)

11. Loss per share

From continuing and discontinued operations:	2022	2021
	Number	Number

Weighted average number of equity shares	50,933,289	20,286,757

	$	$

Earnings, being loss after tax	(24,664,000)	(11,073,000)

	Cents	Cents

Loss per share	(48.4)	(54.6)

In 2022 there were share options outstanding that could have a dilutive effect on earnings per share in the future but are not taken into account in the current period because the Group has reported a loss. In 2021 there were no outstanding instruments that can result in diluted earnings per share to be different from basic earnings per share.

From continuing operations:	2022	2021
	Number	Number

Weighted average number of equity shares	50,933,289	20,286,757

	$	$

Earnings, being loss after tax before discontinued operations	(21,875,000)	(11,206,000)

	Cents	Cents

Loss per share	(42.9)	(55.2)

From discontinued operations:

2022

2021

Cents

Basic and diluted (loss) / earnings per share

(5.5)

0.7

12. Goodwill

	$'000
Cost
Balance at 1 January 2021 & 31 December 2021	2,417
Additions	-
Balance at 31 December 2022	2,417

Impairment
Balance at 1 January 2021 & 31 December 2021	-
Impairment charge	1,158
Balance at 31 December 2022	1,158

Net book value
31 December 2022	1,259
31 December 2021	2,417

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
	2022	2021
	$'000	$'000

Chinatool UK Limited	1,259	1,259
IMS / Chinatool JV, LLC	-	1,158

The recoverable amount of Chinatool UK Limited has been determined based on a value-in-use calculation. This calculation uses forecasts approved by the Directors which covers a four year period. These are detailed forecasts based on customer schedules and expected project lifetimes. The detailed forecasts have been reviewed for a four 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 cashflows of Chinatool UK Limited have been discounted at 14%. The Directors concluded that this discount rate is 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 stated assumptions, there is significant headroom between the recoverable amount of goodwill relating to Chinatool UK Limited. Applying sensitivity analysis to these calculations, a 2% increase to the discount rate applied reduces the headroom, but still allows for of over $10m of headroom.

13. Intangible assets

	Software
	$'000
Cost
Balance at 1 January 2021	1,706
Additions	421
Effect of movements in foreign exchange	(67)
Balance at 31 December 2021	2,060

Additions	633
Effect of movements in foreign exchange	(244)
Balance at 31 December 2022	2,449

Amortisation and impairment
Balance at 1 January 2021	1,161
Amortisation for the year	440
Effect of movements in foreign exchange	(61)
Balance at 31 December 2021	1,540

Amortisation for the year	602
Effect of movements in foreign exchange	(221)
Balance at 31 December 2022	1,921

Net book value
At 31 December 2022	528
At 31 December 2021	520

Amortisation charge

The amortisation charge is recognised in the following line items in the statement of profit or loss:

	2022	2021
	$'000	$'000

Administrative expenses	602	440

14. Property, plant and equipment

	Plant and equipment	Fixtures and fittings	Motor vehicles	Total
	$'000	$'000	$'000	$'000
Cost
Balance at
1 January 2021	16,687	3,323	38	20,048
Additions	182	1,276	-	1,458
Disposals	(1,049)	(554)	-	(1,603)
Effect of movements in foreign exchange	(554)	(166)	(4)	(724)
Balance at 31 December 2021	15,266	3,879	34	19,179

Effect of hyperinflation	406	179		585
Additions	1,811	1,053	-	2,864
Disposals	(2,654)	(464)	(11)	(3,129)
Effect of movements in foreign exchange	(1,484)	(372)	-	(1,856)
Balance at 31 December 2022	13,345	4,275	23	17,643

Depreciation
Balance at 1 January 2021	8,571	1,855	38	10,464
Depreciation charge for the year	574	1,290	-	1,864
Disposals	(255)	(336)	-	(591)
Effect of movements in foreign exchange	(150)	(85)	(4)	(239)
Balance at 31 December 2021	8,740	2,724	34	11,498

Effect of hyperinflation	146	115	-	261
Depreciation charge for the year	367	1,406	-	1,773
Disposals	(1,826)	(429)	(11)	(2,266)
Effect of movements in foreign exchange	(719)	(206)	-	(925)
Balance at 31 December 2022	6,708	3,610	23	10,341

Net book value
At 31 December 2022	6,637	665	-	7,302
At 31 December 2021	6,526	1,155	-	7,681

15. Leases

The treatment of leases within the scope of IFRS 16 is disclosed in the accounting policies (Note 1).

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 buildings	Plant and machinery	Total
	$'000	$'000	$'000

At 1 January 2021	7,306	243	7,549
Additions	1,538	911	2,449
Depreciation	(2,521)	(547)	(3,068)
Foreign exchange movement	4	8	12
At 31 December 2021	6,327	615	6,942

Effect of hyperinflation	35	-	35
Additions	8,089	435	8,524
Impairment	(429)	-	(429)
Depreciation	(2,866)	(706)	(3,572)
Foreign exchange movement	(683)	(48)	(731)
At 31 December 2022	10,473	296	10,769

The range of incremental borrowing rates used during the year for right of use asset additions is 3.25%-18.4% (2021: 3.25%-8.5%).

Lease liabilities	Land and buildings	Plant and machinery	Total
	$'000	$'000	$'000

At 1 January 2021	7,916	608	8,524
Additions	1,547	911	2,458
Interest expense	541	46	587
Foreign exchange movement	(15)	8	(7)
Repayments	(2,993)	(581)	(3,574)
At 31 December 2021	6,996	992	7,988

Effect of hyperinflation	38	-	38
Additions	7,918	437	8,355
Interest expense	526	44	570
Foreign exchange movement	(760)	(55)	(815)
Repayments	(3,069)	(1,107)	(4,176)
Reduction in lease liabilities	(38)	-	(38)
At 31 December 2022	11,611	311	11,922

The maturity profile of the lease liabilities is as follows:	2022	2021
	$'000	$'000

Under 1 year	3,022	2,844
1-2 years	2,373	1,637
2-5 years	5,327	2,594
More than 5 years	1,200	913

	11,922	7,988

16. Inventories

		Restated
	2022	2021
	$'000	$'000

Raw materials and consumables	6,605	8,627
Work in progress	7,735	6,654
Finished goods	13,002	16,223

	27,342	31,504

Inventories recognised as an expense during the year is disclosed in Note 8.

The provision for inventories recognised during the year ended 31 December 2022 was $333,000 (2021: $229,000).

Trade loans are secured against inventories of $9,583,000 (2021: 5,452,000).

17. Trade and other receivables

	2022	2021
	$'000	$'000

Trade receivables	16,167	26,444
VAT receivable	633	-
Other receivables	1,832	2,633
	18,632	29,077

Prepayments and accrued income	8,248	13,705

Total trade and other receivables	26,880	42,782

Included within trade and other receivables is $Nil (2021 - $Nil) expected to be recovered in more than 12 months.

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 (2021 - $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 2022 trade receivables of $5,897,000 (2021 - $4,007,000) were past due but not impaired. They relate to customers with no default history. The ageing analysis of these receivables is as follows:

	2022	2021
	$'000	$'000

Not past due	10,270	22,174
Past due 1-90 days	4,260	3,498
Past due more than 90 days	1,637	772

	16,167	26,444

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

Invoice finance balances are secured against trade receivables of $7,117,000 (2021: 10,997,000).

18. Trade and other payables

	2022	2021
	$'000	$'000
Current
Trade payables	21,793	24,938
Non-trade payables and accrued expenses	10,266	11,419
Other taxation and social security	2,449	7,388
Contract liabilities	4,118	2,925
Other payables	7,298	3,359

Total	45,924	50,029

Included within trade and other payables is $Nil (2021 - $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 or 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.

Previously 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 before 31 December 2021.

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.

19. 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.

	2022	2021
	$'000	$'000
Current liabilities
Unsecured bank overdraft	358	3,638
Current portion of secured bank loans	9,583	5,452
Invoice finance	7,117	10,997
Unsecured loans	-	2,500

	17,058	22,587

Total	17,058	22,587

Invoice finance balances are secured against trade receivables. Trade loans are secured against inventories.

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

	2022	2021
	$'000	$'000

USD	8,982	12,928
GBP	358	3,147
EUR	7,718	6,433
RMB	-	79

	17,058	22,587

	Currency	Nominal interest rate	Contracted maturity	Carrying amount 31 December 2022 $'000	Carrying amount 31 December 2021 $'000

Unsecured loans	USD	10%	2022	-	2,500
Unsecured bank overdraft	GBP	2.5%	2022	358	3,638
Trade loans	EUR/USD	4.04%	2022	9,583	5,452
Invoice finance	EUR/USD	3.75%	2022	7,117	10,997

				17,058	22,587

Terms and debt repayments

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 and the loans were repaid during the current period.

The Term Loan, which existed in the prior year, 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, which existed in the prior year, was repayable over equal instalments to 2023. Interest was paid monthly in full. The CLBILs were fully repaid on 24 December 2021.

The loan notes, which existed in the prior year, 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.

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.

Trade loans are on a 70 days repayment basis.

The unsecured bank overdraft is repayable on demand and has no set repayment schedules.

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

	Loan notes - liabilities $'000	Loan notes - equity $'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.

2022	Opening balance 1 January	Cash received / (paid) on principal	Other movements (incl FX)	New leases	Interest accrued	Interest paid	Closing balance 31 December
	$'000	$'000	$'000	$'000	$'000	$'000	$'000

Trade loans	5,452	4,131	-	-	377	(377)	9,583
Unsecured loans	2,500	(2,500)	-	-	30	(30)	-
Invoice finance	10,997	(3,880)	-	-	688	(688)	7,117
Lease liabilities	7,988	(3,606)	(815)	8,355	570	(570)	11,922

Balance at 31 December 2022	26,937	(5,855)	(815)	8,355	1,665	(1,665)	28,622

2021	Opening balance 1 January	Cash movements	Foreign exchange movements	Other movements	Closing balance 31 December
	$'000	$'000	$'000	$'000	$'000

Term loan	15,603	(16,042)	(4)	443	-
CLBILs	8,190	(8,351)	(47)	208	-
Trade loans	11,150	(6,092)	-	394	5,452
Unsecured loans	-	2,250	-	250	2,500
Loan notes	7,426	(8,010)	56	528	-
Invoice finance	12,533	(1,537)	-	1	10,997
Lease liabilities	8,524	(1,116)	(7)	587	7,988

Balance at 31 December 2021	63,426	(38,898)	(2)	2,411	26,937

20. Post balance sheet events

On 27 April 2023 the Group announced that it undertook a fundraise and achieved total gross proceeds of $9.6m (before transaction costs of $0.5m).

The fundraising was completed through a combination of subscription and placement of 22,664,259 new ordinary shares at an issue price of 34 pence per share. The issue price represented a discount of approximately 31% to the closing middle market price of 49 pence per ordinary share on 26 April 2023, being the latest practicable date prior to the fundraising announcement.

The new ordinary shares represented approximately 44% of the existing issued share capital of CT Automotive Group plc.

The fundraising completed following the General Meeting on 15 May 2023 and the admission of the new ordinary shares to trading on AIM on 16 May 2023.

The enlarged share capital of the Company following admission increased to 73,597,548 ordinary shares in aggregate.

The net proceeds of the fundraise of approximately $9.1m will predominately be used to strengthen the balance sheet and to provide the Group with flexibility to take advantage of growth opportunities. Additionally, a small portion of the net proceeds will be deployed to realise further efficiency savings including through investment in injection moulding production processes and robotics.

21. 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. 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.

Detail of each of the non-recurring items is disclosed in Note 7.

Adjusted EBITDA and adjusted EBITDA margin	2022	2021
	$'000	$'000

Adjusted EBITDA from continuing operations	(7,129)	3,254
Non-recurring items
- AIM listing fees	(31)	(1,810)
- Turkish foreign exchange losses	-	(1,113)
- Impairment of associate	-	(1,627)
- Impairment of goodwill	(1,158)	-
- Impact of implementing IAS 29	(665)	-
- Backdated Housing fund contribution	(453)	-
- Start-up costs in Mexico	(1,738)	-
- Irrecoverable excess freight costs	(238)	(1,021)

EBITDA	(11,412)	(2,317)
Adjusted EBITDA margin	(6.2%)	6.6%

Adjusted operating (loss) / profit and adjusted operating profit margin from continuing operations	2022	2021
	$'000	$'000

Adjusted operating profit	(12,551)	(1,818)
Non-recurring items
- AIM listing fees	(31)	(1,810)
- Turkish foreign exchange losses	-	(1,113)
- Impairment of associate	-	(1,627)
- Impairment of goodwill	(1,158)	-
- Impact of implementing IAS 29	(665)	-
- Backdated Housing fund contribution	(453)	-
- Start-up costs in Mexico	(1,738)	-
- Irrecoverable excess freight costs	(238)	(1,021)

Operating loss	(16,834)	(7,389)
Adjusted operating profit margin	(10.1%)	2.4%

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Results for the year ended 31 December 2022