REG - CT Automotive Group - Results for the year ended 31 December 2021
19/05/2022 07:00
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RNS Number : 0275M CT Automotive Group PLC 19 May 2022
19 May 2022
CT AUTOMOTIVE GROUP PLC
("CT Automotive", "CT" or the "Group")
Results for the year ended 31 December 2021
Positive trading into 2022 - well positioned as global vehicle production
recovers
CT Automotive, a leading designer, developer and supplier of interior
components to the global automotive industry, today announces audited results
for the year ended 31 December 2021.
Scott McKenzie, Chief Executive Officer of CT Automotive, commented:
"2021 was a landmark year for CT Automotive as we successfully completed our
AIM IPO and achieved a positive trading performance.
We have made good progress in 2022 to date, with further new business wins and
our new manufacturing plant in Mexico on track to commence operations in early
H2. While the global automotive supply chains continue to be disrupted, demand
remains strong, and we are seeing customer schedules and visibility improving.
The Board remains confident of meeting its expectations for the full year.
Looking ahead, we are well placed to build on our strong track record of
growth, client relationships and manufacturing excellence as global
semiconductor shortages ease and vehicle production volumes recover."
Financial highlights
2021 2020 Change
$m $m
Revenue 132.9 109.9 20.9%
Gross profit 29.0 21.3 36.2%
Adjusted EBITDA* 8.8 1.1 700%
Adjusted Profit/(loss) before taxation* (1.8) (7.9) 77.2%
Earnings per share (31.2)p (44.0)p 29.1%
Net debt 9.5 57.9 83.6%
* Adjusted for non-recurring items
· Strong trading recovery from COVID-19 impacted FY2020
o Record revenues of $132.9m
o Recovery momentum in H1 partially offset by H2 2021 slowdown in automotive
volumes as a result of global shortage of semiconductors
· Balance sheet significantly strengthened with gross proceeds of $45m
raised at IPO
· Outperformed the global automotive market, driven by Group's above
average exposure to Electric Vehicles (EVs)
Operational / post period end highlights
· Successful AIM IPO on 23 December 2021, enabling investment in the
next phase of growth
· Further optimisation of operations in Production division to manage
unpredictable customer production schedules
· Encouraging performance in Tooling division, reflecting increased
utilisation of in-house capabilities
· Continued strong growth in Electric Vehicles (EVs): 17% of revenue
derived from EV platforms, compared to EVs overall market share by volume of
c4%
· Appointment of Global Supply Chain and Commercial Director in March
2022 to support growth
· Investment in new manufacturing facilities in Mexico - on track to
begin production in early H2
Current trading and outlook
· Global vehicle production volumes forecast to recover during 2022 and
automotive supply chain issues to resolve fully in 2023
· Forecast recovery in global automotive volumes reflected across
overall CT customer base:
o Semi-conductor shortage remains, but visibility is improving which is
allowing schedules to increase in reliability
o Customer schedules generally show an upward trend on volumes over the next
3 months
o Most customers have requested maximum capacity calculations, indicating
they are preparing for peak volumes to return
· The Group has long-term agreements with its customers and is well
positioned as volumes recover:
o c.97 per cent. of anticipated revenue in 2022 and c.91 per cent. of
anticipated revenue in 2023 expected to come from projects which are currently
in production, or on which the Group has been chosen as the nominated supplier
· Board remains confident of meeting its FY 2022 expectations
For further information, please contact:
CT Automotive
via. MHP Communications
Simon Phillips, Executive Chairman
Scott McKenzie, Chief Executive Officer
David Wilkinson, Chief Financial Officer
MHP Communications (Financial
PR) Tel: +44 (0)20
3100 8540
Tim
Rowntree
CTAutomotive@mhpc.com (mailto:CTAutomotive@mhpc.com)
Charlie Barker
Charlie Protheroe
Liberum (Nominated Adviser and
Broker)
Tel: +44 (0)20 3100 2000
Richard Lindley
Benjamin Cryer
Notes to editors
CT Automotive is engaged in the design, development and manufacture of bespoke
automotive interior finishes (for example dashboard panels and fascia
finishes) and kinematic assemblies (for example air registers, arm rests,
deployable cup holders and storage systems), as well as their associated
tooling, for the world's leading automotive original equipment suppliers
("OEMs") and global Tier One manufacturers.
The Group is headquartered in the UK with a low-cost manufacturing footprint.
Key production facilities are located in Shenzhen and Ganzhou, China
complemented by additional manufacturing facilities in Turkey, the Czech
Republic and the UK.
CT Automotive's operating model enables it to pursue a price leadership
strategy, supplying high quality parts to customers at a lower overall landed
cost than competitors. This has helped the Group to build a high-quality
roster of OEM end customers, both directly and via Tier One suppliers
including Faurecia and Marelli. End customers include volume manufacturers,
such as Nissan, and luxury car brands such as Bentley and Lamborghini. In
addition, the Group supplies electric car manufacturers, including Lucid. It
has also recently started working with e.Go Mobile, a German manufacturer
which plans to launch a series of small electric vehicles for the budget end
of the market.
The Group currently supplies component part types to over 47 different models
for 19 OEMs. Since its formation, the Group has been the only significant new
entrant into the market, which is characterised by high barriers to entry.
Chair's statement
Introduction
I am delighted to present CT Automotive's first set of results as a listed
company. This has been one of the most exciting and challenging years at CT,
concluding with the successful listing in late December. I am proud of what we
have achieved and the position that the Group now holds.
We achieved record revenues, despite the well documented challenges in our end
markets, and, with the funding from the IPO, are well placed to capitalise on
the growth opportunities ahead as global vehicle production volumes recover in
2022 and beyond.
This would not have been possible without the resilience and collaboration
shown by our people in such an extraordinary year. They have consistently
risen to whatever challenges they face which fills me with confidence for the
future of CT.
As part of the listing, we have strengthened our Board and I would like to
welcome Tracey James, Francesca Ecsery and Ray Bench, our three new
non-executive directors. In the short time of working with us, they have
already added strong insight and improved direction to our Board so I am
excited to see this develop over the coming years.
Finally, I'd like to again thank and welcome our new investors who supported
us at IPO. With their backing, we look forward to continuing to build on our
growth track record.
Business overview
2021 was a year of two halves. The first six months continued the strong
recovery trend which started at the end of 2020 following the end of most
COVID-related lockdowns, precipitating the ramping up of light vehicle
production. However, during this period, automotive supply chain shortages
started to arise, most notably semiconductors. Although this didn't directly
impact our supply chain, it caused automotive production lines to slow down
and at times, come to a halt. Original equipment manufacturers (OEMs) have
consequently become more selective about which models to produce to maximise
available resources, typically favouring electric vehicles (EVs). Due to our
customer mix and the vehicle models we are nominated on, these supply chain
issues most significantly impacted the second six months of trading for CT.
Nonetheless, we were still able to deliver record revenues ahead of our
expectations set out at listing, with revenue of $132.9m, up from $109.9m in
2020.
The listing has allowed the Group to repay various credit facilities including
the term loan which arose from the previous management buy-out in 2016. We
have maintained our existing working capital facilities in the form of invoice
finance and import trade loan facilities. The Group's balance sheet has
therefore been significantly strengthened to position the business perfectly
for the next phase of growth.
Dividend
As outlined at our listing in late-December, our focus will be on continuing
to invest in the business for future growth, including the set-up of the new
plant in Mexico. As a result, the Board is recommending no dividend for the
2021 financial year.
This is in line with our capital allocation policy and reflects our confidence
in the growth opportunities we see ahead.
Regulatory and governance
As part of the listing, the Board adopted the QCA Corporate Governance Code
and will actively monitor the effectiveness of our governance processes.
As a result of the pandemic and related travel restrictions, all Board
meetings continue to be held remotely. Although this has not impacted the
effectiveness of the Board, we are hopeful that in-person Board meetings will
be possible at some point in 2022. The first evaluation of effectiveness for
the Board and committees will be completed in late-2022, following a full year
of adoption.
Supporting our people
People and culture remains a core focus at CT. Our growth to this point is
driven by the strength and commitment of our people.
Keeping our people safe is a top priority for CT. Health & safety is
paramount at all sites, with strict guidelines and regular external audits to
ensure best practice processes.
The Board is also in the process of implementing a group-wide employee
engagement surveys to ensure honest and regular feedback on any issues or
concerns or recommendations. As we strive to constantly innovate and improve,
we value the input from our people to achieve this.
Our market
The thoughts of everyone at CT are with the people of Ukraine at this time. We
continue to monitor the situation closely which has impacted the European
automotive industry. Most notably, some automakers source wire harnesses from
Ukraine and have been forced to halt production whilst they re-source supply.
For CT, this only impacted one customer for which production restarted within
four weeks and is expected to recover the lost volumes across 2022. The
short-term impact on global volumes was also offset by increased volumes in
the US during that 4-week period.
Looking ahead
This is a very exciting time for CT. As the global supply chain issues
continue to ease through 2022, there is unprecedented, pent-up consumer demand
within the automotive industry. The supply chain issues within the industry
are primarily impacting our customers rather than our direct supply chain as
we continue to be able to source our required raw materials. Although there is
inflationary pressure mounting, the Group primarily utilises open book pricing
models and hence there are mechanisms in place to pass costs through to
customers. To support this and the future development of the Group, we
employed Stuart Lorraine as our Global Supply Chain and Commercial Director in
March 2022. Stuart has a wealth of experience within the industry including
previously working at OEMs and has already helped mitigate any margin
compression.
In addition, we have already achieved a number of significant new business
wins in 2022 and are well progressed in setting up the new plant in Puebla,
Mexico with production on track to commence in H2 2022. This progress has been
detailed more within the Chief Executive Officer's review.
These factors along with our strong track record of growth, client
relationships and manufacturing excellence fill me with confidence that we are
well positioned for a strong and extended period of growth.
Chief Executive Officer's review
Introduction
2021 was a landmark year for the Group as we successfully navigated a
challenging market backdrop, while completing our AIM listing in December and
achieving record sales.
The automotive industry has historically been demand-led and hence the
just-in-time production processes facilitated the alignment of production
schedules with raw materials and parts orders. The pandemic and related
lockdowns have caused supply-side issues which re-shaped the global automotive
market in 2021 and look set to continue through at least the first half of
2022.
With the pressure to build-back by OEMs around the world mounting and supply
chain issues easing to a degree, the industry is set for a significant bounce
back.
Operations - production trading
The supply chain issues in 2021, most notably the shortages of semiconductors,
caused significant volatility for OEMs. This resulted in a number of customer
temporary shutdowns (for example 2-weeks without production) and also reduced
output across the industry. Global light vehicle production amounted to 73.4
million vehicles in 2021, up only 3.8% on 2020. So far in 2022, there have
been some pandemic-related lockdowns in China. However, these have been
restricted to certain areas, primarily Shanghai, and hence our operations have
not seen any significant disruptions other than re-sourcing activities which
have been completed quickly to ensure continuity of supply.
The Group optimised operations through 2020 and 2021 to better deal with the
unpredictable customer production schedules. However, in-line with the
experience of manufacturers across the global automotive sector, the
"stop-start" production impacted efficiency and created some additional
quality costs.
Customer schedules, although still at reduced levels, have started to become
more consistent and reliable in Q1 2022, with reduced in-month order
cancellations. Such cancellations were most disruptive in Q3 2021 with
in-month order reductions running at c.37%. This improved slightly in Q4 2021
to c.27% and has further improved to c.17% in Q1 2022, as expected. There were
numerous headwinds impacting light vehicle production across the industry in
Q3 2021, most notably the semiconductor shortages and disrupted shipping
schedules. These shipping schedules in 2022 have become noticeably more
stable.
The nature of our production cycle relies on customer schedules being upheld.
This is particularly important for production completed in China and then
shipped to the UK, US and Europe. In 2021, there was an increased level of
in-month order cancellations due to customer supply chain issues. As a result,
this caused issues with overstocking certain product lines in our UK and US
distribution centres. In 2022, this has improved as noted above and hence our
stock levels are more balanced across the Group and our various locations.
Operations - production tooling
Our in-house toolroom in Shenzhen had a very busy year, running at maximum
capacity on new programmes for a variety of products. We are particularly
pleased as this reflects the efforts made to increase utilisation of our
in-house tooling capabilities rather than outsourcing.
Development has been broadly isolated from supply-chain issues in 2021 and
progress has been able to largely continue irrespective of customer shutdowns.
The main impact has been a small number of delayed vehicle launches causing
minor delays to tooling approvals.
Agility
Agility is one of our core values and has been more important than ever
through the last two years. As a high-growth business there are always
multiple challenges and fast changes impacting the business. Our people have
adopted a culture to: Assess, Adjust, Act - allowing us to respond
appropriately to challenges as they arise.
There are many examples of this agility over the last two years, most notably
in our working practices including how many of our people have transitioned to
working from home and how we have maintained strong communication and
relationships with significantly reduced travel (previously a key element in
our global business).
This agility is crucial as we continue to adapt to capitalise on market trends
such as EVs or design trends such as hidden IP vents or address the impact of
tax changes such as the US S301 tariffs.
Expanding in the EV sector
Our design expertise and track record has allowed us to maintain our market
position as a supplier for EVs. This can be seen in our customer mix and the
vehicles we are nominated on which include both established EV manufacturers
and new entrants to the markets. This is supported by our recent nominations
on EV cars, including the Nissan Ariya and e.Go Mobile.
The growth in EVs is also driving an increase in the potential value of
interior components that the Group can supply per model. In addition,
technology advances in autonomous driving have been most prevalent
across EVs resulting in more 'hands-off' time and
interaction with a vehicle's interior. EV marques including Lucid and a
major global EV OEM, have focused particular attention on their vehicles'
interior design, with the Group's highest value of supplied components per
vehicle being that within the new Lucid Air.
The trend towards EVs continues to gain momentum across the globe. This has
been further enhanced in 2021 with the multiple commitments from OEMs towards
full electrification (largely following the COP 26 event in November 2021). We
have also seen a trend of customers prioritising EV production lines when chip
availability has been restricted. Within the automotive sector, EV sales
reached 6.75 million globally in 2021, up 108% on 2020.
Trading performance in Q3 and Q4 2021 was challenging due to the supply chain
conditions and reflected by the global light vehicle production, however we
attribute our slight overall outperformance of the global market due to the
Group's significant exposure to EVs. The Group has above average exposure to
the EV segment with 17% of revenue derived from EV platforms, compared to EVs
overall market share by volume of 4%.
Setting up a new plant in Puebla, Mexico
Following the introduction of additional import tariffs by the Trump
administration on certain goods arriving from China into the USA it has become
less economical for the Group to supply components to US based customers
directly from China. While the Group has entered into cost sharing agreements
with some of its existing customers to mitigate the impact of the tariffs, the
Directors do not believe that they would be able to competitively bid for new
contracts supplied directly by the Group's Chinese plants while the tariffs
remain in force.
In order to continue to supply to customers, including a major EV company in
the US, without the imposition of the China tariffs, the Group is setting up a
new manufacturing site in Mexico from which it will export to the US. The
plant has been identified with a new lease signed and a number of new staff on
site from May 2022. This site has in place the required infrastructure
including appropriate energy connections, to allow the Group to rapidly deploy
machinery. Industrialisation of the plant including shipping the tools from
China will proceed across May and July with production on track to start in H2
2022.
CT has developed a low-cost modular factory design (inclusive of fixtures,
quality gauges and capital equipment) with production lines built and tested
in China prior to shipment, resulting in substantial reductions in capital
expenditure. The Directors estimate that capital expenditure of c.$2.5 million
will be required to prepare the site for first production. The Group has
followed a demand-led expansion program and has secured contracts for delivery
from the Mexico plant such that it is expected to be revenue generating
immediately upon completion. This new site will allow us to remain
competitive, and expand, in the North American market without tariffs and
continues to be well-received by our customers.
Outlook
The semiconductor shortages have continued to impact the industry in early
2022 with further short-term disruption also caused by the Ukraine invasion in
Europe. Our customer schedules are however becoming more consistent with
allows the Group to more effectively plan production schedules and better
manage stock levels across the globe. We continue to expect a recovery in
global production across 2022, most significantly in H2 2022, as supply issues
ease. This recovery timing is largely aligned with public statements made by a
number of OEMs and Tier One suppliers.
The current customer trend towards prioritising key models, due to chip
restrictions, is leading to EVs and larger models typically being favoured.
Although our mix of programmes is powertrain agnostic and includes a mixture
of model sizes, this trend typically favours CT with our above-average
exposure to EV compared to the market. This is aligned with the existing
direction of travel of continued increased demand for EVs and the commitments
towards achieving full electrification on new models made by a number of OEMs.
As a result of existing nominations, we anticipate the Group to benefit from
increased serial production revenues in 2022 as the OEMs seek to meet the
pent-up consumer demand for cars, with the full effect of new launches in 2021
contributing to further growth for CT. Accordingly, we have seen production
volumes start to recover in early 2022 and expect this to continue ahead of
automotive supply chain issues resolving fully in 2023.
The Group is positioned to recover strongly with c.97% of anticipated revenue
in 2022 and c.91% of anticipated revenue in 2023 expected to come from
projects which are currently underway or on which the Group is already the
nominated supplier. This will be further supported once the new plant in
Mexico is operational, allowing us to be more competitive in the North
American markets.
Chief Financial Officer's review
Our existing manufacturing facilities and highly skilled people fill me with
confidence that we can continue to exceed our customer expectations and return
to strong growth.
The global automotive market remains challenging following the impact of
COVID-19 and the global shortage of semiconductors, but demand remains strong
and having completed the AIM listing, CT is now well placed to capitalise on
the recovery when it comes and return to historic growth and profitability.
Trading overview
There was a significant drop in global vehicle production in 2020 as a result
of the COVID-19 pandemic and the preventative measures that were implemented
globally, including national lockdowns that led to factory shutdowns.
Global vehicle production recovered strongly during the latter half of 2020
and this continued into 2021, with significant demand for new vehicles.
Accordingly, as global vehicle production recovered, the Group performed
strongly, generating revenues of $74.7 million in H1 2021, in spite of some
disruption to production caused by a global shortage of semiconductors.
However, in the second half of 2021, the semiconductor shortage increasingly
impacted global vehicle production, which was significantly below prior
expectations for 2021. While the semiconductor shortage has impacted OEMs
unevenly and they have sought to preserve production on key models, the extent
of the shortage led to the Group experiencing a significant trading slowdown
in the second half of 2021 in-line with wider automotive production declines
and as reported at the time of the AIM listing.
As we continue through 2022, production schedules have stabilised, but we have
yet to see any significant improvements. That said, our key customers are all
anticipating higher production volumes later in the year which we hope will be
the start of a longer term recovery.
Revenue increased 21.0% compared to 2020, driven by the completion of some
Engineering, Design and Development programmes in the final quarter of 2021,
as well an improved performance in serial production.
Gross margins improved slightly from 2020 but remained lower than expected as
a result of lower production volumes in China in Q4, with the completion of
some de-stocking also impacting production efficiency. The ongoing disruption
being caused mainly by the shortage of semi-conductors continues to impact
margins and remain below the Group's target margins in normal trading
conditions.
Distribution costs have also increased due to a full 12-month period of
increased freight charges following the pandemic and related logistic issues.
This has resulted in freight container costs exceeding the container rates
quoted to customers. We expect this to normalise over time and have hence
negotiated to recover the excess freight costs from customers as much as
possible.
These irrecoverable excess freight costs have been classified as non-recurring
items for the purpose of alternative performance measures (APMs).
Non-recurring items in 2021 also include AIM listing fees, Turkish foreign
exchange losses and impacted charges following the divestment of Scomadi.
Administrative expenses (adjusted for non-recurring items) have remained
largely flat compared to 2020, reflecting the fact that CT has already scaled
up for the growth that was forecast with significant new program launches,
prior to the pandemic.
These factors have resulted in adjusted EBITDA of $8.8m and adjusted operating
profit of $3.2m, which are both significantly improved from 2020 but margins
remain below the levels achievable once the supply chain issues are resolved.
Financing
The financing position of the Group has changed significantly over the last 12
months, most notably from the admission to AIM in December 2021. We continued
to utilise the Government-backed CLBILS loan obtained in 2020 and also
obtained a further short term loan for $2.5m in January 2021.
Following the decision to list on AIM, the Group raised pre-IPO funding in the
form of convertible loan notes for $5.6m, which converted to Ordinary Shares
on the date of listing.
The AIM listing in December 2021 raised share issue proceeds of $42.5m which
allowed us to pay down multiple credit facilities and inject working capital
into the Group to set up for the next phase of growth.
Admission to AIM
I am delighted that we achieved a successful listing in December 2021. I am
pleased that our new investors recognised our track record for growth prior to
listing and the significant opportunity for future growth as the automotive
industry recovers and CT delivers on the existing nominated programmes.
Organic growth
The past two years have been challenging with extreme disruption across the
business. The robust nature of our business and low-cost operating model has
allowed us to continue throughout to meet all of our customer requirements.
The business is now perfectly positioned to capitalise on the recovery of the
automotive market in the coming years and achieve our growth ambitions. Our
existing manufacturing facilities and highly skilled people fill me with
confidence that we can continue to exceed our customer expectations and return
to strong growth.
This is further supported by the ongoing set-up of our new plant in Mexico
which will further increase our appeal to customers in both North America and
South America.
Acquisitions
The Group has consolidated its focus on automotive components in 2021 which
included the divestment of our Scomadi minority share prior to admission to
AIM. The Scomadi business needed additional investment following the impacts
of the pandemic and the Board concluded that our resources were better focused
on our own growth.
Following the listing and strengthening of the balance sheet, we are open to
acquisition opportunities that may arise. We have significant in-house
corporate finance expertise along with trusted advisors who continue to search
for businesses that meet our strict acquisition criteria and would be a good
strategic fit with our Group.
Post listing actions
The proceeds from listing were intended to provide the Group with capital to
execute our growth plans. Most notably, the proceeds have allowed us to fully
repay our term loan, CLBILS loan along with other debt within the Group. This
strengthened balance sheet position is critical as the Group can now realise
the full growth potential and move away from the previously significant debt
servicing commitments. Over time, this is expected to unlock free cash flow to
fund our growth plans.
The Board previously highlighted the following plans:
Growth plan Current status
Enlarging the Group's production facilities in Europe and opening a new The Mexico facility set-up is underway with local staff currently being
facility in Mexico recruited and production planned to commence by July 2022.
We are currently looking for new premises within Czech Republic to expand our
operations.
Taking on a larger number of new programmes A number of new programmes have been secured since listing to commence in 2023
and 2024.
The working capital of the Group is expected to increase over time in 2022 as
the reduction in debt servicing costs is realised compared to 2021.
Reducing supplier costs by up to c.5% A number of negotiations have already been successfully completed,
particularly in China. Further negotiations are awaiting re-rating from credit
agencies which will follow the publication of this Annual Report. These
negotiations have been primarily led by the new Global Supply Chain and
Commercial Director.
Entry into more strategic partnerships This continues to be planned across 2022 and 2023.
Increasing research and development expenditure to enhance competitive This continues to be planned across 2022 and 2023.
advantage
Consolidated statement of profit or loss and other comprehensive income
for the year ended 31 December 2021
2021 2020
(restated*)
$'000 $'000
Revenue 132,939 109,899
Cost of sales (103,911) (88,583)
________ ________
Gross profit 29,028 21,316
Distribution expenses (5,504) (4,814)
Other operating income 1,478 942
Administrative expenses (27,391) (22,600)
EBITDA (before non-recurring items) 8,767 1,164
Depreciation (2,076) (1,974)
Amortisation (3,509) (2,532)
Non-recurring items (5,571) (1,814)
________ ________
Operating loss (2,389) (5,156)
-
Finance expenses (4,476) (3,979)
Share of post-tax losses of equity accounted associates (579) (574)
________ ________
Loss before tax (7,444) (9,709)
-
Taxation 1,108 1,082
________ ________
Loss for the year attributable to equity holders of the group (6,336) (8,627)
________ ________
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation differences - foreign operations 280 703
________ ________
Other comprehensive income for the year, net of income tax 280 703
________ ________
Total comprehensive loss for the year (6,056) (7,924)
________ ________
Total loss per share
Basic loss per share (31.2)c (44.0)c
Diluted loss per share (31.2)c (44.0)c
Consolidated balance sheet
as at 31 December 2021
Company number 10451211 2021 2020
(restated*)
$'000 $'000
Non-current assets
Property, plant and equipment 10,307 9,584
Intangible assets 520 545
Goodwill 2,417 2,417
Right of use assets 6,942 7,549
Deferred tax assets 1,745 308
Investments in equity-accounted associates - 1,443
________ ________
21,931 21,846
________ ________
Current assets
Inventories 39,779 40,223
Tax receivable 1,496 1,417
Trade and other receivables 42,782 44,626
Cash and cash equivalents 13,445 2,156
________ ________
97,502 88,422
________ ________
Total assets 119,433 110,268
________ ________
Current liabilities
Other interest-bearing loans and borrowings (22,865) (37,121)
Trade and other payables (50,044) (51,942)
Tax payable (655) (778)
Lease liabilities (2,566) (2,683)
________ ________
(76,130) (92,524)
________ ________
Non-current liabilities
Other interest-bearing loans and borrowings (103) (22,963)
Provisions - -
Lease liabilities (5,041) (5,493)
________ ________
(5,144) (28,456)
________ ________
Total liabilities (81,274) (120,980)
________ ________
Net assets/(liabilities) 38,159 (10,712)
________ ________
Equity attributable to equity holders of the parent
Share capital 342 132
Share Premium 54,717 -
Translation reserve 580 300
Merger reserve (35,812) (35,812)
Retained earnings 18,332 24,668
________ ________
Total equity/(deficit) 38,159 (10,712)
________ ________
These financial statements were approved by the Directors on 18 May 2022 and
were signed on its behalf by:
David Wilkinson
Director
Consolidated statement of changes in equity
for the year ended 31 December 2021
Share capital Share Premium Translation reserve Retained earnings Merger reserve Other reserve Total equity
(Restated)
$'000 $'000 $'000 $'000 $'000 $'000 $'000
132 (403) 33,295 (35,812) (2,788)
1 January 2020 - -
Total comprehensive income for the year
- - (8,627) - (8,627)
Loss for the year (restated) - -
- - - 703
Other comprehensive income
- 703 -
________ ________ ________ ________ ________ ________ ________
- 703 (8,627) - (7,924)
Total comprehensive income for the year
(restated)
- -
________ ________ ________ ________ ________ ________ ________
Balance at 31 December 2020 132 300 24,668 (35,812) (10,712)
(restated)
- -
________ ________ ________ ________ ________ ________ ________
132 300 24,668 (35,812) (10,712)
1 January 2021 - -
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 - - - (9,900) 2,509
12,352
Share issue in relation to IPO 153 - - - 45,076
44,923 -
Equity issue costs - (2,558) - - - - (2,558)
Total comprehensive income for the year:
- - (6,336) - (6,336)
Loss for the year - -
Other comprehensive income - - - 280
- 280 -
Total comprehensive income for the year - 280 (6,336) - (6,056)
-
-
________ ________ ________ ________ ________ ________ ________
342 54,717 580 18,332 (35,812) 38,159
Balance at 31 December 2021
-
_______ ________ ________ ________ ________ ________ ________
Consolidated statement of cash flows
for the year ended 31 December 2021
2021 2020
(restated*)
$'000 $'000
Cash flows from operating activities
Loss for the year (6,336) (8,627)
Adjustments for:
Depreciation and amortisation 5,585 4,506
Impairment of associate 1,627 -
Finance expense 4,476 3,979
Loss on sale of property, plant and equipment 1,084 435
Taxation (1,108) (1,082)
Share of post-tax losses of equity accounted associates 579 574
________ ________
5,907 (215)
Decrease in trade and other receivables 1,844 618
Decrease/(Increase) in inventories 444 (3,830)
(Decrease)/Increase in trade and other payables (1,898) 1,672
(Decrease) in provisions - (285)
________ ________
Tax paid (529) (1,190)
________ ________
Net cash generated from/(used in) operating activities 5,768 (3,230)
________ ________
Cash flows from investing activities
Purchase of property, plant and equipment (4,296) (1,595)
Investments in associates (201) (2,017)
Purchase of intangible assets (421) (76)
________ ________
Net cash used in investing activities (4,918) (3,688)
________ ________
Cash flows from financing activities
Proceeds from loan and other facility drawdowns 2,500 11,567
Issue of convertible loan notes 5,600
Share issue (net of transaction costs) 42,370 -
Repayment of lease liabilities (3,565) (2,443)
Interest paid (2,922) (2,688)
Repayment of other borrowings - (2,585)
Repayment of term loan (16,042) -
Repayment of CLBILs (8,351) -
Repayment of trade loans (6,092) -
Repayment of invoice finance (1,537) -
________ ________
Net cash generated from financing activities 11,961 3,851
________ ________
Net increase/(decrease) in cash and cash equivalents 12,811 (3,067)
Cash and cash equivalents at beginning of year (2,677) (168)
Effect of exchange rate fluctuations on cash held (327) 558
________ ________
Cash and cash equivalents at end of year (refer Note 23) 9,807 (2,677)
________ ________
*Details of the restatements are presented in Note 27.
Notes forming part of the consolidated financial statements
for the year ended 31 December 2021
1 Accounting policies
This financial information within this announcement does not constitute the
Company's statutory accounts within the meaning of Section 434 of the
Companies Act 2006. The results for the year ended 31 December 2021 have been
extracted from the full accounts of the Group for that year which received an
unmodified auditor's report, and which have not yet been delivered to the
Registrar of Companies. The financial information for the year ended 31
December 2020 is derived from the statutory accounts for that year, which have
been delivered to the Registrar of Companies. The report of the auditor on
those filed accounts was unmodified and does not include a statement under
section 498(2) or (3) of the Companies Act 2006.
This announcement has been prepared in accordance with the recognition and
measurement principles of UK adopted international accounting standards in
conformity with the requirements of the Companies Act 2006 and in accordance
with the AIM rules. The financial information included in this announcement
does not include all the disclosures required in accounts prepared in
accordance with UK adopted international accounting standards in conformity
with the requirements of the Companies Act 2006 and accordingly it does not
itself comply with UK adopted international accounting standards in conformity
with the requirements of the Companies Act 2006. The accounting policies
used in the preparation of this announcement have remained unchanged from
those set out in the statutory accounts for the year ended 31 December 2020.
They are also consistent with those in the full accounts for the year ended 31
December 2021, which have yet to be published.
The Group will post its annual report and accounts to shareholders in early
June 2022, a copy of the annual report and accounts will be available on the
company's website.
Introduction
CT Automotive Group PLC (the "Company") is a Public company listed on AIM
incorporated, domiciled and registered in England in the UK. The registered
number is 10451211 and the registered address and principal place of business
is 1000 Lakeside North Harbour, Western Road, Portsmouth, PO6 3EN.
The Company's functional and reporting currency is USD, the Directors elected
to set the Company up in this way due to the international nature of the Group
and overall reliance on USD; the Group revenue is predominantly received in
USD and key long term financing instruments, as well as working capital
facilities, are also predominantly denominated in USD.
The Group financial statements consolidate those of the Company and its
subsidiaries (together referred to as the "Group"). The parent company
financial statements present information about the Company as an entity and
not about its group.
The Group financial statements have been prepared and approved by the
Directors in accordance UK-adopted International Accounting Standards and with
the requirements of the Companies Act 2006 as applicable to companies
reporting under those standards. The Company has elected to prepare its parent
company financial statements in accordance with FRS 101.
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these consolidated financial
statements.
There are no judgements or estimates that are deemed to have a significant
effect on the financial statements other than those stated in Note 2.
Measurement convention
The financial statements are prepared on the historical cost basis except that
the following assets and liabilities are stated at their fair value:
derivative financial instruments.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, its financial position, financial risk management
objectives, and its exposures to price, credit, liquidity and cash flow risk
are described in the Strategic report.
The financial statements have been prepared on the going concern basis as the
Group has prepared detailed forecasts which show that the Group is expected to
be able to meet all its liabilities as they fall due over the 12 months from
the approval of the financial statements. These forecasts are built up using
the individual costings that each part of the Group produces and latest volume
forecast. It is acknowledged that COVID-19 and the subsequent impact on supply
chains has had a profound impact on the global automotive industry. For CT
Automotive Group PLC, this impact was most significant in the second half of
2021 with a number of temporary closures at customer sites however the Group
were able to successfully manage production and stock levels throughout to
meet our customers' requirements. It is also acknowledged that the recent
Ukraine invasion has caused some short term disruption for certain
manufacturers in Europe. For CT, this only impacted one customer for which the
relevant components previously sourced from Ukraine were re-sourced and
production recommended within four weeks. This impact has therefore not been
material and does not impact the going concern assessment.
These known supply chain impacts have been factored into the Group's forecast
model along with what Management consider to be a prudent view on the recovery
for the automotive industry through 2022. This model forecasts to December
2027, covering a period of 67 months from the date of approval of these
financial statements. This takes into account the Group's existing banking
facilities, being trade loans and invoice financing, and assumes these
facilities continue to be available. This assumption is made on the basis that
these facilities are committed on a rolling 12-month basis until December 2022
and are structured facilities only available to be drawn against the
respective inventory and customer sales invoices. Management expect that these
facilities will either continue to be available in their existing or be
replaced by similar value facilities. The invoice finance facility has a limit
of $15,800,000 with headroom of $4,803,000 as at 31 December 2021. Similarly,
the trade loan facility has a limit of $10,400,000 with headroom of $4,948,000
as at 31 December 2021. These limits are not forecast to be exceeded within
the forecast period since the Group forecasts to generate sufficient cash
reserves to reduce utilisation of these facilities. In the management
forecast, the invoice facility is not exceeded until February 2023 and trade
loan facility has not exceeded throughout the 12 month period. Beyond February
2023, there is a strong cash reserve position and hence is more likely that
the facility will be uplifted.
Although Management consider the base case to be appropriately prudent,
sensitivity analysis has been performed of the cash flow to model the
potential impact should the automotive supply chain issues continue for a
prolonged period and hence a slower recovery scenario considered. This
assumption carried a 9% decline in annual volumes which is worst case
considering the fact that the base forecast is already modelled at a lower
growth considering the supplying chain issues in the automotive sector. This
scenario is considered to be severe but plausible. The base case forecast and
stress test demonstrate that the Group has sufficient headroom within current
banking facilities and other financing facilities or alternate cash flow
management plans in place across the forecast period. This assessment also
reflects the significantly stronger balance sheet of the Group following the
AIM listing which repaid all long-term credit facilities, most notably the
term loan which included quarterly financial covenants.
After making enquiries, considering the uncertainties described above and
monitoring the year-to-date performance against budget in 2022, CT Automotive
Group PLC is expected to remain in a strong financial position during the
forecast period. The Group is confident of being able to trade for a period of
at least 12 months from the approval of the financial statements and the
Directors have therefore concluded that it is appropriate for the financial
statements to be prepared on the going concern basis.
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an
entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity. In assessing control, the Group takes into
consideration potential voting rights that are currently exercisable. The
acquisition date is the date on which control is transferred to the acquirer.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that
control ceases.
Change in subsidiary ownership and loss of control
Changes in the Group's interest in a subsidiary that do not result in a loss
of control are accounted for as equity transactions.
Where the Group loses control of a subsidiary, the assets and liabilities are
derecognised along with any related non-controlling interests and other
components of equity. Any resulting gain or loss is recognised in profit or
loss. Any interest retained in the former subsidiary is measured at fair
value when control is lost.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses
arising from intra-group transactions, are eliminated. Unrealised gains
arising from transactions with equity-accounted investees are eliminated
against the investment to the extent of the Group's interest in the investee.
Unrealised losses are eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
Foreign currency
Transactions in foreign currencies are translated to the respective functional
currencies of Group entities at the foreign exchange rate ruling at the date
of the transaction. Foreign currency monetary assets and liabilities are
translated at the rates ruling at the reporting date. Exchange differences
arising on the retranslation of unsettled monetary assets and liabilities are
recognised immediately in profit or loss. Exchange differences arising on the
retranslation of the foreign operation are recognised in other comprehensive
income and accumulated in the foreign exchange reserve.
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated to the Group's
presentational currency US Dollars at foreign exchange rates ruling at the
balance sheet date. The revenues and expenses of foreign operations are
translated at an average rate for the year where this rate approximates to the
foreign exchange rates ruling at the dates of the transactions.
Exchange differences arising from this translation of foreign operations are
reported as an item of other comprehensive income and accumulated in the
translation reserve. When a foreign operation is disposed of, such that
control is lost, the entire accumulated amount in the foreign currency
translation reserve, is reclassified to profit or loss as part of the gain or
loss on disposal. When the Group disposes of only part of its interest in a
subsidiary that includes a foreign operation while still retaining control,
the relevant proportion of the accumulated amount is reattributed to
non-controlling interests. When the Group disposes of only part of its
investment in an associate that includes a foreign operation while still
retaining significant influence, the relevant proportion of the cumulative
amount is reclassified to profit or loss.
Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity only to the
extent that they meet the following two conditions:
(a) they include no contractual obligations upon the Company (or Group as the
case may be) to deliver cash or other financial assets or to exchange
financial assets or financial liabilities with another party under conditions
that are potentially unfavourable to the Group; and
(b) where the instrument will or may be settled in the company's own equity
instruments, it is either a non-derivative that includes no obligation to
deliver a variable number of the company's own equity instruments or is a
derivative that will be settled by the company's exchanging a fixed amount of
cash or other financial assets for a fixed number of its own equity
instruments.
To the extent that this definition is not met, the proceeds of any issues are
classified as a financial liability.
Foreign currency
Transactions in foreign currencies are translated to the respective functional
currencies of Group entities at the foreign exchange rate ruling at the date
of the transaction. Foreign currency monetary assets and liabilities are
translated at the rates ruling at the reporting date. Exchange differences
arising on the retranslation of unsettled monetary assets and liabilities are
recognised immediately in profit or loss. Exchange differences arising on the
retranslation of the foreign operation are recognised in other comprehensive
income and accumulated in the foreign exchange reserve.
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated to the Group's
presentational currency US Dollars at foreign exchange rates ruling at the
balance sheet date. The revenues and expenses of foreign operations are
translated at an average rate for the year where this rate approximates to the
foreign exchange rates ruling at the dates of the transactions.
Exchange differences arising from this translation of foreign operations are
reported as an item of other comprehensive income and accumulated in the
translation reserve. When a foreign operation is disposed of, such that
control is lost, the entire accumulated amount in the foreign currency
translation reserve, is reclassified to profit or loss as part of the gain or
loss on disposal. When the Group disposes of only part of its interest in a
subsidiary that includes a foreign operation while still retaining control,
the relevant proportion of the accumulated amount is reattributed to
non-controlling interests. When the Group disposes of only part of its
investment in an associate that includes a foreign operation while still
retaining significant influence, the relevant proportion of the cumulative
amount is reclassified to profit or loss.
Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity only to the
extent that they meet the following two conditions:
(a) they include no contractual obligations upon the Company (or Group as the
case may be) to deliver cash or other financial assets or to exchange
financial assets or financial liabilities with another party under conditions
that are potentially unfavourable to the Group; and
(b) where the instrument will or may be settled in the company's own equity
instruments, it is either a non-derivative that includes no obligation to
deliver a variable number of the company's own equity instruments or is a
derivative that will be settled by the company's exchanging a fixed amount of
cash or other financial assets for a fixed number of its own equity
instruments.
To the extent that this definition is not met, the proceeds of any issues are
classified as a financial liability.
Non-derivative financial instruments
Financial assets and liabilities are recognised when the Group becomes party
to the contractual provisions of the instrument.
Non-derivative financial instruments comprise trade and other receivables,
cash and cash equivalents, loans and borrowings, and trade and other payables.
Trade and other receivables
Trade and other receivables are initially measured at their transaction price.
Trade receivables and other receivables are held to collect the contractual
cash flows which are solely payments of principal and interest. Therefore,
these receivables are subsequently measured at amortised cost using the
effective interest rate method.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to
initial recognition they are measured at amortised cost using the effective
interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank
overdrafts that are repayable on demand and form an integral part of the
Group's cash management are included as a component of cash and cash
equivalents for the purpose only of the cash flow statement.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost using the effective
interest method.
Effective interest rate
The 'effective interest' is calculated using the rate that exactly discounts
estimates future cash payments or receipts (considering all contractual terms)
through the expected life of the financial asset or financial liability to its
carrying amount before any loss allowance.
Impairment of financial assets
A provision for impairment is established on an expected credit loss model
under IFRS 9. The amount of the provision is the difference between the
asset's carrying amount and the expected value of the amounts recovered.
The probability of default and the expected amounts recoverable are assessed
under reasonable and supportable past and forward looking information that is
available without undue cost or effort. The expected credit loss is a
probability weighted amount determined from a range of outcomes (including
assessments made using forward looking information) and takes into account the
time value of money.
Impairment losses and subsequent reversals of impairment losses are adjusted
against the carrying amount of the receivable and recognised in profit or
loss.
Derivative financial instruments
Derivative financial instruments are recognised at fair value. The gain or
loss on remeasurement to fair value is recognised immediately in profit or
loss. The Group utilises derivatives consisting of exchange contracts to
reduce foreign currency risk.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses.
Where parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items of property, plant and
equipment.
Depreciation is charged to the profit and loss account on a straight-line
basis over the estimated useful lives of each part of an item of property,
plant and equipment. The estimated useful lives are as follows:
Assets under construction - not depreciated
Plant and equipment - 2-5 years straight line
Furniture, fixtures and equipment - 2-5 years straight line
Motor vehicles - 2-5 years straight line
Depreciation methods, useful lives and residual values are reviewed at each
balance sheet date.
Intangible assets and goodwill
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units and is not amortised but is tested annually
for impairment. In respect of equity accounted investees, the carrying amount
of goodwill is included in the carrying amount of the investment in the
investee.
Research and development
Expenditure on research activities is recognised in the profit and loss
account as an expense as incurred.
Expenditure on development activities is capitalised if the product or process
is technically and commercially feasible and the Group intends, has the
technical ability and has sufficient resources to complete development, future
economic benefits are probable and if the Group can measure reliably the
expenditure attributable to the intangible asset during its development.
Development activities involve a plan or design for the production of new or
substantially improved products or processes. The expenditure capitalised
includes the cost of materials, direct labour and an appropriate proportion of
overheads and capitalised borrowing costs. Other development expenditure is
recognised in the profit and loss account as an expense as incurred.
Capitalised development expenditure is stated at cost less accumulated
amortisation and less accumulated impairment losses.
Intangible assets (including software)
Expenditure on internally generated goodwill and brands is recognised in the
profit and loss account as an expense as incurred.
Intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation and less accumulated impairment losses.
Amortisation
Amortisation is charged to the profit and loss account on a straight-line
basis over the estimated useful lives of intangible assets. Intangible assets
are amortised from the date they are available for use. The estimated useful
lives are as follows:
Software - 1 - 5 years
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
based on the first-in first-out principle and includes expenditure incurred in
acquiring the inventories, production or conversion costs and other costs in
bringing them to their existing location and condition. In the case of
manufactured inventories and work in progress, cost includes an appropriate
share of overheads based on normal operating capacity.
Net realisable value is the value that would arise on sale of stock in the
normal course of business, minus a reasonable estimation of selling costs.
Impairment excluding inventories and deferred tax assets
The carrying amounts of the Group's non-financial assets, other than
inventories and deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such
indication exists, then the asset's recoverable amount is estimated. For
goodwill, and intangible assets that have indefinite useful lives or that are
not yet available for use, the recoverable amount is estimated each period at
the same time.
The recoverable amount of an asset or cash-generating unit is the greater of
its value in use and its fair value less costs to sell. In assessing value in
use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. For the purpose of
impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other
assets or groups of assets (the "cash-generating unit"). The goodwill acquired
in a business combination, for the purpose of impairment testing, is allocated
to cash-generating units, or ("CGU"). Subject to an operating segment ceiling
test, for the purposes of goodwill impairment testing, CGUs to which goodwill
has been allocated are aggregated so that the level at which impairment is
tested reflects the lowest level at which goodwill is monitored for internal
reporting purposes. Goodwill acquired in a business combination is allocated
to groups of CGUs that are expected to benefit from the synergies of the
combination.
An impairment loss is recognised if the carrying amount of an asset or its CGU
exceeds its estimated recoverable amount. Impairment losses are recognised in
profit or loss. Impairment losses recognised in respect of CGUs are allocated
first to reduce the carrying amount of any goodwill allocated to the units,
and then to reduce the carrying amounts of the other assets in the unit (group
of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other
assets, impairment losses recognised in prior periods are assessed at each
reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
Associates
Where the Group has the power to participate in (but not control) the
financial and operating policy decisions of another entity, it is classified
as an associate. Associates are initially recognised in the consolidated
statement of financial position at cost. Subsequently associates are accounted
for using the equity method, where the Group's share of post-acquisition
profits and losses and other comprehensive income is recognised in the
consolidated statement of profit and loss and other comprehensive income
(except for losses in excess of the Group's investment in the associate unless
there is an obligation to make good those losses).
Profits and losses arising on transactions between the Group and its
associates are recognised only to the extent of unrelated investors' interests
in the associate. The investor's share in the associate's profits and losses
resulting from these transactions is eliminated against the carrying value of
the associate.
Any premium paid for an associate above the fair value of the Group's share of
the identifiable assets, liabilities and contingent liabilities acquired is
capitalised and included in the carrying amount of the associate. Where there
is objective evidence that the investment in an associate has been impaired
the carrying amount of the investment is tested for impairment in the same way
as other non-financial assets.
Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the
Group pays fixed contributions into a separate entity and will have no legal
or constructive obligation to pay further amounts. Obligations for
contributions to defined contribution pension plans are recognised as an
expense in the profit and loss account in the periods during which services
are rendered by employees.
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis
and are expensed as the related service is provided. A liability is
recognised for the amount expected to be paid under short-term cash bonus or
profit-sharing plans if the Group has a present legal or constructive
obligation to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
Convertible loan notes
A portion of loans from directors in the form of loan notes and other loans
have been reclassified or converted from liability into equity during the
financial year consequent to change in the terms and conditions of the loan
agreements.
The instruments were evaluated for the conditions within IAS 32, namely, (a)
the instrument includes no contractual obligation to deliver cash or another
financial asset to another entity and (b) the instrument will or may be
settled in the issuer's own equity instruments.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, that can be
reliably measured and it is probable that an outflow of economic benefits will
be required to settle the obligation. Provisions are determined by discounting
the expected future cash flows at a pre-tax rate that reflects risks specific
to the liability.
All automotive products are sold with a warranty which mirrors the warranty
offered by the OEM to consumers.
Due to the thorough quality checking that is undertaken by the customers
during assembly, and the low risk nature of the products, it is company's
policy to only hold a small provision for warranty claims. This is supported
by the historically low value of warranty claims in the past few years which
the Directors do not consider to be material.
Revenue
Revenue is measured at the fair value of the consideration received or
receivable. Provided it is probable that the economic benefits will flow to
the Group and the revenue and costs, if applicable, can be measured reliably,
revenue is recognised in profit or loss as follows:
Serial production goods are recognised as sold at a point in time when control
is passed to the customer, which depending on the incoterms (a series of
pre-defined commercial terms published by the International Chamber of
Commerce relating to international commercial law) can be when they are
delivered to the customer site or when the customer collects them.
Tooling and the provision of associated services is recognised at a point in
time when the performance obligations in the contract are satisfied and
control is passed to the customer, which is based on the date of issue of the
parts submission warrant (PSW) or a similar approval from customers. Monies
received from customers in advance of completing the performance obligations
are recognised as contracts liabilities as at the balance sheet date and
released to revenue when the related performance obligations are satisfied at
a point in time.
Discounts on the serial production contracts are considered one off and agreed
with the customers as part of the negotiation and as per the terms of the
contract, they are either paid in advance or otherwise. Discounts paid in
advance are recognised as a prepayment and recognised as a debit to revenue in
the period in which the related revenue is recognised. All other discounts are
recognised as a debit to revenue based on the period in which the related
revenues are recognised.
Revenue excludes value added tax or other sales taxes and is after deduction
of any trade discounts.
Government grants
Government grants are recognised on the accrual basis and any performance
requirements are disclosed as required. Grants of a revenue nature are
recognised in the statement of profit and loss in the same period as the
related expenditure and recognised gross as other income.
During the year, income received from the Coronavirus Job Retention Scheme and
similar support in China and Turkey has been accounted for in accordance with
the above.
As part of the UK government scheme, the Group also received CLBILS loan from
accredited lenders during the previous year. The loan was recognised at a fair
value equal to its transaction price at inception and amortised thereafter
with finance expense being recognised using the effective interest rate.
During the first 12 months, the group recognised a finance expense and a
corresponding amount of grant income, and this was presented in the same line
as finance expense on a net basis.
Expenses
Finance income and expenses
Finance expenses comprise interest payable on borrowings and interest on lease
liabilities which are recognised in profit or loss using the effective
interest method.
Interest income is recognised in profit or loss as it accrues, using the
effective interest method.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax
is recognised in the profit and loss account except to the extent that it
relates to items recognised directly in equity, in which case it is recognised
in equity.
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous
years.
The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the end of the reporting period in the
countries where the company and its subsidiaries and associates operate and
generate taxable income. Management periodically evaluates positions taken in
tax returns with respect to situations in which applicable tax regulation is
subject to interpretation and considers whether it is probable that a taxation
authority will accept an uncertain tax treatment. The group measures its tax
balances either based on the most likely amount or the expected value,
depending on which method provides a better prediction of the resolution of
the uncertainty.
Deferred tax
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary differences are not
provided for: the initial recognition of goodwill; the initial recognition of
assets or liabilities that affect neither accounting nor taxable profit other
than in a business combination, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the
balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the temporary
difference can be utilised.
Leases
Identifying Leases
The Group accounts for a contract, or a portion of a contract, as a lease when
it conveys the right to use an asset for a period of time in exchange for
consideration. Leases are those contracts that satisfy the following
criteria:
(a) There is an identified asset;
(b) The Group obtains substantially all the economic benefits from use of the
asset; and
(c) The Group has the right to direct use of the asset.
The Group considers whether the supplier has substantive substitution rights.
If the supplier does have those rights, the contract is not identified as
giving rise to a lease.
In determining whether the Group obtains substantially all the economic
benefits from use of the asset, the Group considers only the economic benefits
that arise use of the asset, not those incidental to legal ownership or other
potential benefits.
In determining whether the Group has the right to direct use of the asset, the
Group considers whether it directs, how and for what purpose the asset is used
throughout the period of use. If there are no significant decisions to be made
because they are pre-determined due to the nature of the asset, the Group
considers whether it was involved in the design of the asset in a way that
predetermines how and for what purpose the asset will be used throughout the
period of use. If the contract or portion of a contract does not satisfy these
criteria, the Group applies other applicable IFRSs rather than IFRS 16.
Identifying Leases (continued)
All leases are accounted for by recognising a right-of-use asset and a lease
liability except for:
· Leases of low value assets; and
· Leases with a duration of 12 months or less.
These other leases are recognised in the profit and loss account on a straight
line basis over the term of the lease.
Lease Measurement
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease unless (as is
typically the case) this is not readily determinable, in which case the
Group's incremental borrowing rate on commencement of the lease is used.
Variable lease payments are only included in the measurement of the lease
liability if they depend on an index or rate. In such cases, the initial
measurement of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also
includes:
· amounts expected to be payable under any residual value
guarantee;
· the exercise price of any purchase option granted in favour of
the company if it is reasonably certain to exercise that option;
· any penalties payable for terminating the lease, if the term of
the lease has been estimated on the basis of a termination option being
exercised.
Right of use assets are initially measured at the amount of the lease
liability, reduced for any lease incentives received, and increased for:
· lease payments made at or before commencement of the lease;
· initial direct costs incurred; and
· the amount of any provision recognised where the company is
contractually required to dismantle, remove or restore the leased asset
Subsequent to initial measurement lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
for lease payments made. Right-of-use assets are amortised on a
straight-line basis over the remaining term of the lease or over the remaining
economic life of the asset if, rarely, this is judged to be shorter than the
lease term.
Earnings per share
The Group only presents basic earnings per share (EPS) data for its ordinary
share on the basis that there are no outstanding instruments that can result
in diluted earnings per share to be different with basic earnings per share in
2021 and 2020. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period.
Segment Reporting
IFRS 8 'Operating Segments' requires operating segments to be determined based
on the Group's internal reporting to the Chief Operating Decision Maker. See
Note 7 for the accounting policy and related disclosures for segment
reporting.
Non-recurring items
The group recognises items within the statement of profit or loss statements
that are infrequent, unusual and not expected during the regular business
operations as non-recurring. These are disclosed as a separate line on the
face of statement profit or loss. Refer note 5 for further details on the
nature of the non-recurring items.
New standards, interpretations and amendments
There have been a number of amendments to existing standards which are
effective from 1 January 2021 but they do not have material effect on the
Group financial statements.
There are a number of new standards, amendments to standards and
interpretations which have been issued by the IASB that are effective in
future accounting periods that the Group has decided not to adopt early. The
following amendments are effective for the period beginning 1 January 2022:
· Onerous Contracts - Costs of fulfilling a Contract (Amendments to
IAS 37)
· Property, Plant and Equipment: Proceeds before intended use
(Amendments to IAS 16)
· Annual improvements to IFRS standards 2018-2020 (Amendments to
IFRS 1, IFRS 9, IFRS 16 and IAS 41)
· References to Conceptual Framework (Amendments to IFRS 3)
The following amendments are effective for the period beginning 1 January
2023:
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2);
· Definition of Accounting Estimates (Amendments to IAS 8); and
· Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12).
The Group is currently assessing the impact of these amendments and does not
expect them to have significant impact on the financial statements.
2 Judgements in applying accounting policies and key sources of estimation
uncertainty
The Group makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future, actual
experiences may differ from these estimates and assumptions. The estimates and
assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year
are discussed below.
In preparing these financial statements, the Directors made the following
judgements:
Incremental borrowing rate used to measure lease liabilities
Where the interest rate implicit in the lease cannot be readily determined,
lease liabilities are discounted at the lessee's incremental borrowing rate.
This is the rate of interest that the lessee would have to pay to borrow over
a similar term, and with a similar security, the funds necessary to obtain an
asset of a similar value to the right-of-use asset in a similar economic
environment. This involves assumptions and estimates, which would affect the
carrying value of the lease liabilities and the corresponding right-of-use
assets.
To determine the incremental borrowing rate, the Group uses recent third-party
financing as a starting point, and adjusts this for conditions specific to the
lease such as its term and security.
The Group used an incremental borrowing rate of from 3.25% to 32.5% depending
on the specifics of the lease, particularly based on which country the
underlying asset is based in.
Deferred tax asset recognition
The Directors consider that the Deferred Tax Assets are recoverable as their
recoverability against future profits is deemed probable. This judgement has
been based on assessment of management forecasts which are compiled using
secured projects and customer volume estimates. These reflect the Group
returning to profitability in the near future.
All deferred tax assets have been classified as non-current assets. This is
based on the expected utilisation of these assets against the future profits
available as projected within management forecasts.
Other key sources of estimation uncertainty:
Stock provision
Inventory is carried at the lower of cost and net realisable value. Provisions
are made to write down obsolete stocks to net realisable value. The provision
is $1,268,000 at 31 December 2021 (2020: $651,000). A difference of 10% in the
provision as a percentage of gross inventory would give rise to a difference
of +/- $126,800- in gross margin.
Goodwill
The carrying amount of goodwill at 31 December 2021 was $2,417,000. This is
split between Chinatool UK Limited ($1,259,000) and IMS / Chinatool JV, LLC
($1,158,000). As part of the annual impairment testing of these balances, no
need for impairment was identified during the year.
Deferred tax recoverability
Estimates are required in assessing whether sufficient future taxable profits
will be made in order to recognise the benefit of deferred tax assets
accumulated at the Balance Sheet date. In assessing recognised and
unrecognised deferred tax assets, the Group has considered its forecast
performance in line with the scenarios set out in its going concern analysis
and impairment models.
Management's forecasts used for the review of the recoverability of deferred
tax assets are consistent with those used for going concern analysis and
impairment reviews for goodwill and other tangible assets. These are detailed
forecasts based on expected customer schedules.
The deferred tax asset value recognised is $1,754,000 at 31 December 2021
(2020: $308,000), giving rise to a credit through the statement of profit and
loss of $1,437,000 during the year and solely relates to UK based businesses.
The forecasts discussed above show that the UK businesses will be profitable
from 2023 and the Directors expect to fully recover the deferred tax asset by
31 December 2024.
If the period of forecasts review for the recoverability of the deferred tax
assets is shortened from 3 to 2 years, the Directors would only expect to
recover $709,000 of the deferred tax asset, and therefore would only recognise
deferred tax assets at 31 December 2021 of this value.
3 Revenue
2021 2020
$'000 $'000
Disaggregation of revenue
An analysis of turnover by type is given below:
Sale of parts 110,764 87,469
Sale of tooling (including design and development) 22,175 22,430
________ ________
Total revenues
132,939 109,899
________ ________
All revenue is recognised from goods transferred at a point in time.
Contract balances
The following table provides information about significant changes during the
year in contract assets and contract liabilities from contracts with
customers:
Contract Contract
assets liabilities
$'000 $'000
Balance as at 1 January 2021 - (8,336)
- 10,047
Revenue recognised that was included in contract liabilities at the beginning
of the year
- (4,636)
Increases due to cash received, excluding amounts recognised as revenue during
the year
- -
Movements due to foreign exchange
________ ________
Balance as at 31 December 2021 - (2,925)
________ ________
The contract liabilities included within trade and other payables primarily
relate to the advance consideration received from customers on tooling
projects.
The contract assets and contract liabilities are recognised into the profit
and loss account when the performance obligations of each contract are
satisfied which is at the point that the contract is satisfied and control has
passed to the customer. As such, the Group does not recognise revenue on any
partially satisfied performance obligations.
The following table includes revenue expected to be recognised in the future
related to performance obligations that are unsatisfied (or partially
unsatisfied) at the reporting date.
2022 2023 Total
$'000 $'000 $'000
Tooling projects 11,961 - 11,961
________ ________ ________
All consideration from contracts with customers are accounted for as contract
assets or liabilities and released to the revenue once performance obligation
is fulfilled.
The Group applies the practical expedient in paragraph 121 of IFRS 15 and does
not disclose information about remaining performance obligations that have
original expected durations of one year or less.
4 Other operating income
2021 2020
$'000 $'000
Government grants 1,458 859
Interest received from bank balances 10 26
Other income 10 57
_______ _______
1,478 942
_______ _______
The government grant income relates to government support designed to help
businesses during the COVID-19 pandemic (e.g. The UK government's Coronavirus
Job Retention Scheme and similar support in China and Turkey).
5 Non-recurring items
2021 2020
$'000 $'000
AIM listing fees 1,810 -
Turkish foreign exchange losses 1,113 -
Impairment of associate 1,627 -
Irrecoverable excess freight costs 1,021 1,814
_______ _______
Total
5,571 1,814
_______ _______
The Directors consider that it is appropriate to remove the non-recurring
costs and certain non-trading items discussed below to better allow the reader
of the accounts to understand the underlying performance of the Group.
The AIM listing completed in December 2021 incurred one-off transaction costs
and advisory fees. Costs of $1,810,000 (2020: $nil) have been recognised
within administrative expenses in relation to this.
In December 2021, the Turkish Lira was significantly depreciated against the
US Dollar following unprecedented Government announcements in Turkey. This
resulted in the Group incurring one-off unrealised foreign exchange losses of
$1,113,000 (2020: $nil) arising in Chinatool Otomotiv San. Tic. Ltd Sti.
An impairment review of the loans and shareholdings the Group held in Marin
Engineering Limited and Scomadi (Thailand) Co. Ltd. was completed in 2021.
These balances were fully impaired before the loan was written off and the
shares were transferred to a third party. This resulted in a one-off
impairment charge of $1,627,000 (2020:$nil).
Global freight costs have temporarily increased significantly following the
pandemic and related logistic issues. This has resulted in freight container
costs exceeding the container rates quoted to customers. In recognition of
this expecting to normalise over time, the Group has negotiated with customers
to maximise the recovery of excess freight costs. There is however an element
of excess freight costs which is deemed irrecoverable amounting to $1,021,000
(2020: $1,814,000) recognised within distribution expenses.
6 Expenses and auditors' remuneration
2020
2021 (Restated)
$'000 $'000
Included in the loss are the following:
Finance Expenses
Interest on bank loans and borrowings 1,949 1,919
Interest on lease liabilities 587 604
Loan note interest 528 692
Amortisation of loan transaction costs 439 -
Other interest charges 973 764
________ ________
4,476 3,979
________ ________
Operating loss is stated after charging:
Amortisation 440 290
Depreciation 2,076 1,974
Foreign exchange 1,576 2,478
Amortisation of right-of-use assets 3,069 2,242
Operating lease charges - 50
Cost of inventories 72,966 45,469
________ ________
Auditor's remuneration 2021 2020
$'000 $'000
Audit of Group financial statements 158 81
Audit of financial statements of subsidiaries of the company 241 187
Audit-related assurance services - 4
________ ________
7 Segment information
Operating segments are reported in a manner consistent with internal reporting
provided to the Chief Operating Decision Maker (CODM). The CODM has been
identified as the management team including the Chief Executive Officer and
Chief Financial Officer. The segmental analysis is based on the information
that the management team uses internally for the purpose of evaluating the
performance of operating segments and determining resource allocation between
segments.
The Group has 3 strategic divisions which are its reportable segments.
The Group has the below main divisions:
1) Tooling - Design, development and sale of tooling for the automotive
industry.
2) Production - Manufacturing and distributing serial production kinematic
interior parts for the automotive industry.
3) Head office - Manages Group financing and capital management
The Group evaluates segmental performance on the basis of revenue and profit
or loss from operations calculated in accordance with IFRS.
Inter-segment sales are priced along the same lines as sales to external
customers, with an appropriate discount being applied to encourage use of
Group resources at a rate acceptable to local tax authorities. This policy was
applied consistently in the current and prior year.
2021
Tooling Production Head office Total
$'000 $'000 $'000 $'000
Revenue
Total revenue from customers 22,175 110,764 - 132,939
Depreciation and amortisation - (5,585) - (5,585)
Finance expense - (2,112) (2,364) (4,476)
________ ________ ________ ________
Segment Profit / (Loss) 5,260 (2,636) (9,489) (6,865)
________ ________ ________
Share of post-tax loss of equity accounted associates (579)
_______
Group Loss before tax (7,444)
_______
2021
Tooling Production Head office Total
$'000 $'000 $'000 $'000
Additions to non-current assets - 4,717 - 4,717
_______ _______ _______ _______
Reporting segment assets 6,802 100,091 12,540 119,433
_______ _______ _______ _______
Reportable segment liabilities 3,628 74,119 3,527 81,274
_______ _______ _______ _______
2020
Tooling Production Head office Total
$'000 $'000 $'000 $'000
Revenue
Total revenue from customers 22,430 87,469 - 109,899
Depreciation and amortisation - (4,506) - (4,506)
Finance expense (41) (2,050) (1,888) (3,979)
________ ________ ________ ________
Segment Profit / (Loss) 4,760 (8,322) (5,573) (9,135)
________ ________ ________
Share of post-tax loss of equity accounted associates (574)
_______
Group Loss before tax (9,709)
_______
2020
Tooling Production Head office Total
$'000 $'000 $'000 $'000
Additions to non-current assets - 1,666 - 1,666
_______ _______ _______ _______
Reporting segment assets 10,642 97,343 840 108,825
_______ _______ _______
Investment in associates 1,443
_______
Total Group assets 110,268
_______
Reportable segment liabilities 6,201 76,685 38,094 120,980
_______ _______ _______ _______
External revenue by location of customers Non-current assets by location of assets
2021 2020 2021 2020
$'000 $'000 $'000 $'000
UK 20,840 20,022 4,213 2,423
US 29,489 19,278 124 25
China 18,289 30,823 16,312 16,253
Turkey 9,690 8,156 555 1,132
Czech Republic 35,356 18,850 440 396
Brazil 3,074 3,301 - -
Spain 6,985 7,369 - -
Thailand 2,187 1,661 - 1,443
Other 7,029 439 287 174
__________ __________ __________ __________
132,939 109,899 21,931 21,846
__________ __________ __________ __________
Balances related to goodwill, right of use assets, deferred tax assets and
investments in equity-accounted associates that aggregated to $11,717,000 were
excluded from the segment disclosures in the financial statements for the year
ended 31 December 2020. These have been updated in comparatives above to be
consistent with the disclosures for 31 December 2021.
Due to the nature of the automotive industry becoming increasingly
consolidated with mergers, acquisitions and strategic alliances, the number of
customers under separate control is decreasing whilst the size of such
customers is increasing.
Analysis of concentration of customers, top 3 and others:
In 2021 the Group had 3 major customers representing $42.7m (32%), $43.2m
(33%) and $13.3m (10%) of Group revenue.
In 2020 the Group had 3 major customers representing $33.6m (31%), $24.6m
(22%) and $12.6m (12%) of Group revenue.
8 Taxation
2020
2021 (Restated)
Recognised in profit and loss $'000 $'000
Current tax expense
Current year (Including carry back of losses) 179 (750)
Adjustments for prior periods 150 -
________ ________
Current tax expense/(credit) 329 (750)
________ ________
Deferred tax credit
Origination and reversal of temporary differences (993) (332)
Effect of changes in tax rates (444) -
________ ________
Deferred tax credit (1,437) (332)
________ ________
Total tax credit (1,108) (1,082)
________ ________
2021 2020
$'000 $'000
Reconciliation of effective tax rate
Loss for the year (6,336) (8,627)
Total tax credit (1,108) (1,082)
________ ________
Loss excluding taxation (7,444) (9,709)
________ ________
Tax using the UK corporation tax rate of 19% (2020 - 19.00%) (1,414) (1,845)
Effect of tax rates in foreign jurisdictions 258 88
Non-taxable income 22 -
Non-deductible expenses 355 559
Adjustments for prior periods 150 -
Tax rate changes (444) 8
Other differences (35) -
Movement in unrecognised deferred tax - 108
________ ________
Total tax credit (1,108) (1,082)
________ ________
The UK Government announced in the March 2021 Budget that the main rate
corporation tax in the UK will increased from 19% to 25%. This was
substantively enacted by the balance sheet date and as a result deferred tax
balances at 31 December 2021 have been measured at 25%.
Included within tax payable is an IFRIC 23 uncertain tax payable totalling
$618,000 (2020: $623,000), which is a result of uncertainty in the tax
legislation in a certain jurisdiction.
9 Loss per share
2021 2020
Number Number
Weighted average number of equity shares 20,286,757 19,600,000
$ $
Earnings, being loss after tax (6,336,000) (8,627,000)
Cents Cents
Loss per share (31.2) (44.0)
There are no outstanding instruments that can result in diluted earnings per
share to be different with basic earnings per share in 2021 and 2020.
The weighted average number of shares outstanding in 2020 has been adjusted to
19,600,000 to reflect the share dilution that occurred on 22 November 2021.
Throughout 2020, there were 98,000 shares outstanding with a nominal value of
£1 each. On 22 November 2021, these were sub-divided into 19,600,000 shares
with a nominal value of £0.005 each. IAS 33 requires that in such events
whereby the number of Ordinary Shares is increased without an increase in
resources, the number of Ordinary Shares outstanding before the event is
adjusted to reflect the event as if it has occurred at the beginning of the
earliest period presented.
10 Property, plant and equipment
Plant and Fixtures Under Motor
equipment and fittings construction vehicles Total
$'000 $'000 $'000 $'000 $'000
Cost
Balance at 15,339 2,824 93 36 18,292
1 January 2020
Additions 1,168 422 - - 1,590
Disposals (859) (13) - - (872)
Re-classifications 93 - (93) - -
Effect of movements in foreign exchange 946 90 - 2 1,038
________ ________ ________ ________ ________
Balance at 16,687 3,323 - 38 20,048
31 December 2020
________ ________ ________ ________ ________
Balance at 16,687 3,323 - 38 20,048
1 January 2021
Additions 2,213 2,083 - - 4,296
Disposals (1,049) (554) - - (1,603)
Re-classifications - - - - -
Effect of movements in foreign exchange (554) (166) - (4) (724)
________ ________ ________ ________ ________
Balance at 17,297 4,686 - 34 22,017
31 December 2021
________ ________ ________ ________ ________
Depreciation
Balance at 7,029 1,531 - 36 8,596
1 January 2020
Depreciation charge for the year 1,579 394 - 1 1,974
Disposals (347) (90) - - (437)
Effect of movements in foreign exchange 310 20 - 1 331
________ ________ ________ ________ ________
Balance at 8,571 1,855 - 38 10,464
31 December 2020
________ ________ ________ ________ ________
Balance at 8,571 1,855 - 38 10,464
1 January 2021
Depreciation charge for the year 717 1,359 - - 2,076
Disposals (255) (336) - - (591)
Effect of movements in foreign exchange (150) (85) - (4) (239)
________ ________ ________ ________ ________
Balance at 8,883 2,793 - 34 11,710
31 December 2021
________ ________ ________ ________ ________
Net book value
At 31 December 2020 8,116 1,468 - - 9,584
________ ________ ________ ________ ________
At 31 December 2021 8,414 1,893 - - 10,307
________ ________ ________ ________ ________
As at 31 December 2021, property, plant and equipment with a carrying value of
$10,307,000 (2020 - $9,584,000) was pledged as security for the invoice
finance and trade loans.
11 Leases
The Group leases buildings and machinery where payments are fixed until the
contracts expire. There is no variability in respect of payments and there is
not considered to be any significant judgement in relation to the lease terms.
Right of use assets
Land and Plant and
buildings machinery Total
$000 $000 $000
At 1 January 2020 8,729 85 8,814
Additions 816 225 1,041
Disposal (82) - (82)
Amortisation (2,166) (76) (2,242)
Foreign exchange movement 9 9 18
________ ________ ________
At 31 December 2020 7,306 243 7,549
At 1 January 2021 7,306 243 7,549
Additions 1,538 911 2,449
Disposal - - -
Amortisation (2,522) (547) (3,069)
Foreign exchange movement 5 8 13
________ ________ ________
At 31 December 2021 6,327 615 6,942
________ ________ ________
Lease liabilities
Land and Plant and
buildings machinery Total
$000 $000 $000
At 1 January 2020 9,084 88 9,172
Additions 816 225 1,041
Disposal (87) - (87)
Finance expense 589 10 599
Foreign exchange movement 42 6 48
Repayments (2,528) (69) (2,597)
________ ________ ________
At 31 December 2020 7,916 260 8,176
At 1 January 2021 7,916 260 8,176
Additions 1,547 911 2,458
Disposal - - -
Finance expense 541 46 587
Foreign exchange movement (15) 8 (7)
Repayments (2,993) (614) (3,607)
________ ________ ________
At 31 December 2021 6,996 611 7,607
________ ________ ________
The maturity profile of the lease liabilities is as follows: 2021 2020
$'000 $'000
Under 1 year 2,566 2,683
1 - 2 years 1,534 1,666
2 - 5 years 2,594 2,459
More than 5 years 913 1,368
_______ _______
7,607 8,176
_______ _______
12 Intangible assets
Software Goodwill Total
$'000 $'000 $'000
Cost
Balance at 1 January 2020 1,572 2,417 3,989
Additions 76 - 76
Effect of movements in foreign exchange 58 - 58
________ ________ ________
Balance at 31 December 2020 1,706 2,417 4,123
________ ________ ________
Balance at 1 January 2021 1,706 2,417 4,123
Additions 421 - 421
Effect of movements in foreign exchange (67) - (67)
________ ________ ________
Balance at 31 December 2021 2,060 2,417 4,477
________ ________ ________
Amortisation and impairment
Balance at 1 January 2020 831 - 831
Amortisation for the year 290 - 290
Effect of movements in foreign exchange 40 - 40
________ ________ ________
Balance at 31 December 2020 1,161 - 1,161
________ ________ ________
Balance at 1 January 2021 1,161 - 1,161
Amortisation for the year 440 - 440
Effect of movements in foreign exchange (61) - (61)
________ ________ ________
Balance at 31 December 2021 1,540 - 1,540
________ ________ ________
Net book value
At 31 December 2020 545 2,417 2,962
________ ________ ________
At 31 December 2021 520 2,417 2,937
________ ________ ________
Amortisation charge
The amortisation charge is recognised in the following line items in the
profit and loss account:
2021 2020
$'000 $'000
Administrative expenses 440 290
________ ________
Goodwill considered significant in comparison to the Group's total carrying
amount of such assets have been allocated to cash generating units or groups
of cash generating units as follows:
Goodwill
2021 2020
$'000 $'000
Chinatool UK Limited 1,259 1,259
IMS / Chinatool JV, LLC 1,158 1,158
The recoverable amounts of Chinatool UK Limited and IMS / Chinatool JV, LLC
have been determined based on a value-in-use calculation. This calculation
uses financial forecasts approved by the Directors which cover a 4 year
period. These are detailed forecasts based on customer schedules and expected
project lifetimes. The detailed forecasts have been reviewed for a 4 year
period as this is considered to be the range over which the customer schedules
can be relied upon to create detailed forecasts.
In performing these calculations, the future cash flows of Chinatool UK
Limited have been discounted at 11% and those of IMS / Chinatool JV, LLC at
12%. The Directors concluded that these discount rates are appropriate having
reviewed discount rates applied by competitors in our sector, including
businesses who are exposed to similar automotive supply risks and applying a
margin to take account of our size, the complexity of our operations and
levels of borrowing in the Group.
Using the above stated assumptions there is significant headroom between the
recoverable amount of goodwill allocated to each CGU. Applying sensitivity
analysis to these calculations, a 2% increase to the discount rate applied
reduces the headroom, but still allows for in excess of over $10m of headroom
on Chinatool UK Limited and over $2m of headroom on IMS / Chinatool JV, LLC.
13 Inventories
2020
2021 (Restated)
$'000 $'000
Raw materials and consumables 8,627 8,548
Work in progress 6,654 11,884
Finished goods 24,498 19,791
_______ _______
39,779 40,223
_______ _______
The provision for inventories recognised during the year ended 31 December
2021 was $616,000 (2020: $651,000).
14 Trade and other receivables
2021 2020
$'000 $'000
Trade receivables 26,444 27,576
Other debtors 2,633 1,112
Loan receivables - 543
________ ________
29,077 29,231
Prepayments 13,705 15,395
________ ________
Total trade and other receivables 42,782 44,626
________ ________
Included within trade and other receivables is $Nil (2020 - $Nil) expected to
be recovered in more than 12 months.
The loan receivable at 31 December 2020 related to amounts due from Automotive
Kinetic Systems Limited, a related party controlled by Simon Phillips. This
balance was unsecured, interest-free and had no specific term of repayment but
was repayable on demand. This balance was reclassified and converted into
equity during the period as detailed within related party disclosure.
The carrying value of trade and other receivables classified at amortised cost
approximates fair value.
The Group does not hold any collateral as security.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision to trade receivables.
The expected loss rates are based on the Group's historical credit losses. Due
to the nature of the Group's customers no credit loss provision has been made
at year end (2020 - $Nil). The key assumptions used in evaluating the credit
loss provision are the historical default ratio of these customers, any known
liquidity risks of the customers and based on the information available we
have assessed a range of possible outcomes.
As at 31 December 2021 trade receivables of $4,270,000 (2020 - $3,641,000)
were past due but not impaired. They relate to customers with no default
history. The ageing analysis of these receivables is as follows:
2021 2020
$'000 $'000
Not past due 22,174 23,935
Past due 1-90 days 3,498 3,000
Past due more than 90 days 772 641
________ ________
26,444 27,576
________ ________
Other classes of financial assets included within trade and other receivables
do not contain impaired assets.
15 Other interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group and
Company's interest-bearing loans and borrowings, which are measured at
amortised cost.
2021 2020
$'000 $'000
Non-current liabilities
Secured bank loans - (15,385)
Loan notes - (7,426)
Non-current portion of finance lease liabilities (103) (152)
________ ________
(103) (22,963)
________ ________
Current liabilities
Current portion of secured bank loans (5,452) (19,558)
Current portion of finance lease liabilities (278) (197)
Unsecured bank overdraft (3,638) (4,833)
Invoice finance (10,997) (12,533)
Unsecured loans (2,500) -
________ ________
(22,865) (37,121)
________ ________
(22,968) (60,084)
________ ________
The secured bank loans are secured by a floating charge over the Group's
property, plant and equipment.
The currency profile of the Group's loans and borrowings is as follows:
2021 2020
$'000 $'000
USD 12,928 50,687
GBP 3,528 381
EUR 6,433 8,668
RMB 79 348
________ ________
22,968 60,084
________ ________
Carrying amount Carrying amount
31 December 31 December
Nominal interest rate Contracted 2021 2020
maturity
Currency $'000 $'000
Term loan USD 5.85% 2023 - 15,603
CLBILs GBP 5.85% 2023 - 8,190
Loan notes USD 9.58% 2022 - 7,426
Unsecured loans USD 10% 2022 2,500 -
Unsecured bank overdraft GBP 2.5% 2022 3,638 4,833
Trade loans EUR/USD 4.04% 2022 5,452 11,150
Invoice finance EUR/USD 3.75% 2022 10,997 12,533
________ ________
22,587 59,735
________ ________
Terms and debt repayments
The Term Loan was repayable over equal instalments to June 2023. Interest was
paid quarterly in full. This term loan was fully repaid on 24 December 2021.
The CLBILs was repayable over equal instalments to 2023. Interest was paid
monthly in full. The CLBILs were fully repaid on 24 December 2021.
Half of the loan note interest was serviced quarterly, with the remainder
being rolled up. The loan notes were due to be repaid in April 2022. The loan
notes were reclassified into equity instruments on 14 September 2021 based on
changes in their terms such that they met the IAS 32 definition of equity. See
below.
The unsecured loans were initially drawn down as a 6 month loan in January
2021. An agreement was reached with the lender to extend repayment to January
2022.
The invoice finance facility allows 90% prepayment against eligible invoices
up to 120 days old. The invoice financing facility is secured against the
debts that it is drawn down on, and the Group's fixed assets.
The loan notes outstanding as at 31 December 2020 were due to related parties.
All other facilities are on demand facilities and have no set repayment
schedules.
The movement of loans notes in the period is as follows:
Loan notes - liabilities Loan notes - equity
$'000 $'000
At 1 January 2021 7,426 -
Accrued interest 528 -
Conversion of shareholder loan notes to equity (7,954) 9,900
Issue of loan notes to third parties 5,600 -
Conversion of loan notes to Ordinary Shares (5,600) (9,900)
________ ________
As at 31 December 2021 - -
________ ________
The original shareholder loan notes due to Simon Phillips ($7,426,000 at 31
December 2020) were reclassified to equity instruments on 14 September 2021
based on changes in their terms such that they met the IAS 32 definition as
equity instruments. At the date of this conversion, $1,946,000 of other
shareholder balances due were also reclassified into equity instruments after
changes in their terms, in line with IAS 32. On 23 December 2021, the balance
of these loan notes ($9,900,000) was set off against $3,694,069 owed by Simon
Phillips and entities controlled by Simon Phillips, with the resulting balance
owed to him ($6,205,931) being satisfied in full by the issue to him of
3,176,871 new Ordinary Shares.
On 20 September 2021, $5,600,000 of new loan notes were issued to unrelated
third parties which were classified as a liability as per the terms of the
agreement, carrying an interest rate of 10% and due to be repaid on 31
December 2023. On 23 December 2021, these were converted into 5,034,898
Ordinary Shares. These were issued at a 43% discount to the AIM listing
placing price.
16 Trade and other payables
2021 2020
$'000 $'000
Current
Trade payables 24,938 22,758
Non-trade payables and accrued expenses 11,419 12,749
Employee social security and taxes 7,388 3,221
Contract liabilities 2,925 8,336
Other payables 3,359 4,878
Provisions for losses on forward contracts 15 -
________ ________
50,044 51,942
________ ________
Included within trade and other payables is $Nil (2020 - $Nil) expected to be
settled in more than 12 months.
All trade and other payables other than employee social security and taxes,
contract liabilities and provisions for losses on forward contracts (fair
value through profit and loss) are classified as financial liabilities
measured at amortised cost. The carrying value of trade and other payables
classified as financial liabilities measured at amortised cost approximates
fair value.
Included within Other payables at 31 December 2020 were $1,946,000 of balances
due to Simon Phillips which were reclassified into Equity Loan Notes on 14
September 2021 and subsequently settled by issue of Ordinary Shares.
In addition to the shareholder loan notes, at 23 December 2021 Directors Loan
balances of $487,619 were satisfied by the issue of 249,615 Ordinary Shares to
the Directors.
17 Prior year adjustment
During the year, management performed a review of the stock overhead
absorption, and identified that, as of 31 December 2020, the Group had not
correctly released the overhead absorption recognised within work in progress
and finished goods. This resulted in the overhead absorption within inventory
being overstated at the year ended 31 December 2020 within Chinatool
Automotive Mould Systems Limited. The adjustment to correct this has resulted
in an increase to cost of sales of $831,481 for the year ended 31 December
2020 and a reduction in inventory value of $831,481 as at 31 December 2020.
This adjustment has increased the loss for the year ended 31 December 2020 by
$831,481. The full impact of the restatement across the financial statements
is disclosed below:
Restated Financial year ended 31 December 2020
Consolidated statement of Profit and Loss and Other Comprehensive Income Reported Financial year ended 31 December 2020
($'000)
Correction
Cost of sales 87,752 831 88,583
Reported as at 31 December 2020 Restated as at 31 December 2020
Consolidated Balance Sheet ($'000) Correction
Inventory 41,054 (831) 40,223
Restated Financial year ended 31 December 2020
Consolidated Statement of Cash Flows ($'000) Reported Financial year ended 31 December 2020
Correction
Loss for the year (7,796) (831) (8,627)
(Increase) in inventories (4,661) 831 (3,830)
Notes forming part of the consolidated financial statements ($'000) Reported as at 31 December 2020 Restated as at 31 December 2020
Correction
Cost of inventories 44,638 831 45,469
The Reconciliation of effective tax rate note within the Notes forming part of
the Consolidated Financial Statements was also impacted by $158,000 and
resulting in the amount of movement in unrecognised deferred tax being
$108,000.
18 Alternative performance measures
The Annual Report includes Alternative Performance Measures (APMs) which are
considered by Management to better allow the readers of the accounts to
understand the underlying performance of the Group. A number of these APMs are
used by Management to measure the KPIs of the Group as outlined within the
Business Review. The Board also monitors these APMs to assess financial
performance throughout the year.
The APMs used in the Annual Report include:
- Adjusted EBITDA - calculated as EBITDA adjusted for non-recurring
items
- Adjusted EBITDA margin - calculated as adjusted EBITDA divided by
revenue in the year
- Adjusted operating profit - calculated as Operating profit/(loss)
adjusted for non-recurring items
- Adjusted operating profit margin - calculated as adjusted operating
profit divided by revenue in the year
EBITDA is calculated based using Operating profit/(loss) before interest,
taxes, depreciation and amortisation.
Adjusted EBITDA and adjusted EBITDA margin
2021 2020
$'000 $'000
Adjusted EBITDA 8,767 1,164
Non-recurring items
- AIM listing fees (1,810) -
- Turkish foreign exchange losses (1,113) -
- Impairment of associate (1,627) -
- Irrecoverable excess freight costs (1,021) (1,814)
_______ _______
EBITDA 3,196 (650)
_______ _______
Adjusted EBITDA margin 6.6% 1.1%
Adjusted operating profit and adjusted operating profit margin
2021 2020
$'000 $'000
Adjusted operating profit 3,182 (3,342)
Non-recurring items
- AIM listing fees (1,810) -
- Turkish foreign exchange losses (1,113) -
- Impairment of associate (1,627) -
- Irrecoverable excess freight costs (1,021) (1,814)
_______ _______
Operating loss (2,389) (5,156)
_______ _______
Adjusted operating profit margin 2.4% (3.0%)
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