REG - Strip Tinning Hldgs - Annual Results for year ended 31 December 2022
07/06/2023 07:00
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RNS Number : 8742B Strip Tinning Holdings PLC 07 June 2023
07 June 2023
Strip Tinning Holdings plc
("Strip Tinning" or the "Company")
Annual Results for year ended 31 December 2022
Strip Tinning Holdings plc (AIM: STG), a leading supplier of specialist
connectors to the automotive sector, is pleased to announce its full year
results for the year ended 31 December 2022.
2022 has been a transitional year for the Company, executed against a very
challenging business environment which was heralded by Russia's invasion of
the Ukraine, which started just six days after the Company's admission to AIM.
Strip Tinning has emerged stronger and leaner and has maintained its core
investment programmes despite the disappointing FY 22 results.
FY23 developments and market outlook:
· EBITDA positive for each of the first five months of FY 23 and the
Board is confident in meeting market expectations for FY 23¹
· Growing pipeline of EV opportunities
o New order worth £0.8m for sample cell contact system modules from the
Company's leading EV customer announced in April
o New opportunities for serial production nominations and a growing number
of new leads
· Strong glazing order book showing greater resilience than
originally expected for FY 23
· Improving prospects for the automotive light vehicle markets,
seeing positive growth as the threat of recession diminishes, supply chain
shortages ease and pent-up demand is satisfied
· The Board is confident of a return to revenue growth in FY 24, with
high exposure to the fast-growing EV space both through our glazing products
and our products for EV battery packs
FY22 Financial highlights:
· Total Revenues of £10.2m (FY 21: £11.2m)
· EV product sales trebled to £1.3m (FY 21: £0.4m)
· Glazing product sales of £8.9m (FY 21: £10.8m)
· Adjusted EBITDA loss of £2.2m (FY 21: £0.5m profit)
· Cash of £1.3m (FY 21: £0.3m)
FY22 Operational highlights:
· Increased EV sales highlight the continuing focus of vehicle
manufacturers on electric ranges, a continuing trend from which the Company is
well-positioned to benefit
· Prudent action taken to accelerate the capture of the EV
opportunity as well as profitability in Glazing, with investment into people,
operations and products
· Robust action taken on Glazing product prices to ensure that the
Company returns to profitability despite strong inflationary cost pressures
· New and improved products, product launch and production processes
to the benefit of both customers and the Company
· £1.4m grant won during FY 22 to support production scale up of the
EV business
· Improved productivity, helping to alleviate pressures from labour
market constraints
· Strengthened management team with extensive experience within the
sector, from which the business is already benefitting
· Uptick in EV performance driven by multiple development programmes
and production orders
Richard Barton, Group Chief Executive Officer of Strip Tinning, commented: "We
are pleased that trading in each of the first five months of FY 23 has been
EBITDA positive, representing a significant turn-around from the losses of
2022, deriving primarily from action taken during the prior period. We are
highly exposed to the fast-growing EV sector and we are benefitting from our
glazing order book showing greater resilience for 2023 than expected. The
improving market outlook and growing pipeline of opportunities is providing
the Group with a firm foundation on which to return to a growth trajectory."
Strip Tinning will be hosting a webinar for private investors on Friday 9(th)
June 2023 at 13:00. If you would like to register for the webinar, please
click the link below:
https://www.investormeetcompany.com/strip-tinning-holdings-plc/register-investor
(https://www.investormeetcompany.com/strip-tinning-holdings-plc/register-investor)
(1) Strip Tinning understands that market expectations for the year ended 31
December 2023 are for revenues of £9.4m, Adjusted EBITDA of £0.1 m and net
cash/debt of -£3.6m. (Source: FactSet)
Enquiries:
Strip Tinning Holdings plc
Via Alma PR
Richard Barton, Chief Executive Officer
Adam Le Van, Chief Financial Officer
Singer Capital Markets (Nominated Adviser and Sole Broker)
+44 (0) 20 7496 3000
Rick Thompson
James Fischer
Alma PR (Financial PR)
striptinning@almapr.co.uk (mailto:striptinning@almapr.co.uk)
Josh Royston
+44 (0) 20
3405 0205
Joe Pederzolli
A copy of this announcement, together with the Annual Report and Accounts will
be available to view on the Company's website in due course at
www.striptinning.com (http://www.striptinning.com/) .
Chairman's statement
Although since coming to market we have been hampered by market conditions we
could not have foreseen, we can take a great deal of pride in the way in which
we have responded to market headwinds and emerged as a leaner organisation.
While this set of financial results is far from what we had hoped for, we can
look to the future with optimism as a result of the action taken during the
period under review.
I would like to take this opportunity to thank all the employees of Strip
Tinning who have worked exceptionally hard this year to achieve a significant
financial and operational turnaround of the business, and to prepare it for
renewed growth moving forwards. We were delighted to be able to reward our
staff for their loyalty and hard work last October with the Issue of Shares
under our SIP scheme, which had been a longstanding ambition of the Board,
creating shared ownership of the business among key employees.
I would also like to thank all our shareholders in Strip Tinning for backing
the business at IPO and for their pragmatic response to the vastly different
set of results from those we were all working towards at the point of the IPO.
Our vastly experienced Board has proven of immense value during the year,
positioning the business to be better positioned to take advantage of recovery
and the continued opportunities Strip Tinning sees in its markets. As might be
expected, in order to address the adverse trading environment, the Board has
met at-least monthly throughout the year, and in August I was delighted to
take up my current position as Executive Chair. I look forward to continuing
in my position and driving the Company back towards growth.
Looking to the future, we look forward to capitalising on the increasing
momentum we are seeing across the business, and whilst we continue to remain
highly vigilant of the wider macro-economic environment, we are increasingly
confident of a year of progress in FY23.
Adam Robson
Executive Chairman
Chief Executive Officer's Report
2022 has been a transitional year for the Company, executed against a very
challenging business environment which was heralded by Russia's invasion of
the Ukraine, which started just six days after the Company's admission to AIM.
I am proud the way the business has responded to the most turbulent time in
trading. The challenges we faced have meant that this year the Company has
delivered its worst financial results in its 60 year history but, at the same
time, it has emerged stronger and leaner, and has maintained its core
investment programmes. The results of these changes are already being seen;
the Company has delivered a positive adjusted EBITDA in all its unaudited
monthly results for 2023 and the Board is confident that the Company will
return to revenue growth in 2024.
Business Environment
The Company's products are used in the production of all classes of automotive
light vehicles, but predominantly for passenger cars made in Europe where ACEA
reported that car production fell by 1.6% in 2022. Having started the year
relatively strongly, albeit off a low base caused by the global shortages of
chips, production softened further following Russia's invasion of the Ukraine.
This directly led to a collapse of car production in Russia (which at the time
accounted for 15% of Strip Tinning's sales through it is Tier 1 customers) and
a knock-on decline in production across Europe due to supply chain disruptions
for the Ukraine in particular. This subsequently triggered a fall in demand
for the Company's products.
At the same time as transitioning to being a listed business, the war in the
Ukraine as well as other headwinds arising from the COVID pandemic presented
numerous challenges to the Company. We also faced the specific major setback
in August 2022 of the cancellation of our EV volume nomination for the supply
of a Cell Contacting Management System (CCMS) to a leading German OEM by the
electric vehicle technology innovator making the battery packs. This was an
undoubted disappointment for the EV division as the contract acted as a
validation of the Strip Tinning EV product offering. The business has worked
hard to reach a fair and acceptable settlement (which is close to being
finalised) and has ensured that the correct lessons have been learnt. The
resulting changes are now bearing fruit in the new programmes we have in our
sales pipeline.
Business improvements completed during 2022
In the face of the aforementioned challenges, the Company had to focus down on
achieving very material improvements in a number of key areas, which it
successfully did. These were:
· Management team - we are fortunate to have recruited a new Managing
Director, Mark Perrins, who brings with him a proven automotive track record
in operational turnarounds. Mark has developed a highly performing senior
leadership team from existing and new managers. This team has driven through
the improvements already achieved and is now taking the business forward
towards growth and improving margins.
· New and improved products, product launch and production processes
to the benefit of both customers and the Company.
· EV product sales trebled to £1.25m (2021: £0.4m) on the back of
multiple development programmes and production orders.
· On time deliveries have improved with ERP improvements and arrears
have been eliminated. Our new SAP ERP will be fully functional by the end of
2023.
· Productivity has improved greatly thanks to the hard work and
support of all our employees. The Glazing connector factory layout had been
completely relocated and reorganised to optimise process flow and improve
quality. Sales per head in Q1 2023 is now 20.3% higher than it was in Q1 2022.
This has also helped to alleviate pressures from labour market constraints.
· Supplier management and development have become even more critical
in the new environment, with suppliers imposing on us unprecedented lead-times
and price increases. We have strengthened our supplier management team and
invested to develop new suppliers, notably on supply of copper materials where
we have an industry leading position.
· Energy consumption has been a focus in pursuit of both off-setting
energy price inflation and reducing our carbon footprint. Improved
productivity and investment to eliminate capacity bottlenecks has allowed us
to end night shift working and this in particular has helped to reduce energy
consumption.
Whilst achieving all of the above, we have maintained a strategic focus on our
long-term growth objectives, most important of which is our entry into the
rapidly growing market for CCMS for use in the battery packs of Electric
Vehicles (EVs). We have supplied CCMS on to a number of production vehicles
and this proof of our capabilities has allowed us to build credibility and we
now have a strong pipeline of much larger programmes for which we are already
delivering sample parts. We expect the first of these to turn into a volume
production nomination later in 2023. This sales pipeline is also being
supported by an investment of over £2 million in a CCMS production line which
will have capacity to produce up to 220,000 units per annum.
We were delighted to win during 2022 a grant from the Advanced Propulsion
Centre (APC) Scale-up Readiness Validation (SuRV) competition worth up to
£1.4 million. This grant is being received via six quarterly drawdowns
covering the period to end of January 2024. This grant has made a valuable
contribution to our cash position which we have further strengthened through
improved terms and collection of receivables form our customers and greater
control of our stocks.
Finally, with the support of our customers during the period, we raised our
Glazing product prices to reflect the pressures felt by all businesses trading
internationally. Customers have engaged constructively with our price
increases, and appreciate Strip Tinning's commitment to remain a strong,
long-term supplier in the Glazing market. That said, with a strong focus on
profitable production, it has not made sense to continue to supply all the
products manufactured in 2022. These changes have made a very material
difference to our profitability in 2023, as seen in the much-improved
financial results announced to date.
The elimination of low margin products does mean that Glazing product sales in
2023 are forecast to decline but we believe that we retain the support of our
customers and we expect that we will see a return to sales growth in 2024. We
are committed to growing both our core Glazing products (used to connect the
electronic functions embedded within the glass panels of automotive vehicles
and occasionally other applications such as buildings) and our new EV related
products. Our pipeline of sales opportunities is growing in both market
segments. We were particularly pleased to announce in March a new order for a
large number of sample CCMS modules from our leading EV customer, supplying
into the autonomous vehicle industry in the USA. The order reflects the
ongoing strength of the relationship between both parties and the significant
progress being made by the end user towards commercialisation, having already
received the necessary regulatory approvals. The value of the order is
c.£775k, with the majority of the parts expected to be shipped in 2023 and
the Company anticipates next receiving C-sample orders as a result. The order
is a strong endorsement of Strip Tinning's offering and underpins the
Company's well-established reputation as a supplier of cell contact systems to
the fast-growing EV space.
ESG
In January 2023 Strip Tinning was pleased to receive confirmation from
Integrum that it has maintained its best-in-class A grade ESG rating, first
obtained at the time of the IPO.
Outlook
Whilst the FY22 result is not what the Board had originally set out to achieve
for shareholders at the start of the financial year, it nevertheless believes
that material progress has been in 2022 which will bear fruit in the medium
term. In the year ahead, automotive light vehicle markets are expected to see
positive growth as the threat of recession diminishes, supply chain shortages
ease and pent-up demand is satisfied. According to ACEA^, European passenger
car production has growth17.8% in the first 5 months of 2023 compared to the
same period in 2022 and the EV growth rate has been 45.1%, representing 12% of
the total market. We are fortunate to have a strong and diverse base of
end-user OEM customers and good exposure to the fast- growing EV sector, both
through our glazing products and our products for EV battery packs. In 2023
the Company is expecting to make over 30% of all its sales into electric and
hybrid vehicles, and growth for this market is forecast to remain very strong
driving high demand in particular for the new EV battery related products
manufactured by the Company(1).
Despite the challenging macroeconomic outlook, the business has delivered a
small adjusted EBITDA profit in the first five months of the current year and
a full year adjusted EBITDA profit is expected to be achieved in total. This
outlook puts the business onto a sound footing for greater success in 2024.
The Company is able to manage its cash requirements whilst maintaining EV and
Glazing investment plans to build capacity, improve capabilities and drive
productivity. Strip Tinning is confident that these investments, coupled
with strong customer relationships, will lead to valuable new supply
nominations in 2023, taking the Company back to growth in 2024.
(1)
https://www.acea.auto/pc-registrations/new-car-registrations-17-2-in-april-battery-electric-11-8-market-share/
R W Barton
Chief Executive Officer
Consolidated statement of comprehensive income
for the year ended 31 December 2022
Note 2022 2021
£'000 £'000
Revenue 3 10,230 11,150
Cost of sales (9,731) (7,872)
Gross profit 499 3,278
Other operating income 4 439 31
Administrative expenses 4 (5,864) (4,213)
Impairment loss 4 (577) -
Operating loss 4 (5,503) (904)
Finance expense 6 (147) (158)
Loss before taxation (5,650) (1,062)
Taxation 7 725 237
Loss and total comprehensive expense for the financial year (4,925) (825)
(33.7) (8.25)
Basic and diluted loss per share (pence) 8
All amounts relate to continuing operations.
There is no other comprehensive income in either the current or prior year.
Under the merger accounting principles applied, the statement includes the
results of the company and its subsidiary as if they had been combined
throughout the current and prior year.
Consolidated statement of financial position as at 31 December 2022
Note 31 December 2022 31
December
2021
£'000 £'000
Assets
Non current assets
Intangible assets 9 1,277 1,561
Right-of-use assets 10 1,151 1,142
Property, plant and equipment 11 2,950 3,089
5,378 5,792
Current assets
Inventories 13 1,848 2,014
Trade and other receivables 14 3,381 3,778
Tax recoverable 559 279
Cash at bank and in hand 1,290 337
7,078 6,408
Total assets 12,456 12,200
Liabilities
Current liabilities
Trade and other payables 15 (3,045) (4,413)
Borrowings 16 (553) (559)
Lease liabilities 17 (182) (152)
(3,780) (5,124)
Non current liabilities
Accruals and deferred income 15 (37) (162)
Borrowings 16 (992) (1,235)
Lease liabilities 17 (995) (1,104)
Provisions 20 (227) -
Deferred taxation 21 - (338)
(2,251) (2,839)
Total liabilities (6,031) (7,963)
Net assets 6,425 4,237
Equity
Called up share capital 22 154 -
Share premium account 22 6,966 -
Merger reserve 22 (100) -
Other reserve 22 (3) -
Accumulated loss/retained earnings (592) 4,237
Total equity 6,425 4,237
These financial statements were approved and authorised for issue by the board
on 6 June 2023 and were signed on its behalf by:
A Le Van
Director
Strip Tinning Holdings
plc
Registered number: 13832126
Company statement of financial position as at 31 December 2022
Note 31 December 2022
£'000
Assets
Non current assets
Investments 12 3,841
Current assets
Trade and other receivables 14 5,791
Cash at bank and in hand 414
6,205
Total assets 10,046
Liabilities
Current liabilities
Trade and other payables 15 (67)
Total liabilities (67)
Net assets 9,979
Equity
Called up share capital 22 154
Share premium account 22 6,966
Merger reserve 22 3,645
Other reserve 22 (3)
Accumulated loss (783)
Total equity 9,979
As permitted by section 408 of the Companies Act 2006, the parent Company's
profit and loss account has not been included in these financial statements.
The Company recorded a loss for the period from incorporation to 31 December
2022 of £879,000.
Consolidated statement of changes in equity for the year ended 31 December 2022
Share premium account Merger reserve Other reserve
Called up share capital £'000 Accumulated loss Total
£'000 £'000 £'000 £'000 Equity
£'000
Balance as at 1 January 2021 - - - - 5,104 5,104
Loss and total comprehensive expense for the financial year - - - - (825) (825)
Share based payment (note 23) - - - - 145 145
Share options deferred tax credit - - - - 225 225
Dividends paid (by Strip Tinning Limited) - - - - (412) (412)
Total contributions by owners - - - - (42) (42)
Balance as at 31 December 2021 - - - - 4,237 4,237
Loss and total comprehensive expense for the financial year - - - - (4,925) (4,925)
Share based payment (note 22, 23) - - - (3) 96 93
Capital reorganisation (note 22) 100 - (100) - - -
Issue of share capital (note 22) 54 6,966 - - - 7,020
Total contributions by owners 54 6,966 - (3) 96 7,113
Balance as at 31 December 2022 154 6,966 (100) (3) (592) 6,425
Company statement of changes in equity for the year ended 31 December 2022
Share premium account Merger reserve Other reserve Accumulated loss Total equity
Called up share capital £'000 £'000 £'000
£'000 £'000 £'000
On incorporation - - - - - -
Loss and total comprehensive expense for the financial year - - - - (879) (879)
Issue of share capital in exchange for Strip Tinning Limited shares (note 22) 100 - 3,645 - - 3,745
Issue of share capital (note 22) 54 6,966 - - - 7,020
Share based payment (note 22, 23) - - - (3) 96 93
Total contributions by owners 154 6,966 3,645 (3) - 10,858
Balance as at 31 December 2022 154 6,966 3,645 (3) (783) 9,979
Consolidated cash flow statement for the year ended 31 December 2022
2022 2021
£'000 £'000
Cash flow from operating activities
Loss for the financial year (4,925) (825)
Adjustment for:
Depreciation of property, plant and equipment 11 592 561
Depreciation of right-of-use assets 10 203 160
Amortisation of intangible assets 9 180 191
Impairment of intangible fixed assets 9 577 -
Loss on disposal of tangible fixed assets 55 -
Foreign exchange movements (9) -
Amortisation of government grants (49) (31)
IPO financing related costs in administrative expenses 314 -
Share based payment 23 96 145
Finance costs 6 147 158
Taxation credit 7 (725) (237)
Changes in working capital:
Decrease/(increase) in inventories 13 166 (492)
Decrease/(increase) in trade and other receivables 14 397 (1,605)
(Decrease)/increase in trade and other payables 15 (1,309) 3,022
Cash (used in)/generated from operations (4,290) 1,047
Income tax received 107 24
Net cash (used in)/generated from operating activities (4,183) 1,071
Cash flows from investing activities
Purchase of property, plant and equipment 11 (508) (737)
Proceeds on disposal of intangible fixed assets 15 -
Purchase of intangible assets 9 (488) (732)
Net cash used in investing activities (981) (1,469)
Cash flows from financing activities
Issue of share capital 22 8,094 -
Share issue costs paid 22 (1,077) -
Dividends paid to shareholders (by Strip Tinning Limited) - (412)
IPO financing related costs paid (314) -
Interest paid (147) (158)
Payment of lease liabilities (199) (136)
Loan advanced - 355
Hire purchase finance received 311 401
Loan repayments (73) -
Repayment of capital element of hire purchase contracts (487) (545)
Net cash generated from/(used in) financing activities 6,108 (495)
Net increase/(decrease) in cash and cash equivalents 944 (893)
Cash and cash equivalents at the beginning of the year 337 1,230
Foreign exchange movements 9 -
Cash and cash equivalents at the end of the year (all cash at bank and in 1,290 337
hand)
Notes to the financial statements
for the year ended 31 December 2022
1 Corporate information
Strip Tinning Holdings plc is a public company incorporated in the United
Kingdom and listed on the Alternative Investment Market. The registered
address of the Company is Arden Business Park, Arden Road, Frankley
Birmingham, West Midlands, B45 0JA.
The principal activity of the Company is as a holding company for a subsidiary
which manufactures automotive busbar, ancillary connectors and flexible
printed circuits (together the 'Group').
2 Accounting policies
Basis of preparation
The Group financial statements have been prepared in accordance with UK
adopted international accounting standards ("IFRS") and in accordance with the
requirements of the Companies Act 2006.
The parent Company financial statements have been prepared under applicable
United Kingdom Financial Reporting Standards 101: Reduced Disclosure Framework
("FRS101") and the requirements of the Companies Act 2006. The following FRS
101 disclosure exemptions have been taken in respect of the parent Company
only information:
· IAS 7 Statement of cash flows;
· IFRS 7 Financial instruments disclosures and;
· IAS 24 Key management remuneration.
The principal accounting policies applied in the preparation of these
consolidated and separate financial statements are set out below. These
policies have been consistently applied to all the years presented, unless
otherwise stated. There are no changes as a result of revised standards to the
policies applied by Strip Tinning Limited in its 2021 financial statements.
The financial statements have been prepared under the historical cost
convention. The financial statements and the accompanying notes are presented
in thousands of pounds sterling ('£'000'), the functional and presentation
currency of the Company, except where otherwise indicated.
Going concern
After making appropriate enquiries, the directors have a reasonable
expectation that the Company and the Group have adequate resources to continue
in operational existence for at least twelve months from the date of approval
of the financial statements. In adopting the going concern basis for preparing
the financial statements, the directors have considered a base case going
concern model and then modelled a series of severe but plausible downside
scenarios such as reductions in sales from potential conflicts, reduced market
demand for the company products, material price increases, the loss of a major
customer, or an unfavourable settlement of the remaining liability associated
with the termination of the EV contract. The results of this stress testing
suggested that with the financing arrangements available to the business and /
or realistic mitigating actions, the Group has adequate resources to continue
in operational existence. For this reason, the directors continue to adopt the
going concern basis in preparing the Group's and Company's financial
statements.
2 Accounting policies (continued)
Standards, amendments and interpretations in issue but not yet effective
Certain new standards, amendments and interpretations to existing standards
have been published that are mandatory for accounting periods beginning on or
after 1 January 2023 and which the Group has chosen not to adopt early. These
include the following standards which may be relevant to the Group:
- Amendment to IAS 1 regarding the classification of liabilities being based
on an entity's rights at the end of a reporting period and disclosure in
respect of material accounting policies;
- IAS 8 Amendments regarding the definition of accounting estimates;
- IAS 12 Amendments regarding deferred tax on leases which give rise to equal
amounts of taxable and deductible temporary differences on recognition;
- IFRS 16 Amendments to clarify how a seller-lessee subsequently measures sale
and leaseback transactions
As a result of initial review of the new standards, interpretations and
amendments which are not yet effective in these financial statements, none are
expected to have a material effect on the Company or Group's future financial
statements.
Use of estimates and judgments
The preparation of the financial statements in conformity with IFRS requires
management to make judgments, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on historical
experience, as well as expectations of future events and various other factors
that are believed to be reasonable under the circumstances, the results of
which form the basis of making the judgments about carrying values of assets
and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised and in any future periods affected. The estimates and
judgements 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.
Right-of-use assets
Estimation
The application of IFRS16 involves an estimation of the appropriate
incremental borrowing rate and of the relevant lease period. The rate is
reviewed in conjunction with the rates on similar borrowings and a judgement
has been made where there are break options by reference to business plans and
the most likely outcome. An increase in the rate of 1% would have reduced the
opening asset and liability by £67,000 with no impact on net assets, reduced
the depreciation charges by £6,000 a year and increased finance charges for
2021 and 2022 by approximately £10,000.
Property, plant and equipment
Estimation
Property, plant and equipment as set out in note 11 is depreciated over the
estimated useful lives of the assets. Useful lives are based on management's
estimates of the period that the assets will generate revenue, which are
reviewed annually for continued appropriateness and events which may cause the
estimate to be revised.
2 Accounting policies (continued)
Intangible assets
Judgement
The capitalisation of development costs set out in note 9 is subject to a
degree of judgement in respect of the point when the commercial viability of
new technology and know-how is reached, supported by the results of testing
and customer trials. The carrying values are shown in note 9.
Estimation
Capitalisation criteria in respect of financial recoverability involves
estimated forecasts of future sales and margins with assumptions based on
experience and trends when they are prepared which may change over time. At 31
December 2022 there was the specific impairment referred to in note 9 and the
group has performed a sensitivity analysis and noted that a reasonable change
in the underlying significant assumptions is not expected to result in an
impairment of an intangible asset.
Amortisation commences once management consider that the asset is available
for use, i.e. when it is judged to be in the location and condition necessary
for it to be capable of operating in the manner intended by management and the
cost is amortised over the estimated 5 to 8 year useful life of the know-how
based on experience of and future expected customer product cycles and lives.
Deferred taxation
Judgement
The recognition of deferred tax assets involves the assessment of forecasts in
respect of future results and taxable profits and judgement as to the
likelihood that these will be achieved and realise the assets.
Inventory
Judgement
The calculation of net realisable value provisions against inventory requires,
in particular, an assessment of whether materials or components can be
utilised in future production. Management use past experience and expectations
of future orders to judge whether inventory will not be used and therefore
requires a provision.
Basis of consolidation
The Company was incorporated on 6 January 2022 with one £0.01 ordinary share
and on 2 February 2022, became the Group parent Company when it issued
9,999,999 £0.01 ordinary shares in exchange for all the ordinary shares in
Strip Tinning Limited. In addition, options over ordinary shares in Strip
Tinning Limited were converted, on equivalent terms, to options over 813,045
shares in the Company. This is considered not to be a business combination and
outside the scope of IFRS3 Business Combinations. This is a key judgement.
and as a transaction where there was no change in the shareholders or holdings
is accordingly accounted for using merger accounting with no change in the
book values of assets and liabilities with no fair value accounting applied.
These consolidated financial statements of the Group are the first set of
financial statements for the newly formed Group. The prior period comparatives
are those of Strip Tinning Limited since no substantive economic changes have
occurred.
The consolidated financial statements present the results of the Company and
its subsidiary as if they have always formed a single group. Intercompany
transactions and balances between Group companies are therefore eliminated in
full. The share capital presented is that of Strip Tinning Holdings plc from
the date of the capital reorganisation in 2022 with the difference on
elimination of Strip Tinning Limited's capital being shown as a merger
reserve.
The consolidated statement of comprehensive income reflects the consolidated
results for the full financial year ended 31 December 2022, inclusive of the
results of the newly incorporated parent entity, plc, from 6 January 2022
onwards.
A subsidiary is an entity over which the Group has control. 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.
2 Accounting policies (continued)
Revenue
Revenue principally comprises income from the sale of automotive glazing
components comprising busbar, ancillary connectors and flexible printed
circuits together with a small degree of product tooling purchased by
customers and represents the amount receivable for the sale of these component
products or tooling, excluding VAT and trade discounts. Tooling is usually
retained by the Group and held as a fixed asset.
There are framework agreements with major customers including pricing per
component and purchase orders are then received from customers for each
delivery. Revenue is recognised to the extent that the performance
obligations, being the agreement to transfer the product meeting the technical
specifications is satisfied, which is when the customer obtains control of the
product or of the tooling and is able to benefit from or direct the use of the
product. The transfer takes place in accordance with the terms agreed with
each customer, either at the point in time the goods are despatched to or
received by the customer. Product is tested before dispatch, but any product
returned by the customer as faulty is treated as a reduction in revenue.
Any tooling revenue is recognised in full once the tooling project is complete
and in use to make parts for the customer.
When an amount has been invoiced or payment received in advance of the
associated performance obligations being fulfilled, any amounts due are
recognised as trade receivables and deferred income is recorded for the sales
value of the performance obligations that have not been provided.
Grants
Income based grants
Income based grants are recognised in other operating income based on the
specific terms related to them as follows:
· A grant is recognised in other operating income when the grant
proceeds are received (or receivable) provided that the terms of the grant do
not impose future performance-related conditions.
· If the terms of a grant impose performance-related conditions
including incurring related expenditure, then the grant is only recognised
in income as the related performance conditions are met.
· Any grants that are received before the revenue recognition
criteria are met are recognised in the statement of financial position as an
other creditor within liabilities.
Capital grants
Grants received relating to tangible and intangible fixed assets are treated
as deferred income and released to the income statement over the expected
useful lives of the assets concerned.
Employee benefits
The Group operates a defined contribution pension scheme. Contributions are
recognised in the statement of comprehensive income in the year in which they
become payable in accordance with the rules of the scheme.
Share based payment
The Company operates an equity-settled share-based compensation plan in which
the Group receives services from employees as consideration for share options.
The fair value is established at the point of grant using an appropriate
pricing model and then the cost is recognised as an expense in administrative
expenses in the statement of comprehensive income, together with a
corresponding increase directly in equity over the period in which the
services are fulfilled. This is the estimated period to vesting in respect of
employees. The cumulative expense recognised for equity-settled transactions
at each reporting date until vesting date reflects the extent to which the
vesting period has expired and the Group's best estimate of the number of
equity instruments that will ultimately vest.
Deferred tax credits in respect of the potential future tax deduction from
exercise of options are initially included in the tax in the statement of
comprehensive income. To the extent the potential corporate tax deduction
exceeds the share based payment charges, the deferred tax is taken directly to
retained earnings in equity in accordance with IAS12.
2 Accounting policies (continued)
Income tax
Current income tax assets and/or liabilities comprise obligations to, or
claims from, fiscal authorities relating to the current or prior reporting
periods, that are unpaid/due at the reporting date. Current tax is payable on
taxable profits, which may differ from profit or loss in the financial
statements. Calculation of current tax is based on the tax rates and tax laws
that have been enacted or substantively enacted at the reporting period.
Deferred taxes are calculated using the liability method on temporary
differences between the carrying amounts of assets and liabilities and their
tax bases. A deferred tax asset is recognised for all deductible temporary
differences to the extent that it is probable that taxable profit will be
available against which the deductible temporary difference can be utilised,
unless the deferred tax asset arises from the initial recognition of an asset
or liability in a transaction that is not a business combination and at the
time of the transaction, affects neither accounting profit nor taxable profit
(tax loss).
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the period when the asset is realised or the liability is
settled, based on tax rates and tax laws that have been enacted or
substantively enacted by the end of the reporting period.
Computer software
Computer software assets are capitalised at the cost of acquiring and bringing
into use the software. Subsequent to initial recognition it is stated at cost
less accumulated amortisation and accumulated impairment. Software is
amortised on a straight line basis over its estimated useful life of two
years. Amortisation on all intangible assets is recognised in administrative
expenses in the Statement of Comprehensive Income.
Research and development costs
An internally generated intangible asset arising from development (or the
development phase) of an internal project to improve the efficiency, design or
capability of the Group's product range is recognised if, and only if, all of
the following have been demonstrated:
· It is technically feasible to complete the development such that
it will be available for use, sale or licence;
· There is an intention to complete the development;
· There is an ability to use, sell or licence the resultant asset;
· The method by which probable future economic benefits will be
generated is known;
· There are adequate technical, financial and other resources
required to complete the development;
· There are reliable measures that can identify the expenditure
directly attributable to the project during its development.
The amount recognised is the expenditure incurred from the date when the
project first meets the recognition criteria listed above. Expenses
capitalised consist of employee costs incurred on development, direct costs
including material or testing and an apportionment of appropriate overheads.
Where the above criteria are not met, research and development expenditure is
charged to the income statement in the period in which it is incurred.
Capitalised development costs are initially measured at cost. After initial
recognition, they are recognised at cost less any accumulated amortisation and
any accumulated impairment losses.
The depreciable amount of a development cost intangible asset with a finite
useful life is amortised on a straight line basis over its useful life,
currently expected to range from 5 to 8 years. Amortisation begins when the
asset is available for use, i.e. when it is in the location and condition
necessary for it to be capable of operating in the manner intended by
management.
The amortisation period and the amortisation method for the assets with a
finite useful life is reviewed at least each financial year-end. If the
expected useful of the asset is different from previous estimates, the
amortisation period is changed accordingly.
Patent costs
Patent cost assets are initially measured at cost. After initial recognition,
they are recognised at cost less any accumulated amortisation and any
accumulated impairment losses. The costs are amortised over a 5 year estimated
useful life.
2 Accounting policies (continued)
Property plant and equipment
Property, plant and equipment is recognised as an asset only if it is probable
that future economic benefits associated with the item will flow to the Group
and the cost of the item can be measured reliably. An item of property, plant
and equipment that qualifies for recognition as an asset is measured at its
cost. Cost of an item of property, plant and equipment comprises the purchase
price and any costs directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in the
manner intended by management.
After recognition, all property, plant and equipment (including plant,
computer equipment and fixtures) is carried at cost less any accumulated
depreciation and any accumulated impairment losses. Depreciation is provided
at rates calculated to write down the cost of assets, less estimated residual
value, over their expected useful lives on the following basis:
Leasehold
improvements
straight line over life of lease
Plant and
machinery
2-15 year straight line
Office equipment
2 year straight line
Tooling
5 year straight line
The residual value and the useful life of an asset is reviewed at least at
each financial year-end and if expectations differ from previous estimates,
the changes are accounted for as a change in an accounting estimate in
accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors.
Gains or losses arising on the disposal of property, plant and equipment are
determined as the difference between the disposal proceeds and the carrying
value of the asset and are recognised in profit or loss.
Right-of-use assets and lease liabilities
Assets and liabilities arising from a lease with a duration of more than one
year are initially measured at the present value of the lease payments and
payments to be made under reasonably certain extension options are also
included in the measurement of the liability. The lease payments are
discounted using the interest rate implicit in the lease or the incremental
borrowing rate that the individual lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value to the right-of-use asset
in a similar economic environment with similar terms, security and conditions.
Lease payments are allocated between repayments of the discounted liability,
presented as a separate category within liabilities, and the lease liability
finance charges. The finance cost is charged to profit or loss over the lease
period to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. Right-of-use assets are measured at
cost comprising the amount of the initial measurement of lease liability, any
lease payments made at or before the commencement date less any lease
incentives received and any initial direct costs and are presented as a
separate category within tangible fixed assets.
Right-of-use assets are generally depreciated over the shorter of the asset's
useful life and the lease
term on a straight-line basis. If the Group is reasonably certain to exercise
a purchase option, the right-of-use asset is depreciated over the underlying
asset's useful life.
Any payments associated with short-term leases of equipment and all leases of
low-value assets would be recognised on a straight-line basis as an expense in
profit or loss. Short-term leases are leases with a lease term of 12 months or
less. There have been no significant short lease costs in the reporting
period. Associated costs of all leases, such as maintenance, service charges
and insurance, are expensed as incurred.
Impairment of intangible assets, right-of-use assets and property, plant and
equipment
For impairment assessment purposes, assets are grouped at the lowest levels
for which there are largely independent cash flows. As a result, some assets
are tested individually for impairment and some are tested at the overall
Group level. 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".
All individual assets or cash-generating units are reviewed for indicators of
impairment at the end of each period and tested for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be
recoverable.
An asset or cash-generating unit is impaired when its carrying amount exceed
its recoverable amount. The recoverable amount is measured as the higher of
fair value less cost of disposal and value in use. The value in use is
calculated as being net projected cash flows based on financial forecasts
discounted back to present value.The impairment loss is allocated to reduce
the carrying amount of the asset pro-rata on the basis of the carrying amount
of each asset in the unit. Non-financial assets that suffered an impairment
are reviewed for a possible reversal of the impairment at the end of each
reporting period. An impairment loss is reversed if the asset's or
cash-generating unit's recoverable amount exceeds its carrying amount.
2 Accounting policies (continued)
Inventories
Inventories are initially recognised at cost, and subsequently at the lower of
cost and net realisable value. Cost comprises all costs of purchase of raw
materials or bought in manufacturing components on a first in first out basis,
costs of conversion and an appropriate proportion of fixed and variable
overheads incurred in bringing the finished goods inventories to their present
location and condition. Net realisable value represents the estimated selling
price less costs to complete and sell. Where necessary, provision is made to
reduce cost to no more than net realisable value having regard to the nature
and condition of inventory, as well as its anticipated utilisation and
saleability.
Financial instruments
Financial assets
Financial assets are recognised in the statement of financial position when,
and only when, the Group becomes a party to the contractual provisions of the
instrument and are classified based upon the purpose for which the asset was
acquired. The Group's business model is to hold all assets recognised within
these financial statements to collect the cash flows.
Financial assets are initially recognised at fair value, which is usually the
cost, plus directly attributable transaction costs. These comprise trade and
other receivables and cash and cash equivalents.Financial assets are
subsequently measured at amortised cost using the effective interest method.
Discounting is omitted where the effect of discounting is immaterial.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade
receivables. The Group measures loss allowances at an amount equal to
lifetime ECL, which is estimated using past experience of the historical
credit losses experienced over the three year period prior to the period end.
Historical loss rates are then adjusted for current and forward-looking
information on macroeconomic factors affecting the Group's customers, such as
inflation rates. The gross carrying amount of a financial asset is written off
(either partially or in full) to the extent that there is no realistic
prospect of recovery.
The Group recognises loss allowances for expected credit losses (ECLs) on
financial assets measured at amortised cost.
A financial asset is derecognised when the contractual rights to the cash
flows from the financial asset expire, or when the financial asset and all
substantial risks and reward are transferred.
Financial liabilities
Financial liabilities include loans, hire purchase borrowings, lease
liabilities, trade and other payables and any derivatives in respect of
forward foreign exchange contracts. Financial liabilities are obligations to
pay cash or other financial assets and are recognised in the statement of
financial position when, and only when, the Group becomes a party to the
contractual provisions of the instrument.
Trade and other payables are initially recognised at fair value and
subsequently carried at amortised cost using the effective interest method.
Loans and hire purchase borrowings are are initially recognised at fair value
net of any transaction costs directly attributable to the issue of the
instrument and subsequently carried at amortised cost using the effective
interest method. Discounting is omitted where the effect of discounting is
immaterial.
Derivatives would be measured at fair value through profit and loss for any
movements. None have been entered into within the period of these financial
statements.
A financial liability is derecognised only when the contractual obligation is
extinguished, that is, when the obligation is discharged, cancelled or
expires.
The Group utilises hire purchase asset backed finance to fund tangible fixed
assets, drawing down finance against individual assets or bundles of assets,
which may directly finance the asset purchase or be drawn down
retrospectively. The economic ownership of assets subject to hire purchase
agreements are transferred to the Group if the Group bears substantially all
the risks and rewards of ownership of the asset. The related asset is
recognised and measured in accordance with the tangible fixed asset policy
with initial cost being the fair value of the asset. A corresponding hire
purchase liability.is recognised in respect of the capital repayments to be
made. These interest bearing liabilities are then measured at amortised cost
with the interest, under the effective interest method, expensed over the
repayment period at a constant rate.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together
with other short term, highly liquid investments that are readily convertible
into known amounts of cash and are subject to an insignificant risk of changes
in value
2 Accounting policies (continued)
Foreign currencies
Transactions entered into by the Group in a currency other than the functional
currency of sterling are recorded at the rates ruling when the transactions
occur. 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 the income statement in administrative expenses.
Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of past events, it is probable that an economic outflow
will occur and a reliable estimate can be made including any additional
evidence from post period end events. Where the timing of the estimate
represents a relatively certain amount it is provided for within accruals.
Equity and reserves
Share capital represents the nominal value of shares that have been issued.
Share premium represents the excess consideration received over the nominal
value of share capital upon the sale of shares, less any incidental costs of
issue. The company's merger reserve arises from the fair value attributed to
the shares issued in exchange for the subsidiary's shares as no share premium
account is recognised under Companies Act merger relief. On consolidation a
merger reserve arises as a result of the difference between the nominal value
of the parent company shares issued in exchange for subsidiary shares and the
nominal value of those subsidiary shares.
Retained earnings include all current and prior period retained profits.
Presentation of non statutory measures
The Group classifies certain one-off charges or credits that have a material
impact on the financial results but are not related to the core underlying
trading as 'exceptional' or 'non-recurring' items. These are disclosed
separately in note 4 and adjusted results to provide further understanding of
the financial performance of the Group.
3 Segmental reporting
IFRS 8, Operating Segments, requires operating segments to be identified on
the basis of internal reports that are regularly reviewed by the Group's chief
operating decision maker. The chief operating decision maker is considered to
be the executive Directors.
The Group previously comprised only one operating segment for the sale of
automotive circuit components for glazing products. The operating segments are
monitored by the chief operating decision maker and strategic decisions are
made on the basis of adjusted segment operating results. All assets,
liabilities and revenues are located in, or derived in, the United Kingdom.
However, the Group has commenced the development and initial sales of its
glazing circuits for electric vehicles ('EV' segment) which are expected to
grow to be a material segment. Separate management reporting and information
has now been prepared for 2022 at a revenue and gross profit level only for a
Glazing segment (sale of glazing circuits for petrol/diesel vehicles) and EV
as follows:
Glazing EV Total
Year ended 31 December 2022 £'000 £'000 £'000
Revenue 8,977 1,253 10,230
Cost of sales (8,650) (1,081) (9,731)
Gross profit 327 172 499
Other operating income 439
Administrative expenses (5,864)
Impairment loss (in EV) (577)
Finance expense (147)
Taxation 725
Loss for the year (4,925)
Some estimated information was derived for the year ended 31 December 2021 for
EV showing sales of £0.35m and net costs of about £1.1m as a result of the
increasing investment and development in this area of activity.
3 Segmental reporting (continued)
Turnover with the largest customers (including customer groups) representing
in excess of 10% of total revenue in the year for 3 customers (2021: 4
customers) has been as follows:
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Customer A 2,062 1,680
Customer B 1,709 2,392
Customer C 1,189 552
Customer D 867 2,091
Customer E 693 1,230
All revenue arises at a point in time and relates to the sale of automotive
busbar, ancillary connectors and flexible printed circuit product. Turnover by
geographical destination is as follows:
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
UK 967 319
Rest of Europe 5,571 6,074
Rest of the World 3,692 4,757
10,230 11,150
4 Operating loss
The operating loss is stated after charging/(crediting):
2022 2021
£'000 £'000
Operating loss is stated after charging/(crediting):
Other operating income
Amortisation of deferred government capital grant income (49) (31)
Government revenue grant income in respect of development work (389) -
Government job retention scheme income (1) (1)
Amortisation of intangible assets 180 191
Depreciation of property, plant and equipment 592 561
Depreciation of right-of-use assets 203 160
Loss on disposal of fixed assets 55 -
Cost of inventory sold 5,092 4,379
Research and development expenditure expensed in the year 925 114
Short term lease rentals 22 24
Foreign exchange (gains)/losses (45) 164
Exceptional or non-recurring costs
IPO preparation related costs 381 198
Restructuring related costs 529 -
Contract termination costs 382 -
Impairment of intangible fixed assets 577 -
Auditor's remuneration
For audit 85 62
For tax advisory services - 6
For other assurance services - 15
£232,000 of fees payable to the auditors in respect of IPO reporting
accountants related services were expensed or included in costs taken to the
share premium account.
5 Staff and key management
Year ended 31 December 2022 Year ended 31 December 2021
Average monthly number of employees
Number Number
Management 15 4
Sales 2 5
Production 146 140
Administration 5 4
168 153
Payroll costs £'000 £'000
Gross salaries 4,577 3,860
Social security costs 511 369
Share based payment 96 145
Contributions to money purchase pension schemes 318 233
5,502 4,607
In view of the size and nature of the Group, the Key Management Personnel in
the period is considered to comprise only the directors of the parent and
subsidiary companies. The Company directors' remuneration was as follows
(disclosed in aggregate in respect of Strip Tinning Limited directors in the
prior year).
Year ended 31 December 2022 Salary Benefits in kind Share based payment Pension Total
£'000 £'000 £'000 £'000 £'000
R W Barton 15 - - - 15
P George 37 - - - 37
A Le Van 140 4 12 8 164
A D Robson 86 - - - 86
M Taylor 37 - - - 37
315 4 12 8 339
Year ended 31 December 2021
Aggregate emoluments 335 - 145 13 493
Retirement benefits were accruing to 1 director in respect of defined
contribution schemes (2021: 2). The highest paid director in 2022 received
£156,000 of remuneration and £8,000 of employer pension contributions.
Key management remuneration was £941,000 (2021: £535,000) including £23,000
of pension contributions (2021: £13,000).
6 Finance costs
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Interest payable on hire purchase obligations 55 71
Bank interest 26 21
Lease liability finance charges 66 66
147 158
7 Income tax
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Current tax:
UK corporation tax (308) (195)
Adjustment for prior periods (79) -
Total current tax credit (387) (195)
Deferred tax:
Origination and reversal of temporary differences (349) (161)
Effect of change in tax rate - 135
Adjustment for prior periods 11 (16)
Total deferred tax credit (338) (42)
Total tax credit (725) (237)
The tax rate used for the reconciliation is the corporate tax rate of 19%
(2021: 19%) payable by corporate entities in the UK on taxable profits under
UK tax law. In May 2021 an increase to 25% from April 2023 was substantively
enacted and, as the expected period of reversal, is accordingly applied to
deferred tax balances at 31 December 2021 and 2022.
The credit for the year can be reconciled to the loss for the year as follows:
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Loss before taxation (5,650) (1,062)
Income tax calculated at 19% (2021: 19%) (1,074) (202)
Expenses not deductible 92 35
Enhanced research and development allowances (132) (84)
Enhanced capital allowances (29) (41)
Deduction on exercise of share options (34) -
Differing deferred and corporate tax rates (83) -
Deferred tax asset in respect of share options - (64)
Effect of change in deferred tax rate - 135
Deferred tax not recognised in respect of losses 603 -
Adjustment for prior periods (68) (16)
Total tax credit (725) (237)
In addition, a deferred tax credit of £nil (2021: £225,000) has been taken
directly to retained earnings in equity in accordance with IAS12. This is in
respect of the extent to which the potential corporate tax deduction exceeds
the share based payment charges.
8 Earnings per share
Year ended 31 December 2022 Year ended 31 December 2021
Loss used in calculating earnings per share (£'000) (4,925) (825)
Weighted average number of shares ('000) 14,612 10,000
Basic and diluted loss per share (pence) (33.7) (8.25)
Earnings per share has been calculated based on the share capital of the
parent company (and equivalent share capital for 2021). There are options in
place over 254,051 (2021: 813,045) shares that were anti-dilutive at the year
end but which may dilute future earnings per share.
9 Intangible assets
Development costs Patents Computer Total
Group £'000 software
£'000 £'000 £'000
Cost
At 1 January 2021 1,298 138 90 1,526
Additions 487 9 236 732
At 31 December 2021 1,785 147 326 2,258
Additions 430 1 57 488
Disposals - - (15) (15)
Removal of fully impaired assets (594) - - (594)
At 31 December 2022 1,621 148 368 2,137
Accumulated amortisation
At 1 January 2021 296 127 83 506
Charge for the year 180 5 6 191
At 31 December 2021 476 132 89 697
Charge for the year 176 4 - 180
Impairment in the year 577 - - 577
Removal of fully impaired assets (594) - - (594)
At 31 December 2022 635 136 89 860
Net book amount
At 31 December 2022 986 12 279 1,277
At 31 December 2021 1,309 15 237 1,561
The Group has a programme of research and development projects to improve the
efficiency and functionality of its products. Capitalised development costs
relate to the projects evaluated as viable and where the successful
developments are being applied and contributing to revenue.
Included within the carrying amount of the above, are assets held under hire
purchase agreements of £159,000 (2021: £159,000) relating to software.
Amortisation charged on these assets in the year amounted to £nil (2021:
£nil).
The 2022 impairment charge results from cancellation of a contract by a
customer for which design and development work had been carried out and
capitalised in 2021.
10 Right-of -use assets
Property leasehold Plant and machinery Total
Group assets assets
£'000 £'000
£'000
Cost
At 1 January 2021 1,656 136 1,792
Additions - 66 66
Disposals - (77) (77)
At 31 December 2021 1,656 125 1,781
Additions 212 - 212
Disposals - (13) (13)
At 31 December 2022 1,868 112 1,980
Accumulated depreciation
At 1 January 2021 465 91 556
Charge for the year 122 38 160
Disposals (77) (77)
At 31 December 2021 587 52 639
Charge for the year 168 35 203
Disposals - (13) (13)
At 31 December 2022 755 74 829
Net book amount
At 31 December 2022 1,113 38 1,151
At 31 December 2021 1,069 73 1,142
The financing charges in respect of right-of-use assets are disclosed in note
6 and the lease liabilities in 17. Short term rentals are disclosed in note 4
with no low value leases in either year. Right-of-use assets and lease
liabilities relate principally to property leases. The Group leases its main
operating premises, typically on a ten year lease, subject to periodic rent
reviews and potential breaks, with the intention and assumption made in
measuring assets and liabilities that the full period will be utilised. Total
cash outflows in respect of leases were £276,000 for the year ended 31
December 2022 (2021: £202,000).
11 Property, plant and equipment
Leasehold improvements Plant and machinery Tooling Office equipment Total
Group £000 £'000 £'000
£'000
£'000
Cost
At 1 January 2021 402 5,222 1,018 122 6,764
Additions 95 515 94 33 737
Disposals - (633) - - (633)
At 31 December 2021 497 5,104 1,112 155 6,868
Additions 19 408 65 16 508
Disposals (69) (31) (22) - (122)
At 31 December 2022 447 5,481 1,155 171 7,254
Accumulated depreciation
At 1 January 2021 236 3,000 512 103 3,851
Charge for the year 27 374 139 21 561
Disposals - (633) - - (633)
At 31 December 2021 263 2,741 651 124 3,779
Charge for the year 31 322 216 23 592
Disposals (62) (1) (4) - (67)
At 31 December 2022 232 3,062 863 147 4,304
Net book amount
At 31 December 2022 215 2,419 292 24 2,950
At 31 December 2021 234 2,363 461 31 3,089
Included within the carrying amount of the above, are assets held under hire
purchase agreements of £1,705,000 (2021: £1,482,000) relating to plant and
machinery and £100,000 (2021: £190,000) relating to tooling. Depreciation
charged on these assets in the year amounted to £213,000 (2021: £297,000).
12 Investments
Shares in group undertakings
Company £'000
Additions and at 31 December 2022 3,841
The Company acquired all of the shares in Strip Tinning Limited by a share for
share exchange on 2 February 2022 with the £3,745,000 cost of investment
recorded in accordance with IAS 27. £96,000 of additions also arise as a
result of the treatment of the share based payment charge in the subsidiary as
a capital contribution. Strip Tinning Limited is incorporated and registered
in England at Arden Business Park, Arden Road, Frankley Birmingham, West
Midlands, B45 0JA.It manufactures automotive busbar, ancillary connectors and
flexible printed circuits.
13 Inventories
31 December 2022 31 December 2021
Group £'000 £'000
Raw materials and consumables 1,536 1,714
Finished goods and goods for resale 312 300
1,848 2,014
An inventory impairment loss of £479,000 (2021: £nil) was recognised in the
year.
14 Trade and other receivables
Group Company
31 December 2022 31 December 2021 31 December 2022
Current £'000 £'000 £'000
Trade receivables 2,691 3,039 -
Impairment provision - (25) -
Net trade receivables 2,691 3,014
Amounts owed by group undertakings - - 5,776
Other receivables 267 131 -
Prepayments 423 633 15
3,381 3,778 5,791
The directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
Amounts owed by group undertakings are unsecured, interest free and have no
fixed repayment date.
The impairment charge and movement in the expected credit loss provision
against trade receivables is as follows:
£'000 £'000
At 1 January 2022/2021 25 -
Impairment charge for the year - 25
Debt written off (25) -
At 31 December 2022/2021 - 25
Ageing of trade receivables past their due dates but not provided were:
Less than 30 days overdue 30 to 60 days overdue More than 60 days overdue
£'000 £'000 £'000
31 December 2021 405 119 148
31 December 2022 498 289 237
The directors consider the credit quality of trade and other receivables that
are neither past due nor impaired to be of good quality with the impairment
charge arising principally from one former customer.
15 Trade and other payables
Group Company
31 December 2022 31 December 2021 31 December 2022
Current £'000 £'000 £'000
Trade payables 2,211 2,985 67
Other payables 41 - -
Taxation and social security 117 336 -
Accruals 476 715 -
Deferred income 200 377 -
3,045 4,413 67
Non current liabilities
Accruals - 19 -
Deferred income (grants) 37 143 -
37 162 -
16 Borrowings
Group Company
31 December 2022 31 December 2021 31 December 2022
Current liabilities £'000 £'000 £'000
Loans 74 61 -
Hire purchase liabilities 479 498 -
553 559 -
Non current liabilities
Loans 208 294 -
Hire purchase liabilities 784 941 -
992 1,235 -
Hire purchase obligations are secured by fixed charges over intangible and
tangible fixed assets and floating charges over other assets and undertakings
of the Group. All obligations fall due within five years with the exception of
£40,000 as at 31 December 2021. This related to a hire purchase liability of
£304,000 repayable over 6 years with interest at 7%. The total payments
including interest in respect of hire purchase liabilities are shown in note
18.
17 Lease liabilities
Group 31 December 2022 31 December 2021
£'000 £'000
Current 182 152
Due in one to five years 588 551
Due in more than five years 407 553
995 1,104
The total payments including interest in respect of lease liabilities are
shown in note 18.
18 Movements in total financing liabilities
Group Borrowings Lease liabilities Total financing
£'000 £'000 £'000
At 1 January 2021 1,583 1,326 2,909
Cash movements:
Lease liability payments - (136) (136)
Hire purchase finance advanced 401 - 401
Loan received 355 - 355
Hire purchase payments (545) - (545)
Interest paid (92) (66) (158)
Non-cash movements
Interest accrued 92 66 158
New lease liabilities - 66 66
At 31 December 2021 1,794 1,256 3,050
Cash movements:
Lease liability payments - (199) (199)
Hire purchase finance advanced 311 - 311
Hire purchase payments (487) - (487)
Loan repayments (73) - (73)
Interest paid (81) (66) (147)
Non-cash movements
Interest accrued 81 66 147
New lease liabilities - 120 120
At 31 December 2022 1,545 1,177 2,722
19 Financial instruments and capital management
Risk management
The Board has overall responsibility for the determination of the Company and
the Group's risk management objectives and policies. The overall objective of
the Board is to set policies that seek to reduce risk as far as possible
without unduly affecting the Group's flexibility. All funding requirements and
financial risks are managed based on policies and procedures adopted by the
Board of Directors. The Group is exposed to financial risks in respect of
market including foreign exchange risk, credit and liquidity risks.
19 Financial instruments and capital management (continued)
Capital management
The Group's capital comprises all components of equity which includes share
capital and retained earnings amounting to £6,425,000 at 31 December 2022
(2021: £4,237,000). The Company's objectives when maintaining capital are to
safeguard the entity's ability to continue as a going concern, so that it can
continue to provide returns for shareholders and benefits for other
stakeholders, and to provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk. The capital
structure of the Company consists of shareholders equity with all working
capital requirements financed from cash and major capital expenditure funded
by leases and hire purchase agreements.
The Company sets the amount of capital it requires in proportion to risk. It
manages its capital structure and makes adjustments to it in the light of
changes in economic conditions, the ability to finance capital purchases and
the risk characteristics of the underlying assets and activity. In order to
maintain or adjust the capital structure, the Company may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new
shares, or sell assets to reduce debt.
Market risks
These arise from the nature and location of the customer markets and include
foreign exchange rate risks.
The Group trades within European and other overseas automotive supplier
markets, and accordingly there is a risk relating to the underlying
performance of these markets. The directors monitor this and the foreign
exchange risk closely with the intention to foresee downturns in trade or
changes in the use of automotive components.
Foreign exchange risk
The Group trades with overseas customers and, whilst it has net foreign
currency balances, also makes a degree of purchases in the respective currency
and uses currency denominated accounts to defer conversion to sterling or to
utilise the currency when needed. There has therefore been a reduced
sensitivity to fluctuations in exchange rates although a 10% increase or
decrease in Euro and US dollar exchange rates against sterling could impact
the results by up to £150,000 or £50,000 as a reduction or increase in
profit respectively.
The Group had the following in net assets comprising cash, sales ledger and
purchase ledger balances denominated in foreign currencies:
31 December 2022 31 December 2021
£'000 £'000
Euro denominated 1,154 1,290
US dollar denominated 496 291
Interest rate risk
The Group makes use of fixed rate three to five year hire purchase agreements
to acquire property, plant and equipment with interest rates typically ranging
from 3.5% (new agreements in 2020 to 2022) to 7% (2018 and 2019); this spreads
the capital cost, ensures that the Group maintains sufficient cash resources
for working capital purposes and ensures certainty of total costs at the point
of acquisition of those assets. A 5 year term bank loan has also been drawn
upon at a fixed interest rate of 9.4%. These liabilities are set out in note
16.
Credit risk
Credit risk is the risk of financial loss if a customer or counterparty to a
financial instrument fails to meet its contractual obligations. The Group is
mainly exposed to credit risk from credit sales and attempts to mitigate
credit risk by assessing the creditworthiness of customers, including using
proforma terms for new customers and closely monitoring the payment record and
trends for each customer. The customers are principally tier 1 automotive
suppliers.
At 31 December 2022 trade receivables were £2,691,000 (31 December 2021:
£2,688,000) with 35% (31 December 2021: 25%) of the balance owed by one
customer group and 25% (2021: 36%) of the balance by 3 other customers with
operations based in a number of European and other countries.
The ageing of overdue debtors is included in note 14 with all amounts
subsequently substantially received. The impairments to trade or other
receivables in 2021 and 2022 have been immaterial and relate to a few smaller
customers.
Credit risk on cash and cash equivalents is considered to be minimal as the
counterparties are all substantial banks with high credit ratings.
19 Financial instruments and capital management (continued)
Liquidity risk
The maturity of the Group's financial liabilities including trade and other
payables, hire purchase and lease liability total payments with the interest
payable is as set out below. Current liabilities were payable on demand or to
normal trade credit terms, hire purchase and loan obligations were payable
monthly and lease liabilities quarterly. Hire purchase and lease liabilities
are used to manage liquidity by spreading the cost of payment for capital
purchases.
At 31 December 2022 Up to 1 year 1-2 years 2-5 years Over 5 years
£'000 £'000 £'000 £'000
Trade, other payables and accruals 2,728 - - -
Hire purchase obligations 548 391 511 -
Loans 92 92 170 -
Lease liabilities 240 217 513 762
3,608 700 1,194 762
At 31 December 2021 Up to 1 year 1-2 years 2-5 years Over 5 years
£'000 £'000 £'000 £'000
Trade, other payables and accruals 3,535 19 - -
Hire purchase obligations 557 455 565 47
Loans 92 92 254 -
Lease liabilities 213 200 521 610
4,397 766 1,340 657
Classification of financial instruments
All financial assets have been classified as at amortised cost, and all
financial liabilities have been classified as other financial liabilities
measured at amortised cost.
Financial assets
31 December 2022 31 December 2021
At amortised cost £'000 £'000
Trade receivables and other receivables 2,958 3,145
Cash and cash equivalents 1,290 337
4,248 3,482
Financial liabilities
31 December 2022 31 December 2021
£'000 £'000
At amortised cost
Trade payables, other payables and accruals 2,728 3,719
Hire purchase obligations 1,263 1,439
Loans 282 355
4,273 5,513
The directors consider that the carrying amount of the financial assets and
liabilities approximates to their fair values.
20 Provisions
The dilapidations provisions have been reassessed during 2022 in respect of
the group's rented properties and increased to allow for potential
reinstatement costs that may be incurred at the end of the leases in 2030
under the standard terms in the contracts. This primarily results in an
increase in the amount recognised in respect of the right of use assets for
property and in the discounted provisions liability which amounts to £227,000
at 31 December 2022.
Group Dilapidations provision
£'000
Transfer from accruals 71
Additions to right of use property assets 156
Liability at 31 December 2022 227
21 Deferred taxation
Group
Liability/(asset) in respect of: Accelerated Intangible R&D assets Share based payment Losses and other timing differences Total
capital allowances
£'000 £'000 £'000 £'000 £'000
As at 31 December 2020 487 190 - (72) 605
Credited to equity - - (225) - (225)
Credit to profit or loss 251 137 (83) (347) (42)
As at 31 December 2021 738 327 (308) (419) 338
Credit to profit or loss (7) (59) 308 (580) (338)
As at 31 December 2022 731 268 - (999) -
The Group has tax losses carried forward of approximately £6,900,000 (2021:
£1,570,000) and an unrecognised deferred tax asset of £790,000. The net
asset has not been recognised as it is not yet considered sufficiently
probable, in the short term, that the asset will be realised.
The Company has tax losses carried forward of £564,000 and an unrecognised
deferred tax asset of £141,000 in respect of these.
22 Share capital
The movements in share capital have been as follows:
Company and Group Number of £0.01 shares Nominal Share premium
£'000 £'000
Share issued on incorporation 1 - -
Shares issued in exchange for Strip Tinning Limited shares 9,999,999 100 -
EIS and VCT placing shares issued at £1.85 each 2,702,702 27 4,973
Other placing shares issued at £1.85 each 1,621,622 16 2,984
Exercise of options at £0.116 each 813,045 8 86
Shares issued to employee benefit trust at £0.01 each 322,345 3 -
Share issue costs (1,077)
15,459,714 154 6,966
The Company was incorporated with one £0.01 share and on 2 February 2022
issued 9,999,999 £0.01 shares in exchange for all of the issued share capital
in Strip Tinning Limited. Merger relief arises under the Companies Act from a
share premium and in accordance with IAS 27 for such a transaction with no
change in control, the consideration was recorded at the Strip Tinning Limited
net asset value of £3,745,000 (£0.375 per share) in the company, £100,000
of nominal share capital and a merger reserve of £3,645,000.
The issue of shares with a nominal value of £100,000 in exchange for the
2,000 £0.10 shares in Strip Tinning Limited with a nominal value of £200
results in a debit to a merger reserve of £99,800 in the consolidated
financial statements, presented as a capital reorganisation after
consolidating applying the merger accounting principles as set out in note 2.
On 10 February 2022, the Company issued a further 4,324,324 £0.01 shares at
£1.85 each and 813,045 £0.01 shares at £0.116 each on exercise of share
options. On 16 February 2022 the Company was listed on AIM. The issue of these
shares in February 2022 resulted in a share premium of £6,966,000 (net of
£1,077,000 of share issue costs).
On 2 November 2022, 322,345 £0.01 ordinary shares were issued to the Employee
Benefit Trust in respect of an employee incentive scheme with a 3 year vesting
period and the nominal value of £3,000 has been debited to an other reserve.
All £0.01 ordinary shares rank equally with the right to receive dividends
and capital distributions.
23 Share based payment
Options were granted on 24 August 2018 over 354 £0.10 A Ordinary Shares in
Strip Tinning Limited ('STL') at an exercise price of £267 per share. These
options were only exercisable on a sale of the company or on a listing and had
the right to share only pro-rata with the Ordinary Shares in the capital
proceeds in excess of £10 million, receive dividends at the discretion of the
directors and have voting rights. They were exchanged for an equivalent
813,045 options in the Company's £0.01 shares with no change in the value of
the options, exercisable at £0.116 per share and exercised in February 2022
when the share price was £1.85. The fair value of £1,345 per STL A option
share was derived using a Black Scholes option pricing model applying a risk
free rate of 1% and an estimated volatility of 40%. The remainder of the
original fair value of £48,000 was expensed on exercise (2021: 4 year
estimated vesting period and charge of £145,000).
Options over parent company shares under a Long Term Incentive Plan were
granted in February 2022 with an exercise price of £0.01. These were subject
to a 3 year vesting period. Options over 122,702 shares required a total
shareholder return ('TSR') target to be achieved and 129,188 earnings and
gross profit targets to be achieved. 42,162 of those subject to a TSR return
and 42,162 subject to earnings targets lapsed when the director left on 31
March 2022. The respective fair values of £0.92 (TSR market condition and
probability applied) and £1.841 (earnings target conditions) have been
calculated using a Black Scholes option pricing model applying the 3 year
vesting period, share price of £1.85 at date of grant, a risk- free rate of
2%, expected dividends of nil and estimated volatility of 45% with a £26,000
charge in the year.
23 Share based payment (continued)
Further options under the plan were granted in May 2022 with an exercise price
of £0.01. These were subject to a 3 year vesting period. Options over 30,270
shares required a total shareholder return ('TSR') target to be achieved and
56,216 earnings and gross profit targets to be achieved. The respective fair
values of £0.733 (TSR market condition and probability applied) and £1.466
(earnings target conditions) have been calculated using a Black Scholes option
pricing model applying the 3 year vesting period, share price of £1.475 at
date of grant, a risk -free rate of 2%, expected dividends of nil and
estimated volatility of 45% with a £10,000 charge in the year.
On 2 November 2022, employees were granted a total of 322,345 of free shares
subject to a 3 year vesting period. The fair value of £0.725 per share has
been calculated using a Black Scholes option pricing model applying the 3 year
vesting period, share price of £0.725 at date of grant, a risk -free rate of
3%, expected dividends of nil and estimated volatility of 50% with a £12,000
charge in the year.
In view of the short period since listing, volatility has been estimated by
reference to similar shares. Unexpired options have an average vesting period
remaining at 31 December 2022 of 2.5 years.
The movements in share options have been as follows:
Weighted average exercise price Transfer of Strip Tinning Limited options PSP Employee free share scheme
£ scheme
Number Number Number
On incorporation - - - -
Conversion of STL options 0.116 813,045 - -
Granted in the year 0.005 - 338,375 322,345
Exercised 0.116 (813,045) - -
Lapsed 0.01 - (84,324) -
As at 31 December 2022 0.004 - 254,051 322,345
24 Capital commitments and contingent liabilities
The Group had capital commitments contracted but not provided for of £303,000
at 31 December 2022 (2021: £nil). The company had no capital commitments.
Following the notification of the termination of an EV contract in July 2022,
effective October 2022, the business has been working hard to reach a fair
settlement and mitigate the liabilities associated with the contract. The
company and the EV customer continue to work closely together to reach a full
and final resolution. Commercial negotiations are now at an advanced stage and
as at the financial statements signing date, a single commercial claim
remained outstanding to settle between the company, the EV customer, and a
supplier on the programme. Whilst the supplier has claimed additional amounts
up to point of termination, they had actually received advanced payment for
work carried out and additional costs have not been supported or justified. A
conclusion is expected to be reached within 2023 with an outcome that is
broadly neutral to the Strip Tinning Group.
25 Post balance sheet events
The business is in the process of transitioning to an alternative banking
facility with a new provider. This is a managed process by mutual agreement
and the new arrangements are expected to be on similar terms and provide the
same initial level of headroom as the previous CID facility was intended to.
The transfer is anticipated to complete by 31 August 2023.
26 Control and related party transactions
At 31 December 2022, the Company was an ultimate parent company. Mr R Barton
was considered to be the ultimate controlling party. The key management
personnel are considered to be the directors. Please refer to note 5 for
details of key management personnel remuneration.
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