REG - Strip Tinning Hldgs - Final Results
21/06/2022 07:00
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RNS Number : 5532P Strip Tinning Holdings PLC 21 June 2022
21 June 2022
Strip Tinning Holdings plc
("Strip Tinning" or the "Company")
Final Results for the year ended 31 December 2021
Strip Tinning Holdings plc (AIM: STG), a leading supplier of specialist
connectors to the automotive sector, is pleased to announce the audited
results for Strip Tinning Limited ("STL") the Group's wholly owned operating
subsidiary for the year ended 31 December 2021.
The Company was incorporated on 6 January 2022 as Strip Tinning Holdings
Limited and on 7 February re-registered as public company changing its name to
Strip Tinning Holdings plc, ahead of its admission to AIM. The Company is the
holding company of the Group. Save for the Company and STL there are no other
companies within the Group.
Financial highlights:
· Group revenues and underlying EBITDA are in line with market
expectations
o Revenues up 29% to £11.1m (FY20: £8.6m)
o Underlying EBITDA of £0.5m (FY20: £1.3m) in spite of considerable
investment in EV and adverse headwinds of COVID and materials
shortages/delays.
Operational highlights:
· New factory unit taken on to support growth;
· New lamination cell successfully commissioned;
· Glazing order successes include connector contracts worth £2.3m
annualised revenue, the majority of which are connectors for electric vehicle
programmes;
· €10m multi-year series production order won in new Electric Vehicle
(EV) division.
Post period end highlights:
· Successful listing on AIM, raising £6.8m to invest in growth;
· Appointment of new MD for Glazing;
· Significant new 10 year supply agreement signed for €3m of
incremental Busbar sales with second biggest customer
· Appointment of a German business development consultant to further
develop opportunities in the EV side of the business
Richard Barton, Group Chief Executive Officer of Strip Tinning, commented:
"Despite the unfavourable market conditions which we are currently
experiencing, the resilience of the business has come to the fore. Confidence
in the medium and long-term prospects of the business is as unwavering as it
has ever been, as demonstrated by the EV side of the business which is
performing ahead of our expectations. Whilst the short-term sector-wide
headwinds faced are frustrating, our extensive experience within the industry
and our longstanding relationships with customers underpin our belief in a
strong recovery once the market brightens".
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
Will Goode
Alex Bond
James Fischer
Alma PR (Financial
PR)
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
Introduction
I am delighted to report on the progress of Strip Tinning for the first time
as a public company following its successful listing onto AIM on 16(th)
February 2022, and to have joined a Company with such a rich history in the
automotive sector. I would like to also welcome and thank those shareholders
who joined us at IPO and thereafter.
Despite the challenging market conditions we have faced, we have made good
strategic progress across both our Glazing and EV business units and the FY21
results we are reporting today represent a robust performance for the Company
in spite of the challenging trading environment we find ourselves in. Our
strategy remains unchanged whilst dealing with the well-documented short-term
headwinds, in remaining a leading supplier of specialist connectors for
Glazing for all classes of automotive vehicles manufactured worldwide and to
become a leading supplier of connector sub-assemblies to the EV market. There
is no doubt that once the market brightens, we anticipate significant future
growth and we continue to invest to be able to meet this future demand.
2021 Financial Results
The Group achieved revenues and underlying EBITDA in 2021 in line with the
Board's expectations. Revenues increased by 29% to £11.1m (FY20: £8.6m) and
underlying EBITDA was £0.5m (FY20: £1.3m), remaining positive despite the
considerable investment made in EV and the adverse headwinds of COVID and
materials shortages/delays.
People
None of this would be possible without the diligence shown by our people, who
have risen to every challenge posed to them. Strip Tinning's long, successful
past is built on a foundation of passionate, hardworking employees and this
has been more apparent than ever. This record performance is a reflection of
that endeavour and on behalf of the Board, I offer them my sincere thanks.
Board and governance
The newly formed Board, established at the time of IPO, brings with it a
wealth of experience. I am delighted to be joined alongside by Paul George,
senior independent director and a senior figure from the accountancy
profession as well as a fellow automotive sector specialist, Matthew Taylor,
who brings years of experience in managing high growth businesses.
Looking ahead
Uncertainty in the global and UK economies has persisted into 2022, with the
softening of the European car market and supply chain disruptions heightened
by Russia's invasion of Ukraine. Whilst FY22 performance of the Glazing side
of the business is being impacted, we are encouraged by the performance of the
EV business unit, which is performing ahead of our FY22 expectations. In
dealing with the external factors impacting the business, great care is being
taken to ensure that overheads are reduced where appropriate in line with
lower than budgeted sales, whilst retaining all the key resources necessary
for protecting the growth activities in the business, on the EV side in
particular.
It is frustrating that external factors beyond the Company's control will
affect Glazing performance this year, but we remain confident in the
medium-term prospects of the business, as illustrated by the progress made in
sales developments which will contribute to future revenue growth.
Adam Robson
Chairman
Chief Executive Officer's Report
Introduction
I am pleased to be reporting on Strip Tinning's FY21 Results, which are in
line with management expectations as we entered the year. The period under
review has seen uncertainty and challenging economic conditions, but I take
great pride in the manner with which we dealt with the impacts of COVID-19 on
working practises during the year, whilst also preparing for the Company's IPO
on AIM. Significant strategic progress has also been made across both our
Glazing and new EV business units. Although current post-period trading has
been hampered by market factors outside of our control, there is a strong
degree of confidence in the medium-term prospects of the business.
The Group consists of two business lines; Automotive Glazing and Electric
Vehicle battery sub-systems ("EV"). Over 90 per cent. of the Group's
historical sales have related to Glazing systems, however the proportion of
revenue generated from the EV division will considerably increase as the
Company exploits the significant new opportunities in this fast growing space.
2021 Performance
As a result of the COVID-19 pandemic, increased material, shipping and labour
costs all impacted margin in the period. Despite this, FY21 represented a
record sales year for Strip Tinning at £11.1m (FY20: £8.6m), underlining the
considerable demand for our product range. This record performance is made all
the more impressive in the context of the challenges faced. As manufacturers,
it is not possible to work from home and the protocols required to maintain
safe COVID-19 operating conditions have had direct costs and also reduced
productivity. Our automation programme was adversely impacted by delays in
commissioning new kit and inability to travel, leading to lower output
requiring costly mitigating actions to fulfil customer demand. The ability
with which the business successfully navigated the operational challenges
faced during the financial year and ultimately delivered record performance,
is testament to the strong foundations upon which we are built and our
robustness as a Group.
These challenges have been faced by our suppliers also, resulting in increased
costs and irregular deliveries. Global metal price increases, including for
the copper and tin that underpin our product lines, have been well documented.
The margin challenges became more pronounced as the year progressed. Although
presenting short-term difficulties, it has led the business to review its
procurement and sourcing strategy in particular, both for cost and continuity
of supply, which will deliver enhanced long-term performance.
Glazing
Strip Tinning has a long, established history in glazing connectors. Glazing
connectors are used on all vehicle types wherever electrical functionality is
embedded within the glass. The market has grown substantially in conjunction
with the introduction of laminated three-layer front windscreens. The
automotive glass market size as of 2021, according to Research and Markets, is
estimated to be $16.5bn, and is expected to grow to $23bn by 2026 (7% CAGR;
c$1.2bn growth YoY).
On the Glazing side, deliveries of our innovative roof connectors and patented
and Pb lead -free back lite connectors began during the year. These product
launches mean that Strip Tinning is the only automotive glazing supplier able
to provide the full suite of connector products, comprising busbar, front /
roof / rear connectors, and connectors in Flexible Printed Circuit (FPC) form.
On the back of these new capabilities, the company has secured extensive new
orders in connectors and a significant new 10 year supply agreement signed for
€3m of incremental Busbar sales with our second biggest customer.
EV
The transition of the automotive sector towards EV is providing significant
new growth opportunities for the Group, with battery-related products
representing the principal opportunity. The new EV business unit has been
developed based on the combination of Strip Tinning's core skills in busbar,
connectors, FPC, and plastic encapsulation to create a Cell Management Systems
(CMS) for EV batteries. The foundation for these has been the commissioning of
a new lamination cell and the addition of a third 7,690 sq. ft building on our
site which now houses our growing EV activities.
Providing thermal management (safety) and voltage control (performance and
efficiency), this product is suitable for all battery technologies
(cylindrical, prismatic, pouch) and "clunk clicks" to the battery pack. The
wiring looms traditionally used in this application are heavy, and labour
intensive to manufacture and assemble to the battery. The CMS has considerable
advantages over the traditional wiring looms it replaces:
- Automated processes allows on-shoring production of CMS versus
reliance on low cost of labour country supply of wiring looms;
- Much lighter weight and space saving with design simplification
opportunities for customers;
- Reduced assembly cost to customer - "clunk click" attachment as
opposed to labour intensive manual connection of wiring loom to individual
terminals;
- Increased OEM efficiency - option to supply onto vehicle assembly
line already tested and connected to battery pack for a quicker assembly time
/ reduced SKUs;
- Increased end product quality - designed for perfect fit,
eliminates wiring errors from manual processes.
The EV division continued to successfully meet progress milestones for CMS
with multiple customers for projects with serial Start of Production dates in
2023 and 2024. The year culminated in a major contract award with a
prestigious, established automotive OEM worth €2m per annum, to commence
production volume supply in H2 2023.
These strategic milestones provide foundations for further growth, as
established OEMs provide external validation of the Strip Tinning product
offering across both business units.
Our IPO
I am delighted that the company completed a long planned Initial Public
Offering (IPO) on the London AIM market on 16 February 2022. The net
proceeds from the sales amounted to £6.8m destined to be invested in
accelerating the growth of both our Glazing and EV divisions. The IPO has
also brought us the rigour of having an external board, a new set of highly
supportive investors and the visibility and credibility that comes with being
a public company. Lastly it will enable us to engage all our employees with
participation in share based incentive schemes.
The Company has already started to invest the funds in line with the strategy
set out at the time of Admission.
People
I would like to thank all the company's employees for their hard work and
dedication over the last year made especially difficult by the Covid
epidemic. I am delighted that with the company's IPO now completed we will
be able to reward all our employees with participation in a new Share
Incentive Plan.
I would also like to welcome to the company a large number of new employees,
especially in our engineering and management team and onto our new Board.
Notable amongst these are Mark Perrins the new MD of Glazing who has joined us
from Plastic Omnium and our three new non-executive directors Adam Robson,
Paul George and Matthew Taylor who between them bring a wealth of automotive
and public company experience.
ESG
Strip Tinning is intent on being a leader in ESG performance. We have been
particularly focussed on our environmental responsibilities: we already
recycle all scrap metals and paper and we are encouraging all employees to
move towards driving electric cars, with free charging available. All Company
cars were mandated to be EVs from August 2021. The Company is determined to
move well beyond this towards being net carbon zero, a move which is not only
the right thing to do but which also matches its customers' and employees'
aspirations (and in the future their requirements). During 2022 a full review
of the Company's carbon footprint will be conducted and a detailed plan
towards net-zero will be agreed. Capital expenditure for the expected required
actions has been allowed for in the Group's capital plans.
As a company subject to the rigorous standards required of any mainstream
automotive supplier, the Company has long reached for the very highest
standards of environmental, social and governance standards and we have built
on this heritage to establish the strategy, processes, and governance rules
and procedures for the company. The success of this approach has been shown by
the ESG evaluation A score (the highest possible rating) received from
Integrum ESG ("Integrum") in January 2022 after the Company's management team
provided Integrum with detailed answers to an extensive 32 questionnaire which
was then processed through Integrum's established scoring engine.
Outlook
Uncertainty in the global and UK economies has persisted into 2022. The
European car market, which accounted for 57% of Group sales in 2021, has
softened considerably with passenger car registrations declining 20.6% in
April 2022 compared to the same period in 2021. Supply chain disruptions have
been heightened by Russia's invasion of Ukraine, which has worsened the
shortage of semiconductors and wiring harnesses, and recent COVID-19 related
lockdowns in Shanghai have all negatively affected car production, with a
number of OEM plants halting production. These uncertainties are likely to
continue in the near term and will continue to impact the Glazing business.
Volumes are down overall (especially on diesel passenger vehicles) due to the
current supply constraints and uncertainties, but all contracts are long term
supply agreements of around 5 years, with recurring annual revenues and Strip
Tinning will benefit from the start of production from new nominations in
2022, including connectors for a high volume, high profile electric vehicle
launch.
Promisingly, no reduction in demand or interest has been seen in the EV
business unit for the CMS product with a strong pipeline of enquiries, with
this side of the business performing ahead of expectations for FY22. There is
strong momentum in the EV side of the business and we have been further
boosted by the post year end recruitment of a European sales lead with strong
contacts into the German OEMs. The funds raised from the IPO will assist Strip
Tinning to benefit from its early mover advantage with the CMS product. We are
well placed within a market only set to expand further.
Strip Tinning has proved its resilience over a 60 year history. Whilst it is
frustrating that factors outside of our control have had such an impact on the
Glazing side of our business, I am proud of the manner in which we are dealing
with the current challenges. With cost control actions underway to adjust to
the current environment, we remain confident in the medium and long term
outlook for Glazing products and are seeing undiminished demand for EV
products.
Richard Barton
Chief Executive Officer
Statement of Comprehensive Income for the year ended 31 December 2021
Notes Year ended 31 December 2021 Year ended 31 December 2020
restated
£'000 £'000
Revenue 3 11,150 8,555
Cost of sales (7,872) (5,024)
Gross profit 3,278 3,531
Other operating income 4 31 104
Administrative expenses (4,213) (3,173)
Operating (loss)/profit 4 (904) 462
Finance costs 6 (158) (113)
(Loss)/profit before taxation (1,062) 349
Taxation 7 237 (131)
(Loss)/profit and total comprehensive (expense)/income for the year
(825) 218
All amounts relate to continuing operations.
Note 26 sets out the impact of transition and restatements.
The accompanying notes form part of these financial statements.
Statement of Financial Position as at 31 December 2021
Notes 31 December 2021 31 December 2020 1 January 2020
restated
restated
£'000 £'000 £'000
ASSETS
Non-current assets
Intangible assets 9 1,561 1,020 863
Right-of-use assets 10 1,142 1,236 1,010
Property, plant and equipment 11 3,089 2,913 2,369
5,792 5,169 4,242
Current assets
Inventories 12 2,014 1,522 1,276
Trade and other receivables 13 3,778 2,173 2,309
Corporation tax receivable 279 108 60
Cash and cash equivalents 337 1,230 1,315
6,408 5,033 4,960
Total assets 12,200 10,202 9,202
LIABILITIES
Current liabilities
Trade and other payables 14 (4,413) (1,190) (1,320)
Borrowings 15 (559) (539) (320)
Lease liabilities 16 (152) (122) (127)
(5,124) (1,851) (1,767)
Non-current liabilities
Accruals and deferred income 14 (162) (394) (142)
Borrowings 15 (1,235) (1,044) (546)
Lease liabilities 16 (1,104) (1,204) (948)
Deferred tax liabilities 19 (338) (605) (449)
(2,839) (3,247) (2,085)
Total liabilities (7,963) (5,098) (3,852)
Net assets 4,237 5,104 5,350
EQUITY
Share capital 21 - - -
Retained earnings 4,237 5,104 5,350
Total equity 4,237 5,104 5,350
The following notes form part of these financial statements.
Statement of Changes in Equity for the year ended 31 December 2021
Note Share Retained earnings Total equity
capital
£'000 £'000 £'000
At 1 January 2020 as restated 26 - 5,350 5,350
Profit and total comprehensive income for the year - 218 218
Share based payment 22 76 76
Dividends paid 8 - (540) (540)
At 31 December 2020 as restated
26 - 5,104 5,104
Loss and total comprehensive expense for the year - (825) (825)
Share based payment 22 - 145 145
Share options deferred tax credit 7 - 225 225
Dividends paid 8 - (412) (412)
At 31 December 2021 - 4,237 4,237
The accompanying notes form part of these financial statements.
Statement of Cash Flows for the year ended 31 December 2021
Notes Year ended 31 December 2021 Year ended 31 December 2020
£'000 £'000
Cash flow from operating activities
(Loss)/profit for the financial year (825) 218
Adjustment for:
Depreciation of property, plant and equipment 11 561 505
Depreciation of right-of-use assets 10 160 152
Amortisation of intangible assets 9 191 149
Amortisation of government grants (31) (33)
Share based payment 145 76
Finance costs 6 158 113
Taxation (credit)/charge (237) 131
Changes in working capital:
(Increase) in inventories 12 (492) (246)
(Increase)/decrease in trade and other receivables (1,605) 135
13
Increase in trade and other payables 14 3,022 123
Cash generated from operations 1,047 1,323
Income tax received/(paid) 24 (23)
Net cash from operating activities 1,071 1,300
Cash flow from investing activities
Purchase of property, plant and equipment (737) (1,049)
Purchase of intangible assets 9 (732) (306)
Net cash used in investing activities
(1,469) (1,355)
Cash flow from financing activities
Dividends paid to shareholders 8 (412) (540)
Interest paid (158) (113)
Payment of lease liabilities 16 (136) (127)
Government grants received - 33
Loan advanced 355 -
Hire purchase finance received 401 1,120
Repayment of capital element of hire purchase contracts
15 (545) (403)
Net cash used in financing activities (495) (30)
Decrease in cash and cash equivalents
(893) (85)
Net cash and cash equivalents at beginning of the year
1,230 1,315
Net cash and cash equivalents at end of year (all cash balances)
337 1,230
The notes on pages 16 to 39 form part of these financial statements.
Notes to the Financial Statements for the year ended 31 December 2021
1. Corporate information
Strip Tinning Limited is a company incorporated in the United Kingdom. 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 the manufacture of automotive busbar,
ancillary connectors and flexible printed circuits.
2. Accounting policies
2.1. Basis of preparation
These financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the United Kingdom in
conformity with the Companies Act 2006. IFRS has been applied with a
transition date from 1 January 2020.
The accounting policies have been applied consistently to all periods
presented, unless otherwise stated.
These are the first period of statutory financial statements prepared under
IFRS and the impact of transition is set out in note 26. IFRS 1 First-Time
Adoption of International Financial Reporting Standards allows first-time
adopters certain exemptions from the retrospective application of certain
IFRSs and no significant exemptions have been applied.
The financial statements have been prepared under the historical cost
convention with the exception of the fair values applied in accounting for
share based payments. 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
The directors have considered the principal risks and uncertainties facing the
business, along with the Company's objectives, policies and processes for
managing its exposure to financial risk.
In making this assessment the directors have prepared cash flows for the
period ending 30 June 2023, being a period of 12 months from the expected date
of approval of the financial statements. The listing on AIM in February 2022
raised a net £6.8m for the Company including the funding for planned
investment where there is discretion in the timing and commitment to
expenditure. Whilst there are major current inflationary and supply chain
pressures in the industry these forecasts therefore show that with the funds
available, the Company has sufficient resources to enable it to manage
significant fluctuations in results and to continue to meet its liabilities as
they fall due.
Based on the above factors, the directors have prepared the financial
statements on a going concern basis.
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.
Accounting policies (continued)
Share based payment
The company has used an option-pricing model where applicable, with inputs, in
particular volatility in respect of a company without a quoted share price,
representing a key estimate in the calculation (Notes 23 and 26).
Right-of-use assets
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 (Note 26). 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 £5,000 a year and increased
finance charges for 2018 to 2020 by approximately £7,000 a year.
Property, plant and equipment
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.
Intangible assets
The capitalisation of development costs set out in note 10 is also subject to
a degree of judgement in respect of the timing when the commercial viability
of new technology and know-how is reached, supported by the results of testing
and customer trials, and by forecasts for the overall value and timing of
sales which may be impacted by other future factors which could impact the
assumptions made. The carrying values are shown in note 10.
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.
2.2. Revenue
Revenue principally comprises income from the sale of automotive glazing
components comprising busbar, ancillary connectors and flexible printed
circuits together with any related product tooling purchased by customers and
represents the amount receivable for the sale of these component products or
tooling, excluding VAT and trade discounts.
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 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.
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 contract liabilities are recorded for the
sales value of the performance obligations that have not been provided.
Accounting policies (continued)
2.3. 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 do impose performance-related conditions
then the grant is only recognised in income when the performance-related
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.
2.4. Employee benefits
The Company 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.
2.5. Share based payment
The Company operates an equity-settled share-based compensation plan in which
the Company 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 Company'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.
2.6. 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.
Accounting policies (continued)
2.7. 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 in the Statement of Comprehensive Income on a straight line basis
over its estimated useful life of two years. These costs are recognised in
administrative expenses.
2.8. 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 Company'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 allocated on a systematic 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.
2.9. 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.
Accounting policies (continued)
2.10. 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
Company 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 15% reducing
balance
Plant and machinery 15%
reducing balance
Specialised Workshop Equipment 50% straight line
Office equipment
50% straight line
Tooling
25% reducing balance
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.
2.11. 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 so as 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 Company 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.
Accounting policies (continued)
2.12. Impairment of intangible 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
Company cash-generating unit level.
All individual assets or cash-generating units are 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.
2.13. 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, 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.
2.14. Financial instruments
Financial assets
Financial assets are recognised in the statement of financial position when,
and only when, the Company becomes a party to the contractual provisions of
the instrument and are classified based upon the purpose for which the asset
was acquired. The Company'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 company applies the IFRS 9 simplified approach to measuring expected
credit losses using a lifetime expected credit loss provision for trade
receivables. The company 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 company'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 company 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.
Accounting policies (continued)
Financial liabilities
Financial liabilities include loans, hire purchase borrowings, 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 Company 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 Company 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 Company if the Company 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.
2.15. 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.
2.16. Foreign currencies
Transactions entered into by the Company 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.
2.17. Provisions
Provisions are recognised when the Company 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.
2.18. 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.
Retained earnings include all current and prior period retained profits.
Accounting policies (continued)
2.19. Presentation of non statutory measures
The Company 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 Company.
2.20. Standards, amendments and interpretations in issue but not yet
effective
IFRS interpretations and amendments to standards issued but not yet effective
have been reviewed and assessed for any impact on the company. There are no
new standards, interpretations and amendments which are not yet effective in
these financial statements, expected to have a material effect on the
Company's future financial statements.
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 Company's
chief operating decision maker. The chief operating decision maker is
considered to be the executive Directors.
The Company 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
Company has now commenced the development and initial sales of products for
electric vehicles ('EV') which are expected to grow to be a material and
reported segment. Separate management reporting and information has not been
prepared for the year ended 31 December 2021. As an indication of the initial
activity, some estimated information has been derived showing sales of £0.35m
for the year ended 31 December 2021, and net costs of about £1.1m as a result
of the increasing investment and development in this area of activity.
Turnover with the major customers (including customer groups) representing in
excess of 10% of total revenue in a year has been as follows:
Year ended 31 December 2021 Year ended 31 December 2020
£'000 £'000
Customer A 2,392 2,010
Customer B 1,680 1,277
Customer C 1,230 1,124
Customer D 2,091 1,042
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 2021 Year ended 31 December 2020
£'000 £'000
Europe 6,393 5,153
Rest of the World 4,757 3,402
11,150 8,555
4. Operating profit
Year ended 31 December 2021 Year ended 31 December 2020
£'000 £'000
Operating profit is stated after charging/(crediting):
Other operating income
Amortisation of deferred capital grant income (31) (33)
Government job retention scheme income (1) (71)
Amortisation of intangible assets 191 149
Depreciation of property, plant and equipment 561 505
Depreciation of right-of-use assets 160 152
Cost of inventory sold 7,598 4,727
Research and development expenditure expensed in the year
114 74
Short term lease rentals 24 15
Foreign exchange losses 164 11
IPO preparation related costs 198 -
Auditor's remuneration
- For audit 45 14
- For taxation compliance - 2
- For tax advisory services 6 28
- For other assurance services 15 27
£157,000 of fees payable to the auditors in respect of IPO reporting
accountants services were included in prepayments at 31 December 2021.
5. Staff and key management personnel
Year ended 31 December 2021 Year ended 31 December 2020
Average monthly number of employees
Number Number
Management 4 3
Sales 5 4
Production 140 108
Administration 4 5
153 120
Payroll costs £'000 £'000
Gross salaries 3,860 3,073
Social security costs 369 280
Share based payment 145 76
Other pension contributions 233 200
4,607 3,629
In view of the size and nature of the Company, the Key Management Personnel in
the three year period is considered to comprise only the directors of the
Company. The directors' (and key management) remuneration was as follows.
Staff and key management personnel (continued)
Year ended 31 December 2021 Year ended 31 December 2020
£'000 £'000
Aggregate emoluments
Remuneration for qualifying services 335 351
Fair value of share base payment 145 76
Pension contributions 13 11
493 438
Highest paid director:
Remuneration for qualifying services 198 211
Pension contributions 8 7
206 218
Retirement benefits were accruing to 2 directors in respect of defined
contribution schemes (2020:2).
6. Finance costs
Year ended 31 December 2021 Year ended 31 December 2020
£'000 £'000
Interest payable on hire purchase obligations 71 57
Bank interest 21 -
Lease liability finance charges 66 56
158 113
7. Income tax
Year ended 31 December 2021 Year ended 31 December 2020
£'000 £'000
Current tax:
UK corporation tax (195) (107)
Adjustment for prior periods - 82
Total current tax (credit) (195) (25)
Deferred tax:
Origination and reversal of temporary differences (161) 100
Effect of change in tax rate 135 51
Adjustment for prior periods (16) 5
Total deferred tax (credit)/expense (42) 156
Total tax (credit)/charge (237) 131
The tax rate used for the reconciliation is the corporate tax rate of 19%
(2020: 19%) payable by corporate entities in the UK on taxable profits under
UK tax law. The Finance Act 2020 enacted in March 2020 maintained the rate of
UK corporation tax rate at 19% and, as the enacted rate, is accordingly
applied to deferred taxation balances at 31 December 2020. 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.
The (credit)/charge for the year can be reconciled to the (loss)/profit for
the year as follows:
Year ended 31 December 2021 Year ended 31 December 2020
£'000 £'000
(Loss)/profit before taxation (1,062) 349
Income tax calculated at 19% (2020: 19%) (202) 66
Expenses not deductible 35 17
Enhanced research and development allowances (84) (90)
Enhanced capital allowances (41) -
Deferred tax asset in respect of share options (64) -
Effect of change in deferred tax rate 135 51
Adjustment for prior periods (16) 87
Total tax (credit)/charge (237) 131
In addition, a deferred tax credit of £225,000 (2020: £nil) 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. Dividends paid and proposed
Amounts recognised as distributions to equity holders in the period:
Year ended 31 December 2021 Year ended 31 December 2020
£'000 £'000
Interim ordinary dividends paid for the year ended 31 December 2021 of £206
(2020 : £270 paid) per share
412 540
9. Intangible assets
Development costs Patent costs Computer software Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2020 1,007 131 82 1,220
Additions 291 7 8 306
As at 31 December 2020 1,298 138 90 1,526
Additions 487 9 236 732
As at 31 December 2021 1,785 147 326 2,258
Amortisation or impairment
At 1 January 2020 170 110 77 357
Charge 126 17 6 149
As at 31 December 2020 296 127 83 506
Charge 180 5 6 191
As at 31 December 2021 476 132 89 697
Net book value
As at 1 January 2020 837 21 5 863
As at 31 December 2020 1,002 11 7 1,020
As at 31 December 2021 1,309 15 237 1,561
The company 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 (2020: £nil) relating to software.
Amortisation charged on these assets in the year amounted to £nil (2020:
£nil).
10. Right-of-use assets
Property leasehold assets Plant and machinery assets Total
£'000 £'000 £'000
Cost
At 1 January 2020 1,303 203 1,506
Additions 353 25 378
Disposals - (92) (92)
As at 31 December 2020 1,656 136 1,792
Additions - 66 66
Disposals - (77) (77)
As at 31 December 2021 1,656 125 1,781
Depreciation
At 1 January 2020 369 127 496
Charge 96 56 152
Disposals - (92) (92)
As at 31 December 2020 465 91 556
Charge 122 38 160
Disposals - (77) (77)
As at 31 December 2021 587 52 639
Net book value
As at 1 January 2020 934 76 1,010
As at 31 December 2020 1,191 45 1,236
As 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. Right-of-use assets and lease liabilities
relate principally to property leases. The Company 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 £202,000 for the year ended 31 December 2021 (2020:
£195,000).
11. Property, plant and equipment
Leasehold improvements Plant and machinery Tooling Office equipment Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2020 370 4,427 815 103 5,715
Additions 32 795 203 19 1,049
As at 31 December 2020
402 5,222 1,018 122 6,764
Additions 95 515 94 33 737
Disposals - (633) - - (633)
As at 31 December 2021
497 5,104 1,112 155 6,868
Depreciation and impairment
At 1 January 2020 208 2,690 366 82 3,346
Charge 28 310 146 21 505
As at 31 December 2020
236 3,000 512 103 3,851
Charge 27 374 139 21 561
Disposals - (633) - - (633)
As at 31 December 2021
263 2,741 651 124 3,779
Net book value
As at 1 January 2020 162 1,737 449 21 2,369
As at 31 December 2020
166 2,222 506 19 2,913
As 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 £1,482,000 (2020: £1,469,000) relating to plant and
machinery and £190,000 (2020: £281,000) relating to tooling. Depreciation
charged on these assets in the year amounted to £297,000 (2020: £78,000).
The Company has received capital grants towards the cost of plant and
machinery from UK government research and development initiatives amounting to
£nil (2020: £33,000) which are deferred and amortised in line with
depreciation or impairment of the related asset.
12. Inventories
31 31 December 2020 1 January 2020
December 2021
£'000 £'000 £'000
Raw materials and consumables 1,714 1,335 1,036
Finished goods and goods for resale 300 187 240
2,014 1,522 1,276
There is no material difference between the value of inventories stated and
their replacement cost. An impairment loss of £nil (2020: £nil) was
recognised in the year.
13. Trade and other receivables
31 31 December 2020 1 January 2020
December 2021
£'000 £'000 £'000
Trade receivables 3,014 1,715 1,856
Other receivables 131 105 113
Prepayments 633 353 340
3,778 2,173 2,309
The directors consider that the carrying amount of trade and other receivables
approximates to their fair value. The impairment charge and movement in the
expected credit loss provision against trade receivables is as follows:
£'000 £'000
At 1 January 2021/2020 - -
Impairment charge for the year 25 -
At 31 December 2021/2020 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 2020 218 14 67
31 December 2021 405 119 148
Other than the £25,000 provided against, the directors consider the credit
quality of trade and other receivables that are neither past due nor impaired
to be of good quality.
The majority of other receivables is VAT receivable from the UK government.
The remaining amounts are considered to bear similar risks to trade
receivables and any expected credit loss is therefore considered to be
immaterial.
14. Trade and other payables
31 December 2021 31 1 January 2020
December 2020
£'000 £'000 £'000
Amounts falling due within one year:
Trade payables 2,985 729 935
Taxes and social security costs 336 108 112
Other payables - - 1
Accruals 715 321 247
Contract liabilities 326 - -
Deferred income - grants 51 32 25
4,413 1,190 1,320
Amounts falling due after more than one year:
Accruals 19 220 -
Deferred income - grants 143 174 142
162 394 142
15. Borrowings
31 31 December 2020 1 January 2020
December 2021
£'000 £'000 £'000
Current liabilities
Loans 61 - -
Hire purchase liabilities 498 539 320
559 539 320
Non-current liabilities
Loans 294 - -
Hire purchase liabilities 941 1,044 546
1,235 1,044 546
1,794 1,583 866
Hire purchase obligations are secured by fixed charges over tangible fixed
assets and floating charges over other assets and undertakings of the Company.
All obligations fall due within five years with the exception of £40,000 as
at 31 December 2021. This relates 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.
16. Lease liabilities
31 31 December 2020 1 January 2020
December 2021
Amounts falling due:
£'000 £'000 £'000
In one year or less 152 122 127
Between one and five years 551 512 364
In more than five years 553 692 584
1,256 1,326 1,075
The total payments including interest in respect of lease liabilities are
shown in note 18.
17. Movements in total financing liabilities
£'000 £'000
At 1 January 2021/2020 2,909 1,941
Cash movements:
Lease liability payments (136) (139)
Hire purchase finance advanced 401 1,120
Loan received 355 -
Hire purchase repayments (545) (403)
Interest paid (158) (113)
Non-cash movements:
Interest accrued 158 113
New lease liabilities 66 390
As at 31 December 2021/2020 3,050 2,909
18. Financial instruments and capital management
Risk management
The Board has overall responsibility for the determination of the Company'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 Company's flexibility. All funding requirements and financial
risks are managed based on policies and procedures adopted by the Board of
Directors. The Company is exposed to financial risks in respect of market
including foreign exchange risk, credit and liquidity risks.
Capital management
The Company's capital comprises all components of equity which includes share
capital and retained earnings.
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 Company 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.
Financial instruments and capital management (continued)
Foreign exchange risk
The Company 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 exchange rates against sterling could impact the results by up to
£200,000 as a reduction or increase in profit respectively.
The Company had the following in net assets comprising cash, sales ledger and
purchase ledger balances denominated in foreign currencies:
31 December 2021 31 December 2020 1
January 2020
£'000 £'000 £'000
Euro denominated 1,290 1,400 2,212
US dollar denominated 291 179 349
Interest rate risk
The Company 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 and 2021) to 7% (2018 and
2019); this spreads the capital cost, ensures that the Company maintains
sufficient cash resources for working capital purposes and ensures certainty
of total costs at the point of acquisition of those assets. These liabilities
are set out in note 15.
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 Company 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 2021 trade receivables were £2,688,000 (31 December 2020:
£1,715,000, 1 January 2020: £1,856,000) with 25% (31 December 2020: 28%, 1
January 2020: 24%) of the balance owed by one customer and 36% (31 December
2020: 50%, 1 January 2020: 44%) 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 invoiced within 2021 or 2020 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.
Liquidity risk
The maturity of the Company'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.
The Company also has a £750,000 bank overdraft facility which was unutilised
at the year end.
Financial instruments and capital management (continued)
At 31 December 2021 Up to 1 year 1-2 years 2-5 years Over 5 years
£'000 £'000 £'000 £'000
Trade and other payables 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
At 31 December 2020 Up to 1 year 1-2 years 2-5 years Over 5 years
£'000 £'000 £'000 £'000
Trade and other payables 1,050 220 - -
Hire purchase obligations 602 480 679 -
Lease liabilities 186 189 517 781
1,838 889 1,196 781
At 1 January 2020 Up to 1 year 1-2 years 2-5 years Over 5 years
£'000 £'000 £'000 £'000
Trade and other payables 1,183 - - -
Hire purchase obligations 282 272 355 -
Lease liabilities 178 141 380 678
1,643 413 735 678
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 2021 31 December 2020 1 January 2020
At amortised cost £'000 £'000 £'000
Trade and other receivables 3,145 1,752 1,895
Cash and cash equivalents 337 1,230 1,315
3,482 2,982 3,210
Financial liabilities
31 December 2021 31 December 2020 1 January 2020
£'000 £'000 £'000
At amortised cost
Trade and other payables 3,719 1,270 1,183
Hire purchase obligations 1,439 1,583 866
Loans 355 - -
5,513 2,853 2,049
The directors consider that the carrying amount of the financial assets and
liabilities approximates to their fair values.
19. Deferred tax liabilities
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 2019 323 142 - (16) 449
Debit to profit or loss 164 48 - (56) 156
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
The Company has tax losses carried forward of approximately £1,570,000 (2020:
£nil).
20. Defined contribution scheme
The Company contributes to personal pension plans for the benefit of certain
employees. The pension cost charge represents contributions payable by the
Company to the fund.
31 December 2021 31 December 2020
£'000 £'000
Contributions payable by the Company for the year
233 200
21. Share capital
31 December 2021 31 December 2020
£ £
Allotted, called up and fully paid
2000 Ordinary Shares of £0.10 each 200 200
All £0.10 Ordinary shares rank equally with the right to receive dividends
and capital distributions.
22. Share based payment
Options were granted on 24 August 2018 and continued to be exercisable at 31
December 2020 and 2021 over 354 £0.10 A Ordinary Shares at an exercise price
of £267 per share. These options are only exercisable on a sale of the
Company or on a listing and lapse when the holder ceases to be an employee (or
for up to a further 12 months). The A Ordinary Shares have the right to share
only prorata 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. The Ordinary Shares share fully in the initial £10 million. No
A Ordinary Shares have yet been issued.
The fair value of £1,345 per option share has been derived using a Black
Scholes option pricing model applying a risk free rate of 1% and volatility of
40%. The estimated vesting period applied is 4 years (2020: 5 years) resulting
in the charge of £145,000 in 2021 (£76,000 in 2020).
23. Contingent liabilities
At 31 December 2021 and 2020, the Company had no contingent liabilities.
24. Ultimate controlling party and related party transactions
The ultimate controlling party as at 31 December 2021 was considered to be Mr
R Barton.
The key management personnel is considered to be the directors. Please refer
to Note 5 for details of key management personnel remuneration.
25. Post balance sheet events
On 2 February 2022, the shareholders and share option holders exchanged their
shares and options for prorata holdings in a new company, Strip Tinning
Holdings Limited. This re-registered as a plc on 7 February 2022 and on 16
February 2022 was listed on the Alternative investment Market ('AIM') raising
additional capital of a net £6.8m in order to fund investment and working
capital for the group's development.
26. Transition to IFRS and prior year restatements
IFRS transition adjustments
From 1 January 2020 the Company has adopted International Financial Reporting
Standards (IFRS) in the preparation of these financial statements. The main
items contributing to the changes in the financial statements compared with
that reported under the United Kingdom standard FRS 102 ('UK GAAP') are shown
below:
IFRS 16: Under this standard, the concept of assessing a lease contract as
either operating or financing is replaced by a single lessee accounting model.
Substantially all former operating lease contracts where the rental was
expensed under UK GAAP result in a lessee acquiring and recognising a
right-to-use asset and a financial liability under IFRS. The asset is
depreciated over the term of the lease and the interest on the financing
liability is charged over the same period. A full retrospective approach has
been applied with the liability representing the future lease payments at
inception discounted at the estimated incremental borrowing rate of 5% and
with an equal right of use asset at inception. The transition simplification
to apply the same rate to all similar leases has been adopted. The leases are
assumed to run full term with no breaks exercised in line with operational
plans and intentions. The income statement is impacted, with the rent expense
relating to operating leases being replaced by a straight line depreciation
charge arising from the right-to-use assets and interest charges arising from
lease financing which are higher in earlier years.
On transition at 1 January 2020, the FRS102 lease prepayments of £31,000 are
removed and discounted lease liabilities have been recorded of £1,075,000 in
respect of the remaining lease payments. Right-of use assets are recognised of
£1,010,000 reflecting accumulated depreciation from the start of the lease to
the transition date.
The operating lease rentals of £195,000 expensed in 2020 have been replaced
by the inclusion of depreciation of £152,000 and financing charges of
£56,000 in 2020. The carrying value of the right-of-use assets at 31 December
2020 was £1,236,000. The carrying value of lease liabilities was
£1,326,000 at 31 December 2020 with the £31,000 of UK GAAP prepayments
removed. A related deferred tax asset of £16,000 was recognised at 1
January 2020 with a tax credit of £5,000 for 2020.
Transition to IFRS and prior year restatements (continued)
IAS 38: Under UK GAAP, the Company had an accounting policy choice over the
treatment of items of research and development expenditure, which met the
criteria for recognition as development assets. The Company chose to
previously expense all items of development to the Statement of Comprehensive
income in the period incurred. Under IAS 38, if development expenditure
meets the criteria for recognition as an intangible asset, it must be
capitalised.
As a result of this £837,000 was recognised as an asset on transition at 1
January 2020 with additions of £291,000 in 2020. Amortisation of £126,000
in 2020 has been charged. A deferred tax liability of £142,000 was
recognised on transition with a £48,000 credit in 2020 resulting in a net
profit increase of £117,000 for 2020.
Prior year adjustments
In addition, the more comprehensive review of accounting for the transition
has identified matters which were applicable under UK GAAP in respect of share
options issued but which have not been applied and therefore represents the
amendment of an error. More information has now also arisen which allows a
prior year quality issue, previously considered likely to be insignificant to
the results, to be quantified as a material prior year adjustment.
IAS 37: provisions. The business routinely logs a small number of quality
issues each year and normally expects the cost of any remediation to be small.
An issue logged in December 2020 has subsequently been more fully investigated
and accurately quantified. This has resulted in a prior year restatement as a
reduction in revenue for the year ended 31 December 2020 and an amount of
£272,000 being accrued for reaching a commercial credit note settlement with
a major customer along with modifications to allow the sale of the components
to continue. A related deferred tax asset of £52,000 has been recognised.
IFRS 2: share based payment. The Company had issued share options which result
in equity-settled share based payment charges. A Black-Scholes model has been
applied to calculate the charges resulting in additional administrative
expenses of £76,000 in 2020 (note 22). A corresponding credit has been made
directly to reserves as the charges relate to equity settled transactions.
In addition, it is considered that foreign exchange differences, previously
reported in cost of sales, are more appropriately included in administrative
expenses. A net £11,000 loss in 2020 has been reclassified.
Cash flows
The cash flow statement has been adjusted for the changes noted above. In
respect of IFRS 16, increased depreciation and finance charge adjustment
replace operating lease rentals previously included in the profit together
with the payment of lease liabilities now included in financing activities. In
respect of IAS 38, additions to intangible fixed assets for development costs
within investing activities and amortisation adjustments replace the
development expense previously included in the profit. In addition, hire
purchase finance has been advanced directly to the Company rather than paid to
suppliers and these cash flows, netted off in UK Gaap financial statements,
have been grossed up and shown separately. There is no net impact on cash with
the treatment and reclassifications principally resulting in a higher cash
inflow from operating activities and increased investing and financing cash
outflows.
Transition to IFRS and prior year restatements (continued)
Reconciliation of comprehensive income for the year ended 31 December 2020 is
as follows.
Year ended 31 December 2020 UK GAAP as reported IFRS 16 IAS 38 IAS 37 Prior year adjustments IFRS
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 8,827 - - (272) - 8,555
Cost of sales (5,093) - 58 - 11 (5,024)
Gross profit 3,734 - 58 (272) 11 3,531
Other operating income 104 - - - 104
Administrative expenses (3,236) 43 107 - (87) (3,173)
Operating profit 602 43 165 (272) (76) 462
Finance costs (57) (56) - - - (113)
Loss before taxation 545 (13) 165 (272) (76) 349
Taxation (140) 5 (48) 52 - (131)
Profit and total comprehensive income for the year
405 (8) 117 (220) (76) 218
Reconciliation of the opening balance sheet as of 1 January 2020 and as of 31
December 2020 is as follows:
As at 1 January 2020 UK GAAP as reported IFRS 16 IAS 38 IFRS
£'000 £'000 £'000 £'000
Non-current assets
Intangible assets 26 - 837 863
Right-of-use assets - 1,010 - 1,010
Property, plant and equipment 2,369 - - 2,369
2,395 1,010 837 4,242
Current assets
Inventories 1,276 - - 1,276
Trade and other receivables 2,340 (31) - 2,309
Corporation tax receivable 60 - - 60
Cash and cash equivalents 1,315 - - 1,315
4,991 (31) - 4,960
Current liabilities
Trade and other payables (1,320) - - (1,320)
Borrowings (hire purchase) (320) - - (320)
Lease liabilities - (127) - (127)
(1,640) (127) - (1,767)
Non-current liabilities
Deferred income - grants (142) - - (142)
Borrowings (hire purchase) (546) - - (546)
Lease liabilities - (948) - (948)
Deferred tax liabilities (323) 16 (142) (449)
(1,011) (932) (142) (2,085)
Net assets 4,735 (80) 695 5,350
Share capital - - - -
Retained earnings 4,735 (80) 695 5,350
Total equity 4,735 (80) 695 5,350
Transition to IFRS and prior year restatements (continued)
As at 31 December 2020 UK GAAP as reported IFRS 16 IAS 38 Prior year adjustment IFRS
£'000 £'000 £'000 £'000 £'000
Non-current assets
Intangible assets 18 - 1,002 - 1,020
Right-of-use assets - 1,236 - - 1,236
Property, plant and equipment 2,913 - - - 2,913
2,931 1,236 1,002 - 5,169
Current assets
Inventories 1,522 - - - 1,522
Trade and other receivables 2,204 (31) - - 2,173
Corporation tax receivable 108 - - - 108
Cash and cash equivalents 1,230 - - - 1,230
5,064 (31) - - 5,033
Current liabilities
Trade and other payables (1,150) 12 - (52) (1,190)
Borrowings (hire purchase) (539) - - - (539)
Lease liabilities - (122) - - (122)
(1,689) (110) - (52) (1,851)
Non-current liabilities
Trade and other payables (174) - - (220) (394)
Borrowings (hire purchase) (1,044) - - - (1,044)
Lease liabilities - (1,204) - - (1,204)
Deferred tax liabilities (488) 21 (190) 52 (605)
(1,706) (1,183) (190) (168) (3,247)
Net assets 4,600 (88) 812 (220) 5,104
Share capital - - - -
Retained earnings 4,600 (88) 812 (220) 5,104
Total equity 4,600 (88) 812 (220) 5,104
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