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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ct Automotive Group Plc | LSE:CTA | London | Ordinary Share | GB00BMHYGR77 | ORD GBP0.005 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 59.00 | 56.00 | 62.00 | 59.00 | 59.00 | 59.00 | 1,653 | 07:34:22 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Motor Vehicle Part,accessory | 128.9M | -24.66M | -0.3351 | -1.76 | 43.42M |
From Apr 2022 to Apr 2024
TIDMCTA
RNS Number : 0275M
CT Automotive Group PLC
19 May 2022
19 May 2022
CT AUTOMOTIVE GROUP PLC
("CT Automotive", "CT" or the "Group")
Results for the year ended 31 December 2021
Positive trading into 2022 - well positioned as global vehicle production recovers
CT Automotive, a leading designer, developer and supplier of interior components to the global automotive industry, today announces audited results for the year ended 31 December 2021.
Scott McKenzie, Chief Executive Officer of CT Automotive, commented:
"2021 was a landmark year for CT Automotive as we successfully completed our AIM IPO and achieved a positive trading performance.
We have made good progress in 2022 to date, with further new business wins and our new manufacturing plant in Mexico on track to commence operations in early H2. While the global automotive supply chains continue to be disrupted, demand remains strong, and we are seeing customer schedules and visibility improving. The Board remains confident of meeting its expectations for the full year.
Looking ahead, we are well placed to build on our strong track record of growth, client relationships and manufacturing excellence as global semiconductor shortages ease and vehicle production volumes recover."
Financial highlights
Hot Features
Premium
2021 2020 Change
$m $m
------------------------ -------- -------- -------
Revenue 132.9 109.9 20.9%
Gross profit 29.0 21.3 36.2%
Adjusted EBITDA* 8.8 1.1 700%
Adjusted Profit/(loss)
before taxation* (1.8) (7.9) 77.2%
Earnings per share (31.2)p (44.0)p 29.1%
Net debt 9.5 57.9 83.6%
------------------------ -------- -------- -------
* Adjusted for non-recurring items
-- Strong trading recovery from COVID-19 impacted FY2020
o Record revenues of $132.9m
o Recovery momentum in H1 partially offset by H2 2021 slowdown in automotive volumes as a result of global shortage of semiconductors
-- Balance sheet significantly strengthened with gross proceeds of $45m raised at IPO
-- Outperformed the global automotive market, driven by Group's above average exposure to Electric Vehicles (EVs)
Operational / post period end highlights
-- Successful AIM IPO on 23 December 2021, enabling investment in the next phase of growth
-- Further optimisation of operations in Production division to manage unpredictable customer production schedules
-- Encouraging performance in Tooling division, reflecting increased utilisation of in-house capabilities
-- Continued strong growth in Electric Vehicles (EVs): 17% of revenue derived from EV platforms, compared to EVs overall market share by volume of c4%
-- Appointment of Global Supply Chain and Commercial Director in March 2022 to support growth
-- Investment in new manufacturing facilities in Mexico - on track to begin production in early H2
Current trading and outlook
-- Global vehicle production volumes forecast to recover during 2022 and automotive supply chain issues to resolve fully in 2023
-- Forecast recovery in global automotive volumes reflected across overall CT customer base:
o Semi-conductor shortage remains, but visibility is improving which is allowing schedules to increase in reliability
o Customer schedules generally show an upward trend on volumes over the next 3 months
o Most customers have requested maximum capacity calculations, indicating they are preparing for peak volumes to return
-- The Group has long-term agreements with its customers and is well positioned as volumes recover:
o c.97 per cent. of anticipated revenue in 2022 and c.91 per cent. of anticipated revenue in 2023 expected to come from projects which are currently in production, or on which the Group has been chosen as the nominated supplier
-- Board remains confident of meeting its FY 2022 expectations
For further information, please contact:
CT Automotive via. MHP Communications
Simon Phillips, Executive Chairman
Scott McKenzie, Chief Executive Officer
David Wilkinson, Chief Financial Officer
MHP Communications (Financial PR) Tel: +44 (0)20 3100 8540
Tim Rowntree CTAutomotive@mhpc.com
Charlie Barker
Charlie Protheroe
Liberum (Nominated Adviser and Broker) Tel: +44 (0)20 3100 2000
Richard Lindley
Benjamin Cryer
Notes to editors
CT Automotive is engaged in the design, development and manufacture of bespoke automotive interior finishes (for example dashboard panels and fascia finishes) and kinematic assemblies (for example air registers, arm rests, deployable cup holders and storage systems), as well as their associated tooling, for the world's leading automotive original equipment suppliers ("OEMs") and global Tier One manufacturers.
The Group is headquartered in the UK with a low-cost manufacturing footprint. Key production facilities are located in Shenzhen and Ganzhou, China complemented by additional manufacturing facilities in Turkey, the Czech Republic and the UK.
CT Automotive's operating model enables it to pursue a price leadership strategy, supplying high quality parts to customers at a lower overall landed cost than competitors. This has helped the Group to build a high-quality roster of OEM end customers, both directly and via Tier One suppliers including Faurecia and Marelli. End customers include volume manufacturers, such as Nissan, and luxury car brands such as Bentley and Lamborghini. In addition, the Group supplies electric car manufacturers, including Lucid. It has also recently started working with e.Go Mobile, a German manufacturer which plans to launch a series of small electric vehicles for the budget end of the market.
The Group currently supplies component part types to over 47 different models for 19 OEMs. Since its formation, the Group has been the only significant new entrant into the market, which is characterised by high barriers to entry.
Chair's statement
Introduction
I am delighted to present CT Automotive's first set of results as a listed company. This has been one of the most exciting and challenging years at CT, concluding with the successful listing in late December. I am proud of what we have achieved and the position that the Group now holds.
We achieved record revenues, despite the well documented challenges in our end markets, and, with the funding from the IPO, are well placed to capitalise on the growth opportunities ahead as global vehicle production volumes recover in 2022 and beyond.
This would not have been possible without the resilience and collaboration shown by our people in such an extraordinary year. They have consistently risen to whatever challenges they face which fills me with confidence for the future of CT.
As part of the listing, we have strengthened our Board and I would like to welcome Tracey James, Francesca Ecsery and Ray Bench, our three new non-executive directors. In the short time of working with us, they have already added strong insight and improved direction to our Board so I am excited to see this develop over the coming years.
Finally, I'd like to again thank and welcome our new investors who supported us at IPO. With their backing, we look forward to continuing to build on our growth track record.
Business overview
2021 was a year of two halves. The first six months continued the strong recovery trend which started at the end of 2020 following the end of most COVID-related lockdowns, precipitating the ramping up of light vehicle production. However, during this period, automotive supply chain shortages started to arise, most notably semiconductors. Although this didn't directly impact our supply chain, it caused automotive production lines to slow down and at times, come to a halt. Original equipment manufacturers (OEMs) have consequently become more selective about which models to produce to maximise available resources, typically favouring electric vehicles (EVs). Due to our customer mix and the vehicle models we are nominated on, these supply chain issues most significantly impacted the second six months of trading for CT. Nonetheless, we were still able to deliver record revenues ahead of our expectations set out at listing, with revenue of $132.9m, up from $109.9m in 2020.
The listing has allowed the Group to repay various credit facilities including the term loan which arose from the previous management buy-out in 2016. We have maintained our existing working capital facilities in the form of invoice finance and import trade loan facilities. The Group's balance sheet has therefore been significantly strengthened to position the business perfectly for the next phase of growth.
Dividend
As outlined at our listing in late-December, our focus will be on continuing to invest in the business for future growth, including the set-up of the new plant in Mexico. As a result, the Board is recommending no dividend for the 2021 financial year.
This is in line with our capital allocation policy and reflects our confidence in the growth opportunities we see ahead.
Regulatory and governance
As part of the listing, the Board adopted the QCA Corporate Governance Code and will actively monitor the effectiveness of our governance processes.
As a result of the pandemic and related travel restrictions, all Board meetings continue to be held remotely. Although this has not impacted the effectiveness of the Board, we are hopeful that in-person Board meetings will be possible at some point in 2022. The first evaluation of effectiveness for the Board and committees will be completed in late-2022, following a full year of adoption.
Supporting our people
People and culture remains a core focus at CT. Our growth to this point is driven by the strength and commitment of our people.
Keeping our people safe is a top priority for CT. Health & safety is paramount at all sites, with strict guidelines and regular external audits to ensure best practice processes.
The Board is also in the process of implementing a group-wide employee engagement surveys to ensure honest and regular feedback on any issues or concerns or recommendations. As we strive to constantly innovate and improve, we value the input from our people to achieve this.
Our market
The thoughts of everyone at CT are with the people of Ukraine at this time. We continue to monitor the situation closely which has impacted the European automotive industry. Most notably, some automakers source wire harnesses from Ukraine and have been forced to halt production whilst they re-source supply. For CT, this only impacted one customer for which production restarted within four weeks and is expected to recover the lost volumes across 2022. The short-term impact on global volumes was also offset by increased volumes in the US during that 4-week period.
Looking ahead
This is a very exciting time for CT. As the global supply chain issues continue to ease through 2022, there is unprecedented, pent-up consumer demand within the automotive industry. The supply chain issues within the industry are primarily impacting our customers rather than our direct supply chain as we continue to be able to source our required raw materials. Although there is inflationary pressure mounting, the Group primarily utilises open book pricing models and hence there are mechanisms in place to pass costs through to customers. To support this and the future development of the Group, we employed Stuart Lorraine as our Global Supply Chain and Commercial Director in March 2022. Stuart has a wealth of experience within the industry including previously working at OEMs and has already helped mitigate any margin compression.
In addition, we have already achieved a number of significant new business wins in 2022 and are well progressed in setting up the new plant in Puebla, Mexico with production on track to commence in H2 2022. This progress has been detailed more within the Chief Executive Officer's review.
These factors along with our strong track record of growth, client relationships and manufacturing excellence fill me with confidence that we are well positioned for a strong and extended period of growth.
Chief Executive Officer's review
Introduction
2021 was a landmark year for the Group as we successfully navigated a challenging market backdrop, while completing our AIM listing in December and achieving record sales.
The automotive industry has historically been demand-led and hence the just-in-time production processes facilitated the alignment of production schedules with raw materials and parts orders. The pandemic and related lockdowns have caused supply-side issues which re-shaped the global automotive market in 2021 and look set to continue through at least the first half of 2022.
With the pressure to build-back by OEMs around the world mounting and supply chain issues easing to a degree, the industry is set for a significant bounce back.
Operations - production trading
The supply chain issues in 2021, most notably the shortages of semiconductors, caused significant volatility for OEMs. This resulted in a number of customer temporary shutdowns (for example 2-weeks without production) and also reduced output across the industry. Global light vehicle production amounted to 73.4 million vehicles in 2021, up only 3.8% on 2020. So far in 2022, there have been some pandemic-related lockdowns in China. However, these have been restricted to certain areas, primarily Shanghai, and hence our operations have not seen any significant disruptions other than re-sourcing activities which have been completed quickly to ensure continuity of supply.
The Group optimised operations through 2020 and 2021 to better deal with the unpredictable customer production schedules. However, in-line with the experience of manufacturers across the global automotive sector, the "stop-start" production impacted efficiency and created some additional quality costs.
Customer schedules, although still at reduced levels, have started to become more consistent and reliable in Q1 2022, with reduced in-month order cancellations. Such cancellations were most disruptive in Q3 2021 with in-month order reductions running at c.37%. This improved slightly in Q4 2021 to c.27% and has further improved to c.17% in Q1 2022, as expected. There were numerous headwinds impacting light vehicle production across the industry in Q3 2021, most notably the semiconductor shortages and disrupted shipping schedules. These shipping schedules in 2022 have become noticeably more stable.
The nature of our production cycle relies on customer schedules being upheld. This is particularly important for production completed in China and then shipped to the UK, US and Europe. In 2021, there was an increased level of in-month order cancellations due to customer supply chain issues. As a result, this caused issues with overstocking certain product lines in our UK and US distribution centres. In 2022, this has improved as noted above and hence our stock levels are more balanced across the Group and our various locations.
Operations - production tooling
Our in-house toolroom in Shenzhen had a very busy year, running at maximum capacity on new programmes for a variety of products. We are particularly pleased as this reflects the efforts made to increase utilisation of our in-house tooling capabilities rather than outsourcing.
Development has been broadly isolated from supply-chain issues in 2021 and progress has been able to largely continue irrespective of customer shutdowns. The main impact has been a small number of delayed vehicle launches causing minor delays to tooling approvals.
Agility
Agility is one of our core values and has been more important than ever through the last two years. As a high-growth business there are always multiple challenges and fast changes impacting the business. Our people have adopted a culture to: Assess, Adjust, Act - allowing us to respond appropriately to challenges as they arise.
There are many examples of this agility over the last two years, most notably in our working practices including how many of our people have transitioned to working from home and how we have maintained strong communication and relationships with significantly reduced travel (previously a key element in our global business).
This agility is crucial as we continue to adapt to capitalise on market trends such as EVs or design trends such as hidden IP vents or address the impact of tax changes such as the US S301 tariffs.
Expanding in the EV sector
Our design expertise and track record has allowed us to maintain our market position as a supplier for EVs. This can be seen in our customer mix and the vehicles we are nominated on which include both established EV manufacturers and new entrants to the markets. This is supported by our recent nominations on EV cars, including the Nissan Ariya and e.Go Mobile.
The growth in EVs is also driving an increase in the potential value of interior components that the Group can supply per model. In addition, technology advances in autonomous driving have been most prevalent across EVs resulting in more 'hands-off' time and interaction with a vehicle's interior. EV marques including Lucid and a major global EV OEM, have focused particular attention on their vehicles' interior design, with the Group's highest value of supplied components per vehicle being that within the new Lucid Air.
The trend towards EVs continues to gain momentum across the globe. This has been further enhanced in 2021 with the multiple commitments from OEMs towards full electrification (largely following the COP 26 event in November 2021). We have also seen a trend of customers prioritising EV production lines when chip availability has been restricted. Within the automotive sector, EV sales reached 6.75 million globally in 2021, up 108% on 2020.
Trading performance in Q3 and Q4 2021 was challenging due to the supply chain conditions and reflected by the global light vehicle production, however we attribute our slight overall outperformance of the global market due to the Group's significant exposure to EVs. The Group has above average exposure to the EV segment with 17% of revenue derived from EV platforms, compared to EVs overall market share by volume of 4%.
Setting up a new plant in Puebla, Mexico
Following the introduction of additional import tariffs by the Trump administration on certain goods arriving from China into the USA it has become less economical for the Group to supply components to US based customers directly from China. While the Group has entered into cost sharing agreements with some of its existing customers to mitigate the impact of the tariffs, the Directors do not believe that they would be able to competitively bid for new contracts supplied directly by the Group's Chinese plants while the tariffs remain in force.
In order to continue to supply to customers, including a major EV company in the US, without the imposition of the China tariffs, the Group is setting up a new manufacturing site in Mexico from which it will export to the US. The plant has been identified with a new lease signed and a number of new staff on site from May 2022. This site has in place the required infrastructure including appropriate energy connections, to allow the Group to rapidly deploy machinery. Industrialisation of the plant including shipping the tools from China will proceed across May and July with production on track to start in H2 2022.
CT has developed a low-cost modular factory design (inclusive of fixtures, quality gauges and capital equipment) with production lines built and tested in China prior to shipment, resulting in substantial reductions in capital expenditure. The Directors estimate that capital expenditure of c.$2.5 million will be required to prepare the site for first production. The Group has followed a demand-led expansion program and has secured contracts for delivery from the Mexico plant such that it is expected to be revenue generating immediately upon completion. This new site will allow us to remain competitive, and expand, in the North American market without tariffs and continues to be well-received by our customers.
Outlook
The semiconductor shortages have continued to impact the industry in early 2022 with further short-term disruption also caused by the Ukraine invasion in Europe. Our customer schedules are however becoming more consistent with allows the Group to more effectively plan production schedules and better manage stock levels across the globe. We continue to expect a recovery in global production across 2022, most significantly in H2 2022, as supply issues ease. This recovery timing is largely aligned with public statements made by a number of OEMs and Tier One suppliers.
The current customer trend towards prioritising key models, due to chip restrictions, is leading to EVs and larger models typically being favoured. Although our mix of programmes is powertrain agnostic and includes a mixture of model sizes, this trend typically favours CT with our above-average exposure to EV compared to the market. This is aligned with the existing direction of travel of continued increased demand for EVs and the commitments towards achieving full electrification on new models made by a number of OEMs.
As a result of existing nominations, we anticipate the Group to benefit from increased serial production revenues in 2022 as the OEMs seek to meet the pent-up consumer demand for cars, with the full effect of new launches in 2021 contributing to further growth for CT. Accordingly, we have seen production volumes start to recover in early 2022 and expect this to continue ahead of automotive supply chain issues resolving fully in 2023.
The Group is positioned to recover strongly with c.97% of anticipated revenue in 2022 and c.91% of anticipated revenue in 2023 expected to come from projects which are currently underway or on which the Group is already the nominated supplier. This will be further supported once the new plant in Mexico is operational, allowing us to be more competitive in the North American markets.
Chief Financial Officer's review
Our existing manufacturing facilities and highly skilled people fill me with confidence that we can continue to exceed our customer expectations and return to strong growth.
The global automotive market remains challenging following the impact of COVID-19 and the global shortage of semiconductors, but demand remains strong and having completed the AIM listing, CT is now well placed to capitalise on the recovery when it comes and return to historic growth and profitability.
Trading overview
There was a significant drop in global vehicle production in 2020 as a result of the COVID-19 pandemic and the preventative measures that were implemented globally, including national lockdowns that led to factory shutdowns.
Global vehicle production recovered strongly during the latter half of 2020 and this continued into 2021, with significant demand for new vehicles. Accordingly, as global vehicle production recovered, the Group performed strongly, generating revenues of $74.7 million in H1 2021, in spite of some disruption to production caused by a global shortage of semiconductors.
However, in the second half of 2021, the semiconductor shortage increasingly impacted global vehicle production, which was significantly below prior expectations for 2021. While the semiconductor shortage has impacted OEMs unevenly and they have sought to preserve production on key models, the extent of the shortage led to the Group experiencing a significant trading slowdown in the second half of 2021 in-line with wider automotive production declines and as reported at the time of the AIM listing.
As we continue through 2022, production schedules have stabilised, but we have yet to see any significant improvements. That said, our key customers are all anticipating higher production volumes later in the year which we hope will be the start of a longer term recovery.
Revenue increased 21.0% compared to 2020, driven by the completion of some Engineering, Design and Development programmes in the final quarter of 2021, as well an improved performance in serial production.
Gross margins improved slightly from 2020 but remained lower than expected as a result of lower production volumes in China in Q4, with the completion of some de-stocking also impacting production efficiency. The ongoing disruption being caused mainly by the shortage of semi-conductors continues to impact margins and remain below the Group's target margins in normal trading conditions.
Distribution costs have also increased due to a full 12-month period of increased freight charges following the pandemic and related logistic issues. This has resulted in freight container costs exceeding the container rates quoted to customers. We expect this to normalise over time and have hence negotiated to recover the excess freight costs from customers as much as possible.
These irrecoverable excess freight costs have been classified as non-recurring items for the purpose of alternative performance measures (APMs). Non-recurring items in 2021 also include AIM listing fees, Turkish foreign exchange losses and impacted charges following the divestment of Scomadi.
Administrative expenses (adjusted for non-recurring items) have remained largely flat compared to 2020, reflecting the fact that CT has already scaled up for the growth that was forecast with significant new program launches, prior to the pandemic.
These factors have resulted in adjusted EBITDA of $8.8m and adjusted operating profit of $3.2m, which are both significantly improved from 2020 but margins remain below the levels achievable once the supply chain issues are resolved.
Financing
The financing position of the Group has changed significantly over the last 12 months, most notably from the admission to AIM in December 2021. We continued to utilise the Government-backed CLBILS loan obtained in 2020 and also obtained a further short term loan for $2.5m in January 2021.
Following the decision to list on AIM, the Group raised pre-IPO funding in the form of convertible loan notes for $5.6m, which converted to Ordinary Shares on the date of listing.
The AIM listing in December 2021 raised share issue proceeds of $42.5m which allowed us to pay down multiple credit facilities and inject working capital into the Group to set up for the next phase of growth.
Admission to AIM
I am delighted that we achieved a successful listing in December 2021. I am pleased that our new investors recognised our track record for growth prior to listing and the significant opportunity for future growth as the automotive industry recovers and CT delivers on the existing nominated programmes.
Organic growth
The past two years have been challenging with extreme disruption across the business. The robust nature of our business and low-cost operating model has allowed us to continue throughout to meet all of our customer requirements. The business is now perfectly positioned to capitalise on the recovery of the automotive market in the coming years and achieve our growth ambitions. Our existing manufacturing facilities and highly skilled people fill me with confidence that we can continue to exceed our customer expectations and return to strong growth.
This is further supported by the ongoing set-up of our new plant in Mexico which will further increase our appeal to customers in both North America and South America.
Acquisitions
The Group has consolidated its focus on automotive components in 2021 which included the divestment of our Scomadi minority share prior to admission to AIM. The Scomadi business needed additional investment following the impacts of the pandemic and the Board concluded that our resources were better focused on our own growth.
Following the listing and strengthening of the balance sheet, we are open to acquisition opportunities that may arise. We have significant in-house corporate finance expertise along with trusted advisors who continue to search for businesses that meet our strict acquisition criteria and would be a good strategic fit with our Group.
Post listing actions
The proceeds from listing were intended to provide the Group with capital to execute our growth plans. Most notably, the proceeds have allowed us to fully repay our term loan, CLBILS loan along with other debt within the Group. This strengthened balance sheet position is critical as the Group can now realise the full growth potential and move away from the previously significant debt servicing commitments. Over time, this is expected to unlock free cash flow to fund our growth plans.
The Board previously highlighted the following plans:
Growth plan Current status
Enlarging the Group's production The Mexico facility set-up is
facilities in Europe and opening underway with local staff currently
a new facility in Mexico being recruited and production
planned to commence by July 2022.
We are currently looking for new
premises within Czech Republic
to expand our operations.
----------------------------------------
Taking on a larger number A number of new programmes have
of new programmes been secured since listing to
commence in 2023 and 2024.
The working capital of the Group
is expected to increase over time
in 2022 as the reduction in debt
servicing costs is realised compared
to 2021.
----------------------------------------
Reducing supplier costs by A number of negotiations have
up to c.5% already been successfully completed,
particularly in China. Further
negotiations are awaiting re-rating
from credit agencies which will
follow the publication of this
Annual Report. These negotiations
have been primarily led by the
new Global Supply Chain and Commercial
Director.
----------------------------------------
Entry into more strategic This continues to be planned across
partnerships 2022 and 2023.
----------------------------------------
Increasing research and development This continues to be planned across
expenditure to enhance competitive 2022 and 2023.
advantage
----------------------------------------
Consolidated statement of profit or loss and other comprehensive income
for the year ended 31 December 2021
2020
2021 (restated*)
$'000 $'000
Revenue 132,939 109,899
Cost of sales (103,911) (88,583)
________ ________
Gross profit 29,028 21,316
Distribution expenses (5,504) (4,814)
Other operating income 1,478 942
Administrative expenses (27,391) (22,600)
EBITDA (before non-recurring items) 8,767 1,164
Depreciation (2,076) (1,974)
Amortisation (3,509) (2,532)
Non-recurring items (5,571) (1,814)
________ ________
Operating loss (2,389) (5,156)
-
Finance expenses (4,476) (3,979)
Share of post-tax losses of equity accounted
associates (579) (574)
________ ________
Loss before tax (7,444) (9,709)
-
Taxation 1,108 1,082
________ ________
Loss for the year attributable to equity
holders of the group (6,336) (8,627)
________ ________
Other comprehensive income
Items that are or may be reclassified subsequently
to profit or loss:
Foreign currency translation differences
- foreign operations 280 703
________ ________
Other comprehensive income for the year,
net of income tax 280 703
________ ________
Total comprehensive loss for the year (6,056) (7,924)
________ ________
Total loss per share
Basic loss per share (31.2)c (44.0)c
Diluted loss per share (31.2)c (44.0)c
Consolidated balance sheet
as at 31 December 2021
Company number 10451211 2021 2020
(restated*)
$'000 $'000
Non-current assets
Property, plant and equipment 10,307 9,584
Intangible assets 520 545
Goodwill 2,417 2,417
Right of use assets 6,942 7,549
Deferred tax assets 1,745 308
Investments in equity-accounted associates - 1,443
________ ________
21,931 21,846
________ ________
Current assets
Inventories 39,779 40,223
Tax receivable 1,496 1,417
Trade and other receivables 42,782 44,626
Cash and cash equivalents 13,445 2,156
________ ________
97,502 88,422
________ ________
Total assets 119,433 110,268
________ ________
Current liabilities
Other interest-bearing loans and borrowings (22,865) (37,121)
Trade and other payables (50,044) (51,942)
Tax payable (655) (778)
Lease liabilities (2,566) (2,683)
________ ________
(76,130) (92,524)
________ ________
Non-current liabilities
Other interest-bearing loans and borrowings (103) (22,963)
Provisions - -
Lease liabilities (5,041) (5,493)
________ ________
(5,144) (28,456)
________ ________
Total liabilities (81,274) (120,980)
________ ________
Net assets/(liabilities) 38,159 (10,712)
________ ________
Equity attributable to equity holders
of the parent
Share capital 342 132
Share Premium 54,717 -
Translation reserve 580 300
Merger reserve (35,812) (35,812)
Retained earnings 18,332 24,668
________ ________
Total equity/(deficit) 38,159 (10,712)
________ ________
These financial statements were approved by the Directors on 18 May 2022 and were signed on its behalf by:
David Wilkinson
Director
Consolidated statement of changes in equity
for the year ended 31 December 2021
Share Share Translation Retained Merger Other Total
capital Premium reserve earnings reserve reserve equity
(Restated)
$'000 $'000 $'000 $'000 $'000 $'000 $'000
1 January
2020 132 - (403) 33,295 (35,812) - (2,788)
Total comprehensive income
for the year
Loss for the
year (restated) - - - (8,627) - - (8,627)
Other comprehensive
income - - 703 - - - 703
________ ________ ________ ________ ________ ________ ________
Total comprehensive
income for
the year
(restated) - - 703 (8,627) - - (7,924)
________ ________ ________ ________ ________ ________ ________
Balance at
31 December
2020 132 300 24,668 (35,812) (10,712)
(restated)
- -
________ ________ ________ ________ ________ ________ ________
1 January
2021 132 - 300 24,668 (35,812) - (10,712)
Contributions by and distributions
to shareholders:
Reclassification
of shareholder
loan notes - - - - - 9,900 9,900
Conversion
of loan notes
/ Other liabilities
into Ordinary
Shares 57 12,352 - - - (9,900) 2,509
Share issue
in relation
to IPO 153 44,923 - - - - 45,076
Equity issue
costs - (2,558) - - - - (2,558)
Total comprehensive income
for the year:
Loss for the
year - - - (6,336) - - (6,336)
Other comprehensive
income - - 280 - - - 280
Total comprehensive
income for
the year - - 280 (6,336) - - (6,056)
________ ________ ________ ________ ________ ________ ________
Balance at
31 December
2021 342 54,717 580 18,332 (35,812) - 38,159
_______ ________ ________ ________ ________ ________ ________
Consolidated statement of cash flows
for the year ended 31 December 2021
2021 2020
(restated*)
$'000 $'000
Cash flows from operating activities
Loss for the year (6,336) (8,627)
Adjustments for:
Depreciation and amortisation 5,585 4,506
Impairment of associate 1,627 -
Finance expense 4,476 3,979
Loss on sale of property, plant and equipment 1,084 435
Taxation (1,108) (1,082)
Share of post-tax losses of equity accounted
associates 579 574
________ ________
5,907 (215)
Decrease in trade and other receivables 1,844 618
Decrease/(Increase) in inventories 444 (3,830)
(Decrease)/Increase in trade and other payables (1,898) 1,672
(Decrease) in provisions - (285)
________ ________
Tax paid (529) (1,190)
________ ________
Net cash generated from/(used in) operating
activities 5,768 (3,230)
________ ________
Cash flows from investing activities
Purchase of property, plant and equipment (4,296) (1,595)
Investments in associates (201) (2,017)
Purchase of intangible assets (421) (76)
________ ________
Net cash used in investing activities (4,918) (3,688)
________ ________
Cash flows from financing activities
Proceeds from loan and other facility drawdowns 2,500 11,567
Issue of convertible loan notes 5,600
Share issue (net of transaction costs) 42,370 -
Repayment of lease liabilities (3,565) (2,443)
Interest paid (2,922) (2,688)
Repayment of other borrowings - (2,585)
Repayment of term loan (16,042) -
Repayment of CLBILs (8,351) -
Repayment of trade loans (6,092) -
Repayment of invoice finance (1,537) -
________ ________
Net cash generated from financing activities 11,961 3,851
________ ________
Net increase/(decrease) in cash and cash
equivalents 12,811 (3,067)
Cash and cash equivalents at beginning of
year (2,677) (168)
Effect of exchange rate fluctuations on
cash held (327) 558
________ ________
Cash and cash equivalents at end of year
(refer Note 23) 9,807 (2,677)
________ ________
*Details of the restatements are presented
in Note 27.
Notes forming part of the consolidated financial statements
for the year ended 31 December 2021
Accounting policies
1
This financial information within this announcement does not constitute the Company's statutory accounts within the meaning of Section 434 of the Companies Act 2006. The results for the year ended 31 December 2021 have been extracted from the full accounts of the Group for that year which received an unmodified auditor's report, and which have not yet been delivered to the Registrar of Companies. The financial information for the year ended 31 December 2020 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The report of the auditor on those filed accounts was unmodified and does not include a statement under section 498(2) or (3) of the Companies Act 2006.
This announcement has been prepared in accordance with the recognition and measurement principles of UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with the AIM rules. The financial information included in this announcement does not include all the disclosures required in accounts prepared in accordance with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006 and accordingly it does not itself comply with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006. The accounting policies used in the preparation of this announcement have remained unchanged from those set out in the statutory accounts for the year ended 31 December 2020. They are also consistent with those in the full accounts for the year ended 31 December 2021, which have yet to be published.
The Group will post its annual report and accounts to shareholders in early June 2022, a copy of the annual report and accounts will be available on the company's website.
Introduction
CT Automotive Group PLC (the "Company") is a Public company listed on AIM incorporated, domiciled and registered in England in the UK. The registered number is 10451211 and the registered address and principal place of business is 1000 Lakeside North Harbour, Western Road, Portsmouth, PO6 3EN.
The Company's functional and reporting currency is USD, the Directors elected to set the Company up in this way due to the international nature of the Group and overall reliance on USD; the Group revenue is predominantly received in USD and key long term financing instruments, as well as working capital facilities, are also predominantly denominated in USD.
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group"). The parent company financial statements present information about the Company as an entity and not about its group.
The Group financial statements have been prepared and approved by the Directors in accordance UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The Company has elected to prepare its parent company financial statements in accordance with FRS 101.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these consolidated financial statements.
There are no judgements or estimates that are deemed to have a significant effect on the financial statements other than those stated in Note 2.
Measurement convention
The financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments.
Going concern
The Group's business activities, together with the factors likely to affect its future development, its financial position, financial risk management objectives, and its exposures to price, credit, liquidity and cash flow risk are described in the Strategic report.
The financial statements have been prepared on the going concern basis as the Group has prepared detailed forecasts which show that the Group is expected to be able to meet all its liabilities as they fall due over the 12 months from the approval of the financial statements. These forecasts are built up using the individual costings that each part of the Group produces and latest volume forecast. It is acknowledged that COVID-19 and the subsequent impact on supply chains has had a profound impact on the global automotive industry. For CT Automotive Group PLC, this impact was most significant in the second half of 2021 with a number of temporary closures at customer sites however the Group were able to successfully manage production and stock levels throughout to meet our customers' requirements. It is also acknowledged that the recent Ukraine invasion has caused some short term disruption for certain manufacturers in Europe. For CT, this only impacted one customer for which the relevant components previously sourced from Ukraine were re-sourced and production recommended within four weeks. This impact has therefore not been material and does not impact the going concern assessment.
These known supply chain impacts have been factored into the Group's forecast model along with what Management consider to be a prudent view on the recovery for the automotive industry through 2022. This model forecasts to December 2027, covering a period of 67 months from the date of approval of these financial statements. This takes into account the Group's existing banking facilities, being trade loans and invoice financing, and assumes these facilities continue to be available. This assumption is made on the basis that these facilities are committed on a rolling 12-month basis until December 2022 and are structured facilities only available to be drawn against the respective inventory and customer sales invoices. Management expect that these facilities will either continue to be available in their existing or be replaced by similar value facilities. The invoice finance facility has a limit of $15,800,000 with headroom of $4,803,000 as at 31 December 2021. Similarly, the trade loan facility has a limit of $10,400,000 with headroom of $4,948,000 as at 31 December 2021. These limits are not forecast to be exceeded within the forecast period since the Group forecasts to generate sufficient cash reserves to reduce utilisation of these facilities. In the management forecast, the invoice facility is not exceeded until February 2023 and trade loan facility has not exceeded throughout the 12 month period. Beyond February 2023, there is a strong cash reserve position and hence is more likely that the facility will be uplifted.
Although Management consider the base case to be appropriately prudent, sensitivity analysis has been performed of the cash flow to model the potential impact should the automotive supply chain issues continue for a prolonged period and hence a slower recovery scenario considered. This assumption carried a 9% decline in annual volumes which is worst case considering the fact that the base forecast is already modelled at a lower growth considering the supplying chain issues in the automotive sector. This scenario is considered to be severe but plausible. The base case forecast and stress test demonstrate that the Group has sufficient headroom within current banking facilities and other financing facilities or alternate cash flow management plans in place across the forecast period. This assessment also reflects the significantly stronger balance sheet of the Group following the AIM listing which repaid all long-term credit facilities, most notably the term loan which included quarterly financial covenants.
After making enquiries, considering the uncertainties described above and monitoring the year-to-date performance against budget in 2022, CT Automotive Group PLC is expected to remain in a strong financial position during the forecast period. The Group is confident of being able to trade for a period of at least 12 months from the approval of the financial statements and the Directors have therefore concluded that it is appropriate for the financial statements to be prepared on the going concern basis.
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
Change in subsidiary ownership and loss of control
Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
Where the Group loses control of a subsidiary, the assets and liabilities are derecognised along with any related non-controlling interests and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss. Exchange differences arising on the retranslation of the foreign operation are recognised in other comprehensive income and accumulated in the foreign exchange reserve.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group's presentational currency US Dollars at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates of the transactions.
Exchange differences arising from this translation of foreign operations are reported as an item of other comprehensive income and accumulated in the translation reserve. When a foreign operation is disposed of, such that control is lost, the entire accumulated amount in the foreign currency translation reserve, is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while still retaining control, the relevant proportion of the accumulated amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate that includes a foreign operation while still retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss.
Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:
(a) they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and
(b) where the instrument will or may be settled in the company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the company's own equity instruments or is a derivative that will be settled by the company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of any issues are classified as a financial liability.
Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss. Exchange differences arising on the retranslation of the foreign operation are recognised in other comprehensive income and accumulated in the foreign exchange reserve.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group's presentational currency US Dollars at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates of the transactions.
Exchange differences arising from this translation of foreign operations are reported as an item of other comprehensive income and accumulated in the translation reserve. When a foreign operation is disposed of, such that control is lost, the entire accumulated amount in the foreign currency translation reserve, is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while still retaining control, the relevant proportion of the accumulated amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate that includes a foreign operation while still retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss.
Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:
(a) they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and
(b) where the instrument will or may be settled in the company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the company's own equity instruments or is a derivative that will be settled by the company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of any issues are classified as a financial liability.
Non-derivative financial instruments
Financial assets and liabilities are recognised when the Group becomes party to the contractual provisions of the instrument.
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Trade and other receivables
Trade and other receivables are initially measured at their transaction price. Trade receivables and other receivables are held to collect the contractual cash flows which are solely payments of principal and interest. Therefore, these receivables are subsequently measured at amortised cost using the effective interest rate method.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow statement.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method.
Effective interest rate
The 'effective interest' is calculated using the rate that exactly discounts estimates future cash payments or receipts (considering all contractual terms) through the expected life of the financial asset or financial liability to its carrying amount before any loss allowance.
Impairment of financial assets
A provision for impairment is established on an expected credit loss model under IFRS 9. The amount of the provision is the difference between the asset's carrying amount and the expected value of the amounts recovered.
The probability of default and the expected amounts recoverable are assessed under reasonable and supportable past and forward looking information that is available without undue cost or effort. The expected credit loss is a probability weighted amount determined from a range of outcomes (including assessments made using forward looking information) and takes into account the time value of money.
Impairment losses and subsequent reversals of impairment losses are adjusted against the carrying amount of the receivable and recognised in profit or loss.
Derivative financial instruments
Derivative financial instruments are recognised at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss. The Group utilises derivatives consisting of exchange contracts to reduce foreign currency risk.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
Depreciation is charged to the profit and loss account on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:
Assets under construction - not depreciated
Plant and equipment - 2-5 years straight line
Furniture, fixtures - 2-5 years straight line
and equipment
Motor vehicles - 2-5 years straight line
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
Intangible assets and goodwill
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment in the investee.
Research and development
Expenditure on research activities is recognised in the profit and loss account as an expense as incurred.
Expenditure on development activities is capitalised if the product or process is technically and commercially feasible and the Group intends, has the technical ability and has sufficient resources to complete development, future economic benefits are probable and if the Group can measure reliably the expenditure attributable to the intangible asset during its development. Development activities involve a plan or design for the production of new or substantially improved products or processes. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads and capitalised borrowing costs. Other development expenditure is recognised in the profit and loss account as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and less accumulated impairment losses.
Intangible assets (including software)
Expenditure on internally generated goodwill and brands is recognised in the profit and loss account as an expense as incurred.
Intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and less accumulated impairment losses.
Amortisation
Amortisation is charged to the profit and loss account on a straight-line basis over the estimated useful lives of intangible assets. Intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:
Software - 1 - 5 years
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.
Net realisable value is the value that would arise on sale of stock in the normal course of business, minus a reasonable estimation of selling costs.
Impairment excluding inventories and deferred tax assets
The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each period at the same time.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit"). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units, or ("CGU"). Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Associates
Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recognised in the consolidated statement of financial position at cost. Subsequently associates are accounted for using the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the consolidated statement of profit and loss and other comprehensive income (except for losses in excess of the Group's investment in the associate unless there is an obligation to make good those losses).
Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate. The investor's share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value of the associate.
Any premium paid for an associate above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the associate. Where there is objective evidence that the investment in an associate has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.
Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the profit and loss account in the periods during which services are rendered by employees.
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Convertible loan notes
A portion of loans from directors in the form of loan notes and other loans have been reclassified or converted from liability into equity during the financial year consequent to change in the terms and conditions of the loan agreements.
The instruments were evaluated for the conditions within IAS 32, namely, (a) the instrument includes no contractual obligation to deliver cash or another financial asset to another entity and (b) the instrument will or may be settled in the issuer's own equity instruments.
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.
All automotive products are sold with a warranty which mirrors the warranty offered by the OEM to consumers.
Due to the thorough quality checking that is undertaken by the customers during assembly, and the low risk nature of the products, it is company's policy to only hold a small provision for warranty claims. This is supported by the historically low value of warranty claims in the past few years which the Directors do not consider to be material.
Revenue
Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:
Serial production goods are recognised as sold at a point in time when control is passed to the customer, which depending on the incoterms (a series of pre-defined commercial terms published by the International Chamber of Commerce relating to international commercial law) can be when they are delivered to the customer site or when the customer collects them.
Tooling and the provision of associated services is recognised at a point in time when the performance obligations in the contract are satisfied and control is passed to the customer, which is based on the date of issue of the parts submission warrant (PSW) or a similar approval from customers. Monies received from customers in advance of completing the performance obligations are recognised as contracts liabilities as at the balance sheet date and released to revenue when the related performance obligations are satisfied at a point in time.
Discounts on the serial production contracts are considered one off and agreed with the customers as part of the negotiation and as per the terms of the contract, they are either paid in advance or otherwise. Discounts paid in advance are recognised as a prepayment and recognised as a debit to revenue in the period in which the related revenue is recognised. All other discounts are recognised as a debit to revenue based on the period in which the related revenues are recognised.
Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.
Government grants
Government grants are recognised on the accrual basis and any performance requirements are disclosed as required. Grants of a revenue nature are recognised in the statement of profit and loss in the same period as the related expenditure and recognised gross as other income.
During the year, income received from the Coronavirus Job Retention Scheme and similar support in China and Turkey has been accounted for in accordance with the above.
As part of the UK government scheme, the Group also received CLBILS loan from accredited lenders during the previous year. The loan was recognised at a fair value equal to its transaction price at inception and amortised thereafter with finance expense being recognised using the effective interest rate. During the first 12 months, the group recognised a finance expense and a corresponding amount of grant income, and this was presented in the same line as finance expense on a net basis.
Expenses
Finance income and expenses
Finance expenses comprise interest payable on borrowings and interest on lease liabilities which are recognised in profit or loss using the effective interest method.
Interest income is recognised in profit or loss as it accrues, using the effective interest method.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the profit and loss account except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The group measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
Deferred tax
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised.
Leases
Identifying Leases
The Group accounts for a contract, or a portion of a contract, as a lease when it conveys the right to use an asset for a period of time in exchange for consideration. Leases are those contracts that satisfy the following criteria:
(a) There is an identified asset;
(b) The Group obtains substantially all the economic benefits from use of the asset; and
(c) The Group has the right to direct use of the asset.
The Group considers whether the supplier has substantive substitution rights. If the supplier does have those rights, the contract is not identified as giving rise to a lease.
In determining whether the Group obtains substantially all the economic benefits from use of the asset, the Group considers only the economic benefits that arise use of the asset, not those incidental to legal ownership or other potential benefits.
In determining whether the Group has the right to direct use of the asset, the Group considers whether it directs, how and for what purpose the asset is used throughout the period of use. If there are no significant decisions to be made because they are pre-determined due to the nature of the asset, the Group considers whether it was involved in the design of the asset in a way that predetermines how and for what purpose the asset will be used throughout the period of use. If the contract or portion of a contract does not satisfy these criteria, the Group applies other applicable IFRSs rather than IFRS 16.
Identifying Leases (continued)
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
-- Leases of low value assets; and -- Leases with a duration of 12 months or less.
These other leases are recognised in the profit and loss account on a straight line basis over the term of the lease.
Lease Measurement
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group's incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes:
-- amounts expected to be payable under any residual value guarantee;
-- the exercise price of any purchase option granted in favour of the company if it is reasonably certain to exercise that option;
-- any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of a termination option being exercised.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:
-- lease payments made at or before commencement of the lease; -- initial direct costs incurred; and
-- the amount of any provision recognised where the company is contractually required to dismantle, remove or restore the leased asset
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.
Earnings per share
The Group only presents basic earnings per share (EPS) data for its ordinary share on the basis that there are no outstanding instruments that can result in diluted earnings per share to be different with basic earnings per share in 2021 and 2020. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.
Segment Reporting
IFRS 8 'Operating Segments' requires operating segments to be determined based on the Group's internal reporting to the Chief Operating Decision Maker. See Note 7 for the accounting policy and related disclosures for segment reporting.
Non-recurring items
The group recognises items within the statement of profit or loss statements that are infrequent, unusual and not expected during the regular business operations as non-recurring. These are disclosed as a separate line on the face of statement profit or loss. Refer note 5 for further details on the nature of the non-recurring items.
New standards, interpretations and amendments
There have been a number of amendments to existing standards which are effective from 1 January 2021 but they do not have material effect on the Group financial statements.
There are a number of new standards, amendments to standards and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early. The following amendments are effective for the period beginning 1 January 2022:
-- Onerous Contracts - Costs of fulfilling a Contract (Amendments to IAS 37) -- Property, Plant and Equipment: Proceeds before intended use (Amendments to IAS 16)
-- Annual improvements to IFRS standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41)
-- References to Conceptual Framework (Amendments to IFRS 3)
The following amendments are effective for the period beginning 1 January 2023:
-- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2); -- Definition of Accounting Estimates (Amendments to IAS 8); and
-- Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).
The Group is currently assessing the impact of these amendments and does not expect them to have significant impact on the financial statements.
Judgements in applying accounting policies and key sources of estimation
2 uncertainty
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experiences may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
In preparing these financial statements, the Directors made the following judgements:
Incremental borrowing rate used to measure lease liabilities
Where the interest rate implicit in the lease cannot be readily determined, lease liabilities are discounted at the lessee's incremental borrowing rate. This is the rate of interest that the lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. This involves assumptions and estimates, which would affect the carrying value of the lease liabilities and the corresponding right-of-use assets.
To determine the incremental borrowing rate, the Group uses recent third-party financing as a starting point, and adjusts this for conditions specific to the lease such as its term and security.
The Group used an incremental borrowing rate of from 3.25% to 32.5% depending on the specifics of the lease, particularly based on which country the underlying asset is based in.
Deferred tax asset recognition
The Directors consider that the Deferred Tax Assets are recoverable as their recoverability against future profits is deemed probable. This judgement has been based on assessment of management forecasts which are compiled using secured projects and customer volume estimates. These reflect the Group returning to profitability in the near future.
All deferred tax assets have been classified as non-current assets. This is based on the expected utilisation of these assets against the future profits available as projected within management forecasts.
Other key sources of estimation uncertainty:
Stock provision
Inventory is carried at the lower of cost and net realisable value. Provisions are made to write down obsolete stocks to net realisable value. The provision is $1,268,000 at 31 December 2021 (2020: $651,000). A difference of 10% in the provision as a percentage of gross inventory would give rise to a difference of +/- $126,800- in gross margin.
Goodwill
The carrying amount of goodwill at 31 December 2021 was $2,417,000. This is split between Chinatool UK Limited ($1,259,000) and IMS / Chinatool JV, LLC ($1,158,000). As part of the annual impairment testing of these balances, no need for impairment was identified during the year.
Deferred tax recoverability
Estimates are required in assessing whether sufficient future taxable profits will be made in order to recognise the benefit of deferred tax assets accumulated at the Balance Sheet date. In assessing recognised and unrecognised deferred tax assets, the Group has considered its forecast performance in line with the scenarios set out in its going concern analysis and impairment models.
Management's forecasts used for the review of the recoverability of deferred tax assets are consistent with those used for going concern analysis and impairment reviews for goodwill and other tangible assets. These are detailed forecasts based on expected customer schedules.
The deferred tax asset value recognised is $1,754,000 at 31 December 2021 (2020: $308,000), giving rise to a credit through the statement of profit and loss of $1,437,000 during the year and solely relates to UK based businesses. The forecasts discussed above show that the UK businesses will be profitable from 2023 and the Directors expect to fully recover the deferred tax asset by 31 December 2024.
If the period of forecasts review for the recoverability of the deferred tax assets is shortened from 3 to 2 years, the Directors would only expect to recover $709,000 of the deferred tax asset, and therefore would only recognise deferred tax assets at 31 December 2021 of this value.
Revenue
3
2021 2020
$'000 $'000
Disaggregation of revenue
An analysis of turnover by type is given below:
Sale of parts 110,764 87,469
Sale of tooling (including design and development) 22,175 22,430
________ ________
Total revenues
132,939 109,899
________ ________
All revenue is recognised from goods transferred at a point in time.
Contract balances
The following table provides information about significant changes during the year in contract assets and contract liabilities from contracts with customers:
Contract Contract
assets liabilities
$'000 $'000
Balance as at 1 January 2021 - (8,336)
Revenue recognised that was included in contract
liabilities at the beginning of the year - 10,047
Increases due to cash received, excluding
amounts recognised as revenue during the year - (4,636)
Movements due to foreign exchange - -
________ ________
Balance as at 31 December 2021 - (2,925)
________ ________
The contract liabilities included within trade and other payables primarily relate to the advance consideration received from customers on tooling projects.
The contract assets and contract liabilities are recognised into the profit and loss account when the performance obligations of each contract are satisfied which is at the point that the contract is satisfied and control has passed to the customer. As such, the Group does not recognise revenue on any partially satisfied performance obligations.
The following table includes revenue expected to be recognised in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the reporting date.
2022 2023 Total
$'000 $'000 $'000
Tooling projects 11,961 - 11,961
________ ________ ________
All consideration from contracts with customers are accounted for as contract assets or liabilities and released to the revenue once performance obligation is fulfilled.
The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.
Other operating income
4
2021 2020
$'000 $'000
Government grants 1,458 859
Interest received from bank balances 10 26
Other income 10 57
_______ _______
1,478 942
_______ _______
The government grant income relates to government support designed to help businesses during the COVID-19 pandemic (e.g. The UK government's Coronavirus Job Retention Scheme and similar support in China and Turkey).
Non-recurring items
5
2021 2020
$'000 $'000
AIM listing fees 1,810 -
Turkish foreign exchange losses 1,113 -
Impairment of associate 1,627 -
Irrecoverable excess freight costs 1,021 1,814
_______ _______
Total 5,571 1,814
_______ _______
The Directors consider that it is appropriate to remove the non-recurring costs and certain non-trading items discussed below to better allow the reader of the accounts to understand the underlying performance of the Group.
The AIM listing completed in December 2021 incurred one-off transaction costs and advisory fees. Costs of $1,810,000 (2020: $nil) have been recognised within administrative expenses in relation to this.
In December 2021, the Turkish Lira was significantly depreciated against the US Dollar following unprecedented Government announcements in Turkey. This resulted in the Group incurring one-off unrealised foreign exchange losses of $1,113,000 (2020: $nil) arising in Chinatool Otomotiv San. Tic. Ltd Sti.
An impairment review of the loans and shareholdings the Group held in Marin Engineering Limited and Scomadi (Thailand) Co. Ltd. was completed in 2021. These balances were fully impaired before the loan was written off and the shares were transferred to a third party. This resulted in a one-off impairment charge of $1,627,000 (2020:$nil).
Global freight costs have temporarily increased significantly following the pandemic and related logistic issues. This has resulted in freight container costs exceeding the container rates quoted to customers. In recognition of this expecting to normalise over time, the Group has negotiated with customers to maximise the recovery of excess freight costs. There is however an element of excess freight costs which is deemed irrecoverable amounting to $1,021,000 (2020: $1,814,000) recognised within distribution expenses.
Expenses and auditors' remuneration
6
2020
2021 (Restated)
$'000 $'000
Included in the loss are the following:
Finance Expenses
Interest on bank loans and borrowings 1,949 1,919
Interest on lease liabilities 587 604
Loan note interest 528 692
Amortisation of loan transaction costs 439 -
Other interest charges 973 764
________ ________
4,476 3,979
________ ________
Operating loss is stated after charging:
Amortisation 440 290
Depreciation 2,076 1,974
Foreign exchange 1,576 2,478
Amortisation of right-of-use assets 3,069 2,242
Operating lease charges - 50
Cost of inventories 72,966 45,469
________ ________
Auditor's remuneration 2021 2020
$'000 $'000
Audit of Group financial statements 158 81
Audit of financial statements of subsidiaries
of the company 241 187
Audit-related assurance services - 4
________ ________
Segment information
7
Operating segments are reported in a manner consistent with internal reporting provided to the Chief Operating Decision Maker (CODM). The CODM has been identified as the management team including the Chief Executive Officer and Chief Financial Officer. The segmental analysis is based on the information that the management team uses internally for the purpose of evaluating the performance of operating segments and determining resource allocation between segments.
The Group has 3 strategic divisions which are its reportable segments.
The Group has the below main divisions:
1) Tooling - Design, development and sale of tooling for the automotive industry.
2) Production - Manufacturing and distributing serial production kinematic interior parts for the automotive industry.
3) Head office - Manages Group financing and capital management
The Group evaluates segmental performance on the basis of revenue and profit or loss from operations calculated in accordance with IFRS.
Inter-segment sales are priced along the same lines as sales to external customers, with an appropriate discount being applied to encourage use of Group resources at a rate acceptable to local tax authorities. This policy was applied consistently in the current and prior year.
2021
Tooling Production Head office Total
$'000 $'000 $'000 $'000
Revenue
Total revenue from customers 22,175 110,764 - 132,939
Depreciation and amortisation - (5,585) - (5,585)
Finance expense - (2,112) (2,364) (4,476)
________ ________ ________ ________
Segment Profit / (Loss) 5,260 (2,636) (9,489) (6,865)
________ ________ ________
Share of post-tax loss of equity accounted associates (579)
_______
Group Loss before tax (7,444)
_______
2021
Tooling Production Head office Total
$'000 $'000 $'000 $'000
Additions to non-current
assets - 4,717 - 4,717
_______ _______ _______ _______
Reporting segment assets 6,802 100,091 12,540 119,433
_______ _______ _______ _______
Reportable segment liabilities 3,628 74,119 3,527 81,274
_______ _______ _______ _______
2020
Tooling Production Head office Total
$'000 $'000 $'000 $'000
Revenue
Total revenue from customers 22,430 87,469 - 109,899
Depreciation and amortisation - (4,506) - (4,506)
Finance expense (41) (2,050) (1,888) (3,979)
________ ________ ________ ________
Segment Profit / (Loss) 4,760 (8,322) (5,573) (9,135)
________ ________ ________
Share of post-tax loss of equity accounted associates (574)
_______
Group Loss before tax (9,709)
_______
2020
Tooling Production Head office Total
$'000 $'000 $'000 $'000
Additions to non-current
assets - 1,666 - 1,666
_______ _______ _______ _______
Reporting segment assets 10,642 97,343 840 108,825
_______ _______ _______
Investment in associates 1,443
_______
Total Group assets 110,268
_______
Reportable segment liabilities 6,201 76,685 38,094 120,980
_______ _______ _______ _______
External revenue by Non-current assets
location of customers by location of assets
2021 2020 2021 2020
$'000 $'000 $'000 $'000
UK 20,840 20,022 4,213 2,423
US 29,489 19,278 124 25
China 18,289 30,823 16,312 16,253
Turkey 9,690 8,156 555 1,132
Czech Republic 35,356 18,850 440 396
Brazil 3,074 3,301 - -
Spain 6,985 7,369 - -
Thailand 2,187 1,661 - 1,443
Other 7,029 439 287 174
__________ __________ __________ __________
132,939 109,899 21,931 21,846
__________ __________ __________ __________
Balances related to goodwill, right of use assets, deferred tax assets and investments in equity-accounted associates that aggregated to $11,717,000 were excluded from the segment disclosures in the financial statements for the year ended 31 December 2020. These have been updated in comparatives above to be consistent with the disclosures for 31 December 2021.
Due to the nature of the automotive industry becoming increasingly consolidated with mergers, acquisitions and strategic alliances, the number of customers under separate control is decreasing whilst the size of such customers is increasing.
Analysis of concentration of customers, top
3 and others:
In 2021 the Group had 3 major customers representing $42.7m (32%), $43.2m (33%) and $13.3m (10%) of Group revenue.
In 2020 the Group had 3 major customers representing $33.6m (31%), $24.6m (22%) and $12.6m (12%) of Group revenue.
Taxation
8
2020
2021 (Restated)
Recognised in profit and loss $'000 $'000
Current tax expense
Current year (Including carry back of losses) 179 (750)
Adjustments for prior periods 150 -
________ ________
Current tax expense/(credit) 329 (750)
________ ________
Deferred tax credit
Origination and reversal of temporary differences (993) (332)
Effect of changes in tax rates (444) -
________ ________
Deferred tax credit (1,437) (332)
________ ________
Total tax credit (1,108) (1,082)
________ ________
2021 2020
$'000 $'000
Reconciliation of effective tax rate
Loss for the year (6,336) (8,627)
Total tax credit (1,108) (1,082)
________ ________
Loss excluding taxation (7,444) (9,709)
________ ________
Tax using the UK corporation tax rate of 19%
(2020 - 19.00%) (1,414) (1,845)
Effect of tax rates in foreign jurisdictions 258 88
Non-taxable income 22 -
Non-deductible expenses 355 559
Adjustments for prior periods 150 -
Tax rate changes (444) 8
Other differences (35) -
Movement in unrecognised deferred tax - 108
________ ________
Total tax credit (1,108) (1,082)
________ ________
The UK Government announced in the March 2021 Budget that the main rate corporation tax in the UK will increased from 19% to 25%. This was substantively enacted by the balance sheet date and as a result deferred tax balances at 31 December 2021 have been measured at 25%.
Included within tax payable is an IFRIC 23 uncertain tax payable totalling $618,000 (2020: $623,000), which is a result of uncertainty in the tax legislation in a certain jurisdiction.
Loss per share
9
2021 2020
Number Number
Weighted average number of equity shares 20,286,757 19,600,000
$ $
Earnings, being loss after tax (6,336,000) (8,627,000)
Cents Cents
Loss per share (31.2) (44.0)
There are no outstanding instruments that can result in diluted earnings per share to be different with basic earnings per share in 2021 and 2020.
The weighted average number of shares outstanding in 2020 has been adjusted to 19,600,000 to reflect the share dilution that occurred on 22 November 2021. Throughout 2020, there were 98,000 shares outstanding with a nominal value of GBP1 each. On 22 November 2021, these were sub-divided into 19,600,000 shares with a nominal value of GBP0.005 each. IAS 33 requires that in such events whereby the number of Ordinary Shares is increased without an increase in resources, the number of Ordinary Shares outstanding before the event is adjusted to reflect the event as if it has occurred at the beginning of the earliest period presented.
Property, plant and equipment
10
Plant and Fixtures Under Motor
equipment and fittings construction vehicles Total
$'000 $'000 $'000 $'000 $'000
Cost
Balance at
1 January 2020 15,339 2,824 93 36 18,292
Additions 1,168 422 - - 1,590
Disposals (859) (13) - - (872)
Re-classifications 93 - (93) - -
Effect of movements
in foreign
exchange 946 90 - 2 1,038
________ ________ ________ ________ ________
Balance at
31 December
2020 16,687 3,323 - 38 20,048
________ ________ ________ ________ ________
Balance at
1 January 2021 16,687 3,323 - 38 20,048
Additions 2,213 2,083 - - 4,296
Disposals (1,049) (554) - - (1,603)
Re-classifications - - - - -
Effect of movements
in foreign
exchange (554) (166) - (4) (724)
________ ________ ________ ________ ________
Balance at
31 December
2021 17,297 4,686 - 34 22,017
________ ________ ________ ________ ________
Depreciation
Balance at
1 January 2020 7,029 1,531 - 36 8,596
Depreciation
charge for
the year 1,579 394 - 1 1,974
Disposals (347) (90) - - (437)
Effect of movements
in foreign
exchange 310 20 - 1 331
________ ________ ________ ________ ________
Balance at
31 December
2020 8,571 1,855 - 38 10,464
________ ________ ________ ________ ________
Balance at
1 January 2021 8,571 1,855 - 38 10,464
Depreciation
charge for
the year 717 1,359 - - 2,076
Disposals (255) (336) - - (591)
Effect of movements
in foreign
exchange (150) (85) - (4) (239)
________ ________ ________ ________ ________
Balance at
31 December
2021 8,883 2,793 - 34 11,710
________ ________ ________ ________ ________
Net book value
At 31 December
2020 8,116 1,468 - - 9,584
________ ________ ________ ________ ________
At 31 December
2021 8,414 1,893 - - 10,307
________ ________ ________ ________ ________
As at 31 December 2021, property, plant and equipment with a carrying value of $10,307,000 (2020 - $9,584,000) was pledged as security for the invoice finance and trade loans.
Leases
11
The Group leases buildings and machinery where payments are fixed until the contracts expire. There is no variability in respect of payments and there is not considered to be any significant judgement in relation to the lease terms.
Right of use assets
Land and Plant and
buildings machinery Total
$000 $000 $000
At 1 January 2020 8,729 85 8,814
Additions 816 225 1,041
Disposal (82) - (82)
Amortisation (2,166) (76) (2,242)
Foreign exchange movement 9 9 18
________ ________ ________
At 31 December 2020 7,306 243 7,549
At 1 January 2021 7,306 243 7,549
Additions 1,538 911 2,449
Disposal - - -
Amortisation (2,522) (547) (3,069)
Foreign exchange movement 5 8 13
________ ________ ________
At 31 December 2021 6,327 615 6,942
________ ________ ________
Lease liabilities
Land and Plant and
buildings machinery Total
$000 $000 $000
At 1 January 2020 9,084 88 9,172
Additions 816 225 1,041
Disposal (87) - (87)
Finance expense 589 10 599
Foreign exchange movement 42 6 48
Repayments (2,528) (69) (2,597)
________ ________ ________
At 31 December 2020 7,916 260 8,176
At 1 January 2021 7,916 260 8,176
Additions 1,547 911 2,458
Disposal - - -
Finance expense 541 46 587
Foreign exchange movement (15) 8 (7)
Repayments (2,993) (614) (3,607)
________ ________ ________
At 31 December 2021 6,996 611 7,607
________ ________ ________
The maturity profile of the lease liabilities
is as follows: 2021 2020
$'000 $'000
Under 1 year 2,566 2,683
1 - 2 years 1,534 1,666
2 - 5 years 2,594 2,459
More than 5 years 913 1,368
_______ _______
7,607 8,176
_______ _______
Intangible assets
12
Software Goodwill Total
$'000 $'000 $'000
Cost
Balance at 1 January 2020 1,572 2,417 3,989
Additions 76 - 76
Effect of movements in foreign exchange 58 - 58
________ ________ ________
Balance at 31 December 2020 1,706 2,417 4,123
________ ________ ________
Balance at 1 January 2021 1,706 2,417 4,123
Additions 421 - 421
Effect of movements in foreign exchange (67) - (67)
________ ________ ________
Balance at 31 December 2021 2,060 2,417 4,477
________ ________ ________
Amortisation and impairment
Balance at 1 January 2020 831 - 831
Amortisation for the year 290 - 290
Effect of movements in foreign exchange 40 - 40
________ ________ ________
Balance at 31 December 2020 1,161 - 1,161
________ ________ ________
Balance at 1 January 2021 1,161 - 1,161
Amortisation for the year 440 - 440
Effect of movements in foreign exchange (61) - (61)
________ ________ ________
Balance at 31 December 2021 1,540 - 1,540
________ ________ ________
Net book value
At 31 December 2020 545 2,417 2,962
________ ________ ________
At 31 December 2021 520 2,417 2,937
________ ________ ________
Amortisation charge
The amortisation charge is recognised in the following line items in the profit and loss account:
2021 2020
$'000 $'000
Administrative expenses 440 290
________ ________
Goodwill considered significant in comparison to the Group's total carrying amount of such assets have been allocated to cash generating units or groups of cash generating units as follows:
Goodwill
2021 2020
$'000 $'000
Chinatool UK Limited 1,259 1,259
IMS / Chinatool JV, LLC 1,158 1,158
The recoverable amounts of Chinatool UK Limited and IMS / Chinatool JV, LLC have been determined based on a value-in-use calculation. This calculation uses financial forecasts approved by the Directors which cover a 4 year period. These are detailed forecasts based on customer schedules and expected project lifetimes. The detailed forecasts have been reviewed for a 4 year period as this is considered to be the range over which the customer schedules can be relied upon to create detailed forecasts.
In performing these calculations, the future cash flows of Chinatool UK Limited have been discounted at 11% and those of IMS / Chinatool JV, LLC at 12%. The Directors concluded that these discount rates are appropriate having reviewed discount rates applied by competitors in our sector, including businesses who are exposed to similar automotive supply risks and applying a margin to take account of our size, the complexity of our operations and levels of borrowing in the Group.
Using the above stated assumptions there is significant headroom between the recoverable amount of goodwill allocated to each CGU. Applying sensitivity analysis to these calculations, a 2% increase to the discount rate applied reduces the headroom, but still allows for in excess of over $10m of headroom on Chinatool UK Limited and over $2m of headroom on IMS / Chinatool JV, LLC.
Inventories
13
2020
2021 (Restated)
$'000 $'000
Raw materials and consumables 8,627 8,548
Work in progress 6,654 11,884
Finished goods 24,498 19,791
_______ _______
39,779 40,223
_______ _______
The provision for inventories recognised during the year ended 31 December 2021 was $616,000 (2020: $651,000).
Trade and other receivables
14
2021 2020
$'000 $'000
Trade receivables 26,444 27,576
Other debtors 2,633 1,112
Loan receivables - 543
________ ________
29,077 29,231
Prepayments 13,705 15,395
________ ________
Total trade and other receivables 42,782 44,626
________ ________
Included within trade and other receivables is $Nil (2020 - $Nil) expected to be recovered in more than 12 months.
The loan receivable at 31 December 2020 related to amounts due from Automotive Kinetic Systems Limited, a related party controlled by Simon Phillips. This balance was unsecured, interest-free and had no specific term of repayment but was repayable on demand. This balance was reclassified and converted into equity during the period as detailed within related party disclosure.
The carrying value of trade and other receivables classified at amortised cost approximates fair value.
The Group does not hold any collateral as security.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision to trade receivables. The expected loss rates are based on the Group's historical credit losses. Due to the nature of the Group's customers no credit loss provision has been made at year end (2020 - $Nil). The key assumptions used in evaluating the credit loss provision are the historical default ratio of these customers, any known liquidity risks of the customers and based on the information available we have assessed a range of possible outcomes.
As at 31 December 2021 trade receivables of $4,270,000 (2020 - $3,641,000) were past due but not impaired. They relate to customers with no default history. The ageing analysis of these receivables is as follows:
2021 2020
$'000 $'000
Not past due 22,174 23,935
Past due 1-90 days 3,498 3,000
Past due more than 90 days 772 641
________ ________
26,444 27,576
________ ________
Other classes of financial assets included within trade and other receivables do not contain impaired assets.
Other interest-bearing loans and borrowings
15
This note provides information about the contractual terms of the Group and Company's interest-bearing loans and borrowings, which are measured at amortised cost.
2021 2020
$'000 $'000
Non-current liabilities
Secured bank loans - (15,385)
Loan notes - (7,426)
Non-current portion of finance lease liabilities (103) (152)
________ ________
(103) (22,963)
________ ________
Current liabilities
Current portion of secured bank loans (5,452) (19,558)
Current portion of finance lease liabilities (278) (197)
Unsecured bank overdraft (3,638) (4,833)
Invoice finance (10,997) (12,533)
Unsecured loans (2,500) -
________ ________
(22,865) (37,121)
________ ________
(22,968) (60,084)
________ ________
The secured bank loans are secured by a floating charge over the Group's property, plant and equipment.
The currency profile of the Group's loans and
borrowings is as follows:
2021 2020
$'000 $'000
USD 12,928 50,687
GBP 3,528 381
EUR 6,433 8,668
RMB 79 348
________ ________
22,968 60,084
________ ________
Carrying amount Carrying amount
31 December 31 December
Nominal
interest Contracted
rate maturity 2021 2020
Currency $'000 $'000
Term loan USD 5.85% 2023 - 15,603
CLBILs GBP 5.85% 2023 - 8,190
Loan notes USD 9.58% 2022 - 7,426
Unsecured loans USD 10% 2022 2,500 -
Unsecured bank
overdraft GBP 2.5% 2022 3,638 4,833
Trade loans EUR/USD 4.04% 2022 5,452 11,150
Invoice finance EUR/USD 3.75% 2022 10,997 12,533
________ ________
22,587 59,735
________ ________
Terms and debt repayments
The Term Loan was repayable over equal instalments to June 2023. Interest was paid quarterly in full. This term loan was fully repaid on 24 December 2021.
The CLBILs was repayable over equal instalments to 2023. Interest was paid monthly in full. The CLBILs were fully repaid on 24 December 2021.
Half of the loan note interest was serviced quarterly, with the remainder being rolled up. The loan notes were due to be repaid in April 2022. The loan notes were reclassified into equity instruments on 14 September 2021 based on changes in their terms such that they met the IAS 32 definition of equity. See below.
The unsecured loans were initially drawn down as a 6 month loan in January 2021. An agreement was reached with the lender to extend repayment to January 2022.
The invoice finance facility allows 90% prepayment against eligible invoices up to 120 days old. The invoice financing facility is secured against the debts that it is drawn down on, and the Group's fixed assets.
The loan notes outstanding as at 31 December 2020 were due to related parties.
All other facilities are on demand facilities and have no set repayment schedules.
The movement of loans notes in the period
is as follows:
Loan notes Loan notes
- liabilities - equity
$'000 $'000
At 1 January 2021 7,426 -
Accrued interest 528 -
Conversion of shareholder loan notes to equity (7,954) 9,900
Issue of loan notes to third parties 5,600 -
Conversion of loan notes to Ordinary Shares (5,600) (9,900)
________ ________
As at 31 December 2021 - -
________ ________
The original shareholder loan notes due to Simon Phillips ($7,426,000 at 31 December 2020) were reclassified to equity instruments on 14 September 2021 based on changes in their terms such that they met the IAS 32 definition as equity instruments. At the date of this conversion, $1,946,000 of other shareholder balances due were also reclassified into equity instruments after changes in their terms, in line with IAS 32. On 23 December 2021, the balance of these loan notes ($9,900,000) was set off against $3,694,069 owed by Simon Phillips and entities controlled by Simon Phillips, with the resulting balance owed to him ($6,205,931) being satisfied in full by the issue to him of 3,176,871 new Ordinary Shares.
On 20 September 2021, $5,600,000 of new loan notes were issued to unrelated third parties which were classified as a liability as per the terms of the agreement, carrying an interest rate of 10% and due to be repaid on 31 December 2023. On 23 December 2021, these were converted into 5,034,898 Ordinary Shares. These were issued at a 43% discount to the AIM listing placing price.
Trade and other payables
16
2021 2020
$'000 $'000
Current
Trade payables 24,938 22,758
Non-trade payables and accrued expenses 11,419 12,749
Employee social security and taxes 7,388 3,221
Contract liabilities 2,925 8,336
Other payables 3,359 4,878
Provisions for losses on forward contracts 15 -
________ ________
50,044 51,942
________ ________
Included within trade and other payables is $Nil (2020 - $Nil) expected to be settled in more than 12 months.
All trade and other payables other than employee social security and taxes, contract liabilities and provisions for losses on forward contracts (fair value through profit and loss) are classified as financial liabilities measured at amortised cost. The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value.
Included within Other payables at 31 December 2020 were $1,946,000 of balances due to Simon Phillips which were reclassified into Equity Loan Notes on 14 September 2021 and subsequently settled by issue of Ordinary Shares.
In addition to the shareholder loan notes, at 23 December 2021 Directors Loan balances of $487,619 were satisfied by the issue of 249,615 Ordinary Shares to the Directors.
Prior year adjustment
17
During the year, management performed a review of the stock overhead absorption, and identified that, as of 31 December 2020, the Group had not correctly released the overhead absorption recognised within work in progress and finished goods. This resulted in the overhead absorption within inventory being overstated at the year ended 31 December 2020 within Chinatool Automotive Mould Systems Limited. The adjustment to correct this has resulted in an increase to cost of sales of $831,481 for the year ended 31 December 2020 and a reduction in inventory value of $831,481 as at 31 December 2020.
This adjustment has increased the loss for the year ended 31 December 2020 by $831,481. The full impact of the restatement across the financial statements is disclosed below:
Restated Financial
Consolidated statement of Reported Financial year ended 31
Profit and Loss and Other Comprehensive year ended 31 December Correction December 2020
Income ($'000) 2020
Cost of sales 87,752 831 88,583
Reported as at 31 Restated as
Consolidated Balance Sheet December 2020 Correction at 31 December
($'000) 2020
Inventory 41,054 (831) 40,223
Restated Financial
Consolidated Statement of Reported Financial year ended 31
Cash Flows ($'000) year ended 31 December Correction December 2020
2020
Loss for the year (7,796) (831) (8,627)
(Increase) in inventories (4,661) 831 (3,830)
Notes forming part of the Reported as at 31 Restated as
consolidated financial statements December 2020 Correction at 31 December
($'000) 2020
Cost of inventories 44,638 831 45,469
The Reconciliation of effective tax rate note within the Notes forming part of the Consolidated Financial Statements was also impacted by $158,000 and resulting in the amount of movement in unrecognised deferred tax being $108,000.
Alternative performance measures
18
The Annual Report includes Alternative Performance
Measures (APMs) which are considered by Management
to better allow the readers of the accounts
to understand the underlying performance of
the Group. A number of these APMs are used
by Management to measure the KPIs of the Group
as outlined within the Business Review. The
Board also monitors these APMs to assess financial
performance throughout the year.
The APMs used in the Annual Report include:
* Adjusted EBITDA - calculated as EBITDA adjusted for
non-recurring items
* Adjusted EBITDA margin - calculated as adjusted
EBITDA divided by revenue in the year
* Adjusted operating profit - calculated as Operating
profit/(loss) adjusted for non-recurring items
* Adjusted operating profit margin - calculated as
adjusted operating profit divided by revenue in the
year
EBITDA is calculated based using Operating
profit/(loss) before interest, taxes, depreciation
and amortisation.
Adjusted EBITDA and adjusted EBITDA margin
2021 2020
$'000 $'000
Adjusted EBITDA 8,767 1,164
Non-recurring items
(1,810) -
* AIM listing fees
(1,113) -
* Turkish foreign exchange losses
(1,627) -
* Impairment of associate
* Irrecoverable excess freight costs (1,021) (1,814)
_______ _______
EBITDA 3,196 (650)
_______ _______
Adjusted EBITDA margin 6.6% 1.1%
Adjusted operating profit and adjusted operating
profit margin
2021 2020
$'000 $'000
Adjusted operating profit 3,182 (3,342)
Non-recurring items
(1,810) -
* AIM listing fees
(1,113) -
* Turkish foreign exchange losses
(1,627) -
* Impairment of associate
* Irrecoverable excess freight costs (1,021) (1,814)
_______ _______
Operating loss (2,389) (5,156)
_______ _______
Adjusted operating profit margin 2.4% (3.0%)
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