REG - CT Automotive Group - Final Results
20/05/2024 07:00
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RNS Number : 0052P CT Automotive Group PLC 20 May 2024
20 May 2024
CT Automotive Group PLC
("CT Automotive" or the "Group")
"A return to strength driven by sustainable operational efficiencies."
CT Automotive, a leading designer, developer and supplier of interior
components to the global automotive industry, today announces its results for
the year ended 31 December 2023 ("FY23").
Simon Phillips, Chief Executive Officer of CT Automotive, commented:
"Our markets re-opened in 2023 after a pro-longed hiatus relating to the Covid
pandemic. As a result, our business bounced back strongly and quickly into
profitability. We grew the business, raised new capital and reset our
financial position. The improved market and successful fundraise allowed our
business to flourish in the second half and we used this period to drive new
cost efficiencies across the business, enhancing our performance and setting
the business up for sustained success with trading in the first part of 2024
in line with expectations."
Financial highlights(+)
FY23 FY22
$m $m
Revenue 143.0 124.3
Gross profit 30.9 14.9
Underlying EBITDA* 16.1 (7.1)
Underlying profit/(loss) before taxation* 8.3 (14.5)
Profit/(loss) before taxation 5.9 (18.8)
Earnings/(loss) per share 10.1c (42.9)c
Net debt** 3.8 12.2
* Adjusted for non-recurring items as explained in Notes 6 and 21 of the
consolidated financial statements
** Net debt excludes IFRS 16 lease liabilities
(+)Note: the above figures are derived from continuing operations excluding UK
discontinued operations
FY23 highlights
· With the strong recovery in automotive markets during 2023 our
revenues rebounded 15%, driven by production revenue up by 13% and $10.9m
(FY22: $7.0m) of tooling projects
· Gross profit margin improved from 12% to 22% benefitting from a
return of direct labour and materials spend to pre Covid levels as well as
management's successful margin improvement initiatives
· Significantly stronger second half performance following successful
$9.6m fundraise in May which unlocked the potential to drive profits, with 70%
of underlying PBT generated in H2
· Overall, underlying PBT grew to $8.3m (FY22: $14.5m loss) supported
by the improved gross profit margin, internal cost saving programmes to right
size the overhead base and a return to pre-pandemic freight costs
· EBITDA to cash conversion rate of 59%
· Significant improvement in net debt to $3.8m (FY22: $12.2m)
(excluding IFRS 16 lease liabilities)
· FY23 operational update
o All production facilities are operating at healthy levels of profitability
o China benefitted from reopening automotive markets post Covid, normalised
direct labour and supply chain, further boosted by margin improvements from
production efficiencies and automation
o Resilient performance from Türkiye whilst managing extreme inflationary
pressures
o Mexico plant continued to perform to plan following start-up phase in FY22
Outlook
· In line with our expectations demand volumes have moderated as
OEMs align inventory levels with normal market conditions
· This will be partially offset by our new business pipeline,
building on wins with Ford, Marelli and Rivian
· Margin improvement initiatives made in FY23 will annualise in
FY24 with ongoing cost programmes expected to further benefit profitability in
the current year
· We are currently in advanced negotiations to secure a new debt
facility
· Overall trading is in line with market expectations for 2024
Enquiries:
CT Automotive Via Novella
Simon Phillips, Chief Executive Officer
Anna Brown, Chief Financial Officer
Liberum (Nominated Adviser and Broker) Tel: +44 (0)20 3100 2000
Richard Lindley
Novella Communications (Financial Public Relations) Tel : +44 (0)20 3151 7008
Tim Robertson, Claire de Groot, Safia Colebrook ctautomotive@novella-comms.com
Notes to editors
CT Automotive is engaged in the design, development and manufacture of bespoke
automotive interior finishes (for example, dashboard panels and fascia
finishes) and kinematic assemblies (for example, air registers, arm rests,
deployable cup holders and storage systems), as well as their associated
tooling, for the world's leading automotive original equipment suppliers
("OEMs") and global Tier One manufacturers.
The Group is headquartered in the UK with a low cost manufacturing footprint.
Key production facilities are located in Shenzhen and Ganzhou, China
complemented by additional manufacturing facilities in Mexico, Türkiye and
Czechia.
CT Automotive's operating model enables it to pursue a price leadership
strategy, supplying high quality parts to customers at a lower overall landed
cost than competitors. This has helped the Group build a high-quality
portfolio of OEM customers, both directly and via Tier One suppliers including
Forvia and Marelli. End customers include volume manufacturers, such as
Nissan, Ford, GM and Volkswagen Audi Group, and premium luxury car brands such
as Bentley and Lamborghini. In addition, the Group supplies all our customer
base with a range of products for PHEV and BEV platforms and supplies electric
car manufacturers, including Rivian and a US based major EV OEM.
The Group currently supplies component part types to over 57 different models
for 22 OEMs. Since its formation, the Group has been one of the very few new
entrants to the market, which is characterised by high barriers to entry.
Use of alternative performance measures
The commentary uses alternative performance measures, which have been adjusted
for certain non-recurring items. An explanation of the items identified as
non-recurring and that have been adjusted can be found in Notes 6 and 21 of
the consolidated financial statements. Non- recurring items are items which
due to their one-off, non-trading and non-underlying nature, have been
separately classified by the Directors in order to draw them to the attention
of the reader and allow for a greater understanding of the operating
performance of the Group.
Chairman's Statement
Overview
It is particularly pleasing to be able to deliver my first statement as
Chairman of CT Automotive alongside such a strong set of results, which show a
significant increase in revenues and the Company moving strongly and quickly
back into profitability.
In 2023, we were supported by an improving more stable market environment, our
successful fundraise in May, and good demand for our products helped by our
customers catching up from the slower Covid affected period. Moreover, the
significant operational improvements we made during 2023 have driven our
margin performance, setting us on course for sustained long-term success.
Design-led, low cost manufacturing
85% of global vehicle production is undertaken by 23 manufacturers. Of these,
the Group currently supplies components to 22. They include volume producers,
such as Nissan and Ford, premium brands, such as Bentley and Lamborghini, and
leading EV brands, such as Rivian and a US based major EV OEM. Importantly,
we do not prioritise BEV or PHEV over ICE models. Instead, we have an agnostic
position focusing on delivering quality components to all segments of the
automotive market.
Our objective is simply to expand our relationships with our existing client
base and attract new customers. In 2023 we achieved this aim adding seven new
program wins.
Key to our success is our design-led, low-cost manufacturing offer, combined
with the strength of our strategically placed distribution and logistics
centres, enabling us to deliver rapidly to our clients.
Strategically, the opening of our Mexico facility in 2022 has established a
platform to grow our business with our North American customers. With a
trained workforce and stable operating processes now in place, this facility
is primed for revenue growth in future years.
The vehicle interior environment and the interior as an extension of the
technology story is rapidly becoming a key product differentiator.
Manufacturers are allocating an increasing share of their build cost to
deliver increased levels of perceived quality, and to provide customer delight
features. The Group's product portfolio and embedded development skills are
well matched to these market trends.
Board Changes
During 2023, the Company has made further progress towards QCA best practice
and improved governance by appointing an independent Chairman and making
several other notable changes to the Board. Simon Phillips moved from being
Executive Chairman to become our Chief Executive Officer. Scott McKenzie,
previously Chief Executive Officer, stepped down from the Board to a new key
role as Chief Operating Officer, Sales and Product Development. I moved from
Non-Executive Director to become Non-Executive Chairman and Anna Brown joined
as CFO.
In addition, we appointed Francesca Ecsery as Senior Independent
Non-Executive, Nick Timberlake as a Non-Executive Director and Geraint Davies
as an Independent Non-Executive Director and Chair of the Audit and Risk
Committee.
Financial Performance
In FY23 the Group delivered an excellent financial performance, reflecting not
only a much improved trading environment, with China reopening and supply
chains and container rates normalising, but also, as the year progressed, the
effect of management's self-help initiatives bearing fruit.
We generated total revenues of $143.0 million up by 15% compared to the prior
year. This was made up of $132.0 million of production revenue, up 13% on
FY22, and $10.9m of tooling revenue.
The group delivered significant gross margin improvement from 12% to 22%,
resulting from the aforementioned volume improvements as well as production
efficiency measures and automation. This, alongside significant overhead and
indirect cost reduction saw underlying PBT recover strongly to $8.3 million
compared to a loss of $14.5 million in the prior year.
Cash generation from an improved EBITDA (with a cash conversion rate of 59%)
combined with the gross proceeds of $9.6 million from the successful fundraise
helped reduce net debt to $3.8 million versus $12.2 million at the end of FY22
(excluding IFRS 16 lease liabilities).
CEO Statement
Introduction
CT Automotive has successfully navigated the challenges presented by the
pandemic and its aftermath, and has emerged as a much stronger business,
reinforcing our position as a design led low-cost supplier to the global
automotive market. During 2023, we won seven key tenders which supported our
performance and provided the Group with good revenue visibility going out to
2030. These achievements were made possible by the efforts of our entire team,
and I am deeply grateful to all our staff, knowing that it is their skills and
dedication that lie at the heart of our past and future success.
Fundamentally, the results for this financial year show the business is in
good health and well-placed to grow market share.
New capital
Strong backing from our shareholder base in May last year brought in
$9.6million, providing the capital to achieve the positive outcomes for the
year. This came at a critical time for the business with the Zero Covid period
in China having halted production for 20% of the prior year, causing severe
disruption and a significant increase in associated costs of our business. The
injection of new capital re-energised the entire Group, enabling us not only
to reduce debt but as importantly, to invest in our production process as well
as our new business pipeline. This coincided with the start of the global
OEM's re-engagement with suppliers, seeking to ramp up plans not only for
production that had been lost in FY22 but also for future auto models. As a
result of all the measures we took to put the business on a sound footing, the
Group was ready and able to bounce back strongly during FY23.
Production program wins
Our highly experienced sales teams, under Scott McKenzie, are spread
strategically across the globe to be close to both existing and potential
clients. This ensured they were well placed to secure a competitive share of
the new business pipeline emerging in the middle part of 2023, from which the
Group will benefit in the medium to longer term.
At the time of reporting our Interim Results in September, our new business
team had secured five new production program wins. In the last three months of
2023 the team secured a further two wins. Combined, these will generate a
total annualised production turnover of c.$20.0 million, and tooling business
awards of c.$11.0 million.
Pursuing efficiencies across the Group
Improvement in gross margin is a key ongoing focus. In 2023, our gross margin
grew from 12% to 22%, an excellent achievement due to the hard work of all
employees across the Group. This expansion came from measures taken to
reduce unit labour costs as volumes recovered, as well as from a significant
improvement in raw material costs. Whilst undoubtedly, margins benefitted
naturally from volume improvement in a more normal market environment, a
significant proportion of the recovery came from internal actions to improve
production efficiencies, the full impact of which is still coming through in
2024.
With 70% of our production volumes coming from China, this facility is our
main focus as any improvement there is a major driver of future profitability.
Successful cost saving measures initiated in China are then replicated in
Türkiye and Mexico.
There are four main areas of focus:
· Supply chain rationalisation - primarily through the negotiation of
better rates for key raw materials.
· Restructuring manufacturing footprint - benefit from the closure of
Chinatool Automotive Systems Limited ("CAS"), our unprofitable UK facility in
Newton Aycliffe, which generated a loss of $2.8 million in FY22. In addition,
ongoing consolidation of some production lines in China from Shenzhen to
Ganzhou, taking advantage of lower labour costs.
· Optimised production processes - re-evaluating production lines
specifically assessing labour level requirements for each production line
across the business.
· Automation initiatives - embraced by the Group and led by China. This
is a key area of competitive advantage and therefore growth. Inserting
robotics into production and assembly lines to replace individuals is being
carefully tested and implemented whilst retaining optionality to revert to
manual practices. The processes are very similar in all sites and the scope to
significantly extend the use of robotics has material future benefits for the
Group.
Türkiye
The economic environment is starting to improve in Türkiye. Our manufacturing
site in Gebze performed resiliently during 2023, despite the impact of
hyperinflation and currency movements. The business has successfully
implemented a cost escalation system, agreed with all key clients, that is
applied monthly passing on inflationary and currency cost increases. Given the
economic backdrop, the team in Türkiye has performed well, continuing to
attract new customers and sustaining a commercial margin.
Mexico
Our manufacturing site in Puebla, Mexico was set up in 2022 (at a cost of
$3.3m), to provide manufacturing services to the key US market. To date, the
site has performed to plan and is demonstrating the potential to be a
significant future driver of profitability. Currently operating at 50%
capacity, it is expected to reach 100% in 2025 and will need investment to
expand its operations to meet visible demand for 2026 and beyond. Working in
close harmony with the central China team, the general manager, a Mexican
national who was previously working for us in China for 12 years, has ensured
the Puebla plant is a close replica of the operational and systems structure
used in our sites in China. The shared knowledge and approach has been core
to the success of this exciting operation.
Quality control
To be successful in the automotive industry requires a dedication to detail,
consistency and quality. To produce a single new car involves the contribution
of many suppliers working in harmony. Any drop in quality from CT Automotive
would be costly both financially and in reputation. We are therefore very
focused on delivering products of the highest quality every time. Our
procedures for delivering on this objective are rigorous, focusing on quality
checks (QC) throughout the production process. Reflecting our dedication in
this area, CT Automotive China and Türkiye plants were recertified under IATF
16949:2016 standard in FY21, while Mexico is expected to receive their
certification later in 2024. We are proud of our track record in delivering
quality and we believe the high levels of repeat custom achieved by the Group
reflects this.
Sustainability
We are wholly committed to sustainability and corporate social responsibility,
and ensuring that we continue to monitor the environmental impact of our
operations, both externally and internally. Last year we engaged EcoVadis to
undertake a full sustainability report of the Group's operations, and as a
result in 2023 introduced a new environmental policy across all locations. We
believe the new policy has set a valuable benchmark of CT Automotive's
performance against key sustainability and CSR measures. Customers are
continually raising the bar in their requirements for high standards of
sustainability reporting and we continue to adapt and grow in this field to
ensure that we not only comply with these requirements but go above and
beyond.
Our People
The excellent financial performance of the business in 2023 is the direct
result of the hard work of all our people. We employ c.2,200 people across the
business and on behalf of the Board, I would like to take this opportunity to
thank them all for their endeavours and to recognise their contribution to the
results we have achieved. Furthermore, we appreciate they represent the driver
of our future success.
Current trading and outlook
Trading in 2024 has been positive and in line with market expectations, with
good customer demand and good visibility over both booked production and
tooling revenues extending into the year end and beyond.
We entered 2024 in a much-improved financial position. We have reduced our net
debt to $3.8 million (FY22: $12.2 million) and the Group is currently in the
advanced stages of agreeing a new longer term debt facility with a new lender
to replace the existing working capital facilities.
In 2023, our production demand surpassed consumer demand due to the urgent
need for OEMs to replenish depleted inventories resulting from the disruptions
in the supply chain caused by the pandemic. This year, demand volumes have, in
line with our expectations, moderated as OEMs align inventory levels to a more
balanced scenario, where production demand is more closely paired with
consumer demand. This will be partially offset by our new business pipeline,
building on high-profile wins with Ford, Marelli and Rivian.
In addition, margin improvement initiatives made in FY23 will annualise in
FY24 with ongoing cost programmes expected to further benefit profitability in
current year.
Looking further forward, 2025 holds significant promise underlined by secured
business wins, with a series of new product launches driving a stepped growth
pattern. I think CT Automotive will continue to build market share and I look
forward to reporting on our progress.
Financial review
Revenue and margins
During FY23 the Group generated total revenue of $143.0m, up by 15% compared
to prior year (FY22: $124.3m on a continuing basis, excluding FY22
discontinued revenue of $4.0m). FY23 growth was supported by strong demand,
clearing the backlog in global automotive production volumes and easing of
supply chain issues and new wins. Growth came from both production revenue
which increased by 13% from $117.3m to $132.0m and an increase in tooling
revenue from $7.0m to $10.9m.
Gross profit increased to $30.9m (FY22: $14.9m) and gross margins improved to
22% (FY22: 12%) on the back of recovered trading conditions and the Group's
ongoing efficiency initiatives in China and Türkiye which started to deliver
savings. These initiatives include optimisation of production lines,
restructuring of tooling operations and manufacturing footprint, supplier and
logistics rationalisation as well as automation initiatives.
Non-recurring items
During FY23 the Group incurred non-recurring items representing a net cost of
$2.4m (FY22: $4.3m). These items primarily related to $0.9m of costs
incurred on previously completed tooling projects, the impact of
hyperinflation in Türkiye of $0.7m, the write off of historic working capital
balances with a net impact of $0.5m and $0.3m of customer payments for
Covid-related business disruption.
For further details, see Notes 6 and 21 of the consolidated financial
statements.
EBITDA and operating result
FY23 underlying EBITDA was $16.1m (FY22: $7.1m loss) while reported EBITDA was
$13.7m (FY22: $11.4m loss). This improvement mainly came from an increase in
gross profit from $14.9m to $30.9m, a reduction in distribution expenses to
$3.2m (FY22: $5.1m) and in administrative expenses to $20.0m (FY22: $27.3m).
A reduction in distribution expenses by $1.9m was due to container rates
settling to pre-Covid levels: FY22 average container rates between China and
the US/UK were $17.4k while the average rates for FY23 reduced to $6.6k per
container.
An improvement in administrative expenses mainly came from headcount
reductions and leases and foreign exchange gains. During FY23 the Group
benefitted from $0.9m of foreign exchange gains (FY22: $3.8m loss) due to
favourable exchange rate movements primarily against the US$ and from actively
reducing intercompany loan balances, which contributed to FY22 foreign
exchange losses.
Depreciation and amortisation charges remained broadly the same at $5.2m
(FY22: $5.4m) in FY23. Therefore, the resulting underlying operating profit
was $10.8m (FY22: $12.6m loss) and reported operating profit was $8.5m (FY22:
$16.8m loss).
Taxation
The Group has recognised a tax credit of $0.6m (FY22: $3.1m tax charge).
This is primarily driven by the recognition of a deferred tax asset in the UK
and Chinese entities, resulting in a deferred tax credit of $1.7m (FY22: $2.4m
charge). This was partially offset by a tax charge of $1.1m (FY22: $0.6m)
being a current year tax expense in our manufacturing subsidiaries and a
technical provision for a tax uncertainty in a specific jurisdiction as
required by IFRIC 23.
Discontinued operations
During FY22, the Group announced the closure of CAS, which was impacted by
severe labour shortages and inflationary increases in energy costs and wages.
FY23 loss attributable to the discontinued operations was $0.2m (FY22: $2.8m
loss) and related to CAS administrative expenses incurred in during the first
six month of FY23.
Profit from continuing operations and EPS
FY23 underlying profit before tax was $8.3m (FY22: $14.5m loss), while
reported profit before tax was $5.9m (FY22: $18.8m loss), taking into account
non-recurring items of $2.4m (FY22: $4.3m). Profit after tax from continuing
operations was $6.6m (FY22: $21.9m loss), benefitting from tax credit
mentioned above. This resulted in basic EPS from continuing operations of
10.1c (FY22: 42.9c loss).
Capital structure, working capital and interest
Since December 2022 year end, the Group saw its net asset value increase to
$17.0m (FY22: $2.6m) supported by the fundraise proceeds in May 2023 and net
profits generated during the year.
Non-current assets reduced to $18.1m (FY22: $19.9m), mainly reflecting a $5.2m
(FY22: $5.4m) depreciation charge in relation to PPE, right of use assets and
intangible assets, partially offset by the $1.6m deferred tax asset (FY22:
nil).
During FY23, the Group saw a $7.0m increase in its current assets. This was
primarily driven by an increase in trade debtors as the customer payment terms
reverted back to normal, a VAT receivable balance in Mexico, the proceeds of
the fundraise and cash generated by the Group from its operating activities.
Trade and other payables reduced by $2.5m during FY23 as supplier payments
have returned to normal and a portion of proceeds from the fundraise has been
used to pay suppliers in China and the UK.
The Group has continued to prudently manage its working capital by utilising
available debt facilities, cash generated from the operations and from the
proceeds of the fundraise. Cash and cash equivalents as at 31 December 2023
were $9.4m (FY22: $4.8m). The year end cash balance was boosted by the
timing of December payroll payments in China of $1.7m which took place in
early January 2024. Net debt as at 31 December 2023 was $3.8m (FY22: $12.2m)
and included bank overdrafts, amounts drawn on the Group's trade loans and
invoice finance facilities with HSBC. After applying IFRS 16 accounting for
right-of-use assets on current and non-current lease liabilities, net debt as
at 31 December 2023 was $12.8m (FY22: $24.1m).
The Group uses HSBC post-dispatch trade loans and invoice financing facilities
as an additional working capital lever. As at 31 December 2023 the amounts
drawn on the Group's trade loans and invoice finance facilities were $13.2m
(FY22: $16.7m) against total available facilities of c.$21m. Net finance
costs increased to $2.5m (FY22: $2.0m) reflecting higher interest rates.
During May 2023 the Group completed a fundraise with total gross proceeds of
$9.6m. The net proceeds of the fundraise of $9.1m have predominately been used
to strengthen the balance sheet and to provide the Group with the flexibility
to take advantage of growth opportunities. Additionally, a small portion of
the net proceeds has been deployed to realise further efficiency savings,
including through investment in injection moulding production processes and
robotics.
Going concern
The Directors have assessed the Group's business activities and the factors
likely to affect future performance in light of the current and anticipated
trading conditions. In making their assessment the Directors have reviewed
the Group's latest budget, current trading, available current banking debt
facilities and considered the likely impact of reasonably possible downside
sensitivities in performance and the likely impact of potential mitigating
actions.
The Directors are confident that, after taking into account existing cash and
available debt facilities, the Group has adequate resources in place to
continue in operational existence for a period of at least 12 months from the
date of approval of the financial statements. In making their assessment the
Directors have stress tested the forecast cash flows of the business.
For the purposes of stress testing, the Directors modelled a base case,
several downside scenarios, a combined downside scenario and a set of
mitigating actions to the combined downside scenario. The base case was
modelled on a prudent basis, assuming revenues based on the production
schedules and cost estimates. Positive cash headroom is maintained under the
base case scenario. Taking into account the economic outlook, expected
interest rates and geopolitical events, the Directors have identified certain
specific key risks to the base case assumptions and have modelled the
scenarios as follows:
· Reduction in revenue risk: the entire automotive market suffers a
downturn of 10% in revenue reflecting a scenario similar to the 2008-2009
downturn;
· Increased cost of sales risk: reflecting the impact of inflation in
cost of sales raising by 5% and the inability to recover the increase in costs
from customers;
· Stockholding risk: reflecting a scenario caused by the disruption in
customer schedules due to prolonged conflicts in the Red Sea or other
plausible disruptions resulting in the need to hold more than normal stock
levels required in the distribution centres.
In addition, the Directors have modelled a combined downside scenario and
considered several controllable mitigating actions. The principal
mitigation action modelled is the agreement of extended supplier payment
terms. Additional mitigating actions which have not been modelled but are
available for Management to deploy, if required, are reduced customer payment
terms and a further reduction of overheads. Such mitigating actions are
within Management's control and the business closely monitors appropriate lead
indicators to implement these actions in sufficient time to achieve the
required cash preservation impact.
In any of the scenarios noted above the combined impact of the above downside
assumptions, the stress testing model, incorporating the above principal
mitigation, demonstrates that the business is able to maintain a positive cash
balance throughout the entire going concern review period considered.
The Group currently has trade loans and invoice finance facilities which are
renewed at set times (typically quarterly, six monthly or annually) and which
have been recently renewed as part of this renewal cycle. The Group will be
reviewing our current banking debt facility providers going forward and
will be considering all viable options with regard to our potential lenders
to ensure that we have the best commercial arrangements in place. Following a
full externally run tender process we are currently in advanced negotiations
to secure new banking debt facilities. Signed heads of terms are in place and
customary due diligence is well progressed. Our current trade loan and invoice
finance facilities remain in place until such time as the new banking debt
facility is completed.
As a result of the above considerations, the Directors consider that the Group
has adequate resources in place for at least 12 months from the date of the
approval of FY23 financial statements and have therefore adopted the going
concern basis of accounting in preparing the financial statements.
Consolidated Statement of Profit or Loss and other Comprehensive Income
For the year ended 31 December 2023
Notes 2023 2022
$'000 $'000
Continuing operations:
Revenue 4 142,974 124,269
Cost of sales (112,118) (109,407)
Gross profit 30,856 14,862
Distribution expenses (3,150) (5,059)
Other operating income 5 807 650
Administrative expenses (20,041) (27,287)
EBITDA (before non-recurring items) 16,090 (7,129)
Depreciation 7 (4,950) (4,820)
Amortisation 7 (294) (602)
Non-recurring items 6 (2,374) (4,283)
Operating profit / (loss) 7 8,472 (16,834)
Finance income - 10
Finance expenses (2,535) (1,997)
Profit / (loss) before tax 5,937 (18,821)
Taxation credit / (charge) 8 616 (3,054)
Profit / (loss) for the year from continuing operations 6,553 (21,875)
Discontinued operations
Loss for the year from discontinued operations 9 (238) (2,789)
Profit / (loss) for the year attributable to equity shareholders 6,315 (24,664)
Profit attributable to:
Owners of the Company 6,313 (24,664)
Non-controlling interests 2 -
6,315 (24,664)
Other comprehensive income / (loss)
Items that are / may be reclassified subsequently to profit or loss:
Foreign currency translation differences - foreign operations (1,426) (927)
Other comprehensive loss for the year, net of income tax (1,426) (927)
Total comprehensive income / (loss) for the year 4,889 (25,591)
Total earnings / (loss) per share
From continuing operations:
Basic earnings / (loss) per share 10 10.1c (42.9)c
Diluted earnings / (loss) per share 10 9.7c -
From continuing and discontinued operations:
Basic earnings / (loss) per share 10 9.7c (48.4)c
Diluted earnings / (loss) per share 10 9.4c -
Consolidated Balance Sheet
As at 31 December 2023
Notes 2023 2022
$'000 $'000
Assets
Non-current assets
Goodwill 11 1,259 1,259
Intangible assets 12 314 528
Property, plant and equipment 13 7,089 7,302
Right of use assets 14 7,895 10,769
Deferred tax assets 15 1,571 -
18,128 19,858
Current assets
Inventories 16 25,997 27,342
Tax receivable 261 227
Trade and other receivables 17 30,578 26,880
Cash and cash equivalents 18 9,440 4,829
66,276 59,278
Current liabilities
Trade and other payables 19 (43,390) (45,924)
Other interest-bearing loans and borrowings 20 (13,198) (17,058)
Derivative financial liabilities (52) (671)
Corporate tax payable (1,847) (771)
Current lease liabilities 14 (3,492) (3,022)
(61,979) (67,446)
Non-current liabilities
Derivative financial liabilities - (95)
Deferred tax liabilities 15 - (118)
Non-current lease liabilities 14 (5,458) (8,900)
(5,458) (9,113)
Net assets 16,967 2,577
Equity attributable to owners of the Company
Share capital 484 342
Share premium 63,696 54,717
LTIP reserve 4 -
Translation reserve (1,397) (347)
Accumulated Deficit (10,070) (16,323)
Merger reserve (35,812) (35,812)
16,905 2,577
Non-controlling interest 62 0
Total equity 16,967 2,577
Total equity
16,967
2,577
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
Share capital Share premium LTIP reserve Translation reserve Accumulated Deficit Non-Controlling interest Merger reserve Total equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2022 as previously published 342 54,717 - 580 7,430 - (35,812) 27,257
Hyperinflationary monetary adjustment relating to 2021 - - - - 911 - - 911
Restated at 1 January 2022 342 54,717 - 580 8,341 - (35,812) 28,168
Total comprehensive income for the year:
Loss for the year - - - - (24,664) - - (24,664)
Other comprehensive income - - - (927) - - - (927)
Total comprehensive income/loss for the year - - - (927) (24,664) - - (25,591)
At 31 December 2022 and at 1 January 2023 342 54,717 - (347) (16,323) - (35,812) 2,577
Total comprehensive income for the year:
Profit for the year - - - - 6,313 2 - 6,315
Recognition of LTIP reserve - - 4 - - - 4
Foreign currency translation - - - (1,049) - - - (1,049)
Total comprehensive income/ (loss) for the year - - 4 (1,049) 6,313 2 - 5,270
Transactions with equity:
Share issue 142 9,488 - - - - - 9,630
Issuance Cost (510) (510)
Share issue in CT-Mexico (60) 60 0
142 8,978 - - (60) 60 - 9,120
At 31 December 2023 484 63,695 4 (1,396) (10,070) 62 (35,812) 16,967
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
2023 2022
$'000 $'000
Cash flows from operating activities
Profit / (loss) from continuing operations 6,555 (21,875)
Loss from discontinued operations (240) (2,789)
Profit / (Loss) for the year after tax 6,315 (24,664)
Adjustments for:
Depreciation 4,950 5,345
Amortisation 294 602
Impairment of goodwill - 1,158
Finance income - (10)
Finance expense 2,535 2,090
Net fair value (profits)/losses recognised in profit or loss (714) 750
Share based payment charge 4 -
Impairment of lease assets - 429
Loss on disposal of fixed assets 1,136 825
Gain on renegotiation of lease - (168)
Taxation (credit)/charge (616) 3,103
Hyperinflation impact on operating profit 683 665
14,587 (9,875)
(Increase) / decrease in trade and other receivables (4,620) 14,786
Decrease in inventories 641 1,104
Decrease in trade and other payables (2,530) (618)
Tax (paid)/refund (41) 145
Net cash generated from operating activities 8,037 5,542
Cash flows from investing activities
Purchase of intangible assets (96) (633)
Purchase of property, plant and equipment (3,114) (2,864)
Interest received - 10
Net cash used in investing activities (3,210) (3,487)
Cash flows from financing activities
(Repayment) of loan facilities - (2,500)
Gross proceeds from Share issue 9,630 -
Payment of professional fees related to share issue (509) -
Repayment of lease liabilities (3,005) (3,607)
Interest paid (2,535) (2,090)
(Repayment) / drawdown of trade loans (578) 4,131
Repayment of invoice finance (2,924) (3,880)
Net cash generated/ (used in) from financing activities 79 (7,946)
Net increase/(decrease) in cash and cash equivalents 4,906 (5,891)
Cash and cash equivalents at beginning of year 4,471 9,807
Effect of exchange rate fluctuations on cash held 63 555
Cash and cash equivalents at end of year (see Note 18) 9,440 4,471
Notes to the consolidated financial statements
1. Accounting Policies
Introduction
CT Automotive Group Plc (the "Company") is a public Company limited by shares
incorporated and domiciled in England and Wales under the Companies Act 2006.
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 as the Group's revenue
and working capital facilities are also predominantly denominated and/or
received in USD.
The Group financial statements consolidate those of the Company and its
subsidiaries (together referred to as the "Group").
The Group financial statements have been prepared and approved by the
Directors in accordance with UK-adopted International Accounting Standards and
with the requirements of the Companies Act 2006 as applicable to companies
reporting under those standards.
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these consolidated financial
statements.
Judgements or estimates that are deemed to have a significant effect on the
financial statements are stated in Note 2.
Measurement convention
The financial statements are prepared on the historical cost basis except for
the financial statements of the foreign operations in Turkiye which are
subject to hyperinflationary accounting, and derivative financial instruments
which are stated at fair value.
Going Concern
The Directors have assessed the Group's business activities and the factors
likely to affect future performance in light of the current and anticipated
trading conditions. In making their assessment the Directors have reviewed
the Group's latest budget, current trading, available current banking debt
facilities and considered the likely impact of reasonably possible downside
sensitivities in performance and the likely impact of potential mitigating
actions.
The Directors are confident that, after taking into account existing cash and
available debt facilities, the Group has adequate resources in place to
continue in operational existence for a period of at least 12 months from the
date of approval of the financial statements. In making their assessment the
Directors have stress tested the forecast cash flows of the business.
For the purposes of stress testing, the Directors modelled a base case,
several downside scenarios, a combined downside scenario and a set of
mitigating actions to the combined downside scenario. The base case was
modelled on a prudent basis, assuming revenues based on the production
schedules and cost estimates. Positive cash headroom is maintained under the
base case scenario. Taking into account the economic outlook, expected
interest rates and geopolitical events, the Directors have identified certain
specific key risks to the base case assumptions and have modelled the
scenarios as follows:
· Reduction in revenue risk: the entire automotive market suffers a
downturn of 10% in revenue reflecting a scenario similar to the 2008-2009
downturn;
· Increased cost of sales risk: reflecting the impact of inflation in
cost of sales raising by 5% and the inability to recover the increase in costs
from customers;
· Stockholding risk: reflecting a scenario caused by the disruption
in customer schedules due to prolonged conflicts in the Red Sea or other
plausible disruptions resulting in the need to hold more than normal stock
levels required in the distribution centres.
In addition, the Directors have modelled a combined downside scenario and
considered several controllable mitigating actions. The principal
mitigation action modelled is the agreement of extended supplier payment
terms. Additional mitigating actions which have not been modelled but are
available for Management to deploy, if required, are reduced customer payment
terms and a further reduction of overheads. Such mitigating actions are
within Management's control and the business closely monitors appropriate lead
indicators to implement these actions in sufficient time to achieve the
required cash preservation impact.
In any of the scenarios noted above the combined impact of the above downside
assumptions, the stress testing model, incorporating the above principal
mitigation, demonstrates that the business is able to maintain a positive cash
balance throughout the entire going concern review period considered.
The Group currently has trade loans and invoice finance facilities which are
renewed at set times (typically quarterly, six monthly or annually) and which
have been recently renewed as part of this renewal cycle. The Group will be
reviewing our current banking debt facility providers going forward and
will be considering all viable options with regard to our potential lenders
to ensure that we have the best commercial arrangements in place. Following a
full externally run tender process we are currently in advanced negotiations
to secure new banking debt facilities. Signed heads of terms are in place and
customary due diligence is well progressed. Our current trade loan and invoice
finance facilities remain in place until such time as the new banking debt
facility is completed.
As a result of the above considerations, the Directors consider that the Group
has adequate resources in place for at least 12 months from the date of the
approval of FY23 financial statements and have therefore adopted the going
concern basis of accounting in preparing the financial statements.
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.
Non-controlling interest
Non-controlling interest represents the equity in subsidiaries that is not
attributable to all shareholders of the Group.
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.
Discontinued operations
When the Group has sold or discontinued a component that represents a separate
major line of business or geographical area of operations during the year, or
has classified the component as held for sale, its results are presented
separately, net of any profit or loss on disposal, in the statement of profit
or loss and other comprehensive income, with the comparative amounts restated.
Foreign Currency
Transactions in foreign currencies are translated into 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 into the Group's
reporting 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.
Effective from 1 January 2022, the Group has applied IAS 29, Financial
Reporting in Hyperinflationary Economies, for its subsidiary in Türkiye,
whose functional currency has experienced a cumulative inflation rate of more
than 100% over the past three years. Assets, liabilities, the financial
position and results of foreign operations in hyperinflationary economies are
translated to US Dollar at the exchange rate prevailing at the reporting date.
The exchange differences are recognised directly in other comprehensive income
and accumulated in the translation reserve in equity. Such translation
differences are reclassified to profit or loss only on disposal or partial
disposal of the foreign operation. Prior to translating the financial
statements of foreign operations, the non-monetary assets and liabilities and
comprehensive income (both previously stated at historic cost) are restated to
account for changes in the general purchasing power of the local currencies
based on the consumer price index published by the Turkish Statistical
Institute. The consumer price index for the year ended 31 December 2023 and 31
December 2022 increased by 64.77% and 64.27% respectively. Monetary items are
not restated because they are already expressed in terms of the monetary unit
current at the end of the reporting period.
Amounts presented in the consolidated financial statements at 1 January 2022
were not restated. Hyperinflationary accounting needs to be applied as if
Türkiye has always been a hyperinflationary economy. Therefore as per CT
Automotive Group's policy choice, the difference was between equity at 31
December 2021 as reported and the equity after restatement of the non-monetary
items to the measuring unit current at 31 December 2022 were recognised in
retained earnings. The subsequent gains or losses resulting from the
restatement of non-monetary assets and liabilities are recorded in the
Consolidated Statement of Profit or Loss and Other Comprehensive Income.
Revenue
Revenue is measured at the fair value of the consideration received or
receivable. Provided it is probable that the economic benefits will flow to
the Group and the revenue and costs, if applicable, can be measured reliably,
revenue is recognised in profit or loss as follows:
Serial production goods are recognised as sold at a point in time when control
is passed to the customer, which depending on the incoterms (a series of
pre-defined commercial terms published by the International Chamber of
Commerce relating to international commercial law) can be when they are
delivered to the customer site or when the customer collects them.
Tooling revenue and the provision of associated services is recognised at a
point in time when the performance obligations in the contract are satisfied
and control is passed to the customer, which is based on the date of issue of
the parts submission warrant (PSW) or a similar approval from customers, or
other evidence of the commencement of serial production. Monies received from
customers in advance of completing the performance obligations are recognised
as contract liabilities as at the balance sheet date and released to revenue
when the related performance obligations are satisfied at a point in time.
Discounts on the serial production contracts are considered to be one off and
agreed with the customers as part of the negotiation and as per the terms of
the contract, they are either paid in advance or otherwise. Discounts paid in
advance are recognised as a prepayment and recognised as a debit to revenue in
the period in which the related revenue is recognised. All other discounts are
recognised as a debit to revenue based on the period in which the related
revenues are recognised.
Revenue excludes value added tax or other sales taxes and is after deduction
of any trade discounts.
Government Grants
Government grants are recognised on the accrual basis and any performance
requirements are disclosed as required. Grants of a revenue nature are
recognised in the statement of profit or loss in the same period as the
related expenditure and reported gross as other income.
Expenses
Distribution expenses:
Distribution expenses incurred directly in respect of bringing products to
market. These will include marketing and commissioning costs to distributors
and are recorded at the point the expense is incurred.
Admin expenses:
Admin expenses represent expenses incurred as fixed costs of business
operations of the Group, including rent, utilities, payroll. These expenses
are incurred at the point they are incurred.
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. Finance expense also includes
the IAS29, Hyperinflationary impact on the profit and loss of the Turkish
subsidiary.
Non-recurring items
Non-recurring items are items, which, due to their one-off, non-trading and
non-underlying nature, have been separately classified by the Directors in
order to draw them to the attention of the reader and allow for greater
understanding of the operating performance of the Group. Note 6 provides
further details on the nature of the non-underlying and non-recurring items.
Taxation
(a) Current taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax
is recognised in profit or loss except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous
years.
The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the end of the reporting period in the
countries where the Company and its subsidiaries operate and generate taxable
income. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to
interpretation and considers whether it is probable that a taxation authority
will accept an uncertain tax treatment. The Group measures its tax balances
either based on the most likely amount or the expected value, depending on
which method provides a better prediction of the resolution of the
uncertainty.
(b) Deferred tax
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary differences are not
provided for: the initial recognition of goodwill; the initial recognition of
assets or liabilities that affect neither accounting nor taxable profit other
than in a business combination, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the
balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the temporary
difference can be utilised.
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units and is not amortised but is tested annually
for impairment. In respect of equity accounted investees, the carrying amount
of goodwill is included in the carrying amount of the investment in the
investee.
Intangible assets
Research and development
Expenditure on research activities is recognised in profit or loss as an
expense as incurred.
Expenditure on development activities is capitalised if the product or process
is technically and commercially feasible and the Group has the technical
ability and has sufficient resources to complete development, future economic
benefits are probable and if the Group can measure reliably the expenditure
attributable to the intangible asset during its development. Development
activities involve a plan or design for the production of new or substantially
improved products or processes. The expenditure capitalised includes the cost
of materials, direct labour and an appropriate proportion of overheads and
capitalised borrowing costs. Other development expenditure is recognised in
profit or loss as an expense as incurred. Capitalised development expenditure
is stated at cost less accumulated amortisation and less accumulated
impairment losses.
Intangible assets (including software)
Expenditure on internally generated goodwill and brands is recognised in
profit or loss as an expense as incurred.
Intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation and less accumulated impairment losses.
Amortisation
Amortisation is charged to profit or loss on a straight-line basis over the
estimated useful lives of intangible assets. Intangible assets are amortised
from the date they are available for use. The estimated useful lives are as
follows:
Software - 1 - 5 years
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses.
Where parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items of property, plant and
equipment.
Depreciation is charged to profit or loss on a straight-line basis over the
estimated useful lives of each part of an item of property, plant and
equipment. The estimated useful lives are as follows:
Assets under construction
- not depreciated
Plant and equipment
- 2-15 years straight line
Furniture, fixtures and equipment -
2-5 years straight line
Motor
vehicles
- 2-5 years straight line
Depreciation methods, useful lives and residual values are reviewed at each
balance sheet date.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
based on the first-in first-out principle and includes expenditure incurred in
acquiring the inventories, production or conversion costs and other costs in
bringing them to their existing location and condition. In the case of
manufactured inventories and work in progress, cost includes an appropriate
share of overheads based on normal operating capacity.
Net realisable value is the value that would arise on sale of inventories in
the normal course of business, minus a reasonable estimation of selling costs.
Impairment excluding inventories and deferred tax assets
The carrying amounts of the Group's non-financial assets, other than
inventories and deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such
indication exists, then the asset's recoverable amount is estimated. For
goodwill and intangible assets that have indefinite useful lives or that are
not yet available for use, the recoverable amount is estimated each period at
the same time.
The recoverable amount of an asset or cash-generating unit is the greater of
its value in use and its fair value less costs to sell. In assessing value in
use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. For the purpose of
impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other
assets or groups of assets (the "cash-generating unit"). The goodwill acquired
in a business combination, for the purpose of impairment testing, is allocated
to cash-generating units, or ("CGU"). Subject to an operating segment ceiling
test, for the purposes of goodwill impairment testing, CGUs to which goodwill
has been allocated are aggregated so that the level at which impairment is
tested reflects the lowest level at which goodwill is monitored for internal
reporting purposes. Goodwill acquired in a business combination is allocated
to group 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.
Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity only to the
extent that they meet the following two conditions:
(a) they include no contractual obligations upon the Company (or Group as the
case may be) to deliver cash or other financial assets or to exchange
financial assets or financial liabilities with another party under conditions
that are potentially unfavourable to the Group; and
(b) where the instrument will or may be settled in the Company's own equity
instruments, it is either a non-derivative that includes no obligation to
deliver a variable number of the Company's own equity instruments or is a
derivative that will be settled by the Company's exchanging a fixed amount of
cash or other financial assets for a fixed number of its own equity
instruments.
To the extent that this definition is not met, the proceeds of any issues are
classified as a financial liability.
Non-derivative financial instruments
Financial assets and liabilities are recognised when the Group becomes party
to the contractual provisions of the instrument.
Non-derivative financial instruments comprise trade and other receivables,
cash and cash equivalents, loans and borrowings, and trade and other payables.
Trade and other receivables
Trade and other receivables are initially measured at their transaction price.
Trade receivables and other receivables are held to collect the contractual
cash flows which are solely payments of principal and interest. Therefore,
these receivables are subsequently measured at amortised cost using the
effective interest rate method.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to
initial recognition they are measured at amortised cost using the effective
interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank
overdrafts that are repayable on demand and form an integral part of the
Group's cash management are included as a component of cash and cash
equivalents for the purpose only of the cash flow statement.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost using the effective
interest method. See Note 20 for full details of classes of interest-bearing
borrowings.
Effective interest rate
The 'effective interest' is calculated using the rate that exactly discounts
estimated 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.
Employee Benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the
Group pays fixed contributions into a separate entity and will have no legal
or constructive obligation to pay further amounts. Obligations for
contributions to defined contribution pension plans are recognised as an
expense in profit or loss in the periods during which services are rendered by
employees.
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis
and are expensed as the related service is provided. A liability is
recognised for the amount expected to be paid under short-term cash bonus or
profit-sharing plans if the Group has a present legal or constructive
obligation to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, that can be
reliably measured, and it is probable that an outflow of economic benefits
will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects
risks specific to the liability.
All automotive products are sold with a warranty which mirrors the warranty
offered by the Original Equipment Manufacturer (OEM) to consumers.
Due to the thorough quality checking that is undertaken by the customers
during assembly, and the low-risk nature of the products, it is Company's
policy to only hold a small provision for warranty claims. This is supported
by the historically low value of warranty claims in the past few years which
the Directors do not consider to be material.
Leases
Identifying leases
The Group accounts for a contract, or a portion of a contract, as a lease when
it conveys the right to use an asset for a period of time in exchange for
consideration. Leases are those contracts that satisfy the following
criteria:
(a) There is an identified asset;
(b) The Group obtains substantially all the economic benefits from use of the
asset; and
(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.
All leases are accounted for by recognising a right-of-use asset and a lease
liability except for:
• Leases of low value assets; and
• Leases with a duration of 12 months or less.
These other leases are recognised in profit or loss on a straight-line basis
over the term of the lease.
Lease measurement
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease unless (as is
typically the case) this is not readily determinable, in which case the
Group's incremental borrowing rate on commencement of the lease is used.
Variable lease payments are only included in the measurement of the lease
liability if they depend on an index or rate. In such cases, the initial
measurement of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also
includes:
• amounts expected to be payable under any residual value
guarantee;
• the exercise price of any purchase option granted in
favour of the Company if it is reasonably certain to exercise that option;
• any penalties payable for terminating the lease, if the
term of the lease has been estimated on the basis of a termination option
being exercised.
Right of use assets are initially measured at the amount of the lease
liability, reduced for any lease incentives received, and increased for:
• lease payments made at or before commencement of the
lease;
• initial direct costs incurred; and
• the amount of any provision recognised where the Company
is contractually required to dismantle, remove or restore the leased asset.
Subsequent to initial measurement lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
for lease payments made. Right-of-use assets are amortised on a
straight-line basis over the remaining term of the lease or over the remaining
economic life of the asset if, rarely, this is judged to be shorter than the
lease term.
Earnings per share
Basic earnings per share ("EPS") is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period. Share options are
dilutive, and the Group has calculated dilutive EPS in note 10.
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 3 for the accounting policy and related disclosures for segment
reporting.
New standards, interpretations and amendments
There have been a number of amendments to existing standards which are
effective from 1 January 2023, but they do not have material effect on the
Group financial statements.
New/Revised International Financial Reporting Standards Effective Date: Annual periods beginning on or after: UKEB adopted
IAS 1 Amendments to IAS 1: Disclosure of Accounting Policies 1 January 2023 Yes
IAS 8 Amendments to IAS 8: Definition of Accounting Estimates 1 January 2023 Yes
IAS 12 Amendment to IAS 12: Deferred Tax related to Assets and Liabilities arising 1 January 2023 Yes
from a Single Transaction
IFRS 17 IFRS 17: Insurance Contracts 1 January 2023 Yes
At the date of approval of the consolidated financial statements, the IASB and
IFRS Interpretations Committee have issued standards, interpretations and
amendments which are applicable to the Group. For the next reporting period,
applicable International Financial Reporting Standards will be those endorsed
by the UK Endorsement Board (UKEB).
Whilst these standards and interpretations are not effective for, and have not
been applied in the preparation of, these consolidated financial statements,
the following could have a material impact on the Group's financial statements
going forward:
New/Revised International Financial Reporting Standards Effective Date: Annual periods beginning on or after: UKEB adopted
IAS 1 Amendments to IAS 1: Classification of Liabilities as Current or Non-current 1 January 2024 Yes
IAS 7 & IFRS 7 Amendments to IAS 7 and IFRS 7: Supplier Finance Arrangements 1 January 2024 Yes
IFRS 16 Amendment to IFRS 16: Lease Liability in a Sale and Leaseback 1 January 2024 Yes
Management anticipates that all relevant pronouncements will be adopted in the
Group's accounting policies for the first period beginning after the effective
date of the pronouncement.
There are no other standards and interpretations in issue but not yet adopted
that the Directors anticipate will have a material effect on the reported
income or net assets of the Group.
2. Judgements in applying accounting policies and key sources of
estimation uncertainty
The Group makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future, actual
experiences may differ from these estimates and assumptions. The estimates and
assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year
are discussed below.
In preparing these financial statements, the Directors made the following
judgements:
Incremental borrowing rate used to measure lease liabilities
Where the interest rate implicit in the lease cannot be readily determined,
lease liabilities are discounted at the lessee's incremental borrowing rate.
This is the rate of interest that the lessee would have to pay to borrow over
a similar term, and with a similar security, the funds necessary to obtain an
asset of a similar value to the right-of-use asset in a similar economic
environment. This involves assumptions and estimates, which would affect the
carrying value of the lease liabilities and the corresponding right-of-use
assets.
To determine the incremental borrowing rate, the Group uses recent third-party
financing as a starting point and adjusts this for conditions specific to the
lease such as its term and security.
The Group used an incremental borrowing rate of from 3.25% to 35% depending on
the specifics of the lease, particularly based on which country the underlying
asset is based in.
Deferred tax asset recognition and recoverability
As at 31 December 2022, the Directors assessed the recoverability of the
deferred tax assets and concluded that sufficient taxable profits arising in
the UK to utilise any deferred tax asset(s) would be possible rather than
probable. As a result, the Directors opted not to recognise any deferred tax
asset(s).
A deferred tax asset has been recognised as at 31 December 2023 at a value of
$1.6m. Of this deferred tax asset, $458k arises on interGroup transactions
related to provision of unrealised profits in tooling revenue. The remaining
deferred tax asset has been recognised in relation to brought forward tax
losses, whereby there are estimated probable future taxable profits that the
Group anticipates utilising these losses against which the Group anticipates
utilising these losses.
Other key sources of estimation uncertainty:
Inventories provision
Inventory is carried at the lower of cost and net realisable value. Provisions
are made to write down obsolete inventories to net realisable value. The
provision is $1,194,000 at 31 December 2023 (2022: $1,601,000).
Non-Controlling Interests:
The Company owned 100% of CT Automotive Systems DE, Mexico subsidiary as at 31
December 2022. On 23 November 2023, 10% of the shares in the subsidiary were
sold to Simon Phillips, CEO and Scott McKenzie, COO resulting in a
non-controlling interest in the Group's consolidated financial statements. The
Group has exercised judgement in evaluating the control it exercises over the
Mexican subsidiary after the change in ownership. Based on their evaluation,
the Group has concluded that the profits of the Mexican entity will be split
between the owners of the Group and non-controlling interests based on the
percentage ownership of the subsidiary. On the date of the transfer of
ownership, the entity held a net liability of $598,604 of which 10% is
attributable to the non-controlling interests at $59,860. The issuance of new
equity to the non-controlling interest resulted in a profit of $54,000. The
non-controlling interests are recorded separately in the Statement of Profit
or Loss, the Statement of Balance Sheet and the Statement of Changes in
Equity.
Goodwill
The carrying amount of goodwill at 31 December 2023 was $1,259,000 (2022:
$1,259,000) which solely relates to Chinatool UK Limited. The goodwill
relating to Chinatool UK Limited was subject to annual impairment testing, and
no need for impairment was identified during the year. Details of the
impairment testing performed, and sensitivity analysis performed is set out in
Note 11.
Hyperinflation
The Group exercises significant judgement in determining the impact of the
onset of hyperinflation in countries in which it operates and whether the
functional currency of its subsidiaries in such countries is the currency of a
hyperinflationary economy.
Various characteristics of the economic environment of each country are taken
into account. These characteristics include, but are not limited to, whether:
· the general population prefers to keep its wealth in non-monetary
assets or in a relatively stable foreign currency;
· prices are quoted in a relatively stable foreign currency;
· sales or purchase prices take expected losses of purchasing power
during a short credit period into account;
· interest rates, wages and prices are linked to a price index; and
· the cumulative inflation rate over three years is approaching, or
exceeds, 100%.
Management exercises judgement as to when a restatement of the financial
statements of a Group entity becomes necessary. Following management's
assessment, the Group's subsidiary in Türkiye has been, and continues to be
accounted for as an entity operating in a hyperinflationary economy. The
results, cash flows and financial position of Chinatool Otomotiv Sanayi Tic.
Limited Sti. have been expressed in terms of the measuring units current at
the reporting date.
The movement in the general price index in the reporting period was 54.5%
(2022: 47.8%).
In applying IAS 29 to the financial reporting of the subsidiary incorporated
in Türkiye, it is crucial to note that a deliberate judgement has been
exercised in the treatment of indexation agreements that impact consolidated
profit or loss. The impact is included as a finance expense in 2023 for
$146,000 (2022: $665,000 included in non-recurring expenses). These specific
agreements have been intentionally ignored in the calculations, aligning with
the guidelines set forth in IAS 29, and maintains continuity with the prior
year detailed calculations and commentary.
IAS 29 does note that non-monetary (balance sheet) items that are linked to
indexation agreements have the rates stipulated within the agreements applied,
rather than a general price index, although the same allowance/ exception is
not provided for items of profit or loss.
Change in methodology of calculating tooling overheads
During FY23 the Group has improved its processes in relation to the review and
estimation of tooling costs, whereby Work in Progress (WIP) is tracked on an
individual project level. The improvement in methodology arises from the
recent organisational restructuring, enhanced timecard systems and a review of
overheads on a project by project basis associated with tooling.
Historically, tooling costs were measured at direct material costs plus
timecard-based toolroom costs. Production overheads were absorbed into
tooling WIP without specific project allocation. An organisational
restructuring in FY23 introduced timecards across all tooling departments,
enabling precise cost allocation to individual projects. The rationale
behind the change is to enhance the accuracy of tooling costings, ensuring
improved project profitability analysis and timely cost release aligned with
project completion.
A key judgement has been made that the change in inputs to the tooling WIP
valuation model is not a change in accounting policy but rather a change in
accounting estimate. It refines the identification and allocation of
overheads to tooling projects, enhancing accuracy without fundamentally
altering the approach.
EPS
With respect to the fundraise that took place in May 2023, a judgement has
been made over whether there is a bonus element that requires retrospective
adjustment, or not.
The process for determining the price of the share issue was established via a
book building exercise carried out by the Company's brokers where existing and
potential shareholders were invited to bid for the value they would be willing
to subscribe to in the new share issue. In the interest of raising the
maximum amount of capital possible, CT Automotive took the decision to offer
22.7 million new shares at 34p per share to ensure that the fundraise would
achieve between $9-10 million.
Given the maximum price that could be obtained for the shares to raise
sufficient capital was determined to be 34p, a judgement was made that the
issue price for the new shares was at fair value, although this was lower than
the quoted market price, and so the share issue did not contain a bonus
element and no retrospective adjustment was required.
3. Segment Information
Operating segments are reported in a manner consistent with internal reporting
provided to the Chief Operating Decision Maker (CODM). The CODM has been
identified as the management team including the Chief Executive Officer and
Chief Financial Officer. The segmental analysis is based on the information
that the management team uses internally for the purpose of evaluating the
performance of operating segments and determining resource allocation between
segments.
The Group has 3 strategic divisions which are its reportable segments.
The Group has the below main divisions:
1) Tooling - Design, development and sale of tooling for the automotive
industry.
2) Production - Manufacturing and distributing serial production kinematic
interior parts for the automotive industry.
3) Head office - Manages Group financing and capital management.
The Group evaluates segmental performance on the basis of revenue and profit
or loss from operations calculated in accordance with IFRS.
Inter-segment sales are priced along the same lines as sales to external
customers, with an appropriate discount being applied to encourage use of
Group resources at a rate acceptable to local tax authorities. This policy was
applied consistently in the current and prior year. The inter-segment sales in
2023 were $nil (FY22): $nil.
2023 Tooling Production Head Office Total
$'000 $'000 $'000 $'000
Revenue
Total revenue from external customers 10,928 132,046 - 142,974
Revenue from other operating segments
Depreciation and amortisation - (5,244) - (5,244)
Finance expense - (2,485) (50) (2,535)
Segment Profit/(Loss) 3,885 9,145 (7,093) 5,937
Group Profit before tax and discontinued operations 5,937
2023 Tooling Production Head Office Total
$'000 $'000 $'000 $'000
Additions to non-current assets - 3,114 - 3,114
Reporting segment assets 4,239 81,902 263 86,404
Reportable segment liabilities (2,770) (62,748) (919) (66,437)
2022 Tooling Production Head Office Total
$'000 $'000 $'000 $'000
Revenue
Total revenue from external customers 6,980 117,289 - 124,269
Revenue from other operating segments
Depreciation and amortisation - (5,243) - (5,243)
Finance expense - (1,939) (58) (1,997)
Segment Profit/(Loss) 1,601 866 (21,288) (18,821)
Group Loss before tax and discontinued operations (18,821)
2022 Tooling Production Head Office Total
$'000 $'000 $'000 $'000
Additions to non-current assets - 3,549 - 3,549
Reporting segment assets 1,517 77,071 548 79,136
Reportable segment liabilities (4,994) (70,051) (1,514) (76,559)
External revenue by location of customers Non-current assets by location of assets
2023 2022 2023 2022
$'000 $'000 $'000 $'000
US 22,261 27,640 401 253
UK 23,417 16,603 2,143 2,395
Czechia 25,768 21,399 353 651
China 17,586 18,415 10,466 12,578
Türkiye 12,923 12,806 1,102 1,450
Mexico 13,641 4,766 2,036 2,390
Hong Kong 12,429 - - -
Spain 2,742 4,692 - -
Brazil 3,365 3,567 - -
Japan 3,555 3,162 - -
Thailand 1,680 2,378 - -
Slovakia 27 1,051 - -
Italy 1,638 986 - -
South Africa 1,018 960 - -
Germany 229 727 - -
Other 695 5,117 1,627 141
142,974 124,269 18,128 19,858
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, above 10% of Group
revenue:
In 2023 the Group had 3 major customers representing $60.7m (43%), $19m
(13%) and $17.6m (12%) of Group revenue.
In 2022 the Group had 3 major customers representing $50.4m (39%), $23.9m
(18%) and $20.1m (16%) of Group revenue.
4. Revenue
2023 2022
$'000 $'000
Disaggregation of revenue
An analysis of revenue by type is given below:
Sale of parts 132,046 117,289
Sale of tooling (including design and development) 10,928 6,980
142,974 124,269
An analysis of revenue by geographical market is given within Note 3.
All revenue is recognised from goods transferred at a point in time.
Contract balances
The following table provides information about significant changes during the
year in contract assets and contract liabilities from contracts with
customers:
Contract assets Contract liabilities
$'000 $'000
Balance as at 1 January 2023 - 4,118
Revenue recognised that was included in contract liabilities at the beginning - (3,104)
of the year
Increases due to cash received, excluding amounts recognised as revenue during - 4,755
the year
Movements due to foreign exchange - -
Balance as at 31 December 2023 - 5,769
The contract liabilities included within trade and other payables primarily
relate to the advance consideration received from customers on tooling
projects.
The contract assets and contract liabilities are recognised in profit or loss
when the performance obligations of each contract are satisfied which is at
the point that the contract is satisfied, and control has passed to the
customer. As such, the Group does not recognise revenue on any partially
satisfied performance obligations.
The following table includes revenue expected to be recognised in the future
related to performance obligations that are unsatisfied (or partially
unsatisfied) at the reporting date.
2024 2025 Total
31 December 2023 $'000 $'000 $'000
Tooling projects 10,465 1,876 12,341
31 December 2022 2023 2024 Total
$'000 $'000 $'000
Tooling projects 10,047 - 10,047
All consideration from contracts with customers is 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.
5. Other operating income
2023 2022
$'000 $'000
Government grants 646 546
Other income 161 104
807 650
The government grant income relates to government support received in China
relating to utilities and training subsidies and promotion of foreign trade.
Specific performance obligations are dictated by the grant agreements and must
be adhered to receive the government grants.
6. Non-recurring items
2023 2022
$'000 $'000
AIM listing fees - 31
Impairment of goodwill - 1,158
Impact of Hyperinflation 683 665
China housing fund contribution - 453
Start-up costs in Mexico - 1,738
Irrecoverable excess freight costs - 238
One off working capital write offs (net) 494 -
Redundancy Costs 71 -
Costs from historic tooling projects 849
Covid related business disruption charges 277 -
2,374 4,283
Non-recurring items are items, which, due to their one-off, non-trading and
non-underlying nature, have been separately classified by the Directors in
order to draw them to the attention of the reader and allow for greater
understanding of the operating performance of the Group. Each item has been
identified and explained below:
· Effective from 1 January 2022, the Group has applied IAS 29,
Financial Reporting in Hyperinflationary Economies for its subsidiary in
Türkiye. The impact of applying this standard in respect of 2023 results was
a charge of $683,000 and is considered as non-trading.
· The Group has carried out an exercise to improve reporting and
governance. This has resulted in a review of historic balances on the
payables and receivables ledgers that has resulted in a $584,000 income.
Additionally, there was a review of inventory balances that resulted in the
identification of $1,078,000 of stock that was unable to generate a realisable
value. The net impact resulted in a write off for $494,000 and is considered
as a one-off item.
· One-off redundancy costs of $71,000 were incurred during the
first half of 2023 in relation to optimising our manufacturing footprint in
China and Türkiye.
· One-off historic costs of $849,000 were written off in the
reporting period in relation to previously completed tooling projects.
· The Group made non-recurring customer payments of $277,000 as a
compensation for Covid-related business disruption.
Additional items included in non-recurring costs in the prior year:
· The AIM listing completed in December 2021 incurred one-off
transaction costs and advisory fees. Costs of $nil (2022: $31,000) have been
recognised within administrative expenses in relation to this.
· 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 expectation 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 $nil (2022: $238,000) recognised within
distribution expenses.
· During the year ended 31 December 2022, the Group's Chinese
entities received a backdated demand for Housing Fund contributions (a form of
social insurance in China) relating to the period 2010 to 2019. Since 2020
these contributions have been correctly calculated and paid so this backdated
charge has not reoccurred.
· During the year ended 31 December 2022, the Group opened a new
production facility in Mexico and incurred $1,738,000 of pre-opening and
start-up costs which the Directors consider to be non-underlying in nature.
· Goodwill of $1,158,000 relating to IMS/Chinatool JV, LLC was
fully impaired during the year ended 31 December 2022.
7. Expenses and Auditors' remuneration
2023 2022
$'000 $'000
Operating profit/(loss) is stated after charging:
Amortisation:
- Continuing operations 294 602
Depreciation:
- Continuing operations 1,898 1,608
- Discontinued operations - 165
Foreign exchange (gain) / loss (880) 3,804
Depreciation of right-of-use assets:
- Continuing operations 3,052 3,212
- Discontinued operations - 360
Cost of inventories 91,241 86,148
2023 2022
$'000 $'000
Auditors' remuneration
Audit of Group financial statements 305 355
Audit of financial statements of Chinese subsidiaries of the Company 158 139
Audit of financial statements of Hong Kong subsidiaries of the Company 59 59
8. Taxation
2023 2022
Recognised in profit or loss $'000 $'000
Current tax expense
Current year 1,073 621
Adjustments for prior periods - 23
Current tax expense 1,073 644
Deferred tax credit
Origination and reversal of temporary differences (1,689) 2,438
Adjustments for prior periods - (88)
Effect of changes in tax rates - 60
Deferred tax (credit) / charge (1,689) 2,410
Total tax (credit) / charge (616) 3,054
2023 2022
$'000 $'000
Reconciliation of effective tax rate
Profit/(Loss) for the year 6,553 (21,875)
Total tax (credit)/charge (616) 3,054
Profit/(Loss) excluding taxation 5,937 (18,821)
Tax using the UK corporation tax rate of 25% (2022 - 19%) 1,484 (3,576)
Effect of tax rates in foreign jurisdictions (768) 1,810
Non-taxable income - 13
Non-deductible expenses - 209
Adjustments for prior periods - 1,328
Tax rate changes 357 (590)
(Recognised)/Unrecognised deferred tax assets (1,689) 3,845
Other differences - 15
Total tax (credit) / charge (616) 3,054
The UK Government announced in the March 2021 Budget that the main rate
corporation tax in the UK will increase from 19% to 25%. This was
substantively enacted by the comparative balance sheet date and as a result
deferred tax balances at both reporting dates presented have been measured at
25%.
Included within tax payable is an IFRIC 23 uncertain tax payable totalling
$781,000 (2022: $778,000), which is a result of uncertainty in the tax
legislation in a certain jurisdiction.
Tax attributable to discontinued operations of $2,000 is included in the total
tax credit for 2023.
9. Discontinued operations
On 30 September 2022, the Group made a decision to discontinue Chinatool
Automotive Systems Limited.
The results of the discontinued operations, which have been included in the
profit for the year, were as follows:
2023 2022
$'000 $'000
Revenue - 3,958
Cost of sales - (5,240)
Other income - 21
Distribution expenses - (110)
Administrative expenses (238) (1,276)
Net finance income / expense - (93)
Loss before tax (238) (2,740)
Attributable tax expense (2) (49)
Net loss attributable to discontinued operations (240) (2,789)
There were no significant cash flows during the year in relation to
discontinued operations.
Assets and liabilities of Chinatool Automotive Systems Limited have not been
classified as held for sale at 31 December 2023 or 2022 due to their
immaterial nature and because all short-term assets and liabilities are
expected to be either settled or transferred to continuing Group operations.
These are included in the respective Group assets and liabilities and are as
follows:
2023 2022
$'000 $'000
Assets
Property, plant and equipment - 68
Right of use assets - 98
Inventories - 219
Trade and other receivables 23 171
Cash 4 34
Total assets 27 590
Liabilities
Trade and other payables (676) (810)
Overdraft - (153)
Lease liability (191) (494)
Current tax liability - (46)
Deferred tax liability (90) (37)
Total liabilities (956) (1,540)
Net liabilities (929) (950)
10. Earnings per share
From continuing and discontinued operations: 2023 2022
Number Number
Weighted average number of equity shares 65,191,848 50,933,289
$ $
Earnings, being profit / (loss) after tax 6,315,000 (24,664,000)
Cents Cents
Earnings / (loss) per share 9.7 (48.4)
Diluted Earnings per share 9.4 -
In 2023 there were share options outstanding that could have a dilutive effect
on earnings per share in the future. In 2022 there were share options
outstanding that could have a dilutive effect on earnings per share in the
future but are not taken into account in the prior period because the Group
has reported a loss.
From continuing operations: 2023 2022
Number Number
Weighted average number of equity shares 65,191,848 50,933,289
$ $
Earnings, being profit / (loss) after tax before discontinued operations 6,553,000 (21,875,000)
Cents Cents
Earnings / (loss) per share 10.1 (42.9)
Diluted Earnings per share 9.7 -
From discontinued operations: 2023 2022
Cents Cents
Basic and diluted loss per share (0.4) (5.5)
11. Goodwill
$'000
Cost
Balance at 1 January 2023 & 31 December 2022 2,417
Additions -
Balance at 31 December 2023 2,417
Impairment
Balance at 1 January 2022 -
Impairment charge 1,158
Balance at 31 December 2022 1,158
Impairment charge -
Balance at 31 December 2023 1,158
Net book value
31 December 2023 1,259
31 December 2022 1,259
Goodwill considered significant in comparison to the Group's total carrying
amount of such assets have been allocated to cash generating unit as follows:
Goodwill
2023 2022
$'000 $'000
Chinatool UK Limited 1,259 1,259
The recoverable amount of Chinatool UK Limited has been determined based on a
value-in-use calculation. This calculation uses forecasts approved by the
Directors which covers a four-year period. These are detailed forecasts based
on customer schedules and expected project lifetimes. The detailed forecasts
have been reviewed for a four year period as this is considered to be the
range over which the customer schedules can be relied upon to create detailed
forecasts.
In performing these calculations, the future cashflows of Chinatool UK Limited
have been discounted at 14%. The Directors concluded that this discount rate
is appropriate having reviewed discount rates applied by competitors in our
sector, including businesses who are exposed to similar automotive supply
risks and applying a margin to take account of our size, the complexity of our
operations and levels of borrowing in the Group.
Using the stated assumptions, there is significant headroom between the
recoverable amount and the fair value of goodwill relating to Chinatool UK
Limited. Applying sensitivity analysis to these calculations, a 2% increase to
the discount rate applied reduces the headroom, but still allows for of over
$10m of headroom.
Goodwill of $1,158,000 relating to IMS/Chinatool JV, LLC was fully impaired
during the year ended 31 December 2022 as the setting up of CT Automotive
Systems DE Mexico SA DE CV is expected to curtail future trading through
IMS/Chinatool JV, LLC as US sales through the Mexican subsidiary will be
subject to lower tariffs. Management expects to move manufacturing and
distribution of existing North American projects to Mexico and is tendering
for new North American projects on the basis of manufacturing and distribution
from Mexico. Moving manufacturing for these projects from China to Mexico will
reduce the exposure to Section 301 tariffs on imports into the US from China
and will improve the Group's competitive pricing for North American projects.
12. Intangible assets
Software
$'000
Cost
Balance at 1 January 2022 2,060
Additions 633
Effect of movements in foreign exchange (244)
Balance at 31 December 2022 2,449
Additions 96
Disposals (648)
IAS 29 adjustment 32
Effect of movements in foreign exchange (46)
Balance at 31 December 2023 1,883
Amortisation and impairment
Balance at 1 January 2022 1,540
Amortisation for the year 602
Effect of movements in foreign exchange (221)
Balance at 31 December 2022 1,921
Amortisation for the year 294
Disposals (630)
IAS 29 adjustment 28
Effect of movements in foreign exchange (44)
Balance at 31 December 2023 1,569
Net book value
At 31 December 2023 314
At 31 December 2022 528
Amortisation charge
The amortisation charge is recognised in the following line items in the
statement of profit or loss:
2023 2022
$'000 $'000
Administrative expenses 294 602
13. Property, plant and equipment
Plant and equipment Fixtures and fittings Motor vehicles Total
$'000 $'000 $'000 $'000
Cost
Balance at 1 January 2022 15,266 3,879 34 19,179
Effect of hyperinflation 406 179 585
Additions 1,811 1,053 - 2,864
Disposals (2,654) (464) (11) (3,129)
Effect of movements in foreign exchange (1,484) (372) - (1,856)
Balance at 31 December 2022 13,345 4,275 23 17,643
Effect of hyperinflation 1,176 291 - 1,467
Additions 2,315 799 - 3,114
Disposals (1,658) (713) - (2,371)
Effect of movements in foreign exchange (784) (493) - (1,277)
Balance at 31 December 2023 14,394 4,159 23 18,576
Depreciation
Balance at 1 January 2022 8,740 2,724 34 11,498
Effect of hyperinflation 146 115 - 261
Depreciation charge for the year 367 1,406 - 1,773
Disposals (1,826) (429) (11) (2,266)
Effect of movements in foreign exchange (719) (206) - (925)
Balance at 31 December 2022 6,708 3,610 23 10,341
Effect of hyperinflation 948 263 - 1,211
Depreciation charge for the year 1,498 400 - 1,898
Disposals (429) (711) - (1,140)
Effect of movements in foreign exchange (515) (308) - (823)
Balance at 31 December 2023 8,210 3,254 23 11,487
Net book value
At 31 December 2023 6,184 905 - 7,089
At 31 December 2022 6,637 665 - 7,302
14. Leases
The treatment of leases within the scope of IFRS 16 is disclosed in the
accounting policies (Note 1).
The Group leases buildings and machinery where payments are fixed until the
contracts expire. There is no variability in respect of payments and there is
not considered to be any significant judgement in relation to the lease terms.
Right of use assets Land and buildings Plant and machinery Total
$'000 $'000 $'000
At 1 January 2022 6,327 615 6,942
Effect of hyperinflation 35 - 35
Additions 8,089 435 8,524
Impairment (429) - (429)
Depreciation (2,866) (706) (3,572)
Foreign exchange movement (683) (48) (731)
At 31 December 2022 10,473 296 10,769
Effect of hyperinflation 86 - 86
Additions 1,639 55 1,694
Depreciation (2,859) (193) (3,052)
Disposal (1,368) (17) (1,385)
Foreign exchange movement (127) (90) (217)
At 31 December 2023 7,844 51 7,895
The range of incremental borrowing rates used during the year for right of use
asset additions is 3.25%-18.4% (2022: 3.25%-35%).
Lease liabilities Land and buildings Plant and machinery Total
$'000 $'000 $'000
At 1 January 2022 6,996 992 7,988
Effect of hyperinflation 38 - 38
Additions 7,918 437 8,355
Interest expense 526 44 570
Foreign exchange movement (760) (55) (815)
Repayments (3,069) (1,107) (4,176)
Reduction in lease liabilities (38) - (38)
At 31 December 2022 11,611 311 11,922
Effect of hyperinflation - - -
Additions 1,645 55 1,700
Interest expense 571 15 586
Foreign exchange movement (135) (34) (169)
Repayments (3,343) (249) (3,592)
Lease Modifications (1,469) (28) (1,497)
At 31 December 2023 8,880 70 8,950
The maturity profile of the lease liabilities is as follows: 2023 2022
$'000 $'000
Under 1 year 3,492 3,022
1-2 years 1,861 2,373
2-5 years 2,662 5,327
More than 5 years 935 1,200
8,950 11,922
15. Deferred tax assets and liabilities
A review of the deferred tax is performed at each Balance Sheet date and
adjustments made in the event of a change in any key assumptions.
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Liabilities/ (assets) Liabilities/ (assets)
2023 2022
$'000 $'000
Property, plant and equipment (458) 118
Losses (1,113) -
Tax (assets) / liabilities (1,571) 118
Net tax (assets) / liabilities (1,571) 118
Movement in deferred tax during the year
1 January 2023 Recognised in income 31 December 2023
$'000 $'000 $'000
Property, plant and equipment 118 (576) (458)
Losses - (1,113) (1,113)
Movement in deferred tax during the prior year
1 January 2022 Recognised in income 31 December 2022
$'000 $'000 $'000
Property, plant and equipment 260 (142) 118
Losses (2,005) 2,005 -
Deferred tax assets are recognised to the extent that it is probable that
future taxable profits will be available against which deductible temporary
differences can be utilised. In estimating future taxable profits the Group
has considered its forecasted performance in line with its going concern
analysis. More details on the forecast assumption made at this judgement are
in Note 2.
As at 31 December 2023, the Directors have assessed the recoverability of the
deferred tax assets and concluded that sufficient taxable profits arising in
the UK and elsewhere to utilise any deferred tax asset(s) would be probable.
As a result, the Directors opted to recognise deferred tax asset(s).
A deferred tax asset has been recognised as at 31 December 2023 at a value of
$1,565k. These deferred tax assets arise on interGroup transactions,
provision for unrealised profits in China and estimated probable future
taxable profits that are expected to arise within the Group whereby they can
be offset against future tax charges.
In addition, there are trading losses arising in other entities outside of the
UK, however no deferred tax assets have been recognised in respect of these.
Unrecognised deferred tax assets
2023 2022
$'000 $'000
Tax losses carried forward against profits of future years 3,332 3,200
As at 31 December 2023, the Directors have assessed the unrecognized deferred
tax assets related to tax losses carried forward against future profits is
$3.3m, of which the Company will utilize $634,000 in FY2024 and $647,000 in
FY2025 and the remaining amount will be carried forward to subsequent years.
Given the profit achieved in FY2023, the Directors projected a similar revenue
growth in FY2024 and FY2025 resulting in profits in the subsequent years.
Of the unused tax losses, $3,332,000 can be carried forward indefinitely.
16. Inventories
2023 2022
$'000 $'000
Raw materials and consumables 6,117 6,605
Work in progress 7,084 7,735
Finished goods 12,796 13,002
25,997 27,342
Inventories recognised as an expense during the year is disclosed in Note 7.
The provision for inventories recognised and reported in the Statement of
Profit or loss during the year ended 31 December 2023 was $1,194,000 (2022:
$333,000).
Trade loans are secured against inventories of $9,005,000 (2022: $9,583,000).
17. Trade and other receivables
2023 2022
$'000 $'000
Trade receivables 16,943 16,167
VAT receivable 1,813 633
Other receivables 1,807 1,832
20,563 18,632
Prepayments and accrued income 10,015 8,248
Total trade and other receivables 30,578 26,880
Included within trade and other receivables is $Nil (2022: $Nil) expected to
be recovered in more than 12 months. The Group makes an impairment provision
for all debts that are considered unlikely to be collected. At 31 December
2023, trade and other receivables were shown net of an allowance for
impairment of $340,000 (FY22: $0).
Included within prepayments and accrued income are amounts of $Nil (2022:
$Nil) relating to discounts on serial production contracts paid in advance.
The carrying value of trade and other receivables classified at amortised cost
approximates fair value.
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 historic credit losses are limited,
however a small credit loss provision of $340,000 has been made at year end
(2022 - $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 2023 trade receivables of $5,603,000 were past due net of
impairment of $340,000 (2022 - $5,897,000 past due but not impaired). They
relate to customers with no default history. The ageing analysis of these
receivables is as follows:
2023 2022
$'000 $'000
Not past due 11,340 10,270
Past due 1-90 days 4,480 4,260
Past due more than 90 days 1,123 1,637
16,943 16,167
Other classes of financial assets included within trade and other receivables
do not contain impaired assets.
Invoice finance balances are secured against trade receivables of $4,193,000
(2022: $7,117,000).
18. Cash and cash equivalents
Cash and cash equivalents for purposes of the statement of cash flows
comprises:
2023 2022
$'000 $'000
Cash and cash equivalents 9,440 4,829
Unsecured bank overdraft - (358)
Cash and cash equivalents 9,440 4,471
The cash and cash equivalents balances are held in Current Accounts and are
readily available with no restrictions in place. 67.0% of the Group's cash and
cash equivalents are held in foreign subsidiaries (2022: 73.6%). The Parent
Company has the ability to recall these balances through management charges
and dividend repatriation.
19. Trade and other payables
2023 2022
$'000 $'000
Current
Trade payables 20,187 21,793
Non-trade payables and accrued expenses 9,684 10,266
Other taxation and social security 1,997 2,449
Contract liabilities 5,769 4,118
Other payables 5,753 7,298
Total 43,390 45,924
Included within trade and other payables is $Nil (2022 - $Nil) expected to be
settled in more than 12 months.
All trade and other payables other than employee social security and taxes,
contract liabilities and provisions for losses on forward contracts (fair
value through profit or loss) are classified as financial liabilities measured
at amortised cost. The carrying value of trade and other payables classified
as financial liabilities measured at amortised cost approximates fair value.
Employee social security and taxes are valued at fair value.
20. Borrowings
This note provides information about the contractual terms of the Group and
Company's interest-bearing loans and borrowings, which are measured at
amortised cost.
2023 2022
$'000 $'000
Current liabilities
Unsecured bank overdraft - 358
Current portion of secured bank loans (Trade Loans) 9,005 9,583
Invoice finance 4,193 7,117
13,198 17,058
Total 13,198 17,058
Invoice finance balances are secured against trade receivables. Trade loans
are secured against inventories.
The currency profile of the Group's loans and borrowings is as follows:
2023 2022
$'000 $'000
USD 7,779 8,982
GBP - 358
EUR 5,277 7,718
RMB 142 -
13,198 17,058
Currency Nominal interest rate Contracted maturity Carrying amount 31 December 2023 Carrying amount 31 December 2022
$'000 $'000
Unsecured bank overdraft GBP 2.5% 2024 - 358
Trade loans EUR/USD 4.04% 2024 9,005 9,583
Invoice finance EUR/USD 3.75% 2024 4,193 7,117
13,198 17,058
Terms and debt repayments
The invoice finance facility allows 90% prepayment against eligible invoices
up to 120 days old. The invoice financing facility is secured against which it
is drawn down.
Trade loans are issued on a 70 day repayment basis and interest payable at the
end of the loan period at the rate of 3.75% per annum over either the Bank of
England Rate or the Currency Rate.
The unsecured bank overdraft is repayable on demand and has no set repayment
schedules.
2023 Opening balance 1 January Cash received / (paid) on principal Other movements (incl FX) New leases Interest accrued Interest paid Closing balance 31 December
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Trade loans 9,583 (660) 82 - 529 (529) 9,005
Invoice finance 7,117 (2,974) 50 - 925 (925) 4,193
Lease liabilities 11,922 (3,005) (1,667) 1,700 586 (586) 8,950
Balance at 31 December 2023 28,622 (6,639) (1,535) 1,700 2,040 (2,040) 22,148
2022 Opening balance 1 January Cash received / (paid) on principal Other movements (incl FX) New leases Interest accrued Interest paid Closing balance 31 December
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Trade loans 5,452 4,131 - - 377 (377) 9,583
Unsecured loans 2,500 (2,500) - - 30 (30) -
Invoice finance 10,997 (3,880) - - 688 (688) 7,117
Lease liabilities 7,988 (3,606) (815) 8,355 570 (570) 11,922
Balance at 31 December 2022 26,937 (5,855) (815) 8,355 1,665 (1,665) 28,622
21. Alternative performance measures
The Annual Report includes Alternative Performance Measures (APMs) which are
considered by Management to better allow the readers of the accounts to
understand the underlying performance of the Group. A number of these APMs are
used by Management to measure the KPIs of the Group as outlined within the
Business Review on pages 6 to 17. The Board also monitors these APMs to assess
financial performance throughout the year.
The APMs used in the Annual Report include:
- Adjusted EBITDA - calculated as EBITDA adjusted for
non-recurring items
- Adjusted EBITDA margin - calculated as adjusted EBITDA divided
by revenue in the year
- Adjusted operating profit - calculated as Operating
profit/(loss) adjusted for non-recurring items
- Adjusted operating profit margin - calculated as adjusted
operating profit divided by revenue in the year
EBITDA is calculated based using Operating profit/(loss) before interest,
taxes, depreciation and amortisation.
Detail of each of the non-recurring items is disclosed in Note 6.
Adjusted EBITDA and Adjusted EBITDA margin 2023 2022
$'000 $'000
Adjusted EBITDA from continuing operations 16,090 (7,129)
Adjusted EBITDA margin 11.25% (6.20%)
Non-underlying & non-recurring items
- AIM listing fees - (31)
- Impairment of goodwill - (1,158)
- Impact of Hyperinflation (683) (665)
- Backdated Housing fund contribution - (453)
- Start-up costs in Mexico - (1,738)
- Irrecoverable excess freight costs - (238)
- One-off working capital write offs (494) -
- Redundancy Costs (71) -
- Costs from historic tooling projects (849) -
- COVID related business disruption charges (277)
EBITDA 13,716 (11,412)
EBITDA margin 9.59% (9.18%)
Adjusted operating profit / (loss) before tax and Adjusted operating profit / 2023 2022
(loss) before tax margin
$'000 $'000
Adjusted operating profit / (loss) 10,846 (12,551)
Adjusted operating Profit / (loss) margin 7.59% (10.1%)
Non-underlying items
- AIM listing fees - 31
- Impairment of goodwill - 1,158
- Impact of hyperinflation (683) 665
- Backdated Housing fund contribution - 453
- Start-up costs in Mexico - 1,738
- Irrecoverable excess freight costs - 238
- One-off working capital write offs (494) -
- Redundancy Costs (71) -
- Costs from historic tooling projects (849) -
- COVID related business disruption charges (277)
Operating profit / (loss) 8,472 (16,834)
Operating profit / (loss) margin 5.93% (13.5%)
22. Events after the reporting period
There are no events after the reporting period affecting these financial
statements.
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