Final Results
21 June 2022
Strip Tinning Holdings plc
("Strip Tinning" or the "Company")
Final Results for the year ended 31 December 2021
Strip Tinning Holdings plc (AIM: STG), a leading supplier of specialist connectors to the automotive sector, is pleased to announce the audited results for Strip Tinning Limited ("STL") the Group's wholly owned operating subsidiary for the year ended 31 December 2021.
The Company was incorporated on 6 January 2022 as Strip Tinning Holdings Limited and on 7 February re-registered as public company changing its name to Strip Tinning Holdings plc, ahead of its admission to AIM. The Company is the holding company of the Group. Save for the Company and STL there are no other companies within the Group.
Financial highlights:
· Group revenues and underlying EBITDA are in line with market expectations
o Revenues up 29% to £11.1m (FY20: £8.6m)
o Underlying EBITDA of £0.5m (FY20: £1.3m) in spite of considerable investment in EV and adverse headwinds of COVID and materials shortages/delays.
Operational highlights:
· New factory unit taken on to support growth;
· New lamination cell successfully commissioned;
· Glazing order successes include connector contracts worth £2.3m annualised revenue, the majority of which are connectors for electric vehicle programmes;
· €10m multi-year series production order won in new Electric Vehicle (EV) division.
Post period end highlights:
· Successful listing on AIM, raising £6.8m to invest in growth;
· Appointment of new MD for Glazing;
· Significant new 10 year supply agreement signed for €3m of incremental Busbar sales with second biggest customer
· Appointment of a German business development consultant to further develop opportunities in the EV side of the business
Richard Barton, Group Chief Executive Officer of Strip Tinning, commented: "Despite the unfavourable market conditions which we are currently experiencing, the resilience of the business has come to the fore. Confidence in the medium and long-term prospects of the business is as unwavering as it has ever been, as demonstrated by the EV side of the business which is performing ahead of our expectations. Whilst the short-term sector-wide headwinds faced are frustrating, our extensive experience within the industry and our longstanding relationships with customers underpin our belief in a strong recovery once the market brightens".
Enquiries:
Strip Tinning Holdings plc Via Alma PR
Richard Barton, Chief Executive Officer
Adam Le Van, Chief Financial Officer
Singer Capital Markets (Nominated Adviser and Sole Broker) +44 (0) 20 7496 3000
Rick Thompson
Will Goode
Alex Bond
James Fischer
Alma PR (Financial PR) striptinning@almapr.co.uk
Josh Royston +44 (0) 20 3405 0205
Joe Pederzolli
A copy of this announcement, together with the Annual Report and Accounts will be available to view on the Company's website in due course at www.striptinning.com .
Chairman's Statement
Introduction
I am delighted to report on the progress of Strip Tinning for the first time as a public company following its successful listing onto AIM on 16th February 2022, and to have joined a Company with such a rich history in the automotive sector. I would like to also welcome and thank those shareholders who joined us at IPO and thereafter.
Despite the challenging market conditions we have faced, we have made good strategic progress across both our Glazing and EV business units and the FY21 results we are reporting today represent a robust performance for the Company in spite of the challenging trading environment we find ourselves in. Our strategy remains unchanged whilst dealing with the well-documented short-term headwinds, in remaining a leading supplier of specialist connectors for Glazing for all classes of automotive vehicles manufactured worldwide and to become a leading supplier of connector sub-assemblies to the EV market. There is no doubt that once the market brightens, we anticipate significant future growth and we continue to invest to be able to meet this future demand.
2021 Financial Results
The Group achieved revenues and underlying EBITDA in 2021 in line with the Board's expectations. Revenues increased by 29% to £11.1m (FY20: £8.6m) and underlying EBITDA was £0.5m (FY20: £1.3m), remaining positive despite the considerable investment made in EV and the adverse headwinds of COVID and materials shortages/delays.
People
None of this would be possible without the diligence shown by our people, who have risen to every challenge posed to them. Strip Tinning's long, successful past is built on a foundation of passionate, hardworking employees and this has been more apparent than ever. This record performance is a reflection of that endeavour and on behalf of the Board, I offer them my sincere thanks.
Board and governance
The newly formed Board, established at the time of IPO, brings with it a wealth of experience. I am delighted to be joined alongside by Paul George, senior independent director and a senior figure from the accountancy profession as well as a fellow automotive sector specialist, Matthew Taylor, who brings years of experience in managing high growth businesses.
Looking ahead
Uncertainty in the global and UK economies has persisted into 2022, with the softening of the European car market and supply chain disruptions heightened by Russia's invasion of Ukraine. Whilst FY22 performance of the Glazing side of the business is being impacted, we are encouraged by the performance of the EV business unit, which is performing ahead of our FY22 expectations. In dealing with the external factors impacting the business, great care is being taken to ensure that overheads are reduced where appropriate in line with lower than budgeted sales, whilst retaining all the key resources necessary for protecting the growth activities in the business, on the EV side in particular.
It is frustrating that external factors beyond the Company's control will affect Glazing performance this year, but we remain confident in the medium-term prospects of the business, as illustrated by the progress made in sales developments which will contribute to future revenue grow th.
Adam Robson
Chairman
Chief Executive Officer's Report
Introduction
I am pleased to be reporting on Strip Tinning's FY21 Results, which are in line with management expectations as we entered the year. The period under review has seen uncertainty and challenging economic conditions, but I take great pride in the manner with which we dealt with the impacts of COVID-19 on working practises during the year, whilst also preparing for the Company's IPO on AIM. Significant strategic progress has also been made across both our Glazing and new EV business units. Although current post-period trading has been hampered by market factors outside of our control, there is a strong degree of confidence in the medium-term prospects of the business.
The Group consists of two business lines; Automotive Glazing and Electric Vehicle battery sub-systems ("EV"). Over 90 per cent. of the Group's historical sales have related to Glazing systems, however the proportion of revenue generated from the EV division will considerably increase as the Company exploits the significant new opportunities in this fast growing space.
2021 Performance
As a result of the COVID-19 pandemic, increased material, shipping and labour costs all impacted margin in the period. Despite this, FY21 represented a record sales year for Strip Tinning at £11.1m (FY20: £8.6m), underlining the considerable demand for our product range. This record performance is made all the more impressive in the context of the challenges faced. As manufacturers, it is not possible to work from home and the protocols required to maintain safe COVID-19 operating conditions have had direct costs and also reduced productivity. Our automation programme was adversely impacted by delays in commissioning new kit and inability to travel, leading to lower output requiring costly mitigating actions to fulfil customer demand. The ability with which the business successfully navigated the operational challenges faced during the financial year and ultimately delivered record performance, is testament to the strong foundations upon which we are built and our robustness as a Group.
These challenges have been faced by our suppliers also, resulting in increased costs and irregular deliveries. Global metal price increases, including for the copper and tin that underpin our product lines, have been well documented. The margin challenges became more pronounced as the year progressed. Although presenting short-term difficulties, it has led the business to review its procurement and sourcing strategy in particular, both for cost and continuity of supply, which will deliver enhanced long-term performance.
Glazing
Strip Tinning has a long, established history in glazing connectors. Glazing connectors are used on all vehicle types wherever electrical functionality is embedded within the glass. The market has grown substantially in conjunction with the introduction of laminated three-layer front windscreens. The automotive glass market size as of 2021, according to Research and Markets, is estimated to be $16.5bn, and is expected to grow to $23bn by 2026 (7% CAGR; c$1.2bn growth YoY).
On the Glazing side, deliveries of our innovative roof connectors and patented and Pb[lead]-free back lite connectors began during the year. These product launches mean that Strip Tinning is the only automotive glazing supplier able to provide the full suite of connector products, comprising busbar, front / roof / rear connectors, and connectors in Flexible Printed Circuit (FPC) form. On the back of these new capabilities, the company has secured extensive new orders in connectors and a significant new 10 year supply agreement signed for €3m of incremental Busbar sales with our second biggest customer.
EV
The transition of the automotive sector towards EV is providing significant new growth opportunities for the Group, with battery-related products representing the principal opportunity. The new EV business unit has been developed based on the combination of Strip Tinning's core skills in busbar, connectors, FPC, and plastic encapsulation to create a Cell Management Systems (CMS) for EV batteries. The foundation for these has been the commissioning of a new lamination cell and the addition of a third 7,690 sq. ft building on our site which now houses our growing EV activities.
Providing thermal management (safety) and voltage control (performance and efficiency), this product is suitable for all battery technologies (cylindrical, prismatic, pouch) and "clunk clicks" to the battery pack. The wiring looms traditionally used in this application are heavy, and labour intensive to manufacture and assemble to the battery. The CMS has considerable advantages over the traditional wiring looms it replaces:
- Automated processes allows on-shoring production of CMS versus reliance on low cost of labour country supply of wiring looms;
- Much lighter weight and space saving with design simplification opportunities for customers;
- Reduced assembly cost to customer - "clunk click" attachment as opposed to labour intensive manual connection of wiring loom to individual terminals;
- Increased OEM efficiency - option to supply onto vehicle assembly line already tested and connected to battery pack for a quicker assembly time / reduced SKUs;
- Increased end product quality - designed for perfect fit, eliminates wiring errors from manual processes.
The EV division continued to successfully meet progress milestones for CMS with multiple customers for projects with serial Start of Production dates in 2023 and 2024. The year culminated in a major contract award with a prestigious, established automotive OEM worth €2m per annum, to commence production volume supply in H2 2023.
These strategic milestones provide foundations for further growth, as established OEMs provide external validation of the Strip Tinning product offering across both business units.
Our IPO
I am delighted that the company completed a long planned Initial Public Offering (IPO) on the London AIM market on 16 February 2022. The net proceeds from the sales amounted to £6.8m destined to be invested in accelerating the growth of both our Glazing and EV divisions. The IPO has also brought us the rigour of having an external board, a new set of highly supportive investors and the visibility and credibility that comes with being a public company. Lastly it will enable us to engage all our employees with participation in share based incentive schemes.
The Company has already started to invest the funds in line with the strategy set out at the time of Admission.
People
I would like to thank all the company's employees for their hard work and dedication over the last year made especially difficult by the Covid epidemic. I am delighted that with the company's IPO now completed we will be able to reward all our employees with participation in a new Share Incentive Plan.
I would also like to welcome to the company a large number of new employees, especially in our engineering and management team and onto our new Board. Notable amongst these are Mark Perrins the new MD of Glazing who has joined us from Plastic Omnium and our three new non-executive directors Adam Robson, Paul George and Matthew Taylor who between them bring a wealth of automotive and public company experience.
ESG
Strip Tinning is intent on being a leader in ESG performance. We have been particularly focussed on our environmental responsibilities: we already recycle all scrap metals and paper and we are encouraging all employees to move towards driving electric cars, with free charging available. All Company cars were mandated to be EVs from August 2021. The Company is determined to move well beyond this towards being net carbon zero, a move which is not only the right thing to do but which also matches its customers' and employees' aspirations (and in the future their requirements). During 2022 a full review of the Company's carbon footprint will be conducted and a detailed plan towards net-zero will be agreed. Capital expenditure for the expected required actions has been allowed for in the Group's capital plans.
As a company subject to the rigorous standards required of any mainstream automotive supplier, the Company has long reached for the very highest standards of environmental, social and governance standards and we have built on this heritage to establish the strategy, processes, and governance rules and procedures for the company. The success of this approach has been shown by the ESG evaluation A score (the highest possible rating) received from Integrum ESG ("Integrum") in January 2022 after the Company's management team provided Integrum with detailed answers to an extensive 32 questionnaire which was then processed through Integrum's established scoring engine.
Outlook
Uncertainty in the global and UK economies has persisted into 2022. The European car market, which accounted for 57% of Group sales in 2021, has softened considerably with passenger car registrations declining 20.6% in April 2022 compared to the same period in 2021. Supply chain disruptions have been heightened by Russia's invasion of Ukraine, which has worsened the shortage of semiconductors and wiring harnesses, and recent COVID-19 related lockdowns in Shanghai have all negatively affected car production, with a number of OEM plants halting production. These uncertainties are likely to continue in the near term and will continue to impact the Glazing business. Volumes are down overall (especially on diesel passenger vehicles) due to the current supply constraints and uncertainties, but all contracts are long term supply agreements of around 5 years, with recurring annual revenues and Strip Tinning will benefit from the start of production from new nominations in 2022, including connectors for a high volume, high profile electric vehicle launch.
Promisingly, no reduction in demand or interest has been seen in the EV business unit for the CMS product with a strong pipeline of enquiries, with this side of the business performing ahead of expectations for FY22. There is strong momentum in the EV side of the business and we have been further boosted by the post year end recruitment of a European sales lead with strong contacts into the German OEMs. The funds raised from the IPO will assist Strip Tinning to benefit from its early mover advantage with the CMS product. We are well placed within a market only set to expand further.
Strip Tinning has proved its resilience over a 60 year history. Whilst it is frustrating that factors outside of our control have had such an impact on the Glazing side of our business, I am proud of the manner in which we are dealing with the current challenges. With cost control actions underway to adjust to the current environment, we remain confident in the medium and long term outlook for Glazing products and are seeing undiminished demand for EV products.
Richard Barton
Chief Executive Officer
Statement of Comprehensive Income for the year ended 31 December 2021
|
|
Notes |
|
Year ended 31 December 2021 |
|
Year ended 31 December 2020 restated |
||||||
|
|
|
|
£'000 |
|
£'000 |
||||||
|
|
|
|
|
|
|
||||||
|
Revenue |
3 |
|
11,150 |
|
8,555 |
||||||
|
|
|
|
|
|
|
||||||
|
Cost of sales |
|
|
(7,872) |
|
(5,024) |
||||||
|
|
|
|
|
|
|
||||||
|
Gross profit |
|
|
3,278 |
|
3,531 |
||||||
|
|
|
|
|
|
|
||||||
|
Other operating income |
4 |
|
31 |
|
104 |
||||||
|
Administrative expenses |
|
|
(4,213) |
|
(3,173) |
||||||
|
|
|
|
|
|
|
||||||
|
Operating (loss)/profit |
4 |
|
(904) |
|
462 |
||||||
|
|
|
|
|
|
|
||||||
|
Finance costs |
6 |
|
(158) |
|
(113) |
||||||
|
|
|
|
|
|
|
||||||
|
(Loss)/profit before taxation |
|
|
(1,062) |
|
349 |
||||||
|
|
|
|
|
|
|
||||||
|
Taxation |
7 |
|
237 |
|
(131) |
||||||
|
|
|
|
|
|
|
||||||
|
(Loss)/profit and total comprehensive (expense)/income for the year |
|
|
(825) |
|
218 |
||||||
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
All amounts relate to continuing operations.
Note 26 sets out the impact of transition and restatements.
The accompanying notes form part of these financial statements.
Statement of Financial Position as at 31 December 2021
|
|
Notes |
|
31 December 2021 |
|
31 December 2020 restated |
1 January 2020
restated |
|
|
|
|
£'000 |
|
£'000 |
£'000 |
|
ASSETS |
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
Intangible assets |
9 |
|
1,561 |
|
1,020 |
863 |
|
Right-of-use assets |
10 |
|
1,142 |
|
1,236 |
1,010 |
|
Property, plant and equipment |
11 |
|
3,089 |
|
2,913 |
2,369 |
|
|
|
|
5,792 |
|
5,169 |
4,242 |
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Inventories |
12 |
|
2,014 |
|
1,522 |
1,276 |
|
Trade and other receivables |
13 |
|
3,778 |
|
2,173 |
2,309 |
|
Corporation tax receivable |
|
|
279 |
|
108 |
60 |
|
Cash and cash equivalents |
|
|
337 |
|
1,230 |
1,315 |
|
|
|
|
6,408 |
|
5,033 |
4,960 |
|
|
|
|
|
|
|
|
|
Total assets |
|
|
12,200 |
|
10,202 |
9,202 |
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Trade and other payables |
14 |
|
(4,413) |
|
(1,190) |
(1,320) |
|
Borrowings |
15 |
|
(559) |
|
(539) |
(320) |
|
Lease liabilities |
16 |
|
(152) |
|
(122) |
(127) |
|
|
|
|
(5,124) |
|
(1,851) |
(1,767) |
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
Accruals and deferred income |
14 |
|
(162) |
|
(394) |
(142) |
|
Borrowings |
15 |
|
(1,235) |
|
(1,044) |
(546) |
|
Lease liabilities |
16 |
|
(1,104) |
|
(1,204) |
(948) |
|
Deferred tax liabilities |
19 |
|
(338) |
|
(605) |
(449) |
|
|
|
|
(2,839) |
|
(3,247) |
(2,085) |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
(7,963) |
|
(5,098) |
(3,852) |
|
|
|
|
|
|
|
|
|
Net assets |
|
|
4,237 |
|
5,104 |
5,350 |
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
21 |
|
- |
|
- |
- |
|
Retained earnings |
|
|
4,237 |
|
5,104 |
5,350 |
|
Total equity |
|
|
4,237 |
|
5,104 |
5,350 |
The following notes form part of these financial statements.
Statement of Changes in Equity for the year ended 31 December 2021
|
|
|
|
|
|
|
|
||||||||
|
|
Note |
Share capital |
|
|
Retained earnings |
|
|
Total equity |
|
|
||||
|
|
|
£'000 |
|
|
£'000 |
|
|
£'000 |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
At 1 January 2020 as restated |
26 |
- |
|
|
5,350 |
|
|
5,350 |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Profit and total comprehensive income for the year |
|
- |
|
|
218 |
|
|
218 |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Share based payment |
22 |
|
|
|
76 |
|
|
76 |
|
|
||||
|
Dividends paid |
8 |
- |
|
|
(540) |
|
|
(540) |
|
|
||||
|
At 31 December 2020 as restated |
26 |
- |
|
|
5,104 |
|
|
5,104 |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Loss and total comprehensive expense for the year |
|
- |
|
|
(825) |
|
|
(825) |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Share based payment |
22 |
- |
|
|
145 |
|
|
145 |
|
|
||||
|
Share options deferred tax credit |
7 |
- |
|
|
225 |
|
|
225 |
|
|
||||
|
Dividends paid |
8 |
- |
|
|
(412) |
|
|
(412) |
|
|
||||
|
At 31 December 2021 |
|
- |
|
|
4,237 |
|
|
4,237 |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form part of these financial statements.
Statement of Cash Flows for the year ended 31 December 2021
|
|
Notes |
|
|
Year ended 31 December 2021 |
|
Year ended 31 December 2020 |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
|
Cash flow from operating activities |
|
|
|
|
|
|
|
|
(Loss)/profit for the financial year |
|
|
|
(825) |
|
218 |
|
|
Adjustment for: |
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment |
11 |
|
|
561 |
|
505 |
|
|
Depreciation of right-of-use assets |
10 |
|
|
160 |
|
152 |
|
|
Amortisation of intangible assets |
9 |
|
|
191 |
|
149 |
|
|
Amortisation of government grants |
|
|
|
(31) |
|
(33) |
|
|
Share based payment |
|
|
|
145 |
|
76 |
|
|
Finance costs |
6 |
|
|
158 |
|
113 |
|
|
Taxation (credit)/charge |
|
|
|
(237) |
|
131 |
|
|
Changes in working capital: |
|
|
|
|
|
|
|
|
(Increase) in inventories |
12 |
|
|
(492) |
|
(246) |
|
|
(Increase)/decrease in trade and other receivables |
13 |
|
|
(1,605) |
|
135 |
|
|
Increase in trade and other payables |
14 |
|
|
3,022 |
|
123 |
|
|
Cash generated from operations |
|
|
|
1,047 |
|
1,323 |
|
|
Income tax received/(paid) |
|
|
|
24 |
|
(23) |
|
|
Net cash from operating activities |
|
|
|
1,071 |
|
1,300 |
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities |
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
|
|
(737) |
|
(1,049) |
|
|
Purchase of intangible assets |
9 |
|
|
(732) |
|
(306) |
|
|
Net cash used in investing activities |
|
|
|
(1,469) |
|
(1,355) |
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
|
|
|
Dividends paid to shareholders |
8 |
|
|
(412) |
|
(540) |
|
Interest paid |
|
|
|
(158) |
|
(113) |
|
Payment of lease liabilities |
16 |
|
|
(136) |
|
(127) |
|
Government grants received |
|
|
|
- |
|
33 |
|
Loan advanced |
|
|
|
355 |
|
- |
|
Hire purchase finance received |
|
|
|
401 |
|
1,120 |
|
Repayment of capital element of hire purchase contracts |
15 |
|
|
(545) |
|
(403) |
|
Net cash used in financing activities |
|
|
|
(495) |
|
(30) |
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents |
|
|
|
(893) |
|
(85) |
|
|
|
|
|
|
|
|
|
Net cash and cash equivalents at beginning of the year |
|
|
|
1,230 |
|
1,315 |
|
|
|
|
|
|
|
|
|
Net cash and cash equivalents at end of year (all cash balances) |
|
|
|
337 |
|
1,230 |
|
|
|
|
|
|
|
|
The notes on pages 16 to 39 form part of these financial statements.
Notes to the Financial Statements for the year ended 31 December 2021
1. Corporate information
Strip Tinning Limited is a company incorporated in the United Kingdom. The registered address of the Company is Arden Business Park, Arden Road, Frankley Birmingham, West Midlands, B45 0JA.
The principal activity of the Company is the manufacture of automotive busbar, ancillary connectors and flexible printed circuits.
2. Accounting policies
2.1. Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the United Kingdom in conformity with the Companies Act 2006. IFRS has been applied with a transition date from 1 January 2020.
The accounting policies have been applied consistently to all periods presented, unless otherwise stated.
These are the first period of statutory financial statements prepared under IFRS and the impact of transition is set out in note 26. IFRS 1 First-Time Adoption of International Financial Reporting Standards allows first-time adopters certain exemptions from the retrospective application of certain IFRSs and no significant exemptions have been applied.
The financial statements have been prepared under the historical cost convention with the exception of the fair values applied in accounting for share based payments. The financial statements and the accompanying notes are presented in thousands of pounds sterling ('£'000'), the functional and presentation currency of the Company, except where otherwise indicated.
Going concern
The directors have considered the principal risks and uncertainties facing the business, along with the Company's objectives, policies and processes for managing its exposure to financial risk.
In making this assessment the directors have prepared cash flows for the period ending 30 June 2023, being a period of 12 months from the expected date of approval of the financial statements. The listing on AIM in February 2022 raised a net £6.8m for the Company including the funding for planned investment where there is discretion in the timing and commitment to expenditure. Whilst there are major current inflationary and supply chain pressures in the industry these forecasts therefore show that with the funds available, the Company has sufficient resources to enable it to manage significant fluctuations in results and to continue to meet its liabilities as they fall due.
Based on the above factors, the directors have prepared the financial statements on a going concern basis.
Use of estimates and judgments
The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience, as well as expectations of future events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Accounting policies (continued)
Share based payment
The company has used an option-pricing model where applicable, with inputs, in particular volatility in respect of a company without a quoted share price, representing a key estimate in the calculation (Notes 23 and 26).
Right-of-use assets
The application of IFRS16 involves an estimation of the appropriate incremental borrowing rate and of the relevant lease period. The rate is reviewed in conjunction with the rates on similar borrowings and a judgement has been made where there are break options by reference to business plans and the most likely outcome (Note 26). An increase in the rate of 1% would have reduced the opening asset and liability by £67,000 with no impact on net assets, reduced the depreciation charges by £5,000 a year and increased finance charges for 2018 to 2020 by approximately £7,000 a year.
Property, plant and equipment
Property, plant and equipment as set out in note 11 is depreciated over the estimated useful lives of the assets. Useful lives are based on management's estimates of the period that the assets will generate revenue, which are reviewed annually for continued appropriateness and events which may cause the estimate to be revised.
Intangible assets
The capitalisation of development costs set out in note 10 is also subject to a degree of judgement in respect of the timing when the commercial viability of new technology and know-how is reached, supported by the results of testing and customer trials, and by forecasts for the overall value and timing of sales which may be impacted by other future factors which could impact the assumptions made. The carrying values are shown in note 10.
Amortisation commences once management consider that the asset is available for use, i.e. when it is judged to be in the location and condition necessary for it to be capable of operating in the manner intended by management and the cost is amortised over the estimated 5 to 8 year useful life of the know-how based on experience of and future expected customer product cycles and lives.
2.2. Revenue
Revenue principally comprises income from the sale of automotive glazing components comprising busbar, ancillary connectors and flexible printed circuits together with any related product tooling purchased by customers and represents the amount receivable for the sale of these component products or tooling, excluding VAT and trade discounts.
There are framework agreements with major customers including pricing per component and purchase orders are then received from customers for each delivery. Revenue is recognised to the extent that the performance obligations, being the agreement to transfer the product is satisfied, which is when the customer obtains control of the product or of the tooling and is able to benefit from or direct the use of the product. The transfer takes place in accordance with the terms agreed with each customer, either at the point in time the goods are despatched to or received by the customer.
When an amount has been invoiced or payment received in advance of the associated performance obligations being fulfilled, any amounts due are recognised as trade receivables and contract liabilities are recorded for the sales value of the performance obligations that have not been provided.
Accounting policies (continued)
2.3. Grants
Income based grants
Income based grants are recognised in other operating income based on the specific terms related to them as follows:
· A grant is recognised in other operating income when the grant proceeds are received (or receivable) provided that the terms of the grant do not impose future performance-related conditions.
· If the terms of a grant do impose performance-related conditions then the grant is only recognised in income when the performance-related conditions are met.
· Any grants that are received before the revenue recognition criteria are met are recognised in the statement of financial position as an other creditor within liabilities.
Capital grants
Grants received relating to tangible and intangible fixed assets are treated as deferred income and released to the income statement over the expected useful lives of the assets concerned.
2.4. Employee benefits
The Company operates a defined contribution pension scheme. Contributions are recognised in the statement of comprehensive income in the year in which they become payable in accordance with the rules of the scheme.
2.5. Share based payment
The Company operates an equity-settled share-based compensation plan in which the Company receives services from employees as consideration for share options. The fair value is established at the point of grant using an appropriate pricing model and then the cost is recognised as an expense in administrative expenses in the statement of comprehensive income, together with a corresponding increase directly in equity over the period in which the services are fulfilled. This is the estimated period to vesting in respect of employees. The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects the extent to which the vesting period has expired and the Company's best estimate of the number of equity instruments that will ultimately vest.
Deferred tax credits in respect of the potential future tax deduction from exercise of options are initially included in the tax in the statement of comprehensive income. To the extent the potential corporate tax deduction exceeds the share based payment charges, the deferred tax is taken directly to retained earnings in equity in accordance with IAS12.
2.6. Income tax
Current income tax assets and/or liabilities comprise obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid/due at the reporting date. Current tax is payable on taxable profits, which may differ from profit or loss in the financial statements. Calculation of current tax is based on the tax rates and tax laws that have been enacted or substantively enacted at the reporting period.
Deferred taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Accounting policies (continued)
2.7. Computer software
Computer software assets are capitalised at the cost of acquiring and bringing into use the software. Subsequent to initial recognition it is stated at cost less accumulated amortisation and accumulated impairment. Software is amortised in the Statement of Comprehensive Income on a straight line basis over its estimated useful life of two years. These costs are recognised in administrative expenses.
2.8. Research and development costs
An internally generated intangible asset arising from development (or the development phase) of an internal project to improve the efficiency, design or capability of the Company's product range is recognised if, and only if, all of the following have been demonstrated:
· It is technically feasible to complete the development such that it will be available for use, sale or licence;
· There is an intention to complete the development;
· There is an ability to use, sell or licence the resultant asset;
· The method by which probable future economic benefits will be generated is known;
· There are adequate technical, financial and other resources required to complete the development;
· There are reliable measures that can identify the expenditure directly attributable to the project during its development.
The amount recognised is the expenditure incurred from the date when the project first meets the recognition criteria listed above. Expenses capitalised consist of employee costs incurred on development, direct costs including material or testing and an apportionment of appropriate overheads.
Where the above criteria are not met, research and development expenditure is charged to the income statement in the period in which it is incurred.
Capitalised development costs are initially measured at cost. After initial recognition, they are recognised at cost less any accumulated amortisation and any accumulated impairment losses.
The depreciable amount of a development cost intangible asset with a finite useful life is allocated on a systematic basis over its useful life, currently expected to range from 5 to 8 years. Amortisation begins when the asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.
The amortisation period and the amortisation method for the assets with a finite useful life is reviewed at least each financial year-end. If the expected useful of the asset is different from previous estimates, the amortisation period is changed accordingly.
2.9. Patent costs
Patent cost assets are initially measured at cost. After initial recognition, they are recognised at cost less any accumulated amortisation and any accumulated impairment losses. The costs are amortised over a 5 year estimated useful life.
Accounting policies (continued)
2.10. Property plant and equipment
Property, plant and equipment is recognised as an asset only if it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. An item of property, plant and equipment that qualifies for recognition as an asset is measured at its cost. Cost of an item of property, plant and equipment comprises the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
After recognition, all property, plant and equipment (including plant, computer equipment and fixtures) is carried at cost less any accumulated depreciation and any accumulated impairment losses. Depreciation is provided at rates calculated to write down the cost of assets, less estimated residual value, over their expected useful lives on the following basis:
Leasehold improvements 15% reducing balance
Plant and machinery 15% reducing balance
Specialised Workshop Equipment 50% straight line
Office equipment 50% straight line
Tooling 25% reducing balance
The residual value and the useful life of an asset is reviewed at least at each financial year-end and if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying value of the asset and are recognised in profit or loss.
2.11. Right-of-use assets and lease liabilities
Assets and liabilities arising from a lease with a duration of more than one year are initially measured at the present value of the lease payments and payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease or the incremental borrowing rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
Lease payments are allocated between repayments of the discounted liability, presented as a separate category within liabilities, and the lease liability finance charges. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the amount of the initial measurement of lease liability, any lease payments made at or before the commencement date less any lease incentives received and any initial direct costs and are presented as a separate category within tangible fixed assets.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease
term on a straight-line basis. If the Company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life.
Any payments associated with short-term leases of equipment and all leases of low-value assets would be recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. There have been no significant short lease costs in the reporting period. Associated costs of all leases, such as maintenance, service charges and insurance, are expensed as incurred.
Accounting policies (continued)
2.12. Impairment of intangible assets and property, plant and equipment
For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash flows. As a result, some assets are tested individually for impairment and some are tested at the overall Company cash-generating unit level.
All individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An asset or cash-generating unit is impaired when its carrying amount exceed its recoverable amount. The recoverable amount is measured as the higher of fair value less cost of disposal and value in use. The value in use is calculated as being net projected cash flows based on financial forecasts discounted back to present value.
The impairment loss is allocated to reduce the carrying amount of the asset pro-rata on the basis of the carrying amount of each asset in the unit. Non-financial assets that suffered an impairment are reviewed for a possible reversal of the impairment at the end of each reporting period. An impairment loss is reversed if the asset's or cash-generating unit's recoverable amount exceeds its carrying amount.
2.13. Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase of raw materials or bought in manufacturing components, costs of conversion and an appropriate proportion of fixed and variable overheads incurred in bringing the finished goods inventories to their present location and condition. Net realisable value represents the estimated selling price less costs to complete and sell. Where necessary, provision is made to reduce cost to no more than net realisable value having regard to the nature and condition of inventory, as well as its anticipated utilisation and saleability.
2.14. Financial instruments
Financial assets
Financial assets are recognised in the statement of financial position when, and only when, the Company becomes a party to the contractual provisions of the instrument and are classified based upon the purpose for which the asset was acquired. The Company's business model is to hold all assets recognised within these financial statements to collect the cash flows.
Financial assets are initially recognised at fair value, which is usually the cost, plus directly attributable transaction costs. These comprise trade and other receivables and cash and cash equivalents.
Financial assets are subsequently measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.
The company applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. The company measures loss allowances at an amount equal to lifetime ECL, which is estimated using past experience of the historical credit losses experienced over the three year period prior to the period end. Historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the company's customers, such as inflation rates. The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery.
The company recognises loss allowances for expected credit losses (ECLs) on financial assets measured at amortised cost.
A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and reward are transferred.
Accounting policies (continued)
Financial liabilities
Financial liabilities include loans, hire purchase borrowings, trade and other payables and any derivatives in respect of forward foreign exchange contracts. Financial liabilities are obligations to pay cash or other financial assets and are recognised in the statement of financial position when, and only when, the Company becomes a party to the contractual provisions of the instrument.
Trade and other payables are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. Loans and hire purchase borrowings are are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument and subsequently carried at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.
Derivatives would be measured at fair value through profit and loss for any movements. None have been entered into within the period of these financial statements.
A financial liability is derecognised only when the contractual obligation is extinguished, that is, when the obligation is discharged, cancelled or expires.
The Company utilises hire purchase asset backed finance to fund tangible fixed assets, drawing down finance against individual assets or bundles of assets, which may directly finance the asset purchase or be drawn down retrospectively. The economic ownership of assets subject to hire purchase agreements are transferred to the Company if the Company bears substantially all the risks and rewards of ownership of the asset. The related asset is recognised and measured in accordance with the tangible fixed asset policy with initial cost being the fair value of the asset. A corresponding hire purchase liability.is recognised in respect of the capital repayments to be made.
These interest bearing liabilities are then measured at amortised cost with the interest, under the effective interest method, expensed over the repayment period at a constant rate.
2.15. Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value.
2.16. Foreign currencies
Transactions entered into by the Company in a currency other than the functional currency of sterling are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in the income statement in administrative expenses.
2.17. Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an economic outflow will occur and a reliable estimate can be made including any additional evidence from post period end events. Where the timing of the estimate represents a relatively certain amount it is provided for within accruals.
2.18. Equity and reserves
Share capital represents the nominal value of shares that have been issued. Share premium represents the excess consideration received over the nominal value of share capital upon the sale of shares, less any incidental costs of issue.
Retained earnings include all current and prior period retained profits.
Accounting policies (continued)
2.19. Presentation of non statutory measures
The Company classifies certain one-off charges or credits that have a material impact on the financial results but are not related to the core underlying trading as 'exceptional' or 'non-recurring' items. These are disclosed separately in note 4 and adjusted results to provide further understanding of the financial performance of the Company.
2.20. Standards, amendments and interpretations in issue but not yet effective
IFRS interpretations and amendments to standards issued but not yet effective have been reviewed and assessed for any impact on the company. There are no new standards, interpretations and amendments which are not yet effective in these financial statements, expected to have a material effect on the Company's future financial statements.
3. Segmental reporting
IFRS 8, Operating Segments, requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the Company's chief operating decision maker. The chief operating decision maker is considered to be the executive Directors.
The Company comprised only one operating segment for the sale of automotive circuit components for glazing products. The operating segments are monitored by the chief operating decision maker and strategic decisions are made on the basis of adjusted segment operating results. All assets, liabilities and revenues are located in, or derived in, the United Kingdom. However, the Company has now commenced the development and initial sales of products for electric vehicles ('EV') which are expected to grow to be a material and reported segment. Separate management reporting and information has not been prepared for the year ended 31 December 2021. As an indication of the initial activity, some estimated information has been derived showing sales of £0.35m for the year ended 31 December 2021, and net costs of about £1.1m as a result of the increasing investment and development in this area of activity.
Turnover with the major customers (including customer groups) representing in excess of 10% of total revenue in a year has been as follows:
|
|
|
|
Year ended 31 December 2021 |
|
Year ended 31 December 2020 |
|
|
|
|
£'000 |
|
£'000 |
|
Customer A |
|
|
2,392 |
|
2,010 |
|
Customer B |
|
|
1,680 |
|
1,277 |
|
Customer C |
|
|
1,230 |
|
1,124 |
|
Customer D |
|
|
2,091 |
|
1,042 |
All revenue arises at a point in time and relates to the sale of automotive busbar, ancillary connectors and flexible printed circuit product. Turnover by geographical destination is as follows:
|
|
|
|
Year ended 31 December 2021 |
|
Year ended 31 December 2020 |
|
|
|
|
£'000 |
|
£'000 |
|
Europe |
|
|
6,393 |
|
5,153 |
|
Rest of the World |
|
|
4,757 |
|
3,402 |
|
|
|
|
11,150 |
|
8,555 |
4. Operating profit
|
|
|
|
Year ended 31 December 2021 |
|
Year ended 31 December 2020 |
|
|
|
|
£'000 |
|
£'000 |
|
Operating profit is stated after charging/(crediting): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating income |
|
|
|
|
|
|
Amortisation of deferred capital grant income |
|
|
(31) |
|
(33) |
|
Government job retention scheme income |
|
|
(1) |
|
(71) |
|
|
|
|
|
|
|
|
Amortisation of intangible assets |
|
|
191 |
|
149 |
|
Depreciation of property, plant and equipment |
|
|
561 |
|
505 |
|
Depreciation of right-of-use assets |
|
|
160 |
|
152 |
|
Cost of inventory sold |
|
|
7,598 |
|
4,727 |
|
Research and development expenditure expensed in the year |
|
|
114 |
|
74 |
|
Short term lease rentals |
|
|
24 |
|
15 |
|
Foreign exchange losses |
|
|
164 |
|
11 |
|
IPO preparation related costs |
|
|
198 |
|
- |
|
|
|
|
|
|
|
|
Auditor's remuneration |
|
|
|
|
|
|
- For audit |
|
|
45 |
|
14 |
|
- For taxation compliance |
|
|
- |
|
2 |
|
- For tax advisory services |
|
|
6 |
|
28 |
|
- For other assurance services |
|
|
15 |
|
27 |
|
|
|
|
|
|
|
£157,000 of fees payable to the auditors in respect of IPO reporting accountants services were included in prepayments at 31 December 2021.
5. Staff and key management personnel
|
Average monthly number of employees |
|
|
Year ended 31 December 2021 |
|
Year ended 31 December 2020 |
|
|
|
|
Number |
|
Number |
|
|
|
|
|
|
|
|
Management |
|
|
4 |
|
3 |
|
Sales |
|
|
5 |
|
4 |
|
Production |
|
|
140 |
|
108 |
|
Administration |
|
|
4 |
|
5 |
|
|
|
|
153 |
|
120 |
|
|
|
|
|
|
|
|
Payroll costs |
|
|
£'000 |
|
£'000 |
|
Gross salaries |
|
|
3,860 |
|
3,073 |
|
Social security costs |
|
|
369 |
|
280 |
|
Share based payment |
|
|
145 |
|
76 |
|
Other pension contributions |
|
|
233 |
|
200 |
|
|
|
|
4,607 |
|
3,629 |
|
|
|
|
|
|
|
In view of the size and nature of the Company, the Key Management Personnel in the three year period is considered to comprise only the directors of the Company. The directors' (and key management) remuneration was as follows.
|
Staff and key management personnel (continued) |
|||||
|
|
|
|
Year ended 31 December 2021 |
|
Year ended 31 December 2020 |
|
|
|
|
£'000 |
|
£'000 |
|
Aggregate emoluments |
|
|
|
|
|
|
Remuneration for qualifying services |
|
|
335 |
|
351 |
|
Fair value of share base payment |
|
|
145 |
|
76 |
|
Pension contributions |
|
|
13 |
|
11 |
|
|
|
|
493 |
|
438 |
|
|
|
|
|
|
|
|
Highest paid director: |
|
|
|
|
|
|
Remuneration for qualifying services |
|
|
198 |
|
211 |
|
Pension contributions |
|
|
8 |
|
7 |
|
|
|
|
206 |
|
218 |
Retirement benefits were accruing to 2 directors in respect of defined contribution schemes (2020:2).
6. Finance costs
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 December 2021 |
|
Year ended 31 December 2020 |
|
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
Interest payable on hire purchase obligations |
|
|
71 |
|
57 |
|
Bank interest |
|
|
21 |
|
- |
|
Lease liability finance charges |
|
|
66 |
|
56 |
|
|
|
|
158 |
|
113 |
7. Income tax
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 December 2021 |
|
Year ended 31 December 2020 |
|
|
|
|
£'000 |
|
£'000 |
|
Current tax: |
|
|
|
|
|
|
UK corporation tax |
|
|
(195) |
|
(107) |
|
Adjustment for prior periods |
|
|
- |
|
82 |
|
Total current tax (credit) |
|
|
(195) |
|
(25) |
|
|
|
|
|
|
|
|
Deferred tax: |
|
|
|
|
|
|
Origination and reversal of temporary differences |
|
|
(161) |
|
100 |
|
Effect of change in tax rate |
|
|
135 |
|
51 |
|
Adjustment for prior periods |
|
|
(16) |
|
5 |
|
Total deferred tax (credit)/expense |
|
|
(42) |
|
156 |
|
|
|
|
|
|
|
|
Total tax (credit)/charge |
|
|
(237) |
|
131 |
|
|
|
|
|
|
|
The tax rate used for the reconciliation is the corporate tax rate of 19% (2020: 19%) payable by corporate entities in the UK on taxable profits under UK tax law. The Finance Act 2020 enacted in March 2020 maintained the rate of UK corporation tax rate at 19% and, as the enacted rate, is accordingly applied to deferred taxation balances at 31 December 2020. In May 2021 an increase to 25% from April 2023 was substantively enacted and, as the expected period of reversal, is accordingly applied to deferred tax balances at 31 December 2021.
The (credit)/charge for the year can be reconciled to the (loss)/profit for the year as follows:
|
|
|
|
Year ended 31 December 2021 |
|
Year ended 31 December 2020 |
|
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
(Loss)/profit before taxation |
|
|
(1,062) |
|
349 |
|
|
|
|
|
|
|
|
Income tax calculated at 19% (2020: 19%) |
|
|
(202) |
|
66 |
|
Expenses not deductible |
|
|
35 |
|
17 |
|
Enhanced research and development allowances |
|
|
(84) |
|
(90) |
|
Enhanced capital allowances |
|
|
(41) |
|
- |
|
Deferred tax asset in respect of share options |
|
|
(64) |
|
- |
|
Effect of change in deferred tax rate |
|
|
135 |
|
51 |
|
Adjustment for prior periods |
|
|
(16) |
|
87 |
|
Total tax (credit)/charge |
|
|
(237) |
|
131 |
In addition, a deferred tax credit of £225,000 (2020: £nil) has been taken directly to retained earnings in equity in accordance with IAS12. This is in respect of the extent to which the potential corporate tax deduction exceeds the share based payment charges.
8. Dividends paid and proposed
Amounts recognised as distributions to equity holders in the period:
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 December 2021 |
|
Year ended 31 December 2020 |
|
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
Interim ordinary dividends paid for the year ended 31 December 2021 of £206 (2020 : £270 paid) per share |
|
|
412 |
|
540 |
9. Intangible assets
|
|
|
|
|
|
|
|
|
Development costs |
Patent costs |
Computer software |
|
Total |
|
|
£'000 |
£'000 |
£'000 |
|
£'000 |
|
Cost |
|
|
|
|
|
|
At 1 January 2020 |
1,007 |
131 |
82 |
|
1,220 |
|
|
|
|
|
|
|
|
Additions |
291 |
7 |
8 |
|
306 |
|
As at 31 December 2020 |
1,298 |
138 |
90 |
|
1,526 |
|
|
|
|
|
|
|
|
Additions |
487 |
9 |
236 |
|
732 |
|
As at 31 December 2021 |
1,785 |
147 |
326 |
|
2,258 |
|
|
|
|
|
|
|
|
Amortisation or impairment |
|
|
|
|
|
|
At 1 January 2020 |
170 |
110 |
77 |
|
357 |
|
|
|
|
|
|
|
|
Charge |
126 |
17 |
6 |
|
149 |
|
As at 31 December 2020 |
296 |
127 |
83 |
|
506 |
|
|
|
|
|
|
|
|
Charge |
180 |
5 |
6 |
|
191 |
|
As at 31 December 2021 |
476 |
132 |
89 |
|
697 |
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
As at 1 January 2020 |
837 |
21 |
5 |
|
863 |
|
As at 31 December 2020 |
1,002 |
11 |
7 |
|
1,020 |
|
As at 31 December 2021 |
1,309 |
15 |
237 |
|
1,561 |
The company has a programme of research and development projects to improve the efficiency and functionality of its products. Capitalised development costs relate to the projects evaluated as viable and where the successful developments are being applied and contributing to revenue.
Included within the carrying amount of the above, are assets held under hire purchase agreements of £159,000 (2020: £nil) relating to software. Amortisation charged on these assets in the year amounted to £nil (2020: £nil).
10. Right-of-use assets
|
|
Property leasehold assets |
|
Plant and machinery assets |
|
Total |
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
Cost |
|
|
|
|
|
|
|
|
At 1 January 2020 |
1,303 |
|
203 |
|
1,506 |
|
|
|
Additions |
353 |
|
25 |
|
378 |
|
|
|
Disposals |
- |
|
(92) |
|
(92) |
|
|
|
As at 31 December 2020 |
1,656 |
|
136 |
|
1,792 |
|
|
|
Additions |
- |
|
66 |
|
66 |
|
|
|
Disposals |
- |
|
(77) |
|
(77) |
|
|
|
As at 31 December 2021 |
1,656 |
|
125 |
|
1,781 |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
At 1 January 2020 |
369 |
|
127 |
|
496 |
|
|
|
Charge |
96 |
|
56 |
|
152 |
|
|
|
Disposals |
- |
|
(92) |
|
(92) |
|
|
|
As at 31 December 2020 |
465 |
|
91 |
|
556 |
|
|
|
Charge |
122 |
|
38 |
|
160 |
|
|
|
Disposals |
- |
|
(77) |
|
(77) |
|
|
|
As at 31 December 2021 |
587 |
|
52 |
|
639 |
|
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
As at 1 January 2020 |
934 |
|
76 |
|
1,010 |
|
|
|
As at 31 December 2020 |
1,191 |
|
45 |
|
1,236 |
|
|
|
As at 31 December 2021 |
1,069 |
|
73 |
|
1.142 |
|
|
|
|
|
|
|
|
|
|
|
The financing charges in respect of right-of-use assets are disclosed in note 6 and the lease liabilities in 17. Right-of-use assets and l ease liabilities relate principally to property leases. The Company leases its main operating premises, typically on a ten year lease, subject to periodic rent reviews and potential breaks, with the intention and assumption made in measuring assets and liabilities that the full period will be utilised. Total cash outflows in respect of leases were £202,000 for the year ended 31 December 2021 (2020: £195,000).
11. Property, plant and equipment
|
|
Leasehold improvements |
Plant and machinery |
Tooling |
Office equipment |
Total |
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
Cost |
|
|
|
|
|
||
|
At 1 January 2020 |
370 |
4,427 |
815 |
103 |
5,715 |
||
|
Additions |
32 |
795 |
203 |
19 |
1,049 |
||
|
As at 31 December 2020 |
402 |
5,222 |
1,018 |
122 |
6,764 |
||
|
Additions |
95 |
515 |
94 |
33 |
737 |
||
|
Disposals |
- |
(633) |
- |
- |
(633) |
||
|
As at 31 December 2021 |
497 |
5,104 |
1,112 |
155 |
6,868 |
||
|
|
|
|
|
|
|
||
|
Depreciation and impairment |
|
|
|
|
|
||
|
At 1 January 2020 |
208 |
2,690 |
366 |
82 |
3,346 |
||
|
Charge |
28 |
310 |
146 |
21 |
505 |
||
|
As at 31 December 2020 |
236 |
3,000 |
512 |
103 |
3,851 |
||
|
Charge |
27 |
374 |
139 |
21 |
561 |
||
|
Disposals |
- |
(633) |
- |
- |
(633) |
||
|
As at 31 December 2021 |
263 |
2,741 |
651 |
124 |
3,779 |
||
|
|
|
|
|
|
|
||
|
Net book value |
|
|
|
|
|
||
|
As at 1 January 2020 |
162 |
1,737 |
449 |
21 |
2,369 |
||
|
As at 31 December 2020 |
166 |
2,222 |
506 |
19 |
2,913 |
||
|
As at 31 December 2021 |
234 |
2,363 |
461 |
31 |
3,089 |
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
Included within the carrying amount of the above, are assets held under hire purchase agreements of £1,482,000 (2020: £1,469,000) relating to plant and machinery and £190,000 (2020: £281,000) relating to tooling. Depreciation charged on these assets in the year amounted to £297,000 (2020: £78,000).
The Company has received capital grants towards the cost of plant and machinery from UK government research and development initiatives amounting to £nil (2020: £33,000) which are deferred and amortised in line with depreciation or impairment of the related asset.
12. Inventories
|
|
|
|
|
|
|
|
|
|
|
31 December 2021 |
|
31 December 2020 |
|
1 January 2020 |
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
Raw materials and consumables |
|
1,714 |
|
1,335 |
|
1,036 |
|
Finished goods and goods for resale |
|
300 |
|
187 |
|
240 |
|
|
|
2,014 |
|
1,522 |
|
1,276 |
There is no material difference between the value of inventories stated and their replacement cost. An impairment loss of £nil (2020: £nil) was recognised in the year.
13. Trade and other receivables
|
|
|
|
|
|
|
|
|
|
|
31 December 2021 |
|
31 December 2020 |
|
1 January 2020 |
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
Trade receivables |
|
3,014 |
|
1,715 |
|
1,856 |
|
Other receivables |
|
131 |
|
105 |
|
113 |
|
Prepayments |
|
633 |
|
353 |
|
340 |
|
|
|
3,778 |
|
2,173 |
|
2,309 |
|
|
|
|
|
|
|
|
The directors consider that the carrying amount of trade and other receivables approximates to their fair value. The impairment charge and movement in the expected credit loss provision against trade receivables is as follows:
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2021/2020 |
|
- |
|
- |
|
|
|
Impairment charge for the year |
|
25 |
|
- |
|
|
|
At 31 December 2021/2020 |
|
25 |
|
- |
|
|
Ageing of trade receivables past their due dates but not provided were:
|
|
|
|
|
|
|
|
|
Less than 30 days overdue |
|
30 to 60 days overdue |
|
More than 60 days overdue |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
31 December 2020 |
218 |
|
14 |
|
67 |
|
31 December 2021 |
405 |
|
119 |
|
148 |
|
|
|
|
|
|
|
Other than the £25,000 provided against, the directors consider the credit quality of trade and other receivables that are neither past due nor impaired to be of good quality.
The majority of other receivables is VAT receivable from the UK government. The remaining amounts are considered to bear similar risks to trade receivables and any expected credit loss is therefore considered to be immaterial.
14. Trade and other payables
|
|
31 December 2021 |
|
31 December 2020 |
|
1 January 2020 |
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
|
Amounts falling due within one year: |
|
|
|
|
|
|
|
Trade payables |
2,985 |
|
729 |
|
935 |
|
|
Taxes and social security costs |
336 |
|
108 |
|
112 |
|
|
Other payables |
- |
|
- |
|
1 |
|
|
Accruals |
715 |
|
321 |
|
247 |
|
|
Contract liabilities |
326 |
|
- |
|
- |
|
|
Deferred income - grants |
51 |
|
32 |
|
25 |
|
|
|
4,413 |
|
1,190 |
|
1,320 |
|
|
Amounts falling due after more than one year: |
|
|
|
|
|
|
|
Accruals |
19 |
|
220 |
|
- |
|
|
Deferred income - grants |
143 |
|
174 |
|
142 |
|
|
|
162 |
|
394 |
|
142 |
|
|
|
|
|
|
|
|
|
15. Borrowings
|
|
|
31 December 2021 |
|
31 December 2020 |
|
1 January 2020 |
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
Current liabilities |
|
|
|
|
|
|
|
Loans |
|
61 |
|
- |
|
- |
|
Hire purchase liabilities |
|
498 |
|
539 |
|
320 |
|
|
|
559 |
|
539 |
|
320 |
|
Non-current liabilities |
|
|
|
|
|
|
|
Loans |
|
294 |
|
- |
|
- |
|
Hire purchase liabilities |
|
941 |
|
1,044 |
|
546 |
|
|
|
1,235 |
|
1,044 |
|
546 |
|
|
|
1,794 |
|
1,583 |
|
866 |
|
|
|
|
|
|
|
|
Hire purchase obligations are secured by fixed charges over tangible fixed assets and floating charges over other assets and undertakings of the Company. All obligations fall due within five years with the exception of £40,000 as at 31 December 2021. This relates to a hire purchase liability of £304,000 repayable over 6 years with interest at 7%. The total payments including interest in respect of hire purchase liabilities are shown in note 18.
16. Lease liabilities
|
Amounts falling due: |
|
31 December 2021 |
|
31 December 2020 |
|
1 January 2020 |
|
||||||||||
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
||||||||||
|
|
|
|
|
|
|
|
|
||||||||||
|
In one year or less |
|
152 |
|
122 |
|
127 |
|
||||||||||
|
Between one and five years |
|
551 |
|
512 |
|
364 |
|
||||||||||
|
In more than five years |
|
553 |
|
692 |
|
584 |
|
||||||||||
|
|
|
1,256 |
|
1,326 |
|
1,075 |
|
||||||||||
|
|
|
|
|
|
|
|
|
||||||||||
|
The total payments including interest in respect of lease liabilities are shown in note 18. |
|
||||||||||||||||
|
17. Movements in total financing liabilities |
|
|
|
||||||||||||||
|
|
|
|
|
£'000 |
|
£'000 |
|
||||||||||
|
|
|
|
|
|
|
|
|
||||||||||
|
At 1 January 2021/2020 |
|
|
|
2,909 |
|
1,941 |
|
||||||||||
|
Cash movements: |
|
|
|
|
|
|
|
||||||||||
|
Lease liability payments |
|
|
|
(136) |
|
(139) |
|
||||||||||
|
Hire purchase finance advanced |
|
|
|
401 |
|
1,120 |
|
||||||||||
|
Loan received |
|
|
|
355 |
|
- |
|
||||||||||
|
Hire purchase repayments |
|
|
|
(545) |
|
(403) |
|
||||||||||
|
Interest paid |
|
|
|
(158) |
|
(113) |
|
||||||||||
|
Non-cash movements: |
|
|
|
|
|
|
|
||||||||||
|
Interest accrued |
|
|
|
158 |
|
113 |
|
||||||||||
|
New lease liabilities |
|
|
|
66 |
|
390 |
|
||||||||||
|
As at 31 December 2021/2020 |
|
|
|
3,050 |
|
2,909 |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18. Financial instruments and capital management
Risk management
The Board has overall responsibility for the determination of the Company's risk management objectives and policies. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company's flexibility. All funding requirements and financial risks are managed based on policies and procedures adopted by the Board of Directors. The Company is exposed to financial risks in respect of market including foreign exchange risk, credit and liquidity risks.
Capital management
The Company's capital comprises all components of equity which includes share capital and retained earnings.
The Company's objectives when maintaining capital are to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The capital structure of the Company consists of shareholders equity with all working capital requirements financed from cash and major capital expenditure funded by leases and hire purchase agreements.
The Company sets the amount of capital it requires in proportion to risk. It manages its capital structure and makes adjustments to it in the light of changes in economic conditions, the ability to finance capital purchases and the risk characteristics of the underlying assets and activity. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.
Market risks
These arise from the nature and location of the customer markets and include foreign exchange rate risks.
The Company trades within European and other overseas automotive supplier markets, and accordingly there is a risk relating to the underlying performance of these markets. The directors monitor this and the foreign exchange risk closely with the intention to foresee downturns in trade or changes in the use of automotive components.
Financial instruments and capital management (continued)
Foreign exchange risk
The Company trades with overseas customers and, whilst it has net foreign currency balances, also makes a degree of purchases in the respective currency and uses currency denominated accounts to defer conversion to sterling or to utilise the currency when needed. There has therefore been a reduced sensitivity to fluctuations in exchange rates although a 10% increase or decrease in exchange rates against sterling could impact the results by up to £200,000 as a reduction or increase in profit respectively.
The Company had the following in net assets comprising cash, sales ledger and purchase ledger balances denominated in foreign currencies:
|
|
|
31 December 2021 |
|
31 December 2020 |
1 January 2020 |
|
|
|
£'000 |
|
£'000 |
£'000 |
|
|
|
|
|
|
|
|
Euro denominated |
|
1,290 |
|
1,400 |
2,212 |
|
US dollar denominated |
|
291 |
|
179 |
349 |
Interest rate risk
The Company makes use of fixed rate three to five year hire purchase agreements to acquire property, plant and equipment with interest rates typically ranging from 3.5% (new agreements in 2020 and 2021) to 7% (2018 and 2019); this spreads the capital cost, ensures that the Company maintains sufficient cash resources for working capital purposes and ensures certainty of total costs at the point of acquisition of those assets. These liabilities are set out in note 15.
Credit risk
Credit risk is the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company is mainly exposed to credit risk from credit sales and attempts to mitigate credit risk by assessing the creditworthiness of customers, including using proforma terms for new customers and closely monitoring the payment record and trends for each customer. The customers are principally tier 1 automotive suppliers.
At 31 December 2021 trade receivables were £2,688,000 (31 December 2020: £1,715,000, 1 January 2020: £1,856,000) with 25% (31 December 2020: 28%, 1 January 2020: 24%) of the balance owed by one customer and 36% (31 December 2020: 50%, 1 January 2020: 44%) of the balance by 3 other customers with operations based in a number of European and other countries.
The ageing of overdue debtors is included in note 14 with all amounts subsequently substantially received. The impairments to trade or other receivables invoiced within 2021 or 2020 have been immaterial and relate to a few smaller customers.
Credit risk on cash and cash equivalents is considered to be minimal as the counterparties are all substantial banks with high credit ratings.
Liquidity risk
The maturity of the Company's financial liabilities including trade and other payables, hire purchase and lease liability total payments with the interest payable is as set out below. Current liabilities were payable on demand or to normal trade credit terms, hire purchase and loan obligations were payable monthly and lease liabilities quarterly. Hire purchase and lease liabilities are used to manage liquidity by spreading the cost of payment for capital purchases.
The Company also has a £750,000 bank overdraft facility which was unutilised at the year end.
Financial instruments and capital management (continued)
|
At 31 December 2021 |
Up to 1 year |
|
1-2 years |
|
2-5 years |
|
Over 5 years |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
3,535 |
|
19 |
|
- |
|
- |
|
Hire purchase obligations |
557 |
|
455 |
|
565 |
|
47 |
|
Loans |
92 |
|
92 |
|
254 |
|
- |
|
Lease liabilities |
213 |
|
200 |
|
521 |
|
610 |
|
|
4,397 |
|
766 |
|
1,340 |
|
657 |
|
At 31 December 2020 |
Up to 1 year |
|
1-2 years |
|
2-5 years |
|
Over 5 years |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
1,050 |
|
220 |
|
- |
|
- |
|
Hire purchase obligations |
602 |
|
480 |
|
679 |
|
- |
|
Lease liabilities |
186 |
|
189 |
|
517 |
|
781 |
|
|
1,838 |
|
889 |
|
1,196 |
|
781 |
|
At 1 January 2020 |
Up to 1 year |
|
1-2 years |
|
2-5 years |
|
Over 5 years |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
1,183 |
|
- |
|
- |
|
- |
|
Hire purchase obligations |
282 |
|
272 |
|
355 |
|
- |
|
Lease liabilities |
178 |
|
141 |
|
380 |
|
678 |
|
|
1,643 |
|
413 |
|
735 |
|
678 |
Classification of financial instruments
All financial assets have been classified as at amortised cost, and all financial liabilities have been classified as other financial liabilities measured at amortised cost.
|
Financial assets |
|
|
|
|
|
|
|||
|
|
31 December 2021 |
|
31 December 2020 |
|
1 January 2020 |
||||
|
At amortised cost |
£'000 |
|
£'000 |
|
£'000 |
|
|||
|
Trade and other receivables |
3,145 |
|
1,752 |
|
1,895 |
|
|||
|
Cash and cash equivalents |
337 |
|
1,230 |
|
1,315 |
|
|||
|
|
3,482 |
|
2,982 |
|
3,210 |
|
|||
|
Financial liabilities |
|
|
|
|
|
|
|||
|
|
31 December 2021 |
|
31 December 2020 |
|
1 January 2020 |
|
|||
|
|
£'000 |
|
£'000 |
|
£'000 |
|
|||
|
At amortised cost |
|
|
|
|
|
|
|||
|
Trade and other payables |
3,719 |
|
1,270 |
|
1,183 |
|
|||
|
Hire purchase obligations |
1,439 |
|
1,583 |
|
866 |
|
|||
|
Loans |
355 |
|
- |
|
- |
|
|||
|
|
5,513 |
|
2,853 |
|
2,049 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
The directors consider that the carrying amount of the financial assets and liabilities approximates to their fair values.
19. Deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Liability/(asset) in respect of: |
Accelerated capital allowances |
|
Intangible R&D assets |
|
Share based payment |
|
Losses and other timing differences |
|
Total |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
|
|
|
As at 31 December 2019 |
323 |
|
142 |
|
- |
|
(16) |
|
449 |
|
|
|
|
|
|
|
|
|
|
|
|
Debit to profit or loss |
164 |
|
48 |
|
- |
|
(56) |
|
156 |
|
As at 31 December 2020 |
487 |
|
190 |
|
- |
|
(72) |
|
605 |
|
|
|
|
|
|
|
|
|
|
|
|
Credited to equity |
- |
|
- |
|
(225) |
|
- |
|
(225) |
|
Credit to profit or loss |
251 |
|
137 |
|
(83) |
|
(347) |
|
(42) |
|
As at 31 December 2021 |
738 |
|
327 |
|
(308) |
|
(419) |
|
338 |
The Company has tax losses carried forward of approximately £1,570,000 (2020: £nil).
20. Defined contribution scheme
The Company contributes to personal pension plans for the benefit of certain employees. The pension cost charge represents contributions payable by the Company to the fund.
|
|
|
31 December 2021 |
|
31 December 2020 |
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
Contributions payable by the Company for the year |
|
233 |
|
200 |
|
|
|
|
|
|
21. Share capital
|
|
|
31 December 2021 |
|
31 December 2020 |
|
|
|
£ |
|
£ |
|
Allotted, called up and fully paid |
|
|
|
|
|
2000 Ordinary Shares of £0.10 each |
|
200 |
|
200 |
|
|
|
|
|
|
All £0.10 Ordinary shares rank equally with the right to receive dividends and capital distributions.
22. Share based payment
Options were granted on 24 August 2018 and continued to be exercisable at 31 December 2020 and 2021 over 354 £0.10 A Ordinary Shares at an exercise price of £267 per share. These options are only exercisable on a sale of the Company or on a listing and lapse when the holder ceases to be an employee (or for up to a further 12 months). The A Ordinary Shares have the right to share only prorata with the Ordinary Shares in the capital proceeds in excess of £10 million, receive dividends at the discretion of the directors and have voting rights. The Ordinary Shares share fully in the initial £10 million. No A Ordinary Shares have yet been issued.
The fair value of £1,345 per option share has been derived using a Black Scholes option pricing model applying a risk free rate of 1% and volatility of 40%. The estimated vesting period applied is 4 years (2020: 5 years) resulting in the charge of £145,000 in 2021 (£76,000 in 2020).
23. Contingent liabilities
At 31 December 2021 and 2020, the Company had no contingent liabilities.
24. Ultimate controlling party and related party transactions
The ultimate controlling party as at 31 December 2021 was considered to be Mr R Barton.
The key management personnel is considered to be the directors. Please refer to Note 5 for details of key management personnel remuneration.
25. Post balance sheet events
On 2 February 2022, the shareholders and share option holders exchanged their shares and options for prorata holdings in a new company, Strip Tinning Holdings Limited. This re-registered as a plc on 7 February 2022 and on 16 February 2022 was listed on the Alternative investment Market ('AIM') raising additional capital of a net £6.8m in order to fund investment and working capital for the group's development.
26. Transition to IFRS and prior year restatements
IFRS transition adjustments
From 1 January 2020 the Company has adopted International Financial Reporting Standards (IFRS) in the preparation of these financial statements. The main items contributing to the changes in the financial statements compared with that reported under the United Kingdom standard FRS 102 ('UK GAAP') are shown below:
IFRS 16: Under this standard, the concept of assessing a lease contract as either operating or financing is replaced by a single lessee accounting model. Substantially all former operating lease contracts where the rental was expensed under UK GAAP result in a lessee acquiring and recognising a right-to-use asset and a financial liability under IFRS. The asset is depreciated over the term of the lease and the interest on the financing liability is charged over the same period. A full retrospective approach has been applied with the liability representing the future lease payments at inception discounted at the estimated incremental borrowing rate of 5% and with an equal right of use asset at inception. The transition simplification to apply the same rate to all similar leases has been adopted. The leases are assumed to run full term with no breaks exercised in line with operational plans and intentions. The income statement is impacted, with the rent expense relating to operating leases being replaced by a straight line depreciation charge arising from the right-to-use assets and interest charges arising from lease financing which are higher in earlier year s.
On transition at 1 January 2020, the FRS102 lease prepayments of £31,000 are removed and discounted lease liabilities have been recorded of £1,075,000 in respect of the remaining lease payments. Right-of use assets are recognised of £1,010,000 reflecting accumulated depreciation from the start of the lease to the transition date.
The operating lease rentals of £195,000 expensed in 2020 have been replaced by the inclusion of depreciation of £152,000 and financing charges of £56,000 in 2020. The carrying value of the right-of-use assets at 31 December 2020 was £1,236,000. The carrying value of lease liabilities was £1,326,000 at 31 December 2020 with the £31,000 of UK GAAP prepayments removed. A related deferred tax asset of £16,000 was recognised at 1 January 2020 with a tax credit of £5,000 for 2020.
Transition to IFRS and prior year restatements (continued)
IAS 38: Under UK GAAP, the Company had an accounting policy choice over the treatment of items of research and development expenditure, which met the criteria for recognition as development assets. The Company chose to previously expense all items of development to the Statement of Comprehensive income in the period incurred. Under IAS 38, if development expenditure meets the criteria for recognition as an intangible asset, it must be capitalised.
As a result of this £837,000 was recognised as an asset on transition at 1 January 2020 with additions of £291,000 in 2020. Amortisation of £126,000 in 2020 has been charged. A deferred tax liability of £142,000 was recognised on transition with a £48,000 credit in 2020 resulting in a net profit increase of £117,000 for 2020.
Prior year adjustments
In addition, the more comprehensive review of accounting for the transition has identified matters which were applicable under UK GAAP in respect of share options issued but which have not been applied and therefore represents the amendment of an error. More information has now also arisen which allows a prior year quality issue, previously considered likely to be insignificant to the results, to be quantified as a material prior year adjustment.
IAS 37: provisions. The business routinely logs a small number of quality issues each year and normally expects the cost of any remediation to be small. An issue logged in December 2020 has subsequently been more fully investigated and accurately quantified. This has resulted in a prior year restatement as a reduction in revenue for the year ended 31 December 2020 and an amount of £272,000 being accrued for reaching a commercial credit note settlement with a major customer along with modifications to allow the sale of the components to continue. A related deferred tax asset of £52,000 has been recognised.
IFRS 2: share based payment. The Company had issued share options which result in equity-settled share based payment charges. A Black-Scholes model has been applied to calculate the charges resulting in additional administrative expenses of £76,000 in 2020 (note 22). A corresponding credit has been made directly to reserves as the charges relate to equity settled transactions.
In addition, it is considered that foreign exchange differences, previously reported in cost of sales, are more appropriately included in administrative expenses. A net £11,000 loss in 2020 has been reclassified.
Cash flows
The cash flow statement has been adjusted for the changes noted above. In respect of IFRS 16, increased depreciation and finance charge adjustment replace operating lease rentals previously included in the profit together with the payment of lease liabilities now included in financing activities. In respect of IAS 38, additions to intangible fixed assets for development costs within investing activities and amortisation adjustments replace the development expense previously included in the profit. In addition, hire purchase finance has been advanced directly to the Company rather than paid to suppliers and these cash flows, netted off in UK Gaap financial statements, have been grossed up and shown separately. There is no net impact on cash with the treatment and reclassifications principally resulting in a higher cash inflow from operating activities and increased investing and financing cash outflows.
Transition to IFRS and prior year restatements (continued)
Reconciliation of comprehensive income for the year ended 31 December 2020 is as follows.
|
Year ended 31 December 2020 |
UK GAAP as reported |
IFRS 16 |
IAS 38 |
IAS 37 |
Prior year adjustments |
IFRS |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Revenue |
8,827 |
- |
- |
(272) |
- |
8,555 |
|
Cost of sales |
(5,093) |
- |
58 |
- |
11 |
(5,024) |
|
Gross profit |
3,734 |
- |
58 |
(272) |
11 |
3,531 |
|
Other operating income |
104 |
- |
- |
- |
|
104 |
|
Administrative expenses |
(3,236) |
43 |
107 |
- |
(87) |
(3,173) |
|
Operating profit |
602 |
43 |
165 |
(272) |
(76) |
462 |
|
Finance costs |
(57) |
(56) |
- |
- |
- |
(113) |
|
Loss before taxation |
545 |
(13) |
165 |
(272) |
(76) |
349 |
|
Taxation |
(140) |
5 |
(48) |
52 |
- |
(131) |
|
Profit and total comprehensive income for the year |
405 |
(8) |
117 |
(220) |
(76) |
218 |
Reconciliation of the opening balance sheet as of 1 January 2020 and as of 31 December 2020 is as follows:
|
As at 1 January 2020 |
UK GAAP as reported |
IFRS 16 |
IAS 38 |
IFRS |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
|
Intangible assets |
26 |
- |
837 |
863 |
|
Right-of-use assets |
- |
1,010 |
- |
1,010 |
|
Property, plant and equipment |
2,369 |
- |
- |
2,369 |
|
|
2,395 |
1,010 |
837 |
4,242 |
|
Current assets |
|
|
|
|
|
Inventories |
1,276 |
- |
- |
1,276 |
|
Trade and other receivables |
2,340 |
(31) |
- |
2,309 |
|
Corporation tax receivable |
60 |
- |
- |
60 |
|
Cash and cash equivalents |
1,315 |
- |
- |
1,315 |
|
|
4,991 |
(31) |
- |
4,960 |
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
(1,320) |
- |
- |
(1,320) |
|
Borrowings (hire purchase) |
(320) |
- |
- |
(320) |
|
Lease liabilities |
- |
(127) |
- |
(127) |
|
|
(1,640) |
(127) |
- |
(1,767) |
|
Non-current liabilities |
|
|
|
|
|
Deferred income - grants |
(142) |
- |
- |
(142) |
|
Borrowings (hire purchase) |
(546) |
- |
- |
(546) |
|
Lease liabilities |
- |
(948) |
- |
(948) |
|
Deferred tax liabilities |
(323) |
16 |
(142) |
(449) |
|
|
(1,011) |
(932) |
(142) |
(2,085) |
|
|
|
|
|
|
|
Net assets |
4,735 |
(80) |
695 |
5,350 |
|
|
|
|
|
|
|
Share capital |
- |
- |
- |
- |
|
Retained earnings |
4,735 |
(80) |
695 |
5,350 |
|
Total equity |
4,735 |
(80) |
695 |
5,350 |
Transition to IFRS and prior year restatements (continued)
|
As at 31 December 2020 |
UK GAAP as reported |
IFRS 16 |
IAS 38 |
Prior year adjustment |
IFRS |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
|
|
Intangible assets |
18 |
- |
1,002 |
- |
1,020 |
|
Right-of-use assets |
- |
1,236 |
- |
- |
1,236 |
|
Property, plant and equipment |
2,913 |
- |
- |
- |
2,913 |
|
|
2,931 |
1,236 |
1,002 |
- |
5,169 |
|
Current assets |
|
|
|
|
|
|
Inventories |
1,522 |
- |
- |
- |
1,522 |
|
Trade and other receivables |
2,204 |
(31) |
- |
- |
2,173 |
|
Corporation tax receivable |
108 |
- |
- |
- |
108 |
|
Cash and cash equivalents |
1,230 |
- |
- |
- |
1,230 |
|
|
5,064 |
(31) |
- |
- |
5,033 |
|
Current liabilities |
|
|
|
|
|
|
Trade and other payables |
(1,150) |
12 |
- |
(52) |
(1,190) |
|
Borrowings (hire purchase) |
(539) |
- |
- |
- |
(539) |
|
Lease liabilities |
- |
(122) |
- |
- |
(122) |
|
|
(1,689) |
(110) |
- |
(52) |
(1,851) |
|
Non-current liabilities |
|
|
|
|
|
|
Trade and other payables |
(174) |
- |
- |
(220) |
(394) |
|
Borrowings (hire purchase) |
(1,044) |
- |
- |
- |
(1,044) |
|
Lease liabilities |
- |
(1,204) |
- |
- |
(1,204) |
|
Deferred tax liabilities |
(488) |
21 |
(190) |
52 |
(605) |
|
|
(1,706) |
(1,183) |
(190) |
(168) |
(3,247) |
|
|
|
|
|
|
|
|
Net assets |
4,600 |
(88) |
812 |
(220) |
5,104 |
|
|
|
|
|
|
|
|
Share capital |
- |
- |
- |
|
- |
|
Retained earnings |
4,600 |
(88) |
812 |
(220) |
5,104 |
|
Total equity |
4,600 |
(88) |
812 |
(220) |
5,104 |
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