30 April
2024
Strip Tinning Holdings
plc
("Strip
Tinning" or the "Company")
Annual Results for year
ended 31 December 2023
Financial performance in
line with market expectations, with operational enhancements and
strong sales pipeline leaving the Company well-positioned for
accelerated growth
Strip Tinning Holdings plc (AIM:
STG), a leading supplier of specialist connection systems to the
automotive sector, is pleased to announce its full year results for
the year ended 31 December 2023.
FY23 Financial highlights:
· Total Revenues of £10.8m (FY 22: £10.2m).
· Renamed Battery Technologies division (formerly EV division)
product sales of £1.1m (FY 22: £1.2m).
· Glazing division product sales of £9.7m (FY 22:
£8.9m).
· Adjusted EBITDA of £0.1m (FY 22: loss of £2.2m).
· £1.0m of cash generated from operating activities (2022:
£4.2m outflow) with cash of £0.3m as of 31 December 2023 (2022:
£1.3m).
· £5.1m fund raise completed post-period end in January 2024,
leaving the Battery Technologies division sufficiently
capitalised.
FY23 Operational
highlights:
· Battery Technologies division well-positioned for growth
acceleration, with an increasing pipeline and sufficient funding to
capture the significant market opportunity.
· Growth in Glazing division driven by improved margins and
valuable new production supply nominations.
· Glazing division now cash generative and able to fund its own
growth plans.
· Further improved products, new product launch and production
processes to the benefit of both customers and the
Group, with Glazing division Gross Margins
improved from 3.6% in 2022 to 28.7% in 2023.
· Maintained a strong commitment to responsible business
practices with an A grade ESG rating for the third year
running.
Board Changes
· Two
planned changes to the Company's Board which will be effective from
1 June, with the promotion of Mark Perrins, the Group MD, to Group
CEO and the transition of current CEO, Richard Barton, to Deputy
Chair.
Outlook
· Strong momentum already demonstrated in 2024 with two
significant new wins announced in the emerging "smart" glass
market, in which Strip Tinning benefits from first mover advantage,
with sales growth coming in 2025 once serial production
commences.
· The
Company anticipates securing further major programmes across its
Battery Technologies and Glazing product lines throughout
2024, with a significant new Cell Contact
System win for the Battery Technologies division expected in H1
2024, with sales from volume ramp up anticipated in Q4
2025.
Adam Robson, Executive Chair of
Strip Tinning, commented: "We are
delighted with the progress we have made in stabilising our
operations during FY23, driven by the improvements and
reorganisations implemented in 2022 and into
2023.
We believe that 2024 will be a
formative year for Strip Tinning, with the strong momentum across
the business already demonstrated by our recent wins worth £18.6m.
This year we are securing the nominations that will return us to
growth from 2025, and we will maintain the investment needed to
maximise our success in converting the strong
Battery Technologies and Glazing sales pipelines we have before
us."
Investor Presentation
Strip Tinning will be hosting a
webinar for investors on Wednesday 1st May 2024 at
12:00. If you would like to register for the webinar, please click
the link below:
https://www.investormeetcompany.com/strip-tinning-holdings-plc/register-investor
Enquiries:
Strip Tinning Holdings plc
Via Alma
Adam Robson, Executive
Chairman
Richard Barton, Chief Executive
Officer
Adam Le Van, Chief Financial
Officer
Singer Capital Markets (Nominated
Adviser and Sole Broker)
+44 (0) 20 7496
3000
Rick Thompson
James Fischer
Alma (Financial PR)
striptinning@almastrategic.com
Josh Royston
+44 (0) 20 3405 0205
Joe Pederzolli
Chairman's statement for the year ended 31 December
2023
2023 has been a year of strong
progress for Strip Tinning. I would like to start by thanking all
employees of the Company who have worked exceptionally hard during
the year. Together, we have been implementing an operational
turnaround of the business and delivered a set of financial results
which are in line with market expectations. Having invested in new
capabilities and capacity, the business now finds itself on firm
footing following the well-documented challenges we have contended
with. Our quality of service has never been better and our customer
base continues to reward us with a steady stream of new business
opportunities and production nominations.
I would also like to thank our
many shareholders who have supported our recent and successful
fundraise. We are delighted to have raised gross proceeds of £5.1m
post year-end which leaves us with a well-structured balance sheet
and ensures that we are appropriately configured to capture the
significant market opportunity across the Electric Vehicle (EV)
Battery Technologies market.
Despite the headwinds we have
faced during the last two years, there is no doubt that we have
emerged as a leaner, higher performing organisation, with the right
team to deliver on our significant market opportunity. Our people,
capacity, and financial resources are in place to address the
growing pipeline of new business opportunities we anticipate. As
such, we look forward to 2024 as a period in which we expect to
secure major programmes across both our EV Battery Technologies and
Glazing product lines, which will underpin our sales growth for the
years ahead. Indeed, two record breaking Glazing wins have
already been announced, which together have increased by 91% the
total lifetime sales value of Strip Tinning's Connectors
nominations, from £20.5 million at the end of 2023 to £39.1 million
today. The total lifetime sales value of all nominations held by
the Company is now £52.7 million.
We remain committed as a Board to
maintaining high standards of Environmental and Social Governance
(ESG) and we were pleased to receive confirmation from Integrum
that we have maintained our best-in-class A grade ESG rating for
the third year running. As an organisation we are proud of our
growing contribution to the world's drive towards electrification,
and advancing our ESG programme remains a key focus for the
Group
The experience of our Board has
proven to be of immense value during the year, helping us to
maintain our focus on operational excellence and targeted markets,
as well as our positioning us for the growth ahead. In order to
maintain the positive momentum across the business, the Board has
met at-least monthly throughout the year, and so I would like to
thank the Board members for the commitment they have
shown.
I am also pleased to announce two
Board changes scheduled to take effect on 1 June 2024, marking the
next step in our succession planning as we enter an exciting
high-growth period. We are promoting Mark Perrins, who has
served as Managing Director for the past two years, to the title of
Group Chief Executive Officer (CEO). Mark has played a pivotal role
in leading the improvements of the business and positioning the
Group for a return to growth, and is now ready for greater
responsibilities for the leadership of the Group. Richard
Barton will transition to the role of Deputy Chair, where he will
continue to focus on the Group's strategy and provide support to
Mark and the sales team. Additionally, Richard has also chosen to
extend his "orderly market" agreement in relation to his ordinary
shares for a further year. My role as Executive Chair
is unchanged.
Looking to the future, we are
focused on securing our target new business programmes whilst
continuing to enhance the core business processes, capabilities,
and production capacity which will underpin our profitable
growth.
Adam Robson
Executive Chairman
Chief Executive Officer's statement for the year ended 31
December 2023
We are pleased to deliver a
financial performance in line with market expectations, with
significantly improved EBITDA performance in 2023 having primarily
been driven by the prioritisation of increased gross margins and
enhanced productivity.
We have invested in new production
capabilities and in turn we are providing our customers with a
quality of service that is better than ever, which has resulted in
a growing pipeline of new nominations. We continue to hold a
diverse customer base, formed partly by longstanding customers that
we have worked with for many years, as well as new customers across
both our traditional Automotive Glazing market, and from the
Electric Vehicle (EV) Battery Technologies market.
We have officially renamed our
"EV" division to "Battery Technologies" effective immediately. This
change is to provide clarity regarding the target markets of the
two divisions. The Glazing Division remains focused on connectors
used in association with automotive and occasionally non-automotive
Glazing. A significant proportion of our Glazing sales are now
intended for use in EVs, meaning the previous distinction between
the EV and non-EV divisions is no longer applicable. At the same
time, our former "EV" division has achieved success with a range of
products all comprising subsystems within battery packs. These
packs are not only utilised in EVs but also across a wide range of
other applications including static storage.
Financial Results for 2023
The Group's financial performance
for the year has been much improved. Sales grew to £10.8m (FY22:
£10.2m), with gross profit margins improving steadily throughout
the year to 30.6% in 2023 (2022: 4.9%), as production of lower
margin products ceased and as productivity enhancement measures and
other cost reduction activities came into effect. Adjusted EBITDA
has improved to £0.1m (FY22: loss of £2.2m) and is in line with
market expectations, having significantly improved from the prior
year's losses. Our reported EBITDA for 2023 would have been higher
had we not chosen to use the extra income to fund increased
investment into the enhancement of our team of managers, engineers,
quality personnel, supply chain and programme managers, in order to
respond effectively to the growing pipeline of Battery Technologies
and Glazing sales opportunities. Our Net Profit also improved
materially to a loss of £0.8m in 2023 (FY22: loss of £4.9m)
assisted by R&D Tax Credit claims and Grant Income. This
continued loss reflects both the lower margins achieved during part
of the year in the Glazing business as the operational improvements
were progressively enacted, as well as the significant investments
we are making to grow our Battery Technologies
business.
Business Environment
Our Battery Technologies business
line is focussed on the sale of Flexible Printed Circuits (FPC) and
Cell Contact Systems (CCS), key components which operate within EV
battery packs. We target the sale of these products into the
Mid-Market, which we broadly define as vehicles with production
volumes under 50,000 units per annum. Typical applications
are sports and luxury cars, trucks, off-highway vehicles, new
vehicle types such as autonomous shuttles, motorcycles, and even
Electric Vertical Take Off and Landing (eVTOL) aircraft. We
also include static power solutions such as mobile battery packs
which replace mobile gensets.
The scale of the Battery
Technologies opportunity we are addressing in the Mid-Market is
considerable. We recently completed a market study conducted by
FEV, the German automotive consultancy, which quantified the total
addressable market in Europe and North America for CCS alone in the
Mid-Market. The study identified that our addressable market will
be worth £220m in 2030 and £420m in 2035.
The Group's Glazing products are
predominantly used in the production of all classes of automotive
light vehicles, of which the majority are passenger cars
manufactured in Europe, where the European Automobile
Manufacturers' Association (ACEA) reported that car sales increased
by 13.9% in 2023. This notes a substantial improvement after the
supply chain difficulties of 2022, but one which still leaves the
industry selling 19% fewer vehicles compared to 2019. Industry
consensus expects vehicle production to see modest growth
continuing into 2024, but for growth in EV and Hybrid Electric
vehicle sales to be higher, having respectively achieved an annual
growth in 2023 of 37% and 29.5%. We estimate that 40% of our sales
in 2023 were onto EV and Hybrid platforms, providing us with good
exposure to higher growth markets and reflecting our focus on
supplying parts for innovative and higher value
vehicles.
For our Glazing connector
products, we are experiencing higher growth than that in the
underlying vehicle production market, driven by innovation,
functionality, value add and product pricing. Key to our marketing
strategy is focusing on the product areas with high levels of
innovation. Our own market model suggests that the innovation lead
Automotive Glazing market is growing at 6.3% per annum worldwide.
The European automotive industry has historically been a leader in
adopting new technologies. We see this most clearly today in
the
adoption of "smart" glass,
primarily based on using polymer-dispersed liquid crystals (PDLC).
Glass containing PDLC requires a new generation of electrical
connectors, and we are proud to have been one of the first
suppliers in 2022 to support a volume production launch into this
new segment. We have since won two further high-volume
nominations and between all our PDLC programmes we forecast annual
sales of £3.7m, ramping up from Q4 2025. Our leading pedigree in
the automotive sector has also positioned us well to serve the
newly emerging volume glazing market for architectural
glass.
Sales progress during 2023
In January 2023, with the support
of our customers, we raised our Glazing product prices to reflect
the pressures felt by all businesses trading internationally.
Customers engaged constructively with our price increases, and
appreciated Strip Tinning's commitment to remaining a strong,
long-term supplier in the Glazing market. That said, with a strong
focus on profitable production, it has not made sense to continue
to supply all the products previously manufactured in 2022 and our
customers have phased out purchasing of these products during
2023. As a result of price increases, our gross margins have
improved and we have returned the business to operating on a
sustainable basis. Although sales volumes declined throughout the
year, total Glazing sales in 2023 stood at £9.7m ahead of the £9.2m
achieved in 2022 but off much lower volumes. Continuing sales in
the last quarter at £2.2m left us at an annualised run rate of
£8.8m as we entered 2024.
A further consequence of the price
increase was that during the first half of 2023 our customers were
predominantly focussed on digesting the price increases rather than
discussing new business opportunities with us. In the second
half of the year we noted a significant increase in our Glazing
sales pipeline, having won valuable new production supply
nominations. The most significant of these was the supply of
glazing connectors to a range of leading global automotive Original
Equipment Manufacturers (OEMs) including Mercedes, Volkswagen,
Toyota and Skoda for a number of battery and combustion
engine-based vehicle programmes. Supply will commence in Q2 2024
and will continue for between two and five years, depending on the
end of production dates of the individual programmes, with an
estimated lifetime sales value of c.€3.0m. Based on this and a
notable pipeline of other awards we expect to secure, we are
optimistic that Glazing sales will recover towards their 2022
levels in 2024. Beyond 2024, based on our strong pipeline of sales
opportunities, which includes a number of large and exciting PDLC
smart glass programmes, we expect to return to growth in
2025.
We continued to make strong
progress in the Battery Technologies Mid-Market during 2023.
Throughout 2023, we developed a larger pipeline of opportunities
which today stands at 13 new programmes coming from 9 new customers
on which we are particularly focussed. Over half of these
programmes were unknown to us 12 months ago, showing the speed at
which our pipeline is developing. We were delighted to have
announced, in November 2023 a production nomination for the supply
of FPCs to a leading European manufacturer of advanced battery
systems, who are a new customer to us. The FPCs are for a mobile
battery application used across a range of sectors, including the
catering, construction, and film industries. The contract started
in December 2023 and will run until the end of 2025, with a
forecast lifetime sales value of $1.0m. Strip Tinning is replacing
a non-European supplier part way through the product life cycle,
hence the nomination's shorter than normal duration. Looking
ahead, we are confident there will be further opportunities within
the "smart" glass sector and we anticipate a significant new Cell
Contact System win for our Battery Technologies division in
H1.
Operational Review
We continue to strengthen our
capabilities across the business with the objectives of improving
quality and supply effectiveness and reducing costs and
waste. Notable advances have been:
· Strengthened Management team - our soon to be CEO, Mark
Perrins, who joined us in early 2022 as a Managing Director, has
continued to develop his Senior Leadership Team from existing and
new managers. This team has driven through the improvements already
achieved and is now taking the business forward towards growth and
improving margins. We are particularly pleased to have Rob Smith
join us as Chief Technology Officer (CTO), who returns to the UK
having spent 8 years in China with Tata Engineering Services,
working on new electric programmes for Chinese and Vietnamese car
makers. We are also pleased to welcome Damian Lee as Supply Chain
Director who joins us having had a 30-year career with
international automotive Tier 1s;
· Further improved products, product launch and production
processes to the benefit of both customers and the
Group;
· Upgraded FPC production line installed and in production.
Laser Weld line for CCS is on order and will start production in
June 2024. To date we have invested £5m in our Battery Technologies
production processes which has benefitted from our £1.4m grant from
the Advanced Propulsion Centre (APC) Scale-up Readiness Validation
(SuRV) fund. We are hopeful that we can secure further
funds for the continued expansion of this line and for further
development and innovation in our product capabilities;
· New
SAP B1 ERP (SAP Business One Enterprise Resource Management system)
went live on 1 January 2024;
· Quality - we have successfully passed all customer audits
during the year and our core process certifications are all up to
date:
o ISO 9001 Quality Management System
o ISO 14001 Environmental Management System
o IATF 16949 Automotive Quality Management System
o OHSAS 18001, Occupational Health and Safety Management
Systems
· Productivity has risen significantly during the year with
average sales per production employee rising by 39% from £76,343 in
2022 to £106,137 in 2023.
· Working Capital - we have improved Working Capital management
throughout the year such that Debtors reduced from £3.4m to £2.7m
despite the increase in sales over the year, with a targeted effort
at resolving any invoice queries as well as being firm on payment
to credit terms. Trade Creditors also reduced from £3m to £2.2m on
the back of improved material purchasing and maintaining good
supplier relationships. Stock opened at £1.8m at the beginning of
2023 and had been managed down to £1.3m by 2023 year end. The
business is targeting a further £0.3m stock reduction over 2024,
building on the initiatives pursued in 2023 and the benefits of the
SAP B1 ERP system.
ESG
As mentioned, we were pleased to
receive confirmation from Integrum that we have maintained our
best-in-class A grade ESG rating for the third year running. We are
proud of our growing contribution to the world's electrification
drive and advancing our ESG programmes remains a key focus for the
Group.
Fund Raise and Cash Management
We were pleased to complete our
£5.1m fund raise in January 2024 when it received shareholder
approval. We raised £4.0m in Convertible Loan Notes from our
three leading VCT fund shareholders, £1.0m from other existing
shareholders, including £0.1m from management, and £0.1m from
private investors. This raise was in line with our target and
provides our Battery Technologies business with the funds it needs
to accelerate its growth over the next two years. Our Glazing
business is now cash generative and able to fund its own growth
plans and together we expect the entire Group to be cash generative
in 2026.
This addition to our cash reserves
comes after a strong operating cash performance in 2023, with £1m
of cash generated from operating activities (2022: £4.2m outflow),
closing the year with £0.3m in the bank after investments of £1.7m
during the period.
Outlook
Following the improvements and
reorganisations implemented in 2023, 2024 we are preparing to
return to growth, underpinned by the two new PDLC Glazing Connector
production nominations we have already announced in the current
year, as well as a pipeline of other potential nominations across
both Battery Technologies and Glazing. Given the lead time of our
projects, most of these wins will see their production start dates
fall in 2025, and will therefore have limited impact on 2024 sales,
except for the supply of samples which for Battery Technologies can
be of material value. We also start the year at a low point
in expected sales, with the products discontinued in 2023 now out
of the system and the new products won only entering production
from April onwards. The net effect is that whilst on a quarterly
basis we expect to see growth from the Q1 2024 low point, net sales
across the year are expected to be in line with those of
2023.
EBITDA will benefit from improving
trends in gross margins but will be countered by further increases
in our overheads, as we carry the full year costs of our expanded
business growth team and the falling away of our APC grant which
contributed £1.1m to EBITDA in 2023. The net effect is that we
expect to see a small EBITDA loss made in 2024, with the profits
generated on the Glazing side being offset by our significant
investment in the Battery Technologies
opportunity.
On the cash side our net debt is
expected to show a £1.6m change as we continue our investment in
Battery Technologies production assets and cover the on-going
start-up costs of the Battery Technologies business.
We believe that 2024 will be a
formative year for the business with a strong focus on preparing
for profitable delivery of the nominations already received as they
ramp up in in 2025 and maintaining the investment needed to
maximise our success in converting the strong Battery Technologies
and Glazing sales pipeline we have before us to secure the
nominations that will return us to significant growth from
2025.
I would also like to welcome Mark
Perrins to his new Board role as Group CEO. Mark has made a
very impressive start to his career at Strip Tinning over the last
two years, delivering great successes in operations and sales
growth. I am very confident that Mark is the right person to
lead the company into this high growth period under the continued
leadership of Adam Robson as Executive Chair. In my capacity as
Deputy Chair, I look forward to focusing on the Company's growth
strategy and sales execution, and to supporting Adam and Mark in
their roles.
Richard Barton
Chief Executive Officer
Consolidated statement of comprehensive income
for the year ended 31 December 2023
|
Note
|
2023
|
2022
|
|
|
£'000
|
£'000
|
Revenue
|
3
|
10,826
|
10,230
|
Cost of sales
|
|
(7,517)
|
(9,731)
|
Gross profit
|
|
3,309
|
499
|
Other operating income
|
4
|
1,364
|
439
|
Administrative expenses
|
5
|
(6,075)
|
(5,864)
|
Impairment loss
|
5
|
-
|
(577)
|
Operating loss
|
5
|
(1,402)
|
(5,503)
|
Finance expense
|
8
|
(331)
|
(147)
|
Loss before taxation
|
|
(1,733)
|
(5,650)
|
Taxation
|
9
|
962
|
725
|
Loss and total comprehensive expense for the financial
year
|
|
(771)
|
(4,925)
|
Basic and diluted loss per share (pence)
|
10
|
(5.0)
|
(33.7)
|
All amounts relate to continuing
operations.
There is no other comprehensive
income in either the current or prior year.
Under the merger accounting
principles applied the statement includes the results of the
company and its subsidiary as if they had been combined throughout
the prior year.
Notes to the financial statements
for the year ended 31 December 2023
1. Corporate information
Strip Tinning Holdings plc is a
public company incorporated in the United Kingdom and listed on
AIM. The registered address of the Company is Arden Business Park,
Arden Road, Frankley Birmingham, West Midlands, B45 0JA.
The principal activity of the
Company is as a holding company for a subsidiary which manufactures
automotive busbar, ancillary connectors and flexible printed
circuits (together the 'Group').
2. Accounting policies
Basis of
preparation
The Group financial statements
have been prepared in accordance with UK adopted international
accounting standards ("IFRS") and in accordance with the
requirements of the Companies Act 2006.
The parent Company financial
statements have been prepared under applicable United Kingdom
Financial Reporting Standards 101: Reduced Disclosure Framework
("FRS101") and the requirements of the Companies Act 2006. The
following FRS 101 disclosure exemptions have been taken in respect
of the parent Company only information:
· IAS
7 Statement of cash flows;
· IFRS
7 Financial instruments disclosures and;
· IAS
24 Key management remuneration.
The principal accounting policies
applied in the preparation of these consolidated and separate
financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise
stated. The IASB has published the following amendments which were
implemented by the group on 1 January 2023 but which have not had
any significant impact on the group's financial
statements:
· Amendments to IAS 8 Accounting policies, Changes in
Accounting Estimates and Errors: Definition of Accounting
Estimates
· Amendments to IAS 1 Presentation of Financial Statements and
IFRS Practice Statements 2: Disclosure of Accounting
Policies.
· IAS
12 Income Taxes: Deferred Tax related to Assets and Liabilities
arising from a Single Transaction.
The financial statements have been
prepared under the historical cost convention. The financial
statements and the accompanying notes are presented in thousands of
pounds sterling ('£'000'), the functional and presentation currency
of the Company, except where otherwise indicated.
Going
concern
After making appropriate
enquiries, the directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in
operational existence for at least twelve months from the date of
approval of the financial statements. In adopting the going concern
basis for preparing the financial statements, the directors have
considered a base case going concern model and then modelled a
series of severe but plausible downside scenarios:
· All
Glazing Connector Sales not already under contract or in the
pipeline have been excluded from sales forecasts despite the track
record of the Group in winning new business;
· All
Sales into the Battery Technologies division other than those
covered by a Purchase Order have been pushed back into 2025 to
simulate possible delays;
· All
forecast Battery Technologies division sales in 2026 have been
pushed back into 2027 to simulate a full year delay.
Despite the removal of over £4m of
sales from 2024 and 2025 via these scenarios, the adverse cash
impact would still be more than covered by the reserves provided by
the January 2024 fund raise and the financing arrangements the
Group already has in place in the form of a £1.5m working capital
facility. This working capital facility is currently
undrawn.
Further, the Group would take
mitigation actions to alleviate the loss of non-contracted sales,
including:
· Substantially reducing planned Battery Technologies CAPEX
spend (up to £1.5m possible if Sales delayed)
· Deferring recruitment to align with Sales being pushed to the
right to achieve a very conservative total saving of £0.4m spread
across 2024 and 2025.
Implementing the mitigating
actions would mean the Group did not need to utilise its working
capital facility during the Going Concern assessment
period.
Under these scenarios, the
financing arrangements available to the business and / or realistic
mitigating actions that can be taken to respond to results that are
not as planned mean the directors still have a reasonable
expectation that the Group have adequate resources to continue in
operational existence for the going concern model period, which is
in excess of twelve months from the date of approval of the
financial statements. Beyond this period, the directors remain
confident that the product offering of the Group is attractive to
the market and augurs well for future prospects.
Standards, amendments and interpretations in issue but not
yet effective
Certain new standards, amendments
and interpretations to existing standards have been published that
are mandatory for accounting periods beginning on or after 1
January 2024 and which the Group has chosen not to adopt early.
These include the following standards which may be relevant to the
Group:
- Amendment to IAS 1 regarding the
classification of liabilities being based on an entity's rights at
the end of a reporting period and disclosure in respect of post
period end covenants that have to be met in the 12 months post
period end;
- IAS 7/IFRS 7 amendments in
respect of supplier finance arrangements and disclosures that allow
an investor to understand the nature of these;
- IFRS 16 Amendments to clarify
how a seller-lessee subsequently measures sale and leaseback
transactions
As a result of initial review of
the new standards, interpretations and amendments which are not yet
effective in these financial statements, none are expected to have
a material effect on the Company or Group's future financial
statements.
Use of estimates and
judgments
The preparation of the financial
statements in conformity with IFRS requires management to make
judgments, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions are based on
historical experience, as well as expectations of future events and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the
judgments about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ
from these estimates.
Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the
estimate is revised and in any future periods affected. The
estimates and judgements that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed
below.
Intangible
assets
Judgement
The capitalisation of development
costs set out in note 11 is subject to a degree of judgement in
respect of the point when the commercial viability of new
technology and know-how is reached, supported by the results of
testing and customer trials. The carrying values are shown in note
11. Once the trigger point is reached costs that can be reliably
measured and directly relate to the development of relevant
projects are capitalised. These include payroll costs, 3rd party
invoices for subcontract cost and materials cost in excess of the
bill of materials. The other judgement used in intangible assets is
the Weight Average Cost of Capital (WACC) used in the impairment
review's discounted cashflow model. A CAPM formula has been used
for this, with management judgement used in the risk premium
factor.
Estimation
Capitalisation criteria in respect
of financial recoverability involves estimated forecasts of future
sales and margins with assumptions based on experience and trends
when they are prepared which may change over time. These
capitalised development costs include £0.7m of costs incurred in
developing the technologies, processes, and products for the FPC
and CCS capability of the business. As at accounting period end,
the Directors were very confident that the extensive development
programmes conducted with customers over multiple accounting period
ends would translate into nominations for serial volume production,
resulting in a significant contribution to revenue. As at Balance
Sheet signing date two major FPC nominations had been received but
the outcome of two major CCS nominations was still awaited. Of the
two CCS nominations, one had a detailed contract with the Tier 1
customer agreed, but not signed, as launch remained subject to
sign-off by the ultimate OEM customer
and the other had been delayed by
the customer due to design changes. The Directors remain confident
that at least one, if not both, of the major CCS nominations will
be secured imminently based on how far advanced the programmes are
and the level of engagement with the customers. In the absence of
signed contracts in particular, there is always a risk that
revenues will not accrue in a manner expected by the directors.
Should actual or expected revenues be significantly short of those
currently forecast , it will be necessary to reassess the carrying
value of this intangible asset.
Amortisation commences once
management consider that the asset is available for use, i.e. when
it is judged to be in the location and condition necessary for it
to be capable of operating in the manner intended by management and
the cost is amortised over the estimated 5 to 8 year useful life of
the know-how based on experience of and future expected customer
product cycles and lives.
Right-of-use
assets
Judgement
The application of IFRS 16
involves an estimation of the appropriate incremental borrowing
rate and judgement 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.
Property, plant and
equipment
Estimation
Property, plant and equipment as
set out in note 13 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. If the estimated life was
increased by a year, annual depreciation charges would be
approximately £75,000 less.
Impairment of
investment
Estimate
Investments are tested for
impairment in accordance with IAS 36 'Impairment of Assets'.
Investments have separately identifiable cashflows. Key inputs into
the estimation uncertainty are the discount rates reflecting the
asset specific risks and the future cashflows from the investment.
Carrying values of the investment can be seen in note 14. A
discounted cashflow model shows a recoverable value with headroom
of £1,775,000 above the investment amount. Sensitivities have been
applied to this amount, with a 1% increase in the discount rate
reducing the headroom by £806,000 and a £100,000 reduction in final
year cashflows from the investment reducing the headroom by
£424,000.
Expected credit losses on
intercompany receivables
Estimate
The intercompany receivable has
been assessed for expected credit losses in accordance with IFRS 9
'Financial Instruments'. The receivable relates to a loan amount
with no conditions attached, it is therefore assumed to be
repayable on demand with no interest charged. The loan is partially
offset every year via settlement by Strip Tinning Limited of Strip
Tinning Holdings PLC staff costs with the outstanding balance being
repaid once Strip Tinning Limited moves to Free Cash Flow. The
recoverability has been assessed on the basis of the future
cashflows of Strip Tinning Limited and therefore the key input into
the estimate are the future cashflows of Strip Tinning Limited.
Discounting has not been considered as the loan is interest free
and repayable on demand. To estimate these future cashflows,
management have used their base case model, which external
investors have relied on, which estimates that Strip Tinning
Limited would be able to repay the balance in full by 2028. The
same extreme sensitivity used for the impairment assessment of the
investment in Strip Tinning Limited has been used. The sensitised
model estimates that Strip Tinning Limited will be able to repay
the balance in full by 2031, even assuming no new contracts were
won going forward (so that revenues were solely from existing
contracted work) versus the management base case model. Under both
scenarios Strip Tinning Holdings plc would be willing to allow the
loan to be paid over this period, and so it is concluded that no
expected credit loss need be recognised.
Deferred
taxation
Judgement
The recognition of deferred tax
assets involves the assessment of forecasts in respect of future
results and taxable profits and judgement as to the likelihood that
these will be achieved and realise the assets.
Inventory
Judgement
The calculation of net realisable
value provisions against inventory requires, in particular, an
assessment of whether materials or components can be utilised in
future production. Management identify stock for provision based on
a combination of the past 12 month usage and the forecast next 12
month usage of the item code,
Estimate
Stock which is identified as
having more than one years usage in stock is provided for on a
sliding scale of 20%-90%. This has resulted in new provisions of
£254,000 being made in the year, this stock has not been physically
written off or scrapped, however we have decreased its net
realisable value to reflect its likely future use in the business.
An sensitivity is applied to provide 100% for all stock with more
than one years usage in stock, this would increase the provision
applied by £160,000, however management believe that this stock
does have some residual value and alternative usages, so the
sliding scale is more appropriate.
Basis of consolidation
The Company was incorporated on 6
January 2022 with one £0.01 ordinary share and on 2 February 2022,
became the Group parent Company when it issued 9,999,999 £0.01
ordinary shares in exchange for all the ordinary shares in Strip
Tinning Limited. In addition, options over ordinary shares in Strip
Tinning Limited were converted, on equivalent terms, to options
over 813,045 shares in the Company. This is considered not to be a
business combination and outside the scope of IFRS3 Business
Combinations. This is a key judgement and, as a transaction
where there was no change in the shareholders or holdings, is
accordingly accounted for using merger accounting with no change in
the book values of assets and liabilities with no fair value
accounting applied.
The consolidated financial
statements present the results of the Company and its subsidiary as
if they have always formed a single group. Intercompany
transactions and balances between Group companies are therefore
eliminated in full. The share capital presented is that of Strip
Tinning Holdings plc from the date of the capital reorganisation in
2022 with the difference on elimination of Strip Tinning Limited's
capital being shown as a merger reserve.
The consolidated statement of
comprehensive income reflects the consolidated results for the full
comparative financial year ended 31 December 2022, inclusive of the
results of the newly incorporated parent entity, plc, from 6
January 2022 onwards.
A subsidiary is an entity over
which the Group has control. The Group controls an entity when it
is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those
returns through its power over the entity.
Revenue
Revenue principally comprises
income from the sale of automotive glazing components comprising
busbar, ancillary connectors and flexible printed circuits,
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 meeting the technical
specifications is satisfied, which is when the customer obtains
control of the product. This recognition occurs at a point in time.
The transfer takes place in accordance with the terms agreed with
each customer, either at the point in time the goods are despatched
to or received by the customer. Product is tested before dispatch,
but any product returned by the customer as faulty is treated as a
reduction in revenue.
When an amount has been invoiced
or payment received in advance of the associated performance
obligations being fulfilled, any amounts due are recognised as
trade receivables and deferred income is recorded for the sales
value of the performance obligations that have not been
provided.
Grants
Income based grants
Income based grants are recognised
in other operating income based on the specific terms related to
them as follows:
· A
grant is recognised in other operating income when the grant
proceeds are received (or receivable) provided that the terms of
the grant do not impose future performance-related
conditions.
· If
the terms of a grant impose performance-related conditions
including incurring related expenditure, then the grant is
only recognised in income as the related performance conditions are
met.
· Any
grants that are received before the revenue recognition criteria
are met are recognised in the statement of financial position as an
other creditor within liabilities.
Capital grants
Grants received relating to
tangible and intangible fixed assets are treated as deferred income
and released to the income statement on a straight line basis over
10 years.
Employee benefits
The Group operates a defined
contribution pension scheme. Contributions are recognised in the
statement of comprehensive income in the year in which they become
payable in accordance with the rules of the scheme.
Share based payment
The Company operates an
equity-settled share-based compensation plan in which the Group
receives services from employees as consideration for share
options. The fair value is established at the point of grant using
an appropriate pricing model and then the cost is recognised as an
expense in administrative expenses in the statement of
comprehensive income, together with a corresponding increase
directly in equity over the period in which the services are
fulfilled. This is the estimated period to vesting in respect of
employees. The cumulative expense recognised for equity-settled
transactions at each reporting date until vesting date reflects the
extent to which the vesting period has expired and the Group's best
estimate of the number of equity instruments that will ultimately
vest. As an example, if Performance Conditions attached to the
share based compensation plan can no longer be met, no expense
would be recognised.
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.
Income tax
Current income tax assets and/or
liabilities comprise obligations to, or claims from, fiscal
authorities relating to the current or prior reporting periods,
that are unpaid/due at the reporting date. Current tax is payable
on taxable profits, which may differ from profit or loss in the
financial statements. Calculation of current tax is based on the
tax rates and tax laws that have been enacted or substantively
enacted at the reporting period.
Deferred taxes are calculated
using the liability method on temporary differences between the
carrying amounts of assets and liabilities and their tax bases. A
deferred tax asset is recognised for all deductible temporary
differences to the extent that it is probable that taxable profit
will be available against which the deductible temporary difference
can be utilised, unless the deferred tax asset arises from the
initial recognition of an asset or liability in a transaction that
is not a business combination and at the time of the transaction,
affects neither accounting profit nor taxable profit (tax
loss).
Deferred tax assets and
liabilities are measured at the tax rates that are expected to
apply to the period when the asset is realised or the liability is
settled, based on tax rates and tax laws that have been enacted or
substantively enacted by the end of the reporting
period.
Computer software
Computer software assets are
capitalised at the cost of acquiring and bringing into use the
software. Subsequent to initial recognition it is stated at cost
less accumulated amortisation and accumulated impairment. Software
is amortised on a straight line basis over its estimated useful
life of two years. Amortisation on all intangible assets is
recognised in administrative expenses in the Statement of
Comprehensive Income.
Research and development costs
An internally generated intangible
asset arising from development (or the development phase) of an
internal project to improve the efficiency, design or capability of
the Group's product range is recognised if, and only if, all of the
following have been demonstrated:
· It
is technically feasible to complete the development such that it
will be available for use, sale or licence;
· There is an intention to complete the development;
· There is an ability to use, sell or licence the resultant
asset;
· The
method by which probable future economic benefits will be generated
is known;
· There are adequate technical, financial and other resources
required to complete the development;
· There are reliable measures that can identify the expenditure
directly attributable to the project during its
development.
The amount recognised is the
expenditure incurred from the date when the project first meets the
recognition criteria listed above. Expenses capitalised consist of
employee costs incurred on development and direct costs including
material or testing.
Where the above criteria are not
met, research and development expenditure is charged to the income
statement in the period in which it is incurred.
Capitalised development costs are
initially measured at cost. After initial recognition, they are
recognised at cost less any accumulated amortisation and any
accumulated impairment losses.
The depreciable amount of a
development cost intangible asset with a finite useful life is
amortised on a straight line basis over its useful life, currently
expected to range from 5 to 8 years. Amortisation begins when the
asset is available for use, i.e. when it is in the location and
condition necessary for it to be capable of operating in the manner
intended by management.
The amortisation period and the
amortisation method for the assets with a finite useful life is
reviewed at least each financial year-end. If the expected useful
life of the asset is different from previous estimates, the
amortisation period is changed
accordingly.
Patent costs
Patent cost assets are initially
measured at cost. After initial recognition, they are recognised at
cost less any accumulated amortisation and any accumulated
impairment losses. The costs are amortised over a 5 year estimated
useful life.
Property plant and equipment
Property, plant and equipment is
recognised as an asset only if it is probable that future economic
benefits associated with the item will flow to the Group and the
cost of the item can be measured reliably. An item of property,
plant and equipment that qualifies for recognition as an asset is
measured at its cost. Cost of an item of property, plant and
equipment comprises the purchase price and any costs directly
attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended
by management.
After recognition, all property,
plant and equipment (including plant, computer equipment and
fixtures) is carried at cost less any accumulated depreciation and
any accumulated impairment losses. Depreciation is provided at
rates calculated to write down the cost of assets, less estimated
residual value, over their expected useful lives on the following
basis:
Leasehold
improvements
straight line over life of lease
Plant and machinery
2-15 year straight
line
Office equipment
2 year
straight line
Tooling
5 year straight
line
The residual value and the useful
life of an asset is reviewed at least at each financial year-end
and if expectations differ from previous estimates, the changes are
accounted for as a change in an accounting estimate in accordance
with IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors.
Gains or losses arising on the
disposal of property, plant and equipment are determined as the
difference between the disposal proceeds and the carrying value of
the asset and are recognised in profit or loss.
Right-of-use assets and lease liabilities
Assets and liabilities arising
from a lease with a duration of more than one year are initially
measured at the present value of the lease payments and payments to
be made under reasonably certain extension options are also
included in the measurement of the liability. The lease payments
including any expected dilapidation 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 Group is reasonably
certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset's useful
life.
Any payments associated with
short-term leases of equipment and all leases of low-value assets
would be recognised on a straight-line basis as an expense in
profit or loss. Short-term leases are leases with a lease term of
12 months or less. There have been no significant short lease costs
in the reporting period. Associated costs of all leases, such as
maintenance, service charges and insurance, are expensed as
incurred.
Impairment of intangible assets, right-of-use assets and
property, plant and equipment
For impairment assessment
purposes, assets are grouped at the lowest levels for which there
are largely independent cash flows. As a result, some assets are
tested individually for impairment and some are tested at the
overall Group level. For the purpose of impairment testing, assets
that cannot be tested individually are grouped together into the
smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of
other assets or groups of assets (the "cash-generating unit"). Two
cash-generating units have been used in our impairment testing,
being the Glazing and Battery Technologies divisions of the
business, these have largely separably identifiable cashflows, and
so the Battery Technologies cash-generating unit as a whole has
been assessed for impairment.
All individual assets or
cash-generating units are reviewed for indicators of impairment at
the end of each period and tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable.
An asset or cash-generating unit
is impaired when its carrying amount exceed its recoverable amount.
The recoverable amount is measured as the higher of fair value less
cost of disposal and value in use. The value in use is calculated
as being net projected cash flows based on financial forecasts
discounted back to present value. The impairment loss is allocated
to reduce the carrying amount of the asset pro-rata on the basis of
the carrying amount of each asset in the unit. Non-financial assets
that suffered an impairment are reviewed for a possible reversal of
the impairment at the end of each reporting period. An impairment
loss is reversed if the asset's or cash-generating unit's
recoverable amount exceeds its carrying amount.
Inventories
Inventories are initially
recognised at cost, and subsequently at the lower of cost and net
realisable value. Cost comprises all costs of purchase of raw
materials or bought in manufacturing components on a first in first
out basis, costs of conversion and an appropriate proportion of
fixed and variable overheads incurred in bringing the finished
goods inventories to their present location and condition. Net
realisable value represents the estimated selling price less costs
to complete and sell. Where necessary, provision is made to reduce
cost to no more than net realisable value having regard to the
nature and condition of inventory, as well as its anticipated
utilisation and saleability.
Financial instruments
Financial
assets
Financial assets are recognised in
the statement of financial position when, and only when, the Group
becomes a party to the contractual provisions of the instrument and
are classified based upon the purpose for which the asset was
acquired. The Group's business model is to hold all assets
recognised within these financial statements to collect the cash
flows.
Financial assets are initially
recognised at fair value, which is usually the cost, plus directly
attributable transaction costs. These comprise trade and other
receivables and cash and cash equivalents. Financial assets are
subsequently measured at amortised cost using the effective
interest method. Discounting is omitted where the effect of
discounting is immaterial.
The Group applies the IFRS 9
simplified approach to measuring expected credit losses using a
lifetime expected credit loss ('ECL') provision for trade
receivables. The Group measures loss allowances at an amount
equal to lifetime ECL, which is estimated using past experience of
the historical credit losses experienced over the three year period
prior to the period end. Historical loss rates are then adjusted
for current and forward-looking information on macroeconomic
factors affecting the Group's customers, such as inflation rates.
The gross carrying amount of a financial asset is written off
(either partially or in full) to the extent that there is no
realistic prospect of recovery.
Amounts owed by group undertakings
are unsecured, interest free and have no fixed repayment date.
Management do not intend to recall these balances within twelve
months. Expected credit losses on these balances are assessed
differently to trade receivables, with an impairment assessment
being carried out on the balance as outlined in the Critical
Judgements and Estimates section above.
The Group recognises loss
allowances for expected credit losses (ECLs) on financial assets
measured at amortised cost.
A financial asset is derecognised
when the contractual rights to the cash flows from the financial
asset expire, or when the financial asset and all substantial risks
and reward are transferred.
Financial
liabilities
Financial liabilities include
loans, borrowings secured on fixed assets, lease liabilities, trade
and other payables. Financial liabilities are obligations to pay
cash or other financial assets and are recognised in the statement
of financial position when, and only when, the Group becomes a
party to the contractual provisions of the instrument.
Trade and other payables are
initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method. Loans and asset
backed finance borrowings 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.
A financial liability is
derecognised only when the contractual obligation is extinguished,
that is, when the obligation is discharged, cancelled or
expires.
The Group utilises asset based
borrowings 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.
Control does not pass to the finance provider and therefore the
borrowings are recognised under IFRS 9 as financing liabilities.
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 asset backed finance liability.is
recognised in respect of the capital repayments to be made. These
interest-bearing liabilities are then measured at amortised cost
with the interest, under the effective interest method, expensed
over the repayment period at a constant rate.
Cash and cash equivalents
Cash and cash equivalents comprise
cash on hand and demand deposits, together with other short term,
highly liquid investments that are readily convertible into known
amounts of cash and are subject to an insignificant risk of changes
in value.
Staff and key management categories
Categories for the staff and key
management average employee numbers have been changed for the
current year. The prior year numbers totals remain unchanged but
have been restated to reflect the categories now used by management
within the business
Foreign currencies
Transactions entered into by the
Group in a currency other than the functional currency of sterling
are recorded at the rates ruling when the transactions occur.
Foreign currency monetary assets and liabilities are translated at
the rates ruling at the reporting date. Exchange differences
arising on the retranslation of unsettled monetary assets and
liabilities are recognised immediately in the income statement in
administrative expenses.
Provisions
Provisions are recognised when the
Group has a present legal or constructive obligation as a result of
past events, it is probable that an economic outflow will occur and
a reliable estimate can be made including any additional
evidence from post period end events. Where the timing of the
estimate represents a relatively certain amount it is
provided for within accruals.
Equity and reserves
Share capital represents the
nominal value of shares that have been issued. Share premium
represents the excess consideration received over the nominal value
of share capital upon the sale of shares, less any incidental costs
of issue. The company's merger reserve arises from the fair value
attributed to the shares issued in exchange for the subsidiary's
shares as no share premium account is recognised under Companies
Act merger relief. On consolidation a merger reserve arises as a
result of the difference between the nominal value of the parent
company shares issued in exchange for subsidiary shares and the
nominal value of those subsidiary shares, however this was capped
at net assets of Strip Tinning Limited on the merger date. Retained
earnings include all current and prior period retained
profits.
Presentation of non statutory measures
The Group classifies certain
one-off charges or credits that have a material impact on the
financial results but are not related to the core underlying
trading as 'exceptional' or 'non-recurring' items. These are
disclosed separately in note 4 and adjusted results to provide
further understanding of the financial performance of the
Group.
3. Segmental reporting
IFRS 8, Operating Segments,
requires operating segments to be identified on the basis of
internal reports that are regularly reviewed by the Group's chief
operating decision maker. The chief operating decision maker is
considered to be the executive Directors.
The 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. The Group has commenced the
development and sales of specialised connectors for electric
vehicle battery systems (the Battery Technologies segment) which
are expected to grow to be a material segment. Separate management
reporting and information is prepared at a revenue and gross profit
level only for a Glazing segment (sale of specialist automotive
busbar and electrical connectors typically housed in vehicle
glazing) and Battery Technologies as follows:
|
Glazing
|
Battery
Technologies
|
Total
|
Year ended 31 December 2023
|
£'000
|
£'000
|
£'000
|
|
|
|
|
Revenue
|
9,706
|
1,121
|
10,826
|
Cost of sales
|
(6,922)
|
(596)
|
(7,517)
|
Gross profit
|
2,784
|
525
|
3,309
|
Other operating income
|
|
|
1,364
|
Administrative expenses
|
|
|
(6,075)
|
Finance expense
|
|
|
(331)
|
Taxation
|
|
|
962
|
Loss for the year
|
|
|
(771)
|
|
Glazing
|
Battery
Technologies
|
Total
|
Year ended 31 December 2022
|
£'000
|
£'000
|
£'000
|
|
|
|
|
Revenue
|
8,977
|
1,253
|
10,230
|
Cost of sales
|
(8,650)
|
(1,081)
|
(9,731)
|
Gross profit
|
327
|
172
|
499
|
Other operating income
|
|
|
439
|
Administrative expenses
|
|
|
(5,864)
|
Impairment loss (in EV)
|
|
|
(577)
|
Finance expense
|
|
|
(147)
|
Taxation
|
|
|
725
|
Loss for the year
|
|
|
(4,925)
|
Turnover with the largest
customers (including customer groups) representing in excess of 10%
of total revenue in the year for 3 customers (2022: 3 customers)
has been as follows:
|
|
|
Year ended
31 December
2023
|
|
Year
ended 31 December 2022
|
|
|
|
£'000
|
|
£'000
|
Customer A
|
|
|
3,090
|
|
2,062
|
Customer B
|
|
|
1,384
|
|
1,709
|
Customer C
|
|
|
1,298
|
|
867
|
Customer D
|
|
|
773
|
|
1,189
|
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
2023
|
|
Year
ended 31 December 2022
|
|
|
|
£'000
|
|
£'000
|
UK
|
|
|
1,224
|
|
967
|
Rest of Europe
|
|
|
4,792
|
|
5,571
|
Rest of the World
|
|
|
4,810
|
|
3,692
|
|
|
|
10,826
|
|
10,230
|
4. Other operating income
The operating loss is stated after
charging/(crediting):
|
2023
£'000
|
2022
£'000
|
|
|
|
Other operating income
comprising:
|
|
|
Amortisation of deferred
government capital grant income
|
(88)
|
(49)
|
Government revenue grant
income in respect of development work
|
(1,146)
|
(389)
|
Income relating to claim
settlement with a customer
|
(130)
|
-
|
Government job retention
scheme income
|
-
|
(1)
|
|
|
|
A major government grant was
awarded to the group to reimburse employment, depreciation,
subcontract and other revenue costs related to the scale up of its
Battery Technologies production line and process.
|
5. Operating loss
The operating loss is stated after
charging/(crediting):
|
2023
£'000
|
2022
£'000
|
Amortisation of intangible
assets
|
173
|
180
|
Depreciation of property, plant
and equipment
|
828
|
592
|
Depreciation of right-of-use
assets
|
225
|
203
|
Loss on disposal of fixed
assets
|
-
|
55
|
Cost of inventory sold
|
4,174
|
5,092
|
Research and development
expenditure expensed in the year
|
1,120
|
925
|
Short term lease
rentals
|
-
|
22
|
Foreign exchange
losses/(gains)
|
18
|
(45)
|
|
|
|
Exceptional or non-recurring
costs
|
|
|
IPO preparation
related costs
|
-
|
381
|
Restructuring related
costs
|
-
|
529
|
Contract termination
costs
|
-
|
382
|
Impairment of
intangible fixed assets
|
-
|
577
|
|
|
|
Auditor's remuneration
|
|
|
For audit
|
110
|
85
|
Additional fees for prior year
audit
|
20
|
-
|
£232,000 of fees payable to the
auditors in respect of IPO reporting accountants related services
were expensed or included in costs taken to the share premium
account in 2022.
6. Adjusted EBITDA
In reporting financial
information, the Group presents an alternative performance measure
(APM), which is not defined or specified under the requirements of
IFRS. The Group believes that this APM, provides understanding to
the users of the financial statements to allow for further
assessment of the underlying performance of the Group. The Group's
primary results measure, which is considered by the directors of
the Group to represent the underlying and continuing performance of
the Group, is adjusted EBITDA as set out below, in which earnings
are stated before net finance income, tax, amortisation and
depreciation and non-recurring items.
|
2023
|
2022
|
|
£'000
|
£'000
|
Operating loss
|
(1,402)
|
(5,503)
|
Depreciation
|
1,053
|
795
|
Loss on disposal of fixed
assets
|
-
|
55
|
Amortisation and
impairment
|
173
|
757
|
Capital grant
amortisation
|
-
|
(49)
|
EBITDA
|
(176)
|
(3,945)
|
Foreign exchange
|
18
|
(45)
|
Share based payments
|
142
|
96
|
R&D tax credit fees
|
92
|
-
|
IPO related non-recurring
costs
|
-
|
381
|
Non-recurring staff
expenses
|
-
|
247
|
Factory move costs
|
-
|
282
|
Contract termination
costs
|
-
|
382
|
R&D stock
obsolescence
|
-
|
353
|
Adjusted EBITDA
|
76
|
(2,249)
|
7. Staff and key management
Average monthly number of employees
|
|
|
Year ended 31 December
2023
|
|
Year
ended 31 December 2022
|
(2022 split restated for
consistency with categories now used by the business)
|
|
|
Number
|
|
Number
|
|
|
|
|
|
|
Management
|
|
|
14
|
|
15
|
Engineering, administration and
support
|
|
|
21
|
|
19
|
Production, quality and
distribution
|
|
|
102
|
|
134
|
|
|
|
137
|
|
168
|
|
|
|
|
|
|
Payroll costs
|
|
|
£'000
|
|
£'000
|
Gross salaries
|
|
|
4,392
|
|
4,577
|
Social security costs
|
|
|
436
|
|
511
|
Share based payment
|
|
|
142
|
|
96
|
Contributions to money purchase
pension schemes
|
|
|
300
|
|
318
|
|
|
|
5,270
|
|
5,502
|
|
|
|
|
|
|
In view of the size and nature of
the Group, the Key Management Personnel in the period is considered
to comprise only the directors of the parent and subsidiary
companies. The Company directors' remuneration was as
follows:
Year ended 31 December 2023
|
Salary
|
|
Bonus
|
Benefits in
kind
|
|
Share based
payment
|
|
Pension
|
|
Total
|
|
£'000
|
|
£'000
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
R W Barton
|
-
|
|
-
|
7
|
|
-
|
|
-
|
|
7
|
P George
|
40
|
|
-
|
-
|
|
-
|
|
-
|
|
40
|
A Le Van
|
144
|
|
60
|
5
|
|
18
|
|
7
|
|
234
|
A D Robson
|
130
|
|
49
|
6
|
|
16
|
|
-
|
|
201
|
M Taylor
|
40
|
|
-
|
-
|
|
-
|
|
-
|
|
40
|
|
354
|
|
109
|
18
|
|
34
|
|
7
|
|
522
|
Year ended 31 December 2022
|
Salary
|
|
Bonus
|
Benefits in
kind
|
|
Share based
payment
|
|
Pension
|
|
Total
|
|
£'000
|
|
£'000
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
R W Barton
|
15
|
|
-
|
-
|
|
-
|
|
-
|
|
15
|
P George
|
37
|
|
-
|
-
|
|
-
|
|
-
|
|
37
|
A Le Van
|
140
|
|
-
|
4
|
|
12
|
|
8
|
|
164
|
A D Robson
|
86
|
|
-
|
-
|
|
-
|
|
-
|
|
86
|
M Taylor
|
37
|
|
-
|
-
|
|
-
|
|
-
|
|
37
|
|
315
|
|
-
|
4
|
|
12
|
|
8
|
|
339
|
Retirement benefits were accruing
to 1 director in respect of defined contribution schemes (2022:
1).
Key management remuneration was
£1,044,000 (2022: £941,000) including £22,000 of pension
contributions (2022: £23,000).
Highest paid director received
remuneration of £234,000 (2022: £164,000) including pension
contributions of £7,000 (2022: 8,000).
8. Finance costs
|
|
|
Year ended 31 December
2023
|
|
Year
ended 31 December 2022
|
|
|
|
£'000
|
|
£'000
|
|
|
|
|
|
|
Interest payable on asset backed
finance obligations
|
|
|
119
|
|
55
|
Bank interest
|
|
|
133
|
|
26
|
Unwinding of discount on
provisions
|
|
|
12
|
|
-
|
Lease liability finance
charges
|
|
|
67
|
|
66
|
|
|
|
331
|
|
147
|
9. Income tax
|
|
|
Year ended 31 December
2023
|
|
Year
ended 31 December 2022
|
|
|
|
|
£'000
|
|
£'000
|
|
Current tax:
|
|
|
|
|
|
|
UK corporation tax
|
|
|
(222)
|
|
(308)
|
|
Adjustment for prior
periods
|
|
|
(740)
|
|
(79)
|
|
Total current tax
credit
|
|
|
(962)
|
|
(387)
|
|
|
|
|
|
|
|
|
Deferred tax:
|
|
|
|
|
|
|
Origination and reversal of
temporary differences
|
|
|
-
|
|
(349)
|
|
Adjustment for prior
periods
|
|
|
-
|
|
11
|
|
Total deferred tax
credit
|
|
|
-
|
|
(338)
|
|
|
|
|
|
|
|
|
Total tax credit
|
|
|
(962)
|
|
(725)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
The tax rate used for the
reconciliation is the average corporate tax rate of 23.5% (2022:
19%) payable by corporate entities in the UK on taxable profits
under UK tax law. 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 2022
and 2023.
The credit for the year can be
reconciled to the loss for the year as follows:
|
|
|
Year ended 31 December
2023
|
|
Year
ended 31 December 2022
|
|
|
|
£'000
|
|
£'000
|
|
|
|
|
|
|
Loss before taxation
|
|
|
(1,733)
|
|
(5,650)
|
|
|
|
|
|
|
Income tax calculated at 23.5%
(2022: 19%)
|
|
|
(407)
|
|
(1,074)
|
Expenses not deductible
|
|
|
(11)
|
|
92
|
Enhanced research and development
allowances
|
|
|
(256)
|
|
(132)
|
Surrender of losses for R&D
credit
|
|
|
265
|
|
-
|
Enhanced capital
allowances
|
|
|
-
|
|
(29)
|
Deduction on exercise of share
options
|
|
|
-
|
|
(34)
|
Differing deferred and corporate
tax rates
|
|
|
(12)
|
|
(83)
|
Deferred tax not recognised in
respect of losses
|
|
|
199
|
|
603
|
Adjustment for prior
periods
|
|
|
(740)
|
|
(68)
|
Total tax credit
|
|
|
(962)
|
|
(725)
|
10. Earnings per share
|
|
|
Year ended 31 December
2023
|
|
Year
ended 31 December 2022
|
|
|
|
|
|
|
Loss used in calculating earnings
per share (£'000)
|
|
|
(771)
|
|
(4,925)
|
Weighted average number of shares
('000)
|
|
|
15,459
|
|
14,612
|
Basic and diluted loss per share
(pence)
|
|
|
(5.0)
|
|
(33.7)
|
Earnings per share has been
calculated based on the share capital of the parent company. There
are options in place over 1,214,959 (2022: 254,051) shares that
were anti-dilutive at the year end but which may dilute future
earnings per share. Post year end the group completed a fundraise
in part equity part convertible loan notes which resulted in an
issue of 2,765,375 ordinary shares, if in place for the whole year
this would have reduced the loss per share to 9.5 pence. The
£4,000,000 convertible loan note issued would convert into
10,000,000 shares at 40 pence per share.
11. Intangible assets
Group
|
Development
costs
£'000
|
Patents
£'000
|
Computer
Software
£'000
|
Total
£'000
|
Cost
|
|
|
|
|
At 1 January 2022
|
1,785
|
147
|
326
|
2,258
|
Additions
|
430
|
1
|
57
|
488
|
Disposals
|
-
|
-
|
(15)
|
(15)
|
Removal of fully impaired
assets
|
(594)
|
-
|
-
|
(594)
|
At 31 December 2022
|
1,621
|
148
|
368
|
2,137
|
Additions
|
333
|
-
|
206
|
539
|
At 31 December 2023
|
1,954
|
148
|
574
|
2,676
|
Accumulated amortisation
|
|
|
|
|
At 1 January 2022
|
476
|
132
|
89
|
697
|
Charge for the year
|
176
|
4
|
-
|
180
|
Impairment in the year
|
577
|
-
|
-
|
577
|
Removal of fully impaired
assets
|
(594)
|
-
|
-
|
(594)
|
At 31 December 2022
|
635
|
136
|
89
|
860
|
Charge for the year
|
168
|
4
|
1
|
173
|
At 31 December 2023
|
803
|
140
|
90
|
1,033
|
Net book amount
|
|
|
|
|
At 31 December 2023
|
1,151
|
8
|
484
|
1,643
|
At 31 December 2022
|
986
|
12
|
279
|
1,277
|
The Group has a programme of
research and development projects to improve the efficiency and
functionality of its products. Capitalised development costs relate
to the projects evaluated as viable and where the successful
developments are being applied and contributing to
revenue.
Included within the carrying
amount of the above, are assets held under asset backed finance
agreements of £nil (2022: £159,000) relating to software.
Amortisation charged on these assets in the year amounted to £nil
(2022: £nil).
The 2022 impairment charge results
from cancellation of a contract by a customer for which design and
development work had been carried out and capitalised in
2021.
These capitalised development
costs include £0.7m of costs incurred in developing the
technologies, processes, and products for the FPC and CCS
capability of the business. As at accounting period end, the
Directors were very confident that the extensive development
programmes would translate into nominations for serial volume
production, resulting in a significant contribution to revenue. As
at Balance Sheet signing date two major FPC nominations had been
received but the outcome of two major CCS nominations was still
awaited. Of the two CCS nominations, one had a detailed contract
with the Tier 1 customer agreed, but not signed, as launch remained
subject to sign-off by the ultimate OEM customer and the other had
been delayed by the customer due to design changes. The Directors
remain confident that at least one, if not both, of the major CCS
nominations will be secured imminently based on how far advanced
the programmes are and the level of engagement with the customers.
In the absence of signed contracts in particular, there is always a
risk that revenues will not accrue in a manner expected by the
directors. Should actual or expected revenues be significantly
short of those currently forecast , it will be necessary to
reassess the carrying value of this intangible asset.
12. Right-of -use assets
Group
|
Property
leasehold
assets
£'000
|
Plant and
machinery
assets
£'000
|
Total
£'000
|
Cost
|
|
|
|
At 1 January 2022
|
1,656
|
125
|
1,781
|
Additions
|
212
|
-
|
212
|
Disposals
|
-
|
(13)
|
(13)
|
At 31 December 2022
|
1,868
|
112
|
1,980
|
Additions
|
-
|
164
|
164
|
Disposals
|
-
|
(55)
|
(55)
|
At 31 December 2023
|
1,868
|
221
|
2,089
|
Accumulated depreciation
|
|
|
|
At 1 January 2022
|
587
|
52
|
639
|
Charge for the year
|
168
|
35
|
203
|
Disposals
|
-
|
(13)
|
(13)
|
At 31 December 2022
|
755
|
74
|
829
|
Charge for the year
|
173
|
52
|
225
|
Disposals
|
|
(55)
|
(55)
|
At 31 December 2023
|
928
|
71
|
999
|
Net book amount
|
|
|
|
At 31 December 2023
|
940
|
150
|
1,090
|
At 31 December 2022
|
1,113
|
38
|
1,151
|
The financing charges in respect
of right-of-use assets are disclosed in note 6 and the lease
liabilities in 19. Short term rentals are disclosed in note 4 with
no low value leases in either year. Right-of-use assets and
lease liabilities relate principally to
property leases. The Group leases its main operating premises,
typically on a ten year lease, subject to periodic rent reviews and
potential breaks, with the intention and assumption made in
measuring assets and liabilities that the full period will be
utilised. Total cash outflows in respect of leases were £271,000
for the year ended 31 December 2023 (2022: £276,000).
13. Property, plant and equipment
Group
|
Leasehold
improvements
£000
|
Plant and
machinery
£'000
|
Tooling
£'000
|
Office
equipment
£'000
|
Total
£'000
|
Cost
|
|
|
|
|
|
At 1 January 2022
|
497
|
5,104
|
1,112
|
155
|
6,868
|
Additions
|
19
|
408
|
65
|
16
|
508
|
Disposals
|
(69)
|
(31)
|
(22)
|
-
|
(122)
|
At 31 December 2022
|
447
|
5,481
|
1,155
|
171
|
7,254
|
Additions
|
95
|
898
|
79
|
41
|
1,113
|
Disposals
|
-
|
(2)
|
-
|
-
|
(2)
|
At 31 December 2023
|
542
|
6,377
|
1,234
|
212
|
8,365
|
Accumulated depreciation
|
|
|
|
|
|
At 1 January 2022
|
263
|
2,741
|
651
|
124
|
3,779
|
Charge for the year
|
31
|
322
|
216
|
23
|
592
|
Disposals
|
(62)
|
(1)
|
(4)
|
-
|
(67)
|
At 31 December 2022
|
232
|
3,062
|
863
|
147
|
4,304
|
Charge for the year
|
35
|
630
|
138
|
25
|
828
|
At 31 December 2023
|
267
|
3,692
|
1,001
|
172
|
5,132
|
Net book amount
|
|
|
|
|
|
At 31 December 2023
|
275
|
2,685
|
233
|
40
|
3,233
|
At 31 December 2022
|
215
|
2,419
|
292
|
24
|
2,950
|
Included within the carrying
amount of the above, are assets held under asset backed finance
agreements of £1,679,000 (2022: £1,705,000) relating to plant and
machinery and £44,000 (2022: £100,000) relating to tooling.
Depreciation charged on these assets in the year amounted to
£407,000 (2022: £213,000).
14. Investments
|
|
|
Shares in group
undertakings
|
Company
|
|
|
£'000
|
At 31 December 2022
|
|
|
3,841
|
Capital contribution to subsidiary
in respect of employee share options
|
|
|
142
|
At 31 December 2023
|
|
|
3,983
|
The Company acquired all of the
shares in Strip Tinning Limited by a share for share exchange on 2
February 2022. Strip Tinning Limited is incorporated and registered
in England at Arden Business Park, Arden Road, Frankley Birmingham,
West Midlands, B45 0JA.It manufactures automotive busbar, ancillary
connectors and flexible printed circuits. A new subsidiary, Strip
Tinning Technologies Limited, with share capital of £0.01 and
registered at the same address, has been incorporated and has not
yet traded.
15. Inventories
|
|
31 December
2023
|
31 December
2022
|
Group
|
|
£'000
|
£'000
|
Raw materials and
consumables
|
|
1,150
|
1,536
|
Finished goods and goods for
resale
|
|
137
|
312
|
|
|
1,287
|
1,848
|
An inventory impairment loss of
£254,000 (2022: £479,000) was recognised in the year.
16. Trade and other receivables
|
Group
|
Group
|
Company
|
Company
|
|
31 December
2023
|
31
December 2022
|
31 December
2023
|
31
December 2022
|
Current
|
£'000
|
£'000
|
£'000
|
£'000
|
Trade receivables
|
2,173
|
2,691
|
-
|
-
|
Impairment provision
|
-
|
-
|
-
|
-
|
Net trade receivables
|
2,173
|
2,691
|
-
|
-
|
Amounts owed by group
undertakings
|
-
|
-
|
5,563
|
5,776
|
Other receivables
|
242
|
267
|
-
|
-
|
Prepayments
|
270
|
423
|
16
|
15
|
|
2,685
|
3,381
|
5,579
|
5,791
|
The directors consider that the
carrying amount of trade and other receivables approximates to
their fair value.
Amounts owed by group undertakings
are unsecured, interest free and have no fixed repayment
date.
The impairment charge and movement
in the expected credit loss provision against trade receivables is
as follows:
|
|
|
2023
£'000
|
|
2022
£'000
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2023/2022
|
|
|
-
|
|
25
|
|
|
Impairment charge for the
year
|
|
|
34
|
|
-
|
|
|
Debt written off
|
|
|
(34)
|
|
(25)
|
|
|
At 31 December
2023/2022
|
|
|
-
|
|
-
|
|
|
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 2022
|
498
|
|
289
|
|
237
|
31 December 2023
|
308
|
|
-
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
The directors consider the credit
quality of trade and other receivables that are neither past due
nor impaired to be of good quality with the impairment charges
arising principally from one former customer.
17. Trade and other payables
|
Group
|
Group
|
Company
|
Company
|
|
31 December
2023
|
31
December 2022
|
31 December
2023
|
31
December 2022
|
Current
|
£'000
|
£'000
|
£'000
|
£'000
|
Trade payables
|
1,271
|
2,211
|
56
|
67
|
Other payables
|
99
|
41
|
-
|
-
|
Taxation and social
security
|
111
|
117
|
-
|
-
|
Accruals
|
549
|
476
|
143
|
-
|
Deferred income
|
167
|
200
|
-
|
-
|
|
2,197
|
3,045
|
199
|
67
|
Non current liabilities
|
|
|
|
|
Deferred income
(grants)
|
11
|
37
|
-
|
-
|
18. Borrowings
|
Group
|
|
Company
|
|
|
31 December
2023
|
31
December 2022
|
31 December
2023
|
31
December 2022
|
Current liabilities
|
£'000
|
£'000
|
£'000
|
£'000
|
Invoice discounting
facility
|
492
|
-
|
-
|
-
|
Loans
|
74
|
74
|
-
|
-
|
Asset-based borrowings
|
407
|
479
|
-
|
-
|
|
973
|
553
|
-
|
-
|
Non current liabilities
|
|
|
|
|
Loans
|
155
|
208
|
-
|
-
|
Asset-based borrowings
|
643
|
784
|
-
|
-
|
|
798
|
992
|
-
|
-
|
Asset backed finance obligations
are secured by fixed charges over certain tangible fixed assets and
floating charges over other assets and undertakings of the Group.
All obligations fall due within five years. The total payments
including interest in respect of asset backed finance liabilities
are shown in note 20.
The invoice discounting facilities
are secured by fixed and floating charges over all other assets of
the Group.
19. Lease liabilities
Group
|
31 December
2023
|
31
December 2022
|
|
£'000
|
£'000
|
Current
|
201
|
182
|
|
|
|
Due in one to five
years
|
683
|
588
|
Due in more than five
years
|
253
|
407
|
|
936
|
995
|
The total payments including
interest in respect of lease liabilities are shown in note
20.
20. Movements in total financing
liabilities
Group
|
Borrowings
|
Lease
liabilities
|
Total
financing
|
|
£'000
|
£'000
|
£'000
|
At 1 January 2022
|
1,794
|
1,256
|
3,050
|
Cash movements:
|
|
|
|
Lease liability
payments
|
-
|
(199)
|
(199)
|
Asset backed finance
advanced
|
311
|
-
|
311
|
Asset backed finance
payments
|
(487)
|
-
|
(487)
|
Loan repayments
|
(73)
|
-
|
(73)
|
Interest paid
|
(81)
|
(66)
|
(147)
|
Non-cash movements
|
|
|
|
Interest accrued
|
81
|
66
|
147
|
New lease liabilities
|
-
|
120
|
120
|
At 31 December 2022
|
1,545
|
1,177
|
2,722
|
Cash movements:
|
|
|
|
Lease liability
payments
|
-
|
(204)
|
(204)
|
Asset backed finance
advanced
|
297
|
-
|
297
|
Asset backed finance
payments
|
(510)
|
-
|
(510)
|
Invoice discounting finance
advanced
|
492
|
-
|
492
|
Loan repayments
|
(53)
|
-
|
(53)
|
Interest paid
|
(252)
|
(67)
|
(319)
|
Non-cash movements
|
|
|
|
Interest accrued
|
252
|
67
|
319
|
New lease liabilities
|
-
|
164
|
164
|
At 31 December 2023
|
1,771
|
1,137
|
2,908
|
21. Financial instruments and capital
management
Risk
management
The Board has overall
responsibility for the determination of the Company and the Group's
risk management objectives and policies. The overall objective of
the Board is to set policies that seek to reduce risk as far as
possible without unduly affecting the Group's flexibility. All
funding requirements and financial risks are managed based on
policies and procedures adopted by the Board of Directors. The
Group is exposed to financial risks in respect of market including
foreign exchange risk, credit and liquidity risks.
Capital
management
The Group's capital comprises all
components of equity which includes share capital and retained
earnings amounting to £4,834,000 at 31 December 2023 (2022:
£6,245,000). The Company's objectives when maintaining capital are
to safeguard the entity's ability to continue as a going concern,
so that it can continue to provide returns for shareholders and
benefits for other stakeholders, and to provide an adequate return
to shareholders by pricing products and services commensurately
with the level of risk. The capital structure of the Company
consists of shareholders equity with all working capital
requirements financed from cash and major capital expenditure
funded by leases and asset backed finance agreements.
The Company sets the amount of
capital it requires in proportion to risk. It manages its capital
structure and makes adjustments to it in the light of changes in
economic conditions, the ability to finance capital purchases and
the risk characteristics of the underlying assets and activity. In
order to maintain or adjust the capital structure, the Company may
adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares, or sell assets to reduce
debt.
Market
risks
These arise from the nature and
location of the customer markets and include foreign exchange rate
risks.
The Group trades within European
and other overseas automotive supplier markets, and accordingly
there is a risk relating to the underlying performance of these
markets. The directors monitor this and the foreign exchange risk
closely with the intention to foresee downturns in trade or changes
in the use of automotive components.
Foreign exchange
risk
The Group trades with overseas
customers and, whilst it has net foreign currency balances, also
makes a degree of purchases in the respective currency and uses
currency denominated accounts to defer conversion to sterling or to
utilise the currency when needed. There has therefore been a
reduced sensitivity to fluctuations in exchange rates although a
10% increase or decrease in Euro and US dollar exchange rates
against sterling could impact the results by up to £150,000 or
£50,000 as a reduction or increase in profit
respectively.
The Group had the following in net
assets comprising cash, sales ledger and purchase ledger balances
denominated in foreign currencies:
|
|
31 December
2023
|
|
31
December 2022
|
|
|
£'000
|
|
£'000
|
Euro denominated
|
|
1,119
|
|
1,154
|
US dollar denominated
|
|
413
|
|
496
|
Interest rate
risk
The Group makes use of fixed rate
three to five year asset backed finance agreements to acquire
property, plant and equipment with interest rates typically ranging
from 3.5% (new agreements in 2020 to 2022) to 7% (2018 and 2019);
this spreads the capital cost, ensures that the Group maintains
sufficient cash resources for working capital purposes and ensures
certainty of total costs at the point of acquisition of those
assets. A 5 year term bank loan has also been drawn upon at a fixed
interest rate of 9.4% and invoice discounting facilities of up to
£1.5m subject to eligible receivables at an interest rate of 2.85%
over base rates. These liabilities are set out in note
18.
Credit
risk
Credit risk is the risk of
financial loss if a customer or counterparty to a financial
instrument fails to meet its contractual obligations. The Group is
mainly exposed to credit risk from credit sales and attempts to
mitigate credit risk by assessing the creditworthiness of
customers, including using proforma terms for new customers and
closely monitoring the payment record and trends for each customer.
The customers are principally tier 1 automotive
suppliers.
At 31 December 2023 trade
receivables were £2,173,000 (31 December 2022: £2,691,000) with 35%
(31 December 2022: 35%) of the balance owed by one customer group
and 40% (2022: 25%) 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 16 with all amounts subsequently substantially
received. The impairments to trade or other receivables in 2022 and
2023 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 Group's
financial liabilities including trade and other payables, asset
backed finance 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, asset backed finance and
loan obligations were payable monthly and lease liabilities
quarterly. Asset backed finance and lease liabilities are used to
manage liquidity by spreading the cost of payment for capital
purchases.
At 31 December 2023
|
Up to 1
year
|
|
1-2 years
|
|
2-5 years
|
|
Over 5
years
|
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
|
|
|
|
|
|
|
|
|
|
Trade, other payables and
accruals
|
1,919
|
|
-
|
|
-
|
|
-
|
|
Asset backed finance
obligations
|
488
|
|
374
|
|
419
|
|
-
|
|
Loans and invoice discounting
facility
|
584
|
|
92
|
|
77
|
|
-
|
|
Lease liabilities
|
260
|
|
212
|
|
602
|
|
591
|
|
|
3,251
|
|
678
|
|
1,098
|
|
591
|
|
At 31 December 2022
|
Up to 1
year
|
|
1-2 years
|
|
2-5 years
|
|
Over 5
years
|
|
£'000
|
|
£'000
|
|
£'000
|
|
£'000
|
|
|
|
|
|
|
|
|
Trade, other payables and
accruals
|
2,728
|
|
-
|
|
-
|
|
-
|
Asset backed finance
obligations
|
548
|
|
391
|
|
511
|
|
-
|
Loans
|
92
|
|
92
|
|
170
|
|
-
|
Lease liabilities
|
240
|
|
217
|
|
513
|
|
762
|
|
3,608
|
|
700
|
|
1,194
|
|
762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
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
2023
|
|
31
December 2022
|
|
|
At amortised cost
|
£'000
|
|
£'000
|
|
Trade receivables and other
receivables
|
2,415
|
|
2,958
|
|
Cash and cash
equivalents
|
343
|
|
1,290
|
|
|
2,758
|
|
4,248
|
|
Financial liabilities
|
|
|
|
|
|
|
31 December
2023
|
|
31
December 2022
|
|
|
|
£'000
|
|
£'000
|
|
|
At amortised cost
|
|
|
|
|
|
Trade payables, other payables and
accruals
|
1,919
|
|
2,728
|
|
|
Asset backed finance
obligations
|
1,050
|
|
1,263
|
|
|
Loans and invoice discounting
facility
|
721
|
|
282
|
|
|
|
3,690
|
|
4,273
|
|
|
|
|
|
|
|
|
|
| |
Financial instruments and capital management
(continued)
The directors consider that the
carrying amount of the financial assets and liabilities
approximates to their fair values.
23. Provisions
The dilapidations provisions were
reassessed during 2022 in respect of the group's rented properties
and increased to allow for potential reinstatement costs that may
be incurred at the end of the leases in 2030 under the standard
terms in the contracts. This primarily resulted in an increase in
the amount recognised in respect of the right of use assets for
property and in the discounted provisions liability which amounts
to £239,000 at 31 December 2023 (2022: £227,000).
In 2023, a provision was recorded
to allow for the potential supplier settlement costs of a
terminated contract (see note 26).
Group
|
Dilapidations
provision
|
Terminated contract
provision
|
Total
|
|
£'000
|
£'000
|
£'000
|
|
|
|
|
Transfer from accruals
|
71
|
-
|
71
|
Additions to right of use property
assets
|
156
|
-
|
156
|
Liability at 31 December
2022
|
227
|
-
|
227
|
Provision charged in
year
|
-
|
121
|
121
|
Unwinding of discount on
provision
|
12
|
-
|
12
|
Liability at 31 December 2023
|
239
|
121
|
360
|
24. Deferred taxation
Group
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 2021
|
738
|
327
|
(308)
|
(419)
|
338
|
Credit to profit or
loss
|
(7)
|
(59)
|
308
|
(580)
|
(338)
|
As at 31 December 2022
|
731
|
268
|
-
|
(999)
|
-
|
Credit to profit or
loss
|
142
|
(97)
|
(59)
|
14
|
-
|
As at 31 December 2023
|
873
|
171
|
(59)
|
(985)
|
-
|
The Group has tax losses carried
forward of approximately £5,403,000 (2022: £6,900,000) and an
unrecognised deferred tax asset of £456,000 (2022: £790,000). The
deferred tax asset has not been recognised as it is not yet
considered sufficiently probable, in the short term, that the asset
will be realised. The tax losses carried forward have no expiry
date.
The Company has tax losses carried
forward of £1,182,000 (2022: £564,000) and an unrecognised deferred
tax asset of £296,000 (2022: £141,000) in respect of these. The
deferred tax asset has only been recognised as far as it offsets
the deferred tax losses due to the timing of when the tax will
materialise, so it is appropriate to net them off.
The deferred tax asset on the
balance of losses and other timing differences is split further
into losses £976,000 and defined contribution pension scheme
£9,000.
25. Share capital
The movements in share capital
have been as follows:
Company and Group
|
Number of £0.01
shares
|
|
|
Nominal
|
|
Share
premium
|
|
|
|
|
£'000
|
|
£'000
|
|
|
|
|
|
|
|
Share issued on
incorporation
|
1
|
|
|
-
|
|
-
|
Shares issued in exchange for
Strip Tinning Limited shares
|
9,999,999
|
|
|
100
|
|
-
|
EIS and VCT placing shares issued
at £1.85 each
|
2,702,702
|
|
|
27
|
|
4,973
|
Other placing shares issued at
£1.85 each
|
1,621,622
|
|
|
16
|
|
2,984
|
Exercise of options at £0.116
each
|
813,045
|
|
|
8
|
|
86
|
Shares issued to employee benefit
trust at £0.01 each
|
322,345
|
|
|
3
|
|
-
|
Share issue costs
|
|
|
|
|
|
(1,077)
|
At 31 December 2022 and 2023
|
15,459,714
|
|
|
154
|
|
6,966
|
The Company was incorporated with
one £0.01 share and on 2 February 2022 issued 9,999,999 £0.01
shares in exchange for all of the issued share capital in Strip
Tinning Limited. Merger relief arises under the Companies Act from
a share premium and in accordance with IAS 27 for such a
transaction with no change in control, the consideration was
recorded at the Strip Tinning Limited net asset value of £3,745,000
(£0.375 per share) in the company, £100,000 of nominal share
capital and a merger reserve of £3,645,000.
The issue of shares with a nominal
value of £100,000 in exchange for the 2,000 £0.10 shares in Strip
Tinning Limited with a nominal value of £200 resulted in a debit to
a merger reserve of £99,800 in the consolidated financial
statements, presented as a capital reorganisation after
consolidating applying the merger accounting principles as set out
in note 2.
On 10 February 2022, the Company
issued a further 4,324,324 £0.01 shares at £1.85 each and 813,045
£0.01 shares at £0.116 each on exercise of share options. On 16
February 2022 the Company was listed on AIM. The issue of these
shares in February 2022 resulted in a share premium of £6,966,000
(net of £1,077,000 of share issue costs).
On 2 November 2022, 322,345 £0.01
ordinary shares were issued to the Employee Benefit Trust in
respect of an employee incentive scheme with a 3 year vesting
period and the nominal value of £3,000 has been debited to an other
reserve.
All £0.01 ordinary shares rank
equally with the right to receive dividends and capital
distributions.
26. Share based payment
Options were granted on 24 August
2018 over 354 £0.10 A Ordinary Shares in Strip Tinning Limited
('STL') at an exercise price of £267 per share. These options were
only exercisable on a sale of the company or on a listing and had
the right to share only prorata with the Ordinary Shares in the
capital proceeds in excess of £10m, receive dividends at the
discretion of the directors and have voting rights. They were
exchanged for an equivalent 813,045 options in the Company's £0.01
shares with no change in the value of the options, exercisable at
£0.116 per share and exercised in February 2022 when the share
price was £1.85. The fair value of £1,345 per STL A option share
was derived using a Black Scholes option pricing model applying a
risk free rate of 1% and an estimated volatility of 40%. The
remainder of the original fair value of £48,000 was expensed on
exercise in 2022.
Options over parent company shares
under a Long Term Incentive Plan were granted in February 2022 with
an exercise price of £0.01. These were subject to a 3 year vesting
period. Options over 122,702 shares required a total shareholder
return ('TSR') target to be achieved and 129,188 earnings and gross
profit targets to be achieved. 42,162 of those subject to a TSR
return and 42,162 subject to earnings targets lapsed when the
director left on 31 March 2022. The respective fair values of
£0.92 (TSR market condition and probability applied) and £1.841
(earnings target conditions) have been calculated using a Black
Scholes option pricing model applying the 3 year vesting period,
share price of £1.85 at date of grant, a risk free rate of 2%,
expected dividends of nil and estimated volatility of 45% with a
£25,000 (2022: £26,000) charge in the year.
Further options under the LTIP
plan were granted in May 2022 with an exercise price of £0.01.
These were subject to a 3 year vesting period. Options over 30,270
shares required a total shareholder return ('TSR') target to be
achieved and 56,216 earnings and gross profit targets to be
achieved. The respective fair values of £0.733 (TSR market
condition and probability applied) and £1.466 (earnings target
conditions) have been calculated using a Black Scholes option
pricing model applying the 3 year vesting period, share price of
£1.475 at date of grant, a risk free rate of 2%, expected dividends
of nil and estimated volatility of 45% with a £7,000 (2022:
£10,000) charge in the year.
On 2 November 2022, employees were
granted a total of 322,345 of free shares subject to a 3 year
vesting period. The fair value of £0.725 per share has been
calculated using a Black Scholes option pricing model applying the
3 year vesting period, share price of £0.725 at date of grant, a
risk free rate of 3%, expected dividends of nil and estimated
volatility of 50% with a £74,000 (2022: £12,000) charge in the
year.
On 3 March 2023, 960,908 options
under the LTIP plan were granted with an exercise price of £0.01.
These were subject to a 3 year vesting period. Options over 480,454
shares required a total shareholder return ('TSR') target to be
achieved and 480,454 operating profit targets to be achieved. The
respective fair values of £0.271 (TSR market condition and
probability applied) and £0.541 (earnings target conditions) have
been calculated using a Black Scholes option pricing model applying
the 3 year vesting period, share price of £0.55 at date of grant, a
risk free rate of 5%, expected dividends of nil and estimated
volatility of 45% with a £36,000 charge in the year. No charge has
been recognised in respect of the performance conditions associated
with these options as these are now not expected to be
met.
In view of the short period since
listing, volatility has been estimated by reference to similar
shares. Unexpired options have an average vesting period remaining
at 31 December 2023 of 1.9 years (2022: 2.5 years).
The movements in share options
have been as follows:
|
Weighted average exercise
price
£
|
Transfer of Strip Tinning
Limited options
|
PSP
scheme
|
Employee free share
scheme
|
|
|
Number
|
Number
|
Number
|
On incorporation
|
-
|
-
|
-
|
-
|
Conversion of STL
options
|
0.116
|
813,045
|
-
|
-
|
Granted in the year
|
0.005
|
-
|
338,375
|
322,345
|
Exercised
|
0.116
|
(813,045)
|
-
|
-
|
Lapsed
|
0.01
|
-
|
(84,324)
|
-
|
As at 31 December 2022
|
0.004
|
-
|
254,051
|
322,345
|
Granted in the year
|
0.01
|
-
|
960,908
|
-
|
As at 31 December 2023
|
0.008
|
-
|
1,214,959
|
322,345
|
|
|
|
|
|
27. Capital commitments and contingent
liabilities
The Group had capital commitments
contracted but not provided for of £nil at 31 December 2023 (2022:
£303,000). The company had no capital commitments.
Following the notification of the
termination of a Battery Technologies contract in July 2022,
effective October 2022, the business has been working hard to reach
a fair settlement and mitigate the liabilities associated with the
contract. The company and the Battery
Technologies customer continue to work closely together to
reach a full and final resolution. Commercial negotiations are now
at an advanced stage and as at the financial statements signing
date, a single commercial claim remained outstanding to settle
between the company, the Battery Technologies customer, and a
supplier on the programme. Whilst the supplier has claimed
additional amounts up to point of termination, they had actually
received advanced payment for work carried out and additional costs
have not been supported or justified.
28. Post balance sheet events
On 15 January 2024, shareholder
approval was received for a further fund raise. The gross fund
raise of £5,100,000 was made up of £4,000,000 of Convertible Loan
Notes by the three leading VCT fund shareholders and £1,106,000 for
2,765,375 new ordinary shares at 40 pence each resulting in
£4,643,087 after expenses of the fund raise. The Convertible Loan
Notes have a term of up to 5 years, bear interest at 10% which
rolls up each year and is payable on redemption. The company may
redeem them after 2 years only if certain targets have been met and
on an exit or after 5 years, the holders may convert the capital
and accrued interest to ordinary shares at the lower of 52 pence
per share or the issue price at the last fundraising round prior to
conversion.
29. Control and related party transactions
At 31 December 2023, the Company
was an ultimate parent company. Mr R Barton was considered to be
the ultimate controlling party. The key management personnel is
considered to be the directors. Please refer to note 8 for
details of key management personnel remuneration.
There were no related party
transactions in the year excluding intercompany transactions and
directors remuneration.