STG Strip Tinning Holdings Plc

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.