CT Automotive plc (LON:CTA), a leading designer, developer and supplier of interior components to the global automotive industry, has provided an update on its financial performance for the half year ended 30 June 2022 and the outlook for the full year.
Trading Performance
Revenues for H1 2022 were ahead of the Board’s expectations at c.$55 million. Reduced vehicle production volumes seen in H2 2021, primarily as a result of semiconductor shortages, continued into H1 2022 as anticipated, with signs of the expected recovery in volumes building in the second half of the current year.
While the Group’s underlying trading performance was in line with expectations, gross margin in the period was impacted by two non-recurring items. Firstly, Covid-related lockdowns in China in H1 2022 and the associated disruption to freight resulted in the Group experiencing delayed shipping which required an increase in the use of air freight to ensure customer demand was met. While the majority of this cost was passed on to customers, the Group incurred an additional c.$1.6 million of freight costs. This issue was resolved by the end of the first half, with a return to normal shipping methods.
Secondly, inflationary cost pressures and a shortage of labour has led to the Group’s UK manufacturing facility becoming loss-making, impacting H1 gross margin by c. $1.7 million. The Board has therefore taken the decision to cease the UK manufacturing operations, which accounted for c.5% of Group revenues. Production of the core components in the UK is being relocated to the Group’s existing overseas facilities, such that Group revenues will not be materially impacted by the closure. This will result in a very modest exceptional charge related to the closure in the H1 2022 accounts.
Outlook
The Board expects global vehicle production volumes to continue to recover during 2022 and automotive supply chain issues to resolve fully in 2023. The latest indicators are showing a stronger step up in production for the Group in H2 2022 than previously expected.
While the delivery of current OEM production schedules for H2 2022 would enable the Group to meet expectations for FY22, the Board is mindful of the possibility that the continuing macroeconomic uncertainty and any changes in timing or demand levels could impact the H2 trading performance.
H2 2022 gross margin is expected to be stronger than originally forecast, with increased sales driving economies of scale within manufacturing operations, combined with efficiency initiatives delivered since IPO. Once fully implemented, these efficiency initiatives will provide benefits to the business into FY23 and beyond. As a result of these initiatives and production volume indications the Board’s expectations for FY23 remain unchanged.
Notice of Results
The Group expects to announce its results for the six months ended 30 June 2022 in mid-September 2022.
Scott McKenzie, Chief Executive Officer of CT Automotive, commented:
“We were pleased to achieve first half revenues ahead of our expectations, while managing one-off challenges. While automotive market and macroeconomic uncertainty persists, the Board remains confident that its strategy as set out at the time of its IPO will deliver significant growth in H2 2022 and over the coming years.”
