CT Automotive on an upward trajectory with new customer wins

CT Automotive Group plc (LON:CTA), a leading designer, developer and supplier of interior components to the global automotive industry, has announced its results for the year ended 31 December 2022. 

Scott McKenzie, Chief Executive Officer of CT Automotive, commented:

“The Group navigated through a turbulent year and is now on an upward trajectory, with new awards and customer wins. We responded to the challenging operating conditions while focusing on executing our important strategic priorities. This included opening our new facility in Mexico, winning new contracts and making good progress with margin enhancement initiatives.

Trading in FY23 to date has been encouraging as market conditions have improved, with increasing stability and visibility from customers. Meanwhile, our roadmap to drive further efficiencies in the business is on track. While macroeconomic uncertainty remains, the Board remains confident of achieving its expectations for FY23 and delivering significant growth in the medium-term.”

Financial headlines

 AuditedFY 22RestatedFY 21
Gross profit14.925.2
Adjusted EBITDA*(7.1)3.3
Adjusted loss before taxation*(14.5)(6.8)
Loss before taxation(18.8)(12.4)
Earnings per share(42.9)c(55.2)c
Net debt12.29.1

* Adjusted for non-recurring items

Note: continuing operations excluding UK discontinued operations

·     Group revenue from continuing operations was broadly maintained at FY21 levels

·   Strong FY22 production revenues despite volatile and short-term nature of customer orders offsetting reduced tooling revenues

·   Profitability impacted by increased production and distribution costs as the Group reacted to maintain service

·  Balance sheet strengthened following post period-end fundraise with gross proceeds of $9.6m predominately to support working capital

Operational highlights

·    Cost savings programme is progressing as planned

o  Commenced in H2 FY22 to improve the profit margin across the Group’s operations and further enhanced in the new financial year with roadmap to realise c.9 percentage points profit before tax margin improvement

·    Supply chain disruptions and semi-conductors shortages impacted production levels

·    New customer wins including Rivian and Vinfast

·    New manufacturing plant in Mexico opened and supplying customers

Current trading and outlook

·    Encouraging current trading, with strong customer demand and order book

·    The Group’s manufacturing facilities have recovered from the specific operational challenges experienced in Q4 2022

·   Global chip shortage is subsiding with the majority of semiconductor suppliers already reporting or expecting a semiconductor surplus in 20231.

·    Efficiency initiatives have started to come on stream and are delivering run rate pre tax profit margin of approximately 7.6 per cent, in line with plan

·     No change to the Board’s expectations for FY23


1.    https://advisory.kpmg.us/articles/2022/global-semiconductor-industry-outlook-2023.html

Strategic and operational review


FY22 presented a series of unforeseen challenges for CT Automotive – both on the supply and demand sides of our business. We responded to the challenging operating conditions while focusing on several key strategic initiatives set out at our IPO in late 2021. This has left the business in a stronger position to deliver on our growth strategy and capitalise on improved market conditions as we move through FY23.

We would like to express our gratitude for the unwavering support from the shareholders, lenders, suppliers, employees and customers during the year. Their backing has been instrumental as we navigated the challenges presented to us.

In particular, we would like to thank our existing and new shareholders who supported us in the recent fundraising which secured c$9.6m of gross proceeds. The net proceeds of the fundraise will predominately be used to strengthen the balance sheet and to provide the Group with flexibility to take advantage of new pipeline opportunities as the business positions for growth. Additionally, a small portion of the net proceeds will be deployed to realise further efficiency savings including through investment in injection moulding production processes and robotics.


CT Automotive is a leading manufacturer of kinematic parts and decorative finishers for car interiors, supplying some of the world’s largest Original Equipment Manufacturers (OEMs). With manufacturing facilities located in low-cost economies, we leverage our strategic presence to provide full service  through our efficient distribution centres, creating a streamlined and robust supply chain.

Over the past year, CT Automotive has made further strides in the highly competitive automotive industry.

We further strengthened our market position through significant new wins with existing blue-chip customers such as Nissan, Ford and Lotus and also secured partnerships with new electric vehicle (EV) start-ups such as Rivian.

We successfully opened a new production facility in Puebla, Mexico, in-line with our plans outlined at our IPO in December 2021 and despite the headwinds caused by the global pandemic. This strategic move has allowed us to diversify some of our production away from China, secure an improved supply chain for the Americas and enabled us to offer our customers in the region better pricing.

We are pleased to report that the plant is now fully operational and is performing to plan, after overcoming initial start-up issues during the first few months caused by fluctuations in customer production schedules as a result of supply chain issues detailed below. 

During the year our business experienced significant challenges posed by lockdowns in China, which resulted in the enforced closure of our factories for up to 20% of the year. This also strained the supply chain and had a ripple effect on our suppliers, causing significant inefficiencies and production delays. Following the reversal of the zero-Covid policy towards the end of FY22, our manufacturing facilities in China have been able to rapidly return to full production capacity and drive efficiency back into the business.

As previously announced, increased labour, production and utility costs have led to the closure of our UK production facility in Sunderland with the majority of production capacity relocated to other Group sites.

Performance summary

We are pleased to report that our revenues from continued operations remained broadly flat at $124.3m (FY21: $127.8m), despite the challenges experienced over the past year. Although customer demand continued to improve compared to FY21 as the industry recovered from Covid-19, production levels were highly unstable due to wider automotive supply chain disruptions and semi-conductor shortages, which adversely impacted our profitability. Notwithstanding this, we continued to secure significant new development contracts, which underpin our future growth and demonstrate the OEMs’ confidence in our capabilities.

Market conditions

The past year presented numerous hurdles for our business: semi-conductor shortages hampering OEM production, China’s ‘zero-Covid’ policy which led to enforced plant closures, surging shipping container prices and general supply chain disruptions. High inflation rates in the UK in the latter part of FY22 caused an increase in energy and materials prices and labour costs and led to the decision to close our UK plant. In addition, the hyperinflationary environment in Turkey drove up energy and material costs and led to wage increases at our local facility. Despite these challenges, we were able to share certain costs with our customers and maintain supply.

In order to better manage potential demand volatility, the Group is investing in improved stock management processes and in increased automation of the key production processes. The new stock management processes are aimed at optimising inventory levels, thereby reducing costs and freeing up cashflow through improved production planning and material management, freight packing optimisation and a more efficient utilisation of production staff. The Directors believe that these improvements will strengthen the Group and improve operations but also better position the Group to mitigate similar adverse events that may occur in the future.

Key achievements

Our new facility in Puebla, Mexico, opened in late 2022 to support local supply to our North American customers and, following initial production delays due to the impact of continued supply chain disruption, production is now ramping up. The timely closure of our Sunderland production facility helped to curtail future production losses in the UK.

During the latter part of FY22 we successfully introduced production line efficiencies, while our new global supply chain office in Pune, India, has already identified and secured significant material cost savings.

Importantly, last year we successfully launched several new interior programs, showcasing the Group’s wide range of engineering & design skills for air vent, wrapped panels, interior lighting, console lids and kinetic assemblies.  In FY22 CT Automotive delivered a variety of new projects for example, producing sun visors, mirror covers, footwell dividers and armrest hinges for Lotus, air vents and cup holders for Ford and air vents and wrapped panels for Marelli.

Strategic update

Our strategic focus is: on successfully securing new contracts, particularly new EV platforms, and on achieving further cost savings.  

New contracts

During FY22 the shift to EV accelerated faster than anticipated. We recognise the need to monitor the transition of legacy automakers to EVs closely and the increasing competition from Chinese OEMs presents a forward threat to European and US OEMs. As the industry navigates through this period of transition, we are well positioned to secure EV platform contracts with existing customers, including Ford and a leading American EV OEM.  In addition, with our manufacturing capabilities in China, we are strategically well placed to embrace the fast-growing Chinese EV market and domestic OEMs.

Margin enhancement initiatives

Our emphasis on cost savings is underpinned by a pricing strategy to ensure the very best landed costs to our customers, acknowledging the industry practice that, where applicable, cost increases of materials, labour, freight and in some cases utilities are passed across to our customers.

In the second half of FY22 the Group commenced an efficiency programme to target further cost savings across the Group and to realise an approximately nine percentage point improvement in pre-tax profit margin. The efficiency programme includes proposals to increase the flexibility of the Group’s workforce and increasing the agility of the Group in response to elevated variability in customer order volumes. These proposals aim to ensure that the Group maximises its profitability while global automotive volumes continue to recover, and the Directors believe that these actions will ensure that the Group is well placed to further benefit from anticipated increased production volumes going forward.

As part of the efficiency programme, initial preparations are underway to consolidate some of the Group’s manufacturing operations in China to Ganzhou, Jiangxi province, benefitting from comparatively lower labour costs.  Additionally, the Group’s proposed investment in robotics will realise efficiencies in the injection moulding process, with equipment expected to be deployed at the Group’s manufacturing facilities in China by Q4 2023, with a short payback period.  The combination of increased automation and the consolidation of our manufacturing facilities in Jiangxi would significantly improve our agility and responsiveness.

While the full benefits of these initiatives will be felt in FY24, action already taken to date resulted in a run rate pre-tax profit margin of approximately 7.6%. Action to be taken later in the year is expected to realise a further approximately 3 percentage points of margin, resulting in a run rate pre-tax profit margin by the end of the year of 10.5%.

Focus on quality

The automotive industry is widely recognised for its stringent quality standards, as even a small number of non-conforming parts reaching the customer can result in costly penalties. Consequently, the Group places significant emphasis on maintaining exceptional quality. In addition to delivering optimal cost efficiency to our customers, we prioritise providing them with products of the highest quality. This commitment is upheld through the implementation of rigorous quality checks (QC) throughout the production process and the internal “firewall” quality teams during a “safe launch” period of typically 90 days from the start of production during which 100% of new product is inspected. As a testament to our dedication, CT Automotive China and Turkey plants were recertified under the IATF 16949:2016 standard in FY21, while our plant in Mexico is expecting the certification audit in late FY23, further underpinning our commitment to excellence.

Health and safety

The well-being and safety of our employees take precedence above all else. Recognising that certain operations conducted within our global facilities possess inherent risks that could potentially lead to severe consequences, including fatalities, we maintain strict adherence to robust health and safety protocols. The efficacy of this approach is evident in the Group’s global health and safety incident report, which highlights zero occurrences of fatal or severe injuries across all our plants throughout the year. We take immense pride in this accomplishment. More information on this can be found in the Sustainability Report section of the Annual Report.

Board changes

On 13 December 2022, the Group’s Chief Financial Officer, David Wilkinson notified the Board of his decision to step down for personal reasons and he left the Group on 28 April 2023. David made a considerable contribution to the development of CT Automotive over 11 years at the company and we wish him well.

After the period-end, on 1 February 2023, we were pleased to announce the appointment of Anna Brown. She was appointed to the Board as an Executive Director of the Company on 28 April 2023, following an orderly handover period. Anna brings substantial listed company and financial experience to the role that will be invaluable as we continue to execute our growth strategy.

As previously announced, the Board intends to appoint a further non-executive director with the individual to be a representative of one of the Company’s significant shareholders. A further announcement will be made in due course.

Our people

Throughout what has been a challenging year, one thing has remained consistent, and that has been the resilience and commitment of our people. Day in and day out, all around the globe, the employees at CT Automotive have been dedicated and enthusiastic, their expertise has been vital in driving the business forward.  We thank them for their valuable contribution.

Sustainability and Corporate Social Responsibility (CSR)

We remain committed to sustainability and corporate social responsibility. This commitment extends to our operations, our employees and our communities. We are dedicated to continuously improving our environmental footprint, promoting fair and ethical labour practices, and engaging in initiatives that benefit our communities.

Current trading and outlook

Trading in the current year to date has been encouraging, with strong customer demand and order books building. The Group’s manufacturing facilities have recovered from the specific operational challenges experienced in Q4 last year:

·   The Group has seen a rapid recovery in manufacturing at the Group’s facilities in China following the lifting of the Government’s zero-Covid policy measures.

·    The Group’s new facility in Puebla, Mexico is now fully operational.

The cost savings programme launched in the second half of FY22 continues to progress in line with plan. Efficiency initiatives have started to come on stream and are delivering margin improvements.

The Board is encouraged by stabilising order volumes since the start of FY23 and visibility for the year ahead. While macroeconomic uncertainty remains, there are signs that customer schedules are strengthening and OEM automotive supply chain issues are resolving.

As a result, the Board remains confident of achieving its expectations for FY23, supported by the benefit expected from efficiency savings.

We are optimistic about the outlook for the automotive industry. With the scrapping of the zero-Covid policy in China, we anticipate being able to operate normally and return to stable rhythm in our production facilities. With container shipping prices stabilising back to pre-pandemic levels, the Group can take advantage of improved supply chain efficiencies. Additionally, better allocation of semi-conductors and stabilised customer production schedules will contribute to a more predictable operating environment where efficiencies can be leveraged to reduce cost and improve margins.

We will continue to focus on efficiency and optimisation across our global facilities. Our investment in the latest automation technologies will maximise production efficiency and strengthen our competitive position.

As we look to the future, we are optimistic about the resilience and adaptability of CT Automotive. We have a robust strategy in place, and we are well positioned to capitalise on the improved stability of our operating environment and the continued recovery in our global automotive end-markets. Thank you once again for your steadfast support, and we look forward to a year of progress and shared success.

Financial review

Revenue and margins

Total Group revenue from continuing operations was relatively stable with a small decrease of 3% from $127.8m in FY21 to $124.3m in FY22.

Although highly unstable due to supply chain disruptions and semi-conductor shortages, overall demand for interior components remained high.  As a result, our production revenue grew by 11% to $117.3m (FY21: $105.6m). Tooling revenue reduced by 68% to $7.0m (FY21: $22.2m) predominately reflecting the timing of completion and its project-based nature.

Gross profit margins were adversely impacted by the increased variability and short-term nature of orders as the Group’s customers reacted to available supply elsewhere in their respective supply chains, which in turn increased the Group’s production costs as it responded to maintain service. Furthermore, enforcement of the Chinese Government’s zero-Covid policy resulted in the temporary closure of some of the Group’s manufacturing facilities and those of local suppliers, leading to increased costs as the Group caught up on lost production and expedited delivery of materials from local suppliers, as well as finished goods to customers, at a higher cost.  During the year the Group incurred costs that, while part of the underlying results, are not expected to repeat as we return to more stable trading conditions. These costs included c.$5m in connection with higher than forecasted production inefficiencies and expedited air freight costs following lockdowns in China.

The above production challenges, together with completing fewer tooling projects, which typically generate higher margins, led to a decline in gross profit to $14.9m (FY21: $25.2m) and consequently a deterioration in gross profit margin to 12.0% in FY22 from a gross profit margin of 19.7 % in FY21. 

Non-recurring items

During FY22 the Group incurred non-recurring costs of $4.3m (FY21: $5.6m).  These costs primarily related to pre-opening and start-up costs of $1.7m (FY21: nil) in connection with the new production facility in Mexico, goodwill impairment of $1.2m (FY21: nil) in relation to curtailing our US entity activity as the operations in Mexico came on-stream and $0.7m (FY21: nil) being an accounting adjustment reflecting the impact of hyperinflation in Turkey.

EBITDA and operating result

FY22 underlying EBITDA was a loss of $7.1m (FY21: $3.3m profit) while reported EBITDA was a loss of $11.4m (FY21: $2.3m loss) as a result of significantly lower gross profit and after taking account of distribution expenses of $5.1m (FY21: $5.5m) and administrative expenses of $27.3m (FY21: $28.6m).  The Group incurred $3.8m of foreign exchange losses (FY21: $1.5m) due to unfavourable exchange rates movements primarily against US$.  These are included in administrative expenses.  Depreciation and amortisation charges remained at similar levels for the year at $5.4m (FY21: $5.1m).  Therefore, the resulting underlying operating loss was $12.6m (FY21: $1.8m) and reported operating loss was $16.8m (FY21: $7.4m).


Despite generating losses before tax of $18.8m (FY21: $12.4m), the Group has recognised a tax charge of $3.1m (FY21: $1.2m tax credit).  This is primarily driven by the write off of deferred tax assets previously recognised in the UK entities, resulting in a deferred tax charge of $2.4m (FY21: $1.4m credit).   

In addition, the tax charge includes $0.6m (FY21: $0.3m) being a current year tax expense in our manufacturing subsidiaries and a technical provision for a tax uncertainty in a specific jurisdiction as required by IFRIC 23.

Discontinued operations

During FY22 the Group announced the closure of Chinatool Automotive Systems Limited, a production facility in Sunderland, UK, which was impacted by severe labour shortages and inflationary increases in energy costs and wages. Loss for the year attributable to the discontinued operations was $2.8m (FY21: profit of $0.1m).

Prior period adjustments

During the consolidation process, management identified an error with regards to the calculation of the year-end inventory, which related to a number of years. The adjustment relates to the calculation of the provision for unrealised profits resulting from intra Group sales and a corresponding absorption of overheads within inventory.  The adjustment resulted in the reduction of inventory, and therefore net assets, by $8.3m at 31 December 2021. 

In addition, the Group has identified an error with regards to the transfer of tooling assets from the Group balance sheet to cost of sales upon completion of tooling and sale to the customer in FY21. As at 31 December 2021, the value of property, plant and equipment has been reduced by $2.6m with a corresponding increase in costs of sales in FY22.

Capital structure and interest

After taking into account the impact of prior period adjustments, the Group saw its total asset value decrease to $79.1m (FY21: $108.5m) and net asset value decrease to $2.6m (FY21: $27.3m).

Non-current assets remained broadly flat at $19.9m (FY21: $19.3m), reflecting a $3.8m increase in right of use assets (FY21: $0.6m decrease) offset by a goodwill impairment of $1.2m in relation to curtailing our US entity activity as the operations in Mexico came on-stream and a write down of deferred tax assets by $3.2m. 

As at 30 June 2022, the Group recognised on its balance sheet $3.2m (FY21: 1.7m) of deferred tax assets in relation to losses which previously arose in the UK.  As at 31 December 2022, the Directors have re-assessed the recoverability of these assets.  Based on management forecasts of the taxable profits specifically in relation to the UK statutory entities, we expect these deferred tax assets to be recovered against future taxable profits in the UK in FY24-FY26.  The Directors have therefore concluded that sufficient taxable profits arising in the UK to utilise these deferred tax assets would be possible rather than probable and have chosen to derecognise these deferred tax assets in accordance with the technical requirements of IAS12.

During FY22 the Group saw a $29.9m decrease in its current assets. This was primarily driven by a decrease in trade debtor and other receivable balances from $42.8m in FY21 to $26.9m in FY22 and the reduction in cash balances from $13.4m in FY21 to $4.8m in FY22 as the Group switched its customers to shorter payment terms and consumed cash to meet the increased production and distribution costs requirements. 

The Group continued to actively manage its working capital by deploying the IPO proceeds, with the help of major customers and by utilising available finance facilities.  Net debt as at 31 December 2022 was $12.2m (FY21: $9.1m) and included amounts drawn on the Group’s trade loans and invoice finance facilities with HSBC. As at the year end $16.7m of the facilities were utilised (FY21: $16.5m) against total available facilities of c.$22m. 

Although higher than originally anticipated due to increased interest rates and utilisation of facilities during the year, when compared to FY21 levels, FY22 net finance costs reduced to $2.0m (FY21: $4.4m).  This was due to repayment of $26.2m term loans, unsecured loans and CLBILs at the end of FY21 and early FY22 utilising the proceeds from the IPO.

Post balance sheet events: $9.6m fundraising and changes to share capital

On 27 April 2023 the Group announced a fundraise and achieved total gross proceeds of $9.6m (before transaction costs of $0.5m). 

The fundraising completed following the General Meeting on 15 May 2023 and the admission of the new ordinary shares to trading on AIM on 16 May 2023.

The enlarged share capital of the Company following admission increased to 73,597,548 ordinary shares in aggregate.

The net proceeds of the fundraise of $9.1m will predominately be used to strengthen the balance sheet and to provide the Group with flexibility to take advantage of growth opportunities. Additionally, a small portion of the net proceeds will be deployed to realise further efficiency savings including through investment in injection moulding production processes and robotics.

Going concern

The Directors have assessed the Group’s business activities and the factors likely to affect future performance in light of the current and anticipated trading conditions.  In making their assessment the Directors have reviewed the Group latest budget, current trading, available debt facilities, proceeds from the recent fundraising and considered reasonably possible downside sensitivities in performance and mitigating actions.

The Directors are confident that, after taking into account existing cash and debt facilities available to the Group and the net proceeds of fundraising, the Group has adequate resources in place to continue in operational existence for a period of at least 12 months from the date of approval of the financial statements being to June 2024 and have therefore adopted the going concern basis of accounting in preparing the financial statements.  In making their assessment the Directors have considered the key factors listed below:


On 27 April 2023 the Group announced that it undertook a fundraise and achieved total gross proceeds of $9.6m (before transaction costs of $0.5m).  The net proceeds of the fundraise of approximately $9.1m will predominately be used to strengthen the balance sheet and to provide the Group with flexibility to take advantage of growth opportunities. Additionally, a small portion of the net proceeds will be deployed to realise further efficiency savings including through investment in injection moulding production processes and robotics.

HSBC facilities

The Group uses HSBC post-despatch trade loans and invoice financing facilities as an additional working capital lever.  These facilities have been committed for 12 months since the IPO, however starting from January 2023 the facilities are provided on a rolling 3-months basis, and these are expected to be renewed going forward in light of the current trading and the post year end fundraise.  As at 31 December 2022 the amounts drawn on the Group’s trade loans and invoice finance facilities were $16.7m (FY21: $16.5m) against a total facility of c.$22m. The Directors believe that should the HSBC facilities be withdrawn, alternative funding options would be available to the Group.

Scenario modelling

As a result of difficult trading conditions and losses incurred during FY22, the Group has carefully considered its future liquidity position.  In stress testing the forecast cash flows of the business, the Directors modelled a base case, several downside scenarios, a combined downside scenario and a set of mitigating actions to the downside scenario.  The base case was modelled on a prudent basis, assuming flat revenues and using the production schedules and cost estimates.  Positive cash headroom is maintained under the base case scenario.

Taking into account the trading conditions which existed during FY22 and outlook, the Directors have identified certain specific key risks to the base case assumptions and have modelled the scenarios as follows:

·     Reduction in revenue risk: the entire market is down by 10% due to global economic recession, reflecting a scenario similar to 2008-2009 downturn;

·     Increased cost of sales risk: reflecting the impact of inflation in cost of sales by 5% and 10% and inability to recover from customers;

·     Stockholding risk: reflecting a scenario caused by disruption in customer schedules and therefore the need to hold more than normal stock levels required in the distribution centers;

·     Availability of HSBC facilities: reflecting a withdrawal of HSBC facilities following a 3 months’ notice and failure to replace the facilities with equivalent facilities on similar terms in October 2023.

In addition, the directors have modelled the first three risks above into a combined downside scenario and considered several controllable mitigating actions. The principal mitigating actions have been modelled as managing stock levels and payment terms with customers and suppliers.  Such mitigating actions are within management’s control and the business closely monitors appropriate lead indicators to implement these actions in sufficient time to achieve the required cash preservation impact.

Despite the combined impact of the above downside assumptions, the stress testing model demonstrates that the business is able to maintain a positive cash headroom.

As a result of the above considerations, the Directors consider that CT Automotive has adequate resources in place for at least 12 months form the date of the approval of FY22 financial statements and have therefore adopted the going concern basis of accounting in preparing the financial statements. 

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