The directors present the strategic report for the year ended 31 December 2023.
In 2023 turnover increased by 8% but with a much stronger recovery in operating profit from £8.2M to £13.2M. The impact of the semi-conductor shortage progressively eased and plant production schedules stabilised although still well below full capacity. The Company continued to make progress in offsetting the impacts of the inflationary pressures that remained high in 2023. For the period from October to December 2023 our principal customer reported it’s highest wholesale sales volumes in 11 quarters, this was combined with a strong order book at the end of 2023 giving us confidence in the future outlook.
Semiconductor shortages
Automotive supply chains with Just-in-Time manufacturing are generally highly efficient but have also proved to be highly vulnerable to disruptions in supply. Our highly-advanced automotive assemblies are configured to each specific vehicle order, from thousands of possible combinations, in the hours preceding delivery and are then shipped ‘sequenced-in-line’ matching the customer vehicle assembly line build. If the vehicle assembly line stops, so too do our final assembly lines. Whereas 2022 was marked by significant supply chain disruption originating elsewhere in the sector, 2023 was marked by a return to regular and stable levels of production allowing a more efficient and better-planned usage of our manufacturing plants.
Ukraine and Covid-19
Our longer term and highly favourable energy hedges expired at the end of Q1 2023 leaving us facing significant price increases but with much less of the substantial turbulence in the energy markets that followed Putin’s illegal invasion of Ukraine in 2022. Whilst we deplore the continued assaults on Ukraine, we did not experience direct impacts on our supply chains in 2023. Similiarly, Covid-19 had no significant impact upon the company in 2023 and the hybrid-working arrangements in place for office staff, where appropriate, continue and remain well-received.
Automotive program risk
The automotive sector depends upon many factors such as economic activity, car manufacturing strategies, access to credit and supplier risk. This list is by no means exhaustive and publicity surrounding diesel vehicles remains adverse. Furthermore, the success of an individual vehicle can have a material impact on sales and financial results. Whilst the company has limited scope for diversifying its customer base, the group of which it is a member supplies nearly all global car manufacturers. These relationships, in turn, benefit the company, both in terms of development and production work. Future development and production commitments are subject to a rigorous approval process, using skills and expertise and critical judgement from across the group. Following launch, a project is then subject to regular and structured review, including operational and financial monitoring.
Supplier risk
The automotive sector has a tightly managed supply chain involving closely interdependent partners, and accreditation of suppliers only occurs if they meet strictly defined criteria. Supplier monitoring is ongoing and the company draws upon support from specialist purchasing teams within the group.
The directors consider the operating result together with the change in the net financial debt to be key performance indicators. This latter indicator is effectively a measure of the company’s net cash flow, given the existence of group-wide cash-pooling and intra-group debt accounts. We reported an operating profit of £13,225,000 in 2023 compared with £8,214,000 in 2022. In 2023 the net financial debt prior to dividends and measured on a basis comparable to 2022, fell by £16,112,000 (2022 increase of £12,489,000 but largely due to the effect of unusually early customer receipts in late 2021).
The Directors have acted in a manner that they consider, in good faith, to be most likely to promote the success of the Company for the benefit of its shareholders as a whole, and in so doing have regarded (amongst other matters):
The likely consequences of any decision in the long term.
The interests of the Company’s employees.
The need to foster business relationships with customers, suppliers and others.
The impact of the Company’s operations on the environment and the community.
The desirability of the Company maintaining a reputation for the highest standards of business conduct.
The need to act fairly as between members of the Company.
Where or to the extent that the purposes of the Company consist of or include purposes other than the benefit of its members, the subsection above has effect as if the reference to promoting the success of the Company for the benefit of its members were to achieving those purposes.
The duty imposed by this section has effect subject to any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company.
The Directors are based at the Group headquarters in France, with operational decisions and day-to-day management of the Company delegated to the local management team but within the framework of objectives set by and reviewed with the Group, together with extensive Group wide commitment approval procedures.
In acting in this manner, we are targeting the long term success of the business and fully recognising that this depends on maintaining good relationships with the abovementioned key stakeholders, whilst considering eternal impacts.
The Company engages with employees through many means including regular and direct communication sessions and via a consultative committee at each of the major sites. Considerable focus is placed upon energy efficiency, more eco-friendly energy sources and on the recycling of waste products. Each of the Company’s 3 manufacturing sites are now equipped with a Combined Heat and Power generation system that can significantly reduce carbon emissions compared with traditional power generation. Our Warrington plant has 3000 solar panels installed on its roof and we are actively looking into possibilities at other facilities, although connections to the grid even for non-exporting sites, remain a considerable roadblock.
On 27th March 2024 Plastic Omnium became OPmobility (the Company’s name is unchanged at the date of this report). The OPmobility Group, of which the Company is a member, has a Supplier Charter together with internal Golden Rules and Codes of Conduct which are clearly communicated to indirect employees including via detailed training sessions. The company participates in the OPmobility TEMPO suppliers' portal, facilitating interaction and exchanges with it's supplier base. The Health & Safety of employees and visitors remains the highest priority with detailed regular reporting. Considerably more detail about such matters can be found in the Group’s Corporate Social Responsibility Report including the Statement of Non-Financial Performance, published annually and available at www.opmobility.com. Whilst these are group-wide reports, many of the initiatives apply across the Group including to the Company. The Company occupational pension scheme continues to have the Pensions Quality Mark Plus accreditation independently assessed by the Pensions and Lifetime Savings Association.
The Directors and management consider and discuss information from across all operations to help them understand the views and interests of key stakeholders. There are reviews of strategy, financial and operational performance and information covering risks and regulatory/legal compliance. These activities and information allow for an overview of engagement with stakeholders and consideration of other factors allowing the Directors to comply with their Companies Act 2006 section 172 legal duty.
Key decisions such as dividend distributions, major investment plans and other key strategic matters are discussed with the appropriate stakeholders and may be subject to their formal approval. During the year, a new 10 year lease was agreed on the Hams Hall final assembly site and Group approval obtained for a significant investment and reconfiguration of the Warrington plant to accommodate future vehicle projects.
By order of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The profit for the year, after taxation, amounted to £9,336,000 (2022 - £6,907,000).
Ordinary dividends were paid amounting to £5,760,000 (2022 - £1,000,000). The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The company agrees payment terms with suppliers aiming to match these with those agreed with the company’s customers.
The company's current policy concerning the payment of trade creditors is to:
settle the terms of payment with suppliers when agreeing the terms of each transaction;
ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and
pay in accordance with the company's contractual and other legal obligations.
Compagnie Plastic Omnium SE (the company’s intermediate parent company listed on the Euronext Paris stock exchange) operates a cash pooling system organised around Plastic Omnium Finance. Liquidity, currency and interest rate risks are managed on behalf of, and in association with, subsidiaries. The company participated in a non-recourse sale of receivables, co-ordinated by Plastic Omnium Finance, selling £14,838,000 and €9,188,000 of receivables at 31 December 2023.
Compagnie Plastic Omnium SE manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business.
The company is exposed to interest rate risk on part of its intra-group borrowings with Plastic Omnium Finance, based on 3 month LIBOR and EURIBOR rates fixed at the end of each quarter.
The company is exposed to currency movements, essentially on the Euro. These are generally in respect of components specified by customers and sourced from Euro zone suppliers. The company aims to achieve a natural hedge as far as possible, including payments by customers in Euros. The remaining exposure is closely monitored including via short and medium term forecasts with net future requirements generally hedged via the Group Treasury Department of Plastic Omnium Finance.
Receivables balances are monitored very closely on an ongoing basis, with overdues subject to regular Group reporting. Where appropriate dedicated monitoring systems are also employed. Provision is made for doubtful debts where necessary. The sale of receivables, when used, can have the effect of significantly reducing credit risk.
The company uses forward foreign exchange contracts and currency deposits to hedge exchange rate risk on net Euro purchases as appropriate, but these are now fairly evenly matched by Euro receipts. Hedging instruments are taken out via Plastic Omnium Finance. At 31 December 2023, contracts for the purchase of €830,000 remained outstanding with a 2024 Q1 maturity.
The company continues to invest significantly in the development of new products and has full access to extensive research facilities within the Plastic Omnium Group.
The company currently has development projects extending to 2026 prior to production launches. The production life of parts currently in production and under development is generally 3-5 years from start of production.
Ernst & Young LLP were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
Summary
Plastic Omnium Automotive Ltd greenhouse gas emissions, reportable under SECR in 2023 were 12,400 tonnes CO2e.
This figure includes the emissions associated with the purchase of UK grid electricity and the combustion of fuels, specifically natural gas, LPG, and transport fuel. The total CO2e emissions during 2023 were approximately 20% lower than those in 2022. The combination of reduction in electricity, Natural Gas, LPG and company-operated transport resulted in the company’s overall emission reduction. In line with SECR guidelines, the carbon intensity ratio for the 2023 reporting period has been calculated as 1.38 kgCO2e per tonne of production output, a decrease of approximately 31% on the previous period.
When split by scope, Scope 1 emissions accounted for the largest share during 2023: 67% of the total, having exhibited a 20% decrease on the previous year. The second largest contribution was from Scope 2 at 31%, emissions in this category have decreased by 21% since 2022. Scope 3 emissions accounted for 2% of the total emissions during 2023, the quantity reported being 1% more than that from 2022.
Emissions have been calculated using the latest conversion factors provided by the UK Government. There are no material omissions from the mandatory reporting scope. An 'operational control’ approach has been used to define the Greenhouse Gas emissions boundary. This approach captures emissions associated with the operation of all buildings such as warehouses, offices, and manufacturing sites, plus company-owned and leased transport. This report covers UK operations only, as required by SECR legislation for large unquoted companies, and the information contained in it was collected and reported in line with the methodology set out in the UK Government’s Environmental Reporting Guidelines, 2019.
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e of production.
Coleshill/Edison Road
Natural Gas
Combined heat and power plant installation — Cogeneration plant installed to capture waste heat during electricity generation/recover the waste heat generated from the paint line. This heat is then used to pre-heat various pieces of process equipment across the site.
Drop compression tool temperature/close compression tools during non-production time.
Bonding cell flaming auto-off.
Measham
Electricity
Replacement of two injection presses with one more efficient press.
Piovan drying system improvements.
Paint chiller setpoint.
Booth humidity setpoint increase.
Motor conversions using more efficient press.
Natural gas
Heating improvements in factory and offices
Replacing space heating with radiant tubes.
Optimise RTPO burnout, reduction in number of burnouts.
Booth humidity setpoint increase - Primer and Clearcoat.
Warrington
Electricity
Turn AHU off for the full year.
Upgrade glue storage.
Occupancy sensors in flowjet, chill pump room and paint airlock.
Remove primer oven.
Energy procedure (shutdown, startup etc).
Injection: barrel heat system.
Compressed air isolation.
PIR sensors paint offload fans.
CHP action plans.
Natural Gas
Remove primer oven.
Emissions source | 2022 | 2023 | Share % | YOY Variance % |
Fuel combustion: Natural Gas | 10,371 | 8,270 | 67% | -21% |
Purchased Electricity | 4,835 | 3,814 | 31% | -20% |
Fuel combustion: Transport | 56 | 51 | 0% | -9% |
LPG | 263 | 265 | 2% | 1% |
Total emissions (tCO2e) | 15,525 | 12,400 | 100% | -20% |
Production (tonnes) | 7,707 | 8,955 |
| 16% |
Intensity: (tCO2e per Production kg) | 2.01 | 1.38 |
| -31% |
The Company participates in a group-wide overnight cashpooling system to help optimize net cash/debt positions and assist in currency risk management, this has been the case since 1997. Plastic Omnium Finance acts as an internal bank to the Group and as such the Company’s finances are intrinsically linked to those of the Group. The Group has confirmed by email to the directors that it will provide ongoing access to the cash pool facility for a period of twelve months from the date of approval of the balance sheet to assist the Company in meeting its liabilities as they fall due, only to the extent that money is not otherwise available to the Company to meet such liabilities. The Group's published Consolidated Full Year Results 2023 press release reported a Group net debt of €1,540M, down from €1,669M 1 year earlier with free cashflow generation of €227M. As at December 31, 2023, the Group had available liquidities of €2.3 billion, comprising €475 million in available cash and €1.8 billion in confirmed, undrawn credit facilities, with an average maturity of 3 years and no covenants.
Detailed forecasts of month-by-month results, balance sheets and cashflow to the end of the financial year are prepared each month and are subject to detailed review within the Group, as are monthly actual results. In addition to annual budgets, reviewed at the highest Group level, strategic plans are prepared annually looking ahead at least 3 years.
Having made appropriate extensive reviews and taking into account the risks and uncertainties facing the company, the directors are of the opinion that the company has sufficient resources to continue in operation as a going concern for the foreseeable future (defined as 12 months from the date of approval of these accounts) and is able to meet its liabilities as they fall due. Accordingly the directors continue to adopt the going concern basis in preparing these financial statements.
We have audited the financial statements of Plastic Omnium Automotive Limited for the year ended 31 December 2023 which comprise the Income Statement, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows and the related notes 1 to 31, including a summary of material accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company’s ability to continue as a going concern for a period of 12 months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the company’s ability to continue as a going concern.
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement set out on page 8, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.
We obtained an understanding of the legal and regulatory frameworks that are applicable to the company and determined that the most significant are those that relate to reporting framework (UK adopted international accounting standards, Companies Act 2006 and the relevant tax compliance regulations in the jurisdiction in which the Company operates, notably in UK).
In addition, we concluded that there are certain laws and regulations that may have an effect on the determination of the amounts and disclosures in the financial statements and those laws and regulations relating to health and safety, employees, climate and environmental and bribery corruption practices;
We understood how the Company is complying with those frameworks by making enquiries of management and those charged with governance to understand how the Company maintains and communicates its policies and procedures in these areas. We corroborated our enquiries through our review of minutes of the meetings of those charged with governance. We understood any controls put in place by management to reduce the opportunities for fraudulent transactions and how monitoring of these processes is done to avoid any instance of non-compliance;
We assessed the susceptibility of the Company’s financial statements to material misstatement, including how fraud might occur by meeting with management to understand where they considered there was a susceptibility to fraud. We also considered performance targets and the potential incentives or opportunities to manage earnings or influence the perceptions of stakeholders. We considered the programmes and controls that the entity has established to address identified risk, or that otherwise prevent or detect fraud; and how senior management monitors the programmes and controls. Where the risk was considered to be higher, in particular in respect of adjustments to revenue arising other than through routine invoicing with the Company’s customers, we performed audit procedures to address this identified fraud risk. These procedures included obtaining the population of all journals processed during the year. We performed a three-way correlation between revenue, receivables and cash and obtained explanations for any material outliers. We also tested manual journals posted to revenue using professional judgement. We determined the sample based on either size or nature for further testing and agreed to source documentation. These procedures were designed to provide reasonable assurance that the financial statements were free from material fraud;
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved understanding management’s internal controls over compliance with laws and regulations, enquiries of management, vouching transactions to source documentation and verifying that they are recorded in compliance with UK adopted international accounting standards and in conformity with the requirements of Companies Act 2006.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The income statement has been prepared on the basis that all operations are continuing operations.
The company has no recognised gains or losses other than the profit for the financial year.
Plastic Omnium Automotive Ltd is a private company limited by shares incorporated in England and Wales. The registered office is Westminster Industrial Estate, Huntingdon Way, Measham, Swadlincote, Derbyshire, DE12 7DS. The company's principal activities and nature of its operations are disclosed in the directors' report.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £'000.
The accounting treatment is based on the identification by the company in most cases of two performance obligations, distinct from the production of parts, under the Design activity and certain specific tooling whose control is transferred to clients.
The costs related to performance obligations are recognised in inventories during the project phase and then in expenses when their control is transferred to the client, i.e. at the start of production.
Revenue related to those same obligations are recognised at the start of production. Payments received prior to the start of production are recorded in customer advances.
The company has also examined the concepts specified or introduced by IFRS 15, such as the concept of “agent versus principal”.
Freehold land is not depreciated.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the income statement.
Assets under construction are not depreciated until brought into use when reclassified to appropriate category.
In accordance with IAS16, Property, Plant and Equipment, for property and major functional assemblies such as paint lines and presses, each significant part of the asset is depreciated separately over its specific estimated useful life.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.
In the case of right-of-use assets, expected useful lives are determined by reference to comparable owned assets or the lease term, if shorter.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.
Trade and inter-company receivables
Trade and inter-company receivables are measured at fair value. Any changes in measurement, excluding normal settlements, are recognised through the income statement with the balances subject to regular reviews.
The company recognises financial debt when the company becomes a party to the contractual provisions of the instruments. Financial liabilities are classified as either 'financial liabilities at fair value through profit or loss' or 'other financial liabilities'.
Other financial liabilities, including borrowings, trade and inter-company payables, are initially measured at fair value, net of transaction costs. Finance leases are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the net carrying amount on initial recognition.
Financial liabilities are derecognised when, and only when, the company’s obligations are discharged, cancelled, or they expire.
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
The company uses derivative instruments traded on organised markets or over-the-counter to manage its exposure to currency risks arising in the normal course of trading. In accordance with IAS39, these hedging instruments are recognised in the balance sheet and measured at fair value. When formal hedging agreements are in place the changes in their fair value are recognised in income or expense.
The tax expense represents the sum of the tax currently payable and deferred tax.
At inception, the company assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the company recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within property, plant and equipment, apart from those that meet the definition of investment property.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish or restore the underlying asset and the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other property, plant and equipment. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the company's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the company is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the company's estimate of the amount expected to be payable under a residual value guarantee; or the company's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The company has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.
Other research and development costs
Other research and development costs are generally recognised as an expense when incurred, unless of a material value in which case the cost is recognised in the year in which production commenced.
Start-up costs
The start-up costs of new production capacity or techniques and organisation expense are recognised as an expense for the period in which they are incurred.
Provisions for liabilities
Provisions for liabilities are recorded when the company has a present obligation and it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and no equivalent benefit is expected to be received in return. They are recognised within current liabilities because the obligation is generally expected to be settled within one year.
Forthcoming requirements:
Adoptions of the following mentioned standards, amendments and interpretations in future years are not expected to have a material impact on the Company’s financial statements:
Amendments to IFRS 16 Lease Liability in a Sale and Leaseback - 1 January 2024
Amendments to IAS 1 Classification of Liabilities as Current or Non-current - 1 January 2024
Amendments to IAS 1 Non-current Liabilities with Covenants - 1 January 2024
Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements - 1 January 2024
Amendments to IAS 21 Lack of Exchangeability - 1 January 2025
New currently effective requirements:
Amendments to IFRS 17 Insurance Contracts - 1 January 2023
Amendments to IFRS 17 Initial application and IFRS 9 - Comparative information - 1 January 2023
Amendments to IAS 8 Definition of Accounting Estimates - 1 January 2023
Amendments to IAS 1 and IFRS Practice Statement 2 Disclosure of Accounting Policies - 1 January 2023
Amendments to IAS 12 Deferred tax - Assets and Liabilities arising from a Single Transaction - 1 January 2023
Amendments to IAS 12 International Tax Reform – Pillar Two Model Rules - 1 January 2023
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
The preparation of the financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses and commitments. These estimates and assumptions are reviewed at regular intervals. Actual results may differ from these estimates, if the underlying assumptions are changed to reflect actual experience or changes in circumstances or economic conditions. Management consider there to be no material critical judgements or estimates.
An analysis of the company's total revenue is as follows:
The average monthly number of persons employed by the company during the year was:
Their aggregate remuneration comprised:
The directors did not receive any remuneration for their services to the Company during the current or prior year and they were remunerated by another company within the Group. There is no allocation of costs for the directors as this is considered to be inconsequential to their wider role.
The Corporation Tax rate for the year ended 31 December 2022 was 19%. On 24 May 2021, the UK tax rate increased from 19% to 25% with effect from 1 April 2023. Adjustments recognised in the period for current tax charges/(credits) of prior periods amount to 2023 £377,000 and 2022 (£375,000).
The effective rate of 23.5% is based on a corporation tax rate of 19% to 31/03/2023 and 25% thereafter.
As at 31 December 2023, the Current tax payable £1,348,000 represents the 2023 corporation tax provision less RDEC claims (2022 - £1,099,000 Current tax receivable).
Reversals of previous impairment losses have been recognised in profit or loss as follows:
The intangible assets comprise development costs. These are recognised at the start of production of the part in question and are amortised straight-line over the estimated period of series production (generally 3 years).
Property, plant and equipment includes right-of-use assets, as follows:
Freehold land of £4,307,000 has not been depreciated (2022 - £4,307,000).
Inventories are stated net of a provision of £4,021,000 (2022 - £4,145,000)
Trade debtors are stated net of the sale of receivables of £14,838,000 and €9,188,000 (2022: £ nil).
At 31 December 2023 trade debtors and amounts due from group undertakings included non-GBP denominated balances of €150,000 and $3,000 (2022: €15,750,000 and $4,000) within trade debtors and €20,154,000 (2022: €1,524,000) due from group undertakings. All other receivables were GBP denominated.
Amounts owed by fellow Group undertakings include Group current accounts linked to the overnight cash-pooling system bank accounts. The remaining balances arise from normal trading operations with settlement on standard Group established commercial terms.
The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.
The Company’s principal financial assets are bank balances and trade and other receivables. Receivables balances are monitored very closely on an ongoing basis, with overdues subject to regular Group reporting at the highest level. Where appropriate, dedicated monitoring systems are also employed. Provision is made for doubtful debts where necessary.
Liquidity Risk
The company needs to have access, at all times, to adequate financial resources not only to finance operations and the investments required to support its growth, but also to withstand the effects of any exceptional development. Liquidity is managed by the Group on behalf of subsidiaries and needs are met by long-term financing on the capital markets, ensuring that all of the Group’s net debt can be maintained over a long period, as well as through short-term commercial paper programs.
The company’s intra-group debt, prior to any sales of receivables, is a key performance indicator and is subject to very close monitoring.
The company’s financial obligations outside of the Group consist of trade creditors and other creditors. All of these are payable within 12 months.
Liquidity Risk Management
Liquidity is managed via a group deposit/loan facility at SONIA linked interest rates and denominated in GBP and EUR as required by the company. A credit line is agreed annually with the Plastic Omnium Group, if required, the company can apply for a revision to the agreed limit. The company participates in a GBP and a EUR cash-pooling system managed by Plastic Omnium Finance.
Foreign Currency Risk
The Company operates internationally giving rise to exposure from changes in foreign exchange rates principally with the Euro and then indirectly with the US Dollar in respect of the price of oil and its impact upon derived products (see Commodities risk). The company systematically hedges its Euro risk via forward exchange contracts and holdings of currency deposits to meet estimated on net requirements, in agreement with the Group Treasury Department of Plastic Omnium Finance, with whom the duration of hedging arrangements are also agreed. At 31 December 2023 the company had no unsettled forward exchange contracts (2022: nil). At 31 December 2023 the company held a deposit of €19,598,000 and £38,147,000 (2022: €1,024,000) within the intra-group deposit/loan facility.
Interest Rate Risk
The Company is exposed to interest rate risk on its intra-group debt and factoring facilities. Interest is paid on the daily value-dated net intra-group debt/factored balances at margins of up to approximately 2.1% above 3 month SONIA or EURIBOR fixed on the 25th of March, June September and December for the forthcoming quarter. Intra-group deposits are remunerated on the same basis but at SONIA or EURIBOR less 0.2%. A 1% rise/fall in interest rates would have decreased/ increased profit for the year and equity by approximately £100,000 (2022: £220,000).
Commodity Risk - Plastic
The Company is exposed to the risk of price fluctuations in the price of raw materials used in injection moulding, where the supply contracts contain oil price indexation clauses. The risk is largely mitigated via offsetting provisions in customer contracts.
Financial Risk Management
Financial risks include market risk (principally foreign currency risk), credit risk, liquidity risk and interest risk. The Company seeks to minimise the effect of these risks by developing and applying policies and procedures which are regularly reviewed for appropriateness and effectiveness. The Company's principal financial instruments comprise cash held in current accounts, trade receivables, amounts recoverable under contracts, trade payables and other payables that arise directly from its operations.
Credit risk refers to the risk that a customer or counterparty to a financial instrument fails to meet its contractual obligations, resulting in financial loss to the company, and arises principally from the company’s receivables from customers. Customers that wish to trade on credit terms are subject to credit verification procedures and receivable balances are monitored on an ongoing basis.
The concentration of credit risk is subject to ongoing monitoring in conjunction with the Group. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.
Included in Other Payables are Customer Prepayments of £5,138,000 (2022: £1,094,000).
At 31 December 2023 trade creditors and amounts owed to group undertakings included EUR denominated balances of €12,986,000 (2022: €9,399,000) and €224,000 (2022: €344,000) respectively (payable in line with credit terms). Aside from USD $2,000 (2022: $2,000), all remaining current liabilities were GBP denominated.
The directors consider that the carrying amount of trade payables approximates to their fair value.
Lease liabilities are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:
The company leases plant and equipment with a carrying value of £12,688,000 (2022: £8,956,000) under lease agreements. Lease terms are negotiated on an individual basis.
At 31 December 2023 the company has a deferred tax provision of £2,431,000 (2022: £2,918,000) being the full potential deferred tax provision and applying an enacted tax rate of 25% to short-to-medium term timing differences, principally accelerated capital allowances and intangible asset deduction timing differences expected to reverse.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon during the current and prior reporting period.
Deferred tax assets and liabilities are offset in the financial statements only where the company has a legally enforceable right to do so.
The retained earnings represent profits and losses retained in the previous and current period.
Operating lease payments represent rentals payable for certain properties, plant and equipment.
Amounts recognised in profit or loss as an expense during the period in respect of lease arrangements are as follows:
At 31 December 2023 the company had capital commitments as follows:
Compagnie Plastic Omnium (the Plastic Omnium group holding company) operates a global cash management system around Plastic Omnium Finance, which manages currency, interest rates and liquidity risks in liaison with and on behalf of all subsidiaries.
To maintain ready access to sufficient financial resources to carry out its business operations, fund the investments required to drive growth and respond to exceptional circumstances, the Group raises both capital and debt financing on the capital markets. The capital structure of the Group consists of debt, cash and cash equivalents and equity comprising issued share capital, reserves and retained earnings. The company is not subject to any externally imposed capital requirements.
The remuneration of key management personnel, including directors, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.
The ultimate parent company of Plastic Omnium Automotive Limited is Burelle S.A. During the year the company entered into transactions with members of Burelle S.A group, who are related parties:
At the reporting date, the following amounts were owed by and to members of the Burelle SA group who are related parties:
At the reporting date, the following amounts were owed by and to members of the Burelle SA group who are related parties: