PLASTIC_OMNIUM_AUTOMOTIVE - Accounts
PLASTIC_OMNIUM_AUTOMOTIVE - Accounts
2020 was clearly an unprecedented year. Warning signs were already present at the start of the year and rapidly escalated as the Covid-19 pandemic took hold. At this point we introduced very tight controls on expenditure. We closed our operations in late March 2020 and had to furlough in excess of 90% of employees. There was a minimal start back in May followed by a more progressive one in June but with extensive precautionary arrangements in place. Manufacturing operations then continued for the remainder of the year but with office staff not directly supporting plants, often working from home. We put on record our thanks to our employees, in particular those working onsite, often facing considerable restrictions compared with the normal workplace environment. Against this backdrop, demand remained subdued with turnover falling by approximately one-third to £238,489,000 with a small operating loss reported of £281,000. We commenced 2020 with a relatively comfortable net debt position and ended the year very slightly slower, this despite payment of a £10,000,000 intra-group dividend and with the backing of a group with a very robust financial standing.
Risks and uncertainties
Covid-19
As noted we commenced a partial startback of manufacturing in May 2020 and more extensively in June 2020. Very extensive measures were introduced including startback inductions for all employees, one-way systems, daily thermal imaging temperature checks prior to anyone going onsite, mandatory face masks and working from home where possible combined with further IT system investments to facilitate the latter. We benefitted significantly from the CJRS furlough grant scheme, but mindful of the spirit of the scheme, we did not claim for pre-planned holiday shutdown periods. At the time of writing most areas of the business are operating relatively normally despite the ongoing restrictions and the number of employees on furlough is very low. The sharp drop in activity levels also led to a significant drop in employment with a year-on-year reduction of just over 200 employees and temporary agency workers. The Company deferred £9,926,083 of VAT between 31st March and 30th June but repaid this in full prior to 31st December 2020.
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. In 2020 we faced the administration of a major supplier, but working closely with our key customer, the supplier and their administrators we jointly supported a limited continuation of production and were able to avoid any significant disruption.
Brexit
We had made very considerable preparations for Brexit, with over 100 suppliers located in the EU mostly part of ‘Just-in-Time supply chains’. In part due to these extensive preparations and to a further pre-year-end stock build, there was almost no disruption in early January 2021. The free trade elements of the EU-UK Trade and Co-operation Agreement were a welcome last minute addition, albeit subject to burdensome declarations of origin. Fortunately we should avoid customs duties but we face an ongoing administrative burden and additional costs essentially from the customs clearance of several hundred EU-UK shipments per month.
Key performance indicators
The directors consider the operating result together with the change in the intra-group financial debt, prior to any receivables sales, 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. Compared with a 2019 operating profit of £20,971,000 we reported an operating loss in 2020 of £281,000. In 2020 the intragroup financial debt prior to factoring impacts, dividends and IFRS 16 newly-capitalised leasing debt and measured on a basis comparable to 2019, decreased by £10,139,000 (£28,038,000 reduction in 2019).
The Directors have acted in a manner that they consider, in good faith, to be likely to promote the success of the Company for the benefit of its shareholders but with regard to matters such as;
The likely longer-term consequences of decisions.
The interests of the Company’s employees.
The need to cultivate business relationships with customers, suppliers and others.
The impact of the Company’s operations on the environment and the community.
The desirability of maintaining a reputation for the highest standards of business conduct.
The Company engages with employees through many means including 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 is now equipped with a Combined Heat and Power generation systems that can significantly reduce carbon emissions compared with traditional power generation. In addition Warrington plant entered into a local council sponsored initiative and has 3000 solar panels installed on its roof, with local services benefitting from the council’s returns.
During the Covid-19 pandemic, our Engineering Centre used 3D printers including employees own machines, to produce face shields for local health sector workers.
The Plastic Omnium 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 Health & Safety of employees and visitors remains the highest priority with detailed regular reporting and the former World Safety Day has now been enlarged to a corporate social responsibility ‘ACT FOR ALL’ day across the Group. Considerably more detail about such matters can be found in the Plastic Omnium Group Corporate Social Responsibility Report including the Statement of Non-Financial Performance, published annually and available at www.plasticomnium.com. Whilst these are group-wide reports, many of the initiatives apply across the Group including to the Company.
The Directors and delegated 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.
By order of the board
The directors present their annual report and financial statements for the year ended 31 December 2020.
The loss for the year, after taxation, amounted to (£742,000) (2019 - £17,404,000 profit).
Ordinary dividends were paid amounting to £10,000,000. 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:
Compagnie Plastic Omnium (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. At 31/12/2019 the company participated in a non-recourse sale of receivables, co-ordinated by Plastic Omnium Finance, selling £5,399,000 of receivables but did not make any sale at 31/12/2020.
Compagnie Plastic Omnium 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 non-recourse receivables sale facility carries interest charges linked to 2 month LIBOR and EURIBOR.
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 forecast 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. Hedging instruments are taken out via Plastic Omnium Finance.
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 2023 prior to production launches. The production life of parts currently in production and under development is generally 3-5 years from start of production.
Mazars LLP were the independent auditor to the company during the year and a resolution to re-appoint Mazars LLP as auditor will be proposed at the forthcoming annual meeting.
Summary
Plastic Omnium Automotive Ltd greenhouse gas emissions, reportable under SECR in 2020 were 14,443 tonnes CO2e.
These include the emissions associated with UK electricity, natural gas, LPG consumption and business travel in company vehicles by employees. Based on UK company production output of circa 13,421 tonnes, the intensity is 1.08 tonnes CO2e per tonne of production.
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 for Non-Quoted Large Companies.
This information was collected and reported in line with the methodology set out in the UK Government’s Environmental Reporting Guidelines, 2019.
Emissions have been calculated using the latest conversion factors provided by the UK Government. There are no material omissions from the mandatory reporting scope.
The reporting period is January 2020 to December 2020, as per the financial accounts.
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e of production.
Plastic Omnium Automotive aims to operate at maximum energy efficiency in order to reduce environmental impact and operational energy costs. There has been the installation of LED lighting in several production areas, a Tri-gen CHP has been installed at the Warrington site in late 2020 and there are further plans for Solar PV and Wind Turbines at other sites if they are financially and technically viable. A CHP generator has been in place at the Measham site for several years and a substantial solar PV installation at the Warrington site went live in 2019.
Emissions source | 2020 | Share % |
Natural Gas | 7,755 | 53.7% |
Purchased Electricity | 6,465 | 44.8% |
LPG | 164 | 1.1% |
Transportation Fuel | 59 | 0.4% |
Total emissions (tCO2e) | 14,443 | 100% |
Production (tonnes) | 13,421.3 |
|
Intensity: (tCO2e per Production kg) | 1.08 |
|
The Company participates in a group-wide overnight cashpooling system to help optimize net cash/debt positions and assist in currency risk management. 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's 2020 published Consolidated Financial Statements (p187) report a Group net debt at 41% of equity with EUR 2.6bn of liquidity including EUR 1.87bn of undrawn confirmed facilities with an average maturity of 4.4 years and without any covenants.The Company’s principal customers are also significant customers of other non-UK Group companies.
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. The Company entered 2020 following its two strongest years of cash generation, with in excess of £28M positive cashflow in 2019 and £20.4M in 2018. In 2020 itself, the company generated a net cash inflow of nearly £10M prior to payment of the intra-group dividend and without the benefit of any VAT deferral at 31 December 2020.
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 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.
properly select and apply accounting policies; present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and make an assessment of the company's ability to continue as a going concern.
We have audited the financial statements of Plastic Omnium Automotive Limited (the ‘company’) for the year ended 31 December 2020 which comprise the Income Statement, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006.
give a true and fair view of the state of the company's affairs as at 31 December 2020 and of its loss for the year then ended; and have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006
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 at least twelve 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.
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 our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, 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 or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this 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 our 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 the 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 7, 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.
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.
Based on our understanding of the company and its industry, we identified that the principal risks of non-compliance with laws and regulations related to UK tax legislation, pensions legislation, employment regulation and health and safety regulation, anti-bribery, corruption and fraud, money laundering, non-compliance with implementation of government support schemes relating to COVID-19, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements, such as the Companies Act 2006.
We evaluated the directors’ and management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls) and determined that the principal risks were related to posting manual journal entries to manipulate financial performance, management bias through judgements and assumptions in significant accounting estimates, in particular in relation to loss reserves, and significant one-off or unusual transactions.
Our audit procedures were designed to respond to those identified risks, including non-compliance with laws and regulations (irregularities) and fraud that are material to the financial statements. Our audit procedures included but were not limited to:
Discussing with the directors and management their policies and procedures regarding compliance with laws and regulations;
Communicating identified laws and regulations throughout our engagement team and remaining alert to any indications of non-compliance throughout our audit; and
Considering the risk of acts by the company which were contrary to applicable laws and regulations, including fraud.
Our audit procedures in relation to fraud included but were not limited to:
Making enquiries of the directors and management on whether they had knowledge of any actual, suspected or alleged fraud;
Gaining an understanding of the internal controls established to mitigate risks related to fraud;
Discussing amongst the engagement team the risks of fraud; and
Addressing the risks of fraud through management override of controls by performing journal entry testing.
There are inherent limitations in the audit procedures described above and the primary responsibility for the prevention and detection of irregularities including fraud rests with management. As with any audit, there remained a risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls.
A further description of our responsibilities is available 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 the audit 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 £.
The accounting treatment applied since 1 January 2018 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”.
Projects with a Start of Production date after 01/01/2018:
Development costs incurred during the project phase and related to the execution of the contract with the customer not fulfilling a performance obligation are recognized as intangible assets. These internal and external costs relate to the work on the organization of purchasing, logistics and industrial processes to produce the parts that will be ordered by customers.
They are depreciated over the expected production period, typically three years.
The amortization of development hours is booked under Research and Development costs.
These assets are subject to annual impairment tests.
Revenue received from customers related to these costs are recorded in turnover from the start of series life over the production period. Payments received before the start of life are recorded in customer prepayments.
The accounting treatment of costs that meet a performance obligation is described in the notes.
Furthermore, under IFRS 15, costs incurred prior to the award of the contract, whether or not the contract is obtained, are recognized as an expense for the period.
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.
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.
the asset has been acquired principally for the purpose of selling in the near term, or on initial recognition it is part of a portfolio of identified financial instruments that the manages together and has a recent actual pattern of short-term profit taking, or it is a derivative that is not designated and effective as a hedging instrument.
Debt instruments are classified as financial assets measured at fair value through other comprehensive income where the financial assets are held within the company’s business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt instrument measured at fair value through other comprehensive income is recognised initially at fair value plus transaction costs directly attributable to the asset. After initial recognition, each asset is measured at fair value, with changes in fair value included in other comprehensive income. Accumulated gains or losses recognised through other comprehensive income are directly transferred to profit or loss when the debt instrument is derecognised.
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.
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'.
it has been incurred principally for the purpose of repurchasing it in the near term, or on initial recognition it is part of a portfolio of identified financial instruments that the manages together and has a recent actual pattern of short-term profit taking, or it is a derivative that is not designated and effective hedging instrument.
Other financial liabilities, including borrowings, 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 profit 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 and charges
Provisions for liabilities and charges 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:
Amendment to IFRS 16 COVID-19-Related Rent Concessions - 1 June 2020
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform - 1 January 2021
Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract - 1 January 2022
Annual Improvements to IFRS Standards 2018 - 2020 - 1 January 2022
Amendments to IAS 16 Property, Plant and Equipment: Proceeds before intended use - 1 January 2022
Amendments to IFRS 3 Reference to Conceptual Framework - 1 January 2022
Amendments to IAS 1 Classification of Liabilities as Current or Non-current - 1 January 2023
Amendments to IFRS 17 Cinsurance Contracts - 1 January 2023
New currently effective requirements:
Adoptions of the following mentioned standards, amendments and interpretations in the current year have not had a material impact on the Company’s financial statements:
Amendments to IAS 1 Presentation of Financial Statements - 1 January 2020
Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - 1 January 2020
Amendments to IFRS 3 Business Combinations - 1 January 2020
Revised Conceptual Framework for Financial reporting - 1 January 2020
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 revenue is as follows:
The average monthly number of persons employed by the company during the year was:
Their aggregate remuneration comprised:
The charge for the year can be reconciled to the (loss)/profit per the income statement 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:
Included in additions for 2019 is £16,575 initial recognition of right-of-use assets related to the first adoption of IFRS16 as at 1 January 2019 (also see note 2).
Inventories are stated net of a provision of £6,089,000 (2019 - £5,790,000)
Trade debtors are stated net of a provision of £ 39,000 (2019: £ nil) and the sale of receivables of £ nil (2019: £5,399,000).
At 31 December 2020 trade debtors and amounts due from group undertakings included non-GBP denominated balances of €18,106,000 and $1,000 (2019: €19,406,000 and $ nil) within trade debtors and €13,992,000 (2019: €13,175,000) due from group undertakings. All other receivables were GBP denominated.
The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.
The Group’s principal financial assets are bank balances and cash 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 LIBOR 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 the 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 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 2020 the company had no unsettled forward exchange contracts (2019: nil). At 31 December 2020 the company held a deposit of €12,223,000 (2019: €13,175,000) 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 LIBOR 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 Libor or EURIBOR less 0.2%. A 1% rise/fall in interest rates would have decreased/ increased profit for the year and equity by approximately £300,000 (2019: £540,000).
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 Group seeks to minimise the effect of these risks by developing and applying policies and procedures which are regularly reviewed for appropriateness and effectiveness. The Group’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 £33,991,000 (2019: £39,402,000)
At 31 December 2020 trade creditors and amounts owed to group undertakings included EUR denominated balances of €16,943,000 (2019: €17,864,000) and €207,000 (2019: € 1,164,000) respectively. Aside from USD $1,000 (2019: $1,000), 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 £14,053,000 (2019 – £16,689,000) under a finance lease agreement expiring within 6 years. Lease terms are negotiated on an individual basis.
At 31 December 2020 the company has a deferred tax provision of £4,659,000 (2019: £4,495,000) being the full potential deferred tax provision and arising applying an enacted tax rate of 19% 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 total costs charged to income in respect of defined contribution plans is £6,215,000 (2019 - £6,174,000) which represents contributions payable to the scheme by the company at rates specified in the rules of the plan. At 31 December 2020 £1,161 remained outstanding in respect of contributions to be paid over to the scheme for newly auto-enrolled employees with unexpired opt-out periods (2019: £6,631).
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 2020 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: