Mechatronics Systems Wales Ltd - Limited company accounts 20.1

REGISTERED NUMBER: 12668376 (England and Wales)

MECHATRONICS SYSTEMS WALES LTD

STRATEGIC REPORT,

REPORT OF THE DIRECTOR AND

FINANCIAL STATEMENTS

FOR THE PERIOD

13 JUNE 2020 TO 31 MARCH 2021

Page

Company Information

1

Strategic Report

2

Report of the Director

4

Report of the Independent Auditors

6

Statement of Profit or Loss

10

Statement of Profit or Loss and Other
Comprehensive Income

11

Statement of Financial Position

12

Statement of Changes in Equity

13

Statement of Cash Flows

14

Notes to the Statement of Cash Flows

15

Notes to the Financial Statements

16

DIRECTOR:

K J Gittins

REGISTERED OFFICE:

PO Box SA11 4SP

c/o Jtekt Automotive UK Ltd

Neath Vale Supplier Park

Resolven

Neath

SA11 4SP

REGISTERED NUMBER:

12668376 (England and Wales)

AUDITORS:

Bevan Buckland LLP

Chartered Accountants

And Statutory Auditors

Langdon House

Langdon Road

SA1 Swansea Waterfront

Swansea

SA1 8QY

The director presents his strategic report for the period 13 June 2020 to 31 March 2021.

STRATEGIC REPORT

The directors present their annual strategic report for the year ended 31 March 2021.

BUSINESS REVIEW AND PRINCIPAL ACTIVITIES

This is the first year of trading for the company, the company purchased the assets and stock from KSR Electronics Systems Limited, a company in administration and started production on 2nd July 2020.

Principal activities

The principal activity of the company is to develop, manufacture and sell proprietary motion control systems containing silicon-controlled semiconductors principally for use in the automotive industry.

The directors are not aware, at the date of this report, of any likely changes in the company's activities in the forthcoming year.

KEY PERFORMANCE INDICATORS

The management of the business use a range of performance indicators, both financial and non-financial, to measure the delivery of the company's strategic objectives. The KPIs are used by management to compare actual performance during the financial period, and the latest monthly forecasts, against the annual budgeted targets. The KPIs, both financial and non-financial, are set out below:

Financial

Quality

Parts Per Million Defect

0

Safety

Number of accidents

0

Delivery

Number of short shipments

0

Asset turnover

5.58

Gross Profit

15%

Turnover

£6.7m

Gross Profit

£1.36m

PRINCIPAL RISKS AND UNCERTAINTIES

The management of the business and the execution of the company's strategy are subject to a number of risks.

The key business risks and uncertainties affecting the company are considered to be foreign exchange risk, credit risk, liquidity risk, competition risk and impact of leaving the European Union.

Foreign exchange risk

The company's activities expose it to a number of financial risks of changes in foreign currencies, particularly with respect to the Euro and US Dollar. Currency fluctuations are managed by matching the selling currency with the purchasing currency where possible.

Credit risk

The company at this time has a single Customer, JHPI which is a partner company within the JTEKT group, therefore no risk to credit.

Liquidity risk

The company is a subsidiary of JTEKT Automotive UK Ltd and is principally funded by intra-group borrowings to ensure it has sufficient available funds for operations.

Impact of the United Kingdom leaving the European Union

The completion of the EU - UK trade and cooperation agreement has caused some delays related to Customs clearance on imports and exports. However, to minimise the risks we have contacted and are working closely with key European suppliers and increased critical material stock levels.

Impact of the Covid 19 pandemic

The company has managed the pandemic in a robust manner, maintaining a zero-infection rate within the business. The supply chain risks are managed locally, and impact minimised by increase of component inventory during the period of uncertainty.

FUTURE STRATEGY AND DEVELOPMENT

The existing business with key customers for EHPS systems continues and there are several new projects in discussion with multiple OEM's. There are several new EHPS projects for different OEMs with both low and high volume projects.

Key business for Mechatronics Systems Wales Ltd is EHPS ECU's (electronic control unit). MSW has capacity to manufacture over 600,000 current ECU's a year and has core IP and significant manufacturing experience. Although management is aware that a current EHPS contract will expire in FY2024, there have already been additional EHPS programs secured through to FY2028 and a continuing pursuit of additional programs with EHPS and other electronic device technologies.

The key focus of MSW will continue to be EHPS ECUs based on a strong order book.

ON BEHALF OF THE BOARD:

K J Gittins - Director

30 June 2021

The director presents his report with the financial statements of the company for the period 13 June 2020 to 31 March 2021.

INCORPORATION

The company was incorporated on 13 June 2020 .

DIVIDENDS

No dividends will be distributed for the period ended 31 March 2021.

DIRECTOR

K J Gittins was appointed as a director on 13 June 2020 and held office during the whole of the period from then to the date of this report.

The director, being eligible, offers himself for election at the forthcoming first Annual General Meeting.

STATEMENT OF DIRECTOR'S RESPONSIBILITIES

The director is responsible for preparing the Strategic Report, the Report of the Director and the financial statements in accordance with applicable law and regulations.

Company law requires the director to prepare financial statements for each financial year. Under that law the director has elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union. Under company law the director must not approve the financial statements unless he is satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the director is required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The director is responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable him to ensure that the financial statements comply with the Companies Act 2006. He is also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the director is aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

AUDITORS

The auditors, Bevan Buckland LLP, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

K J Gittins - Director

30 June 2021

Opinion

We have audited the financial statements of Mechatronics Systems Wales Ltd (the 'company') for the period ended 31 March 2021 which comprise the Statement of Profit or Loss, the Statement of Profit or Loss and Other Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and Notes to the Statement of Cash Flows, 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 Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 March 2021 and of its loss for the period then ended;

-	have been properly prepared in accordance with IFRSs as adopted by the European Union; and

-	have been prepared in accordance 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 Auditors' 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 director's 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 director with respect to going concern are described in the relevant sections of this report.

Other information

The director is responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Director, but does not include the financial statements and our Report of the Auditors thereon.

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 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 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 the audit:

-	the information given in the Strategic Report and the Report of the Director for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Director have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the 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 Report of the Director.

We have nothing to report in respect of the following matters where 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 director's remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Responsibilities of director

As explained more fully in the Statement of Director's Responsibilities set out on page four, the director is 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 director determines 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 director is 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 director either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

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 a Report of the Auditors 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. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Extent to which the audit was considered capable of detecting irregularities, including fraud

We identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, and then, design and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion.

We discussed our audit independence complying with the Revised Ethical Standard 2019 with the engagement team members whilst planning the audit and continually monitored our independence throughout the process.

Identifying and assessing potential risks related to irregularities.

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, our procedures included the following:

-

enquiring of management, including obtaining and reviewing supporting documentation, concerning the Company's policies and procedures relating to:

-

identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;

-

detecting and responding to the risks of fraud and whether they have knowledge of any actual. suspected or alleged fraud;

-

the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations;

-

discussing among the engagement team how and where fraud might occur in the Financial Statements and any potential indicators of fraud. As part of this discussion, we identified potential for fraud in the following areas;

-

Assumptions used when valuing work in progress at the year end, and;

-

Potential for overstating income

-

obtaining an understanding of the legal and regulatory frameworks that the Company operates in, focusing on those laws and regulations that had a direct effect on the Financial Statements or that had a fundamental effect on the operations of the Company, The key laws and regulations we considered in this context included the UK Companies Act and relevant tax legislation.

Audit response to risks identified

In addition to the above, our procedures to respond to risks identified included the following:

-

reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with relevant laws and regulations;

-

enquiring of management concerning actual and potential litigation and claims; performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;

-

reading minutes of meetings of those charged with governance and reviewing correspondence with HMRC; and

-

in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments;

-

assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and

-

evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

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 a Report of the Auditors 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.

Henry Lloyd Davies (Senior Statutory Auditor)

for and on behalf of Bevan Buckland LLP

Chartered Accountants

And Statutory Auditors

Langdon House

Langdon Road

SA1 Swansea Waterfront

Swansea

SA1 8QY

30 June 2021

CONTINUING OPERATIONS

Revenue

3

6,711

Cost of sales

(5,349

)

GROSS PROFIT

1,362

Other operating income

4

109

Administrative expenses

(1,912

)

OPERATING LOSS

(441

)

LOSS BEFORE INCOME TAX

6

(441

)

Income tax

7

-

LOSS FOR THE PERIOD

(441

)

LOSS FOR THE PERIOD

(441

)

OTHER COMPREHENSIVE INCOME

-

TOTAL COMPREHENSIVE INCOME
FOR THE PERIOD

(441

)

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment

8

860

CURRENT ASSETS

Inventories

9

1,563

Trade and other receivables

10

2,394

Cash and cash equivalents

11

1,152

5,109

TOTAL ASSETS

5,969

EQUITY

SHAREHOLDERS' EQUITY

Called up share capital

12

3,000

Retained earnings

13

(441

)

TOTAL EQUITY

2,559

LIABILITIES

CURRENT LIABILITIES

Trade and other payables

14

3,377

Provisions

15

33

3,410

TOTAL LIABILITIES

3,410

TOTAL EQUITY AND LIABILITIES

5,969

The financial statements were approved by the director and authorised for issue on 30 June 2021 and were signed by:

K J Gittins - Director

Called up

share

Retained

Total

capital

earnings

equity

£'000

Changes in equity

Issue of share capital

3,000

-

3,000

Total comprehensive income

-

(441

)

(441

)

Balance at 31 March 2021

3,000

(441

)

2,559

Cash flows from operating activities

Cash generated from operations

1

(2,388

)

Net cash from operating activities

(2,388

)

Cash flows from investing activities

Purchase of tangible fixed assets

(1,156

)

Sale of tangible fixed assets

75

Net cash from investing activities

(1,081

)

Cash flows from financing activities

Amounts introduced by parent company

1,621

Share issue

3,000

Net cash from financing activities

4,621

Increase in cash and cash equivalents

1,152

Cash and cash equivalents at
beginning of period

2

-

Cash and cash equivalents at end of
period

2

1,152

1.	RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS

£'000

Loss before income tax

(441

)

Depreciation charges

215

Loss on disposal of fixed assets

6

(220

)

Increase in inventories

(1,563

)

Increase in trade and other receivables

(2,394

)

Increase in trade and other payables

1,789

Cash generated from operations

(2,388

)

2.	CASH AND CASH EQUIVALENTS

The amounts disclosed on the Statement of Cash Flows in respect of cash and cash equivalents are in respect of these Statement of Financial Position amounts:

Period ended 31 March 2021

31.3.21

13.6.20

£'000

Cash and cash equivalents

1,152

-

1.	STATUTORY INFORMATION

Mechatronics Systems Wales Ltd is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.

2.	ACCOUNTING POLICIES

Basis of preparation

The company financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs").

The accounting policies set out below have , unless otherwise stated, been applied consistently to all periods presented in these financial statements. The presentation currency of these financial statements is sterling. All amounts in the financial statements have been rounded to the nearest £1,000.

The Company's ultimate parent undertaking, JTEKT Corporation includes the Company in its consolidated financial statements. The consolidated financial statements of JTEKT Corporation are available to the public via JTEKT Corporation website.

Going concern

The directors have, at the time of approving the financial statements, a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. Further detail is contained in the Strategic Report..

Critical accounting judgements and key sources of estimation uncertainty

In the application of the company's accounting policies, which are described in note 2, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are-reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods .. Management have not identified any critical accounting judgements. .

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below:

Warranty provision

Provisions for the expected cost of warranty obligations are recognised at the date of sale of the relevant products, warranty provision is included at a rate of 0.5% of income for that year, the directors have reviewed this policy and confirmed that it is still relevant to include.

Revenue recognition

Revenue recognition is based on the consideration to which the company expects to be entitled in a contract with a customer and excludes amounts collected on behalf of third parties. The company recognises revenue when it transfers control of a product to a customer at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes. Revenue is reduced for estimated customer returns, rebates, and other· similar allowances.

Sale of goods

- Revenue from the sale of goods is recognised when all of the following conditions are satisfied:

- The company has transferred to the buyer the significant risks and rewards of ownership of the goods;

-The company retains neither continuing managerial involvement to the degree usually associated with

ownership nor effective control over the goods sold; The amount of revenue can be measured reliably;

- It is probable that the economic benefits associated with the transaction will flow to the entity; and o The costs incurred in respect of the.transaction can be measured reliably.

Finance income

Finance income is recognised when it is probable that the economic benefits will flow to the company and the amount of revenue can be measured reliably. Finance income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated

- future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

Property, plant and equipment

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Plant and machinery

-

20% on cost

Plant and equipment are shown in the statement of financial position at their historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the "acquisition and installation of the items. Subsequent costs are included in the asset's carrying amounts or recognised as a separate asset as appropriate only when it is probable that future economic benefits associated with them will flow to the company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement as incurred.

Depreciation is provided so as to write off the initial cost of each asset to its residual value on a straight-line basis over its estimated useful life as follows:

Plant and machinery - 5 years

The assets' residual values and useful lives are reviewed and adjusted, if appropriate, at each statement of financial position date. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount gains and losses on disposals are determined by comparing proceeds with carrying amounts. These are included in the income statement.

Impairment of assets

Assets that have an indefinite life are not subject to amortisation and are tested at least annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised in the income statement for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of the fair value less costs to sell and the value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

Financial instruments

Financial assets and financial liabilities are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) ate added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

All purchases or sales of financial assets are recognised and derecognised on a trade date basis.

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the . time frame established by regulation or-convention in the marketplace.

All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.

Classification of financial assets

Debt instruments that meet the following conditions are measured subsequently at amortised cost:

- the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; 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.

Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI):

- the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the 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.

By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL). Despite the foregoing, the Group may make the following irrevocable election/designation at initial recognition of a financial asset:

- the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if certain criteria are met (see (iii) below); and

- the Group may irrevocably designate a debt investment that meets the amortised cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch (see (iv) below).

(i) Amortised cost and effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period.

For financial assets other than purchased or originated credit-impaired financial assets (i.e. assets that are credit-impaired on initial recognition), the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected credit losses, through the expected life of the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt instrument on initial recognition.

For purchased or originated credit-impaired financial assets, a credit-adjusted effective interest rate is calculated by discounting the estimated future cash flows, including expected credit losses, to the amortised cost of the debt instrument on initial recognition. The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance. Interest income is recognised using the effective interest method for debt instruments measured subsequently at amortised cost and at FVTOCI.

For financial assets other than purchased or originated credit-impaired financial assets, interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-impaired (see below).

For financial assets that have subsequently become credit-impaired, interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset. If, in subsequent reporting periods, the credit risk on the credit-impaired financial instrument improves so that the financial asset is no longer credit-impaired, interest income is recognised by applying the effective interest rate to the gross carrying amount of the financial asset.

For purchased or originated credit-impaired financial assets, the company recognises interest income by applying the credit-adjusted effective interest rate to the amortised cost of the financial asset from initial recognition. The calculation does not revert to the gross basis even if the credit risk of the financial asset subsequently improves so that the financial asset is no longer credit-impaired. Interest income is recognised in profit or loss and is included in the "finance income" line item (note 9).

(ii) Debt instruments classified as at FVTOCI

Debt instruments held by the company are classified as at FVTOCI and are initially measured at fair value plus transaction costs. Subsequently, changes in the carrying amounts as a result of foreign exchange gains and losses (see below), impairment gains or losses (see below), and interest income calculated using the effective interest method are recognised in profit or loss. The amounts that are recognised in profit or loss are the same as the amounts that would have been recognised in profit or loss had they been measured at amortised cost. All other changes in the carrying amount are recognized other comprehensive income and accumulated under the heading of investments revaluation reserve. When they are derecognised, the cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss.

(iii) Equity instruments designated as at FVTOCI

On initial recognition, the company may make an' irrevocable election (on an instrument-by-instrument.basis) to designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognised by an acquirer in a business combination.

A financial asset is held for trading if:

- it has been acquired principally for the purpose of selling it in the near term; or

- on initial recognition it is part of a portfolio of identified financial instruments that the company manages together and has evidence of a recent actual pattern of short-term profit-taking; or

(iii) Equity instruments designated as at FVTOCI

- it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised . in other comprehensive income and accumulated in the investments revaluation reserve. The cumulative gain or loss is not be reclassified to profit or loss on disposal of the equity investments, instead, it is transferred to retained earnings.

(iv) Financial assets at FVTPL

Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI (see (i) to (iii) above)

- are measured at FVTPL, specifically:

- Investments in equity instruments are classified as at FVTPL, unless the company designates an equity investment that is neither held for trading nor a contingent consideration arising from a business combination as at FVTOCI on initial recognition (see (iii) above).

- Debt instruments that do not meet the amortised cost criteria or the FVTOCl criteria (see (i) and (ii) above) are classified as at FVTPL. In addition, debt instruments that meet either the amortised cost criteria or the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency (so called 'accounting mismatch') that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The company has not designated any debt instruments as at FVTPL.

Foreign exchange gains and losses

The carrying amount of financial assets that are denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period, specifically:

- for financial assets measured at amortised cost that are not part of a designated hedging relationship, exchange differences are recognised in profit or loss in the 'other gains and losses' line item;

- for debt instruments measured at FVTOCI that are not part of a designated hedging relationship, exchange differences on the amortised cost of the debt instrument are recognised in profit or loss 'in the 'other gains and losses' line item (note II). Other exchange differences are recognised in other comprehensive income' in the investments revaluation reserve;

- for financial assets measured at FVTPL that are not part of a designated hedging relationship, exchange differences are recognised in profit or loss in the 'other gains and losses' line item (note 10); and

- for equity instruments measured at FVTOCI, exchange differences are recognised in other comprehensive income in the investments revaluation reserve. '

Impairment of financial assets

The company recognises a loss allowance for expected credit losses on investments in debt instruments that are measured at amortised cost or at FVTOCI, lease receivables, trade receivables and contract assets, as well as on financial guarantee contracts. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.

The company measures the loss allowance for trade receivables, contract assets and lease receivables at an amount equal to lifetime expected credit loss (ECL). The ECL on trade receivables is estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor's current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of the conditions at the reporting date. For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, In addition, assessed for impairment on a collective basis.

For all other financial instruments, the company recognises lifetime EeL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the company measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.

Lifetime EeL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month EeL represents the portion of lifetime EeL. that is expected to result from default. events on a financial instrument that are possible within 12 months after the reporting date.

When a trade receivable is considered uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

Derecognition of financial assets

The company derecognises a financial. asset 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 of the asset to another entity. If the company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the company retains substantially all the risks and rewards of ownership of a transferred financial asset, the company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

On derecognition of a financial asset other than in its entirety (e.g. when the company retains an option to repurchase part of a transferred asset), the company allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance. with the substance of the Contractual arrangement,

Equity instruments

An equity instrument's any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the company are recognised at the proceeds received, net of direct issue costs.

Repurchase of the company's own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the company's own equity instruments.

Financial liabilities

Financial liabilities are classified as 'other financial liabilities.

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities 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, or, where appropriate, a shorter period, to "the net carrying amount on initial recognition.

Provisions

A provision is recognised in the statement of financial position when the company has a legal or constructive obligation as a result of a past event, where it is more likely than not that an outflow of resources will be required to settle that obligation, and a reliable estimate of the amount can be made

Where there are a number of similar obligations, the likelihood that an outflow will "be required in settlement is determined by considering the class of obligation as a whole. A provision is recognised even if the likelihood of an outflow with respect to anyone item included in the same class of obligation may be small.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost represents expenses incurred in bringing each product to its present location and condition. Net realisable value is based on estimated normal selling price, less further costs expected to be incurred in bringing the products to completion and disposal. Provision is made for obsolete and slow-moving items where appropriate.

Taxation

Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantially enacted by the statement of financial position date.

Foreign currencies

Foreign currency transactions are initially recorded at the exchange rate ruling at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at exchange rates ruling at the statement of financial position date of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Employee benefit costs

The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to the income statement in the period to which they relate.

Operating loss

Operating loss is stated before finance income, finance costs and foreign exchange.

Government grants

Government grants are recorded initially as deferred income and recognised in the income statement in line-with "the expense to which they contribute. For grants in respect of the purchase of property, plant and equipment, the deferred income is released over the life of the related assets. For grants in respect of staff costs, the deferred income is released over the monitoring period of the grant offer.

Pensions

The company operates a defined contribution pension scheme. The amounts charged to the income statement in respect of the scheme are the contributions payable in the period. Differences between the contributions payable in the period and contributions actually paid are shown as either accruals or prepayments in the statement of financial position.

3.

REVENUE

Business and geographical segments

2021

£'000

Analysis by destination

The revenue by destination was as follows:

Europe

6,711

Revenue arises from a single class of business.

Included in revenue are sales of approximately £6.7m to the company's largest customer.

Revenue from contracts with customers

IFRS 15 Revenue from Contracts with Customers introduced a five-step approach to revenue recognition. The company has applied IFRS 15 in accordance with the modified retrospective approach. IFRS 15 used the terms 'contract asset' and 'contract liability' to describe what might more commonly be known as 'accrued revenue' and 'deferred revenue' and the company has adopted this terminology to describe such balances.

The application of IFRS 15 has not had a significant impact on the financial position and/or financial performance of the company.

4.	OTHER OPERATING INCOME

£'000

Rents received

5

Government grants

104

109

During the year the above Job Retention scheme government support was received during the ongoing pandemic

There are no unfulfilled conditions attached to the above grants received.

5.	EMPLOYEES AND DIRECTORS

£'000

Wages and salaries

1,512

Social security costs

107

Other pension costs

52

1,671

The average number of employees during the period was as follows:

Production

59

Sales and administration

8

67

Included within salaries is an amount of £316,357 relating to redundancy costs in the year.

The total employee benefits of the ley management personnel for the company amounted to £185,262.

For the period ended 31 March 2021, the director was remunerated through the parent company, JTEKT Automotive UK Limited. It is not practicable to allocate their remuneration between their services as directors of this company and as directors or employees of other group companies. No pension costs in relation to the directors were payable in either financial period.

6.	LOSS BEFORE INCOME TAX

The loss before income tax is stated after charging:

£'000

Cost of inventories recognised as expense

5,349

Depreciation - owned assets

216

Loss on disposal of fixed assets

6

Auditors' remuneration

15

Foreign exchange differences

102

7.	INCOME TAX

Analysis of tax expense

No liability to UK corporation tax arose for the period.

8.	PROPERTY, PLANT AND EQUIPMENT

Plant and

machinery

£'000

COST

Additions

1,501

Disposals

(83

)

Reclassification/transfer

(406

)

At 31 March 2021

1,012

DEPRECIATION

Charge for period

216

Eliminated on disposal

(3

)

Reclassification/transfer

(61

)

At 31 March 2021

152

NET BOOK VALUE

At 31 March 2021

860

The reclassification in the year relates to fixed assets purchased which are now being held for resale and have therefore been transferred to inventories at the year end.

9.	INVENTORIES

£'000

Raw materials

1,096

Work-in-progress

103

Finished goods

364

1,563

10.	TRADE AND OTHER RECEIVABLES

£'000

Current:

Trade debtors

1,732

Other debtors

395

VAT

253

Prepayments and accrued income

14

2,394

11.	CASH AND CASH EQUIVALENTS

£'000

Bank accounts

1,152

12.	CALLED UP SHARE CAPITAL

2021

£'000

Called up, allotted and fully paid

Brought forward

-

Share issue in the year

3,000

Carry forward

3,000

3,000,000 ordinary shares of £1 each

The company has ordinary shares which carry no right to fixed income.

13.

RESERVES

Retained

earnings

£'000

Deficit for the period

(441

)

At 31 March 2021

(441

)

14.	TRADE AND OTHER PAYABLES

£'000

Current:

Trade creditors

1,537

Amounts owed to group undertakings

1,621

Social security and other taxes

36

Other creditors

148

Accruals and deferred income

35

3,377

15.	PROVISIONS

£'000

Other provisions

33

Analysed as follows:

Current

33

2021

£'000

Warranty provision

At beginning of accounting period

-

Increase/(decrease) in provision in the period

33

Utilisation of provision

-

At 31 March

33

The warranty provision is established to recognise known and expected claims against delivered products within the contractual guarantee periods for such sales. The expenditure is expected to be mainly incurred within 60 months of the statement of financial position date, i.e. the contractual warranty period.

16.	PENSION COMMITMENTS

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held in separate trustee-administered funds. Contributions made during the year amounted.to £52,168, there is no amount included in creditors in respect of unpaid contributions for either year.

17.	RELATED PARTY DISCLOSURES

During the year, the company entered into the following transactions with related parties:

2021

£'000

Related party income

JTEKT HPI SAS - Income

6,671

JTEKT Automotive UK Limited - rental income

5

At 31 March 2021, the balance owed by JTEKT HPI SAS was £1,731,664. This company is a subsidiary of JTEKT Corporation, the ultimate parent company of the group.

At 31 March 2021, there was a inter-company balance owed to the parent company, JTEKT Automotive UK Limited of £1,621,139.

18.	ULTIMATE CONTROLLING PARTY

The parent company is JTEKT Automotive UK Limited, a company registered in England and Wales, company number 03345292.

The company's ultimate parent and controlling party is JTEKT Corporation, a company registered in Japan and listed on the Tokyo stock exchange.

The largest and smallest group for which group financial statements are prepared is. that headed by JTEKT Corporation, whose place of business is at Postcode 542-8502, 5-8 Minamisemba 3-Chome Chuo-ku Osaka, Japan. Consolidated financial statements are available to the public and may be obtained from this address.

19.	FINANCIAL RISK MANAGEMENT

Credit risk management

Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the company. The company has adopted a policy of only dealing with credit worthy counter parties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The company's exposure and the credit ratings of its counter parties are continuously monitored and the aggregate value of transactions concluded are spread amongst approved counter parties.

The credit risk on liquid funds and derivative financial instruments is limited because the counter parties are banks with high credit-ratings assigned by international credit-rating agencies. The risk on trade debtors is also considered low as the companies under consideration are multinational companies with a stable financial position and with no history of non-payment. The inter-company loan is low risk as the repayments are guaranteed by the parent company JTEKT Corporation.

Market risk management

The company's activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The company enters into a variety of derivative financial instruments to manage its exposure to foreign currency risk.

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the company's short, medium and long-term funding and liquidity management requirements. The company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve. borrowing facilities, by continuously monitoring forecast and actual cash flows; .and by matching the maturity profiles of financial assets and liabilities