TIDMTIFS
RNS Number : 3059S
TI Fluid Systems PLC
16 March 2021
16 March 2021
TI Fluid Systems plc
Results for the 12 months ended 31 December 2020
TI Fluid Systems plc, a leading global manufacturer of
automotive fluid storage, carrying and delivery systems and thermal
management products and systems for light vehicles announces its
2020 results.
Management basis* As reported
EURm 2020 2019 Change 2020 2019 Change
----------- ----------- ---------- ----------- -------
Revenue 2,814.5 3,411.1 (596.6) 2,814.5 3,411.1 (596.6)
% Change at constant
currency (15.9)%
Adjusted EBIT / Operating
Profit or (Loss) 173.3 340.4 (167.1) (176.3) 258.9 (435.2)
Margin 6.2% 10.0% (3.8)% (6.3)% 7.6% (13.9)%
Adjusted Net Income or
(Loss) / Profit for the
year 13.7 150.3 (136.6) (252.2) 144.6 (396.8)
Earnings per share 2.64 28.91 (26.27) (48.88) 27.24 (76.12)
Adjusted Free Cash Flow** 148.2 180.2 (32.0)
Dividend (EUR cents) 6.74 3.02 3.72 6.74 3.02 3.72
*Management basis metrics are Non - IFRS measures as defined on
pages 24 to 25
** No equivalent GAAP measure - see table 8a for reconciliation
to statutory cash flow items
Group Highlights:
-- Demonstrated resilience through the unprecedented global
COVID-19 pandemic and ability to respond quickly as markets
recovered following one of the sharpest volume drops in the history
of automotive production
-- Results reflect continued delivery of the Group's proven
model with revenue performance broadly in line with market whilst
demonstrating effective cost flexibility, positive margins and
strong free cash generation despite volatile market dynamics:
-- Revenue broadly in line with global light vehicle production,
with revenue 15.9% lower year on year at constant currency compared
to a decline of 16.1% in global light vehicle production volumes.
At actual rates, revenue declined by 17.5% year on year
-- Solid Adjusted EBIT margin of 6.2% as a result of swift
action to control costs and despite revenue reduction; the
Operating Loss and margin reflected the exceptional impairment
charge taken at the half year
-- Outstanding Adjusted Free Cash Flow generation of EUR148.2
million and net cash generated from operating activities of
EUR374.4 million, supported by highly effective cash preservation
programme
-- Strong balance sheet and liquidity with cash position of
EUR485.8 million at 31 December 2020
-- Refinancing of term loan and revolving credit facilities,
extending the term from 2022 to 2024
-- A structural fixed cost reduction programme was announced and
commenced in the period to enhance the long term returns profile
resulting from a rebasing of the global light vehicle production
forecasts to lower levels in the short to medium term
-- A non-cash charge of EUR304.6 million impacting goodwill,
intangibles and fixed assets primarily relating to the 2015 Bain
purchase of TI Automotive resulted in a reported loss of EUR252.2
million for the period
-- Continued commitment to, and successful execution of, our
organic growth strategy and strategic focus on battery electric
vehicles ('BEVs') and hybrid electric vehicles ('HEVs')
-- Q4 2020 launches of Volkswagen's newly released ID.3 and ID.4
battery electric vehicles and additional new BEV business wins with
attractive content per vehicle ('CPV')
-- The Group estimates to have its product content on more than
two thirds of 46 key BEVs recently identified to come to market
between 2020 and 2022 with approximately 50% of these BEVs having
TIFS thermal product content*
-- Continued growth in the awarded CPV for BEVs from an average
of EUR120 per vehicle (EUR400 maximum) in 2018 to EUR135 (EUR480
maximum) in 2020
*Company estimates/ JP Morgan Europe Equity Research: EV Deep
Dive: European Focus 10 July 2020
-- Awarded the London Stock Exchange Green Economy Mark,
recognising that the Group generates over 50% of its revenue from
environmentally positive products, an endorsement of our
technologies and products that are helping vehicles become greener
and making the world a better place to live
-- Commitment to disciplined and proactive capital allocation to
drive strategy and shareholder returns:
-- Continued investment into product development in support of electrification strategy
-- Payment of an interim dividend of 6.74 Euro cents per share,
reflecting the Group's resilience and recovery in the year
-- Commitment to resume annual dividend payments for fiscal year
2021 in accordance with policy
COVID-19 Response
In response to the COVID-19 pandemic, the Group took a number of
steps early on to protect and prioritise the safety of our
employees, their families and our communities. This response
consisted of a global travel ban and the transition to remote work
for all applicable staff employees as well sequentially closing
production facilities as the pandemic spread to different regions
and our OEM customers closed their assembly plants. The Group also
implemented a detailed return to work protocol with enhanced
workplace and manufacturing measures such as social distancing,
improved hygiene procedures and modified shift patterns which
allowed us to safely re-open our facilities in order to support and
supply our OEM customers. As of 30 June 2020 all of the Group's
production facilities have re-opened.
In addition, to provide humanitarian support to front line
health workers, the Group collaborated with Ford Motor Co. and 3M
to prototype, develop and produce air flex tube assemblies for
powered air-purifying respiratory systems (PAPR). The Group was
able to rapidly leverage its design and manufacturing capabilities
to mass produce quick connectors and a new 'one size fits all' air
flex tube solution for the PAPR system to meet the urgent demand of
much needed protection for health care workers.
William L. Kozyra, Chief Executive Officer and President,
commented:
"2020 saw the impacts of an unprecedented global economic
downturn resulting from the widening of the COVID-19 pandemic. The
Group acted quickly, beginning in early March, to implement
safeguards to protect the health of our employees together with
cost savings and cash preservation measures to protect the
viability of our business. Our actions were executed quickly and
encompassed every aspect of our business. In 2020, we delivered
revenue broadly in line with global light vehicle production,
positive margins and strong free cash flow generation despite the
significant headwinds. Our balance sheet, liquidity and cash
positions remain strong. These actions and initiatives were
significant and will continue to assist the Group's financial
performance beyond 2020. We are pleased to have been awarded the
London Stock Exchange's Green Economy Mark as further recognition
of the positive environmental impact our product technologies are
providing to help make cars greener and the world cleaner.
Environmental, Social and Governance ('ESG') remains central to our
strategy and company purpose. This year we also made steady
progress on our electrification strategy and continue to win
significant thermal business for regional BEV programmes with
multiple global customers and gain share in HEV fuel tanks with the
award of a high volume pressure resistant HEV fuel tank programme
with a European OEM customer in Europe. The Group is well
positioned on BEVs launching in the market today and over 2020-2022
has a solid share of new thermal product content on key BEV
programs coming to market. We have initiated many new collaboration
projects with key customers, including in China, to reduce weight,
and maximise efficiency, through integrated thermal products and
systems. The Group is well positioned for the automotive megatrends
of reduced emissions and electrification.
The Group demonstrated its business resilience in 2020 during
one of the biggest declines the global automotive market has faced
in modern history. We remain confident in our strategy, business
model resilience, operating flexibility and strength in our ability
to generate positive profit and positive free cash flow in
2021."
Results presentation
TI Fluid Systems plc will host a teleconference for analysts and
investors at 9.00 am UK time on 16 March 2021.
Conference Call Dial-In Details:
UK: +44 (0) 330 336 9105
Conference Code: 5196922
The presentation will be available at 7:00 am UK time from
www.tifluidsystems.com. An audio recording will be available on our
website in due course.
Enquiries
TI Fluid Systems plc
David J Royce
Investor Relations
Tel: +1 (248) 376 8624
FTI Consulting
Richard Mountain
Nick Hasell
Tel: +44 (0)20 3727 1340
Chief Executive Officer's review
We are pleased to report overall solid performance in 2020
despite what has proven to be one of the most challenging years in
the history of global vehicle production and as every business and
person across the globe has had to manage through the effects of
the COVID-19 health pandemic.
COVID-19 response
The World Health Organization declared the COVID-19 outbreak a
pandemic in March 2020 with the virus then spreading to more than
200 countries, resulting in severe public health and economic
consequences. The Group's priority from the onset of COVID-19 was
to secure the health and safety of our employees and preserve the
viability of our business. Early in March we implemented a global
work from home mandate together with a global travel ban, well
ahead of other auto suppliers and OEMs. We also quickly upgraded
our IT systems to ensure that our employees could work remotely to
continue to effectively and safely manage our business.
We sequentially closed our manufacturing facilities around the
world in accordance with local public health orders and in close
coordination with our OEM customers. We then re-opened those
facilities safely with enhanced health and safety protocols such as
temperature checks, protective face coverings, social distancing,
improved hygiene procedures and modified work proximities and
altered shift patterns. These efforts greatly limited the impact of
COVID-19 infection among our employees and enabled all of the
Group's production facilities to operate safely and to continue to
supply our OEM customers with only very minor disruptions.
Thanks to these steps, no COVID-19 infections have been traced
to TI Fluid Systems facilities. The health and safety of our
workforce remains our number one priority.
In addition, in March 2020, our management team implemented
aggressive cost reduction and cash preservation measures to
safeguard the Group's 2020 financial performance and cash
balances.
Our COVID-19 response extended beyond our employees with the
donation of protective face masks, hand sanitation supplies and
other personal protection equipment to support those communities
where we operate. We also are proud to have participated in the
accelerated development and supply of our 'one size fits all' air
flex tube solution for the Ford/3M powered air-purifying
respiratory systems ('PAPR') which helped meet the need for
protective equipment for front line health care workers in the
United States.
2020 performance
Global light vehicle production volume declined significantly by
16.1% in 2020, compared to the prior year. We delivered revenue of
EUR2.8 billion (-15.9% at constant currency), or 0.2%
outperformance of global light vehicle production. If we include
the impact of currency translation, revenue declined by 17.5%.
We also continued to generate strong Adjusted EBITDA of EUR331
million (11.8% margin) and Adjusted EBIT of EUR173 million (6.2%
margin). Loss for the year was EUR252 million (2019: EUR145 million
Profit) and Adjusted Free Cash Flow amounted to EUR148 million
(2019: EUR180 million). These strong results compared well in our
sector.
Our ability to maintain our strong financial performance with
solid margins and excellent positive cash flow in the face of the
prevailing market conditions demonstrates the Group's resilience
and the strength of our strategy, business model and management
focus.
Strategy update
In 2020, while managing through the COVID-19 crisis, we
continued the successful execution of our business strategy. Our
financial performance benefited from our commitment, focus and
dedication to designing and producing products and systems for
greener vehicles. We also continue to benefit from operational
flexibility and our balanced customer, platform and regional
profile. We continue to be confident in our focus on
electrification and on delivering our hybrid electric vehicle
('HEV') and battery electric vehicle ('BEV') strategy which is
progressing very well and continuing our commitment to helping make
vehicles greener and the world a greener, cleaner and better place
to live.
Use our strength in key product areas to drive the Group's
market position in the BEV market
In 2020, we were pleased to see the continued results of the
successful execution of our organic growth strategy and focus on
the transition to BEVs.
We were proud to announce at the half year that the Group
estimates to have significant content representation on key BEV
platforms. Specifically, we estimate that the Group has product
content on more than 30 of 46 key BEV programmes recently announced
to go into production between 2020 and 2022. Importantly,
approximately 50% of these BEVs will have thermal product content
supplied by the Group.
Of particular note, in the fourth quarter of 2020, we launched
production of a range of products for thermal fluid management on
Volkswagen's newly introduced ID.3 and ID.4 BEVs. In addition to
supplying Volkswagen various thermal coolant assemblies, we are
also proud to be the sole supplier of the cabin comfort CO(2) heat
pump valve unit assembly on this BEV platform, an exciting new
technology which delivers increased operating efficiency and
supports extended EV driving range over that of a traditional
refrigeration-based cabin comfort system.
As further evidence of the Group's positive transition to
electrification, we are pleased to see the continued growth in our
awarded content per vehicle ('CPV') for BEVs. CPV for new BEV
business wins have increased from an average of EUR120 per vehicle
and a maximum of EUR400 per vehicle in 2018 to an average of EUR135
per vehicle and maximum of EUR480 per vehicle in 2020, clearly
illustrating the upside contribution to the Group's growth provided
by the transition to electrification.
The Group also continues to win new business awards for BEV
programmes with a wide range of global and regional OEMs across all
three major light vehicle production regions. These continued wins
further demonstrate our ability to meet the fluid handling and
thermal management needs of all propulsion modes including
electrification.
I am confident that the Group is now, and will continue to be, a
market leader in providing EV fluid handling solutions.
Use our technology to support the growing hybrid electric
vehicle (HEV) market
In 2020, the Group was pleased to introduce a new generation
pressure resistant plastic fuel tank with the launch of volume
production for Volkswagen in China on the Passat and Magotan
Plug-in HEV models. Volkswagen is planning to adopt our high
pressure tanks across a wider range of global platforms.
This innovative technology represents the culmination of
collaborative design, rigorous testing and vehicle evaluations by
Volkswagen and TI development teams across China and Europe.
Conventional fuel tanks operate at atmospheric pressure while the
new generation of plug-in HEV models require fuel tanks that are
able to resist cyclic pressure up to 500 mbar when in certain full
electric driving modes. To resist in-tank pressure, the new TI
design solution introduces overmoulded ball pins with snap-fit
column structures that use the Group's patented split parison blow
moulding manufacturing process. Our design and technology provides
a lightweight plastic solution for HEVs that overcomes the
disadvantages of competing tanks that utilise internal welded
structures. Our pressure resistant HEV fuel tank continues to be
well recognised as an industry leading design and our win rate of
HEV fuel tanks is increasing.
Maintain balanced customer, platform, regional and product
diversification
The Group has highly diversified revenue with no dependency on
one geography. In 2020, we generated approximately 38% of our
revenue in Europe and Africa, 35% in Asia Pacific, 26% in North
America and 1% in Latin America. This diversification continues to
be a benefit for the Group.
We believe that the Group's long history of engineering and
manufacturing high-quality, reliable, performance-critical products
for global OEMs has built our positive reputation as an industry
leader and allowed us to develop strong and lasting relationships
with all of our customers. The Group has a highly diversified
customer base of global and local OEMs with only three customers,
individually, representing more than 10% of revenue in 2020.
Given our deep industry experience and history, we have gained
familiarity with each of our customers' unique engineering, design
and development processes. As a result, the Group is viewed as a
'trusted partner' by our OEM customers.
We continue to enhance our strategic position through
collaboration and development projects with key customers for the
design and engineering of thermal products for HEVs, BEVs and, most
recently, autonomous driving electric vehicles ('AEV'). We have
development projects across different platforms and regions,
including China, as we continue to work with OEMs to reduce weight
in the vehicle and increase efficiency through our thermal products
and systems that take advantage of our technology and nylon
capabilities.
Strengthen the Group's position as an advanced technology leader
in fluid systems to meet industry megatrends
As the requirements of OEMs have continued to advance, the Group
has capitalised on its extensive knowledge of fluid components,
lighter weight materials, systems architecture and manufacturing
processes to provide our OEM customers with more advanced designs
and products to assist them to meet regulatory requirements and
consumer expectations. Most of our products contribute to a cleaner
world by making vehicles greener.
The Group continues to invest in its fluid management portfolio
to include advanced products that are required to reduce emissions
and improve fuel economy in vehicles such as pressure resistant
fuel tanks and thermal management products for EVs.
Capitalise on the Group's global scale, footprint and
position
The Group has significant manufacturing presence in all of the
major geographies for OEM vehicle production. In 2020, the Group
had 107 locations across 28 countries on five continents. Being in
close proximity to our OEM customers serves the Group very
well.
With respect to China, we were able to successfully flex our
cost base to mitigate the impact of the ongoing US-China trade
conflict and protect our financial performance, particularly our
Fluid Carrying Systems ('FCS') division which has had a large
presence in China for decades. Our Fuel Tank & Delivery Systems
('FTDS') division continues to grow in China, benefiting from the
ongoing conversion of heavy steel fuel tanks to lighter weight
plastic fuel tanks as well as tighter emission standards that are
creating higher demand for our partial and zero emission fuel
tanks.
In 2020, China made up 23% of the Group's revenue. The Group
enjoys 14 wholly-owned manufacturing facilities in China. China
remains the world's largest vehicle market despite the short-term
volatility in volumes.
Deliver strong growth, profitability and cash flow
generation
The Group has a consistent record of delivering strong financial
results.
In 2020, we successfully demonstrated the Group's resilient
performance in the face of an unprecedented global COVID-19
pandemic and related economic downturn. We instituted a significant
cost savings and aggressive cash preservation programme early in
the year to protect the Group's near-term viability. In addition,
we initiated a structural fixed cost reduction programme in the
period to address long-term viability resulting from a potential
prolonged reduction of global light vehicle production, closing six
plants fully and two plants partially. These actions have
consolidated production capacity in order to manage the short-term
volume recovery to continue to support the competitive performance
of the Group and our OEM customers.
Our people
The Group relies on the skills and expertise of its excellent
employees worldwide, and the results of 2020, would not have been
achieved without the commitment and dedication of our entire global
team, whom I would like to recognise and sincerely thank.
Our strength as a global tier one automotive supplier is
directly tied to the talent and diversity of our staff, management
and Board leadership. We are committed to treating individuals with
respect and to building and maintaining a culture that values and
promotes ethical business practices, compliance, diversity and
inclusion. We welcome employees with diverse perspectives who share
our vision of a world marked by knowledge and compassion. During
2020, the Group progressed with its Diversity and Inclusion
initiative by establishing a D&I committee and assessing 100 of
our top 300 managers/Directors.
I could not be more proud of our 25,700 employees for their
outstanding personal commitment to the Group in 2020. A big thanks
to all employees for their loyal support of TI and myself. Our
people are our greatest strength.
Leadership changes
As previously announced, I will be retiring as Chief Executive
Officer and stepping down from the Board of Directors later this
year.
Hans Dieltjens, who is currently Chief Operating Officer, will
become the Company's new Chief Executive Officer. Hans has a
Master's degree in Electro/Mechanical Engineering along with 25
years of automotive experience in Asia, Europe and the Americas. I
am very pleased and fully supportive of the Board's decision to
appoint Hans as my successor. During the 12 years that Hans and I
have worked together, he has continued to develop his leadership
and strategic ability and is now ready to take on this very
important role for our Company. I am confident the Group will
continue its success under Hans' leadership.
I could not be prouder of the tremendous success the Group has
achieved during my tenure as CEO, especially navigating through two
global crises (2008 and 2020) while also developing exciting new
products for the emerging electric vehicle market. I also sincerely
appreciate the trust and support that I and the Company have
received from all of our shareholders since we listed on the London
Stock Exchange three years ago.
While the leadership of the Company is changing, the Group's
mission and purpose remains the same. Our Company's successful DNA,
our Core Values, are deeply embedded in all of our great employees.
TI Fluid Systems will continue to be a leading global manufacturer
of highly engineered fluid and thermal management systems that
enable vehicle manufacturers to sustainably reduce CO(2) emissions
and improve fuel economy across all vehicle types, especially
hybrid and battery electric vehicles.
We look forward to continuing to support our world's transition
to greener vehicles and keeping our environment clean, making our
world a better place to live.
Looking ahead
We continue to build on and invest in our leadership in
technology, global manufacturing and competitive cost structure to
support long-term revenue growth, profitability and cash flow
generation.
The impact of the COVID-19 pandemic remains a factor to manage
across the regions we operate. We continue to monitor the situation
and are confident that our enhanced workplace protocols and
approaches are effective to assist in managing the impact which is
likely to remain in the short term. Over the longer term, we expect
to benefit not only as global light vehicle production continues to
grow, but also from increased demand for our advanced fluid
handling products and systems and higher content opportunities
driven by the underlying megatrends of emission reduction,
increased fuel efficiency and electrification. These megatrends
will continue to be front and centre for our sector.
We prioritise variable and fixed cost management and capital
allocation to deliver sustainable growth.
We believe the Group's strong customer relationships, extensive
global footprint and trusted reputation as a leading fluid systems
provider have contributed to thermal BEV collaboration agreements,
HEV and BEV production contracts and will support continued growth
in these markets for many years to come.
While many uncertainties and challenges will continue in 2021, I
remain excited about the path we are on and the Group's ability to
be successful as global production volumes recover and hybrid and
battery electric vehicles gain market share.
Recognition of products and technology that support the green
economy
The TI Group is committed to sustainability by developing
advanced products that contribute to a cleaner world. We are
pleased and proud to have been awarded the London Stock Exchange's
Green Economy Mark in recognition of the positive environmental
impact our product technologies have by helping make cars greener.
At the same time, we strive to consistently operate our business in
a manner that minimises our impact on the environment though energy
efficiency, waste reduction and conservation of resources. We are
dedicated to promoting a cleaner and greener world.
Bill Kozyra
Chief Executive Officer and President
15 March 2021
Chief Financial Officer's Report
In 2020, we have continued to demonstrate our financial
resilience amidst the impact of the COVID-19 pandemic and global
automotive rapid volume declines and extreme volatility. With our
revenue performance in line with global light vehicle production,
we delivered respectable margins and strong cash generation.
Appropriate responsive restructuring actions were initiated across
both Divisions and we also extended the maturity of our borrowing
facilities to underpin our strong liquidity position.
Table 1: Key Performance measures EURm
Management basis* As reported
2020 2019 Change 2020 2019 Change
----------- ----------- ----------- ----------- -----------
Revenue 2,814.5 3,411.1 (596.6) 2,814.5 3,411.1 (596.6)
% Change at constant currency (15.9)%
Adjusted EBITDA 330.9 497.8 (166.9)
Margin 11.8% 14.6% (2.8)%
Adjusted EBIT / Operating
(Loss) or Profit 173.3 340.4 (167.1) (176.3) 258.9 (435.2)
Margin 6.2% 10.0% (3.8)% (6.3)% 7.6% (13.9)%
Adjusted Net Income / (Loss)
Profit for the year 13.7 150.3 (136.6) (252.2) 144.6 (396.8)
Earnings per share (EUR
cents) 2.64 28.91 (26.27) (48.88) 27.24 (76.12)
Adjusted Free Cash Flow
** 148.2 180.2 (32.0)
Dividend (EUR cents) *** 6.74 3.02 3.72 6.74 3.02 3.72
*Management basis metrics are Non - IFRS measures as defined on
pages 24 to 25
**No equivalent GAAP measure - see table 8a for reconciliation
to statutory cash flow items
***2019 Dividend represents the Interim dividend as the Final
dividend was not approved for payment in the AGM
Global light vehicle production is the principal driver of the
Group's performance. In 2020, global light vehicle production
decreased significantly to 74.6 million vehicles or by 16.1%
compared to the prior year.
Revenue decreased by EUR532.3 million, or 15.9% year over year
on a constant currency basis, to EUR2,814.5 million, broadly in
line with global light vehicle production, or 0.2% outperformance
in 2020. If we include the negative impact of currency of EUR64.2
million, reported revenue declined by EUR596.6 million, or 17.5%
year over year.
We generated Adjusted EBIT of EUR173.3 million with a margin of
6.2%, a reduction of 380bps from the prior year Adjusted EBIT
margin. The decline in margin is directly related to the conversion
of lower sales arising from the impacts of COVID-19. Similarly, we
incurred an operating loss of EUR176.3 million compared to an
operating profit of EUR258.9 million in the prior year mainly due
to the exceptional impairment charge of EUR304.6 million in
addition to the conversion of lower sales. This is discussed in
more detail in the Operating Profit, Adjusted EBITDA and Adjusted
EBIT section of this report.
Adjusted Net Income fell EUR136.6 million to EUR13.7 million,
compared to EUR150.3 million in the prior year. The reported loss
for 2020 was EUR252.2 million compared to EUR144.6 million profit
in 2019. Basic EPS was (48.88) Euro cents (2019: 27.24 Euro cents)
and Adjusted Basic EPS was 2.64 Euro cents, a decrease from 28.91
Euro cents in 2019. In spite of the significantly lower global
light vehicle production volumes and uncertainties related to the
global COVID-19 pandemic, 2020 was also another year of strong cash
flow performance, where we delivered Adjusted Free Cash Flow of
EUR148.2 million (2019: EUR180.2 million). This strong cash
performance resulted in our reported cash and cash equivalent
balances increasing by EUR110.6 million (2019: EUR48.2 million)
before currency translation and a year-end cash balance of EUR485.8
million (2019: EUR411.7 million). We ended the year with net debt
of EUR590.0 million (2019: EUR738.3 million).
Automotive Markets
Global light vehicle production volumes declined significantly
by 16.1% in 2020 to 74.6 million vehicles as shown in table 2 - an
unprecedented fall due to the impact of COVID-19. The reduction was
across all major regions of the world with the deepest decline
occurring in the month of April at (61.5)% compared to the same
month in 2019. Global production was significantly affected in the
first half of the year, with volumes falling by (32.3)% compared to
the first half of 2019, and markets started to recover in the
second half, with volumes increasing by 0.5% compared to the second
half of 2019.
Table 2: Global light vehicle production volumes: millions of
units
2020 % Change
Europe, including Middle East and Africa 18.3 (20.8)%
Asia Pacific 41.1 (11.3)%
North America 13.0 (20.2)%
Latin America 2.2 (31.4)%
-------------------------------------------- ---- ------
Total global volumes 74.6 (16.1)%
-------------------------------------------- ---- ------
Source: IHS Markit, February 2021 and Company estimates
Change percentages calculated using unrounded data
Revenue
Our revenue in each of the regions and by segment is included in
table 3.
Table 3: Revenue by region and by segment EURm
% Change
at constant
2020 2019 Change % Change currency
Total Group Revenue 2,814.5 3,411.1 (596.6) (17.5)% (15.9)%
By Region
Europe and Africa 1,077.5 1,368.6 (291.1) (21.3)% (21.0)%
Asia Pacific 982.5 1,030.6 (48.1) (4.7)% (2.5)%
North America 714.7 936.7 (222.0) (23.7)% (22.2)%
Latin America 39.8 75.2 (35.4) (47.1)% (29.6)%
By segment
Fluid Carrying Systems ("FCS") 1,526.9 1,917.6 (390.7) (20.4)% (18.4)%
Fuel Tank and Delivery Systems
("FTDS") 1,287.6 1,493.5 (205.9) (13.8)% (12.7)%
Group revenue in 2020 was EUR2,814.5 million, a decrease of
15.9% year over year at constant currency and when compared to the
global light vehicle production decrease of 16.1% over the same
period resulted in a 0.2% outperformance.
In Europe and Africa, revenue at constant currency declined by
21.0% year over year compared to a similar light vehicle production
decline of 20.8%. This slight underperformance was driven by the
ramp down of some programmes which offset the benefit of the
successful launch of new HEV/BEV programmes for both FTDS and FCS.
In the region we aligned with our customers production shut downs
and temporarily ceased operations in our factories to minimise risk
to employee well-being and also control costs. The volume recovery
in the second half of the year was tempered by the activity impact
of subsequent waves of the pandemic.
In Asia Pacific, revenue at constant currency declined by 2.5%
year over year compared to light vehicle production decline of
11.3%, for a strong outperformance of 8.8%. The Group generated 23%
(2019: 19%) of its total revenue in China, benefiting from our
long-standing market position in our brake and fuel lines business
within our FCS division and continued growth in fuel tank business
within the FTDS division. The high market share for FCS in China
meant that revenue was more impacted by the general volume decline
in China, whereas FTDS continues to benefit from successful
business launches of conventional plastic fuel tanks and HEV
pressure resistant fuel tanks and this segment enjoyed double digit
year over year growth.
In North America, revenue at constant currency declined by 22.2%
year over year compared to light vehicle production decline of
20.2%, a 2.0% underperformance. The main impact for this region was
programme ramp downs in the FCS division, and the continued impact
of our lower share of the popular large truck/SUV platforms.
FCS revenue declined by EUR390.7 million, 18.4% at constant
currency from the prior year to EUR1,526.9 million, an
underperformance of 2.3% when compared to global light vehicle
production. The FCS revenue performance is driven by unfavourable
regional mix, with powertrain programme ramp downs in North America
region offsetting the benefit of successful launches of thermal
programmes in Europe and Asia Pacific.
FTDS revenue at constant currency decreased by 12.7% to
EUR1,287.6 million, outperforming global light vehicle production
by 3.4%. This performance is heavily influenced by outperformance
of 0.5% and 16.9% in Europe and Asia Pacific, respectively, which
account for over 80% of FTDS sales in 2020. Notably our sales in
Asia Pacific saw positive growth over 2019 at constant currency of
5.6%, reflecting the benefits of programme launches and ramp ups in
China and Korea and favourable mix.
Currency exchange rates had a net adverse impact of EUR64.2
million on revenue compared with the prior year. This was mostly
due to strengthening of the Euro against the US dollar and other
key currencies in countries where the Group has manufacturing
operations. Accordingly, revenue declined by 17.5% to EUR2,814.5
million at reported rates. Table 4 below sets out the movement in
exchange rates most relevant to our operations.
Table 4: Exchange Rates
31 December 31 December
Key Euro exchange rates 2020 Average 2019 Average % Change 2020 2019 % Change
======================== ============ ============ ========== =========== =========== ==========
US dollar 1.141 1.120 1.9% 1.224 1.122 9.1%
======================== ============ ============ ===== =========== =========== =====
Chinese renminbi 7.869 7.731 1.8% 7.988 7.815 2.2%
======================== ============ ============ ===== =========== =========== =====
South Korean won 1,344 1,304 3.1% 1,331 1,295 2.8%
======================== ============ ============ ===== =========== =========== =====
Operating profit, Adjusted EBITDA* and Adjusted EBIT*
We use several financial measures to manage our business,
including Adjusted EBITDA and Adjusted EBIT, which are non-IFRS
measures, but are measures of profitability that have been used
consistently by the Group and give insight into the operating
performance of the business. The metrics are also used in certain
of our compensation plans and to communicate to our investors.
Table 5 shows a reconciliation between the reported measure,
operating profit, Adjusted EBITDA and Adjusted EBIT.
Table 5: Calculation of Adjusted EBITDA* and Adjusted EBIT*
EURm
2020 2019
Operating (loss) / profit (176.3) 258.9
Depreciation and impairment of PP&E 104.6 108.6
Depreciation and impairment of right-of-use assets 31.9 31.5
Amortisation and impairment of intangible assets 76.7 89.8
Share of (loss)/profit of associates (3.5) 0.3
Exceptional impairment 304.6 -
------------------------------------------------------- ------- -------
EBITDA 338.0 489.1
Net foreign exchange gains (27.2) (0.5)
Dividend received from associates 0.5 0.5
Net restructuring costs 16.1 9.0
Share of loss/(profit) of associates 3.5 (0.3)
Adjusted EBITDA 330.9 497.8
------------------------------------------------------- ------- -------
Less:
Depreciation and impairment of PP&E (104.6) (108.6)
Depreciation and impairment of right-of-use assets (31.9) (31.5)
Amortisation and impairment of intangible assets (76.7) (89.8)
Add back:
Depreciation uplift arising on purchase accounting 12.9 14.5
Amortisation uplift arising on purchase accounting 42.7 58.0
------------------------------------------------------- ------- -------
Adjusted EBIT 173.3 340.4
------------------------------------------------------- ------- -------
* See Non-IFRS measures
The operating loss of EUR176.3 million (2019: EUR258.9 million
profit) includes the impact of the exceptional impairment charge of
EUR304.6 million recognised in the first half of 2020 following a
full impairment review triggered by the significant change in
projected volumes and forecast cash flows projected at that time.
Note 9 provides further detail of this charge, the basis of its
determination and confirmation that no further charge has been
required following the Group's full year annual impairment review.
The latest global light vehicle production volume projections
indicate volumes return to 2019 levels slightly earlier in the
forecast period than the data used for the June 2020 impairment
review. Our future cash forecasts are also ahead of those used to
underpin the impairment charge recognised. As market uncertainties
still remain and until this recovery is sustained and prolonged, we
do not anticipate reversing any of the impairment charge
recognised. The impact of the impairment charge, recognised in
terms of lower depreciation and amortisation, was EUR6.9 million on
the operating loss and EUR5.7 million on Adjusted EBIT.
The Operating Loss was also impacted by conversion on the lower
revenues caused by the COVID-19-related market impacts with
inefficiencies in the production processes due to lower and
inconsistent volumes in addition to COVID-19-related working
protocols to comply with appropriate distancing and cleanliness
provisions. In response to the COVID-19 pandemic, projected market
volume outlook and to strengthen our business performance in the
future, we incurred restructuring charges of EUR16.1 million
related to permanent headcount reductions across all our businesses
and the planned closure and downsizing of eight of our
manufacturing plants in Europe, North America and Latin America.
Four plant closures were completed in 2020, the remaining closures
will commence in 2021.
Active cost management actions in the year included utilising
local government economic support regimes which included, but was
not limited to, the use of furlough and short-term working schemes,
2020 reductions in social costs and rental and utility cost
reliefs. Economic support payments received direct from government
authorities amounted to a net EUR32 million and any payroll support
was fully passed on to employees. Additionally, employment costs
totalling EUR10 million were avoided in 2020 as national
governments directly funded these costs to employees. In the year
short-term employee agreed salary reductions of EUR3.7 million
helped manage cash costs, though these were repaid in full during
the year.
Amortisation of intangible assets was EUR13.1 million lower due
to EUR14.0 million relating to some of the assets recognised on the
Bain acquisition becoming fully amortised in the prior year and
EUR2.0 million reduced charge in the second half of the year as a
result of the impairment mentioned above, partially offset by
higher local impairments in 2020.
Adjusted EBITDA was robust at EUR330.9 million (2019: EUR497.8
million) and Adjusted EBITDA margin was 11.8% (2019: 14.6%) with
the major impact being lower operating profit as a result of
conversion on lower revenue, partially offset by reduction in
overhead costs as a result of cost saving measures in response to
COVID-19. We continue to manage our costs in line with the reduced
volumes in order to minimise the impact on margins. The EUR16.1
million net restructuring charges comprised EUR19.5 million in
respect of headcount reduction actions, plant closure and
downsizing with an associated headcount reduction of 1,059 offset
by a EUR3.4 million gain arising from the land and building
disposals associated with FCS plant closure actions. By region, the
restructuring charges borne in Europe (EUR12.4 million), Latin
America (EUR2.0 million), Asia Pacific (EUR1.5 million) and North
America (EUR3.6 million) were offset by the land and building
disposal gains in North America (EUR3.4 million). The segmental
impact to FCS and FTDS was EUR7.0 million and EUR9.1 million
respectively. At the end of 2020 there was a restructuring
provision of EUR11.0 million (2019: EUR5.1 million).
Adjusted EBIT was EUR173.3 million (2019: EUR340.4 million) and
Adjusted EBIT margin was 6.2% (2019: 10.0%). This change was
impacted by lower Adjusted EBITDA as described previously. During
the year there were programme specific impairment charges of EUR9.2
million (2019: EUR3.5 million), EUR2.9 million in FCS and EUR6.3
million in FTDS.
By segment, FCS Adjusted EBIT was EUR97.2 million (2019:
EUR199.4 million) with Adjusted EBIT margin of 6.4% (2019: 10.4%).
FCS continues to achieve positive margins despite the prevailing
market environment. The year over year decline in margin reflects
the volume reduction particularly in Europe and North America. Asia
Pacific margin remains strong as the region recovered earlier from
factory shutdowns when compared to other regions. The 2019 Adjusted
EBIT included EUR12.0 million benefit arising from the US pensions
settlement and Brazilian indirect tax compensation, and was only
partially repeated in 2020 from a further US pension settlement
amounting to EUR1.6 million.
FTDS Adjusted EBIT decreased by EUR64.9 million to EUR76.1
million (2019: EUR141.0 million) with Adjusted EBIT margin of 5.9%
(2019: 9.4%). The decrease in margin reflects the conversion of the
significantly reduced revenues as a result of COVID-19. Asia
Pacific margin also remains strong, benefiting from new business
launches in the fuel tanks business. The 2019 Adjusted EBIT
included EUR1.9 million benefit arising from the US pensions
settlement which was only partially repeated in 2020 from the
further US pension settlement amounting to EUR0.5 million.
As a direct consequence of unwinding the Group's hedging
programme in March 2020 to release 'in the money' contractual
positions to cash, the Group has benefited from the translation
impact on unhedged non-Euro currency inter-company loan positions.
This is the primary constituent of the EUR27.2 million foreign
exchange gain arising in 2020.
Net finance expense
Net finance expense for the year was EUR74.0 million, an
increase of EUR16.5 million from the prior year. The increase was a
result of a hedge ineffectiveness loss of EUR7.1 million from the
early close out of certain cash flow hedges at the end of March
2020, as part of the Group's cash preservations measures (2019:
EUR0.2 million), which also gave rise to EUR1.3 million fair value
net gains on derivatives and foreign exchange contracts not in
hedged relationships (2019: EUR10.2 million). The Group realised
cash proceeds of EUR15.9 million on termination of these
derivatives and in total received EUR16.6 million in the year from
these arrangements.
Taxation
The Group income tax charge, before exceptional items, is
EUR28.1 million, down EUR29.0 million over 2019. This reduction
results in an increase in the Effective Tax Rate to 55.3% (2019:
28.3%) on Group Profit Before Tax of EUR50.8 million. Adjusting for
the one-off effect of the 2019 EUR12.2 million tax credit
associated with the US Research and Experimentation claim and the
impact of accounting for associates on an after tax basis, the 2020
Effective Tax Rate is 51.7% (2019: 34.4%). The unusually high
effective tax rate is reflective of the mix effect of the
significant drop in the level of profits generating a tax charge
and a stable level of losses where no deferred tax asset is
recognised. The effective tax rate for those entities which are
ordinarily subject to tax or where deferred tax assets are
recognised is broadly consistent year-on-year, 24.6% (2019: 26.4%),
despite the fall in the absolute level of net profits. The level of
losses not subject to a tax charge was EUR38.7 million (2019:
EUR36.0 million). More detail is available in Note 6.
The 2020 Adjusted Effective Tax Rate is 42.6% (2019: 32.3%). The
Adjusted Effective Tax Rate, as shown in table 6, adjusts for the
impact of the UK accounting loss of EUR26.4 million (2019: EUR35.0
million) on which no tax benefit is recognised and the net prior
year tax charge movements of EUR6.3 million (2019: EUR19.3
million). The increased Adjusted Effective Tax Rate of 42.6%
reflects the adjusted income tax charge of EUR34.4 million on
adjusted Group Profit Before Tax of EUR80.7 million.
Table 6 shows the calculation of the Effective and Adjusted
Effective Tax Rates.
Table 6: Calculation of Effective and Adjusted Effective Tax
rates* EURm
Amounts in the table below do not include the exceptional
impairment charge of EUR304.6 million and exceptional tax benefit
of EUR29.7 million.
2020 2019
Profit Profit
before before
tax Tax charge Tax rate tax Tax charge Tax rate
As reported 50.8 (28.1) 55.3% 201.7 (57.1) 28.3%
Add back:
Share of associate loss/(profit) 3.5 (0.3)
Prior year tax benefit
related to US R & E
claims - (12.2)
------- ---------- ---------- ------- ---------- ----------
54.3 (28.1) 51.7% 201.4 (69.3) 34.4%
Less:
UK accounting loss** 26.4 35.0
Prior year deferred
tax charge (0.7) 5.0
Prior year corporate
tax benefit (5.6) (12.1)
--------------------------------- ------- ---------- ---------- ------- ---------- ----------
Adjusted 80.7 (34.4) 42.6% 236.4 (76.4) 32.3%
--------------------------------- ------- ---------- ------ ------- ---------- ------
*See Non-IFRS measures
** UK accounting loss is not tax effected due to the UK
historical tax loss position
The 2020 exceptional impairment charge of EUR304.6 million has
an associated deferred tax credit of EUR29.7 million, an effective
tax rate of 9.8%. The lower effective tax rate is due to the fact
that the majority of the impairment is related to goodwill that
does not carry a deferred tax balance and therefore this portion of
the impairment is not tax effected.
Adjusted Net Income* and profit for the year
Adjusted Net Income is a component of the Adjusted Basic EPS
calculation and is also used to guide our dividend policy
calculation. The calculation of Adjusted Net Income is shown in
table 7a.
Table 7a: Adjusted Net Income* EURm
2020 2019
Adjusted EBITDA (see table 5) 330.9 497.8
Less:
Net finance expense before exceptional items (74.0) (57.5)
Income tax credit/(expense) before exceptional items (28.1) (57.1)
Depreciation and impairment of PP&E (104.6) (108.6)
Depreciation and impairment of right-of-use assets (31.9) (31.5)
Amortisation and impairment of intangible assets (76.7) (89.8)
Non-controlling interests' share of profit (1.9) (3.0)
Adjusted Net Income 13.7 150.3
------------------------------------------------------- -------
Table 7b: Reconciliation of profit for the year to Adjusted Net
Income* EURm
2020 2019
(Loss)/profit for the year (252.2) 144.6
Less:
Non-controlling interests' share of profit (1.9) (3.0)
Net foreign exchange gains (27.2) (0.5)
Exceptional deferred tax credit (29.7) -
Add back:
Exceptional asset impairment cost 304.6 -
Net restructuring costs 16.1 9.0
Associate income less dividend received 4.0 0.2
Adjusted Net Income 13.7 150.3
--------------------------------------------- ------- -----
*See Non-IFRS measures
Adjusted Net Income was EUR13.7 million in 2020, a decrease from
EUR150.3 million in 2019, primarily driven by the flow through of
lower revenues as a result of the reduced light vehicle production
volumes.
Basic EPS and Adjusted Basic EPS*
On a statutory basis, Basic Earnings per Share ('EPS') was
(48.88) Euro cents for the year (2019: 27.24 Euro cents),
reflecting the significant reported statutory loss. Adjusted Basic
EPS calculation is based on Adjusted Net Income and the weighted
average number of shares in issue. Adjusted Basic EPS was 2.64 Euro
cents per share for the year (2019: 28.91 Euro cents per share)
reflecting the decrease in Adjusted Net Income as noted above.
Weighted average shares outstanding on 31 December 2020 were 519.8
million (31 December 2019: 519.9 million).
*See Non-IFRS measures
Dividend
The Company's dividend policy is to target an annual dividend of
approximately 30% of Adjusted Net Income, one third payable
following half year results and two thirds following the Group's
final results.
In light of the unprecedented conditions and associated
uncertainty resulting from COVID-19, and the Group's 2020 H1
results, the Board did not declare an interim dividend for the 2020
financial year. However, the Board is mindful of the importance of
dividends to the Group's shareholders and, given the continued
strength of cash generation and greater confidence in the outlook,
is committed to reinstating dividend payments.
Following the exceptional cash preservation measures during
2020, the Group is pleased to announce that during Q4 2020 it took
actions to repay all employees who shared in the sacrifice to
support the Group through unprecedented times. The Group has repaid
any previously received UK furlough payments to the UK government
and has retroactively reinstated pay levels for all employees who
took part in pay and salary reductions. We wish to thank our entire
global organisation for their commitment, excellent performance and
support during what turned out to be the toughest market decline
this industry has faced.
The Group paid an interim dividend of 6.74 Euro cents per share,
amounting to EUR35.0 million on 19 February 2021 based on the
overall strength of the Group's financial position and prospects.
The Group is committed to its stated annual dividend policy (30%
Adjusted Net Income) paid on an interim and final basis for each
financial year. However, in light of the significant amount of the
interim dividend paid, despite exceptional operating and financial
performance during 2020, Adjusted Net Income for 2020 is relatively
low. The Board has decided that it would not be practical to
propose a nominal final year 2020 dividend under the dividend
policy. The Company expects to return to its stated annual dividend
policy and normal dividend payment cadence for the 2021 financial
year. The Board continues to believe that dividends represent an
important part of the Group's shareholder value proposition and
that the Company's dividend policy is both affordable and
sustainable within its wider capital allocation framework.
The Group continues to remain confident in its business model,
cost flexibility, solid cash generation, experienced management
team, and successful transition to electrification.
Cash Flow performance
The Group uses Adjusted Free Cash Flow as its primary operating
measure of cash flow performance.
Table 8a: Adjusted Free Cash Flow* EURm
2020 2019
Net cash generated from operating activities 257.6 334.4
Net cash used by investing activities (95.4) (157.0)
------ -------
Free Cash Flow* 162.2 177.4
Deduct:
Cash received on settlement of derivatives (16.6) (5.6)
Amounts received in cash from Financial Assets at
FVTPL (included in net cash generated from operations) - (0.3)
Add back: Net restructuring cash spend 2.6 8.7
----------------------------------------------------------- ------ -------
Adjusted Free Cash Flow 148.2 180.2
----------------------------------------------------------- ------ -------
Table 8b: Reconciliation of Adjusted EBITDA to Adjusted Free
Cash Flow* EURm
2020 2019
Adjusted EBITDA 330.9 497.8
Less:
Net cash interest paid (54.1) (61.6)
Cash taxes paid (59.7) (79.7)
Payment for property, plant and equipment (82.1) (119.4)
Payment for intangible assets (30.1) (39.7)
Movement in working capital 63.1 2.7
Movement in retirement benefit obligations (9.1) (12.4)
Movement in provisions and other 3.3 (4.3)
------------------------------------------------ ------ -------
Free Cash Flow* 162.2 177.4
------------------------------------------------ ------ -------
Deduct:
Cash received on settlement of derivatives (16.6) (5.6)
Amounts received in cash from Assets at FVTPL - (0.3)
Restructuring Proceeds on Sale of facilities (10.4) -
Add back: Restructuring cash spend 13.0 8.7
------------------------------------------------ ------ -------
Adjusted Free Cash Flow 148.2 180.2
------------------------------------------------ ------ -------
*See Non-IFRS measures
In 2020, we generated solid Adjusted Free Cash Flow of EUR148.2
million (2019: EUR180.2 million). The Adjusted EBITDA generated by
the Group was used to fund investment in capital equipment and
intangibles. There was a EUR46.9 million decrease in property,
plant and equipment and intangibles expenditure primarily due to
tight control of the expenditure to preserve cash. Tax cash
payments were EUR20.0 million lower due to lower taxable profits.
The favourable movement in working capital of EUR63.1 million was
driven by the natural unwind of working capital balances and also
close management of inventory levels and ensuring receivables were
collected to terms. The net cash outflow on restructuring was
EUR2.6 million as cash outflows, predominantly severance payments
of EUR13.0 million (2019: EUR8.7 million), was mitigated by net
disposal proceeds of EUR10.4 million from the sale of two
facilities subject to closure actions. The restructuring cash
adjustment has been made to align the treatment of restructuring
with the other Adjusted measures and has been applied
retrospectively. Cash received from the early close-out of the in
the money foreign exchange hedges in March 2020 amounted to EUR15.9
million which would ordinarily have expired later in the year. In
total EUR16.6 million was received in the year from these
arrangements.
In addition to the EUR162.2 million (2019: EUR177.4 million)
arising from free cash flow, cash outflows from financing were
EUR51.6 million (2019: EUR129.2 million) resulting in a reported
increase in cash and cash equivalents of EUR110.6 million (2019
EUR48.2 million). Financing outflows include the net impact of the
2020 refinancing and other borrowing repayments of EUR19.0 million
(2019: EUR54.8 million); EUR28.6 million (2019: EUR27.1 million)
lease principal repayments and the 2020 EUR3.5 million funding of
share purchases by the Group's Employee Benefit Trust to satisfy
share scheme vesting in 2021 and beyond.
Pre-emptive drawdowns in March 2020, given concerns over bank
liquidity, of the Group's revolving credit and asset-backed lending
facilities of $125 million and $25 million respectively were repaid
in full in July and May 2020. The 2019 dividend cash outflow
amounted to EUR46.6 million.
Retirement benefits
We operate funded and unfunded defined benefit schemes across
multiple jurisdictions with the largest being the US pension and
retiree healthcare schemes, which represent 54% (2019: 55%) of our
net unfunded position at 31 December 2020. We also have funded
schemes in the UK and Canada 2% (2019: 5%) and Germany 18% (2019:
18%). While all of our major plans are closed to new entrants, a
few allow for future accrual. Our schemes are subject to periodic
actuarial valuations. Our net unfunded position increased by EUR7.0
million to EUR160.7 million at 31 December 2020 due primarily to
discount rates differential year-on-year, favourable translation,
and weak overall pension investment performance influenced by the
2020 market disruption. The increase was offset by a EUR2.1 million
(2019: EUR9.1 million) US settlement gain arising from a further
voluntary lump sum buy-out programme.
Net debt* and net leverage*
Net debt, a non-IFRS measure, as at 31 December 2020 was
EUR590.0 million, a significant decrease of EUR148.3 million from
the prior year end. On 30 September 2020, the Group successfully
completed the amendment and extension of its existing credit and
debt facilities, moving maturity dates out to December 2024. As
part of this refinancing, which was accounted for as debt
modification, overall borrowings remain unchanged, though changes
were negotiated to amend the term, adjust the mix of currencies,
replace the $100 million Asset Backed Loan (ABL) facility and
increase the $125 million revolving credit facility by $100
million. Full details of these changes is given in Note 10. These
changes resulted in incremental costs of EUR17.7 million which were
capitalised and will result in an annual fee amortisation of EUR3.7
million as well as increased interest costs, the annual impact of
which is estimated at EUR12.6 million. Issuance fees and discounts
of EUR67.4 million on the legacy loans are carried forward for
future amortisation.
The Group's net leverage ratio, also a non-IFRS measure, was 1.8
times Adjusted EBITDA as at 31 December 2020 (31 December 2019: 1.5
times); the increase reflects the lower Adjusted EBITDA.
The Group excludes IFRS 16 lease liabilities from its net debt
and net leverage ratio. If the IFRS 16 lease liabilities were to be
included, the Group's net debt would be EUR741.0 million (2019:
EUR905.0 million) and net leverage ratio would be 2.2 times
Adjusted EBITDA (31 December 2019: 1.8 times).
*See Non-IFRS measures
Liquidity
Our principal sources of liquidity have historically been cash
generated from operating activities and amounts available under our
credit facilities, that currently consist of a revolving facility
under our cash flow credit agreement of $225 million (EUR183.8
million). Completing the debt modification in September 2020
maintains existing levels of liquidity and increases flexibility to
support the Group's continued resilience through all economic
cycles and execution of its electrification growth strategies.
Total available liquidity (cash plus available facilities) on 31
December 2020 was EUR666.5 million (31 December 2019: EUR588.9
million).
Outlook
Global light vehicle production volumes are expected to recover
in 2021 but not yet to 2019 levels. We are well positioned to take
advantage of the growth in electric vehicle production which
supports our commitment to contributing to a healthier environment
and we expect that our revenue will continue the historic trend and
outperform the global light vehicle volume growth excluding
currency movements. Due to the industry recovery and the benefits
of the restructuring actions taken, we anticipate our 2021 full
year Adjusted EBIT margin to recover to a high single digit and
that Adjusted Free Cash Flow conversion will be similar to
pre-COVID-19 levels. It is our plan to continue to reduce net
leverage while resuming the dividend policy to target a payout
ratio of around 30% of Adjusted Net Income.
Non-IFRS measures
In addition to the results reported under IFRS, we use certain
non-IFRS financial measures to monitor and measure performance of
our business and operations and the profitability of our Divisions.
Such measures are also utilised by the Board as targets in
determining compensation of certain executives and key members of
management, as well as in our communications with investors. In
particular, we use Adjusted EBIT, Adjusted EBITDA, Adjusted Net
Income, Adjusted Basic EPS, Adjusted Free Cash Flow and Adjusted
Effective Tax Rate. These non-IFRS measures are not recognised
measurements of financial performance or liquidity under IFRS, and
should be viewed as supplemental and not replacements or
substitutes for any IFRS measures.
EBITDA is defined as profit or loss before tax before net
finance expense, depreciation, amortisation and exceptional
impairment of tangible and intangible assets.
Adjusted EBITDA is defined as EBITDA adjusted for exceptional
administration costs, net foreign exchange gains/(losses), net
restructuring charges and associate share of profits or losses and
dividends received from associates.
Adjusted EBIT is defined as Adjusted EBITDA less depreciation,
amortisation and impairment arising on tangible and intangible
assets net of depreciation and amortisation arising on purchase
price accounting.
Operating profit margin is defined as operating profit expressed
as a percentage of revenue.
Adjusted Net Income is defined as Profit or Loss for the period
attributable to the ordinary shareholders before exceptional items
adjusted to reflect associate dividends received and eliminate the
impact of net restructuring charges and foreign exchange gains or
losses.
Adjusted Basic EPS is defined as Adjusted Net Income divided by
the weighted average number of shares in issue in the year.
Free Cash Flow is defined as the total of net cash generated
from operating activities and net cash used by investing
activities.
Adjusted Free Cash Flow is defined as Free Cash Flow adjusted
for cash movements in financial assets at fair value through the
profit or loss, cash payments related to IPO costs, net cashflows
relating to restructuring and settlement of derivatives. The
restructuring cash adjustment is made to align the treatment of
restructuring with the other Adjusted measures and is applied
retrospectively.
Adjusted Income Tax before Exceptional items is defined as
income tax before exceptional items adjusted for the tax impact of
prior year tax provisions and adjustments.
Adjusted Profit before Income Tax is defined as profit before
income tax adjusted for UK losses.
Adjusted Effective Tax Rate is defined as adjusted income tax
before exceptional items as a percentage of adjusted profit before
income tax.
Net debt is defined as the total of current and non-current
borrowings excluding lease liabilities, net of cash and cash
equivalents and financial assets at fair value through the profit
and loss.
Net leverage is defined as net debt divided by last 12 months
Adjusted EBITDA.
Ronald Hundzinski
Chief Financial Officer
15 March 2021
Cautionary Statement
This announcement contains certain forward-looking statements
with respect to the financial condition, results of operations and
business of TI Fluid Systems plc (the "Group"). The words
"believe", "expect", "anticipate", "intend", "estimate",
"forecast", "project", "will", "may", "should" and similar
expressions identify forward-looking statements. Others can be
identified from the context in which they are made. By their
nature, forward-looking statements involve risks and uncertainties,
and such forward-looking statements are made only as of the date of
this presentation. Accordingly, no assurance can be given that the
forward-looking statements will prove to be accurate and you are
cautioned not to place undue reliance on forward-looking statements
due to the inherent uncertainty therein. Past performance of the
Company cannot be relied on as a guide to future performance.
Nothing in this announcement should be construed as a profit
forecast.
TABLE OF CONTENTS
GROUP FINANCIAL STATEMENTS
Consolidated Income Statement
........................................................................................... 28
Consolidated Statement of Comprehensive Income .............................................................. 29
Consolidated Balance Sheet
.................................................................................................. 30
Consolidated Statement of Changes in Equity
........................................................................ 31
Consolidated Statement of Cash Flows
.................................................................................. 32
NOTES TO THE GROUP FINANCIAL STATEMENTS
General Information
1 ................................................................................................... 33
Basis of Preparation
2 .................................................................................................... 33
Segment Reporting
3 ..................................................................................................... 33
Net Foreign Exchange Gains
4 ........................................................................................ 34
Finance Income and Expense
5 ...................................................................................... 35
Income Tax
.........................................................................................................
6 ........ 35
Earnings Per Share
7 ...................................................................................................... 38
Intangible Assets
8 ........................................................................................................ 39
Impairments
.........................................................................................................
9 ...... 40
Borrowings
.........................................................................................................
10 ........ 50
Retirement Benefit Obligations
11 ................................................................................... 55
Provisions
.........................................................................................................
12 .......... 56
Cash Generated from Operations
13 ............................................................................... 58
Group Financial Statements
Consolidated Income Statement
For the year ended 31 December
2020 2020
Before Exceptional
exceptional item (Note
item 9) 2020 2019
Continuing operations Note EURm EURm EURm EURm
-------------------------------- ---- ------------ ----------- --------- -----------
Revenue 3 2,814.5 - 2,814.5 3,411.1
Cost of sales (2,493.1) (120.4) (2,613.5) (2,922.7)
Gross profit/(loss) 321.4 (120.4) 201.0 488.4
--------------------------------
Distribution costs (83.7) - (83.7) (95.0)
Administrative expenses (145.1) (184.2) (329.3) (141.7)
Other income 8.5 - 8.5 6.7
Net foreign exchange gains 4 27.2 - 27.2 0.5
Operating profit/(loss) 128.3 (304.6) (176.3) 258.9
--------------------------------
Finance income 5 3.5 - 3.5 15.0
Finance expense 5 (77.5) - (77.5) (72.5)
Net finance expense 5 (74.0) - (74.0) (57.5)
--------------------------------
Share of (loss)/profit of
associates (3.5) - (3.5) 0.3
-------------------------------- ---- ------------ ----------- --------- ---------
Profit/(loss) before income
tax 50.8 (304.6) (253.8) 201.7
-------------------------------- ---- ------------ ----------- --------- ---------
Income tax (expense)/credit 6 (28.1) 29.7 1.6 (57.1)
Profit/(loss) for the year 22.7 (274.9) (252.2) 144.6
--------------------------------
Profit/(loss) for the year
attributable to:
Owners of the parent company 20.8 (274.9) (254.1) 141.6
Non-controlling interests 1.9 - 1.9 3.0
-------------------------------- ---- ------------ ----------- --------- ---------
22.7 (274.9) (252.2) 144.6
-------------------------------- ---- ------------ ----------- --------- ---------
Total earnings per share (Euro,
cents)
-------------------------------- ---- ------------ ----------- --------- -----------
Basic 7 0.04 (48.88) 27.24
Diluted 7 0.04 (48.88) 27.24
-------------------------------- ---- ------------ ----------- --------- ---------
Consolidated Statement of Comprehensive Income
For the year ended 31 December
2020 2019
EURm EURm
------------------------------------------------------ ------- --------
(Loss)/profit for the year (252.2) 144.6
Other comprehensive (expense)/income
Items that will not be reclassified to profit or
loss
- Re-measurements of retirement benefit obligations (21.1) (10.7)
- Income tax credit on retirement benefit obligations 3.6 2.3
(17.5) (8.4)
------------------------------------------------------
Items that may be subsequently reclassified to profit
or loss
- Currency translation (52.4) 14.8
- Cash flow hedges 13.2 4.9
- Net investment hedges 6.9 0.3
(32.3) 20.0
------------------------------------------------------
Total other comprehensive (expense)/income for the
year (49.8) 11.6
------------------------------------------------------ ------- ------
Total comprehensive (expense)/income for the year (302.0) 156.2
------------------------------------------------------ ------- ------
Attributable to:
- Owners of the parent company (303.2) 153.4
- Non-controlling interests 1.2 2.8
------------------------------------------------------ ------- ------
Total comprehensive (expense)/income for the year (302.0) 156.2
------------------------------------------------------ ------- ------
Consolidated Balance Sheet
At 31 December
2020 2019
Note EURm EURm
---------------------------------------------- ---- ------- ---------
Non-current assets
Intangible assets 8 883.8 1,182.2
Right-of-use assets 124.9 161.4
Property, plant and equipment 590.8 715.0
Investments in associates 14.6 19.2
Deferred income tax assets 6 62.4 25.1
Trade and other receivables 18.9 21.6
---------------------------------------------- ---- ------- -------
1,695.4 2,124.5
---------------------------------------------- ---- ------- -------
Current assets
Inventories 351.4 367.1
Trade and other receivables 534.8 574.5
Current income tax assets 6 13.7 13.7
Derivative financial instruments 0.4 18.4
Financial assets at fair value through profit
and loss 0.9 0.9
Cash and cash equivalents 485.8 411.7
---------------------------------------------- ---- ------- -------
1,387.0 1,386.3
---------------------------------------------- ---- ------- -------
Total assets 3,082.4 3,510.8
---------------------------------------------- ---- ------- -------
Equity
Share capital 6.8 6.8
Share premium 2.2 2.2
Other reserves (137.7) (106.1)
Retained earnings 987.7 1,261.7
---------------------------------------------- ---- ------- -------
Equity attributable to owners of the Parent
Company 859.0 1,164.6
---------------------------------------------- ---- ------- -------
Non-controlling interests 25.2 24.5
---------------------------------------------- ---- ------- -------
Total equity 884.2 1,189.1
---------------------------------------------- ---- ------- -------
Non-current liabilities
Trade and other payables 20.0 12.3
Borrowings 10 1,069.3 1,148.5
Lease liabilities 122.4 138.0
Deferred income tax liabilities 6 104.3 128.5
Retirement benefit obligations 11 160.7 153.7
Provisions 4.9 5.0
---------------------------------------------- ---- ------- -------
1,481.6 1,586.0
---------------------------------------------- ---- ------- -------
Current liabilities
Trade and other payables 614.1 611.2
Current income tax liabilities 6 40.7 48.7
Borrowings 10 7.4 2.4
Lease liabilities 28.6 28.7
Derivative financial instruments 0.2 25.4
Provisions 25.6 19.3
---------------------------------------------- ---- ------- -------
716.6 735.7
---------------------------------------------- ---- ------- -------
Total liabilities 2,198.2 2,321.7
---------------------------------------------- ---- ------- -------
Total equity and liabilities 3,082.4 3,510.8
---------------------------------------------- ---- ------- -------
Consolidated Statement of Changes in Equity
For the year ended 31 December
Ordinary Share Other Retained Non-controlling Total
shares premium reserves earnings Total interests equity
EURm EURm EURm EURm EURm EURm EURm
-------------------------- -------- -------- --------- --------- ------- --------------- ---------
Balance at 1
January 2020 6.8 2.2 (106.1) 1,261.7 1,164.6 24.5 1,189.1
(Loss)/profit
for the year - - - (254.1) (254.1) 1.9 (252.2)
Total other comprehensive
expense for the
year - - (31.6) (17.5) (49.1) (0.7) (49.8)
-------------------------- -------- -------- --------- --------- ------- --------------- -------
Total comprehensive
(expense)/income
for the year - - (31.6) (271.6) (303.2) 1.2 (302.0)
-------------------------- -------- -------- --------- --------- ------- --------------- -------
Share-based expense - - - 0.9 0.9 - 0.9
Dividends paid - - - - - (0.5) (0.5)
Purchase of own
shares - - - (3.5) (3.5) - (3.5)
Issue of own
shares from Employee
Benefit Trust - - - 0.2 0.2 - 0.2
Balance at 31
December 2020 6.8 2.2 (137.7) 987.7 859.0 25.2 884.2
--------------------------
Ordinary Share Other Retained Non-controlling Total
shares premium reserves earnings Total interests equity
EURm EURm EURm EURm EURm EURm EURm
-------------------------- -------- -------- --------- --------- ------- --------------- ---------
Balance at 1
January 2019 6.8 1.4 (126.3) 1,175.7 1,057.6 22.5 1,080.1
Profit for the
year - - - 141.6 141.6 3.0 144.6
Total other comprehensive
income/(expense)
for the year - - 20.2 (8.4) 11.8 (0.2) 11.6
-------------------------- -------- -------- --------- --------- ------- --------------- -------
Total comprehensive
income for the
year - - 20.2 133.2 153.4 2.8 156.2
-------------------------- -------- -------- --------- --------- ------- --------------- -------
Decrease in share
held by Non-controlling
interests - - - 0.1 0.1 (0.1) -
Share-based expense - - - 1.4 1.4 - 1.4
Net employee
tax settlement
from vested shares - - - (2.1) (2.1) - (2.1)
Dividends paid - - - (46.6) (46.6) (0.7) (47.3)
Shares issued - 0.8 - - 0.8 - 0.8
-------------------------- -------- -------- --------- --------- ------- --------------- -------
Balance at 31
December 2019 6.8 2.2 (106.1) 1,261.7 1,164.6 24.5 1,189.1
-------------------------- -------- -------- --------- --------- ------- --------------- -------
Consolidated Statement of Cash Flows
For the year ended 31 December
2020 2019
Note EURm EURm
-------------------------------------------------- ---- ------- ---------
Cash flows from operating activities
Cash generated from operations 13 374.4 477.2
Interest paid (57.1) (63.1)
Income tax paid (59.7) (79.7)
-------------------------------------------------- ---- ------- -------
Net cash generated from operating activities 257.6 334.4
-------------------------------------------------- ---- ------- -------
Cash flows from investing activities
Payment for property, plant and equipment (82.1) (119.4)
Payment for intangible assets (30.1) (39.7)
Proceeds from the sale of property, plant
and equipment 13.8 0.6
Interest received 3.0 1.5
-------------------------------------------------- ---- ------- -------
Net cash used by investing activities (95.4) (157.0)
-------------------------------------------------- ---- ------- -------
Cash flows from financing activities
Purchase of own shares (3.5) -
Proceeds from new borrowings 213.6 -
Fees paid on proceeds from new borrowings (17.7) (0.3)
Voluntary repayments of borrowings (209.6) (50.0)
Scheduled repayments of borrowings (5.3) (4.5)
Lease principal repayments (28.6) (27.1)
Dividends paid - (46.6)
Dividends paid to non-controlling interests (0.5) (0.7)
-------------------------------------------------- ---- ------- -------
Net cash used by financing activities (51.6) (129.2)
-------------------------------------------------- ---- ------- -------
Increase in cash and cash equivalents 110.6 48.2
-------------------------------------------------- ---- ------- -------
Cash and cash equivalents at the beginning
of the year 411.7 360.1
Currency translation on cash and cash equivalents (36.5) 3.4
-------------------------------------------------- ---- ------- -------
Cash and cash equivalents at the end of the
year 485.8 411.7
-------------------------------------------------- ---- ------- -------
1 . General Information
The Group's full financial statements have been approved by the
Board of Directors and reported on by the auditors on 15 March
2021. A copy of the statutory accounts for the year ended 31
December 2019 has been delivered to the Registrar of Companies, and
those for the year ended 31 December 2020 will be delivered in due
course. The independent auditors' report on the full financial
statements for the year ended 31 December 2019 was unqualified and
did not contain an emphasis of matter paragraph or any statement
under section 498 of the Companies Act 2006.
2 . Basis of Preparation
The consolidated financial information included within this
announcement has been prepared in accordance with international
financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union, the UK Companies
Act 2006 applicable to companies reporting under IFRS, and
International Financial Reporting Interpretations Committee ('IFRS
IC') interpretations issued and effective at the time of preparing
the financial information. The financial information in this
preliminary announcement does not, however comply with all
disclosure requirements and does not constitute statutory accounts
within the meaning of section 435 of the Companies Act 2006.
The consolidated financial information has been prepared under
the historical cost convention, except for the fair valuation of
assets and liabilities of subsidiary companies acquired, and
financial assets and liabilities at fair value through profit or
loss ('FVTPL') (including derivative instruments not in hedging
relationships).
The preparation of the financial information in conformity with
IFRS requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities and the reported amounts
of revenue and expenses during the reporting period. Although these
estimates are based on management's reasonable knowledge of the
amount, event or actions, actual results may differ from those
estimates.
3 . Segment Reporting
In accordance with the provisions of IFRS 8 'Operating
Segments', the Group's segment reporting is based on the management
approach with regard to segment identification; under which
information regularly provided to the chief operating decision
maker ('CODM') for decision making purposes forms the basis of the
disclosure. The Company's CODM is the Chief Executive Officer and
the Chief Financial Officer. The CODM evaluates the performance of
the Company's segments primarily on the basis of revenue and
Adjusted EBITDA, and Adjusted EBIT, both non-IFRS measures.
Two operating segments have been identified by the Group: Fluid
Carrying Systems ('FCS') and Fuel Tank and Delivery Systems
('FTDS').
Inter-segment revenue is attributable solely to the ordinary
business activities of the respective segment and is conducted on
an arm's-length basis.
2020 2019
EURm EURm
----------------------------- ----------- -----------
Revenue
- FCS - External 1,526.9 1,917.6
- Inter-segment 67.9 82.4
----------------------------- ------- -------
1,594.8 2,000.0
----------------------------- ------- -------
- FTDS - External 1,287.6 1,493.5
- Inter-segment 3.3 4.8
----------------------------- ------- -------
1,290.9 1,498.3
----------------------------- ------- -------
Inter-segment elimination (71.2) (87.2)
----------------------------- ------- -------
Total consolidated revenue 2,814.5 3,411.1
----------------------------- ------- -------
Adjusted EBITDA
- FCS 170.8 274.0
- FTDS 160.1 223.8
----------------------------- ------- -------
330.9 497.8
----------------------------- ------- -------
Adjusted EBITDA % of revenue
- FCS 11.2% 14.3%
- FTDS 12.4% 15.0%
----------------------------- ------- -------
Total 11.8% 14.6%
----------------------------- ------- -------
Adjusted EBIT
- FCS 97.2 199.4
- FTDS 76.1 141.0
----------------------------- ------- -------
173.3 340.4
----------------------------- ------- -------
Adjusted EBIT % of revenue
- FCS 6.4% 10.4%
- FTDS 5.9% 9.4%
----------------------------- ------- -------
Total 6.2% 10.0%
----------------------------- ------- -------
During 2020 the Group recognised a EUR2.1 million (2019: EUR9.1
million) settlement gain following a lump sum buyout offering of
two of the Group's US pension plans (see Note 11).
Restructuring costs of EUR16.1 million (EUR7.0 million in FCS
and EUR9.1 million in FTDS) are stated net of gains on disposal of
land and buildings in FCS of EUR3.4 million completed in the year
as part of the approved restructuring activities.
Following a definitive ruling on a Brazilian indirect tax
matter, the FCS division recognised a benefit of EUR0.2 million
(2019: EUR3.3 million) while FTDS recognised a benefit of EUR0.1
million (2019: EUR1.5 million).
4. Net Foreign Exchange Gains
Net foreign exchange gains recognised in the year of EUR27.2
million (2019: EUR0.5 million) primarily relate to gains on the
Group's unhedged US dollar denominated intercompany borrowings in
Euro functional currency companies. These arose after March 2020,
following termination of all the Group's forward foreign exchange
contracts designated in cash flow hedge relationships. The US
dollar average exposure from March 2020 on which these gains arose
was $276.0 million.
5 . Finance Income and Expense
2020 2019
EURm EURm
---------------------------------------------------------------- ------ --------
Finance income
Interest on short-term deposits, other financial assets
and other interest income 2.2 2.0
Interest income on indirect tax receivable - 2.8
Fair value gain on derivatives and foreign exchange
contracts not in hedged relationships 1.3 10.2
Finance income 3.5 15.0
----------------------------------------------------------------
Finance expense
Interest payable on term loans including expensed fees (55.9) (56.5)
Net interest expense of retirement benefit obligations (4.1) (4.6)
Fair value net losses on financial instruments: ineffectiveness (7.1) (0.2)
Net interest expense related to specific uncertain
tax positions - (0.3)
Interest payable on lease liabilities (10.4) (10.5)
Utilisation of discount on provisions and other finance
expense - (0.4)
---------------------------------------------------------------- ------ ------
Finance expense (77.5) (72.5)
---------------------------------------------------------------- ------ ------
Total net finance expense (74.0) (57.5)
---------------------------------------------------------------- ------ ------
2020 2019
Fees included in interest payable under the effective
interest method EURm EURm
------------------------------------------------------ ----- -------
Fees included in interest payable on term loans (8.0) (7.7)
------------------------------------------------------ ----- -----
6 . Income Tax
6.1. Income Tax Expense
2020 2019
EURm EURm
------------------------------------------------------- ------ --------
Current tax on profit for the year (58.5) (83.6)
Adjustments in respect of prior years 5.5 17.8
------------------------------------------------------- ------ ------
Total current tax expense (53.0) (65.8)
------------------------------------------------------- ------ ------
Origination and reversal of temporary deferred tax
differences 24.9 8.7
------------------------------------------------------- ------ ------
Total deferred tax benefit 54.6 8.7
------------------------------------------------------- ------ ------
Income tax credit/(expense) - Income Statement 1.6 (57.1)
------------------------------------------------------- ------ ------
Origination and reversal of temporary deferred tax
differences 3.6 2.3
------------------------------------------------------- ------ ------
Income tax expense - Statement of Comprehensive Income 3.6 2.3
------------------------------------------------------- ------ ------
Total income tax credit/(expense) 5.2 (54.8)
------------------------------------------------------- ------ ------
The Group income tax charge, before exceptional items, is
EUR28.1 million, down EUR29.0 million over 2019. The 2019 Group
income tax charge, EUR57.1 million, was favourably impacted by the
EUR12.2 million prior year tax credit recognised in respect of the
US Research & Experimentation claims. Group profit before tax
after adjusting for the impact of the Group's share of associate
after tax profits and losses, EUR3.5 million losses (2019: EUR0.3
million profits), amounted to EUR54.3 million (2019: EUR201.4
million). Normalising 2019 for the EUR12.2 million prior year tax
credit the 2020 and 2019 effective tax rates were 51.7% and 34.4%
respectively.
The table below analyses the constituent elements of the Group
income tax charge separately identifying the tax charges recognised
in respect of entities that ordinarily pay tax or where the
recognition of deferred tax assets is appropriate, the impact of
entities where the level of tax losses limits the payment of tax or
restricts the deferred tax recognition in respect of the losses,
the impact of withholding taxes suffered in the UK, Group tax
charges recognised in respect of unrecognised overseas
distributable reserves and the impact of purchase accounting
adjustments.
2020 2019
Profit Profit
before before
tax Tax charge tax Tax charge
EURm EURm EURm EURm
------------------------------------------------- ------- ---------- ------- ------------
Results excluding exceptional items 50.8 (28.1) 201.7 (57.1)
Adjustments:
Share of associate loss/(profit) 3.5 - (0.3) -
Prior year tax benefit related to US
R&E claims - - - (12.2)
------------------------------------------------- ------- ---------- ------- ----------
54.3 (28.1) 201.4 (69.3)
------------------------------------------------- ------- ---------- ------- ----------
Analysed as:
Tax charges (including deferred tax assets)
recognised 148.5 (36.5) 309.8 (81.9)
Tax losses where no deferred tax assets
recognised (38.6) (0.2) (35.9) (0.2)
UK withholding tax and Group tax on unrecognised
distributable reserves - (5.2) - (5.2)
Annual amortisation and depreciation
of assets with historic purchase price
accounting adjustments (55.6) 13.8 (72.5) 18.0
------------------------------------------------- ------- ---------- ------- ----------
54.3 (28.1) 201.4 (69.3)
------------------------------------------------- ------- ---------- ------- ----------
For 2020, the Group is reporting an exceptional impairment
charge of EUR304.6 million with a deferred tax benefit of EUR29.7
million which results in an exceptional effective tax rate of 9.8%.
The low exceptional effective tax rate is due to the fact that the
majority of the impairment is related to goodwill that does not
carry a deferred tax balance and therefore this portion of the
impairment is not tax effected.
The tax on the Group's profit/(loss) before tax differs from the
theoretical amount that would arise using the UK statutory tax rate
applicable to profits of the consolidated entities as follows:
2020
Before
exceptional Exceptional
item item 2020 2019
EURm EURm EURm EURm
----------------------------------------------- ------------ ----------- ------- --------
Profit/(loss) before income tax 50.8 (304.6) (253.8) 201.7
----------------------------------------------- ------------ ----------- ------- ------
Income tax calculated at UK statutory
tax rate of 19% (2019: 19%) applicable
to profits in respective countries (9.7) 57.9 48.2 (38.3)
Tax effects of:
Overseas tax rates (excluding associates) (5.1) 9.0 3.9 (16.2)
Income not subject to tax 9.9 - 9.9 6.4
Expenses not deductible for tax purposes
- other & UK non-deductible interest
/ expenses (14.7) - (14.7) (13.1)
Expenses not deductible for tax purposes
- goodwill impairment - (35.0) (35.0) -
Temporary differences on unremitted
earnings (3.3) - (3.3) (3.3)
Specific tax provisions (2.5) - (2.5) (3.1)
Unrecognised deferred tax assets (4.5) (2.2) (6.7) (3.7)
Other taxes (8.3) - (8.3) (10.6)
Adjustment in respect of prior years
- US R&E tax credit (see note below) - - - 12.2
Adjustment in respect of prior years
- current tax adjustments 5.5 - 5.5 12.1
Adjustment in respect of prior years
- deferred tax adjustments 0.7 - 0.7 (5.0)
Impact of changes in tax rate (0.2) - (0.2) 0.3
Double Tax Relief and other tax credits 4.1 - 4.1 5.2
Income tax (expense)/ credit - Income
Statement (28.1) 29.7 1.6 (57.1)
-----------------------------------------------
Deferred tax credit on re-measurement
of retirement benefit obligations 3.6 - 3.6 2.3
----------------------------------------------- ------------ ----------- ------- ------
Income tax credit - Statement of Comprehensive
Income 3.6 - 3.6 2.3
----------------------------------------------- ------------ ----------- ------- ------
Total tax (expense)/credit (24.5) 29.7 5.2 (54.8)
----------------------------------------------- ------------ ----------- ------- ------
Other taxes comprised various local taxes of EUR2.0 million
(2019: EUR3.2 million) together with taxes withheld on dividend,
interest and royalty remittances totalling EUR6.3 million (2019:
EUR7.4 million).
During 2019, TI Automotive LLC ("TI US") completed a Research
and Experimentation ('R&E') study for the years 2011 through
2018. As a result of the R&E study, TI US was able to report a
material tax benefit in the 2019 accounts in the amount of EUR12.2
million net of the uncertain tax position associated with the tax
credit. The R&E tax credit had a material favourable impact on
the 2019 effective tax rate for the Group.
For 2020, the Group is reporting an exceptional impairment
charge of EUR304.6 million with a deferred tax benefit of EUR29.7
million. The majority of the impairment is related to goodwill that
does not carry a deferred tax balance and therefore this portion of
the impairment is not tax effected and results in a material
unfavourable permanent tax adjustment.
Factors that may affect future tax charges include the continued
non-recognition of deferred tax assets in certain territories as
well as the existence of tax losses in certain territories which
could be available to offset future taxable income in certain
territories and for which no deferred tax asset is currently
recognised.
6.2. Deferred Tax Assets and Liabilities
2020 2019
EURm EURm
----------------------------- ------- ---------
Deferred tax assets 62.4 25.1
Deferred tax liabilities (104.3) (128.5)
----------------------------- ------- -------
Net deferred tax liabilities (41.9) (103.4)
----------------------------- ------- -------
6.2.1. Movement on Net Deferred Tax Liabilities
2020 2019
EURm EURm
-------------------------------------------------------- ------- ---------
At 1 January (103.4) (106.7)
Income statement benefit 24.9 8.7
Exceptional income statement benefit - tax impact of
impairment charge 29.7 0.0
Tax on remeasurement of retirement benefit obligations 3.6 2.3
Transfer of uncertain tax position balance from current
tax to deferred tax (0.7) (7.3)
Currency translation 4.0 (0.4)
At 31 December (41.9) (103.4)
--------------------------------------------------------
7 . Earnings Per Share
7.1. Basic and Diluted Earnings Per Share
2020 2019
Weighted Weighted
Loss average Profit average
attributable number of *Earnings attributable number of Earnings
to shareholders shares (in Per Share to shareholders shares (in Per Share
(EURm) millions) (EUR, cents) (EURm) millions) (EUR, cents)
----------------
Basic (254.1) 519.8 (48.88) 141.6 519.9 27.24
Dilutive shares - 2.6 - - - -
Diluted (254.1) 522.4 (48.88) 141.6 519.9 27.24
---------------- --------------- ----------- ------------- --------------- ----------- -------------
7.2. Adjusted Earnings Per Share
2020 2019
Basic Diluted Basic Diluted
----------------------------------
Adjusted Net Income (EURm) 13.7 13.7 150.3 150.3
Weighted average number of shares
(in millions) 519.8 522.4 519.9 519.9
Adjusted Earnings Per Share (EUR,
in cents) 2.64 2.62 28.91 28.91
---------------------------------- ----- ------- ----- -------
Adjusted Net Income is based on loss for the period attributable
to shareholders EUR254.1 million (2019: EUR141.6 million profit)
after adding back net adjustments of EUR267.8 million (2019: EUR8.7
million).
8 . Intangible Assets
2020 2019
EURm EURm
---------------------------------------------------- ----- ---------
Goodwill 535.9 739.0
Capitalised development expenses, computer software
and licences, technology and customer platforms 347.9 443.2
---------------------------------------------------- ----- -------
Total intangible assets 883.8 1,182.2
---------------------------------------------------- ----- -------
8.1. Goodwill
Goodwill is deemed to have an indefinite useful life. It is
carried at cost and reviewed annually for impairment.
EURm
------------------------------------------- ---------
Cost at 1 January 2020 739.0
Currency translation (24.8)
------------------------------------------- -------
Cost at 31 December 2020 714.2
------------------------------------------- -------
Accumulated impairment at 1 January 2020 -
Exceptional impairment charge (184.2)
Currency translation 5.9
------------------------------------------- -------
Accumulated impairment at 31 December 2020 (178.3)
------------------------------------------- -------
Net book value at 31 December 2020 535.9
------------------------------------------- -------
EURm
------------------------------------------- -----
Cost at 1 January 2019 733.3
Currency translation 5.7
------------------------------------------- -----
Cost at 31 December 2019 739.0
------------------------------------------- -----
Accumulated impairment at 1 January 2019 -
------------------------------------------- -----
Accumulated impairment at 31 December 2019 -
------------------------------------------- -----
Net book value at 31 December 2019 739.0
------------------------------------------- -----
8.2. Capitalised Development Expenses, Computer Software and
Licences, Technology and Customer Platforms
Intangibles assets are amortised over their useful economic
life, which range from 3 to 25 years.
Capitalised Computer
development software Customer
expenses and licences Technology platforms* Total
EURm EURm EURm EURm EURm
------------------------------ ------------ ------------- ---------- ----------- ---------
Cost at 1 January 2020 237.4 16.2 135.9 474.4 863.9
Accumulated amortisation (102.2) (11.3) (125.5) (181.7) (420.7)
------------------------------ ------------ ------------- ---------- ----------- -------
Net book value at 1 January
2020 135.2 4.9 10.4 292.7 443.2
------------------------------ ------------ ------------- ---------- ----------- -------
Additions 24.3 8.4 - - 32.7
Disposals (0.1) - - - (0.1)
Amortisation charge (26.7) (1.6) (2.3) (40.4) (71.0)
Impairments - exceptional
charge (5.7) - - - (5.7)
Currency translation (2.9) (0.6) (0.5) (9.6) (13.6)
------------------------------ ------------ ------------- ---------- ----------- -------
Net book value at 31 December
2020 102.9 10.6 6.9 227.5 347.9
------------------------------ ------------ ------------- ---------- ----------- -------
Cost at 31 December 2020 254.4 23.3 126.7 455.2 859.6
Accumulated amortisation (151.5) (12.7) (119.8) (227.7) (511.7)
------------------------------ ------------ ------------- ---------- ----------- -------
Net book value at 31 December
2020 102.9 10.6 6.9 227.5 347.9
------------------------------ ------------ ------------- ---------- ----------- -------
*Customer platforms includes intangible assets relating to:
customer platforms; aftermarket customer relationships; trade names
& trademarks.
Capitalised Computer
development software Customer
expenses and licences Technology platforms Total
EURm EURm EURm EURm EURm
------------------------------ ------------ ------------- ---------- ---------- ---------
Cost at 1 January 2019 205.4 15.0 130.7 469.0 820.1
Accumulated amortisation (71.5) (9.8) (104.2) (138.1) (323.6)
------------------------------ ------------ ------------- ---------- ---------- -------
Net book value at 1 January
2019 133.9 5.2 26.5 330.9 496.5
------------------------------ ------------ ------------- ---------- ---------- -------
Additions 31.7 1.2 - - 32.9
Disposals (0.6) - - - (0.6)
Amortisation charge (28.3) (1.5) (16.5) (41.5) (87.8)
Impairments (2.0) - - - (2.0)
Currency translation 0.5 0.0 0.4 3.3 4.2
------------------------------ ------------ ------------- ---------- ---------- -------
Net book value at 31 December
2019 135.2 4.9 10.4 292.7 443.2
------------------------------ ------------ ------------- ---------- ---------- -------
Cost at 31 December 2019 237.4 16.2 135.9 474.4 863.9
Accumulated amortisation (102.2) (11.3) (125.5) (181.7) (420.7)
------------------------------ ------------ ------------- ---------- ---------- -------
Net book value at 31 December
2019 135.2 4.9 10.4 292.7 443.2
------------------------------ ------------ ------------- ---------- ---------- -------
The above amortisation charges for 'technology' and 'customer
platforms' amounting to EUR42.7 million (2019: EUR70.6 million)
arise from intangible assets recognised through purchase price
accounting. Amortisation charges are included within cost of
sales.
9. Impairments
9.1. Impairment Tests for Goodwill and Intangibles
The purchase of TIFS Holdings Ltd ('TIFSHL') on 30 June 2015,
which was the previous Parent Company of the Group, and the
consequent fair valuation of assets and liabilities, resulted in
total goodwill recognition of EUR711.1 million and intangibles of
EUR663.2 million. The purchase of Millennium Industries Corporation
on 16 February 2016 resulted in total goodwill recognition of
EUR57.1 million and intangibles of EUR72.6 million, included in the
FCS-NA CGU.
The intangible assets recognised from acquisitions, as outlined
above, included EUR369.7 million and EUR57.1 million in relation to
customer platforms arising on the Bain and Millennium acquisitions
respectively. These assets reflect the future revenue expected to
arise from customer platforms existing at the date of acquisition,
based on platform lives and probabilities of renewals.
During H1 2020, forecasts for global automotive production
volumes in the near and medium term were significantly impacted by
the COVID-19 pandemic, when compared to equivalent forecasts that
underpinned the Group's 2019 annual impairment assessment, where no
impairment was recognised. The scale of this volume deterioration,
which was beyond what was reasonably estimable in early 2020,
triggered the Group to perform a full impairment test as at 30 June
2020.
The impairment test for goodwill and intangible assets is
conducted at a CGU level, which the Group defines as the
intersection between the two operating segments, FCS and FTDS, and
the geographic sub divisions, North America ('NA'), Europe ('EU'),
Asia Pacific ('AP') and Latin America ('LA').
The results of the H1 2020 impairment test indicated that the
carrying values of CGU assets were higher than their recoverable
amounts for six of the CGUs, resulting in the following impairments
being recognised at 30 June 2020:
Impairment Total exceptional
Recoverable Impairment of other CGU impairment
amount of goodwill assets charge
EURm EURm EURm EURm
-------- ----------- ------------ ------------- -------------------
FCS-NA 437.2 71.7 - 71.7
FCS-EU 421.5 77.7 - 77.7
FCS-LA - - 6.3 6.3
FTDS-NA 68.1 - 88.8 88.8
FTDS-EU 273.2 34.8 22.2 57.0
FTDS-LA - - 3.1 3.1
-------- ----------- ------------ ------------- -----------------
1,200.0 184.2 120.4 304.6
-------- ----------- ------------ ------------- -----------------
The 'other CGU asset' impairments of EUR120.4 million have been
apportioned across the respective CGU asset categories on a
pro-rata basis resulting in the following asset class
allocation:
H1 2020
impairment
charge
EURm
------------------------------------- -------------
Goodwill 184.2
Capitalised development expenses 21.2
Computer software and licences 0.5
Other intangible assets 15.9
Land & buildings 13.9
PP&E 41.6
Assets in the course of construction 10.5
Right-of-use assets 16.8
------------------------------------- -----------
304.6
------------------------------------- -----------
The reduction in asset carrying values following the H1
impairment gave rise to a reduced H2 depreciation and amortisation
charge of EUR6.9 million. The portion of this not attributed to
assets arising on purchase accounting resulted in an improvement to
Adjusted EBIT of EUR5.5 million for FTDS and EUR0.2 million for
FCS.
Following the H1 2020 impairment, the goodwill and intangible
asset carrying values as at 31 December 2020 were as follows:
2020 2019
--------------------- -----------------------
EURm EURm EURm EURm
Goodwill Intangibles Goodwill Intangibles
---------------- -------- ----------- -------- -------------
FCS
---------------- -------- ----------- -------- -------------
North America 139.5 80.7 223.9 102.5
Europe & Africa 140.7 47.1 218.4 53.9
Asia Pacific 231.6 85.9 237.1 100.6
Latin America - - - 0.2
---------------- -------- ----------- -------- -----------
FTDS
---------------- -------- ----------- -------- -------------
North America - 6.2 - 41.5
Europe & Africa - 81.2 34.8 95.5
Asia Pacific 24.1 46.8 24.8 48.7
Latin America - - - 0.3
---------------- -------- ----------- -------- -----------
535.9 347.9 739.0 443.2
---------------- -------- ----------- -------- -----------
The intangible assets above include customer platforms arising
on the Bain and Millennium acquisitions with carrying values at 31
December 2020 of EUR168.5 million and EUR28.7 million respectively
(year ended 31 December 2019: EUR206.7 million and EUR36.4 million)
with remaining useful lives of 5.0 and 5.7 years.
9.2. H1 2020 Impairment Test
The recoverable amount estimated in the H1 2020 impairment test
for the CGUs was determined based on a value-in-use calculation.
Due to the high level of uncertainty over future global automotive
production volumes, management elected to use an 'expected cash
flow' approach, as described in IAS 36, to obtain their estimate of
future operating cash flows for each of the CGUs. To determine the
expected cash flows, the Group established four volume scenarios
which covered the period from 30 June 2020 to 30 June 2025, with
relative probabilities then assigned to the operating cash flows
arising from these scenarios. Weighted average operating cash flows
across the scenarios were then calculated for inclusion in the
discounted cash flow model.
To reflect the high level of uncertainty in future volume
projections, the four scenarios demonstrated alternative profiles
in terms of likely future volumes and the rate of market volume
recovery.
The base case scenario utilised May 2020 IHS global light
vehicle production forecasts. These forecasts exhibited a
significant reduction in 2020 production units versus 2019, with a
subsequent recovery profile that returned volumes to 2019 levels in
2024, a compound annual growth rate (CAGR) of 0.4%.
The three additional scenarios reflected two downside volume
profiles relative to the base scenario and one upside volume
profile. These scenarios were prepared by reflecting factors such
as historical external forecasting accuracy, geographical
distributions of volume and different potential rates of market
volume recovery, as demonstrated in the graph in the attached pdf.
(link below).
http://www.rns-pdf.londonstockexchange.com/rns/3059S_1-2021-3-15.pdf
The table below outlines the respective probabilities assigned
to each of these scenarios as well as the 2019 actual production
volumes and 2020 forecast production volumes, with corresponding
growths rates over this period.
2020 global
light vehicle
2019 global production
light vehicle management
production forecast
Scenario Assigned probability (million units) (million units) 2019-2024 CAGR
----------- ---------------------- ---------------- ---------------- ----------------
Base case 70% 88.9 68.3 0.4%
Downside 1 15% 88.9 60.0 (1.2)%
Downside 2 10% 88.9 60.0 (2.7)%
Upside 5% 88.9 70.0 0.8%
----------- ---------- --------- ---------------- ---------------- ---------- ---
The probabilities were selected by management with consideration
to global economic forecasts, and the perceived likelihood of
plausible outcomes.
Assumptions
The key assumptions used in the value-in-use calculations
were:
-- Forecast operating cash flows
-- Long-term expected growth rates
-- Discount rates
As outlined above, the forecast operating cash flows were
established using the respective volume scenarios and the resultant
forecast demand for our products given those volumes. Product mix,
pricing assumptions, market outperformance and working capital
management actions, which remain broadly consistent with those that
underpinned the 2019 impairment review, were then applied to the
forecast sales profiles.
Refer to section 18.3 for the discount and growth rates used in
both the H1 2020 and H2 2020 impairment models.
Sensitivity analysis
The H1 2020 impairment review necessitated that the CGU assets,
within the scope of IAS 36, of FCS-LA and FTDS-LA, be fully
impaired. Each scenario modelled resulted in operating cash
outflows. The Latin American CGUs were therefore excluded from the
following sensitivity analysis, as management did not believe
reasonably possible changes in input assumptions would alter this
result.
Where the H1 impairment test resulted in an impairment, or where
at H1 management believed a reasonably possible change in
assumption would cause a future impairment, sensitivity testing was
performed.
The following table demonstrates the impact of changes in the H1
long-term expected growth rates and discount rates, in isolation,
for CGUs deemed to be sensitive to such changes.
Impact of 100 BPS
H1 assumption change
Long-term
Long-term expected
Recoverable expected Discount growth
amount Discount growth rate rate
EURm rate rate EURm EURm
--------
FCS-NA 437.2 15.3% 2.0% 32.7 20.1
FCS-EU 421.5 16.0% 2.8% 36.4 22.9
FTDS-NA 68.1 16.3% 3.0% 7.2 4.5
FTDS-EU 273.2 17.0% 2.5% 20.4 12.1
-------- ----------- ------ ------ ------------ ---------
Potential variability in the amount and timing of operating cash
flows was incorporated in the calculation of forecast operating
cash flows, using the expected cash flow approach and four
scenarios outlined above.
Assuming 100% probability weightings to each of the four H1
scenarios resulted in the following hypothetical impairments:
100% Base 100% Downside 100% Downside
As recorded Case 1 2 100% Upside
-------- ----------- --------- ------------- ------------- -------------
FCS-NA 71.7 38.2 147.3 221.3 14.2
FCS-EU 77.7 33.1 208.0 237.7 -
FCS-LA 6.3 6.3 6.3 6.3 6.3
FTDS-NA 88.8 81.6 111.5 132.3 33.7
FTDS-EU 57.0 45.8 105.1 127.2 -
FTDS-LA 3.1 3.1 3.1 3.1 3.1
-------- ----------- --------- ------------- ------------- -----------
304.6 208.1 581.3 727.9 57.3
-------- ----------- --------- ------------- ------------- -----------
No impairments were recorded in FCS-AP and FTDS-AP due to more
resilient production volume forecasts in the Asia Pacific region.
Applying a 100% weighting to the Downside 2 scenario still resulted
in recoverable amounts in excess of CGU net assets.
In response to the COVID-19 pandemic, management initiated a
number of mitigating cost reduction schemes, including global
restructuring programmes. Only savings from restructuring events
that were appropriately authorised by management and communicated
to the affected employees on or before 30 June 2020 were reflected
in the H1 2020 forecast operating cash flows. The impact of
restructuring activities undertaken subsequent to this date have
been included in the H2 impairment test, see section 18.3 for
further details.
9.3. H2 2020 Impairment Test
Due to continuing uncertainty over global automotive production
volumes in the near and medium term, management performed an
additional full impairment test as at 31 December 2020, to
establish whether the recoverable amounts of CGU assets exceed
their carrying values.
During the second half of 2020, automotive production volumes
have shown some signs of stabilising, with actual 2020 global light
vehicle production of 74.6 million units compared with 68.3 million
forecast in the H1 2020 base case scenario.
As greater clarity emerges over the market response to the
pandemic, management believe it is appropriate to reduce the number
of scenarios used in the expected cash flow model to reflect a
narrower range of plausible outcomes.
Accordingly, two scenarios have been established utilising IHS
global light vehicle production forecasts; a 'base case' and a
'downside'.
The base case scenario uses November 2020 IHS volume forecasts,
adjusted for product mix, pricing assumptions and market
outperformance to establish forecast sales values. Contribution
margin, fixed cost, research and development expenditure, capital
expenditure and working capital management estimates are then
applied to arrive at the forecast operating cash flows for
inclusion in the value-in-use discounted cash flow model. Cash
flows resulting from restructuring activities not announced at the
reporting date and cash flows that are contingent on enhanced
capital expenditure are excluded from the forecasts.
The downside scenario uses a more conservative volume forecast
dataset issued by IHS and also incorporates risk adjustments, where
appropriate, for potential programme losses, and longer term
impacts to consumer demand arising from technological evolution in
response to climate change and evolving mobilisation trends.
Management have considered the potential impacts of climate
change on the impairment assessment. This has included risk
adjusting forecast cash flows to capture uncertainty regarding
possible future changes to environmental regimes and their impact
on existing automotive market trends, including the transition to
full electrification.
The attached graph (as shown in the link below) demonstrates the
volume profile of these two scenarios across the five year
medium-term plan horizon. These have been superimposed on to the H1
2020 volume scenarios for reference purposes.
http://www.rns-pdf.londonstockexchange.com/rns/3059S_2-2021-3-15.pdf
The below table outlines the respective probabilities assigned
to each of these scenarios as well as the 2020 actual production
volumes and 2021 forecast production volumes, with corresponding
growths rates over this period.
2021 global
light vehicle
2020 global production
light vehicle management
production forecast
Scenario Assigned probability (million units) (million units) 2020-2025 CAGR
---------- ---------------------- ---------------- ---------------- ----------------
Base case 85% 74.6 83.0 4.9%
Downside 15% 74.6 78.9 4.5%
---------- ---------- --------- ---------------- ---------------- --------- ----
The probabilities were selected by management with consideration
to global economic forecasts, and the perceived likelihood of
plausible outcomes.
Applying the weighted average operating cash flows from the two
scenarios to the value-in-use calculation resulted in CGU headroom
as outlined in the below table. This table also includes the
goodwill and other asset impairments recorded in H1 2020, for
context.
2020 H1 goodwill 2020 H1 other
2020 H2 headroom impairment asset impairments
CGU (EURm) (EURm) (EURm)
-------- ---------------- ---------------- --------------------
FCS-NA 85.2 71.7 -
FCS-EU 42.8 77.7 -
FCS-AP 260.5 - -
FCS-LA 0.4 - 6.3
FTDS-NA 52.3 - 88.8
FTDS-EU 18.8 34.8 22.2
FTDS-AP 405.6 - -
FTDS-LA 0.6 - 3.1
-------- ---------------- ---------------- ------------------
866.2 184.2 120.4
-------- ---------------- ---------------- ------------------
The outcome of the H2 2020 impairment test demonstrates that CGU
recoverable amounts are in excess of their respective asset
carrying values, and therefore no additional impairments have been
recorded in the second half of 2020.
This observed increase in recoverable amount when compared to
the H1 2020 impairment test is a result of improved external
automotive volume forecasts in combination with the execution of
internal cost saving initiatives and restructuring activities. To
the extent that such activities were appropriately authorised by
management, and communicated to the affected employees on or before
31 December 2020, the associated cash savings have been reflected
in management's forecast of operating cash flows.
Whilst impairments recorded against goodwill cannot be reversed
in a subsequent reporting period, management are required to
monitor external and internal sources of information for indicators
that previously recognised impairment losses for intangible assets,
PP&E and leased right-of-use assets may have decreased or no
longer exist. This is applicable to FCS-LA, FTDS-LA, FTDS-NA and
FTDS-EU, where asset impairments, other than goodwill, were
recorded at H1 2020.
Both Latin America CGUs were fully impaired at H1 2020, as a
result of forecast negative cash flows. Although restructuring
activities have been implemented during H2 2020 to mitigate these
negative cash flows, uncertainty over the longer term economic
viability of operations in this region lead management to conclude
that it is appropriate to maintain the impairment losses as at 31
December 2020.
Despite positive headroom in FTDS-NA and FTDS-EU providing an
indication that previously recognised impairment losses have
decreased, management do not believe sufficient time has passed
since recognising these impairment losses in H1 2020 to evidence a
significant and prolonged improvement in the economic performance
arising from the underlying CGU assets. Furthermore, as evidenced
in the H2 2020 sensitivity analysis (below) reasonably possible
changes to the estimates made in the H2 2020 impairment model may
result in significant variations in resulting headroom over the
short-term, particularly where market interruption caused by the
COVID-19 pandemic persists.
Management will therefore continue to monitor external and
internal sources during 2021, and until such a time that indicators
of a sustained improvement in future CGU cash generation can be
demonstrated with sufficient confidence, before contemplating the
reversal of impairment losses.
Assumptions
The key assumptions used in the value-in-use calculations
are:
-- Forecast operating cash flows
-- Long-term expected growth rates
-- Discount rates
Forecast operating cash flows were established using the
respective volume scenarios and the resultant forecast demand for
our products given those volumes. Product mix, pricing assumptions,
market outperformance and working capital management actions were
then applied to the forecast sales profiles.
Long-term expected growth rates and discount rates are
determined with reference to the services of third party valuation
experts and utilise externally available sources of information,
adjusted where relevant for industry specific factors. Long-term
growth rates are based on long-term economic forecasts for growth
in the automotive sector in the geographical regions in which the
CGUs operate. Discount rates are calculated for each division using
a weighted average cost of capital specific to the geographical
regions from which the cash flows are derived.
The range of discount and growth rates used were as follows:
2020 H2 2020 H1 2019
FCS FTDS FCS FTDS FCS FTDS
-----------------------
Pre-tax discount rates
North America 15.25% 16.25% 15.25% 16.25% 13.75% 14.75%
Europe & Africa 15.50% 16.25% 16.00% 17.00% 15.50% 16.50%
Asia Pacific 15.50% 15.75% 16.00% 16.50% 15.50% 15.75%
Latin America 26.00% 24.50% 27.00% 26.50% 26.25% 27.00%
Long-term growth rates
North America 2.00% 3.00% 2.00% 3.00% 2.50% 3.50%
Europe & Africa 2.75% 2.50% 2.75% 2.50% 3.25% 3.00%
Asia-Pacific 5.00% 4.75% 5.00% 4.75% 5.50% 5.25%
Latin America 4.50% 3.50% 4.50% 3.50% 5.00% 4.00%
----------------------- ----- ----- ----- ----- ----- -----
Management consider the input assumptions used in the impairment
model to be critical estimates, as there is a significant risk of a
material adjustment to the carrying value of CGU net assets
resulting from changes in these assumptions.
Sensitivity analysis
Where management believe a reasonably possible change in
assumption could result in the recognition of additional impairment
charges, or in the reversal of previously recognised impairment
charges, sensitivity analysis has been performed.
Based on the observed level of headroom in FCS-AP, FTDS-AP,
FCS-NA and FCS-EU, management do not believe a reasonably possible
change in assumptions would impact the carrying value of CGU
assets. When applying a 100% probability weighting to the downside
scenario, all four CGUs still demonstrate positive headroom.
Furthermore, the H1 2020 impairments in FCS-NA and FCS-EU were to
goodwill only, which cannot be reversed in a subsequent reporting
period.
Both Latin America CGUs were fully impaired at H1 2020 due to
forecast operating losses, and as described above, despite
implementing restructuring initiatives during H2 of 2020,
management believe the economic environment in this region will not
be conducive to reducing the previously recognised impairment
losses in the short to medium term.
Sensitivity analysis has therefore been performed for FTDS-NA
and FTDS-EU.
The following table demonstrates the impact of changes in the
long-term expected growth rates and discount rates, in isolation,
for CGUs deemed to be sensitive to such changes.
H2 assumption Impact of 100 BPS
change
Long-term
Long-term expected
Recoverable expected Discount growth
amount Discount growth rate rate
EURm rate rate EURm EURm
--------
FTDS-NA 96.9 16.25% 3.0% 7.7 4.5
FTDS-EU 275.7 16.25% 2.5% 18.8 10.3
-------- ----------- ------ ------ ------------ ---------
Potential variability in the amount and timing of operating cash
flows was incorporated in the calculation of forecast operating
cash flows, using the expected cash flow approach and two scenarios
outlined above.
Assuming 100% probability weightings to each of the H2 scenarios
resulted in the following hypothetical headroom / (impairment):
100% Base
As calculated Case 100% Downside
(EURm) (EURm) (EURm)
-------- ------------- --------- ---------------
FTDS-NA 52.3 60.3 7.3
FTDS-EU 18.8 27.8 (32.1)
-------- ------------- --------- -------------
10 . Borrowings
2020 2019
Note EURm EURm
----------------------------- ---- ------- ---------
Non-current:
Secured loans:
- Main borrowing facilities 10.4 1,069.2 1,148.4
- Other secured loans 10.5 0.1 0.1
----------------------------- ---- ------- -------
Total non-current borrowings 1,069.3 1,148.5
----------------------------- ---- ------- -------
Current:
Secured loans:
- Main borrowing facilities 10.4 7.4 2.3
- Other secured loans 10.5 - 0.1
Total current borrowings 7.4 2.4
-----------------------------
Total borrowings 1,076.7 1,150.9
----------------------------- ---- ------- -------
Main borrowing facilities 10.4 1,076.6 1,150.7
Other loans 10.5 0.1 0.2
Total borrowings 1,076.7 1,150.9
-----------------------------
The main borrowing facilities are shown net of issuance
discounts and fees of EUR25.3 million (2019: EUR23.8 million).
10.1. Movement in Total Borrowings
Main borrowing Other
facilities loans Total borrowings
EURm EURm EURm
----------------------------------- -------------- ------ ------------------
At 1 January 2020 1,150.7 0.2 1,150.9
Accrued interest 47.9 - 47.9
Scheduled payments (53.1) (0.1) (53.2)
Fees expensed 8.0 - 8.0
New borrowings 213.6 - 213.6
Fees paid on new borrowings (17.7) - (17.7)
Voluntary repayments of borrowings (209.6) - (209.6)
Currency translation (63.2) - (63.2)
----------------------------------- -------------- ------ ----------------
At 31 December 2020 1,076.6 0.1 1,076.7
----------------------------------- -------------- ------ ----------------
New borrowings in the year consisted of a partial drawdown of
the asset-backed loan of $25.0 million (EUR22.6 million), a draw
down of the revolving credit facility of $125.0 million (EUR113.0
million) and an increase in the Euro tranche of the main borrowings
of EUR78.0 million as a result of the Group's refinancing see Note
10.4.
Voluntary repayments of borrowings in the year consisted of a
repayment of the asset-backed loan of $25.0 million drawn earlier
in the year (EUR22.8 million), a repayment of the revolving credit
facility drawn earlier in the year of $125.0 million (EUR106.2
million) and a repayment of the US dollar tranche of the main
borrowings of $94.2 million (EUR80.6 million) as a result of the
Group's refinancing.
Main borrowing
facilities Other loans Total borrowings
EURm EURm EURm
----------------------------------- -------------- ----------- ------------------
At 1 January 2019 1,181.4 0.3 1,181.7
Accrued interest 48.8 0.3 49.1
Scheduled payments (53.2) (0.4) (53.6)
Fees expensed 7.7 - 7.7
Fees on new borrowings (0.3) - (0.3)
Voluntary repayments of borrowings (50.0) - (50.0)
Currency translation 16.3 - 16.3
----------------------------------- -------------- ----------- ----------------
At 31 December 2019 1,150.7 0.2 1,150.9
----------------------------------- -------------- ----------- ----------------
10.2. Currency Denomination of Borrowings
2020 2019
EURm EURm
----------------- ------- ---------
US dollar 587.9 731.5
Euro 488.8 419.4
----------------- ------- -------
Total borrowings 1,076.7 1,150.9
----------------- ------- -------
10.3. Maturity of Borrowings
2020 2019
EURm EURm
--------------------------- ------- ---------
Less than one year 7.4 2.4
Between one and five years 1,069.3 1,148.5
Total borrowings 1,076.7 1,150.9
---------------------------
10.4. Main Borrowing Facilities and Unsecured Notes
The main borrowing facilities comprise a package of secured
loans consisting of a term loan, an asset-backed loan, and a
revolving credit facility.
The amounts outstanding under the agreements are:
2020 2019
EURm EURm
---------------------------- ------- ---------
Principal outstanding:
US term loan 603.1 743.2
Euro term loan 498.8 424.4
---------------------------- ------- -------
Main borrowing facilities 1,101.9 1,167.6
---------------------------- ------- -------
Issuance discounts and fees (25.3) (16.9)
---------------------------- ------- -------
Main borrowing facilities 1,076.6 1,150.7
---------------------------- ------- -------
On 30 September 2020, the Group successfully executed a
refinancing of its external borrowings. The key elements of the
transaction were as follows:
-- The Euro term loan of EUR422 million was extended from 30
June 2022 to 16 December 2024, the amount was increased by EUR78
million to EUR500 million, and the rate was increased by 1% from
EURIBOR (minimum 0.75% p.a.) +2.75% p.a. to EURIBOR (minimum 0.75%
p.a.) +3.75% p.a.
-- The US dollar term loan of $834.2 million was extended from
30 June 2022 to 16 December 2024, the amount was decreased by $94.2
million to $740 million, and the rate was increased by 1.25% from
US dollar LIBOR (minimum 0.75% p.a.) +2.5% p.a. to US dollar LIBOR
(minimum 0.75% p.a.) +3.75% p.a. The loan also become repayable at
$1.85 million per quarter until the final balance falls due on 16
December 2024. Prior to the refinancing, capital payments were not
due during the remaining lifetime of the loan, as they had been
prepaid as part of a voluntary repayment made in a prior year.
-- The revolving credit facility ('RCF') of $125 million was
increased by $100 million to $225 million and was extended from 16
July 2023 to 16 July 2024. The amount payable on the facility was
increased from a range of US$ LIBOR +3.0% to US$ LIBOR + 3.5% p.a.
(depending on leverage ratios) to a range of US$ LIBOR +3.0% to US$
LIBOR + 3.75% p.a. (depending on total net leverage ratio).
-- The asset-backed loan facility of up to $100m (depending on
the levels of inventory and receivables) was extinguished. This
facility bore interest at US$ LIBOR +1.25% p.a., or US$ LIBOR
+1.50% p.a. if drawings are over $50m. Unamortised transaction
costs of $0.9 million (EUR0.8million) were released on the
extinguishment of this loan and recognised as finance expense.
Directly attributable incremental fees of EUR17.7 million were
capitalised as part of the transaction consisting of EUR7.1 million
for the Euro term loan, $9.4 million (EUR8.3 million) for the US
dollar term loan, and $2.6 million for the RCF (EUR2.3 million) to
be released to the Income Statement over the remaining term of the
term loans and the RCF facility.
Term loan
The principal outstanding of the US term loan in US dollars at
31 December 2020 is $738.2 million (2019: $834.2 million).
Following the Group's refinancing on 30 September 2020, the
interest rate payable on the US term loan is three month US dollar
LIBOR (minimum 0.75% p.a.) +3.75% p.a. and on the Euro term loan is
three month EURIBOR (minimum 0.75% p.a.) +3.75% p.a. The US dollar
term loan is repayable in amounts of $1.85 million per quarter
until the balance falls due on 16 December 2024. Prior to the
refinancing, capital payments were not due during the remaining
lifetime of the loan, as they had been prepaid as part of a
voluntary repayment made in a prior year. The Euro term loan is
repayable in amounts of EUR1.25 million per quarter (EUR1.1 million
per quarter before refinancing), with the balance also falling due
on 16 December 2024.
On 6 October 2015, the Group entered into hedging transactions
with a number of financial institutions which effectively converted
borrowings of $400.0 million at floating interest rates into
EUR355.0 million at a fixed interest rate of 4.2%, thereby reducing
foreign currency exposure for future cash flows and locking in
lower long-term Euro fixed interest rates. In March 2020, the group
terminated all these hedging instruments. Most of the instruments
had original maturity dates of October 2020. Due to the market
fluctuations at the start of the COVID-19 pandemic, the Group
decided to crystallise these asset positions and convert them to
cash.
Revolving Credit Facility and Asset-Backed Loan
Prior to the Group's refinancing, the revolving credit agreement
provided a facility of up to $125.0 million. Drawings under this
facility bore interest in a range of US$ LIBOR +3.0% to US$ LIBOR +
3.5% p.a. depending on the Group's leverage ratios. On 27 March
2020, the Group drew down the full amount available under the
facility. The amount was repaid in full on 29 July 2020. After the
Group's refinancing on 30 September 2020, the facility's interest
rate was increased to bear interest in a range of US$ LIBOR +3.0%
to US$ LIBOR + 3.75% p.a. (depending on total net leverage ratio).
The facility was also increased by $100 million to $225 million,
was extended from 16 July 2023 to 16 July 2024, and became
available to be used to issue letters of credit on behalf of TI
Group Automotive Systems LLC, a subsidiary undertaking. The
facility is undrawn at 31 December 2020 (except for letters of
credit see below).
The asset-backed loan ('ABL') provided up to $100.0 million
depending upon the level of inventories and trade receivables in
the Group's US and Canadian businesses. The facility was also
available to be used to issue letters of credit on behalf of TI
Group Automotive Systems LLC, a subsidiary undertaking. Drawings
under the facility bore interest at US$ LIBOR +1.50% p.a. unless
the drawings were below $50.0 million when the rate was US$ LIBOR
+1.25% p.a. On 27 March 2020, the Group drew down $25.0 million
under the facility. The amount was repaid in full on 21 May 2020.
The facility was extinguished on 30 September 2020 as part of the
Group's refinancing.
The net undrawn facilities under the agreements are shown
below:
2020 2019
$m EURm $m EURm
===== ===== ===== =======
Asset backed loan:
Availability - - 77.7 69.2
Utilisation for letters of credit - - (3.8) (3.4)
======================================== ----- ----- ===== =====
Net undrawn asset backed loan facility - - 73.9 65.8
---------------------------------------- ----- ----- ----- -----
Revolving credit agreement 225.0 183.8 125.0 111.4
Utilisation for letters of credit (3.8) (3.1) - -
---------------------------------------- ----- ----- ----- -----
Net undrawn revolving credit facility 221.2 180.7 125.0 111.4
---------------------------------------- ----- ----- ----- -----
Main borrowings: net undrawn facilities 221.2 180.7 198.9 177.2
======================================== ===== ===== ===== =====
Issuance discounts and fees
Initial issuance discounts and fees from the 2015 agreements,
brought forward at 1 January 2020 were EUR67.4 million. As a result
of the refinancing, an additional EUR17.7 million of fees were
capitalised in the year bringing the total fees capitalised to
EUR85.1 million at 31 December 2020.
All capitalised fees are expensed using the effective interest
rate method over the remaining terms of the facilities.
10.5. Other Secured Loans
A subsidiary in Spain has granted security over certain of its
assets in return for credit facilities from its banks. The loan has
total amortisa tion repayments of EUR54,000 per annum payable
quarterly (2019: EUR54,000) and expires on 15 June 2022. The
balance outstanding at 31 December 2020 is EUR115,000 (2019:
EUR169,000).
10.6. Total Undrawn Borrowing Facilities
2020 2019
EURm EURm
---------------------------------- ----- -------
Floating rate:
Expiring within one year 4.8 6.1
Expiring after more than one year 180.7 177.2
---------------------------------- ----- -----
Total at floating rate 185.5 183.3
---------------------------------- ----- -----
Fixed rate:
Expiring within one year 3.8 3.9
---------------------------------- ----- -----
Total at fixed rate 3.8 3.9
---------------------------------- ----- -----
Total at the end of the year 189.3 187.2
---------------------------------- ----- -----
10.7. Movements in Net Borrowings and Lease liabilities
Non-cash changes
---------- --------------
At 1
January Cash Currency Remeas-urement At 31 December
2020 flows New leases Fees expensed translation and disposals 2020
EURm EURm EURm EURm EURm EURm EURm
-------------- --------- ------ ---------- ------------- ------------ -------------- ---------------
Cash and cash
equivalents 411.7 110.6 - - (36.5) - 485.8
Financial
assets at
FVTPL 0.9 - - - - - 0.9
Borrowings (1,150.9) 19.0 - (8.0) 63.2 - (1,076.7)
-------------- --------- ------ ---------- ------------- ------------ -------------- -------------
Total net
borrowings (738.3) 129.6 - (8.0) 26.7 - (590.0)
-------------- --------- ------ ---------- ------------- ------------ -------------- -------------
Lease
liabilities (166.7) 28.6 (17.9) - 7.0 (2.0) (151.0)
-------------- --------- ------ ---------- ------------- ------------ -------------- -------------
Net borrowings
and
Lease
liabilities (905.0) 158.2 (17.9) (8.0) 33.7 (2.0) (741.0)
-------------- --------- ------ ---------- ------------- ------------ -------------- -------------
Non-cash changes
---------- --------------
At 1
January Cash Currency Remeas-urement At 31 December
2019 flows New leases Fees expensed translation and disposals 2019
EURm EURm EURm EURm EURm EURm EURm
-------------- --------- ------ ---------- ------------- ------------ -------------- ---------------
Cash and cash
equivalents 360.1 48.2 - - 3.4 - 411.7
Financial
assets at
FVTPL 1.2 (0.3) - - - - 0.9
Borrowings (1,181.7) 54.8 - (7.7) (16.3) - (1,150.9)
-------------- --------- ------ ---------- ------------- ------------ -------------- -------------
Total net
borrowings (820.4) 102.7 - (7.7) (12.9) - (738.3)
-------------- --------- ------ ---------- ------------- ------------ -------------- -------------
Lease
liabilities (147.0) 27.1 (47.5) - - 0.7 (166.7)
-------------- --------- ------ ---------- ------------- ------------ -------------- -------------
Net borrowings
and
lease
liabilities (967.4) 129.8 (47.5) (7.7) (12.9) 0.7 (905.0)
-------------- --------- ------ ---------- ------------- ------------ -------------- -------------
Cash flows from financing activities arising from changes in
financial liabilities are analysed below:
2020 2019
EURm EURm
----------------------------------------------------- ------- ------
Proceeds from new borrowings (213.6) -
Fees paid on proceeds from new borrowings 17.7 0.3
Voluntary repayments of borrowings 209.6 50.0
Scheduled repayments of borrowings 5.3 4.5
Lease principal repayments 28.6 27.1
----------------------------------------------------- ------- ----
Cash outflows from financing activities arising from
changes in financial liabilities 47.6 81.9
----------------------------------------------------- ------- ----
Borrowings cash flows 19.0 54.8
Lease liabilities cash flows 28.6 27.1
----------------------------------------------------- ------- ----
Cash outflows from financing activities arising from
changes in financial liabilities 47.6 81.9
----------------------------------------------------- ------- ----
11 . Retirement Benefit Obligations
11.1. Defined Benefit Arrangements in the Primary Financial
Statements
a. Balance Sheet
Other post
Other employment
US pensions pensions US healthcare liabilities Total
Net liability EURm EURm EURm EURm EURm
----------------------------- ----------- --------- ------------- ------------ ---------
Present value of retirement
benefit obligations (209.2) (117.9) (33.8) (95.3) (456.2)
Fair value of plan assets 156.9 115.4 - 26.8 299.1
Asset ceiling - (3.6) - - (3.6)
----------------------------- ----------- --------- ------------- ------------ -------
Net liability at 31 December
2020 (52.3) (6.1) (33.8) (68.5) (160.7)
----------------------------- ----------- --------- ------------- ------------ -------
Other post
Other employment
US pensions pensions US healthcare liabilities Total
Net liability EURm EURm EURm EURm EURm
----------------------------- ----------- --------- ------------- ------------ ---------
Present value of retirement
benefit obligations (222.9) (107.9) (34.0) (92.0) (456.8)
Fair value of plan assets 171.7 111.9 - 24.5 308.1
Asset ceiling - (5.0) - - (5.0)
----------------------------- ----------- --------- ------------- ------------ -------
Net liability at 31 December
2019 (51.2) (1.0) (34.0) (67.5) (153.7)
----------------------------- ----------- --------- ------------- ------------ -------
b. Income Statement
Net (expense)/income recognised in the Income Statement is as
follows:
Other post
Other employment
US pensions pensions US healthcare liabilities Total
Net expense EURm EURm EURm EURm EURm
------------------------------ ----------- --------- ------------- ------------ --------
Current service cost (0.2) (1.3) - (7.2) (8.7)
Settlement / curtailment gain 2.1 - - 0.1 2.2
Net interest (expense)/income (2.4) 0.1 (1.0) (0.8) (4.1)
------------------------------ ----------- --------- ------------- ------------ ------
Total expense year ended 31
December 2020 (0.5) (1.2) (1.0) (7.9) (10.6)
------------------------------ ----------- --------- ------------- ------------ ------
Other post
Other employment
US pensions pensions US healthcare liabilities Total
Net expense EURm EURm EURm EURm EURm
------------------------------ ----------- --------- ------------- ------------ -------
Current service cost (0.1) (1.1) - (6.9) (8.1)
Settlement gain 9.1 - - 0.2 9.3
Net interest (expense)/income (2.3) 0.2 (1.3) (1.2) (4.6)
------------------------------ ----------- --------- ------------- ------------ -----
Total income/(expense) for
the year ended 31 December
2019 6.7 (0.9) (1.3) (7.9) (3.4)
------------------------------ ----------- --------- ------------- ------------ -----
During 2020, a settlement gain of EUR2.1 million (2019: EUR9.1
million) was recognised following a buyout offering of the Group's
US pension plan.
11.2. Sensitivity analysis
Changes in the principal assumptions would decrease/(increase)
the total defined benefit obligation (DBO) as follows:
2020 2019
Change in Increase Decrease Increase Decrease
Decrease/(increase) in DBO assumption EURm EURm EURm EURm
Discount rate 0.5% 30.9 (36.2) 29.5 (34.7)
Inflation rate 0.5% (11.1) 11.0 (8.7) 9.7
Salary growth rate 0.5% (3.7) 3.5 (3.3) 3.1
Life expectancy 1 year (16.3) 16.4 (15.7) 15.2
Healthcare cost trend: Initial
rate 0.5% (1.4) 1.3 (1.4) 1.3
------------------------------- ------- --- -------- -------- -------- --------
The sensitivity analysis above illustrates the change in each
major assumption whilst holding all others constant. The methods of
calculating the defined benefit obligation for this purpose are the
same as used for calculating the end of year position.
12. Provisions
Movements in provisions are as follows:
Product
warranty Restructuring Other Total
EURm EURm EURm EURm
------------------------------------ --------- ------------- ----- --------
At 1 January 2020 13.9 5.1 5.3 24.3
Provisions made during the year 15.0 16.1 0.2 31.3
Provisions used during the year (12.1) (2.6) (0.3) (15.0)
Non cash movements - (7.0) - (7.0)
Provisions reversed during the year (1.5) - - (1.5)
Utilisation of discount - - (0.1) (0.1)
Currency translation (0.7) (0.6) (0.2) (1.5)
------------------------------------ --------- ------------- ----- ------
At 31 December 2020 14.6 11.0 4.9 30.5
------------------------------------ --------- ------------- ----- ------
Total provisions:
2020 2019
EURm EURm
----------------- ---- ------
Non-current 4.9 5.0
Current 25.6 19.3
----------------- ---- ----
Total provisions 30.5 24.3
----------------- ---- ----
Product warranty
The majority of product warranty provisions relate to specific
customer issues, and are based upon open negotiations and past
customer claims experience. Utilisation of the warranty provision
is expected in 2021.
Restructuring
Restructuring provisions comprise planned headcount reductions
and similar costs of balancing production capacity with market
requirements. The charge for the period, primarily severance, of
EUR19.5 million is offset by the EUR3.4 million net gain on the
disposal of properties related to the restructuring activities.
Cash paid in the period of EUR13.0 million has been offset by
proceeds on disposal of these properties of EUR10.4 million. The
provision at 31 December 2020 relates to global restructuring
initiatives in response to reduced output following the COVID-19
pandemic. The balance is expected to be fully utilised in 2021.
Other provisions
Other provisions at 31 December 2020 comprise provisions for
disputed claims for indirect taxes totalling EUR0.7 million (2019:
EUR1.2 million) and asset retirement obligations totalling EUR4.2
million (2019: EUR4.1 million). Asset retirement obligations are
linked to the useful lives of the underlying assets, with expected
utilisation ranging from 2021 to 2025. The indirect tax provisions
are expected to be utilised over the next 5 years.
13 . Cash Generated from Operations
2020 2019
EURm EURm
---------------------------------------------------- ------- --------
(Loss)/profit for the year (252.2) 144.6
Income tax expense before exceptional items 28.1 57.1
Exceptional income tax credit (29.7) -
---------------------------------------------------- ------- ------
(Loss)/profit before income tax (253.8) 201.7
---------------------------------------------------- ------- ------
Adjustments for:
Depreciation, amortisation and impairment charges 213.2 229.9
Exceptional impairment charges 304.6 -
Loss on disposal of PP&E and intangible assets 0.5 1.6
Gain on disposal of PP&E in restructuring costs (3.4) -
Share-based payment excluding social security costs 0.9 1.4
Net finance expense 74.0 57.5
Unremitted share of (loss)/profit from associates 4.0 0.2
Net foreign exchange gains (27.2) (0.5)
Changes in working capital:
- Inventories - (10.8)
- Trade and other receivables 38.6 (0.4)
- Trade and other payables 24.3 13.9
Change in provisions 7.8 (4.9)
Change in retirement benefit obligations (9.1) (12.4)
---------------------------------------------------- ------- ------
Total 374.4 477.2
---------------------------------------------------- ------- ------
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