Released: 12 March 2024
Full Year Results
2023
Double-digit revenue growth and Adjusted EPS up
57%
Confidence in achieving
mid-term targets
TI Fluid Systems plc ("The
Group"), a global industry leader in highly engineered automotive
fluid storage, carrying and delivery systems and thermal management
products and systems, announces its results for the year ended
31 December 2023.
€ millions
|
|
|
|
Adjusted Measures*
|
2023
|
2022
|
Change
|
Constant Currency Change
|
Revenue
|
3,516.2
|
3,268.3
|
7.6%
|
11.1%
|
Adjusted EBIT
|
259.6
|
180.0
|
44.2%
|
52.3%
|
Adjusted EBIT Margin %
|
7.4%
|
5.5%
|
190bps
|
|
Adjusted Net Income**
|
132.8
|
84.3
|
57.5%
|
|
Adjusted Basic Earnings per Share
(€ cents)**
|
25.8
|
16.4
|
56.8%
|
|
Adjusted Free Cash Flow
|
140.7
|
78.4
|
79.5%
|
|
|
|
|
|
|
Statutory Measures
|
2023
|
2022
|
Change
|
|
Revenue
|
3,516.2
|
3,268.3
|
7.6%
|
|
Operating Profit /
(Loss)
|
195.8
|
(217.0)
|
|
|
Profit / (Loss) for the
Year
|
83.6
|
(279.0)
|
|
|
Basic Earnings per Share (€
cents)
|
16.2
|
(54.4)
|
|
|
Dividend per Share (€
cents)
|
6.83
|
2.54
|
168.9%
|
|
*Adjusted measures are non - IFRS
metrics and reconciled in Note 4 and defined in
the glossary in Note 15
**Adjusted Net Income and Adjusted
Basic EPS definition changed to exclude impact of purchase
accounting adjustments, consistent with other metrics, see Note
4
Strong financial performance slightly ahead of
expectations:
•
|
Revenue growth of 11.1% at constant currency as we capitalised on
industry volume growth, launched new programmes and executed our
commercial strategy
|
•
|
Significant Adjusted EBIT margin
expansion, up 190 basis points to
7.4% through commercial performance
combined with cost reduction actions
|
•
|
57% increase in Adjusted Basic EPS driven by higher profitability
and a lower effective tax rate
|
•
|
Strong Adjusted Free Cash Flow
conversion of 36% of Adjusted
EBITDA1 as a result of disciplined working capital
management
|
•
|
Value creation demonstrated by a
ROCE of 27.6%
|
•
|
Net leverage1 reduced
to 1.5x Adjusted EBITDA at year end, ahead
of plan
|
•
|
Enhanced focus on shareholder
returns delivered through a 169% increase in full year dividend per
share to 6.83 € cents and a share buyback programme with 3.8
million shares purchased by year end
|
Delivering on our strategy for sustainable and profitable
growth:
•
|
Bookings secured with lifetime
revenue of €3.0 billion, including BEV bookings of €1.3 billion, of
which one third in China. First bookings for Integrated Thermal
Management modules in China and Europe
|
•
|
Three further e-Mobility
Innovation Centres opened in Asia
|
•
|
Successful acquisition of Cascade
Engineering and collaboration with Sanden to strengthen our EV
product offering
|
•
|
Development of electric coolant
valve and pump to complete our thermal mechatronics product set for
EVs
|
•
|
Further footprint and cost
optimisation initiatives executed successfully to secure long-term
competitiveness, adapt to customer needs and deliver our mid-term
targets
|
•
|
15% reduction in Scope 1 & 2
carbon emissions compared to 2021. 2030 targets approved by
SBTi
|
Outlook for 2024 - productivity to drive continued progress
towards our mid-term objectives:
Our 2024 planning assumptions are
based on a modest year-on-year industry volume decline. Automotive
production volumes for 2024 are forecast to be slightly higher in
North America, flat in China and slightly negative in
Europe.
For 2024, we expect flat to
low-single digit constant currency revenue growth. Through
productivity and efficiency initiatives, we expect to further
increase our Adjusted EBIT margin above the 7.4% achieved in 2023.
We are targeting strong Adjusted Free Cash Flow conversion of
approximately 30% of Adjusted EBITDA.
Building on the significant
strides made in 2023, we expect 2024 to be another year of progress
towards our goal of achieving revenue of €3.8-4.2
billion[1] by 2026 and returning to a
double-digit Adjusted EBIT margin in the mid-term.
Hans Dieltjens, Chief Executive Officer and President,
commented:
"We delivered a strong 2023
financial performance with double-digit revenue growth at constant
currency and significant Adjusted EBIT margin expansion driven by
unrelenting operational and commercial execution. I would like to
thank the team for successfully navigating three years of
transformation and external challenges.
Our strategic initiatives,
outlined in our Taking-The-Turn strategy, are delivering results as
we capitalise on the strengths of our conventional portfolio and
the opportunities of electrification.
We remain committed to driving
innovation and delivering value for our customers, while
maintaining a strong focus on sustainability. Our efforts in these
areas are helping to strengthen our position as a leader in our
industry and are driving long-term growth and success.
Looking ahead, we expect to make
further progress towards our mid-term targets during 2024 as we
further increase our emphasis on operational efficiency and
productivity. We will continue to execute on our strategic plan and
remain focused on delivering strong results for our stakeholders.
We are confident in our ability to achieve our mid-term targets and
remain excited about the opportunities that lie ahead."
Notes
1. Adjusted EBITDA
and net leverage defined in Note 15 in the glossary
Results presentation
TI Fluid Systems plc will host a
webcast and audio conference for investors and analysts at 9.00 am
UK time on 12 March 2024.
Webcast Link:
https://webcast.openbriefing.com/tifluid-fy23/
Conference Call Dial-In
Details:
United Kingdom (local):
|
+44 20 3936 2999
|
United States (local):
|
+1 646 664 1960
|
All other locations:
|
Global
Dial-In Numbers
|
Conference Code:
|
080020
|
Should you wish to pre-register
for the audio conference call, please use this link to receive a
unique PIN to dial directly into the call.
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
|
Headland Consultancy
|
Kellie McAvoy
|
Matthew Denham
|
Investor Relations
|
Chloe Francklin
|
Tel: +44 7354 846374
|
Tel: +44 20 3805 4822
|
Chief Executive Officer's review
In 2023, we achieved double-digit
revenue growth at constant currency, a significant increase in
Adjusted EBIT margin and strong cash generation. We also made
important progress on the execution of our 'Taking-the-Turn'
strategy further positioning TI for a successful transition to
electrification.
Strong 2023 performance and progress
In 2023, TI delivered a strong
performance, demonstrating the quality, professionalism and
commitment of the wider team as the organisation delivered growth
in revenue and profitability. This success is a result of the hard
work and dedication of our people, and I would like to thank them
all for their contribution.
We have made significant progress
towards our mid-term financial targets, with revenue growing at
11.1% at constant currency and our
Adjusted EBIT margin increasing by 190
basis points to 7.4% as compared to 2022.
Our 36% conversion of Adjusted EBITDA to
cash reflects our financial discipline. So all in all, we delivered
on our promises, with the full year slightly ahead of expectations,
even after upgrading our 2023 financial outlook in
August.
We also delivered an improvement
in our environmental footprint. TI's success is built on innovating
and developing products that reduce vehicle emissions and increase
efficiency, and we are committed to manufacturing products in a
more sustainable manner. Actions to improve our environmental
footprint resulted in a double-digit reduction in our Scope 1 &
2 carbon emissions versus a 2021 baseline and we are on plan for
our 50% reduction commitment by 2030.
When I became CEO in late 2021, it
was clear that we needed to respond to the accelerating pace of the
industry transition to electric vehicles (EV). Since then, our
Take-the-Turn strategy has driven a significant step up in EV
bookings. As we set out at our Capital Markets Event in
September 2023, Taking-the-Turn is the next step to accelerate our
strategic execution. We also set mid-term financial targets to grow
revenue to €3.8-4.2 billion and return to a double-digit Adjusted
EBIT margin. Our Taking-the-Turn strategy and progress towards our
financial targets are on track.
Our EV product portfolio leverages
our deep expertise in fluid handling and builds on existing
technologies, products and strengths. Our product-agnostic
portfolio is a key differentiator, particularly brake lines which
are truly propulsion agnostic, and our lines and connectors which
are used in coolant or refrigerant systems, and where we have
decades of experience. Additionally, our connectors, lines and
Integrated Thermal Modules support the increased cooling and
heating requirements of EVs and are expected to translate into
higher EV volume growth in the future.
Finally, conventional products are
an integral part of our business, particularly fuel tanks and
delivery systems for ICE vehicles. We are focused on maximising
their profitability and cash flow, and ensuring we capture the
opportunities presented by hybrid vehicles.
EVs are clearly the future, but
the shape and pace of the transition are more difficult to predict.
We are, therefore, disciplined in how we invest in ICE and EV
product lines and are successfully managing the transition within
our historic levels of restructuring and capital
expenditure.
Our industry
TI operates in a dynamic and
rapidly changing industry. In 2023, we again demonstrated our
agility by responding to significant industry growth while
maintaining our focus on execution. Global light vehicle production
volumes recovered sharply, increasing by 9.4% year-on-year to 90.1
million units, driven by strong demand, inventory restocking and
easing supply chain shortages.
However, the operating environment
was not without its challenges, including persistently high
inflation, volatility in customer production schedules, and the UAW
strike. Despite this, all regions and propulsion types experienced
good growth, with EV volumes increasing 36% year on year, resulting
in EVs accounting for 24% of global light vehicle production. BEV
production increased 33% to account for 13% of global light vehicle
production. Production volumes from the local Chinese OEMs
increased 21%, well ahead of overall growth in Chinese light
vehicle production of 9.4%.
2023 performance: double-digit revenue growth and significant
margin recovery
In 2023, TI achieved 11.1% revenue growth at constant currency, with
revenue of €3,516.2 million. This growth
was driven by the recovery in industry volumes, inflationary cost
recoveries, and the successful launch of new products.
We successfully completed launches
across a broad mix of product lines, customers and powertrains
across all regions which will drive future growth.
Revenue growth was strongest in
Europe & Africa and North America,
with constant currency growth rates of 14.2% and 14.3% respectively.
In both regions we outperformed light vehicle production (by
300 basis points in Europe & Africa,
and by 480 basis points in North
America). In Asia Pacific, constant currency revenue growth
was 4.5%, again reflecting industry volume
growth, inflationary recoveries and launches. We
underperformed light vehicle production in the region by
450 basis points, due to China where we
have lower share with the local OEMs, creating a negative mix
effect. As discussed below, we expect launches in 2023 and plans
for 2024 will improve our position with local OEMs.
The key financial highlight of the
year was the significant recovery in Adjusted EBIT margin to
7.4%, 190 basis
points higher year on year. Adjusted EBIT increased 44.2% to €259.6 million from
€180.0 million in 2022. This was due to a
strong commercial performance and cost actions.
Despite the working capital
investment needs of growth, Adjusted Free Cash Flow conversion was
36% of Adjusted EBITDA, better than our track record and prior
outlook.
Delivering on our strategic priorities
At our Capital Markets event in
September, we outlined our strategy for sustainable and profitable
growth. We set clear financial targets based on delivering revenue
growth and a return to double-digit Adjusted EBIT
margins:
•
|
Revenue: 2026 target of €3.8-4.2
billion; 2030 target of >€4.5 billion[2]
|
•
|
Adjusted EBIT margin: mid-term
target to return to double digits
|
•
|
Adjusted Free Cash Flow
conversion: circa 30% of Adjusted EBITDA
|
•
|
Carbon emissions: re-affirmed 2030
targets for a 50% reduction in Scope 1 & 2, and a 30% reduction
in Scope 3 versus 2021
|
We made substantial progress
towards achieving these targets in 2023, but the entire team
recognises that more work remains to be done.
Sustainable, long-term revenue growth
TI has a clear strategy for
achieving sustainable revenue growth. The key strategic building
blocks include expanding our fluid handling business for EVs,
strengthening our position in Modules & Systems for EVs,
enhancing our position in China and maximising the profitability of
our conventional portfolio for ICE vehicles.
•
|
|
Expanding our fluid handling business - lines &
connectors:
|
|
○
|
EVs present a tremendous growth
opportunity for fluid handling products, particularly lines and
connectors. We estimate that BEVs require 4-5x as many connectors
and 2-4x as many coolant lines versus a comparable ICE vehicle. In
2023, over 40% of our bookings related to Thermal products largely
in this field.
|
|
|
|
|
○
|
Our e-Mobility Innovation Centres
(eMICs) are a differentiator in winning new thermal management
business for EVs. These centres bring critical design, engineering,
and testing capabilities under one roof to drive innovation and
enable more effective collaboration with customers. They also
provide customers with one-stop shops to tackle their thermal
management challenges and accelerate speed to market.
|
|
|
|
|
○
|
A key component of our strategy is
to further develop our technologies and capabilities for EVs. We
can drive this development organically, but there are also
inorganic opportunities. A good example is the acquisition of
Cascade Engineering Europe (Cascade), which increases our market
share in thermal connectors, broadens our speciality connectors
offering, and increases our vertical integration. The
business was acquired for a base purchase price of circa €26.2
million.
|
|
|
|
•
|
|
Strengthening our position in Modules &
Systems: Towards the end of 2023,
we announced a collaboration with Sanden, a leader in refrigerant
and e-compressors. This co-operation accelerates development of our
next generation Thermal Refrigerant Modules (ITMrs or Integrated
Thermal Module refrigerant) as we now can offer system solutions
including the compressor, a critical component. We also secured our
first bookings for our ITMas or Integrated Thermal Manifolds for
coolant applications with programme awards in Europe and
China.
|
|
|
|
•
|
|
Enhancing our position in China: TI has a long history of operating successfully in China,
with strong market positions with global OEMs. We are leveraging
this position to increase share with the local OEMs who have had
strong growth momentum in the last two years. Our actions in 2023,
including the decision to move to a regional model and the opening
of an eMIC in Jiading, Shanghai, are already showing results and
increased traction. Both improve the agility of the local team to
respond quickly to specific local market needs in a region where
speed is a critical factor. Our progress can be seen in new
launches - 48 in 2023, over half with local OEMs, and a further 81
planned for 2024. BEV bookings amounted to €0.4 billion (2022: €0.4
billion), with a number of strategic wins. These include an entry
point with the largest local OEM with brake lines and PHEV
tanks.
|
|
|
|
•
|
|
Maximising our conventional portfolio:
The majority of TI's conventional products are
used in ICE vehicles where TI is well-positioned to be the natural
choice for platform extensions. This is reflected in bookings,
which include extensions for a number of ICE programmes. We are
also delivering strong profitability - in 2023, our Fuel Tank
Delivery Systems segment grew revenue 10.5% at constant currency, well ahead of growth in
its addressable markets (estimated at 6.6%), and generated an
Adjusted EBIT margin of 8.8%.
|
Finally, in 2023 we maintained our
focus on bookings, which are a key priority and underpin our future
success. We successfully maintained our BEV awards at the
same level as 2022 at €1.3 billion (2022: €1.3 billion) of which
China represented 33% or €0.4 billion (2022: 35% and €0.4 billion
respectively). HEV awards were €0.8 billion (2022: €1.3
billion). This was a good performance, particularly given the
commercial organisation's focus on inflationary cost recoveries.
Moreover, our bookings demonstrate that our Taking-The-Turn
strategy is delivering important key wins in Thermal Management,
Modules & Systems and in China.
Returning to double-digit Adjusted EBIT
margins
In 2023, we took an important step
towards achieving our targeted double-digit Adjusted EBIT margin.
This was driven by commercial activity, volume growth and
productivity measures. Productivity included actions taken to
optimise our footprint, headcount and purchasing, with a less
volatile trading environment helping to drive efficiency
gains. During the year, we invested €13.4 million (2022:
€22.8 million) in restructuring, largely related to headcount
reductions and footprint optimisation. Cost recoveries also played
an important role as we secured compensation for a fair share of
inflation borne by TI.
Looking ahead, the three building
blocks of our path to a double-digit Adjusted EBIT margin remain
unchanged. Conversion of volume growth and mix, recovering costs
and driving productivity remain the key three components, combined
with launching and winning new EV product lines at historic
margins.
Delivering on our sustainability agenda
Sustainability is at the heart of
our purpose, commercial strategy and how we run our business.
This starts with our products and a focus on new, cleaner
technologies to support customers in producing greener vehicles. In
2023, TI revenues related to battery electric and hybrid vehicles
are broadly in-line with the industry, and EV bookings represented
over two thirds of total bookings.
Secondly, we improved our own
environmental footprint. Greater use of renewable energy and
increasing energy efficiency has delivered a double-digit reduction
in our Scope 1 & 2 emissions in 2023 compared to a 2021
baseline. We are on track to deliver a planned 50% reduction by
2030.
Thirdly, in 2023, we significantly
expanded our safety management system to an additional 27
manufacturing locations. This is building awareness, driving better
reporting and improving our health & safety culture.
People and shift to a regional organisation
The regional organisation
announced last September improves alignment with customers and
industry developments. It is also a better fit with the wider
geopolitical environment, including deglobalisation. Our regional
leaders are better placed to adapt to changes in their individual
markets, particularly the EV transition, which is moving at
different speeds in different regions. The regional structure
allows a more effective shift in resources between product lines
and captures synergies as we transition our portfolio for
electrification.
Talent remains a key priority.
This starts with developing, retaining and promoting talent from
within. At the same time, we seek to bring valuable new skills into
the Group through select external appointments. As a result, we
have a well-balanced leadership team, with a mix of experienced TI
leaders and external appointees with a broad range of skills and
diversity of experience.
We continue to embed the 'Six
Mindsets for Success' into our culture through consistent
reinforcement at internal presentations and alignment with our
day-to-day activities. By embracing our Six Mindsets, we will
instil a winning culture that is agile and able to adapt in order
to ensure success through the industry transition.
Improving returns to shareholders
Our revised capital allocation
strategy seeks to optimise shareholder value creation by balancing
investment in growth with returns. By moving to a progressive
dividend, starting with €35 million, we aim to improve returns and
visibility. We are also making progress with the €40 million share
buyback announced in August.
Confident in our prospects
Looking ahead, we expect to make
further progress in 2024 towards our mid-term financial targets as
we continue to execute our strategy. Our flexible business model,
committed workforce and propulsion agnostic product portfolio mean
we are well-positioned to continue create value for
shareholders.
Hans Dieltjens
Chief Executive Officer and
President
11 March 2024
Chief Financial Officer's Report
Our strong financial performance
demonstrates that we are successfully executing the strategy set
out in September. We have achieved double-digit revenue growth at
constant currency, a 190 basis point
Adjusted EBIT margin expansion, a significant reduction in our tax
rate and excellent cash conversion, ahead of target. This
ultimately results in an industry-leading return on capital
employed of 27.6%.
Additionally, we have advanced
strategically through M&A and collaborations. Our balance sheet
is strong, with leverage reducing to 1.5x Adjusted EBITDA, and our
updated capital allocation policy will ensure we provide more
attractive returns whilst maintaining our resilience and
flexibility to invest in growth.
With our well-defined strategy, we
have a significant opportunity to further create value for
shareholders by delivering profitable growth. We have made good
progress towards our targets through disciplined execution, and I
am confident that we will continue to build on this in
2024.
Double-digit revenue growth
Revenue for the year increased
11.1% at constant currency to
€3,516.2 million, driven by industry
volume growth, higher prices to compensate for cost inflation and
new launches. Growth was broad-based across both segments and all
regions. Reported revenue growth was 7.6%
due to a foreign exchange headwind from the strengthening of the
Euro against key currencies, particularly in the second
half.
Revenue by segment and by region €m
|
2023
|
2022
|
Change
|
Change at constant
currency
|
Light vehicle production
growth
|
Total Group revenue
|
3,516.2
|
3,268.3
|
7.6%
|
11.1%
|
9.4%
|
By segment
|
|
|
|
|
|
FCS
|
2,018.1
|
1,869.7
|
7.9%
|
11.6%
|
9.4%
|
FTDS
|
1,498.1
|
1,398.6
|
7.1%
|
10.5%
|
9.4%
|
By region
|
|
|
|
|
|
Europe and Africa
|
1,375.3
|
1,207.1
|
13.9%
|
14.2%
|
11.2%
|
Asia Pacific
|
1,087.6
|
1,114.3
|
(2.4)%
|
4.5%
|
9.0%
|
North America
|
997.8
|
895.8
|
11.4%
|
14.3%
|
9.5%
|
Latin America
|
55.5
|
51.1
|
8.6%
|
16.4%
|
3.1%
|
Revenue by segment: Fluid Carrying Systems (FCS) revenue increased
11.6% at constant currency as a result of
industry volume growth, inflationary cost recoveries and successful
launches of thermal management programmes for hybrid and battery
electric vehicles. Fuel Tanks & Delivery Systems (FTDS) revenue
increased 10.5% at constant currency, well
ahead of the 6.6% growth in its addressable markets. This was
driven by inflationary cost recoveries, and our success on hybrid
vehicle platforms.
Revenue by region: in Europe
& Africa and North America we delivered mid-teens revenue
growth at constant currency. In both regions, growth was a result
of industry volume growth, inflationary cost recoveries and
launches. These more than offset volatility in customer production
schedules, particularly for EVs in Europe towards the end of the
year. The impact of the UAW strike on our business in the second
half was limited. Both regions outperformed light vehicle
production.
In Asia Pacific, revenue growth at
constant currency was 4.5%, below light
vehicle production volume growth due to negative mix effects,
specifically market share gains by local Chinese OEMs with whom we
are under-represented.
Foreign exchange reduced reported
revenue growth by 350 basis points. This
is largely related to the strengthening of the Euro against the US
dollar, Korean won and Chinese renminbi. Over half of the Group's
revenues are denominated in these currencies.
Significant Adjusted EBIT margin recovery
The Group uses several financial
measures to manage the business, including Adjusted EBIT, which is
a non-IFRS measure, but which has been consistently used by the
Group to monitor and measure the underlying operating performance
of the business, and to ensure that decisions taken align with the
Group's long-term interests. The metrics are also used in certain
of our compensation plans and to communicate to our investors. A
reconciliation between the reported and adjusted measures is shown
in Note 4.
One of the key financial
highlights of the year was the significant recovery of the Group's
Adjusted EBIT margin, which increased 190
basis points to 7.4% (2022: 5.5%).
Adjusted EBIT increased 44.2% to
€259.6 million (2022: €180.0 million) with
strong operating leverage, converting 32% of incremental revenue
into Adjusted EBIT.
The Group benefited from volume
growth, inflationary cost recovery agreements with customers in
order to recover a fair share of the cost increases borne by TI
since 2021, efficiencies in operations and restructuring benefits.
These were only partially offset by other factors, including
foreign exchange movements.
2023 represents significant
progress towards our mid-term goal of returning to a double-digit
Adjusted EBIT margin. We entered 2024 with a strong focus on
productivity and a pipeline of initiatives in areas such as
purchasing and fixed costs.
Statutory Operating profit was
€195.8 million (2022: €217.0 million loss), with a material year-on-year
improvement due to the non-recurrence of a €317.4 million exceptional impairment charge and
improved underlying profitability compared to 2022. The key
adjusting items excluded from Adjusted EBIT but included in
statutory operating profit are set out below.
Reconciliation of Adjusted EBIT to reported operating
profit
|
2023
|
2022
|
|
|
|
Statutory operating profit/(loss)
|
195.8
|
(217.0)
|
Depreciation and amortisation on
purchase accounting
|
45.5
|
54.3
|
Restructuring costs
|
13.4
|
22.8
|
Exceptional impairment
charge
|
-
|
317.4
|
Other
|
4.9
|
2.5
|
Adjusted EBIT
|
259.6
|
180.0
|
The largest adjusting item relates
to non-cash depreciation and amortisation on purchasing accounting,
mainly relating to Bain's acquisition of the Group in 2015. In
order to improve our cost structure and address the constantly
evolving needs of our customers, we incurred restructuring costs of
€13.4 million (2022: €3.3 million). These costs are in-line with historic
levels and the majority are cash-related.
In 2022, the Group realised an
exceptional impairment charge of €317.4
million relating to the impairment of goodwill arising from the
Bain acquisition and other assets, including property, plant and
equipment, other intangibles and right-of-use assets. There are no
material impairment charges relating to 2023.
Higher net finance expense
Net finance expense was higher
year on year at €74.7 million (2022:
€58.7 million). This was due to increased
interest rates on the Group's term loans, retirement obligations
and leases, partially offset by higher interest income.
In August 2023, we repaid €99.2
million of term loan debt. This reduced the term loan interest
costs and crystallised an accelerated fee write-off of
€2.8 million.
Reducing effective tax rate
The adjusted income tax expense
was €52.0 million (2022: €36.9 million), with the adjusted
effective tax rate reducing to 28.1% (2022: 30.4%) on Adjusted
Profit Before Tax of €184.9 million (2022: €121.3 million).
Historical one-off factors which have resulted in a higher
effective tax rate in recent years have largely been addressed.
This combined with significantly higher profitability has resulted
in an adjusted effective tax rate reducing towards the average of
the countries in which we operate.
The Group's statutory income tax expense was
€37.5 million (2022: €23.4 million).
Earnings per share significantly higher
During 2023, we updated our
definition of Adjusted Net Income to include an adjustment for
depreciation and amortisation arising on purchase accounting, net
of tax. This is consistent with the definition of Adjusted EBIT and
therefore in Management's view, this change in definition improves
consistency within the adjusted performance measures and provides
increased transparency into the performance of the Company. The
adjustment to the comparative data for 2022 is an increase of €40
million, and the data is presented including this
adjustment.
On this basis, Adjusted Net Income
and Adjusted Basic EPS increased 57.5% to
€132.8 million and 56.8% to 25.8 Euro cents
respectively (2022 restated: €84.3 million
and 16.4 Euro cents). The weighted average
number of shares for 2023 was 515.6
million (2022: 513.1 million).
On a statutory basis, the Group's
Profit for the Year was €83.6 million
(2022: loss of €279 million), resulting in Basic Earnings per Share
('EPS') of 16.2 Euro cents for the year
(2022: loss of 54.4 Euro cents).
Maintaining cash discipline: 36% Adjusted Free Cash Flow
conversion
Adjusted Free Cash Flow
|
2023
€m
|
2022
€m
|
Net cash generated from operating
activities
|
236.1
|
167.5
|
Net cash used in investing
activities
|
(131.9)
|
(116.6)
|
Free Cash Flow
|
104.2
|
50.9
|
Cash received on movements of
financial assets at FVTPL
|
-
|
(0.9)
|
Net restructuring cash
spend
|
14.3
|
23.6
|
Purchase of Cascade Engineering
Europe net of cash acquired and pre-existing relationships
effectively settled on acquisition
|
18.6
|
-
|
Tax paid on the gain on disposal
of associated undertakings
|
-
|
3.0
|
Cash spend associated with
business acquisitions or disposals
|
2.4
|
1.8
|
Cash spent on customisation and
configuration costs of significant software as a service ("SaaS")
arrangements
|
1.2
|
-
|
Adjusted Free Cash Flow
|
140.7
|
78.4
|
The Group uses Adjusted Free Cash
Flow as its primary operating measure of cash flow performance.
Strong cash flow discipline resulted in Adjusted Free Cash Flow
conversion of 36% of Adjusted EBITDA,
ahead of the Group's circa 30% target.
Adjusted Free Cash flow increased
79% to €140.7
million (2022: €78.4 million), reflecting strong profitability and
excellent working capital management. Our working capital ratio
improved significantly to 8.7% (2022:
10.3%) due to receivables and inventory management. As a result,
the Group's working capital outflow was only €11.1 million (2022: €22.7 million outflow) despite
double-digit revenue growth. Group tax payments increased to
€66.5 million (2022: €58.3
million).
Our capex needs are modest, at
3.5% of revenue in 2023, with
€124.4 million (2022: €117.9 million) largely consisting of maintenance capex
and thermal growth investments. The net cash outflow on
restructuring was €14.3 million (2022:
€23.6 million), predominantly related to severance
payments.
Free cash flows of €104.2 million (2022: €50.9 million) were offset by
financing cash outflows of €162.5 million,
the largest item being the €99.2 million prepayment of our USD term
loan. The €18.6 million cash outflow for
acquisitions relates to Cascade Engineering Europe (including
payment of an existing trading balance with Cascade). Other
financing cash flows include total dividend cash outflow of
€19.8 million (2022: €12.6 million) and a
further €6.3 million outflow as part of
the ongoing share buyback programme announced in August
2023.
Very strong return on capital employed
('ROCE')
The Group's 'ROCE' increased to an
industry-leading level of 27.6% (2022:18.3%). This demonstrates our
discipline in deploying capital effectively to maximise value
creation.
Improving returns for shareholders: progressive dividend and
share buyback
Under the Group's revised capital
allocation policy, TI has adopted a progressive dividend policy.
This seeks to improve the quantum and visibility of shareholder
returns, starting with a dividend of €35.0 million for 2023 (2022:
€13.1 million). An interim dividend of 2.30 Euro cents per share,
or €11.8 million, was paid in September 2023. The Board intends to
recommend a final dividend of 4.53 Euro cents per share, or €23.2
million.
The Group has made good progress
with its €40.0 million share buyback. As at 31 December 2023, 3.8
million shares had been purchased for a total of €5.8 million and
cancelled.
Composition of net debt
|
|
Interest
|
2023
|
2022
|
Borrowings
|
Currency
|
rate exposure
|
Amount
|
€
Equivalent
|
Amount
|
€
Equivalent
|
Secured US term loan
(2026)
|
USD
|
1 month term SOFR +
3.25%
|
$185.0m
|
€167.5m
|
$294.8m
|
€276.2m
|
Secured Euro term loan
(2026)
|
EUR
|
3 month EURIBOR + 3.25%
|
€257.6m
|
€257.6m
|
€260.3m
|
€260.3m
|
Unsecured Senior Notes
(2029)
|
EUR
|
Fixed at 3.75%
|
€600.0m
|
€600.0m
|
€600.0m
|
€600.0m
|
Unamortised fees
|
|
|
|
€(13.4)m
|
|
€(20.6)m
|
Total gross debt drawn at year end
|
|
|
|
€1,011.7m
|
|
€1,115.9m
|
Cash and cash equivalents at year
end
|
|
|
|
€(416.7)m
|
|
€(491.0)m
|
Net debt
|
|
|
|
€595.0m
|
|
€624.9m
|
Additionally, the Group has a
revolving facility of up to €203.7 million
expiring in July 2026. This was largely undrawn at year end apart
from €4.2 million used to issue letters of
credit.
Strong balance sheet and liquidity
Net debt at 31 December 2023 was
€595.0 million (2022: €624.9m), with the
reduction versus the prior year reflecting cash generation. At year
end, the Group's net leverage ratio reduced to 1.5x Adjusted EBITDA (2022: 1.9x), driven by higher
Adjusted EBITDA and lower net debt.
The Group's debt is on attractive
terms, secured until 2026 and 2029, and with almost 60% drawn
facilities at a fixed rate of 3.75%. As announced in August, the
prepayment of €99.2 million of USD term loan using available cash
has reduced gross leverage. The Group's strong balance sheet
provides flexibility to invest in growth in combination with
attractive shareholder returns.
Total available liquidity (cash
plus available facilities) on 31 December 2023 was €616.2 million (2022: €699.9 million) with the
reduction due primarily to the €99.2 million term loan
repayment.
The Group excludes IFRS 16 lease
liabilities from its net debt and leverage ratio - if these were
included, net debt would be €727.5 million
(2022: €774.5 million) and net leverage would be 1.9x times
Adjusted EBITDA (2022: 2.3x).
The Group operates funded and
unfunded defined benefit schemes across multiple territories. All
major plans are closed to new entrants, but a few allow for future
accrual. Schemes are subject to periodic actuarial valuations. As
at 31 December 2023, the Group's net liability position was
€103.9 million (2022: €104.2 million) with
asset performance offsetting lower discount rates.
Outlook for 2024 - productivity to drive continued progress
towards our mid-term objectives:
Our 2024 planning assumptions are
based on a modest year-on-year industry volume decline. Automotive
production volumes for 2024 are forecast to be slightly higher in
North America, flat in China and slightly negative in
Europe.
For 2024, we expect flat to
low-single digit constant currency revenue growth. Through
productivity and efficiency initiatives, we expect to further
increase our Adjusted EBIT margin above the 7.4%
achieved in 2023. We are targeting strong
Adjusted Free Cash Flow conversion of approximately 30% of adjusted
EBITDA.
Building on the significant
strides made in 2023, we expect 2024 to be another year of progress
towards our goal of achieving revenue of €3.8-4.2
billion[3] by 2026 and returning to a
double-digit Adjusted EBIT margin in the mid-term.
Alexander de Bock
Chief Financial Officer
11 March 2024
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.
September 2023 general meeting results
update
In accordance with Provision 4 of
the UK Corporate Governance Code, we are providing an update on the
feedback received and any actions the company intends to take
following the outcome of voting at the September 2023 General
Meeting.
The General Meeting was held to
seek approval of a Rule 9 Waiver in order to allow the Company to
exercise the Buy Back Authority granted by shareholders at the 2023
AGM, specifically in respect of a share buyback programme of up to
€40 million which formed part of the Group's revised capital
allocation policy.
Approval of the Rule 9 Waiver was
granted, with 62.45% of Independent shareholders present and voting
at the General Meeting in September voting in favour. Following
this, the Company actively engaged with shareholders representing
over two thirds of votes cast against. Feedback received indicates
that votes cast against reflected, principally, opposition to the
granting of Rule 9 waivers in general due to concerns over the
resultant risk of creeping control. Whilst the Company acknowledges
that certain of its shareholders will be obliged to follow their
internal voting guidelines and may have objections to the granting
of Rule 9 waivers on principle, the Company considers that it
remains in the best interest of shareholders to seek shareholder
approval of a Rule 9 waiver at its 2024 AGM in order to complete
the current €40 million share buyback programme.
TABLE OF CONTENTS
GROUP FINANCIAL STATEMENTS
|
|
|
Consolidated Income
Statement
|
|
|
Consolidated Statement of
Comprehensive Income
|
|
|
Consolidated Balance
Sheet
|
|
|
Consolidated Statement of Changes
in Equity
|
|
|
Consolidated Statement of Cash
Flows
|
|
|
|
|
NOTES TO THE GROUP FINANCIAL STATEMENTS
|
|
|
1
|
General Information
|
|
|
2
|
Basis of Preparation
|
|
|
3
|
Segment Reporting
|
|
|
4
|
Alternative Performance
Measures
|
|
|
5
|
Finance Income and
Expense
|
|
|
6
|
Income Tax
|
|
|
7
|
Earnings Per Share
|
|
|
8
|
Intangible Assets
|
|
|
9
|
Impairments
|
|
|
10
|
Acquisition
|
|
|
11
|
Borrowings
|
|
|
12
|
Retirement Benefit
Obligations
|
|
|
13
|
Provisions
|
|
|
14
|
Cash Generated from
Operations
|
|
|
15
|
Glossary of terms
|
|
Group Financial Statements
Consolidated Income Statement
For the year ended 31 December
2023
|
|
2023
|
2022
|
2022
|
2022
|
|
|
Before and after exceptional
items
|
Before
exceptional items
|
Exceptional items
|
After
exceptional items
|
Continuing operations
|
Note
|
€m
|
€m
|
€m
|
€m
|
Revenue
|
3
|
3,516.2
|
3,268.3
|
-
|
3,268.3
|
Cost of sales
|
|
(3,059.0)
|
(2,938.0)
|
(100.3)
|
(3,038.3)
|
Gross profit/(loss)
|
|
457.2
|
330.3
|
(100.3)
|
230.0
|
Distribution costs
|
|
(109.9)
|
(112.1)
|
-
|
(112.1)
|
Administrative expenses
|
|
(155.9)
|
(119.0)
|
(217.1)
|
(336.1)
|
Net foreign exchange
losses
|
|
(0.2)
|
(0.7)
|
-
|
(0.7)
|
Other gains and losses
|
|
4.6
|
1.9
|
-
|
1.9
|
Operating profit/(loss)
|
|
195.8
|
100.4
|
(317.4)
|
(217.0)
|
Finance income
|
5
|
7.6
|
5.7
|
-
|
5.7
|
Finance expense
|
5
|
(82.3)
|
(64.4)
|
-
|
(64.4)
|
Net finance expense
|
5
|
(74.7)
|
(58.7)
|
-
|
(58.7)
|
Profit/(loss) before income tax
|
|
121.1
|
41.7
|
(317.4)
|
(275.7)
|
Income tax
(expense)/credit
|
6
|
(37.5)
|
(23.4)
|
20.1
|
(3.3)
|
Profit/(loss) for the year
|
|
83.6
|
18.3
|
(297.3)
|
(279.0)
|
Profit/(loss) for the year
attributable to:
|
|
|
|
|
|
Owners of the Parent
Company
|
|
83.5
|
18.2
|
(297.3)
|
(279.1)
|
Non-controlling
interests
|
|
0.1
|
0.1
|
|
0.1
|
|
|
83.6
|
18.3
|
(297.3)
|
(279.0)
|
Total earnings per share (Euro, cents)
|
|
|
|
|
|
Basic
|
7
|
16.19
|
|
|
(54.39)
|
Diluted
|
7
|
16.11
|
|
|
(54.39)
|
Refer to Note 4 for reconciliation to adjusted performance measures
(APMs).
Consolidated Statement of Comprehensive
Income
For the year ended 31 December
2023
|
|
2023
|
2022
|
|
Note
|
€m
|
€m
|
Profit/(loss) for the year
|
|
83.6
|
(279.0)
|
Other comprehensive income
|
|
|
|
Items that will not be
reclassified to profit or loss
|
|
|
|
- Re-measurements of retirement
benefit obligations
|
|
0.8
|
28.0
|
- Income tax expense on retirement
benefit obligations
|
6
|
(0.7)
|
(6.9)
|
|
|
0.1
|
21.1
|
Items that may be
subsequently reclassified to profit or loss
|
|
|
|
- Currency translation
|
|
(54.1)
|
6.0
|
Total other comprehensive income for the
year
|
|
(54.0)
|
27.1
|
Total comprehensive income for the year
|
|
29.6
|
(251.9)
|
Attributable to:
|
|
|
|
- Owners of the Parent
Company
|
|
29.5
|
(252.0)
|
- Non-controlling
interests
|
|
0.1
|
0.1
|
Total comprehensive income for the year
|
|
29.6
|
(251.9)
|
Consolidated Balance Sheet
As at 31 December 2023
|
|
2023
|
2022
|
|
Note
|
€m
|
€m
|
Non-current assets
|
|
|
|
Intangible assets
|
8
|
542.4
|
603.9
|
Right-of-use assets
|
|
97.1
|
109.3
|
Property, plant and
equipment
|
|
546.5
|
531.4
|
Deferred income tax
assets
|
6
|
126.1
|
105.2
|
Trade and other
receivables
|
|
23.4
|
20.6
|
|
|
1,335.5
|
1,370.4
|
Current assets
|
|
|
|
Inventories
|
|
378.4
|
372.0
|
Trade and other
receivables
|
|
551.2
|
541.9
|
Current income tax
assets
|
|
9.0
|
7.9
|
Derivative financial
instruments
|
|
3.0
|
2.8
|
Cash and cash
equivalents
|
|
416.7
|
491.0
|
|
|
1,358.3
|
1,415.6
|
Total assets
|
|
2,693.8
|
2,786.0
|
Equity
|
|
|
|
Share capital
|
|
6.8
|
6.8
|
Share premium
|
|
2.2
|
2.2
|
Other reserves
|
|
(109.5)
|
(55.4)
|
Retained earnings
|
|
765.7
|
722.6
|
Equity attributable to owners of the Parent
Company
|
|
665.2
|
676.2
|
Non-controlling
interests
|
|
0.6
|
0.5
|
Total equity
|
|
665.8
|
676.7
|
Non-current liabilities
|
|
|
|
Trade and other
payables
|
|
15.1
|
12.8
|
Borrowings
|
11
|
1,010.2
|
1,114.0
|
Lease liabilities
|
|
107.6
|
121.5
|
Deferred income tax
liabilities
|
6
|
58.7
|
80.7
|
Retirement benefit
obligations
|
12
|
103.9
|
104.2
|
Provisions
|
13
|
2.6
|
2.6
|
|
|
1,298.1
|
1,435.8
|
Current liabilities
|
|
|
|
Trade and other
payables
|
|
632.9
|
584.8
|
Current income tax
liabilities
|
|
55.4
|
44.5
|
Borrowings
|
11
|
1.5
|
1.9
|
Lease liabilities
|
|
24.9
|
28.1
|
Derivative financial
instruments
|
|
0.1
|
0.2
|
Provisions
|
13
|
15.1
|
14.0
|
|
|
729.9
|
673.5
|
Total liabilities
|
|
2,028.0
|
2,109.3
|
Total equity and liabilities
|
|
2,693.8
|
2,786.0
|
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
|
Ordinary
shares
|
Share
premium
|
Other
reserves
|
Retained
earnings
|
Total
|
Non-controlling
interests
|
Total
equity
|
|
€m
|
€m
|
€m
|
€m
|
€m
|
€m
|
€m
|
Balance at 1 January
2023
|
6.8
|
2.2
|
(55.4)
|
722.6
|
676.2
|
0.5
|
676.7
|
Profit for the year
|
-
|
-
|
-
|
83.5
|
83.5
|
0.1
|
83.6
|
Other comprehensive
income
|
-
|
-
|
(54.1)
|
0.1
|
(54.0)
|
-
|
(54.0)
|
Total comprehensive income for the year
|
-
|
-
|
(54.1)
|
83.6
|
29.5
|
0.1
|
29.6
|
Share-based expense
|
-
|
-
|
-
|
8.6
|
8.6
|
-
|
8.6
|
Vested share awards
|
|
|
|
(15.1)
|
(15.1)
|
|
(15.1)
|
Issue of own shares from employee
benefit trust
|
-
|
-
|
-
|
11.1
|
11.1
|
-
|
11.1
|
Purchase of Own Shares for Share
Buy Back Programme
|
-
|
-
|
-
|
(6.3)
|
(6.3)
|
-
|
(6.3)
|
Amounts committed for future
purchase of own shares
|
-
|
-
|
-
|
(19.0)
|
(19.0)
|
|
(19.0)
|
Dividends paid
|
-
|
-
|
-
|
(19.8)
|
(19.8)
|
-
|
(19.8)
|
Transactions with owners recognised directly in
equity
|
-
|
-
|
-
|
(40.5)
|
(40.5)
|
-
|
(40.5)
|
Balance at 31 December 2023
|
6.8
|
2.2
|
(109.5)
|
765.7
|
665.2
|
0.6
|
665.8
|
|
Ordinary
shares
|
Share
premium
|
Other
reserves
|
Retained
earnings
|
Total
|
Non-controlling interests
|
Total
equity
|
|
€m
|
€m
|
€m
|
€m
|
€m
|
€m
|
€m
|
Balance at 1 January
2022
|
6.8
|
2.2
|
(61.4)
|
995.9
|
943.5
|
0.4
|
943.9
|
Profit for the year
|
-
|
-
|
-
|
(279.1)
|
(279.1)
|
0.1
|
(279.0)
|
Total other comprehensive income
for the year
|
-
|
-
|
6.0
|
21.1
|
27.1
|
-
|
27.1
|
Total comprehensive income for the
year
|
-
|
-
|
6.0
|
(258.0)
|
(252.0)
|
0.1
|
(251.9)
|
Share-based expense
|
-
|
-
|
-
|
9.6
|
9.6
|
-
|
9.6
|
Issue of own shares from Employee
Benefit Trust
|
-
|
-
|
-
|
1.0
|
1.0
|
|
1.0
|
Vested share awards
|
-
|
-
|
-
|
(1.9)
|
(1.9)
|
|
(1.9)
|
Purchase of own shares
|
-
|
-
|
-
|
(11.4)
|
(11.4)
|
-
|
(11.4)
|
Dividends paid
|
-
|
-
|
-
|
(12.6)
|
(12.6)
|
|
(12.6)
|
Transactions with owners
recognised directly in equity
|
-
|
-
|
-
|
(15.3)
|
(15.3)
|
-
|
(15.3)
|
Balance at 31 December
2022
|
6.8
|
2.2
|
(55.4)
|
722.6
|
676.2
|
0.5
|
676.7
|
Consolidated Statement of Cash Flows
For the year ended 31 December
2023
|
|
2023
|
2022
|
|
Note
|
€m
|
€m
|
Cash flows from operating activities
|
|
|
|
Cash generated from
operations
|
14
|
373.3
|
282.5
|
Interest paid
|
|
(70.7)
|
(56.7)
|
Income tax paid on operating
activities
|
|
(66.5)
|
(58.3)
|
Net cash generated from operating
activities
|
|
236.1
|
167.5
|
Cash flows from investing activities
|
|
|
|
Payment for property, plant and
equipment
|
|
(105.4)
|
(90.8)
|
Payment for intangible
assets
|
|
(19.0)
|
(27.1)
|
Proceeds from the sale of
property, plant and equipment
|
|
1.4
|
-
|
Tax paid on the proceeds from the
sale of associated undertakings
|
|
-
|
(3.0)
|
Purchase of Cascade Engineering
Europe net of cash acquired
|
|
(16.9)
|
-
|
Interest received
|
|
8.0
|
4.3
|
Net cash used in investing activities
|
|
(131.9)
|
(116.6)
|
Net cash generated from operating & investing activities
('Free Cash Flow')
|
4
|
104.2
|
50.9
|
Cash flows from financing activities
|
|
|
|
Purchase of own shares into
EBT
|
|
-
|
(11.4)
|
Purchase of own shares for share
buy back programme
|
|
(6.3)
|
-
|
Scheduled repayments of
borrowings
|
|
(4.0)
|
(5.5)
|
Overdrafts repaid on acquisition
of Cascade Engineering Europe (CEE)
|
|
(3.2)
|
-
|
Voluntary repayments of
borrowings
|
|
(99.2)
|
-
|
Lease principal
repayments
|
|
(30.0)
|
(32.9)
|
Dividends paid
|
|
(19.8)
|
(12.6)
|
Net cash used in financing activities
|
|
(162.5)
|
(62.4)
|
Net decrease in cash and cash equivalents
|
|
(58.3)
|
(11.5)
|
Cash and cash equivalents at the
beginning of the year
|
|
491.0
|
499.1
|
Currency translation on cash and
cash equivalents
|
|
(16.0)
|
3.4
|
Cash and cash equivalents at the end of the
year
|
|
416.7
|
491.0
|
1. General Information
The Group's full financial
statements have been approved by the Board of Directors and
reported on by the auditors on 11 March 2024. These condensed
consolidated financial statements for the current and prior years
do not constitute statutory accounts as defined in section 434 of
the Companies Act 2006. A copy of the statutory accounts for the
year ended 31 December 2022 has been
delivered to the Registrar of Companies, and those for the year
ended 31 December 2023 will be delivered
in due course. The independent auditors' report on the full
financial statements for the year ended 31
December 2022 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 condensed consolidated
financial statements included within this announcement have been
prepared in accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006.
The consolidated financial statements have been
prepared under the historical cost convention, except for the fair
valuation of assets and liabilities of subsidiary companies
acquired, retirement benefit obligations, and financial assets and
liabilities at fair value through profit or loss ('FVTPL')
(including derivative instruments not in hedged
relationships).
The preparation of financial
statements in conformity with UK-adopted International Accounting
Standards 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, 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 makers ('CODM') for decision-making
purposes forms the basis of the disclosure. The Company's CODM is
the Chief Executive Officer ('CEO'), Chief Operating Officer and
the Chief Financial Officer. The CODM evaluates the performance of
the Company's segments primarily on the basis of revenue, adjusted
EBITDA, and adjusted EBIT (see note
4).
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.
|
2023
|
2022
|
|
€m
|
€m
|
Revenue
|
|
|
- FCS -
External
|
2,018.1
|
1,869.7
|
- Inter-segment
|
66.7
|
67.0
|
|
2,084.8
|
1,936.7
|
- FTDS - External
|
1,498.1
|
1,398.6
|
- Inter-segment
|
5.6
|
2.8
|
|
1,503.7
|
1,401.4
|
Inter-segment elimination
|
(72.3)
|
(69.8)
|
Total consolidated revenue
|
3,516.2
|
3,268.3
|
Adjusted EBITDA
|
|
|
- FCS
|
195.5
|
170.4
|
- FTDS
|
197.5
|
162.9
|
|
393.0
|
333.3
|
Adjusted EBITDA % of revenue
|
|
|
- FCS
|
9.7%
|
9.1%
|
- FTDS
|
13.2%
|
11.6%
|
Total
|
11.2%
|
10.2%
|
Adjusted EBIT
|
|
|
- FCS
|
127.9
|
95.0
|
- FTDS
|
131.7
|
85.0
|
|
259.6
|
180.0
|
Adjusted EBIT % of revenue
|
|
|
- FCS
|
6.3%
|
5.1%
|
- FTDS
|
8.8%
|
6.1%
|
Total
|
7.4%
|
5.5%
|
Restructuring costs of
€13.4 million
(€10.9 million in FCS and €2.5 million in FTDS) (2022: €22.8
million of which €19.8 million in FCS and €3.0 million in FTDS)
comprise announced headcount reductions and related costs of
balancing production capacity with market requirements. Please
refer to Alternative Performance Measures (Note
4) for reconciliation to Income
Statement.
4. Adjusting Items & Alternative
Performance Measures
In addition to the results reported
under IFRS, Management use certain non-IFRS financial measures to
monitor and measure the performance and profitability of the
business and operations. 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 communications with
investors. In particular, Management use Adjusted EBIT, Adjusted
EBITDA, Adjusted Net Income, Adjusted Free Cash Flow, Adjusted
Basic EPS and Return on Capital Employed (ROCE). 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.
Definitions for alternative
performance measures are included in the Note 15 glossary.
The definition of Adjusted Net
Income has been updated in the year to adjust for depreciation and
amortisation arising on purchase accounting, net of tax. This is
consistent with the definition of Adjusted EBIT and therefore in
Management's view, this change in definition improves
understandability of the adjusted performance measures. In addition
to this, the tax impact on adjusting items has been included as a
separate line item. Comparative information has been restated
accordingly, increasing Adjusted Net Income by €40.8 million, from
€43.5 million to €84.3 million.
|
|
2023
|
2022
|
Adjusted Performance Measures
|
Note
|
€m
|
€m
|
Adjusted EBIT
|
4.2
|
259.6
|
180.0
|
Adjusted EBITDA
|
4.2
|
393.0
|
333.3
|
Adjusted Net Income*
|
4.2
|
132.8
|
84.3
|
Adjusted Free Cash Flow
|
4.2
|
140.7
|
78.4
|
Adjusted Basic EPS*
|
7.2
|
25.76
|
16.43
|
*Restated
4.1 Adjusting
Items
Management exclude certain items in
the derivation of alternative performance measures, as shown
below:
|
|
2023
|
2022
|
Adjusting Items
|
Note
|
€m
|
€m
|
Restructuring costs
|
13
|
13.4
|
22.8
|
Exceptional impairment
charge
|
|
-
|
317.4
|
Depreciation and amortisation
arising on purchase accounting
|
|
45.5
|
54.3
|
Net foreign exchange
losses
|
|
0.2
|
0.7
|
Costs associated with business
acquisitions or disposals
|
|
3.5
|
1.8
|
Customisation and configuration
costs of significant software as a service ("SaaS")
arrangements
|
|
1.2
|
-
|
|
|
63.8
|
397.0
|
Costs associated with business
acquisitions or disposals include €1.8 million in relation to the
acquisition of Cascade Engineering Europe (CEE) 'Cascade', see Note 10.
Adjusting items represent
transactions that in Management's view do not form part of the
substance of the trading activities of the Group, such as
large-scale reorganisations, system implementations, acquisition
costs and certain non-cash accounting measures.
Restructuring costs comprise
announced headcount reductions and related costs of balancing
production capacity with market requirements.
The prior year exceptional
impairment charge relates to the write-down of goodwill, intangible
assets, property, plant and equipment and right-of-use assets,
following the outcome of the 2022 annual impairment test. As a
significant, non-recurring item, this charge has been excluded from
our alternative performance measures.
Net foreign exchange gains/losses
on the foreign currency revaluation of intercompany loan and cash
balances are included in adjusting items to remove the impact of
foreign exchange volatility on our adjusted performance
measures.
Costs associated with business
acquisitions or disposals and customisation and configuration costs
of significant SaaS arrangements in relation to initial costs of
multi-year system upgrades or implementations have been excluded
from the alternative performance measures due to their ad-hoc
nature.
4.2 Adjusted Performance Measures
Reconciliations of adjusted
performance measures to their statutory GAAP equivalent measures
are provided below.
Adjusted EBITDA
|
Note
|
2023
€m
|
2022
€m
|
Operating profit/(loss)
|
|
195.8
|
(217.0)
|
Adjusting items
|
4.1
|
63.8
|
397.0
|
Adjusted EBIT
|
|
259.6
|
180.0
|
Depreciation, amortisation and
non-exceptional impairments on non-purchase accounting
|
|
133.4
|
153.3
|
Adjusted EBITDA
|
|
393.0
|
333.3
|
|
|
|
Restated
|
Adjusted Net Income
|
Note
|
2023
€m
|
2022
€m
|
Profit/(loss) for the year
|
|
83.6
|
(279.0)
|
Non-controlling interests' share
of profit
|
|
(0.1)
|
(0.1)
|
Adjusting items
|
4.1
|
63.8
|
397.0
|
Tax impact on adjusting
items
|
|
(14.5)
|
(33.6)
|
Adjusted Net Income
|
7.2
|
132.8
|
84.3
|
Adjusted Free Cash Flow
|
Note
|
2023
€m
|
2022
€m
|
Net cash generated from operating
activities
|
|
236.1
|
167.5
|
Net cash used in investing
activities
|
|
(131.9)
|
(116.6)
|
Free Cash Flow
|
|
104.2
|
50.9
|
Cash received on movements of
financial assets at FVTPL
|
|
-
|
(0.9)
|
Net restructuring cash
spend
|
|
14.3
|
23.6
|
Purchase of Cascade Engineering
Europe net of cash acquired and pre-existing relationships
effectively settled on acquisition
|
|
18.6
|
-
|
Tax paid on the gain on disposal
of associated undertakings
|
|
-
|
3.0
|
Cash spend associated with
business acquisitions or disposals
|
|
2.4
|
1.8
|
Cash spent on customisation and
configuration costs of significant software as a service ("SaaS")
arrangements
|
|
1.2
|
-
|
Adjusted Free Cash Flow
|
|
140.7
|
78.4
|
The Purchase of Cascade Engineering
Europe of €18.6 million above includes €1.7m relating to the
effective settlement of pre-existing relationships, which are
included in net cash generated from operating
activities.
ROCE has been introduced in 2023 as
one of the Group's key performance indicators as it provides an
indication of our ability to deploy capital effectively to create
value. It is defined as adjusted EBIT divided by average capital
employed. Capital employed is defined as total equity, excluding
taxation balances, derivatives, net debt and lease liabilities,
restructuring provisions and balances related to Bain acquisition
accounting (goodwill, intangible assets and purchase price
allocation adjustments). Balances relating to Bain acquisition
accounting are excluded as they represent accounting adjustments to
the carrying value of the Group's existing asset base at the time
of the Bain Capital purchase of TIFS Holdings Ltd (TIFSHL) on 30
June 2015, instead of assets arising from the Group's investments
in acquisition of external businesses. Average capital employed is
calculated as the average of opening and closing capital employed
of the year.
Return on Capital Employed
|
Note
|
2023
€m
|
2022
€m
|
Adjusted EBIT
|
|
259.6
|
180.0
|
Capital employed
|
|
|
|
Total equity
|
|
665.8
|
676.7
|
Net current and deferred tax
(assets)/liabilities
|
|
(21.0)
|
12.1
|
Derivative financial
instruments
|
|
(2.9)
|
(2.6)
|
Net debt and lease
liabilities
|
11
|
727.5
|
774.5
|
Restructuring
provisions
|
13
|
4.6
|
7.8
|
Purchase price allocation balances
arising on the Bain acquisition
|
|
(448.7)
|
(510.9)
|
Capital employed
|
|
925.3
|
957.6
|
Average capital employed
|
|
941.5
|
983.8
|
Return on Capital Employed
|
|
27.6%
|
18.3%
|
5. Finance Income and
Expense
|
2023
|
2022
|
|
€m
|
€m
|
Finance income
|
|
|
Interest on short-term deposits,
other financial assets and other interest income
|
7.5
|
3.9
|
Interest income on indirect
tax receivable
|
0.1
|
-
|
Fair value gains on derivatives
and foreign exchange contracts not in hedged
relationships
|
-
|
1.8
|
Finance income
|
7.6
|
5.7
|
Finance expense
|
|
|
Interest payable on term loans
before expensed fees
|
(37.4)
|
(24.8)
|
Interest payable on term loans:
expensed fees
|
(3.1)
|
(3.5)
|
Interest payable on term loans:
expensed fees on voluntary repayments of borrowings
|
(2.8)
|
-
|
Interest payable on unsecured
senior notes before expensed fees
|
(22.5)
|
(22.5)
|
Interest payable on unsecured
senior notes: expensed fees
|
(1.1)
|
(1.2)
|
Net interest expense of retirement
benefit obligations
|
(4.5)
|
(2.8)
|
Net interest expense related to
specific uncertain tax positions
|
-
|
(0.1)
|
Interest payable on lease
liabilities
|
(10.2)
|
(9.3)
|
Other finance expense
|
(0.7)
|
(0.2)
|
Finance expense
|
(82.3)
|
(64.4)
|
Total net finance expense
|
(74.7)
|
(58.7)
|
6. Income Tax
6.1. Income Tax (Expense)/Credit
|
2023
|
2022
|
|
€m
|
€m
|
Current tax on profit for the
year
|
(77.2)
|
(66.0)
|
Adjustments in respect of prior
years
|
7.4
|
8.6
|
Total current tax expense
|
(69.8)
|
(57.4)
|
Origination and reversal of
temporary deferred tax differences
|
32.3
|
34.0
|
Exceptional - deferred tax impact
of impairment charge
|
-
|
20.1
|
Total deferred tax benefit
|
32.3
|
54.1
|
Income tax expense - Income Statement
|
(37.5)
|
(3.3)
|
Origination and reversal of
temporary deferred tax differences
|
(0.7)
|
(6.9)
|
Income tax expense - Statement of Comprehensive
Income
|
(0.7)
|
(6.9)
|
Total income tax expense
|
(38.2)
|
(10.2)
|
In 2022, the Group reported an
exceptional impairment charge of €317.4 million with a deferred tax
benefit of €20.1 million which results in an exceptional effective
tax rate of 6.3%. The low exceptional effective tax rate in the
prior year 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.
On 20 June 2023, Finance (No.2) Act
2023 was substantively enacted in the UK, introducing a global
minimum effective tax rate of 15%. This UK legislation implements a
domestic top-up tax and a multinational top-up tax (UK Pillar Two
taxes), effective for accounting periods starting on or after 31
December 2023. The Group is in scope of the legislation and has
performed an assessment of its potential exposure based on the most
recent tax filings, country-by-country reporting for 2022 and tax
charges included in these 2023 financial statements for the
constituent entities in the Group. Based on the assessment, the UK
Pillar Two effective tax rates in most of the jurisdictions in
which the Group operates are above 15%, there are only a limited
number of jurisdictions where the transitional safe harbour relief
should not apply and the Group does not expect a material exposure
to UK Pillar Two taxes in those jurisdictions. The Group has
applied the exception under the IAS 12 Paragraph 4A amendment to
recognising and disclosing information about deferred tax assets
and liabilities related to Pillar Two income taxes.
The tax on the Group's profit
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:
|
2023
|
2022
|
|
Before and after exceptional
items
|
Before
exceptional item
|
Exceptional items
|
After
exceptional items
|
|
€m
|
€m
|
€m
|
€m
|
Profit before income tax
|
121.1
|
41.7
|
(317.4)
|
(275.7)
|
Income tax calculated at UK
statutory tax rate of 23.5% (2022: 19%) applicable to profits in
respective countries
|
(28.5)
|
(7.9)
|
60.3
|
52.4
|
Tax effects of:
|
|
|
|
|
Overseas tax rates
|
0.7
|
(3.6)
|
3.0
|
(0.6)
|
Utilisation of government
incentives*
|
7.2
|
2.1
|
-
|
2.1
|
Favourable adjustments for tax
purposes*
|
17.7
|
7.8
|
-
|
7.8
|
Expenses not deductible for tax
purposes
|
(17.2)
|
(17.1)
|
-
|
(17.1)
|
Expenses not deductible for tax
purposes - goodwill impairment
|
-
|
-
|
(41.2)
|
(41.2)
|
Temporary differences on
unremitted earnings
|
1.0
|
0.2
|
-
|
0.2
|
Specific tax provisions
|
(8.3)
|
(3.6)
|
-
|
(3.6)
|
Unrecognised current year deferred
tax assets
|
(10.3)
|
(9.1)
|
(2.0)
|
(11.1)
|
Adjustment in respect of prior
years - current tax adjustments
|
7.4
|
8.6
|
-
|
8.6
|
Adjustment in respect of prior
years - deferred tax adjustments
|
0.8
|
6.4
|
-
|
6.4
|
Impact of changes in tax
rate
|
0.4
|
(0.4)
|
-
|
(0.4)
|
Other local taxes, National
minimum taxes and withholding taxes
|
(21.4)
|
(10.1)
|
-
|
(10.1)
|
Double Tax Relief and Other Tax
Credits
|
13.0
|
3.3
|
-
|
3.3
|
Income tax (expense)/benefit - Income
Statement
|
(37.5)
|
(23.4)
|
20.1
|
(3.3)
|
Deferred tax expense on
re-measurement of retirement benefit obligations
|
(0.7)
|
(6.9)
|
-
|
(6.9)
|
Income tax expense - Statement of Comprehensive
Income
|
(0.7)
|
(6.9)
|
-
|
(6.9)
|
Total tax (expense)/benefit
|
(38.2)
|
(30.3)
|
20.1
|
(10.2)
|
*In the prior year, 'Utilisation of
government incentives' and 'Favourable adjustments for tax
purposes' were combined and presented as 'Income not subject to
tax'.
Favourable adjustments for tax
purposes comprised various local tax deductions related to foreign
exchange movements, inflation adjustments, local taxes and
non-taxable interest.
Other taxes comprised various
local and national minimum taxes of €5.2 million (2022: €1.7
million) together with taxes withheld on dividend, interest and
royalty remittances totalling €16.2 million (2022: €8.4
million).
In 2022, the Group reported an
exceptional impairment charge of €317.4 million with a deferred tax
benefit of €20.1 million. The majority of the impairment was
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
|
2023
|
2022
|
|
€m
|
€m
|
Deferred tax assets
|
126.1
|
105.2
|
Deferred tax
liabilities
|
(58.7)
|
(80.7)
|
|
67.4
|
24.5
|
6.2.1. Movement on
Net Deferred Tax Assets/(Liabilities)
|
2023
|
2022
|
|
€m
|
€m
|
At 1 January
|
24.5
|
(25.3)
|
Income statement
benefit
|
32.3
|
34.0
|
Exceptional income statement
benefit - tax impact of impairment charge
|
-
|
20.1
|
Tax on remeasurement of retirement
benefit obligations
|
(0.7)
|
(6.9)
|
Transfer of uncertain tax position
balance from deferred tax to current tax
|
6.5
|
2.0
|
Acquisition - deferred tax
asset
|
0.1
|
-
|
Currency translation
|
4.7
|
0.6
|
At
31 December
|
67.4
|
24.5
|
7. Earnings Per Share
7.1. Basic and Diluted Earnings Per Share
|
2023
|
2022
|
|
Profit attributable to
shareholders (€m)
|
Weighted average number of
shares
(in
millions)
|
Earnings Per
Share
(€, cents)
|
Loss
attributable to shareholders (€m)
|
Weighted
average number of shares
(in
millions)
|
Earnings
Per Share
(€,
cents)
|
Basic
|
83.5
|
515.6
|
16.19
|
(279.1)
|
513.1
|
(54.39)
|
Dilutive potential ordinary
shares
|
-
|
2.6
|
-
|
-
|
-
|
-
|
Diluted
|
83.5
|
518.2
|
16.11
|
(279.1)
|
513.1
|
(54.39)
|
The potential shares related to
the €19.0 million liability included within accrued expenses
regarding amounts committed for future own share purchases for
subsequent cancellation, have not been included in the calculation
of diluted earnings per share in the year because they would be
antidilutive.
In 2022, dilutive potential
ordinary shares of 7.3 million were not included in the calculation
of diluted earnings per share in the year because they were
antidilutive.
7.2. Adjusted Earnings Per Share
|
2023
|
2022
|
|
Adjusted
basic
|
Adjusted
diluted
|
Adjusted
basic
|
Adjusted
diluted
|
Adjusted Net Income
(€m)*
|
132.8
|
132.8
|
84.3
|
84.3
|
Weighted average number of shares
(in millions)
|
515.6
|
518.2
|
513.1
|
513.1
|
Adjusted Earnings Per Share (€, in
cents)*
|
25.76
|
25.63
|
16.43
|
16.43
|
Adjusted Net Income is based on
the profit for the year attributable to the Parent Company of €83.5
million (2022: €(279.1) million loss), after adding back
exceptional items net of tax, and eliminating the impact of net
restructuring charges, foreign exchange gains or losses,
depreciation and amortisation arising on purchase accounting,
customisation and configuration costs of significant SaaS
arrangements, the costs associated with any business acquisitions
or disposals, and the tax impact on adjusting items, totalling
€49.3 million (2022: €363.4 million).
Reconciliations of adjusted profit measures to statutory measures
are included in Note 4.
8. Intangible Assets
|
2023
|
2022
|
|
€m
|
€m
|
Goodwill
|
346.2
|
353.9
|
Capitalised development expenses,
computer software and licences, technology and customer
platforms
|
196.2
|
250.0
|
Total intangible assets
|
542.4
|
603.9
|
8.1. Goodwill
Goodwill is deemed to have an
indefinite useful life. It is carried at cost and reviewed annually
for impairment.
|
€m
|
Cost at 1 January 2023
|
759.0
|
Arising on acquisition (Note
10)
|
11.6
|
Currency translation
|
(24.6)
|
Cost at 31 December 2023
|
746.0
|
Accumulated impairment at 1
January 2023
|
(405.1)
|
Currency translation
|
5.3
|
Accumulated impairment at 31 December 2023
|
(399.8)
|
Net book value at 31 December 2023
|
346.2
|
|
€m
|
Cost at 1 January 2022
|
747.6
|
Currency translation
|
11.4
|
Cost at 31 December
2022
|
759.0
|
Accumulated impairment at 1
January 2022
|
(183.3)
|
Impairment - exceptional
charge
|
(217.1)
|
Currency translation
|
(4.7)
|
Accumulated impairment at 31
December 2022
|
(405.1)
|
Net book value at 31 December
2022
|
353.9
|
8.2. Capitalised Development
Expenses, Computer Software and Licences, Technology and Customer
Platforms
Intangible assets are amortised
over their useful economic life, which range from three to 25
years.
|
Capitalised development
expenses
|
Computer software and
licences
|
Technology
|
Customer
platforms*
|
Total
|
|
€m
|
€m
|
€m
|
€m
|
€m
|
Cost at 1 January 2023
|
270.5
|
25.7
|
138.5
|
492.2
|
926.9
|
Accumulated
amortisation
|
(179.1)
|
(19.9)
|
(135.0)
|
(342.9)
|
(676.9)
|
Net book value at 1 January 2023
|
91.4
|
5.8
|
3.5
|
149.3
|
250.0
|
Additions
|
21.6
|
0.7
|
-
|
-
|
22.3
|
Arising on acquisition (Note
10)
|
-
|
0.1
|
-
|
-
|
0.1
|
Disposals
|
(0.3)
|
-
|
-
|
-
|
(0.3)
|
Amortisation charge
|
(23.4)
|
(2.4)
|
(1.1)
|
(40.9)
|
(67.8)
|
Impairments
|
(0.5)
|
-
|
-
|
-
|
(0.5)
|
Currency translation
|
(2.2)
|
(0.3)
|
(0.2)
|
(4.9)
|
(7.6)
|
Net book value at 31 December 2023
|
86.6
|
3.9
|
2.2
|
103.5
|
196.2
|
Cost at 31 December
2023
|
280.8
|
26.3
|
10.8
|
476.1
|
794.0
|
Accumulated
amortisation
|
(194.2)
|
(22.4)
|
(8.6)
|
(372.6)
|
(597.8)
|
Net
book value at 31 December 2023
|
86.6
|
3.9
|
2.2
|
103.5
|
196.2
|
*Customer platforms includes
intangible assets relating to: customer platforms, aftermarket
customer relationships, trade names and trademarks.
|
Capitalised development expenses
|
Computer
software and licences
|
Technology
|
Customer
platforms
|
Total
|
|
€m
|
€m
|
€m
|
€m
|
€m
|
Cost at 1 January 2022
|
267.2
|
24.9
|
137.8
|
481.9
|
911.8
|
Accumulated
amortisation
|
(161.0)
|
(15.4)
|
(132.6)
|
(282.3)
|
(591.3)
|
Net book value at 1 January
2022
|
106.2
|
9.5
|
5.2
|
199.6
|
320.5
|
Additions
|
23.3
|
1.0
|
-
|
-
|
24.3
|
Disposals
|
(1.8)
|
-
|
-
|
-
|
(1.8)
|
Amortisation charge
|
(26.2)
|
(4.3)
|
(2.0)
|
(42.6)
|
(75.1)
|
Impairments - exceptional
charge
|
(11.1)
|
(0.6)
|
-
|
(11.9)
|
(23.6)
|
Currency translation
|
1.0
|
0.2
|
0.3
|
4.2
|
5.7
|
Net book value at 31 December
2022
|
91.4
|
5.8
|
3.5
|
149.3
|
250.0
|
Cost at 31 December
2022
|
270.5
|
25.7
|
138.5
|
492.2
|
926.9
|
Accumulated
amortisation
|
(179.1)
|
(19.9)
|
(135.0)
|
(342.9)
|
(676.9)
|
Net book value at 31 December
2022
|
91.4
|
5.8
|
3.5
|
149.3
|
250.0
|
The above amortisation charges for
'technology' and 'customer platforms' amounting to €42.0
million (2022: €44.6 million) arise from
intangible assets recognised through purchase price accounting.
Amortisation charges are included within cost of sales.
During the year part of the Technology intangible became fully
amortised and was disposed, with cost €121.2 million and
accumulated amortisation €121.2 million, giving net nil impact on
net book value.
As at 31 December 2023, goodwill
of €346.2 million (2022: €353.9 million), technology of €2.2
million (2022: €3.5 million) and customer platforms of €103.5
million (2022: €149.3 million) relate to assets that arose from
purchase price allocations following historic
acquisitions.
9. Impairments
9.1. Impairment Tests for Goodwill
and Intangibles
As part of the Bain Capital
acquisition, the purchase of TIFS Holdings Ltd ('TIFSHL') on 30
June 2015, being the previous parent company of the Group, and the
consequent fair valuation of assets and liabilities, resulted in
recognition of goodwill of €711.1 million and other intangible
assets of €663.2 million. The purchase of Millennium Industries
Corporation on 16 February 2016 resulted in recognition of goodwill
of €57.1 million and other intangible assets of €72.6 million,
included in the FCS North Americas CGU. The acquisition of Cascade
Engineering Europe on 2 November 2023 resulted in the recognition
of goodwill with a provisional value of €11.6 million
(see note 10).
The non-goodwill intangible assets
recognised from the acquisitions outlined above included €369.7
million and €57.1 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.
The impairment test for goodwill
and intangible assets is conducted at the level at which Management
monitor goodwill, which is the intersection between the two
operating segments, FCS and FTDS, and the geographic sub-divisions,
North America ('NA'), Europe & Africa ('EU'), Asia Pacific
('AP') and Latin America ('LA').
During 2020, an impairment loss of
€304.6 million was recognised due to volume deterioration driven by
the COVID-19 pandemic, with €184.2 million allocated to goodwill
and the remaining €120.4 million apportioned across other assets on
a pro rata basis, as required by IAS 36 'Impairment of
assets'.
A further impairment loss of €317.4
million was recognised in 2022, with €217.1 million allocated to
goodwill and the remaining €100.3 million apportioned across other
assets on a pro rata basis, as required by IAS 36 'Impairment of
assets'. This impairment was driven by several factors,
including declining trend in volume projections for light vehicle
production, supply chain disruptions and semiconductor shortages,
the impact of Russia's invasion of Ukraine, challenges on profit
margin posed by inflationary increases in input prices and energy
costs to customers, and the impact on discount rates from increased
interest rates.
The results of the 2022 impairment
test indicated that the carrying values of CGU assets were higher
than their recoverable amounts for four of the CGUs, resulting in
the following impairment loss being recognised at 31 December
2022:
|
Recoverable
amount
€m
|
Impairment of
goodwill
€m
|
Impairment of other
assets
€m
|
Total
exceptional
impairment
charge
€m
|
FCS North America
|
309.3
|
76.4
|
-
|
76.4
|
FCS Europe & Africa
|
159.0
|
140.7
|
78.4
|
219.1
|
FCS Latin America
|
-
|
-
|
1.8
|
1.8
|
FTDS Europe &
Africa
|
285.8
|
-
|
20.1
|
20.1
|
|
754.1
|
217.1
|
100.3
|
317.4
|
The 'other asset' impairment loss
of €100.3 million was apportioned across the respective CGU asset
categories on a pro rata basis, resulting in the following asset
class allocation:
|
2022 impairment
charge
€m
|
Goodwill
|
217.1
|
Capitalised development
expenses
|
11.1
|
Computer software and
licences
|
0.6
|
Other intangible assets
|
11.9
|
Land & buildings
|
6.3
|
Property, plant and equipment
(PP&E)
|
52.0
|
Right-of-use assets
|
18.4
|
|
317.4
|
2023 has seen a stabilisation of
the driving factors behind the 2022 impairment. External
forecasts from S&P Global Mobility has seen some improvement in
the volume projections for light vehicle production when compared
to 2022 expectations. The business has been successful in
passing on some of the increased costs from inflationary pressures
to customers through cost recoveries and repricing, which has
improved underlying profitability. Declining bond yields
during the year which impacted discount rates have had a favourable
effect on the headroom of the CGUs in the 2023 impairment
test.
The carrying values of goodwill and
other intangible assets as at 31 December 2023 are as
follows:
|
2023
|
2022
|
|
Goodwill
|
Other
intangibles
|
Goodwill
|
Other
intangibles
|
|
€m
|
€m
|
€m
|
€m
|
FCS
|
|
|
|
|
North America
|
80.8
|
47.2
|
83.6
|
63.5
|
Europe & Africa
|
11.6
|
18.5
|
-
|
21.2
|
Asia Pacific
|
229.6
|
42.6
|
244.6
|
61.6
|
Latin America
|
-
|
-
|
-
|
-
|
FTDS
|
|
|
|
|
North America
|
-
|
2.4
|
-
|
5.1
|
Europe & Africa
|
-
|
53.1
|
-
|
58.6
|
Asia Pacific
|
24.2
|
32.4
|
25.7
|
40.0
|
Latin America
|
-
|
-
|
-
|
-
|
|
346.2
|
196.2
|
353.9
|
250.0
|
Goodwill in FCS Europe &
Africa arose on acquisition of Cascade Engineering Europe (CEE),
see note 10.
The intangible assets above
include customer platforms arising on the Bain and Millennium
acquisitions with carrying values at 31 December 2023 of €68.8
million and €16.2 million respectively (2022: €114.5 million and
€22.1 million) and remaining useful lives of 2.5 and 3.1
years.
9.2. 2023 Impairment
Assessment
IAS 36 'Impairment of assets'
requires the recoverable amount to be determined based on the
higher of value in use and fair value less costs of disposal.
In carrying out the 2023 annual impairment assessment, management
considered both value in use and fair value less costs of disposal
to determine the recoverable amount. As a result, recoverable
amounts are predominantly determined using fair value less costs of
disposal, which were estimated with the input of external experts,
using a weighted combination of the discounted cash flow method at
75%, and guideline public company method at 25% (where fair values
are determined by referring to the historical and/or anticipated
financial metrics of the CGUs by multiples, such as enterprise
value to EBITDA, derived from an analysis of certain guideline
companies). These fair values are classified as Level 3 fair value
measurement within the fair value hierarchy.
The basis of the fair value less
costs of disposal valuation is forecast operating cash flows
covering the years 2024-2028 from the Group's latest budget and
medium-term plan ('MTP') approved by the Board of Directors, which
utilises S&P Global Mobility global light vehicle production
forecasts. The Group is forecasting based on global automotive
production volumes commencing in 2024 of 88.1 million.
Volume forecasts are 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 model. In
following this approach, management carefully assessed the cost
recovery rates that are expected to be achieved in the future
taking into consideration historical experiences. In addition, the
impact of cost increases arising from the continued effect of
decarbonisation of the supply chain or carbon taxes, is assumed to
be recovered from the customer base.
Cash flows resulting from
restructuring activities, and enhanced capital expenditure (such as
our developing thermal product portfolio), are reflected in the
forecasts. Cash flows from the Corporate function are allocated to
CGUs based on their respective proportion of total Group
revenue.
The five-year operating cash flows
were taken from the MTP, with a further five years extrapolated
using the long-term expected growth rate, which were then
discounted to present value using CGU specific discount rates, and
combined with a perpetuity value calculated by applying the
long-term expected growth rate to the terminal year cash flow
forecast.
A single base set of 2024-2028
volume forecasts has been utilised, with a specific FTDS long term
expected negative growth rate being applied in the long-term cash
flow estimation, as further explained below.
The forecast operating cash flows
are on a nominal basis and therefore include the effect of
inflation. They are then discounted using nominal discount
rates.
Management have considered the
potential impacts of climate change on the impairment
assessment. Cost implications of managing the impact of
climate change have been incorporated into the forecast operating
cash flows within the impairment model. These include expenditure
to reduce the carbon output from the Group's production processes
and to increase the mix of renewable energy within the Group's
electricity consumption, in line with our commitment to a 50% reduction of Scope 1 and 2 emissions and a
30% reduction in Scope 3 emissions by 2030 based on a 2021
baseline. As previously noted, other costs arising from the
effects of climate change are assumed to be recovered from
customers.
Climate change also poses
transitional risks to the products that the Group currently
manufactures. This is particularly evident in the FTDS division,
where existing products predominantly cater for internal combustion
engine (ICE) vehicle platforms. The impact of climate change on
environmental regimes and automotive market trends has a
significant bearing on the rate of transition to battery electric
vehicle (BEV) platforms. In some jurisdictions this transition will
be mandated, as governments enforce requirements for curtailing the
production of ICE vehicles, in order to achieve climate-related
commitments.
Whilst an increase in hybrid
electric vehicle (HEV) production and their need for higher margin
pressurised fuel tanks, offers mid-term opportunities for the FTDS
division, the eventual transition to BEV will result in a declining
market for existing FTDS products. Management's forecasts indicate
that the peak in ICE and HEV vehicle production will occur in the
mid-to late-2020s with BEV platforms subsequently driving future
growth in the automotive market.
The risk to future cash flows that
can be achieved from the current FTDS technology and asset base has
been captured in the impairment model by applying a negative growth
rate to the terminal year perpetuity calculation. This is to
account for the expected decline in the volumes of ICE and HEV
vehicle after the MTP period (i.e. from 2029) due to the current
climate change commitment from the COP21 Paris Agreement to limit
global temperature increases over the next century to 1.5 to 2
degrees Celsius and associated climate change mitigations, coupled
with changing customer behaviour in the future.
As the FCS division is less
susceptible to future changes in platform mix that may arise as a
result of climate change, it was not deemed appropriate to apply a
negative growth rate, and a conventional positive long-term
expected growth rate is used in the perpetuity
calculation.
The 2023 impairment assessment
resulted in no impairments in the year ended 31 December 2023. A
limited headroom was observed in FCS-EU (€13.4 million), which is
sensitive to reasonably possible changes in key
assumptions.
The key assumptions used in the
fair value less costs of disposal calculations are as
follows:
·
forecast operating cash flows
·
long-term expected growth rates
·
discount rates
Forecast operating cash flows are
established as described above, based upon the Budget and MTP
approved by the Board of Directors which were prepared using
external forecast volume data from S&P Global
Mobility.
Long-term expected growth rates and
discount rates are determined with input from external 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. As
described above, for FTDS specifically, negative growth rates have
been used in the terminal year perpetuity calculation to reflect
the impact climate change may have on the rate of market transition
to BEVs.
The negative growth rates utilise a
long-term forecast prepared by management in conjunction with
information from external sources, covering the period from 2029 to
2036. Based on this, a long-term negative compound annual growth
rate (CAGR) was calculated for each of the FTDS CGUs, reflecting a
forecast decline in ICE and HEV revenues over the long-term
period. Compared to prior year assumptions, the deterioration
in ICE and HEV revenues has been offset by significantly improved
forecast revenues arising from BEV platforms, which has improved
the negative growth rates in the division.
These negative growth rates are
then applied in perpetuity and therefore reflected in the expected
cash generation from ICE, HEV, and BEV sales from 2029
onwards.
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, and
reflecting an appropriate company specific risk premium, with input
from external experts.
The range of discount and growth
rates used were as follows:
|
2023
|
2022
|
|
Post-tax
|
Post-tax
|
|
FCS
|
FTDS
|
FCS
|
FTDS
|
Discount rates
|
|
|
|
|
North America
|
12.25%
|
15.00%
|
13.50%
|
14.00%
|
Europe & Africa
|
13.50%
|
12.75%
|
14.75%
|
15.25%
|
Asia Pacific
|
16.00%
|
12.75%
|
16.25%
|
13.00%
|
Latin America
|
14.75%
|
n/a
|
16.25%
|
n/a
|
|
|
|
|
|
Long-term growth rates
|
|
|
|
|
North America
|
2.00%
|
(5.75%)
|
2.00%
|
(10.00%)
|
Europe & Africa
|
2.75%
|
(9.50%)
|
2.75%
|
(9.75%)
|
Asia Pacific
|
5.00%
|
-%
|
5.00%
|
(0.80%)
|
Latin America
|
4.50%
|
n/a
|
4.50%
|
n/a
|
The Group ceased operations in FTDS
Latin America in 2022.
Sensitivity analysis
Where 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 level of headroom in
FCS North America, FCS Asia Pacific, FTDS North America, FTDS
Europe & Africa, and FTDS Asia Pacific, management does not
believe a reasonably possible change in assumptions would impact
the headroom position of the CGU assets. The Latin America CGUs in
both FCS and FTDS were fully impaired in 2020 due to forecast
operating losses, with a further minor impairment loss in 2022. The
sensitivity analysis has therefore been focussed on FCS Europe
& Africa due to its relatively lower headroom.
The table below demonstrates the
impact of changes in the long-term expected growth rates and
discount rates, in isolation, as the CGU's headroom is sensitive to
such changes.
FCS Europe & Africa is also
sensitive to changes in forecast operating cash flows, which could
be driven by factors such as reduced demand for products, failure
to recover inflationary cost increases and other potential cost
pressures, such as the future imposition of carbon taxes. The
table also demonstrates the impact of an isolated 10% reduction in
operating cash flow annually and into perpetuity.
|
Recoverable
amount
€m
|
Assumption
|
Impact of 100 bps
change
|
Impact of 10%
change
|
|
Post-tax discount
rate
|
Long-term expected growth
rate
|
Discount
rate
€m
|
Long-term expected growth
rate
€m
|
Operating cash
flow
€m
|
FCS
Europe & Africa
|
221.7
|
13.50%
|
2.75%
|
(30.0)
|
(20.0)
|
(30.0)
|
Should a reasonably possible change
in input assumption materialise and trigger a further impairment
loss, it would initially be allocated against the goodwill of €11.6
million, with any excess then being allocated across other assets
on a pro rata basis.
10. Acquisition
On 2 November 2023, the Group
completed a transaction to acquire 100% of the ordinary share
capital of Cascade Engineering Europe
(CEE) 'Cascade' an automotive company based
in Hungary. After the acquisition, the company was
renamed TI Fluid Systems Hungary Kft.
The Company has applied purchase
accounting to the acquisition and consolidated the activities of
Cascade from the date of acquisition. Acquisition-related costs
recognised as an expense in the year total €1.8 million and
are included in administrative expenses. There are no unexpensed
costs borne by the Group. The revenue contributed by Cascade in the
year ended 31 December 2023 totalled €4.3 million.
If the business combination had
occurred on 1 January 2023, it is estimated that the group's
revenue for the year would have been €25.8 million higher, whilst
the impact on the group's profit would not be material. This
information is not necessarily indicative of the results of the
combined operations, if the acquisition had actually occurred on 1
January 2023 and neither is it indicative of the future results of
the combined operations.
The purchase consideration for the
acquisition is as follows:
|
2 November
2023
|
|
€m
|
Base purchase price
|
26.2
|
Working capital
adjustments
|
0.1
|
Debt acquired settled immediately
post-acquisition
|
(3.2)
|
Pre-existing relationships
effectively settled on acquisition
|
(1.7)
|
Consideration
|
21.4
|
Initial cash consideration paid as
shown in the Cash flow statement
|
16.9
|
Deferred consideration to be
paid
|
4.5
|
Consideration
|
21.4
|
The purchase price before closing
working capital adjustments was $27.7 million (€26.2 million).
There is no contingent consideration applicable to the transaction
and no contingent liabilities have been recognised on the
acquisition. Deferred consideration on the transaction totals $4.8
million, (€4.5 million) of which $1.1 million (€1.0 million) will
be paid on 2 November 2024 and $3.7 million (€ 3.5 million) on 2
May 2025.
The purchase consideration and
provisional amounts of net assets acquired (including goodwill) are
shown in the table below. Due to the proximity of the date of
acquisition to the year-end, the values of net assets acquired as
shown above are provisional. Upon finalisation of the purchase
price allocation, separable acquired intangible assets will be
recognised. These are not expected to be material.
|
2 November
2023
|
|
€m
|
Consideration above
|
21.4
|
Intangible assets
|
0.1
|
Right-of-use assets
|
0.3
|
Property, plant and
equipment
|
9.0
|
Inventories
|
6.3
|
Trade and other
receivables
|
4.8
|
Deferred income tax
assets
|
0.1
|
Trade and other
payables
|
(7.0)
|
Current income tax
liabilities
|
(0.3)
|
Borrowings: bank
overdrafts
|
(3.2)
|
Lease liabilities
|
(0.3)
|
Net assets acquired
|
9.8
|
Total goodwill
|
11.6
|
The goodwill is attributable to the
technical and manufacturing expertise of the workforce and the
opportunity to leverage this expertise across key product lines
across the Group. None of the goodwill is expected to be deductible
for tax purposes.
11. Borrowings
|
2023
|
2022
|
|
€m
|
€m
|
Non-current:
|
|
|
Unsecured senior notes
|
594.0
|
592.9
|
Secured term loans and
facilities
|
416.2
|
521.1
|
Total non-current borrowings
|
1,010.2
|
1,114.0
|
Current:
|
|
|
Secured term loans and
facilities
|
1.5
|
1.9
|
Total current borrowings
|
1.5
|
1.9
|
Total borrowings
|
1,011.7
|
1,115.9
|
Unsecured senior notes
|
594.0
|
592.9
|
Secured term loans and
facilities
|
417.7
|
523.0
|
Total borrowings
|
1,011.7
|
1,115.9
|
The main borrowing facilities are
shown net of issuance discounts and fees of €13.4
million (2022: €20.6 million).
11.1 Movement in Total
Borrowings
|
Unsecured senior
notes
|
Term loans and
facilities
|
Overdrafts
|
Total
borrowings
|
|
€m
|
€m
|
€m
|
€m
|
At 1 January 2023
|
592.9
|
523.0
|
-
|
1,115.9
|
Accrued interest
|
22.5
|
37.4
|
-
|
59.9
|
Scheduled payments including
interest
|
(22.5)
|
(41.4)
|
-
|
(63.9)
|
Scheduled principal repayments of
borrowings
|
-
|
(4.0)
|
-
|
(4.0)
|
Overdrafts acquired on acquisition
of Cascade Engineering Europe (CEE)
|
-
|
-
|
3.2
|
3.2
|
Overdrafts repaid on acquisition
of Cascade Engineering Europe (CEE)
|
-
|
-
|
(3.2)
|
(3.2)
|
Voluntary repayments of
borrowings
|
-
|
(99.2)
|
-
|
(99.2)
|
Fees expensed
|
1.1
|
3.1
|
-
|
4.2
|
Fees expensed on voluntary
repayments of borrowings
|
-
|
2.8
|
-
|
2.8
|
Currency translation
|
-
|
(8.0)
|
-
|
(8.0)
|
31
December 2023
|
594.0
|
417.7
|
-
|
1,011.7
|
Accrued interest payable on the
borrowings at 31 December 2023 of €4.8 million (31 December 2022:
€4.8 million) is included in current trade and other payables.
Scheduled principal repayments of borrowings in the year were €4.0
million (2022: €5.5 million) relating to payments on the
Group's term loans and facilities.
On 15 August 2023 the Group made a
voluntary repayment of the US dollar tranche of the main borrowings of $108.3 million (€99.2 million).
The voluntary repayment was treated as a partial
extinguishment of the Group's US term loan, and as a result
unamortised transaction costs were recognised as a finance expense
in the income statement of $3.0 million (€2.8 million), see Note
5.
On 2 November 2023 the Company
acquired Cascade which had overdrafts of €3.2 million. As part of
the terms of the acquisition the Company settled this
indedbtedness.
|
Unsecured senior notes
|
Term
loans and facilities
|
Total
borrowings
|
|
€m
|
€m
|
€m
|
At 1 January 2022
|
591.7
|
508.6
|
1,100.3
|
Accrued interest
|
22.5
|
24.8
|
47.3
|
Scheduled payments including
interest
|
(22.5)
|
(30.3)
|
(52.8)
|
Scheduled principal repayments of
borrowings
|
-
|
(5.5)
|
(5.5)
|
Fees expensed
|
1.2
|
3.5
|
4.7
|
Currency translation
|
-
|
16.4
|
16.4
|
31 December 2022
|
592.9
|
523.0
|
1,115.9
|
11.2. Currency Denomination of
Borrowings
|
2023
|
2022
|
|
€m
|
€m
|
US dollar
|
163.3
|
267.1
|
Euro
|
848.4
|
848.8
|
Total borrowings
|
1,011.7
|
1,115.9
|
11.3. Main Borrowing
Facilities
The main borrowing facilities are
comprised of unsecured Senior Notes and a package of secured loans
consisting of a Euro term loan, a US dollar term loan, and a
revolving credit facility (which was undrawn during the year except
for letters of credit).
The amounts outstanding under the
agreements are:
|
2023
|
2022
|
|
€m
|
€m
|
Principal outstanding:
|
|
|
Unsecured senior notes
|
600.0
|
600.0
|
US term loan
|
167.5
|
276.2
|
Euro term loan
|
257.6
|
260.3
|
Total principal outstanding
|
1,025.1
|
1,136.5
|
Issuance discounts and
fees
|
(13.4)
|
(20.6)
|
Main borrowings facilities
|
1,011.7
|
1,115.9
|
Unsecured
Senior Notes
The unsecured Senior Notes bear an
interest rate of 3.75% per annum and mature on 15 April 2029.
Interest on the Notes is payable semi-annually in arrears on 15
April and 15 October of each year.
US term
loan
The principal outstanding of the US
term loan in US dollars at 31 December 2023
is $185.0 million (2022:
$294.8 million). On 15 August 2023 the Group made a voluntary
repayment of the US dollar tranche of the main borrowings of $108.3
million (€99.2 million). The amount repayable per quarter on the
loan was $750,000 but following the voluntary repayment, no further
repayments of principal are due on the US term loan until the
final balance falls due on 16 December 2026.
Benchmark interest rate
transition
During the first six months of the
year, the US dollar term loan bore interest at US-dollar
three-month LIBOR (minimum 0.5% p.a.) +3.25% p.a. On 30 June 2023,
the Group's US dollar term loan agreement was amended to replace
the interest rate benchmark, previously US-dollar three-month
LIBOR, with an adjusted Term Secured Overnight Financing Rate
("Term SOFR"). The other terms of the agreement were
unchanged. From that date, the Group's US dollar term loan
agreement incurs interest at one-month Term SOFR + 0.11448%
(minimum 0.5% p.a.) +3.25% p.a. The difference in the interest rate
between the US-dollar LIBOR and one-month term SOFR replacement
rate, at the date of transition, was not significant. The Group
amended the small number of intercompany loan agreements impacted
by the transition to Term SOFR in the second half of the year. The
Group had no derivative arrangements impacted by the transition,
and no changes to the interest rate risk management strategy
resulted from the transition.
Euro term
loan
The rate on the Euro term loan is
unchanged on the prior year at three-month EURIBOR (minimum 0.0%
p.a.) +3.25% p.a. and the amount repayable per quarter is €662,500
(2022: €662,500 per quarter) until the final balance falls due on
16 December 2026.
Revolving Credit
Facility
The revolving credit agreement
provides a facility of up to $225.0 million (2022: $225.0 million).
Drawings under this facility bear interest in a range of SOFR +3.0%
to SOFR + 3.75% p.a. depending on the Group's total net leverage
ratio. The facility
is available to be used to issue letters of credit on behalf of TI
Group Automotive Systems LLC, a subsidiary undertaking. The
facility was undrawn at 31 December 2023 and 31 December 2022
(except for letters of credit see below). The revolving credit
facility ('RCF') expires on 16 July 2026 and the non-utilisation
fee is 0.25% p.a. In the event the total net leverage ratio is
greater than 3.5:1, the non-utilisation fee will increase to 0.375%
p.a.
The net undrawn facilities under
the RCF are shown below:
|
2023
|
2022
|
$m
|
€m
|
$m
|
€m
|
RCF Agreement
|
225.0
|
203.7
|
225.0
|
210.8
|
Utilisation for letters of
credit
|
(4.7)
|
(4.2)
|
(2.0)
|
(1.9)
|
Net
undrawn revolving credit facility
|
220.3
|
199.5
|
223.0
|
208.9
|
Issuance discounts and
fees
All capitalised fees are expensed
using the effective interest method over the remaining terms of the
facilities. Net issuance discounts and fees at 31 December 2023 are
€13.4 million (2022: €20.6 million).
11.4. Total Undrawn Borrowing Facilities
|
2023
|
2022
|
|
€m
|
€m
|
Expiring within one
year
|
11.2
|
11.1
|
Expiring after more than one
year
|
199.5
|
208.9
|
Total
|
210.7
|
220.0
|
All facilities are at floating
rates.
11.5.Movements in Net Debt and Lease
Liabilities
|
At 1 January
2023
|
Cash flows
|
|
|
changes
|
|
At 31 December
2023
|
Cascade Net debt and lease
liabilities acquired
|
New leases
|
Fees
expensed
|
Currency
translation
|
Remeasurement and
disposals
|
|
€m
|
€m
|
€m
|
€m
|
€m
|
€m
|
€m
|
€m
|
Cash and cash
equivalents
|
491.0
|
(58.3)
|
-
|
-
|
-
|
(16.0)
|
-
|
416.7
|
Borrowings
|
(1,115.9)
|
106.4
|
(3.2)
|
-
|
(7.0)
|
8.0
|
-
|
(1,011.7)
|
Total net debt
|
(624.9)
|
48.1
|
(3.2)
|
-
|
(7.0)
|
(8.0)
|
-
|
(595.0)
|
Lease liabilities
|
(149.6)
|
30.0
|
(0.3)
|
(14.4)
|
-
|
3.7
|
(1.9)
|
(132.5)
|
Net debt and lease liabilities
|
(774.5)
|
78.1
|
(3.5)
|
(14.4)
|
(7.0)
|
(4.3)
|
(1.9)
|
(727.5)
|
|
At 1
January 2022
|
Cash
flows
|
|
Non-cash changes
|
|
At 31
December 2022
|
New
leases
|
Fees
expensed
|
Currency
translation
|
Remeas-urement and disposals
|
|
€m
|
€m
|
€m
|
€m
|
€m
|
€m
|
€m
|
Cash and cash
equivalents
|
499.1
|
(11.5)
|
-
|
-
|
3.4
|
-
|
491.0
|
Financial assets at
FVTPL
|
0.9
|
(0.9)
|
-
|
-
|
-
|
-
|
-
|
Borrowings
|
(1,100.3)
|
5.5
|
-
|
(4.7)
|
(16.4)
|
-
|
(1,115.9)
|
Total net debt
|
(600.3)
|
(6.9)
|
-
|
(4.7)
|
(13.0)
|
-
|
(624.9)
|
Lease liabilities
|
(149.9)
|
32.9
|
(42.6)
|
-
|
(3.0)
|
13.0
|
(149.6)
|
Net debt and lease
liabilities
|
(750.2)
|
26.0
|
(42.6)
|
(4.7)
|
(16.0)
|
13.0
|
(774.5)
|
Cash flows from financing
activities arising from changes in financial liabilities are
analysed below:
|
2023
|
2022
|
|
€m
|
€m
|
Voluntary repayments of
borrowings
|
99.2
|
-
|
Scheduled repayments of
borrowings
|
4.0
|
5.5
|
Overdrafts repaid on acquisition
of Cascade Engineering Europe (CEE)
|
3.2
|
-
|
Lease principal
repayments
|
30.0
|
32.9
|
Cash outflows from financing activities arising from changes
in financial liabilities
|
136.4
|
38.4
|
Borrowings cash flows
|
106.4
|
5.5
|
Lease liabilities cash
flows
|
30.0
|
32.9
|
Cash outflows from financing activities arising from changes
in financial liabilities
|
136.4
|
38.4
|
12. Retirement Benefit Obligations
12.1 Defined Benefit Arrangements in the
Primary Financial Statements
a. Balance Sheet
|
US
pensions
|
Other
pensions
|
US
healthcare
|
Other post- employment
liabilities
|
Total
|
Net liability
|
€m
|
€m
|
€m
|
€m
|
€m
|
Present value of retirement
benefit obligations
|
(141.2)
|
(72.5)
|
(22.3)
|
(88.8)
|
(324.8)
|
Fair value of plan
assets
|
116.2
|
77.1
|
-
|
32.2
|
225.5
|
Asset ceiling
|
-
|
(4.6)
|
-
|
-
|
(4.6)
|
Net
liability at 31 December 2023
|
(25.0)
|
-
|
(22.3)
|
(56.6)
|
(103.9)
|
|
US
pensions
|
Other
pensions
|
US
healthcare
|
Other
post- employment liabilities
|
Total
|
Net liability
|
€m
|
€m
|
€m
|
€m
|
€m
|
Present value of retirement
benefit obligations
|
(145.5)
|
(68.9)
|
(28.0)
|
(79.7)
|
(322.1)
|
Fair value of plan
assets
|
117.9
|
77.7
|
-
|
31.1
|
226.7
|
Asset ceiling
|
-
|
(8.8)
|
-
|
-
|
(8.8)
|
Net liability at 31 December
2022
|
(27.6)
|
-
|
(28.0)
|
(48.6)
|
(104.2)
|
b. Income Statement
Net (expense)/income recognised in
the Income Statement is as follows:
Net expense /(income)
|
US
pensions
€m
|
Other
pensions
€m
|
US
healthcare
€m
|
Other post employment
liabilities
€m
|
Total
€m
|
Current service cost
|
-
|
(0.6)
|
-
|
(8.0)
|
(8.6)
|
Settlement / curtailment
(loss)/gain
|
-
|
(0.4)
|
-
|
0.3
|
(0.1)
|
Net interest
(expense)/income
|
(1.4)
|
0.5
|
(1.4)
|
(2.2)
|
(4.5)
|
Total expense for the year ended 31 December
2023
|
(1.4)
|
(0.5)
|
(1.4)
|
(9.9)
|
(13.2)
|
Net (expense)/income
|
US
pensions
€m
|
Other
pensions
€m
|
US
healthcare
€m
|
Other
post employment liabilities
€m
|
Total
€m
|
Current service cost
|
-
|
(1.5)
|
-
|
(6.4)
|
(7.9)
|
Past service cost
|
-
|
-
|
-
|
(0.3)
|
(0.3)
|
Settlement / curtailment
loss
|
-
|
(0.5)
|
-
|
-
|
(0.5)
|
Net interest
(expense)/income
|
(1.0)
|
0.2
|
(0.9)
|
(1.1)
|
(2.8)
|
Total expense for the year ended 31
December 2022
|
(1.0)
|
(1.8)
|
(0.9)
|
(7.8)
|
(11.5)
|
Restructuring of the Group's
Bramalea Canada facility resulted in a settlement loss of €0.4
million in the year (2022: €0.5 million loss).
c. Statement of Comprehensive
Income
Re-measurements of retirement
benefit obligations included in the Statement of Comprehensive
Income are as follows:
(Expense)/income
|
US
pensions
€m
|
Other
pensions
€m
|
US
healthcare
€m
|
Other post employment
liabilities
€m
|
Total
€m
|
Return on assets excluding amounts
recognised in the Income Statement
|
7.6
|
(0.9)
|
-
|
(0.2)
|
6.5
|
Changes in demographic
assumptions
|
0.8
|
0.9
|
0.3
|
0.1
|
2.1
|
Changes in financial
assumptions
|
(4.1)
|
(3.1)
|
2.9
|
(3.7)
|
(8.0)
|
Experience
gains/(losses)
|
0.4
|
(1.4)
|
0.9
|
(3.9)
|
(4.0)
|
Change in asset ceiling
|
-
|
4.2
|
-
|
-
|
4.2
|
Total net Income for the year ended 31 December
2023
|
4.7
|
(0.3)
|
4.1
|
(7.7)
|
0.8
|
(Expense)/income
|
US
pensions
€m
|
Other
pensions
€m
|
US
healthcare
€m
|
Other
post employment liabilities
€m
|
Total
€m
|
Return on assets excluding amounts
recognised in the Income Statement
|
(37.3)
|
(43.5)
|
-
|
-
|
(80.8)
|
Changes in demographic
assumptions
|
-
|
(0.8)
|
-
|
0.3
|
(0.5)
|
Changes in financial
assumptions
|
46.0
|
49.1
|
5.2
|
13.2
|
113.5
|
Experience
gains/(losses)
|
1.3
|
(3.2)
|
1.4
|
(3.9)
|
(4.4)
|
Change in asset ceiling
|
-
|
0.2
|
-
|
-
|
0.2
|
Total net income for the year ended
31 December 2022
|
10.0
|
1.8
|
6.6
|
9.6
|
28.0
|
12.2 Sensitivity analysis
Changes in the principal
assumptions would decrease/(increase) the total defined benefit
obligation (DBO) as follows:
Decrease/(increase) in DBO
|
Change in
assumption
|
2023
|
2022
|
Increase
€m
|
Decrease
€m
|
Increase
€m
|
Decrease
€m
|
Discount rate
|
0.5%
|
15.7
|
(17.3)
|
15.7
|
(17.2)
|
Inflation rate
|
0.5%
|
(5.3)
|
5.2
|
(4.9)
|
4.9
|
Salary growth rate
|
0.5%
|
(2.5)
|
2.3
|
(2.2)
|
2.0
|
Life expectancy
|
1
year
|
(8.3)
|
8.4
|
(8.7)
|
8.8
|
Healthcare cost trend: Initial
rate
|
0.5%
|
(0.7)
|
0.7
|
(0.9)
|
0.8
|
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.
13. Provisions
Movements in provisions are as
follows:
|
Product
warranty
|
Restructuring
|
Other
|
Total
|
|
€m
|
€m
|
€m
|
€m
|
At 1 January 2023
|
5.1
|
7.8
|
3.7
|
16.6
|
Provisions made during the
year
|
4.5
|
13.4
|
3.4
|
21.3
|
Provisions reversed during the
year
|
(0.7)
|
-
|
(0.1)
|
(0.8)
|
Provisions used during the
year
|
(1.7)
|
(15.9)
|
(1.1)
|
(18.7)
|
Currency translation
|
-
|
(0.7)
|
-
|
(0.7)
|
At 31 December 2023
|
7.2
|
4.6
|
5.9
|
17.7
|
|
|
|
|
|
Total provisions:
|
2023
|
2022
|
|
€m
|
€m
|
Non-current
|
2.6
|
2.6
|
Current
|
15.1
|
14.0
|
Total provisions
|
17.7
|
16.6
|
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 2024.
Restructuring
Restructuring provisions comprise
announced headcount reductions and similar costs of balancing
production capacity with market requirements. Provisions made
during the year of €13.4 million (2022: €23.1 million) results in a
net charge to the Income Statement of €13.4 million (2022: €22.8
million). A significant portion of the balance is expected to be
utilised in 2024 with the remaining residual amount in
2025.
Other provisions
Other provisions at 31 December
2023 comprise provisions for disputed claims for indirect taxes
totalling €1.0 million (2022: €0.7 million), asset retirement
obligations totalling €1.9 million (2022: €3.0 million) and other
supplier, customer and employee claims of €3.0 million (2022: nil).
Asset retirement obligations are linked to the useful lives of the
underlying assets, with expected utilisation ranging from 2024 to
2026. The indirect tax provisions are expected to be utilised over
the next four years. Other claims are expected to be utilised in
2024.
14. Cash Generated from Operations
|
2023
|
2022
|
|
€m
|
€m
|
Profit/(loss) for the year
|
83.6
|
(279.0)
|
Income tax expense before
exceptional items
|
37.5
|
23.4
|
Exceptional income tax
credit
|
-
|
(20.1)
|
Profit/(loss) before income tax
|
121.1
|
(275.7)
|
Adjustments for:
|
|
|
Depreciation, amortisation and
non-exceptional impairment charges
|
178.9
|
207.6
|
Exceptional impairment
charges
|
-
|
317.4
|
Net losses on disposal of
PP&E, intangible and right of use assets
|
0.2
|
0.3
|
Loss on disposal of PP&E in
restructuring costs
|
-
|
3.7
|
Share-based expense excluding
social security costs
|
8.6
|
9.6
|
Net finance expense
|
74.7
|
58.7
|
Net foreign exchange
losses
|
0.2
|
0.7
|
Changes in working
capital:
|
|
|
- Inventories
|
(11.6)
|
(34.0)
|
- Trade and other
receivables
|
(25.8)
|
(16.3)
|
- Trade and other
payables
|
26.3
|
27.6
|
Change in provisions
|
1.8
|
(14.4)
|
Change in retirement benefit
obligations
|
(1.1)
|
(2.7)
|
Total
|
373.3
|
282.5
|
The changes in working capital
(movements in inventories, trade and other receivables and trade
and other payables) reflect a number of non-cash transactions. The
most significant of these arises from movements due to changes in
foreign exchange rates, on translation of the Group's overseas
operations into the Group's presentation currency, Euro.
15. Glossary of Terms
Adjusting Items
Adjusting items represent
transactions that in Management's view do not form part of the
substance of the trading activities of the Group, such as
large-scale reorganisations, system implementations, acquisition
costs and certain non-cash accounting measures. At the reporting
date, Adjusting Items comprise: exceptional items, depreciation and
amortisation arising on purchase accounting, net foreign exchange
losses/(gains), restructuring costs, customisation and
configuration costs of significant software as a service ("SaaS")
arrangements and costs associated with business acquisitions or
disposals.
Adjusted Basic EPS
Adjusted Net Income divided by the
weighted average number of shares outstanding.
Adjusted Diluted EPS
Adjusted Net Income divided by the
weighted average number of diluted shares outstanding.
Adjusted EBIT
Operating profit excluding
Adjusting Items.
Adjusted EBITDA
Adjusted EBIT plus depreciation,
amortisation and non-exceptional impairments on non-purchase
accounting.
Adjusted Free Cash Flow
Free Cash Flow adjusted for cash
movements in financial assets at fair value through Profit or Loss,
and the net cash flows arising on Adjusting Items.
Adjusted Net Income
Profit or Loss for the period
attributable to ordinary shareholders, excluding Adjusting Items,
net of their tax effect.
BEV
Battery Electric
Vehicles.
CGU
Cash Generating Unit, being the
management level of the Group, for example FCS North
America.
Constant currency
The remeasurement of prior
period results at current exchange rates to eliminate fluctuations
in translation rates and achieve a like-for-like
comparison.
EBITDA
Profit or loss before tax, net
finance expense, depreciation, amortisation and impairment of
property, plant and equipment, intangible assets and
right-of-use assets.
EV
Electric Vehicles including BEV
and HEV.
FCS
Fluid Carrying Systems, a division
of the Group which supplies Brake & Fuel lines and thermal
products.
FHEV
Full Hybrid Electric vehicles,
includes PHEV and self-charging HEV.
Free Cash Flow
The total of net cash generated
from operating activities and net cash used by investing
activities.
FTDS
Fuel Tanks and Delivery Systems, a
division of the Group that supplies fuel tanks and fuel pumps and
modules.
GLVP
Global Light Vehicle Production of
light vehicles.
HEV
Hybrid Electric Vehicles,
excluding mild hybrid vehicles.
ICE
Internal Combustion Engine
vehicles.
LVP
Light Vehicle production used as a
reference when referring to regional data.
MHEV
Mild Hybrid Electric Vehicles,
which only have modest electrification.
Net debt
The total of current and
non-current borrowings excluding lease liabilities, net of cash and
cash equivalents and financial assets at fair value through profit
or loss.
Net leverage
Net debt divided by the last 12
months' Adjusted EBITDA.
OEM
Original Equipment Manufacturer,
used to refer to vehicle manufacturers, the main customers of the
Group.
PHEV
Plug in Hybrid Electric
Vehicles.
ROCE
Return on Capital Employed is
Adjusted EBIT divided by the two-year trailing average of capital
employed, which is defined as total equity, excluding taxation
balances, derivatives, net debt and lease liabilities,
restructuring provisions and balances related to Bain acquisition
accounting (goodwill, intangible assets and purchase price
allocation adjustments).
Revenue outperformance
The growth in revenue at constant
currency compared to the growth in global light vehicle production
volumes.
SBTi
Science-Based Target Initiative
which is used to refer to the climate change targets aligned to the
Paris Agreement targets.