TIDMTIFS
RNS Number : 3307V
TI Fluid Systems PLC
09 August 2022
Released: 9 August 2022
TI Fluid Systems plc
Half Year Results 2022
Results in line with expectations despite market challenges
Strong growth in EV bookings
Confirms full year 2022 outlook
TI Fluid Systems plc (TIFS), a leading global manufacturer of
automotive fluid storage, carrying and delivery systems and thermal
management products and systems for light vehicles announces its
results for the six-month period ended 30 June 2022.
Management basis* / Statutory basis
EURm H1 2022 H1 2021 Change H1 2022 H1 2021 Change
------- ------- ------ ------- ------
Revenue 1,559.5 1,522.5 37.0 1,559.5 1,522.5 37.0
% Change at constant / actual
rates (2.4)% 2.4%
Adjusted EBIT / Operating
Profit 83.7 127.8 (44.1) 48.3 76.5 (28.2)
Margin 5.4% 8.4% (3.0)% 3.1% 5.0% (1.9)%
Adjusted Net Income / Profit
for the Period 9.0 45.4 (36.4) 0.5 11.1 (10.6)
Adjusted Basic EPS / Basic
EPS (EUR cents) 1.75 8.75 (7.00) 0.10 1.96 (1.86)
Adjusted Free Cash Flow** (1.6) 46.3 (47.9)
Dividend (EUR cents) 1.00 1.93 (0.93) 1.00 1.93 (0.93)
*Management basis metrics are Non - IFRS measures as defined on
pages 18 to 20
** No equivalent GAAP measure - see table 8a for reconciliation
to statutory cash flow items
Group Highlights:
-- The Group has successfully navigated through significant
headwinds from cost inflation and lower global light vehicle
production (GLVP) volumes during the first half of the year
- H1 2022 revenue of EUR1,559.5 million, growing 2.4% versus H1 2021
- At constant currency, H1 2022 revenue fell by 2.4%,
underperforming GLVP by (60) basis points
- At constant currency, Q2 revenue outperformed the market by 330 basis points
- Adjusted EBIT margin of 5.4%, modestly lower than H2 2021 as anticipated
- Statutory Operating Profit margin of 3.1%, including
restructuring costs and Russia impairment charges
- Adjusted Free Cash Flow outflow of EUR(1.6) million and net
cash generated from operating activities of EUR40.2 million
-- The balance sheet remains strong with a cash position of
EUR457.4 million at 30 June 2022
-- Continued and successful execution of our organic growth
strategy and strategic focus on developing thermal products and
systems for new battery electric vehicles (BEVs) and hybrid
electric vehicles (HEVs)
- New business BEV awards in H1 2022 of EUR600 million on lifetime revenue basis
- Key awards include thermal business wins for two high volume
global platforms with European and American customers
- Successful launch of various thermal programs in Asia and North America
-- 2022 interim dividend of 1.00 euro cents per share, which is
in line with our annual dividend policy of 30% of Adjusted Net
Income.
Hans Dieltjens, Chief Executive Officer and President,
commented:
"The first half of 2022 has been marked by several challenges in
the automotive industry. The shortage of microchips and other
supplies, the Russian invasion of Ukraine and the COVID lockdowns
in China have significantly hindered OEM production. Additionally,
these macroeconomic factors have exacerbated the cost increase
pressures, with inflation at levels not seen since the 1990s.
Despite the challenging environment, the Group delivered an
adjusted EBIT margin of 5.4% and maintained a strong balance sheet
position.
We continue to see the success of our Take the Turn (T(3) )
strategy to address electrification through the development of an
expanded line of thermal products for greener HEV and BEV vehicles.
Our FCS division, that represents the majority of our
electrification business, has significantly outperformed the market
by 420 basis points supported by various launches in thermal
products.
In addition, we had EUR600 million of new lifetime sales
business bookings for BEVs during the first six months of the year
as well as significant HEV bookings.
Finally, in April 2022 the Group opened its first of five
E-Mobility Innovation Centres (e-MIC) in Rastatt, Germany. These
technical centres are a crucial element in providing customer
support and demonstrate our ability to design, develop and
manufacture an expanded line of thermal products for electric
vehicle platforms, including offering increasingly modular
systems.
I continue to be very grateful to our workforce for supporting
the Group's many achievements during the first half of this year
through their dedication, focus and hard work as the Group, along
with the industry as a whole manages through a variety of difficult
economic, social and geo-political challenges."
Outlook
While market uncertainties and economic risks persist, we
anticipate that full year production volumes will be at, or
slightly above 2021 levels, as microchip availability gradually
improves, and that inflationary cost increases will continue,
albeit at a slower pace. We continue to make good progress with
customer negotiations for cost recoveries. As such, we expect the
Group's margins to recover during H2 2022.
Based on our H1 2022 results and current view of H2 2022, we are
maintaining our previously issued full year 2022 outlook guidance.
We expect to achieve revenue outperformance vs GLVP, margins
slightly below 2021 levels and historical levels of cash flow
conversion.
Results presentation
TI Fluid Systems plc will host a teleconference for analysts and
investors at 11.30 am UK time on 9 August 2022.
Analysts wishing to join may listen to the presentation live by
using the details below.
Conference Call Dial-In Details:
UK: +44 (0) 330 165 4012
Conference Code: 3480120
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
Pilar Riesco
Investor Relations
Tel: +34 607 577 830
FTI Consulting
Richard Mountain
Nick Hasell
Tel: +44 (0)20 3727 1340
Chief Executive Officer's review
Global light vehicle production volumes for H1 2022 were 1.8%
below the same period in 2021. The microchip shortages, the Russian
invasion of Ukraine and the China Covid-19 lockdowns are still
hindering the ability of OEMs to fulfil consumer demand. These
events have also led to an inflationary environment that has
created significant challenges to the business.
Despite these headwinds, the Group's H1 2022 revenue increased
by 2.4% at actual rates compared to H1 2021, with a roughly flat
performance to market on a constant currency basis (60 bps below
GLVP).
Our ability to maintain a robust revenue profile and financial
performance given the ongoing issues demonstrates the Group's
consistent resilience and the strength of our strategy, business
model and experienced management team.
Half year 2022 performance
Global light vehicle production volume decreased by 1.8% in the
first six months of 2022, compared to the first half of 2021. We
delivered revenue of EUR1,559.5 million, which was an increase of
2.4% compared to the first half of 2021. At constant currency,
revenue was 2.4% lower than the first half of 2021, or 60 bps below
global light vehicle production.
We also continued to generate strong Adjusted EBITDA of EUR160.1
million (10.3% margin) and Adjusted EBIT of EUR83.7 million (5.4%
margin). Adjusted Net Income for the period was EUR9.0 million (H1
2021: EUR45.4 million), Profit for the period was EUR0.5 million
(H1 2021: EUR11.1 million), and Adjusted Free Cash Flow amounted to
EUR(1.6) million (H1 2021: EUR46.3 million).
Strategy update
The Group continues to successfully implement its Take The Turn
(T(3) ) Strategy which is built on our commitment, focus and
dedication to designing and producing products that help make
vehicles greener, the environment cleaner and the world a better
place to live. We also continue to benefit from operational
flexibility and our balanced and diversified customer, platform and
regional profile.
We are pleased with our continued business bookings for both HEV
and BEV platforms, with EUR600 million of BEV bookings in H1 2022.
We are also making great progress with Korean OEMs and are
increasing our business wins with Chinese OEMs. We continue to win
new business awards for our advanced pressure resistant plastic
fuel tank technology on HEVs.
Building on the Group's long trusted reputation as a leading
fluid systems provider, we opened our first E-Mobility Innovation
Centre (e-MIC) in Rastatt, Germany, where we collaborate with our
OEM customers to develop new thermal products and systems that meet
their needs and offer new solutions for electric vehicles.
We will continue our financial discipline on cost management and
capital allocation to deliver sustainable growth and financial
performance, balancing the investment of our new products with the
cash generation in existing products.
Our people
Our employees, their knowledge and commitment are essential to
achieve our challenging targets. The Group continues its deep
engagement with employee development with a focus on inclusion. To
further expand our employees' existing skills and expertise
worldwide, we offer curated learning paths which will enable them
to adapt to the evolving EV markets.
I remain excited about the future of the Company as the
automotive industry shifts to electrified mobility.
Hans Dieltjens
Chief Executive Officer and President
8 August 2022
Chief Financial Officer's Report
The first half of 2022 has been characterised by the persistent
global macroeconomic headwinds arising from continued supply chain
pressures in the form of cost inflation and dampened demand due to
the continuing microchip shortages, plus the impact of the Ukraine
situation on our European businesses. We continue to operate in a
challenging environment and delivered revenue growth at actual
rates. Although our margins have been impacted by the cost
pressures as well as further COVID-19 related shutdowns in China,
we are proud of the gains we continue to make with our cost
rationalisation initiatives across the business and the progress
being made on recovering the costs from our customers recognising
there is timing lag due to the negotiation process.
Table 1: Key Performance measures EURm
Management basis* / Statutory basis
H1 2022 H1 2021 Change H1 2022 H1 2021 Change
------- ------- ------ ------- ------
Revenue 1,559.5 1,522.5 37.0 1,559.5 1,522.5 37.0
% Change at constant / actual
rates (2.4)% 2.4%
Adjusted EBITDA 160.1 198.5 (38.4)
Margin 10.3% 13.0% (2.7)%
Adjusted EBIT / Operating
Profit 83.7 127.8 (44.1) 48.3 76.5 (28.2)
Margin 5.4% 8.4% (3.0)% 3.1% 5.0% (1.9)%
Adjusted Net Income / Profit
for the period 9.0 45.4 (36.4) 0.5 11.1 (10.6)
Adjusted Basic EPS / Basic
EPS (EUR cents) 1.75 8.75 (7.00) 0.10 1.96 (1.86)
Adjusted Free Cash Flow ** (1.6) 46.3 (47.9)
Dividend (EUR cents) 1.00 1.93 (0.93) 1.00 1.93 (0.93)
*Management basis metrics are Non - IFRS measures as defined on
pages 18 to 20
**No equivalent GAAP measure - see table 8a for reconciliation
to statutory cash flow items
Global light vehicle production continues to be the principal
driver of the Group's performance. In the first half of 2022,
global light vehicle production decreased to 38.7 million vehicles
or by 1.8% compared to the prior period mainly impacted by
persistent supply chain shortages, COVID-19 related shutdowns and
the war in Ukraine.
Group revenue decreased by EUR37.5 million, or 2.4% period over
period on a constant currency basis, to EUR1,559.5 million,
underperforming global light vehicle production by (60) bps in the
period. If we include the positive currency impact of EUR74.5
million, reported revenue increased by EUR37.0 million, or 2.4%
period over period. For Q2 2022 revenue was EUR804.5 million (Q2
2021: EUR772.5 million) which outperformed global light vehicle
production by 330 bps at constant currency.
We generated Adjusted EBIT of EUR83.7 million with a margin of
5.4%, a decrease of 300 bps from the prior period Adjusted EBIT
margin. The decrease in margin is directly related to the
conversion of lower volumes as well as ongoing inflationary and
cost pressures which have increased our operating costs. Recovery
of these costs is a priority for our management team and good
progress has been made both in recovering historic amounts and also
setting future prices on a sustainable basis. On a statutory basis,
we achieved an operating profit of EUR48.3 million compared to
EUR76.5 million in the prior period mainly due to the conversion of
lower sales and the time lag on recoveries. This is discussed in
more detail in the Operating Profit, Adjusted EBITDA and Adjusted
EBIT section of this report.
Adjusted Net Income was EUR9.0 million compared to EUR45.4
million in the prior period. The reported profit for the half year
was EUR0.5 million compared to EUR11.1 million in the corresponding
half of 2021. Basic EPS was 0.10 Euro cents (H1 2021: 1.96 Euro
cents) and Adjusted Basic EPS was 1.75 Euro cents, a decrease from
8.75 Euro cents in the first half of 2021. The volatile production
environment had an adverse impact on working capital management and
in turn our adjusted free cash flow generation, which was EUR(1.6)
million compared to EUR46.3 million in H1 2021. Cash generated from
operating activities was offset by cash outflows from investing and
financing activities, mainly capex, lease and dividend payments,
resulting in our reported cash and cash equivalent balances
decreasing by EUR(53.9) million (H1 2021: EUR(32.6) million) before
currency translation, and a period end cash balance of EUR457.4
million (December 2021: EUR499.1 million). We ended the period with
net debt excluding the IFRS16 lease liability of EUR664.1 million
(31 December 2021: EUR600.3 million).
Automotive Markets
Global light vehicle production volumes decreased by 1.8% in H1
2022 to 38.7 million vehicles as shown in table 2 - driven by the
macroeconomic headwinds of high inflation, supply chain
disruptions, COVID-19 related lockdowns and the war in Ukraine.
Volumes decreased across all major regions except North
America.
Table 2: Global light vehicle production volumes: millions of
units
H1 2022 % Change
Europe, including Middle East and Africa 9.0 (9.7) %
Asia Pacific 21.3 (0.2) %
North America 7.1 4.7%
Latin America 1.3 (0.5) %
----------------------------------------- ------- --------
Total global volumes 38.7 (1.8) %
----------------------------------------- ------- --------
Source: IHS Markit, July 2022 and Company estimates
Change percentages calculated using unrounded data
Revenue
Our revenue in each of the regions and by segment is included in
table 3.
Table 3: Revenue by region and by segment EURm
% Change
at constant
H1 2022 H1 2021 Change % Change currency
Total Group Revenue 1,559.5 1,522.5 37.0 2.4% (2.4) %
By Region
(4.2)
Europe and Africa 596.4 622.4 (26.0) % (4.3) %
(0.8)
Asia Pacific 515.2 519.3 (4.1) % (6.9) %
North America 424.3 356.5 67.8 19.0% 8.0%
(2.9)
Latin America 23.6 24.3 (0.7) % (14.5)%
By segment
Fluid Carrying Systems ("FCS") 876.9 813.1 63.8 7.8% 2.4%
Fuel Tank and Delivery Systems
("FTDS") 682.6 709.4 (26.8) (3.8)% (7.8)%
Group revenue in H1 2022 was EUR1,559.5 million, a decrease of
2.4% period over period at constant currency and when compared to
the global light vehicle production decrease of 1.8% over the same
period resulted in a 60 bps underperformance primarily driven by
the disproportionate impact of COVID-19 lockdowns in China.
In Europe and Africa, revenue at constant currency decreased by
4.3% period over period compared to a light vehicle production
decrease of 9.7%, an outperformance of 540 bps. This strong
outperformance was driven by the continuing launches of new HEV/BEV
programmes for both FTDS and FCS, which offset the slow ramp up of
some programs as a result of the Ukraine crisis.
In Asia Pacific, revenue at constant currency decreased by 6.9%
period over period compared to light vehicle production decrease of
0.2%, for an underperformance of (670) bps. This underperformance
was driven by the disproportionate impact of lockdowns and higher
growth of BEV volumes in China where we are under indexed.
In North America, revenue at constant currency increased by 8.0%
period over period compared to light vehicle production increase of
4.7%, reflecting an outperformance of 330 bps. The main impact for
this region was new business launches and programme ramp ups in the
FCS division, which outperformed the market in that region by 730
bps.
FCS revenue increased by EUR20.5 million, 2.4% at constant
currency from the prior period to EUR876.9 million, an
outperformance of 420 bps when compared to global light vehicle
production. The strong FCS revenue growth is driven by successful
launches of thermal programmes in Europe and North America.
FTDS revenue at constant currency decreased by 7.8% to EUR682.6
million, underperforming global light vehicle production by (600)
bps, primarily driven by higher BEV growth in Asia Pacific where
there is less FTDS content, as well as ramp downs in North America.
Tooling revenue was significantly lower due to delays in the timing
of programme ramp ups.
Revenue increased by 2.4% to EUR1,559.5 million at actual rates
due to a net positive currency exchange rate impact of EUR74.5
million compared with the prior period. This was mostly due to
weakening of the Euro against the US dollar and other key
currencies in countries where the Group has manufacturing
operations. Table 4 below sets out the movement in exchange rates
most relevant to our operations.
Table 4: Exchange Rates
Key Euro exchange % Change 30 June 30 June % Change
rates H1 2022 H1 2021 2022 Period 2021 Period
Average Average End End
------------------ -------- -------- -------- ------------ ------------ --------
US dollar 1.093 1.205 (9.3)% 1.047 1.185 (11.6)%
------------------ -------- -------- -------- ------------ ------------ --------
Chinese renminbi 7.079 7.797 (9.2)% 7.013 7.651 (8.3)%
------------------ -------- -------- -------- ------------ ------------ --------
South Korean won 1,348 1,347 0.1% 1,354 1,340 1.0%
------------------ -------- -------- -------- ------------ ------------ --------
Operating Profit, Adjusted EBITDA* and Adjusted EBIT*
We use several financial measures to manage our business,
including Adjusted EBITDA and Adjusted EBIT, which are non-IFRS
measures, but are measures of profitability that have been used
consistently by the Group and give insight into the operating
performance of the business. The metrics are also used in certain
of our compensation plans and to communicate to our investors.
Table 5 shows a reconciliation between the reported measure,
operating profit, Adjusted EBITDA and Adjusted EBIT.
Table 5: Calculation of Adjusted EBITDA* and Adjusted EBIT*
EURm
H1 2022 H1 2021
Operating profit 48.3 76.5
Depreciation and impairment of PP&E 50.6 47.1
Depreciation and impairment of right-of-use assets 15.3 14.7
Amortisation and impairment of intangible assets 37.4 35.0
Share of loss of associates - (1.2)
EBITDA 151.6 172.1
Net foreign exchange (gains) /losses (3.2) 7.6
Net restructuring costs 11.5 17.6
Share of loss of associates - 1.2
Other reconciling adjustments 0.2 -
------------------------------------------------------- ------- -------
Adjusted EBITDA 160.1 198.5
Less:
Depreciation and impairment of PP&E (50.6) (47.1)
Depreciation and impairment of right-of-use assets (15.3) (14.7)
Amortisation and impairment of intangible assets (37.4) (35.0)
Add back:
Depreciation uplift arising on purchase accounting 4.9 5.3
Amortisation uplift arising on purchase accounting 22.0 20.8
------------------------------------------------------- ------- -------
Adjusted EBIT 83.7 127.8
------------------------------------------------------- ------- -------
* See Non-IFRS measures on pages 18 to 20
The operating profit of EUR48.3 million (H1 2021: EUR76.5
million) reflects the challenging operating conditions being
experienced in 2022 due to inflationary pressures impacting our
input costs and pricing pressures impacting recoveries. Management
is making good progress on negotiating for compensation for the
inflationary cost increases and also resetting purchase order
prices for future business.
The restructuring and cost rationalisation programme started in
2020 continues to be implemented through 2022 and we are now
starting to see the benefits across the business. We incurred
further restructuring charges of EUR11.5 million in the period
related to permanent headcount reductions across all our businesses
and the planned closure and downsizing of manufacturing plants in
Europe. During the period we have written down the assets in our
Russian businesses and incurred costs of EUR6.0 million which are
included in the restructuring charge. At the end of H1 2022 there
was a restructuring provision of EUR9.6 million (December 2021:
EUR15.8 million).
Adjusted EBITDA in the first half of the year was EUR160.1
million (H1 2021: EUR198.5 million) and Adjusted EBITDA margin was
10.3% (H1 2021: 13.0%) with the major impact being the increase in
operating costs as mentioned above. We continue to see challenge in
the supply chain relating to pricing pressure and inflation of
input costs for metals, resin, labour and utilities.
Adjusted EBIT was EUR83.7 million (H1 2021: EUR127.8 million)
and Adjusted EBIT margin was 5.4% (H1 2021: 8.4%). This change was
impacted by lower Adjusted EBITDA. During the period there were
programme specific impairment charges of EUR0.7 million (H1 2021:
EUR1.2 million).
By segment, FCS Adjusted EBIT was EUR46.1 million compared to
EUR69.6 million in H1 2021, with Adjusted EBIT margin of 5.3% (H1
2021: 8.6%). The period over period margin reduction reflects
increasing inflation on metal and resin, components and labour, as
well as the lag on recoveries. These impacts have offset the fixed
cost savings arising from efficiency gains and restructuring
benefits.
FTDS Adjusted EBIT was EUR37.6 million compared to EUR58.2
million in H1 2021, with Adjusted EBIT margin of 5.5% (H1 2021:
8.2%). The reduction in margin reflects the conversion of lower
revenues in the period, as well as increased operating costs and
delayed recoveries.
Net finance expense
Net finance expense for the period was EUR28.5 million, a
decrease of EUR2.3 million from the prior period (excluding the
exceptional write-off of unamortised issue costs in the prior
period). The decrease was due to the refinancing carried out in
April 2021, reflecting the more favourable terms compared to the
previous debt facilities.
Taxation
The income tax charge for the first half of 2022 is EUR19.3
million based on Group profit before tax of EUR19.8 million. This
period over period decrease in the tax charge of EUR5.3 million is
primarily due to a significant period over period decrease in
profit. However, there was also an increase in the tax charge due
to the H1 2022 establishment of tax valuation allowances in
Argentina, Russia and South Africa which increased the H1 2022 tax
charge and Effective Tax Rate. The H1 2022 Effective Tax Rate is
97.5% (H1 2021: 55.2%) There were no significant changes to
uncertain tax positions during the period.
The H1 2022 Adjusted Effective Tax Rate is 46.4% (H1 2021:
34.6%). The Adjusted Effective Tax Rate is calculated by adjusting
for the impact of UK losses, the impact of the share of associate
loss and the prior period tax movements.
Table 6 shows the calculation of the Effective and Adjusted
Effective Tax Rates.
Table 6: Calculation of Effective and Adjusted Effective Tax
rates* EURm
Amounts in the table below do not include the H1 2021
exceptional charge of EUR11.6 million and exceptional tax benefit
of EUR2.8 million.
H1 2022 H1 2021
----------------------------- -----------------------------
Profit Profit
before before
tax Tax charge Tax rate tax Tax charge Tax rate
Statutory basis 19.8 (19.3) 97.5% 44.5 (24.6) 55.2%
Add back:
Share of associate loss - 1.2
UK accounting loss** 22.2 - 26.3 -
------- ---------- -------- ------- ---------- --------
42.0 (19.3) 46.0% 72.0 (24.6) 34.2%
Less:
Prior period deferred
tax charge 1.4 -
Prior period corporate
tax benefit (1.6) (0.3)
-------------------------- ------- ---------- -------- ------- ---------- --------
Adjusted 42.0 (19.5) 46.4% 72.0 (24.9) 34.6%
-------------------------- ------- ---------- -------- ------- ---------- --------
*See Non-IFRS measures on pages 18 to 20
** UK accounting loss is not tax effected due to the UK
historical tax loss position
Adjusted Net Income* and profit for the period
Adjusted Net Income is a component of the Adjusted Basic EPS
calculation and is also used to guide our dividend policy
calculation. The calculation of Adjusted Net Income is shown in
table 7a.
Table 7a: Adjusted Net Income* EURm
H1 2022 H1 2021
Adjusted EBITDA (see table 5) 160.1 198.5
Less:
Net finance expense before exceptional items (28.5) (30.8)
Income tax expense before exceptional items (19.3) (24.6)
Depreciation and impairment of PP&E (50.6) (47.1)
Depreciation and impairment of right-of-use assets (15.3) (14.7)
Amortisation and impairment of intangible assets (37.4) (35.0)
Non-controlling interests' share of profit - (0.9)
Adjusted Net Income 9.0 45.4
----------------------------------------------------- ------- -------
Table 7b: Reconciliation of profit for the period to Adjusted
Net Income* EURm
H1 2022 H1 2021
Profit for the period 0.5 11.1
Less:
Non-controlling interests' share of profit - (0.9)
Net foreign exchange (gains)/ losses (3.2) 7.6
Add back:
Exceptional finance expenses - 11.6
Exceptional deferred tax credit - (2.8)
Net restructuring costs 11.5 17.6
Share of loss of associates - 1.2
Other reconciling adjustments 0.2 -
--------------------------------------------- ------- -------
Adjusted Net Income 9.0 45.4
--------------------------------------------- ------- -------
*See Non-IFRS measures on pages 18 to 20
Adjusted Net Income was EUR9.0 million in H1 2022 compared to
EUR45.4 million in H1 2021, primarily driven by the flow through of
lower revenues and increased operating costs.
Basic EPS and Adjusted Basic EPS*
On a statutory basis, Basic Earnings per Share ('EPS') was 0.10
Euro cents for the period (H1 2021: 1.96 Euro cents), reflecting
the reduced profit for the period. Adjusted Basic EPS calculation
is based on Adjusted Net Income and the weighted average number of
shares issued. Adjusted Basic EPS was 1.75 Euro cents per share for
the period (H1 2021: 8.75 Euro cents per share) reflecting the
decrease in Adjusted Net Income as noted above.
*See Non-IFRS measures on pages 18 to 20
Dividend
The Company's dividend policy is to target an annual dividend of
approximately 30% of Adjusted Net Income, one third payable
following half year results and two thirds following the Group's
final results.
The Group paid a final dividend in respect of the 2021 financial
year of 1.46 Euro cents per share, amounting to EUR7.5 million on
23 June 2022. The Group is committed to its stated annual dividend
policy and the Board has recommended a 2022 interim dividend of
1.00 Euro cents per share, amounting to EUR5.1 million. The Board
continues to believe that dividends represent an important part of
the Group's shareholder value proposition and that the Company's
dividend policy is both affordable and sustainable within its wider
capital allocation framework.
Cash Flow performance
The Group uses Adjusted Free Cash Flow as its primary operating
measure of cash flow performance.
Table 8a: Adjusted Free Cash Flow* EURm
H1 2022 H1 2021
Net cash generated from operating activities 40.2 98.8
Net cash used by investing activities (56.3) (62.6)
----------------------------------------------------------- ------- -------
Free Cash Flow* (16.1) 36.2
Deduct:
Amounts received in cash from Financial Assets at
FVTPL (included in net cash generated from operations) (0.7) -
Add back:
Net restructuring cash spend 12.2 10.1
Tax paid on the gain on the disposal of associated
undertakings 3.0 -
----------------------------------------------------------- ------- -------
Adjusted Free Cash Flow* (1.6) 46.3
----------------------------------------------------------- ------- -------
Table 8b: Reconciliation of Adjusted EBITDA to Adjusted Free
Cash Flow* EURm
H1 2022 H1 2021
Adjusted EBITDA 160.1 198.5
Less:
Net cash interest paid (24.1) (22.6)
Cash taxes paid (25.3) (28.0)
Payment for property, plant and equipment (39.9) (42.2)
Payment for intangible assets (15.3) (21.7)
Movement in working capital (54.4) (37.1)
Movement in retirement benefit obligations (2.6) (1.2)
Movement in provisions and other (14.6) (9.5)
----------------------------------------------------- ------- -------
Free Cash Flow* (16.1) 36.2
----------------------------------------------------- ------- -------
Deduct:
Amounts received in cash from Assets at FVTPL (0.7) -
Add back: - -
Restructuring cash spend 12.2 10.1
Tax paid on the gain on the disposal of associated
undertakings 3.0 -
----------------------------------------------------- ------- -------
Adjusted Free Cash Flow* (1.6) 46.3
----------------------------------------------------- ------- -------
*See Non-IFRS measures on pages 18 to 20
In H1 2022, Adjusted Free Cash Flow was EUR(1.6) million (H1
2021: EUR46.3 million). The Adjusted EBITDA generated by the Group
was used to fund investment in capital equipment and intangibles.
There was a EUR8.7 million decrease in property, plant and
equipment and intangibles expenditure. Tax cash payments were
EUR2.7 million lower due to lower profits. The outflow from working
capital of EUR54.4 million was driven by the increase in working
capital balances due to the increased level of uncertainty leading
to holding higher levels of inventory and increased receivables
particularly in our China operations which suffered from sudden
COVID related shutdowns and in Europe which has been impacted by
short notice customer call off changes as a result of parts
shortages from Ukraine. The net cash outflow on restructuring was
EUR12.2 million, predominantly severance payments (H1 2021: EUR10.1
million) and included EUR1.1 million relating to the suspension of
trading activities in Russia.
Cash outflows from financing were EUR37.8 million (H1 2021:
EUR68.8 million), and together with free cash outflows of EUR16.1
million (H1 2021: EUR36.2 million inflows), resulted in a reported
decrease in cash and cash equivalents before currency translation
of EUR53.9 million (H1 2021: EUR(32.6) million). Financing outflows
include purchase of own shares of EUR11.4 million (H1 2021: nil),
borrowing repayments of EUR2.7 million (H1 2021: EUR17.8 million
including fees), EUR16.2 million (H1 2021: EUR16.0 million) lease
principal repayments and EUR7.5 million dividend payments (H1 2021:
EUR35.0 million).
Retirement benefits
We operate funded and unfunded defined benefit schemes across
multiple jurisdictions with the largest being the US pension and
retiree healthcare schemes, which represent 57% of our net unfunded
position at 30 June 2022 (H1 2021: 52%). We also have funded
schemes in Germany 18% (H1 2021: 20%), UK and Canada nil% (H1 2021:
1%). While all our major plans are closed to new entrants, a few
allow for future accrual. Our schemes are subject to periodic
actuarial valuations. Our net unfunded position decreased by
EUR19.3 million from December 2021 to EUR108.8 million at 30 June
2022 due primarily to discount rates differential period-on-period
and overall pension investment performance.
Net debt* and net leverage*
Net debt, a non-IFRS measure, as at 30 June 2022 was EUR664.1
million, an increase of EUR63.8 million from the prior year end.
The facilities also include a $225.0 million revolving credit
facility with an undrawn amount of $223.1 million (EUR213.1
million) at 30 June 2022. Full details of the facilities are given
in Note 8. Issuance fees and discounts of EUR23.0 million on the
loans are carried forward for future amortisation.
The Group's net leverage ratio, also a non-IFRS measure, was 2.1
times last twelve months Adjusted EBITDA of EUR314.5 million as at
30 June 2022 (31 December 2021: 1.7 times, last twelve months
Adjusted EBITDA of EUR352.9 million); the increase reflects the
lower Adjusted EBITDA.
The Group excludes IFRS 16 lease liabilities from its net debt
and net leverage ratio. If the IFRS 16 lease liabilities were to be
included, the Group's net debt would be EUR808.8 million (31
December 2021: EUR750.2 million) and net leverage ratio would be
2.6 times Adjusted EBITDA (31 December 2021: 2.1 times).
*See Non-IFRS measures on pages 18 to 20
Liquidity and Going Concern
Our principal sources of liquidity have historically been cash
generated from operating activities and amounts available under our
credit facilities, that currently consist of a revolving facility
under our cash flow credit agreement of $225.0 million (EUR214.9
million). Total available liquidity (cash plus available
facilities) on 30 June 2022 was EUR670.5 million (31 December 2021:
EUR695.3 million).
The Directors have reviewed the likely performance of the Group
for the period to 31 December 2023 by reference to an outlook using
the approved Budget and Medium-Term Plan, updated for actual year
to date performance and current projections as a base case scenario
(global light vehicle volume assumptions - 2022: 78.0 million
units, 2023: 84.3 million units). The volumes used are lower than
the current IHS global light vehicle production forecast of 80.8
million units for 2022 and 87.3 million units for 2023 reflecting
some modelling caution and alignment with the assumptions made
during our Budget and Medium-Term Plan which assumed a slower
recovery to normalised production volumes in light of the continued
supply chain shortages. The Directors' assessment has been made
with reference to the Group's current position and prospects, the
Group's existing committed finance facilities, the Group's
strategy, business model and the potential impact of the principal
risks and how these are managed, as detailed in the strategic
report contained within the 2021 Annual Report.
In making their assessment, the Directors reviewed a base case
forecast covering the period to 31 December 2023 prepared using a
global light vehicle production volume forecast which takes account
of the short-term challenges associated with the current supply
chain issues and showed liquidity (cash plus undrawn banking
facilities) of EUR804 million at the end of the review period. The
base model was stress tested to assess the adverse impact of the
crystallisation of the principal risks likely to have a significant
financial impact in the period to December 2023. This severe but
plausible downside scenario assumed:
-- A further 10% lower global production volumes in Q4 2022 and
2023 compared to the data used in the base model, volumes used -
2022: 75.9 million units, 2023: 75.9 million units, (Risk: Global
Light Vehicle production volumes)
-- 10% increase in direct costs caused by inflationary pressures
(commodities and energy costs), environmental strategy
implementation costs and customer price reduction pressures from
schedule changes (Risk: Competition and Customer Pricing Pressure,
and Business Continuity)
-- A further 0.5% sales price reduction in addition to reduction
already assumed in the base case (Risk: Competition and Customer
Pricing Pressure)
-- EUR25 million additional annual supply chain disruption costs (Risk: Business Continuity)
The other principal risks were not considered to have a
significant sustained financial impact.
The impact of the severe but plausible downside scenario would
be to reduce available liquidity as per the base case to EUR523
million at the end of the review period, EUR281 million lower than
the base case. In both the base case and the severe but plausible
downside scenario, no breach of covenant is projected for the
review period.
A reverse stress test was performed to determine the level of
global light vehicle production which would extinguish all cash. It
was found that even a 100% volume reduction from October 2022
through 2023 compared to the base case (volumes used - 2022: 58.0
million units, 2023: 0 units) would not use up the existing cash,
and the $225 million revolving credit facility would not be
utilised. This contrasts with the 2020 global light vehicle
production low of 74.6 million, a drop of 16.1% to compared to
2019. As a result, the Directors do not believe that a catastrophic
100% volume drop in 2023 is likely and therefore do not regard this
as a probable outcome.
The current banking facilities were also considered and
specifically the available headroom under the downside scenario and
their availability during the review period as well as any
associated covenants. The downside model showed the availability of
significant liquidity headroom without use of the revolving credit
facility. The only covenant measure that exists is a leverage ratio
which must be below 3.8x Adjusted EBITDA when the revolving
facility is drawn over 35%, there were no covenant breaches in the
review period.
The Directors have concluded after reviewing the future funding
requirements for the Group over the period to the end of 2023 by
reference to the headroom on the committed banking facilities and
the expected performance of the Group, that it is appropriate for
the financial statements to be prepared on a going concern basis
with no material uncertainties.
Principal Risks and Uncertainties
The executive management and Directors have considered the
principal risks and uncertainties of the Group and have determined,
on balance, that those reported in the 2021 Annual Report and
Accounts remain relevant for the remaining half of the financial
year. Current operating challenges from volatile customer
production volumes and supply chain disruptions in the automotive
industry are not thought to represent prolonged long-term risks
though they will persist into the second half and into 2023. In
addition, the Directors noted that the increasing inflationary
pressure on our input costs has posed, and will continue to pose,
challenges on the business in the short and potentially medium
term. An associated risk is our ability to recover increased costs
from the customers as the supply chain rebalances over the short
and medium term. In the first half of 2022, we have been able to
recover part of the cost increases from the customers and realign
prices accordingly, but the challenge of inflationary pressure will
continue, requiring careful management.
Furthermore, the Directors noted a potential risk with regard to
energy availability (in particular natural gas) as a result of
recent political and economic tensions within Europe following
Russia's invasion of Ukraine. The macro environment is still
evolving, and the Company is assessing the potential exposure and
mitigation.
The Directors continue to monitor and consider the current
COVID-19 landscape and related risks stemming from the pandemic as
well as reviewing the developing risks identified in our 2021
Annual Report - product portfolio redundancies, technological
obsolescence, product pivoting, climate change and increasing
geopolitical tensions and conflict. We continue to believe that
these do not represent separate new principal risks and
uncertainties at this time.
Details of the Group's Principal Risks and Uncertainties are
available in the 2021 Annual Report and Accounts available on our
website www.tifluidsystems.com.
Outlook
While market uncertainties and economic risks persist, we
anticipate that full year production volumes will be at, or
slightly above 2021 levels, as microchip availability gradually
improves, and that inflationary cost increases will continue,
albeit at a slower pace. We continue to make good progress with
customer negotiations for cost recoveries. As such, we expect the
Group's margins to recover during H2 2022.
Based on our H1 2022 results and current view of H2 2022, we are
maintaining our previously issued full year 2022 outlook guidance.
We expect to achieve revenue outperformance vs GLVP, margins
slightly below 2021 levels and historical levels of cash flow
conversion.
Non-IFRS measures
In addition to the results reported under IFRS, we use certain
non-IFRS financial measures to monitor and measure performance of
our business and operations and the profitability of our Divisions.
Such measures are also utilised by the Board as targets in
determining compensation of certain executives and key members of
management, as well as in our communications with investors. In
particular, we use Adjusted EBIT, Adjusted EBITDA, Adjusted Net
Income, Adjusted Basic EPS, Adjusted Free Cash Flow, Constant
Currency, Net Debt and Adjusted Effective Tax Rate. These non-IFRS
measures are not recognised measurements of financial performance
or liquidity under IFRS, and should be viewed as supplemental and
not replacements or substitutes for any IFRS measures.
EBITDA is defined as profit or loss before tax, net finance
expense, depreciation, amortisation and impairment of tangible and
intangible assets, and share of associate profits or losses.
Adjusted EBITDA is defined as EBITDA adjusted for exceptional
operating costs, net foreign exchange gains/(losses), net
restructuring charges, share of associate profits or losses,
associate dividends received and the impact of any business
acquisitions or disposals.
Adjusted EBIT is defined as Adjusted EBITDA less depreciation,
amortisation and non-exceptional impairment on tangible and
intangible assets (except those included in restructuring costs)
net of depreciation and amortisation on purchase price
accounting.
Constant currency refers to the statement of prior period
results at current exchange rates to eliminate fluctuations in
translation rates and achieve a like for like comparison.
Revenue outperformance/underperformance is defined as the change
in revenue at constant currency compared to the change in global
light vehicle production volumes.
Operating profit margin is defined as operating profit expressed
as a percentage of revenue.
Adjusted Net Income is defined as Profit or Loss for the period
attributable to the ordinary shareholders before exceptional items
adjusted to reflect associate dividends received and eliminate the
impact of net restructuring charges, foreign exchange gains or
losses and the impact of any business acquisitions or
disposals.
Adjusted Basic EPS is defined as Adjusted Net Income divided by
the weighted average number of shares in issue in the period.
Free Cash Flow is defined as the total of net cash generated
from operating activities and net cash used by investing
activities.
Adjusted Free Cash Flow is defined as Free Cash Flow adjusted
for cash movements in financial assets at fair value through profit
or loss ('FVTPL'), net cash flows relating to restructuring,
settlement of derivatives and the impact of any business
acquisitions or disposals. The restructuring cash adjustment is
made to align the treatment of restructuring with the other
adjusted measures.
Adjusted Income Tax before Exceptional items is defined as
income tax before exceptional items adjusted for the tax impact of
prior period tax provisions and adjustments, UK accounting losses
and tax arising on the impact of any business acquisitions or
disposals.
Adjusted Profit before Income Tax is defined as profit before
income tax adjusted for UK losses, share of associate loss, and the
impact of any business acquisitions or disposals.
Adjusted Effective Tax Rate is defined as adjusted income tax
before exceptional items as a percentage of adjusted profit before
income tax.
Net debt is defined as the total of current and non-current
borrowings excluding lease liabilities, net of cash and cash
equivalents and financial assets at fair value through profit or
loss.
Net leverage is defined as net debt divided by Adjusted EBITDA
of the last twelve months.
Ronald Hundzinski
Chief Financial Officer
8 August 2022
Cautionary Statement
This announcement contains certain forward-looking statements
with respect to the financial condition, results of operations and
business of TI Fluid Systems plc (the "Group"). The words
"believe", "expect", "anticipate", "intend", "estimate",
"forecast", "project", "will", "may", "should" and similar
expressions identify forward-looking statements. Others can be
identified from the context in which they are made. By their
nature, forward-looking statements involve risks and uncertainties,
and such forward-looking statements are made only as of the date of
this presentation. Accordingly, no assurance can be given that the
forward-looking statements will prove to be accurate and you are
cautioned not to place undue reliance on forward-looking statements
due to the inherent uncertainty therein. Past performance of the
Company cannot be relied on as a guide to future performance.
Nothing in this announcement should be construed as a profit
forecast.
TABLE OF CONTENTS
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Income Statement
Condensed Consolidated Statement of Comprehensive Income
Condensed Consolidated Balance Sheet
Condensed Consolidated Statement of Changes in Equity
Condensed Consolidated Statement of Cash Flows
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1 Summary of Significant Accounting Policies
2 Segment Reporting
3 Finance Income and Expenditure
4 Income Tax
5 Earnings Per Share
6 Property, Plant and Equipment
7 Intangible Assets and I mpairments
8 Borrowings
9 Fair Values of Financial Assets and Liabilities
10 Retirement Benefit Obligations
11 Restructuring and Other Provisions
12 Cash Generated from Operations
13 Commitments and Contingencies
14 Related Party Transactions
Independent review report
Directors' Responsibility Statement
Condensed Consolidated Income Statement
For the period ended 30 June
2022 2021 2021 2021
Continuing Before exceptional Exceptional After exceptional
operations items items items
Unaudited Note EURm EURm EURm EURm
---------------- ---- --------------------- ------------------------ --------------------- ------------------------
Revenue 2 1,559.5 1,522.5 - 1,522.5
Cost of sales (1,401.7) (1,334.0) - (1,334.0)
Gross profit 157.8 188.5 - 188.5
----------------
Distribution
costs (53.3) (46.1) - (46.1)
Administrative
expenses (60.1) (60.2) - (60.2)
Other income 0.7 1.9 - 1.9
Net foreign
exchange
gains/(losses) 3.2 (7.6) - (7.6)
Operating profit 48.3 76.5 - 76.5
----------------
Finance income 3 1.6 2.5 - 2.5
Finance expense 3 (30.1) (33.3) (11.6) (44.9)
Net finance
expense 3 (28.5) (30.8) (11.6) (42.4)
----------------
Share of loss of
associates - (1.2) - (1.2)
---------------- ---- --------------------- ------------------------ --------------------- ------------------------
Profit before
income tax 19.8 44.5 (11.6) 32.9
---------------- ---- --------------------- ------------------------ --------------------- ------------------------
Income tax
expense 4 (19.3) (24.6) 2.8 (21.8)
Profit for the
period 0.5 19.9 (8.8) 11.1
----------------
Profit for the
period
attributable
to:
Owners of the
Parent Company 0.5 19.0 (8.8) 10.2
Non-controlling
interests - 0.9 - 0.9
---------------- ---- --------------------- ------------------------ --------------------- ------------------------
0.5 19.9 (8.8) 11.1
---------------- ---- --------------------- ------------------------ --------------------- ------------------------
Total earnings
per share
(Euro, cents)
---------------- ---- --------------------- ------------------------ --------------------- ------------------------
Basic 5 0.10 1.96
Diluted 5 0.10 1.95
---------------- ---- --------------------- ------------------------ --------------------- ------------------------
Condensed Consolidated Statement of Comprehensive Income
For the period ended 30 June
Unaudited Unaudited
2022 2021
EURm EURm
------------------------------------------------------- --------- ---------
Profit for the period 0.5 11.1
Other comprehensive income
Items that will not be reclassified to profit or
loss
- Re-measurements of retirement benefit obligations 22.9 24.4
- Income tax expense on retirement benefit obligations (5.6) (4.9)
17.3 19.5
-------------------------------------------------------
Items that may be subsequently reclassified to profit
or loss
- Currency translation 42.4 31.8
Total other comprehensive income for the period 59.7 51.3
-------------------------------------------------------
Total comprehensive income for the period 60.2 62.4
------------------------------------------------------- --------- ---------
Attributable to:
- Owners of the Parent Company 60.2 61.6
- Non-controlling interests - 0.8
------------------------------------------------------- --------- ---------
Total comprehensive income for the period 60.2 62.4
------------------------------------------------------- --------- ---------
Condensed Consolidated Balance Sheet
As at 30 June and 31 December
Unaudited
2022 2021
Note EURm EURm
---------------------------------------------- ---- --------- -------
Non-current assets
Intangible assets 7 888.2 884.8
Right-of-use assets 119.6 125.2
Property, plant and equipment 6 589.1 595.4
Deferred income tax assets 4 66.7 70.5
Trade and other receivables 18.8 19.2
---------------------------------------------- ---- --------- -------
1,682.4 1,695.1
---------------------------------------------- ---- --------- -------
Current assets
Inventories 385.5 332.3
Trade and other receivables 605.6 520.5
Current income tax assets 4 9.3 11.4
Derivative financial instruments 9 1.0 0.9
Financial assets at fair value through profit
and loss 9 0.2 0.9
Cash and cash equivalents 9 457.4 499.1
---------------------------------------------- ---- --------- -------
1,459.0 1,365.1
---------------------------------------------- ---- --------- -------
Total assets 3,141.4 3,060.2
---------------------------------------------- ---- --------- -------
Equity
Share capital 6.8 6.8
Share premium 2.2 2.2
Other reserves (19.0) (61.4)
Retained earnings 997.6 995.9
---------------------------------------------- ---- --------- -------
Equity attributable to owners of the Parent
Company 987.6 943.5
---------------------------------------------- ---- --------- -------
Non-controlling interests 0.4 0.4
---------------------------------------------- ---- --------- -------
Total equity 988.0 943.9
---------------------------------------------- ---- --------- -------
Non-current liabilities
Trade and other payables 14.4 14.6
Borrowings 8 1,120.0 1,098.5
Lease liabilities 8 115.2 119.8
Deferred income tax liabilities 4 93.9 95.8
Retirement benefit obligations 10 108.8 128.1
Provisions 11 2.8 2.6
---------------------------------------------- ---- --------- -------
1,455.1 1,459.4
---------------------------------------------- ---- --------- -------
Current liabilities
Trade and other payables 601.0 546.1
Current income tax liabilities 4 44.1 49.9
Borrowings 8 1.7 1.8
Lease liabilities 8 29.5 30.1
Derivative financial instruments 9 0.8 0.3
Provisions 11 21.2 28.7
---------------------------------------------- ---- --------- -------
698.3 656.9
---------------------------------------------- ---- --------- -------
Total liabilities 2,153.4 2,116.3
---------------------------------------------- ---- --------- -------
Total equity and liabilities 3,141.4 3,060.2
---------------------------------------------- ---- --------- -------
Condensed Consolidated Statement of Changes in Equity
For the period ended 30 June
Ordinary Share Other Retained Non-controlling Total
shares premium reserves earnings Total interests equity
Unaudited EURm EURm EURm EURm EURm EURm EURm
-------------------------- -------- -------- --------- --------- ------ --------------- -------
Balance at 1 January
2022 6.8 2.2 (61.4) 995.9 943.5 0.4 943.9
Profit for the
period - - - 0.5 0.5 - 0.5
Total other comprehensive
income for the
period - - 42.4 17.3 59.7 - 59.7
-------------------------- -------- -------- --------- --------- ------ --------------- -------
Total comprehensive
income for the
period - - 42.4 17.8 60.2 - 60.2
Share-based expense - - - 3.7 3.7 - 3.7
Dividends paid - - - (7.5) (7.5) - (7.5)
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)
-------------------------- -------- -------- --------- --------- ------ --------------- -------
Total transactions
with owners - - - (16.1) (16.1) - (16.1)
-------------------------- -------- -------- --------- --------- ------ --------------- -------
Balance at 30
June 2022 6.8 2.2 (19.0) 997.6 987.6 0.4 988.0
-------------------------- -------- -------- --------- --------- ------ --------------- -------
Ordinary Share Other Retained Non-controlling Total
shares premium reserves earnings Total interests equity
Unaudited EURm EURm EURm EURm EURm EURm EURm
-------------- ----------------- ---------------- --------------- ------------------------- --------------- -------------------- ---------------
Balance at 1
January
2021 6.8 2.2 (137.7) 987.7 859.0 25.2 884.2
Profit for the
period - - - 10.2 10.2 0.9 11.1
Total other
comprehensive
income for
the
period - - 31.9 19.5 51.4 (0.1) 51.3
-------------- ----------------- ---------------- --------------- ------------------------- --------------- -------------------- ---------------
Total
comprehensive
income for
the
period - - 31.9 29.7 61.6 0.8 62.4
-------------- ----------------- ---------------- --------------- ------------------------- --------------- -------------------- ---------------
Share-based
expense - - - 3.5 3.5 - 3.5
Dividends paid - - - (35.0) (35.0) - (35.0)
Issue of own
shares
from Employee
Benefit Trust - - - 1.2 1.2 - 1.2
Vested shared
awards - - - (0.9) (0.9) - (0.9)
-------------- ----------------- ---------------- --------------- ------------------------- --------------- -------------------- ---------------
Total
transactions
with owners - - - (31.2) (31.2) - (31.2)
-------------- ----------------- ---------------- --------------- ------------------------- --------------- -------------------- ---------------
Balance at 30
June 2021 6.8 2.2 (105.8) 986.2 889.4 26.0 915.4
-------------- ----------------- ---------------- --------------- ------------------------- --------------- -------------------- ---------------
Condensed Consolidated Statement of Cash Flows
For the period ended 30 June
Unaudited Unaudited
Half Year Half Year
2022 2021
Note EURm EURm
-------------------------------------------------- ---- --------- ---------
Cash flows from operating activities
Cash generated from operations 12 91.4 150.7
Interest paid (25.9) (23.9)
Income tax paid (25.3) (28.0)
-------------------------------------------------- ---- --------- ---------
Net cash generated from operating activities 40.2 98.8
-------------------------------------------------- ---- --------- ---------
Cash flows from investing activities
Payment for property, plant and equipment (39.9) (42.2)
Payment for intangible assets (15.3) (21.7)
Proceeds from the sale of property, plant
and equipment 0.1 -
Tax paid on the proceeds from the sale of
associated undertakings (3.0) -
Interest received 1.8 1.3
-------------------------------------------------- ---- --------- ---------
Net cash used by investing activities (56.3) (62.6)
-------------------------------------------------- ---- --------- ---------
Cash flows from financing activities
Purchase of own shares (11.4) -
Proceeds from new borrowings - 600.0
Fees paid on proceeds from new borrowings - (13.7)
Voluntary repayments of borrowings - (600.0)
Scheduled repayments of borrowings 8 (2.7) (4.1)
Lease principal repayments 8 (16.2) (16.0)
Dividends paid (7.5) (35.0)
Net cash used by financing activities (37.8) (68.8)
--------------------------------------------------
Decrease in cash and cash equivalents (53.9) (32.6)
-------------------------------------------------- ---- --------- ---------
Cash and cash equivalents at the beginning
of the period 499.1 485.8
Currency translation on cash and cash equivalents 12.2 16.2
-------------------------------------------------- ---- --------- ---------
Cash and cash equivalents at the end of the
period 457.4 469.4
-------------------------------------------------- ---- --------- ---------
1. Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of
these condensed consolidated interim financial statements are the
same as those applied in the audited consolidated financial
statements for the year ended 31 December 2021.
1.1. Basis of Preparation
These condensed consolidated interim financial statements have
been prepared on the going concern basis. They do not constitute
statutory accounts within the meaning of section 434 of the
Companies Act 2006. Statutory accounts for the year ended 31
December 2021 have been filed with the Registrar of Companies. The
report of the auditors on those accounts was unqualified, did not
contain an emphasis of matter paragraph and did not contain any
statement under section 498 of the Companies Act 2006. These
condensed consolidated interim financial statements have been
reviewed, not audited.
These condensed consolidated interim financial statements have
been prepared in accordance with IAS 34 'Interim Financial
Reporting', as adopted by the United Kingdom and the Disclosure and
Transparency Rules of the Financial Conduct Authority. These
condensed consolidated interim financial statements need to be read
in conjunction with the annual consolidated financial statements
for the year ended 31 December 2021.
1.2. New and Revised IFRS Affecting Amounts Reported in the
Current Period (and/or Prior Periods)
There are no new standards or IFRS IC interpretations effective
in the period that have a material impact on the Group.
1.3. Critical Accounting Estimates and Judgements
The preparation of financial statements requires the use of
accounting estimates and for management to exercise judgement in
applying the Group's accounting policies. Assumptions and
accounting estimates are subject to regular review, governed by
Group-wide policies and controls. Any revisions required to
accounting estimates are recognised in the period in which the
revisions are made including all future periods affected.
The judgement and estimates that have the most significant and
critical effect on the amounts included in the financial statements
are in relation to post-employment obligations and impairments of
assets as described below.
1.3.1 Critical Accounting Estimates
Details of the Group's critical accounting estimates around
post-employment obligations can be found in Note 1.4.1.1 of the
audited consolidated financial statements for the year ended 31
December 2021.
1.3.2 Critical Accounting Judgements
1.3.2.1 Impairments of assets
Management carry out the annual impairment review on the Group's
intangible and tangible assets as at 31 December, which involves
judgement in determining the assets' recoverable amount (as
outlined in the 2021 Annual Report and Accounts). At interim
reporting, Management performed a review for any indicators of
impairment, as an update to the impairment review performed as part
of the 2021 year-end process. Further discussion on this assessment
is included within Note 7.
2. Segment Reporting
In accordance with the provisions of IFRS 8 'Operating
Segments', the Group's segment reporting is based on the management
approach with regard to segment identification; under which
information regularly provided to the chief operating decision
maker ('CODM') for decision-making purposes forms the basis of the
disclosure. The Company's CODM is the Chief Executive Officer
('CEO'), the 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.
Two operating segments have been identified by the Group: Fluid
Carrying Systems ('FCS') and Fuel Tank and Delivery Systems
('FTDS').
Unaudited Unaudited
Half Year Half Year
2022 2021
EURm EURm
----------------------------- --------- ---------
Revenue
- FCS - External 876.9 813.1
- Inter-segment 34.8 36.7
----------------------------- --------- ---------
911.7 849.8
----------------------------- --------- ---------
- FTDS - External 682.6 709.4
- Inter-segment 2.0 0.1
----------------------------- --------- ---------
684.6 709.5
----------------------------- --------- ---------
Inter-segment elimination (36.8) (36.8)
----------------------------- --------- ---------
Total consolidated revenue 1,559.5 1,522.5
----------------------------- --------- ---------
Adjusted EBITDA
- FCS 82.3 98.3
- FTDS 77.8 100.2
----------------------------- --------- ---------
160.1 198.5
----------------------------- --------- ---------
Adjusted EBITDA % of revenue
- FCS 9.4% 12.1%
- FTDS 11.4% 14.1%
----------------------------- --------- ---------
Total 10.3% 13.0%
----------------------------- --------- ---------
Adjusted EBIT
- FCS 46.1 69.6
- FTDS 37.6 58.2
----------------------------- --------- ---------
83.7 127.8
----------------------------- --------- ---------
Adjusted EBIT % of revenue
- FCS 5.3% 8.6%
- FTDS 5.5% 8.2%
----------------------------- --------- ---------
Total 5.4% 8.4%
----------------------------- --------- ---------
A reconciliation of non-IFRS measures to statutory measures is
included within the CFO's Report on page 12.
3. Finance Income and Expenditure
Unaudited Unaudited
Half Year Half Year
2022 2021
Note EURm EURm
--------------------------------------------------- ---- --------- ---------
Finance income
Interest on short-term deposits, other financial
assets and other interest income 1.6 1.5
Fair value gains on derivatives and foreign
exchange contracts not in hedged relationships - 1.0
--------------------------------------------------- ---- --------- ---------
Finance income 1.6 2.5
--------------------------------------------------- ---- --------- ---------
Finance expense
Interest payable on term loans including expensed
fees 8 (11.8) (21.9)
Interest payable on unsecured senior notes
including expensed fees 8 (11.9) (4.9)
Net interest expense of retirement benefit
obligations 10 (1.4) (1.3)
Fair value net losses on derivatives and foreign
exchange contracts not in hedged relationships (0.4) -
Net interest expense related to specific uncertain
tax positions - (0.2)
Interest payable on lease liabilities (4.6) (5.0)
Finance expense before exceptional items (30.1) (33.3)
Unamortised issuance discounts and fees expensed
on voluntary repayments of borrowings - (11.6)
---------------------------------------------------
Exceptional finance expense - (11.6)
--------------------------------------------------- ---- --------- ---------
Finance expense after exceptional items (30.1) (44.9)
--------------------------------------------------- ---- --------- ---------
Total net finance expense (28.5) (42.4)
--------------------------------------------------- ---- --------- ---------
Exceptional finance expenses in the prior period of EUR11.6
million relate to a release of unamortised transaction costs
following a partial extinguishment of the Group's Euro and US
dollar term loans.
4. Income Tax
The income tax expense for the period ending 30 June 2022 has
been recognised based on Management's estimate of the annual
effective tax rate of each legal entity (or tax group within a
country), considering any projected permanent tax adjustments and
tax credits that are available, multiplied by the applicable
statutory tax rate for each country. The annual estimated effective
tax rates are applied to the first half profits / losses of each
legal entity or tax group to determine the overall Group tax charge
for the period.
This has resulted in an ordinary effective tax rate of 97.5% for
the half year ended 30 June 2022 (55.2% for the half year ended 30
June 2021). The effective tax rate is impacted by UK accounting
losses of EUR22.2 million for the half year ended 30 June 2022
(EUR26.3 million for the half year ended 30 June 2021). This is not
tax effected due to the projected and historical tax loss position
in the UK and therefore has a material impact on the effective tax
rate for both periods.
The UK accounting losses incurred to 30 June 2022 are due to net
interest and financing expense in the amount of EUR6.6 million (30
June 2021: EUR10.8 million) and net foreign exchange gains of
EUR(6.1) million (30 June 2021: net foreign exchange loss of EUR4.7
million) due to movements in the US dollar and Euro exchange rates
related to US dollar denominated intercompany loans. It also
includes other operating expenses of EUR21.7 million (30 June 2021:
EUR10.8 million).
When the UK accounting losses of EUR22.2 million for the half
year ended 30 June 2022 (EUR26.3 million loss for the half year
ended 30 June 2021), the share of the associates loss (H1 2021
only) and the prior period tax adjustments are not considered, the
effective tax rate is adjusted to 46.4% for the half year to 30
June 2022 (34.6% for the half year ended 30 June 2021).
The effective tax rate was also impacted by the establishment of
tax valuation allowances in Argentina, Russia and South Africa
which increased the tax charge and Effective Tax Rate for the
period ended 30 June 2022.
Exceptional Charge / Tax Benefit:
During April 2021, the Group debt was refinanced which resulted
in the write-off of a portion of the US related loan fees from
prior refinancing transactions. This resulted in an exceptional US
refinancing charge of EUR11.6 million and a tax benefit of EUR2.8
million for the half year ended 30 June 2021. The exceptional tax
benefit of EUR2.8 million resulted in an effective tax rate of
approximately 24% representing the blended US Federal and various
State effective tax rates. There was no similar exceptional tax
charge / benefit in the six months to 30 June 2022.
Other items:
The table below analyses the constituent elements of the Group
income tax charge. It separately identifies the tax charges
recognised in respect of i) entities that ordinarily pay tax or
where the recognition of deferred tax assets is appropriate, ii)
the impact of entities where the level of tax losses limits the
payment of tax or restricts the deferred tax recognition in respect
of the losses, iii) the impact of withholding taxes suffered and
tax charges recognised in respect of unremitted overseas
distributable reserves and iv) the impact of purchase accounting
adjustments.
Half Year 2022 Half Year 2021
----------------------------
Profit Profit
before before
tax Tax (charge)/credit tax Tax credit/(charge)
Unaudited EURm EURm ETR EURm EURm ETR
------------------------------------- ------- ------------------- ------ ------- ------------------- -----
Results excluding exceptional
items 19.8 (19.3) 97.5% 44.5 (24.6) 55.2%
Adjustments:
Share of associate losses - - -% 1.2 - -%
------------------------------------- ------- ------------------- ------ ------- ------------------- -----
19.8 (19.3) 97.5% 45.7 (24.6) 53.8%
------------------------------------- ------- ------------------- ------ ------- ------------------- -----
Analysed as:
Tax charges (including deferred
tax assets) recognised 76.8 (20.6) 26.8% 100.8 (27.8) 27.6%
Tax losses where no deferred
tax assets recognised (30.2) (1.5) (5.0)% (29.1) - -%
Withholding tax and Group tax
on unremitted distributable
reserves - (3.7) - (3.1)
Annual amortisation and depreciation
of assets with historic purchase
price accounting (26.8) 6.5 24.3% (26.0) 6.3 24.3%
------------------------------------- ------- ------------------- ------ ------- ------------------- -----
19.8 (19.3) 97.5% 45.7 (24.6) 53.8%
------------------------------------- ------- ------------------- ------ ------- ------------------- -----
Deferred tax assets originating from tax loss carry forwards
mainly relate to Germany, France and Spain as at 30 June 2022.
Forecasts for Germany, France and Spain are prepared by management
on a five year basis and use external automotive industry data
sources. The forecasts demonstrate several years of continued
future profitability and all have consistent expectations of future
financial performance. As a result management believe that the
current tax losses will be utilised.
5. Earnings Per Share
5.1. Basic and Diluted Earnings Per Share
Half Year 2022 Half Year 2021
------------------------------------------------
Weighted Earnings Weighted average Earnings
Profit attributable average number Per Share Profit attributable number of Per Share
to shareholders of shares (EUR, to shareholders shares (in (EUR,
Unaudited (EURm) (in millions) cents) (EURm) millions) cents)
---------- ------------------- ---------------- ----------
Basic 0.5 513.5 0.10 10.2 519.3 1.96
Dilutive
shares - 10.0 - - 5.5 -
Diluted 0.5 523.5 0.10 10.2 524.8 1.95
---------- ------------------- --------------- ---------- ------------------- ---------------- ----------
5.2. Adjusted Earnings Per Share
Half Year 2022 Half Year 2021
---------------- ----------------
Unaudited Basic Diluted Basic Diluted
---------------------------------- ------ ------ --------
Adjusted Net Income (EURm) 9.0 9.0 45.4 45.4
Adjusted Earnings Per Share (EUR,
in cents) 1.75 1.72 8.75 8.67
---------------------------------- ------ -------- ------ --------
Adjusted Net Income is based on profit for the period
attributable to shareholders of EUR0.5 million (2021: EUR10.2
million) after adding back net adjustments of EUR8.5 million (2021:
EUR35.2 million). See Table 7b in the Chief Financial Officer's
Report for Reconciliation of profit for the period to Adjusted Net
Income.
6. Property, Plant and Equipment ("PP&E")
During the period the Group made PP&E additions of EUR32.3
million (2021 full year: EUR87.7 million). Assets with a carrying
value of EUR4.2 million (2021 full year: EUR5.6 million) were
disposed/impaired during the period.
7. Intangible Assets and I mpairments
Following on from the 2021 annual impairment assessment,
Management performed a review for indicators of impairment and
reversal of previous impairments as at 30 June 2022 for each cash
generating unit (CGU). This review involved assessing factors such
as: external forecast global light vehicle production volumes (IHS
Markit); supply chain issues stemming from the war in Ukraine;
inflationary pressures on input prices and energy costs, and the
ability to pass these on to customers; global interruptions of
supply of semiconductor chips; and possible changes to the
underlying CGU discount rates used in the calculation of
recoverable amount.
Having performed this review, Management concluded that the
factors considered currently do not sufficiently indicate a
long-term deterioration to the Group's business and profitability
to trigger a formal impairment review at 30 June 2022, following on
from the full impairment review performed as part of the 2021
year-end close. Management will continue to monitor the various
events and factors for the remainder of 2022. The next annual full
impairment review will be performed as at 31 December 2022.
Management will therefore continue to monitor the potential
triggers for the remainder of 2022. During the fourth quarter of
2022, the Group will prepare its full annual budget and medium-term
plan, utilising latest volume forecasts and full market analysis
covering the period 2023 to 2027. This will form the basis for the
2022 annual impairment test.
8. Borrowings
Unaudited
30 June 31 December
2022 2021
EURm EURm
----------------------------- --------- -----------
Non-current:
Unsecured senior notes 592.3 591.7
Secured loans:
- Term loans and facilities 527.7 506.8
Total non-current borrowings 1,120.0 1,098.5
-----------------------------
Current:
Secured loans:
- Term loans and facilities 1.7 1.8
Total current borrowings 1.7 1.8
-----------------------------
Total borrowings 1,121.7 1,100.3
----------------------------- --------- -----------
Unsecured senior notes 592.3 591.7
Term loans and facilities 529.4 508.6
Total borrowings 1,121.7 1,100.3
-----------------------------
The borrowings are shown net of issuance discounts and fees of
EUR23.0 million (2021: EUR24.6 million).
8.1 Movement in Total Borrowings
Unsecured
senior Term loans Total
notes and facilities borrowings
Unaudited EURm EURm EURm
--------------------- --------- --------------- -----------
At 1 January 2022 591.7 508.6 1,100.3
Interest accrued 11.3 10.0 21.3
Scheduled payments (11.3) (12.7) (24.0)
Fees expensed 0.6 1.8 2.4
Currency translation - 21.7 21.7
--------------------- --------- --------------- -----------
At 30 June 2022 592.3 529.4 1,121.7
--------------------- --------- --------------- -----------
Accrued interest payable on the borrowings at 30 June 2022 of
EUR4.8 million (31 December 2021: EUR4.7 million) is included in
current trade and other payables.
Unsecured
senior Term loans
notes and facilities Other loans Total borrowings
EURm EURm EURm EURm
------------------------------------- --------- --------------- ----------- ----------------
1 January 2021 - 1,076.6 0.1 1,076.7
Interest accrued 15.9 29.1 - 45.0
Scheduled payments (15.9) (35.8) (0.1) (51.8)
Fees expensed 0.8 4.4 - 5.2
New borrowings 600.0 - - 600.0
Fees on new borrowings (9.1) (6.2) - (15.3)
Voluntary repayments of borrowings - (600.0) - (600.0)
Fee expensed on voluntary repayments
of borrowings - 11.8 - 11.8
Currency translation - 28.7 - 28.7
------------------------------------- --------- --------------- ----------- ----------------
31 December 2021 591.7 508.6 - 1,100.3
------------------------------------- --------- --------------- ----------- ----------------
8.2 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 period except for letters of credit).
The amounts outstanding under the agreements are:
Unaudited
30 June 31 December
2022 2021
EURm EURm
---------------------------- --------- -----------
Principal outstanding:
Unsecured senior notes 600.0 600.0
US term loan 283.0 261.9
Euro term loan 261.7 263.0
Total principal outstanding 1,144.7 1,124.9
----------------------------
Issuance discounts and fees (23.0) (24.6)
---------------------------- --------- -----------
Main borrowing facilities 1,121.7 1,100.3
---------------------------- --------- -----------
The unsecured senior notes bear interest at a fixed rate of
3.75% per annum and mature on 15 April 2029. Interest on the notes
is payable semi-annually in arrears on April 15 and October 15 of
each year.
The US dollar term loan bears interest at US dollar three-month
LIBOR (minimum 0.5% p.a.) +3.25% p.a. The amount repayable per
quarter on the loan is $750,000 a quarter until the final balance
falls due on 16 December 2026. The principal outstanding on the US
term loan in US dollars at 30 June 2022 is $296.3 million (31
December 2021: $297.8 million).
The Euro term loan bears interest at three-month EURIBOR
(minimum 0.0% p.a.) +3.25% p.a. The amount repayable per quarter on
the loan is EUR662,500 a quarter until the final balance falls due
on 16 December 2026.
The Group also has access to a revolving credit facility ('RCF')
of $225.0 million (31 December 2021: $225.0 million) which matures
on 16 July 2026. Drawings under this facility bear interest in a
range of US dollar LIBOR +3.0% to US dollar LIBOR + 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 during the period except for letters of credit
outstanding of $1.9 million (31 December 2021: $1.9 million),
resulting in a net undrawn facility at 30 June 2022 of $223.1
million (EUR213.1 million) (31 December 2021: $223.1 million;
EUR196.2 million). The non-utilisation fee on the facility 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.
8.3 Movements in Net Borrowings and Lease liabilities
Non-cash changes
--------------------------------------------------------
Fees
At 1 expensed
January Cash net of Currency Remeas-urement At 30
2022 flows New leases fees accrued trans-lation and disposals June 2022
Unaudited EURm EURm EURm EURm EURm EURm EURm
----------------- ------------ ---------- ---------- ------------- ------------- -------------- -------------
Cash and cash
equivalents 499.1 (53.9) - - 12.2 - 457.4
Financial assets
at FVTPL 0.9 (0.7) - - - - 0.2
Borrowings (1,100.3) 2.7 - (2.4) (21.7) - (1,121.7)
----------------- ------------ ---------- ---------- ------------- ------------- -------------- -------------
Net borrowings (600.3) (51.9) - (2.4) (9.5) - (664.1)
----------------- ------------ ---------- ---------- ------------- ------------- -------------- -------------
Lease liabilities (149.9) 16.2 (7.8) - (5.3) 2.1 (144.7)
----------------- ------------ ---------- ---------- ------------- ------------- -------------- -------------
Net borrowings
and lease
liabilities (750.2) (35.7) (7.8) (2.4) (14.8) 2.1 (808.8)
----------------- ------------ ---------- ---------- ------------- ------------- -------------- -------------
Non-cash changes
--------------------------------------------------------
At 31
At 1 January Currency Remeas-urement December
2021 Cash flows New leases Fees expensed translation and disposals 2021
EURm EURm EURm EURm EURm EURm EURm
----------------- ------------ ---------- ---------- ------------- ------------- -------------- -------------
Cash and cash
equivalents 485.8 (11.0) - - 24.3 - 499.1
Financial assets
at FVTPL 0.9 - - - - - 0.9
Borrowings (1,076.7) 22.1 - (17.0) (28.7) - (1,100.3)
----------------- ------------ ---------- ---------- ------------- ------------- -------------- -------------
Net borrowings (590.0) 11.1 - (17.0) (4.4) - (600.3)
----------------- ------------ ---------- ---------- ------------- ------------- -------------- -------------
Lease liabilities (151.0) 31.6 (18.1) (5.3) (7.1) (149.9)
----------------- ------------ ---------- ---------- ------------- ------------- -------------- -------------
Net borrowings
and lease
liabilities (741.0) 42.7 (18.1) (17.0) (9.7) (7.1) (750.2)
----------------- ------------ ---------- ---------- ------------- ------------- -------------- -------------
Cash flows from financing activities arising from changes in
financial liabilities are analysed below:
Unaudited
30 June 31 December
2022 2021
EURm EURm
----------------------------------------------------- --------- -----------
Proceeds from new borrowings - (600.0)
Fees paid on proceeds from new borrowings - 15.3
Voluntary repayments of borrowings - 600.0
Scheduled repayments of borrowings 2.7 6.8
Lease principal repayments 16.2 31.6
----------------------------------------------------- --------- -----------
Cash outflows from financing activities arising from
changes in financial liabilities 18.9 53.7
----------------------------------------------------- --------- -----------
Borrowings cash flows 2.7 22.1
Lease liabilities cash flows 16.2 31.6
----------------------------------------------------- --------- -----------
Cash outflows from financing activities arising
from changes in financial liabilities 18.9 53.7
----------------------------------------------------- --------- -----------
9. Fair Values of Financial Assets and Liabilities
Financial Instruments by Category
As at 30 June 2022:
Assets
at amortised Assets
Unaudited cost at FVTPL Total
Financial assets EURm EURm EURm
-------------------------------------------------- ------------- --------- -------
Cash and cash equivalents 457.4 - 457.4
Financial assets at FVTPL - 0.2 0.2
Trade and other receivables excluding prepayments 559.0 - 559.0
Derivative financial instruments:- forward
foreign exchange contracts (cash flow hedges) - 1.0 1.0
-------------------------------------------------- ------------- --------- -------
Total at 30 June 2022 1,016.4 1.2 1,017.6
-------------------------------------------------- ------------- --------- -------
Liabilities
at amortised Liabilities
Unaudited cost at FVTPL Total
Financial liabilities EURm EURm EURm
----------------------------------------------- ------------- ----------- ---------
Trade and other payables excluding deferred
income (531.4) - (531.4)
Borrowings: unsecured senior notes (415.8) - (415.8)
Borrowings: term loans and facilities (529.4) - (529.4)
Lease liabilities (144.7) - (144.7)
Derivative financial instruments:- forward
foreign exchange contracts (cash flow hedges) - (0.8) (0.8)
----------------------------------------------- ------------- ----------- ---------
Total at 30 June 2022 (1,621.3) (0.8) (1,622.1)
----------------------------------------------- ------------- ----------- ---------
As at 31 December 2021:
Assets
at amortised Assets
cost at FVTPL Total
Financial assets EURm EURm EURm
-------------------------------------------------- ------------- --------- -----
Cash and cash equivalents 499.1 - 499.1
Financial assets at FVTPL - 0.9 0.9
Trade and other receivables excluding prepayments 478.3 - 478.3
Derivative financial instruments:- Forward
foreign exchange contracts (cash flow hedges) - 0.9 0.9
-------------------------------------------------- ------------- --------- -----
Total at 31 December 2021 977.4 1.8 979.2
-------------------------------------------------- ------------- --------- -----
Liabilities
at amortised Liabilities
cost at FVTPL Total
Financial liabilities EURm EURm EURm
---------------------------------------------- ------------------- -------------------- --------------------
Trade and other payables excluding deferred
income (474.8) - (474.8)
Borrowings: unsecured senior notes (604.5) - (604.5)
Borrowings: term loans and facilities (508.6) - (508.6)
Lease liabilities (149.9) - (149.9)
Derivative financial instruments:
Forward foreign exchange contracts (cash flow
hedges) - (0.3) (0.3)
---------------------------------------------- ------------------- -------------------- --------------------
Total at 31 December 2021 (1,737.8) (0.3) (1,738.1)
---------------------------------------------- ------------------- -------------------- --------------------
The unsecured senior notes are quoted instruments and the fair
value is calculated based on the market price. The fair value of
the notes is within Level 1 of the fair value hierarchy specified
in IFRS 13 'Fair Value Measurement'.
The fair values of non-derivative amounts are determined in
accordance with generally accepted valuation techniques based on
discounted cash flow analysis. It is assumed that by their nature
their carrying value approximates their fair value. These fair
values are within Level 2 of the fair value hierarchy specified in
IFRS 13 'Fair Value Measurement'.
10. Retirement Benefit Obligations
Balance Sheet
The net liability for defined benefit arrangements is as
follows:
Other Other post-employment
Unaudited US pensions pensions US healthcare liabilities Total
Net liability EURm EURm EURm EURm EURm
============================ =========== ========= ============= ===================== =======
Present value of retirement
benefit obligations (162.2) (80.3) (30.6) (75.0) (348.1)
Fair value of plan assets 131.0 95.1 - 28.0 254.1
Asset ceiling - (14.8) - - (14.8)
============================ =========== ========= ============= ===================== =======
Net liability at 30 June
2022 (31.2) - (30.6) (47.0) (108.8)
============================ =========== ========= ============= ===================== =======
Other post-employment
US pensions Other pensions US healthcare liabilities Total
Net liability EURm EURm EURm EURm EURm
============================= =========== ============== ============= ===================== =======
Present value of retirement
benefit obligations (184.5) (117.7) (33.4) (88.2) (423.8)
Fair value of plan assets 150.7 126.5 - 27.8 305.0
Asset ceiling - (9.3) - - (9.3)
============================= =========== ============== ============= ===================== =======
Net liability at 31 December
2021 (33.8) (0.5) (33.4) (60.4) (128.1)
============================= =========== ============== ============= ===================== =======
Income Statement
Net (expense)/income recognised in the Income Statement is as
follows:
Other
pensions Other post-employment
Unaudited US pensions EURm US healthcare liabilities Total
Net expense EURm EURm EURm EURm EURm
============================== =========== ========= ============= ===================== =====
Current service cost - (0.8) - (3.3) (4.1)
Actuarial gains recognised
on other post-employment
liabilities* - - - 1.6 1.6
Settlement/curtailment gain - - - 0.1 0.1
Net interest (expense)/income (0.5) 0.1 (0.4) (0.6) (1.4)
============================== =========== --------- ============= ===================== =====
Total net expense for the
period ended 30 June 2022 (0.5) (0.7) (0.4) (2.2) (3.8)
============================== =========== ========= ============= ===================== =====
*Actuarial gains recognised relate to other long-term benefit
plans, such as long service agreements. The gains recognised are a
result of discount rates increasing by approximately 200 bps since
31 December 2021.
Other post-employment
Unaudited US pensions Other pensions US healthcare liabilities Total
Net expense EURm EURm EURm EURm EURm
============================ =========== ============== ============= ===================== =====
Current service cost - (0.8) - (2.8) (3.6)
Actuarial gains recognised
on other post-employment
liabilities - - - 0.7 0.7
Settlement/curtailment gain - - - 0.1 0.1
Net interest expense (0.6) - (0.4) (0.3) (1.3)
============================ =========== ============== ============= ===================== =====
Total net expense for the
period ended 30 June 2021 (0.6) (0.8) (0.4) (2.3) (4.1)
============================ =========== ============== ============= ===================== =====
At 30 June 2022, the Group reviewed the discount rates relating
to the retirement benefit obligations. For US pension obligations
the discount rate was determined to be 4.70% (2.80% at 31 December
2021), the impact of which was to reduce the present value of
retirement benefit obligations by EUR34.3 million. Overall pension
asset performance for the US pension in the same period reduced the
fair value of plan assets by EUR31.7 million. The overall decrease
in the net US pension liability as a result of these two impacts
was EUR2.6million.
For other funded pension obligations the discount rate was
determined to be 4.0% (2.12% at 31 December 2021) the impact of
which was to reduce the present value of retirement benefit
obligations by EUR37.4 million. Overall pension asset performance
for the other pensions in the same period reduced the fair value of
plan assets by EUR31.4 million. With the increase of the net
surplus, the asset ceiling has been applied, resulting in an
overall decrease in the net other funded pension liability of
EUR0.5 million.
The decrease/(increase) in the total retirement benefit
obligations due to a +50bp/-50bp change in the discount rate is
EUR21.0 million/(EUR23.1 million) for all plans combined.
11. Restructuring and Other Provisions
Movements in provisions are as follows:
Product
warranty Restructuring Other Total
Unaudited EURm EURm EURm EURm
-------------------------------------- --------- ------------- ----- ------
At 1 January 2022 10.7 15.8 4.8 31.3
Provisions made during the period 1.0 6.0 0.2 7.2
Provisions used during the period (2.0) (12.2) (0.1) (14.3)
Provisions reversed during the period (0.6) (0.2) - (0.8)
Currency translation 0.3 0.2 0.1 0.6
-------------------------------------- --------- ------------- ----- ------
At 30 June 2022 9.4 9.6 5.0 24.0
-------------------------------------- --------- ------------- ----- ------
Product
warranty Restructuring Other Total
EURm EURm EURm EURm
------------------------------------ --------- ------------- ----- ------
At 1 January 2021 14.6 11.0 4.9 30.5
Provisions made during the year 6.6 27.4 - 34.0
Provisions used during the year (6.8) (22.2) - (29.0)
Provisions reversed during the year (3.9) (0.6) (0.1) (4.6)
Currency translation 0.2 0.2 - 0.4
------------------------------------ --------- ------------- ----- ------
At 31 December 2021 10.7 15.8 4.8 31.3
------------------------------------ --------- ------------- ----- ------
Restructuring provisions made, less restructuring provisions
reversed, in the period of EUR5.8 million relate to ongoing
restructuring programmes across the Group to align production
capacity with market demand.
In addition to the EUR5.8 million net restructuring charge shown
through the provision, the Income Statement also includes a further
EUR4.9 million of non-cash asset impairments and write-offs
following the rationalisation of operations in Russia, in response
to the Ukrainian conflict, as well as EUR0.8 million of other
miscellaneous non-cash asset impairments and write-offs.
The total net restructuring charge of EUR11.5 million in the
period comprises EUR9.3 million in relation to the FCS division and
EUR2.2 million in relation to FTDS (year ended 31 December 2021:
EUR15.3 million and EUR11.5 million respectively).
12. Cash Generated from Operations
Unaudited Unaudited
Half Year Half Year
2022 2021
EURm EURm
------------------------------------------------------- --------- ---------
Profit for the period 0.5 11.1
Income tax expense before exceptional items 19.3 24.6
Exceptional income tax credit - (2.8)
------------------------------------------------------- --------- ---------
Profit before income tax 19.8 32.9
------------------------------------------------------- --------- ---------
Adjustments for:
Depreciation, amortisation and impairment charges 103.3 96.8
Loss on disposal of PP&E and intangible assets 0.9 0.3
Impairment of PP&E, right of use assets and intangible
assets in restructuring costs 2.4 -
Deferred tax impairment in restructuring costs 0.9 -
Share-based expense excluding social security costs 3.7 3.5
Net finance expense 28.5 42.4
Unremitted share of loss from associates - 1.2
Net foreign exchange (gains)/losses (3.2) 7.6
Changes in working capital:
- Inventories (40.1) (24.3)
- Trade and other receivables (65.8) 38.0
- Trade and other payables 51.5 (50.8)
Change in provisions (7.9) 4.3
Change in retirement benefit obligations (2.6) (1.2)
------------------------------------------------------- --------- ---------
Total 91.4 150.7
------------------------------------------------------- --------- ---------
The changes in working capital (movements in inventories, trade
and other receivables and trade and other payables) exclude 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.
13. Commitments and Contingencies
Capital Commitments
Expenditure on non-current assets authorised and contracted for
at the end of the period but not yet incurred is as below:
Unaudited
30 June 31 December
2022 2021
EURm EURm
------------------------------ --------- -----------
Intangible assets 8.4 8.1
Property, plant and equipment 44.0 30.3
------------------------------ --------- -----------
Total 52.4 38.4
------------------------------ --------- -----------
14. Related Party Transactions
At 30 June 2022 there is no ultimate controlling party of TI
Fluid Systems plc.
Balances and transactions between Group companies have been
eliminated on consolidation, and are not disclosed in this note
except for subsidiaries that are not wholly owned. Transactions
with those companies are made on the Group's standard terms of
trade.
There have been no significant changes in the nature of
transactions between subsidiaries that are not wholly owned and
other group companies that have materially affected the condensed
group financial statements in the period.
Independent review report to TI Fluid Systems plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed TI Fluid Systems plc's condensed consolidated
interim financial statements (the "interim financial statements")
in the Half Year Results 2022 of TI Fluid Systems plc for the 6
month period ended 30 June 2022 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
-- the Condensed Consolidated Balance Sheet as at 30 June 2022;
-- the Condensed Consolidated Income Statement and Condensed
Consolidated Statement of Comprehensive Income for the period then
ended;
-- the Condensed Consolidated Statement of Cash Flows for the period then ended;
-- the Condensed Consolidated Statement of Changes in Equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year
Results 2022 of TI Fluid Systems plc have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half Year
Results 2022 and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with this ISRE.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Half Year Results 2022, including the interim financial
statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the Half
Year Results 2022 in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the Half Year Results 2022,
including the interim financial statements, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or to cease
operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the Half Year Results 2022 based on our
review. Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Birmingham
8 August 2022
Directors' Responsibility Statement
The Directors of the Company confirm that these half year
condensed group financial statements have been prepared in
accordance with the basis of preparation (Note 1.1) and that they
include a fair review of the information required, namely:
-- An indication of important events that have occurred during
the first six months and their impact on the half year condensed
group financial statements, and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
-- Material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report for the year ended 31 December
2021.
By order of the Board
Hans Dieltjens
President and CEO
8 August 2022
Ronald Hundzinski
Chief Financial Officer
8 August 2022
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END
IR BKFBKBBKBKFK
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August 09, 2022 02:00 ET (06:00 GMT)
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