TIDMTIFS
RNS Number : 3435T
TI Fluid Systems PLC
20 March 2019
TI Fluid Systems plc - Full year results 2018
20 March 2019
TI Fluid Systems plc
Results for the 12 months ended 31 December 2018
TI Fluid Systems plc, a leading global manufacturer of
automotive fluid storage, carrying and delivery systems for light
vehicles announces its 2018 results.
Group Highlights:
-- Successfully executing our hybrid electric vehicle ("HEV")
and electric vehicle ("EV") strategy creating organic growth
opportunities.
o Significant EV awards and expected additional orders for the
design, engineering and supply of thermal products with two leading
high volume European Original Equipment Manufacturers ("OEMs")
o Lifetime revenue opportunity of approximately EUR700 million
(customer planning volumes)
o Strategic progress in advancing share position of the HEV
pressurised fuel tank market and continuing to win thermal awards
on available key EV platforms with Korean and Chinese OEMs
-- Strong financial results in 2018
-- Revenue growth of 2.0% year over year (at constant currency)
or 3.1% above global light vehicle production growth volumes
-- Solid Adjusted EBIT of EUR373.5 million and margin of 10.8%
-- Profit for the year growth of EUR24.9 million to EUR140.1 million
-- Adjusted Net Income growth of EUR19.2 million or 14.1% to
EUR155.2 million with Adjusted Basic EPS of 29.9 euro cents
-- Significant Adjusted Free Cash Flow of EUR146.2 million
-- Final dividend proposal of 5.94 euro cents per share, making
8.96 euro cents for the full year
-- Refinanced borrowing facilities repaying 8.75% senior
unsecured notes using cash and additional term loan reducing
interest expense by EUR10 million per annum
William L. Kozyra, Chief Executive Officer and President,
commented:
"2018 was a great year for TI Fluid Systems. Despite a slight
softening in global light vehicle production growth, we achieved
strong organic growth, solid profit margins and free cash flow
generation. The excellent progress delivered in executing our HEV
and EV strategy in 2018, as well as our approach of continued and
disciplined organic growth has positioned the Group well for 2019
and beyond.
We continue to work on new design and engineering thermal
management and pressurised tank opportunities with our existing
customers as the electric market continues to progress. We are
confident that our business model will continue to deliver
consistent, strong financial performance along with attractive
returns."
Results presentation
TI Fluid Systems plc is holding a presentation to analysts and
investors at 09:00am UK time on 20 March 2019 at the offices of FTI
Consulting, 200 Aldersgate Street, London EC1A 4HD.
Analysts wishing to attend should contact FTI Consulting to
register. Analysts unable to attend in person may listen to the
presentation live by using the details below. Questions will only
be taken at the event.
Conference Call Dial-In Details:
UK: +44 (0) 330 336 9105
Conference Code: 9808024
The presentation will be at 7:00am UK time from
www.tiautomotive.com. An audio recording will be available on our
website in due course.
Capital Markets Event
TI Fluid Systems plc is hosting a Capital Markets Event in
London at 2:00pm UK time on 17 May 2019.
The event will be hosted by Bill Kozyra, CEO and Timothy
Knutson, CFO, and will include product demonstrations as well as
presentations from our Executive Vice Presidents of our two
segments, Fluid Carrying Systems ("FCS") and Fuel Tank and Delivery
Systems ("FTDS"). The presentations will be available on the TI
Fluid Systems website from 2:00pm that day.
Enquiries
TI Fluid Systems plc
Alpna Amar
Investor Relations
Tel: +44 (0)1865 871824
FTI Consulting
Richard Mountain
Nick Hasell
Tel: +44 (0) 20 3727 1340
Chief Executive Officer's review:
2018 was another year of strong organic growth for the Group.
Although, global light vehicle production volume slightly declined
by 1.1% compared to the prior year, we delivered a solid financial
performance in 2018 with revenue of EUR3,473 million (+2.0% at
constant currency), or 3.1% above global light vehicle production
growth. If we include the impact of currency translation, revenue
slightly declined by 0.5%
We also continued to generate strong Adjusted EBITDA of EUR484
million (13.9% margin) and Adjusted EBIT of EUR374 million (10.8%
margin). Profit for the year was EUR140 million (2017: EUR115
million).
Adjusted Free Cash Flow amounted to EUR146 million (2017: EUR119
million). This high level of cash generation supports our strong
organic business growth opportunities, deleveraging and return of
capital to shareholders through our dividend policy.
Strategy Update
Organic growth opportunities in EVs and HEVs has been a key
focus for the Group. We are extremely proud of the significant
progress on this strategy in 2018.
Utilise the Group's market position strengths in our key product
areas
We are the #1 supplier of brake and fuel lines globally with
approximately 34% market share. In 2018, the Group was able to
leverage its technology, customer relationships and global
footprint in brake and fuel lines to be awarded significant orders
for the design, engineering and supply of thermal management
products with two leading high volume OEMs for global EV
platforms.
Combining these awards with expected orders for thermal products
on these OEM platforms, we anticipate that TI Fluid Systems will
have approximately 50% share of these combined EV platforms. We
believe this represents a total lifetime revenue opportunity of
approximately EUR700 million based on customer planning
volumes.
It is worth noting, that these thermal awards are expected to
last for the eight to ten year life of the vehicles. A few of these
EV platforms are expected to begin production in 2019 and 2020.
Beyond these important awards, we have received other EV thermal
product awards with Korean and Chinese OEMs.
We continue to advance our thermal system development
discussions with key EV OEM producers. For example, we recently
completed a thermal system design project focused on light weight
nylon components and optimised fluid management for a large
European OEM.
These thermal awards demonstrate the Group's competencies as a
leading fluid handling supplier and experienced partner to the
global OEMs. This strong award level further demonstrates that as
the EV market develops, our business strengths should ultimately
position us to have similar share in thermal products with the
share position in our brake and fuel line business today.
I am very pleased with the progress our company and employees
have made in 2018 to demonstrate that we will be a leading supplier
of fluid products for HEVs and EVs today and in the future.
We are the #3 supplier of plastic fuel tanks globally with 15%
market share. The Group has been able to capitalise on its strong
fuel tank technology leadership positions to progress its strategy
for plug-in hybrid electric vehicles (PHEV).
In 2018, the Group launched its PHEV pressurised plastic fuel
tank for a leading European OEM in China. The plastic fuel tank
utilises our proprietary technology to meet the new increased fuel
vapour pressure requirements of HEVs. It also minimises permeation
by insertion of special components into the tank during the
manufacturing process. The total lifetime units of this fuel tank
is estimated at 950,000 units based on customer planning
volumes.
We are pleased that with our recent wins in pressurised fuel
tanks, our PHEV tank share is trending to greater than 20%, which
is higher than our existing fuel tank market share.
We are leveraging our fluid system competencies to adapt our
products and support electrification trends, which continue to be
great growth opportunities for us.
Maintain balanced customer, platform, regional and product
diversification
The Group has a diversified base of vehicle platforms and
nameplates to which we supply our products. The Group's products
are found in most of the highest volume vehicle nameplates across
North America, Europe and China.
In 2018, we generated approximately 40% of our revenue in
Europe, 30% in North America and 30% in Asia Pacific and Latin
America.
We believe that the Group's reputation for engineering and
manufacturing high quality, reliable, performance-critical products
for the top global OEMs has also generated strong local
relationships. The Group has a highly diversified customer base of
global and local OEMs with no single customer representing more
than 12% of revenue in 2018.
Through our experience and history, we have familiarity with
each of our OEM customer's unique engineering, design and
development processes. We have long-standing relationships with
OEMs and a reputation for developing leading technology and high
quality products.
Our geographical diversity combined with our customer diversity
and innovative technologies continues to position us to be awarded
new and replacement business at higher content levels.
Continue enhancing the Group's position as an advanced
technology leader in automotive fluid systems to meet industry
megatrend changes
The Group has specialised in fluid systems for almost a century
and we have advanced technology development centres and regional
application engineering centres to focus our research, development
and application engineering.
As the requirements of OEMs have continued to advance, the Group
has capitalised on its deep knowledge of fluid components, lighter
weight material and systems architecture to provide our OEM
customers with more advanced designs and products to facilitate
meeting consumer expectations and local regulatory requirements for
reduced emissions and improved fuel economy.
The Group has introduced a number of first-to-market
technologies and received various customer and industry awards.
We are also pleased to announce that the Group has been
nominated for a 2019 Automotive News Premier Automotive Suppliers
Contribution in Excellence ("PACE") Innovation Award for our
pressurised fuel tank addressing the PHEV market.
Continued focus on automotive megatrends
The growing HEV and EV market trends provides significant
content expansion opportunities aligned with the Group's strength
in fluid systems.
In particular, HEVs typically contain all the standard brake and
fuel line components found on a traditional ICE vehicle and also
require more advanced low emission pressurised fuel tanks together
with additional thermal management systems.
In addition, both HEV and EVs also require these higher content
thermal fluid systems to heat and cool the battery, chassis and
electronic components. The Group has developed products to address
these new requirements e.g. thermal heating and cooling tubes,
loops and lightweight nylon materials.
We believe that these advanced components and systems have the
potential to significantly increase the fluid handling content in
HEV and EVs compared to the content for a more traditional ICE
vehicle. Additional thermal management products are also expected
and required for autonomous vehicles.
We expect further progress in meeting our HEV and EV goals in
2019.
Capitalise on the Group's strong customer relationships, global
footprint and excellent position in China
The Group has established trusted relationships over many
decades with major OEMs by leveraging its strong technical
capabilities, global manufacturing footprint, local management
teams and long history as a leading provider of automotive fluid
systems. These relationships extend globally as the Group's OEM
customers have expanded into emerging markets.
In addition, our extensive low-cost global footprint provides a
competitive advantage in winning replacement and new business with
a competitive manufacturing model. We have manufacturing facilities
near OEM assembly plants in 114 locations across 28 countries in 5
continents. This manufacturing footprint is a distinct advantage
for the Group and its customers.
In 2018, 19% of our revenue was generated from China where we
have wholly-owned operations in 16 locations and a #1 market
position in brake and fuel lines. We continue to use this strong
position to generate growth opportunities for our plastic fuel tank
and thermal management products.
Deliver strong growth, profitability and cash flow
generation
The Group has consistently demonstrated leading financial
metrics and performance with strong revenue growth, profitability
and cash flow generation. Our experienced management team has a
track record of managing volume fluctuations e.g. the impact of the
new emissions testing in Europe and lower production in China that
the market experienced in the second half of 2018. By successfully
adjusting costs in line with our customers' production schedules,
we were able to deliver consistent margins and strong cash flow
generation for our stakeholders.
Looking ahead
The excellent progress delivered in executing our HEV and EV
strategy in 2018, as well as our approach of continued and
disciplined organic growth has positioned the Group well for 2019
and beyond.
We continue to work on new design and engineering for thermal
management products and pressurised tank opportunities with our
customers as the electrification market continues to progress. We
are confident that our business model will continue to deliver
consistent, leading financial performance along with attractive
returns.
Our people
The Group's strong performance is attributed to the dedication
of our 28,700 employees across the globe. I would like to thank
them for their commitment and contribution throughout the year.
We look forward to reporting our progress over the coming
months.
Chief Financial Officer's Report:
The Group delivered another year of strong performance in 2018.
Revenues increased by 2.0% year over year on a constant currency
basis to EUR3.5 billion and exceeded global light vehicle
production growth by 3.1%. Revenue slightly declined by 0.5% at
reported rates.
We generated solid Adjusted EBIT of EUR374 million with a margin
of 10.8%, which is broadly consistent with the prior year. We
delivered Adjusted Net Income of EUR155.2 million for the year, an
increase of 14.1%. Adjusted Basic EPS was 29.9 euro cents, an
increase of 14.0%. The Group also achieved strong Adjusted Free
Cash Flow of EUR146.2 million, a year over year increase of
23.3%.
Table 1: Key performance measures EURm
% Change
at constant
2018 2017 Change % Change currency
Revenue 3,472.8 3,490.9 (18.1) (0.5)% 2.0%
Adjusted EBIT 373.5 383.5 (10.0) (2.6)% (0.2)%
Adjusted EBIT margin 10.8% 11.0% (0.2)%
Profit for the Year 140.1 115.2 24.9 21.6% 27.1%
Adjusted Net Income 155.2 136.0 19.2 14.1%
Adjusted Basic EPS (EUR cents) 29.9 26.2 3.7 14.0%
Adjusted Free Cash Flow 146.2 118.6 27.6 23.3%
Automotive Markets
Global light vehicle production volume remains the most
significant factor in our financial performance.
Global and regional light vehicle production volumes softened by
1.1% in 2018 to 94.1 million vehicles compared to the prior year as
shown in table 2.
Table 2: Global light vehicle production volumes: millions of
units
2018 % Change
Europe, including Middle East and Africa 24.5 (1.2)%
Asia Pacific 49.2 (1.4)%
North America 17.0 (0.7)%
Latin America 3.4 3.1%
----- ------
Total global volumes 94.1 (1.1)%
===== ======
Source: IHS Markit, February 2019 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
2018 2017 Change % Change % Change
at constant
currency
Total Group Revenue 3,472.8 3,490.9 (18.1) (0.5)% 2.0%
By Region
Europe and Africa 1,398.6 1,389.7 8.9 0.6% 0.8%
Asia Pacific 1,032.2 1,024.6 7.6 0.7% 3.3%
North America 971.9 995.3 (23.4) (2.4)% 2.1%
Latin America 70.1 81.3 (11.2) (13.8)% 6.8%
By segment
Fluid Carrying Systems ("FCS") 2,026.7 2,057.1 (30.4) (1.5)% 1.5%
Fuel Tank and Delivery Systems
("FTDS") 1,446.1 1,433.8 12.3 0.9% 2.8%
Group revenue in 2018 was EUR3.5 billion, which at constant
currency is a 2.0% year over year increase and 310 basis points
above year over year reduction in global light vehicle production
of 1.1%. Revenue growth above vehicle production changes was solid
across all regions primarily due to new business related launches,
and favourable ramp impacts.
In Europe and Africa, year over year revenue growth at constant
currency was 0.8%, or 200 basis points above year over year change
in light vehicle production of (1.2)%. 2018 Europe and Africa
revenue growth is mostly attributable to launches of new FTDS
business and related favourable ramp impacts including tooling
revenue.
In Asia Pacific year over year revenue growth at constant
currency was 3.3%, or 470 basis points above year over year change
in light vehicle production volume of (1.4)%. While China volumes
declined on a year over year basis, revenue increased with new
business in tanks and thermal.
In North America, year over year revenue growth at constant
currency was 2.1% or 280 basis points above year over year change
in light vehicle production volume of (0.7)% . Growth above market
was primarily due to powertrain.
On a year over year basis at constant currency growth rates, the
Fluid Carrying Systems ("FCS") division's revenue expanded 1.5% to
EUR2,027 million, and the Fuel Tank and Delivery Systems ("FTDS")
division's revenue grew 2.8% to EUR1,446 million.
When comparing 2018 to 2017 changes, currency exchange rates had
a net unfavourable impact of EUR88 million on revenue due mostly to
strengthening of the Euro against the US dollar, Chinese renminbi
and South Korean won. Accordingly, revenue slightly declined by
0.5% to EUR3,473 million at reported rates.
Adjusted EBITDA*, Adjusted EBIT* and Profit for the Year
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 are also used as metrics in certain
of our compensation plans. Table 4 shows a reconciliation between
Profit for the year, Adjusted EBITDA and Adjusted EBIT.
Table 4: Calculation of Adjusted EBITDA* and Adjusted EBIT*
EURm
2018 2017
EURm EURm
Profit for the year 140.1 115.2
Income tax expense 77.0 42.8
------ -----
Profit before tax 217.1 158.0
Net finance expense 64.5 115.3
Share of profit of associates (0.5) (0.3)
------ -----
Operating profit 281.1 273.0
Depreciation and impairment of PP&E 101.5 98.8
Amortisation and impairment of intangible assets 95.6 96.1
Share of profit of associates 0.5 0.3
------ -----
EBITDA 478.7 468.2
Exceptional items - administrative expenses - 40.2
Net foreign exchange gains (1.2) (24.6)
Bain management fee - 3.9
Dividend received from associates 0.2 0.4
Restructuring costs 7.1 2.9
Share of profit of associates (0.5) (0.3)
------ -----
Adjusted EBITDA 484.3 490.7
Less:
Depreciation and impairment of PP&E (101.5) (98.8)
Amortisation and impairment of intangible assets (95.6) (96.1)
Add back:
Depreciation uplift arising on purchase accounting 15.7 15.5
Amortisation uplift arising on purchase accounting 70.6 72.2
------ -----
Adjusted EBIT 373.5 383.5
====== =====
* See Non - IFRS measures
Our Adjusted EBITDA and Adjusted EBIT margins for the year were
broadly consistent with the prior year.
However, while we continued to see increases in raw material
costs such as steel and resin, we were able to successfully offset
these with customer pricing and operational efficiencies. The Group
was also slightly impacted by the recent US tariffs on steel.
Adjusted EBIT was EUR374 million and Adjusted EBIT margin was
10.8%, in line with the Group's expectations.
By division, FCS Adjusted EBIT was EUR241 million with Adjusted
EBIT margin of 11.9%. FCS continues to achieve strong margins. The
slight year over year decline in margin reflected the impact of
ramp ups and launch activity in our North America region which was
partially offset by operational efficiencies.
FTDS Adjusted EBIT increased by EUR20 million to EUR133 million
with Adjusted EBIT margin of 9.2%. The increase in margin reflects
the benefit of higher volumes, mix and strong operational
performance.
Profit for the year grew by EUR25 million to EUR140 million. The
principal drivers for the increase were EUR33 million lower finance
expense due to lower post IPO leverage and reduced interest rates,
lower net exceptional items of EUR29 million, partially offset by
lower net foreign exchange gains of EUR23 million.
Exceptional Items
Exceptional items are defined as those items that, by virtue of
their nature, size and expected frequency, warrant separate
additional disclosure in the financial information in order to
fully understand the underlying performance of the Group.
In 2018 we incurred exceptional finance costs of EUR11.8 million
associated with the repayment of the unsecured senior notes and
additional term loan debt in July 2018.
During 2017, the majority of exceptional costs were in relation
to the IPO. Exceptional administrative costs in 2017 included net
IPO costs of EUR25.7 million, share based payment costs prior to
the IPO of EUR11.1 million and restructuring costs of EUR3.4
million related to the exit of our operations in Australia.
In 2017 we also incurred exceptional finance costs of EUR17.7
million associated with the repayment premium related to the
unsecured senior notes and an EUR8.7 million non--cash charge
associated with previously capitalised debt issuance fees in
connection with the debt principal amounts paid down with a portion
of the IPO proceeds.
As a result of the US Tax Cuts and Jobs Act of 2017, we
recognised an exceptional deferred tax asset of EUR25.4 million in
2017.
Table 5: Exchange Rates
Table 5 shows the movement in exchange rates for currencies most
relevant to our operations:
Key euro exchange 2018 2017 2018 2017
rates Average Average % Change Year-end Year-end % Change
------------------- -------- -------- ---------- --------- --------- ----------
US dollar 1.181 1.129 4.6% 1.147 1.201 (4.5)%
------------------- -------- -------- ----- --------- --------- ------
Chinese renminbi 7.805 7.631 2.3% 7.890 7.815 1.0%
------------------- -------- -------- ----- --------- --------- ------
South Korean won 1,299 1,276 1.8% 1,278 1,282 (0.3)%
------------------- -------- -------- ----- --------- --------- ------
Net Foreign Exchange Gains
Net foreign exchange gains were EUR1.2 million in 2018 compared
to EUR24.6 million in 2017. Foreign exchange gains include
non-trade items related to foreign currency translation and fair
value movement in foreign exchange forward contracts. We aim to
naturally hedge our operational transactions by earning revenues
and incurring costs in the same currency to the extent possible,
but will engage in forward foreign exchange contracts to the extent
necessary to mitigate our exposure.
Net Finance Expense
Net finance expense for the year was EUR64.5 million, a decrease
of EUR50.8 million, or 44.1% compared with 2017. The reduction was
largely due to lower exceptional financing charges, the full year
impact of the reduced post-IPO leverage as well as the interest
savings following the repayment of the 8.75% unsecured senior notes
in July 2018.
Taxation
Income tax expense before exceptional items was EUR77.0 million,
an increase of EUR8.8 million from the prior year.
Accordingly, the 2018 Adjusted Effective Tax Rate increased to
32.2% (2017: 28.8%). The 2017 Adjusted Effective Tax Rate benefited
from a credit on the unwind of a deferred tax liability relating to
withholding tax in China. Absent this tax benefit, the Adjusted
Effective Tax Rate remained largely consistent.
The rate was calculated by adjusting for the impact of UK
losses, the prior year tax adjustments and for the year 2017 only,
the impact of the US Tax Cuts and Jobs Act 2017.
Proforma Adjusted Basic EPS*
Adjusted Basic Earnings per Share ("EPS") calculation has been
presented on a proforma basis, based on Adjusted Net Income and the
519.9 shares in issue at 31 December 2018, as opposed to the
statutory measure, which is based on an average including the
pre-IPO period. Therefore, the proforma basis is a more relevant
metric for shareholders of the Group.
Accordingly, the Proforma Adjusted Basic EPS for 2018 was 29.85
euro cents per share, 14.0% higher than the 26.18 euro cents in
2017.
*See Non-IFRS measures
Adjusted Net Income*
The calculation of Adjusted Net Income is shown in table 6a.
Table 6a: Adjusted Net Income* EURm
2018 2017
Adjusted EBITDA (see table 4) 484.3 490.7
Less:
Net finance expense before exceptional
items (52.7) (88.9)
Income tax expense before exceptional
items (77.0) (68.2)
Depreciation and impairment of PP&E (101.5) (98.8)
Amortisation and impairment of intangible
assets (95.6) (96.1)
Non-controlling interests share of
profit (2.3) (2.7)
------ -----
Adjusted Net Income 155.2 136.0
====== =====
*See Non-IFRS measures
Table 6b: Reconciliation of Profit for the Year to Adjusted Net
Income* EURm
2018 2017
Profit for the year 140.1 115.2
Less:
Non-controlling interests share of
profit (2.3) (2.7)
Net foreign exchange gains (1.2) (24.6)
Add back:
Exceptional items - administration
expenses - 40.2
Exceptional items - finance expenses 11.8 26.4
Exceptional items - tax credit - (25.4)
Other reconciling items** 6.8 6.9
----- -----
Adjusted Net Income 155.2 136.0
===== =====
** Other reconciling items include non-exceptional restructuring
charges, the Bain management charge (in 2017) and adjustments for
associate income.
Adjusted Net Income was EUR155.2 million in 2018, an increase of
14.1% from EUR136.0 million in 2017, driven by higher profit for
the year. In 2017, EUR24.6 million of foreign exchange gains as
well as exceptional administration and finance charges of EUR40.2
million and EUR26.4 million, respectively, were incurred relating
to the IPO and subsequent debt repayment. These have been adjusted
for as reflected in Table 6b.
Dividend
The Board'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.
Consequently, the Board is recommending a final dividend of 5.94
euro cents per share, amounting to EUR30.9 million. This final
dividend together with the interim dividend of 3.02 euro cents per
share paid in August 2018, makes a total dividend for the 2018
financial year of 8.96 euro cents per share, and amounts to EUR46.6
million. Subject to shareholder approval at the Annual General
Meeting on 16 May 2019, the final dividend will be paid on 31 May
2019. The dividend will be converted to Sterling at a fixed rate on
26 April 2019, the Dividend Record Date.
Adjusted Free Cash Flow*
We also use Adjusted Free Cash Flow as an operating measure of
our cash flows.
Table 7a: Adjusted Free Cash Flow* EURm
2018 2017
Net cash generated from operating activities 297.0 237.4
Net cash used by investing activities (149.5) (140.9)
------ ------
Free Cash Flow 147.5 96.5
Add back: IPO costs (included in net cash generated
from operations) 3.1 22.1
Deduct:
Cash received on settlement of derivatives (2.7) -
Amounts received in cash from Financial Assets
at FVTPL (included in net cash generated from
operations) (1.7) -
------ ------
Adjusted Free Cash Flow 146.2 118.6
====== ======
Table 7b: Reconciliation of Adjusted EBITDA to Adjusted Free
Cash Flow* EURm
2018 2017
Adjusted EBITDA (see note 3) 484.3 490.7
Less:
Net cash interest paid (62.5) (87.7)
Cash taxes paid (88.2) (88.9)
Payment for property, plant and equipment (115.8) (118.8)
Payment for intangible assets (35.8) (25.1)
Movement in working capital (27.5) (26.2)
Movement in retirement benefit obligations (5.2) (13.4)
Exceptional cash paid (IPO and restructuring) (3.1) (25.9)
Movement in provisions and other 1.3 (8.2)
------ ------
Free Cash Flow 147.5 96.5
Add back:
Cash received on settlement of derivatives (2.7) -
IPO cash costs in Net Cash from Operations 3.1 22.1
Amounts received in cash from Assets at FVTPL (1.7) -
------ ------
Adjusted Free Cash Flow 146.2 118.6
====== ======
*See Non-IFRS measures
In 2018, we generated Adjusted Free Cash Flow of EUR146.2
million, an increase of EUR27.6 million on the prior year. The cash
flow was higher than the Group's expectations. Adjusted Free Cash
Flow significantly increased as a result of operations remaining
strongly cash generative, lower interest payments, reduced IPO
related exceptional payments and a reduction in retirement benefit
obligations and provisions as well as the timing of some customer
payments.
Retirement Benefits
We operate funded and unfunded defined benefit schemes across
multiple jurisdictions with the largest being the US pension and
retiree healthcare schemes. We also have significant schemes in the
UK, Canada and Germany. While all of our significant plans are
closed to new entrants, a few allow for future accruals. Our
schemes are subject to periodic actuarial valuations. Our net
unfunded position decreased by EUR14.2 million to EUR148.2 million
at the end of 2018 principally due to an increase in US discount
rates.
Net Debt and Net Leverage
Net debt as at 31 December 2018 was EUR822.4 million, a
reduction of EUR68.7 million from 31 December 2017. The Group
repaid its 8.75% unsecured senior notes in July 2018 as outlined
below. The net leverage ratio was 1.7 times Adjusted EBITDA at the
end of 2018, (2017: 1.8 times).
In July 2018, the Group successfully refinanced its borrowing
facilities by obtaining additional loans of EUR115.0 million Euros
and $41.0 million (EUR35.0 million) USD. With these incremental
term loans as well as cash generated from operations we repaid all
amounts under the Group's former 8.75% unsecured senior facilities
that amounted to $220.5 million (EUR188.4 million). The additional
term loans have the same rate of interest as the existing term loan
and are subject to the same maturity on 30 June 2022. The
annualised interest saving is estimated at EUR10 million.
In addition, the Group was able to successfully extend the
maturities of the revolving credit facility and asset backed loan
by 3 years to 30 June 2023.
In March 2019, the Group paid down a further $56.5 million
(EUR50.0 million) against its USD term loan.
Liquidity
Our principal sources of liquidity have historically been cash
generated from operating activities and amounts available under our
credit facilities, that currently consist of a revolving facility
under our cash flow credit agreement of $125 million (EUR109.0
million) and an asset backed loan ("ABL") facility of $100 million
(EUR87.2 million). The availability under both facilities as of 31
December 2018 was EUR184.6 million.
Outlook
For 2019, we expect revenue growth in excess of global light
vehicle production volume levels excluding the impact of currency
movements. We expect consistent Adjusted EBIT margin with the prior
year and Adjusted Free Cash Flow similar to or slightly lower than
the prior year. We plan to reduce net leverage through strong cash
flow generation and to maintain a consistent dividend policy.
IFRS 16 "Leases"
For the financial year 2019, a new accounting standard IFRS 16
"Leases" comes into effect.
Under IFRS 16, the concept of operating leases will be
eliminated and these leases will be accounted for in the same
manner as finance leases. Finance leases are capitalised on the
balance sheet. Accordingly, operating lease costs are expected to
decrease whereas depreciation and interest expenses related to the
lease liability are expected to increase. The preliminary impact of
IFRS 16 is expected to improve Adjusted EBITDA, slightly improve
Adjusted EBIT and increase net debt. In addition, the net impact on
cash is expected to be nil as lease payments will be unchanged. The
Group expects to recognise lease liabilities of between EUR134
million and EUR174 million on 1 January 2019.
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.
In particular, we use Adjusted EBIT, Adjusted EBITDA, Adjusted Net
Income, Adjusted Basic EPS, Adjusted Free Cash Flow and Adjusted
Effective Tax Rate. These non-IFRS measures are not recognised
measurements of financial performance or liquidity under IFRS, and
should be viewed as supplemental and not replacements or
substitutes for any IFRS measures. Such measures are also utilised
by the Board of Directors as targets in determining compensation of
certain executives and key members of management.
Adjusted EBITDA is defined as profit for the year adjusted for
income tax expense, net finance expense, depreciation, amortisation
and impairment of PP&E and intangible assets, net foreign
exchange gains/ losses and other reconciling items. Other
reconciling items includes adjustments for restructuring costs, the
Bain management fee and adjustment for associate income.
Adjusted EBIT is defined as Adjusted EBITDA less depreciation
(including PP&E impairment) and amortisation (including
intangible impairment) arising on tangible and intangible assets
before adjusting for any purchase price adjustments to fair values
arising on acquisitions.
Adjusted Net Income is defined as Adjusted EBITDA less net
finance expense before exceptional items, income tax expense before
exceptional items, depreciation and amortisation (including
PP&E and intangible asset impairments) and non-controlling
interests share of profit.
Adjusted Basic EPS is defined as Adjusted Net Income divided by
the number of shares in issue at the current balance sheet
date.
Adjusted Free Cash Flow is defined as cash generated from
operating activities, less cash used by investing activities,
adjusted for acquisitions, movements in financial assets at fair
value through the profit or loss, cash payments related to IPO
costs and cash received on settlement of derivatives.
Adjusted Income Tax before Exceptional items is defined as
Income tax before Exceptional Items adjusted for the tax impact of
prior year tax provisions and adjustments.
Adjusted Profit before Income Tax is defined as profit before
income tax adjusted for UK losses.
Adjusted Effective Tax Rate is defined as Adjusted Income Tax
before Exceptional Items as a percentage of Adjusted Profit before
Income Tax.
Consolidated Income Statement
For the year ended 31 December
2018 2017
Continuing operations Notes EURm EURm
-------------------------------------------------- -----------
Revenue 3 3,472.8 3,490.9
--------------------------------------------------
Cost of sales (2,938.2) (2,928.5)
-------------------------------------------------- ----- -------- --------
Gross profit 534.6 562.4
-------------------------------------------------- ----- -------- --------
Distribution costs (102.4) (103.7)
--------------------------------------------------
Administrative expenses before exceptional items (164.5) (177.8)
--------------------------------------------------
Exceptional items 5 - (40.2)
-------------------------------------------------- -------- --------
Administrative expenses after exceptional items (164.5) (218.0)
-------------------------------------------------- -------- --------
Other income 12.2 7.7
--------------------------------------------------
Net foreign exchange gains 1.2 24.6
-------------------------------------------------- ----- -------- --------
Operating profit 281.1 273.0
-------------------------------------------------- ----- -------- --------
Finance income 6 14.3 11.2
--------------------------------------------------
Finance expense before exceptional items 6 (67.0) (100.1)
--------------------------------------------------
Exceptional items 5 (11.8) (26.4)
-------------------------------------------------- -------- --------
Finance expense after exceptional items 6 (78.8) (126.5)
-------------------------------------------------- -------- --------
Net finance expense after exceptional items 6 (64.5) (115.3)
--------------------------------------------------
Share of profit of associates 0.5 0.3
-------------------------------------------------- ----- -------- --------
Profit before income tax 217.1 158.0
-------------------------------------------------- ----- -------- --------
Income tax expense before exceptional items 7 (77.0) (68.2)
--------------------------------------------------
Exceptional items 5 - 25.4
-------------------------------------------------- ----- -------- --------
Income tax expense after exceptional items 7 (77.0) (42.8)
-------------------------------------------------- ----- -------- --------
Profit for the year 140.1 115.2
-------------------------------------------------- ----- -------- --------
Profit for the year attributable to:
--------------------------------------------------
Owners of the Parent Company 137.8 112.5
--------------------------------------------------
Non-controlling interests 2.3 2.7
-------------------------------------------------- ----- -------- --------
140.1 115.2
-------------------------------------------------- ----- -------- --------
Total earnings per share (euro cents)
-------------------------------------------------- ----- --------- -----------
Basic 26.53 29.55
Diluted 26.44 29.52
-------------------------------------------------- ----- -------- --------
Consolidated Statement of Comprehensive Income
For the year ended 31 December
2018 2017
Notes EURm EURm
-------------------------------------------------------- ----- ------ --------
Profit for the year 140.1 115.2
--------------------------------------------------------
Other comprehensive income/(expense)
--------------------------------------------------------
Items that will not be reclassified to profit
or loss
--------------------------------------------------------
- Re-measurements of retirement benefit obligations 16.9 7.3
--------------------------------------------------------
- Income tax (expense)/credit on retirement
benefit obligations before exceptional items 7 (4.3) 0.1
--------------------------------------------------------
Exceptional items 7 - (15.0)
-------------------------------------------------------- ----- -----
- Income tax expense on retirement benefit obligations
after exceptional items (4.3) (14.9)
-------------------------------------------------------- ----- ----- -----
12.6 (7.6)
-------------------------------------------------------- ----- ----- -----
Items that may be subsequently reclassified
to profit or loss
- Currency translation 11.8 (75.2)
- Cash flow hedges (0.3) 12.1
- Net investment hedges (7.2) (3.2)
-------------------------------------------------------- ----- ----- -----
4.3 (66.3)
-------------------------------------------------------- ----- ----- -----
Other comprehensive income/(expense) for the
year, net of tax 16.9 (73.9)
-------------------------------------------------------- ----- ----- -----
Total comprehensive income for the year 157.0 41.3
-------------------------------------------------------- ----- ----- -----
Attributable to:
- Owners of the Parent Company 154.6 38.9
- Non-controlling interests 2.4 2.4
-------------------------------------------------------- ----- ----- -----
Total comprehensive income for the year 157.0 41.3
-------------------------------------------------------- ----- ----- -----
Consolidated Balance Sheet
At 31 December
2018 2017
Notes EURm EURm
----------------------------------------------- ----- -------- ----------
Non-current assets
-----------------------------------------------
Intangible assets 1,229.8 1,273.9
-----------------------------------------------
Property, plant and equipment 706.5 686.8
-----------------------------------------------
Investments in associates 19.6 19.2
-----------------------------------------------
Derivative financial instruments 5.4 8.3
-----------------------------------------------
Deferred income tax assets 7 34.9 51.0
-----------------------------------------------
Trade and other receivables 14.8 13.4
----------------------------------------------- ----- ------- -------
2,011.0 2,052.6
----------------------------------------------- ----- ------- -------
Current assets
Inventories 352.8 329.3
Trade and other receivables 578.3 588.3
Current income tax assets 4.4 8.2
Derivative financial instruments 8.5 5.3
Financial assets at fair value through profit
and loss 1.2 2.9
Cash and cash equivalents 360.1 287.2
----------------------------------------------- ----- ------- -------
1,305.3 1,221.2
----------------------------------------------- ----- ------- -------
Total assets 3,316.3 3,273.8
----------------------------------------------- ----- ------- -------
Equity
Share capital 6.8 6.8
Share premium 1.4 404.3
Other reserves (126.3) (130.5)
Accumulated profits 1,175.7 640.9
----------------------------------------------- ----- ------- -------
Equity attributable to owners of the Parent
Company 1,057.6 921.5
----------------------------------------------- ----- ------- -------
Non-controlling interests 22.5 20.3
----------------------------------------------- ----- ------- -------
Total equity 1,080.1 941.8
----------------------------------------------- ----- ------- -------
Non-current liabilities
Trade and other payables 17.1 17.6
Borrowings 9 1,179.3 1,178.2
Derivative financial instruments 45.3 72.4
Deferred income tax liabilities 7 141.6 159.8
Retirement benefit obligations 148.2 162.4
Provisions 4.9 5.5
----------------------------------------------- ----- ------- -------
1,536.4 1,595.9
----------------------------------------------- ----- ------- -------
Current liabilities
Trade and other payables 608.4 637.6
Current income tax liabilities 60.2 69.6
Borrowings 9 4.4 3.0
Derivative financial instruments 2.8 3.4
Provisions 24.0 22.5
----------------------------------------------- ----- ------- -------
699.8 736.1
----------------------------------------------- ----- ------- -------
Total liabilities 2,236.2 2,332.0
----------------------------------------------- ----- ------- -------
Total equity and liabilities 3,316.3 3,273.8
----------------------------------------------- ----- ------- -------
Consolidated Statement of Changes in Equity
Ordinary Share Other Accumulated Non-controlling Total
shares premium reserves profits Total interests equity
EURm EURm EURm EURm EURm EURm EURm
----------------------- -------- -------- --------- ----------- -------- ----------------- ----------
Balance at 1 January
2018 6.8 404.3 (130.5) 640.9 921.5 20.3 941.8
Profit for the year - - - 137.8 137.8 2.3 140.1
Other comprehensive
income for the year - - 4.2 12.6 16.8 0.1 16.9
----------------------- -------- ------- -------- ---------- ------- ------------ --- -------
Total comprehensive
income for the year - - 4.2 150.4 154.6 2.4 157.0
----------------------- -------- ------- -------- ---------- ------- ------------ --- -------
Share option cost - - - 4.0 4.0 - 4.0
Dividends paid - - - (22.5) (22.5) (0.2) (22.7)
Capital reduction - (404.3) - 404.3 - - -
Shares issued - 1.4 - (1.4) - - -
----------------------- -------- ------- -------- ---------- ------- ------------ --- -------
Balance at 31 December
2018 6.8 1.4 (126.3) 1,175.7 1,057.6 22.5 1,080.1
----------------------- -------- ------- -------- ---------- ------- ------------ --- -------
Ordinary Share Other Accumulated Non-controlling Total
shares premium reserves profits/(losses) Total interests equity
EURm EURm EURm EURm EURm EURm EURm
-------------------- -------- -------- --------- ------------------- ------ ----------------- ---------
Balance at 1
January
2017 493.7 - (64.5) 36.2 465.4 19.0 484.4
Profit for the year - - - 112.5 112.5 2.7 115.2
Other comprehensive
loss for the year - - (66.0) (7.6) (73.6) (0.3) (73.9)
-------------------- -------- -------- -------- --------------- ----- ------------ ------
Total comprehensive
(expense)/income
for
the year - - (66.0) 104.9 38.9 2.4 41.3
-------------------- -------- -------- -------- --------------- ----- ------------ --- ------
Share option cost - - - 11.3 11.3 - 11.3
Dividends paid - - - - - (1.1) (1.1)
Capital reduction (488.7) - - 488.7 - - -
Share capital
raised
on initial public
offering 1.6 423.0 - - 424.6 - 424.6
Shares issued to
Directors
and certain
employees 0.2 1.0 - (0.2) 1.0 - 1.0
Share capital
issuance
costs - (19.7) - - (19.7) - (19.7)
-------------------- -------- ------- --------- ------------------- ----- ----------------- ------
Balance at 31
December
2017 6.8 404.3 (130.5) 640.9 921.5 20.3 941.8
-------------------- ------- ------- -------- --------------- ----- ------------ --- ------
Consolidated Statement of Cash Flows
For the year ended 31 December
2018 2017
Notes EURm EURm
--------------------------------------------------- ----- ------- ---------
Cash flows from operating activities
---------------------------------------------------
Cash generated from operations 10 449.6 415.9
---------------------------------------------------
Interest paid (64.4) (89.6)
---------------------------------------------------
Income tax paid (88.2) (88.9)
--------------------------------------------------- ----- ------ ------
Net cash generated from operating activities 297.0 237.4
--------------------------------------------------- ----- ------ ------
Cash flows from investing activities
Payment for property, plant and equipment (115.8) (118.8)
Payment for intangible assets (35.8) (25.1)
Proceeds from the sale of property, plant and
equipment 0.2 1.1
Interest received 1.9 1.9
--------------------------------------------------- ----- ------ ------
Net cash used by investing activities (149.5) (140.9)
--------------------------------------------------- ----- ------ ------
Cash flows from financing activities
Proceeds from issue of new share capital - 424.6
Share capital issuance costs - (19.7)
Proceeds from new borrowings 150.0 -
Fees paid on proceeds from new borrowings (2.2) -
Fees paid on repricing of loans - (1.6)
Voluntary repayments of borrowings (188.4) (363.6)
Fees paid on voluntary repayments of borrowings (8.2) (17.7)
Scheduled repayments of borrowings (5.4) (11.1)
Dividends paid (22.5) -
Dividends paid to non-controlling interests (0.2) (1.1)
--------------------------------------------------- ----- ------ ------
Net cash (used by)/generated from financing
activities (76.9) 9.8
--------------------------------------------------- ----- ------ ------
Increase in cash and cash equivalents 70.6 106.3
--------------------------------------------------- ----- ------ ------
Cash and cash equivalents at the beginning of
the year 287.2 196.2
Currency translation on cash and cash equivalents 2.3 (15.3)
--------------------------------------------------- ----- ------ ------
Cash and cash equivalents at the end of the
year 360.1 287.2
--------------------------------------------------- ----- ------ ------
Notes
1. General Information
On 25 October 2017, TI Fluid System plc's shares were listed on
the London Stock Exchange following a global offer of 519.4 million
ordinary shares of 255p each.
The Group's full financial statements have been approved by the
Board of Directors and reported on by the auditors on 19 March
2019. A copy of the statutory accounts for the year ended 31
December 2017 has been delivered to the Registrar of Companies, and
those for the year ended 31 December 2018 will be delivered in due
course. The independent auditors' report on the full financial
statements for the year ended 31 December 2017 was unqualified and
did not contain an emphasis of matter paragraph or any statement
under section 498 of the Companies Act 2006.
2. Basis of Preparation
The consolidated financial information included within this
announcement has been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union, the UK Companies Act 2006 applicable to companies reporting
under IFRS, and International Financial Reporting Interpretations
Committee ("IFRIC") interpretations issued and effective at the
time of preparing the financial information. The financial
information in this preliminary announcement does not, however
comply with all disclosure requirements.
The consolidated financial information has been prepared under
the historical cost convention, except for the fair valuation of
assets and liabilities of subsidiary companies acquired, and
financial assets and liabilities at fair value through profit or
loss ("FVTPL") (including derivative instruments not in hedging
relationships).
The preparation of the financial information in conformity with
IFRS requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities and the reported amounts
of revenue and expenses during the reporting period. Although these
estimates are based on management's reasonable knowledge of the
amount, event or actions, actual results may differ from those
estimates.
IFRS 9 'Financial Instruments' and IFRS 15 'Revenue from
Contracts with Customers' were adopted by the Group for the first
time have had no material impact on the Group's financial
information for the financial reporting year beginning 1 January
2018.
The Group will apply IFRS 16 'Leases' from its mandatory
adoption date of 1 January 2019 in the 2019 consolidated financial
statements. The simplified transition approach is expected to be
applied. Comparative amounts for the year ended 31 December 2018
will not be restated. All right-of-use assets will be measured at
the amount of the lease liability on adoption (adjusted for any
prepaid or accrued lease expenses). The Group intends to apply the
practical expedient to grandfather the definition of a lease on
transition. This means that it will apply IFRS 16 to all contracts
entered into before 1 January 2019 and identified as leases, in
accordance with IAS 17 and IFRIC 4. Lease liabilities of between
EUR 134.0 million and EUR174.0 million on 1 January 2019 and a net
nil deferred tax adjustment are expected to be recognised.
3. Segment Reporting
In accordance with the provisions of IFRS 8 Operating Segments,
the Group's segment reporting is based on the management approach
with regard to segment identification; under which information
regularly provided to the chief operating decision maker ("CODM")
for decision making purposes forms the basis of the disclosure. The
Company's CODM is the Chief Executive Officer and the Chief
Financial Officer. The CODM evaluates the performance of the
Company's segments primarily on the basis of revenue, Adjusted
EBITDA, and Adjusted EBIT, both non-IFRS measures.
Two operating segments have been identified by the Company:
Fluid Carrying Systems ("FCS") and Fuel Tank and Delivery Systems
("FTDS").
Revenue, Adjusted EBITDA and Adjusted EBIT by Segment:
2018 2017
EURm EURm
------------------------------ ----------- -----------
Revenue
- FCS - External 2,026.7 2,057.1
- FTDS - External 1,446.1 1,433.8
------------------------------ ------- -------
Total 3,472.8 3,490.9
------------------------------ ------- -------
Adjusted EBITDA
- FCS 291.1 319.9
- FTDS 193.2 170.8
------------------------------ ------- -------
Total 484.3 490.7
------------------------------ ------- -------
Adjusted EBITDA % of revenue
- FCS 14.4% 15.5%
- FTDS 13.4% 11.9%
------------------------------ ------- -------
Total 13.9% 14.1%
------------------------------ ------- -------
Adjusted EBIT
- FCS 241.0 271.1
- FTDS 132.5 112.4
------------------------------ ------- -------
Total 373.5 383.5
------------------------------ ------- -------
Adjusted EBIT % of revenue
- FCS 11.9% 13.2%
- FTDS 9.2% 7.8%
------------------------------ ------- -------
Total 10.8% 11.0%
------------------------------ ------- -------
4. Research and development expenditure
Research and development expenditure before third party income,
comprised:
2018 2017
EURm EURm
-------------------------------------------- ----- -------
Research and development expenses 40.8 43.0
Capitalised development expenses 35.4 33.6
-------------------------------------------- ----- -----
Total research and development expenditure 76.2 76.6
-------------------------------------------- ----- -----
5. Exceptional Items
2018 2017
EURm EURm
-------------------------------------------------- ------ --------
Share option costs prior to the IPO - (11.1)
-------------------------------------------------- -----
Restructuring costs - (3.4)
-------------------------------------------------- -----
IPO 2016 expenses - 1.5
-------------------------------------------------- -----
IPO 2017 expenses - (27.2)
-------------------------------------------------- ----- -----
Administrative expenses - (40.2)
-------------------------------------------------- ----- -----
Early redemption premium on voluntary repayments
of borrowings (8.2) (17.7)
Unamortised issuance discounts and fees expensed
on voluntary repayments of borrowings (3.6) (8.7)
-------------------------------------------------- ----- -----
Finance expense (11.8) (26.4)
-------------------------------------------------- ----- -----
Income tax expense - 25.4
-------------------------------------------------- ----- -----
Total exceptional expense recognised in Income
Statement (11.8) (41.2)
-------------------------------------------------- ----- -----
Income tax benefit recognised in Statement of
Comprehensive Income - (15.0)
-------------------------------------------------- ----- -----
Total exceptional expense (11.8) (56.2)
-------------------------------------------------- ----- -----
Share option costs incurred prior to the IPO in October 2017 are
considered exceptional as they represent compensation arrangements
made to incentivise staff in relation to transactions undertaken by
the Group and its shareholders.
Restructuring costs of EUR3.4 million in the prior year relate
to the exit of operations in Australia.
IPO expenses for the prior year consist of EUR27.2 million in
relation to costs incurred during 2017, offset by a EUR1.5 million
reversal in the carried forward 2016 accrual. These costs were
incurred in preparing the Company for the IPO.
The exceptional net finance expense relates to voluntary
repayments of borrowings and comprises an early redemption premium
of EUR8.2 million (2017: EUR17.7 million) and the expense of
unamortised issuance discounts and fees of EUR3.6 million (2017:
EUR8.7 million). See Note 9 for additional details.
As a result of the US Tax Cuts and Jobs Act of 2017, the Group
recognised EUR15 million of exceptional deferred tax benefit in the
Statement of Comprehensive Income in 2017.
6. Finance Income and Expense
2018 2017
EURm EURm
----------------------------------------------------------------- ------ ---------
Finance income
Interest on short-term deposits, other financial assets
and other interest income 1.9 1.9
Fair value gain on derivatives and foreign exchange
contracts not in hedged relationships 9.0 9.3
Net interest income on release of specific uncertain
tax positions 3.4 -
----------------------------------------------------------------- ----- ------
Finance income 14.3 11.2
----------------------------------------------------------------- ----- ------
Finance expense
Interest payable on term loans including expensed
fees (51.7) (56.9)
Interest payable on unsecured senior notes including
expensed fees (9.3) (33.3)
Net interest expense of retirement benefit obligations (4.4) (5.7)
Fair value net losses on financial instruments: ineffectiveness (0.6) (3.2)
Utilisation of discount on provisions and other finance
expense (1.0) (1.0)
----------------------------------------------------------------- ----- ------
Finance expense excluding exceptional items (67.0) (100.1)
----------------------------------------------------------------- ----- ------
Early redemption premium on voluntary repayments of
borrowings (8.2) (17.7)
Unamortised issuance discounts and fees expensed on
voluntary repayments of borrowings (3.6) (8.7)
Exceptional finance expense (11.8) (26.4)
----------------------------------------------------------------- ----- ------
Total finance expense (78.8) (126.5)
----------------------------------------------------------------- ----- ------
Total net finance expense after exceptional items (64.5) (115.3)
----------------------------------------------------------------- ----- ------
Fees included in interest payable under the effective 2018 2017
interest method EURm EURm
------------------------------------------------------- ----- -------
Fees included in interest payable on term loans (6.5) (7.5)
Fees included in interest payable on unsecured senior
notes (0.4) (1.4)
------------------------------------------------------- ---- ----
2018 2017
Fees expensed in exceptional net finance expense EURm EURm
---------------------------------------------------- ----- -------
Fees expensed in respect of term loans - (4.2)
Fees expensed in respect of unsecured senior notes (3.6) (4.5)
---------------------------------------------------- ---- ----
7. Income Tax
Income Tax Expense
2018 2017
EURm EURm
-------------------------------------------------------- ------ --------
Current tax on profit for the year (96.5) (89.6)
--------------------------------------------------------
Adjustments in respect of prior years 14.2 (5.1)
-------------------------------------------------------- ----- -----
Total current tax expense (82.3) (94.7)
-------------------------------------------------------- ----- -----
Origination and reversal of temporary deferred tax
differences 5.3 26.5
Exceptional - impact of change in US tax rate - 25.4
-------------------------------------------------------- ----- -----
Total deferred tax benefit 5.3 51.9
-------------------------------------------------------- ----- -----
Income tax expense - Income Statement (77.0) (42.8)
-------------------------------------------------------- ----- -----
Origination and reversal of temporary deferred tax
differences (4.3) 0.1
Exceptional - impact of change in US tax rate - (15.0)
-------------------------------------------------------- ----- -----
Income tax expense - Statement of Comprehensive Income (4.3) (14.9)
-------------------------------------------------------- ----- -----
Total income tax expense (81.3) (57.7)
-------------------------------------------------------- ----- -----
Previously de-recognised deferred tax assets in the 2018 2017
year EURm EURm
----------------------------------------------------- ----- -----
Income Statement - 4.7
Statement of Comprehensive Income - 2.0
----------------------------------------------------- ----- -----
Previously de-recognised deferred tax assets in the
year - 6.7
----------------------------------------------------- ----- -----
Deferred tax assets originating from tax loss carry forwards
mainly relate to Canada and France as at 31 December 2018.
Forecasts for Canada and France 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.
For 2017 only, as a result of the US Tax Cuts and Jobs Act of
2017, the Group recognised EUR25.4 million of exceptional deferred
tax benefit in the Income Statement and EUR15.0 million of
exceptional deferred tax charge in the Statement of Comprehensive
Income to reflect the new U.S. corporate tax rate of 21% and other
tax reform changes, offset by a EUR0.6 million one-time transition
tax on accumulated foreign earnings.
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the UK statutory tax rate
applicable to profits of the consolidated entities as follows:
2018 2017
EURm EURm
----------------------------------------------------------- ------ --------
Profit before income tax 217.1 158.0
----------------------------------------------------------- ----- -----
Income tax calculated at UK statutory tax rate of 19.00%
(2017: 19.25%) applicable to profits in respective
countries (41.2) (30.4)
Tax effects of:
Overseas tax rates (excluding associates) (18.9) (23.1)
Income not subject to tax - other and UK foreign exchange
gain 11.3 14.1
Expenses not deductible for tax purposes - other and
UK non-deductible interest (17.1) (25.7)
Expenses not deductible for tax purposes - transaction
costs - (9.0)
Temporary differences on unremitted earnings (3.1) 5.9
Specific tax provisions (3.5) (2.2)
Unrecognised deferred tax assets (11.2) (7.5)
Other taxes (9.7) (11.5)
Adjustment in respect of prior years - current tax
adjustments 14.2 (5.1)
Adjustment in respect of prior years - deferred tax
adjustments (1.0) 16.2
Impact of changes in tax rate 0.2 2.2
Exceptional - impact of change in US tax rate - 25.4
Double tax relief and other tax credits 3.0 7.9
----------------------------------------------------------- ----- -----
Income tax expense - Income Statement (77.0) (42.8)
----------------------------------------------------------- ----- -----
Deferred tax (expense)/credit on re-measurement of
retirement benefit obligations (4.3) 0.1
Exceptional - impact of change in US tax rate - (15.0)
----------------------------------------------------------- ----- -----
Income tax expense - Statement of Comprehensive Income (4.3) (14.9)
----------------------------------------------------------- ----- -----
Total tax expense (81.3) (57.7)
----------------------------------------------------------- ----- -----
Other taxes comprised various local taxes of EUR2.4 million
(2017: EUR4.2 million) including US Transition Tax, together with
taxes withheld on dividend, interest and royalty remittances
totalling EUR7.3 million (2017: EUR7.3 million).
Factors that may affect future tax charges include the continued
non-recognition of deferred tax assets in certain territories as
well as the existence of tax losses in certain territories which
could be available to offset future taxable income in certain
territories and for which no deferred tax asset is currently
recognised.
Deferred Tax Assets and Liabilities
2018 2017
EURm EURm
------------------------------ ------- ---------
Deferred tax assets 34.9 51.0
Deferred tax liabilities (141.6) (159.8)
------------------------------ ------ ------
Net deferred tax liabilities (106.7) (108.8)
------------------------------ ------ ------
Movement on Net Deferred Tax Liabilities
2018 2017
EURm EURm
--------------------------------------------------------- ------- ---------
At 1 January (108.8) (151.6)
Income Statement benefit 5.3 26.5
Exceptional Income Statement benefit - impact of change
in US tax rate - 25.4
Tax on remeasurement of retirement benefit obligations (4.3) 0.1
Exceptional tax on remeasurement of retirement benefit
obligations - impact of change in US tax rate - (15.0)
Currency translation 1.1 5.8
--------------------------------------------------------- ------ ------
At 31 December (106.7) (108.8)
--------------------------------------------------------- ------ ------
Earnings Per Share
Pro forma adjusted Adjusted Basic earnings per share
For the purpose of Pro forma Adjusted Basic EPS for the years
ended 31 December 2018 and 31 December 2017, the average number of
ordinary shares is stated as if the shares issued in the year
occurred at the beginning of the financial year.
Pro forma Adjusted Basic EPS is defined as Adjusted Net Income
divided by the number of shares in issue at the current balance
sheet date.
2018 2017
(pro (pro
EUR (in cents) forma) forma)
--------------------------------------------- -------- ----------
Pro forma Adjusted Basic Earnings per Share 29.85 26.18
--------------------------------------------- -------- --------
Earnings used in pro forma adjusted basic earnings per share
2018 2017
(pro (pro
EURm forma) forma)
----------------------------------------------- -------- ----------
Earnings used in Pro forma Adjusted Basic EPS 155.2 136.0
----------------------------------------------- -------- --------
Pro forma adjusted basic weighted average number of ordinary
shares
2018 2017
(pro (pro
Number of shares (in millions) forma) forma)
------------------------------------------------------ -------- ----------
Pro forma average number of ordinary shares as at 1
January 519.9 519.4
Pro forma average number of ordinary shares as at 31
December 519.9 519.4
------------------------------------------------------ -------- --------
8. Borrowings
2018 2017
EURm EURm
----------------------------------------------- ------- ---------
Non-current:
Secured loans:
Main borrowing facilities 1,179.1 996.3
Other loans 0.2 0.2
Unsecured notes - 179.7
Finance leases - 2.0
----------------------------------------------- ------- -------
Total non-current borrowings 1,179.3 1,178.2
----------------------------------------------- ------- -------
Current:
Secured loans:
Main borrowing facilities 2.3 1.5
Other loans 0.1 0.1
Finance leases 2.0 1.4
----------------------------------------------- ------- -------
Total current borrowings 4.4 3.0
----------------------------------------------- ------- -------
Total borrowings 1,183.7 1,181.2
----------------------------------------------- ------- -------
Main borrowing facilities and unsecured notes 1,181.4 1,177.5
Finance leases and other loans 2.3 3.7
----------------------------------------------- ------- -------
Total borrowings 1,183.7 1,181.2
----------------------------------------------- ------- -------
The main borrowing facilities and unsecured notes are shown net
of issuance discounts and fees of EUR23.8 million (2017: EUR31.3
million).
Movement in Total Borrowings
Main borrowing Finance
facilities leases
Unsecured and unsecured and other Total
Term loan notes notes loans borrowings
EURm EURm EURm EURm EURm
--------------------------------------- ---------- ---------- --------------- ------------- --------------
At 1 January 2018 997.8 179.7 1,177.5 3.7 1,181.2
Accrued interest 45.2 8.9 54.1 0.5 54.6
Scheduled payments (49.2) (8.9) (58.1) (1.9) (60.0)
Fees expensed 6.5 0.4 6.9 - 6.9
New borrowings 150.0 - 150.0 - 150.0
Fees paid on proceeds from new
borrowings (2.2) - (2.2) - (2.2)
Voluntary repayments of borrowings - (188.4) (188.4) - (188.4)
Fees expensed on voluntary repayments
of borrowings - 3.6 3.6 - 3.6
Currency translation 33.3 4.7 38.0 - 38.0
--------------------------------------- --------- --------- -------------- --------- -----------
At 31 December 2018 1,181.4 - 1,181.4 2.3 1,183.7
--------------------------------------- --------- --------- -------------- --------- -----------
Main borrowing Finance
facilities leases
Unsecured and unsecured and other Total
Term loan notes notes loans borrowings
EURm EURm EURm EURm EURm
--------------------------------------- --------- --------- -------------- ------------ -------------
At 1 January 2017 1,277.8 416.3 1,694.1 4.6 1,698.7
Accrued interest 49.4 31.9 81.3 0.8 82.1
Scheduled payments (59.6) (31.9) (91.5) (1.7) (93.2)
Fees expensed 7.5 1.4 8.9 - 8.9
Fees on repricing of loans (1.6) - (1.6) - (1.6)
Voluntary repayments of borrowings (166.5) (197.1) (363.6) - (363.6)
Fees expensed on voluntary repayments
of borrowings 4.2 4.5 8.7 - 8.7
Currency translation (113.4) (45.4) (158.8) - (158.8)
--------------------------------------- -------- -------- ------------- ------------ ----------
At 31 December 2017 997.8 179.7 1,177.5 3.7 1,181.2
--------------------------------------- -------- -------- ------------- -------- ----------
Currency Denomination of Borrowings
2018 2017
EURm EURm
------------------ ------- ---------
US dollar 759.9 868.0
Euro 423.8 313.2
------------------ ------- -------
Total borrowings 1,183.7 1,181.2
------------------ ------- -------
Maturity of borrowings
2018 2017
EURm EURm
---------------------------- ------- ---------
Less than one year 4.4 3.0
Between one and five years 1,179.3 998.5
After five years - 179.7
---------------------------- ------- -------
Total borrowings 1,183.7 1,181.2
---------------------------- ------- -------
2015 agreements
The 2015 agreements comprise a package of secured loans
(consisting of a term loan, an asset-backed loan, and a revolving
credit facility) and unsecured senior notes.
The amounts outstanding under the agreements are:
2018 2017
EURm EURm
----------------------------------------------- -------- ----------
Principal outstanding:
US term loan 776.4 707.5
Euro term loan 428.8 317.7
----------------------------------------------- ------- -------
Main borrowing facilities (term loan) 1,205.2 1,025.2
----------------------------------------------- ------- -------
Unsecured senior notes - 183.6
----------------------------------------------- ------- -------
Total principal outstanding 1,205.2 1,208.8
----------------------------------------------- ------- -------
Issuance discounts and fees (23.8) (31.3)
----------------------------------------------- ------- -------
Main borrowing facilities and unsecured notes 1,181.4 1,177.5
----------------------------------------------- ------- -------
The term loan initially comprised tranches of $1,065.0 million
and EUR325.0 million. On 31 October 2017, the Group voluntarily
repaid $194.0 million (EUR166.5 million) of its US term loan. No
penalties were incurred as a result of the early payment. On 16
July 2018, the Group successfully executed a repayment and
modification of its external borrowings. The balance of 8.75%
unsecured senior notes of $220.5 million (EUR188.4 million) was
repaid using a combination of EUR115.0 million of additional
borrowing under the euro term loan, $41.0 million (EUR35.0 million)
of additional borrowing under the US term loan and EUR38.4 million
of existing cash. Interest rates and maturity dates of the Euro and
US term loans remained unchanged.
The principal outstanding of the US term loan in US dollars at
31 December 2018 was $890.7 million (2017: $849.7 million).
The interest payable on the US dollar term loan was US$ LIBOR
(minimum 0.75% p.a.) +2.75% p.a., and the interest payable on the
euro term loan was EURIBOR (minimum 0.75% p.a.) +3.0% p.a until 23
January 2018. On 23 January 2018, the Group met certain borrowings
criteria which enabled it to reduce the interest rate payable on
the US term loan by 0.25% p.a. to US$ LIBOR (minimum 0.75% p.a.)
+2.5% p.a., and the euro term loan by 0.25% p.a. to EURIBOR
(minimum 0.75% p.a.) +2.75% p.a., both effective from 30 December
2017.
The US dollar tranche was repayable in amounts of $2.7 million
per quarter until 31 October 2017. On 31 October 2017, the Group
made a voluntary repayment of this loan of $194.0 million as a
result of which no further capital payments are due on the US
dollar tranche until the balance falls due on 30 June 2022. The
euro tranche was repayable in amounts of EUR0.8 million per quarter
in the prior year and for the first six months of 2018. Following
the modification of the Groups' borrowings on 16 July 2018, the
euro tranche was increased and is now repayable in amounts of
EUR1.1 million per quarter, with the balance also falling due on 30
June 2022.
On 6 October 2015 the Group entered into hedging transactions
with a number of financial institutions which effectively converted
borrowings of $400.0 million at floating interest rates into
EUR355.0 million at a fixed interest rate of 4.2%, thereby reducing
foreign currency exposure for future cash flows and locking in
lower long-term Euro fixed interest rates.
Initial issuance discounts and fees of EUR63.3 million arising
from the 2015 agreements were capitalised in 2015. Following the
repricing of the term loans on 27 January 2017, new fees
capitalised in 2017 were EUR1.6 million; bringing the total fees
capitalised under the 2015 agreements to EUR64.9 million at 31
December, 2017. Following the Group's repayment and modification of
its external borrowings on 16 July 2018 as described above, a
further EUR2.2 million of directly attributable incremental fees
were capitalised bringing the total fees capitalised to EUR67.1
million. All capitalised fees are expensed using the effective
interest rate method over the remaining terms of the facilities. As
a result of the Group's voluntary repayment of its unsecured senior
notes in July 2018, unamortised transaction costs of $4.2 million
(EUR3.6 million) were released and recognised as exceptional
finance expenses in the year.
The asset-backed loan ("ABL") provides up to $100.0 million
depending upon the level of inventories and trade receivables in
the Group's US and Canadian businesses. The facility is also
available to be used to issue letters of credit on behalf of TI
Group Automotive Systems LLC, a subsidiary undertaking. Drawings
under the facility bear interest at US$ LIBOR +1.50% p.a. unless
the drawings are below $50.0 million when the rate is US$ LIBOR
+1.25% p.a. The revolving credit agreement provides a facility of
up to $125.0 million. Drawings under this facility bear interest in
a range of US$ LIBOR +3.0% to US$ LIBOR + 3.5% p.a. depending on
the Group's leverage ratios. Following the July 2018 refinancing,
both facilities are now due to expire on 23 July 2023.
The net undrawn facilities under the agreements are shown
below:
2018 2017
$m EURm $m EURm
Asset-backed loan:
Availability 89.7 78.2 86.5 72.0
Utilisation for letters of credit (3.0) (2.6) (3.1) (2.6)
Net undrawn asset-backed loan facility 86.7 75.6 83.4 69.4
Revolving credit agreement 125.0 109.0 125.0 104.1
----------------------------------------- ----- ----- ----- -----
Main borrowings: net undrawn facilities 211.7 184.6 208.4 173.5
----------------------------------------- ----- ----- ----- -----
Other Secured Loans
Subsidiaries in Italy and Spain have granted security over
certain of their assets in return for credit facilities from their
banks. The loans have total amortisation repayments of EUR0.1
million per annum payable quarterly (2017: EUR0.2 million). The
loan in Italy was fully repaid during the year.
Total Undrawn Borrowing Facilities
2018 2017
EURm EURm
----------------------------------- ----- -------
Floating rate:
Expiring within one year 6.0 5.8
Expiring after more than one year 184.6 173.5
----------------------------------- ----- -----
190.6 179.3
----------------------------------- ----- -----
Fixed rate:
Expiring within one year 3.9 3.9
----------------------------------- ----- -----
3.9 3.9
----------------------------------- ----- -----
Total at the end of the year 194.5 183.2
----------------------------------- ----- -----
Movements in Net Borrowings
Non-cash changes
--------------------------- ----------- --------- ------------------------------- --------
At 31
At 1 January Currency December
2018 Cash flows Fees expensed translation 2018
EURm EURm EURm EURm EURm
--------------------------- ------------ ---------- --------------- -----------
Cash and cash equivalents 287.2 70.6 - 2.3 360.1
Financial assets at FVTPL 2.9 (1.7) - - 1.2
Borrowings (1,181.2) 46.0 (10.5) (38.0) (1,183.7)
--------------------------- ----------- --------- ----------- ---------- --------
Total net borrowings (891.1) 114.9 (10.5) (35.7) (822.4)
--------------------------- ----------- --------- ----------- ---------- --------
Non-cash changes
--------------------------- ----------- ---------- ------------------------------- -------------
At 1 January Currency At 31 December
2017 Cash flows Fees expensed translation 2017
EURm EURm EURm EURm EURm
--------------------------- ------------ ---------- ----------------
Cash and cash equivalents 196.2 106.3 - (15.3) 287.2
Financial assets at FVTPL 2.9 - - - 2.9
Borrowings (1,698.7) 376.3 (17.6) 158.8 (1,181.2)
--------------------------- ----------- ---------- ----------- ---------- -------------
Total net borrowings (1,499.6) 482.6 (17.6) 143.5 (891.1)
--------------------------- ----------- ---------- ----------- ---------- -------------
9. Cash Generated from Operations
2018 2017
EURm EURm
--------------------------------------------------- ------ --------
Profit for the year 140.1 115.2
Income tax expense before exceptional items 77.0 68.2
Exceptional income tax benefit - (25.4)
--------------------------------------------------- ----- -----
Profit before income tax 217.1 158.0
--------------------------------------------------- ----- -----
Adjustments for:
Depreciation, amortisation and impairment charges 197.1 194.9
Losses/(gains) on disposal of PP&E and intangible
assets 0.6 (0.2)
Share option cost 4.0 11.3
Shares issued to Directors and certain employees - 1.0
Net finance expense after exceptional items 64.5 115.3
Unremitted share of profit from associates (0.3) 0.1
Net foreign exchange gains (1.2) (24.6)
Changes in working capital:
Inventories (21.7) (51.4)
Trade and other receivables 17.4 (20.2)
Trade and other payables (23.2) 45.3
Change in provisions 0.5 (0.2)
Change in retirement benefit obligations (5.2) (13.4)
--------------------------------------------------- ----- -----
Total 449.6 415.9
--------------------------------------------------- ----- -----
10. Events After the Balance Sheet Date
In March 2019, the Group paid down $56.5 million (EUR50.0
million) against its US dollar term loan.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR GGUAUWUPBGAB
(END) Dow Jones Newswires
March 20, 2019 03:00 ET (07:00 GMT)
Grafico Azioni Ti Fluid Systems (LSE:TIFS)
Storico
Da Feb 2024 a Mar 2024
Grafico Azioni Ti Fluid Systems (LSE:TIFS)
Storico
Da Mar 2023 a Mar 2024