TIDMTIFS
RNS Number : 4924V
TI Fluid Systems PLC
09 April 2019
9 April 2019
TI Fluid Systems plc
(the "Company")
Annual Report and Accounts 2018 and Annual General Meeting
2019
The Company announces that today it has released the below
listed documents:
-- Annual Report and Accounts for the financial year ended 31
December 2018 ("Annual Report and Accounts 2018");
-- Notice of the Annual General Meeting 2019 ("AGM"); and
-- Form of Proxy for the AGM.
In accordance with Listing Rule 9.6.1, these documents have been
submitted to the National Storage Mechanism and will shortly be
available for inspection at www.morningstar.co.uk/uk/nsm and on the
Company's website at www.tifluidsystems.com.
The AGM is scheduled to be held at 9:00 am on Thursday 16 May
2019 at The May Fair Hotel, Stratton Street, London W1J 8LT.
Enquiries:
TI Fluid Systems plc +44 (0)1865 871824
Alpna Amar
Investor Relations
FTI Consulting 44 (0)20 3727 1340
Richard Mountain
Nick Hasell
Matthew Paroly +44 (0)1865 871855
Company Secretary
About TI Fluid Systems plc
TI Fluid Systems (LSE: TIFS) is a leading global manufacturer of
fluid storage, carrying and delivery systems primarily for the
light duty automotive market. With nearly 100 years of automotive
fluid systems experience, TI Fluid Systems has manufacturing
facilities in 114 locations across 28 countries serving all major
global OEMs.
Appendix
The information below, which is extracted from the Annual Report
and Accounts 2018, is included solely for the purpose of complying
with DTR 6.3.5 and the requirements it imposes on issuers as to how
to make public annual financial reports. It should be read in
conjunction with the Company's preliminary results announcement
released on 20 March 2019. This announcement is not a substitute
for reading the full Annual Report and Accounts 2018. Page, note
and section references in the text below refer to page numbers,
note and section references in the Annual Report and Accounts
2018.
Statement of Directors' responsibilities in respect of the
financial statements
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulation.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have prepared the group financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union and parent company financial statements in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union. Under company law the directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
group and parent company and of the profit or loss of the group and
parent company for that period. In preparing the financial
statements, the directors are required to:
-- select suitable accounting policies and then apply them consistently
-- state whether applicable IFRS as adopted by the European
Union have been followed for the group financial statements and
IFRSs as adopted by the European Union have been followed for the
company financial statements, subject to any material departures
disclosed and explained in the financial statements
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and parent
company will continue in business.
The directors are also responsible for safeguarding the assets
of the group and parent company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the group and
parent company's transactions and disclose with reasonable accuracy
at any time the financial position of the group and parent company
and enable them to ensure that the financial statements and the
Directors' Remuneration Report comply with the Companies Act 2006
and, as regards the group financial statements, Article 4 of the
IAS Regulation.
The directors are responsible for the maintenance and integrity
of the parent company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Directors' confirmations
The directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the group and
parent company's position and performance, business model and
strategy.
Each of the directors, whose names and functions are listed in
the Board of Directors section of this report confirm that, to the
best of their knowledge:
-- the parent company financial statements, which have been
prepared in accordance with IFRS as adopted by the European Union,
give a true and fair view of the assets, liabilities, financial
position and profit of the company
-- the group financial statements, which have been prepared in
accordance with IFRS as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
profit of the group; and
-- the Strategic Review includes a fair review of the
development and performance of the business and the position of the
group and parent company, together with a description of the
principal risks and uncertainties that it faces.
-- In the case of each director in office at the date the Directors' Report is approved:
-- so far as the director is aware, there is no relevant audit
information of which the group and parent company's auditors are
unaware; and
-- they have taken all the steps that they ought to have taken
as a director in order to make themselves aware of any relevant
audit information and to establish that the group and parent
company's auditors are aware of that information.
This responsibility statement was approved by the Board of
Directors on 19 March 2019 and is signed on its behalf by:
William L. Kozyra, Chief Executive Officer and President;
and
Timothy Knutson, Chief Financial Officer
Principal risks and uncertainties
The Board is responsible for the Group's system of risk
management and internal controls. The Audit & Risk Committee
supports the Board by advising on the Group's overall risk
appetite, tolerance and strategy, current risk exposures and future
risk strategy.
A review of the Group's risk management framework used to
collate, report and manage business critical risks was presented to
the Audit & Risk Committee in March 2019. The Board has
concluded that a robust assessment of the Group's principal risks
had been undertaken.
TI Fluid Systems' global operations are exposed to a number of
risks which could, either on their own, or in combination with
others, have an adverse impact on the Group's results, strategy,
business performance and reputation which, in turn, could impact
upon shareholder returns. The following section highlights the
major risks that may affect the Group's ability to deliver the
strategy, as set out on pages 18 to 19. The mitigating activities
described below will help to reduce the impact or likelihood of the
major risk occurring, although the Board recognises it will not be
possible to eliminate these risks entirely. The Board recognises
there could be risks that may be unknown or that may be judged to
be insignificant at present, but may later prove to be
significant.
Global light vehicle production volumes
Description
TI Fluid Systems has 114 manufacturing locations in 28 countries
on five continents and a substantial amount of its revenue is
closely linked to the economic cycle and the general macro-economic
environment.
Impact
Historically, there has been close correlation between economic
growth and the global light vehicle production volumes. The cost
structure of the business, operating across manufacturing
facilities in 114 locations, means that a large reduction in
revenue will have an impact on profitability.
Controls and mitigation
-- TI Fluid Systems' presence in 28 countries supplying a wide
range of customers acts as a hedge to neutralise localized economic
volatility.
-- The Group has an extensive manufacturing presence in emerging
and other low-cost markets which currently have relatively low
rates of light vehicle penetration per head of population and are
believed to have strong growth potential.
-- Although the Group's products are primarily for light
vehicles, it operates across both a broad geographic footprint and
a diversified range of vehicle platforms, brands and models.
-- A proportion of the Group's workforce in a number of local
markets are employed on temporary contracts, which provides some
flexibility in the cost-base.
-- The Group monitors closely and responds to any changes in
customer demand on a local or group-wide basis.
Product quality
Description
TI Fluid Systems' business is based on the repeatable supply and
delivery of components and parts to an agreed specification and
time.
Impact
Failure to meet customer requirements or specifications can
cause long-term damage to the Group's reputation and have financial
consequences, such as the loss of a customer, warranty claims and
product liability.
Controls and mitigation
-- TI Fluid Systems operates rigorous quality control systems
designed to ensure a high-quality standard for all products,
including testing and validation during the design and production
phases.
-- The Group collaborates with key customers to evaluate and
improve quality control standards and to confirm the compliance of
its manufacturing processes with customers' quality standards.
-- Quality systems and processes operated at local manufacturing
level are subject to oversight by divisional quality teams.
-- Where necessary, the Group's manufacturing facilities
maintain relevant industry accreditations, such as TS 16949.
-- The Group monitors the field performance of its products in
order to seek to continuously improve product quality.
Competition and customer pricing pressure
Description
This risk encompasses a number of identified global trends in
the markets in which TI Fluid Systems operates. The Group operates
in a dynamic competitive environment and faces competition from
other manufacturers and suppliers of automotive components in each
of the market segments in which it operates. The Group may be
subject to pressure from customers to reduce costs on current
contracts. The environment for bidding and securing new contract
awards from OEMs is competitive.
Impact
The Group's customers face constant pressure to lower their
selling and production costs to be competitive against their peers
and may require reductions in the selling price of the Group's
systems and components over the term of a vehicle platform or
model. Commercial activity by competitors, or changes in their
products or technologies, could impact upon the Group's market
share and profitability.
Controls and mitigation
-- The Group seeks to offset pricing pressure by achieving
improved operating efficiencies and cost reductions.
-- A growing trend by customers to standardise and globalise
vehicle platforms has the potential to minimise the Group's
exposure to the cancellation of any single vehicle platform or
model.
-- TI Fluid Systems has a strong brand and industry leading
technology which supports its status as a key supplier to its
customers.
-- The Group engages in extensive and regular dialogue and has
strong commercial and engineering relationships with key
customers.
-- The Group uses market intelligence and competitor analysis to
support its market activities and inform investment decisions.
-- Across the Group there is an emphasis on research and
development and improving the technical content of products.
Business continuity
Description
TI Fluid Systems' business is based upon achieving assurance in
quality and reliability across all its locations and their
products. Business continuity encompasses a number of areas of risk
to the Group, including key supplier failure, sourcing of raw
materials, exposure to price fluctuations of key raw materials,
maintaining stable labour relations, and ensuring the reliability
of the Group's management systems and IT infrastructure. In
addition, the Group is exposed to risks from accidents and
incidents arising from health and safety failures.
Impact
A loss of production capability at a facility, or quality
failings in products, could lead to an inability to supply
customers, reduce volumes and/or increase claims made against the
business under warranties. In periods of high demand or in the
event of supplier difficulties, availability of raw materials may
be constrained which could result in rapid movements in price and
have an impact on the profitability of the Group's operations. In
certain circumstances the loss of a supplier, or supplier quality
failing, could lead to an inability to supply products in a timely
or efficient manner or risk impacting adversely on engineering
quality.
The loss of systems capability at a Group facility as a result
of IT failure, or other events such as strike action by employees,
could impact the Group's ability to supply customers. Injuries
arising from health and safety incidents could result in lost time,
reduce employee morale and possible changes in working practices.
Serious incidents can also have a detrimental impact on the Group's
reputation.
Controls and mitigation
-- The Group continues to expand its business continuity
planning (BCP) to enhance the localised continuity planning
strategy operated at each facility.
-- The Group's global network of facilities provides a degree of backup capacity.
-- The Group maintains a scheduled programme of maintenance and inspection of all equipment.
-- The wide geographic spread of operations, purchasing and
supply chain functions allows the Group to use a range of
techniques to address potential supply disruption, such as
long-term purchase contracts, dual sourcing and ongoing research
and development into alternative materials and solutions.
-- In certain markets the Group uses preferred suppliers for major materials.
-- The Group maintains business interruption insurance and has added cyber incident coverage.
-- The Group participates in a number of works councils and
other represented employee forums and seeks to establish and
maintain good relationships with its employees and unions.
-- The Group continues to assess and strengthen its cyber security programme.
-- The Group's decentralised IT systems worldwide provide some
resilience against the loss of production or systems capability to
the Group as a whole.
-- IT has developed and implemented a disruption recovery plan for the organisation.
-- The Group has an embedded health and safety culture and
operates a global health and safety policy, with local health and
safety operations in place in each manufacturing facility.
-- Health and safety performance is monitored regularly by each division and by the Group.
Product development and changes in technology
Description
The automotive industry is subject to changes in technology and
the Group's products are subject to changes in regulatory
requirements to reduce emissions and increase fuel economy.
Operating across numerous markets and territories requires
compliance with a wide variety of regulations. Changes in consumer
demand, e.g. the popularity of a particular vehicle type, model,
platform or technology such as HEVs and EVs may also impact on
demand for the Group's products. In addition, the Group's products
have performance-critical applications and have high levels of
technical content and know-how.
Impact
Failure to keep up with changes in technology in the light
vehicle automotive industry or in competitive technologies may
render certain existing products obsolete or less attractive as
well as damaging the Group's market position and brand strength.
Failure to comply with all relevant regulatory requirements could
affect the Group's reputation and/or its ability to operate in
certain markets or territories. Changing environmental regulations
could affect demand for certain products. The Group's technologies
and intellectual property rights need to be kept current through
continuous improvement and research and development and are
susceptible to theft, infringement, loss and/or replication by
competitors.
Controls and mitigation
-- The Group is engaged in continued investment in alternative
engineering solutions and the development of more advanced designs
and innovative products to ensure compliance with changes to
environmental regulations and customer demand.
-- TI Fluid Systems has an international network of five
technical centres which focus on research and development.
-- The Group seeks to maintain close relationships and technical
partnerships with key customers.
-- The Group has established seven regional application centres
which focus on application engineering worldwide.
-- Both Group and divisional management monitor and assess
relevant regulatory requirements and the likelihood and impact of
any changes.
-- The Group's products, materials and processes are continually
developed and enhanced through research and development and
technical input.
-- TI Fluid Systems actively registers, manages and enforces its intellectual property rights.
Operating globally and regulatory compliance
Description
TI Fluid Systems has operations globally, with manufacturing
facilities in 28 countries across five continents. The markets in
which the Group operates are covered by a range of different
regulatory systems and complex compliance requirements and may also
be subject to cycles, structural change and other external factors,
such as changes in tariffs, customs arrangements and other
regulations. In addition, operating across a number of territories
exposes the Group to currency variations.
Impact
A substantial downturn in one or more key markets could have a
material adverse impact on the Group's profitability, cash flow and
carrying value of its assets. Significant changes to the different
regulatory systems and compliance requirements in and between the
countries and regions in which the Group operates may have a
negative impact on the Group's operations in a particular country
or market. The risks associated with Brexit are not considered
material to the Group. High foreign exchange volatility may
increase financing costs.
Controls and mitigation
-- The Group's international footprint provides some protection
against a downturn in particular territories or regions.
-- The markets and any changes to the regulatory environment in
which TI Fluid Systems operates, including tariffs and trade
policies, are continually monitored and assessed.
-- Changes to the Group's investment strategy and cross- border
relocation might result from a significant change in the regulatory
environment in a particular country or region.
-- The Group's treasury policy covers, inter alia, the use of
currency contracts, investment hedging policy and regular reporting
of foreign exchange exposure.
-- Focus throughout the Group on adherence to our Code of
Business Conduct (COBC), including ongoing training and review of
policies and procedures.
Key personnel dependencies
Description
The future success of TI Fluid Systems is dependent upon the
continued services of key personnel. Succession is a routine
consideration given some of the Group's key global positions at all
levels, including business unit, division and Group.
Impact
TI Fluid Systems competes globally to attract and retain
personnel in a number of key roles. A lack of new talent, the
inability to retain and develop existing talent, or replace
retiring senior management could hinder the Group's operations and
strategy. A loss of key personnel, with associated intellectual
property and know-how, could disrupt our business and strategy. In
a number of local markets the Group may experience a shortage of
skilled and experienced personnel for certain key roles.
Controls and mitigation
-- The Group applies bespoke terms and conditions of employment
for key personnel where appropriate.
-- The Group has in place incentive arrangements, including
bonuses, pensions and long-term incentive plans.
-- The Group operates established recruitment and development programmes.
-- Succession plans continue to be reviewed for relevant key positions.
Related Party Transactions
Transactions with Affiliates of the funds managed by Bain
Capital
The 'funds managed by Bain Capital' represent affiliates of and
funds advised by Bain Capital LLC.
During the year, the Group procured products and materials
totalling EUR0.3 million (2017: EUR0.6 million) from companies in
which the funds managed by Bain Capital, the Group's ultimate
controlling party since 30 June 2015, had investment interests.
These transactions were completed on the basis of normal commercial
terms.
Since the IPO in 2017, the Group has not incurred any management
charges from Bain (2017: EUR3.9 million).
Transactions with Group Companies
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.
The Group holds 73% of the shares in Hanil Tube Corporation
('Hanil') which is located in South Korea. At 31 December 2018,
Hanil had trade and loan receivables net of payables from other
Group undertakings amounting to EUR23.6 million (2017: EUR20.7
million) and made sales within the Group during the year of EUR7.6
million (2017: EUR8.7 million).
The Group holds 97% of the shares in Bundy India Ltd. At 31
December 2018, Bundy India Ltd had trade and loan payables net of
receivables to other Group undertakings amounting to EUR7.2 million
(2017: EUR7.6 million) and made sales within the Group during the
year of EUR9.8 million (2017: EUR8.7 million).
Ultimate controlling party
The funds managed by Bain Capital have been the Company's
ultimate controlling party since its incorporation.
Transactions with Associates
2018 2017
EURm EURm
Amounts owed to associates 1.9 3.0
------ ------
Purchases from associates
in the year 13.7 19.6
------ ------
Transactions with related parties other than subsidiaries are
attributable solely to the ordinary business activities of the
respective company and were conducted on an arm's-length basis.
END
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