TIDMTIFS
RNS Number : 3636G
TI Fluid Systems PLC
17 March 2020
17 March 2020
TI Fluid Systems plc
Results for the 12 months ended 31 December 2019
TI Fluid Systems plc, a leading global manufacturer of
automotive fluid storage, carrying and delivery systems for light
vehicles announces its 2019 results.
Management basis* As reported
EURm 2019** 2018 % Change 2019** 2018 % Change
----------- ----------- ---------- ----------- ----------
Revenue 3,411.1 3,472.8 (1.8)% 3,411.1 3,472.8 (1.8)%
% Change at constant currency (3.5)%
Adjusted EBIT / Operating
Profit 340.4 373.5 (8.9)% 258.9 281.1 (7.9)%
Margin 10.0% 10.8% (80)bps 7.6% 8.1% (50)bps
Adjusted Net Income / Profit
for the year 150.3 155.2 (3.2)% 144.6 140.1 3.2%
Earnings per share 28.91 29.87 (3.2)% 27.24 26.53 2.7%
Adjusted Free Cash Flow*** 171.5 146.2 17.3%
Dividend (EUR cents) 8.96 8.96 -% 8.96 8.96 -%
*Management basis metrics are Non - IFRS measures as defined on
pages 16 to 17
**Current year results include the impact of applying IFRS 16
whilst the prior year comparatives have not been restated
***IFRS 16 - Leases impact on Adjusted Free Cash Flow totalled
EUR26.8m in 2019. Impacts on other measures are shown on page
18
Group Highlights:
-- Successfully continuing to execute our organic growth
strategy in the global automotive fluid systems market
-- Strategic investment in a new thermal products facility in
Morocco to primarily supply growing battery electric vehicle
('BEV') production
-- Thermal product and system collaboration with key customers for BEVs
-- Continuation of thermal product wins on several smaller regional BEVs
-- First new business win with a Japanese customer using our
plastic fuel tank Integrated Transfer System ('ITS') process
technology for a large mild hybrid electric vehicle ('HEV')
platform in North America
-- Global light vehicle production volumes remained challenging,
declining 5.6% year on year
-- Revenue was 3.5% lower year on year, at constant currency and
outperformed global light vehicle production volumes by 2.1%. At
actual rates, revenue declined by 1.8% year on year
-- Adjusted EBIT margin and operating profit margin primarily
impacted by lower volumes, particularly in Fluid Carrying Systems
('FCS') with a weak China environment and cost increases in
Europe
-- Business strength through strong cash generation
-- Adjusted Free Cash Flow of EUR171.5 million
-- Strengthened balance sheet through secured term loan pay down
with a EUR50 million voluntary payment in March 2019
-- 2019 final dividend of 5.94 Euro cents per share, maintained
at 2018 level, which represents a full year pay-out in excess of
our 30% of Adjusted Net Income dividend policy. Dividend cover of
3.2 times Adjusted Basic EPS (2018: 3.3 times)
William L. Kozyra, Chief Executive Officer and President,
commented:
"2019 represents steady progress in our organic growth strategy
for fluid systems with the award of a high volume HEV fuel tank
programme in North America. We also continue to invest in the
business with our new thermal products facility in Morocco to
primarily supply BEVs. The Group was successful in being awarded
additional smaller regional EV programmes along with new
collaboration projects with key customers, including in China, to
reduce weight, and maximise power efficiency in the vehicle through
thermal products and systems. We remain well positioned as a
leading partner for our customer's thermal BEV needs. The Group
remains well positioned for the automotive megatrends of reduced
emissions and electrification.
The Group continued to outperform global light vehicle
production, however, the global automotive market remains
challenging given the uncertainty presented by the COVID-19
(coronavirus) outbreak to regional and global economies. We remain
confident in our strategy, business model, operating flexibility
and strength in our ability to generate positive free cash
flow."
Results presentation
TI Fluid Systems plc will host a teleconference for analysts and
investors at 9.00 am UK time on 17 March 2020.
Analysts wishing to join should contact FTI Consulting to
register and may listen to the presentation live by using the
details below.
Conference Call Dial-In Details:
UK: +44 (0) 330 336 9105
Conference Code: 1931880
The presentation will be available at 7:00 am UK time from
www.tifluidsystems.com. An audio recording will be available on our
website in due course.
Enquiries
TI Fluid Systems plc
David J Royce
Investor Relations
Tel: +1 (248) 376 8624
FTI Consulting
Richard Mountain
Nick Hasell
Tel: +44 (0)20 3727 1340
Chief Executive Officer's review
Our business continues to be resilient with strong margins and
leading cash flow generation.
We are pleased to report overall solid performance in 2019
despite the challenging global vehicle production environment.
2019 performance
Global light vehicle production volume declined by 5.6% in 2019,
compared to the prior year. We delivered revenue of EUR3.4 billion
(-3.5% at constant currency), or 2.1% above global light vehicle
production. If we include the impact of currency translation,
revenue slightly declined by 1.8%.
We also continued to generate strong Adjusted EBITDA of EUR498
million (14.6% margin) and Adjusted EBIT of EUR340 million (10.0%
margin). Profit for the year was EUR145 million (2018: EUR140
million) and Adjusted Free Cash Flow amounted to EUR172 million
(2018: EUR146 million). These strong results compared well in our
sector.
Our ability to maintain our strong financial performance with
solid margins and excellent positive cash flow in the face of the
prevailing market conditions demonstrates the Group's resilience
and the strength of our strategy, business model and management
focus.
Strategy update
In 2019, we continued our success as a leading global
manufacturer of highly engineered fluid storage, carrying and
delivery systems for light vehicles through the execution of our
strategy. Our financial performance benefited from our commitment,
focus and dedication to designing and producing products for
greener vehicles. We also continue to benefit from operational
flexibility and our balanced customer, platform and regional
profile. We continue to be confident in our focus on
electrification and our HEV and BEV strategy which is progressing
well.
Use our strength in key product areas to drive the Group's
market share
In 2019, we have worked to ensure the successful launch of the
two significant high volume thermal product programmes for EV
platforms that were awarded to us last year by two leading high
volume OEMs. Based on expected orders for thermal products on these
two BEV platforms, we anticipate that the Group will have an
approximate 50% share of these combined BEV platforms, representing
a total lifetime revenue opportunity of approximately EUR700
million. These thermal programmes are expected to last for the
eight to ten year life of the BEV vehicle models. Production is
expected to launch in 2020 for the first of these platforms. The
Group also launched and won other smaller, regional BEV platforms
in 2019.
Earlier this year, the Group set up a new facility in Tangier,
Morocco, to support the launch of these and future thermal products
for BEVs. The 7,700 square metre facility expanded the Group's
extrusion capabilities, expertise and capacity. The Group's
investment in Morocco also provides logistics savings as well as a
competitive cost structure with access to highly qualified labour.
Our expectation is that the business in Morocco will continue to
grow with the strength of our longstanding global customers, which
value Morocco's competitive export focus and strategic location.
The facility marks the Group's second location in Morocco.
In addition, I am very pleased that our strategic investment in
Morocco was done within the Group's overall capital expenditure
target of 3-4% of revenue.
In 2019, the Group also won a notable programme with a Japanese
OEM in North America for the supply of plastic fuel tanks. The
total lifetime units of these fuel tanks is estimated at 710,000
based on customer planning volumes. A significant number of these
tanks are for HEVs. We are pleased that this award, together with
other recent fuel tank business awards, continue to demonstrate
that our technology and advanced products are key elements that
support the ongoing mission of our OEM customers to meet their
stringent emission reduction and fuel efficiency targets. Our HEV
fuel tank continues to be well recognised as an industry leading
design and manufacturing product. Our win rate of HEV fuel tanks is
increasing.
Maintain balanced customer, platform, regional and product
diversification
The Group has highly diversified revenue with no dependency on
one geography. In 2019, we generated approximately 40% of our
revenue in Europe and Africa, 30% in Asia Pacific, 28% in North
America and 2% in Latin America. This diversification continues to
be a benefit for the Group.
We believe that the Group's long history of engineering and
manufacturing high-quality, reliable, performance-critical products
for global OEMs has built our positive reputation as an industry
leader and allowed us to develop strong and lasting relationships
with all of our customers. The Group has a highly diversified
customer base of global and local OEMs with only three customers,
individually, representing more than 10% of revenue in 2019.
Given our deep industry experience and history, we have gained
familiarity with each of our customers' unique engineering, design
and development processes. As a result, the Group is viewed as a
'trusted partner' by our OEM customers.
We continue to enhance our strategic position through
collaboration and development projects with key customers for the
design and engineering of thermal products for HEVs, BEVs and, most
recently AEVs. These projects are across different platforms and
regions, including China. We continue to work with the OEMs to
reduce weight in the vehicle through thermal products and systems
that take advantage of our technology and nylon capabilities.
Strengthen the Group's position as an advanced technology leader
in fluid systems to meet industry megatrends
As the requirements of OEMs have continued to advance, the Group
has capitalised on its knowledge of fluid components, lighter
weight material and systems architecture to provide our OEM
customers with more advanced designs and products to assist them to
meet regulatory requirements and consumer expectations. Most of our
products contribute to a cleaner world by making vehicles
greener.
The Group continues to invest in its fluid management portfolio
to include advanced products that are required to reduce emissions
and improve fuel economy in vehicles such as pressurised fuel tanks
and thermal management products.
The Group is the only global supplier with a fully integrated
design, development, manufacturing and supply capability for the
fuel tank system.
Capitalise on the Group's global scale, footprint and
position
The Group has significant manufacturing presence in all of the
major geographies for OEM vehicle production. In 2019, the Group
had 108 locations across 28 countries on 5 continents. Being in
close proximity to our OEM customers serves the Group very
well.
With respect to China, we were able to successfully flex our
cost base to mitigate the impact of the ongoing US-China trade
conflict and protect our financial performance, particularly our
Fluid Carrying Systems ('FCS') division which has had a large
presence in China for decades. Our Fuel Tank & Delivery Systems
('FTDS') division continues to grow in China, benefiting from the
ongoing conversion of heavy steel tanks to lighter weight plastic
tanks as well as tighter emission standards that are creating
higher demand for our partial and zero emission tanks.
In 2019, China made up 19% of the Group's revenue. China remains
the world's largest vehicle market despite the short-term
volatility in volumes.
Deliver strong growth, profitability and cash flow
generation
The Group has a consistent record of delivering strong financial
results.
In 2019, we successfully managed our fixed costs and
profitability despite lower global light vehicle production
volumes, particularly in China. We also successfully managed our
net pricing and commodity cost impacts to maintain broadly
consistent financial performance despite short-term market
headwinds.
Looking ahead
We continue to build on and invest in our leadership in
technology, global manufacturing and competitive cost structure to
support long-term revenue growth, profitability and cash flow
generation.
The impact of the current COVID-19 outbreak is highly uncertain
at this time. We are taking a number of mitigation actions but some
negative impact in the short-term appears likely. Over the longer
term, we expect to benefit not only as global light vehicle
production continues to grow, but also from increased demand for
our advanced fluid handling products and systems and higher content
opportunities driven by the underlying megatrends of emission
reduction, increased fuel efficiency and electrification. These
megatrends will continue to be front and centre for our sector.
We prioritise variable and fixed cost management and capital
allocation to deliver sustainable growth.
We believe the Group's strong customer relationships, extensive
global footprint and trusted reputation as a leading fluid systems
provider has contributed to thermal BEV collaboration agreements,
HEV and BEV production contracts and will support continued growth
in these markets for many years to come.
I remain excited about the path we are on and the Group's
future.
Our people
The Group relies on the skills and expertise of its excellent
employees worldwide, and the results of 2019 would not have been
achieved without the commitment and dedication of our entire global
team, whom I would like to recognise and sincerely thank.
Protecting the health and safety of our people is our highest
priority. We have taken proactive actions around the world,
including travel restrictions and flexible work programmes. I am
happy to report that, as I am writing this statement, we are not
aware of any of our employees that have been infected with
COVID-19.
We will continue to manage through the difficult environment in
2020.
Chief Financial Officer's Report
We are well placed to continue outperforming global light
vehicle production and delivering strong financial performance.
Table 1: Key Performance measures EURm
Management basis* As reported
2019** 2018 % Change 2019 2018 % Change
----------- ----------- ---------- ----------- ----------
Revenue 3,411.1 3,472.8 (1.8)% 3,411.1 3,472.8 (1.8)%
% Change at constant currency (3.5)%
Adjusted EBITDA 497.8 484.3 2.8%
Margin 14.6% 13.9% 70 bps
Adjusted EBIT / Operating
Profit 340.4 373.5 (8.9)% 258.9 281.1 (7.9)%
Margin 10.0% 10.8% (80)bps 7.6% 8.1% (50)bps
Adjusted Net Income / Profit
for the year 150.3 155.2 (3.2)% 144.6 140.1 3.2%
Earnings per share 28.91 29.87 (3.2)% 27.24 26.53 2.7%
Adjusted Free Cash Flow 171.5 146.2 17.3%
Dividend (EUR cents) 8.96 8.96 -% 8.96 8.96 -%
*Management basis metrics are Non - IFRS measures as defined on
pages 16 to 17
**Current year results include the impact of applying IFRS 16
whilst the prior year comparatives have not been restated. Impacts
on our key measures are shown on page 18
Global light vehicle production has a significant influence on
the Group's performance. In 2019, global light vehicle production
decreased by 5.6% to 88.9 million vehicles compared to the prior
year. Our revenue continued to outperform global light vehicle
production.
Revenue decreased by EUR124.1 million, or 3.5% year over year on
a constant currency basis, to EUR3.4 billion and exceeded the
global light vehicle production change by 2.1% in 2019. If we
include the positive impact of currency of EUR62.4 million,
reported revenue declined by EUR61.7 million, or 1.8% year over
year.
We generated Adjusted EBIT of EUR340.4 million with a margin of
10.0%, a reduction of 0.8% from the prior year Adjusted EBIT
margin. The margin decline was primarily due to lower volumes in
our FCS segment, particularly in China.
We delivered Adjusted Net Income of EUR150.3 million, compared
to EUR155.2 million in the prior year. Profit for the year was
EUR144.6 million compared to EUR140.1 million in 2018. Basic EPS
was 27.24 Euro cents, an increase of 2.7% from the prior year, and
Adjusted Basic EPS was 28.91 Euro cents, a decrease of 3.2% from
2018. 2019 was also another year of strong cash flow performance,
where we delivered Adjusted Free Cash Flow of EUR171.5 million,
EUR144.7 million excluding the EUR26.8 million impact of IFRS 16 -
Leases.
The new accounting standard for Leases, IFRS 16, was adopted
from 1 January 2019. The Group has applied the modified
retrospective approach and therefore has not restated its
comparative figures. Accordingly, some of the key performance
measures presented above and in this report are not comparable with
the prior year. Table 9 on page 18 details the impact of IFRS 16 on
individual line items.
Automotive Markets
Global light vehicle production volumes softened by 5.6% in 2019
to 88.9 million vehicles as shown in table 2. The softening was
across all major regions.
Table 2: Global light vehicle production volumes: millions of
units
2019 % Change
Europe, including Middle East and Africa 23.1 (5.9)%
Asia Pacific 46.2 (6.2)%
North America 16.3 (3.9)%
Latin America 3.3 (4.5)%
Total global volumes 88.9 (5.6)%
----------------------------------------------- ----- ------
Source: IHS Markit, February 2020 and Company estimates.
Change percentages calculated using unrounded data.
Revenue
Our revenue in each of the regions and by segment is included in
table 3.
Table 3: Revenue by region and by segment EURm
% Change
at constant
2019 2018 Change % Change currency
Total Group Revenue 3,411.1 3,472.8 (61.7) (1.8)% (3.5)%
By Region
Europe and Africa 1,368.6 1,398.6 (30.0) (2.1)% (2.1)%
Asia Pacific 1,030.6 1,032.2 (1.6) (0.2)% (1.5)%
North America 936.7 971.9 (35.2) (3.6)% (8.6)%
Latin America 75.2 70.1 5.1 7.3% 15.0%
By segment
Fluid Carrying Systems ("FCS") 1,917.6 2,026.7 (109.1) (5.4)% (7.2)%
Fuel Tank and Delivery Systems
("FTDS") 1,493.5 1,446.1 47.4 3.3% 1.6 %
Group revenue in 2019 was EUR3.4 billion, a decrease of 3.5%
year over year at constant currency and 2.1% better than the change
in global light vehicle production. Favourable exchange rate
movements of EUR62.4 million resulted in revenue being 1.8% lower
than the prior year.
In Europe and Africa, revenue at constant currency was 2.1%
lower than the prior year and outperformed light vehicle production
in the region by 3.8%. Europe and Africa light vehicle production
declined by 5.9%. Revenue outperformance was primarily due to new
business launches and favourable programme ramp up impacts,
particularly in FTDS, offset by lower volumes in FCS.
In Asia Pacific, revenue at constant currency declined by 1.5%
and outperformed light vehicle production in the region by 4.7%.
Asia Pacific light vehicle production declined by 6.2%. The
weakness in light vehicle production was most notable for us in
China. The Group generates 19% of its revenue in China, driven by
our longstanding market position in our brake and fuel lines
business within our FCS segment. Accordingly, FCS revenue was
impacted by the volume declines in China. Despite this we continued
to outperform in the region, primarily through continued new
business success with our fuel tanks in FTDS in China where the
Group is benefiting from the automotive megatrends of reduced
evaporative emissions and fuel efficiency, driven by the ongoing
switch from steel to plastic fuel tanks.
In North America, revenue at constant currency was 8.6% lower
than the prior year, or 4.7% below light vehicle production volume.
North America light vehicle production declined by 3.9%. Revenue
was impacted by OEM programme relocations to Europe and China as
well as mix, with the Group's lower exposure to SUVs and light
truck programmes in this region.
FCS revenue at constant currency declined by 7.2% from the prior
year to EUR1.9 billion. The FCS segment was particularly impacted
by lower production in China and mix in North America.
FTDS revenue at constant currency increased by 1.6% to EUR1.5
billion. FTDS continued to benefit from new wins in Asia Pacific
and resilient performance in Europe.
Currency exchange rates had a net favourable impact of EUR62.4
million on revenue compared with the prior year. This was mostly
due to weakening of the Euro against a number of key currencies in
countries where the Group has manufacturing operations.
Accordingly, revenue declined by 1.8% to EUR3.4 billion at reported
rates. Table 4 below sets out the movement in exchange rates most
relevant to our operations.
Table 4: Exchange Rates
2019 year 2018 year
Key Euro exchange rates 2019 Average 2018 Average % Change end end % Change
========================= ============ ============ ========== ========= ========= ==========
US dollar 1.120 1.181 (5.2)% 1.122 1.147 (2.2)%
========================= ============ ============ ====== ========= =========
Chinese renminbi 7.731 7.805 (0.9)% 7.765 7.890 (1.6)%
========================= ============ ============ ====== ========= ========= ======
South Korean won 1,304 1,299 0.4% 1,286 1,278 0.6%
========================= ============ ============ ====== ========= ========= ======
Operating profit, Adjusted EBITDA* and Adjusted EBIT*
We use several financial measures to manage our business,
including Adjusted EBITDA and Adjusted EBIT, which are non-IFRS
measures, but are measures of profitability that have been used
consistently by the Group. The metrics are also used in certain of
our compensation plans and to communicate to our investors. Table 5
shows a reconciliation between the reported measure, operating
profit, Adjusted EBITDA and Adjusted EBIT.
Table 5: Calculation of Adjusted EBITDA* and Adjusted EBIT*
EURm
2019 2018
Operating profit 258.9 281.1
-------------------------------------------------------- ------ ------
Depreciation and impairment of PP&E 108.6 101.5
Depreciation of right-of-use assets 31.5 -
Amortisation and impairment of intangible assets 89.8 95.6
Share of profit of associates 0.3 0.5
EBITDA 489.1 478.7
-------------------------------------------------------- ------ ------
Net foreign exchange gains (0.5) (1.2)
Dividend received from associates 0.5 0.2
Restructuring costs 9.0 7.1
Share of profit of associates (0.3) (0.5)
Adjusted EBITDA 497.8 484.3
-------------------------------------------------------- ------ ------
Less:
Depreciation and impairment of PP&E (108.6) (101.5)
Depreciation of right-of-use assets (31.5) -
Amortisation and impairment of intangible assets (89.8) (95.6)
Add back:
Depreciation uplift arising on purchase accounting 14.5 15.7
Amortisation uplift arising on purchase accounting 58.0 70.6
Adjusted EBIT 340.4 373.5
-------------------------------------------------------- ------ ------
* See Non-IFRS measures
Operating profit of EUR258.9 million (2018: EUR281.1 million)
was impacted by lower revenue and partially offset by the adoption
of IFRS 16 which had a EUR5.5 million positive impact being the net
of the operating lease charges and the additional depreciation on
the right of use assets. As part of our ongoing pension management,
we executed a voluntary lump sum buyout exercise in the US. This
generated a EUR9.1 million settlement gain. Additionally a
definitive ruling on a Brazilian indirect tax matter delivered a
EUR4.8 million benefit to our operating profit. Both these 2019
gains offset higher costs and charges incurred in prior years.
Adjusted EBITDA was EUR497.8 million (2018: EUR484.3 million)
and Adjusted EBITDA margin was 14.6% (2018: 13.9%) where the lower
operating profit as a result of lower revenue was offset by the
impact of adopting IFRS 16 which had a EUR37.2 million benefit due
to the reversal of the operating lease charges. The main adjusting
item relates to restructuring where we took action in our
operations in Europe and North America.
Adjusted EBIT was EUR340.4 million (2018: EUR373.5 million) and
Adjusted EBIT margin was 10.0% (2018: 10.8%). This change was
impacted by conversion on lower revenue, partially offset by
reductions in overhead costs and the adoption of IFRS 16. We
continue to manage our costs in line with the reduced volumes in
order to minimise the impact on margins. Depreciation relating to
right-of-use assets recognised as part of IFRS 16 accounted for
EUR31.5 million of the increase in the depreciation and impairment
charge of PP&E.
By segment, FCS Adjusted EBIT was EUR199.4 million (2018:
EUR241.0 million) with Adjusted EBIT margin of 10.4% (2018: 11.9%).
FCS continues to achieve double digit margins despite the
prevailing market environment. The year over year decline in margin
reflected the volume reduction particularly in China, where we have
a high market share, as well as increases in resin costs.
FTDS Adjusted EBIT increased by EUR8.5 million to EUR141.0
million (2018: EUR132.5 million) with Adjusted EBIT margin of 9.4%
(2018: 9.2%). The increase in margin reflects the benefits of mix
and strong operational performance.
Net finance expense
Net finance expense for the year was EUR57.5 million, a decrease
of EUR7.0 million from the prior year.
We benefited from the full year impact of the interest savings
following the repayment of the 8.75% unsecured senior notes in July
2018, and a further EUR50 million term loan repayment in March
2019. These benefits amounted to EUR4.5 million. 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. There was no equivalent charge in
2019. These benefits were partially offset by EUR10.5 million of
interest on lease liabilities, which have been recognised following
the adoption of IFRS 16.
Taxation
Income tax expense before exceptional items was EUR57.1 million
(2018: EUR77.0 million), which represents an Effective Tax Rate of
28.3% (2018: 35.5%). The tax expense was EUR19.9 million lower than
2018 due to an overall decrease in taxable profits, and the EUR12.2
million net benefit arising from the completion of a prior year
related Research & Experimentation claim in the US. Recognition
of this claim favourably impacts the Effective Tax Rate by
5.2%.
The Adjusted Effective Tax Rate, which was calculated by
adjusting for the impact of UK losses where no tax relief is
available, and prior year tax movements, including the Research
& Experimentation benefit, was 32.3% (2018: 32.2%). This
remained largely consistent with the prior year as the global mix
of profits and territories in which the Group operated remained
broadly the same.
Table 6 shows the calculation of the Adjusted Effective Tax
Rate.
Table 6: Calculation of Adjusted Effective Tax rate* EURm
Profit Profit
before before
tax Tax charge tax Tax charge
2019 2019 2018 2018
As reported 201.7 (57.1) 217.1 (77.0)
Effective Tax Rate 28.3% 35.5%
Add back:
UK book loss 35.0 62.8
Prior year deferred tax charge 5.0 1.0
Less:
Prior year tax benefit related to
US Research & Experimentation claims (12.2) -
Prior year corporate tax benefit (12.1) (14.2)
Adjusted profit before income tax
/ Tax charge 236.7 (76.4) 279.9 (90.2)
------- -------- ------- --------
Adjusted Effective Tax Rate 32.3% 32.2%
*See Non-IFRS measures
Adjusted Net Income* and profit for the year
Adjusted Net Income is a component of the Adjusted Basic EPS
calculation and is also used to guide our dividend calculation. The
calculation of Adjusted Net Income is shown in table 7a.
Table 7a: Adjusted Net Income* EURm
2019 2018
Adjusted EBITDA (see table 5) 497.8 484.3
Less:
Net finance expense before exceptional items (57.5) (52.7)
Income tax expense before exceptional items (57.1) (77.0)
Depreciation and impairment of PP&E (108.6) (101.5)
Depreciation of right-of-use assets (31.5) -
Amortisation and impairment of intangible assets (89.8) (95.6)
Non-controlling interests share of profit (3.0) (2.3)
Adjusted Net Income 150.3 155.2
---------------------------------------------------- ------ ------
Table 7b: Reconciliation of profit for the year to Adjusted Net
Income* EURm
2019 2018
Profit for the year 144.6 140.1
Less:
Non-controlling interests share of profit (3.0) (2.3)
Net foreign exchange gains (0.5) (1.2)
Add back:
Exceptional finance expenses - 11.8
Restructuring costs 9.0 7.1
Associate income less dividend received 0.2 (0.3)
Adjusted Net Income 150.3 155.2
--------------------------------------------- ----- -----
*See Non-IFRS measures
Profit for the year increased by EUR4.5 million to EUR144.6
million, with lower operating profit as a result of conversion of
lower sales, offset by lower fixed costs, finance expense and
tax.
Adjusted Net Income was EUR150.3 million in 2019, a decrease of
3.2% from EUR155.2 million in 2018, primarily driven by exceptional
finance expenses added back to profit in 2018 which did not recur
in 2019, and the adoption of IFRS 16. Excluding IFRS 16 impacts,
the result was EUR155.3 million in line with 2018, despite lower
revenue. The Group incurred restructuring costs of EUR9.0 million
in the year primarily related to operations in Europe and North
America (2018: EUR7.1 million).
Basic EPS and Adjusted Basic EPS*
On a statutory basis, Basic Earnings per Share ('EPS') was 27.24
Euro cents (2018: 26.53 Euro cents), an increase of 2.7% from the
prior year, reflecting the slightly higher statutory profit arising
from lower operating profit as a result of lower trading volumes
offset by lower net finance expense and tax. Adjusted Basic EPS
calculation is based on Adjusted Net Income and the weighted
average number of shares in issue. Adjusted Basic EPS was 28.91
Euro cents per share (2018: 29.87 Euro cents per share) reflecting
the decrease in Adjusted Net Income as noted above. Weighted
average shares outstanding in 2019 were 519.9 million (2018: 519.5
million). The prior year comparative has been re-presented to be
consistent with the 2019 number.
*See Non-IFRS measures
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.
The Board has decided to recommend 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 2019, makes a total dividend for 2019 of 8.96 Euro
cents per share and amounts to EUR46.6 million. The total annual
dividend is 31% of Adjusted Net Income (2018: 30%). Subject to
shareholder approval at the Annual General Meeting on 14 May 2020,
the final dividend will be paid on 29 May 2020. The dividend will
be converted to Sterling at a fixed rate on 24 April 2020, the
Dividend Record Date.
Adjusted Free Cash Flow*
The Group uses Adjusted Free Cash Flow as its primary operating
measure of cash flow performance.
Table 8a: Adjusted Free Cash Flow* EURm
2019 2018
Net cash generated from operating activities 334.4 297.0
Net cash used by investing activities (157.0) (149.5)
---------------------------------------------------------------- ------ ------
Free Cash Flow* 177.4 147.5
---------------------------------------------------------------- ------ ------
Add back:
IPO costs (included in net cash generated from
operations) - 3.1
Deduct:
Cash received on settlement of derivatives (5.6) (2.7)
Amounts received in cash from Financial Assets
at FVTPL (included in net cash generated from operations) (0.3) (1.7)
---------------------------------------------------------------- ------ ------
Adjusted Free Cash Flow 171.5 146.2
---------------------------------------------------------------- ------ ------
Table 8b: Reconciliation of Adjusted EBITDA to Adjusted Free
Cash Flow* EURm
2019 2018
Adjusted EBITDA (see note 3) 497.8 484.3
Less:
Net cash interest paid (61.6) (62.5)
Cash taxes paid (79.7) (88.2)
Payment for property, plant and equipment (119.4) (115.8)
Payment for intangible assets (39.7) (35.8)
Movement in working capital 2.7 (27.5)
Movement in retirement benefit obligations (12.5) (5.2)
Exceptional cash paid (IPO costs) - (3.1)
Movement in provisions and other (10.2) 1.3
Free Cash Flow* 177.4 147.5
------------------------------------------------- ------ ------
Add back:
IPO cash costs in Net Cash from Operations - 3.1
Less:
Cash received on settlement of derivatives (5.6) (2.7)
Amounts received in cash from Assets at FVTPL (0.3) (1.7)
------ ------
Adjusted Free Cash Flow 171.5 146.2
------------------------------------------------- ------ ------
*See Non-IFRS measures
In 2019, we generated Adjusted Free Cash Flow of EUR171.5
million (2018: EUR146.2 million). The adoption of IFRS 16 had a
positive EUR26.8 million impact on Adjusted Free Cash Flow. The
Adjusted EBITDA generated by the Group was used to fund increased
investment in capital equipment and intangibles. There was a EUR7.5
million increase in property, plant and equipment and intangibles
expenditure primarily related to investment in our HEV and BEV
strategy and upcoming programme launches. The increase was offset
by lower working capital outflows due to lower revenue. Cash spend
on restructuring activities was EUR6.0 million (2018: EUR1.7
million).
Retirement benefits
We operate funded and unfunded defined benefit schemes across
multiple jurisdictions with the largest being the US pension and
retiree healthcare schemes. We also have major schemes in the UK,
Canada and Germany. While all of our major plans are closed to new
entrants, a few allow for future accrual. Our schemes are subject
to periodic actuarial valuations. Our net unfunded position
increased by EUR5.5 million to EUR153.7 million at the end of 2019
principally due to declining discount rates across many
territories, of which all but approximately EUR13.1 million of the
impact was offset by strong pension investment performance.
Offsetting this increase was a EUR9.1 million gain on settlement
arising from the voluntary lump sum buyout of two of our retirement
plans in the US.
Net debt* and net leverage
Net debt, a non-IFRS measure, at the end of 2019 was EUR738.3
million, a decrease of EUR82.1 million from the prior year. In
March 2019, the Group made a voluntary payment of $56.5 million
(EUR50.0 million) against its USD term loan using cash from
operations. The Group's net leverage ratio was 1.5 times Adjusted
EBITDA as at 31 December 2019 (2018: 1.7 times).
The Group excludes IFRS 16 lease liabilities from its net debt
and net leverage ratio. If the IFRS 16 lease liabilities were to be
included, the Group's net debt would be EUR905 million and net
leverage ratio would be 1.8 times Adjusted EBITDA.
*See Non-IFRS measures
Liquidity
Our principal sources of liquidity have historically been cash
generated from operating activities and amounts available under our
credit facilities, that currently consist of a revolving facility
under our cash flow credit agreement of $125 million (EUR111.4
million) and an asset backed loan ('ABL') facility of $100 million
(EUR89.1 million). The availability under both facilities as of 31
December 2019 was EUR177.2 million.
Outlook
Despite the forecasted decline in global light vehicle
production volumes in 2020, we expect that our 2020 revenue will
outperform global light vehicle production volumes similar to the
prior year, excluding currency movements. We also anticipate that
in 2020 our Adjusted EBIT margin will be a high single digit and
that Adjusted Free Cash Flow conversion will be similar to the
prior year. It is our plan to continue to reduce net leverage while
maintaining a consistent dividend policy. However, importantly, our
outlook for 2020 does not include the impact of the ongoing
COVID-19 (coronavirus) outbreak, which is continuing to evolve. In
the event that the COVID-19 outbreak becomes more widespread and/or
continues for an extended period of time, the impact to the
automotive industry and the Company will be difficult to predict.
We will continue to take actions to mitigate the negative impact of
COVID-19 as appropriate.
Non-IFRS measures
In addition to the results reported under IFRS, we use certain
non-IFRS financial measures to monitor and measure performance of
our business and operations and the profitability of our divisions.
Such measures are also utilised by the Board as targets in
determining compensation of certain executives and key members of
management, as well as in our communications with investors. In
particular, we use Adjusted EBIT, Adjusted EBITDA, Adjusted Net
Income, Adjusted Basic EPS, Adjusted Free Cash Flow and Adjusted
Effective Tax Rate. These non-IFRS measures are not recognised
measurements of financial performance or liquidity under IFRS, and
should be viewed as supplemental and not replacements or
substitutes for any IFRS measures.
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), restructuring costs and adjustment for
associate income.
Adjusted EBIT is defined as Adjusted EBITDA less depreciation
(including PP&E impairment) and amortisation (including
intangibles impairment) arising on tangible and intangible assets
before adjusting for any purchase price adjustments to fair values
arising on acquisitions.
Operating profit margin is defined as operating profit expressed
as a percentage of revenue.
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 weighted average number of shares in issue in the year.
Free Cash Flow is defined as the total of net cash generated
from operating activities and net cash used by investing
activities.
Adjusted Free Cash Flow is defined as free cash flow adjusted
for 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.
Net debt is defined as the total of current and non-current
borrowings excluding lease liabilities, net of cash and cash
equivalents and financial assets at fair value through the profit
and loss.
Impact of adopting IFRS 16 - Leases
Reconciliations of key performance metrics have been shown where
appropriate to demonstrate the underlying performance on a
like-for-like basis.
Table 9: Impact on 2019 results from adopting IFRS 16 EURm
Pre-IFRS Basis IFRS 16 Basis Net Impact
Income statement
Revenue - - -
Depreciation of right-of-use assets - (31.5) (31.5)
Uncapitalised lease costs (45.7) (8.5) 37.2
Net foreign exchange losses on IFRS
16 Leases - (0.2) (0.2)
------------------------------------- ---------- ---- ----------
Operating Profit (45.7) (40.2) 5.5
------------------------------------- ---------- --- ---------- --------
Net finance expense - (10.5) (10.5)
Profit for the Year (45.7) (50.7) (5.0)
------------------------------------- ---------- --- ---------- --------
Balance Sheet
Right-of-use assets - 161.4 161.4
Property, Plant & Equipment 1.4 - (1.4)
Borrowings (1.8) - 1.8
Lease liabilities - (166.7) (166.7)
---------------
Total Balance Sheet Impact (0.4) (5.3) (4.9)
------------------------------------- ---------- --- ---------- --------
Cash Flow Statement
Operating Profit (45.7) (40.2) 5.5
Depreciation of right-of-use assets - 31.5 31.5
Interest paid - (10.5) (10.5)
Net foreign exchange losses on IFRS
16 Leases and Other - 0.3 0.3
Lease principal repayments (0.3) (27.1) (26.8)
----------
Total cash outflow (46.0) (46.0) -
------------------------------------- ---------- --- ---------- --------
Other Key performance measures
Adjusted EBITDA 460.6 497.8 37.2
Adjusted EBITDA margin 13.5% 14.6% 1.1%
Adjusted EBIT 334.9 340.4 5.5
Adjusted EBIT Margin 9.8% 10.0% 0.2%
Adjusted Net Income 155.3 150.3 (5.0)
Adjusted Free Cash Flow 144.7 171.5 26.8
TABLE OF CONTENTS
GROUP FINANCIAL STATEMENTS
.....................................................................................................................
......
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
NOTES TO THE GROUP FINANCIAL STATEMENTS
General
Information...................................................................................................
1 .................................
Basis of
Preparation...................................................................................................
2 ..................................
Segment
Reporting.....................................................................................................
3 .................................
Research and Development
4 Expenditure...........................................................................................
Finance Income and
Expense.......................................................................................................
5 ...........
Income
Tax...........................................................................................................
6 ............................................
Earnings Per
Share.........................................................................................................
7 ...............................
Intangible
Assets........................................................................................................
8 ...................................
Leases........................................................................................................
9 ........................................................
Borrowings....................................................................................................
10 ...................................................
Retirement Benefit
Obligations...................................................................................................
11 ............
Cash Generated from
Operations....................................................................................................
12 ......
Group Financial Statements
Consolidated Income Statement
For the year ended 31 December
2019 2018
Continuing operations Notes EURm EURm
--------------------------------------------- ------ --------- -----------
Revenue 3 3,411.1 3,472.8
Cost of sales (2,922.7) (2,938.2)
------
Gross profit 488.4 534.6
------ --------
Distribution costs (95.0) (102.4)
Administrative expenses (141.7) (164.5)
Other income 6.7 12.2
Net foreign exchange gains 0.5 1.2
Operating profit 258.9 281.1
--------
Finance income 15.0 14.3
Finance expense (72.5) (67.0)
--------------------------------------------- ------ -------- --------
Exceptional items - (11.8)
Finance expense after exceptional items (72.5) (78.8)
--------
Net finance expense after exceptional items 5 (57.5) (64.5)
Share of profit of associates 0.3 0.5
------
Profit before income tax 201.7 217.1
------ --------
Income tax expense 6 (57.1) (77.0)
-------- --------
Profit for the year 144.6 140.1
-------- --------
Profit for the year attributable to:
Owners of the Parent Company 141.6 137.8
Non-controlling interests 3.0 2.3
--------------------------------------------- ------ -------- --------
144.6 140.1
Total earnings per share (Euro, cents)
---------
Basic 7 27.24 26.53
Diluted 7 27.24 26.44
--------------------------------------------- ------ -------- --------
Consolidated Statement of Comprehensive Income
For the year ended 31 December
2019 2018
Notes EURm EURm
----------------------------------------------------- ------ ------ --------
Profit for the year 144.6 140.1
Other comprehensive income/(expense)
Items that will not be reclassified to profit
or loss
- Re-measurements of retirement benefit obligations (10.7) 16.9
- Income tax credit/(expense) on retirement
benefit obligations 6 2.3 (4.3)
(8.4) 12.6
-----------------------------------------------------
Items that may be subsequently reclassified
to profit or loss
- Currency translation 14.8 11.8
- Cash flow hedges 4.9 (0.3)
- Net investment hedges 0.3 (7.2)
20.0 4.3
Other comprehensive income for the year, net
of tax 11.6 16.9
-----------------------------------------------------
Total comprehensive income for the year 156.2 157.0
----------------------------------------------------- ------ ----- -----
Attributable to:
- Owners of the Parent Company 153.4 154.6
- Non-controlling interests 2.8 2.4
Total comprehensive income for the year 156.2 157.0
-----------------------------------------------------
Consolidated Balance Sheet
At 31 December
2019 2018
Notes EURm EURm
----------------------------------------------- ------ -------- ----------
Non-current assets
Intangible assets 8 1,182.2 1,229.8
Right-of-use assets 9 161.4 -
Property, plant and equipment 715.0 706.5
Investments in associates 19.2 19.6
Derivative financial instruments - 5.4
Deferred income tax assets 6 25.1 34.9
Trade and other receivables 21.6 14.8
2,124.5 2,011.0
-----------------------------------------------
Current assets
Inventories 367.1 352.8
Trade and other receivables 574.5 578.3
Current income tax assets 13.7 4.4
Derivative financial instruments 18.4 8.5
Financial assets at fair value through profit
and loss 0.9 1.2
Cash and cash equivalents 411.7 360.1
1,386.3 1,305.3
Total assets 3,510.8 3,316.3
-----------------------------------------------
Equity
Share capital 6.8 6.8
Share premium 2.2 1.4
Other reserves (106.1) (126.3)
Accumulated profits 1,261.7 1,175.7
Equity attributable to owners of the Parent
Company 1,164.6 1,057.6
-----------------------------------------------
Non-controlling interests 24.5 22.5
Total equity 1,189.1 1,080.1
-----------------------------------------------
Non-current liabilities
Trade and other payables 12.3 17.1
Borrowings 10 1,148.5 1,179.3
Lease liabilities 9 138.0 -
Derivative financial instruments - 45.3
Deferred income tax liabilities 6 128.5 141.6
Retirement benefit obligations 11 153.7 148.2
Provisions 5.0 4.9
1,586.0 1,536.4
-----------------------------------------------
Current liabilities
Trade and other payables 611.2 608.4
Current income tax liabilities 48.7 60.2
Borrowings 10 2.4 4.4
Lease liabilities 9 28.7 -
Derivative financial instruments 25.4 2.8
Provisions 19.3 24.0
735.7 699.8
-----------------------------------------------
Total liabilities 2,321.7 2,236.2
Total equity and liabilities 3,510.8 3,316.3
-----------------------------------------------
Consolidated Statement of Changes in Equity
For the year ended 31 December
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 2019 6.8 1.4 (126.3) 1,175.7 1,057.6 22.5 1,080.1
Profit for the
year - - - 141.6 141.6 3.0 144.6
Other comprehensive
income/(expense)
for the year - - 20.2 (8.4) 11.8 (0.2) 11.6
----------------------- -------- -------- -------- ---------- ------- ------------ -------
Total comprehensive
income for the
year - - 20.2 133.2 153.4 2.8 156.2
----------------------- -------- -------- -------- ---------- ------- ------------ --- -------
Decrease in share
held by
non-controlling
interests - - - 0.1 0.1 (0.1) -
Share-based expense - - - 1.4 1.4 - 1.4
Net employee
tax settlement
from vested shares (2.1) (2.1) - (2.1)
Dividends paid - - - (46.6) (46.6) (0.7) (47.3)
Shares issued - 0.8 - - 0.8 - 0.8
----------------------- -------- -------- -------- ---------- ------- ------------ --- -------
Balance at 31
December 2019 6.8 2.2 (106.1) 1,261.7 1,164.6 24.5 1,189.1
----------------------- -------- -------- -------- ---------- ------- ------------ --- -------
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/(expense)
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-based expense - - - 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
--------------------- -------- ------- -------- ---------- ------- ------------ -------
Consolidated Statement of Cash Flows
For the year ended 31 December
2019 2018
Notes EURm EURm
--------------------------------------------------- ------ ------- ---------
Cash flows from operating activities
Cash generated from operations 12 477.2 449.6
Interest paid (63.1) (64.4)
Income tax paid (79.7) (88.2)
Net cash generated from operating activities 334.4 297.0
---------------------------------------------------
Cash flows from investing activities
Payment for property, plant and equipment (119.4) (115.8)
Payment for intangible assets (39.7) (35.8)
Proceeds from the sale of property, plant and
equipment 0.6 0.2
Interest received 1.5 1.9
--------------------------------------------------- ------ ------ ------
Net cash used by investing activities (157.0) (149.5)
--------------------------------------------------- ------ ------ ------
Cash flows from financing activities
Proceeds from new borrowings - 150.0
Fees paid on proceeds from new borrowings (0.3) (2.2)
Voluntary repayments of borrowings 10 (50.0) (188.4)
Fees paid on voluntary repayments of borrowings - (8.2)
Scheduled repayments of borrowings (4.5) (5.4)
Lease principal repayments 9 (27.1) -
Dividends paid (46.6) (22.5)
Dividends paid to non-controlling interests (0.7) (0.2)
--------------------------------------------------- ------ ------ ------
Net cash used by financing activities (129.2) (76.9)
--------------------------------------------------- ------ ------ ------
Increase in cash and cash equivalents 48.2 70.6
--------------------------------------------------- ------ ------ ------
Cash and cash equivalents at the beginning of
the year 360.1 287.2
Currency translation on cash and cash equivalents 3.4 2.3
--------------------------------------------------- ------ ------ ------
Cash and cash equivalents at the end of the
year 411.7 360.1
--------------------------------------------------- ------ ------ ------
1 . General Information
The Group's full financial statements have been approved by the
Board of Directors and reported on by the auditors on 16 March
2020. A copy of the statutory accounts for the year ended 31
December 2018 has been delivered to the Registrar of Companies, and
those for the year ended 31 December 2019 will be delivered in due
course. The independent auditors' report on the full financial
statements for the year ended 31 December 2018 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 ('IFRS IC') interpretations issued and effective at the
time of preparing the financial information. The financial
information in this preliminary announcement does not, however
comply with all disclosure requirements.
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.
The Group has applied IFRS 16 'Leases' for the first time in the
2019 consolidated financial statements from its mandatory adoption
date of 1 January 2019, using the simplified transition (modified
retrospective) approach. Comparative amounts for the year ended 31
December 2018 have not been restated. All right-of-use assets
previously treated as operating leases have been measured at the
amount of the lease liability on adoption (adjusted for any prepaid
or accrued lease expenses). The Group has applied the practical
expedient to grandfather the definition of a lease on transition
and has therefore applied IFRS 16 to all contracts entered into
before 1 January 2019 and identified as leases, in accordance with
IAS 17 and IFRIC 4. The Group recognised right-of-use assets of
EUR146.3 million and lease liabilities of EUR147.0 million on
transition.
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 Group: Fluid
Carrying Systems ('FCS') and Fuel Tank and Delivery Systems
('FTDS').
Inter-segment revenue is attributable solely to the ordinary
business activities of the respective segment and is conducted on
an arm's-length basis.
2019 2018
EURm EURm
------------------------------ ----------- -----------
Revenue
- FCS - External 1,917.6 2,026.7
- Inter-segment 82.4 82.4
------------------------------ ------- -------
2,000.0 2,109.1
------------------------------ ------- -------
- FTDS - External 1,493.5 1,446.1
- Inter-segment 4.8 2.0
------------------------------ ------- -------
1,498.3 1,448.1
------------------------------ ------- -------
Inter-segment elimination (87.2) (84.4)
------------------------------ ------- -------
Total consolidated revenue 3,411.1 3,472.8
------------------------------ ------- -------
Adjusted EBITDA
- FCS 274.0 291.1
- FTDS 223.8 193.2
------------------------------ ------- -------
497.8 484.3
------------------------------ ------- -------
Adjusted EBITDA % of revenue
- FCS 14.3% 14.4%
- FTDS 15.0% 13.4%
------------------------------ ------- -------
Total 14.6% 13.9%
------------------------------ ------- -------
Adjusted EBIT
- FCS 199.4 241.0
- FTDS 141.0 132.5
------------------------------ ------- -------
340.4 373.5
------------------------------ ------- -------
Adjusted EBIT % of revenue
- FCS 10.4% 11.9%
- FTDS 9.4% 9.2%
------------------------------ ------- -------
Total 10.0% 10.8%
------------------------------ ------- -------
4 . Research and Development Expenditure
Research and development expenditure before third party income,
comprised:
2019 2018
EURm EURm
-------------------------------------------- ---- ------
Research and development expenses 45.1 40.8
Capitalised development costs 31.7 35.4
-------------------------------------------- ---- ----
Total research and development expenditure 76.8 76.2
-------------------------------------------- ---- ----
5 . Finance Income and Expense
2019 2018
EURm EURm
----------------------------------------------------------------- ------ --------
Finance income
Interest on short-term deposits, other financial assets
and other interest income 2.0 1.9
Interest income on indirect tax receivable 2.8 -
Net interest income on release of specific uncertain
tax positions - 3.4
Fair value gain on derivatives and foreign exchange
contracts not in hedged relationships 10.2 9.0
----------------------------------------------------------------- ----- -----
Finance income 15.0 14.3
----------------------------------------------------------------- ----- -----
Finance expense
Interest payable on term loans including expensed fees (56.5) (51.7)
Interest payable on unsecured senior notes including
expensed fees - (9.3)
Net interest expense of retirement benefit obligations (4.6) (4.4)
Fair value net losses on financial instruments: ineffectiveness (0.2) (0.6)
Net interest expense related to specific uncertain
tax positions (0.3) -
Interest payable on lease liabilities (10.5) -
Utilisation of discount on provisions and other finance
expense (0.4) (1.0)
----------------------------------------------------------------- ----- -----
Finance expense excluding exceptional items (72.5) (67.0)
----------------------------------------------------------------- ----- -----
Early redemption premium on voluntary repayments of
borrowings - (8.2)
Unamortised issuance discounts and fees expensed on
voluntary repayments of borrowings - (3.6)
----------------------------------------------------------------- ----- -----
Exceptional finance expense - (11.8)
----------------------------------------------------------------- ----- -----
Finance expense after exceptional items (72.5) (78.8)
----------------------------------------------------------------- ----- -----
Total net finance expense after exceptional items (57.5) (64.5)
----------------------------------------------------------------- ----- -----
2019 2018
Fees included in interest payable under the effective
interest method EURm EURm
------------------------------------------------------- ----- -------
Fees included in interest payable on term loans (7.7) (6.5)
Fees included in interest payable on unsecured senior
notes - (0.4)
------------------------------------------------------- ---- ----
2019 2018
Fees expensed in exceptional net finance expense EURm EURm
---------------------------------------------------- ---- -------
Fees expensed in respect of unsecured senior notes - (3.6)
---------------------------------------------------- ---- ----
6 . Income Tax
6.1. Income Tax Expense
2019 2018
EURm EURm
---------------------------------------------------------- ------ --------
Current tax on profit for the year (83.6) (96.5)
Adjustments in respect of prior years 17.8 14.2
---------------------------------------------------------- ----- -----
Total current tax expense (65.8) (82.3)
---------------------------------------------------------- ----- -----
Origination and reversal of temporary deferred tax
differences 8.7 5.3
---------------------------------------------------------- ----- -----
Total deferred tax benefit 8.7 5.3
---------------------------------------------------------- ----- -----
Income tax expense - Income Statement (57.1) (77.0)
---------------------------------------------------------- ----- -----
Origination and reversal of temporary deferred tax
differences 2.3 (4.3)
---------------------------------------------------------- ----- -----
Income tax credit/(expense) - Statement of Comprehensive
Income 2.3 (4.3)
---------------------------------------------------------- ----- -----
Total income tax expense (54.8) (81.3)
---------------------------------------------------------- ----- -----
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:
2019 2018
EURm EURm
------------------------------------------------------------ ------ --------
Profit before income tax 201.7 217.1
------------------------------------------------------------ ----- -----
Income tax calculated at UK statutory tax rate of 19%
(2018: 19%) applicable to profits in respective countries (38.3) (41.2)
Tax effects of:
Overseas tax rates (excluding associates) (16.2) (18.9)
Income not subject to tax 6.4 11.3
Expenses not deductible for tax purposes - other &
UK non-deductible interest / expenses (13.1) (17.1)
Temporary differences on unremitted earnings (3.3) (3.1)
Specific tax provisions (3.1) (3.5)
Unrecognised deferred tax assets (3.7) (11.2)
Other taxes (10.6) (9.7)
Adjustment in respect of prior years - US R&E tax credit 12.2 -
Adjustment in respect of prior years - current tax
adjustments 12.1 14.2
Adjustment in respect of prior years - deferred tax
adjustments (5.0) (1.0)
Impact of changes in tax rate 0.3 0.2
Double Tax Relief and Other Tax Credits 5.2 3.0
------------------------------------------------------------ ----- -----
Income tax expense - Income Statement (57.1) (77.0)
------------------------------------------------------------ ----- -----
Deferred tax benefit/(expense) on re-measurement of
retirement benefit obligations 2.3 (4.3)
------------------------------------------------------------ ----- -----
Income tax credit/(expense) - Statement of Comprehensive
Income 2.3 (4.3)
------------------------------------------------------------ ----- -----
Total tax expense (54.8) (81.3)
------------------------------------------------------------ ----- -----
Other taxes comprised taxes withheld on dividend, interest and
royalty remittances totalling EUR7.4 million (2018: EUR7.3 million)
and various local taxes of EUR3.2 million (2018: EUR2.4
million).
During 2019, TI Automotive LLC ('TI US') completed a Research
and Experimentation ('R&E') study for the years 2011 through
2018. As a result of the R&E study, TI US was able to report a
material tax benefit in the 2019 accounts in the amount of EUR12.2
million net. The R&E tax credit had a material favourable
impact on the 2019 effective tax rate for the Group.
Factors that may affect future tax charges include the continued
non-recognition of deferred tax assets in certain territories as
well as the existence of tax losses in certain territories which
could be available to offset future taxable income in certain
territories and for which no deferred tax asset is currently
recognised.
6.2. Deferred Tax Assets and Liabilities
2019 2018
EURm EURm
------------------------------------- ------- ---------
Deferred income tax assets 25.1 34.9
Deferred income tax liabilities (128.5) (141.6)
------------------------------------- ------ ------
Net deferred income tax liabilities (103.4) (106.7)
------------------------------------- ------ ------
6.2.1. Movement on Net Deferred Tax Liabilities
2019 2018
EURm EURm
--------------------------------------------------------- ------- ---------
At 1 January (106.7) (108.8)
Income statement benefit 8.7 5.3
Tax on remeasurement of retirement benefit obligations 2.3 (4.3)
Transfer of uncertain tax position balance from current
tax to deferred tax (7.3) -
Currency translation (0.4) 1.1
--------------------------------------------------------- ------ ------
At 31 December (103.4) (106.7)
--------------------------------------------------------- ------ ------
7 . Earnings Per Share
7.1. Basic and Diluted Earnings Per Share
2019 2018
Weighted Weighted
Profit average Profit average
attributable number of Earnings attributable number of Earnings
to shareholders shares (in Per Share to shareholders shares (in Per Share
(EURm) millions) (EUR, cents) (EURm) millions) (EUR, cents)
---------------- -----------
Basic 141.6 519.9 27.24 137.8 519.5 26.53
Dilutive shares - - - - 1.6 (0.09)
Diluted 141.6 519.9 27.24 137.8 521.1 26.44
---------------- --------------- ----------- ------------- --------------- ----------- -----------
7.2. Adjusted Earnings Per Share
2019 2018
Basic Diluted Basic Diluted
-----------------------------------
Adjusted Net Income (EURm) 150.3 150.3 155.2 155.2
Weighted average number of shares
(in millions) 519.9 519.9 519.5 521.1
Adjusted Earnings Per Share (EUR,
in cents) 28.91 28.91 29.87 29.78
----------------------------------- ----- ------- ----- -------
Adjusted Net Income is based on Profit attributable to
shareholders EUR141.6 million (2018: EUR137.8 million) after adding
back net adjustments of EUR8.7 million (2018: EUR17.4 million)
8 . Intangible Assets
2019 2018
EURm EURm
----------------------------------------------------- ------- ---------
Goodwill 739.0 733.3
Capitalised development expenses, computer software
and licences, technology and customer platforms 443.2 496.5
----------------------------------------------------- ------- -------
Total intangible assets 1,182.2 1,229.8
----------------------------------------------------- ------- -------
8.1. Goodwill
EURm
-------------------------------------------- -------
Cost at 1 January 2019 733.3
Currency translation 5.7
-------------------------------------------- -----
Cost at 31 December 2019 739.0
-------------------------------------------- -----
Accumulated impairment at 1 January 2019 -
-------------------------------------------- -----
Accumulated impairment at 31 December 2019 -
-------------------------------------------- -----
Net book value at 31 December 2019 739.0
-------------------------------------------- -----
EURm
-------------------------------------------- -------
Cost at 1 January 2018 724.9
Currency translation 8.4
-------------------------------------------- -----
Cost at 31 December 2018 733.3
-------------------------------------------- -----
Accumulated impairment at 1 January 2018 -
-------------------------------------------- -----
Accumulated impairment at 31 December 2018 -
-------------------------------------------- -----
Net book value at 31 December 2018 733.3
-------------------------------------------- -----
8.2. Capitalised Development Expenses, Computer Software and
Licences, Technology and Customer Platforms
Capitalised Computer
development software Customer
expenses and licences Technology platforms* Total
EURm EURm EURm EURm EURm
------------------------------- ------------ --------------- ---------- ----------- ---------
Cost at 1 January 2019 205.4 15.0 130.7 469.0 820.1
Accumulated amortisation (71.5) (9.8) (104.2) (138.1) (323.6)
------------------------------- ----------- ----------- --------- ---------- ------
Net book value at 1 January
2019 133.9 5.2 26.5 330.9 496.5
------------------------------- ----------- ----------- --------- ---------- ------
Additions 31.7 1.2 - - 32.9
Disposals (0.6) - - - (0.6)
Amortisation charge (28.3) (1.5) (16.5) (41.5) (87.8)
Impairments (2.0) - - - (2.0)
Currency translation 0.5 - 0.4 3.3 4.2
------------------------------- ----------- ----------- --------- ---------- ------
Net book value at 31 December
2019 135.2 4.9 10.4 292.7 443.2
------------------------------- ----------- ----------- --------- ---------- ------
Cost at 31 December 2019 237.4 16.2 135.9 474.4 863.9
Accumulated amortisation (102.2) (11.3) (125.5) (181.7) (420.7)
------------------------------- ----------- ----------- --------- ---------- ------
Net book value at 31 December
2019 135.2 4.9 10.4 292.7 443.2
------------------------------- ----------- ----------- --------- ---------- ------
*Customer platforms includes intangible assets relating to:
customer platforms; aftermarket customer relationships; trade names
& trademarks.
Capitalised Computer
development software Customer
expenses and licences Technology platforms Total
EURm EURm EURm EURm EURm
------------------------------- -------------- --------------- ---------- ---------- ---------
Cost at 1 January 2018 168.8 13.4 127.2 461.9 771.3
Accumulated amortisation (47.5) (8.0) (71.3) (95.5) (222.3)
------------------------------- ---------- ----------- --------- --------- ------
Net book value at 1 January
2018 121.3 5.4 55.9 366.4 549.0
------------------------------- ---------- ----------- --------- --------- ------
Additions 35.4 1.3 - - 36.7
Disposals (0.6) - - - (0.6)
Amortisation charge (22.4) (1.6) (30.1) (40.5) (94.6)
Impairments (1.0) - - - (1.0)
Currency translation 1.2 0.1 0.7 5.0 7.0
------------------------------- ---------- ----------- --------- --------- ------
Net book value at 31 December
2018 133.9 5.2 26.5 330.9 496.5
------------------------------- ---------- ----------- --------- --------- ------
Cost at 31st December
2018 205.4 15.0 130.7 469.0 820.1
Accumulated amortisation (71.5) (9.8) (104.2) (138.1) (323.6)
------------------------------- ---------- ----------- --------- --------- ------
Net book value at 31 December
2018 133.9 5.2 26.5 330.9 496.5
------------------------------- ---------- ----------- --------- --------- ------
The above amortisation charges for 'technology' and 'customer
platforms' amounting to EUR58.0 million (2018: EUR70.6 million)
arise from intangible assets recognised through purchase price
accounting.
Amortisation charges are included within cost of sales.
9. Leases
The Group has changed its accounting policy for leases and
adopted IFRS 16 'Leases' in the year in accordance with the
simplified transition approach permitted in the standard. The new
rules have been adopted in the current year only, with the
cumulative effect of initially applying the new standard recognised
on 1 January 2019. The Group has not restated comparative amounts
for the year ended 31 December 2018.
9.1. Amounts recognised in the Balance Sheet
The balance sheet at 31 December 2019 shows the following
amounts relating to leases:
2019
EURm
------------------------- -------
Right-of-Use Assets 161.4
------------------------- -----
Non-current liabilities
Lease Liabilities 138.0
Current liabilities
Lease Liabilities 28.7
Total Lease Liabilities 166.7
------------------------- -----
In the previous year, the Group only recognised lease
liabilities in relation to leases that were classified as 'finance
leases' under IAS 17 Leases. These were included as part of the
Group's borrowings in 2018 see Note 10, and were reclassified to
lease liabilities in the current year, as part of the adoption of
IFRS 16.
On adoption of IFRS 16, the Group recognised right-of-use assets
of EUR146.3 million and lease liabilities of EUR147.0 million on
the transition date of 1 January 2019. Property, plant and
equipment decreased by EUR1.4 million as a result of reclassifying
leased assets that were previously treated as property, plant and
equipment into right-of-use assets. Borrowings decreased by EUR2.0
million as a result of reclassifying finance lease liabilities that
were previously treated as borrowings into lease liabilities.
Prepayments also reduced by EUR0.3 million and accruals by EUR0.4
million. The net impact on retained earnings on 1 January 2019 of
the adoption of IFRS 16 was EURnil.
The following reconciliation of the opening balance for lease
liabilities as at 1 January 2019 is based on the operating lease
commitments at 31 December 2018. The weighted average incremental
borrowing rate applied to the lease liabilities on 1 January 2019
was 6.6%.
The range of incremental borrowing rates applied to lease
liabilities in the year by region was:
2019
Range
---------------- ------------
Europe & Africa 3.4% - 23.2%
North America 4.9% - 12.6%
Asia Pacific 5.3% - 13.4%
Latin America 8.7% - 18.2%
---------------- ------------
The Group believes that any reasonably possible change in the
weighted average incremental borrowing rate would not cause the
carrying value of lease liabilities or the lease interest payable
charged to the income statement to be materially different.
A reconciliation of the operating lease commitments disclosed as
at 31 December 2018 and the lease liabilities and right-of-use
assets recognised at 1 January 2019 is disclosed below:
2019
EURm
-------------------------------------------------------------------- --------
Operating lease commitments disclosed as at 31 December 2018 157.9
Less: short-term leases recognised on a straight-line basis
as an expense (2.5)
Less: low-value leases recognised on a straight-line basis
as an expense (1.0)
Less: commitments for which the underlying asset was unavailable
for use at 31 December 2018* (14.7)
Add: adjustments as a result of a different treatment of extension
and termination options 49.1
-------------------------------------------------------------------- -----
Adjusted operating lease commitments at 31 December 2018 188.8
-------------------------------------------------------------------- -----
Impact of discounting at the Group's incremental borrowing
rates at the date of initial application (43.8)
-------------------------------------------------------------------- -----
Discounted adjusted operating lease commitments at 31 December
2018 145.0
-------------------------------------------------------------------- -----
Add: finance lease liabilities reclassified from borrowings
as at 31 December 2018 2.0
-------------------------------------------------------------------- -----
Lease Liabilities recognised at 1 January 2019 147.0
-------------------------------------------------------------------- -----
Prepaid or accrued lease expenses at 31 December 2018 (0.1)
Less: finance lease liabilities reclassified from borrowings
as at 31 December 2018 (2.0)
Add: Leased assets reclassified from Property, Plant & Equipment
as at 31 December 2018 1.4
-------------------------------------------------------------------- -----
Right-of-Use Assets recognised at 1 January 2019 146.3
-------------------------------------------------------------------- -----
*Commitments for which the underlying asset was unavailable for
use at 31 December 2018 relate to leases that were not commenced at
31 December 2018, to which the Group was already committed.
9.1.1. Right-of-use assets
Movements in right-of-use assets in the year are disclosed
below:
Land and Plant, machinery
buildings and equipment Total
EURm EURm EURm
------------------------------------------- ---------- ------------------ --------
Balance at 31 December 2018 - - -
Change in accounting policy: adoption of
IFRS 16 134.0 12.3 146.3
------------------------------------------- --------- ------------- --- -----
Restated at 1 January 2019 134.0 12.3 146.3
------------------------------------------- --------- ------------- --- -----
Additions 42.3 5.2 47.5
Disposals (1.3) - (1.3)
Remeasurements 0.4 0.2 0.6
Depreciation charge (25.8) (5.7) (31.5)
Currency translation (0.2) - (0.2)
------------------------------------------- --------- ------------- --- -----
Net book value at 31 December 2019 149.4 12.0 161.4
------------------------------------------- --------- ------------- --- -----
Cost 174.5 17.7 192.2
Accumulated depreciation (25.1) (5.7) (30.8)
------------------------------------------- --------- ------------- -----
Net book value at 31 December 2019 149.4 12.0 161.4
------------------------------------------- --------- ------------- --- -----
9.1.2. Lease liabilities
Movements in lease liabilities in the year are disclosed
below:
Lease
liabilities
EURm
-------------------------------------------------- --------------
Balance at 31 December 2018 -
Change in accounting policy: adoption of IFRS 16 147.0
-------------------------------------------------- ----------
Restated at 1 January 2019 147.0
-------------------------------------------------- ----------
Additions 47.5
Disposals (1.3)
Remeasurements 0.6
Accrued interest 10.5
Repayments (37.6)
-------------------------------------------------- ----------
At 31 December 2019 166.7
-------------------------------------------------- ----------
Non-current 138.0
Current 28.7
-------------------------------------------------- ----------
At 31 December 2019 166.7
-------------------------------------------------- ----------
The maturity of lease liabilities is:
Total minimum
lease payments Interest Principal
EURm EURm EURm
---------------------------- --------------- -------- -----------
Less than one year 39.2 10.5 28.7
Between one and five years 109.9 26.7 83.2
Over five years 65.7 10.9 54.8
---------------------------- --------------- -------- ---------
Total at 31 December 2019 214.8 48.1 166.7
---------------------------- --------------- -------- ---------
The maturity of finance lease liabilities at 31 December 2018,
prior to the application of IFRS 16 'Leases' was:
Total
minimum
lease
payments Interest Principal
EURm EURm EURm
--------------------------- --------- -------- -----------
Less than one year 2.1 0.1 2.0
--------------------------- --------- -------- ---------
Total at 31 December 2018 2.1 0.1 2.0
--------------------------- --------- -------- ---------
The currency denomination of lease liabilities is:
2019
EURm
------------------------- -------
Euro 75.6
US dollar 44.7
Chinese renminbi 27.1
Other 19.3
------------------------- -----
Total lease liabilities 166.7
------------------------- -----
9.2. Amounts recognised in the statements of profit or loss and cash flows
The statement of profit or loss includes the following amounts
relating to leases:
2019
EURm
===================================================== ------
Depreciation charge of right-of-use assets 31.5
Interest payable on lease liabilities 10.5
Expense relating to short-term and low value leases 8.5
----------------------------------------------------- ----
The total depreciation charge on right-of-use assets in 2019 is
all recognised in cost of sales.
The statement of cash flows includes the following amounts
relating to leases:
2019
EURm
=============================================================== ------
Cash paid for short-term and low value leases reported within
cash generated from operations 8.5
Interest paid on lease liabilities reported within interest
paid 10.5
Lease principal repayments reported separately in cashflows
from financing activities 27.1
----
Total cash outflow for leases 46.1
----
9.3. Leasing Activities
The Group as Lessee
The Group leases various manufacturing facilities, offices,
plant & machinery and cars. Rental contracts are typically made
for fixed initial periods of 1 to 10 years for manufacturing
facilities and offices and 2 to 5 years for plant & machinery
and cars. Many agreements also have extension options, as described
below, and contain a range of terms and conditions. The lease
agreements do not impose any covenants, but leased assets may not
be used as security for borrowing purposes.
Extension options (or periods after termination options) are
only included for valuation purposes in the lease term if the lease
is reasonably certain to be extended (or not terminated). Potential
future cash outflows of EUR51.7 million have not been included in
the lease liability because it is not reasonably certain that the
leases will be extended (or not terminated).
10 . Borrowings
2019 2018
EURm EURm
------------------------------ ---------
Non-current:
Secured loans:
- Main borrowing facilities 1,148.4 1,179.1
- Other secured loans 0.1 0.2
------------------------------ ------- -------
Total non-current borrowings 1,148.5 1,179.3
------------------------------ ------- -------
Current:
Secured loans:
- Main borrowing facilities 2.3 2.3
- Other secured loans 0.1 0.1
- Finance leases - 2.0
------------------------------ ------- -------
Total current borrowings 2.4 4.4
------------------------------ ------- -------
Total borrowings 1,150.9 1,183.7
------------------------------ ------- -------
Main borrowing facilities 1,150.7 1,181.4
Other loans 0.2 0.3
Finance leases - 2.0
------------------------------ ------- -------
Total borrowings 1,150.9 1,183.7
------------------------------ ------- -------
The main borrowing facilities are shown net of issuance
discounts and fees of EUR16.9 million (2018: EUR23.8 million).
10.1. Movement in Total Borrowings
Main borrowing Finance
facilities leases Other loans Total borrowings
EURm EURm EURm EURm
--------------------------------------- -------------- ------- ------------- ------------------
At 1 January 2019 1,181.4 2.0 0.3 1,183.7
Change in accounting policy: adoption
of IFRS 16 - (2.0) - (2.0)
--------------------------------------- ------------- ------ --------- --------------
Restated at 1 January 2019 1,181.4 - 0.3 1,181.7
--------------------------------------- ------------- ------ --------- --------------
Accrued interest 48.8 - 0.3 49.1
Scheduled payments (53.2) - (0.4) (53.6)
Fees expensed 7.7 - - 7.7
Fees on new borrowings (0.3) - - (0.3)
Voluntary repayments of borrowings (50.0) - - (50.0)
Currency translation 16.3 - - 16.3
--------------------------------------- ------------- ------ --------- --------------
At 31 December 2019 1,150.7 - 0.2 1,150.9
--------------------------------------- ------------- ------ --------- --------------
The Group has adopted IFRS 16 from 1 January 2019 by applying
the simplified transition approach, under which the comparatives
for the 2018 reporting period are not restated see Note 2 and Note
9. As part of the adoption, finance lease liabilities at 1 January
2019 of EUR2.0 million have been reclassified from borrowings to
lease liabilities.
On 11 March 2019 the Group made a voluntary repayment of $56.5
million (EUR50.0 million) against the US dollar tranche of its
secured term loan.
Main borrowing
facilities Finance
and unsecured leases and
notes other loans Total borrowings
EURm EURm EURm
------------------------------------------- -------------- -------------- ------------------
At 1 January 2018 1,177.5 3.7 1,181.2
Accrued interest 54.1 0.5 54.6
Scheduled repayments (58.1) (1.9) (60.0)
Fees expensed 6.9 - 6.9
New borrowings 150.0 - 150.0
Fees paid on proceeds from new borrowings (2.2) - (2.2)
Voluntary repayments of borrowings (188.4) - (188.4)
Fees expensed on voluntary repayments of
borrowings 3.6 - 3.6
Currency translation 38.0 - 38.0
------------------------------------------- ------------- ---------- --------------
At 31 December 2018 1,181.4 2.3 1,183.7
------------------------------------------- ------------- ---------- --------------
10.2. Currency Denomination of Borrowings
2019 2018
EURm EURm
------------------ ------- ---------
US dollar 731.5 759.9
Euro 419.4 423.8
------------------ ------- -------
Total borrowings 1,150.9 1,183.7
------------------ ------- -------
10.3. Maturity of Borrowings
2019 2018
EURm EURm
---------------------------- ------- ---------
Less than one year 2.4 4.4
Between one and five years 1,148.5 1,179.3
---------------------------- ------- -------
Total borrowings 1,150.9 1,183.7
---------------------------- ------- -------
10.4. Main Borrowing Facilities and Unsecured Notes
The main borrowing facilities comprise a package of secured
loans consisting of a term loan, an asset-backed loan, and a
revolving credit facility.
The amounts outstanding under the agreements are:
2019 2018
EURm EURm
--------------------------------------- -------- ----------
Principal outstanding:
US term loan 743.2 776.4
Euro term loan 424.4 428.8
--------------------------------------- ------- -------
Main borrowing facilities (term loan) 1,167.6 1,205.2
--------------------------------------- ------- -------
Issuance discounts and fees (16.9) (23.8)
--------------------------------------- ------- -------
Main borrowing facilities (term loan) 1,150.7 1,181.4
--------------------------------------- ------- -------
Term loan
The principal outstanding of the US term loan in US dollars at
31 December 2019 is $834.2 million (2018: $890.7 million). On 11
March 2019 the Group made a voluntary repayment of $56.5 million
(EUR50.0 million) against the US dollar tranche of the loan.
The interest rate payable on the US term loan is US$ LIBOR
(minimum 0.75% p.a.) +2.5% p.a., and on the Euro term loan is
EURIBOR (minimum 0.75% p.a.) +2.75% p.a. No capital payments are
due on the US dollar tranche until the balance falls due on 30 June
2022. The Euro tranche is 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 (Note 3.3.2).
Asset-backed loan, and a revolving credit facility
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.
Maturities of the revolving credit facility and asset-backed
loan are due to expire on 16 July 2023.
The net undrawn facilities under the agreements are shown
below:
2019 2018
=========================================
$m EURm $m EURm
========================================= ====== ====== ====== ========
Asset backed loan:
Availability 77.7 69.2 89.7 78.2
Utilisation for letters of credit (3.8) (3.4) (3.0) (2.6)
========================================= ===== ===== ===== =====
Net undrawn asset backed loan facility 73.9 65.8 86.7 75.6
========================================= ===== ===== ===== =====
Revolving credit agreement 125.0 111.4 125.0 109.0
========================================= ===== ===== ===== =====
Main borrowings: net undrawn facilities 198.9 177.2 211.7 184.6
========================================= ===== ===== ===== =====
Issuance discounts and fees
Initial issuance discounts and fees from the 2015 agreements,
brought forward at 1 January 2018 were EUR64.9 million. Following
the Group's repayment and modification of its external borrowings
in the prior year, a further EUR2.2 million of directly
attributable incremental fees were capitalised in 2018 and an
additional EUR0.3 million of fees were capitalised in 2019 bringing
the total fees capitalised to EUR67.4 million at 31 December
2019.
All capitalised fees are expensed using the effective interest
rate method over the remaining terms of the facilities.
As a result of the Group extinguishing it's remaining 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 prior year (see Note 5).
10.5. Other Secured Loans
A subsidiary in Spain has granted security over certain of its
assets in return for credit facilities from its banks. The loan has
total amortisation repayments of EUR54,000 per annum payable
quarterly (2018: EUR54,000).
10.6. Finance Leases
The Group has adopted IFRS 16 from 1 January 2019. As part of
the adoption, finance lease liabilities at 1 January 2019 of EUR2.0
million have been reclassified from borrowings to lease
liabilities.
The maturity of finance lease liabilities in the prior year
was:
Total minimum
lease payments Interest Principal
EURm EURm EURm
--------------------------- --------------- -------- -----------
Less than one year 2.1 0.1 2.0
--------------------------- --------------- -------- ---------
Total at 31 December 2018 2.1 0.1 2.0
=========================== =============== ======== =========
10.7. Total Undrawn Borrowing Facilities
2019 2018
EURm EURm
----------------------------------- ----- -------
Floating rate:
Expiring within one year 6.1 6.0
Expiring after more than one year 177.2 184.6
----------------------------------- ----- -----
183.3 190.6
----------------------------------- ----- -----
Fixed rate:
Expiring within one year 3.9 3.9
----------------------------------- ----- -----
3.9 3.9
----------------------------------- ----- -----
Total at the end of the year 187.2 194.5
----------------------------------- ----- -----
10.8. Movements in Net Borrowings and Lease liabilities
Non-cash changes
---------------
Change
in
accounting
policy: Restated
At 1 adoption at 1 At 31
January of IFRS January Cash New Fees Currency Re-measure-ment December
2019 16 2019 flows leases expensed translation and other 2019
EURm EURm EURm EURm EURm EURm EURm EURm EURm
Cash and
cash
equivalents 360.1 - 360.1 48.2 - - 3.4 - 411.7
Financial
assets at
FVTPL 1.2 - 1.2 (0.3) - - - - 0.9
Borrowings (1,183.7) 2.0 (1,181.7) 54.8 - (7.7) (16.3) - (1,150.9)
------------- -------- ------- --- -------- ----- ----- ------ ------- --- --------------- --------
Total net
borrowings (822.4) 2.0 (820.4) 102.7 - (7.7) (12.9) - (738.3)
Lease
liabilities - (147.0) (147.0) 27.1 (47.5) - - 0.7 (166.7)
------------- ------- ----- ------ ---------------
Net
borrowings
and Lease
liabilities (822.4) (145.0) (967.4) 129.8 (47.5) (7.7) (12.9) 0.7 (905.0)
------------- -------- ------- -------- ----- ----- ------ ------- --- --------------- --------
Non-cash changes
At 1
January Currency At 31 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)
-------------------------------------- -------- --------- ----------- ---------- -------------
Lease liabilities - - - - -
-------------------------------------- -------- --------- ----------- ---------- -------------
Net borrowings and lease liabilities (891.1) 114.9 (10.5) (35.7) (822.4)
-------------------------------------- -------- --------- ----------- ---------- -------------
11 . Retirement Benefit Obligations
11.1. Defined Benefit Arrangements in the Primary Financial
Statements
a. Balance Sheet
Other post
Other employment
US pensions pensions US healthcare liabilities Total
Net liability EURm EURm EURm EURm EURm
------------------------------ ----------- --------- --------------- -------------- ---------
Present value of retirement
benefit obligations (222.9) (107.9) (34.0) (92.0) (456.8)
Fair value of plan assets 171.7 111.9 - 24.5 308.1
Asset ceiling - (5.0) - - (5.0)
------------------------------ ---------- -------- ----------- ---------- ------
Net liability at 31 December
2019 (51.2) (1.0) (34.0) (67.5) (153.7)
------------------------------ ---------- -------- ----------- ---------- ------
Other post
Other employment
US pensions pensions US healthcare liabilities Total
Net liability EURm EURm EURm EURm EURm
------------------------------ ----------- --------- --------------- -------------- ---------
Present value of retirement
benefit obligations (231.0) (86.2) (33.1) (83.4) (433.7)
Fair value of plan assets 174.2 92.8 - 25.1 292.1
Asset ceiling - (6.6) - - (6.6)
------------------------------ ---------- -------- ----------- ---------- ------
Net liability at 31 December
2018 (56.8) - (33.1) (58.3) (148.2)
------------------------------ ---------- -------- ----------- ---------- ------
b. Income Statement
Net (expense)/income recognised in the Income Statement is as
follows:
Other post
Other employment
US pensions pensions US healthcare liabilities Total
Net expense EURm EURm EURm EURm EURm
------------------------------- ------------- --------- --------------- -------------- -------
Current service cost (0.1) (1.1) - (6.9) (8.1)
Settlement gain 9.1 - - 0.2 9.3
Net interest (expense)/income (2.3) 0.2 (1.3) (1.2) (4.6)
------------------------------- --------- -------- ----------- ---------- ----
Total income/(expense) year
ended 31 December 2019 6.7 (0.9) (1.3) (7.9) (3.4)
------------------------------- --------- -------- ----------- ---------- ----
During 2019, a settlement gain of EUR9.1 million was recognised
following a buyout offering of two of the Group's US pension
plans.
11.2. Sensitivity analysis
Other post-employment liabilities 2019 2018
----------------------------------- -------- --------
Discount rate 1.45% 2.15%
Inflation rate 1.30% 1.39%
Salary increases 2.85% 2.63%
Benefit increases 1.95% 1.95%
----------------------------------- ---- ----
Changes in the principal assumptions would decrease/(increase)
the total defined benefit obligation (DBO) as follows:
2019 2018
------------------------ ------------
Decrease/(increase) in Increase Decrease Decrease Increase
DBO Change in assumption EURm EURm EURm EURm
------------------------ ----------------------
Discount rate 0.5% 29.5 (34.7) 26.8 (30.9)
Inflation rate 0.5% (8.7) 9.7 (6.6) 6.4
Salary growth rate 0.5% (3.3) 3.1 (2.6) 2.4
Life expectancy 1 year (15.7) 15.2 (12.9) 12.9
Healthcare cost trend:
Initial rate 0.5% (1.4) 1.3 (1.3) 1.2
------------------------ ------------ ------- ------- ------- ------- -------
The sensitivity analysis above illustrates the change in each
major assumption whilst holding all others constant. The methods of
calculating the defined benefit obligation for this purpose are the
same as used for calculating the end of year position.
Other post
Other employment
US pensions pensions US healthcare liabilities Total
Net expense EURm EURm EURm EURm EURm
------------------------------- ------------- --------- --------------- -------------- --------
Current service cost (0.2) (1.3) - (5.9) (7.4)
Past service cost - (0.3) - - (0.3)
Net interest (expense)/income (2.1) 0.2 (1.3) (1.2) (4.4)
------------------------------- --------- -------- ----------- ---------- -----
Total expense year ended 31
December 2018 (2.3) (1.4) (1.3) (7.1) (12.1)
------------------------------- --------- -------- ----------- ---------- -----
12 . Cash Generated from Operations
2019 2018
EURm EURm
--------------------------------------------------- ------ --------
Profit for the year 144.6 140.1
Income tax expense before exceptional items 57.1 77.0
--------------------------------------------------- ----- -----
Profit before income tax 201.7 217.1
--------------------------------------------------- ----- -----
Adjustments for:
Depreciation, amortisation and impairment charges 229.9 197.1
Loss on disposal of PP&E and intangible assets 1.6 0.6
Share option cost 1.4 4.0
Net finance expense 57.5 64.5
Unremitted share of profit from associates 0.2 (0.3)
Net foreign exchange gains (0.5) (1.2)
Changes in working capital:
- Inventories (10.8) (21.7)
- Trade and other receivables (0.4) 17.4
- Trade and other payables 13.9 (23.2)
Change in provisions (4.9) 0.5
Change in retirement benefit obligations (12.4) (5.2)
--------------------------------------------------- ----- -----
Total 477.2 449.6
--------------------------------------------------- ----- -----
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 GPUMUWUPUGRQ
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March 17, 2020 03:00 ET (07:00 GMT)
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