REG - Dauch Corporation - Publication of Historical Pro Forma Financials
20/04/2026 14:00
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RNS Number : 1663B Dauch Corporation 20 April 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 3, 2026
DAUCH CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-14303 38-3161171
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One Dauch Drive
Detroit, Michigan 48211-1198
(Address of principal executive offices) (Zip Code)
(313) 758-2000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Trading symbol Name of exchange on which registered
Common Stock, par value $0.01 per share DCH The New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as
defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter)
or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this
chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act. ¨
Explanatory Note
On February 3, 2026, Dauch Corporation ("Dauch") completed its previously
announced recommended offer to acquire the entire issued and to be issued
share capital of Dowlais Group plc (name subsequently changed to Dowlais Group
Limited) ("Dowlais") (the "Business Combination"), as previously disclosed in
Dauch's Current Report on Form 8-K filed on February 3, 2026 (the "Original
8-K"). This Current Report on Form 8-K/A is being filed to amend Item 9.01 of
the Original 8-K to include the financial statements of Dowlais and pro forma
financial information required by Item 9.01 of Form 8-K (this "Amendment No.
1").
The pro forma financial information included in this Amendment No. 1 has been
presented for informational purposes only, as required by Form 8-K. It does
not purport to represent the actual results of operations that Dauch and
Dowlais would have achieved had the companies been combined during the periods
presented in the pro forma financial information, and is not intended to
project the future results of operations that the combined company may achieve
after completion of the Business Combination. Except as described above, this
Amendment No. 1 does not otherwise amend, modify, or update the disclosures
contained in the Original 8-K.
Item 9.01 Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
The audited consolidated financial statements of Dowlais as of December 31,
2025 and 2024, and for each of the fiscal years ended December 31, 2025 and
2024 with the notes related thereto and the Report of Independent Auditors
thereon are filed as Exhibit 99.1 hereto and incorporated herein by reference.
The consent of Deloitte LLP, independent auditors of Dowlais, is filed as
Exhibit 23.1 hereto and incorporated herein by reference.
(b) Pro forma financial information.
The unaudited pro forma condensed combined balance sheet as of December 31,
2025, giving effect to the Business Combination as if it had occurred on
December 31, 2025, and the unaudited pro forma condensed combined statement of
income for the fiscal year ended December 31, 2025, giving effect to the
Business Combination as if it had occurred on January 1, 2025 and the notes
related thereto, are filed as Exhibit 99.2 hereto and incorporated herein by
reference.
Exhibit No. Description
23.1 Consent of Deloitte LLP, independent auditors (with respect to Dowlais Group
Limited).
99.1 Audited consolidated financial statements of Dowlais Group Limited as of
December 31, 2025 and 2024, and for each of the fiscal years ended December
31, 2025 and 2024.
99.2 Unaudited pro forma condensed combined balance sheet as of December 31, 2025
and unaudited pro forma condensed combined statement of income for the fiscal
year ended December 31, 2025.
104 Cover Page Interactive Data File (formatted in Inline XBRL).
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this Current Report on Form 8-K to be
signed on its behalf by the undersigned, hereunto duly authorized.
DAUCH CORPORATION
Date: April 17, 2026 By: /s/ Christopher J. May
Christopher J. May
Executive Vice President & Chief Financial Officer
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement Nos.
333-293139, 333-288246, 333-257572, 333-225468, 333-220300 and 333-181163 on
Form S-8 of Dauch Corporation, of our report dated 17 April 2026, relating to
the financial statements of Dowlais Group Limited appearing in this Current
Report on Form 8-K/A dated 17 April 2026.
/s/ Deloitte LLP
London, United Kingdom
17 April 2026
Exhibit 99.1
INDEPENDENT AUDITOR'S REPORT
To the Members of Dowlais Group Limited
Opinion
We have audited the consolidated financial statements of Dowlais Group Limited
and subsidiaries (the "Company"), which comprise the consolidated balance
sheets as of December 31, 2025 and 2024 and the related consolidated income
statements, consolidated statements of comprehensive income, consolidated
statements of changes in equity, and consolidated statements of cash flows for
the years then ended, and the related notes to the consolidated financial
statements (collectively referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
2025 and 2024, and the results of its operations and its cash flows for the
years then ended in accordance with IFRS Accounting Standards as issued by the
International Accounting Standards Board (IASB).
Basis for Opinion
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America (GAAS). Our responsibilities under
those standards are further described in the Auditor's Responsibilities for
the Audit of the Financial Statements section of our report. We are required
to be independent of the Company and to meet our other ethical
responsibilities, in accordance with the relevant ethical requirements
relating to our audits. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the
financial statements in accordance with IFRS Accounting Standards as issued by
the IASB, and for the design, implementation, and maintenance of internal
control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, management is responsible for assessing
the Company's ability to continue as a going concern at least, but not limited
to, twelve months from the end of the reporting period, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless management either intends to liquidate the Company or to
cease operations, or has no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not absolute
assurance and therefore is not a guarantee that an audit conducted in
accordance with GAAS will always detect a material misstatement when it
exists. The risk of not detecting a material misstatement resulting from fraud
is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of
internal control. Misstatements are considered material if there is a
substantial likelihood that, individually or in the aggregate, they would
influence the judgment made by a reasonable user based on the financial
statements.
In performing an audit in accordance with GAAS, we:
· Exercise professional judgment and maintain professional skepticism throughout
the audit.
· Identify and assess the risks of material misstatement of the financial
statements, whether due to fraud or error, and design and perform audit
procedures responsive to those risks. Such procedures include examining, on a
test basis, evidence regarding the amounts and disclosures in the financial
statements.
· Obtain an understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company's
internal control. Accordingly, no such opinion is expressed.
· Evaluate the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well
as evaluate the overall presentation of the financial statements.
· Conclude whether, in our judgment, there are conditions or events, considered
in the aggregate, that raise substantial doubt about the Company's ability to
continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit, significant
audit findings, and certain internal control-related matters that we
identified during the audit.
/s/ Deloitte LLP
London, United Kingdom
17 April 2026
Consolidated income Statement
Notes Year ended Year ended
31 December 2025
31 December 2024
£m
£m
Revenue 4, 5 4,410 4,337
Cost of sales (3,706 ) (3,691 )
Gross profit 704 646
Selling, general and administrative expenses (733 ) (813 )
Operating loss 5 (29 ) (167 )
Share of results of equity accounted investments, net of tax 13 65 61
Finance costs 7 (115 ) (131 )
Finance income 7 15 22
Loss before tax (64 ) (215 )
Tax 8 (23 ) 47
Loss after tax for the year (87 ) (168 )
Attributable to:
Owners of the parent (82 ) (173 )
Non-controlling interests (5 ) 5
(87 ) (168 )
Earnings per share
- Basic 10 (6.2 )p (12.6 )p
- Diluted 10 (6.2 )p (12.6 )p
Consolidated Statement of Comprehensive Income
Notes Year ended Year ended
31 December 2025
31 December 2024
£m
£m
Loss after tax for the year (87 ) (168 )
Items that will not be reclassified subsequently to the Income Statement:
Net remeasurement gain on retirement benefit obligations 23 43 37
Income tax charge relating to items that will not be reclassified 8 (13 ) (9 )
30 28
Items that may be reclassified subsequently to the Income Statement:
Currency translation (61 ) (68 )
Impact of hyperinflationary economies 2 9
Share of other comprehensive expense from equity accounted investments 13 (12 ) (3 )
Gain arising on hedging instruments designated as hedge of net investment 24 35 4
Fair value (loss)/gain on hedging instruments designated as cash flow hedges 24 (2 ) 2
Cumulative loss/(gain) on hedging instruments reclassified to the Income 24 2 (3 )
Statement
Income tax credit relating to items that may be reclassified 8 - 6
(36 ) (53 )
Other comprehensive expense for the year (6 ) (25 )
Total comprehensive expense for the year (93 ) (193 )
Attributable to:
Owners of the parent (87 ) (198 )
Non-controlling interests (6 ) 5
(93 ) (193 )
Consolidated Statement of Cash Flows
Notes Year ended Year ended
31 December 2025
31 December 2024
£m
£m
Net cash from operating activities 26 151 120
Investing activities
Purchase of property, plant and equipment (171 ) (188 )
Proceeds from disposal of property, plant and equipment 34 4
Purchase of computer software and capitalised development costs (6 ) (3 )
Disposal of business, net of cash disposed 5 (10 )
Dividends received from equity accounted investments 13 64 70
Interest received 15 8
Net cash used in investing activities (59 ) (119 )
Financing activities
Drawings on borrowings facilities 331 921
Repayment of borrowing facilities (309 ) (792 )
Costs of raising debt finance - (2 )
Repayment of principal under lease obligations 27 (27 ) (24 )
Purchase of own shares under share buy-back 25 (6 ) (26 )
Dividends paid to non-controlling interests - (2 )
Dividends paid to equity shareholders 9 (38 ) (58 )
Net cash (used in)/from financing activities (49 ) 17
Net increase in cash and cash equivalents, net of bank overdrafts 43 18
Cash and cash equivalents, net of bank overdrafts at the beginning of the year 26 323 313
Effect of foreign exchange rate changes 26 (12 ) (8 )
Cash and cash equivalents, net of bank overdrafts at the end of the year 26 354 323
Consolidated Balance Sheet
Notes 31 December 31 December
2025
2024
£m
£m
Non-current assets
Goodwill and other intangible assets 11 1,905 2,129
Property, plant and equipment 12 1,524 1,676
Interests in equity accounted investments 13 374 385
Deferred tax assets 21 139 157
Derivative financial assets 24 8 9
Retirement benefit surplus 23 43 34
Other receivables 16 17 13
4,010 4,403
Current assets
Inventories 15 431 431
Trade and other receivables 16 525 485
Derivative financial assets 24 30 9
Current tax assets 14 25
Other financial assets 24 - 18
Assets associated with businesses classified as held for sale 14 36 -
Cash and cash equivalents 17 386 336
1,422 1,304
Total assets 5 5,432 5,707
Current liabilities
Trade and other payables 18 1,008 961
Interest-bearing loans and borrowings 19 226 13
Lease obligations 27 28 29
Derivative financial liabilities 24 2 32
Liabilities associated with businesses classified as held for sale 14 10 -
Current tax liabilities 48 65
Provisions 20 128 142
1,450 1,242
Non-current liabilities
Other payables 18 13 18
Interest-bearing loans and borrowings 19 1,095 1,291
Lease obligations 27 93 103
Derivative financial liabilities 24 1 14
Deferred tax liabilities 21 158 199
Retirement benefit obligations 23 391 418
Provisions 20 80 117
1,831 2,160
Total liabilities 5 3,281 3,402
Equity
Issued share capital 25 13 14
Capital redemption reserve 25 1 -
Own shares 25 (6 ) (7 )
Translation reserve 25 (168 ) (133 )
Hedging reserve 25 - -
Retained earnings 2,280 2,392
Equity attributable to owners of the parent 2,120 2,266
Non-controlling interests 31 39
Total equity 2,151 2,305
Total liabilities and equity 5,432 5,707
Consolidated Statement of Changes in Equity
Issued share Capital Own shares Translation reserve Hedging reserve Retained earnings Equity attributable to Non-controlling Total
capital
redemption
£m
£m
£m
£m
owners
interests
equity
£m
reserve
of the parent
£m
£m
£m
£m
At 1 January 2024 14 - (7 ) (81 ) 1 2,620 2,547 36 2,583
Loss for the year - - - - - (173 ) (173 ) 5 (168 )
Other comprehensive (expense)/income - - - (52 ) (1 ) 28 (25 ) - (25 )
Total comprehensive (expense)/income - - - (52 ) (1 ) (145 ) (198 ) 5 (193 )
Dividends paid to equity shareholders - - - - - (58 ) (58 ) (2 ) (60 )
Purchase of own shares under share buy-back - - - - - (26 ) (26 ) - (26 )
Equity-settled share-based payments - - - - - 1 1 - 1
At 31 December 2024 14 - (7 ) (133 ) - 2,392 2,266 39 2,305
Loss for the year - - - - - (82 ) (82 ) (5 ) (87 )
Other comprehensive (expense)/income - - - (35 ) - 30 (5 ) (1 ) (6 )
Total comprehensive expense - - - (35 ) - (52 ) (87 ) (6 ) (93 )
Dividends paid to equity shareholders - - - - - (38 ) (38 ) (2 ) (40 )
Purchase of own shares under share buy-back - - - - - (6 ) (6 ) - (6 )
Transaction with shareholder((1)) - - - - - (18 ) (18 ) - (18 )
Cancellation of shares((2)) (1 ) 1 - - - - - - -
Equity-settled share-based payments - - - - - 3 3 - 3
Shares issued by Employee Benefit Trust (EBT) - - 1 - - (1 ) - - -
At 31 December 2025 13 1 (6 ) (168 ) - 2,280 2,120 31 2,151
1. A charge of £18 million has been recognised directly in equity relating to
the settlement of a derivative over the Company's own shares following a
return of capital from shareholder Melrose Industries PLC.
2. During the year, the Company cancelled shares purchased under the share
buy-back programme and shares received from Melrose Industries PLC,
recognising a transfer to a capital redemption reserve in relation to the par
value of the shares cancelled.
Further information on issued share capital and reserves is set out in Note
25.
1. Corporate information
Dowlais Group Limited (the "Company") comprises the GKN Automotive and GKN
Powder Metallurgy businesses along with certain Corporate functions, together
referred to as the "Group". GKN Automotive is a global technology and systems
engineer which designs, develops, manufactures and integrates an extensive
range of driveline technologies, including electric vehicle components. GKN
Powder Metallurgy is a global leader in precision powder metal parts for the
automotive and industrial sectors, as well as the production of powder metal.
GKN Hydrogen formed part of the Group, offering reliable and secure hydrogen
storage solutions, until its sale on 29 July 2024 to Langley Holdings plc.
1.1 Corporate structure
As at 31 December 2025, Dowlais Group plc was a public company limited by
shares incorporated in the United Kingdom and is registered in England &
Wales, whose shares were publicly traded on the London Stock Exchange.
On 3 February 2026, Dauch Corporation acquired the entire issued ordinary
share capital of Dowlais by way of a Court-sanctioned scheme of arrangement
under Part 26 of the Companies Act 2006.
On 4 February 2026, the Group's shares were cancelled from admission to
trading on London Stock Exchange and on 5 March 2026 the Company re-registered
to become a private company and changed its name to Dowlais Group Limited.
1.2 Basis of preparation
The Consolidated Financial Statements have been prepared in accordance with
IFRS Accounting Standards (IFRS®) as issued by the International Accounting
Standards Board (IASB). The Consolidated Financial Statements are presented in
pounds Sterling and, unless stated otherwise, rounded to the nearest million.
They have been prepared under the historical cost convention, as modified by
the revaluation of certain financial assets and financial liabilities
(including derivative instruments).
1.3 New Standards, Amendments and Interpretations affecting amounts,
presentation or disclosure reported in the current year
The following amendments to IFRS Accounting Standards have been applied for
the first time by the Group. Their adoption has not had any material impact on
the disclosures or on the required amounts reported in these Consolidated
Financial Statements:
- Amendments to IAS 21 Lack of Exchangeability.
1.4 New and revised IFRS Accounting Standards in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not
applied the following new and revised IFRS Accounting Standards that have been
issued but are not yet effective:
- Amendments to IFRS 9 and IFRS 7 Amendments to the Classification and
Measurement of Financial Instruments.
- Contracts referencing Nature-dependent Electricity (Amendments to IFRS 9 and
IFRS 7).
- Annual improvements to IFRS Accounting Standards - Volume 11.
- Amendments to IFRS 18 Presentation and Disclosure in Financial Statements
which will become effective for the Group's Consolidated Financial Statements
for the financial year ended 31 December 2027.
- IFRS 19 Subsidiaries without Public Accountability: Disclosures.
With the exception of IFRS 18, the Directors do not expect that the adoption
of the Standards listed above will have a material impact on the Consolidated
Financial Statements of the Group in future periods. The impact of IFRS 18
will not change how items are recognised and measured however there is likely
to be a material impact on the Group's presentation and classification of the
Consolidated Income Statement and reporting of financial performance.
2. Summary of material accounting policies
Going concern
The Consolidated Financial Statements have been prepared on a going concern
basis as the Directors consider that adequate resources exist for the Company
to continue in operational existence for a period of not less than 12 months
from the date of this report. In making this assessment, the Directors have
considered the Group's liquidity and funding arrangements as at 31 December
2025 and up to the date of the Group's acquisition by Dauch which completed on
3 February 2026, together with reviewing cash flow forecasts to 30 April 2027
on a business as usual ("BAU") basis. An overlay was then applied to those
forecasts to estimate the impact of the changes to the Group's funding
structure following the acquisition by Dauch. Scenario analysis was performed
on these forecast cash flows as set out below.
Liquidity and funding arrangements
As at 31 December 2025, the Group's funding facilities comprised a
multicurrency revolving credit facility ("RCF") of £1,233 million, of which
£726 million had been drawn down, a multicurrency term loan of £187 million
and US Private Placement ("USPP") notes of £372 million. As a result, the
Group had undrawn facilities of £0.5 billion (2024: £0.5 billion) and cash
and cash equivalents on the Consolidated Balance Sheet of £0.4 billion (2024:
£0.3 billion).
Subsequent to the Group's acquisition by Dauch on 3 February 2026, Dauch
provided funding to the Group by way of an inter-company loan which the Group
used to repay and cancel its existing RCF and term loan facilities in full.
On 4 February 2026, Dauch implemented an internal restructure to transfer all
US subsidiaries of the Group out of Dowlais ownership. Following the transfer,
the Group's funding structure comprised an inter-company loan with Dauch and
USPP loan notes.
Forecasts to 30 April 2027
In concluding that the going concern basis is appropriate, the Directors
prepared a working capital model on a BAU stand-alone basis (i.e. assuming the
Group's structure and funding at 31 December 2025 continued to 30 April 2027
as if the acquisition by Dauch did not occur) with a 'base case' scenario
supported by the Group's latest internal forecasts to 30 April 2027. The
forecasts include the estimated impact of end market and operational factors,
including supply chain and inflationary challenges and the Group's latest
estimate of the impact of US tariffs throughout the going concern period.
Climate related risks have also been considered, including estimating the
expected transition from internal combustion engines to electric vehicles and
considering potential risks to the Group's infrastructure resulting from
extreme weather or climate events.
The Directors also modelled the impact of a 'worst case' scenario to the 'base
case' by including an aggregation of three plausible but severe downside
risks.
The three downside scenarios modelled were (i) economic shock/downturn, (ii)
losing a key market, product or customer and (iii) significant contract
delivery issues, including a cyber attack scenario.
2. Summary of material accounting policies continued
Throughout the forecast period covered by the model, after applying the 'worst
case' scenario, the model demonstrated that the Group had sufficient funds to
continue operating and would have met the financial covenant requirements in
its existing debt at each testing date. The model also demonstrated that,
following a reverse stress test, the Group could absorb a further reduction in
revenue and cash generation over the 'base case' scenario in the period to 30
April 2027, still assuming no mitigating actions, before the Group breached
its leverage and interest covenants.
Following the completion of the acquisition of the Group by Dauch on 3
February 2026, an overlay was applied to the working capital model to reflect
the changes to the Group's organisational and funding structures as described
in the Liquidity and funding arrangements section above. The overlay
effectively replaced the Group's existing RCF and term loan funding with a new
inter-company loan from Dauch and adjusted the forecast cash flows to replace
the forecast cash flows from the Group's US subsidiaries for the period to 30
April 2027 with the proceeds received on disposal on 4 February 2026.
Based on these overlays, remaining USPP covenant compliance was forecast to
continue to be met comfortably for the period to 30 April 2027 and the Group
would not expect to require additional funding from Dauch to support its
operations during that period. Any future funding decisions that Dauch may
make post acquisition date that might impact the Group's ability to continue
to operate are currently unknown and therefore the Directors have obtained a
letter from Dauch Corporation stating its intention to support the Group for
at least the period of the going concern assessment.
Going concern conclusion
Based on the Director's assessment of the Group's ability to remain in
operation on a standalone basis and taking consideration of Dauch's letter of
support, the Directors are satisfied that the going concern basis remains
appropriate for the preparation of the Consolidated Financial Statements.
Consideration of climate change
In preparing the Consolidated Financial Statements, the Directors have
considered the impact of climate change, particularly Task Force on
Climate-related Financial Disclosures recommended risks. There has been no
material impact identified on the financial reporting judgements and
estimates. In particular, the Directors considered the impact of climate
change in respect of the following areas:
- preparing the going concern assessment of the Group;
- cash flow forecasts used in the impairment assessments of non-current assets
including goodwill and other intangible assets; and
- the carrying value and useful economic lives of property, plant and equipment.
Whilst there is currently no medium-term impact expected from climate change,
the Directors are aware of the ever-changing risks that may result from
climate change and will regularly assess these risks against judgements and
estimates made in preparation of the Group's Consolidated Financial
Statements.
Business combinations and goodwill
The acquisition of subsidiaries is accounted for using the acquisition method.
The cost of acquisition is measured at the fair value of assets transferred,
the liabilities incurred or assumed at the date of exchange of control and
equity instruments issued by the Group in exchange for control of the
acquiree. Control is achieved where the Group has the power to govern the
financial and operating policies of an investee entity so as to obtain
benefits from its activities. Costs directly attributable to business
combinations are recognised as an expense in the Consolidated Income Statement
as incurred.
The acquired identifiable assets and liabilities are measured at their fair
value at the date of acquisition except those where specific guidance is
provided by IFRS.
Any excess of the cost of the acquisition over the fair values of the
identifiable net assets acquired is recognised as goodwill. If the initial
accounting for a business combination is incomplete by the end of the
reporting period in which the combination occurs, the Group reports
provisional amounts where appropriate. Those provisional amounts are adjusted
during the measurement period, or additional assets or liabilities recognised,
to reflect new information obtained about facts and circumstances that existed
as of the acquisition date that, if known, would have affected the amounts
recognised at that date.
The measurement period is the period from the date of acquisition to the date
the Group obtains complete information about facts and circumstances that
existed as of the acquisition date and is subject to a maximum period of one
year.
Goodwill on acquisition is initially measured at cost, being the excess of the
sum of the consideration transferred, the amount of any non-controlling
interest in the acquiree and the fair value of the acquirer's previously held
equity interest in the acquiree over the acquirer's interest in the net fair
value of the identifiable assets, liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost less any
accumulated impairment losses. Goodwill is reviewed for impairment annually or
more frequently if events or changes in circumstances indicate that the
carrying value may be impaired.
If, after reassessment, the Group's interest in the fair value of the
acquiree's identifiable net assets exceeds the sum of the consideration
transferred, the amount of any non-controlling interest in the acquiree and
the fair value of the acquirer's previously held equity interest in the
acquiree, the excess is recognised immediately in profit or loss as a bargain
purchase gain.
As at the acquisition date, any goodwill acquired is allocated to the
cash-generating units acquired. Impairment is determined by assessing the
recoverable amount of the cash-generating unit, or group of cash-generating
units to which goodwill relates. Where the recoverable amount of the
cash-generating unit is less than the carrying amount, an impairment loss is
recognised in the Income Statement and is not subsequently reversed. When
there is a disposal of a cash-generating unit, goodwill relating to the
operation disposed of is taken into account in determining the gain or loss on
disposal of that operation. The amount of goodwill allocated to a partial
disposal is measured on the basis of the relative values of the operation
disposed of and the operation retained.
Equity accounted investments
A joint venture is an entity which is not a subsidiary undertaking but where
the interest of the Group is that of a partner in a business over which the
Group exercises joint control with its partners over the financial and
operating policies. In all cases voting rights are 50% or lower.
2. Summary of material accounting policies continued
Associated undertakings are entities that are neither a subsidiary nor a joint
venture, but where the Group has a significant influence.
The results, assets and liabilities of equity accounted investments are
accounted for by applying the equity method of accounting. The Group's share
of equity includes goodwill arising on acquisition.
When a Group entity transacts with an equity accounted investment of the
Group, profits and losses resulting from the transactions with the equity
accounted investments are recognised in the Consolidated Income Statement only
to the extent of interests in equity accounted investments that are not
related to the Group.
Revenue
Revenues are recognised at the point of transfer of control of goods, as the
Group does not currently generate any revenue that qualifies to be recognised
over time.
The nature of contracts into which the Group enters means that certain of the
Group's arrangements with its customers have multiple elements that can
include a combination of:
- Sale of products; and
- Design and build.
Contracts are reviewed to identify each performance obligation relating to
distinct goods and the associated consideration. The Group allocates revenue
to multiple element arrangements based on the identified performance
obligations within the contracts in line with the policies below. A
performance obligation, which generally relates to the manufacture and supply
of products for use in our customers' operations, is identified if the
customer can benefit from the goods on their own or together with other
readily available resources, and it can be separately identified within the
contract. This review is performed by reference to the specific contract
terms.
Sale of products
This revenue stream accounts for the majority of Group sales.
Invoices for goods are raised and revenue is recognised when control of the
goods is transferred to the customer. Dependent upon contractual terms this
may be at the point of despatch or acceptance by the customer. Revenue
recognised is the transaction price as it is the observable selling price per
product.
Cash discounts, volume rebates and other customer incentive programmes are
based on certain percentages agreed with the Group's customers, which are
typically earned by the customer over an annual period. These are allocated to
performance obligations and are recorded as a reduction in revenue at the
point of sale based on the estimated future outcome. Due to the nature of
these arrangements an estimate is made based on historical results to date,
estimated future results across the contract period and the contractual
provisions of the customer contract.
Certain of the Group's Automotive and Powder Metallurgy businesses recognise
an element of revenue via a surcharge or similar raw material cost recovery
mechanism. The surcharge is generally based on prior period movement in raw
material price indices applied to current period deliveries.
Participation fees are payments made to original equipment manufacturers
relating to long-term contracts. They are recognised as contract assets to the
extent that they can be recovered from future sales over the lives of the
contracts, generally up to seven years.
Design and build
This revenue stream affects a discrete number of Automotive businesses.
Generally, revenue is only recognised on the sale of product as detailed
above, however, on occasions cash is received in advance of work performed to
compensate the Group for costs incurred in design and development activities.
The Group performs an assessment of its performance obligations to understand
multiple elements. As there is generally only one performance obligation, any
cash received in advance is deferred on the Consolidated Balance Sheet and
recognised at a point in time as the deliveries are made under the contract.
Finance costs
Issue costs of loans
The finance cost recognised in the Consolidated Income Statement in respect of
the issue costs of borrowings is allocated to periods over the terms of the
instrument using the effective interest rate method.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale. Investment income earned
on the temporary investment of specific borrowings pending their expenditure
on qualifying assets is deducted from the borrowing costs eligible for
capitalisation.
All other borrowing costs are recognised in the Consolidated Income Statement
in the period in which they are incurred and accrued on a time basis, by
reference to the principal outstanding and the effective interest rate
applicable.
Finance income
Finance income is recognised when it is probable that the economic benefits
will flow to the Group and the amount of income can be measured reliably.
Finance income is accrued on a time basis, by reference to the principal
outstanding and the effective interest rate applicable.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and any impairment in value.
The initial cost of an asset comprises its purchase price or construction
cost, any costs directly attributable to bring the asset into operation, and
any material borrowing costs on qualifying assets. Qualifying assets are
defined as an asset or programme where the period of capitalisation is more
than 12 months. Purchase price or construction cost is the aggregate amount
paid and the fair value of any other consideration given to acquire the asset.
Where assets are in the course of construction at the balance sheet date, they
are classified as capital work-in-progress and presented within Plant and
equipment. Transfers are made to other asset categories when they are
available for use, at which point depreciation commences.
Right-of-use assets arise under IFRS 16 Leases and are depreciated over the
shorter of the estimated life or the lease term.
2. Summary of material accounting policies continued
Property, plant and equipment continued
Depreciation is calculated on a straight-line basis over the estimated useful
life of the asset as follows:
Freehold buildings and long leasehold property over expected economic life not exceeding 50 years
Short leasehold property and equipment over the term of the lease
Plant and equipment 3 - 15 years
The estimated useful lives of property, plant and equipment are reviewed on an
annual basis and, if necessary, changes in useful lives are accounted for
prospectively. No depreciation is charged on freehold land.
The carrying values of property, plant and equipment are reviewed annually for
indicators of impairment, or if events or changes in circumstances indicate
that the carrying value may not be recoverable. If such indication exists an
impairment test is performed and, where the carrying values exceed the
estimated recoverable amount, the assets are written down to their recoverable
amount. The recoverable amount of property, plant and equipment is the greater
of net selling price and value in use. In assessing value in use, estimated
future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. For an asset that does not generate
largely independent cash inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from the continued use of
the asset. Any gain or loss arising on derecognition of the asset (calculated
as the difference between the net disposal proceeds or costs and the carrying
amount of the item) is included in the Consolidated Income Statement in the
period that the item is derecognised.
Intangible assets
Intangible assets, with a finite useful life, are stated at cost less
accumulated amortisation and accumulated impairment losses.
On acquisition of businesses, separately identifiable intangible assets are
initially recorded at their fair value at the acquisition date.
Access to the use of brands and intellectual property are valued using a
"relief from royalty" method which determines the net present value of future
additional cash flows arising from the use of the intangible asset.
Customer relationships and contracts are valued on the basis of the net
present value of the future additional cash flows arising from customer
relationships with appropriate allowance for attrition of customers.
Technology assets are valued using a replacement cost approach, or a "relief
from royalty" method.
Amortisation of intangible assets is recorded in the Consolidated Income
Statement and is calculated on a straight-line basis over the estimated useful
lives of the asset as follows:
Customer relationships and contracts 20 years or less
Brands and intellectual property 20 years or less
Technology 9 years or less
Computer software 5 years or less
Development costs 6 years or less
Where computer software is not integral to an item of property, plant or
equipment, its costs are capitalised and categorised as intangible assets.
Computer software is initially recorded at cost. Where these assets have been
acquired through a business combination, this will be the fair value allocated
in the acquisition accounting. Where these have been acquired other than
through a business combination, the initial cost is the aggregate amount paid
and the fair value of any other consideration given to acquire the asset.
Intangible assets (other than computer software and development costs) are
tested for impairment annually or more frequently whenever events or changes
in circumstances indicate that the carrying value may not be recoverable.
Impairment losses are measured on a similar basis to property, plant and
equipment. Useful lives are also examined on an annual basis and adjustments,
where applicable, are made on a prospective basis.
Assets and liabilities held for sale
Non-current assets and disposal groups are classified as held for sale when
their carrying amount will be recovered through a sale transaction rather than
continuing use. This is regarded as being the case only when the asset (or
disposal group) is available for immediate sale in its present condition, and
its sale must be highly probable. A sale is considered to be highly probable
if the appropriate level of management are committed to a plan to sell the
asset (or disposal group), and an active programme to locate a buyer and
complete the plan must have been initiated including marketing the asset (or
disposal group) for sale at a price that is reasonable in relation to its
current fair value. In addition, the sale should be expected to qualify for
recognition as a completed sale within one year from the date of
classification, and actions required to complete the plan should indicate that
it is unlikely that significant changes to the plan will be made or that the
plan will be withdrawn.
Non-current assets and disposal groups classified as held for sale are
measured at the lower of carrying amount and fair value less costs to sell.
Depreciation and amortisation of related assets will cease once the asset, or
business has met the criteria to be classified as held for sale.
Research and development costs
Research costs are expensed as incurred.
Costs relating to clearly defined and identifiable development projects are
capitalised when there is a technical degree of exploitation, adequacy of
resources and a potential market or development possibility in the undertaking
that are recognisable; and where it is the intention to produce, market or
execute the project. A correlation must also exist between the costs incurred
and future benefits and those costs must be able to be measured reliably.
Capitalised costs are expensed on a straight-line basis over their useful
lives of 6 years or less. Costs not meeting such criteria are expensed as
incurred.
Research and development activities generally relate to enhancing the
engineering, design or manufacturing processes of our products, particularly
in relation to electric vehicles and propulsion source agnostic components.
In 2025, research and development costs of £101 million (2024: £126 million)
were recorded in selling, general and administrative expenses.
Inventories
Inventories are valued at the lower of cost and net realisable value and are
measured using a first in, first out or weighted average cost basis. Cost
includes all direct expenditure and appropriate production overhead
expenditure incurred in bringing goods to their current state based on normal
operating conditions. Net realisable value is based on estimated selling price
less costs expected to be incurred to completion and disposal. Provisions are
made for obsolescence or other expected losses where considered necessary.
2. Summary of material accounting policies continued
Cash and cash equivalents
Cash and cash equivalents may comprise cash in hand, balances with banks and
similar institutions, and short-term deposits which are readily convertible to
cash and are subject to insignificant risks of changes in value.
For the purpose of the Consolidated Statement of Cash Flows, cash and cash
equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
Leases
Where a lease arrangement is identified, a liability to the lessor is included
in the Consolidated Balance Sheet as a lease obligation calculated at the
present value of minimum lease payments. A corresponding right-of-use asset is
recorded in property, plant and equipment. The discount rate used to calculate
the lease liability is the Group's incremental borrowing rate, unless the rate
implicit in the lease is reasonably determinable. The incremental borrowing
rate is used for the majority of leases. Incremental borrowing rates are based
on the term, currency, country and start date of the lease and reflect the
rate the Group would pay for a loan with similar terms and security.
Following initial recognition, the lease liability is measured at amortised
cost using the effective interest rate method. Where there is a change in
future lease payments due to a rent review, change in index or rate, or a
change in the Group's assessment of whether it is reasonably certain to
exercise a purchase, extension or break option, the lease obligation is
remeasured. A corresponding adjustment is made to the associated right-of-use
asset. Right-of-use assets are depreciated over the shorter of the estimated
useful life of the asset and the lease term.
Lease payments are apportioned between finance costs and a reduction in the
lease obligation so as to reflect the interest on the remaining balance of the
obligation. Finance charges are recorded in the Consolidated Income Statement
within finance costs.
Leases with a term of 12 months or less and leases for low value are not
recorded on the Consolidated Balance Sheet. Lease payments for these leases
are recognised as an expense in the Consolidated Income Statement on a
straight-line basis over the lease term. Expenses relating to variable lease
payments which are not included in the lease liability, due to being based on
a variable other than an index or rate, are recognised as an expense in the
Consolidated Income Statement when incurred.
Financial instruments - assets
Classification and measurement
All financial assets are classified as either those which are measured at fair
value, through profit or loss or other comprehensive income, and those
measured at amortised cost.
Financial assets are initially recognised at fair value. For those which are
not subsequently measured at fair value through profit or loss, this includes
directly attributable transaction costs. Trade and other receivables, contract
assets and amounts due from equity accounted investments are subsequently
measured at amortised cost.
Recognition and derecognition of financial assets
Financial assets are recognised in the Consolidated Balance Sheet when the
Group becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised when, and only when, a) the contractual
rights to the cash flows from the financial asset expire or are settled, b)
the Group transfers to another party substantially all of the risks and
rewards of ownership of the financial asset, or c) the Group, despite having
retained some, but not all, significant risks and rewards of ownership, has
transferred control of the asset to another party.
Impairment of financial assets
For trade receivables and contract assets, the simplified approach permitted
under IFRS 9 Financial Instruments is applied. The simplified approach
requires that at the point of initial recognition the expected credit loss
across the life of the receivable must be recognised. As these balances do not
contain a significant financing element, the simplified approach relating to
expected lifetime losses is applicable under IFRS 9.
Derivatives over own equity
The Group held a derivative asset over its own equity as a result of a
contract for its own shares to be returned to it at nil cost under certain
circumstances dependent on the Company's share price at a future date. As a
transaction with a shareholder, the asset was initially recognised directly in
equity at the fair value of the shares expected to be returned. Following
initial recognition, the derivative asset was held on the Consolidated Balance
Sheet at fair value, with gains and losses arising on the remeasurement of the
asset recognised immediately in the Consolidated Income Statement. The asset
was settled by the return of the Company's shares and derecognised directly in
equity aligned with the initial recognition.
Trade and other receivables
Trade and other receivables that are held within a business model whose
objective is to hold the receivables in order to collect contractual cash
flows, and where the contractual terms of the receivables give rise to cash
flows that are solely payments of principal and interest on the principal
amount outstanding, are measured and carried at amortised cost using the
effective interest method, less any impairment. For trade receivables, the
carrying amount is reduced by a loss allowance for expected credit losses.
Subsequent recoveries of amounts previously written off are credited against
the allowance account and changes in the carrying amount of the allowance
account are recognised in the Consolidated Income Statement.
Trade receivables that are assessed not to be impaired individually are also
assessed for impairment on a collective basis. In measuring the expected
credit losses, the Group considers all reasonable and supportable information
such as the Group's past experience at collecting receipts, any increase in
the number of delayed receipts in the portfolio past the average credit
period, and forward looking information such as forecasts of future economic
decisions.
Other receivables are also considered for impairment. The Group recognises the
expected lifetime credit loss when there has been a significant increase in
credit risk (such as changes to credit ratings or when the contractual
payments are overdue by more than 30 days) since initial recognition. However,
if the credit risk has not increased significantly since initial recognition,
the Group measures the loss allowance at an amount equal to the 12-month
expected credit loss. The carrying amount is reduced by any loss arising which
is recorded in the Consolidated Income Statement.
2. Summary of material accounting policies continued
Financial instruments - liabilities
Recognition and derecognition of financial liabilities
Financial liabilities are recognised in the Consolidated Balance Sheet when
the Group becomes a party to the contractual provisions of the instruments and
are initially measured at fair value, net of transaction costs. The Group
derecognises financial liabilities when the Group's obligations are
discharged, significantly modified, cancelled or they expire.
Classification and measurement
Non-derivative financial liabilities are subsequently measured at amortised
cost using the effective interest method, with interest expense recognised on
an effective interest rate basis. The effective interest method is a method of
calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant periods. The effective interest rate is the
rate that discounts estimated future cash payments throughout the expected
life of the financial liability, or, where appropriate, a shorter period to
the gross carrying amount of the financial liability.
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value of the
consideration received net of associated issue costs. After initial
recognition, interest-bearing loans and borrowings are subsequently measured
at amortised cost using the effective interest rate method.
Derivative financial instruments
The Group uses derivative financial instruments to manage its exposure to
interest rate, foreign exchange rate and commodity risks, arising from
operating and financing activities. The Group does not hold or issue
derivative financial instruments for speculative trading purposes. Derivative
financial instruments are recognised and stated at fair value in the
Consolidated Balance Sheet. Their fair value is recalculated at each reporting
date. The accounting treatment for the resulting gain or loss will depend on
whether the derivative meets the criteria to qualify for hedge accounting and
are designated as such.
Where derivatives do not meet the criteria to qualify for hedge accounting,
any gains or losses on the revaluation to fair value at the period end are
recognised immediately in the Consolidated Income Statement. Where derivatives
do meet the criteria to qualify for hedge accounting, recognition of any
resulting gain or loss on revaluation depends on the nature of the hedge
relationship and the item being hedged.
Derivative financial instruments with maturity dates of less than one year
from the period end date are classified as current in the Consolidated Balance
Sheet. Features embedded in non-derivative host contracts are recognised
separately as derivative financial instruments at their fair value in the
Consolidated Balance Sheet when the nature, characteristics and risks of the
embedded features are not closely related to the host contract. Gains and
losses arising on the remeasurement of these embedded derivatives at each
balance sheet date are recognised in the Consolidated Income Statement.
Hedge accounting
In order to qualify for hedge accounting, the Group is required to document
from inception the relationship between the item being hedged and the hedging
instrument, along with its risk management objectives and its strategy for
undertaking various hedge transactions. Furthermore, at the inception of the
hedge and on an ongoing basis, the Group documents that the hedge will be
highly effective, which is when the hedging relationships meet all of the
following hedge effectiveness requirements:
- there is an economic relationship between the hedged item and the hedging
instrument;
- the effect of credit risk does not dominate the value changes that result from
that economic relationship; and
- the hedge ratio of the hedging relationship is the same as that resulting from
the quantity of the hedged item that the Group actually hedges and the
quantity of the hedging instrument that the Group actually uses to hedge that
quantity of hedged item.
The Group discontinues hedge accounting only when the hedging relationship (or
a part thereof) ceases to meet the qualifying criteria (after rebalancing, if
applicable). This includes instances when the hedging instrument expires or is
sold, terminated or exercised. The discontinuation is accounted for
prospectively. The Group designates certain hedging instruments as either cash
flow hedges or hedges of net investments in foreign operations. No hedge
accounting was in place within the Group prior to the demerger from the
Melrose Industries PLC group.
Cash flow hedges
Derivative financial instruments are classified as cash flow hedges when they
hedge the Group's exposure to the variability in cash flows that are either
attributable to a particular risk associated with a recognised asset or
liability, or a highly probable forecasted cash flow.
The Group designates the interest rate swap contracts as the hedging
instrument for variable interest rate exposure on debt. The effective portion
of any gain or loss from revaluing the derivative financial instrument is
recognised in the Statement of Comprehensive Income and accumulated in equity.
The gain or loss relating to the ineffective portion is recognised immediately
in the Consolidated Income Statement.
Amounts previously recognised in the Statement of Comprehensive Income and
accumulated in equity are recycled to the Consolidated Income Statement in the
periods when the hedged item is recognised in the Consolidated Income
Statement or when the forecast transaction is no longer expected to occur.
Hedges of net investments in foreign operations
Debt financial instruments are classified as net investment hedges when they
hedge the Group's net investment in foreign operations. The effective element
of any foreign exchange gain or loss from revaluing the debt at a reporting
period end is recognised in the Statement of Comprehensive Income. Any
ineffective element is recognised immediately in the Consolidated Income
Statement.
Gains and losses accumulated in equity are recognised immediately in the
Consolidated Income Statement when the foreign operation is disposed.
2. Summary of material accounting policies continued
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation. If the effect of the time value of money is material, provisions
are determined by discounting the expected future cash flows at a rate that
reflects the current market assessment of the time value of money and, where
appropriate, the risks specific to the liability. Where discounting is used,
the increase in the provision due to the passage of time is recognised as a
finance cost.
Pensions and other retirement benefits
The Group operates defined benefit pension plans and defined contribution
plans, some of which require contributions to be made to administered funds
separate from the Group.
For the defined benefit pension and retirement benefit plans, plan assets are
measured at fair value and plan liabilities are measured on an actuarial basis
and discounted at an interest rate equivalent to the current rate of return on
a high-quality corporate bond of equivalent currency and term to the plan
liabilities. Any assets resulting from this calculation are limited to past
service cost plus the present value of available refunds and reductions in
future contributions to the plan. The present value of the defined benefit
obligation, and the related current service cost and past service cost, are
measured using the projected unit credit method.
The service cost of providing pension and other retirement benefits to
employees for the period is charged to the Consolidated Income Statement.
Net interest expense on net defined benefit obligations is determined by
applying discount rates used to measure defined benefit obligations at the
beginning of the year to net defined benefit obligations at the beginning of
the year. The net interest expense is recognised within finance costs.
Remeasurement gains and losses comprise actuarial gains and losses, the effect
of the asset ceiling (if applicable) and the return on plan assets (excluding
interest). Remeasurement gains and losses, and taxation thereon, are
recognised in full in the Statement of Comprehensive Income in the period in
which they occur and are not subsequently recycled.
Actuarial gains and losses may result from differences between the actuarial
assumptions underlying the plan obligations and actual experience during the
period or changes in the actuarial assumptions used in the valuation of the
plan obligations.
For defined contribution plans, contributions payable are charged to the
Consolidated Income Statement when employees have rendered services entitling
them to the contributions.
Foreign currencies
The individual financial statements of each Group company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). For the purpose of the Group's Consolidated Financial
Statements, the results and financial position of each Group company are
expressed in pounds Sterling, which is also the presentation currency.
In preparing the financial statements of the individual companies,
transactions in currencies other than the entity's functional currency
(foreign currencies) are recorded at the rates of exchange prevailing on the
dates of the transactions. At each balance sheet date, monetary assets and
liabilities that are denominated in foreign currencies are retranslated at the
rates prevailing on the balance sheet date. Non-monetary items carried at fair
value that are denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined. Non-monetary items
that are measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are included in the Consolidated Income
Statement for the period. Exchange differences arising on the retranslation of
non-monetary items carried at fair value are included in the Consolidated
Income Statement for the period except for differences arising on the
retranslation of non-monetary items in respect of which gains and losses are
recognised directly in equity. For such non-monetary items, any exchange
component of that gain or loss is also recognised directly in equity.
For the purpose of presenting the Group's Consolidated Financial Statements,
the assets and liabilities of the Group's foreign operations are translated at
exchange rates prevailing on the balance sheet date. Income and expense items
are translated at the average exchange rates for the period, unless exchange
rates fluctuate significantly during that period, in which case the exchange
rates at the date of transactions are used. Exchange differences arising, if
any, are recognised in the Statement of Comprehensive Income and accumulated
in equity (attributed to non-controlling interests as appropriate). Such
translation differences are recognised as income or as expenses in the period
in which the related operation is disposed of. Any exchange differences that
have previously been attributed to non-controlling interests are derecognised
but they are not reclassified to the Consolidated Income Statement.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the rate prevailing at the balance sheet date.
Hyperinflation
During 2022, Turkey's economy became hyperinflationary. IAS 29 Financial
Reporting in Hyperinflationary Economies requires affected entities to present
their financial statements reflecting the general purchasing power of the
relevant functional currency in terms of the measuring unit current at the end
of the reporting period. The Group applies the Turkey Domestic Producer Price
Index (D-PPI), which was 4,783 (31 December 2024: 3,747) as at the end of the
year, to the results of the Group's operations in Turkey whose functional
currency is the Turkish Lira.
2. Summary of material accounting policies continued
Taxation
The tax expense is based on the taxable profits for the period and represents
the sum of the tax paid or currently payable and deferred tax.
Taxable profit differs from net profit as reported in the Consolidated Income
Statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable
or deductible. The Group's liability for current tax is calculated using tax
rates and tax laws that have been enacted or substantively enacted by the
balance sheet date.
A tax provision is recognised for those matters for which the tax
determination is uncertain but it is considered probable that there will be a
future outflow of funds to a tax authority. The provisions are measured at the
best estimate of the amount expected to become payable. The assessment is
based on the judgement of tax professionals within the Group supported by
previous experience in respect of such activities and in certain cases based
on specialist independent advice.
Deferred tax is provided, using the liability method, on all temporary
differences at the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences
except:
- where the deferred tax liability arises on the initial recognition of goodwill
or an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss; and
- where the timing of the reversal of the temporary differences associated with
investments in subsidiaries and interests in equity accounted investments can
be controlled and it is probable that the temporary differences will not
reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences,
carry-forward of unused tax assets and unused tax losses, to the extent that
it is probable that taxable profit will be available against which the
deductible temporary differences, and carry-forward of unused tax assets and
unused tax losses can be utilised except:
- where the deferred tax asset arises from the initial recognition of an asset
or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor taxable
profit or loss; and
- in respect of deductible temporary differences associated with investments in
subsidiaries and interests in equity accounted investments, deferred tax
assets are only recognised to the extent that it is probable that the
temporary differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences can be
utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax
asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the year when the asset is realised or the liability is
settled, based on tax rates and tax laws that have been enacted or
substantively enacted at the relevant balance sheet date.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
Tax relating to items recognised directly in other comprehensive income is
recognised in the Statement of Comprehensive Income and not in the
Consolidated Income Statement.
Revenues, expenses and assets are recognised net of the amount of sales tax
except:
- where the sales tax incurred on a purchase of goods and services is not
recoverable from the taxation authority, in which case the sales tax is
recognised as part of the cost of acquisition of the asset or as part of the
expense item as applicable; and
- where receivables and payables are stated with the amount of sales tax
included.
The net amount of sales tax recoverable from, or payable to, the taxation
authority is included as part of receivables or payables in the Consolidated
Balance Sheet.
Share-based payments
The Group has applied the requirements of IFRS 2 Share-based payment. The
Group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value of the equity
instrument excluding the effect of non-market based vesting conditions at the
date of grant. The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line basis over
the vesting period, based on the Group's estimate of shares that will
eventually vest and adjusted for the effect of non-market based vesting
conditions. Fair value is measured by use of a Monte Carlo pricing model.
3. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in
Note 2, the Directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions
are based on historical experiences and other factors that are considered to
be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of revision and future periods if the revision affects both current and future
periods.
Critical accounting judgements
No critical accounting judgements have been identified.
Key sources of estimation uncertainty
Assumptions concerning the future and other key sources of estimation
uncertainty at the balance sheet date, that may have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed below.
Assumptions used to determine the recoverable amount of goodwill and other
assets
Determining whether the goodwill of groups of cash-generating units ("CGUs")
is impaired requires an estimation of its recoverable amount which is compared
against the carrying value. The recoverable amount is deemed to be the higher
of the value in use and fair value less costs to sell. For the year ended 31
December 2025, impairment testing has been performed for each group of CGUs
using the value in use method based on estimated discounted cash flows.
The impairment tests concluded that there was headroom of £240 million for
the Automotive group of CGUs, and headroom of £61 million for the Powder
Metallurgy group of CGUs.
The models used to calculate value in use for each group of CGUs are
particularly sensitive to key assumptions around discount rates, long-term
growth rates and underlying assumptions underpinning forecasts including the
impact of macroeconomic conditions such as interest rates and inflation on
future sales and input prices which drive forecast operating margins and
ultimately cash flows.
Details of the key assumptions supporting the impairment tests, together with
sensitivity analysis in respect of those key assumptions, are set out in Note
11. Whilst actual movements might be different to sensitivities shown, these
are considered to reflect a reasonably possible change that could occur.
Assumptions used to determine the carrying amount of the Group's defined
benefit obligations
The Group's pension plans are significant in size. The defined benefit
obligations in respect of the plans are discounted at rates set by reference
to market yields on high quality corporate bonds. Estimation is required when
setting the criteria for bonds to be included in the population from which the
yield curve is derived. The most significant criteria considered for the
selection of bonds to include are the issue size of the corporate bonds,
quality of the bonds and the identification of outliers which are excluded. In
addition, assumptions are made in determining mortality and inflation rates to
be used when valuing the plan's defined benefit obligations. At 31 December
2025, the retirement benefit obligation was a net deficit of £348 million
(2024: £384 million).
Further details of the assumptions applied and a sensitivity analysis on the
principal assumptions used to determine the defined benefit liabilities of the
Group's obligations are shown in Note 23. Whilst actual movements might be
different to sensitivities shown, these are considered to reflect a reasonably
possible change that could occur.
4. Revenue
An analysis of the Group's revenue, presented by destination (i.e. by the
location of the external customer), is as follows:
Year ended 31 December 2025 Automotive Powder Metallurgy Total
£m
£m
£m
UK 145 13 158
Rest of Europe 1,051 331 1,382
North America 1,558 408 1,966
South America 192 15 207
Asia 527 166 693
Africa 2 2 4
Revenue 3,475 935 4,410
Year ended 31 December 2024 Automotive Powder Metallurgy Total
£m
£m
£m
UK 196 13 209
Rest of Europe 993 339 1,332
North America 1,495 406 1,901
South America 176 16 192
Asia 516 170 686
Africa 15 2 17
Revenue 3,391 946 4,337
The Group derives its revenue from the transfer of goods at a point in time.
For the year ended 31 December 2025, the Group has identified two major
customers (defined as customers that individually contributed at least 10% of
the Group's revenue) primarily reported within the Automotive segment that
each accounted for approximately 11% of the Group's total revenue recognised
in the year (2024: two customers that accounted for approximately 11% and 10%
of the Group's total revenue for 2024).
Revenue can also be disaggregated by product line as follows:
Year ended Year ended
31 December 2025
31 December 2024
£m
£m
Automotive
Driveline 2,219 2,268
ePowertrain 1,180 1,049
Other 76 74
3,475 3,391
Powder Metallurgy
Sinter 701 707
Powder 159 172
Acceleration Platforms 75 67
935 946
5. Segment information
Segment information is presented in accordance with IFRS 8 Operating Segments
which requires operating segments to be identified on the basis of internal
reports about components of the Group that are regularly reported to the
Group's Chief Operating Decision Maker ("CODM"), which has been deemed to be
the Group's Board of Directors, in order to allocate resources to the segments
and assess their performance.
The operating segments are as follows:
Automotive - a global technology and systems engineer which designs, develops,
manufactures and integrates an extensive range of driveline technologies,
including electric vehicle components.
Powder Metallurgy - a global leader in precision powder metal parts for the
automotive and industrial sectors, as well as the production of powder metal.
Hydrogen - offering reliable and secure hydrogen storage solutions, the
business was sold on 29 July 2024.
5. Segment information continued
In addition, central corporate cost centres are also reported to the Board.
The central corporate cost centres contain the Group head office costs and
charges related to the divisional management long-term incentive plans and
associated assets and liabilities, and include the Group's external cash and
debt facilities.
No operating segments have been aggregated to form the reportable segments.
Reportable segment results include items directly attributable to a segment as
well as those which can be allocated on a reasonable basis. Inter-segment
pricing is determined on an arm's length basis, in a manner similar to
transactions with third parties.
The Group's geographical segments are determined by the location of the
Group's non-current assets and, for revenue, the location of external
customers. Inter-segment sales are not material and have not been disclosed.
The following tables present the segment revenues and operating profits as
regularly reported to the CODM, as well as certain asset and liability
information regarding the Group's operating segments and central cost centres.
a) Segment revenues
The Group has assessed that the disaggregation of revenue recognised from
contracts with customers by operating segment is appropriate as this is the
information regularly reviewed by the CODM in evaluating financial
performance.
Year ended 31 December 2025 Notes Automotive Powder Metallurgy Total
£m
£m
£m
Adjusted revenue 4,027 973 5,000
Equity accounted investments 13 (590 )
Revenue 4 4,410
Year ended 31 December 2024 Notes Automotive Powder Metallurgy Total
£m
£m
£m
Adjusted revenue 3,954 983 4,937
Equity accounted investments 13 (600 )
Revenue 4 4,337
b) Segment operating profit
Year ended Year ended
31 December
31 December
2025
2024
£m
£m
Adjusted operating profit/(loss):
Automotive 335 268
Powder Metallurgy 81 89
Hydrogen - (9 )
Total 416 348
Corporate costs((1)) (42 ) (24 )
Unallocated items:
Restructuring costs((2)) (95 ) (145 )
Amortisation of intangible assets acquired in business combinations (184 ) (191 )
Movement in derivatives and associated financial assets and liabilities 62 (71 )
Dauch acquisition costs((3)) (62 ) -
Business disposal related losses (38 ) (18 )
Litigation release/(costs) 3 (3 )
Demerger costs - (1 )
Net release and changes in discount rates of certain fair value items - 27
Adjusted operating profit of equity accounted investments((4)) (89 ) (89 )
Operating loss (29 ) (167 )
Share of results of equity accounted investments, net of tax 65 61
Finance costs (115 ) (131 )
Finance income 15 22
Loss before tax (64 ) (215 )
1. Corporate costs include a charge of £11 million (2024: £nil) in respect
of divisional management long-term incentive plans.
2. Costs associated with restructuring projects included:
a. A charge of £61 million (2024: £125 million) within the
Automotive division, primarily relating to significant footprint consolidation
actions as the business continues to address its cost base and deliver
transformational programmes. Costs incurred include direct costs relating to
the closure of Automotive plants in Köping, Sweden and Roxboro, North
Carolina together with direct costs of expansion of the Group's production
capacity in Mexico, and continued transfer of manufacturing from Mosel,
Germany to Miskolc, Hungary.
b. A charge of £32 million (2024: £17 million) within the Powder
Metallurgy segment relating to the optimisation of headcount and the decision
to exit the magnets product line and £2 million (2024: £3 million) of
corporate costs.
3. Professional fees and employee benefits totalling £62 million have been
recorded in the period (2024: £nil) in relation to the acquisition of the
Group by Dauch Corporation (Dauch).
4. Segmental adjusted operating profit includes the Group's share of
operating profit of equity accounted investments, excluding any amortisation
of intangible assets acquired in business combinations, which is not included
in the Group's operating profit/(loss).
5. Segment information continued
c) Segment total assets and liabilities
Total assets Total liabilities
31 December 31 December 31 December 31 December
2025
2024
2025
2024
£m
£m
£m
£m
Automotive 3,916 4,123 1,541 1,655
Powder Metallurgy 1,081 1,185 343 373
Total segmental assets/liabilities 4,997 5,308 1,884 2,028
Corporate 435 399 1,397 1,374
Total Group assets/liabilities 5,432 5,707 3,281 3,402
d) Segment additions to non-current assets and depreciation
Additions to non-current assets((1)) Depreciation of Depreciation of
owned assets
leased assets
Year ended Year ended Year ended Year ended Year ended Year ended
31 December
31 December
31 December
31 December
31 December
31 December
2025
2024
2025
2024
2025
2024
£m
£m
£m
£m
£m
£m
Automotive 129 194 190 187 13 14
Powder Metallurgy 33 43 45 46 14 11
Total 162 237 235 233 27 25
1. Additions to non-current assets excludes lease additions.
e) Geographical information
The Group operates in various geographical areas around the world. The parent
company's country of domicile is the UK and the Group's revenues and
non-current assets in the rest of Europe and North America are also considered
to be material.
The Group's revenue from external customers and information about specific
segment assets (non-current assets excluding deferred tax assets, non-current
derivative financial assets, other financial assets, retirement benefit
surplus and non-current other receivables) by geographical location are
detailed in the following table:
Revenue((1)) from Segment assets
external customers
Year ended Year ended 31 December 31 December
31 December
31 December
2025
2024
2025
2024
£m
£m
£m
£m
UK 158 209 463 520
Rest of Europe 1,382 1,332 1,433 1,521
North America 1,966 1,901 1,124 1,285
Other 904 895 783 864
Total 4,410 4,337 3,803 4,190
1. Revenue is presented by destination.
Total revenue includes revenue from customers located in the United States of
£1,399 million (2024: 1,322 million), in Mexico of £518 million (2024: £514
million) and Germany of £450 million (2024: £474 million) which are
considered individually material.
6. Staff costs
An analysis of staff costs and employee numbers is as follows:
Year ended Year ended
31 December
31 December
2025
2024
£m
£m
Staff costs during the year (including Executive Directors)
Wages and salaries 873 878
Social security costs 182 190
Pension costs (Note 23)
- defined benefit plans 6 6
- defined contribution plans 13 14
Share-based compensation expense (Note 22) 3 1
Total staff costs 1,077 1,089
7. Finance costs and finance income
An analysis of finance costs and income is as follows:
Year ended Year ended
31 December
31 December
2025
2024
£m
£m
Finance costs and income
Interest on bank loans and overdrafts (90 ) (89 )
Amortisation of costs of raising finance (4 ) (5 )
Net interest cost on pensions (14 ) (15 )
Lease interest (6 ) (6 )
Unwind of discount on provisions (1 ) (1 )
Fair value changes on other financial assets - (10 )
Other finance costs - (5 )
Finance costs (115 ) (131 )
Other finance income 15 22
Finance income 15 22
8. Tax
Year ended Year ended
31 December
31 December
2025
2024
£m
£m
Analysis of tax charge/(credit) in the year:
Current tax
Current year tax charge 58 19
Adjustments in respect of prior years (5 ) -
Total current tax charge 53 19
Deferred tax
Origination and reversal of temporary differences (70 ) (62 )
Adjustments in respect of prior years 26 22
Tax on the change in value of derivative financial instruments 18 (14 )
Recognition of previously unrecognised deferred tax assets (3 ) (6 )
Non-recognition of deferred tax (1 ) (6 )
Total deferred tax credit (30 ) (66 )
Tax 23 (47 )
The tax charge/(credit) for the year can be reconciled to the loss before tax
per the Consolidated Income Statement as follows:
Year ended Year ended
31 December
31 December
2025
2024
£m
£m
Loss before tax: (64 ) (215 )
Tax credit on loss before tax at the weighted average rate of 20% (2024: 19%) (13 ) (41 )
Tax effect of:
Withholding taxes, disallowable expenses and other permanent differences ((1)) 32 (10 )
Temporary differences not recognised in deferred tax (1 ) (6 )
Recognition of previously unrecognised deferred tax assets (3 ) (6 )
Tax credits and other rate differences (13 ) (6 )
Adjustments in respect of prior years 21 22
Total tax charge/(credit) for the year 23 (47 )
1. Withholding taxes, disallowable expenses and other permanent differences
for the year ended 31 December 2024 include a £45 million provision release
following the settlement of a German tax audit relating to the years 2010 to
2021.
The reconciliation has been performed at a blended Group tax rate of 20%
(2024: 19%) which represents the weighted average of the tax rates applying to
profits and losses in the jurisdictions in which those results arose in the
year.
Tax charges/(credits) included in other comprehensive income are as follows:
Year ended Year ended
31 December
31 December
2025
2024
£m
£m
Deferred tax on retirement benefit obligations 13 9
Deferred tax on foreign exchange gains and losses - (6 )
Total charge for the year 13 3
9. Dividends
Year ended Year ended
31 December
31 December
2025
2024
£m
£m
Interim dividend - 19
Final dividend 38 39
38 58
No interim or final dividend have been proposed by the Board for the year
ended 31 December 2025 in accordance with the terms of the acquisition by
Dauch.
For the year ended 31 December 2024, a final dividend of 2.8 pence per
ordinary share was proposed by the Board and paid on 29 May 2025 totalling
£38 million. An interim dividend of 1.4 pence per ordinary share was declared
by the Board on 13 August 2024 and paid on 4 October 2024, totalling £19
million.
10. Earnings per share
Earnings attributable to owners of the parent Year ended Year ended
31 December
31 December
2025
2024
£m
£m
Net loss attributable to shareholders (82 ) (173 )
Adjustments for earnings attributable to shares subject to recall 1 4
Earnings for basis of earnings per share (81 ) (169 )
Year ended Year ended
31 December 31 December
2025 2024
Number Number
Weighted average number of ordinary shares (million) 1,323 1,373
Adjustment for shares subject to recall (million) (12 ) (28 )
Weighted average number of ordinary shares for the purposes of basic earnings 1,311 1,345
per share (million)
Weighted average number of ordinary shares for the purposes of diluted 1,311 1,345
earnings per share (million)
Earnings per share Year ended Year ended
31 December
31 December
2025
2024
pence
pence
Basic earnings per share (6.2 ) (12.6 )
Diluted earnings per share (6.2 ) (12.6 )
11. Goodwill and other intangible assets
Goodwill Customer Brands and Technology Computer Development Total
£m
relationships
intellectual
£m
software
costs
£m
and contracts
property
£m
£m
£m
£m
Cost
At 1 January 2024 1,556 1,719 183 402 106 109 4,075
Additions - - - - - 3 3
Disposals - - - - (19 ) (2 ) (21 )
Impact of hyperinflationary economies 1 3 - - - - 4
Exchange adjustments (27 ) (36 ) - (1 ) (2 ) - (66 )
At 31 December 2024 1,530 1,686 183 401 85 110 3,995
Additions - - - - 3 3 6
Disposals - - - - (3 ) - (3 )
Disposal of business (15 ) (10 ) - (8 ) (2 ) - (35 )
Impact of hyperinflationary economies - 2 - - - - 2
Exchange adjustments (11 ) (21 ) - (1 ) - (3 ) (36 )
At 31 December 2025 1,504 1,657 183 392 83 110 3,929
Amortisation and impairment
At 1 January 2024 (449 ) (782 ) (53 ) (272 ) (82 ) (72 ) (1,710 )
Charge for the year - (136 ) (8 ) (47 ) (6 ) (8 ) (205 )
Disposals - - - - 19 2 21
Exchange adjustments 12 14 - 1 1 - 28
At 31 December 2024 (437 ) (904 ) (61 ) (318 ) (68 ) (78 ) (1,866 )
Charge for the year - (133 ) (9 ) (42 ) (8 ) (9 ) (201 )
Disposals - - - - 3 - 3
Disposal of business - 10 - 8 2 - 20
Exchange adjustments 3 14 - 1 - 2 20
At 31 December 2025 (434 ) (1,013 ) (70 ) (351 ) (71 ) (85 ) (2,024 )
Net book value
At 31 December 2025 1,070 644 113 41 12 25 1,905
At 31 December 2024 1,093 782 122 83 17 32 2,129
Amortisation expense of £9 million (2024: £7 million) and £192 million
(2024: £198 million) is included within costs of sales and selling, general
and administrative expenses, respectively.
The goodwill generated as a result of acquisitions represents the premium paid
in excess of the fair value of all net assets, including intangible assets
identified at the point of acquisition. On demerger of the Group from Melrose,
goodwill relating to historical acquisitions was transferred at book value
based on the goodwill that arose on the original acquisition. No additional
goodwill was created as a result of the demerger.
Goodwill acquired in business combinations, net of impairment, has been
allocated to the businesses, each of which comprises several CGUs. Goodwill is
allocated to CGUs, or groups of CGUs, that are expected to benefit from the
synergies of the acquisition. Goodwill is allocated to the Automotive and
Powder Metallurgy groups of CGUs, which each represent reportable segments, as
this is the lowest level within the Group at which the goodwill is monitored
for internal management purposes.
Goodwill 31 December 31 December
2025
2024
£m
£m
Automotive 1,007 1,014
Powder Metallurgy 63 79
Total 1,070 1,093
Impairment testing
The Group tests goodwill annually or more frequently if there are indications
that goodwill might be impaired. The date of the annual impairment test is 31
October, aligned with internal forecasting and review processes. In accordance
with IAS 36 Impairment of Assets, the Group values goodwill at the recoverable
amount, being the higher of the value in use or fair value less costs to sell.
For the current year, impairment tests for both groups of CGUs were performed
by applying a value in use approach (2024: value in use).
Based on impairment testing completed for the year ended 31 December 2025 no
impairment was identified in respect of either the Automotive or the Powder
Metallurgy group of CGUs (2024: no impairment identified in either group of
CGUs).
Significant assumptions and estimates
The basis of the impairment tests and the key assumptions are set out in the
tables below:
2025 2024
Groups of CGUs Pre-tax Long-term growth rates Years in Pre-tax Long-term growth rates Years in
discount rates
forecast
discount rates
forecast
Automotive 13.0 % 3.3 % 5 12.5 % 3.5 % 5
Powder Metallurgy 12.8 % 3.5 % 5 12.6 % 3.5 % 5
11. Goodwill and other intangible assets continued
Risk adjusted discount rates
Cash flows within the groups of CGUs are discounted using a post-tax discount
rate specific to each group of CGUs. Discount rates reflect the current market
assessments of the time value of money and the territories in which the group
of CGUs operates. In determining the cost of equity, the Capital Asset Pricing
Model ("CAPM") has been used. Under CAPM, the cost of equity is determined by
adding a risk premium, based on an industry adjustment ("Beta"), to the
expected return of the equity market above the risk-free return. The relative
risk adjustment reflects the risk inherent in each group of CGUs relative to
all other sectors and geographies on average.
The cost of debt is determined using a risk-free rate based on the cost of
government bonds and an interest rate premium equivalent to a corporate bond
with a credit rating similar to the rating of the Group.
The pre-tax discount rate for each group of CGUs is derived such that when
applied to pre-tax cash flows it results in the same discounted value as when
the observable post-tax weighted average cost of capital is applied to
post-tax cash flows.
Assumptions applied in financial forecasts
The Group prepares five-year cash flow forecasts derived from financial
budgets and medium-term forecasts. Each forecast has been prepared using a
cash flow period deemed most appropriate by management, considering the nature
of each group of CGUs. The key assumptions used in forecasting cash flows
relate to future budgeted revenue and operating margins likely to be achieved
and the expected rates of long-term growth by market sector. Underlying
factors in determining the values assigned to each key assumption are shown
below.
Revenue growth and operating margins
Revenue growth assumptions in the forecast period are based on financial
budgets and medium-term forecasts by management, taking into account industry
growth rates and management's historical experience in the context of wider
industry and economic conditions. Projected sales are built up with reference
to markets and product categories. They incorporate past performance,
historical growth rates, projections of developments in key markets, secured
orders and orders forecast to be achieved in the short to medium-term given
trends in the relevant market sector. Revenue assumptions take account of
relevant external market data, where available, and also consider the
potential continued impact of recent macroeconomic and political instability.
Operating margins have been forecast based on historical levels achieved
considering the likely impact of changing economic environments and
competitive landscapes on volumes and revenues and the impact of management
actions on costs. Projected margins reflect the impact of all committed and
initiated projects to improve operational efficiency and leverage scale.
Forecasts for other operating costs are based on inflation forecasts and
supply and demand factors, which take account of climate change implications
for affected markets. Overall, climate risk exposure is considered to be
relatively low across the divisions in the short and medium-term but starts to
increase in the longer-term, for example through increasing likelihood of
flooding risk or increasing wildfire risk. Impairment testing includes short
to medium-term planning (five years) for each of the groups of CGUs, which
addresses known risks from climate change and other environmental factors
impacting forecast costs as well as the opportunities in associated markets as
they prepare for change, for example, transition to electrification in
Automotive which is expected to impact revenues.
Across the Group, the key driver for growth in operating margin is the Group's
ability to optimise performance. This includes manufacturing optimisation and
automation, making supply chain savings, commercial activities to align sales
prices with inflationary pressures, and restructuring activities to ensure the
Group is operating an efficient cost base.
For Automotive, sector growth is driven by global demand for a large range of
cars, ranging from smaller low-cost cars to larger premium vehicles. Demand is
influenced by technological advancements, particularly in electric and full
hybrid vehicles, market expectations for global vehicle production
requirements, fuel prices, raw material input costs and expectations of their
recovery, consumer spending, credit availability, and other macroeconomic
factors.
For Powder Metallurgy, growth is dependent on trends in the automotive and
industrial markets. Market expectations for global light vehicle production
requirements, raw material input costs and technological advancements,
particularly in additive manufacturing, influence demand for these products
along with other macroeconomic factors.
Long-term growth rates
Long-term growth rates are based on long-term forecasts for growth in the
sectors and geographies in which the group of CGUs operates. These rates are
determined using forecasts that reflect the international presence and the
markets in which each business operates. The rates are applied to calculate a
terminal value for cash flows after the five-year period covered by management
forecasts.
Sensitivity analysis
The models used to calculate value in use for each group of CGUs are
particularly sensitive to key assumptions around discount rates, long-term
growth rates and underlying assumptions underpinning forecasts including the
impact of macroeconomic conditions such as interest rates and inflation on
future sales and input prices which drive forecast operating margins and
ultimately cash flows.
11. Goodwill and other intangible assets continued
Automotive group of CGUs - sensitivity analysis
At 31 December 2025, forecasts determined that headroom of £240 million above
the carrying amount existed for the Automotive group of CGUs. Sensitivity
analysis demonstrated that a reasonably possible increase in the discount rate
from 13.0% to 14.0%, would reduce headroom to £nil. Further increases in the
discount rate to 14.4% would result in an impairment charge of c.£95 million.
Management does not believe reasonably possible changes in the long-term
growth rate of 3.3% would result in headroom being eroded to £nil, however
for indication purposes, a decrease in the long-term growth rate to 2.5% would
result in a reduction of headroom by £140 million. Operating margin
assumptions are a key driver of business value and an 11% reduction in the
terminal operating profit would reduce operating profit margin by 1.0
percentage points, resulting in headroom of £nil. An additional reduction in
the terminal operating profit, representing a total reduction of 16%, would
reduce operating profit margin by 1.4 percentage points, resulting in an
impairment charge of c.£98 million.
Powder Metallurgy group of CGUs - sensitivity analysis
At 31 December 2025, forecasts determined that headroom of £61 million above
the carrying amount existed for the Powder Metallurgy group of CGUs.
Sensitivity analysis demonstrated that a reasonably possible increase in the
discount rate from 12.8% to 13.5%, would reduce headroom to £nil. Further
increases in the discount rate to 14.1% would result in an impairment charge
of c.£45 million.
The value of the Powder Metallurgy group of CGUs remains sensitive to and
dependent upon the underlying forecast and financial assumptions in the
future. Operating margin assumptions are a key driver of business value and a
reduction in the terminal operating profit by 9% would reduce the operating
margin by 0.8 percentage points, resulting in headroom of £nil. An additional
reduction in the terminal operating profit, representing a total reduction of
15%, would reduce operating profit margin by 1.4 percentage points, resulting
in an impairment charge of c.£42 million. A reasonably possible decrease in
long-term growth rates from 3.5% to 2.4% would result in headroom of £nil. A
further decrease in the long-term growth rate to 1.4% would result in an
impairment charge of c.£44 million being incurred.
For all sensitivities, it is assumed that all other variables remain
unchanged.
Allocation of significant intangible assets
The allocation of significant customer relationships and contracts, brands,
intellectual property and technology is as follows:
Customer relationships and contracts
Remaining amortisation period Net book value
31 December 2025 31 December 2024 31 December 2025 31 December 2024
Years
Years
£m
£m
Automotive 5 6 298 396
Powder Metallurgy 10 11 346 386
Total 644 782
Brands, intellectual property and technology
Remaining amortisation period Net book value
31 December 2025 31 December 2024 31 December 2025 31 December 2024
Years
Years
£m
£m
Automotive 13 14 119 166
Powder Metallurgy 13 14 35 39
Total 154 205
12. Property, plant and equipment
Land and buildings Plant and Total
£m
equipment
£m
£m
Cost
At 1 January 2024 687 2,071 2,758
Additions 15 242 257
Disposals (13 ) (33 ) (46 )
Disposal of business (2 ) (5 ) (7 )
Transfer 50 (50 ) -
Lease reassessments (11 ) 1 (10 )
Impact of hyperinflationary economies 4 8 12
Exchange adjustments (26 ) (55 ) (81 )
At 31 December 2024 704 2,179 2,883
Additions 13 164 177
Disposals (44 ) (35 ) (79 )
Disposal of business (2 ) (10 ) (12 )
Transfer 9 (9 ) -
Transfer to assets held for sale (7 ) (45 ) (52 )
Lease reassessments (3 ) 1 (2 )
Impact of hyperinflationary economies 1 4 5
Exchange adjustments 1 (24 ) (23 )
At 31 December 2025 672 2,225 2,897
Accumulated depreciation and impairment
At 1 January 2024 (136 ) (871 ) (1,007 )
Charge for the year (30 ) (214 ) (244 )
Disposals 10 32 42
Disposal of business 2 5 7
Impairments (9 ) (22 ) (31 )
Impact of hyperinflationary economies (3 ) (4 ) (7 )
Exchange adjustments 5 28 33
At 31 December 2024 (161 ) (1,046 ) (1,207 )
Charge for the year (31 ) (214 ) (245 )
Disposals 23 29 52
Disposal of business - 10 10
Impairments (8 ) (10 ) (18 )
Transfer to assets held for sale 3 31 34
Impact of hyperinflationary economies (1 ) (4 ) (5 )
Exchange adjustments 2 4 6
At 31 December 2025 (173 ) (1,200 ) (1,373 )
Net book value
At 31 December 2025 499 1,025 1,524
At 31 December 2024 543 1,133 1,676
Depreciation expense of £230 million (2024: £227 million) and £15 million
(2024: £17 million) is included within costs of sales and selling, general
and administrative expenses, respectively. Impairments of £18 million (2024:
£31 million) are included in selling, general and administrative expenses.
Assets under the course of construction at 31 December 2025 totalled £151
million (31 December 2024: £176 million). Assets under the course of
construction are presented as plant and equipment until the point at which the
asset is ready for use. Transfers of £9 million (2024: £50 million) between
asset classes were recorded on completion of construction projects.
The basis of testing for impaired assets, which resulted in a charge totalling
£18 million (2024: £31 million), primarily used fair value less costs to
sell methodology which was classified as a level 3 fair value under the IFRS
13 fair value hierarchy. Impairments of £6 million in Automotive and £12
million in Powder Metallurgy arose as a direct result of restructuring
projects (2024: £22 million in Automotive and £5 million in Powder
Metallurgy as a result of restructuring, £4 million in Hydrogen relating to
disposal of the business).
Property, plant and equipment includes the net book value of right-of-use
assets as follows:
Right-of-use asset Land and Plant and Total
buildings
equipment
£m
£m
£m
At 1 January 2024 102 35 137
Additions 10 13 23
Depreciation (13 ) (12 ) (25 )
Reassessments (11 ) 1 (10 )
Impairments (5 ) - (5 )
Impact of hyperinflationary economies 2 - 2
Exchange adjustments (7 ) (1 ) (8 )
At 31 December 2024 78 36 114
Additions 9 12 21
Depreciation (13 ) (14 ) (27 )
Reassessments (3 ) 1 (2 )
Disposals (6 ) - (6 )
Exchange adjustments - 2 2
At 31 December 2025 65 37 102
13. Equity accounted investments
31 December 31 December
2025
2024
£m
£m
Aggregated amounts relating to equity accounted investments:
Share of non-current assets 214 256
Share of current assets(1) 471 445
Share of current liabilities (291 ) (288 )
Share of non-current liabilities (20 ) (28 )
Interests in equity accounted investments 374 385
1. The Group's share of current assets of equity accounted investments
includes cash and cash equivalents of £215 million (2024: £213 million).
13. Equity accounted investments continued
Group share of results Year ended Year ended
31 December
31 December
2025
2024
£m
£m
Revenue 590 600
Selling, general and administrative expenses (521 ) (531 )
Operating profit 69 69
Net finance income 3 1
Profit before tax 72 70
Tax (7 ) (9 )
Share of results of equity accounted investments, net of tax 65 61
Group share of equity accounted investments Year ended Year ended
31 December
31 December
2025
2024
£m
£m
At 1 January 385 397
Share of results of equity accounted investments 65 61
Dividends paid to the Group (64 ) (70 )
Exchange adjustments (12 ) (3 )
At 31 December 374 385
Within the Group's share of equity accounted investments there is one
significant joint venture, held within the Automotive segment, Shanghai GKN
HUAYU Driveline Systems Co Limited ("SDS").
Year ended 31 December 2025 Shanghai GKN Group 50% share Amortisation of Intra-Group Total Group share
HUAYU Driveline
of SDS
acquisition
elimination
of SDS
Systems Co Limited
£m
intangibles
£m
£m
£m
£m
Revenue 1,066 533 - (27 ) 506
Operating profit 138 69 (19 ) - 50
Interest income 4 2 - - 2
Dividend income 18 9 - (9 ) -
Tax (16 ) (8 ) 3 - (5 )
Profit after tax 144 72 (16 ) (9 ) 47
Year ended 31 December 2024
Revenue 1,102 551 - (37 ) 514
Operating profit 138 69 (20 ) - 49
Interest income 4 2 - - 2
Tax (18 ) (9 ) 3 - (6 )
Profit after tax 124 62 (17 ) - 45
31 December 2025 Shanghai GKN Group 50% share Fair value Total Group share
HUAYU Driveline
of SDS
adjustments
of SDS
Systems Co Limited
£m
£m
£m
£m
Non-current assets 114 57 139 196
Current assets 744 372 - 372
Current liabilities (460 ) (230 ) - (230 )
Non-current liabilities - - (12 ) (12 )
Net assets 398 199 127 326
31 December 2024
Non-current assets 138 69 163 232
Current assets 734 367 - 367
Current liabilities (472 ) (236 ) - (236 )
Non-current liabilities (8 ) (4 ) (16 ) (20 )
Net assets 392 196 147 343
14. Disposals and Assets held for sale
Disposals
On 31 December 2025, the Group completed the disposal of Forecast 3D, a
business within the Powder Metallurgy division. A loss on disposal of £11
million including transaction costs and foreign exchange gains recycled from
the translation reserve was recognised within selling, general and
administrative expenses.
Classes of assets and liabilities disposed of as a result of the disposal were
as follows:
Forecast 3D disposal
£m
Goodwill 15
Property, plant and equipment 2
Inventories 2
Trade and other receivables 4
Total assets 23
Trade and other payables 4
Lease obligations 1
Provisions 1
Total liabilities 6
Net assets 17
14. Disposals and Assets held for sale continued
Assets held for sale
During the fourth quarter of 2025, the Group agreed the sale of its 59%
investment holding in GKN Zhongyuan Cylinder Liner Company Limited to the
minority shareholder. The sale completed in February 2026. The assets and
liabilities of Zhongyuan which were expected at the year end to be recovered
through the sales process have been classified as held for sale as at the
balance sheet date and an impairment of £27 million recorded to reflect the
agreed value for the business. The portion of the impairment relating to the
non-controlling interest is £11 million and has been allocated to
profit/(loss) attributable to non-controlling interests in the Consolidated
Income Statement.
31 December 2025 Transferred to Impairment Held for sale
Held for sale
£m
£m
£m
Property, plant and equipment 18 (18 ) -
Inventories 21 (9 ) 12
Trade and other receivables 17 - 17
Cash and cash equivalents 7 - 7
Total assets held for sale 63 (27 ) 36
Trade and other payables 9 - 9
Current tax liabilities 1 - 1
Total liabilities held for sale 10 - 10
15. Inventories
31 December 31 December
2025
2024
£m
£m
Raw materials 237 240
Work in progress 106 105
Finished goods 88 86
431 431
In 2025 the write down of inventories to net realisable value amounted to £17
million (2024: £19 million). The reversal of write downs amounted to £9
million (2024: £9 million). Write downs and reversals in both years relate to
ongoing assessments of inventory obsolescence, excess inventory holding and
inventory resale values across all of the Group's businesses.
The cost of inventory recognised as an expense during the year ended 31
December 2025 totalled £3,706 million (2024: £3,691 million).
16. Trade and other receivables
Current 31 December 31 December
2025
2024
£m
£m
Trade receivables, gross 408 384
Allowance for expected credit loss (11 ) (15 )
Trade receivables 397 369
Other receivables 52 38
Other taxes receivable 41 44
Prepayments 23 25
Contract assets 12 9
525 485
Trade receivables are non interest-bearing. Credit terms offered to customers
vary upon the country of operation but are generally between 30 and 90 days.
Non-current 31 December 31 December
2025
2024
£m
£m
Other receivables 12 8
Contract assets 5 5
17 13
As described in Note 24, certain businesses participate in receivables working
capital programmes and have the ability to choose whether to receive payment
earlier than the normal due date, for specific customers on a non-recourse
basis. As at 31 December 2025, eligible receivables under these programmes
have been factored and derecognised in line with the derecognition criteria of
IFRS 9 Financial Instruments.
16. Trade and other receivables continued
An allowance has been made for expected lifetime credit losses with reference
to past default experience and management's assessment of credit worthiness
over trade receivables, an analysis of which is as follows:
Total
£m
At 1 January 2024 16
Impairment recognised on trade receivables 1
Impairment reversed on trade receivables (1 )
Exchange adjustments (1 )
At 31 December 2024 15
Impairment reversed on trade receivables (4 )
At 31 December 2025 11
The concentration of credit risk is limited due to the large number of
unrelated customers. Credit control procedures are implemented to ensure that
sales are only made to organisations that are willing and able to pay for
them. Such procedures include the establishment and review of customer credit
limits and terms. The Group does not hold any collateral or any other credit
enhancements over any of its trade receivables nor does it have a legal right
of offset against any amounts owed by the Group to the counterparty.
The ageing of impaired trade receivables past due, allowance for expected
credit losses and recoverable amounts are as follows:
31 December 2025 Gross Loss allowance Recoverable
£m
£m
£m
Current 364 - 364
0 - 30 days 19 (3 ) 16
31 - 60 days 8 - 8
60+ days 17 (8 ) 9
408 (11 ) 397
31 December 2024 Gross Loss allowance Recoverable
£m
£m
£m
Current 348 - 348
0 - 30 days 19 (8 ) 11
31 - 60 days 4 - 4
60+ days 13 (7 ) 6
384 (15 ) 369
The Directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
The Group's contract assets comprise the following:
Participation fees Other Total
£m
£m
£m
At 1 January 2024 8 5 13
Additions 5 - 5
Utilised (1 ) (2 ) (3 )
Exchange adjustments - (1 ) (1 )
At 31 December 2024 12 2 14
Additions 2 3 5
Utilised (1 ) (1 ) (2 )
At 31 December 2025 13 4 17
An assessment for impairment of contract assets has been performed in
accordance with policies described in Note 2. No such impairment has been
recorded.
Participation fees
Participation fees are described in the accounting policies in Note 2 and are
considered to be a reduction in revenue for the related customer contract.
Amounts are capitalised and 'amortised' to match to the related performance
obligation.
17. Cash and cash equivalents
31 December 31 December
2025
2024
£m
£m
Cash and cash equivalents 386 336
Cash and cash equivalents comprises cash at bank and in hand which earns
interest at floating rates based on daily bank deposit rates. The carrying
amount of these assets is considered to be equal to their fair value.
In addition to the amounts presented in the table above, the Group also holds
£7 million (2024: £nil) of cash and cash equivalents which has been
classified as held for sale (Note 14).
18. Trade and other payables
Current 31 December 31 December
2025
2024
£m
£m
Trade payables 591 577
Accruals and other payables 366 325
Customer advances and contract liabilities 5 11
Other taxes and social security 45 47
Deferred government grants 1 1
1,008 961
As at 31 December 2025, and as described in Note 24, included within trade
payables were invoices on supplier finance facilities of £120 million (2024:
£148 million).
Trade payables are non-interest-bearing. Normal settlement terms vary by
country and the average credit period taken for trade payables is 82 days
(2024: 85 days).
Non-current 31 December 31 December
2025
2024
£m
£m
Other payables 8 9
Customer advances and contract liabilities 5 9
13 18
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value. Non-current other payables fall due for
payment within one to two years.
19. Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group's
interest-bearing loans and borrowings. Details of the Group's exposure to
credit, liquidity, interest rate and foreign currency risk are included in
Note 24.
Current Non-current Total
31 December 31 December 31 December 31 December 31 December 31 December
2025
2024
2025
2024
2025
2024
£m
£m
£m
£m
£m
£m
Floating rate obligations
Bank borrowings - US Dollar loan - - 282 319 282 319
Bank borrowings - Sterling loan 100 - 165 240 265 240
Bank borrowings - Euro loan 87 - 279 339 366 339
Unamortised finance costs - - (1 ) (4 ) (1 ) (4 )
Other loans and bank overdrafts 39 13 - - 39 13
Fixed rate obligations
US Private Placement - - 372 399 372 399
Unamortised finance costs - - (2 ) (2 ) (2 ) (2 )
Total interest-bearing loans and borrowings 226 13 1,095 1,291 1,321 1,304
As at 31 December 2025 the Group's committed bank facility included a
multi-currency denominated term loan of £100 million and €100 million as
well as a multi-currency denominated revolving credit facility of £350
million, US$660 million and €450 million. In addition, the Group held notes
of US$500 million in the US Private Placement (USPP) market. The USPP notes
were at fixed interest rates with remaining terms of between 4 and 11 years.
The bank facilities and USPP had two financial covenants being a leverage
covenant and an interest cover covenant, both of which were tested half
yearly, in June and December. Further details on the covenants and covenant
compliance for the year ended 31 December 2025 are contained in Note 24.
Loans drawn under these facilities were guaranteed by Dowlais Group Limited
(formerly Dowlais Group plc) and certain of its subsidiaries, and the Group
provided no security over any of its assets in respect of these facilities.
At 31 December 2025, the term loans were fully drawn at £100 million and
€100 million (2024: fully drawn at £100 million and €100 million). A
further £165 million (2024: £140 million), US$380 million (2024: US$400
million) and €320 million (2024: €310 million) were drawn on the
multi-currency revolving credit facility. A number of uncommitted overdraft,
guarantee and borrowing facilities were also available to the Group.
The bank margin on the bank facility depended on the Group's leverage. The
average interest rate payable on the bank facilities and US PP, net of the
impact of interest rate hedging, was 5.74% for the year (2024: 6.32%).
Subsequent to the completion of the acquisition of the Group by Dauch on 3
February 2026, the bank facilities were repaid in full and US$151 million of
the USPP notes were also repaid. The repayments were funded by way of a loan
from Dauch, as set out in Note 30.
20. Provisions
Loss-making Property Environmental Warranty Restructuring Other Total
contracts
related costs
and litigation
related costs
£m
£m
£m
£m
£m
£m
£m
At 1 January 2025 10 4 40 91 90 24 259
Utilised (4 ) - (3 ) (18 ) (124 ) (8 ) (157 )
Charge to operating profit - - 10 36 86 16 148
Release to operating profit - - (11 ) (24 ) (4 ) (3 ) (42 )
Disposal of business - (1 ) - - - - (1 )
Exchange adjustments - - (2 ) (1 ) 4 - 1
31 December 2025 6 3 34 84 52 29 208
Current 5 - 15 44 47 17 128
Non-current 1 3 19 40 5 12 80
Loss-making contracts
Provisions for loss-making contracts are considered to exist where the Group
has a contract under which the unavoidable costs of meeting the obligations
exceed the economic benefits expected to be received under it. This obligation
has been discounted and will be utilised over the period of the respective
contracts, which is up to five years.
Calculation of loss-making contract provisions is based on contract
documentation and delivery expectations, along with an estimate of directly
attributable costs and represents management's best estimate of the
unavoidable costs of fulfilling the contract.
Property related costs
The provision for property related costs represents dilapidation costs for
ongoing leases and is expected to result in cash expenditure over the next
five years. Calculation of dilapidation obligations are based on lease
agreements with landlords and external quotes or, in the absence of specific
documentation, management's best estimate of the costs required to fulfil
obligations.
Environmental and litigation
Environmental provisions relate to the estimated remediation costs of
pollution, soil and groundwater contamination at certain sites and amounted to
£12 million (2024: £15 million). Liabilities for environmental costs are
recognised when environmental remediation works are probable and the
associated costs can be reasonably estimated. The majority of the provision is
anticipated to be utilised over the next 12 years.
Litigation provisions amounting to £22 million (2024: £25 million) relate to
estimated future payments and/or settlements in relation to legal claims and
associated insurance obligations. The Group has on occasion been required to
take legal or other actions to defend itself against proceedings brought by
other parties. Provisions are made for the expected costs associated with such
matters, based on past experience of similar items and other known factors,
considering professional advice received. This represents management's best
estimate of the likely outcome. The timing of utilisation of these provisions
is frequently uncertain, reflecting the complexity of issues and the outcome
of various court proceedings and negotiations. Contractual and other
provisions represent management's best estimate of the cost of settling the
obligations and reflect management's assessment of the likely settlement
method, which may change over time. However, no provision is made for
proceedings which have been, or might be, brought by other parties against
Group companies unless management, considering professional advice received,
assess that it is more likely than not that such proceedings may be
successful.
Warranty related costs
Provisions for the expected cost of warranty obligations under local sale of
goods legislation are recognised at the date of sale of the relevant products
and subsequently updated for changes in estimates as necessary. The provision
for warranty related costs represents the best estimate of the expenditure
required to settle the Group's obligations, based on past experience, recent
claims and current estimates of costs relating to specific claims. Warranty
terms are, on average, between one and five years.
Restructuring
Restructuring provisions relate to committed costs in respect of restructuring
programmes, usually resulting in cash spend within three years. A
restructuring provision is recognised when the Group has developed a detailed
formal plan for the restructuring and has raised a valid expectation in those
affected that it will carry out the restructuring by either starting to
implement the plan or by announcing its main features to those affected by it.
The measurement of a restructuring provision includes only the direct
expenditures arising from the restructuring, which are those amounts that are
necessarily entailed by the restructuring programmes.
Other
Other provisions include long-term incentive plans for senior management and
the employer tax on equity-settled incentive schemes which are expected to
result in cash expenditure over the next one to five years.
Where appropriate, provisions have been discounted using discount rates
depending on the territory in which the provision resides and the length of
its expected utilisation.
21. Deferred tax
The following are the major deferred tax assets and liabilities recognised by
the Group and movements thereon during the current and prior year.
Deferred tax assets Deferred tax liabilities
Tax losses and Accelerated Deferred tax on Total deferred Total net
other assets
capital allowances
intangible assets
tax liabilities
deferred tax
£m
and other liabilities
£m
£m
£m
£m
At 1 January 2024 303 (102 ) (303 ) (405 ) (102 )
(Charge)/credit to Consolidated Income Statement (13 ) 30 49 79 66
Charge to equity - (3 ) - (3 ) (3 )
Exchange adjustments (9 ) 2 4 6 (3 )
At 31 December 2024 281 (73 ) (250 ) (323 ) (42 )
(Charge)/credit to Consolidated Income Statement (50 ) 36 44 80 30
Charge to equity - (13 ) - (13 ) (13 )
Exchange adjustments 5 (1 ) 2 1 6
At 31 December 2025 236 (51 ) (204 ) (255 ) (19 )
Deferred tax assets and liabilities are recognised on the Consolidated Balance
Sheet, after offset of balances within territories in accordance with IAS 12,
as follows:
31 December 31 December
2025
2024
£m
£m
Deferred tax asset 139 157
Deferred tax liability (158 ) (199 )
(19 ) (42 )
A deferred tax asset of £83 million (2024: £63 million) has been recognised
in respect of £302 million (2024: £209 million) of tax losses. No asset has
been recognised in respect of the remaining losses of £507 million (2024:
£424 million) due to the divisional and geographic split of anticipated
future profit streams. Most of these losses may be carried forward
indefinitely subject to certain continuity of business requirements. Where
losses are subject to time expiry, a deferred tax asset is recognised to the
extent that sufficient future profits are anticipated to utilise these losses.
In addition to the corporate income tax losses included above, a deferred tax
asset of £31 million (2024: £27 million) has been recognised on tax credits
(primarily US) and US state tax losses.
Deferred tax assets have also been recognised on Group retirement benefit
obligations at £38 million (2024: £54 million).
There are no material unrecognised deferred tax assets at 31 December 2025
(2024: £nil), other than the losses referred to above. No deferred tax is
recognised on the unremitted earnings of overseas subsidiaries except where
the distribution of such profits is planned. If these earnings were remitted
in full, tax of £61 million (2024: £56 million) would be payable.
Following completion of the acquisition of the Group by Dauch on 3 February
2026, certain tax attributes may expire under applicable local tax laws as a
result of the change in ownership of the Group. The Group is assessing the
impact of this on its recognised and unrecognised deferred tax assets.
22. Share-based payments
During the year, the Company recognised a charge of £3 million (2024: £1
million) in respect of the Group's share incentive schemes.
At 31 December 2025, the share-based payment arrangements were as follows:
2023 Performance Share Plan (PSP)
Date of grants 2 May 2023, 10 October 2023, 15 November 2023
Number of share awards granted 6,223,292
Contractual life 3 years
Vesting condition Three years' service, achievement of target growth in earnings per share and
achievement of a total shareholder return ranking against comparator group.
Each employee share award converts into one ordinary share of the Company on
vesting. No amounts are paid or payable by recipient on receipt of the award.
The awards carry neither rights to dividends nor voting rights. Awards are
forfeited if the employee leaves the Company before the share awards vest,
unless the Remuneration Committee deems the employee a good leaver, in which
case a discretionary award may be granted.
Details of the share awards outstanding during the year are as follows:
Number of share awards 31 December 31 December
2025
2024
Outstanding at the beginning of the year 5,772,363 6,149,660
Exercised during the year((1)) (155,318 ) -
Forfeited during the year (83,354 ) (377,297 )
Outstanding at the end of the year 5,533,691 5,772,363
1. During the year certain share awards vested early in relation to
employees who left employment during the year and were deemed to be 'good'
leavers.
Fair value of share awards and assumptions
The inputs into the Monte Carlo pricing model that were used to fair value the
share awards at the grant dates were as follows:
Valuation
assumptions
Weighted average share price £ 1.31
Weighted average exercise price nil
Expected volatility 38.65 %
Expected life at inception 3 years
Risk free interest rate 3.78 %
Expected dividend yield 3.2 %
22. Share-based payments continued
2024 Omnibus Share Plan (OSP)
Date of grants 24 May 2024
Number of share awards granted 9,921,488
Contractual life 3 years
Vesting condition Three years' service, achievement of target growth in earnings per share and
achievement of a total shareholder return ranking against comparator group.
Each employee share award converts into one ordinary share of the Company on
vesting. No amounts are paid or payable by recipient on receipt of the award.
The awards accrue dividend equivalents but do not carry voting rights. Awards
are forfeited if the employee leaves the Company before the share awards vest,
unless the Remuneration Committee deems the employee a good leaver, in which
case a discretionary award may be granted.
Details of the share awards outstanding during the year are as follows:
Number of share awards 31 December 31 December
2025
2024
Outstanding at the beginning of the year 9,921,488 -
Granted during the year - 9,921,488
Exercised during the year((1)) (578,074 ) -
Forfeited during the year (135,832 ) -
Outstanding at the end of the year 9,207,582 9,921,488
1. During the year certain share awards vested early in relation to
employees who left employment during the year and were deemed to be 'good'
leavers.
Fair value of share awards and assumptions
The inputs into the Monte Carlo pricing model that were used to fair value the
share awards at the grant dates were as follows:
Valuation
assumptions
Weighted average share price £ 0.72
Weighted average exercise price nil
Expected volatility 33.67 %
Expected life at inception 3 years
Risk free interest rate 4.37 %
Expected dividend yield n/a
22. Share-based payments continued
2025 Omnibus Share Plan (OSP)
Date of grants 10 March 2025
Number of share awards granted 11,347,654
Contractual life 3 years
Vesting condition Three years' service, achievement of target growth in earnings per share and
achievement of a total shareholder return ranking against comparator group.
Each employee share award converts into one ordinary share of the Company on
vesting. No amounts are paid or payable by recipient on receipt of the award.
The awards accrue dividend equivalents but do not carry voting rights. Awards
are forfeited if the employee leaves the Company before the share awards vest,
unless the Remuneration Committee deems the employee a good leaver, in which
case a discretionary award may be granted.
Details of the share awards outstanding during the year are as follows:
Number of share awards 31 December
2025
Outstanding at the beginning of the year -
Granted during the year 11,347,654
Exercised during the year((1)) (489,345 )
Forfeited during the year -
Outstanding at the end of the year 10,858,309
1. During the year certain share awards vested early in relation to
employees who left employment during the year and were deemed to be 'good'
leavers.
Fair value of share awards and assumptions
The inputs into the Monte Carlo pricing model that were used to fair value the
share awards at the grant dates were as follows:
Valuation
assumptions
Weighted average share price £ 0.69
Weighted average exercise price Nil
Expected volatility 34.32 %
Expected life at inception 3 years
Risk free interest rate 4.15 %
Expected dividend yield n/a
Due to the short listing period of the Company's shares, the expected
volatility for all awards was determined using an average of the historic
volatility of the Company's peer group share prices.
23. Retirement benefit obligations
Defined contribution plans
The Group operates defined contribution plans for qualifying employees across
several jurisdictions. The assets of the plans are held separately from those
of the Group in funds under the control of Trustees.
The total costs charged during the year of £13 million (2024: £14 million)
represent contributions payable to these plans by the Group at rates specified
in the rules of the plans.
Defined benefit plans
The Group sponsors defined benefit plans for qualifying employees of certain
subsidiaries. The funded defined benefit plans are administered by separate
funds that are legally separated from the Group. The Trustees of the funds are
required by law to act in the interest of the fund and of all relevant
stakeholders in the plans. The Trustees of the pension funds are responsible
for the investment policy with regard to the assets of the fund.
The most significant defined benefit pension plans in the Group at 31 December
2025 were:
UK: GKN Group Pension Schemes (No.2 and No.3)
The GKN Group Pension Schemes (Numbers 2 and 3) are disclosed within the
Automotive segment. These schemes are funded, closed to new members and were
closed to future accrual in 2017. The valuation of the schemes was based on
the latest triennial statutory actuarial valuation as of 5 April 2022, updated
to 31 December 2025 by independent actuaries. The next triennial valuation of
the schemes as of April 2025 is currently underway.
US: GKN Automotive and GKN Powder Coatings Pension Plans
The GKN Automotive and GKN Powder Coatings Pension Plans are funded plans,
closed to new members and closed to future accrual. The valuation of these
plans was based on a full actuarial valuation as of 1 January 2025, updated to
31 December 2025 by independent actuaries.
Germany: GKN Germany Pension Plans
The GKN Germany Pension Plans provide benefits dependent on final salary and
service with the Company. The plans are generally unfunded and closed to new
members.
Other plans include a number of funded and unfunded defined benefit
arrangements and retiree medical insurance plans, predominantly in the US and
Europe.
The cost of the Group's defined benefit plans is determined in accordance with
IAS 19 (revised 2011) Employee Benefits, using the advice of independent
professionally qualified actuaries on the basis of formal actuarial valuations
and using the projected unit credit method. In line with normal practice,
statutory scheme valuations are undertaken triennially in the UK and annually
in the US and Germany.
Contributions
The Group contributed £34 million (2024: £44 million) to defined benefit
pension plans and retirement plans in the year ended 31 December 2025
including a deficit reduction payment to GKN Group Pension Scheme No. 3 of £5
million.
In 2026, the Group expects to contribute c.£30 million to the plans including
an estimate of the annual deficit reduction payment to GKN Group Pension
Scheme No. 3. The deficit reduction payment is of a variable amount contingent
on the funding valuation of the scheme at 31 December and for 2026 is capped
at the lower of £17 million or the funding deficit on the scheme.
Actuarial assumptions
The major assumptions used by the actuaries in calculating the Group's pension
liabilities are as set out below:
Rate of increase Discount rate Price inflation
of pensions in
%
(RPI/CPI)
payment
%
% per annum
31 December 2025
GKN Group Pension Schemes (No.2 - No.3) 2.4 5.5 2.7/2.4
GKN US plans n/a 5.2 n/a
GKN Germany plans 2.0 4.1 2.0/2.0
31 December 2024
GKN Group Pension Schemes (No.2 - No.3) 2.5 5.5 3.0/2.7
GKN US plans n/a 5.5 n/a
GKN Germany plans 2.0 3.4 2.0/2.0
Mortality
GKN Group Pension Schemes (No.2 - No.3)
The GKN Group Pension Schemes (No.2 - No.3) use the SAPS "S3PA" base tables
with scheme-specific adjustments. The base table mortality assumption for each
of the UK schemes reflects best estimate results from the most recent
mortality experience analyses for each scheme. Weighting factors vary by
scheme.
Future improvements for all UK plans are in line with the 2023 Continuous
Mortality Investigation ("CMI") core projection model (SK = 7.0, A = 0%, w2022
=w2023= 15%) with a long-term rate of improvement of 1.25% p.a. for both males
and females.
GKN US Consolidated Pension Plan
GKN US Pension and Medical Plans use base mortality tables (PRI 2012) as used
in the funding valuation. Future improvements for all US plans are in line
with MP2021.
GKN Germany Pension Plans
All German plans use the Richttafeln 2018 G tables, with no adjustment.
23. Retirement benefit obligations continued
The following table shows the future life expectancy of individuals aged 65 at
the year end and the future life expectancy of individuals aged 65 in 20
years' time.
GKN Group GKN US GKN Germany
Pension Schemes
Consolidated
Pension Plans
(No2.-No.3)
Pension Plan
Years
Years
Years
Male today 20.9 19.8 21.0
Female today 23.3 21.8 24.4
Male in 20 years' time 22.0 21.3 23.7
Female in 20 years' time 24.6 23.2 26.6
Consolidated Balance Sheet disclosures
The amounts recognised in the Consolidated Balance Sheet in respect of defined
benefit plans were as follows:
31 December 31 December
2025
2024
£m
£m
Present value of funded defined benefit obligations (681 ) (686 )
Fair value of plan assets 715 717
Funded status 34 31
Present value of unfunded defined benefit obligations (382 ) (415 )
Net liabilities (348 ) (384 )
Analysed as:
Retirement benefit surplus (non-current assets)((1)) 43 34
Retirement benefit obligations (non-current liabilities) (391 ) (418 )
Net liabilities (348 ) (384 )
1. Includes a surplus relating to the GKN Group Pension Scheme (No.2) of
£34 million (2024: £33 million), the GKN Group Pension Scheme (No.3) of £7
million (2024: £nil).
A retirement benefit surplus is recognised in relation to the GKN Group
Pension Schemes (No.2 and No.3) as the Group has an unconditional right to a
refund of surplus assets when there are no remaining members of the schemes.
The net retirement benefit obligation is attributable to Automotive: liability
of £329 million (2024: £360 million) and Powder Metallurgy: liability of
£19 million (2024: £24 million).
The plan assets and liabilities at the year end were as follows:
31 December 2025 UK US European Other Total
Plans
Plans
Plans
Plans
£m
£m
£m
£m
£m
Plan assets 613 75 16 11 715
Plan liabilities (574 ) (103 ) (365 ) (21 ) (1,063 )
Net assets/(liabilities) 39 (28 ) (349 ) (10 ) (348 )
The plan assets and liabilities at the previous year end were as follows:
31 December 2024 UK US European Other Total
Plans
Plans
Plans
Plans
£m
£m
£m
£m
£m
Plan assets 613 76 16 12 717
Plan liabilities (584 ) (111 ) (385 ) (21 ) (1,101 )
Net assets/(liabilities) 29 (35 ) (369 ) (9 ) (384 )
The major categories and fair values of plan assets at the end of the year for
each category were as follows:
31 December 31 December
2025
2024
£m
£m
Equities 18 28
Government bonds 266 339
Corporate bonds 136 112
Property 3 5
Insurance contracts 11 11
Multi-strategy/Diversified growth funds 232 182
Private equity 8 9
Other((1)) 41 31
Total 715 717
1. Primarily consists of cash collateral and other assets associated with
liability driven investments in the UK schemes.
The assets were well diversified and the majority of plan assets had quoted
prices in active markets. All government bonds were issued by reputable
governments and were generally AA rated or higher. Interest rate and inflation
rate swaps were also employed to complement the role of fixed and index-linked
bond holdings for liability risk management.
The Trustees continually review whether the chosen investment strategy is
appropriate with a view to providing the pension benefits and to ensure
appropriate matching of risk and return profiles. The main strategic policies
included maintaining an appropriate asset mix, managing interest rate
sensitivity and maintaining an appropriate equity buffer. Investment results
are regularly reviewed.
23. Retirement benefit obligations continued
Movements in the present value of defined benefit obligations during the year:
Year ended Year ended
31 December
31 December
2025
2024
£m
£m
At 1 January 1,101 1,232
Current service cost 6 6
Interest cost on obligations 51 49
Remeasurement gains - demographic - (6 )
Remeasurement gains - financial (44 ) (89 )
Remeasurement losses - experience 2 -
Benefits paid out of plan assets (66 ) (68 )
Curtailments 1 1
Settlements - (5 )
Past service cost - 1
Exchange adjustments 12 (20 )
At 31 December 1,063 1,101
The defined benefit plan liabilities were 15% (2024: 17%) in respect of active
plan participants, 22% (2024: 22%) in respect of deferred plan participants
and 63% (2024: 61%) in respect of pensioners.
The weighted average duration of the defined benefit plan liabilities at 31
December 2025 was 12 years (31 December 2024: 12 years).
Movements in the fair value of plan assets during the year:
Year ended Year ended
31 December
31 December
2025
2024
£m
£m
At 1 January 717 775
Interest income on plan assets 37 34
Gain/(loss) on plan assets, excluding interest income 1 (60 )
Contributions 34 44
Benefits paid out of plan assets (66 ) (68 )
Plan administrative costs (3 ) (2 )
Settlements - (5 )
Exchange adjustments (5 ) (1 )
At 31 December 715 717
The actual return on plan assets was a gain of £38 million (2024: loss of
£26 million).
Consolidated Income Statement disclosures
Amounts recognised in the Consolidated Income Statement in respect of these
defined benefit plans were as follows:
Year ended Year ended
31 December
31 December
2025
2024
£m
£m
Included within operating loss:
- current service cost 6 6
- plan administrative costs 3 2
- curtailments and past service cost((1)) 1 2
Included net within finance costs:
- interest cost on defined benefit obligations 51 49
- interest income on plan assets (37 ) (34 )
1. Curtailments and past service costs relate to benefits provided as a result
of redundancies and a pension scheme wind up following site closures.
Statement of Comprehensive Income disclosures
Amounts recognised in the Consolidated Statement of Comprehensive Income in
respect of these defined benefit plans were as follows:
Year ended Year ended
31 December
31 December
2025
2024
£m
£m
Gain/(loss) on plan assets, excluding interest income 1 (60 )
Remeasurement gain arising from changes in demographic assumptions - 6
Remeasurement gains arising from changes in financial assumptions 44 89
Change in unrecognised asset due to asset ceiling - 2
Remeasurement losses arising from experience adjustments (2 ) -
Net remeasurement gain on retirement benefit obligations 43 37
Risks and sensitivities
The defined benefit plans expose the Group to actuarial risks, such as
longevity risk, inflation risk, interest rate risk and market (investment)
risk. The Group is not exposed to any unusual, entity specific or plan
specific risks.
23. Retirement benefit obligations continued
A sensitivity analysis on the principal assumptions used to measure the
defined benefit obligations at the year end was as follows:
Change in assumption Decrease/ Increase/
(increase)
(decrease)
to plan liabilities
to profit before tax
£m
£m
Discount rate Increase by 0.5 ppts 57 (2 )
Decrease by 0.5 ppts (62 ) 2
Inflation assumption((1)) Increase by 0.5 ppts (40 ) n/a
Decrease by 0.5 ppts 36 n/a
Assumed life expectancy at age 65 (rate of mortality) Increase by 1 year (37 ) n/a
Decrease by 1 year 37 n/a
1. The inflation sensitivity encompasses the impact on pension increases and
salary increases, where applicable.
The sensitivity analysis above was determined based on reasonably possible
changes to the respective assumptions, while holding all other assumptions
constant. There has been no change in the methods or assumptions used in
preparing the sensitivity analysis from prior years. Sensitivities are based
on the relevant assumptions and membership profile as at 31 December 2025 and
are applied to obligations at the end of the reporting period. Whilst the
analysis does not take account of the full distribution of cash flows
expected, it does provide an approximation to the sensitivity of assumptions
shown. Extrapolation of these results beyond the sensitivity figures shown may
not be appropriate and the sensitivity analysis presented may not be
representative of the actual change in the defined benefit obligation as it is
unlikely that the change in assumptions would occur in isolation of one
another as some of the assumptions may be correlated.
24. Financial instruments and risk management
The table below sets out the Group's accounting classification of each
category of financial assets and liabilities and their carrying values at 31
December 2025 and 31 December 2024:
31 December 2025 Current Non-current Total
£m
£m
£m
Financial assets
Classified as amortised cost:
Cash and cash equivalents 386 - 386
Net trade receivables((1)) 397 - 397
Classified as fair value:
Derivative financial assets
Foreign currency forward contracts 28 8 36
Other derivatives 2 - 2
Financial liabilities
Classified as amortised cost:
Interest-bearing loans and borrowings (226 ) (1,095 ) (1,321 )
Lease obligations (28 ) (93 ) (121 )
Other financial liabilities (777 ) (8 ) (785 )
Classified as fair value:
Derivative financial liabilities
Foreign currency forward contracts (2 ) (1 ) (3 )
31 December 2024 Current Non-current Total
£m
£m
£m
Financial assets
Classified as amortised cost:
Cash and cash equivalents 336 - 336
Net trade receivables((1)) 369 - 369
Classified as fair value:
Derivative over own equity((2)) 18 - 18
Derivative financial assets
Foreign currency forward contracts 9 6 15
Interest rate swaps - 3 3
Financial liabilities
Classified as amortised cost:
Interest-bearing loans and borrowings (13 ) (1,291 ) (1,304 )
Lease obligations (29 ) (103 ) (132 )
Other financial liabilities (778 ) (8 ) (786 )
Classified as fair value:
Derivative financial liabilities
Foreign currency forward contracts (32 ) (14 ) (46 )
1. Net trade receivables are presented net of an allowance for expected lifetime
credit losses of £11 million (2024: £15 million).
2. Included within other financial assets.
24. Financial instruments and risk management continued
The fair value of the derivative financial instruments is derived from inputs
other than quoted prices that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices) and
they are therefore categorised within level 2 of the fair value hierarchy set
out in IFRS 13 Fair Value Measurement. The Group's policy is to recognise
transfers into and out of the different fair value hierarchy levels at the
date of the event or change in circumstances that caused the transfer to
occur. There have been no transfers between levels during the current year.
In the prior year, the fair value of the derivative over own equity was
derived from unobservable inputs and as such, classified as level 3 of the
fair value hierarchy set out in IFRS 13. Inputs to the valuation included the
terms of the contract under which the asset arose, the Company's share price
and expected volatility in the share price. The asset was settled during the
year by receipt of the Company's shares with the derecognition of the asset
recorded directly in equity.
Fair values
Set out below is a comparison of the carrying amounts and fair values of the
Group's interest-bearing loans and borrowings (excluding bank overdrafts).
31 December 2025 Carrying amount Fair value
£m
£m
Floating rate obligations 912 914
Fixed rate obligations 370 428
31 December 2024
Floating rate obligations 894 901
Fixed rate obligations 397 455
Management consider all other financial assets and liabilities to have
carrying values that are reasonable approximations of their fair values.
Credit risk
The Group's principal financial assets are cash and cash equivalents, trade
receivables and derivative financial assets which represent the Group's
maximum exposure to credit risk in relation to financial assets.
The Group's credit risk on cash and cash equivalents and derivative financial
assets is limited because the ultimate counterparties are banks with
investment grade credit ratings assigned by international credit rating
agencies. Exposure is managed on the basis of risk rating and counterparty
limits. The value of credit risk in derivative assets is modelled using
publicly available inputs as part of their fair value.
The Group's credit risk is therefore primarily attributable to its trade
receivables. The amounts presented in the Consolidated Balance Sheet are net
of an allowance for expected credit losses, estimated by the Group's
management based on prior experience and their assessment of the current
economic environment. Note 16 provides further details regarding the recovery
of trade receivables.
Capital risk
The Group manages its capital to ensure that entities in the Group will be
able to continue as a going concern. The capital structure of the Group
consists of interest-bearing loans and borrowings less cash and cash
equivalents as disclosed in the Consolidated Balance Sheet, and equity
attributable to the owners of the parent, comprising issued share capital,
reserves and retained earnings as disclosed in the Consolidated Statement of
Changes in Equity.
Liquidity risk management
Overview of banking facilities
At 31 December 2025 the Group's committed bank facilities included a
multi-currency denominated term loan of £100 million and €100 million as
well as a multi-currency denominated revolving credit facility of £350
million, US$660 million and €450 million. Details of amounts drawn under
these facilities at year end are included in Note 19.
The revolving credit and term loan facilities had an initial maturity date of
20 April 2026, the Group had the option to extend the maturity of the
revolving credit facility by up to two years, at its sole discretion.
In addition, the Group held notes of US$500 million in the US Private
Placement (USPP) market. The USPP notes were at fixed interest rates with
remaining terms of between 4 and 11 years.
Loans drawn under the bank facilities and USPP were guaranteed by Dowlais
Group Limited (formerly Dowlais Group plc) and certain of its subsidiaries,
and the Group provided no security over any of its assets in respect of these.
Cash amounted to £386 million at year end (2024: £336 million) with an
additional £7 million (2024: £nil) of cash classified as held for sale,
which together are offset against interest-bearing loans and borrowings of
£1,321 million (2024: £1,304 million).
Subsequent to the completion of the acquisition of the Group by Dauch on 3
February 2026, the bank facilities were repaid in full and US$151 million of
the USPP notes were also repaid. The repayments were funded by way of a loan
from Dauch.
The committed bank funding and USPP had two financial covenants, both of which
were tested half-yearly in June and December.
Interest rates on the USPP are fixed subject to the Group maintaining an
investment grade credit rating. Following completion of the acquisition of the
Group by Dauch, on 3 February 2026 the credit rating of the Group was
downgraded and an additional one percentage point was added to the interest
rate until the Group's credit rating returns to investment grade.
24. Financial instruments and risk management continued
Maturity of financial liabilities (excluding currency contracts)
The table below shows the maturity profile of anticipated future cash flows,
including interest, on an undiscounted basis in relation to the Group's
financial liabilities. The amounts shown therefore differ from the carrying
value and fair value of the Group's financial liabilities.
Interest-bearing loans and Finance lease obligations Other financial Total financial
borrowings
£m
liabilities
liabilities
£m
£m
£m
Within one year 290 34 777 1,101
In one to two years 760 26 8 794
In two to five years 169 40 - 209
After five years 324 49 - 373
Total anticipated cash flows 1,543 149 785 2,477
Effect of financing (222 ) (28 ) - (250 )
31 December 2025 1,321 121 785 2,227
Within one year 90 35 778 903
In one to two years 944 27 8 979
In two to five years 189 47 - 236
After five years 365 54 - 419
Total anticipated cash flows 1,588 163 786 2,537
Effect of financing (284 ) (31 ) - (315 )
31 December 2024 1,304 132 786 2,222
Working capital
The Group has a small number of uncommitted working capital programmes, which
provide favourable financing terms on eligible customer receipts and
competitive financing terms to suppliers on eligible supplier payments.
Businesses that participate in these customer related finance programmes have
the ability to choose whether to receive payment earlier than the normal due
date, for specific customers on a non-recourse basis. As at 31 December 2025,
the drawings on these facilities were £198 million (2024: £168 million).
Some suppliers may utilise the Group's supplier finance programmes, which are
provided by a limited number of the Group's relationship banks. There is no
cost to the Group for providing these programmes to its suppliers. These
arrangements do not change the date suppliers are due to be paid by the Group,
and therefore there is no additional impact on the Group's liquidity. These
programmes allow suppliers to choose, at their sole discretion, whether they
want to accelerate the payment of their invoices, by the financing banks, for
an interest cost which is competitive and based on the credit rating of the
Group as determined by the financing banks funding each programme. The amounts
owed by the Group to the banks in relation to amounts suppliers have drawn
under these programmes are included in trade payables on the Consolidated
Balance Sheet and the cash flows are presented in cash flows from operating
activities. The arrangements do not change the timing of the Group's cash
outflows.
Payment dates for trade payables under supplier finance arrangements, and
comparable trade payables which are not financed, are generally between 60 and
120 days. Payment terms vary across the Group depending on individual supplier
agreements and the jurisdictions under which the purchases are made. The total
of supplier invoices under these facilities as at 31 December 2025 was £120
million (2024: £148 million). Movement on this balance in the year includes a
£5 million non-cash decrease due to exchange rate movements. Of the balance
at 31 December 2025, £71 million had been paid by the facilitating banks to
suppliers (2024: £79 million).
Finance cost risk management
The bank margin on the bank facility depends on the Group's leverage.
Management performs periodic reviews of the Group's interest rate exposure and
fix a proportion of the exposure as deemed necessary at that time. As at 31
December 2025, 36% of the Group's interest exposure was fixed (2024: 46%).
Interest rate risk
Cash flow hedges
The Group uses interest rate swaps to hedge against the risk of interest rate
fluctuation on the floating rate debt. The fair value of the interest rate
swaps as at 31 December 2025 was £nil (31 December 2024: asset of £3
million).
There is an economic relationship between the hedged item and the hedging
instrument in relation to SOFR (2024: SOFR and EURIBOR) interest cash flows.
The Group has established a hedge ratio of 1:1 for the hedging relationships
based on the notional of the hedging instrument and the hedged item. Group
management performs periodic prospective effectiveness assessments to
determine hedge effectiveness.
As a result of the anticipated acquisition of the Group by Dauch, the interest
cash flows on the floating rate debt were deemed to no longer be probable and
hedge accounting was discontinued.
During the year movements on the interest rate swaps comprised a debit of
£2 million (2024: credit of £2 million) booked to derivatives losses on
hedge relationships within other comprehensive income, £1 million credit
(2024: £8 million) booked to interest in the Consolidated Income Statement,
and a cash inflow of £2 million (2024: £10 million).
Hedge ineffectiveness may occur due to:
Differences in the timing of the cash flows of the hedged items and the
hedging instruments;
The counterparties' credit risk differently impacting the fair value movements
of the hedging instruments and hedged items;
Changes to the forecasted amount of cash flows of hedged items and hedging
instruments; or
Mismatches in payment frequency and/or reset dates.
During the year ended 31 December 2025, some of the critical terms of the
interest rate swaps and the hedged items were not perfectly matched; however,
this did not give rise to any ineffectiveness through the Consolidated Income
Statement in the year (2024: £nil).
24. Financial instruments and risk management continued
Interest rate sensitivity analysis
Assuming the net debt, inclusive of interest rate swaps, held as at the
balance sheet date was outstanding for the whole year, a one percentage point
rise in market interest rates for all currencies would decrease profit before
tax by the following amounts:
Year ended Year ended
31 December
31 December
2025
2024
£m
£m
Sterling 2 3
US Dollar 2 1
Euro 4 3
On the basis of the floating-to-fixed interest rate swaps in place at the
balance sheet date, a one percentage point fall in market interest rates for
all currencies would have £nil impact on Group equity (2024: decrease Group
equity by £4 million).
Exchange rate risk management
The Group trades in various countries around the world and is exposed to
movements in a number of foreign currencies. The Group therefore carries
exchange rate risk that can be categorised into three types: transaction,
translation and disposal related risk as described in the paragraphs below.
The Group's policy is designed to protect against the majority of the cash
risks but not the non-cash risks.
The most common exchange rate risk is the transaction risk the Group takes
when it invoices a customer or purchases from suppliers in a different
currency to the underlying functional currency of the relevant business. The
Group's policy is to review transactional foreign exchange exposures, and
place appropriate hedging contracts, quarterly on a rolling basis. To the
extent the cash flows associated with a transactional foreign exchange risk
are committed, the Group will hedge up to 100% at the time that the cash flow
becomes committed. For forecast and variable material cash flows, the Group
hedges a proportion of the expected cash flows on a phased basis over a time
horizon of up to two years in accordance with the Group's treasury policy.
The average time horizons for GKN Automotive and GKN Powder Metallurgy reflect
the long-term nature of the contracts within these divisions. Typically, in
total the Group hedges a minimum of 70% of foreign exchange exposures expected
over the following year, and 40% to 60% of exposures between one and two
years. This policy reduces, but does not eliminate, the cash risk.
The translation rate risk is the effect on the Group's results in the year due
to the movement in exchange rates used to translate results in foreign
currencies into Sterling from one period to the next. No specific exchange
instruments are used to protect against the translation risk because until
foreign currency is converted to Sterling, this is a non-cash risk to the
Group.
Finally, exchange rate risk arises when a business that reports in a currency,
other than Sterling, is sold. The proceeds for those businesses may be
received in a foreign currency and therefore an exchange rate risk may arise
on conversion of the foreign currency proceeds into Sterling. Protection
against this risk is considered on a case-by-case basis and, if appropriate,
hedged at that time.
As at 31 December 2025, the Group held foreign exchange forward and swap
contracts to mitigate expected exchange rate fluctuations on future cash flows
from sales to customers and purchases from suppliers. The fair value of all
foreign exchange forward and swap contracts across the Group was a net asset
at 31 December 2025 of £33 million (2024: net liability of £31 million).
The following table shows the maturity profile of undiscounted contracted
gross cash flows of derivative financial liabilities used to manage currency
risk:
Cash inflows Cash outflows Total
£m
£m
£m
Year ended 31 December 2025
Within 1 year
Foreign exchange forward contracts 79 (82 ) (3 )
In one to two years
Foreign exchange forward contracts 15 (16 ) (1 )
Foreign exchange swap contracts 1 (1 ) -
Year ended 31 December 2024
Within 1 year
Foreign exchange forward contracts 319 (347 ) (28 )
Foreign exchange swap contracts 1 (1 ) -
In one to two years
Foreign exchange forward contracts 189 (195 ) (6 )
Hedge of net investment in foreign operations
The interest-bearing loans as at 31 December 2025 (Note 19) include US Dollar
borrowings of US$880 million (2024: US$900 million) and Euro borrowings of
€420 million (2024: €410 million), which have been designated as hedges of
the Group's net investments in US Dollar and Euro denominated subsidiaries
respectively. These borrowings are used to hedge the Group's exposure to the
foreign exchange risk on these investments. Gains or losses on the
retranslation of these borrowing are recorded in other comprehensive income to
offset any gains or losses on translation of the net investments in the
subsidiaries.
There is an economic relationship between the hedged item and the hedging
instrument as the net investment creates a translation risk that matches the
risks of foreign exchange fluctuation on the borrowings. The Group has
established a hedge ratio of 1:1 as the underlying risk of the hedging
instrument is identical to the hedged risk component. The Group performs
periodic prospective effectiveness assessments to determine hedge
effectiveness.
24. Financial instruments and risk management continued
Foreign currency sensitivity analysis
Currency risks are defined by IFRS 7 Financial instruments: Disclosures as the
risk that the fair value or future cash flows of a financial asset or
liability will fluctuate because of changes in foreign exchange rates.
The following table details the transactional impact of hypothetical changes
in foreign exchange rates on financial assets and liabilities at the balance
sheet date, illustrating the increase in Group operating profit caused by a
10% strengthening of the US Dollar, Euro and Mexican Peso against Sterling
compared to the year end spot rate. The analysis assumes that all other
variables, in particular other foreign currency exchange rates, remain
constant. The Group operates in a range of different currencies, and those
with a notable impact are shown below:
Year ended Year ended
31 December
31 December
2025
2024
£m
£m
US Dollar 2 1
Euro 1 (2 )
Mexican Peso 4 4
The following table details the impact of hypothetical changes in foreign
exchange rates on financial assets and liabilities at the balance sheet date,
illustrating the decrease in the Group's equity caused by a 10% strengthening
of the US Dollar and Euro against Sterling. The analysis assumes that all
other variables, in particular other foreign currency exchange rates, remain
constant.
31 December 31 December
2025
2024
£m
£m
US Dollar (12 ) (12 )
Euro (7 ) (7 )
In addition, the change in equity due to a 10% strengthening of the US Dollar
against Sterling for the translation of net investment hedging instruments
would be a decrease of £65 million (2024: decrease of £71 million) and for
the Euro, a decrease of £37 million (2024: decrease of £34 million).
However, there would be no overall effect on equity because there would be an
offset in the currency translation of the foreign operations.
Fair value measurements recognised in the Consolidated Balance Sheet
Foreign currency forward contracts are measured using quoted forward exchange
rates and yield curves derived from quoted interest rates matching the
maturities of the contracts.
Interest rate swap contracts are measured using yield curves derived from
quoted interest and foreign exchange rates.
Derivative financial assets and liabilities are presented within the
Consolidated Balance Sheet as:
31 December 31 December
2025
2024
£m
£m
Non-current assets 8 9
Current assets 30 9
Current liabilities (2 ) (32 )
Non-current liabilities (1 ) (14 )
Hedge accounted derivatives
The Group previously designated interest rate swaps as cash flow hedges to
mitigate interest rate risk. Hedge accounting was discontinued during the year
when the hedged cash flows were deemed no longer probable to occur.
The following table sets out details of the Group's cash flow hedging
instruments where hedge accounting is applied at the balance sheet date:
Average fixed rate Notional principal Fair value of assets/
(liabilities)
Cash flow hedging Instruments 31 December 31 December 31 December 31 December 31 December 31 December
2025
2024
2025
2024
2025
2024
%
%
£m
£m
£m
£m
US Dollar Interest rate swaps
Within one year - - - - - -
In two to five years - 3.48 % - 200 - 3
Total - - 200 - 3
All cash flow hedging instruments were booked in the Consolidated Balance
Sheet as derivative financial assets or derivative financial liabilities.
24. Financial instruments and risk management continued
The following table sets out details of the Group's material hedging
relationships at the balance sheet date where hedge accounting is applied:
Change in fair value for Balance in hedging and Balance in hedging and
calculating ineffectiveness
translation reserves for
translation reserves for
continuing hedges
discontinued hedges
31 December 31 December 31 December 31 December 31 December 31 December
2025
2024
2025
2024
2025
2024
£m
£m
£m
£m
£m
£m
Cash flow hedge - interest rate risk
Hedged items
Floating rate borrowings - (2 ) n/a n/a n/a n/a
Hedging instruments
US Dollar Interest rate swaps - 1 - 2 - -
Euro Interest rate swaps - 1 - - - (2 )
Net investment hedge
Hedged items
Net assets of designated investments (35 ) (4 ) (59 ) (24 ) - -
Hedging instruments
US Dollar debt 57 (13 ) 59 2 - -
Euro debt (22 ) 17 - 22 - -
Impact of hedging on equity
The following table sets out the reconciliation for each component of the
hedging reserve and the analysis of associated other comprehensive income.
Cash flow Net investment Total hedging
hedge reserve
hedge reserve
recognised in
£m
£m
equity
£m
At 1 January 2025 - 18 18
Effective portion of changes in fair value arising from:
Fair value loss on interest rate swaps (2 ) - (2 )
Foreign currency revaluation of the US Dollar debt - 57 57
Foreign currency revaluation of the Euro debt - (22 ) (22 )
Cumulative loss on interest rate swaps reclassified to the Consolidated Income 2 - 2
Statement
Tax impact - (9 ) (9 )
At 31 December 2025 - 44 44
Amounts reclassified to other finance cost in the Consolidated Income
Statement of £2 million (2024: £3 million) relate to the discontinuation of
hedge accounting where the hedged item was no longer expected to occur.
25. Issued share capital and reserves
Share capital
Share Capital 31 December 31 December
2025
2024
£m
£m
Allotted, called-up and fully paid
1,316,658,644 (2024: 1,352,695,566) ordinary shares of 1p each 13 14
13 14
During the year, the Group purchased and cancelled 8,171,451 (2024:
40,577,961) of the Company's shares at a cost of £6 million (2024: £26
million) under a share buy-back programme. The programme was terminated on 29
January 2025 following the announcement of the recommended acquisition of the
Group by Dauch.
The Company also received and cancelled 27,865,471 shares on the settlement of
a pre-demerger agreement with Melrose Industries PLC.
A £1 million transfer to a capital redemption reserve has been made in
relation to the par value of the shares cancelled.
Own shares
The Group's Employee Benefit Trust (EBT) holds shares in the capital of the
Company for the purpose of settling awards vesting under the Group's share
incentive schemes.
In the current year, 779,260 shares (2024: 52,559) were issued by the EBT to
employees under the Group's share incentive schemes. At the year end,
4,743,811 shares (2024: 5,523,071) were held by the EBT. No shares were
purchased by the EBT in the current or prior year.
Translation reserve
The translation reserve contains exchange differences on the translation of
subsidiaries with a functional currency other than pound Sterling together
with exchange differences arising on debt financial instruments which have
been designated as hedges of net investment.
Hedging reserve
The hedging reserve contains the effective portion of any gains or losses from
revaluation of interest rate swap contracts which have been designated as cash
flow hedging instruments. No contracts were designated as cash flow hedges at
the year end.
26. Cash flow statement
Reconciliation of loss after tax to net cash from operating activities:
Year ended Year ended
31 December 2025
31 December 2024
£m
£m
Loss after tax (87 ) (168 )
Share of results of equity accounted investments, net of tax (65 ) (61 )
Finance costs 115 131
Finance income (15 ) (22 )
Tax 23 (47 )
Adjustments for:
Depreciation & impairment of property, plant and equipment 263 275
Amortisation of computer software and development costs 17 14
Amortisation & impairment of intangible assets acquired in business 184 191
combinations
Gain on disposal of non-current assets (1 ) -
Loss on disposal of business 38 8
Share-based payment expense 3 1
Unrealised loss/(gain) on derivatives (62 ) 73
Other non-cash add back (15 ) (2 )
Movements in provisions (51 ) (62 )
Defined benefit pension costs charged 9 10
Defined benefit pension contributions paid (34 ) (44 )
Change in inventories (27 ) 66
Change in receivables (63 ) 85
Change in payables 76 (178 )
Tax paid (59 ) (56 )
Interest paid on loans and borrowings (92 ) (88 )
Interest paid on lease liabilities (6 ) (6 )
Net cash from operating activities 151 120
Reconciliation of cash and cash equivalents, net of bank overdrafts
31 December 2025 31 December 2024
£m
£m
Cash and cash equivalents per Consolidated Balance Sheet 386 336
Cash and cash equivalents classified within assets held for sale (Note 14) 7 -
Bank overdrafts (Note 19) (39 ) (13 )
Cash and cash equivalents, net of bank overdrafts per Consolidated Statement 354 323
of Cash Flows
Reconciliation of liabilities arising from financing activities
As at 31 December 2024, liabilities arising from financing activities, as
defined by IAS 7 Statement of Cash Flows, totalled £1,423 million comprising
interest-bearing loans and borrowings of £1,291 million and lease obligations
of £132 million.
During the year, cash transactions on financing balances totalled a net cash
outflow £5 million. This comprised net drawdowns on external debt facilities
of £22 million and the repayment of finance lease principal of £27 million.
Non-cash transactions included a £37 million reduction in liabilities due to
foreign exchange movements, £4 million increase in liabilities due to the
amortisation of debt issue costs, £19 million increase in lease liabilities
due to new leases and the reassessment of existing lease liabilities, and a
£1 million reduction in lease liabilities due to the disposal of the Forecast
3D business within the Powder Metallurgy division.
As at 31 December 2025, liabilities arising from financing activities, as
defined by IAS 7, totalled £1,403 million comprising interest-bearing loans
and borrowings of £1,282 million and lease obligations of £121 million.
27. Commitments
Amounts payable under lease obligations:
Minimum lease payments 31 December 2025 31 December 2024
£m
£m
Amounts payable:
Within one year 34 35
After one year but within five years 66 74
Over five years 49 54
Less: future finance charges (28 ) (31 )
Present value of lease obligations 121 132
Analysed as:
Amounts due for settlement within one year 28 29
Amount due for settlement after one year 93 103
Present value of lease obligations 121 132
It is the Group's policy to lease certain of its property, plant and
equipment. The average lease term is ten years. Interest rates are fixed at
the contract date. All leases are on a fixed repayment basis and no
arrangements have been entered into for contingent rental payments.
The Group's obligations under lease arrangements are secured by the lessors'
rights over the leased assets.
The table below shows the key components in the movement in lease obligations.
Year ended Year ended
31 December
31 December
2025
2024
£m
£m
At 1 January 132 151
Additions 21 23
Interest charge 6 6
Reassessment of lease obligation (2 ) (12 )
Payment of principal (27 ) (24 )
Payment of interest (6 ) (6 )
Disposal of business (1 ) (1 )
Exchange adjustments (2 ) (5 )
At 31 December 121 132
The expense related to short-term leases in the year was £1 million (2024:
£1 million).
27. Commitments continued
Capital commitments
At 31 December 2025, the Group had committed expenditure of £22 million
(2024: £26 million) relating to the acquisition of new plant and machinery.
28. Related Parties
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the
Group, is set out below in aggregate for each of the categories specified in
IAS 24 Related Party Disclosures:
Year ended Year ended
31 December 2025
31 December 2024
£m
£m
Short-term employee benefits 4 3
Share-based payments 1 -
5 3
Transactions between companies within the Group, which are Related Parties,
have been eliminated on consolidation and are not disclosed in this note.
In the ordinary course of business, sales and purchases of goods take place
between subsidiaries and equity accounted investment companies priced on an
arm's length basis. Sales by subsidiaries to equity accounted investments in
the year totalled £8 million (2024: £7 million). Purchases by subsidiaries
from equity accounted investments totalled £13 million (2024: £12 million).
At 31 December 2025, there were no amounts receivable from equity accounted
investments (2024: £nil) and amounts payable to equity accounted investments
totalled £2 million (2024: £3 million).
29. Contingent liabilities
As a result of historical acquisitions, certain contingent legal and warranty
liabilities were identified as part of the fair value review of these
acquisition balance sheets. Whilst it is difficult to reasonably estimate the
timing and ultimate outcome of these claims, the Directors' best estimate has
been included in the Consolidated Balance Sheet where they existed at the time
of acquisition and hence were recognised in accordance with IFRS 3 Business
combinations. Where a provision has been recognised, information regarding the
different categories of such liabilities and the amount and timing of outflows
is included within Note 20.
Given the nature of the Group's business many of the Group's products have a
large installed base, and any recalls or reworks related to such products
could be particularly costly. The costs of product recalls or reworks are not
always covered by insurance. Recalls or reworks may have a material adverse
effect on the Group's financial condition, results of operations and cash
flows.
The Group has contingent liabilities representing guarantees and contract
bonds given in the ordinary course of business on behalf of trading
subsidiaries. No losses are anticipated to arise on these contingent
liabilities. The Group does not have any other significant contingent
liabilities.
30. Post balance sheet events
On 29 January 2025, the boards of Dowlais and Dauch announced that they
reached agreement on the terms of a recommended cash and share acquisition by
Dauch of the entire issued and to be issued ordinary share capital of Dowlais.
As a result of the Court sanction of the scheme, on 30 January 2026 awards
over Dowlais ordinary shares vested to certain Group employees. To enable the
vested awards to be satisfied, the Group issued 11,127,886 new shares.
On 3 February 2026, the acquisition was implemented by way of a
Court-sanctioned scheme of arrangement under Part 26 of the Companies Act
2006. Simon Mackenzie Smith, Liam Butterworth, Celia Baxter, Philip Harrison,
Shali Vasudeva and Fiona MacAulay tendered their resignations and stepped down
from the Dowlais Board whilst John Nicholson was appointed to the Dowlais
Board.
In accordance with the terms of the agreement, each Dowlais shareholder, where
no valid election was made under the Mix and Match Facility (which allowed
shareholders to choose between receiving cash or shares), received 0.0881 new
shares of common stock of Dauch and 43 pence in cash for each Dowlais share
held.
Subsequent to the Group's acquisition by Dauch on 3 February 2026, Dauch
provided funding to the Group by way of an inter-company loan which the Group
used to repay and cancel its existing RCF and term loan facilities in full,
and an offer was made to the USPP note holders to redeem the notes. On 4
February 2026, the Group's shares were cancelled from admission to trading on
London Stock Exchange.
On the same day, Dauch implemented an internal restructure to transfer all US
subsidiaries of the Group out of Dowlais ownership.
On 9 March 2026, the Group repaid US$151 million of USPP notes.
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(in millions, except per share amounts)
On February 3, 2026, Dauch Corporation (formerly American Axle &
Manufacturing Holdings, Inc.) ("we," "our," "us," "Dauch" or "the Company")
completed our previously announced acquisition of Dowlais Group plc (Dowlais)
whereby we acquired the entire issued share capital of Dowlais (the Business
Combination). Pursuant to the Business Combination, Dowlais shareholders
received for each Dowlais ordinary share (the Dowlais Shares): 0.0881 shares
of new Dauch Corporation common stock (the Dauch shares) and 43 pence per
share in cash (approximately $0.59 per share as of the closing date),
resulting in the issuance of approximately 117 million Dauch shares and a
total purchase price of approximately $1.7 billion.
The aggregate cash consideration for the Business Combination was financed
using (i) a portion of the net proceeds from the issuance in October 2025 by
the Company of $850 million of 6.375% senior secured notes due 2032 and $1,250
million of 7.75% senior unsecured notes due 2033 and (ii) borrowings by the
Company of $835 million on an incremental Tranche C term facility.
The following unaudited pro forma condensed combined financial information
(comprised of the unaudited pro forma condensed combined balance sheet,
unaudited pro forma condensed combined statement of income and the related
notes, and collectively referred to as the unaudited pro forma condensed
combined financial information) gives effect to the Business Combination and
related financing, which includes adjustments for the following:
· the conversion of Dowlais' historical financial statements from pound sterling
to U.S. Dollars;
· certain reclassifications to conform Dowlais' historical financial statement
presentation to Dauch's presentation;
· the conversion of Dowlais' historical financial statements prepared in
accordance with IFRS, as issued by the International Accounting Standards
Board ("IASB"), to generally accepted accounting principles in the United
States of America (U.S. GAAP);
· application of the acquisition method of accounting under the provisions of
Accounting Standards Codification 805, "Business Combinations" ("ASC 805"),
and to reflect consideration transferred in exchange for 100% of all
outstanding Dowlais Shares; and
· transaction and financing costs incurred in connection with the Business
Combination.
The unaudited pro forma condensed combined financial information is based on,
and should be read in conjunction with, the following:
(i) the historical consolidated financial statements of Dauch and the
related notes included in our Annual Report on Form 10-K for the year ended
December 31, 2025, which was filed with the Securities and Exchange Commission
(the SEC) on February 13, 2026, and
(ii) the consolidated financial statements of Dowlais for the year ended
December 31, 2025 and the related notes, which are included in our Form 8-K/A
filed with the SEC on April 17, 2026.
The unaudited pro forma condensed combined statement of income for the year
ended December 31, 2025 combines the historical consolidated statement of
income of Dauch and Dowlais, giving effect to the adjustments made in the
unaudited pro forma condensed combined balance sheet reflecting the accounting
for the Business Combination assuming those adjustments were made January 1,
2025. The accompanying unaudited pro forma condensed combined balance sheet as
of December 31, 2025 combines the historical consolidated balance sheets of
Dauch and Dowlais, giving effect to adjustments reflecting the accounting for
the Business Combination.
To produce the unaudited pro forma condensed combined financial information,
the Company adjusted Dowlais' assets and liabilities to their estimated fair
values. As of the date of the filing of the unaudited pro forma condensed
combined financial information, Dauch has not finalized the detailed valuation
analysis necessary to arrive at the final determination of the fair value of
Dowlais' assets and liabilities and any increases or decreases in the fair
value of relevant balance sheet amounts will result in adjustments to the
balance sheet and/or statement of income of the combined entity (the Combined
Group) until the purchase price allocation is finalized. There can be no
assurance that such finalization will not result in material changes from the
preliminary purchase price allocation included in the accompanying unaudited
pro forma condensed combined financial information, and therefore these
changes could have a material impact on the accompanying unaudited pro forma
condensed combined financial information and the combined entity's future
results of operations and financial position.
The value of the stock consideration in the Business Combination is based on
the trading price of Dauch Shares at the time of the completion of the
Business Combination. The preliminary unaudited pro forma purchase price
allocation has been made solely for the purpose of preparing the accompanying
unaudited pro forma condensed combined financial information. The preliminary
purchase price allocation is based the preliminary results of a third-party
valuation assessment, reviews of publicly disclosed allocations for other
acquisitions in the automotive supplier industry, Dauch's historical
experience, data that was available through the public domain and Dauch's
review of Dowlais' business and financial records.
The accompanying unaudited pro forma condensed combined financial information
does not reflect the costs of any integration activities or benefits that may
result from the realization of future cost savings from operating
efficiencies, or any other synergies that may result from the Business
Combination. The unaudited pro forma adjustments are based upon available
information and certain assumptions that the Company believes are reasonable
as of the date hereof. The unaudited pro forma condensed combined financial
information is provided for informational purposes only and does not purport
to indicate the results that would actually have been obtained had the
Business Combination been completed on the assumed date or for the periods
presented, or which may be realized in the future.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of December 31, 2025
IFRS to U.S. Pro Forma
Dauch Reclassification GAAP Transaction Condensed
(U.S. GAAP) Dowlais (IFRS) Adjustments Adjustments Adjustments Combined
in $ millions Note 1 Notes 1 and 7 Note 2 Note 3 Notes Note 5 Notes (U.S. GAAP)
Assets
Current assets
Cash and cash equivalents $ 708.9 $ 520.0 $ - $ - $ 49.6 5a $ 1,278.5
Restricted cash 1,496.6 - - - (1,496.6 ) 5a -
Accounts receivable, net 733.0 708.0 (96.6 ) - - 1,344.4
Inventories, net 466.4 581.0 (95.3 ) - 39.4 5b 991.5
Prepaid expenses and other 230.1 - 161.4 - - 391.5
Derivative financial assets - 40.0 (40.0 ) - - -
Current tax assets - 19.0 (19.0 ) - - -
Current assets held-for-sale - 48.0 - - - 48.0
Total current assets 3,635.0 1,916.0 (89.5 ) - (1,407.6 ) 4,053.9
Property, plant and equipment, net 1,591.5 2,053.0 12.4 (72.2 ) 3a 795.1 5c 4,379.8
Deferred income taxes 235.9 187.0 - - - 422.9
Goodwill 174.4 - 1,441.0 - (1,231.0 ) 5d 384.4
Other intangible assets, net 375.2 - 1,091.3 - (1,091.3 ) 5e 375.2
Goodwill and other intangible assets - 2,566.0 (2,566.0 ) - - -
GM postretirement cost sharing asset 116.0 - - - - 116.0
Operating lease right-of-use assets 122.3 - - 72.2 3a - 194.5
Other assets and deferred charges 419.9 - 706.8 - 379.7 5f 1,506.4
Interests in equity accounted investments - 504.0 (504.0 ) - - -
Derivative financial assets - 11.0 (11.0 ) - - -
Retirement benefit surplus - 58.0 (58.0 ) - - -
Other receivables - 23.0 (23.0 ) - - -
Total assets $ 6,670.2 $ 7,318.0 $ - $ - $ (2,555.1 ) $ 11,433.1
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt $ 10.4 $ 304.0 $ - $ - $ (304.0 ) 5g $ 10.4
Accounts payable 718.3 - 1,131.0 - - 1,849.3
Accrued compensation and benefits 254.9 - 203.7 - (46.8 ) 4a, 5i 411.8
Trade and other payables - 1,358.0 (1,358.0 ) - - -
Deferred revenue 38.5 - 6.7 - - 45.2
Current portion of operating lease liabilities 24.7 - - 17.1 3a - 41.8
Accrued expenses and other 187.2 - 294.6 (23.8 ) 3a, 3b (51.9 ) 5i 406.1
Lease obligations - 38.0 (38.0 ) - - -
Derivative financial liabilities - 3.0 (3.0 ) - - -
Current tax liabilities - 65.0 (65.0 ) - - -
Provisions - 172.0 (172.0 ) - - -
Current liabilities held-for-sale - 13.0 - - - 13.0
Total current liabilities 1,234.0 1,953.0 - (6.7 ) (402.7 ) 2,777.6
Long-term debt, net 4,039.1 1,475.0 - - (211.7 ) 5g 5,302.4
Deferred revenue 33.9 - 7.0 - - 40.9
Deferred income taxes 9.1 213.0 - - 30.7 5h 252.8
Long-term portion of operating lease liabilities 100.1 - - 55.1 3a - 155.2
Postretirement benefits and other long-term liabilities 614.0 - 772.0 (56.4 ) 3a, 3b - 1,329.6
Other payables - 18.0 (18.0 ) - - -
Lease obligations - 125.0 (125.0 ) - - -
Derivative financial liabilities - 1.0 (1.0 ) - - -
Retirement benefit obligations - 527.0 (527.0 ) - - -
Provisions - 108.0 (108.0 ) - - -
Total liabilities 6,030.2 4,420.0 - (8.0 ) (583.7 ) 9,858.5
Stockholders' equity
Preferred stock - - - - - -
Series common stock - - - - - -
Common stock 1.3 18.0 - - (16.8 ) 5i 2.5
Paid-in capital 1,411.2 - - - 932.2 5i 2,343.4
Capital redemption reserve - 1.0 - - (1.0 ) 5i -
Accumulated earnings (deficit) (267.9 ) 3,071.0 - 8.0 3b (3,119.8 ) 5i (308.7)
Treasury stock at cost (238.5 ) (8.0 ) - - 8.0 5i (238.5)
Accumulated other comprehensive income (loss)
Defined benefit plans, net of tax (164.3 ) - - - - (164.3)
Foreign currency translation adjustments (109.8 ) (226.0 ) - - 226.0 5i (109.8)
Unrecognized gain (loss) on hedges, net of tax 8.0 - - - - 8.0
Equity attributable to owners of the parent 640.0 2,856.0 - 8.0 (1,971.4 ) 1,532.6
Noncontrolling interests in subsidiaries - 42.0 - - - 42.0
Total stockholders' equity 640.0 2,898.0 - 8.0 (1,971.4 ) 1,574.6
Total liabilities and stockholders' equity $ 6,670.2 $ 7,318.0 $ - $ - $ (2,555.1 ) $11,433.1
See the accompanying notes to the unaudited pro forma condensed combined
financial information.
Unaudited Pro Forma Condensed Combined Statement of Income
Year Ended December 31, 2025
IFRS to U.S. Pro Forma
Dauch Dowlais (IFRS) Reclassification GAAP Transaction Condensed
(U.S. GAAP)
Adjustments
Adjustments
Adjustments
Combined
in $ millions Note 1 Notes 1 and 7 Note 2 Note 3 Notes Note 6 Notes (U.S. GAAP)
Net sales $ 5,836.7 $ 5,813.0 $ - $ - $ (68.4 ) 6a $ 11,581.3
Cost of goods sold 5,132.2 4,885.0 - 3.4 3a 85.3 6b,6c, 6e 10,105.9
Gross profit (loss) 704.5 928.0 - (3.4 ) (153.7 ) 1,475.4
Selling, general and administrative expenses 389.0 966.0 (428.3 ) 0.8 3a - 927.5
Amortization of intangible assets 81.8 - 253.0 - (253.0 ) 6d 81.8
Impairment charges 8.0 - 50.1 - - 58.1
Restructuring and acquisition-related costs 113.4 - 206.9 - 65.0 6g 385.3
Operating income (loss) 112.3 (38.0 ) (81.7 ) (4.2 ) 34.3 22.7
Interest expense (201.1 ) - (150.0 ) 32.7 3a, 3c, 3d (96.4 ) 6f (414.8 )
Finance costs - (152.0 ) 152.0 - - -
Interest income 39.8 20.0 - - - 59.8
Other income (expense)
Debt refinancing and redemption costs (6.2 ) - - - - (6.2 )
Share of results of equity accounted investments - 86.0 (86.0 ) - - -
Gain on Business Combination Derivative 52.9 - - - - 52.9
Other income (expense), net 3.8 - 165.7 (28.5 ) 3c, 3d - 141.0
Income (loss) before income taxes 1.5 (84.0 ) - - (62.1 ) (144.6 )
Income tax expense (benefit) 21.2 31.0 - - (15.5 ) 6h 36.7
Net loss $ (19.7 ) $ (115.0 ) $ - $ - $ (46.6 ) $ (181.3 )
Basic loss per share $ (0.17 ) $ (0.08 ) 6i $ (0.77 )
Diluted loss per share $ (0.17 ) $ (0.08 ) 6i $ (0.77 )
See the accompanying notes to the unaudited pro forma condensed combined
financial information.
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
1. Basis of Pro Forma Presentation
The accompanying unaudited pro forma condensed combined financial information
was prepared in accordance with Article 11 of Regulation S-X, as adopted by
the SEC, and is based on the historical consolidated financial statements of
the Company and Dowlais. Our historical financial statements were prepared in
accordance with U.S. GAAP and presented in U.S. Dollars. Dowlais' historical
financial statements were prepared in accordance with IFRS as issued by the
IASB and presented in pound sterling. The historical Dowlais financial
statements have been translated to U.S. Dollars as discussed in Note 7.
The unaudited pro forma condensed combined financial information reflects pro
forma adjustments for:
(i) the conversion of Dowlais' historical financial statements from pound
sterling to U.S. Dollars;
(ii) reclassifications resulting from differences in the Company's and
Dowlais' accounting policies or changes to financial statement presentation to
conform the financial statements of Dauch and Dowlais (Note 2 - Effect of
Reclassification Adjustments);
(iii) adjustments to Dowlais' financial statements for differences in
accounting treatment and/or financial statement presentation between IFRS and
U.S. GAAP (Note 3 - IFRS to U.S. GAAP Adjustments); and
(iv) adjustments to reflect the consideration transferred in exchange for 100%
of all outstanding Dowlais Shares and the resulting application of the
acquisition method of accounting under ASC 805, as well as estimated
transaction costs anticipated to be incurred and financing costs incurred in
connection with the Business Combination (Note 4 - Consideration Transferred
and Preliminary Allocation of Purchase Price, Note 5 - Adjustments to the
Unaudited Pro Forma Condensed Combined Balance Sheet and Note 6 - Adjustments
to the Unaudited Pro Forma Condensed Combined Statement of Income).
The unaudited pro forma condensed combined balance sheet has been prepared
giving effect to adjustments reflecting the accounting for the Business
Combination. The unaudited pro forma condensed combined statement of income
has been prepared to give effect to the adjustments made in the unaudited pro
forma condensed combined balance sheet reflecting the accounting for the
Business Combination assuming those adjustments were made on January 1, 2025.
The accompanying unaudited pro forma condensed combined financial information
was prepared reflecting, among others, the accounting for the Business
Combination using the acquisition method of accounting under the provisions of
ASC 805 with Dauch considered the acquirer of Dowlais. The acquisition method
generally requires the acquirer to allocate the purchase price to the
identifiable assets and liabilities of the acquired entity based on the
acquisition-date fair values of the assets and liabilities, with certain
exceptions.
For purposes of preparing the unaudited pro forma condensed combined financial
information, we have calculated the purchase price (Note 4 - Consideration
Transferred and Preliminary Allocation of Purchase Price) and have allocated
the purchase price to the identifiable tangible and intangible assets acquired
and liabilities assumed based on their respective fair values as of the
closing date of the Business Combination.
The following table represents the exchange rates used throughout the
unaudited pro forma condensed combined financial information. Dowlais'
historical financial statements and pro forma adjustments were translated from
pound sterling to U.S. Dollars using the period-end rate for the unaudited pro
forma condensed combined balance sheet as of December 31, 2025 and a
historical average rate during the period for the unaudited pro forma
condensed combined statement of income for the year ended December 31, 2025.
Year ended December 31, 2025 Average spot rate $1.3182/£
December 31, 2025 Period-end spot rate $1.3471/£
Source: Bloomberg
The pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable. The unaudited pro forma
condensed combined financial information is provided for informational
purposes only and does not purport to represent or be indicative of the
consolidated results of operations or financial condition of the Company had
the Business Combination been completed as of the dates presented and should
not be construed as representative of the future consolidated results of
operations or financial condition of the combined entity.
2. Effect of Reclassification Adjustments
The table below represents a summary of reclassification adjustments made to
conform the presentation of Dowlais' balance sheet as of December 31, 2025 to
that of Dauch and to conform the material differences in the significant
accounting policies of Dowlais to those of Dauch.
Balance Sheet as of December 31, 2025 Pro Forma
Dowlais
Reclassification
in $ millions (a) (b) (c) (d) (e) Adjustments
Assets
Current assets
Accounts receivable, net $ - $ (102.4 ) $ 5.8 $ - $ - $ (96.6 )
Inventories, net - - (95.3 ) - - (95.3 )
Prepaid expenses and other 59.0 i 102.4 - - - 161.4
Derivative financial assets (40.0 ) i - - - - (40.0 )
Current tax assets (19.0 ) i - - - - (19.0 )
Non-current assets
Property, plant and equipment, net - - 12.4 - - 12.4
Goodwill 1,441.0 ii - - - - 1,441.0
Other intangible assets, net 1,125.0 ii - - (33.7 ) - 1,091.3
Goodwill and other intangible assets (2,566.0 ) ii - - - - (2,566.0 )
Other assets and deferred charges 596.0 iii - 77.1 33.7 - 706.8
Interests in equity accounted investments (504.0 ) iii - - - - (504.0 )
Derivative financial assets (11.0 ) iii - - - - (11.0 )
Retirement benefit surplus (58.0 ) iii - - - - (58.0 )
Other receivables (23.0 ) iii - - - - (23.0 )
Liabilities
Current liabilities
Accounts payable 1,358.0 iv - - - (227.0 ) 1,131.0
Accrued compensation and benefits - - - - 203.7 203.7
Trade and other payables (1,358.0 ) iv - - - - (1,358.0 )
Deferred revenue - - - - 6.7 6.7
Accrued expenses and other 278.0 v - - - 16.6 294.6
Lease obligations (38.0 ) v - - - - (38.0 )
Derivative financial liabilities (3.0 ) v - - - - (3.0 )
Current tax liabilities (65.0 ) v - - - - (65.0 )
Provisions (172.0 ) v - - - - (172.0 )
Non-current liabilities
Deferred revenue 7.0 vi - - - - 7.0
Post-retirement benefits and other long-term liabilities 772.0 vi - - - - 772.0
Other payables (18.0 ) vi - - - - (18.0 )
Lease obligations (125.0 ) vi - - - - (125.0 )
Derivative financial liabilities (1.0 ) vi - - - - (1.0 )
Retirement benefit obligations (527.0 ) vi - - - - (527.0 )
Provisions (108.0 ) vi - - - - (108.0 )
(a) Represents the reclassification of certain balances from Dowlais' balance
sheet to conform its presentation with that of the Company.
(b) Represents the reclassification from Accounts receivable, net to Prepaid
expenses and other of Dowlais' income and other tax receivables, prepayments,
and participation fees previously paid to customers related to long-term
agreements.
(c) Represents the reclassification of certain items presented by Dowlais
within Inventories, net that are presented in other line items in our balance
sheet, as follows: 1) $5.8 million of customer-owned tooling recoveries that
has been reclassified to Accounts receivable, net; 2) $12.4 million of
short-life tooling that has been reclassified to Property, plant and
equipment, net; and 3) $77.1 million of equipment spare parts that have been
reclassified to Other assets and deferred charges.
(d) Represents the reclassification of Dowlais engineering, design and
development costs from Other intangible assets to Other assets and deferred
charges.
(e) Represents the reclassification of certain items presented by Dowlais
within Accounts Payable that are presented in other line items in our balance
sheet.
Refer to the table below for a summary of reclassification adjustments made to
conform Dowlais' statement of income for the year ended December 31, 2025 to
that of the Company:
Pro Forma
Dowlais
Statement of Income for the Year Ended December 31, 2025 Reclassification
in $ millions (f) (g) (h) (i) Adjustments
Selling, general and administrative expenses $ (253.0 ) (206.9 ) $ (50.1 ) $ 81.7 $ (428.3 )
Amortization of intangible assets 253.0 - - - 253.0
Impairment charges - - 50.1 - 50.1
Restructuring and acquisition-related costs - 206.9 - - 206.9
Interest expense (150.0 ) - - - (150.0 )
Finance costs 152.0 - - - 152.0
Share of results of equity accounted investments (86.0 ) - - - (86.0 )
Other income (expense), net 84.0 - - 81.7 165.7
(f) Represents the reclassification of certain balances from Dowlais'
statement of income to conform its presentation with that of the Company. The
reclassification of Finance costs from Dowlais' statement of income was
divided, with $150.0 million reclassified to Interest expense and $2.0 million
reclassified to Other income (expense), net based on the nature of the
underlying items.
(g) Represents the reclassification of Dowlais restructuring costs from
selling, general and administrative (SG&A) to Restructuring and
acquisition-related costs.
(h) Represents the reclassification of business disposal losses from SG&A
to Impairment charges.
(i) Represents the reclassification of unrealized gains and losses on foreign
currency derivative contracts from SG&A to Other income (expense), net.
3. IFRS to U.S. GAAP Adjustments
The historical consolidated financial statements of Dowlais have been prepared
under IFRS accounting standards. The IFRS to U.S. GAAP adjustments outlined
below represent conforming adjustments to present Dowlais' financial
statements under U.S. GAAP. These adjustments are preliminary and are subject
to change as additional information becomes available and additional analysis
is performed.
a. Leases
Dowlais, in its capacity as a lessee, accounts for substantially all leases
under one accounting model, which is effectively equivalent to that of a
finance lease under U.S. GAAP. The primary difference in the two models is the
classification of lease expense where Dowlais' records a portion of lease
expense to depreciation expense and a portion to interest expense. Under U.S.
GAAP, operating leases are recorded on a straight-line basis to operating
lease expense, which is not classified as depreciation or interest.
The following adjustments have been made for Dowlais' leases under U.S. GAAP:
(i) Unaudited Pro Forma Condensed Combined Balance Sheet impact:
Leases classified as operating leases are reclassified to Operating lease
right-of-use assets from Property, plant and equipment, net and their
corresponding lease liabilities to Current portion of operating lease
liabilities and Long-term portion of operating lease liabilities for the
current and non-current portion, respectively. This adjustment reclassifies
$72.2 million of operating lease right-of-use assets from Property, plant and
equipment, net to Operating lease right-of-use assets, reclassifies $17.1
million from Accrued expenses and other to Current portion of operating lease
liabilities and reclassifies $55.1 million from Postretirement benefits and
other long-term liabilities to Long-term portion of operating lease
liabilities.
(ii) Unaudited Pro Forma Condensed Combined Statement of Income impact:
Under IFRS, finance lease expenses are classified as depreciation and interest
whereas under U.S. GAAP operating leases are recorded as lease expense on a
straight-line basis. For the year ended December 31, 2025, this adjustment
reclassifies $3.4 million of previously recognized interest expense to Cost of
goods sold and reclassifies $0.8 million of previously recognized interest
expense to SG&A for the leases that are classified as operating leases
under U.S. GAAP. The interest expense was reclassified proportionally based on
an approximation of Dowlais' expense recognition for leases between Cost of
goods sold and SG&A.
b. Provisions for loss-making contracts
Under IFRS, Dowlais has recorded provisions for loss-making (onerous)
contracts. IFRS provides for a more broadly applicable principle to be applied
to contracts that are determined to be onerous, while U.S. GAAP requires that
provisions be recorded for onerous contracts in certain limited circumstances
under ASC 605, primarily when the contracts are construction-type or
production-type contracts. Dowlais does not have contracts that qualify as
construction-type or production-type contracts. This adjustment removes $6.7
million from Accrued expenses and other and $1.3 million from Postretirement
benefits and other long-term liabilities associated with Dowlais' provision
for loss-making contracts as we do not believe that the contracts would meet
the requirements for provision under U.S. GAAP. There was no expense
associated with loss-making contracts in the year ended December 31, 2025 and
thus no adjustment to the unaudited pro forma condensed combined statement of
income.
c. Pension interest
Under IFRS, Dowlais presents its net interest cost on pensions as a component
of Interest expense. The Company presents all components of net periodic
pension and postretirement benefit costs other than service costs in Other
income (expense), net. For the year ended December 31, 2025, this adjustment
reclassifies $18.0 million of Dowlais' net interest cost on pensions from
Interest expense to Other income (expense), net.
d. Factoring commissions
Under IFRS, Dowlais presents its factoring commissions as a component of
Interest expense. The Company presents factoring commissions within Other
income (expense), net. For the year ended December 31, 2025, this adjustment
reclassifies $10.5 million of Dowlais' factoring commissions from Interest
expense to Other income (expense), net.
4. Consideration Transferred and Preliminary Allocation of Purchase Price
a. Preliminary Purchase Price
The following table represents the preliminary calculation of consideration
transferred under the Business Combination:
(in millions except
Note share data)
Calculation of share consideration
Number of Dowlais Shares issued and outstanding (in thousands) (i) 1,327,715
Exchange ratio (i) 0.0881
Number of Dauch Shares to be issued in the Business Combination (in thousands) 116,972
Closing price per Dauch Share on February 2, 2026 (i) $ 7.98
Fair value of Dauch Shares issued 933.4
Estimated cash consideration (ii) 791.3
Estimated fair value of preliminary consideration transferred $ 1,724.7
(i) Upon closing, Dowlais shareholders received 0.0881 Dauch Shares for each
Dowlais Share held. ASC 805 requires the calculation of consideration be
performed as of the closing date of the Business Combination. The number of
Dowlais Shares issued and outstanding includes approximately 15 million shares
associated with unvested Dowlais outstanding share awards that were settled
and are attributable to pre-Business Combination service.
(ii) Upon closing, Dowlais shareholders received 43 pence per share in cash
for each Dowlais Share held, which translated to $0.59 per Dowlais Share at
the closing date. This amount also includes approximately $10 million for the
settlement of certain Dowlais compensation awards at closing that were
attributable to pre-Business Combination service. As this $10 million was
included in consideration transferred, and had been previously accrued in
Dowlais' balance sheet as of December 31, 2025, we removed this accrual
through a Transaction Adjustment in the unaudited pro forma condensed combined
balance sheet.
b. Preliminary Allocation of Purchase Price
The purchase price, as shown in the table above, is allocated to the tangible
and intangible assets acquired and liabilities assumed of Dowlais based on
their preliminary estimated fair values. As further discussed in Note 1 -
Basis of Pro Forma Presentation, the fair value assessments are preliminary
and are based upon available information and certain assumptions which the
Company believes are reasonable. Actual results may differ materially from the
assumptions used within the unaudited pro forma condensed combined financial
information.
Description (in millions)
Total consideration transferred $ 1,724.7
Fair value of Dowlais noncontrolling interest 42.0
Dowlais fair value 1,766.7
Cash and cash equivalents 520.0
Inventories 525.1
Other current assets 820.8
Property, plant and equipment 2,788.3
Other non-current assets 1,345.7
Total assets 5,999.9
Accounts payable 1,131.0
Other current liabilities 511.3
Long-term debt 1,779.5
Other non-current liabilities 1,021.4
Net assets to be acquired 1,556.7
Preliminary goodwill $ 210.0
5. Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet
The items below represent pro forma adjustments reflected in the Transaction
Adjustments column of the unaudited pro forma condensed combined balance
sheet:
a. Reflects the sources and uses of funds relating to the Business Combination,
as follows:
Description Note December 31, 2025
(in millions)
Sources (Uses)
Increase in Cash and cash equivalents resulting from release of funds held in (i) $ 1,496.6
escrow previously presented as Restricted cash
Dauch borrowings under credit facilities (i) 835.0
Cash paid for debt issuance costs associated with Dauch borrowings under (i) (71.2 )
credit facilities
Cash portion of consideration related to the Business Combination (ii) (791.3 )
Estimated cash paid for transaction costs (iii) (90.0 )
Cash paid to repay certain Dowlais' indebtedness (i) (1,279.5 )
Estimated cash paid for Dowlais' compensation awards attributable to (iv) (50.0 )
post-Business Combination service and retention awards
Pro forma adjustment to Cash and cash equivalents $ 49.6
(i) Reflects financing activities associated with the Business Combination as
further described in Note 5g below.
(ii) Reflects the cash consideration paid by the Company to effect the
Business Combination, including payment of the cash portion associated with
certain Dowlais compensation awards that were accelerated and are attributable
to pre-Business Combination service.
(iii) Reflects the payment of non-recurring banking, legal, financial
advisory, accounting, consulting and other directly related transaction costs
expected to be incurred in conjunction with the Business Combination. Total
non-recurring transaction costs are currently estimated to be approximately
$185.0 million, of which $95.0 million was paid by Dauch and Dowlais during
2025. See Note 5i and Note 6g for the corresponding adjustments to pro forma
stockholders' equity and the unaudited pro forma condensed combined statement
of income, respectively.
(iv) Reflects estimated cash paid for Dowlais compensation awards and
retention awards that were liabilities assumed by Dauch in purchase accounting
and are expected to be paid subsequent to the closing date.
b. Reflects the adjustment to inventories based on the preliminary fair value
assessment:
Description Note December 31, 2025
(in millions)
Estimated fair value of inventories (i) $ 525.1
Dowlais historical net book value of inventories after Reclassification 485.7
Adjustments
Fair value step-up 39.4
(i) Raw materials inventory was not adjusted as the carrying value of raw
materials is assumed to represent fair value. The portion of the preliminary
adjustment that relates to finished goods is based on the estimated selling
price of the inventory less costs to sell the inventory and a reasonable
profit margin on the sale. The portion of the preliminary adjustment
associated with work-in-progress inventory includes estimated costs to
complete the inventory and also includes a reasonable profit margin. Changes
in these inputs could have a significant impact on the valuation of
inventories. See Note 6e for the associated impact on Cost of goods sold.
c. Reflects the adjustment to property, plant and equipment, net based on a
preliminary fair value assessment:
Description December 31, 2025
(in millions)
Estimated fair value of Property, plant and equipment, net $ 2,788.3
Less: Dowlais' historical net book value of Property, plant and equipment (1,993.2 )
after Reclassification and IFRS to U.S. GAAP Adjustments
Pro forma adjustment to Property, plant and equipment, net $ 795.1
d. Reflects the adjustment to goodwill based on the preliminary purchase price
allocation:
Description Note December 31, 2025
(in millions)
Preliminary goodwill (i) $ 210.0
Less: Dowlais' historical net book value of goodwill after Reclassification (1,441.0 )
Adjustments
Pro forma adjustment to Goodwill $ (1,231.0 )
(i) Goodwill represents the excess of purchase price over the preliminary fair
value of the underlying net tangible and intangible assets acquired and
liabilities assumed. Refer to the preliminary purchase price allocation in
Note 4b above for more details.
e. Reflects the adjustment to intangible assets based on a preliminary fair value
assessment:
Description Note December 31, 2025
(in millions)
Fair value of intangible assets acquired (i) $ -
Less: Dowlais' historical net book value of other intangible assets after (1,091.3 )
Reclassification Adjustments
Pro forma adjustment to Other intangible assets, net $ (1,091.3 )
(i) No intangible assets were identified as part of the preliminary fair value
assessment. This adjustment was made to remove the historical net book value
of the intangible assets from Dowlais' balance sheet.
f. Reflects the adjustment to Other assets and deferred charges based on a
preliminary fair value assessment:
Description Note December 31, 2025
(in millions)
Fair value of equity method investments acquired (i) $ 883.7
Less: Dowlais' historical net book value of equity method investments (504.0 )
Pro forma adjustment to Other assets and deferred charges $ 379.7
(i) This adjustment primarily relates to recognizing Dowlais' 50% joint
venture with Shanghai GKN HUAYU Driveline Systems Co Limited (SDS) at fair
value.
g. In connection with the Business Combination, the Company incurred
additional debt that was used, in part, to fund the cash consideration payable
in connection with the Business Combination, related fees and expenses, and
repay certain existing indebtedness of Dowlais. This adjustment to Long-term
debt, net reflects the incremental borrowings under our credit facilities and
repayment of certain of Dowlais' existing indebtedness at fair value assumed
as part of the Business Combination, in each case, based on the assumptions
further described in Note 6f:
Description December 31, 2025
(in millions)
Dauch borrowings under credit facilities $ 835.0
Dauch estimated debt issuance costs associated with borrowings under credit (71.2 )
facilities
Payment of certain of Dowlais' long-term debt (975.5 )
Pro forma adjustment to Long-term debt, net $ (211.7 )
Payment of current portion of Dowlais' existing debt $ (304.0 )
h. Reflects the adjustment to deferred tax liability associated with the
incremental differences in the book and tax basis created from the preliminary
purchase allocation:
Fair Value Adjustment Impact to Deferred Taxes
December 31, 2025
Description Note (in millions) (in millions)
Adjustment to Inventories, net (i) $ 39.4 $ 9.9
Adjustment to Property, plant and equipment, net (i) 795.1 198.7
Adjustment to Other intangible assets, net (i) (1,091.3 ) (272.8 )
Adjustment to Other assets and deferred charges (i) 379.7 94.9
Pro forma adjustment to Deferred income taxes (i) $ 122.9 $ 30.7
(i) The adjustment to Deferred income taxes arises from the preliminary fair
values of inventories, property plant and equipment, and other assets and
deferred charges due to the transaction. These adjustments were based on the
statutory tax rate in the U.K. of 25% applied to the associated adjustments to
fair value. The effective tax rate of the Combined Group could be
significantly different (either higher or lower) depending on post-closing
Business Combination activities, including cash needs, the geographical mix of
income and changes in tax law. Because the tax rate used for the unaudited
condensed combined pro forma financial information is estimated, the rate will
likely vary from the actual effective rate in periods subsequent to the
closing of the Business Combination. The determination is preliminary and
subject to change based upon the final determination of the fair value of the
acquired assets and assumed liabilities.
i. Reflects the adjustment to the Company and Dowlais equity based on the
following:
Estimated Estimated
Value of Shares Acceleration
Eliminate Issued to Expense of Estimated
Dowlais' Dowlais Dowlais Share Transaction Total
Historical Shareholders Awards, net of tax Costs, net of tax Adjustments to
(in millions) Equity (i) (ii) (iii) Equity
Common stock $ (18.0 ) $ 1.2 $ - $ - $ (16.8 )
Paid-in capital - 932.2 - - 932.2
Capital redemption reserve (1.0 ) - - - (1.0 )
Retained earnings (3,071.0 ) - (9.8 ) (39.0 ) (3,119.8 )
Common stock held in treasury, at cost 8.0 - - - 8.0
Foreign currency translation adjustments 226.0 - - - 226.0
$ (2,856.0 ) $ 933.4 $ (9.8 ) $ (39.0 ) $ (1,971.4 )
(i) Reflects the issuance of Dauch Shares in connection with the Business
Combination. See Note 4a for additional detail.
(ii) Reflects one-time incremental compensation costs ($13.0 million pre-tax
and $9.8 million net of tax) related to certain Dowlais compensation awards,
as well as retention awards related to the Business Combination. The
corresponding tax effect has reduced income taxes payable within Accrued
expenses and other by $3.2 million. See Note 5a and Note 6g for additional
detail.
A corresponding impact has been recorded within Cash and cash equivalents of
$50.0 million, which represents total expected cash payments for
compensation-related items associated with the Business Combination. This
adjustment also resulted in a reduction of Accrued compensation and benefits
of $37.0 million for the portion of the payment that was accrued in Dowlais'
balance sheet as of December 31, 2025.
(iii) The Company expects to incur approximately $185.0 million of total
transaction costs associated with the Business Combination, of which
approximately $133.0 million were incurred prior to December 31, 2025 and are
reflected in the historical consolidated financial statements of Dauch and
Dowlais. This adjustment reflects the additional charge for transaction costs
($52.0 million pre-tax and $39.0 million net of tax) not yet incurred and not
previously reflected in the historical financial statements of the Company or
Dowlais.
A corresponding impact has been recorded within Cash and cash equivalents of
$90.0 million, which represents the total expected cash payments for
transaction costs of $185.0 million less $95.0 million paid by Dauch and
Dowlais in 2025. This adjustment also resulted in a reduction of income taxes
payable of $13.0 million for the corresponding tax effect and an adjustment of
$38.0 million for accrued transaction costs incurred but not yet paid that
were presented in Accrued expenses and other in the historical balance sheets
of Dauch and Dowlais as of December 31, 2025. In addition, $52.0 million has
been recorded within Restructuring and acquisition-related costs in the
unaudited pro forma condensed combined statement of income for the year ended
December 31, 2025. See Note 5a and Note 6g for additional detail.
6. Adjustments to the Unaudited Pro Forma Condensed Combined Statement of
Income
The items below represent pro forma adjustments reflected in the Transaction
Adjustments column of the unaudited pro forma condensed combined statement of
income and are expected to have a continuing impact on the Combined Group
unless stated otherwise.
a. Reflects the pro forma adjustment to Net sales to eliminate sales between
Dauch and Dowlais:
Year Ended December
Description 31, 2025
(in millions)
Elimination of Dauch to Dowlais revenue $ (17.0 )
Elimination of Dowlais to Dauch revenue (51.4 )
Pro forma adjustment to Net sales $ (68.4 )
b. Reflects the pro forma adjustment to Cost of goods sold associated with the
eliminated sales between Dauch and Dowlais:
Year Ended December
Description 31, 2025
(in millions)
Elimination of costs associated with Dauch to Dowlais revenue $ (17.0 )
Elimination of costs associated with Dowlais to Dauch revenue (51.4 )
Pro forma adjustment to Cost of goods sold $ (68.4 )
c. Reflects the pro forma adjustment to depreciation expense for acquired
property, plant and equipment, which will be depreciated on a straight-line
basis over their expected useful lives. The adjustment represents incremental
depreciation expense based on the estimated preliminary fair values and useful
lives of the property, plant and equipment, as follows:
Year Ended
Net Adjustment December 31,
to PP&E Estimated Life 2025
(in millions) (years) (in millions)
Land $ 44.9 Indefinite $ -
Buildings and site improvements 107.6 15 7.2
Machinery and equipment 642.6 6 107.1
Incremental depreciation of property, plant and equipment $ 795.1 $ 114.3
d. No intangible assets were identified as part of the preliminary fair value
assessment. The net adjustment to amortization expense in the table below
removes Dowlais' historical amortization expense on previously recognized
intangible assets.
Year Ended December 31, 2025
(in millions)
Adjustment to remove Dowlais historical amortization expense $ (253.0 )
e. Reflects the non-recurring adjustment to Cost of goods sold for the first year
following the Business Combination to reflect the step-up in fair value of
acquired inventories which is higher than Dowlais historical cost. See Note 5b
for additional detail.
Year Ended December 31, 2025
(in millions)
Acquisition-related fair value inventory adjustment $ 39.4
f. As discussed in Note 5 - Adjustments to the Unaudited Pro Forma Condensed
Combined Balance Sheet, the Company incurred new debt as result of the
Business Combination that was used, in part, to fund the cash consideration
payable in connection with the Business Combination, related fees and
expenses, and repay certain existing indebtedness of Dowlais. The Company
incurred $2,935.0 million of additional debt associated with the Business
Combination, of which $2,100 million was incurred in October 2025 and is
included in Dauch's balance as of December 31, 2025, while the remaining
$835.0 million was incurred at closing of the Business Combination. The
maturities approximate seven years and resulted in an estimated weighted
average interest rate of 7.0%, plus the amortization of debt issuance costs.
The following calculation represents the preliminary estimate of the impact on
Interest expense as a result of the new borrowings and repayment of certain
existing long-term indebtedness of Dowlais.
Year Ended
December 31,
2025
(in millions)
Estimated interest expense on Dauch borrowings under credit facilities $ 171.2
Amortization of debt issuance costs 14.2
Elimination of Dowlais' historical interest expense (89.0 )
Adjustment to Interest expense $ 96.4
The Company incurred $99.4 million of total debt issuance costs associated
with these borrowings, of which $28.2 million was paid in 2025 and included in
Dauch's balance sheet as of December 31, 2025, while the remaining $71.2
million is presented as a Transaction Adjustment in the unaudited pro forma
condensed combined financial information as a use of cash in Note 5a and a
reduction of Long-term debt in Note 5g. These debt issuance costs will be
amortized into Interest expense over the life of the borrowings. The impact of
a 1/8% (12.5 basis points) change in the interest rate on $835 million of
variable rate debt that was incurred as a result of the Business Combination
would result in a change of approximately $1.0 million in Interest expense on
an annual basis.
g. Reflects the adjustment for transaction costs associated with the Business
Combination, as follows:
Year Ended
December 31,
2025
Note (in millions)
Expected transaction costs (i) $ 52.0
Estimated expense for Dowlais' compensation awards attributable to (ii) 13.0
post-Business Combination service and retention awards
Total $ 65.0
(i) Represents estimated transaction costs directly attributable to the
Business Combination that are expected to be incurred and are not recorded
within the historical consolidated statement of income of the Company or
Dowlais. These costs are assumed to be settled in cash in the unaudited pro
forma condensed combined balance sheet (see Note 5a). Transaction costs are
non-recurring and not expected to be incurred in any period beyond 12 months
from the closing date of the Business Combination. The unaudited pro forma
condensed combined statement of income for the year ended December 31, 2025
reflects $52.0 million ($39.0 million net of tax) of non-recurring transaction
costs as if those costs were incurred on January 1, 2025. See Note 5i for
additional detail.
(ii) Represents $13.0 million ($9.8 million net of tax) of estimated expense
related to Dowlais' compensation awards attributable to post-Business
Combination service and retention payments to Dowlais employees following the
Business Combination with certain future service requirements. These costs are
not recorded within the historical consolidated statement of income of Dowlais
and are assumed to have been settled in cash in the unaudited pro forma
condensed combined balance sheet (see Note 5a).
h. To record the income tax impact of the pro forma adjustments utilizing the
statutory income tax rate in the U.K. of 25% for the year ended December 31,
2025. The effective tax rate of the Combined Group could be significantly
different (higher or lower) depending on post-closing Business Combination
activities, including cash needs, the geographical mix of income and changes
in tax laws. Because the tax rate used for the unaudited pro forma condensed
combined financial information is estimated, the rate will likely vary from
the actual effective rate in periods subsequent to the Business Combination.
This determination is preliminary and subject to change based upon, among
other factors, the final determination of the fair value of the assets
acquired and liabilities assumed.
i. The pro forma basic and diluted weighted average shares outstanding are a
combination of our historical weighted average Dauch Shares and the share
impact as a result of the Business Combination. The pro forma basic and
diluted loss per share calculations are based on the adjusted basic and
diluted weighted average shares following the Business Combination. The basic
and diluted loss per share are the same for the year ended December 31, 2025
as the impact of potentially dilutive share-based compensation would have been
antidilutive.
The calculation of pro forma loss per share is as follows:
Year Ended
December 31, 2025
(in millions, except
Note per share data)
Pro forma net loss $ (181.3 )
Historical weighted average number of Dauch Shares outstanding
Basic 118.4
Diluted 118.4
Impact of the Business Combination on weighted average number of Dauch Shares (i) 117.0
outstanding
Pro forma weighted average number of Dauch Shares outstanding
Basic 235.4
Diluted 235.4
Pro forma loss per Dauch Share
Basic $ (0.77 )
Diluted $ (0.77 )
(i) Reflects the issuance of Dauch Shares in connection with the Business
Combination. See Note 4 - Consideration Transferred and Preliminary Allocation
of Purchase Price.
7. Translation of Dowlais Historical Financial Statements
Dowlais' historical financial statements were presented in millions of pound
sterling. In order to align the presentation with that of the Company, the
Dowlais balance sheet was translated into millions of U.S. Dollars using the
period-end spot rate of $1.3471 to £1.00 as of December 31, 2025.
IFRS IFRS
December 31, December 31,
2025 2025
Consolidated Balance Sheet (£ in millions) ($ in millions)
Non-current assets
Goodwill and other intangible assets £ 1,905 $ 2,566
Property, plant and equipment 1,524 2,053
Interests in equity accounted investments 374 504
Deferred tax assets 139 187
Derivative financial assets 8 11
Retirement benefit surplus 43 58
Other receivables 17 23
Total non-current assets 4,010 5,402
Current assets
Inventories 431 581
Trade and other receivables 525 708
Derivative financial assets 30 40
Current tax assets 14 19
Assets associated with businesses classified as held for sale 36 48
Cash and cash equivalents 386 520
Total current assets 1,422 1,916
Total assets £ 5,432 $ 7,318
Current liabilities
Trade and other payables £ 1,008 $ 1,358
Interest-bearing loans and borrowings 226 304
Lease obligations 28 38
Derivative financial liabilities 2 3
Liabilities associated with businesses classified as held for sale 10 13
Current tax liabilities 48 65
Provisions 128 172
Total current liabilities 1,450 1,953
Non-current liabilities
Other payables 13 18
Interest-bearing loans and borrowings 1,095 1,475
Lease obligations 93 125
Derivative financial liabilities 1 1
Deferred tax liabilities 158 213
Retirement benefit obligations 391 527
Provisions 80 108
Total non-current liabilities 1,831 2,467
Total liabilities 3,281 4,420
Equity
Issued share capital 13 18
Capital redemption reserve 1 1
Own shares (6 ) (8 )
Translation reserve (168 ) (226 )
Retained earnings 2,280 3,071
Equity attributable to owners of the parent 2,120 2,856
Non-controlling interests 31 42
Total equity 2,151 2,898
Total liabilities and equity £ 5,432 $ 7,318
The Dowlais statement of income was translated into millions of U.S. Dollars
using an average spot rate of $1.3182 to £1.00 for the year ended December
31, 2025. The Dowlais historical statement of income was presented with
brackets around all expense items. The use of brackets in the presentation
below have been adjusted to align with that of Dauch.
IFRS IFRS
Year Ended Year Ended
December 31, December 31,
2025 2025
Consolidated Statement of Income (£ in millions) ($ in millions)
Revenue £ 4,410 $ 5,813
Cost of sales 3,706 4,885
Gross profit 704 928
Selling, general and administrative expenses 733 966
Operating loss (29 ) (38 )
Share of results of equity accounted investments, net of tax 65 86
Finance costs (115 ) (152 )
Finance income 15 20
Loss before tax (64 ) (84 )
Tax 23 31
Loss after tax for the year £ (87 ) $ (115 )
Attributable to:
Owners of the parent £ (82 ) $ (108 )
Non-controlling interests (5 ) (7 )
£ (87 ) $ (115 )
Loss per share
Basic £ (0.062 ) $ (0.082 )
Diluted £ (0.062 ) $ (0.082 )
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