REG - TI Fluid Systems PLC - Half Year Results 2024
08/08/2024 07:00
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RNS Number : 6177Z TI Fluid Systems PLC 08 August 2024
Released: 8 August 2024
TI Fluid Systems plc
Half Year Results 2024
Strong execution amidst a flat market
Adjusted EBIT margin up 40 basis points, 15% Adjusted EPS growth
Improved full year margin outlook despite weaker market forecasts
TI Fluid Systems plc (TIFS), a global industry leader in highly engineered
automotive fluid storage, carrying and delivery systems and thermal management
products and systems, announces its results for the six months ended 30 June
2024 (the 'period').
€millions
Adjusted Measures* H1 2024 H1 2023 Change Constant currency change
Revenue 1,719.4 1,768.1 (2.8)% (1.4)%
Adjusted EBIT 135.5 131.9 +2.7% +4.8%
Adjusted EBIT Margin % 7.9 7.5 +40bps
Adjusted Net Income 70.6 62.5 +13.0%
Adjusted Basic Earnings per Share (€ cents) 13.9 12.1 +14.6%
Adjusted Free Cash Flow (14.4) 2.3
Statutory Measures H1 2024 H1 2023 Change
Revenue 1,719.4 1,768.1 (2.8)%
Operating Profit / EBIT 95.8 95.0 +0.8%
Profit for the period 40.2 33.3 +20.7%
Basic Earnings per Share (€ cents) 7.9 6.4 +22.5%
Dividend per Share (€ cents) 2.40 2.30 +4.3%
*Adjusted measures are non-IFRS, reconciled in Note 3, defined in Note 18
H1 2024 financial performance
· Revenue declined 1.4% at constant currency in the period
o EMEA revenue increased 4.4% including a circa 250 basis points
contribution from last year's acquisition of Cascade
o Revenue in Asia Pacific reduced by 7.1% with lower revenue in China in
line with the reduction in Global OEM production
o Americas revenue was 3.4% lower with a circa 480 basis points headwind
from the previously announced exit of an unprofitable product line
· Continued Adjusted EBIT margin expansion, up 40 basis points,
driven by ongoing execution of our productivity and efficiency initiatives as
well as continuing commercial activities
· Adjusted Basic EPS 14.6% higher due to increased profitability
and a lower effective tax rate
· Adjusted Free Cash Flow reflects modest inventory build as a
result of recent production schedule volatility and timing of payments. We
remain on track for our full year cash conversion target
· Adjusted ROCE of 25.4% (H1 2023: 21.7%), demonstrating our
ability to deploy capital effectively
· Interim dividend increased 4.3% to 2.40 € cents per share
Progressing our strategy for sustainable and profitable growth
· Bookings demonstrate the benefits of our propulsion agnostic
portfolio, with total bookings increasing 11% to €1.5 billion including
€0.6 billion of EV awards
· Continued progress in China including five new awards with the
largest Chinese OEM and 40 launches, half with local OEMs
· Fifth and final e-Mobility Innovation Centre opened in North
America
· Further footprint optimisation, with two facilities closed and
others downsized to adapt to customer needs and support progress towards our
mid-term, double-digit Adjusted EBIT margin target
· Capital allocation policy delivering: €12.0 million interim
dividend, 13.3 million shares acquired in the period for €22.5 million and
net leverage of 1.7x Adjusted EBITDA (H1 2023: 1.8x)
Full year outlook - higher Adjusted EBIT margin expectation despite weaker
market forecasts
The productivity and efficiency measures implemented in late 2023 and early
2024 are on track and reaffirm our confidence in expanding our Adjusted EBIT
margin. As a result, we are increasing our full year Adjusted EBIT margin
expectation to above 7.6% notwithstanding a slight decline in revenue at
constant currency due to the recent softening of the 2024 industry outlook.
We continue to expect Adjusted Free Cash Flow conversion of approximately 30%
of Adjusted EBITDA.
Comment from Hans Dieltjens, CEO & President:
"Our first half performance demonstrates strong operational execution,
successful strategic delivery and the resilience of our propulsion agnostic
portfolio. Through our productivity and efficiency measures, we have once
again improved our Adjusted EBIT margin, making progress towards our mid-term
double-digit target.
We have a strong pipeline of productivity initiatives and are agile to respond
to changing market conditions. As a result, we have raised our full year
Adjusted EBIT margin expectation to above 7.6% in a market with a slightly
softer near-term outlook.
Bookings are up 11% year-on-year, highlighting the advantages of a product
portfolio catering to all propulsions and the benefits of growing demand for
hybrid vehicles. I am confident that our market-leading positions and ability
to adapt to changing market conditions will continue to underpin the execution
of our Taking-the-Turn strategy and achievement of our mid-term targets."
Results presentation
TI Fluid Systems plc will host a webcast and audio conference for investors
and analysts at 11.00 am UK time on 8 August 2024.
Webcast Link: https://webcast.openbriefing.com/tifs_h1/
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The presentation will be available at 11:00 am UK time from
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following the event.
Enquiries
TI Fluid Systems plc Headland Consultancy
Kellie McAvoy Matthew Denham
Investor Relations Chloe Francklin
Tel: +44 7354 846374 Tel: +44 20 3805 4822
Chief Executive Officer's Review - operational execution delivering further
Adjusted EBIT margin expansion
Our performance in the first six months of 2024 demonstrates strong
operational execution and the resilience of our propulsion agnostic portfolio.
In a flat market environment and with a continued mix shift towards local
Chinese OEMs, we improved Adjusted EBIT margin and took another important step
on the journey back to a double-digit margin. Adjusted EPS increased by 14.6%,
reflecting our financial discipline. Bookings were up 11% to €1.5 billion,
as we adapted to a changing market environment with relatively higher
combustion engine vehicle opportunities. Our Taking-the-Turn strategy is on
track.
Financial performance
Group revenue reflects a strong performance in Europe, good underlying growth
in the Americas excluding a planned product line exit and continued mix
effects in China. Group revenue declined 1.4% at constant currency.
· EMEA revenue increased 4.4%, well ahead of the market. Cascade,
acquired last year, contributed circa 250 basis points and is performing well.
The region benefited from growth in fuel tanks and delivery systems, including
on plug-in hybrid ("PHEV") platforms, partially offset by lower volumes for
thermal products for EVs.
· Revenue in Asia Pacific reduced by 7.1% due to lower revenue in
China, partially offset by strength in Japan and India. In China, we
experienced continued mix effects with production declining 13% for the global
OEMs ("GOEMs") compared to 18% growth for the local OEMs ("LOEMs").
· America's revenue was 3.4% lower as expected due to a circa 480
basis points headwind from the planned exit of an unprofitable product line.
Excluding this, the region grew well including in fuel tanks and brake lines.
Adjusted EBIT margin increased to 7.9% (H1 2023: 7.5%) despite the headwinds
of lower revenue and labour inflation. Productivity contributed circa 150
basis points to the Adjusted EBIT margin. This is testament to efforts of the
team to implement operational productivity initiatives whilst continuing our
commercial activities.
In addition, we converted a 2.7% increase in Adjusted EBIT into 14.6% growth
in Adjusted EPS through disciplined financial execution across the P&L.
First half Adjusted Free Cash Flow performance reflected some short-term
timing differences, with a €14.4 million outflow (H1 2023: €2.3 million
inflow). These are expected to reverse in the second half, and we are on track
for full year cash conversion of circa 30% of Adjusted EBITDA. Net leverage of
1.7x was below the 1.8x reported for H1 2023. Our capital allocation policy
continues to deliver attractive returns with a total cash outflow of €45.3
million on the 2023 final dividend and share buyback.
Our industry
The automotive market is now in a demand-driven cycle. Overall volumes
remained at a healthy level, with global light vehicle production ("GLVP")
reducing marginally, down 0.2% to 43.6 million units (H1 2023: 43.7 million).
The short-term volume outlook for the industry has softened in recent weeks.
Some markets also experienced short-term destocking in June. S&P has
lowered its 2024 GLVP outlook and now expects a 2.0% year on year
reduction(( 1 (#_ftn1) )), with lower volumes in most regions as OEMs
increase their focus on inventory management.
The key feature of our industry today is rising uncertainty as to the shape
and speed of the EV transition. BEV growth has slowed, while forecast demand
for hybrids has increased. The latest industry forecasts expect 14% growth in
BEV production volumes in 2024(( 2 (#_ftn2) )), which compares with 38% 12
months ago(( 3 (#_ftn3) )). Alongside this, there are signs that HEVs and
PHEVs may play a larger role in the transition than previously anticipated,
with many OEMs announcing new hybrid models and some moving towards flexible
architectures utilising all powertrains. Industry forecasts also indicate
increasing demand for range extender BEVs which utilise a small combustion
engine for battery charging as well as a slower pace of near-term decline in
ICE production volumes.
Looking through these short-term fluctuations, the mid- to longer-term outlook
remains positive, with GLVP expected to grow at circa 1-2% on average.
On track with our strategy for long-term, profitable growth
Our Taking-the-Turn strategy is designed to capitalise on the opportunities of
electrification and maximise the strengths of our conventional portfolio.
· Revenue growth: 2026 target of €3.8-4.2 billion; 2030 target of
>€4.5 billion.
· Return to double-digit Adjusted EBIT margins in the mid-term.
· Attractive shareholder value creation: targeting Adjusted Free
Cash Flow Conversion of 30% and leverage of 1.5x to underpin returns,
including a progressive dividend.
· A more sustainable business: 2030 targets for a 50% reduction in
Scope 1 & 2 carbon emissions, and a 30% reduction in Scope 3 as compared
with a 2021 baseline.
Sustainable, long-term revenue growth
Bookings underpin our future growth and in H1 2024 total bookings increased
11% to €1.5 billion (2023: €1.4 billion). These include €0.6 billion of
EV awards (H1 2023: €0.9 billion). Additional bookings secured with the
largest Chinese OEM represent a significant achievement and demonstrate
strategic progress in China.
We completed launches across a broad mix of product lines, customers and
powertrains in all regions which will drive future growth.
Our e-Mobility Innovation Centres ("eMICs") bring critical design, engineering
and testing capabilities under one roof to drive innovation and enable more
effective collaboration with customers. Towards the end of the period, we
opened our fifth and final eMIC in the US.
In China, we continued to enhance our position with the LOEMs, leveraging our
long history of operating in China and strong market positions with GOEMs.
Over half of the 40 launches in the period were with LOEMs. We also made
further progress with the largest LOEM, with five additional awards for brake
lines and tanks for BEV and PHEV platforms. This progress has yet to be fully
reflected in revenue, but we are confident that bookings and launches are the
foundations for future growth.
Recent market forecasts have reduced the expected pace of decline of ICE
vehicle production. In addition, we see customers shifting to flexible
architectures utilising all powertrains. TI is ideally positioned to
capitalise on these opportunities to maximise our conventional products for
ICE. During the period, we benefited from good growth in tanks for ICE and
hybrid vehicles, and over half our bookings related to ICE platforms as
customers extended existing and launched new ICE programmes.
Returning to double-digit Adjusted EBIT margins
The Group's 40 basis points Adjusted EBIT margin expansion was primarily
driven by self-help initiatives, which more than compensated for lower volumes
and labour inflation.
Productivity and efficiency have always been part of the Group's DNA, and we
entered 2024 with a clear focus on productivity and many actions underway.
Initiatives implemented in 2023 also contributed positively. We continued to
optimise our footprint, closing two facilities and downsizing other locations.
Our best cost locations in Mexico and Morocco are running at increasing levels
of efficiency, fixed cost savings from regional synergies and headcount
reduction are being realised and we are seeing increasing benefits from our
purchasing programme. We invested €14.1 million (H1 2023: €6.8 million) in
restructuring, largely related to headcount and footprint optimisation.
Capital allocation delivering returns for shareholders
During the first half of 2024, we returned €22.8 million in respect of the
2023 final dividend and spent €22.5 million on buying back shares. The €40
million share buyback programme announced in August last year is now around
three quarters complete. In-line with our progressive dividend policy, the
Board has approved a 2024 interim dividend of 2.40 € cents per share, which
represents a 4.3% increase on a per share basis over the interim dividend of
2.30 € cents per share declared on 8 August 2023.
A more sustainable business
Sustainability starts with our products and a focus on new, cleaner
technologies to support customers in producing EVs. Our revenue mix remains
broadly in-line with the industry. We continue to focus on improving our own
environmental footprint and made good progress with initiatives that will
increase our energy efficiency in the period. Development of our life cycle
analysis and mapping of product carbon footprint in the period will also help
us to define Scope 3 carbon emission reduction actions. We remain on track
with our carbon reduction targets.
Continuous improvement of health & safety is another focus area. Having
already rolled out our ISO 45001 Occupational Health & Safety Management
System to manufacturing sites, we are now undertaking the same process for our
eMICs, test centres and selected warehouses.
Summary and outlook
Our first half performance demonstrates TI's fundamental strengths. Our
propulsion agnostic portfolio and geographic and customer diversification
underpin our resilience. Our ability to deliver further margin expansion
despite volume and labour inflation headwinds reaffirms our confidence in
returning to a double-digit Adjusted EBIT margin in the mid-term.
The productivity and efficiency measures implemented in late 2023 and early
2024 are on track and reaffirm our confidence in expanding our Adjusted EBIT
margin. As a result, we are increasing our full year Adjusted EBIT margin
expectation to above 7.6% notwithstanding a slight decline in revenue at
constant currency due to the recent softening of the 2024 industry outlook.
We continue to expect Adjusted Free Cash Flow conversion of approximately 30%
of Adjusted EBITDA.
Beyond, 2024, our market-leading positions and ability to adapt to changing
market conditions will continue to support the execution of our
Taking-the-Turn strategy.
Chief Financial Officer's Review
Our first half financial performance was strong despite modestly lower
industry volumes, with our Adjusted EBIT margin expanding to 7.9%. Our capital
allocation policy is delivering improved returns for shareholders and a 4.3%
increase in the interim dividend to €2.40 cents translates into a cash
return of €12.0 million. We spent a further €22.5 million to repurchase
13.3 million shares in the period. Adjusted return on capital employed
increased to 25.4%, demonstrating our discipline in deploying capital to
create value.
Key financial highlights
Adjusted Statutory
H1 2024 H1 2023 Change Constant currency change H1 2024 H1 2023 Change
Revenue 1,719.4 1,768.1 (2.8)% (1.4)% 1,719.4 1,768.1 (2.8)%
EBITDA 202.6 198.6 +2.0% +3.9%
EBIT / Operating profit 135.5 131.9 +2.7% +4.8% 95.8 95.0 +0.8%
EBIT margin 7.9 7.5 +40bps 5.6 5.4 +20bps
Net Income 70.6 62.5 +13.0% 40.2 33.3 +20.7%
Basic EPS 13.9 12.1 +14.6% 7.9 6.4 +22.5%
Dividend per share 2.40 2.30 +4.3%
Free Cash Flow (14.4) 2.3 (22.8) (7.5)
Group revenue declined 1.4% at constant currency to €1,719.4 million (H1
2023: €1,768.1 million). The Cascade acquisition made a 100 basis point
positive contribution to group constant currency growth, while the planned
product line exit in the Americas was a circa 140 basis point headwind.
Reported revenue declined 2.8%, largely due to foreign exchange headwinds from
the stronger Euro against the Chinese Renminbi and Korean Won.
H1 2024 revenue by region
H1 2024 H1 2023 Change Constant currency change GLVP growth
EMEA 733.3 702.8 +4.3% +4.4% (2.7)%
Asia Pacific 480.5 540.3 (11.1)% (7.1)% +0.7%
Americas 505.6 525.0 (3.7)% (3.4)% 0.3%
Total 1,719.4 1,768.1 (2.8)% (1.4)% (0.2)%
Our Adjusted EBIT margin improvement was driven mainly by our operational
efficiency and productivity initiatives as well as our continuing commercial
activities. This 40 basis points expansion reflects higher margins in EMEA and
the Americas (up 220 and 60 basis points respectively) driven by growth in
EMEA and a strong productivity focus in both regions. This was partially
offset by Asia Pacific (down 180 basis points) due to lower volumes in China,
only partially offset by productivity actions.
Statutory Operating Profit was €95.8m (H1 2023: €95.0 million). The key
adjusting items are set out below. This includes a €14.1 million
restructuring cost (H1 2023: €6.8 million) related to activity to drive
efficiency, optimise our footprint and adjust our workforce. The increase in
restructuring costs compared to 2023 relates to elevated activity in response
to the recent softening of industry volume forecasts.
Reconciliation of Adjusted EBIT to Statutory Operating Profit / EBIT
H1 2024 H1 2023
€m €m
Adjusted EBIT 135.5 131.9
Depreciation and amortisation on purchase accounting (21.5) (24.6)
Restructuring costs (14.1) (6.8)
Other (4.1) (5.5)
Statutory Operating Profit / EBIT 95.8 95.0
Net finance expense reduced to €34.6 million (H1 2023: €36.1 million). The
benefits of higher interest income on short-term deposits and lower term loan
interest costs due to the August 2023 repayment more than offset higher costs
related to lease interest and pensions.
The Group's Adjusted Effective Tax Rate on Adjusted Profit Before Tax reduced
to 29.9% (H1 2023: 34.7%) which further strengthens our confidence in a
mid-term Adjusted Effective Tax Rate in the low 30%. The Group's statutory tax
rate was 34.3% (H1 2023: 43.5%).
Adjusted Net Income increased 13.0% to €70.6 million (H1 2023: €62.5
million) as a result of higher Adjusted EBIT and a reduction in interest costs
and effective tax rate. The growth in Adjusted EPS was slightly higher at
14.6% due to a lower number of shares as a result of our share buyback. The
weighted average number of shares for the period was 508.1 million as compared
with 515.5 million for H1 2023.
On a statutory basis, Group Profit for the Year was €40.2 million (H1 2023:
€33.3 million), reflecting the increased profit for the period together with
lower interest and tax costs. Basic Earnings per Share were 7.9 € cents (H1
2023: 6.4 € cents).
Cash Flow - short-term factors expected to unwind in the second half
Adjusted Free Cash Flow, the Group's primary measure of cash flow performance,
was a €14.4 million outflow (H1 2023: €2.3 million inflow). Statutory cash
flow from operating activities was €36.3 million (H1 2023: €47.6 million).
H1 2024 H1 2023
€m €m
Net cash generated from operating activities 36.3 47.6
Net cash used in investing activities (59.1) (55.1)
Free Cash Flow (22.8) (7.5)
Net cash spend on restructuring 8.6 8.4
Costs paid associated with business acquisitions or disposals 0.5 0.8
Other adjusting items (0.7) 0.6
Adjusted Free Cash Flow (14.4) 2.3
Net cash generated from operating activities includes a €85.8 million
working capital outflow (H1 2023: €78.9 million). In addition to the usual
seasonal outflow, working capital at period end reflected a modest inventory
build due to recent volatility in OEM production schedules and timing
differences on payments. We expect both to unwind in the second half as
commercial agreements translate into cash and we reduce inventory. Group tax
payments increased to €34.5 million (H1 2023: €28.6 million) due to
timing.
Our capex needs remain modest, with €68.7 million invested including
capitalised R&D (H1 2023: €59.6 million). A net cash outflow on
restructuring of €8.6 million (H1 2023: €8.4 million) largely relates to
severance payments
Cash outflows from financing were €61.0 million (H1 2023: €25.7 million),
largely relating to lease principal repayments of €14.4 million (H1 2023:
€15.0 million), the 2023 final dividend payment of €22.8 million (H1 2023:
€8.0 million) and a €22.5 million outflow related to the ongoing €40
million share buyback programme.
Strong balance sheet maintained
The Group's strong balance sheet gives flexibility to invest in growth and
provide attractive shareholder returns. Net debt at 30 June 2024 was €682.8
million (H1 2023: €668.0 million), higher than at the end of 2023 due to
payment of the 2023 final dividend, the share buyback programme and a working
capital outflow as discussed above. At period end, net leverage was 1.7x (30
June 2023: 1.8x).
Total available liquidity (cash plus available facilities) on 30 June 2024 was
€539.5 million.
The Group excludes IFRS 16 lease liabilities from its net debt and net
leverage ratio. Including IFRS 16 lease liabilities, net debt would be
€853.0 million (30 June 2023: €807.1 million) and net leverage would be
2.1x Adjusted EBITDA (30 June 2023: 2.2x).
The table below shows the composition of the Group's net debt at 30 June 2024.
Borrowings Currency Interest rate exposure Amount € Equivalent
Secured US term loan (2026) USD 1 month term SOFR (incl. CSA)(( 4 (#_ftn4) )) + 3.25% $185.0m €172.7m
Secured Euro term loan (2026) EUR 3 month EURIBOR + 3.25% €256.4m €256.4m
Unsecured Senior Notes (2029) EUR Fixed at 3.75% €600.0m €600.0m
Unamortised fees €(11.7)m
Total gross debt drawn at period end €1,017.4m
Cash & cash equivalents at period end €(334.6)m
Net debt €682.8m
Additionally, as at 30 June 2024, the Group had a Revolving Credit Facility
("RCF") of up to $225.0 million expiring in July 2026. This was largely
undrawn at period end apart from €5.1 million used to issue letters of
credit.
The Group operates funded and unfunded defined benefit schemes across multiple
jurisdictions which are subject to periodic actuarial valuations. All major
defined benefit plans are closed to new entrants, but a few allow for future
accrual. As at 30 June, our net liability position decreased to €98.2
million (31 December 2023: €103.9 million) primarily due to increasing
discount rates, especially in the US which was determined at 5.45% (5.05% at
31 December 2023). US pension and retiree healthcare schemes represent 43% of
our net liability position at 30 June 2024 (31 December 2023: 46%).
Strong Adjusted return on capital ("ROCE") maintained
The Group's Adjusted ROCE increased to 25.4% (H1 2023: 21.7%), demonstrating
our discipline in deploying capital to maximise value creation and Adjusted
EBIT margin expansion.
Capital allocation policy delivering returns for shareholders
As part of the Group's revised capital allocation policy, TI adopted a
progressive dividend policy in 2023. In-line with this, the Board has
approved a 4.3% increase on a per share basis in the interim dividend to 2.40
€ cents per share (H1 2023: 2.30 € cents). The dividend amount of 2.40 €
cents will be converted from Euro to Sterling using the London closing spot
rate on the record date of Friday, 16 August 2024 and the Sterling rate will
be announced on Monday, 19 August 2024. The interim dividend will be paid on
Friday, 13 September 2024 to holders of ordinary shares on the register on the
record date.
The Group has also made good progress with its share buyback programme, which
was almost three quarters complete by period end. During H1, 13.3 million
shares were bought back for a total of €22.5 million. As at 30 June 2024,
the buyback was almost three quarters complete with 17.1 million shares
repurchased (and subsequently cancelled) for a total of €28.8 million.
Liquidity and going concern
As at 30 June 2024, the Group's external financing arrangements comprised
unsecured Senior Notes of €600.0 million (maturing on 15 April 2029), a Euro
term loan of €256.4 million (repayable in instalments until 16 December
2026), a US Dollar term loan of $185.0 million (repayable on 16 December 2026)
and a revolving credit facility ("RCF") of $225.0 million (maturing 16 July
2026). The amount utilised under the RCF, as of 30 June 2024, was €5.1
million, with the available undrawn amount at €204.9 million. The only
covenant measure that exists applies to the RCF and is a net leverage ratio,
which must be below 3.8x Adjusted EBITDA when the revolving facility is drawn
over 35%.
In addition, the Group held €334.6 million of cash and cash equivalents as
at 30 June 2024. Actual available liquidity, including cash and revolving
facility on 30 June 2024, was, therefore, €539.5 million, which provides a
strong basis for the Group's liquidity during the review period.
The Directors have reviewed the likely performance of the Group and the
Company for the period to the end of 2025 by reference to the latest outlook
for 2024 and approved Medium-Term Plan for 2025 as a base case scenario
(volumes used: 2024 89.5 million units, 2025 90.6 million units).
A severe, yet plausible, downside scenario, mindful of developing geopolitical
tensions and emerging economic challenges, was produced comprising a 10%
reduction in global light vehicle production volumes during the review period
against the base case (volumes used: 2024 85.0 million units, 2025 81.5
million units), a further 5% annual reduction in operating margin due to
increased costs, a further 0.5% annual sales price reduction, a €8 million
profit impact of business disruption from an unexpected plant closure, and an
incremental annual capital expenditure of €10 million. These reflect the
downside impact of principal risks facing the business in respect of global
light vehicle production volumes, cost pressures (commodities, labour and
energy costs), customer price reduction pressures, the impact of a business
disruption and changes in technology. The downside scenario showed an
availability of liquidity headroom without the use of the revolving credit
facility. There were no covenant breaches under this downside scenario in the
review period.
In addition, a reverse stress test was performed as part of the review which
indicates that there would need to be a catastrophic reduction in volumes to
exhaust cash and cash equivalents, which the Directors considered to be highly
unlikely.
The going concern scenarios do not indicate a material uncertainty, which may
cast significant doubt over the Company's and Group's ability to continue as a
going concern. Based on these assessments, the Directors have a reasonable
expectation that the Company has adequate resources to continue in operational
existence for the foreseeable future, and, accordingly, have adopted the going
concern basis in preparing the consolidated financial statements. This
disclosure has been prepared in accordance with the UK Corporate Governance
Code.
Principal risks and uncertainties
The Directors and executive management have considered the principal risks and
uncertainties of the Group and have determined, on balance, that those
reported in the 2023 Annual Report and Accounts remain relevant and
appropriate for the remaining half of the financial year.
The challenge and uncertainty associated with the shift in technology and
market dynamics impacting the automotive industry, as well as the related need
to attract and retain the talent to address this shift, remains of the highest
priority to executive management and the Directors, who have continued to
drive a strategic evolution through the business in order to ensure continued
excellence in operational and market performance.
The Group is navigating a challenging market environment characterised by
volatile customer production and margin pressures. These factors are expected
to persist throughout 2024 and into 2025. The Group is actively mitigating
these pressures by recovering costs from customers, implementing price
adjustments, and maintaining tight control over operational expenses. However,
further economic and demand challenges, such as changes in tariffs and the
decline of market share of the global OEMs in China, could exacerbate existing
overcapacity within the industry, posing additional volume and margin pressure
in the short to medium term. Management and the Board of Directors are closely
monitoring the situation and exploring various risk mitigation strategies,
including ongoing communication with both suppliers and customers as
circumstances develop.
The Directors continue to monitor the impact of geopolitical tensions and
uncertainty including conflicts within Europe and the Middle East,
particularly with regards to risks related to supply chain disruptions and
economic downturn in those regions. The Directors also monitor the developing
risks identified in our 2023 Annual Report - climate change, sustainability
and managing the transition to a low carbon economy (including uncertainty of
timelines and regulatory complexity), as well as the changes in economic
climate and potential data protection and labour related issues arising from
the evolution of generative AI. We continue to believe that these do not
represent separate new principal risks and uncertainties to the Group at
present.
Details of the Group's Principal Risks and Uncertainties are available in the
2023 Annual Report and Accounts, available on our website
www.tifluidsystems.com (http://www.tifluidsystems.com) .
By order of the Board
Hans Dieltjens Alexander De Bock
Chief Executive Officer & President Chief Financial Officer
7 August 2024 7 August 2024
Cautionary statement
This announcement contains certain forward-looking statements with respect to
the financial condition, results of operations and business of TI Fluid
Systems plc (the "Group"). The words "believe", "expect", "anticipate",
"intend", "estimate", "forecast", "project", "will", "may", "should" and
similar expressions identify forward looking statements. Others can be
identified from the context in which they are made. By their nature,
forward-looking statements involve risks and uncertainties, and such
forward-looking statements are made only as of the date of this presentation.
Accordingly, no assurance can be given that the forward-looking statements
will prove to be accurate and you are cautioned not to place undue reliance on
forward-looking statements due to the inherent uncertainty therein. Past
performance of the Company cannot be relied on as a guide to future
performance. Nothing in this announcement should be construed as a profit
forecast.
TABLE OF CONTENTS
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Income Statement
Condensed Consolidated Statement of Comprehensive Income
Condensed Consolidated Balance Sheet
Condensed Consolidated Statement of Changes in Equity
Condensed Consolidated Statement of Cash Flows
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1 Summary of significant accounting policies
2 Segment reporting
3 Adjusting items and alternative performance measures
4 Financial risk management
5 Finance income and expense
6 Income tax
7 Earnings per share
8 Property, plant and equipment
9 Impairments
10 Borrowings
11 Fair values of financial assets and liabilities
12 Retirement benefit obligations
13 Provisions
14 Cash generated from operations
15 Acquisition
16 Commitments and contingencies
17 Related party transactions
18 Glossary of terms
Independent review report
Directors' Responsibility Statement
Condensed Consolidated Income Statement
For the period ended 30 June 2024
2024 2023
Unaudited Unaudited
Continuing operations Note €m €m
Revenue 2 1,719.4 1,768.1
Cost of sales (1,505.1) (1,537.5)
Gross profit 214.3 230.6
Distribution costs (53.3) (55.6)
Administrative expenses (65.2) (77.0)
Net foreign exchange losses (3.5) (3.3)
Other gains and losses 3.5 0.3
Operating profit 95.8 95.0
Finance income 5 4.5 4.4
Finance expense 5 (39.1) (40.5)
Net finance expense 5 (34.6) (36.1)
Profit before income tax 61.2 58.9
Income tax expense 6 (21.0) (25.6)
Profit for the period 40.2 33.3
Profit for the period attributable to:
Owners of the Parent Company 40.1 33.2
Non-controlling interests 0.1 0.1
40.2 33.3
Total earnings per share (€ cents)
Basic 7 7.89 6.44
Diluted 7 7.81 6.41
Condensed Consolidated Statement of Comprehensive Income
For the period ended 30 June 2024
Unaudited Unaudited
2024 2023
€m €m
Profit for the period 40.2 33.3
Other comprehensive income
Items that will not be reclassified to profit or loss
-Re-measurements of retirement benefit obligations 7.7 3.7
-Income tax expense on retirement benefit obligations (2.0) (1.0)
5.7 2.7
Items that may be subsequently reclassified to profit or loss
-Currency translation 2.7 (56.8)
-Cash flow hedges (0.3) -
- Net investment hedges (0.9) -
1.5 (56.8)
Total other comprehensive income for the period 7.2 (54.1)
Total comprehensive income for the period 47.4 (20.8)
Attributable to:
-Owners of the Parent Company 47.3 (20.9)
-Non-controlling interests 0.1 0.1
Total comprehensive income for the period 47.4 (20.8)
Condensed Consolidated Balance Sheet
As at 30 June 2024
Unaudited Audited
30 June 2024 31 December 2023
Note €m €m
Non-current assets
Intangible assets 521.2 542.4
Right-of-use assets 136.1 97.1
Property, plant and equipment 8 549.1 546.5
Deferred income tax assets 6 128.5 126.1
Trade and other receivables 22.3 23.4
1,357.2 1,335.5
Current assets
Inventories 407.5 378.4
Trade and other receivables 619.0 551.2
Current income tax assets 6 14.0 9.0
Derivative financial instruments 4,11 3.3 3.0
Cash and cash equivalents 334.6 416.7
1,378.4 1,358.3
Total assets 2,735.6 2,693.8
Equity
Share capital 6.6 6.8
Share premium 2.2 2.2
Other reserves (107.8) (109.5)
Retained earnings 778.2 765.7
Equity attributable to owners of the Parent Company 679.2 665.2
Non-controlling interests 0.7 0.6
Total equity 679.9 665.8
Non-current liabilities
Trade and other payables 15.4 15.1
Borrowings 10 1,015.9 1,010.2
Lease liabilities 142.4 107.6
Derivative financial instruments 4,11 2.6 -
Deferred income tax liabilities 6 61.0 58.7
Retirement benefit obligations 12 98.2 103.9
Provisions 13 2.6 2.6
1,338.1 1,298.1
Current liabilities
Trade and other payables 621.7 632.9
Current income tax liabilities 6 48.4 55.4
Borrowings 10 1.5 1.5
Lease liabilities 27.8 24.9
Derivative financial instruments 4,11 0.1 0.1
Provisions 13 18.1 15.1
717.6 729.9
Total liabilities 2,055.7 2,028.0
Total equity and liabilities 2,735.6 2,693.8
Condensed Consolidated Statement of Changes in Equity
For the period ended 30 June 2024
Ordinary shares Share premium Other reserves Retained earnings Total Non-controlling interests Total equity
Unaudited €m €m €m €m €m €m €m
Balance at 1 January 2024 6.8 2.2 (109.5) 765.7 665.2 0.6 665.8
Profit for the period - - - 40.1 40.1 0.1 40.2
Total other comprehensive income for the period - - 1.5 5.7 7.2 - 7.2
Total comprehensive income for the period - - 1.5 45.8 47.3 0.1 47.4
Share-based expense - - - 4.9 4.9 - 4.9
Vested share awards - - - (7.3) (7.3) (7.3)
Issue of own shares from employee benefit trust - - - 6.9 6.9 - 6.9
Purchase of own shares for share buy back programme - - - (22.5) (22.5) - (22.5)
Cancellation of own shares purchased (0.2) - 0.2 - - - -
Movement in amounts committed for future purchase of own shares - - - 7.5 7.5 - 7.5
Dividends paid - - - (22.8) (22.8) - (22.8)
Total transactions with owners (0.2) - 0.2 (33.3) (33.3) - (33.3)
Balance at 30 June 2024 6.6 2.2 (107.8) 778.2 679.2 0.7 679.9
Ordinary Share premium Other Retained earnings Total Non-controlling interests Total
shares reserves equity
Unaudited €m €m €m €m €m €m €m
Balance at 1 January 2023 6.8 2.2 (55.4) 722.6 676.2 0.5 676.7
Profit for the period - - - 33.2 33.2 0.1 33.3
Total other comprehensive income for the period - - (56.8) 2.7 (54.1) - (54.1)
Total comprehensive income for the period - - (56.8) 35.9 (20.9) 0.1 (20.8)
Share-based expense - - - 3.5 3.5 - 3.5
Dividends paid - - - (8.0) (8.0) - (8.0)
Issue of own shares from Employee Benefit Trust - - - 10.9 10.9 - 10.9
Vested shared awards - - - (14.9) (14.9) - (14.9)
Total transactions with owners - - - (8.5) (8.5) - (8.5)
Balance at 30 June 2023 6.8 2.2 (112.2) 750.0 646.8 0.6 647.4
Condensed Consolidated Statement of Cash Flows
For the period ended 30 June 2024
Unaudited Unaudited
Half Year Half Year
2024 2023
Note €m €m
Cash flows from operating activities
Cash generated from operations 14 105.5 112.1
Interest paid (34.7) (35.9)
Income tax paid (34.5) (28.6)
Net cash generated from operating activities 36.3 47.6
Cash flows from investing activities
Payment for property, plant and equipment (57.3) (47.9)
Payment for intangible assets (11.4) (11.7)
Proceeds from the sale of property, plant and equipment 4.3 0.7
Purchase of Cascade Engineering Europe: consideration adjustment 15 0.7 -
Interest received 4.6 3.8
Net cash used by investing activities (59.1) (55.1)
Net cash used by operating and investing activities ("Free Cash Flow") (22.8) (7.5)
Cash flows from financing activities
Purchase of own shares for share buy back programme (22.5) -
Scheduled repayments of borrowings 10 (1.3) (2.7)
Lease principal repayments 10 (14.4) (15.0)
Dividends paid (22.8) (8.0)
Net cash used by financing activities (61.0) (25.7)
Decrease in cash and cash equivalents (83.8) (33.2)
Cash and cash equivalents at the beginning of the period 416.7 491.0
Currency translation on cash and cash equivalents 1.7 (16.3)
Cash and cash equivalents at the end of the period 334.6 441.5
1. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
condensed consolidated interim financial statements are the same as those
applied in the audited consolidated financial statements for the year ended 31
December 2023.
1.1. Basis of preparation
These condensed consolidated interim financial statements do not constitute
statutory accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2023 have been filed
with the Registrar of Companies. The report of the auditors on those accounts
was unqualified, did not contain an emphasis of matter paragraph and did not
contain any statement under section 498 of the Companies Act 2006. These
condensed consolidated interim financial statements have been reviewed, not
audited.
These condensed consolidated interim financial statements have been prepared
in accordance with IAS 34 'Interim Financial Reporting', as adopted by the
United Kingdom and the Disclosure and Transparency Rules of the Financial
Conduct Authority. These condensed consolidated interim financial statements
need to be read in conjunction with the annual consolidated financial
statements for the year ended 31 December 2023.
Foreign operations are those subsidiaries whose functional currency is not
Euro. For the purposes of consolidation, income and expenses of foreign
operations are translated to Euro at average exchange rates for the period,
and assets and liabilities of foreign operations are translated to Euro at
exchange rates at the reporting date. Foreign currency translation differences
are recognised in the Statement of Comprehensive Income.
The average and period-end exchange rates for the Group's principal currencies
were:
Key Euro exchange rates H1 2024 Average H1 2023 Average % Change 30 June 2024 Period End 30 June 2023 Period End % Change
US dollar 1.081 1.081 -% 1.071 1.092 (1.9)%
Chinese renminbi 7.799 7.488 4.2% 7.784 7.918 (1.7)%
South Korean won 1,460 1,401 4.2% 1,477 1,438 2.7%
1.1.1. Going concern
As at 30 June 2024, the Group's external financing arrangements comprised
unsecured Senior Notes of €600.0 million (maturing on 15 April 2029), a Euro
term loan of €256.4 million (repayable in instalments until 16 December
2026), a US Dollar term loan of $185.0 million (repayable on 16 December 2026)
and a revolving credit facility ("RCF") of $225.0 million (maturing 16 July
2026). The amount utilised under the RCF, as of 30 June 2024, was €5.1
million, with the available undrawn amount at €204.9 million. The only
covenant measure that exists applies to the RCF and is a net leverage ratio,
which must be below 3.8x Adjusted EBITDA when the revolving facility is drawn
over 35%.
In addition, the Group held €334.6 million of cash and cash equivalents as
at 30 June 2024. Actual available liquidity, including cash and revolving
facility on 30 June 2024, was, therefore, €539.5 million, which provides a
strong basis for the Group's liquidity during the review period.
The Directors have reviewed the likely performance of the Group and the
Company for the period to the end of 2025 by reference to the latest outlook
for 2024 and approved Medium-Term Plan for 2025 as a base case scenario
(volumes used: 2024 89.5 million units, 2025 90.6 million units).
A severe, yet plausible, downside scenario, mindful of developing geopolitical
tensions and emerging economic challenges, was produced comprising a 10%
reduction in global light vehicle production volumes during the review period
against the base case (volumes used: 2024 85.0 million units, 2025 81.5
million units), a further 5% annual reduction in operating margin due to
increased costs, a further 0.5% annual sales price reduction, a €8 million
profit impact of business disruption from an unexpected plant closure, and an
incremental annual capital expenditure of €10 million. These reflect the
downside impact of principal risks facing the business in respect of global
light vehicle production volumes, cost pressures (commodities, labour and
energy costs), customer price reduction pressures, the impact of a business
disruption and changes in technology. The downside scenario showed an
availability of liquidity headroom without the use of the revolving credit
facility. There were no covenant breaches under this downside scenario in the
review period.
In addition, a reverse stress test was performed as part of the review which
indicates that there would need to be a catastrophic reduction in volumes to
exhaust cash and cash equivalents, which the Directors considered to be highly
unlikely.
The going concern scenarios do not indicate a material uncertainty, which may
cast significant doubt over the Company's and Group's ability to continue as a
going concern. Based on these assessments, the Directors have a reasonable
expectation that the Company has adequate resources to continue in operational
existence for the foreseeable future, and, accordingly, have adopted the going
concern basis in preparing the consolidated financial statements. This
disclosure has been prepared in accordance with the UK Corporate Governance
Code.
1.2. New and revised IFRS affecting amounts reported in the
current period (and/or prior periods)
There are no new standards or IFRS IC interpretations effective in the period
that have a material impact on the Group.
1.3. Critical accounting estimates and judgements
The preparation of financial statements requires the use of accounting
estimates and for Management to exercise judgement in applying the Group's
accounting policies. Assumptions and accounting estimates are subject to
regular review, governed by Group-wide policies and controls. Any revisions
required to accounting estimates are recognised in the period in which the
revisions are made including all future periods affected.
The judgement and estimates that have the most significant and critical effect
on the amounts included in the financial statements are in relation to
post-employment obligations, impairments of assets and deferred tax assets
described below.
1.3.1 Critical accounting estimates
1.3.1.1 Post-employment obligations
Details of the Group's critical accounting estimates around post-employment
obligations can be found in Note 1.4.1.1 of the audited consolidated financial
statements for the year ended 31 December 2023.
1.3.1.2 Impairments of assets
Management carry out the annual impairment review on the Group's property,
plant and equipment, intangible, and right-of-use assets as at 31 December,
which involves judgement in determining the assets' recoverable amount (as
outlined in the 2023 Annual Report and Accounts). At interim reporting,
Management performed a review for any indicators of impairment, as an update
to the impairment review performed as part of the 2023 year-end process.
Further discussion on this assessment is included within Note 9.
1.3.2 Critical accounting judgement
1.3.2.1 Deferred tax assets
Details of the Group's critical accounting judgement around deferred tax
assets can be found in Note 1.4.2 of the audited consolidated financial
statements for the year ended 31 December 2023.
2. Segment reporting
In accordance with the provisions of IFRS 8 'Operating Segments', the Group's
segment reporting is based on the management approach with regard to segment
identification; under which information regularly provided to the chief
operating decision maker ("CODM") for decision-making purposes forms the basis
of the disclosure. The Company's CODM is the Chief Executive Officer ("CEO")
and the Chief Financial Officer. The CODM evaluates the performance of the
Company's segments primarily on the basis of revenue, Adjusted EBITDA, and
Adjusted EBIT.
Effective from 1 January 2024, the Group is operating a new regional reporting
structure, ensuring better alignment with customers and enhancing regional
leaders' agility to respond to changes in their markets, particularly the
transition to electrification. The three regional segments that the CODM now
manage the business by are: Americas ("AMER"), Europe, the Middle East and
Africa ("EMEA") and Asia Pacific ("APAC"). The comparative information for
the following segmental disclosures has been restated accordingly, to reflect
the change from a two division structure to the three regions.
Unaudited Unaudited
Half Year Half Year
2024 2023
€m €m
Revenue
- AMER - External 505.6 525.0
- Inter-segment 7.3 8.0
512.9 533.0
- EMEA - External 733.3 702.8
- Inter-segment 19.8 16.0
753.1 718.8
- APAC- External 480.5 540.3
- Inter-segment 16.0 13.8
496.5 554.1
Inter-segment elimination (43.1) (37.8)
Total consolidated revenue 1,719.4 1,768.1
Adjusted EBITDA
- AMER 57.6 57.7
- EMEA 78.2 57.1
- APAC 66.8 83.8
202.6 198.6
Adjusted EBITDA % of revenue
- AMER 11.4% 11.0%
- EMEA 10.7% 8.1%
- APAC 13.9% 15.5%
Total 11.8% 11.2%
Adjusted EBIT
- AMER 44.9 43.6
- EMEA 48.2 30.9
- APAC 42.4 57.4
135.5 131.9
Adjusted EBIT % of revenue
- AMER 8.9% 8.3%
- EMEA 6.6% 4.4%
- APAC 8.8% 10.6%
Total 7.9% 7.5%
Restructuring costs of €14.1 million (€3.6 million in AMER, €4.3 million
in APAC and €6.2 million in EMEA) (2023: €6.8 million, of which €1.6
million in AMER, €0.7 million in APAC and €4.5 million in EMEA) comprise
announced headcount reductions and related costs of balancing production
capacity with market requirements. Please refer to alternative performance
measures (Note 3) for reconciliation to Income Statement.
3. Adjusting items and alternative performance measures
In addition to the results reported under IFRS, Management use certain
non-IFRS financial measures to monitor and measure the performance and
profitability of the business and operations. Such measures are also utilised
by the Board as targets in determining compensation of certain executives and
key members of management, as well as in communications with investors. In
particular, Management use Adjusted EBIT, Adjusted EBITDA, Adjusted Net
Income, Adjusted Free Cash Flow, Adjusted Basic EPS and Adjusted Return on
Capital Employed (ROCE). These non-IFRS measures are not recognised
measurements of financial performance or liquidity under IFRS, and should be
viewed as supplemental and not replacements or substitutes for any IFRS
measures.
Definitions for alternative performance measures are included in the Note 18
glossary.
Unaudited
Half Year Unaudited
2024 Half Year
2023
Adjusted Performance Measures Note €m €m
Adjusted EBIT 3.2 135.5 131.9
Adjusted EBITDA 3.2 202.6 198.6
Adjusted net income 3.2 70.6 62.5
Adjusted free cash flow 3.2 (14.4) 2.3
Adjusted basic EPS 7.2 13.89 12.12
Adjusted Return on capital employed 3.2 25.4% 21.7%
3.1 Adjusting items
Management exclude certain items in the derivation of alternative performance
measures, as shown below:
Unaudited Unaudited
Half Year Half Year
2024 2023
Adjusting Items Note €m €m
Restructuring costs 13 14.1 6.8
Net foreign exchange losses 3.5 3.3
Depreciation and amortisation arising on purchase accounting 21.5 24.6
Customisation and configuration costs of significant software as a service - 0.9
("SaaS") arrangements
Costs associated with business acquisitions or disposals 0.6 1.3
39.7 36.9
Adjusting items represent transactions that in Management's view do not form
part of the substance of the trading activities of the Group, such as
large-scale reorganisations, system implementations, acquisition costs and
certain non-cash accounting measures.
Restructuring costs comprise announced headcount reductions and related costs
of balancing production capacity with market requirements.
Net foreign exchange gains/losses on the foreign currency revaluation of
intercompany loan and cash balances are included in adjusting items to remove
the impact of foreign exchange volatility on our adjusted performance
measures.
Depreciation and amortisation arising on purchase accounting relates to the
uplift of tangible and intangible assets, acquired through business
combinations, to their fair market value, which is then depreciated and
amortised over the remaining useful life of these assets.
Costs associated with business acquisitions or disposals and customisation and
configuration costs of significant SaaS arrangements in relation to initial
costs of multi-year system upgrades or implementations have been excluded from
the alternative performance measures due to their ad-hoc nature.
3.2 Adjusted performance measures
Reconciliations of adjusted performance measures to their statutory GAAP
equivalent measures are provided below.
Adjusted EBITDA Note Unaudited Unaudited
Half Year Half Year
2024 2023
€m €m
Operating profit 95.8 95.0
Adjusting items 3.1 39.7 36.9
Adjusted EBIT 135.5 131.9
Non-adjusting depreciation, amortisation and impairments 67.1 66.7
Adjusted EBITDA 202.6 198.6
Adjusted Net Income Note Unaudited
Half Year Unaudited
2024 Half Year
€m 2023
€m
Profit for the period 40.2 33.3
Non-controlling interests' share of profit (0.1) (0.1)
Adjusting items 3.1 39.7 36.9
Tax impact on adjusting items 6 (9.2) (7.6)
Adjusted net Income 70.6 62.5
Adjusted Free Cash Flow Unaudited Unaudited
Half Year Half Year
2024 2023
€m €m
Net cash generated from operating activities 36.3 47.6
Net cash used in investing activities (59.1) (55.1)
Free Cash Flow (22.8) (7.5)
Net restructuring cash spend 8.6 8.4
Purchase of Cascade Engineering Europe: consideration adjustment (0.7) -
Cash spend associated with business acquisitions or disposals 0.5 0.8
Cash spent on customisation and configuration costs of significant software as - 0.6
a service (SaaS) arrangements
Adjusted Free Cash Flow (14.4) 2.3
Adjusted Return on Capital Employed Note Unaudited Unaudited
Half Year Half Year
2024 2023
€m €m
LTM adjusted EBIT 263.2 228.2
Capital employed
Total equity 679.9 647.4
Net current and deferred tax (assets)/liabilities 6 (33.1) 6.9
Derivative financial instruments 11 (0.6) (3.1)
Net debt and lease liabilities 10 853.0 807.1
Restructuring provisions 13 9.5 5.2
Purchase price allocation balances arising on the Bain acquisition (431.4) (464.5)
Capital employed 1,077.3 999.0
Average capital employed 1,038.2 1,054.0
Adjusted return on capital employed 25.4% 21.7%
4. Financial risk management
The Group enters into derivative contracts, and incurs financial liabilities,
in order to manage market risks, the risk that changes in market prices, such
as foreign exchange rates and interest rates, will affect the Group's income,
expenditure or the value of its holdings of financial instruments.
4.1 Foreign Currency Risk
The Group is exposed to currency risk on revenue, purchases, investments and
borrowings that are denominated in a currency other than the functional
currencies of individual Group entities, which are primarily Euro, US dollars,
Chinese renminbi and Korean won. The Group uses derivative instruments to
manage foreign currency exposure.
The Group enters into forward foreign exchange contracts not designated in
hedge relationships. The nominal value of these derivatives as at 30 June 2024
was €132.9 million (31 December 2023: €112.3 million) and the aggregate
fair value was a €1.7 million net receivable (31 December 2023: €2.9
million net receivable).
Cross currency interest rate swap contracts - designated as net investment
hedges
On 12 June 2024, the Group entered into two cross currency interest rate swap
contracts to hedge the Group's net investment in its Chinese subsidiaries. The
contracts hedge foreign currency exposure on Chinese net investments, reducing
currency translation gains or losses in other comprehensive income arising on
the translation of Chinese net assets in the Group's financial statements. In
aggregate these instruments exchange a portion of the unsecured senior notes
of €200.0 million at a fixed interest rate of 3.75% for notional CNH
(Chinese Renminbi) borrowings of CNH 1,566,570,000 (€200.0 million) at an
average fixed interest rate of 3.24%. The hedge ratio of this economic
relationship is 1:1. The contracts are split equally between two financial
institutions. The contracts mature on 15 April 2026.
The nominal value of the contracts in this arrangement as at 30 June 2024 was
€200.0 million (31 December 2023: €nil); and their aggregate fair value
was a €0.8 million liability (31 December 2023: €nil). A fair value loss
of €0.9 million (31 December 2023: €nil) was recorded in other
comprehensive income in the period for these contracts. No amounts were
recycled during the period, other than amounts reclassified from the cost of
hedging reserve of €0.1 million (31 December 2023: €nil). There was no
ineffectiveness recognised in the period (31 December 2023: €nil).
4.2 Interest Rate Risk
Most of the Group's interest rate risk arises on its main external borrowing
facilities.
The Group borrowings include €600.0 million of unsecured Senior Notes
bearing a fixed interest rate of 3.75% p.a., a Euro term loan, of which
€256.4 million is outstanding at 30 June 2024, which bears interest at
three-month EURIBOR (minimum 0.0% p.a.) +3.25% p.a., and a US dollar term
loan, of which $185.0 million (€172.7 million) is outstanding at 30 June
2024 which bears interest at one-month term SOFR + 0.11448% (minimum 0.5%
p.a.) +3.25% p.a.
Interest rate swaps
In addition to the CNH currency interest rate swaps above, on 13 June 2024,
the Group entered into two US dollar interest rate swaps with two different
financial institutions. In aggregate, these instruments converted the US term
loan of $185.0 million at floating interest rates of one-month term SOFR +
0.11448% (minimum 0.5% p.a.) +3.25% p.a. into an average fixed interest rate
of 4.46% + 0.11448% (minimum 0.5% p.a.) +3.25% p.a. and are designated as a
cashflow hedge. The contracts mature on 30 November 2026. The notional value
of the interest rate swaps at 30 June 2024 is $185.0 million (31 December
2023: $nil) and their fair value is a €0.3 million liability (31 December
2023: €nil). A fair value loss of €0.3 million (31 December 2023: €nil)
was recorded in other comprehensive income after a gain of €0.1 million
(31 December 2023: €nil) was recycled to the income statement. There was no
ineffectiveness recognised in the period (31 December 2023: €nil)
5. Finance income and expense
Unaudited Unaudited
Half Year Half Year
2024 2023
Note €m €m
Finance income
Interest on short-term deposits, other financial assets and other interest 4.3 3.7
income
Net interest income related to specific uncertain tax positions 0.1 0.1
Fair value gains on derivatives and foreign exchange contracts not in hedged - 0.6
relationships
Amounts reclassified from the cost of hedging reserve 0.1 -
Finance income 4.5 4.4
Finance expense
Interest payable on term loans before expensed fees 10 (17.2) (19.4)
Interest payable on term loans: expensed fees 10 (1.4) (1.8)
Interest payable on unsecured senior notes before expensed fees 10 (11.3) (11.3)
Interest payable on unsecured senior notes: expensed fees 10 (0.6) (0.5)
Net interest expense on retirement benefit obligations 12 (2.4) (2.2)
Interest payable on lease liabilities (5.9) (5.3)
Other finance expense (0.3) -
Finance expense (39.1) (40.5)
Total net finance expense (34.6) (36.1)
6. Income tax
The income tax expense for the period ending 30 June 2024 has been recognised
based on Management's estimate of the annual effective tax rate of each legal
entity (or tax group within a country), considering any projected permanent
tax adjustments and tax credits that are available, multiplied by the
applicable statutory tax rate for each country. The annual estimated
effective tax rates are applied to the first half profits / losses of each
legal entity or tax group to determine the overall Group tax charge for the
period.
This has resulted in an ordinary effective tax rate of 34.3% for the half year
ended 30 June 2024 (43.5% for the half year ended 30 June 2023) and when the
impact of the Adjusting Items is excluded from the Group results, the H1 2024
Effective Tax Rate is 29.9% (H1 2023: 34.7%) reflecting an average of the tax
rates of the countries in which we operate.
30 June 2024 30 June 2023
Profit before income tax Income tax expense Profit before income tax Income tax expense
Unaudited €m €m ETR €m €m ETR
Results excluding Adjusting items 100.9 (30.2) 29.9% 95.8 (33.2) 34.7%
Adjusting items (39.7) 9.2 23.2% (36.9) 7.6 20.6%
Reported results 61.2 (21.0) 34.3% 58.9 (25.6) 43.5%
Recognition of deferred tax assets is based on forecast taxable income and a
key input is the Group's 2024 budget and 2025 to 2028 medium term plan.
Estimation is used in the budget and plan in forecasting global automotive
production, pricing and operating costs. In addition, it requires the exercise
of Management's judgement regarding the period over which recoverability is
assessed taking into account factors such as regulations regarding the amount
of tax losses that can be utilised per year and any restrictions on the amount
of time that tax losses can be carried forward.
On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK,
introducing a global minimum effective tax rate of 15%. The legislation
implements a domestic top-up tax and a multinational top-up tax, effective for
accounting periods starting on or after 31 December 2023. The Group has
applied the exception under the IAS 12 amendment to recognising and disclosing
information about deferred tax assets and liabilities related to top-up income
taxes.
7. Earnings per share
7.1 Basic and diluted earnings per share
Half Year 2024 Half Year 2023
Unaudited Profit attributable to shareholders Weighted average number of shares Earnings Per Share Profit attributable to shareholders Weighted average number of shares Earnings Per Share
€m in millions € cents €m in millions € cents
Basic 40.1 508.1 7.89 33.2 515.5 6.44
Dilutive shares - 5.6 - - 2.8 -
Diluted 40.1 513.7 7.81 33.2 518.3 6.41
The potential shares related to the €11.9 million liability included within
accrued expenses regarding amounts committed for future own share purchases
for subsequent cancellation, have not been included in the calculation of
diluted earnings per share in the period because they would be antidilutive.
7.2 Adjusted earnings per share
Half Year 2024
Half Year 2023
Unaudited Basic Diluted Basic Diluted
Adjusted Net Income (€m) 70.6 70.6 62.5 62.5
Adjusted Earnings Per Share (€ in cents) 13.89 13.74 12.12 12.06
Adjusted Net Income is based on profit for the period attributable to the
Parent Company of €40.1 million (2023: €33.2 million), after adding back
exceptional items net of tax, and eliminating the impact of net restructuring
charges, foreign exchange gains or losses, depreciation and amortisation
arising on purchase accounting, customisation and configuration costs of
significant SaaS arrangements, the costs associated with any business
acquisitions or disposals, and the tax impact on adjusting items, totalling
€30.5 million (2023: €29.3 million). Reconciliations of adjusted profit
measures to statutory measures are included in Note 3.
8. Property, plant and equipment ("PP&E")
During the period the Group made PP&E additions of €47.2 million, of
which €3.5 million were in relation to acquisition adjustments (2023 full
year: €118.8 million, with €9.0 million arising on acquisitions). Assets
with a carrying value of €2.7 million (2023 full year: €1.6 million) were
disposed of during the period.
9. Impairments
With the business now operating on a regional structure, the cash generating
unit (CGU) groups for goodwill impairment assessment purposes now identified
for the Group are AMER, EMEA, and APAC.
Following the 2023 annual impairment assessment which indicated no impairments
as at 31 December 2023, Management performed a review, at the goodwill CGU
group level, for indicators of impairment (or reversal of previous impairment)
as at 30 June 2024. The review involved assessing factors such as: external
forecast global light vehicle production volumes (from S&P Global
Mobility) and the impact of climate change and current market trend on the
transition to BEV; current circumstances of industry-wide matters such as
changes in the pace of electrification and competition dynamics; economic
factors such as inflationary pressures on input prices, and the ability to
pass these on to customers; and possible changes to the underlying discount
rates used in estimating the recoverable amounts.
Based on the assessment, Management concluded that there were no indicators of
impairment, nor those that would require an impairment reversal, as at 30 June
2024. The next annual impairment test will be performed on 31 December 2024.
10. Borrowings
Unaudited Audited
30 June 31 December
2024 2023
€m €m
Non-current:
Unsecured senior notes 594.6 594.0
Secured term loans and facilities 421.3 416.2
Total non-current borrowings 1,015.9 1,010.2
Current:
Secured term loans and facilities 1.5 1.5
Total current borrowings 1.5 1.5
Total borrowings 1,017.4 1,011.7
Unsecured senior notes 594.6 594.0
Secured term loans and facilities 422.8 417.7
Total borrowings 1,017.4 1,011.7
The borrowings are shown net of issuance discounts and fees of €11.7 million
(31 December 2023: €13.4 million).
10.1 Movement in total borrowings
Unsecured senior notes Term loans and facilities Total borrowings
Unaudited €m €m €m
At 1 January 2024 594.0 417.7 1,011.7
Interest accrued 11.3 17.2 28.5
Scheduled payments including interest (11.3) (18.5) (29.8)
Scheduled principal repayments of borrowings - (1.3) (1.3)
Fees expensed 0.6 1.4 2.0
Currency translation - 5.0 5.0
At 30 June 2024 594.6 422.8 1,017.4
Accrued interest payable on the borrowings at 30 June 2024 of €4.8 million
(31 December 2023: €4.8 million) is included in current trade and other
payables.
Unsecured senior notes Term loans and facilities Overdrafts Total borrowings
Audited €m €m €m €m
1 January 2023 592.9 523.0 - 1,115.9
Interest accrued 22.5 37.4 - 59.9
Scheduled payments including interests (22.5) (41.4) - (63.9)
Schedule principal repayments of borrowings - (4.0) - (4.0)
Overdrafts acquired on acquisition of Cascade Engineering Europe (CEE) - - 3.2 3.2
Overdrafts repaid on acquisition of Cascade Engineering Europe (CEE) - - (3.2) (3.2)
Voluntary repayments of borrowings - (99.2) - (99.2)
Fee expensed 1.1 3.1 - 4.2
Fee expensed on voluntary repayments of borrowings - 2.8 - 2.8
Currency translation - (8.0) - (8.0)
31 December 2023 594.0 417.7 - 1,011.7
10.2 Main borrowing facilities
The main borrowing facilities are comprised of unsecured senior notes and a
package of secured loans consisting of a Euro term loan, a US dollar term loan
and a revolving credit facility (which was undrawn during the period except
for letters of credit).
The amounts outstanding under the agreements are:
Unaudited Audited
30 June 31 December
2024 2023
€m €m
Principal outstanding:
Unsecured senior notes 600.0 600.0
Euro term loan 256.4 257.6
US term loan 172.7 167.5
Total principal outstanding 1,029.1 1,025.1
Issuance discounts and fees (11.7) (13.4)
Main borrowing facilities 1,017.4 1,011.7
The unsecured senior notes bear interest at a fixed rate of 3.75% per annum
and mature on 15 April 2029. Interest on the notes is payable semi-annually in
arrears on 15 April and 15 October of each year.
The Euro term loan bears interest at three-month EURIBOR (minimum 0.0% p.a.)
+3.25% p.a and the amount repayable per quarter is €662,500 (2023:
€662,500 per quarter), until the final balance falls due on 16 December
2026.
The Group's US dollar term loan incurs interest at one-month term SOFR +
0.11448% (minimum 0.5% p.a.) +3.25% p.a. The principal outstanding on the US
dollar term loan in US dollars at 30 June 2024 is $185.0 million (31 December
2023: $185.0 million). No repayments of principal are due on the loan until
the balance falls due on 16 December 2026.
The revolving credit agreement provides a facility of up to $225.0 million (31
December 2023: $225.0 million). Drawings under this facility bear interest in
a range of SOFR +3.0% to SOFR + 3.75% p.a. depending on the Group's total net
leverage ratio. The facility is available to be used to issue letters of
credit on behalf of TI Group Automotive Systems LLC, a subsidiary undertaking.
The facility was undrawn during the period except for letters of credit
outstanding of $5.5 million (31 December 2023: $4.7 million), resulting in a
net undrawn facility at 30 June 2024 of $219.5 million (€204.9 million) (31
December 2023: $220.3 million; €199.5 million). The revolving credit
facility expires on 16 July 2026 and the non-utilisation fee is 0.25% p.a. In
the event the total net leverage ratio is greater than 3.5:1, the
non-utilisation fee will increase to 0.375% p.a.
Issuance discounts and fees
All capitalised fees are expensed using the effective interest method over the
remaining terms of the facilities. Net issuance discounts and fees at 30 June
2024 are €11.7 million (31 December 2023: €13.4 million).
10.3 Movements in net debt and lease liabilities
Non-cash changes
At 1 January 2024 Cash flows New leases Fees expensed Currency translation Remeas-urement and disposals At 30 June 2024
Unaudited €m €m €m €m €m €m €m
Cash and cash equivalents 416.7 (83.8) - - 1.7 - 334.6
Borrowings (1,011.7) 1.3 - (2.0) (5.0) - (1,017.4)
Total net debt (595.0) (82.5) - (2.0) (3.3) - (682.8)
Lease liabilities (132.5) 14.4 (46.2) - (1.6) (4.3) (170.2)
Net debt and lease liabilities (727.5) (68.1) (46.2) (2.0) (4.9) (4.3) (853.0)
Non-cash changes
At 1 January 2023 Cash flows Cascade Net debt and lease liabilities acquired New leases Fees expensed Currency translation Remeas-urement and disposals At 31 December 2023
Audited €m €m €m €m €m €m €m €m
Cash and cash equivalents 491.0 (58.3) - - - (16.0) - 416.7
Borrowings (1,115.9) 106.4 (3.2) - (7.0) 8.0 - (1,011.7)
Total net debt (624.9) 48.1 (3.2) - (7.0) (8.0) - (595.0)
Lease liabilities (149.6) 30.0 (0.3) (14.4) - 3.7 (1.9) (132.5)
Net debt and lease liabilities (774.5) 78.1 (3.5) (14.4) (7.0) (4.3) (1.9) (727.5)
Cash flows from financing activities arising from changes in financial
liabilities are analysed below:
Unaudited Audited
30 June 31 December
2024 2023
€m €m
Overdrafts repaid on acquisition of Cascade Engineering Europe (CEE) - 3.2
Voluntary repayments of borrowings - 99.2
Scheduled repayments of borrowings 1.3 4.0
Lease principal repayments 14.4 30.0
Cash outflows from financing activities arising from changes in financial 15.7 136.4
liabilities
Borrowings cash flows 1.3 106.4
Lease liabilities cash flows 14.4 30.0
Cash outflows from financing activities arising from 15.7 136.4
changes
in financial liabilities
11. Fair values of financial assets and liabilities
Financial instruments by category
As at 30 June 2024:
Unaudited Assets at amortised cost Assets in hedged relationships Assets at FVTPL Total
Financial assets €m €m €m €m
Cash and cash equivalents 334.6 - - 334.6
Trade and other receivables excluding prepayments 572.8 - - 572.8
Derivative financial instruments:
-Forward foreign exchange contracts not designated in hedge relationships - - 1.8 1.8
-Cross currency interest rate swap contracts (net investment hedges) - 0.7 - 0.7
-Interest rate swaps (cash flow hedges) - 0.8 - 0.8
Total at 30 June 2024 907.4 1.5 1.8 910.7
Unaudited Liabilities at amortised cost Liabilities in hedged relationships Liabilities at FVTPL Total
Financial liabilities €m €m €m €m
Trade and other payables excluding deferred income, social security and other (515.5) - - (515.5)
taxes
Borrowings:
-Unsecured senior notes (554.1) - - (554.1)
-Term loans and facilities (422.8) - - (422.8)
Lease liabilities (170.2) - - (170.2)
-Forward foreign exchange contracts not designated in hedge relationships - - (0.1) (0.1)
-Cross currency interest rate swap contracts (net investment hedges) - (1.5) - (1.5)
-Interest rate swaps (cash flow hedges) - (1.1) - (1.1)
Total at 30 June 2024 (1,662.6) (2.6) (0.1) (1,665.3)
As at 31 December 2023:
Audited Assets at amortised cost Assets at FVTPL Total
Financial assets €m €m €m
Cash and cash equivalents 416.7 - 416.7
Trade and other receivables excluding prepayments 506.5 - 506.5
Derivative financial instruments:
-Forward foreign exchange contracts not designated in hedge relationships - 3.0 3.0
Total at 31 December 2023 923.2 3.0 926.2
Audited Liabilities at amortised cost Liabilities at FVTPL Total
Financial liabilities €m €m €m
Trade and other payables excluding deferred income, social security and other (542.2) - (542.2)
taxes
Borrowings:
-Unsecured senior notes (547.1) - (547.1)
-Term loans and facilities (417.7) - (417.7)
Lease liabilities (132.5) - (132.5)
-Forward foreign exchange contracts not designated in hedge relationships - (0.1) (0.1)
Total at 31 December 2023 (1,639.5) (0.1) (1,639.6)
Fair value estimates of derivatives are based on relevant market information
and information about the financial instruments, which are subjective in
nature. The fair value of these financial instruments is estimated by
discounting the future cash flows to net present values using appropriate
market rates prevailing at the reporting date, which is a proxy for market
price. All derivative items reported are within Level 2 of the fair value
hierarchy specified in IFRS 13 'Fair Value Measurement'; their measurement
includes inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly.
The unsecured senior notes are quoted instruments and the fair value is
calculated based on the market price. The fair value of the notes is within
Level 1 of the fair value hierarchy specified in IFRS 13 'Fair Value
Measurement'.
Other than the unsecured senior notes, there were no significant differences
between the book value and fair value (as determined by market value) of the
Group's non-derivative financial assets and liabilities. The fair value of the
term loans and facilities approximates their carrying value because they are
floating-rate instruments, and their interest rates are reset to market rates
each month.
12. Retirement benefit obligations
Balance Sheet
The net liability for defined benefit arrangements is as follows:
Unaudited US pensions Other pensions US healthcare Other post-employment liabilities Total
Net liability €m €m €m €m €m
Present value of retirement benefit obligations (139.2) (69.2) (21.7) (86.4) (316.5)
Fair value of plan assets 118.5 74.7 - 30.6 223.8
Asset ceiling - (5.5) - - (5.5)
Net liability at 30 June 2024 (20.7) - (21.7) (55.8) (98.2)
Audited US pensions Other pensions US healthcare Other post-employment liabilities Total
Net liability €m €m €m €m €m
Present value of retirement benefit obligations (141.2) (72.5) (22.3) (88.8) (324.8)
Fair value of plan assets 116.2 77.1 - 32.2 225.5
Asset ceiling - (4.6) - - (4.6)
Net liability at 31 December 2023 (25.0) - (22.3) (56.6) (103.9)
Income Statement
Net (expense)/income recognised in the Income Statement is as follows:
Unaudited US pensions Other pensions €m US healthcare Other post-employment liabilities Total
Net expense €m €m €m €m €m
Current service cost - (0.2) - (3.6) (3.8)
Actuarial gain recognised on other post-employment liabilities* - - - 0.3 0.3
Settlement/curtailment gain - 0.3 - - 0.3
Net interest (expense)/income (0.7) 0.1 (0.5) (1.3) (2.4)
Total net expense for the period ended 30 June 2024 (0.7) 0.2 (0.5) (4.6) (5.6)
*Actuarial gain recognised relates to other long-term benefit plans, such as
long service agreements.
The actuarial gain recognised is a result of discount rates increasing by
approximately 20 bps since 31 December 2023. By comparison, for the period
ended 30 June 2023, a loss was recognised as a result of discount rates
decreasing by approximately 20 bps since 31 December 2022.
Unaudited US pensions Other pensions US healthcare Other post-employment liabilities Total
Net expense €m €m €m €m €m
Current service cost - (0.3) - (3.6) (3.9)
Actuarial loss recognised on other post-employment liabilities* - - - (0.4) (0.4)
Settlement/curtailment loss - (0.4) - - (0.4)
Net interest (expense)/income (0.7) 0.2 (0.7) (1.0) (2.2)
Total net expense for the period ended 30 June 2023 (0.7) (0.5) (0.7) (5.0) (6.9)
At 30 June 2024, the Group reviewed the discount rates relating to the
retirement benefit obligations.
For US pension obligations, the average discount rate was determined to be
5.45% (5.05% at 31 December 2023). This change in discount rate decreased
the US pension obligation by €5.5 million. This was offset by €0.8m of
currency exchange and €0.4 million of benefit payments and administrative
expenses. As a result, the net decrease in the net US pension liability was
€4.3 million.
For other funded pension obligations, the average discount rate was determined
to be 5.15% (4.60% at 31 December 2023). The resulting discount rate impact
was increased by benefit payments of €1.5 million and offset by currency
exchange and interest, resulting in a net €3.3 million decrease in the
obligation. Overall, pension asset performance for the other funded pensions
in the same period decreased the fair value of plan assets by €2.4 million.
The asset ceiling has been applied to the increase of the net surplus,
resulting in an overall net nil change in the other funded pension liability.
The decrease/(increase) in the total retirement benefit obligations due to a
+50bp/-50bp change in the discount rate is €15.7 million/(€17.3 million)
for all plans combined.
13. Provisions
Movements in provisions are as follows:
Product warranty Restructuring Other Total
Unaudited €m €m €m €m
At 1 January 2024 7.2 4.6 5.9 17.7
Provisions made during the period 1.9 14.1 0.1 16.1
Provisions used during the period (2.3) (9.2) - (11.5)
Provisions reversed during the period (0.1) - (1.8) (1.9)
Currency translation 0.3 - - 0.3
At 30 June 2024 7.0 9.5 4.2 20.7
Product warranty Restructuring Other Total
Audited €m €m €m €m
At 1 January 2023 5.1 7.8 3.7 16.6
Provisions made during the year 4.5 13.4 3.4 21.3
Provisions used during the year (1.7) (15.9) (1.1) (18.7)
Provisions reversed during the year (0.7) - (0.1) (0.8)
Currency translation - (0.7) - (0.7)
At 31 December 2023 7.2 4.6 5.9 17.7
Restructuring provisions made in the period of €14.1 million relate to
ongoing programmes across the Group to align production capacity with market
demand. Utilisation of the remaining provision is mainly expected within the
second half of 2024, and some in 2025.
Product warranty provisions relate to specific customer issues and are based
upon open negotiations and past customer claims experience. The timing of
utilisation for product warranty cases is often uncertain, but are typically
anticipated within the 1 to 2 years range.
Other provisions at 30 June 2024 comprise provisions for disputed claims for
indirect taxes, asset retirement obligations and other matters. Asset
retirement obligations are linked to the useful lives of the underlying
assets, with expected utilisation ranging from 2024 to 2026. The indirect tax
provisions are expected to be utilised over the next three years. Other claims
are expected to be utilised in 2024/2025.
14. Cash generated from operations
Unaudited Unaudited
Half Year Half Year
2024 2023
€m €m
Profit for the period 40.2 33.3
Income tax expense 21.0 25.6
Profit before income tax 61.2 58.9
Adjustments for:
Depreciation, amortisation and impairment charges 88.6 91.3
Gain on disposal of PP&E, intangible, and right of use assets (1.7) (0.1)
Share-based expense excluding social security costs 4.9 3.5
Net finance expense 34.6 36.1
Net foreign exchange losses 3.5 3.3
Changes in working capital:
- Inventories (26.3) (17.0)
- Trade and other receivables (63.3) (121.1)
- Trade and other payables 3.8 59.2
Change in provisions 2.7 (1.4)
Change in retirement benefit obligations (2.5) (0.6)
Total 105.5 112.1
The changes in working capital (movements in inventories, trade and other
receivables and trade and other payables) exclude a number of non-cash
transactions. The most significant of these arises from movements due to
changes in foreign exchange rates, on translation of the Group's overseas
operations into the Group's presentation currency, Euro.
15. Acquisition
Adjustments arising on prior year acquisition
On 2 November 2023, the Group completed a transaction to acquire 100% of the
ordinary share capital of Cascade Engineering Europe (CEE) 'Cascade' an
automotive company based in Hungary. On finalisation of the acquisition
accounting for the purchase, an adjustment was made for working capital of
€0.7 million as shown below:
€m
Consideration as previously reported 21.4
Working capital adjustment (0.7)
Revised consideration 20.7
Due to the proximity of the date of acquisition to the year-end, the values of
net assets previously reported were provisional. Upon finalisation of the
purchase price allocation, a separable acquired intangible asset was
recognised for the customer order backlog valuation of €1.9 million, and
various other fair value adjustments were made as below. The adjustments are
not material and as such the comparative balance sheet was not restated, and
the adjustments have therefore been made in the current period.
2 November 2023 €m
Goodwill as previously reported 11.6
Customer order backlog valuation (1.9)
Fair value uplift to property, plant and equipment (3.5)
Deferred income tax liabilities 0.5
Working capital adjustment to consideration (0.7)
Revised goodwill 6.0
16. Commitments and contingencies
Capital commitments
Expenditure on intangible assets and property, plant and equipment, authorised
and contracted for at the end of the period but not yet incurred is as below:
Unaudited Audited
30 June 31 December
2024 2023
€m €m
Intangible assets 2.6 4.5
Property, plant and equipment 38.1 40.3
Total 40.7 44.8
17. Related party transactions
At 30 June 2024 there is no ultimate controlling party of TI Fluid Systems
plc.
Balances and transactions between Group companies have been eliminated on
consolidation and are not disclosed in this note except for subsidiaries that
are not wholly owned. Transactions with those companies are made on the
Group's standard terms of trade.
There have been no significant changes in the nature of transactions between
subsidiaries that are not wholly owned and other group companies that have
materially affected the condensed group financial statements in the period.
18. Glossary of terms
Adjusting items
Adjusting items represent transactions, that in Management's view, do not form
part of the substance of the trading activities of the Group, such as
large-scale reorganisations, system implementations, acquisition costs and
certain non-cash accounting measures. Adjusting Items comprise: exceptional
items, depreciation and amortisation arising on purchase accounting, net
foreign exchange losses/(gains), restructuring costs, customisation and
configuration costs of significant software as a service (SaaS) arrangements
and costs associated with business acquisitions or disposals.
Adjusted Basic EPS
Adjusted Net Income divided by the weighted average number of shares
outstanding.
Adjusted Diluted EPS
Adjusted Net Income divided by the weighted average number of diluted shares
outstanding.
Adjusted EBIT
Operating profit excluding adjusting Items.
Adjusted EBITDA
Adjusted EBIT plus depreciation, amortisation and non-exceptional impairments
on non-purchase accounting.
Adjusted Free Cash Flow
Free Cash Flow adjusted for cash movements in financial assets at fair value
through profit or loss, and the net cash flows arising on adjusting items.
Adjusted Net Income
Profit or loss for the period attributable to ordinary shareholders, excluding
Adjusting Items, net of their tax effect.
Adjusted ROCE
Adjusted Return on Capital Employed is Adjusted EBIT divided by the two-year
trailing average of capital employed, which is defined as total equity,
excluding taxation balances, derivatives, net debt and lease liabilities,
restructuring provisions and balances related to Bain acquisition accounting
(goodwill, intangible assets and purchase price allocation adjustments).
BEV
Battery electric vehicles.
CGU
Cash-generating unit, being the management level of the Group, for example
Asia Pacific (APAC).
Constant currency
The remeasurement of prior period results at current exchange rates to
eliminate fluctuations in translation rates and achieve a like-for-like
comparison.
EBITDA
Profit or loss before tax, net finance expense, depreciation, amortisation and
impairment of property, plant and equipment, intangible assets and
right-of-use assets.
EV
Electric vehicles including BEV and HEV.
FHEV
Full hybrid electric vehicles, includes PHEV and self-charging HEV.
Free Cash Flow
The total of net cash generated from operating activities and net cash used by
investing activities.
GLVP
Global light vehicle production of light vehicles.
HEV
Hybrid electric vehicles, excluding mild hybrid vehicles.
ICE
Internal combustion engine vehicles.
LVP
Light vehicle production used as a reference when referring to regional data.
MHEV
Mild hybrid electric vehicles, which only have modest electrification.
Net debt
The total of current and non-current borrowings excluding lease liabilities,
net of cash and cash equivalents and financial assets at fair value through
profit or loss.
Net leverage
Net debt divided by the last 12 months' Adjusted EBITDA.
OEM
Original equipment manufacturer, used to refer to vehicle manufacturers, the
main customers of the Group.
PHEV
Plug-in hybrid electric vehicles.
Revenue outperformance
The growth in revenue at constant currency compared to the growth in global
light vehicle production volumes.
SBTi
Science-based target initiative, which is used to refer to the climate change
targets aligned to the Paris Agreement targets.
Independent review report to TI Fluid Systems plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed TI Fluid Systems plc's condensed consolidated interim
financial statements (the "interim financial statements") in the Half Year
Results 2024 of TI Fluid Systems plc for the 6 month period ended
30 June 2024 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
• the Condensed Consolidated Balance Sheet as at 30 June 2024;
• the Condensed Consolidated Income Statement and Condensed
Consolidated Statement of Comprehensive Income for the period then ended;
• the Condensed Consolidated Statement of Cash Flows for the period
then ended;
• the Condensed Consolidated Statement of Changes in Equity for the
period then ended; and
• the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year Results 2024 of TI
Fluid Systems plc have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Half Year Results 2024 and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half Year Results 2024, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Half Year Results 2024 in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Half Year Results 2024,
including the interim financial statements, the directors are responsible for
assessing the group's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half Year Results 2024 based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Birmingham
7 August 2024
Directors' Responsibility Statement
The directors confirm that these condensed interim financial statements have
been prepared in accordance with UK adopted International Accounting Standard
34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority and that
the interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
• An indication of important events that have occurred during the
first six months and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
• Material related-party transactions in the first six months and
any material changes in the related-party transactions described in the last
annual report.
By order of the Board
Hans Dieltjens Alexander De Bock
Chief Executive Officer and President Chief Financial Officer
7 August 2024 7 August 2024
1 July 2024 S&P
2 June 2024 S&P
3 July 2023 S&P
4 Includes Credit Support Agreement ("CSA") element of 0.11448%
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