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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the Month of February 2017
Commission File Number: 001-32294
TATA MOTORS LIMITED
(Translation of registrant’s name into English)
BOMBAY HOUSE
24, HOMI MODY STREET,
MUMBAI 400 001, MAHARASHTRA, INDIA
Telephone # 91 22 6665 8282 Fax # 91 22 6665 7799
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes ☐ No ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes ☐ No ☒
Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing theinformation to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes ☐ No ☒
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g 3-2(b): Not Applicable
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| Item 1: |
2017FY Q3 Investor presentation | |
| 2017FY Q3 Interim Financial Statements |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.
| Tata Motors Limited | ||
| By: | /s/ Hoshang K Sethna | |
| Name: | Hoshang K Sethna | |
| Title: | Company Secretary | |
Dated: February 15, 2017
Table of Contents
JAGUAR
LAND ROVER
Jaguar Electrifies
JAGUAR LAND ROVER
RESULTS FOR THE THREE MONTHS ENDED 31 DECEMBER 2016
14th FEBRUARY 2017
Table of Contents
DISCLAIMER
JAGUAR LAND
ROVER
Statements in this presentation describing the objectives, projections, estimates and expectations of Jaguar Land Rover Automotive plc and its direct and
indirect subsidiaries (the “Company”, “Group” or “JLR”) may be “forward-looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those
expressed or implied. Important factors that could make a difference to the Company’s operations include, among others, economic conditions affecting demand / supply and price conditions in the domestic and overseas markets in which the Company
operates, changes in Government regulations, tax laws and other statutes and incidental factors.
- Q4 FY17 represents the 3 month period from 1 January 2017
to 31 March 2017
- Q3 FY17 represents the 3 month period from 1 October 2016 to 31 December 2016
- Q3 FY16 represents the 3 month period from 1 October 2015 to 31 December 2015
- 9M
FY17 represents the 9 month period from 1 April 2016 to 31 December 2016
- 9M FY16 represents the 9 month period from 1 April 2015 to
31 December 2015
Consolidated results of Jaguar Land Rover Automotive plc and its subsidiaries contained in the presentation are unaudited and presented under
IFRS as approved in the EU.
Retail volume data includes and wholesale volume excludes sales from the Company’s unconsolidated Chinese joint venture.
-2-
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PARTICIPANTS
JAGUAR LAND
ROVER
Kenneth Gregor
CFO, Jaguar Land Rover
Bennett Birgbauer
Treasurer, Jaguar Land Rover
C. Ramakrishnan
Group CFO, Tata Motors
-3-
Table of Contents
Q3 FY17 FINANCIAL RESULTS
JAGUAR LAND ROVER
• Retail sales of 149.3k units, 8.5% up on Q3 FY16
• Wholesale volumes 130.9k units, 4.9% lower — more than explained by the run-out of Discovery in advance of the all-new model going on sale in Q4 FY17
• Revenue of £6.5b, up from £5.8b with the weaker Pound
• PBT £255m, down from £499m a year ago primarily reflecting:
• Lower
wholesale volumes with less favourable product mix partially offset by favourable market mix (including the run-out of Discovery)
• Higher marketing expense, including extended 16MY run-out cost in the US
• Higher depreciation and amortisation
• Unfavourable unrealised FX and commodity
hedge revaluation
• Offset partially by further recoveries related to Tianjin
• Positive free cashflow of £54m after £926m of total investment spending
• Cash and deposits of £3.8b and an undrawn revolving credit facility of £1.9b – before a € 650m 7 year bond and a £300m 4
year bond issued in January 2017 with coupons of 2.20% and 2.75% respectively
-4-
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KEY FINANCIAL METRICS
JAGUAR LAND ROVER
Quarter ended 31 December 9 months ended
31 December
(£ millions, unless stated) 2016 2015 Change 2016 2015 Change
Retail volumes (‘000 units) 149.3 137.7 11.6 424.5 362.8 61.7
Wholesale volumes
(‘000 units)1 130.9 137.6 (6.7) 375.9 359.4 16.5
Revenues 6,537 5,781 756 17,951 15,614 2,337
EBITDA2 611 834 (223) 1,898 2,244 (346)
EBITDA% 9.3% 14.4% (5.1 ppt) 10.6% 14.4% (3.8 ppt)
Profit before tax and exceptional item 170 469 (299) 799 1,195 (396)
Exceptional item — Tianjin recoveries 85 30 55 135 (215) 350
Profit
before tax 255 499 (244) 934 980 (46)
Profit after tax 167 440 (273) 715 840 (125)
Free cash flow (before financing) 54 454 (400) (509) (602) 93
Cash 3,841 3,408 433 3,841 3,408
433
1) Excludes Chery Jaguar Land Rover – Q3 FY17 21,335 units; Q3 FY16 12,830, 9M FY17 46,936 units; 9M FY16 22,219
2) EBITDA defined to include the revaluation of current assets and liabilities and realised FX and commodity hedges but excludes the revaluation of foreign currency debt,
unrealised FX and commodity hedges, as well as exceptional items
-5-
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RECORD Q3 RETAIL SALES OF 149.3k UP 8%
CHINA, NORTH AMERICA AND EUROPE UP
JAGUAR LAND ROVER
Units in ‘000
North America UK China*
Up 20% Down (3)% Up 38%
28.1 33.6 25.0 24.2 26.3 36.4
24.6 21.7 19.0 15.9 9.0 19.4
12.3 11.1
3.5 11.9 6.0 8.4 5.0 5.9
Q3 FY16 Q3 FY17 Q3 FY16 Q3 FY17 Q3 FY16 Q3 FY17
Europe Overseas
Up 7% Down (21)%
31.8 34.1 26.5 21.0
26.3 24.3 22.5 15.3
Land Rover
Jaguar 5.5 9.7 3.9 5.7
CJLR Q3 FY16 Q3 FY17 Q3 FY16 Q3 FY17
* Total volumes includes sales from Chery Jaguar Land
Rover – Q3 FY17 19,395 units; Q3 FY16 9,010
Q3 FY17
North
America,
23%
UK, 16%
Europe (ex.
Russia),
23%
China
Region,
24%
Overseas,
14%
Units
149,288
Q3 FY16
North
America,
20%
UK, 18%
Europe (ex.
Russia),
23%
China
Region, 19%
Overseas,
19%
137,653 Units
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Table of Contents
Q3 WHOLESALES OF 130,910 DOWN 5%
MORE THAN EXPLAINED BY DISCOVERY RUN-OUT
JAGUAR LAND
ROVER
Units in ‘000
11.4 12.5 10.0 5.2 2.7 2.6 20.9 2.9 2.8
XE XF* XJ F-PACE F-TYPE
24.9 22.6 15.3 5.7 23.9 25.0 23.1 20.0 17.5 18.4 5.8 0.1
Discovery Sport* Discovery Range
Rover Evoque* Range Rover Sport Range Rover Discontinued (Defender, Freelander)
Total JLR
137.6 130.9
27.0 44.1
110.6 86.8
Q3 FY16
Q3 FY17
Land Rover
Jaguar
* Total volumes excludes sales from Chery Jaguar Land Rover – Q3 FY17 21,335
units. Q3 FY16 12,830
-7-
Table of Contents
KEY PROFIT DRIVERS
JAGUAR
LAND ROVER
• Revenue of £6.5b up from £5.8b in Q3 FY16, primarily reflecting the weaker Pound partially offset by lower wholesale volumes
• EBITDA of £611m (9.3% margin) compared to £834m (14.4%) a year ago, primarily reflecting:
• Lower wholesale volumes and less favourable product mix partially offset by favourable market mix
(2.0%, including the run-out of Discovery)
•
Unfavourable variable marketing expense (1.7%, including extended 16MY runout expense in the US)
• Higher new model launch costs (0.3%) and biennial pay
negotiation settlement (0.4%)
• Favourable operating exchange offset by realised hedges
• EBITDA margin, analytically adjusting revenue to include FX hedging gains and losses included in EBITDA
10.1%
• PBT £255m, down from £499m a year ago reflecting:
• Lower EBITDA (£223m) and higher depreciation and amortisation (£52m)
•
Unfavourable unrealised FX and commodity hedge revaluation and USD debt revaluation (£42m)
• Higher China JV profits (£13m) and lower net finance
expense (£5m)
• Further recoveries related to Tianjin (£55m)
-8-
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CASH FLOW
POSITIVE FREE
CASH FLOW AFTER INVESTMENT
JAGUAR LAND ROVER
Quarter ended 31 December 9
months ended 31 December
(£ millions, unless stated) 2016 2015 Change 2016 2015 Change
EBITDA 611 834 (223) 1,898 2,244 (346)
Working capital (incl. non cash accruals)* 204 376
(172) (281) (584) 303
Tax paid (9) (12) 3 (109) (117) 8
Cash flow from
operations 806 1,198 (392) 1,508 1,543 (35)
Investment in fixed and intangible assets (830) (765) (65) (2,133) (2,177) 44
Finance income and other (includes FX revaluation) 78 21 57 116 32 84
Free cash flow (before
financing) 54 454 (400) (509) (602) 93
Changes in debt (24) 18 (42) (56) (4) (52)
Finance expenses and fees (26) (24) (2) (95) (99) 4
Dividends paid - - - (150) (150) -
Net change in cash & financial deposits 4 448 (444) (810) (855) 45
*Includes £68m dividend received from CJLR
-9-
Table of Contents
EXCITING NEW PRODUCTS
RECENT & UPCOMING NEW MODELS TO DRIVE GROWTH
JAGUAR LAND ROVER
F-PACE (May 2016) Evoque convertible (Jun 2016) XFL (Sep 2016)
All new Discovery (Q4 FY17) Watch this space! I-PACE concept (2018)
-10 -
Table of Contents
JAGUAR I-PACE CONCEPT
JLR’S FIRST BATTERY ELECTRIC VEHICLE
JAGUAR LAND ROVER
I-PACE concept
•
All-wheel-drive from twin electric motors
• 500km range (NEDC cycle)
• 0-60mph in 4 seconds
• 90kWh lithium-ion battery
• Rapid charging takes 2 hours
• On the road in 2018
Table of Contents
LOOKING AHEAD
CONTINUING
TO INVEST TO DRIVE PROFITABLE GROWTH
JAGUAR LAND ROVER
• JLR’s
strategy continues to be to invest in new products, technology and manufacturing capacity to grow profitably.
• Jaguar Land Rover plans to continue to build
on recent successful product launches with the continued sales ramp up of the Jaguar F-PACE, XF long wheel base in China, the all new Land Rover Discovery and others to be announced this year.
• The start of new Discovery wholesales, peak March UK sales and other seasonal factors should support a solid final quarter.
• JLR continues to have a balanced sales profile and will continue to closely monitor and assess market conditions in key regions.
-12 -
Table of Contents
JAGUAR LAND ROVER
Thank
You
Kenneth Gregor
CFO, Jaguar Land Rover
C. Ramakrishnan
Group CFO, Tata Motors
Bennett Birgbauer
Treasurer, Jaguar Land Rover
Jaguar Land Rover Investor Relations
investor@jaguarlandrover.com
Tata Motors Investor Relations
Ir_tml@tatamotors.com
Jaguar Land Rover
Abbey Road, Whitley, Coventry CV3 4LF
Jaguarlandrover.com
-13 -
Table of Contents
Jaguar Land Rover
ADDITIONAL SLIDES
Table of Contents
INCOME STATEMENT
Jaguar
Land Rover
Quarter ended 31 December 9 months ended 31 December
(£ millions, unless stated) 2016 2015 Change 2016 2015 Change
Revenues
6,537 5,781 756 17,951 15,614 2,337
Material and other cost of sales (3,869) (3,496) (373) (10,623) (9,318) (1,305)
Employee costs (648) (582) (66) (1,838) (1,673) (165)
Other (expense) /income(1) (1,788)
(1,192) (596) (4,664) (3,323) (1,341)
Product development costs capitalised 379 323 56 1,072 944 128
EBITDA 611 834 (223) 1,898 2,244 (346)
Depreciation and amortisation (409) (357) (52) (1,207)
(1,040) (167)
Undesignated debt/unrealised hedges MTM(2) (62) (20) (42) 19 15 4
Net finance (expense) / income and other (5) (10) 5 (24) (39) 15
Share of
profit / (Loss) from Joint Venture 35 22 13 113 15 98
Profit before tax and exceptional item 170 469 (299) 799 1,195 (396)
Exceptional item 85 30 55 135 (215) 350
Profit before tax 255 499 (244) 934 980 (46)
Income tax expense (88) (59) (29) (219) (140) (79)
Profit after tax 167 440
(273) 715 840 (125)
1) Includes mark to market of current assets and liabilities and realised gains/losses on matured FX and commodity hedges
2) Includes mark to market of unrealised FX options (time value) and commodity hedges and revaluation of foreign currency debt
-15 -
Table of Contents
Jaguar Land Rover
RECORD
Q3 RETAIL SALES OF 149.3k UP 8%
STRONG F-PACE, XF AND DISCOVERY SPORT SALES
Units in ‘000
11.4 10.9 6.8 9.7 3.0 3.0 19.3 2.6 2.4
XE XF* XJ F-PACE F-TYPE
26.6 30.8 13.8 8.0 28.4 27.7 22.4 22.7 16.6 14.7 6.0 0.1
Discovery Sport* Discovery Range
Rover Evoque* Range Rover Sport Range Rover Discontinued (Defender, Freelander)
TOTAL JLR
137.7 23.8 113.8 Q3 FY16
149.3 45.4 103.9 Q3 FY17
Land Rover
Jaguar
* Total volumes includes sales from Chery Jaguar Land Rover – Q3 FY17 19,395 units; Q3 FY16 9,010
- 16 -
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RECORD 9M RETAIL SALES OF 424.5k UP 17%
LED BY F-PACE, XE, XF AND DISCOVERY SPORT
Jaguar Land
Rover
Units in ‘000
23.6 31.3 23.2 25.6 8.8 8.4 46.0 8.7 7.7 0.2 0.0
XE XF* XJ F-PACE F-TYPE Discontinued (XK)
61.6 88.2 35.8 33.7 77.6 79.5 62.7 63.5 43.8 39.6 17.2 1.2
Discovery Sport* Discovery Range
Rover Evooque* Range Rover Sport Range Rover Discountinued (Defender, Freelander)
Total JLR
362.8 64.6 298.2 9M FY16
424.5 118.9 305.6 9M FY17
Land Rover Jaguar
* Total volumes includes sales from Chery Jaguar Land Rover – 9M FY17
46,926 units; 9M FY16 19,398
- 17 -
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RECORD 9M RETAIL SALES OF 424.5k UP 17%
ALL REGIONS UP EXCEPT OVERSEAS
Jaguar Land Rover
Units in ‘000
North America UK China*
Up 25% Up 14% Up 35%
88.4 71.9 82.1 91.6
70.8 59.5 53.0 56.1 67.7 19.4 46.9
59.7 37.7 29.2
11.1 28.9 19.0 26.0 10.7 15.5
9M FY16 9M FY17 9M FY16 9M FY17 9M FY16 9M FY17
Europe Overseas
Up 17% Down (6)%
83.8 97.8 68.5 64.6
69.6 69.4 58.9 48.9
Land Rover
Jaguar 14.3 28.4 9.6 15.7
CJLR 9M FY16 9M FY17 9M FY16 9M FY17
* Total volumes includes sales from Chery Jaguar Land
Rover – 9M FY17 46,926 units; 9M FY16 19,398
9M FY17
North
America,
21%
UK, 19%
Europe (ex.
Russia),
23%
China
Region,
22%
Overseas,
15%
424,499 Units
9M FY16
North
America,
20%
UK, 20%
China
Region, 19%
Europe (ex.
Russia),
23%
Overseas,
19%
362,758 Units
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Table of Contents
JAGUAR LAND ROVER
Q3
WHOLESALES OF 130,910 DOWN 5%
NORTH AMERICA AND CHINA UP
Units in ‘000
North America UK China*
Up 23% Down (9)% Up 5%
37.6 26.0 15.3 16.1
30.5 23.7
21.8 10.0
18.3 17.0 10.1
26.1
15.8 7.7 6.7 5.2 6.1
4.4
Q3 FY16 Q3 FY17 Q3 FY16 Q3 FY17 Q3 FY16 Q3 FY17
Europe Overseas
Down (14)% Down (26)%
37.2
32.1 28.7
21.4
32.0 22.7 24.2
15.3
Jaguar Land Rover 5.2 9.4 4.6 6.1
Q3 FY16 Q3 FY17 Q3 FY16 Q3 FY17
* Total volumes excludes sales from Chery Jaguar Land Rover
– Q3 FY17 21,335 units. Q3
FY16 12,830
Q3 FY17
UK, 18%
North
America,
29%
China
Region,
12%
Europe (ex.
Russia),
25%
Overseas,
16%
130,910 Units
Q3 FY16
North
America,
22%
UK, 19%
China
Region, 11%
Europe (ex.
Russia),
27%
Overseas,
21%
137,631 Units
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JAGUAR LAND ROVER
9M
WHOLESALES OF 375.9k UP 5%
STRONG SALES OF F-PACE, XE AND EVOQUE
Units in ‘000
29.1 33.4 23.8 18.8 7.4 7.1 52.9 9.5 8.4 0.1 0.0
XE XF* XI F-PACE F-TYPE Discontinued (XK)
61.6 59.5 37.0 28.5 64.0 68.1 63.8 59.8 44.8 38.8 18.3 0.6
Discovery Sport* Discovery Range
Rover Evooque* Range Rover Sport Range Rover Discountinued (Defender, Freelander)
Total JLR
359.4 69.9 289.5 9M FY16
375.9 120.6 255.3 9M FY17
* Total volumes excludes sales from Chery Jaguar Land Rover – 9M FY17 49,936 units. 9M FY16 22,219
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Table of Contents
9M WHOLESALES OF 375.9k UP 5%
NORTH AMERICA, UK AND EUROPE UP
Jaguar Land Rover
Units in ‘000
North America UK China*
Up 26% Up 1% Down (4)%
74.7 75.3 45.1 43.2
98.4
78.0
61.3 52.2 53.1 35.0 27.1
66.6
37.1 22.4 22.3 10.2 16.2
11.4
9M FY16 9M FY17 9M FY16 9M FY17 9M FY16 9M FY17
Europe
Overseas
Up 8%
Down (14)%
72.3
89.3
96.9
62.0
73.8
67.9
61.9
45.9
Jaguar Land Rover
15.5
28.9
10.4
16.2
9M FY16
9M FY17
9M FY16
9M FY17
9M FY17
North
America,
26%
UK, 20%
China
Region,
12%
Europe (ex.
Russia),
26%
Overseas,
17%
375,870 Units
9M FY16
North
America,
22%
UK, 21%
China
Region, 13%
Europe (ex.
Russia),
25%
Overseas,
20%
359,439 Units
* Total volumes excludes sales from Chery Jaguar Land Rover – 9M FY17
49,936 units. 9M FY16 22,219
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Table of Contents
FINANCING STRUCTURE
STRONG LIQUIDITY
JAGUAR LAND ROVER
£ million (Face value)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
16%
5,278
1,870
3,408
860
Q3 FY16
16%
5,710
1,870
3,840
1,119
Q3 FY17
1,870
807
570
407
407
400
CY17
CY18
CY19
CY20
CY21
CY22
CY23
CY24
Total Balance Sheet Debt as at
31 December 2016
£mn
16%
Bonds
2,591
Short term borrowings
139
Finance lease obligations
8
Pre paid financing costs
(16)
Total
2,722
Cash and financial deposits Bonds* Undrawn RCF
Net Cash Cash/LTM revenue %
*Excludes €650m 7 year and £300m 4 year bonds issued in January at coupons of 2.20% and 2.75% respectively
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Table of Contents
PRODUCT AND OTHER INVESTMENT
CAPITAL EXPENDITURE TO GROW THE BUSINESS
JAGUAR LAND ROVER
(£ millions, unless stated)
R&D expense
Capitalised
Expensed
Total R&D expense
Investment in tangible and other
intangible assets
Total product and other investment
Capital investment as % of revenue
Of which capitalised
Quarter ended 31 December
2016
379
96
475
451
926
14.2%
830
2015
323
77
400
442
842
14.6%
765
Change
56
19
75
9
84
(0.4 ppt)
65
9 months ended 31 December
2016
1,072
269
1,341
1,061
2,402
13.4%
2,133
2015
944
216
1,160
1,233
2,393
15.3%
2,177
Change
128
53
181
(172)
9
(1.9 ppt)
(44)
- 23 -
Table of Contents
FOREIGN EXCHANGE
IMPACT
ON PROFITABILITY
JAGUAR LAND ROVER
(£ millions, unless stated)
Operational exchange1
Realized FX Hedges and other2
Revaluation of Current Assets/Liabilities3
Total FX impacting EBITDA
Revaluation of Undesignated Debt3
Unrealised FX Hedges3
Total FX below EBITDA
Total FX impact on PBT
Total FX Revaluation (included above)
Unrealised commodities
Realised commodities
End of Period Exchange Rates
GBP:USD
GBP:EUR
GBP:CNY
Quarter ended 31 December
2016
n/a
(455)
(2)
n/a
(54)
(13)
(67)
n/a
(69)
5
(11)
1.229
1.168
8.565
Q-o-Q
5.1%
0.9%
1.0%
2015
n/a
(71)
2
n/a
(36)
43
7
n/a
9
(27)
(18)
1.483
1.357
9.740
Change
438
(384)
(4)
50
(18)
(56)
(74)
(24)
(78)
32
7
Q-o-Q
2.1%
0.6%
1.3%
Memo:
1
The year-on-year operational exchange is an analytical estimate, which may differ from the actual
impact
2 Realised hedge gains/(losses) are driven by the difference between executed hedging exchange
rates compared to accounting exchange rates
3 Exchange revaluation gains/(losses) reflects the estimated impact of the change in end of
period exchange rates as applied to relevant balances
- 24 -
Table of Contents
JAGUAR LAND ROVER
Jaguar Land Rover Automotive plc
Interim Report
For the three month and nine month period ended
31 December 2016
Company registered number: 06477691
Table of Contents
| Management’s discussion and analysis of financial condition and results of operations |
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| Condensed consolidated financial statements |
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Group, Company, Jaguar Land Rover and JLR refers to Jaguar Land Rover Automotive plc and its subsidiaries.
| EBITDA | defined as profit for the period before income tax expense, finance expense (net of capitalised interest), finance income, depreciation and amortisation, foreign exchange gains/losses on financing and unrealised derivatives, gains/losses on unrealised commodity derivatives, share of profits/losses from equity accounted investments and exceptional items. | |
| EBITDA margin | measured as EBITDA as a percentage of revenue. | |
| PBT | profit before tax. | |
| PAT | profit after tax. | |
| Net cash | measured as cash and cash equivalents plus short-term deposits less total balance sheet borrowings (including secured and unsecured borrowings, short-term invoice discounting facilities and finance leases). | |
| Free cash flow | reflects net cash generated from operating activities less net cash used in investing activities (excluding investments in short-term deposits) and includes foreign exchange gains/losses on short term deposits. | |
| Total investment | reflects net cash used in investing activities and expensed R&D (not included in net cash used in investing activities) but excluding movements in other restricted deposits, movements in short-term deposits, finance income received and proceeds from the sale of property, plant and equipment. | |
| FY17 | 12 months ending 31 March 2017. | |
| FY16 | 12 months ended 31 March 2016. | |
| CY16 | 12 months ended 31 December 2016. | |
| Q3 | 3 months ended 31 December. | |
| China JV | Chery Jaguar Land Rover Automotive Co., Ltd. | |
Table of Contents
Management’s discussion and analysis of financial condition and results of operations
Jaguar Land Rover achieved record third quarter retail sales with higher volumes in China (including China JV sales), North America and Europe led by strong sales of Discovery Sport, F-PACE and the new long wheel base Jaguar XFL in China. However, profits and margins were lower primarily reflecting lower wholesale volumes (excluding sales from the China JV), more than explained by the run-out of Discovery, and higher marketing expense. Key Q3 FY17 results are as follows:
Key metrics for Q3 FY17 results, compared to Q3 FY16, are as follows:
| • | Retail sales of 149.3k units (including the China JV), up 8.5%. |
| • | Wholesales of 130.9k units (excluding the China JV), down 4.9% |
| • | Revenue of £6.5 billion, up from £5.8 billion. |
| • | EBITDA of £611 million (9.3% margin; 10.1% analytically adjusting revenue to include gains and losses on revenue hedges included in EBITDA), down from £834 million (14.4% margin). |
| • | PBT of £255 million, down from £499 million. |
| • | PAT of £167 million, down from £440 million. |
| • | Free cash flow before financing was £54 million after total investment spending of £926 million. |
The economic environment remained generally positive in most markets in Q3 FY17. Strong consumer spending in the UK supported solid economic performance overall, whilst sterling weakened further on Brexit concerns. Rising employment in the US drove strong economic growth and expectations for fiscal stimulus, following the election of Donald Trump, have buoyed market confidence whilst the US Federal Reserve increased rates by 0.25% in December 2016. China reported growth of 6.7% for CY16 as ongoing government stimulus supported economic performance. Growth in Europe was solid with labour markets improving. However, conditions in emerging markets remained generally challenging.
Total automotive industry car volumes (units)
| Q3 FY17 | Q3 FY16 | Change (%) | ||||||||||
| China |
7,606,600 | 6,575,800 | 15.7 | % | ||||||||
| Europe (excluding UK) |
2,348,616 | 2,301,200 | 2.1 | % | ||||||||
| UK |
542,291 | 536,617 | 1.1 | % | ||||||||
| US |
4,418,700 | 4,401,100 | 0.4 | % | ||||||||
| Other markets (Including Russia and Brazil) |
3,282,894 | 3,337,546 | (1.6 | )% | ||||||||
The total industry car volume data above has been compiled using relevant data available at the time of publishing this interim report, compiled from national automotive associations such as the Society of Motor Manufacturers and Traders in the UK and the ACEA in Europe, according to their segment definitions, which may differ from those used by JLR.
Jaguar Land Rover volume performance
Q3 FY17 total retail sales for the third quarter were 149,288 units (including the China JV), up 8.5% compared to Q3 FY16, primarily driven by the new Jaguar F-PACE as well as strong sales of the Land Rover Discovery Sport and long wheel base Jaguar XFL in China. Retail sales growth year-on-year was strong in China, North America and Europe but down in the UK and in other overseas markets. Land Rover retailed 103,924 units in Q3 FY17, down 8.7% compared to Q3 FY16 as the run-out of Discovery and discontinuation of Defender outweighed continuing strong sales of Discovery Sport. Jaguar retailed 45,364 units, up 90.3% as sales of the F-PACE and long wheel base XFL in China continue to grow.
Wholesales totalled 130,910 units (excluding China JV) in Q3 FY17, down 4.9% compared to the same quarter a year ago. By brand, Jaguar wholesales in Q3 FY17 were 44,099 units, up 63.2% compared to Q3 FY16 driven by F-PACE and XE, and Land Rover wholesales were 86,811 units, down 21.5% primarily reflecting the run-out of Discovery, discontinuation of Defender, and production of the Discovery Sport at the China JV, as well as 2017 model year changeover of Range Rover and Range Rover Sport. By region, wholesales were up in North America (23.5%) and China (5.2%) but down in the UK (8.8%), Europe (13.6%) and in other Overseas markets (25.6%)
2
Table of Contents
Jaguar Land Rover’s Q3 FY17 retail sales (including the China JV) by key region and model compared to Q3 FY16 is detailed in the following table:
| Q3 FY17 | Q3 FY16 | Change (%) | ||||||||||
| UK |
24,227 | 24,994 | (3.1 | %) | ||||||||
| North America |
33,630 | 28,073 | 19.8 | % | ||||||||
| Europe |
34,060 | 31,828 | 7.0 | % | ||||||||
| China2 |
36,408 | 26,308 | 38.4 | % | ||||||||
| Overseas |
20,963 | 26,450 | (20.7 | %) | ||||||||
|
|
|
|
|
|
|
|||||||
| Total JLR |
149,288 | 137,653 | 8.5 | % | ||||||||
|
|
|
|
|
|
|
|||||||
| F-PACE |
19,336 | — | n/a | |||||||||
| F-TYPE |
2,356 | 2,616 | (9.9 | %) | ||||||||
| XE |
10,878 | 11,420 | (4.7 | %) | ||||||||
| XF2 |
9,745 | 6,802 | 43.3 | % | ||||||||
| XJ |
3,049 | 2,991 | 1.9 | % | ||||||||
| XK1 |
— | 12 | n/a | |||||||||
|
|
|
|
|
|
|
|||||||
| Jaguar2 |
45,364 | 23,841 | 90.3 | % | ||||||||
|
|
|
|
|
|
|
|||||||
| Discovery Sport2 |
30,787 | 26,588 | 15.8 | % | ||||||||
| Discovery1 |
8,009 | 13,844 | (42.1 | %) | ||||||||
| Range Rover Evoque2 |
27,688 | 28,406 | (2.5 | %) | ||||||||
| Range Rover Sport |
22,723 | 22,386 | 1.5 | % | ||||||||
| Range Rover |
14,656 | 16,567 | (11.5 | %) | ||||||||
| Defender1 |
59 | 5,997 | (99.0 | %) | ||||||||
| Freelander1 |
2 | 24 | (91.7 | %) | ||||||||
|
|
|
|
|
|
|
|||||||
| Land Rover2 |
103,924 | 113,812 | (8.7 | %) | ||||||||
|
|
|
|
|
|
|
|||||||
| Total JLR |
149,288 | 137,653 | 8.5 | % | ||||||||
|
|
|
|
|
|
|
|||||||
| 1 | Production of the Jaguar XK, Land Rover Freelander, Defender and Discovery models have now been discontinued. |
| 2 | China JV retail volume in Q3 FY17 was 19,395 units (10,406 units of Discovery Sport, 5,186 units of Evoque and 3,803 units of Jaguar XFL). |
Q3 FY17 revenue was £6.5 billion, up from the £5.8 billion in Q3 FY16 as favourable foreign exchange movements more than offset lower wholesale volumes. Revenue for the 9 months to 31 December 2016 was £18.0 billion, up
£2.3 billion compared to the same period a year ago.
EBITDA of £611m (9.3% margin) compared to £834m (14.4%) a year ago, primarily reflecting:
| • | Lower wholesale volumes and less favourable product mix partially offset by favourable market mix (including the run-out of Discovery) |
| • | Unfavourable variable marketing expense (including extended 16MY run-out expense in the US) |
| • | Higher new model launch costs and Biennial pay negotiation settlement |
| • | Favourable operating exchange offset by realised hedges |
The EBITDA margin analytically adjusting revenue for the inclusion of FX hedging gains and losses included in EBITDA was 10.1%.
EBITDA for the 9 months to 31 December 2016 was £1.9 billion (10.6% margin), down £346 million compared to the same 9 month period last year.
PBT was £255 million in Q3 FY17, down from £499 million a year ago predominantly reflecting:
| • | Lower EBITDA (£223 million) and higher depreciation and amortisation (£52 million) |
| • | Unfavourable unrealised FX and commodity hedge revaluation as well as USD debt revaluation (£42 million) |
| • | Higher China JV profits (£13 million) and lower net finance expense (£5 million) |
| • | Further £85 million of exceptional recoveries related to Tianjin (£55 million) |
3
Table of Contents
PBT for the 9 months to 31 December 2016 was £934 million, down £46 million compared to the same period last year.
PAT for Q3 FY17 was £167 million, compared to £440 million in the same period last year. PAT for the 9 months to 31 December 2016 was £715 million, down £125 million compared to last year.
EBITDA reconciliation
| Quarter ended 31 December (£ millions) | 2016 | 2015 | ||||||
| EBITDA Margin |
9.3 | % | 14.4 | % | ||||
| EBITDA |
611 | 834 | ||||||
| Adjustments: |
||||||||
| Depreciation and amortisation |
(409 | ) | (357 | ) | ||||
| Foreign exchange losses - financing |
(54 | ) | (36 | ) | ||||
| Foreign exchange losses - unrealised derivatives |
(13 | ) | 43 | |||||
| Commodity losses - unrealised derivatives |
5 | (27 | ) | |||||
| Finance income |
7 | 9 | ||||||
| Finance expense (net) |
(12 | ) | (19 | ) | ||||
| Share of profit from equity accounted investments |
35 | 22 | ||||||
|
|
|
|
|
|||||
| Profit before tax and exceptional item |
170 | 469 | ||||||
|
|
|
|
|
|||||
| Exceptional item |
85 | 30 | ||||||
|
|
|
|
|
|||||
| Profit before tax |
255 | 499 | ||||||
|
|
|
|
|
|||||
| Income tax expense |
(89 | ) | (59 | ) | ||||
|
|
|
|
|
|||||
| Profit after tax |
166 | 440 | ||||||
|
|
|
|
|
|||||
Cash flow, liquidity and capital resources
Free cash flow before financing in Q3 FY17 was £54 million after £926 million of total investment spending with £282 million of favourable working capital, non-cash accrual and other movements (including the c.£68 million dividend received from the China JV in November 2016). In the quarter, £830 million of investment spending was capitalised and £96 million was expensed in EBITDA.
After the free cash flow of £54 million, finance expenses/fees paid of £26 million and a £24 million decrease in the utilisation of a short-term debt facility, cash and financial deposits at 31 December 2016 stood at £3.8 billion (comprising £1.9 billion of cash and cash equivalents and £1.9 billion of financial deposits). This includes an amount of £567 million held in subsidiaries of Jaguar Land Rover outside of the United Kingdom. The cash in some of these jurisdictions is subject to impediments to remitting cash to the UK other than through annual dividends. As at 31 December 2016, the Company also had an undrawn revolving credit facility totalling £1.9 billion, all maturing in July 2020, and £146 million of undrawn short-term committed credit facilities.
The following table shows details of the Company’s financing arrangements as at 31 December 2016:
| (£ millions) | Facility amount |
Outstanding | Undrawn | |||||||||
| Committed |
||||||||||||
| £400m 5.000% Senior Notes due Feb 2022** |
400 | 400 | — | |||||||||
| £400m 3.875% Senior Notes due Mar 2023** |
400 | 400 | — | |||||||||
| $500m 5.625% Senior Notes due Feb 2023* |
407 | 407 | — | |||||||||
| $700m 4.125% Senior Notes due Dec 2018** |
570 | 570 | — | |||||||||
| $500m 4.250% Senior Notes due Nov 2019** |
407 | 407 | — | |||||||||
| $500m 3.500% Senior Notes due Mar 2020** |
407 | 407 | — | |||||||||
| Revolving 5 year credit facility |
1,870 | — | 1,870 | |||||||||
| Receivable factoring facilities*** |
285 | 139 | 146 | |||||||||
| Finance lease obligations |
8 | 8 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Subtotal |
4,754 | 2,738 | 2,016 | |||||||||
|
|
|
|
|
|
|
|||||||
| Prepaid costs |
— | (16 | ) | — | ||||||||
|
|
|
|
|
|
|
|||||||
| Total |
4,754 | 2,722 | 2,016 | |||||||||
|
|
|
|
|
|
|
|||||||
4
Table of Contents
| * | Issued by Jaguar Land Rover Automotive plc and guaranteed on a senior unsecured basis by Jaguar Land Rover Limited, Jaguar Land Rover Holdings Limited, Land Rover Exports Limited, JLR Nominee Company Limited and Jaguar Land Rover North America LLC. |
| ** | Issued by Jaguar Land Rover Automotive plc and guaranteed on a senior unsecured basis by Jaguar Land Rover Limited and Jaguar Land Rover Holdings Limited. |
| *** | $350 million committed receivables factoring facility issued by Jaguar Land Rover Limited and guaranteed by Jaguar Land Rover Holdings Limited. A bilateral $200 million uncommitted receivables factoring facility, also issued by Jaguar Land Rover Limited and guaranteed by Jaguar Land Rover Holdings Limited, is also available which remained undrawn as at 31 December 2016. |
There were no material acquisitions or disposals in the period.
Off-balance sheet financial arrangements
The Company has no off-balance sheet financial arrangements other than to the extent disclosed in the condensed consolidated financial statements.
On 17 January 2017 the Company issued a €650 million bond maturing in 2024 paying an annual coupon of 2.200%. Subsequently, on 24 January 2017 the company issued a £300 million bond maturing in 2021 paying an annual coupon of 2.750%.
Business risks and mitigating factors
As discussed on pages 46-53 of the Annual Report 2015-16 of the Company, Jaguar Land Rover’s principal risks and mitigating factors are documented.
At the end of Q3 FY17, Jaguar Land Rover employed 39,758 people worldwide including agency personnel. This compared to 37,730 at the end of Q3 FY16.
On 19 December 2016 Cyrus Mistry resigned from the Board of Directors of Jaguar Land Rover Automotive plc. An announcement naming his successor will be made in due course.
The following table provides information with respect to the current members of the Board of Directors of Jaguar Land Rover Automotive plc:
| Name | Position | Year appointed as Director, Chief Executive Officer | ||
| Andrew M. Robb |
Director |
2009 | ||
| Dr. Ralf D. Speth |
Chief Executive Officer and Director |
2010 | ||
| Nasser Mukhtar Munjee |
Director |
2012 | ||
| Chandrasekaran Ramakrishnan |
Director |
2013 |
5
Table of Contents
Condensed Consolidated Income Statement
For the three and nine months ended 31 December 2016 (unaudited)
| Three months ended | Nine months ended | |||||||||||||||||||
| (£ millions) |
Note | 31 December 2016 (unaudited) |
31 December 2015 (unaudited) |
31 December 2016 (unaudited) |
31 December 2015 (unaudited) |
|||||||||||||||
| Revenue |
6,537 | 5,781 | 17,951 | 15,614 | ||||||||||||||||
| Material cost of sales excluding exceptional item |
(3,869 | ) | (3,496 | ) | (10,623 | ) | (9,318 | ) | ||||||||||||
| Exceptional item |
2 | 85 | 30 | 135 | (215 | ) | ||||||||||||||
| Material and other cost of sales |
(3,784 | ) | (3,466 | ) | (10,488 | ) | (9,533 | ) | ||||||||||||
| Employee cost |
(648 | ) | (582 | ) | (1,838 | ) | (1,673 | ) | ||||||||||||
| Other expenses |
(1,388 | ) | (1,153 | ) | (3,841 | ) | (3,241 | ) | ||||||||||||
| Net impact of commodity derivatives |
(6 | ) | (44 | ) | 33 | (117 | ) | |||||||||||||
| Development costs capitalised |
3 | 379 | 323 | 1,072 | 944 | |||||||||||||||
| Other income |
70 | 48 | 190 | 177 | ||||||||||||||||
| Depreciation and amortisation |
(409 | ) | (357 | ) | (1,207 | ) | (1,040 | ) | ||||||||||||
| Foreign exchange loss |
(526 | ) | (63 | ) | (1,027 | ) | (127 | ) | ||||||||||||
| Finance income |
4 | 7 | 9 | 24 | 27 | |||||||||||||||
| Finance expense (net) |
4 | (12 | ) | (19 | ) | (48 | ) | (66 | ) | |||||||||||
| Share of profit from equity accounted investments |
35 | 22 | 113 | 15 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Profit before tax |
255 | 499 | 934 | 980 | ||||||||||||||||
| Income tax expense excluding tax on exceptional item |
(60 | ) | (52 | ) | (181 | ) | (194 | ) | ||||||||||||
| Tax on exceptional item |
(28 | ) | (7 | ) | (38 | ) | 54 | |||||||||||||
| Income tax expense |
9 | (88 | ) | (59 | ) | (219 | ) | (140 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Profit for the period |
167 | 440 | 715 | 840 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
Condensed Consolidated Statement of Comprehensive Income and Expense
For the three and nine months ended 31 December 2016 (unaudited)
| Three months ended | Nine months ended | |||||||||||||||
| (£ millions) |
31 December 2016 (unaudited) |
31 December 2015 (unaudited) |
31 December 2016 (unaudited) |
31 December 2015 (unaudited) |
||||||||||||
| Profit for the period |
167 | 440 | 715 | 840 | ||||||||||||
| Items that will not be reclassified subsequently to profit or loss: |
||||||||||||||||
| Remeasurement of defined benefit obligation |
14 | (86 | ) | (1,279 | ) | 349 | ||||||||||
| Income tax related to items that will not be reclassified |
(16 | ) | (1 | ) | 201 | (88 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (2 | ) | (87 | ) | (1,078 | ) | 261 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Items that may be reclassified subsequently to profit or loss: |
||||||||||||||||
| (Loss)/gain on effective cash flow hedges |
(621 | ) | (341 | ) | (2,715 | ) | 328 | |||||||||
| Cash flow hedges reclassified to ‘Foreign exchange loss’ in profit or loss |
448 | 55 | 827 | 173 | ||||||||||||
| Currency translation differences |
4 | (3 | ) | 34 | (17 | ) | ||||||||||
| Income tax related to items that may be reclassified |
29 | 53 | 356 | (104 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (140 | ) | (236 | ) | (1,498 | ) | 380 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other comprehensive (expense)/income net of tax |
(142 | ) | (323 | ) | (2,576 | ) | 641 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total comprehensive income/(expense) attributable to shareholders |
25 | 117 | (1,861 | ) | 1,481 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
6
Table of Contents
Condensed Consolidated Balance Sheet
| As at (£ millions) |
Note | 31 December 2016 (unaudited) |
31 March 2016 (audited) |
|||||||||
| Non-current assets |
||||||||||||
| Investments |
416 | 339 | ||||||||||
| Other financial assets |
334 | 185 | ||||||||||
| Property, plant and equipment |
5,672 | 5,175 | ||||||||||
| Intangible assets |
5,997 | 5,497 | ||||||||||
| Other non-current assets |
132 | 45 | ||||||||||
| Deferred tax assets |
603 | 354 | ||||||||||
|
|
|
|
|
|||||||||
| Total non-current assets |
13,154 | 11,595 | ||||||||||
|
|
|
|
|
|||||||||
| Current assets |
||||||||||||
| Cash and cash equivalents |
1,944 | 3,399 | ||||||||||
| Short-term deposits and investments |
1,897 | 1,252 | ||||||||||
| Trade receivables |
961 | 1,078 | ||||||||||
| Other financial assets |
6 | 223 | 137 | |||||||||
| Inventories |
7 | 3,584 | 2,685 | |||||||||
| Other current assets |
8 | 443 | 411 | |||||||||
| Current tax assets |
8 | 10 | ||||||||||
|
|
|
|
|
|||||||||
| Total current assets |
9,060 | 8,972 | ||||||||||
|
|
|
|
|
|||||||||
| Total assets |
22,214 | 20,567 | ||||||||||
|
|
|
|
|
|||||||||
| Current liabilities |
||||||||||||
| Accounts payable |
5,811 | 5,758 | ||||||||||
| Short-term borrowings |
14 | 139 | 116 | |||||||||
| Other financial liabilities |
11 | 2,086 | 962 | |||||||||
| Provisions |
12 | 627 | 555 | |||||||||
| Other current liabilities |
13 | 489 | 427 | |||||||||
| Current tax liabilities |
147 | 57 | ||||||||||
|
|
|
|
|
|||||||||
| Total current liabilities |
9,299 | 7,875 | ||||||||||
|
|
|
|
|
|||||||||
| Non-current liabilities |
||||||||||||
| Long-term borrowings |
14 | 2,575 | 2,373 | |||||||||
| Other financial liabilities |
11 | 1,620 | 817 | |||||||||
| Provisions |
12 | 914 | 733 | |||||||||
| Retirement benefit obligation |
18 | 1,843 | 567 | |||||||||
| Other non-current liabilities |
314 | 204 | ||||||||||
| Deferred tax liabilities |
46 | 384 | ||||||||||
|
|
|
|
|
|||||||||
| Total non-current liabilities |
7,312 | 5,078 | ||||||||||
|
|
|
|
|
|||||||||
| Total liabilities |
16,611 | 12,953 | ||||||||||
|
|
|
|
|
|||||||||
| Equity attributable to shareholders |
||||||||||||
| Ordinary shares |
1,501 | 1,501 | ||||||||||
| Capital redemption reserve |
167 | 167 | ||||||||||
| Reserves |
16 | 3,935 | 5,946 | |||||||||
|
|
|
|
|
|||||||||
| Equity attributable to shareholders |
5,603 | 7,614 | ||||||||||
|
|
|
|
|
|||||||||
| Total liabilities and equity |
22,214 | 20,567 | ||||||||||
|
|
|
|
|
|||||||||
These condensed consolidated interim financial statements were approved by the Board of Directors.
Company registered number: 06477691
7
Table of Contents
Condensed Consolidated Statement of Changes in Equity
| (£ millions) |
Ordinary share capital |
Capital redemption reserve |
Other reserves | Total equity | ||||||||||||
| Balance at 1 April 2016 (audited) |
1,501 | 167 | 5,946 | 7,614 | ||||||||||||
| Profit for the period |
— | — | 715 | 715 | ||||||||||||
| Other comprehensive expense for the period |
— | — | (2,576 | ) | (2,576 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total comprehensive expense |
— | — | (1,861 | ) | (1,861 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Dividend paid |
— | — | (150 | ) | (150 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Balance at 31 December 2016 (unaudited) |
1,501 | 167 | 3,935 | 5,603 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (£ millions) |
Ordinary share capital |
Capital redemption reserve |
Other reserves | Total equity | ||||||||||||
| Balance at 1 April 2015 (audited) |
1,501 | 167 | 4,372 | 6,040 | ||||||||||||
| Profit for the period |
— | — | 840 | 840 | ||||||||||||
| Other comprehensive income for the period |
— | — | 641 | 641 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total comprehensive income |
— | — | 1,481 | 1,481 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Dividend paid |
— | — | (150 | ) | (150 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Balance at 31 December 2015 (unaudited) |
1,501 | 167 | 5,703 | 7,371 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
8
Table of Contents
Condensed Consolidated Cash Flow Statement
For the three and nine months ended 31 December 2016 (unaudited)
| Three months ended | Nine months ended | |||||||||||||||||||
| (£ millions) |
Note | 31 December 2016 (unaudited) |
31 December 2015 (unaudited) |
31 December 2016 (unaudited) |
31 December 2015 (unaudited) |
|||||||||||||||
| Cash flows from/(used in) operating activities |
||||||||||||||||||||
| Cash generated from operations |
21 | 747 | 1,210 | 1,549 | 1,660 | |||||||||||||||
| Dividends received |
68 | — | 68 | — | ||||||||||||||||
| Income tax paid |
(9 | ) | (12 | ) | (109 | ) | (117 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net cash generated from operating activities |
806 | 1,198 | 1,508 | 1,543 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Cash flows from/(used in) investing activities |
||||||||||||||||||||
| Investment in other restricted deposits |
(3 | ) | (4 | ) | (21 | ) | (12 | ) | ||||||||||||
| Redemption of other restricted deposits |
32 | 11 | 47 | 23 | ||||||||||||||||
| Movements in other restricted deposits |
29 | 7 | 26 | 11 | ||||||||||||||||
| Investment in short-term deposits and investments |
(1,251 | ) | (1,116 | ) | (3,023 | ) | (2,604 | ) | ||||||||||||
| Redemption of short-term deposits and investments |
851 | 1,001 | 2,443 | 2,675 | ||||||||||||||||
| Movements in short-term deposits and investments |
(400 | ) | (115 | ) | (580 | ) | 71 | |||||||||||||
| Purchases of property, plant and equipment |
(422 | ) | (412 | ) | (1,032 | ) | (1,139 | ) | ||||||||||||
| Proceeds from sale of property, plant and equipment |
— | — | 1 | — | ||||||||||||||||
| Cash paid for intangible assets |
(408 | ) | (353 | ) | (1,101 | ) | (1,038 | ) | ||||||||||||
| Finance income received |
7 | 9 | 24 | 29 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net cash used in investing activities |
(1,194 | ) | (864 | ) | (2,662 | ) | (2,066 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Cash flows from/(used in) financing activities |
||||||||||||||||||||
| Finance expenses and fees paid |
(26 | ) | (24 | ) | (95 | ) | (99 | ) | ||||||||||||
| Proceeds from issuance of short-term borrowings |
127 | 141 | 345 | 413 | ||||||||||||||||
| Repayment of short-term borrowings |
(150 | ) | (122 | ) | (341 | ) | (413 | ) | ||||||||||||
| Repayments of long-term borrowings |
— | — | (57 | ) | — | |||||||||||||||
| Payments of finance lease obligations |
(1 | ) | (1 | ) | (3 | ) | (4 | ) | ||||||||||||
| Dividends paid |
— | — | (150 | ) | (150 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net cash generated used in financing activities |
(50 | ) | (6 | ) | (301 | ) | (253 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net (decrease)/increase in cash and cash equivalents* |
(438 | ) | 328 | (1,455 | ) | (776 | ) | |||||||||||||
| Cash and cash equivalents at beginning of period |
2,382 | 2,104 | 3,399 | 3,208 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Cash and cash equivalents at end of period |
1,944 | 2,432 | 1,944 | 2,432 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| * | Included in ‘Net (decrease)/increase in cash and cash equivalents’ in the three month period is an increase of £15 million (three months ended 31 December 2015: decrease of £7 million) and in the nine month period is an increase of £89 million (nine months ended 31 December 2015: decrease of £49 million) arising from the impact of foreign exchange rate changes on cash and cash equivalents. |
9
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
| 1 | Accounting policies |
Basis of preparation
The information for the three and nine month periods ended 31 December 2016 is unaudited and does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The condensed consolidated interim financial statements of Jaguar Land Rover Automotive plc have been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’ under International Financial Reporting Standards (‘IFRS’) as adopted by the European Union (‘EU’).
The condensed consolidated interim financial statements have been prepared on a historical cost basis except for certain financial instruments held at fair value as highlighted in note 15.
The condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements for the year ended 31 March 2016, which were prepared in accordance with IFRS as adopted by the EU.
The condensed consolidated interim financial statements have been prepared on the going concern basis as set out within the directors’ statement of responsibilities section of the Group’s annual report for the year ended 31 March 2016.
The accounting policies applied are consistent with those of the annual consolidated financial statements for the year ended 31 March 2016, as described in those financial statements.
| 2 | Exceptional item |
The exceptional item of £85 million for the quarter ended 31 December 2016 relates to the continuing impact of the explosion at the port of Tianjin (China) in August 2015. The exceptional credit to the income statement for the quarter relates to the recovery of import duties and taxes and to an updated assessment of the condition of the remaining vehicles, which led to a reversal of the initial provision recorded in the quarter ended 30 September 2015.
The process for finalising ongoing insurance claims and other recoveries may take some months to conclude, so further insurance and other potential recoveries will only be recognised in future periods when received or virtually certain to be received. Due to the size of the provision recorded, the charge together with the associated tax impact was disclosed as an exceptional item in the year ended 31 March 2016, as such any future recoveries will similarly be recognised as a reversal of that charge through exceptional items.
| 3 | Research and development |
| Three months ended | Nine months ended | |||||||||||||||
| (£ millions) |
31 December 2016 (unaudited) |
31 December 2015 (unaudited) |
31 December 2016 (unaudited) |
31 December 2015 (unaudited) |
||||||||||||
| Total research and development costs incurred |
475 | 400 | 1,341 | 1,160 | ||||||||||||
| Research and development expensed |
(96 | ) | (77 | ) | (269 | ) | (216 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Development costs capitalised |
379 | 323 | 1,072 | 944 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Interest capitalised |
25 | 19 | 67 | 55 | ||||||||||||
| Research and development expenditure credit |
(24 | ) | (23 | ) | (64 | ) | (59 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total internally developed intangible additions |
380 | 319 | 1,075 | 940 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
10
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
| 4 | Finance income and expense |
Recognised in net income
| Three months ended | Nine months ended | |||||||||||||||
| (£ millions) |
31 December 2016 (unaudited) |
31 December 2015 (unaudited) |
31 December 2016 (unaudited) |
31 December 2015 (unaudited) |
||||||||||||
| Finance income |
7 | 9 | 24 | 27 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total finance income |
7 | 9 | 24 | 27 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total interest expense on financial liabilities measured at amortised cost |
(34 | ) | (33 | ) | (107 | ) | (107 | ) | ||||||||
| Unwind of discount on provisions |
(4 | ) | (5 | ) | (12 | ) | (15 | ) | ||||||||
| Interest capitalised |
26 | 19 | 71 | 56 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total finance expense (net) |
(12 | ) | (19 | ) | (48 | ) | (66 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The capitalisation rate used to calculate borrowing costs eligible for capitalisation during the nine month period was 4.4% (nine months ended 31 December 2015: 4.6%).
| 5 | Allowances for trade and other receivables |
Changes in the allowances for trade and other receivables are as follows:
| (£ millions) |
Nine months ended 31 December 2016 (unaudited) |
Year ended 31 March 2016 (audited) |
||||||
| At beginning of period/year |
60 | 11 | ||||||
| Charged during the period/year |
— | 49 | ||||||
| Utilised during the period/year |
— | — | ||||||
| Unused amounts reversed |
(13 | ) | — | |||||
| Foreign currency translation |
13 | — | ||||||
|
|
|
|
|
|||||
| At end of period/year |
60 | 60 | ||||||
|
|
|
|
|
|||||
| 6 | Other financial assets – current |
| As at (£ millions) |
31 December 2016 (unaudited) |
31 March 2016 (audited) |
||||||
| Advances and other receivables recoverable in cash |
4 | 8 | ||||||
| Derivative financial instruments |
165 | 73 | ||||||
| Accrued income |
28 | 12 | ||||||
| Other |
26 | 44 | ||||||
|
|
|
|
|
|||||
| Total current other financial assets |
223 | 137 | ||||||
|
|
|
|
|
|||||
| 7 | Inventories |
| As at (£ millions) |
31 December 2016 (unaudited) |
31 March 2016 (audited) |
||||||
| Raw materials and consumables |
87 | 92 | ||||||
|
Work-in-progress |
383 | 379 | ||||||
| Finished goods |
3,114 | 2,214 | ||||||
|
|
|
|
|
|||||
| Total inventories |
3,584 | 2,685 | ||||||
|
|
|
|
|
|||||
| 8 | Other current assets |
| As at (£ millions) |
31 December 2016 (unaudited) |
31 March 2016 (audited) |
||||||
| Recoverable VAT |
173 | 218 | ||||||
| Prepaid expenses |
189 | 111 | ||||||
| Other |
81 | 82 | ||||||
|
|
|
|
|
|||||
| Total other current assets |
443 | 411 | ||||||
|
|
|
|
|
|||||
11
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
| 9 | Taxation |
Recognised in the income statement
The income tax for the three and nine month periods ended 31 December 2016 is charged at the estimated effective tax rate expected to apply for the applicable financial year end.
| 10 | Capital expenditure |
Capital expenditure in the nine month period was £1,058 million (nine month period to 31 December 2015: £1,107 million) on property, plant and equipment and £1,152 million (nine month period to 31 December 2015: £1,089 million) was capitalised as intangible assets (excluding research and development tax credits). There were no impairments, material disposals or changes in use of assets.
| 11 | Other financial liabilities |
| As at (£ millions) |
31 December 2016 (unaudited) |
31 March 2016 (audited) |
||||||
| Current |
||||||||
| Finance lease obligations |
2 | 5 | ||||||
| Interest accrued |
31 | 25 | ||||||
| Derivative financial instruments |
1,715 | 666 | ||||||
| Liability for vehicles sold under a repurchase arrangement |
338 | 266 | ||||||
|
|
|
|
|
|||||
| Total current other financial liabilities |
2,086 | 962 | ||||||
|
|
|
|
|
|||||
| Non-current |
||||||||
| Finance lease obligations |
6 | 6 | ||||||
| Derivative financial instruments |
1,612 | 809 | ||||||
| Other payables |
2 | 2 | ||||||
|
|
|
|
|
|||||
| Total non-current other financial liabilities |
1,620 | 817 | ||||||
|
|
|
|
|
|||||
| 12 | Provisions |
| As at (£ millions) |
31 December 2016 (unaudited) |
31 March 2016 (audited) |
||||||
| Current |
||||||||
| Product warranty |
494 | 441 | ||||||
| Legal and product liability |
116 | 99 | ||||||
| Provisions for residual risk |
7 | 6 | ||||||
| Provision for environmental liability |
8 | 8 | ||||||
| Other employee benefits obligations |
2 | 1 | ||||||
|
|
|
|
|
|||||
| Total current provisions |
627 | 555 | ||||||
|
|
|
|
|
|||||
| Non-current |
||||||||
| Product warranty |
820 | 688 | ||||||
| Legal and product liability |
41 | — | ||||||
| Provision for residual risk |
19 | 13 | ||||||
| Provision for environmental liability |
24 | 23 | ||||||
| Other employee benefits obligations |
10 | 9 | ||||||
|
|
|
|
|
|||||
| Total non-current provisions |
914 | 733 | ||||||
|
|
|
|
|
|||||
12
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
| 12 | Provisions (continued) |
| Nine months ended 31 December 2016 (unaudited) (£ millions) |
Product warranty |
Legal and product liability |
Residual risk |
Environmental liability |
Total | |||||||||||||||
| Opening balance |
1,129 | 99 | 19 | 31 | 1,278 | |||||||||||||||
| Provision made during the period |
531 | 94 | 9 | 1 | 635 | |||||||||||||||
| Reclassification from accounts payable |
— | 19 | — | — | 19 | |||||||||||||||
| Provision used during the period |
(406 | ) | (19 | ) | (4 | ) | — | (429 | ) | |||||||||||
| Unused amounts reversed in the period |
(23 | ) | (37 | ) | — | — | (60 | ) | ||||||||||||
| Impact of discounting |
12 | — | — | — | 12 | |||||||||||||||
| Foreign currency translation |
71 | 1 | 2 | — | 74 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Closing balance |
1,314 | 157 | 26 | 32 | 1,529 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Product warranty provision
The Group offers warranty cover in respect of manufacturing defects, which become apparent one to five years after purchase, dependent on the market in which the purchase occurred.
Legal and product liability provision
A legal and product liability provision is maintained in respect of compliance with regulations, contractual obligations and known or potential litigations or claims which impact the Group.
Residual risk provision
In certain markets, the Group is responsible for the residual risk arising on vehicles sold by dealers on leasing arrangements. The provision is based on the latest available market expectations of future residual value trends. The timing of the outflows will be at the end of the lease arrangements – being typically up to three years.
Environmental liability provision
This provision relates to various environmental remediation costs such as asbestos removal and land clean up.
| 13 | Other current liabilities |
| As at (£ millions) |
31 December 2016 (unaudited) |
31 March 2016 (audited) |
||||||
| Liabilities for advances received |
65 | 139 | ||||||
| Deferred revenue |
141 | 93 | ||||||
| VAT |
208 | 131 | ||||||
| Other taxes payable |
54 | 35 | ||||||
| Other |
21 | 29 | ||||||
|
|
|
|
|
|||||
| Total current other liabilities |
489 | 427 | ||||||
|
|
|
|
|
|||||
13
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
| 14 | Interest bearing loans and borrowings |
| As at (£ millions) |
31 December 2016 (unaudited) |
31 March 2016 (audited) |
||||||
| Short-term borrowings |
||||||||
| Bank loans |
139 | 116 | ||||||
|
|
|
|
|
|||||
| Short-term borrowings |
139 | 116 | ||||||
|
|
|
|
|
|||||
| Long-term borrowings |
||||||||
| EURO MTF listed debt |
2,575 | 2,373 | ||||||
|
|
|
|
|
|||||
| Long-term borrowings |
2,575 | 2,373 | ||||||
|
|
|
|
|
|||||
| Finance lease obligations |
8 | 11 | ||||||
|
|
|
|
|
|||||
| Total debt |
2,722 | 2,500 | ||||||
|
|
|
|
|
|||||
| 15 | Financial Instruments |
The condensed consolidated interim financial statements have been prepared on a historical cost basis except for certain financial instruments held at fair value. These financial instruments are classified as level 2 fair value measurements, as defined by IFRS 13, being those derived from inputs other than quoted prices which are observable. There have been no changes in the valuation techniques used or transfers between fair value levels from those set out in note 34 to the annual consolidated financial statements for the year ended 31 March 2016.
The following tables show the carrying amounts and fair value of each category of financial assets and liabilities.
| 31 December 2016 | 31 March 2016 | |||||||||||||||
| As at (£ millions) |
Carrying value (unaudited) |
Fair value (unaudited) |
Carrying value (audited) |
Fair value (audited) |
||||||||||||
| Cash and cash equivalents |
1,944 | 1,944 | 3,399 | 3,399 | ||||||||||||
| Short-term deposits |
1,897 | 1,897 | 1,252 | 1,252 | ||||||||||||
| Trade receivables |
961 | 961 | 1,078 | 1,078 | ||||||||||||
| Other financial assets - current |
223 | 223 | 137 | 137 | ||||||||||||
| Other financial assets - non-current |
334 | 334 | 185 | 185 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total financial assets |
5,359 | 5,359 | 6,051 | 6,051 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 31 December 2016 | 31 March 2016 | |||||||||||||||
| As at (£ millions) |
Carrying value (unaudited) |
Fair value (unaudited) |
Carrying value (audited) |
Fair value (audited) |
||||||||||||
| Accounts payable |
5,811 | 5,811 | 5,758 | 5,758 | ||||||||||||
| Short-term borrowings |
139 | 139 | 116 | 116 | ||||||||||||
| Long-term borrowings |
2,575 | 2,679 | 2,373 | 2,398 | ||||||||||||
| Other financial liabilities - current |
2,086 | 2,086 | 962 | 962 | ||||||||||||
| Other financial liabilities - non-current |
1,620 | 1,620 | 817 | 817 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total financial liabilities |
12,231 | 12,335 | 10,026 | 10,051 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
14
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
| 16 | Other reserves |
The movement of reserves is as follows:
| (£ millions) |
Translation reserve |
Hedging reserve |
Retained earnings |
Total reserves | ||||||||||||
| Balance at 1 April 2016 (audited) |
(363 | ) | (873 | ) | 7,182 | 5,946 | ||||||||||
| Profit for the period |
— | — | 715 | 715 | ||||||||||||
| Remeasurement of defined benefit obligation |
— | — | (1,279 | ) | (1,279 | ) | ||||||||||
| Loss on effective cash flow hedges |
— | (2,715 | ) | — | (2,715 | ) | ||||||||||
| Currency translation differences |
34 | — | — | 34 | ||||||||||||
| Income tax related to items recognised in other comprehensive income |
— | 521 | 201 | 722 | ||||||||||||
| Cash flow hedges reclassified to ‘Foreign exchange loss’ in profit or loss |
— | 827 | — | 827 | ||||||||||||
| Income tax related to items reclassified to profit or loss |
— | (165 | ) | — | (165 | ) | ||||||||||
| Dividend paid |
— | — | (150 | ) | (150 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Balance at 31 December 2016 (unaudited) |
(329 | ) | (2,405 | ) | 6,669 | 3,935 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (£ millions) |
Translation reserve |
Hedging reserve |
Retained earnings |
Total reserves | ||||||||||||
| Balance at 1 April 2015 (audited) |
(362 | ) | (910 | ) | 5,644 | 4,372 | ||||||||||
| Profit for the period |
— | — | 840 | 840 | ||||||||||||
| Remeasurement of defined benefit obligation |
— | — | 349 | 349 | ||||||||||||
| Gain on effective cash flow hedges |
— | 328 | — | 328 | ||||||||||||
| Currency translation differences |
(17 | ) | — | — | (17 | ) | ||||||||||
| Income tax related to items recognised in other comprehensive income |
— | (70 | ) | (88 | ) | (158 | ) | |||||||||
| Cash flow hedges reclassified to ‘Foreign exchange loss’ in profit or loss |
— | 173 | — | 173 | ||||||||||||
| Income tax related to items reclassified to profit or loss |
— | (34 | ) | — | (34 | ) | ||||||||||
| Dividend paid |
— | — | (150 | ) | (150 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Balance at 31 December 2015 (unaudited) |
(379 | ) | (513 | ) | 6,595 | 5,703 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 17 | Dividends |
During the three months ended 31 December 2016, no ordinary share dividend was proposed and paid (three months to 31 December 2015: £nil).
During the nine months ended 31 December 2016, an ordinary share dividend of £150 million was proposed and paid (nine months to 31 December 2015: £150 million).
| 18 | Employee benefits |
The Group has pension arrangements providing employees with defined benefits related to pay and service as set out in the rules of each fund. The following table sets out the disclosure pertaining to employee benefits of Jaguar Land Rover Limited and overseas subsidiaries which operate defined benefit pension plans.
15
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
| 18 | Employee benefits (continued) |
| (£ millions) |
Nine months ended 31 December 2016 (unaudited) |
Year ended 31 March 2016 (audited) |
||||||
| Change in defined benefit obligation |
||||||||
| Defined benefit obligation at beginning of the period |
7,668 | 7,883 | ||||||
| Current service cost |
148 | 224 | ||||||
| Interest expense |
206 | 263 | ||||||
| Actuarial (gains)/losses arising from: |
||||||||
| - Changes in demographic assumptions |
(76 | ) | (36 | ) | ||||
| - Changes in financial assumptions |
2,364 | (569 | ) | |||||
| - Experience adjustments |
13 | 63 | ||||||
| Exchange differences on foreign schemes |
6 | 3 | ||||||
| Member contributions |
1 | 2 | ||||||
| Benefits paid |
(156 | ) | (165 | ) | ||||
|
|
|
|
|
|||||
| Defined benefit obligation at end of period |
10,174 | 7,668 | ||||||
|
|
|
|
|
|||||
| Change in plan assets |
||||||||
| Fair value of plan assets at beginning of the period |
7,103 | 6,997 | ||||||
| Interest income |
194 | 233 | ||||||
| Remeasurement gain/(loss) on the return of plan assets, excluding amounts included in interest income |
1,020 | (52 | ) | |||||
| Administrative expenses |
(7 | ) | (8 | ) | ||||
| Exchange differences on foreign schemes |
4 | 1 | ||||||
| Employer contributions |
172 | 95 | ||||||
| Member contributions |
1 | 2 | ||||||
| Benefits paid |
(156 | ) | (165 | ) | ||||
|
|
|
|
|
|||||
| Fair value of scheme assets at end of period |
8,331 | 7,103 | ||||||
|
|
|
|
|
|||||
| Amount recognised in the consolidated balance sheet consist of |
||||||||
| Present value of defined benefit obligations |
(10,174 | ) | (7,668 | ) | ||||
| Fair value of scheme assets |
8,331 | 7,103 | ||||||
| Restriction on asset and onerous obligation |
— | (2 | ) | |||||
|
|
|
|
|
|||||
| Net liability |
(1,843 | ) | (567 | ) | ||||
|
|
|
|
|
|||||
| Non-current liabilities |
(1,843 | ) | (567 | ) | ||||
|
|
|
|
|
|||||
The range of assumptions used in accounting for the pension plans in both periods is set out below:
| Nine months ended 31 December 2016 (unaudited) |
Year ended 31 March 2016 (audited) |
|||||||
| Discount rate |
2.7 | % | 3.6 | % | ||||
| Expected rate of increase in compensation level of covered employees |
3.8 | % | 3.5 | % | ||||
| Inflation rate |
3.3 | % | 3.0 | % | ||||
For the valuations at 31 December 2016 and 31 March 2016, the mortality assumptions used are the SAPS base table, in particular S2NxA tables and the Light table for members of the Jaguar Executive Pension Plan. A scaling factor of 120% for males and 110% for females has been used for the Jaguar Pension Plan, 115% for males and 105% for females for the Land Rover Pension Scheme, and 95% for males and 85% for females for the Jaguar Executive Pension Plan. There is an allowance for future improvements in line with the CMI (2014) projections with an allowance for long-term improvements of 1.25% per annum.
16
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
| 19 | Commitments and contingencies |
In the normal course of business, the Group faces claims and assertions by various parties. The Group assesses such claims and assertions and monitors the legal environment on an on-going basis, with the assistance of external legal counsel wherever necessary. The Group recognises a liability for any claims where a potential loss is probable and capable of being estimated and discloses such matters in its financial statements, if material. For potential losses that are considered possible, but not probable, the Group provides a disclosure in the financial statements, if material, but does not recognise a liability.
The following is a description of claims and assertions where a potential loss is possible, but not probable. Management believe that none of the contingencies described below, either individually or in aggregate, would have a material adverse effect on the Group’s financial condition, results of operations, or cash flows.
Litigation and product related matters
The Group is involved in legal proceedings, both as plaintiff and as defendant. There are claims and potential claims of £6 million (31 March 2016: £6 million) against the Group which management have not recognised as they are not considered probable, along with other claims which at this stage cannot be reliably estimated. These claims and potential claims pertain to motor accident claims, consumer complaints, employment and dealership arrangements, personal injury claims and/or compensation for deficiency in the goods and services provided by the Group and/or its dealers.
The Group has provided for the estimated costs of repair following the passenger safety airbag issue in the United States, Japan and Korea. The Group recognises that there is a potential risk of further recalls in other countries in the future, however, the Group are unable at this point in time to reliably estimate the amount and timings of any potential future costs associated with this warranty issue.
Other taxes and dues
During the year ended 31 March 2015, the Group’s Brazilian subsidiary received a demand for 167 million Brazilian Real (£42 million at 31 December 2016 exchange rates) in relation to additional indirect taxes (PIS and COFINS) claimed as being due on local vehicle and parts sales made in 2010. The matter is currently being contested before the Brazilian appellate authorities. Professional legal opinions obtained in Brazil fully support that the basis of the tax authority’s assertion is incorrect and, as a result, the likelihood of any settlement ultimately having to be made is considered remote. Accordingly, no provision has been recognised in the financial statements and the matter is disclosed here purely for the purposes of completeness.
Commitments and contingencies
The Group has entered into various contracts with vendors and contractors for the acquisition of plant and machinery, equipment and various civil contracts of capital nature aggregating £1,832 million (31 March 2016: £797 million) and £13 million (31 March 2016: £12 million) relating to the acquisition of intangible assets.
Commitments and contingencies also includes contingent liabilities of £85 million (31 March 2016: £28 million).
The remaining financial commitments, in particular the purchase commitments and guarantees, are of a magnitude typical for the industry.
Inventory of £Nil (31 March 2016: £Nil) and trade receivables with a carrying amount of £139 million (31 March 2016: £116 million) and property, plant and equipment with a carrying amount of £Nil (31 March 2016: £Nil) and restricted cash with a carrying amount of £Nil (31 March 2016: £Nil) are pledged as collateral/security against the borrowings and commitments.
The Group’s share of capital commitments of its joint ventures at 31 December 2016 is £99 million (31 March 2016: £102 million) and contingent liabilities of its joint ventures at 31 December 2016 is £4 million (31 March 2016: £nil).
17
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
| 20 | Capital Management |
The Group’s objectives when managing capital are to ensure the going concern operation of its entities and to maintain an efficient capital structure to reduce the cost of capital, support the corporate strategy and to meet shareholder expectations.
The Group’s policy is to borrow primarily through capital market debt issues to meet anticipated funding requirements and maintain sufficient liquidity. The Group also maintains certain undrawn committed credit facilities to provide additional liquidity. These borrowings, together with cash generated from operations, are loaned internally or contributed as equity to certain subsidiaries as required. Surplus cash in subsidiaries is swept (where practicable) and invested to satisfy security, liquidity and yield requirements.
The capital structure is governed according to Group policies approved by the Board and is monitored by various metrics such as interest cover, as per the debt covenants. Funding requirements are reviewed periodically with any debt issuances and capital distributions approved by the Board.
The following table summarises the capital of the Group:
| As at (£ millions) |
31 December 2016 (unaudited) |
31 March 2016 (audited) |
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| Short-term debt |
141 | 121 | ||||||
| Long-term debt |
2,581 | 2,379 | ||||||
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| Total debt* |
2,722 | 2,500 | ||||||
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| Equity |
5,603 | 7,614 | ||||||
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| Total capital (debt and equity) |
8,325 | 10,114 | ||||||
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| * | Total debt includes finance lease obligations of £8 million (31 March 2016: £11 million). |
18
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
| 21 | Notes to the consolidated cash flow statement |
Reconciliation of profit for the period to cash generated from operations
| Three months ended | Nine months ended | |||||||||||||||
| (£ millions) |
31 December 2016 (unaudited) |
31 December 2015 (unaudited) |
31 December 2016 (unaudited) |
31 December 2015 (unaudited) |
||||||||||||
| Cash flows from/(used in) operating activities |
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| Profit for the period |
167 | 440 | 715 | 840 | ||||||||||||
| Adjustments for: |
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| Depreciation and amortisation |
409 | 357 | 1,207 | 1,040 | ||||||||||||
| Loss on sale of assets |
2 | 1 | 5 | 4 | ||||||||||||
| Foreign exchange loss/(gain) on loans |
54 | 36 | 114 | (4 | ) | |||||||||||
| Income tax expense |
88 | 59 | 219 | 140 | ||||||||||||
| Finance expense (net) |
12 | 19 | 48 | 66 | ||||||||||||
| Finance income |
(7 | ) | (9 | ) | (24 | ) | (27 | ) | ||||||||
| Foreign exchange loss/(gain) on derivatives |
13 | (43 | ) | (61 | ) | (94 | ) | |||||||||
| Foreign exchange (gain)/loss on short-term deposits and investments |
(42 | ) | (5 | ) | (65 | ) | 8 | |||||||||
| Foreign exchange gain on other restricted deposits |
(1 | ) | — | (7 | ) | — | ||||||||||
| Unrealised (gain)/loss on commodities* |
(5 | ) | 27 | (72 | ) | 83 | ||||||||||
| Share of profit from equity accounted investments |
(35 | ) | (22 | ) | (113 | ) | (15 | ) | ||||||||
| Exceptional item |
(85 | ) | (30 | ) | (135 | ) | 215 | |||||||||
| Other non-cash adjustments |
(4 | ) | 1 | 1 | 1 | |||||||||||
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| Cash flows from operating activities before changes in assets and liabilities |
566 | 831 | 1,832 | 2,257 | ||||||||||||
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| Trade receivables |
79 | (71 | ) | 117 | 67 | |||||||||||
| Other financial assets* |
(15 | ) | (5 | ) | 6 | 2 | ||||||||||
| Other current assets |
(32 | ) | 9 | (32 | ) | 7 | ||||||||||
| Inventories |
(105 | ) | 170 | (764 | ) | (458 | ) | |||||||||
| Other non-current assets |
(22 | ) | (11 | ) | (45 | ) | (25 | ) | ||||||||
| Accounts payable |
34 | 157 | (43 | ) | (456 | ) | ||||||||||
| Other current liabilities |
131 | 11 | 62 | (7 | ) | |||||||||||
| Other financial liabilities* |
1 | (2 | ) | 68 | 60 | |||||||||||
| Other non-current liabilities and retirement benefit obligations |
26 | 87 | 107 | 228 | ||||||||||||
| Provisions |
84 | 34 | 241 | (15 | ) | |||||||||||
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| Cash generated from operations |
747 | 1,210 | 1,549 | 1,660 | ||||||||||||
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| * | Comparatives have been revised for the amendment made in the current year to separately disclose ‘Unrealised (gain)/loss on commodities’, which has resulted in a reclassification of amounts from ‘Other financial liabilities’ and ‘Other financial assets’. There is no impact on ‘Cash generated from operations’ as previously reported for the three and nine months ended 31 December 2015. |
19
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
| 22 | Related party transactions |
The Group’s related parties principally consist of Tata Sons Limited, subsidiaries, associates and joint ventures of Tata Sons Limited which includes Tata Motors Limited (the ultimate parent company), subsidiaries, associates and joint ventures of Tata Motors Limited. The Group routinely enters into transactions with these related parties in the ordinary course of business including transactions for sale and purchase of products and services. Transactions and balances with the Group’s own subsidiaries are eliminated on consolidation.
The following table summarises related party transactions and balances not eliminated in the consolidated condensed interim financial statements.
| 2016 | 2015* | |||||||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||
| Nine months ended 31 December (£ millions) |
With joint ventures of the Group |
With Tata Sons Limited and its subsidiaries and joint ventures |
With immediate or ultimate parent and its subsidiaries and joint ventures |
With joint ventures of the Group |
With Tata Sons Limited and its subsidiaries and joint ventures |
With immediate or ultimate parent and its subsidiaries and joint ventures |
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| Sale of products |
526 | 2 | 32 | 211 | — | 35 | ||||||||||||||||||
| Purchase of goods |
— | — | 52 | — | — | 78 | ||||||||||||||||||
| Services received |
94 | 91 | 73 | 73 | 106 | 78 | ||||||||||||||||||
| Services rendered |
80 | — | 2 | 31 | — | — | ||||||||||||||||||
| Trade and other receivables |
90 | 1 | 27 | 45 | — | 25 | ||||||||||||||||||
| Accounts payable |
1 | 36 | 20 | — | 4 | 39 | ||||||||||||||||||
| Dividends received/receivable |
68 | — | — | — | — | — | ||||||||||||||||||
| Dividend paid |
— | — | 150 | — | — | 150 | ||||||||||||||||||
| * | The 2015 comparative balances have been restated, in order to fully reflect the transactions with all of the Group’s related parties. |
Compensation of key management personnel
| Nine months ended 31 December (£ millions) |
2016 (unaudited) |
2015 (unaudited) |
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| Key management personnel remuneration |
16 | 12 | ||||||
| 23 | Subsequent events |
On 17 January 2017 the company issued a €650 million bond maturing in 2024 and paying an annual coupon of 2.200%. Subsequently, on 24 January 2017 the company issued a £300 million bond maturing in 2021 paying an annual coupon of 2.750%. The company intends to use net proceeds from the issue of bonds for general corporate purposes, including support for the on-going growth and capital spending plan.
20