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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 October 2020
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 the information 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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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: October 28, 2020
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Management’s discussion and analysis of financial condition and results of operations
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Jaguar Land Rover Q2 FY21 sales volumes year-on-year performance | 3 | |||
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Condensed consolidated financial statements | ||||
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Group, Company, Jaguar Land Rover, JLR plc and JLR refers to Jaguar Land Rover Automotive plc and its subsidiaries.
Note 3 on page 13 defines a series of alternative performance measures below.
Adjusted EBITDA margin | measured as adjusted EBITDA as a percentage of revenue. | |
Adjusted EBIT margin | measured as adjusted EBIT as a percentage of revenue. | |
PBT | Profit/(loss) before tax. | |
PAT | Profit/(loss) after tax. | |
Net debt/cash | defined by the Company as cash and cash equivalents plus short-term deposits and other investments less total balance sheet borrowings. | |
Q2 FY21 | 3 months ended 30 September 2020 | |
Q2 FY20 | 3 months ended 30 September 2019 | |
Q1 FY21 | 3 months ended 30 June 2020 | |
Q1 FY20 | 3 months ended 30 June 2019 | |
H1 FY21 | 6 months ended 30 September 2020 | |
H1 FY20 | 6 months ended 30 September 2019 | |
China JV | Chery Jaguar Land Rover Automotive Co., Ltd. |
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Management’s discussion and analysis of financial condition and results of operations
Jaguar Land Rover Automotive plc returned to profit and positive cash flow in the second quarter of Fiscal 2020/21 as sales continued to recover from the prior quarter also supported by ongoing Charge+ savings, however sales volumes, revenue and profitability were still down year-on-year as a result of the ongoing impact of Covid-19.
Key metrics for Q2 FY21 results, compared to Q1 FY21 and Q2 FY20, are as follows:
• | Retail sales 113,569 vehicles, up 53.3% quarter-on-quarter but down 11.9% year-on-year (incl. China up 3.7%) |
• | Wholesales (excl. China JV) of 73,451 vehicles, up 50.2% QoQ but down 39.4% YoY |
• | Revenue of £4.4 billion, up 52.2% QoQ but down 28.5% YoY |
• | PBT of £65 million, compared to the loss before tax of £413 million in Q1 FY21 but lower than the PBT of £156 million in Q2 last year |
• | Profit after tax (PAT) of £117 million (incl. £52 million tax credit), compared to a loss after tax of £648 million (incl. £ 235m tax charge) in Q1 FY21 and PAT of £100 million (incl. £56 million tax charge) in Q2 FY20 |
• | Adjusted EBITDA margin 11.1%, compared to 3.6% in Q1 FY21 and 13.4% in the same quarter a year ago |
• | Adjusted EBIT margin 0.3%, compared to (13.6)% in the prior quarter and 4.5% in the same quarter a year ago |
• | Free cash flow was positive £463 million (£2.0 billion better than Q1 FY21 and £506 million better than Q2 last year); after £531 million of investment spending and £528 million of working capital inflows as a result of the production restart and sales recovery from the prior quarter |
• | Liquidity at 30 September 2020 was £5.0 billion, including £3.05 billion of cash and short-term investments and £ 1.9 billion undrawn credit facility |
• | Covid-19 continues to have a significant impact on global economic performance as governments across the globe continue to grapple with containing a second wave of the virus whilst balancing the need to support an economic recovery. |
• | Passenger car industry volumes recovered strongly in Q2 FY21 across all regions compared to the prior quarter as social distancing measures were lifted, but remain weaker year-on-year (except in China) as Covid-19 continues to impact industry sales volumes. |
• | Economic activity has continued to recover during the second quarter, however there remains considerable uncertainty about the extent, speed and regional differences of the recovery with many regions experiencing a second wave of the pandemic as infection rates continue to rise. |
• | In addition, geopolitical tensions continue, particularly relating to trade with recent increased volatility in financial markets. Further uncertainty and volatility could arise with the upcoming US presidential election on 3 November and the transition period for Brexit moving ever closer with little clarity yet on the future trading arrangements between the UK and the European Union. |
Total automotive industry car volumes (units)
Region | Q2 FY21 | Q1 FY21 | Qtr on Qtr | Q2 FY20 | Year on year | |||||||||||||||
China | 5,508,000 | 4,974,000 | 10.7 | % | 5,112,000 | 7.7 | % | |||||||||||||
Europe (excl. UK) | 2,876,028 | 1,877,892 | 53.2 | % | 3,096,735 | (7.1 | %) | |||||||||||||
UK | 590,154 | 169,945 | 247.3 | % | 593,026 | (0.5 | %) | |||||||||||||
US | 3,898,750 | 2,936,014 | 32.8 | % | 4,318,068 | (9.7 | %) |
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 Q2 FY21 sales volumes performance
Total retail sales (including the China JV) were 113,569 units, up 53.3% quarter on quarter reflecting the continued recovery across all regions including the UK (up 231.6%), Europe (up 78.8%), Overseas (up 35.1%), North America (up 21.3%) and China (14.6%). However, retail sales in Q2 FY21 declined 11.9% year-on-year due to the ongoing impact of Covid-19 with sales down across all regions except China (up 3.7%). As expected, retail sales by model continued to recover in Q2 FY21 compared to the prior quarter but continued to be lower year-on-year. Sales of the New Land Rover Defender continued to ramp up retailing 9,813 vehicles in the second quarter.
Wholesales (excluding the China JV) totalled 73,451 units, up 50.2% quarter on quarter but down 39.4% year on year with sales declining in each region with the exception of China (up 25.8%). Wholesales of the new Land Rover Defender reached 12,125 vehicles in Q2 FY21.
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Jaguar Land Rover’s Q2 FY21 retail sales (including the China JV) by key region and model is detailed in the following table:
Q2 FY21 | Q1 FY21 | QoQ change (%) | Q2 FY20 | YoY change (%) | ||||||||||||||||
UK | 27,365 | 8,252 | 231.6 | % | 28,176 | (2.9 | %) | |||||||||||||
North America | 25,262 | 20,833 | 21.3 | % | 29,992 | (15.8 | %) | |||||||||||||
Europe | 20,613 | 11,527 | 78.8 | % | 25,713 | (19.8 | %) | |||||||||||||
China1 | 27,188 | 23,726 | 14.6 | % | 26,223 | 3.7 | % | |||||||||||||
Overseas | 13,141 | 9,729 | 35.1 | % | 18,849 | (30.3 | %) | |||||||||||||
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Total JLR | 113,569 | 74,067 | 53.3 | % | 128,953 | (11.9 | %) | |||||||||||||
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F-PACE | 7,924 | 4,700 | 68.6 | % | 11,447 | (30.8 | %) | |||||||||||||
I-PACE | 3,214 | 2,481 | 29.5 | % | 3,666 | (12.3 | %) | |||||||||||||
E-PACE1 | 7,027 | 3,593 | 95.6 | % | 9,928 | (29.2 | %) | |||||||||||||
F-TYPE | 1,399 | 927 | 50.9 | % | 1,760 | (20.5 | %) | |||||||||||||
XE1 | 4,944 | 4,562 | 8.4 | % | 6,889 | (28.2 | %) | |||||||||||||
XF1 | 2,562 | 1,946 | 31.7 | % | 2,746 | (6.7 | %) | |||||||||||||
XJ2 | 277 | 578 | (52.1 | %) | 887 | (68.8 | %) | |||||||||||||
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Jaguar1 | 27,347 | 18,787 | 45.6 | % | 37,323 | (26.7 | %) | |||||||||||||
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Discovery Sport1 | 16,421 | 10,659 | 54.1 | % | 16,756 | (2.0 | %) | |||||||||||||
Discovery | 6,147 | 4,440 | 38.4 | % | 7,880 | (22.0 | %) | |||||||||||||
Range Rover Evoque1 | 18,515 | 11,168 | 65.8 | % | 22,405 | (17.4 | %) | |||||||||||||
Range Rover Velar | 11,016 | 7,161 | 53.8 | % | 13,695 | (19.6 | %) | |||||||||||||
Range Rover Sport | 14,434 | 11,607 | 24.4 | % | 18,919 | (23.7 | %) | |||||||||||||
Range Rover | 9,876 | 8,063 | 22.5 | % | 11,975 | (17.5 | %) | |||||||||||||
Defender | 9,813 | 2,182 | n/a | — | n/a | |||||||||||||||
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Land Rover1 | 86,222 | 55,280 | 56.0 | % | 91,630 | (5.9 | %) | |||||||||||||
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Total JLR | 113,569 | 74,067 | 53.3 | % | 128,953 | (11.9 | %) | |||||||||||||
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1 | China JV retail volume in Q2 FY21 was 16,040 units, up 13.9% quarter-on-quarter and 10.3% year-on-year (7,056 units of Discovery Sport, 3,319 units of Evoque, 1,505 units of Jaguar XFL, 3,424 units of Jaguar XEL and 736 units of Jaguar E-PACE). 1China JV retail volume in Q1 FY21 was 14,083 units, (5,663 units of Discovery Sport, 3,008 units of Evoque, 1,399 units of Jaguar XFL, 3,473 units of Jaguar XEL and 540 units of Jaguar E-PACE). China JV retail volume in Q2 FY20 was 14,548 units (6,733 units of Discovery Sport, 2,156 units of Evoque, 1,254 units of Jaguar XFL, 3,785 units of Jaguar XEL and 620 units of Jaguar E-PACE) |
2 | No longer manufactured |
For the quarter ended 30 September 2020, revenue was £4.4 billion, 52.2% higher quarter on quarter but 28.5% lower year on year. Despite the challenging environment the Company returned to profit in the second quarter with PBT of £65 million (11.1% adjusted EBITDA, 0.3% adjusted EBIT), compared to the £413 million loss before tax (3.6% adjusted EBITDA, -13.6% adjusted EBIT) in Q1 FY21 and PBT of £156 million in Q2 FY20 (13.4% adjusted EBITDA, 4.5% adjusted EBIT), primarily reflecting the following factors:
Category | Qtr on Qtr £mils | Year on Year £mils | ||||||
Volume and mix | 331 | (463 | ) | |||||
Variable marketing | 147 | 73 | ||||||
Material, manufacturing and warranty costs | 31 | (62 | ) | |||||
Fixed costs (e.g. Marketing, D&A, furlough) | (70 | ) | 253 | |||||
FX impact & commodity hedges | 39 | 108 | ||||||
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Total PBT variance | 478 | (91 | ) | |||||
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H1 FY21 revenue and profits
Revenue was £7.2 billion in H1 FY21 compared to £11.2 billion for the same period last year, generating a loss before tax of £348 million compared to a loss before tax of £239 million (after exceptional items) in H1 FY20. The Adjusted EBITDA margin in H1 FY21 was 8.1% compared to 9.5% in H1 FY20 and the loss before interest and tax (Adjusted EBIT) margin in H1 FY21 was (5.2)% compared to 0.3% in H1 FY20. The loss after tax in H1 FY21 was £531 million (including a £183 million tax charge) compared to a loss after tax of £302 million in H1 FY20 (including a £63 million tax charge).
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Cash flow, liquidity and capital resources
In Q2 FY21 free cash flow was positive £463 million after £531 million of investment spending and £528 million of working capital inflows following the restart of production and the recovery in sales. The £463 million positive free cash flow in the second quarter was £2.0 billion better than in the prior quarter and £506 million better than in Q2 of last year. Of the £531 million total investment spending in Q2 FY21 £432 million was capitalised and £99 million of research and development costs were expensed through the income statement.
Total cash and cash equivalents, deposits and investments at 30 September 2020 stood at £3.05 billion (comprising £2.8 billion of cash and cash equivalents and £259 million of short-term deposits and other investments). The cash and financial deposits include an amount of £257 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 30 September 2020, the Company also had an undrawn revolving credit facility totalling £1.9 billion, maturing in July 2022, which combined with total cash of £3.05 billion resulted in total available liquidity of £5.0 billion.
The following table shows details of the Company’s financing arrangements as at 30 September 2020:
(£ millions) | Facility amount | Amount outstanding | Undrawn amount | Issuer | ||||||||||
£400m 5.000% Senior Notes due Feb 2022 | 400 | 400 | — | Jaguar Land Rover Automotive plc | ||||||||||
£400m 3.875% Senior Notes due Mar 2023 | 400 | 400 | — | Jaguar Land Rover Automotive plc | ||||||||||
£300m 2.750% Senior Notes due Jan 2021 | 300 | 300 | — | Jaguar Land Rover Automotive plc | ||||||||||
$500m 5.625% Senior Notes due Feb 2023 | 390 | 390 | — | Jaguar Land Rover Automotive plc | ||||||||||
$500m 4.500% Senior Notes due Oct 2027 | 390 | 390 | — | Jaguar Land Rover Automotive plc | ||||||||||
€650m 2.200% Senior Notes due Jan 2024 | 595 | 595 | — | Jaguar Land Rover Automotive plc | ||||||||||
€500m 5.875% Senior Notes due Nov 2024 | 458 | 458 | — | Jaguar Land Rover Automotive plc | ||||||||||
€500m 6.875% Senior Notes due Nov 2026 | 458 | 458 | — | Jaguar Land Rover Automotive plc | ||||||||||
€500m 4.500% Senior Notes due Jan 2026 | 458 | 458 | — | Jaguar Land Rover Automotive plc | ||||||||||
$200m Syndicated Loan due Oct 2022 | 156 | 156 | — | Jaguar Land Rover Automotive plc | ||||||||||
$800m Syndicated Loan due Jan 2025 | 624 | 624 | — | Jaguar Land Rover Automotive plc | ||||||||||
Fleet buyback facility due Dec 2020 | 110 | 110 | — | Jaguar Land Rover Limited | ||||||||||
UKEF loan due Oct 2024 | 510 | 510 | — | Jaguar Land Rover Automotive plc | ||||||||||
China RMB 5b revolving facility due Jun 20211 | 573 | 573 | — | Various | ||||||||||
Other2 | 38 | 38 | — | Jaguar Land Rover Automotive plc | ||||||||||
Revolving credit facility | 1,935 | — | 1,935 | Jaguar Land Rover Automotive plc | ||||||||||
IFRS 16 lease obligations3 | 524 | 524 | — | Various | ||||||||||
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Subtotal | 8,319 | 6,384 | 1,935 | |||||||||||
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Prepaid costs | — | (29 | ) | — | ||||||||||
Fair value adjustments4 | — | 41 | — | |||||||||||
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Total | 8,319 | 6,396 | 1,935 | |||||||||||
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1 | The China RMB 5 billion 3-year syndicated revolving loan facility is subject to an annual confirmatory review. This is fully drawn, equivalent to GBP 573m at 30th September bookkeeping FX rates |
2 | Primarily an advance as part of a sale and leaseback transaction as well as parts factoring in China |
3 | Lease obligations are now accounted for as debt with the adoption of IFRS 16 |
4 | Fair value adjustments relate to hedging arrangements for the $500m 2027 Notes and €500m 2026 Notes |
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There are a number of potential risks which could have a material impact on the Group’s performance and could cause actual results to differ materially from expected and/or historical results, including those discussed on pages 19-22 of the Annual Report 2019-20 of the Group (available at https://www.jaguarlandrover.com/annual-report-2020) along with mitigating factors. The principal risks discussed in the Group’s Annual Report 2019-20 are competitive business efficiency, global economic and geopolitical environment (including COVID-19), brand positioning, distribution channels/retailer performance, IT systems and security, environmental regulations and compliance, supply chain disruptions, human capital, rapid technology change and unethical and prohibited business practices.
There were no material acquisitions or disposals in Q2 FY21.
Off-balance sheet financial arrangements
At 30 September 2020, Jaguar Land Rover Limited (a subsidiary of the Company) had sold £81 million equivalent of receivables under a $700 million invoice discounting facility signed in March 2019.
On 13 October 2020 the Company issued a $700 million bond maturing in October 2025, paying an annual coupon of
7.750%.
Related party transactions for Q2 FY21 are disclosed in note 26 to the condensed consolidated financial statements disclosed on page 29 of this Interim Report. There have been no material changes to the related party transactions described in the latest Annual Report.
At 30 September 2020, Jaguar Land Rover employed 36,433 people worldwide, including agency personnel, compared to 39,360 at 30 September 2019. Thierry Bolloré was appointed to the role of Chief Executive Officer of Jaguar Land Rover Automotive plc, effective 10 September 2020.
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 | ||||
Natarajan Chandrasekaran | Chairman and Director | 2017 | ||||
Thierry Bolloré | Chief Executive Officer and Director | 2020 | ||||
Prof Sir Ralf D Speth | Vice Chairman and Director | 2020 | ||||
Andrew M. Robb | Director | 2009 | ||||
Nasser Mukhtar Munjee | Director | 2012 | ||||
Mr P B Balaji | Director | 2017 | ||||
Hanne Sorensen | Director | 2018 |
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Condensed Consolidated Income Statement
Three months ended | Six months ended | |||||||||||||||||||
£ millions | Note | 30 September 2020 | 30 September 2019 | 30 September 2020 | 30 September 2019 | |||||||||||||||
Revenue | 5 | 4,352 | 6,086 | 7,211 | 11,160 | |||||||||||||||
Material and other cost of sales | (2,695 | ) | (3,720 | ) | (4,528 | ) | (7,001 | ) | ||||||||||||
Employee costs* | 4 | (492 | ) | (631 | ) | (927 | ) | (1,287 | ) | |||||||||||
Other expenses | 8 | (931 | ) | (1,343 | ) | (1,618 | ) | (2,661 | ) | |||||||||||
Exceptional items | 4 | — | (10 | ) | — | (22 | ) | |||||||||||||
Engineering costs capitalised | 6 | 210 | 353 | 378 | 692 | |||||||||||||||
Other income | 41 | 15 | 81 | 41 | ||||||||||||||||
Depreciation and amortisation | (469 | ) | (504 | ) | (960 | ) | (967 | ) | ||||||||||||
Foreign exchange gain/(loss) and fair value adjustments | 100 | (10 | ) | 116 | (51 | ) | ||||||||||||||
Finance income | 7 | 3 | 11 | 7 | 25 | |||||||||||||||
Finance expense (net) | 7 | (55 | ) | (50 | ) | (109 | ) | (99 | ) | |||||||||||
Share of profit/(loss) of equity accounted investments | 1 | (41 | ) | 1 | (69 | ) | ||||||||||||||
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Profit/(loss) before tax | 65 | 156 | (348 | ) | (239 | ) | ||||||||||||||
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Income tax credit/(expense) | 13 | 52 | (56 | ) | (183 | ) | (63 | ) | ||||||||||||
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Profit/(loss) for the period | 117 | 100 | (531 | ) | (302 | ) | ||||||||||||||
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Attributable to: | ||||||||||||||||||||
Owners of the Company | 117 | 100 | (531 | ) | (303 | ) | ||||||||||||||
Non-controlling interests | — | — | — | 1 |
* | ‘Employee costs’ excludes the exceptional item explained in note 4. |
The notes on pages 12 to 29 are an integral part of these condensed consolidated financial statements.
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Condensed Consolidated Statement of Comprehensive Income and Expense
Three months ended | Six months ended | |||||||||||||||
£ millions | 30 September 2020 | 30 September 2019 restated* | 30 September 2020 | 30 September 2019 restated* | ||||||||||||
Profit/(loss) for the period | 117 | 100 | (531 | ) | (302 | ) | ||||||||||
Items that will not be reclassified subsequently to profit or loss: | ||||||||||||||||
Remeasurement of net defined benefit obligation | (10 | ) | (156 | ) | (947 | ) | (200 | ) | ||||||||
Income tax related to items that will not be reclassified | 2 | 28 | 180 | 35 | ||||||||||||
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(8 | ) | (128 | ) | (767 | ) | (165 | ) | |||||||||
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Items that may be reclassified subsequently to profit or loss: | ||||||||||||||||
Gain/(loss) on cash flow hedges (net) | 361 | (70 | ) | 325 | 9 | |||||||||||
Currency translation differences | (2 | ) | (8 | ) | 15 | 19 | ||||||||||
Income tax related to items that may be reclassified | (69 | ) | 10 | (62 | ) | (8 | ) | |||||||||
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290 | (68 | ) | 278 | 20 | ||||||||||||
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Other comprehensive income/(expense) net of tax | 282 | (196 | ) | (489 | ) | (145 | ) | |||||||||
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Total comprehensive income/(expense) attributable to shareholder | 399 | (96 | ) | (1,020 | ) | (447 | ) | |||||||||
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Attributable to: | ||||||||||||||||
Owners of the Company | 399 | (96 | ) | (1,020 | ) | (448 | ) | |||||||||
Non-controlling interests | — | — | — | 1 |
* | see note 1 for details of the restatement |
The notes on pages 12 to 29 are an integral part of these condensed consolidated financial statements.
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Condensed Consolidated Balance Sheet
As at (£ millions) | Note | 30 September 2020 | 31 March 2020 | 30 September 2019 | ||||||||||||
Non-current assets | ||||||||||||||||
Investments | 389 | 399 | 460 | |||||||||||||
Other financial assets | 10 | 294 | 257 | 205 | ||||||||||||
Property, plant and equipment | 14 | 6,795 | 6,814 | 6,573 | ||||||||||||
Intangible assets | 14 | 6,219 | 6,278 | 5,970 | ||||||||||||
Right-of-use assets | 543 | 568 | 606 | |||||||||||||
Pension asset | 22 | — | 408 | — | ||||||||||||
Other non-current assets | 12 | 54 | 23 | 73 | ||||||||||||
Deferred tax assets | 455 | 523 | 567 | |||||||||||||
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Total non-current assets | 14,749 | 15,270 | 14,454 | |||||||||||||
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Current assets | ||||||||||||||||
Cash and cash equivalents | 2,790 | 2,271 | 1,971 | |||||||||||||
Short-term deposits and other investments | 259 | 1,393 | 874 | |||||||||||||
Trade receivables | 692 | 833 | 1,053 | |||||||||||||
Other financial assets | 10 | 328 | 383 | 286 | ||||||||||||
Inventories | 11 | 3,030 | 3,468 | 3,728 | ||||||||||||
Other current assets | 12 | 463 | 477 | 579 | ||||||||||||
Current tax assets | 29 | 9 | 11 | |||||||||||||
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Total current assets | 7,591 | 8,834 | 8,502 | |||||||||||||
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Total assets | 22,340 | 24,104 | �� | 22,956 | ||||||||||||
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Current liabilities | ||||||||||||||||
Accounts payable | 5,465 | 6,499 | 6,572 | |||||||||||||
Short-term borrowings | 18 | 1,131 | 526 | 812 | ||||||||||||
Other financial liabilities | 15 | 784 | 1,073 | 1,176 | ||||||||||||
Provisions | 16 | 915 | 944 | 950 | ||||||||||||
Other current liabilities | 17 | 749 | 716 | 630 | ||||||||||||
Current tax liabilities | 102 | 100 | 86 | |||||||||||||
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Total current liabilities | 9,146 | 9,858 | 10,226 | |||||||||||||
|
|
|
|
|
| |||||||||||
Non-current liabilities | ||||||||||||||||
Long-term borrowings | 18 | 4,741 | 4,817 | 3,759 | ||||||||||||
Other financial liabilities | 15 | 546 | 778 | 777 | ||||||||||||
Provisions | 16 | 1,220 | 1,355 | 1,263 | ||||||||||||
Retirement benefit obligation | 22 | 585 | 28 | 826 | ||||||||||||
Other non-current liabilities | 17 | 477 | 533 | 535 | ||||||||||||
Deferred tax liabilities | 90 | 179 | 106 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total non-current liabilities | 7,659 | 7,690 | 7,266 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total liabilities | 16,805 | 17,548 | 17,492 | |||||||||||||
|
|
|
|
|
| |||||||||||
Equity attributable to shareholders | ||||||||||||||||
Ordinary shares | 1,501 | 1,501 | 1,501 | |||||||||||||
Capital redemption reserve | 167 | 167 | 167 | |||||||||||||
Other reserves | 20 | 3,859 | 4,880 | 3,789 | ||||||||||||
|
|
|
|
|
| |||||||||||
Equity attributable to shareholders | 5,527 | 6,548 | 5,457 | |||||||||||||
|
|
|
|
|
| |||||||||||
Non-controlling interests | 8 | 8 | 7 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total equity | 5,535 | 6,556 | 5,464 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total liabilities and equity | 22,340 | 24,104 | 22,956 | |||||||||||||
|
|
|
|
|
|
The notes on pages 12 to 29 are an integral part of these condensed consolidated financial statements.
These condensed consolidated interim financial statements were approved by the JLR plc Board and authorised for issue on 23 October 2020.
Company registered number: 06477691
9
Table of Contents
Condensed Consolidated Statement of Changes in Equity
(£ millions) | Ordinary shares | Capital redemption reserve | Other reserves | Equity attributable to shareholder | Non- controlling interests | Total equity | ||||||||||||||||||
Balance at 1 April 2020 | 1,501 | 167 | 4,880 | 6,548 | 8 | 6,556 | ||||||||||||||||||
Loss for the period | — | — | (531 | ) | (531 | ) | — | (531 | ) | |||||||||||||||
Other comprehensive expense for the period | — | — | (489 | ) | (489 | ) | — | (489 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total comprehensive expense | — | — | (1,020 | ) | (1,020 | ) | — | (1,020 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Amounts removed from hedge reserve and recognised in inventory | — | — | (1 | ) | (1 | ) | — | (1 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance at 30 September 2020 | 1,501 | 167 | 3,859 | 5,527 | 8 | 5,535 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(£ millions) | Ordinary shares | Capital redemption reserve | Other reserves | Equity attributable to shareholders | Non- controlling interests | Total equity | ||||||||||||||||||
Balance at 1 April 2019 | 1,501 | 167 | 4,305 | 5,973 | 6 | 5,979 | ||||||||||||||||||
Adjustment on initial application of IFRS 16 (net of tax) | — | — | (22 | ) | (22 | ) | — | (22 | ) | |||||||||||||||
Adjusted balance at 1 April 2019 | 1,501 | 167 | 4,283 | 5,951 | 6 | 5,957 | ||||||||||||||||||
(Loss)/profit for the period | — | — | (303 | ) | (303 | ) | 1 | (302 | ) | |||||||||||||||
Other comprehensive expense for the period | — | — | (145 | ) | (145 | ) | — | (145 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total comprehensive (expense)/income | — | — | (448 | ) | (448 | ) | 1 | (447 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Amounts removed from hedge reserve and recognised in inventory | — | — | (56 | ) | (56 | ) | — | (56 | ) | |||||||||||||||
Income tax related to amounts removed from hedge reserve and recognised in inventory | — | — | 10 | 10 | — | 10 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance at 30 September 2019 | 1,501 | 167 | 3,789 | 5,457 | 7 | 5,464 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages 12 to 29 are an integral part of these condensed consolidated financial statements.
10
Table of Contents
Condensed Consolidated Cash Flow Statement
Three months ended | Six months ended | |||||||||||||||||||
£ millions | Note | 30 September 2020 | 30 September 2019 | 30 September 2020 | 30 September 2019 | |||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Cash generated from/(used in) operations | 25 | 1,045 | 776 | 5 | 726 | |||||||||||||||
Income tax paid | (73 | ) | (27 | ) | (97 | ) | (62 | ) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net cash generated from/(used in) operating activities | 972 | 749 | (92 | ) | 664 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Purchases of other investments | — | (3 | ) | — | (5 | ) | ||||||||||||||
Proceeds from sale of other investments | — | — | 22 | — | ||||||||||||||||
Investment in other restricted deposits | (19 | ) | (15 | ) | (21 | ) | (18 | ) | ||||||||||||
Redemption of other restricted deposits | 12 | 4 | 24 | 14 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Movements in other restricted deposits | (7 | ) | (11 | ) | 3 | (4 | ) | |||||||||||||
Investment in short-term deposits and other investments | (361 | ) | (678 | ) | (1,546 | ) | (1,287 | ) | ||||||||||||
Redemption of short-term deposits and other investments | 385 | 664 | 2,674 | 1,468 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Movements in short-term deposits and other investments | 24 | (14 | ) | 1,128 | 181 | |||||||||||||||
Purchases of property, plant and equipment | (229 | ) | (347 | ) | (451 | ) | (648 | ) | ||||||||||||
Proceeds from sale of property, plant and equipment | — | — | 1 | — | ||||||||||||||||
Net cash outflow relating to intangible asset expenditure | (203 | ) | (377 | ) | (422 | ) | (786 | ) | ||||||||||||
Finance income received | 2 | 11 | 10 | 26 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net cash (used in)/generated from investing activities | (413 | ) | (741 | ) | 291 | (1,236 | ) | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Finance expenses and fees paid | (79 | ) | (79 | ) | (153 | ) | (115 | ) | ||||||||||||
Proceeds from issuance of short-term borrowings | 36 | — | 854 | — | ||||||||||||||||
Repayment of short-term borrowings | (82 | ) | — | (252 | ) | (114 | ) | |||||||||||||
Repayment of long-term borrowings | (31 | ) | — | (62 | ) | — | ||||||||||||||
Payments of lease obligations | (19 | ) | (21 | ) | (40 | ) | (33 | ) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net cash (used in)/generated from financing activities | (175 | ) | (100 | ) | 347 | (262 | ) | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net increase/(decrease) in cash and cash equivalents | 384 | (92 | ) | 546 | (834 | ) | ||||||||||||||
Cash and cash equivalents at beginning of period | 2,460 | 2,045 | 2,271 | 2,747 | ||||||||||||||||
Effect of foreign exchange on cash and cash equivalents | (54 | ) | 18 | (27 | ) | 58 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Cash and cash equivalents at end of period | 2,790 | 1,971 | 2,790 | 1,971 | ||||||||||||||||
|
|
|
|
|
|
|
|
The notes on pages 12 to 29 are an integral part of these condensed consolidated financial statements.
11
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
1 | Accounting policies |
Basis of preparation
The financial information in these interim financial statements 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 balance sheet and accompanying notes as at 30 September 2019 have been disclosed solely for the information of the users.
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 19.
The condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements for the year ended 31 March 2020, 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’ report of the Group’s Annual Report for the year ended 31 March 2020.
The accounting policies applied are consistent with those of the annual consolidated financial statements for the year ended 31 March 2020.
The Group has been presenting gains and losses on effective cash flow hedges of inventory in the statement of other comprehensive income and expense as “not to be reclassified to income statement”. With wider industry practice emerging, clearer guidance now being available and with the present economic situation due to COVID-19, the Group has changed the presentation of these effective cash flow hedges of inventory to “may be reclassified to income statement”, from year ended 31 March 2021 and accordingly reclassified the comparative amounts for the prior periods. The change in presentation is within the statement of other comprehensive income and expense and does not affect net income.
Estimates and judgements
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimate uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 March 2020.
Going concern
The Condensed Interim Financial Statements have been prepared on a going concern basis as the Directors consider that adequate resources exist for the Group to continue operating for the foreseeable future.
There is significant liquidity and financing headroom at 30 September 2020 and throughout the going concern forecast period. As at 30 September 2020 total available liquidity stood at £5 billion: this does not include the 7.75% 5 year bond for $700 million that priced 7 October 2020. As compared to the management estimates at 31 March 2020, the Group’s business performance is better for the six months ended 30 September 2020, increasing the amount of headroom at 30 September 2020. Total wholesale volumes are higher than forecast at 31 March 2020, with a particularly strong recovery in China in the six months ended 30 September 2020. The EBIT margin for the six months ended 30 September 2020 was better than that forecast for the FY20 assessment.
The going concern assessment has been made utilising the models and assumptions from the assessment performed for the preparation of the FY20 financial statements, with the period to March 2021 being updated for actual observed performance and trends, while the six months period to September 2021 has been kept consistent with the FY 20 assessment and the forecast extended to March 2022 using the same basis of preparation. Details of the scenarios and assumptions used in the FY20 assessment are set out in Note 2 to the annual financial statements.
The Group has modelled two scenarios in its assessment of going concern; a base case and a severe but plausible downside scenario.
The base case takes into account the estimated impact of the COVID-19 global pandemic as well as other end market and operational factors throughout the going concern period and has been monitored against the actual results and cash generation in the period since 1 October 2020.
The impact of COVID-19 remains uncertain; however, the directors have considered latest external market commentaries and industry forecasts in arriving at a severe but plausible downside scenario.
12
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
1 | Accounting policies (continued) |
This downside scenario assumes a 10% reduction in sales across the going concern period as well as other risk sensitivities and mitigations considered in the ‘Severe scenario’ FY20 assessment. This additional decline in cash flows over and above the base case has an impact on available UK liquidity (which excludes cash in subsidiaries outside of the UK, adjusted for intra-month volatility and excludes new funding) of about 25% over the going concern period when compared to the base scenario.
In the downside scenario there is sufficient liquidity in the forecast for the Group to operate and discharge its liabilities as they fall due, taking into account only cash generated from operations and the funding facilities existing on the date of authorisation of these interim financial statements, including the presently undrawn revolving credit facility.
Consequently, the directors are confident that the Group will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the interim financial statements on a going concern basis.
2 | Government grants |
Employee costs for the three and six month periods ended 30 September 2020 are net of government grants received in relation to employees placed on furlough under the Coronavirus Job Retention Scheme of £54 million and £177 million respectively (three and six months ended 30 September 2019: £nil).
3 | Alternative Performance Measures |
In reporting financial information, the Group presents alternative performance measures (‘APMs’) which are not defined or specified under the requirements of IFRS. The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the business.
The APMs used by the Group are defined below.
Alternative Performance | Definition | |
Adjusted EBITDA | Adjusted EBITDA is defined as profit before: income tax expense; exceptional items; finance expense (net of capitalised interest) and finance income; gains/losses on debt and unrealised derivatives, realised derivatives entered into for the purpose of hedging debt, and equity or debt investments held at fair value; foreign exchange gains/losses on other assets and liabilities, including short-term deposits and cash and cash equivalents; share of profit/loss from equity accounted investments; depreciation and amortisation. | |
Adjusted EBIT | Adjusted EBIT is defined as for adjusted EBITDA but including share of profit/loss from equity accounted investments, depreciation and amortisation. | |
Loss before tax and exceptional items | Loss before tax excluding exceptional items. | |
Free cash flow | Net cash generated from operating activities less net cash used in automotive investing activities, excluding investments in consolidated entities and movements in financial investments, and after finance expenses and fees paid. Financial investments are those reported as Cash and Cash Equivalents, Short Term Deposits and Other Investments, and equity or debt investments held at fair value. | |
Total product and other investment | Cash used in the purchase of property, plant and equipment, intangible assets, investments in equity accounted investments and other trading investments, acquisition of subsidiaries and expensed research and development costs. | |
Operating cash flow before investment | Free cash flow before financing excluding total product and other investment. | |
Working capital | Changes in assets and liabilities as presented in note 25. This comprises movements in assets and liabilities excluding movements relating to financing or investing cash flows or non-cash items that are not included in adjusted EBIT or adjusted EBITDA. | |
Total cash and cash equivalents, deposits and investments | Defined as cash and cash equivalents, short-term deposits and other investments, marketable securities and any other items defined as cash and cash equivalents in accordance with IFRS. | |
Available liquidity | Defined as total cash and cash equivalents, deposits and investments plus committed undrawn credit facilities. | |
Retail sales | Jaguar Land Rover retail sales represent vehicle sales made by dealers to end customers and include the sale of vehicles produced by our Chinese joint venture, Chery Jaguar Land Rover Automotive Company Ltd. | |
Wholesales | Wholesales represent vehicle sales made to dealers. The Group recognises revenue on wholesales. |
13
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
3 | Alternative Performance Measures (continued) |
The Group uses adjusted EBITDA as an APM to review and measure the underlying profitability of the Group on an ongoing basis for comparability as it recognises that increased capital expenditure year-on-year will lead to a corresponding increase in depreciation and amortisation expense recognised within the consolidated income statement.
The Group uses adjusted EBIT as an APM to review and measure the underlying profitability of the Group on an ongoing basis as this excludes volatility on unrealised foreign exchange transactions. Due to the significant level of debt and currency derivatives, unrealised foreign exchange distorts the financial performance of the Group from one period to another.
During the three month period ended 30 September 2020, the definition of ‘Free cash flow’ was amended to exclude non-automotive investments and net investments in equity and debt investments held at fair value, which are deemed more financial investment in nature. The definition was also amended to exclude foreign exchange gains/losses on short-term deposits and cash and cash equivalents, therefore ensuring more consistent treatment since revaluation of other current assets and liabilities is already excluded. The Group considers these changes should provide greater clarity of Free Cash Flow more closely aligned to JLR’s competitors hence providing improved comparability for users of the APM. Free cash flow for the three and six month periods ended 30 September 2019 prior to the change was £(64) million and £(783) million respectively.
During the three month period ended 30 September 2020, the definitions of adjusted EBIT and adjusted EBITDA were amended to exclude foreign exchange gains and losses on revaluation of other assets and liabilities, including short-term deposits and cash and cash equivalents. The Group considers the amended APM to better measure the underlying operational profitability of the Group, and is consistent with the treatment of the revaluation of other balance sheet items such as that of debt and unrealised hedges. It also recognises that the Group may use cash and/or derivatives to hedge debt and/or working capital balance sheet exposures and therefore it is logical to present gains or losses on revaluation of all such items consistently, excluded from EBITDA. This is also consistent with the Group’s definition of Free Cash Flow. Adjusted EBIT for the three and six month periods ended 30 September 2019 prior to the change was £295 million and £17 million respectively. Adjusted EBITDA for the three and six month periods ended 30 September 2019 prior to the change was £840 million and £1,053 million respectively.
Free cash flow is considered by the Group to be a key measure in assessing and understanding the total operating performance of the Group and to identify underlying trends.
Total product and other investment is considered by the Group to be a key measure in assessing cash invested in the development of future new models and infrastructure supporting the growth of the Group.
Operating cash flow before investment is used as a measure of the operating performance and cash available to the Group before the direct cash impact of investment decisions.
Working capital is considered by the Group to be a key measure in assessing short-term assets and liabilities that are expected to be converted into cash within the next 12-month period.
Total cash and cash equivalents, deposits and investments and available liquidity are measures used by the Group to assess liquidity and the availability of funds for future spend and investment.
Reconciliations between these alternative performance measures and statutory reported measures are shown on the next pages.
14
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
3 | Alternative Performance Measures (continued) |
Adjusted | EBIT and Adjusted EBITDA |
Three months ended | Six months ended | |||||||||||||||||||
(£ millions) | Note | 30 September 2020 | 30 September 2019 restated | 30 September 2020 | 30 September 2019 restated | |||||||||||||||
Adjusted EBITDA | 481 | 818 | 583 | 1,065 | ||||||||||||||||
Depreciation and amortisation | (469 | ) | (504 | ) | (960 | ) | (967 | ) | ||||||||||||
Share of profit/(loss) of equity accounted investments | 1 | (41 | ) | 1 | (69 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Adjusted EBIT | 13 | 273 | (376 | ) | 29 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Foreign exchange (loss)/gain on derivatives | (5 | ) | (10 | ) | 3 | 1 | ||||||||||||||
Unrealised gain/(loss) on commodities | 49 | (18 | ) | 65 | (44 | ) | ||||||||||||||
Foreign exchange and fair value adjustments on loans | 79 | (39 | ) | 43 | (108 | ) | ||||||||||||||
Foreign exchange (loss)/gain on economic hedges of loans | (4 | ) | (7 | ) | 28 | 13 | ||||||||||||||
Foreign exchange (loss)/gain on balance sheet, cash and deposits revaluation | (15 | ) | 22 | (16 | ) | (12 | ) | |||||||||||||
Finance income | 7 | 3 | 11 | 7 | 25 | |||||||||||||||
Finance expense (net) | 7 | (55 | ) | (50 | ) | (109 | ) | (99 | ) | |||||||||||
Fair value (loss)/gain on equity investments | — | (16 | ) | 7 | (22 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Profit/(loss) before tax and exceptional items | 65 | 166 | (348 | ) | (217 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Exceptional items | — | (10 | ) | — | (22 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Profit/(loss) before tax | 65 | 156 | (348 | ) | (239 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
Free cash flow
Three months ended | Six months ended | |||||||||||||||
(£ millions) | 30 September 2020 | 30 September 2019 | 30 September 2020 | 30 September 2019 | ||||||||||||
Net cashed generated from/(used in) operating activities | 972 | 749 | (92 | ) | 664 | |||||||||||
Purchases of property, plant and equipment | (229 | ) | (347 | ) | (451 | ) | (648 | ) | ||||||||
Net cash outflow relating to intangible asset expenditure | (203 | ) | (377 | ) | (422 | ) | (786 | ) | ||||||||
Proceeds from sale of property, plant and equipment | — | — | 1 | — | ||||||||||||
Finance expenses and fees paid | (79 | ) | (79 | ) | (153 | ) | (115 | ) | ||||||||
Finance income received | 2 | 11 | 10 | 26 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Free cash flow | 463 | (43 | ) | (1,107 | ) | (859 | ) | |||||||||
|
|
|
|
|
|
|
|
15
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
3 | Alternative Performance Measures (continued) |
Total | product and other investment |
Three months ended | Six months ended | |||||||||||||||||||
(£ millions) | Note | 30 September 2020 | 30 September 2019 | 30 September 2020 | 30 September 2019 | |||||||||||||||
Purchase of property, plant and equipment | 229 | 347 | 451 | 648 | ||||||||||||||||
Net cash outflow relating to intangible asset expenditure | 203 | 377 | 422 | 786 | ||||||||||||||||
Engineering costs expensed | 6 | 99 | 114 | 206 | 197 | |||||||||||||||
Purchases of other investments | — | 3 | — | 5 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total product and other investment | 531 | 841 | 1,079 | 1,636 | ||||||||||||||||
|
|
|
|
|
|
|
|
In accordance with the definition of total product and other investment set out on page 13, “Engineering costs expensed” for the three and six month periods ended 30 September 2020 include £18 million and £40 million respectively of employee costs in relation to employees placed on furlough under the Coronavirus Job Retention Scheme. “Engineering costs expensed” excludes the impacts of grants received.
Total cash and cash equivalents, deposits and investments
As at (£ millions) | 30 September 2020 | 31 March 2020 | 30 September 2019 | |||||||||
Cash and cash equivalents | 2,790 | 2,271 | 1,971 | |||||||||
Short-term deposits and other investments | 259 | 1,393 | 874 | |||||||||
|
|
|
|
|
| |||||||
Total cash and cash equivalents, deposits and investments | 3,049 | 3,664 | 2,845 | |||||||||
|
|
|
|
|
|
Available liquidity
As at (£ millions) | 30 September 2020 | 31 March 2020 | 30 September 2019 | |||||||||
Cash and cash equivalents | 2,790 | 2,271 | 1,971 | |||||||||
Short-term deposits and other investments | 259 | 1,393 | 874 | |||||||||
Committed undrawn credit facilities | 1,935 | 1,935 | 1,935 | |||||||||
|
|
|
|
|
| |||||||
Available liquidity | 4,984 | 5,599 | 4,780 | |||||||||
|
|
|
|
|
|
Retails and wholesales
Three months ended | Six months ended | |||||||||||||||
Units | 30 September 2020 | 30 September 2019 | 30 September 2020 | 30 September 2019 | ||||||||||||
Retail sales | 113,569 | 128,953 | 187,636 | 257,568 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Wholesales* | 73,451 | 121,124 | 122,363 | 225,314 | ||||||||||||
|
|
|
|
|
|
|
|
*Wholesale | volumes exclude sales from Chery Jaguar Land Rover – Q2 FY21: 17,916, Q2 FY20: 13,365, H1 FY21: 34,429, H1 FY20: 27,725 units |
4 | Exceptional items |
There was no exceptional item recognised in the six months ended 30 September 2020.
The exceptional item recognised in the three and six months ended 30 September 2019 comprised additional restructuring costs of £10 million and £22 million respectively relating to the Group restructuring programme that was announced and commenced during the year ended 31 March 2019.
The table on the next page sets out the impact on the consolidated income statement if this item was not disclosed separately as an exceptional item.
16
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
4 | Exceptional items (continued) |
Three months ended | Six months ended | |||||||||||||||
£ millions | 30 September 2020 | 30 September 2019 | 30 September 2020 | 30 September 2019 | ||||||||||||
Employee costs as reported excluding exceptional items | 492 | 631 | 927 | 1,287 | ||||||||||||
Impact of: | ||||||||||||||||
Restructuring costs | — | 10 | — | 22 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Including exceptional items | 492 | 641 | 927 | 1,309 | ||||||||||||
|
|
|
|
|
|
|
|
5 | Disaggregation of revenue |
Three months ended | Six months ended | |||||||||||||||
£ millions | 30 September 2020 | 30 September 2019 | 30 September 2020 | 30 September 2019 | ||||||||||||
Revenue recognised for sales of vehicles, parts and accessories | 4,094 | 6,022 | 6,825 | 10,990 | ||||||||||||
Revenue recognised for services transferred | 88 | 75 | 162 | 149 | ||||||||||||
Revenue - other | 225 | 198 | 319 | 392 | ||||||||||||
|
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|
|
|
|
| |||||||||
Total revenue excluding realised revenue hedges | 4,407 | 6,295 | 7,306 | 11,531 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Realised revenue hedges | (55 | ) | (209 | ) | (95 | ) | (371 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenue | 4,352 | 6,086 | 7,211 | 11,160 | ||||||||||||
|
|
|
|
|
|
|
|
6 | Engineering costs capitalised |
Three months ended | Six months ended | |||||||||||||||
£ millions | �� | 30 September 2020 | 30 September 2019 | 30 September 2020 | 30 September 2019 | |||||||||||
Total engineering costs incurred | 309 | 467 | 584 | 889 | ||||||||||||
Engineering costs expensed | (99 | ) | (114 | ) | (206 | ) | (197 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Engineering costs capitalised | 210 | 353 | 378 | 692 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Interest capitalised in engineering costs capitalised | 25 | 26 | 52 | 49 | ||||||||||||
Research and development grants capitalised | (9 | ) | (17 | ) | (16 | ) | (20 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total internally developed intangible additions | 226 | 362 | 414 | 721 | ||||||||||||
|
|
|
|
|
|
|
|
7 | Finance income and expense |
Three months ended | Six months ended | |||||||||||||||
£ millions | 30 September 2020 | 30 September 2019 | 30 September 2020 | 30 September 2019 | ||||||||||||
Finance income | 3 | 11 | 7 | 25 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total finance income | 3 | 11 | 7 | 25 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total interest expense on financial liabilities measured at amortised cost | (81 | ) | (70 | ) | (161 | ) | (138 | ) | ||||||||
Interest income on derivatives designated as a fair value hedge of financial liabilities | 2 | 1 | 3 | 2 | ||||||||||||
Unwind of discount on provisions | (4 | ) | (8 | ) | (8 | ) | (15 | ) | ||||||||
Interest capitalised | 28 | 27 | 57 | 52 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total finance expense (net) | (55 | ) | (50 | ) | (109 | ) | (99 | ) | ||||||||
|
|
|
|
|
|
|
|
The capitalisation rate used to calculate borrowing costs eligible for capitalisation during the six month period ended 30 September 2020 was 4.2% (six month period ended 30 September 2019: 4.0%).
17
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
8 | Other expenses |
Three months ended | Six months ended | |||||||||||||||
£ millions | 30 September 2020 | 30 September 2019 | 30 September 2020 | 30 September 2019 | ||||||||||||
Stores, spare parts and tools | 21 | 15 | 41 | 55 | ||||||||||||
Freight cost | 117 | 151 | 187 | 287 | ||||||||||||
Works, operations and other costs | 466 | 691 | 855 | 1,291 | ||||||||||||
Power and fuel | 15 | 19 | 27 | 42 | ||||||||||||
Write-down of intangible assets | 41 | — | 41 | — | ||||||||||||
Product warranty | 184 | 270 | 317 | 602 | ||||||||||||
Publicity | 87 | 197 | 150 | 384 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total other expenses | 931 | 1,343 | 1,618 | 2,661 | ||||||||||||
|
|
|
|
|
|
|
|
9 | Allowances for trade and other receivables |
Six months ended | ||||||||
£ millions | 30 September 2020 | 30 September 2019 | ||||||
At beginning of period | 11 | 12 | ||||||
Charged during the period | 5 | 1 | ||||||
Receivables written off as uncollectable | (7 | ) | — | |||||
Unused amounts reversed | (1 | ) | — | |||||
|
|
|
| |||||
At end of period | 8 | 13 | ||||||
|
|
|
|
10 | Other financial assets |
As at (£ millions) | 30 September 2020 | 31 March 2020 | 30 September 2019 | |||||||||
Non-current | ||||||||||||
Restricted cash | 6 | 7 | 103 | |||||||||
Derivative financial instruments | 194 | 142 | 7 | |||||||||
Warranty reimbursement and other receivables | 88 | 102 | 89 | |||||||||
Other | 6 | 6 | 6 | |||||||||
|
|
|
|
|
| |||||||
Total non-current other financial assets | 294 | 257 | 205 | |||||||||
|
|
|
|
|
| |||||||
Current | ||||||||||||
Restricted cash | 10 | 12 | 107 | |||||||||
Derivative financial instruments | 167 | 241 | 13 | |||||||||
Warranty reimbursement and other receivables | 79 | 87 | 104 | |||||||||
Accrued income | 22 | 14 | 31 | |||||||||
Other | 50 | 29 | 31 | |||||||||
|
|
|
|
|
| |||||||
Total current other financial assets | 328 | 383 | 286 | |||||||||
|
|
|
|
|
|
18
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
11 | Inventories |
As at (£ millions) | 30 September 2020 | 31 March 2020 | 30 September 2019 | |||||||||
Raw materials and consumables | 117 | 104 | 143 | |||||||||
Work-in-progress | 465 | 388 | 392 | |||||||||
Finished goods | 2,447 | 2,977 | 3,208 | |||||||||
Inventory basis adjustment | 1 | (1 | ) | (15 | ) | |||||||
|
|
|
|
|
| |||||||
Total inventories | 3,030 | 3,468 | 3,728 | |||||||||
|
|
|
|
|
|
12 | Other assets |
As at (£ millions) | 30 September 2020 | 31 March 2020 | 30 September 2019 | |||||||||
Non-current | ||||||||||||
Prepaid expenses | 11 | 8 | 7 | |||||||||
Research and development credit | 31 | — | 48 | |||||||||
Other | 12 | 15 | 18 | |||||||||
|
|
|
|
|
| |||||||
Total non-current other assets | 54 | 23 | 73 | |||||||||
|
|
|
|
|
| |||||||
Current | ||||||||||||
Recoverable VAT | 235 | 228 | 263 | |||||||||
Prepaid expenses | 122 | 139 | 197 | |||||||||
Research and development credit | 86 | 85 | 113 | |||||||||
Other | 20 | 25 | 6 | |||||||||
|
|
|
|
|
| |||||||
Total current other assets | 463 | 477 | 579 | |||||||||
|
|
|
|
|
|
13 | Taxation |
Recognised in the income statement
Income tax for the six month periods ended 30 September 2020 and 30 September 2019 is charged at the estimated effective tax rate expected to apply for the applicable financial year ends and adjusted for relevant deferred tax amounts where applicable.
14 | Capital expenditure |
Capital expenditure in the six month period was £404 million (six month period to 30 September 2019: £570 million) on property, plant and equipment and £441 million (six month period to 30 September 2019: £794 million) was capitalised as intangible assets (excluding research and development expenditure credits). There were no material disposals or changes in the use of assets.
15 | Other financial liabilities |
As at (£ millions) | 30 September 2020 | 31 March 2020 | 30 September 2019 | |||||||||
Current | ||||||||||||
Lease obligations | 66 | 73 | 76 | |||||||||
Interest accrued | 65 | 65 | 52 | |||||||||
Derivative financial instruments | 251 | 453 | 545 | |||||||||
Liability for vehicles sold under a repurchase arrangement | 402 | 479 | 500 | |||||||||
Other | — | 3 | 3 | |||||||||
|
|
|
|
|
| |||||||
Total current other financial liabilities | 784 | 1,073 | 1,176 | |||||||||
|
|
|
|
|
| |||||||
Non-current | ||||||||||||
Lease obligations | 458 | 468 | 498 | |||||||||
Derivative financial instruments | 88 | 310 | 279 | |||||||||
|
|
|
|
|
| |||||||
Total non-current other financial liabilities | 546 | 778 | 777 | |||||||||
|
|
|
|
|
|
19
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
16 | Provisions |
As at (£ millions) | 30 September 2020 | 31 March 2020 | 30 September 2019 | |||||||||
Current | ||||||||||||
Product warranty | 685 | 731 | 747 | |||||||||
Legal and product liability | 191 | 124 | 127 | |||||||||
Provisions for residual risk | 15 | 61 | 9 | |||||||||
Provision for environmental liability | 3 | 6 | 10 | |||||||||
Other employee benefits obligations | 13 | 7 | 36 | |||||||||
Restructuring | 8 | 15 | 21 | |||||||||
|
|
|
|
|
| |||||||
Total current provisions | 915 | 944 | 950 | |||||||||
|
|
|
|
|
| |||||||
Non-current | ||||||||||||
Product warranty | 1,062 | 1,155 | 1,116 | |||||||||
Legal and product liability | 65 | 54 | 55 | |||||||||
Provision for residual risk | 66 | 114 | 64 | |||||||||
Provision for environmental liability | 18 | 17 | 16 | |||||||||
Other employee benefits obligations | 9 | 15 | 12 | |||||||||
|
|
|
|
|
| |||||||
Total non-current provisions | 1,220 | 1,355 | 1,263 | |||||||||
|
|
|
|
|
|
£ millions | Product warranty | Legal and product liability | Residual risk | Environmental liability | Other employee benefits obligations | Restructuring | Total | |||||||||||||||||||||
Balance at 1 April 2020 | 1,886 | 178 | 175 | 23 | 22 | 15 | 2,299 | |||||||||||||||||||||
Provisions made during the period | 295 | 99 | (4 | ) | — | 2 | 5 | 397 | ||||||||||||||||||||
Provisions used during the period | (442 | ) | (19 | ) | (44 | ) | (2 | ) | — | (12 | ) | (519 | ) | |||||||||||||||
Unused amounts reversed in the period | — | (2 | ) | (40 | ) | — | (2 | ) | — | (44 | ) | |||||||||||||||||
Impact of unwind of discounting | 8 | — | — | — | — | — | 8 | |||||||||||||||||||||
Foreign currency translation | — | — | (6 | ) | — | — | — | (6 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance at 30 September 2020 | 1,747 | 256 | 81 | 21 | 22 | 8 | 2,135 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 and the vehicle purchased. The Group offers warranties of up to eight years on batteries in electric vehicles. The estimated liability for product warranty is recognised when products are sold or when new warranty programmes are initiated. These estimates are established using historical information on the nature, frequency and average cost of warranty claims and management estimates regarding possible future warranty claims, customer goodwill and recall complaints. The discount on the warranty provision is calculated using a risk-free discount rate as the risks specific to the liability, such as inflation, are included in the base calculation. The timing of outflows will vary as and when a warranty claim will arise, being typically up to eight years.
Legal and product liability provision
A legal and product liability provision is maintained in respect of compliance with regulations and known litigations that impact the Group. The provision primarily relates to motor accident claims, consumer complaints, retailer terminations, employment cases, personal injury claims and compliance with emission and battery disposal regulations. The timing of outflows will vary as and when claims are received and settled, which is not known with certainty.
20
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
16 | Provisions (continued) |
Residual risk provision
In certain markets, the Group is responsible for the residual risk arising on vehicles sold by retailers 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. The timing of when these costs will be incurred is not known with certainty.
Other employee benefits obligations
This provision relates to the LTIP scheme for certain employees and other amounts payable to employees.
Restructuring provision
This provision relates to amounts payable to employees under Group restructuring programmes.
17 | Other liabilities |
As at (£ millions) | 30 September 2020 | 31 March 2020 | 30 September 2019 | |||||||||
Current | ||||||||||||
Liabilities for advances received | 53 | 50 | 50 | |||||||||
Ongoing service obligations | 324 | 324 | 315 | |||||||||
VAT | 218 | 169 | 145 | |||||||||
Other taxes payable | 130 | 148 | 102 | |||||||||
Other | 24 | 25 | 18 | |||||||||
|
|
|
|
|
| |||||||
Total current other liabilities | 749 | 716 | 630 | |||||||||
|
|
|
|
|
| |||||||
Non-current | ||||||||||||
Ongoing service obligations | 457 | 522 | 522 | |||||||||
Other | 20 | 11 | 13 | |||||||||
|
|
|
|
|
| |||||||
Total non-current other liabilities | 477 | 533 | 535 | |||||||||
|
|
|
|
|
|
18 | Interest bearing loans and borrowings |
As at (£ millions) | 30 September 2020 | 31 March 2020 | 30 September 2019 | |||||||||
Short-term borrowings | ||||||||||||
Bank loans | 596 | — | — | |||||||||
Current portion of long-term EURO MTF listed debt | 300 | 299 | 812 | |||||||||
Current portion of long-term loans | 235 | 225 | — | |||||||||
Other secured | — | 2 | — | |||||||||
|
|
|
|
|
| |||||||
Short-term borrowings | 1,131 | 526 | 812 | |||||||||
|
|
|
|
|
| |||||||
Long-term borrowings | ||||||||||||
EURO MTF listed debt | 3,578 | 3,562 | 2,958 | |||||||||
Bank loans | 1,149 | 1,241 | 801 | |||||||||
Other unsecured | 14 | 14 | — | |||||||||
|
|
|
|
|
| |||||||
Long-term borrowings | 4,741 | 4,817 | 3,759 | |||||||||
|
|
|
|
|
| |||||||
Lease obligations | 524 | 541 | 574 | |||||||||
|
|
|
|
|
| |||||||
Total debt | 6,396 | 5,884 | 5,145 | |||||||||
|
|
|
|
|
|
Undrawn facilities
As at 30 September 2020, the Group has a fully undrawn revolving credit facility of £1,935 million (31 March 2020: £1,935 million, 30 September 2019: £1,935 million). This facility is available in full until 2022.
21
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
19 | 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 either level 2 fair value measurements, as defined by IFRS 13, being those derived from inputs other than quoted prices which are observable, or level 3 fair value measurements, being those derived from significant unobservable inputs. There have been no changes in the valuation techniques used or transfers between fair value levels from those set out in note 35 to the annual consolidated financial statements for the year ended 31 March 2020.
The tables below show the carrying amounts and fair value of each category of financial assets and liabilities, other than those with carrying amounts that are reasonable approximations of fair values.
30 September 2020 | 31 March 2020 | 30 September 2019 | ||||||||||||||||||||||
As at (£ millions) | Carrying value | Fair value | Carrying value | Fair value | Carrying value | Fair value | ||||||||||||||||||
Cash and cash equivalents | 2,790 | 2,790 | 2,271 | 2,271 | 1,971 | 1,971 | ||||||||||||||||||
Short-term deposits and other investments | 259 | 259 | 1,393 | 1,393 | 874 | 874 | ||||||||||||||||||
Trade receivables | 692 | 692 | 833 | 833 | 1,053 | 1,053 | ||||||||||||||||||
Non-equity accounted investments | 23 | 23 | 37 | 37 | 52 | 52 | ||||||||||||||||||
Other financial assets — current | 328 | 328 | 383 | 383 | 286 | 286 | ||||||||||||||||||
Other financial assets — non-current | 294 | 294 | 257 | 257 | 205 | 205 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total financial assets | 4,386 | 4,386 | 5,174 | 5,174 | 4,441 | 4,441 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Accounts payable | 5,465 | 5,465 | 6,499 | 6,499 | 6,572 | 6,572 | ||||||||||||||||||
Short-term borrowings | 1,131 | 1,129 | 526 | 512 | 812 | 810 | ||||||||||||||||||
Long-term borrowings | 4,741 | 4,359 | 4,817 | 3,859 | 3,759 | 3,411 | ||||||||||||||||||
Other financial liabilities — current | 784 | 784 | 1,073 | 1,073 | 1,176 | 1,176 | ||||||||||||||||||
Other financial liabilities — non-current | 546 | 514 | 778 | 778 | 777 | 777 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total financial liabilities | 12,667 | 12,251 | 13,693 | 12,721 | 13,096 | 12,746 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
20 | Reserves |
The movement in reserves is as follows:
(£ millions) | Translation reserve | Hedging reserve | Cost of hedging reserve | Retained earnings | Total other reserves | |||||||||||||||
Balance at 1 April 2020 | (316 | ) | (286 | ) | (33 | ) | 5,515 | 4,880 | ||||||||||||
Loss for the period | — | — | — | (531 | ) | (531 | ) | |||||||||||||
Remeasurement of defined benefit obligation | — | — | — | (947 | ) | (947 | ) | |||||||||||||
Gain on effective cash flow hedges | — | 211 | 21 | — | 232 | |||||||||||||||
Income tax related to items recognised in other comprehensive income | — | (40 | ) | (4 | ) | 180 | 136 | |||||||||||||
Cash flow hedges reclassified to profit and loss | — | 94 | (1 | ) | — | 93 | ||||||||||||||
Income tax related to items reclassified to profit or loss | — | (18 | ) | — | — | (18 | ) | |||||||||||||
Amounts removed from hedge reserve and recognised in inventory | — | (6 | ) | 5 | — | (1 | ) | |||||||||||||
Income tax related to amounts removed from hedge reserve and recognised in inventory | — | 1 | (1 | ) | — | — | ||||||||||||||
Currency translation differences | 15 | — | — | — | 15 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at 30 September 2020 | (301 | ) | (44 | ) | (13 | ) | 4,217 | 3,859 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
22
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
20 | Reserves (continued) |
(£ millions) | Translation reserve | Hedging reserve | Cost of hedging reserve | Retained earnings | Total other reserves | |||||||||||||||
Balance at 1 April 2019 | (337 | ) | (506 | ) | (33 | ) | 5,181 | 4,305 | ||||||||||||
Adjustment on initial application of IFRS 16 (net of tax) | — | — | — | (22 | ) | (22 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Adjusted balance at 1 April 2019 | (337 | ) | (506 | ) | (33 | ) | 5,159 | 4,283 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Loss for the period | — | — | — | (303 | ) | (303 | ) | |||||||||||||
Remeasurement of defined benefit obligation | — | — | — | (200 | ) | (200 | ) | |||||||||||||
(Loss)/gain on effective cash flow hedges | — | (368 | ) | 6 | — | (362 | ) | |||||||||||||
Income tax related to items recognised in other comprehensive income | — | 63 | (1 | ) | 35 | 97 | ||||||||||||||
Cash flow hedges reclassified to profit and loss | — | 373 | (2 | ) | — | 371 | ||||||||||||||
Income tax related to items reclassified to profit or loss | — | (70 | ) | — | — | (70 | ) | |||||||||||||
Amounts removed from hedge reserve and recognised in inventory | — | (64 | ) | 8 | — | (56 | ) | |||||||||||||
Income tax related to amounts removed from hedge reserve and recognised in inventory | — | 12 | (2 | ) | — | 10 | ||||||||||||||
Currency translation differences | 19 | — | — | — | 19 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at 30 September 2019 | (318 | ) | (560 | ) | (24 | ) | 4,691 | 3,789 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
21 | Dividends |
During the three and six month periods ended 30 September 2020 and 30 September 2019, no ordinary share dividends were proposed or paid.
23
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
22 | 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 scheme. The following table sets out the disclosure pertaining to employee benefits of the JLR Automotive Group plc which operate defined benefit pension schemes.
Six months ended | ||||||||
£ millions | 30 September 2020 | 30 September 2019 | ||||||
Defined benefit obligation at beginning of period | 7,788 | 8,648 | ||||||
Current service cost | 62 | 68 | ||||||
Past service cost | — | 4 | ||||||
Interest expense | 88 | 102 | ||||||
Actuarial gains/(losses) arising from: | ||||||||
Changes in financial assumptions | 1,475 | 1,052 | ||||||
Exchange differences on foreign schemes | 1 | 1 | ||||||
Member contributions | — | 1 | ||||||
Benefits paid | (225 | ) | (285 | ) | ||||
|
|
|
| |||||
Defined benefit obligation at end of period | 9,189 | 9,591 | ||||||
|
|
|
| |||||
Change in present value of scheme assets | ||||||||
Fair value of schemes’ assets at beginning of period | 8,168 | 7,981 | ||||||
Interest income | 93 | 95 | ||||||
Remeasurement gain on the return of plan assets, excluding amounts included in interest income | 528 | 852 | ||||||
Administrative expenses | (2 | ) | (8 | ) | ||||
Exchange differences on foreign schemes | 1 | 1 | ||||||
Employer contributions | 41 | 128 | ||||||
Member contributions | — | 1 | ||||||
Benefits paid | (225 | ) | (285 | ) | ||||
|
|
|
| |||||
Fair value of schemes’ assets at end of period | 8,604 | 8,765 | ||||||
|
|
|
|
The range of assumptions used in accounting for the pension plans in the periods is set out below:
Six months ended | ||||||||
30 September 2020 | 30 September 2019 | |||||||
Discount rate | 1.7 | % | 1.8 | % | ||||
Expected rate of increase in benefit revaluation of covered employees | 2.1 | % | 2.5 | % | ||||
RPI inflation rate | 3.0 | % | 3.1 | % | ||||
|
|
|
|
Amounts recognised in the condensed consolidated balance sheet consist of:
As at (£ millions) | 30 September 2020 | 31 March 2020 | 30 September 2019 | |||||||||
Present value of defined benefit obligations | (9,189 | ) | (7,788 | ) | (9,591 | ) | ||||||
Fair value of schemes’ assets | 8,604 | 8,168 | 8,765 | |||||||||
|
|
|
|
|
| |||||||
Net (liability)/asset | (585 | ) | 380 | (826 | ) | |||||||
|
|
|
|
|
| |||||||
Non-current assets | — | 408 | — | |||||||||
Non-current liabilities | (585 | ) | (28 | ) | (826 | ) | ||||||
|
|
|
|
|
|
24
Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
22 | Employee benefits (continued) |
For the valuations at 30 September 2020 and 31 March 2020, the mortality assumptions used are the SAPS base table, in particular S2PxA tables and the Light table for members of the Jaguar Executive Pension Plan.
For the Jaguar Pension Plan, scaling factors of 111 per cent to 117 per cent have been used for male members and scaling factors of 101 per cent to 112 per cent have been used for female members.
For the Land Rover Pension Scheme, scaling factors of 107 per cent to 111 per cent have been used for male members and scaling factors of 101 per cent to 109 per cent have been used for female members.
For the Jaguar Executive Pension Plan, an average scaling factor of 94 per cent has been used for male members and a scaling factor of 84 per cent has been used for female members.
There is an allowance for future improvements in line with the CMI (2019) projections and an allowance for long-term improvements of 1.25 per cent per annum and a smoothing parameter of 7.5.
For the valuations at 30 September 2019, the mortality assumptions used are the SAPS base table, in particular S2PxA tables and the Light table for members of the Jaguar Executive Pension Plan. Scaling factors of 112 per cent to 118 per cent for males and 101 per cent to 112 per cent for females have been used for the Jaguar Pension Plan, 107 per cent to 112 per cent for males and 101 per cent to 109 per cent for females for the Land Rover Pension Scheme, and 94 per cent for males and 84 per cent for females for the Jaguar Executive Pension Plan. There is an allowance for future improvements in line with the CMI (2018) projections and an allowance for long-term improvements of 1.25 per cent per annum.
A past service cost of £4 million was recognised in the six month period ended 30 September 2019 as part of the Group restructuring program that commenced in the year ended 31 March 2019.
23 | 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 ongoing basis, with the assistance of external legal counsel wherever necessary. The Group records 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 disclosure in the consolidated financial statements but does not record a liability unless the loss becomes probable. Such potential losses may be of an uncertain timing and/or amount.
The following is a description of claims and contingencies where a potential loss is possible, but not probable. Management believes 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 £30 million (31 March 2020: £40 million; 30 September 2019: £18 million) against the Group which management has not recognised, as settlement is not considered probable. These claims and potential claims pertain to motor accident claims, consumer complaints, employment and dealership arrangements, replacement of parts of vehicles and/or compensation for deficiency in the services by the Group or its dealers.
The Group has provided for the estimated cost of repair following the passenger safety airbag issue in the United States, China, Canada, Korea, Taiwan, Australia and Japan. The Group recognises that there is a potential risk of further recalls in the future; however, the Group is unable at this point in time to reliably estimate the amount and timing of any potential future costs associated with this warranty issue.
Other taxes and duties
Contingencies and commitments include tax contingent liabilities of £64 million (31 March 2020: £44 million, 30 September 2019: £49 million). These mainly relate to tax audits and tax litigation claims.
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Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
23 | Commitments and contingencies (continued) |
Commitments
The Group has entered into various contracts with vendors and contractors for the acquisition of plant and equipment and various civil contracts of capital nature aggregating to £1,385 million (31 March 2020: £1,217 million, 30 September 2019: £1,225 million) and £7 million (31 March 2020: £14 million, 30 September 2019: £20 million) relating to the acquisition of intangible assets.
Commitments and contingencies also includes other contingent liabilities of £362 million (31 March 2020: £376 million, 30 September 2019: £376 million) relating to contractual claims and commitments. The timing of any outflow will vary as and when claims are received and settled, which is not known with certainty.
The remaining financial commitments, in particular the purchase commitments and guarantees, are of a magnitude typical for the industry.
Inventory of £138 million (31 March 2020: £127 million, 30 September 2019: £nil) and trade receivables with a carrying amount of £25 million (30 March 2020: £nil, 30 September 2019: £nil) and property, plant and equipment with a carrying amount of £nil (31 March 2020: £nil, 30 September 2019: £nil) and other financial assets with a carrying amount of £8 million (31 March 2020: £nil, 30 September 2019: £nil) are pledged as collateral/security against the borrowings and commitments.
Stipulated within the joint venture agreement for Chery Jaguar Land Rover Automotive Co. Ltd, and subsequently amended by a change to the Articles of Association of Chery Jaguar Land Rover Automotive Co. Ltd. is a commitment for the Group to contribute a total of CNY 5,000 million of capital. Of this amount, CNY 3,475 million has been contributed as at 30 September 2020. The outstanding commitment of CNY 1,525 million translates to £175 million at the 30 September 2020 exchange rate.
At 30 September 2019, the outstanding commitment was CNY 2,125 million (£241 million at the 30 September 2019 exchange rate) restated to reflect an additional CNY 1,500 million that was committed during the year ended 31 March 2017.
The Group’s share of capital commitments of its joint venture at 30 September 2020 is £51 million (31 March 2020: £69 million, 30 September 2019: £106 million) and contingent liabilities of its joint venture 31 March 2020 is £nil (31 March 2020: £nil, 30 September 2019: £nil).
24 | Capital Management |
The Group’s objectives when managing capital are to ensure the going concern operation of all subsidiary companies within the Group and to maintain an efficient capital structure to support ongoing and future operations of the Group and to meet shareholder expectations.
The Group issues debt, primarily in the form of bonds, 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 pooled (where practicable) and invested to satisfy security, liquidity and yield requirements.
The capital structure and funding requirements are regularly monitored by the JLR plc Board to ensure sufficient liquidity is maintained by the Group. All debt issuance and capital distributions are approved by the JLR plc Board.
The following table summarises the capital of the Group:
As at (£ millions) | 30 September 2020 | 31 March 2020 | 30 September 2019 | |||||||||
Short-term debt | 1,197 | 599 | 888 | |||||||||
Long-term debt | 5,199 | 5,285 | 4,257 | |||||||||
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Total debt* | 6,396 | 5,884 | 5,145 | |||||||||
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Equity attributable to shareholders | 5,527 | 6,548 | 5,457 | |||||||||
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Total capital | 11,923 | 12,432 | 10,602 | |||||||||
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* | Total debt includes lease obligations of £524 million (31 March 2020: £541 million, 30 September 2019: £574 million). |
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Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
25 | Notes to the consolidated cash flow statement |
Reconciliation of profit/(loss) for the period to cash used in operations
Three months ended | Six months ended | |||||||||||||||
£ millions | 30 September 2020 | 30 September 2019 | 30 September 2020 | 30 September 2019 | ||||||||||||
Cash flows from operating activities Profit/(loss) for the period | 117 | 100 | (531 | ) | (302 | ) | ||||||||||
Adjustments for: | ||||||||||||||||
Depreciation and amortisation | 469 | 504 | 960 | 967 | ||||||||||||
Write-down of intangible assets | 41 | — | 41 | — | ||||||||||||
(Profit)/loss on disposal of assets | (2 | ) | 22 | (3 | ) | 22 | ||||||||||
Foreign exchange and fair value (gain)/loss on loans | (79 | ) | 39 | (43 | ) | 108 | ||||||||||
Income tax (credit)/expense | (52 | ) | 56 | 183 | 63 | |||||||||||
Finance expense (net) | 55 | 50 | 109 | 99 | ||||||||||||
Finance income | (3 | ) | (11 | ) | (7 | ) | (25 | ) | ||||||||
Foreign exchange loss/(gain) on economic hedges of loans | 4 | 7 | (28 | ) | (13 | ) | ||||||||||
Foreign exchange loss/(gain) on derivatives | 5 | 10 | (3 | ) | (1 | ) | ||||||||||
Foreign exchange (gain)/loss on balance sheet revaluation | (44 | ) | (29 | ) | (17 | ) | 96 | |||||||||
Foreign exchange loss/(gain) on short-term deposits | 5 | 25 | 6 | (27 | ) | |||||||||||
Foreign exchange gain/(loss) on cash and cash equivalents | 54 | (18 | ) | 27 | (57 | ) | ||||||||||
Unrealised (gain)/loss on commodities | (49 | ) | 18 | (65 | ) | 44 | ||||||||||
(Gain)/loss on matured revenue hedges | — | — | (6 | ) | 33 | |||||||||||
Share of (profit)/loss of equity accounted investments | (1 | ) | 41 | (1 | ) | 69 | ||||||||||
Fair value loss/(gain) on equity investments | — | 16 | (7 | ) | 22 | |||||||||||
Exceptional items | — | 10 | — | 22 | ||||||||||||
Other non-cash adjustments | (3 | ) | — | (2 | ) | (1 | ) | |||||||||
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Cash flows from operating activities before changes in assets and liabilities | 517 | 840 | 613 | 1,119 | ||||||||||||
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Trade receivables | (91 | ) | (233 | ) | 145 | 293 | ||||||||||
Other financial assets | 28 | 53 | 40 | 14 | ||||||||||||
Other current assets | 34 | 41 | 10 | (16 | ) | |||||||||||
Inventories | (402 | ) | 37 | 439 | (125 | ) | ||||||||||
Other non-current assets | (9 | ) | (33 | ) | 390 | (65 | ) | |||||||||
Accounts payable | 1,233 | 61 | (981 | ) | (528 | ) | ||||||||||
Other current liabilities | (91 | ) | 22 | 31 | (23 | ) | ||||||||||
Other financial liabilities | (39 | ) | (1 | ) | (81 | ) | 25 | |||||||||
Other non-current liabilities and retirement benefit obligation | (33 | ) | (12 | ) | (446 | ) | (29 | ) | ||||||||
Provisions | (102 | ) | 1 | (155 | ) | 61 | ||||||||||
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Cash generated from/(used in) operations | 1,045 | 776 | 5 | 726 | ||||||||||||
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Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
25 | Notes to the consolidated cash flow statement (continued) |
Reconciliation of movements of liabilities to cash flows arising from financing activities
(£ millions) | Short-term borrowings | Long-term borrowings | Lease obligations | Total | ||||||||||||
Balance at 1 April 2019 | 881 | 3,599 | 31 | 4,511 | ||||||||||||
Adjustment on initial application of IFRS 16 | — | — | 499 | 499 | ||||||||||||
Issue of new leases | — | — | 69 | 69 | ||||||||||||
Repayment of financing | (114 | ) | — | (56 | ) | (170 | ) | |||||||||
Interest accrued | — | — | 23 | 23 | ||||||||||||
Foreign exchange | 45 | 77 | 8 | 130 | ||||||||||||
Fee amortisation | — | 3 | — | 3 | ||||||||||||
Long-term borrowings revaluation in hedge reserve | — | 45 | — | 45 | ||||||||||||
Fair value adjustment on loans | — | 35 | — | 35 | ||||||||||||
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Balance at 30 September 2019 | 812 | 3,759 | 574 | 5,145 | ||||||||||||
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Balance at 1 April 2020 | 526 | 4,817 | 541 | 5,884 | ||||||||||||
Proceeds from issue of financing | 854 | — | — | 854 | ||||||||||||
Issue of new leases | — | — | 23 | 23 | ||||||||||||
Repayment of financing | (314 | ) | — | (61 | ) | (375 | ) | |||||||||
Interest accrued | — | — | 21 | 21 | ||||||||||||
Reclassification of long-term debt | 62 | (62 | ) | — | — | |||||||||||
Foreign exchange | 3 | (15 | ) | — | (12 | ) | ||||||||||
Fee amortisation | — | 5 | — | 5 | ||||||||||||
Fair value adjustment on loans | — | (4 | ) | — | (4 | ) | ||||||||||
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Balance at 30 September 2020 | 1,131 | 4,741 | 524 | 6,396 | ||||||||||||
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Table of Contents
Notes (forming part of the condensed consolidated interim financial statements)
26 | Related party transactions |
Tata Sons Limited is a company with significant influence over the Group’s ultimate parent company Tata Motors Limited. The Group’s related parties therefore include Tata Sons Limited, subsidiaries and joint ventures of Tata Sons Limited and subsidiaries, joint ventures and associates of Tata Motors Limited. The Group routinely enters into transactions with its related parties in the ordinary course of business, including transactions for the sale and purchase of products with its joint ventures and associates.
All transactions with related parties are conducted under normal terms of business and all amounts outstanding are unsecured and will be settled in cash. 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.
Six months ended 30 September 2020 (£ millions) | With joint ventures of the Group | With associates of the Group | With Tata Sons Limited and its subsidiaries and joint ventures | With immediate or ultimate parent and its subsidiaries, joint ventures and associates | ||||||||||||
Sale of products | 179 | — | 1 | 4 | ||||||||||||
Purchase of goods | — | — | — | 33 | ||||||||||||
Services received | — | 1 | 58 | 30 | ||||||||||||
Services rendered | 50 | — | — | — | ||||||||||||
Trade and other receivables | 53 | — | — | 8 | ||||||||||||
Accounts payable | — | — | 10 | 47 | ||||||||||||
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Six months ended 30 September 2019 (£ millions) | With joint ventures of the Group | With associates of the Group | With Tata Sons Limited and its subsidiaries and joint ventures | With immediate or ultimate parent and its subsidiaries, joint ventures and associates | ||||||||||||
Sale of products | 128 | — | 1 | 25 | ||||||||||||
Purchase of goods | — | — | — | 35 | ||||||||||||
Services received | — | 1 | 72 | 42 | ||||||||||||
Services rendered | 63 | — | — | — | ||||||||||||
Trade and other receivables | 100 | — | 1 | 20 | ||||||||||||
Accounts payable | — | — | 7 | 37 | ||||||||||||
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Compensation of key management personnel
Six months ended 30 September (£ millions) | 2020 | 2019 | ||||||
Key management personnel remuneration | 8 | 9 | ||||||
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27 | Subsequent events |
In October 2020 the company issued a $700 million bond maturing in 2025 and paying an annual coupon of 7.75%.
29