6-K 1 d882112d6k.htm FORM 6-K Form 6-K
Table of Contents

 

 

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 January 2020

Commission File Number: 001-32294

 

 

 

LOGO

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

 

 

 


Table of Contents

TABLE OF CONTENTS

 

Item 1:

  

2020FY Q3 Interim Financial Statements


Table of Contents

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: January 30, 2020


Table of Contents

Item 1

 

LOGO

Jaguar Land Rover Automotive plc Interim Report
For the three and nine month period ended
31 December 2019
Company registered number: 06477691


Table of Contents

Contents

Management’s discussion and analysis of financial condition and results of operations

 

Key metrics/highlights for Q3 FY20 results

     3  

Market environment

     3  

Total automotive industry car volumes

     3  

Jaguar Land Rover Q3 FY20 sales volumes year-on-year performance

     3  

Q3 FY20 and YTD FY20 revenue and profits

     4  

Cash flow, liquidity and capital resources

     5  

Debt

     5  

Risks and mitigating factors

     6  

Acquisitions and disposals

     6  

Off-balance sheet financial arrangements

     6  

Post balance sheet items

     6  

Related party transactions

     6  

Employees

     6  

Board of directors

     6  

Condensed consolidated financial statements

  

Income statement

     7  

Statement of comprehensive income and expense

     8  

Balance sheet

     9  

Statement of changes in equity

     10  

Cash flow statement

     11  

Notes

     12  


Table of Contents

Group, Company, Jaguar Land Rover, JLR plc and JLR refers to Jaguar Land Rover Automotive plc and its subsidiaries. Note 3 on page 14 defines a series of alternative performance measures

 

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 before tax.
PAT    profit 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 (as disclosed in note 18 to the condensed consolidated financial statements).
Q3 FY20    3 months ended 31 December 2019
Q3 FY19    3 months ended 31 December 2018
YTD FY20    9 months ended 31 December 2019
YTD FY19    9 months ended 31 December 2018
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 continued to show improved performance in the third quarter with £6.4 billion of revenue and PBT of £318 million (3.3% adjusted EBIT margin) as a result of favourable mix, lower operating costs (including £154 million of Charge savings) lower depreciation and amortisation, favourable foreign exchange and favourable revaluation of commodity hedges.

Key metrics for Q3 FY20 results, compared to Q3 FY19, are as follows:

 

 

Retail sales of 141.2k units (including the China JV), down 2.3%, with China up 24.3%

 

 

Wholesales of 129.9k units (excluding the China JV), down 0.1%

 

 

Revenue of £6.4 billion, up 2.8%

 

 

PBT £318 million, compared to a pre-tax loss of £273 million (before £3.1 billion impairment in Q3 FY19)

 

 

PAT of £372 million, compared to an after tax loss of £3.1 billion

 

 

The adjusted EBITDA margin was 10.8% (7.3% in Q3 FY19) and the adjusted EBIT margin was 3.3% (-2.5% in Q3 FY19)

 

 

Free cash flow was negative £144 million after total investment spending of £892 million and £62 million of working capital outflows. The free cash flow improved by £217 million compared to negative £361 million in Q3 FY19

Market environment

 

 

Despite the election resulting in a significant Conservative majority and certainty around the UK leaving the EU on 31 January 2020, uncertainty remains over the terms of a trade agreement that could be concluded in the transition period ending 31 December 2020. As a result, the Pound has appreciated but the outlook for UK GDP growth remains weak with some indications the Bank of England may cut rates. Auto industry sales were down 1.6% year on year (diesel sales down 25.2%).

 

 

In the US, trade tensions with China are easing following the conclusion of the phase 1 trade agreement and US economic growth remained resilient with financial markets at historical highs, however conflict between the US and Iran has caused some uncertainty and volatility. Automotive industry sales were down 2.3% year on year.

 

 

Growth in Europe remained low in Q3 FY20 despite modestly improved consumer spending but manufacturing activity remained weak. Despite this, auto industry sales increased 11.9% year on year.

 

 

China’s GDP growth remained at 6.0% in the quarter with an improvement in manufacturing activity and consumer spending ahead of the conclusion of the phase 1 trade deal recently signed with the US. Auto industry sales were still down 4.0% year on year though the rate of quarterly sales decline has been slowing since Q3 FY19.

Total automotive industry car volumes (units)

 

     Q3 FY20      Q3 FY19      Change (%)  

China

     6,198,000        6,453,400        (4.0 )% 

Europe (excluding UK)

     2,539,778        2,270,390        11.9

UK

     448,869        456,327        (1.6 )% 

US

     4,261,698        4,360,612        (2.3 )% 

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 Q3 FY20 sales volumes year-on-year performance

Total retail sales (including the China JV) were 141,222 units, down 2.3% year on year, with an encouraging recovery in China sales up 24.3% and North America also increasing (1.1%). Retail sales were down in the UK (11.9%), Overseas markets (11.5%, primarily MENA, Russia and Australia), and Europe (10.1%, largely explained by the high sales volume of the Jaguar I-PACE in the Netherlands in Q3 FY19 ahead of the reduction in tax subsidies for battery electric vehicle sales). Sales of the all new Range Rover Evoque were up significantly (30.0%) as well as the refreshed Land Rover Discovery Sport (9.2%, with sales expected to start in China in February), Land Rover Discovery (4.3%) and the Range Rover Sport (2.5%) offset by lower sales of other models, primarily Jaguar Saloons and E-PACE.

Wholesales (excluding the China JV) totalled 129,947 units, slightly down year on year (-0.1%). By region, wholesales were up in China (34.6% excluding the China JV), North America (10.3%) and in Overseas markets (0.7%) but lower in Europe (15.9%) and the UK (7.4%).

 

3


Table of Contents

Jaguar Land Rover’s Q3 FY20 retail sales (including the China JV) by key region and model is detailed in the following table:

 

     Q3 FY20      Q3 FY19      Change (%)  

UK

     23,134        26,257        (11.9 %) 

North America

     40,187        39,759        1.1

Europe

     29,683        33,013        (10.1 %) 

China1

     27,423        22,066        24.3

Overseas

     20,795        23,507        (11.5 %) 
  

 

 

    

 

 

    

 

 

 

Total JLR

     141,222        144,602        (2.3 %) 
  

 

 

    

 

 

    

 

 

 

F-PACE

     12,174        12,671        (3.9 %) 

I-PACE

     4,612        5,625        (18.0 %) 

E-PACE1

     9,581        12,048        (20.5 %) 

F-TYPE

     1,286        1,502        (14.4 %) 

XE1

     3,495        6,545        (46.6 %) 

XF1

     3,709        5,643        (34.3 %) 

XJ

     585        804        (27.2 %) 
  

 

 

    

 

 

    

 

 

 

Jaguar1

     35,442        44,838        (21.0 %) 
  

 

 

    

 

 

    

 

 

 

Discovery Sport1

     22,978        21,033        9.2

Discovery

     9,820        9,417        4.3

Range Rover Evoque1

     24,009        18,474        30.0

Range Rover Velar

     14,397        15,291        (5.8 %) 

Range Rover Sport

     20,770        20,259        2.5

Range Rover

     13,806        15,290        (9.7 %) 
  

 

 

    

 

 

    

 

 

 

Land Rover1

     105,780        99,764        6.0
  

 

 

    

 

 

    

 

 

 

Total JLR

     141,222        144,602        (2.3 %) 
  

 

 

    

 

 

    

 

 

 

 

1 

China JV retail volume in Q3 FY20 was 15,351 units, up 21.2% year on year (9,329 units of Discovery Sport, 2,376 units of Evoque, 2,116 units of Jaguar XFL, 932 units of Jaguar XEL and 598 units of Jaguar E-PACE). China JV retail volume in Q3 FY19 was 12,669 units (5,568 units of Discovery Sport, 1,777 units of Evoque, 2,495 units of Jaguar XFL, 2,223 units of Jaguar XEL and 606 units of Jaguar E-PACE)

Q3 FY20 revenue and profits

For the quarter ended 31 December 2019, revenue was £6.4 billion, up 2.8% year on year, with PBT of £318 million, compared to the loss before tax of £273 million in Q3 FY19 (excluding the £3.1 billion impairment in Q3 last year), primarily reflecting:

 

   

Favourable mix (£29 million)

 

   

Higher incentive spending (-£59 million including -£25 million US residual accrual for 16 model year)

 

   

Lower operating costs (£170 million, including £154 million of Charge savings)

 

   

Lower depreciation and amortisation (£145 million)

 

   

Favourable FX and favourable revaluation of commodity hedges (£306 million)

Adjusted EBITDA was £688 million (10.8% margin) in Q3 FY20 compared to £456 million (7.3% margin) in Q3 last year and adjusted EBIT was £210 million (3.3% margin) compared to negative £158 million (-2.5% margin) in Q3 FY19. PAT was £372 million in the three months to 31 December 2019, compared to a loss after tax of £3.1 billion in the same quarter of last year (including the £3.1 billion impairment in Q3 last year).

YTD FY20 revenue and profits

Revenue was £17.6 billion in the 9 months to 31 December 2019 compared to £17.1 billion for the same period last year, generating PBT of £101 million (excluding £22 million of exceptional items) compared to a loss before tax of £627 million in the 9 months to December 2019 (excluding the £3.1 billion impairment in Q3 FY19). Adjusted EBITDA for the YTD FY20 was £1.7 billion (9.9% margin) compared to £1.3 billion (7.5% margin) for the YTD FY19 and the adjusted EBIT for the YTD FY20 was £227 million (1.3% margin) compared to negative £397 million (-2.3% margin) for the YTD FY19. PAT for the YTD FY20 was £70 million compared to a loss after tax of £3.4 billion for the YTD FY19 (including the £3.1 billion impairment in YTD FY19).

 

4


Table of Contents

Cash flow, liquidity and capital resources

In Q3 FY20 free cash flow was negative £144 million after £892 million of total investment spending (including a £67 million dividend that was received from and immediately re-invested into the China JV) and £62 million of working capital outflows. The free cash outflow in Q3 FY20 represented a £217 million improvement on Q3 FY19, primarily reflecting the improved profitability and £128 million of lower investment spending year on year. Of the £892 million total investment spending £788 million was capitalised and £104 million was expensed through the income statement.

Total cash and cash equivalents, deposits and investments at 31 December 2019 stood at £3.9 billion (comprising £2.0 billion of cash and cash equivalents and £1.9 billion of short-term deposits and other investments). The cash and financial deposits include an amount of £427 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 2019, the Company also had an undrawn revolving credit facility totalling £1.9 billion, maturing in July 2022, which combined with total cash of £3.9 billion resulted in total available liquidity of £5.8 billion.

Debt

At 31 December 2019, debt totalled £6.1 billion, including £529 million of leases accounted as debt under IFRS 16. The following table shows details of the Company’s financing arrangements as at 31 December 2019:

 

(£ 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

     381        381       —        Jaguar Land Rover Automotive plc

$500m 3.500% Senior Notes due Mar 2020

     381        381       —        Jaguar Land Rover Automotive plc

$500m 4.500% Senior Notes due Oct 2027

     381        381       —        Jaguar Land Rover Automotive plc

€650m 2.200% Senior Notes due Jan 2024

     555        555       —        Jaguar Land Rover Automotive plc

€500m 5.875% Senior Notes due Nov 2024

     427        427       —        Jaguar Land Rover Automotive plc

€500m 6.875% Senior Notes due Nov 2026

     427        427       —        Jaguar Land Rover Automotive plc

€500m 4.500% Senior Notes due Jan 2026

     427        427       —        Jaguar Land Rover Automotive plc

$200m Syndicated Loan due Oct 2022

     152        152       —        Jaguar Land Rover Automotive plc

$800m Syndicated Loan due Jan 2025

     609        609       —        Jaguar Land Rover Automotive plc

£100m fleet buyback facility due Dec 2020

     100        100       —        Jaguar Land Rover Limited

£625m UKEF loan due Oct 2024

     625        625       —        Jaguar Land Rover Automotive plc

Other1

     16        16       —        Various

Revolving 5 year credit facility

     1,935        —         1,935      Jaguar Land Rover Automotive plc

Finance lease obligations2

     529        529       —        Various
  

 

 

    

 

 

   

 

 

    

Subtotal

     8,045        6,110       1,935     
  

 

 

    

 

 

   

 

 

    

Prepaid costs

     —          (36     —       

Fair value adjustments3

     —          4       —       
  

 

 

    

 

 

   

 

 

    

Total

     8,045        6,078       1,935     
  

 

 

    

 

 

   

 

 

    

 

1 

Primarily an advance as part of a sale and leaseback transaction

2 

Lease obligations are now accounted for as debt with the adoption of IFRS 16

3 

Fair value adjustments relate to hedging arrangements for the $500m 2027 Notes and €500m 2026 Notes

 

5


Table of Contents

Risks and mitigating factors

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 70-73 of the Annual Report 2018-19 of the Group (available at www.jaguarlandrover.com) along with mitigating factors. The principal risks discussed in the Group’s Annual Report 2018-19 are competitive business efficiency, global economic and geopolitical environment, brand positioning, environmental regulations and compliance, diesel uncertainty, unethical and prohibited business practices, IT systems and security, rapid technology change, human capital and product liability and recalls.

Acquisitions and disposals

There were no material acquisitions or disposals in Q3 FY20, however, in December the Group acquired Bowler, the UK based manufacturer of All Terrain Performance Specialist automotive business for £3 million consideration.

Off-balance sheet financial arrangements

At the end of Q3 FY20, Jaguar Land Rover Limited (a subsidiary of the Company) had sold £379 million equivalent of receivables under a $700 million invoice discounting facility signed in March 2019.

Post balance sheet items

There were no material post balance sheet items in Q3 FY20.

Related party transactions

Related party transactions for Q3 FY20 are disclosed in note 26 to the condensed consolidated financial statements disclosed on page 31 of this Interim Report. There have been no material changes in the related party transactions described in the latest Annual Report.

Employees

At the end of Q3 FY20, Jaguar Land Rover employed 38,778 people worldwide, including agency personnel, compared to 43,507 at the end of Q3 FY19. On 30 January 2020, it was announced that Professor Sir Ralf Speth will retire from his current role as Executive Director and Chief Executive Officer of Jaguar Land Rover at the end of his contract term in September 2020 and will take the role of Non-Executive Vice Chairman. A search committee will identify a suitable successor to be announced in the coming months.

Board of directors

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    2017

Prof Sir Ralf D Speth

   Chief Executive Officer and Director    2010

Andrew M. Robb

   Director    2009

Nasser Mukhtar Munjee

   Director    2012

Mr P B Balaji

   Director    2017

Hanne Sorensen

   Director    2018

 

6


Table of Contents

Condensed Consolidated Income Statement

 

            Three months ended     Nine months ended  

(£ millions)

   Note      31 December
2019
    31 December
2018
    31 December
2019
    31 December
2018
 

Revenue

     5        6,398       6,223       17,558       17,080  

Material and other cost of sales

        (4,141     (4,056     (11,142     (10,981

Employee costs*

     4        (655     (721     (1,942     (2,158

Other expenses*

     4        (1,265     (1,433     (3,926     (4,061

Exceptional items

     4        —         (3,122     (22     (3,122

Engineering costs capitalised

     6        344       391       1,036       1,235  

Other income

        71       7       112       107  

Depreciation and amortisation

        (453     (598     (1,420     (1,699

Foreign exchange gain/(loss) and

fair value adjustments

        77       (49     26       (120

Finance income

     7        16       11       41       26  

Finance expense (net)

     7        (49     (32     (148     (73

Share of (loss)/profit of equity accounted investments

        (25     (16     (94     17  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit/(loss) before tax

        318       (3,395     79       (3,749
     

 

 

   

 

 

   

 

 

   

 

 

 

Income tax credit/(charge)

     12        54       266       (9     309  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit/(loss) for the period

        372       (3,129     70       (3,440
     

 

 

   

 

 

   

 

 

   

 

 

 

Attributable to:

           

Owners of the Company

        372       (3,131     69       (3,444

Non-controlling interests

        —         2       1       4  

 

*

‘Employee costs’ and ‘Other expenses’ exclude the exceptional items explained in note 4.

The notes on pages 12 to 31 are an integral part of these consolidated financial statements.

 

7


Table of Contents

Condensed Consolidated Statement of Comprehensive Income and Expense

 

     Three months ended     Nine months ended  

(£ millions)

   31 December
2019
    31 December
2018
    31 December
2019
    31 December
2018
 

Profit/(loss) for the period

     372       (3,129     70       (3,440

Items that will not be reclassified subsequently to profit or loss:

        

Remeasurement of defined benefit obligation

     47       (46     (153     103  

(Loss)/gain on effective cash flow hedges of inventory

     (260     39       (129     90  

Income tax related to items that will not be reclassified

     31       (4     43       (41
  

 

 

   

 

 

   

 

 

   

 

 

 
     (182     (11     (239     152  
  

 

 

   

 

 

   

 

 

   

 

 

 

Items that may be reclassified subsequently to profit or loss:

        

Gain/(loss) on cash flow hedges (net)

     856       (143     734       (178

Currency translation differences

     (41     21       (22     17  

Income tax related to items that may be reclassified

     (147     25       (132     32  
  

 

 

   

 

 

   

 

 

   

 

 

 
     668       (97     580       (129
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income/(expense) net of tax

     486       (108     341       23  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income/(expense) attributable to shareholders

     858       (3,237     411       (3,417
  

 

 

   

 

 

   

 

 

   

 

 

 

Attributable to:

        

Owners of the Company

     858       (3,239     410       (3,421

Non-controlling interests

     —         2       1       4  

The notes on pages 12 to 31 are an integral part of these consolidated financial statements.

 

8


Table of Contents

Condensed Consolidated Balance Sheet

 

As at (£ millions)

   Note      31 December
2019
     31 March
2019
     31 December
2018
restated*
 

Non-current assets

           

Investments

        423        546        533  

Other financial assets

     9        397        170        253  

Property, plant and equipment

     13        6,624        6,492        6,337  

Intangible assets

     13        6,145        5,627        5,631  

Right-of-use assets

        568        -        -  

Other non-current assets

     11        91        83        173  

Deferred tax assets

        544        512        477  
     

 

 

    

 

 

    

 

 

 

Total non-current assets

        14,792        13,430        13,404  
     

 

 

    

 

 

    

 

 

 

Current assets

           

Cash and cash equivalents

        1,991        2,747        1,660  

Short-term deposits and other investments

        1,910        1,028        796  

Trade receivables

        836        1,362        1,229  

Other financial assets

     9        347        314        424  

Inventories

     10        3,348        3,608        4,168  

Other current assets

     11        550        570        732  

Current tax assets

        12        10        10  
     

 

 

    

 

 

    

 

 

 

Total current assets

        8,994        9,639        9,019  
     

 

 

    

 

 

    

 

 

 

Total assets

        23,786        23,069        22,423  
     

 

 

    

 

 

    

 

 

 

Current liabilities

           

Accounts payable

        5,959        7,083        6,322  

Short-term borrowings

     18        629        881        583  

Other financial liabilities

     15        981        1,042        1,147  

Provisions

     16        863        988        798  

Other current liabilities

     17        636        664        802  

Current tax liabilities

        113        94        79  
     

 

 

    

 

 

    

 

 

 

Total current liabilities

        9,181        10,752        9,731  
     

 

 

    

 

 

    

 

 

 

Non-current liabilities

           

Long-term borrowings

     18        4,920        3,599        4,055  

Other financial liabilities

     15        689        310        320  

Provisions

     16        1,278        1,140        1,131  

Retirement benefit obligation

     22        764        667        295  

Other non-current liabilities

     17        521        521        495  

Deferred tax liabilities

        101        101        180  
     

 

 

    

 

 

    

 

 

 

Total non-current liabilities

        8,273        6,338        6,476  
     

 

 

    

 

 

    

 

 

 

Total liabilities

        17,454        17,090        16,207  
     

 

 

    

 

 

    

 

 

 

Equity attributable to shareholder

           

Ordinary shares

        1,501        1,501        1,501  

Capital redemption reserve

        167        167        167  

Other reserves

     20        4,657        4,305        4,541  
     

 

 

    

 

 

    

 

 

 

Total equity attributable to shareholder

        6,325        5,973        6,209  
     

 

 

    

 

 

    

 

 

 

Non-controlling interests

        7        6        7  
     

 

 

    

 

 

    

 

 

 

Total equity

        6,332        5,979        6,216  
     

 

 

    

 

 

    

 

 

 

Total liabilities and equity

        23,786        23,069        22,423  
     

 

 

    

 

 

    

 

 

 

 

*

See note 2 for details of the restatement due to changes in accounting policies

The notes on pages 12 to 31 are an integral part of these consolidated financial statements.

These condensed consolidated interim financial statements were approved by the JLR plc Board and authorised for issue on 31 January 2020.

Company registered number: 06477691

 

9


Table of Contents

Condensed Consolidated Statement of Changes in Equity

 

(£ millions)

   Ordinary
share
capital
     Capital
redemption
reserve
     Other
reserves
    Equity
attributable to
shareholder
    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)

     —          —          (23     (23     —          (23
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Adjusted balance at 1 April 2019

     1,501        167        4,282       5,950       6        5,956  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Profit for the period

     —          —          69       69       1        70  

Other comprehensive income for the period

     —          —          341       341       —          341  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total comprehensive income

     —          —          410       410       1        411  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Amounts removed from hedge reserve and recognised in inventory

     —          —          (43     (43     —          (43

Income tax related to amounts removed from hedge reserve and recognised in inventory

     —          —          8       8       —          8  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Balance at 31 December 2019

     1,501        167        4,657       6,325       7        6,332  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

(£ millions)

   Ordinary
share
capital
     Capital
redemption
reserve
     Other
reserves
    Equity
attributable to
shareholder
    Non-
controlling
interests
    Total
equity
 

Balance at 1 April 2018

     1,501        167        8,308       9,976       8       9,984  

Adjustment on initial application of IFRS 9 and IFRS 15 (net of tax) restated*

     —          —          (32     (32     —         (32
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted balance at 1 April 2018 restated*

     1,501        167        8,276       9,944       8       9,952  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

(Loss)/profit for the period

     —          —          (3,444     (3,444     4       (3,440

Other comprehensive income for the period

     —          —          23       23       —         23  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive (expense)/income

     —          —          (3,421     (3,421     4       (3,417
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Amounts removed from hedge reserve and recognised in inventory

     —          —          (110     (110     —         (110

Income tax related to amounts removed from hedge reserve and recognised in inventory

     —          —          21       21       —         21  

Distribution to non-controlling interest

     —          —          —         —         (5     (5

Dividend

     —          —          (225     (225     —         (225
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at 31 December 2018 restated*

     1,501        167        4,541       6,209       7       6,216  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

*

See note 2 for details of the restatement due to changes in accounting policies

The notes on pages 12 to 31 are an integral part of these consolidated financial statements.

 

10


Table of Contents

Condensed Consolidated Cash Flow Statement

 

            Three months ended     Nine months ended  
    (£ millions)    Note      31 December
2019
    31 December
2018
    31 December
2019
    31 December
2018
 

Cash flows generated from operating activities

           

Cash generated from operations

     25        788       548       1,514       271  

Dividends received

        67       —         67       22  

Income tax paid

        (27     (19     (89     (197
     

 

 

   

 

 

   

 

 

   

 

 

 

Net cash generated from operating activities

        828       529       1,492       96  
     

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows used in investing activities

           

Purchases of other investments

        (4     (6     (9     (7

Investment in equity accounted investments

        (67     (1     (67     (3

Investment in other restricted deposits

              (4     (3     (22     (16

Redemption of other restricted deposits

              13       11       27       26  

Movements in other restricted deposits

        9       8       5       10  

Investment in short-term deposits and other investments

              (1,492     (462     (2,779     (1,582

Redemption of short-term deposits and other investments

              405       484       1,873       2,909  

Movements in short-term deposits and other investments

        (1,087     22       (906     1,327  

Purchases of property, plant and equipment

        (368     (406     (1,016     (1,297

Proceeds from sale of property, plant and equipment

        1       1       1       2  

Net cash outflow relating to intangible asset expenditure

        (346     (494     (1,132     (1,449

Acquisition of subsidiary (net of cash acquired)

        (3     —         (3     —    

Finance income received

        14       8       40       24  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

        (1,851     (868     (3,087     (1,393
     

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows generated from financing activities

           

Finance expenses and fees paid

        (64     (52     (179     (138

Proceeds from issuance of long-term borrowings

        1,500       765       1,500       1,214  

Proceeds from issuance of short-term borrowings

        103       129       103       535  

Repayment of short-term borrowings

        —         (137     (114     (516

Repayment of long-term borrowings

        (386     (547     (386     (547

Payments of lease obligations

        (17     —         (50     (2

Dividends paid

        —         —         —         (225

Distribution to non-controlling interest

        —         (3     —         (3
     

 

 

   

 

 

   

 

 

   

 

 

 

Net cash generated from financing activities

        1,136       155       874       318  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net increase/(decrease) in cash and cash equivalents

        113       (184     (721     (979

Cash and cash equivalents at beginning of period

        1,971       1,833       2,747       2,626  

Effect of foreign exchange on cash and cash equivalents

        (93     11       (35     13  
     

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

        1,991       1,660       1,991       1,660  
     

 

 

   

 

 

   

 

 

   

 

 

 

The notes on pages 12 to 31 are an integral part of these 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 (‘the Group’) 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 31 December 2018 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 2019, 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 2019.

The accounting policies applied are consistent with those of the annual consolidated financial statements for the year ended 31 March 2019, as described in those financial statements except as described below.

Change in accounting policies

The Group has had to change its accounting policy and make modified retrospective adjustments as a result of adopting IFRS 16 ‘Leases’. The impact of the adoption of this standard and the new accounting policies are disclosed in note 2.

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 2019.

 

2

Change in accounting policies

This note explains the impact of the adoption of IFRS 16 Leases on the Group’s financial statements which has been applied from 1 April 2019 and an additional transition adjustment and corresponding restatement of the Group’s balance sheet at 31 December 2018 on adoption of IFRS 15 Revenue from contracts with customers from 1 April 2018.

IFRS 16 Leases is effective for the year beginning 1 April 2019 for the Group. This standard replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC 15 Operating Leases - Incentives and SIC 27 Evaluating the Substance of the Transactions Involving the Legal Form of a Lease interpretations. Under IFRS 16, lessee accounting is based on a single model, resulting from the elimination of the distinction between operating and finance leases. All leases will be recognised on the balance sheet with a right-of-use asset capitalised and depreciated over the estimated lease term together with a corresponding liability that will reduce over the same period with an appropriate interest charge recognised.

The Group has elected to apply the exemptions for leases with a lease term of 12 months or less (short-term leases) and for leases for which the underlying asset is of low value. The lease payments associated with those leases are recognised as an expense on a straight-line basis over the lease term or using another systematic basis.

The Group is applying the modified retrospective approach on transition under which the comparative financial statements will not be restated. The cumulative impact of the first-time application of IFRS 16 is recognised as an adjustment to opening equity at 1 April 2019.

 

12


Table of Contents

Notes (forming part of the condensed consolidated interim financial statements)

 

2

Change in accounting policies (continued)

 

The Group has elected to use the following practical expedients permitted by the Standard:

 

   

On initial application, IFRS 16 has only been applied to contracts that were previously classified as leases under IFRIC 4;

 

   

Regardless of the original lease term, lease arrangements with a remaining duration of less than 12 months will continue to be expensed to the income statement on a straight line basis over the lease term;

 

   

Short-term and low value leases will be exempt;

 

   

The lease term has been determined with the use of hindsight where the contract contains options to extend or terminate the lease;

 

   

The discount rate applied as at transition date is the incremental borrowing rate corresponding to the remaining lease term;

 

   

The measurement of a right-of-use asset excludes the initial direct costs at the date of initial application.

The impact of the first-time application of IFRS 16 as at 1 April 2019 is the recognition of right-of-use assets of £547 million and lease liabilities of £499 million. As at the date of initial application, there is a £23 million reduction in net assets (net of tax).

IFRS 15 Revenue from contracts with customers was effective for the year beginning 1 April 2018 for the Group. The Group applied the modified retrospective application approach, which allowed the Group to recognise the cumulative effect of applying the new standard at the date of application with no restatement of the comparative periods.

During the three month period ended 31 March 2019, the Group re-assessed the impact of IFRS 15 on accounting for the cost of providing warranties to customers and determined that a proportion of service-type obligations should be recognised as a contract liability on a stand-alone selling price basis instead of as a warranty provision. In the interim financial statements for the nine months ended 31 December 2018, these obligations were recognised as a cost provision in accordance with IAS 37.

The impact of this re-assessment on the balance sheet as at 1 April 2018 on transition to IFRS 15 is as follows:

 

(£ millions)

   Opening balance      Adjustment on initial
application of IFRS 15
    Adjusted opening
balance
 

Other current liabilities

     547        6       553  

Other non-current liabilities

     454        14       468  

Provisions (current)

     758        (4     754  

Provisions (non-current)

     1,055        (11     1,044  

Other reserves

     8,308        (5     8,303  

In order to provide comparability of these financial statements with the Group’s Annual Report for the year ended 31 March 2019, the comparative balances as at 31 December 2018 have been restated to account for these provisions as contract liabilities in accordance with IFRS 15.

The impact of this re-assessment on the balance sheet as at 31 December 2018 is as follows:

 

(£ millions)

   31 December 2018 as
reported
     Impact of adjusted
application of IFRS 15
    31 December 2018
restated
 

Other current liabilities

     796        6       802  

Other non-current liabilities

     481        14       495  

Provisions (current)

     802        (4     798  

Provisions (non-current)

     1,142        (11     1,131  

Other reserves

     4,546        (5     4,541  

 

13


Table of Contents

Notes (forming part of the condensed consolidated interim financial statements)

 

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

Measure

  

Definition

Adjusted EBITDA    Adjusted EBITDA is defined as profit before income tax expense, exceptional items, finance expense (net of capitalised interest), finance income, gains/losses on unrealised derivatives and debt, gains/losses on realised derivatives entered into for the purpose of hedging debt, unrealised fair value gains/losses on equity investments, 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.
Profit/loss before tax and exceptional items    Profit/loss before tax excluding exceptional items.
Free cash flow    Net cash generated from operating activities less net cash used in investing activities (excluding movements in short-term deposits) and after finance expenses and fees paid. Free cash flow before financing also includes foreign exchange gains/losses on short-term deposits and cash and cash equivalents.
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 or other external customers. The Group recognises revenue on wholesales.

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.

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.

 

14


Table of Contents

Notes (forming part of the condensed consolidated interim financial statements)

 

3

Alternative Performance Measures (continued)

 

During the three month period ended 31 March 2019, the definitions of adjusted EBIT and adjusted EBITDA were amended to exclude unrealised fair value gains and losses on equity investments. The Group considers the amended APM to better measure the underlying profitability of the Group, as it aligns to the presentation of unrealised gains and losses on financial instruments in the form of equity investments with other financial instruments. Adjusted EBIT for the three and nine month periods ended 31 December 2018 prior to the change was £(159) million and £(391) million respectively. Adjusted EBITDA for the three and nine month periods ended 31 December 2018 prior to the change was £435 million and £1,291 million respectively.

During the nine month period ended 31 December 2019, the definition of ‘Free cash flow’ was amended to exclude capital payments in relation to lease obligations. Following the adoption of IFRS 16, the Group considers that the amended APM better reflects the operating cash performance of the Group. Free cash flow for the three month period ended 31 December 2018 prior to the change was £(361) million, and for the nine month period ended 31 December 2018 was £(2,659) million.

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.

Adjusted EBIT and Adjusted EBITDA

 

            Three months ended     Nine months ended  

(£ millions)

   Note      31 December
2019
    31 December
2018
    31 December
2019
    31 December
2018
 

Adjusted EBITDA

        688       456       1,741       1,285  

Depreciation and amortisation

        (453     (598     (1,420     (1,699

Share of (loss)/profit from equity accounted investments

        (25     (16     (94     17  

Adjusted EBIT

        210       (158     227       (397
     

 

 

   

 

 

   

 

 

   

 

 

 

Foreign exchange gain/(loss) on derivatives

        12       (11     13       (32

Unrealised gain/(loss) on commodities

        32       (37     (12     (56

Foreign exchange gain/(loss) and fair value adjustments on loans

        141       (48     33       (109

Foreign exchange (loss)/gain on economic hedges of loans

        (44     3       (31     8  

Finance income

     7        16       11       41       26  

Finance expense (net)

     7        (49     (32     (148     (73

Fair value (loss)/gain on equity investments

        —         (1     (22     6  

Profit/(loss) before tax and exceptional items

        318       (273     101       (627
     

 

 

   

 

 

   

 

 

   

 

 

 

Exceptional items

        —        
(3,122

    (22    
(3,122

     

 

 

   

 

 

   

 

 

   

 

 

 

Profit/(loss) before tax

        318       (3,395     79       (3,749
     

 

 

   

 

 

   

 

 

   

 

 

 

 

15


Table of Contents

Notes (forming part of the condensed consolidated interim financial statements)

 

3

Alternative Performance Measures (continued)

 

Free cash flow

 

     Three months ended      Nine months ended  

(£ millions)

   31 December
2019
     31 December
2018
     31 December
2019
     31 December
2018
 

Net cash generated from operating activities

     828        529        1,492        96  

Net cash used in investing activities

     (1,851      (868      (3,087      (1,393
  

 

 

    

 

 

    

 

 

    

 

 

 

Net cash generated in operating and investing activities

     (1,023      (339      (1,595      (1,297
  

 

 

    

 

 

    

 

 

    

 

 

 

Finance expenses and fees paid

     (64      (52      (179      (138

Adjustments for

           

Movements in short-term deposits

     1,087        (22      906        (1,327

Foreign exchange (loss)/gain on short-term deposits

     (51      41        (24      92  

Effect of foreign exchange on cash and cash equivalents

     (93      11        (35      13  
  

 

 

    

 

 

    

 

 

    

 

 

 

Free cash flow

     (144      (361      (927      (2,657
  

 

 

    

 

 

    

 

 

    

 

 

 

 

16


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      Nine months ended  
            31 December      31 December      31 December      31 December  

(£ millions)

   Note      2019      2018      2019      2018  

Purchases of property, plant and equipment

        368        406        1,016        1,297  

Net cash outflow relating to intangible asset expenditure

        346        494        1,132        1,449  

Research and development expensed

     6        104        113        301        325  

Acquisition of subsidiary

        3        —          3        —    

Purchases of other investments

        4        6        9        7  

Investment in equity accounted investments

        67        1        67        3  
     

 

 

    

 

 

    

 

 

    

 

 

 

Total product and other investment

        892        1,020        2,528        3,081  
     

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents, deposits and investments

 

As at (£ millions)

   31 December 2019      31 March 2019      31 December 2018  

Cash and cash equivalents

     1,991        2,747        1,660  

Short-term deposits and other investments

     1,910        1,028        796  
  

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents, deposits and investments

     3,901        3,775        2,456  
  

 

 

    

 

 

    

 

 

 

Available liquidity

 

As at (£ millions)

   Note      31 December 2019      31 March 2019      31 December 2018  

Cash and cash equivalents

        1,991        2,747        1,660  

Short-term deposits and other investments

        1,910        1,028        796  

Committed undrawn credit facilities

     18        1,935        1,935        1,935  
     

 

 

    

 

 

    

 

 

 

Available liquidity

        5,836        5,710        4,391  
     

 

 

    

 

 

    

 

 

 

Retails and wholesales

 

     Three months ended      Nine months ended  
     31 December      31 December      31 December      31 December  

Units

   2019      2018      2019      2018  

Retail sales

     141,222        144,602        398,790        419,999  
  

 

 

    

 

 

    

 

 

    

 

 

 

Wholesales*

     129,947        130,016        355,261        356,421  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

*

Wholesale volumes exclude sales from Chery Jaguar Land Rover – Q3 QTD FY20: 15,437, Q3 QTD FY19: 11,533, Q3 YTD F20: 43,162 Q3 YTD FY19: 47,343 units

 

17


Table of Contents

Notes (forming part of the condensed consolidated interim financial statements)

 

4

Exceptional items

The exceptional item recognised in the nine month period ended 31 December 2019 comprises £22 million relating to the Group restructuring program that was announced and commenced during the year ended 31 March 2019.

The exceptional items recognised in the three and nine month periods ended 31 December 2018 comprise:

 

   

An impairment charge of £3,105 million following an impairment exercise in accordance with IAS 36.

 

   

A past service cost of £17 million following a high court ruling in October 2018 that pension schemes are required to equalise male and female members’ benefits for the inequalities within guaranteed minimum pension (‘GMP’) earned between 17 May 1990 and 5 April 1997. The Group historically made no assumptions for GMP and therefore considered the change to be a plan amendment.

The table below sets out the exceptional item recorded in the periods and the impact on the consolidated income statement if this item was not disclosed separately as an exceptional item.

 

Nine months ended 31 December 2019 (£ millions)

   Employee costs                              

As reported

     1,942  

Impact of:

  

Restructuring costs

     22  
  

 

 

 

Including exceptional items

     1,964  
  

 

 

 

 

Nine months ended 31 December 2018 (£ millions)

   Employee costs      Other expenses  

As reported

     2,158        4,061  

Impact of:

     

Group impairment

     —          3,105  

Pension past service cost

     17        —    
  

 

 

    

 

 

 

Including exceptional items

     2,175        7,166  
  

 

 

    

 

 

 

 

Three months ended 31 December 2018 (£ millions)

   Employee costs      Other expenses  

As reported

     721        1,433  

Impact of:

     

Group impairment

     —          3,105  

Pension past service cost

     17        —    
  

 

 

    

 

 

 

Including exceptional items

     738        4,538  
  

 

 

    

 

 

 

 

18


Table of Contents

Notes (forming part of the condensed consolidated interim financial statements)

 

5

Disaggregation of revenue

The table below provides a further breakdown of the revenue from continuing operations:

 

     Three months ended      Nine months ended  

(£ millions)

   31 December
2019
     31 December
2018
     31 December
2019
     31 December
2018
 

Revenue recognised for sales of vehicles, parts and accessories

     6,233        6,184        17,223        16,835  

Revenue recognised for services transferred

     72        63        221        182  

Revenue - other

     215        170        607        750  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue excluding realised revenue hedges

     6,520        6,417        18,051        17,767  
  

 

 

    

 

 

    

 

 

    

 

 

 

Realised revenue hedges

     (122      (194      (493      (687
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

     6,398        6,223        17,558        17,080  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

6

Research and development

 

     Three months ended      Nine months ended  

(£ millions)

   31 December
2019
     31 December
2018
     31 December
2019
     31 December
2018
 

Total research and development costs incurred

     448        504        1,337        1,560  

Research and development expensed

     (104      (113      (301      (325
  

 

 

    

 

 

    

 

 

    

 

 

 

Engineering costs capitalised

     344        391        1,036        1,235  
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest capitalised in engineering costs capitalised

     30        27        79        77  

Research and development grants capitalised

     (10      (17      (30      (73
  

 

 

    

 

 

    

 

 

    

 

 

 

Total internally developed intangible additions

     364        401        1,085        1,239  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

7

Finance income and expense

 

     Three months ended      Nine months ended  

(£ millions)

   31 December
2019
     31 December
2018
     31 December
2019
     31 December
2018
 

Finance income

     16        11        41        26  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total finance income

     16        11        41        26  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total interest expense on financial liabilities measured at amortised cost

     (73      (57      (211      (148

Interest income on derivatives designated as a fair value hedge of financial liabilities

     —          1        2        4  

Unwind of discount on provisions

     (8      (6      (23      (19

Interest capitalised

     32        30        84        90  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total finance expense (net)

     (49      (32      (148      (73
  

 

 

    

 

 

    

 

 

    

 

 

 

The capitalisation rate used to calculate borrowing costs eligible for capitalisation during the nine month period ended 31 December 2019 was 4.1% (nine month period ended 31 December 2018: 4.1%).

 

19


Table of Contents

Notes (forming part of the condensed consolidated interim financial statements)

 

8

Allowances for trade and other receivables

 

(£ millions)

   Nine months ended
31 December 2019
     Year ended
31 March 2019
     Nine months ended
31 December 2018
 

At beginning of period/year

     12        50        50  

Charged during the period/year

     6        4        5  

Receivables written off as uncollectable during the period/year

     (2      (41      (1

Unused amounts reversed during the period/year

     (1      2        —    

Foreign currency translation

     —          (3      (3
  

 

 

    

 

 

    

 

 

 

At end of period/year

     15        12        51  
  

 

 

    

 

 

    

 

 

 

 

9

Other financial assets

 

As at (£ millions)

   31 December 2019      31 March 2019      31 December 2018  

Non-current

        

Warranty reimbursement and other receivables

     102        104        108  

Restricted cash held as security

     8        6        6  

Derivative financial instruments

     281        54        127  

Other

     6        6        12  
  

 

 

    

 

 

    

 

 

 

Total other non-current financial assets

     397        170        253  
  

 

 

    

 

 

    

 

 

 

Current

        

Warranty reimbursement and other receivables

     95        88        86  

Restricted cash

     3        11        2  

Derivative financial instruments

     164        133        238  

Accrued income

     43        44        31  

Other

     42        38        67  
  

 

 

    

 

 

    

 

 

 

Total other current financial assets

     347        314        424  
  

 

 

    

 

 

    

 

 

 

 

10

Inventories

 

As at (£ millions)

   31 December 2019      31 March 2019      31 December 2018  

Raw materials and consumables

     113        130        120  

Work-in-progress

     409        369        355  

Finished goods

     2,812        3,117        3,712  

Inventory basis adjustment

     14        (8      (19
  

 

 

    

 

 

    

 

 

 

Total inventories

     3,348        3,608        4,168  
  

 

 

    

 

 

    

 

 

 

 

11

Other assets

 

As at (£ millions)

   31 December 2019      31 March 2019      31 December 2018  

Non-current

        

Prepaid expenses

     6        83        85  

Other

     85        —          88  
  

 

 

    

 

 

    

 

 

 

Total non-current other assets

     91        83        173  
  

 

 

    

 

 

    

 

 

 

Current

        

Recoverable VAT

     238        301        442  

Prepaid expenses

     191        156        180  

Research and development credit

     110        113        110  

Other

     11        —          —    
  

 

 

    

 

 

    

 

 

 

Total current other assets

     550        570        732  
  

 

 

    

 

 

    

 

 

 

 

20


Table of Contents

Notes (forming part of the condensed consolidated interim financial statements)

 

12

Taxation

Recognised in the income statement

Income tax for the three and nine month periods ended 31 December 2019 and 31 December 2018 is charged at the estimated effective tax rate expected to apply for the applicable financial year ends.

 

13

Capital expenditure

Capital expenditure in the nine month period to 31 December 2019 was £897 million (nine month period to 31 December 2018: £1,296 million) on property, plant and equipment and £1,170 million (nine month period to 31 December 2018: £1,306 million) was capitalised as intangible assets (excluding research and development expenditure credits). There were no material disposals or changes in the use of assets.

 

14

Intangibles

Impairment testing

The directors are of the view that the operations of the Group represent a single cash-generating unit (‘CGU’). In the three month period ended 31 December 2018 the directors assessed the recoverable amount of the CGU due to changes in market conditions especially in China, technology disruptions and rising cost of debt as the higher of Fair Value Less Cost of Disposal (‘FVLCD’) and Value in Use (‘VIU’) of the relevant assets of the CGU. This resulted in an exceptional impairment charge of £3,105 million being recognised within ‘Other expenses’. The impairment loss was allocated on a pro-rated basis with £1,548 million allocated against tangible assets and £1,557 million allocated against intangible assets.

 

15

Other financial liabilities

 

As at (£ millions)

   31 December 2019      31 March 2019      31 December 2018  

Current

        

Lease obligations

     73        3        3  

Interest accrued

     65        33        62  

Derivative financial instruments

     345        523        602  

Liability for vehicles sold under a repurchase arrangement

     496        469        480  

Other

     2        14        —    
  

 

 

    

 

 

    

 

 

 

Total current other financial liabilities

     981        1,042        1,147  
  

 

 

    

 

 

    

 

 

 

Non-current

        

Lease obligations

     456        28        28  

Derivative financial instruments

     233        281        285  

Other

     —          1        7  
  

 

 

    

 

 

    

 

 

 

Total non-current other financial liabilities

     689        310        320  
  

 

 

    

 

 

    

 

 

 

 

21


Table of Contents

Notes (forming part of the condensed consolidated interim financial statements)

 

16

Provisions

 

As at (£ millions)

   31 December 2019      31 March 2019      31 December 2018
restated*
 

Current

        

Product warranty

     727        694        661  

Legal and product liability

     105        154        116  

Provision for residual risk

     9        9        9  

Provision for environmental liability

     6        14        8  

Other employee benefits obligations

     10        13        4  

Restructuring

     6        104        —    
  

 

 

    

 

 

    

 

 

 

Total current provisions

     863        988        798  
  

 

 

    

 

 

    

 

 

 

Non-current

        

Product warranty

     1,101        1,048        1,045  

Legal and product liability

     60        43        31  

Provision for residual risk

     83        31        32  

Provision for environmental liability

     20        15        15  

Other employee benefits obligations

     14        3        8  
  

 

 

    

 

 

    

 

 

 

Total non-current provisions

     1,278        1,140        1,131  
  

 

 

    

 

 

    

 

 

 

*See note 2 for details of the restatement due to changes in accounting policies

 

(£ millions)

  Product
warranty
    Legal
and
product
liability
    Residual
risk
    Environmental
liability
    Other
employee
benefits
obligations
    Restructuring     Total  

Balance at 1 April 2019

    1,742       197       40       29       16       104       2,128  

Provision made during the period

    809       73       72       11       40       25       1,030  

Provision used during the period

    (746     (38     (6     (12     (32     (123     (957

Unused amounts reversed in the period

    —         (67     (12     (2     —         —         (81

Impact of discounting

    23       —         —         —         —         —         23  

Foreign currency translation

    —         —         (2     —         —         —         (2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at 31 December 2019

    1,828       165       92       26       24       6       2,141  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 specific warranties for electric vehicle battery failure and degradation in electric vehicles of up to eight years. 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, dealer terminations, employment cases, personal injury claims and compliance with regulations. The timing of outflows will vary as and when claims are received and settled, which is not known with certainty.

 

22


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 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. 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.

Restructuring provision

This provision relates to amounts payable to employees under the Group restructuring programme that was announced and commenced during the year ended 31 March 2019.

 

17

Other liabilities

 

As at (£ millions)

   31 December 2019      31 March 2019      31 December 2018
restated*
 

Current

        

Liabilities for advances received

     53        86        164  

Ongoing service obligations

     307        301        303  

VAT

     148        199        170  

Other taxes payable

     109        53        134  

Other

     19        25        31  
  

 

 

    

 

 

    

 

 

 

Total current other liabilities

     636        664        802  
  

 

 

    

 

 

    

 

 

 

Non-current

        

Ongoing service obligations

     510        504        480  

Other

     11        17        15  
  

 

 

    

 

 

    

 

 

 

Total non-current other liabilities

     521        521        495  
  

 

 

    

 

 

    

 

 

 

*See note 2 for details of the restatement due to changes in accounting policies

 

18

Interest bearing loans and borrowings

 

As at (£ millions)

   31 December 2019      31 March 2019      31 December 2018  

Short-term borrowings

        

Bank loans

     145        114        191  

Current portion of long-term EURO MTF listed debt

     381        767        392  

Other secured

     103        —          —    
  

 

 

    

 

 

    

 

 

 

Total short-term borrowings

     629        881        583  
  

 

 

    

 

 

    

 

 

 

Long-term borrowings

        

EURO MTF listed debt

     3,685        2,844        3,283  

Bank loans

     1,221        755        772  

Other unsecured

     14        —          —    
  

 

 

    

 

 

    

 

 

 

Total long-term borrowings

     4,920        3,599        4,055  
  

 

 

    

 

 

    

 

 

 

Lease obligations

     529        31        31  
  

 

 

    

 

 

    

 

 

 

Total debt

     6,078        4,511        4,669  
  

 

 

    

 

 

    

 

 

 

Undrawn facilities

As at 31 December 2019, the Group has a fully undrawn revolving credit facility of £1,935 million (31 March 2019: £1,935 million, 31 December 2018: £1,935 million). This facility is available in full until 2022.

 

23


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 2019.

The table below shows 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.

 

     31 December 2019      31 March 2019      31 December 2018  

As at (£ millions)

   Carrying
value
     Fair value      Carrying
value
     Fair value      Carrying
value
     Fair value  

Short-term deposits and other investments

     1,910        1,910        1,028        1,028        796        796  

Other financial assets - current

     347        347        314        314        424        424  

Other financial assets - non-current

     397        397        170        170        253        253  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial assets

     2,654        2,654        1,512        1,512        1,473        1,473  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Short-term borrowings

     629        628        881        877        583        579  

Long-term borrowings

     4,920        4,877        3,599        3,245        4,055        3,654  

Other financial liabilities - current

     981        981        1,042        1,042        1,147        1,147  

Other financial liabilities - non-current

     689        689        310        310        320        320  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial liabilities

     7,219        7,175        5,832        5,474        6,105        5,700  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

24


Table of Contents

Notes (forming part of the condensed consolidated interim financial statements)

 

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 2019

     (337     (506     (33     5,181       4,305  

Adjustment on initial application of IFRS 16 (net of tax)

     —         —         —         (23     (23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted balance at 1 April 2019

     (337     (506     (33     5,158       4,282  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the period

     —         —         —         69       69  

Remeasurement of defined benefit obligation

     —         —         —         (153     (153

Gain on effective cash flow hedges

     —         218       23       —         241  

Loss on effective cash flow hedges of inventory

     —         (119     (10     —         (129

Income tax related to items recognised in other comprehensive income

     —         (18     (3     26       5  

Cash flow hedges reclassified to profit and loss

     —         495       (2     —         493  

Income tax related to items reclassified to profit or loss

     —         (94     —         —         (94

Amounts removed from hedge reserve and recognised in inventory

     —         (55     12       —         (43

Income tax related to amounts removed from hedge reserve and recognised in inventory

     —         10       (2     —         8  

Currency translation differences

     (22     —         —         —         (22
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at 31 December 2019

     (359     (69     (15     5,100       4,657  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(£ millions)

   Translation
reserve
    Hedging
reserve
    Cost of
hedging
reserve
    Retained
earnings
    Total
other
reserves
 

Balance at 1 April 2018

     (333     (281     (46     8,968       8,308  

Adjustment on initial application of IFRS 9 and IFRS 15 (net of tax) restated*

     —         (29     2       (5     (32
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted balance at 1 April 2018 restated*

     (333     (310     (44     8,963       8,276  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss for the period

     —         —         —         (3,444     (3,444

Remeasurement of defined benefit obligation

     —         —         —         103       103  

Loss on effective cash flow hedges

     —         (882     (2     —         (884

Gain/(loss) on effective cash flow hedges of inventory

     —         95       (5     —         90  

Income tax related to items recognised in other comprehensive income

     —         148       1       (24     125  

Cash flow hedges reclassified to profit and loss

     —         700       6       —         706  

Income tax related to items reclassified to profit or loss

     —         (133     (1     —         (134

Amounts removed from hedge reserve and recognised in inventory

     —         (125     15       —         (110

Income tax related to amounts removed from hedge reserve and recognised in inventory

     —         24       (3     —         21  

Currency translation differences

     17       —         —         —         17  

Dividend

     —         —         —         (225     (225
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at 31 December 2018 restated*

     (316     (483     (33     5,373       4,541  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*

See note 2 for details of the restatement due to changes in accounting policies

 

21

Dividends

During the three month periods ended 31 December 2019 and 31 December 2018, no ordinary share dividends were proposed.

During the nine month period ended 31 December 2019 no ordinary share dividends were proposed. During the nine months ended 31 December 2018, an ordinary share dividend of £225 million was proposed and paid.

 

25


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.

 

(£ millions)

   Nine months ended
31 December 2019
     Year ended
31 March 2019
     Nine months ended
31 December 2018
 

Change in defined benefit obligation

        

Defined benefit obligation at beginning of the period/year

     8,648        8,320        8,320  

Current service cost

     101        158        125  

Past service cost

     4        42        17  

Interest expense

     153        216        162  

Actuarial losses/(gains) arising from:

        

- Changes in demographic assumptions

     —          (49      —    

- Changes in financial assumptions

     484        544        (179

- Experience adjustments

     (143      32        (35

Exchange differences on foreign schemes

     —          —          1  

Member contributions

     1        2        2  

Benefits paid

     (424      (617      (508
  

 

 

    

 

 

    

 

 

 

Defined benefit obligation at end of period/year

     8,824        8,648        7,905  
  

 

 

    

 

 

    

 

 

 

Change in present value of scheme assets

        

Fair value of schemes’ assets at beginning of the period/year

     7,981        7,882        7,882  

Interest income

     143        208        156  

Remeasurement gains/(losses) on the return of scheme assets, excluding amounts included in interest income

     188        257        (111

Administrative expenses

     (14      (13      (12

Exchange differences on foreign schemes

     1        —          —    

Employer contributions

     184        262        201  

Member contributions

     1        2        2  

Benefits paid

     (424      (617      (508
  

 

 

    

 

 

    

 

 

 

Fair value of scheme assets at end of period/year

     8,060        7,981        7,610  
  

 

 

    

 

 

    

 

 

 

Amount recognised in the consolidated balance sheet consist of

        

Present value of defined benefit obligations

     (8,824      (8,648      (7,905

Fair value of schemes’ assets

     8,060        7,981        7,610  
  

 

 

    

 

 

    

 

 

 

Net liability

     (764      (667      (295
  

 

 

    

 

 

    

 

 

 

Non-current liabilities

     (764      (667      (295
  

 

 

    

 

 

    

 

 

 

The range of assumptions used in accounting for the pension plans in the periods is set out below:

 

     Nine months ended
31 December 2019
    Year ended
31 March 2019
    Nine months ended
31 December 2018
 

Discount rate

     2.1     2.4     2.9

Expected rate of increase in benefit revaluation of covered employees

     2.4     2.4     2.5

RPI Inflation rate

     3.0     3.2     3.2

 

26


Table of Contents

Notes (forming part of the condensed consolidated interim financial statements)

 

22

Employee benefits (continued)

 

For the valuations at 31 December 2019 and 31 March 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.

For the Jaguar Pension Plan, scaling factors of 112 per cent to 118 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 112 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 (2018) projections and an allowance for long-term improvements of 1.25 per cent per annum.

For the valuations at 31 December 2018, 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 113 per cent to 119 per cent for males and 102 per cent to 114 per cent for females have been used for the Jaguar Pension Plan, 108 per cent to 113 per cent for males and 102 per cent to 111 per cent for females for the Land Rover Pension Scheme, and 95 per cent for males and 85 per cent for females for the Jaguar Executive Pension Plan. There is an allowance for future improvements in line with the CMI (2017) projections with an allowance for long-term improvements of 1.25 per cent per annum.

A past service cost of £4 million has been recognised in the nine month period ended 31 December 2019 as part of the Group restructuring program that commenced in the year ended 31 March 2019.

A past service cost of £17 million was recognised in the nine month period ended 31 December 2018. This reflects a plan amendment for certain members as part of the Group restructuring programme and a past service cost following a High Court ruling in October 2018. As a result of the ruling, pension schemes are required to equalise male and female members’ benefits for the inequalities within guaranteed minimum pension earned between 17 May 1990 and 5 April 1997. The Group historically made no assumptions for guaranteed minimum pension and therefore has considered the change to be a plan amendment.

 

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 £20 million (31 March 2019: £17 million, 31 December 2018: £16 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, 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 £46 million (31 March 2019: £41 million, 31 December 2018: £42 million). These mainly relate to tax audits and tax litigation claims.

 

27


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 £1,327 million (31 March 2019: £1,054 million, 31 December 2018: £973 million) and £18 million (31 March 2019: £20 million, 31 December 2018: £15 million) relating to the acquisition of intangible assets.

Commitments and contingencies also includes other contingent liabilities of £377 million (31 March 2019: £222 million, 31 December 2018: £224 million). 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 £103 million (31 March 2019: £nil, 31 December 2018: £nil) and trade receivables with a carrying amount of £nil (31 March 2019: £114 million, 31 December 2018: £191 million) and property, plant and equipment with a carrying amount of £nil (31 March 2019: £nil, 31 December 2018: £nil) and restricted cash with a carrying amount of £nil (31 March 2019: £nil, 31 December 2018: £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 by November 2040. Of this amount, CNY 3,475 million has been contributed as at 31 December 2019. This includes a contribution of CNY 600 million made following a CNY 600 million dividend received from Chery Jaguar Land Rover Automotive Co. Ltd in October 2019. The outstanding commitment of CNY 1,525 million translates to £167 million at the 31 December 2019 exchange rate.

At each of 31 March 2019 and 31 December 2018, the outstanding commitment was CNY 2,125 million (£243 million at the respective period-end exchange rates) 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 31 December 2019 is £71 million (31 March 2019: £151 million, 31 December 2018: £147 million) and contingent liabilities of its joint venture 31 December 2019 is £nil (31 March 2019: £nil, 31 December 2018: £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)

   31 December 2019      31 March 2019      31 December 2018
restated*
 

Short-term debt

     702        884        586  

Long-term debt

     5,376        3,627        4,083  
  

 

 

    

 

 

    

 

 

 

Total debt**

     6,078        4,511        4,669  
  

 

 

    

 

 

    

 

 

 

Equity attributable to shareholders

     6,325        5,973        6,209  
  

 

 

    

 

 

    

 

 

 

Total capital

     12,403        10,484        10,878  
  

 

 

    

 

 

    

 

 

 

 

*

See note 2 for details of the restatement due to changes in accounting policies

**

Total debt includes lease obligations of £529 million (31 March 2019: £31 million, 31 December 2018: £31 million).

 

28


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 generated from operations

 

     Three months ended      Nine months ended  
     31 December      31 December      31 December      31 December  

(£ millions)

   2019      2018      2019      2018  

Profit/(loss) for the period

     372        (3,129      70        (3,440

Adjustments for:

           

Depreciation and amortisation

     453        598        1,420        1,699  

Write-down of tangible assets

     —          —          —          18  

Loss on disposal of assets

     5        8        27        12  

Foreign exchange and fair value (gain)/loss on loans

     (141      48        (33      109  

Income tax (credit)/charge

     (54      (266      9        (309

Finance expense (net)

     49        32        148        73  

Finance income

     (16      (11      (41      (26

Foreign exchange loss/(gain) on economic hedges of loans

     44        (3      31        (8

Foreign exchange (gain)/loss on derivatives

     (12      11        (13      32  

Foreign exchange loss/(gain) on other restricted deposits

     1        1        1        —    

Foreign exchange loss/(gain) on short-term deposits and other investments

     51        (41      24        (92

Foreign exchange loss/(gain) on cash and cash equivalents

     92        (10      35        (12

Unrealised (profit)/loss on commodities

     (32      37        12        56  

Loss on matured revenue hedges

     13        5        46        5  

Share of loss/(profit) from equity accounted investments

     25        16        94        (17

Fair value loss/(gain) on equity investment

     —          1        22        (6

Exceptional items

     —          3,122        22        3,122  

Other non-cash adjustments

     —          (1      (1      (1
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash flows generated from operating activities before changes in assets and liabilities

     850        418        1,873        1,215  
  

 

 

    

 

 

    

 

 

    

 

 

 

Trade receivables

     216        55        527        384  

Other financial assets

     (20      7        (6      38  

Other current assets

     28        (58      12        (103

Inventories

     405        242        280        (418

Other non-current assets

     (1      (14      (66      (39

Accounts payable

     (555      (311      (984      (1,131

Other current liabilities

     7        152        (27      247  

Other financial liabilities

     (35      (20      (10      (3

Other non-current liabilities and retirement benefit obligations

     (28      (3      (57      (31

Provisions

     (79      80        (28      112  
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash generated from operations

     788        548        1,514        271  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

29


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  

Proceeds from issue of financing

     103        1,500        —          1,603  

Reclassification of long-term debt

     146        (146      —          —    

Issue of new leases

     —          —          56        56  

Interest accrued

     —          —          34        34  

Repayment of financing

     (500      —          (84      (584

Foreign exchange

     (1      (29      (7      (37

Arrangement fees paid

     (1      (8      —          (9

Fee amortisation

     1        6        —          7  

Bond revaluation in hedge reserve

     —          (1      —          (1

Fair value adjustment on loans

     —          (1      —          (1
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at 31 December 2019

     629        4,920        529        6,078  
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at 1 April 2018

     652        3,060        19        3,731  

Proceeds from issue of financing

     535        1,214        —          1,749  

Issue of new finance leases

     —          —          14        14  

Reclassification of long-term debt

     392        (392      —          —    

Repayment of financing

     (1,063      —          (2      (1,065

Foreign exchange

     66        61        —          127  

Arrangement fees paid

     —          (18      —          (18

Fee amortisation

     2        4        —          6  

Reclassification of long-term debt fees

     (1      1        —          —    

Long-term borrowings revaluation in hedge reserve

     —          119        —          119  

Fair value adjustment on loans

     —          6        —          6  
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at 31 December 2018

     583        4,055        31        4,669  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

30


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:

 

Nine months ended 31 December 2019 (£ millions)

   With joint
ventures of the
Group
     With Tata Sons
Limited and its
subsidiaries and
joint ventures
     With associates
of the Group
     With immediate
or ultimate
parent and its
subsidiaries,
joint ventures
and associates
 

Sale of products

     149        2        —          43  

Purchase of goods

     —          —          —          82  

Services received

     —          110        2        69  

Services rendered

     72        —          —          —    

Trade and other receivables

     41        2        —          28  

Accounts payable

     —          8        —          41  

Interest paid

     —          —          —          —    

Dividend received

     67        —          —          —    

Dividend paid

     —          —          —          —    

Investments

     67        —          6        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Nine months ended 31 December 2018 (£ millions)

   With joint
ventures of the
Group
     With Tata Sons
Limited and its
subsidiaries and
joint ventures
     With associates
of the Group
     With immediate
or ultimate
parent and its
subsidiaries,
joint ventures
and associates
 

Sale of products

     311        2        —          66  

Purchase of goods

     —          —          —          158  

Services received

     —          133        2        78  

Services rendered

     93        —          —          —    

Trade and other receivables

     81        1        —          32  

Accounts payable

     —          20        —          72  

Interest paid

     —          —          —          2  

Dividend received

     22        —          —          —    

Dividend paid

     —          —          —          225  
  

 

 

    

 

 

    

 

 

    

 

 

 

Compensation of key management personnel

 

Nine months ended 31 December (£ millions)

   2019      2018  

Key management personnel remuneration

     14        8  
  

 

 

    

 

 

 

 

31