Celebrating
100 years
of innovation
Annual Report & Accounts 2022
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Contents
Highlights
2022 highlights
Management reporting measures
Revenue
Adjusted EBIT
€3,268m
2021: €2,957m
Revenue 10.5% higher (+5.2% at
constant currency or 150bps below
global light vehicle production
increase)
€180m
2021: €213m
Adjusted EBIT margin of 5.5%
(2021: 7.2%)
Adjusted Net Income
Adjusted Basic EPS (€ cents)
€44m
2021: €58m
8.5c
2021: 11.2c
Adjusted Free Cash Flow
€78m
2021: €117m
Statutory reporting measures
Operating loss
Loss for the year
€(217)m
2021: €127m Operating Profit
€(279)m
2021: €16m Profit
Basic EPS (€ cents)
Dividend per share
(54.4)c
2021: 2.8c
2.54c
2021: 3.39c
Overview
Our purpose framework
Our business at a glance
100 years of innovation
Strategic report
Chair's statement
Chief Executive Officer's statement
Q&A with our CEO
Our strengths
Our products
Our markets
Business model
Our Take the Turn strategy
KPIs - financial and non-financial
Section 172 and stakeholder engagement
Sustainability
Principal risks and uncertainties
Taskforce on Climate-Related Financial
Disclosures (TCFD)
Chief Financial Officer’s report
Compliance statements
Non-financial information statement
Governance report
Corporate Governance at a glance
Chair’s Corporate Governance statement
Board of Directors
Corporate Governance report
Nomination Committee report
Audit & Risk Committee report
Statement by the Chair of the Remuneration
Committee
Implementation of the remuneration policy
Annual report on remuneration
ESG Steering Committee report
Directors’ report
Statement of Directors’ responsibilities in
respect of the financial statements
Financial statements
Independent auditors’ report to the members of
TI Fluid Systems plc
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Group Financial Statements
Company Balance Sheet
Company Statement of Changes in Equity
Notes to the Company Financial Statements
Group Financial Record
Shareholder information
01
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28
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36
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42
52
58
62
64
68
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106
108
111
114
122
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125
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127
184
185
186
194
196
Our purpose framework
Our purpose
Our purpose is to help make vehicles cleaner
and greener to protect our environment and
make our world a better place to live.
In pursuit of our purpose, we work together
with our many OEM customers and suppliers
around the globe to design, develop,
manufacture and deliver a wide range of
award-winning, industry-leading automotive
fluid systems, operating in a sustainable
manner out of 98 manufacturing locations in
28 countries.
Our vision
We are committed to enabling a sustainable
future and improving the environmental and
social well-being of the communities we
operate in.
Our culture
We embrace innovation, learning, inclusivity,
and teamwork to promote a positive culture
that enables us to achieve our strategic goals.
Our values
Customers
Innovation and improvement
Employees
• Ensure that our customers are the
• Stay ahead of business challenges
•
Hire, develop and retain talented people
focus of our business
•
Build a foundation for positive,
mutual success
• Develop new methods and skills that
• Provide a safe, respectful and inclusive
improve our business
• Maintain and strengthen continuous
improvement culture in all areas of
our business
working environment
• Foster teamwork through
communication
Communities
Compliance
Environment
• Be a responsible member of
our communities
• Support local engagement in
charitable and other activities that
benefit our communities
• Comply with all laws that are applicable
to our business, operations, workforce
and products
• Demonstrate the highest levels of
integrity by embracing our Code of
Business Conduct
• Encourage the prevention of pollution
and the conservation of resources
01
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022Financial Our business at a glance
Who we are
We are the industry leader in automotive
fluid technology.
What we do
We design and manufacture award-
winning, industry-leading automotive fluid
systems in a sustainable manner for OEMs
across the globe.
Where we are
We currently have 98 manufacturing locations
in 28 countries, providing us with global reach
and scale.
25,600
People
€3,268m
Group Revenue
98
Manufacturing Locations
Revenue by Region %
37%
34%
27%
2%
Europe and Africa
Asia Pacific
North America
Latin America
Our Take the Turn strategy
Technology
Increase the market share of our advanced
technology and safety critical products,
including new thermal management products
for EVs
Read more on pages 30–31
Transformation
Operate our business in a sustainable manner
Talent
Develop, promote and retain our workforce
in an inclusive environment
Read more on pages 30–31
Read more on pages 30–31
02
TI Fluid Systems plc | Annual Report & Accounts 2022 North America
Europe and Africa
6,800
People
€896m
Revenue
10,200
People
€1,207m
Revenue
Latin America
Asia Pacific
Revenue
Denotes the collective figure for all TI Fluid companies in a given
region or country
People
Denotes the number of people employed on a direct and indirect
(contract) basis by TI Fluid companies in a given region or country
As at 31 December 2022
800
People
€51m
Revenue
7,800
People
€1,114m
Revenue
03
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022Financial 100 years of innovation
1922
Originally founded as Harry Bundy
and Company in 1922, Harry
Warren Bundy established The
Bundy Corporation in Detroit,
Michigan, USA. First contract from
Ford Motor Company for gas lines
on the Model T. First production
site on Bellevue Avenue in Detroit,
Michigan. Harry Bundy’s 1922
application for a patent for his new
method of tubemaking.
1941–1945
Bundy’s tubing and other
components were used in more
than 5,000 war applications,
including oil and gas lines, brake
lines and brake lubrication lines for
tens of thousands of allied planes,
jeeps, tanks, trucks, landing craft
and carriers.
1985
First facility opened in China.
1929
‘BUNDYWELD’ was invented,
which enhanced torsion and
bending qualities, increased
resistance to corrosion and
improved fatigue strength of tubes.
1976
New York stock exchange
listed Bundy common stock on
9 December 1976.
1988
Bundy Corporation acquired by
TI Group.
04
TI Fluid Systems plc | Annual Report & Accounts 2022 2001
TI Automotive LTD formed as in
independent company in England
after emerging from Smiths Group,
who purchased TI Group plc.
2017
TI Fluid Systems plc listed on the
London Stock Exchange.
2020
TI Fluid Systems supplies thermal
products for the new Ford Mustang
Mach-E battery electric vehicle.
2015
TI Automotive acquired by funds
managed by Bain Capital.
2018
TI wins first high-volume battery
electric vehicle (BEV) thermal
programme.
2022
First e-Mobility Innovation Centre
opens in Rastatt, Germany.
05
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022Financial Strategic
report
Empowering the automotive future
0606
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 In this section
Chair's statement
Chief Executive Officer's statement
Q&A with our CEO
Our strengths
Our products
Our markets
Business model
Our Take the Turn strategy
KPIs – financial and non-financial
Section 172 and stakeholder engagement
Sustainability
Principal risks and uncertainties
Taskforce on Climate-Related Financial
Disclosures (TCFD)
Chief Financial Officer’s report
Compliance statements
Non-financial information statement
08
12
13
16
18
20
28
30
32
36
40
42
52
58
62
64
0707
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Chair’s statement
In 2022, the Board devoted
more time to the evolution
and development of the
Take the Turn strategy as the
pace of the industry’s transition
to EVs quickened.
Tim Cobbold
Chair
Dear shareholder,
Over the past year, I was pleased to be able
to build on and continue the good work of my
predecessor, Manfred Wennemer, as the
Company’s Chair. Since I joined the Board
in November 2019, and having served as
both the Senior Independent Director and
as Chair of the Remuneration Committee, I
have had the opportunity to work closely with
my fellow Directors and the senior executive
team to gain a sound understanding of the
business and the industry in which it operates.
This recent experience complements the five
years I spent working in the, then, TI Group’s
automotive business (which has since
become TI Fluid Systems) during the 1990s.
I have also spent time serving under several
other excellent Chairs in UK-listed companies.
I hope to draw on all of my experience to help
guide the Board, its Executive Management,
and the Company, in general, as we refine and
implement our Take the Turn strategy to take
advantage of the opportunities presented by
the transition to electric vehicles (EVs).
Industry context
2022 proved to be another exceptional year,
continuing into a third year of a period of
unprecedented turbulence and challenge for
industries and businesses across the globe.
The automotive industry suffered as acutely
as any.
The ongoing impact of COVID-19, which
continued late into 2022, especially in China,
was compounded by both the extraordinary
supply chain issues that grew through 2021
into 2022 and, in 2022, a wave of cost inflation
following the war in Ukraine. Together, these
presented exceptional and unprecedented
challenges to the automotive industry.
For all Tier 1 automotive suppliers (and all the
people who work in them) these existential
challenges manifested themselves as
decreased vehicle production, order volatility,
supply chain disruptions and shortages,
and historic inflation that has significantly
increased the cost of labour, energy,
transportation, materials and components.
Whilst these challenges were common to
many industries, they were particularly acute
in the automotive industry. It was as difficult
an operating environment as the industry has
seen for a long time.
As we are all aware, the automotive industry
is also undergoing seismic change as the
climate change imperative drives a switch
away from vehicles powered by internal
combustion engines (ICEs) towards EVs,
including hybrid electric vehicles (HEVs)
and battery electric vehicles (BEVs). It is
difficult to exaggerate the degree of change
this requires of the automotive industry and
the consequential impact this has on the
automotive supply chain, particularly Tier 1
suppliers like TI Fluid Systems.
For TI, this transition provides significant
opportunities (though with some attendant
risks), and it is the business’s Take the Turn
strategy that seeks to take advantage of those
opportunities, managing attendant risks whilst
navigating short-term challenges.
Consequently, when considering TI’s
business performance, it is appropriate to
consider both the short-term performance in
the current operating environment and the
success in laying the foundation for a long-
term market leading position in a growing EV
automotive world.
0808
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Sustainability
Sustainability is another important element
of the Take the Turn strategy. In 2022, the
Group and the Board significantly increased
the time dedicated to sustainability under the
leadership of the ESG Steering Committee.
It is clear that the business has embraced
the imperative wholeheartedly, and, in 2022,
the Group continued to build and invest in
sustainability programmes.
In 2022, we published our inaugural (2021)
Sustainability report, which describes how
the Take the Turn strategy encompasses and
supports the Group’s environmental, social
and governance initiatives. See the Q&A with
our CEO on pages 13–15 and Sustainability
on pages 40–41 for more information on
our environmental commitments, including
updated science-based CO2(e) emissions
reduction targets. For 2022, we have also
reported our Scope 3 emissions for the
first time and have included that important
category of emissions in our reduction
targets. In addition, we have continued to
make progress, and expand, our important
talent development, safety, and diversity and
inclusion programmes.
Business performance in 2022
Excellent progress was made in laying
the foundation for TI’s position in an EV
automotive world, through the development
of technologies and products suited to both
HEV and BEV platforms, evidenced by
our strong growth in order booking for EV
platforms. These bookings are critical as they
provide a growing future revenue stream for
the business.
The business, led by the experienced senior
management team, has responded well to
the challenges of the operating environment.
The extent of the inflationary pressures, which
have been felt across the automotive supply
base, resulted in an extraordinary effort by the
business to secure significant cost inflation
recoveries from customers. Approximately
70% of cost inflation was recovered from
customers, which is in line with recoveries in
the industry. The Group also continued with its
restructuring programme, and in taking steps
to increase efficiency across its operations,
to manage down costs wherever possible,
but without jeopardising the investment for
the future.
As a result of these ongoing efforts, and
bearing in mind the overall environment, the
Group performed well in 2022. EV bookings
were up 50% (2021 up 29%) and accounted
for 76% (2021 48%) of total bookings.
Revenue increased by 10.5% in the year
and was broadly in line with the market on
a constant currency basis, despite volume
challenges in China due to our current EV
mix issues as well as production disruptions
towards the end of the year when the Chinese
government’s COVID-19 policy changed. The
business demonstrated its financial resilience
with an Adjusted EBIT margin of 5.5% (2021
7.1%). Although lower year on year, the
Group is well positioned to realise increased
revenue, profit and cash flow when volumes
recover and inflation stabilises. The non-cash
impairment charge of €297.3 million in the
year reflects the lowered automotive volume
outlook, the cost pressures in the industry,
and also the general interest rate increases.
In-depth information on the financial position
is available in the Chief Financial Officer’s
report on pages 58–61 and in the Financial
Statements on pages 122–195.
Take the Turn strategy
In 2022, the Board devoted more time
to the evolution and development of the
Take the Turn strategy as the pace of the
industry’s transition to EVs quickened. The
need to focus on strategy had been brought
into further relief by the Board’s own self-
evaluation in 2021 and, as a consequence,
the majority of two Board meetings were
spent reviewing the strategy with the wider
Executive Team. This was a significant
increase in the time the Board has spent on
the strategy, reflecting its acute importance
to the long-term future of the business. Hans
Dieltjens and his team, supported by the
Board, have worked extensively in 2022 to
refine the strategy.
Further details can be seen in Our markets
and Our Take the Turn strategy sections on
pages 20–27 and 30–31 respectively.
Technology
Extending our technology and thermal
management product line is a critical element
of the Take the Turn strategy. In support of
this strategic element, the first e-Mobility
Innovation Centre (eMIC) was opened in
Rastatt, Germany, in April 2022. The Board
met in Rastatt and toured the eMIC in October
as part of reviewing the application of existing
and future technologies to EV platforms, and
to deepen the Board’s understanding of the
related critical success factors.
The Rastatt eMIC is the first of five planned
eMICs. We expect to open additional eMICs
in China, South Korea, Japan and the US
during 2023 and 2024. The creation of
eMICs recognises that the development of
EVs is still relatively early in the cycle, and
there is significant opportunity, working in
collaboration with customers, to deploy
innovation in technology and product
systemisation to improve EV operating
performance and cost, both of which are
integral to the rate of take up of EVs by
consumers. Each eMIC will provide a
collaborative environment that combines
six core development competencies (virtual
engineering, design, processing, prototyping,
product testing and vehicle testing) under one
roof. By so doing, our engineers are able to
more efficiently design and develop thermal
management systems and components
for EVs, streamlining product development
cycles, and speeding up the process of
bringing new products to market to support
our OEM customers as they navigate the
complex transition to EVs.
More details on this can be found in our
products on pages 18–19.
0909
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Chair’s statement
Continued
In June 2022, John Smith, who had previously
served on the Remuneration Committee
and, therefore, had the relevant experience,
was appointed Chair of the Remuneration
Committee. Julie Baddeley also joined the
Remuneration Committee. Susan Levine
joined the ESG Steering Committee to
augment the composition of that Committee,
which reflects its increasing importance.
In September 2022, Stephen Thomas
stepped down from the Nomination
Committee and, following Trudy’s
appointment, the Nomination Committee
comprises Independent Directors and a Chair,
independent on appointment, in line with
best practice.
The retirements of Manfred Wennemer and
Ron Hundzinski, together with the resignation
of Jeff Vanneste, provided an opportunity
to further strengthen and enhance our
governance and to drive diversity. In replacing
all three individuals, processes were run with
experienced recruiters and a requirement
that the candidate pool for interview should
include both women and individuals from
recognised ethnic minorities. As a result,
two women and one man were appointed.
None of the successful candidates were
from a recognised ethnic minority, despite
candidates from ethnic minorities having
been interviewed on all three occasions.
However, as shareholders would expect,
we will not appoint solely on the basis of
ethnicity (and neither would candidates want
to be so appointed); the best candidate will
be selected. However, I remain conscious
that, following the Parker Review, there is an
expectation that there will be an individual
from an ethnic minority on the Board.
My commitment is that we will continue to
work to meet this expectation with each and
every Board appointment going forward,
whilst always appointing the person we judge
to be the best candidate.
As a consequence of these changes,
women now represent 50% of the Board.
Women chair two of the Board’s four
Committees, and a woman serves as our
Senior Independent Director.
Importantly, while increasing our gender
diversity, we have maintained geographical
representation with Directors from the UK,
Europe and the US, as well as a broad mix of
market, technology, operational and financial
expertise and experience to support the
Company’s strategic goals.
The Board Skill Matrix on page 68
provides further details of how we view
the composition of the Board in order to
assess the complementarity of candidate’s
skills and experience when making
Board appointments.
More information on the Board, including
biographies and the composition of the
Committees, is available in the Governance
Section starting on page 68 and within the
four Committee reports on pages 80–107.
Governance and
stakeholder engagement
The Board recognises that adherence to the
highest standards of governance and financial
integrity, together with the Group’s business
model and strategy, are the foundations for
long-term growth and success.
Our strong and sound relationships,
cultivated over many years and decades
with a wide range of stakeholders – our
shareholders, employees, customers,
suppliers, and communities – have allowed
us to successfully navigate a series of difficult
years. Importantly, Directors have engaged
directly with our shareholders, management,
and wider workforce throughout the year.
We continue to place particular emphasis
on engaging with our shareholders in order
to provide them with a clear understanding
and insight into how we strategically manage
our business. I remain committed to the
value of engaging with shareholders and met
many of the top shareholders when I served
as Chair of the Remuneration Committee.
On appointment as Chair of the Board, I
wrote to the major ‘non-Bain’ shareholders
and, subsequently, met with many of
them to better understand their views and
perspectives. I remain open to engagement
with shareholders as required.
Board and management changes
The Board recognises that strong
governance is the foundation for long-term
growth and success.
Immediately following the 2021 AGM,
I succeeded Manfred Wennemer as Chair
of the Board, and Manfred stepped down
from the Board. I was, at that time, the
Senior Independent Director and Chair of the
Remuneration Committee.
In June 2022, Jane Lodge joined the Board
and, following Jeff Vanneste’s resignation
from the Board, was appointed Chair of
the Audit & Risk Committee and also
became a member of the Remuneration
Committee. Jane is an experienced Audit
Committee Chair with in-depth knowledge
of the requirements and expectations of
UK-listed companies.
Trudy Schoolenberg joined the Board in
September 2022 and succeeded me as
Senior Independent Director. Trudy also
joined the Nomination Committee. Trudy
brings to the Board a deep background in
technology and product development, which
the Board regarded as particularly important
given the business’s strategy.
In addition to these Board changes, in
November 2022, we recruited Alexander
De Bock to succeed Ron Hundzinski who is
retiring as our CFO in April 2023. The Group
is grateful to Ron for his many contributions
over the past years working with the team and
our key stakeholders to guide the Company
through an exceptionally challenging period
for the industry. Alex joins the Group from
ZF Friedrichshafen AG, where he was CFO
and Senior Vice President of ZF’s Commercial
Vehicle business. Alex brings both financial
expertise and an extensive automotive
background to the Group. We very much look
forward to working with Alex.
Due to the skill, dedication,
and extraordinary resilience
of the people in TI, the Group
made significant progress on
the Take the Turn strategy as
evidenced by our strong EV
bookings in 2022.
Tim Cobbold
Chair
1010
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Read more in the Chair’s Introduction to
Corporate Governance on pages 70–71
Read more on the Board Succession
in the Nomination Committee report on
pages 80–82
Read more on the Compliance
Statements on pages 62–63
John Smith, our designated Non-Executive
Director for workforce engagement, has
continued to attend and take part in All
Employee meetings and reviewed the results
of our employee surveys. We are pleased
with the positive feedback from workforce
surveys, particularly with respect to the
Group’s strategy and focus on sustainability
and learning.
The Board agenda in 2022 was adjusted
to reflect the Board evaluation completed
towards the end of 2021, particularly with
regard to spending more time on strategy,
risk management and sustainability. We
completed a similar, externally-facilitated
evaluation in 2022, and the Board will
consider these evaluations to further improve
its focus and effectiveness during 2023.
More information about how we, as a Board,
have sought to exercise our duties under
Section 172 of the Companies Act 2006, can
be found on pages 36–39.
People
As I have previously explained, 2022 was the
third in a series of extraordinary years. The
issues the business has faced have been
extremely challenging and have impacted
the overall performance of the business. In
addition, the Board is extremely conscious
of the significant toll on the people who work
in the business, and is very aware that it has
been an unrelentingly demanding period.
Due to the skill, dedication and extraordinary
resilience of the people in TI, the Group
made significant progress on the Take the
Turn strategy as evidenced by our strong EV
bookings in 2022.
On behalf of the Board, I would like to
recognise and thank, sincerely, all of our
employees. I am enormously grateful both for
their hard work and dedication during another
difficult year, as well as their enthusiasm
to embrace change and support for our
Take the Turn strategy.
Dividend
The Board is mindful of the importance
of returns to shareholders. The Board
approved and declared a final 2021 dividend
of 1.46 Euro cents per share (1.24 pence per
ordinary share), amounting to approximately
€7.5 million, which was paid on 23 June 2022.
Based on the Group’s first-half 2022 results,
an interim 2022 dividend of 1.00 Euro cents
per ordinary share (0.85 pence per ordinary
share), was paid on 16 September 2022,
amounting to approximately €5.1 million.
The Board remains committed to its stated
annual dividend policy (30% of Adjusted Net
Income) paid on an interim and final basis
for each financial year. As such, we propose
to pay a final dividend, in respect of 2022,
of 1.54 Euro cents per share, amounting to
approximately €7.9 million in line with the
annual dividend policy. Subject to shareholder
approval at the Annual General Meeting on
17 May 2023, the final dividend will be paid on
23 June 2023 to shareholders on the register
on 26 May 2023, the dividend record date.
Looking to the medium term
For the Group’s 2023 outlook, see CFO report
on pages 58–61.
Looking to the medium term, while many
uncertainties and challenges remain in 2023,
we are confident that our business model
and Take the Turn strategy are sound and
will allow us to effectively manage and grow
the business as our industry transitions to
electrification. The Group is well positioned to
be successful as global production volumes
recover and continue to gain market share.
Tim Cobbold
Chair
15 March 2023
1111
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Chief Executive Officer’s statement
An accelerating, changing
world drives the need
for product innovation,
sustainability focus, and talent
reinvention to support business
growth and performance.
The Group is in an excellent
strategic position to capture
opportunities as the market
pivots to vehicle electrification.
Hans Dieltjens
Chief Executive Officer
and President
Dear shareholder,
I am pleased and proud to give my
first full-year report as the CEO of
TI Fluid Systems. It is especially meaningful
given that 2022 was our Company’s historic
centennial year. I remain grateful for the
opportunity to lead this great Company at
such a pivotal time.
First and foremost, in 2022, the Group has
enhanced, strengthened, and continued
to progress our Take the Turn strategy that
charts our path into vehicle electrification.
In 2022, electric vehicles (EVs) accounted
for 19% of total light vehicle production. By
2030, EVs are expected to represent 62%
of light vehicle production, a CAGR of 18.1%
for EVs compared to an overall production
CAGR of 2.1%. Of course, this tremendous
EV growth means declining production of
traditional internal combustion engine (ICE)
vehicles. However, our plans show that we
can profitably manage our ICE business
during the transition to EVs. We believe that
our content-per-vehicle potential for battery
electric vehicles (BEVs) is higher than for
ICE vehicles and that our potential content
per vehicle for hybrid electric vehicles
(HEVs), which are an important bridge
from ICE vehicles to BEVs, is significantly
higher than for traditional ICE vehicles.
Therefore, capitalising on EV growth is the
Group’s biggest opportunity and our key
strategic focus.
To position the Group to realise long-term
benefits from the transition to EVs, we have
developed a range of products specifically
for EVs. In particular, our work on modular
thermal systems to heat and cool EV
batteries, as well as weight-saving plastic
refrigerant and coolant lines, has progressed
significantly as evidenced by the fact that 76%
of our new business bookings in 2022 were
for EVs (totalling €2.6 billion of lifetime sales).
Importantly, China, currently the world’s
largest market for battery electric vehicles
(BEVs), represented 35% of our 2022
bookings for BEV platforms.
In addition, with our eye on the longer term, we
opened the first of our five planned e-Mobility
Innovation Centres (eMICs) in April 2022
in Rastatt, Germany. By 2024, we will have
an eMIC in every major automotive region
(Germany, China, Japan, South Korea, and
the US) in order to bring together key design,
engineering and testing capabilities under
one roof to support EV product innovation in
collaboration with our OEM customers around
the world for the next decade.
While we continue to look to a bright EV
future, our financial performance in 2022
was below our high expectations. However,
2022 results must be viewed in the context
of high inflation, global supply disruptions,
labour shortages, and volatile customer
orders. Our experienced management
team, supported by the hard work and
dedication of our entire workforce, did very
well under the circumstances to deliver the
level of financial performance achieved in
2022. Importantly, I am convinced that the
fundamental strengths of our business – an
experienced management team, advanced
product technology, diverse customer base,
and a global footprint – remain and position
the Group to realise improved financial
performance as market conditions recover.
For the Group’s 2023 Outlook, see the
CFO’s Report on pages 58–61. In summary,
for 2023, our expectation is that production
volumes will be modestly higher than 2022
and that our revenue growth (at constant
currency) will outperform the growth in
production volumes. With a strong focus
on cost management, cost recoveries, and
a more stable production environment, we
expect Adjusted EBIT margin to expand
above 6% and Adjusted Free Cash Flow to
return to the rate of approximately 30% of
Adjusted EBITDA.
In the longer term, the Group is well
positioned to be a winner in the transition
to electrification, and we expect new
EV business bookings to continue to
increase, driving revenue growth and
margin improvement.
Hans Dieltjens
Chief Executive Officer
and President
15 March 2023
1212
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Q&A with our CEO
Q What were the automotive
market conditions and
trends in 2022?
A In 2022, the automotive market was
characterised by the current impacts
of inflation, challenging operating
conditions, and a sluggish production
volume recovery set against a backdrop
of ongoing acceleration of the long-term
trend of vehicle electrification with 77%
more global BEV production, mainly
in China.
Persistent inflationary pressures
in 2022 caused significant cost
increases throughout the value chain,
including raw materials, energy and
labour costs. The Russian invasion
of Ukraine and the lingering effects
of the COVID-19 pandemic resulted
in production volatility, supply chain
disruptions, labour shortages, and
manufacturing instabilities. Our
management team responded by
addressing cost inflation through
negotiation of recoveries with our OEM
customers and further executing on our
restructuring programmes together with
performance enhancement initiatives
to offset some of the post-pandemic
impacts. Despite achieving customer
recoveries to offset approximately 70%
of the cost inflation (in line with peers),
2022 margins were impacted.
Global light vehicle production volumes
increased 6.7% in 2022 to 82.4 million
units (still 7.8% less than 2019), far less
than initially expected. Furthermore,
production growth was not uniform
across regions or powertrains. North
America production volume was up
9.7% in 2022, but production volumes
in Europe were only 0.6% higher than in
2021, being negatively impacted by the
conflict in Ukraine. Production volumes
in Asia Pacific, by far the largest
automotive market, were 8.2% higher
than in 2021, driven primarily from the
increased production and adoption
of BEVs in China, which increased by
93% year on year, mostly produced by
domestic Chinese OEMs. S&P Global
Mobility show that global production
volume is now forecast to grow at
a 2.1% CAGR from 2022–2030,
including a gradual return to 2019 levels
by 2025.
Beyond the challenging operating
environment, 2022 clearly reflected the
sustained, long-term automotive trend
of EV growth. More EVs were produced
by our OEM customers in 2022 than
prior years, with HEVs representing
8.7% of total production and BEVs
representing 10.7%. Business awards
and sourcing in 2022 were also
dominated by new EV platforms.
In 2022 it also became evident that,
while our OEM customers are focused
on launching and producing many
‘early generation’ EV platforms,
they are also working to rapidly
progress the design and engineering
of their EVs in order to reduce costs
and improve performance, both
of which are necessary to support
increased consumer adoption of
EVs. In particular, more efficient and
cost-effective thermal management
solutions must be developed and
deployed for EVs, with a desire
for modular solutions rather than
components.
Q How did the Group perform
in 2022?
A Overall, the team at TI Fluid Systems
is not content with the results achieved
in 2022, but is committed and focused
on improvement in 2023, driving
cost savings and ongoing customer
recoveries for inflation and benefiting
from potential market stabilisation and
volume increases.
The Group delivered revenue
of €3.3 billion (+10.5% vs 2021
and +5.2% at constant currency)
representing a 1.5% underperformance
compared to global light vehicle
production volume, which increased
6.7% from 2021. The Group’s
underperformance was almost
entirely related to Asia Pacific, where
we had underperformance of 8.7%
compared to production volumes due
to COVID-19-related closures in China
as well as production growth in China
coming predominately from BEVs
produced by domestic Chinese OEMs.
In 2022, the Group experienced
inflationary cost increases of
€143 million for the full year, partially
offset by customer recoveries.
Adjusted EBITDA was €333.3 million
(10.2% margin), Adjusted EBIT was
€180.0 million (5.5% margin), and
Adjusted Free Cash Flow amounted
to €78.4 million. The Statutory Loss
for the year was €(279.0) million,
which was heavily impacted by an
exceptional impairment charge, after
tax, of €297.3 million, which reflects
the reduction in medium-term global
light vehicle production growth, impact
of cost pressures, and the increase in
discount rates, all of which act to reduce
the current value of future cash flows.
The majority of the impairment was
applied to goodwill.
The Group also continued its
restructuring initiatives to optimise
fixed costs, closing six facilities and
downsizing another seven in 2022.
Amidst the difficult operating
environment, the transition to vehicle
electrification continued at an
accelerating pace. As such, we were
pleased that 31% of the BEV launches
in 2022 included TIFS content. We
were also pleased that EV bookings
represented 76% of the Group’s total
bookings in 2022 (based on lifetime
revenue), with our 2022 EV bookings
totalling €2.6 billion (BEV awards
of €1.3 billion and HEV awards of
€1.3 billion). Our accelerated focus
on China’s growth market through
our lightweight and energy-saving
product lines for thermal management,
resulted in BEV booking awards of
€0.44 billion lifetime sales, with the
majority allocated to domestic Chinese
OEMs. I can also confirm that these
new business awards will produce
similar margins to our historic, ICE
platform awards.
Q How does the Take the Turn
strategy respond to the
market shift to EVs while
maintaining near-term
performance?
A Our OEM customers have all
introduced ambitious plans to launch
a record number of HEV and BEV
programmes in the next few years.
HEVs and BEVs are forecast to
become a significant portion of the
global light vehicle market – from
19% of total production volume in
2022 (16 million units) to 62% in
2030 (60 million units). As previously
mentioned, in order to support
increased EV production, our OEM
customers are working to rapidly
progress the design and engineering
of their EVs in order to reduce costs
and improve performance, both
of which are necessary to support
increased consumer adoption of
EVs. In particular, more efficient and
cost-effective thermal management
solutions must be developed and
deployed for EVs.
In response, our Take the Turn strategy
charts the Group’s own path to realise
significant EV growth opportunities by
developing innovative, cost-efficient
thermal fluid management
components, modules and systems
solutions in collaboration with our OEM
customers to reduce costs and improve
EV performance in both the near term
and long term.
1313
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Q&A with our CEO
Continued
An important statement is ‘in
collaboration with our OEM customers’
as standards have not been set
and regional differences occur
both in technology and in speed of
adaptation. To do so, we will leverage
the Group’s existing strengths –
our deep customer relationships,
especially in engineering, our global
footprint, and our fluid management
expertise in manufacturing and
design capabilities. Furthermore, to
support this collaborative development
and product expansion, the Group
is establishing a global network of
e-Mobility Innovation Centres (eMICs),
which are collaborative engineering
and lab spaces, close to the customer
base, where digitalisation is key. At an
eMIC, we will be able to work with our
customers to simulate, design, process,
prototype, product test and vehicle test
thermal systems for EVs and take into
consideration the local requirements
and needs from our customer base.
A key area of focus in the near term
is the application of plastic line and
hose solutions for cabin comfort
systems (i.e. passenger heating and air
conditioning). These systems, for both
ICE vehicles and EVs, are currently
constructed using a range of aluminium
and rubber components, which can be
replaced with thermoplastic refrigerant
lines (TPRL) developed by the Group
to generate important weight and
cost savings.
With regards to product solutions
for the thermal management of EV
batteries, the Group is developing
plastic line solutions for current coolant
and refrigerant systems in the near term
to mid term.
The Group is working with our OEM
customers on the development
of modular thermal management
solutions for EVs, including manifolds
and modules for both coolant and
refrigerant systems, given the
increasing importance of the space,
weight and cost savings these modular
product lines offer.
As BEV platforms increase, revenues
from our ICE products are expected to
decline. In the near term, that decline
will be moderated by the fact that HEVs
will continue to require significant
ICE content. In the longer term, the
decline is expected to be offset by a
significant opportunity to increase the
Group’s revenue on BEVs, especially
thermal products, to manage the
heating and cooling of batteries and
other EV components. Nonetheless,
at all phases of the transition, we must
carefully manage the operation of our
ICE-related assets.
While the Group’s overall level of
capital investment (capital assets
plus research and development) is
expected to remain at 4% to 5% of
revenue, the allocation will shift to
support investments in the EV thermal
fluid management business with a tight
control on assets related to ICE. The
Group has sufficient capacity installed
to accommodate the expected life of
ICE products, so that any investment
in future ICE programmes is expected
to be limited and linked to specific
customer requirements and volume
commitments. In addition, there will
be the opportunity to repurpose some
of the blow-moulding machines used
to manufacture fuel tanks to produce
integrated thermal manifold assemblies
(ITMa) for EVs. As fewer engineers
and other personnel are needed to
support ICE-related projects, they will
be reassigned to support the growth of
the thermal fluid management business
for EV platforms.
Q How will the Group return
margins to the levels
achieved in the past?
A Despite lower margins in 2022, the
Group is confident that we will return
to its historic margin levels in the
mid-term.
Our path to achieving historic Adjusted
EBIT margins has three main
components: (i) production volume
recovery, (ii) pricing economics, and
(iii) enhanced productivity.
In the near term, the Group will benefit
from upside margin conversion on
revenue growth which will come from
general global production volume
increases as well as the Group having
an improved BEV business mix in
China over the next few years as our
global OEM customers increase their
BEV production in China and by the
Group pursuing increased BEV content
with domestic Chinese OEMs.
In addition, we will maintain our focus
on pricing economics, including
customer recoveries to offset the
impacts of cost inflation and continued
efficiency initiatives, and restructuring
to optimise fixed costs.
Finally, the Group will realise
productivity benefits from more stable
volumes, less volatile customer
ordering, diminishing supply
disruptions, and series production on
new products.
In the longer term, the Group will
leverage its strengths, including deep
and diversified customer engineering
relationships, and a global footprint,
to develop innovative, cost-efficient
thermal fluid management products
and system solutions in collaboration
with our OEM customers to improve
performance and realise significant EV
growth opportunities.
Q What are the Group’s
objectives and priorities
for 2023?
A The Group’s most immediate financial
priorities for 2023 are to increase
pricing and customer recoveries to
offset the impacts of cost inflation, to
continue cost rationalisation efforts,
to optimise fixed and other costs,
and to complete new launches at the
right price and cost level using indices
where possible.
At the same time, it is imperative
that we continue, in 2023, to lay the
foundation for future EV growth by
furthering our activities with our OEM
customers to develop cost-efficient
thermal fluid management products
and system solutions. To do so, we will
expand our global network of e-Mobility
Innovation Centres (eMICs) so we can
work with our customers to simulate,
design, process, prototype, product
test and vehicle test thermal systems
for EVs.
Q What is the Group’s
approach to sustainability?
A Our Take the Turn strategy reflects
three main pillars that combine to
drive sustainable growth: Technology
(Electrification), Transformation
(Sustainability), and Talent (Learning).
In other words, our Take the Turn
strategy addresses not only the
transitional risks and opportunities
associated with vehicle electrification,
but also the need to operate our
business in a more sustainable manner
to address climate change and maintain
a diverse and talented workforce.
The Group is taking climate change
impacts very seriously and has
performed extensive analysis of the
ways that our business can support the
effort to limit global warming.
1414
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 We have determined that our previously
announced CO2(e) emissions reduction
target (37% reduction of Scope 1
and 2 emissions from 2019 to 2039)
is no longer in line with the current
expectations. The COP27 Conference,
held in November 2022, clearly
demonstrated the critical need for both
the public and private sectors to take
urgent action by 2030, to limit global
warming to 1.5 degrees Celsius using
science-based targets as a first, critical
step to a longer-term net zero world.
So, consistent with the science-based
target initiative (SBTi), we have now
committed to a 50% reduction of our
Scope 1 and 2 emissions and a 30%
reduction of our Scope 3 emissions,
in each case on an absolute basis by
2030 from a 2021 baseline.
We have developed achievement plans,
which include significantly-increased
use of renewable electricity, extensive
energy efficiency improvements, and
supplier engagement. Importantly,
these initiatives have been modelled
and incorporated into our budget
process in terms of operational costs,
capital investments and human
resources. In addition, we are working
on plans to eliminate landfill waste and
conserve water.
In addition to environmental
stewardship, we recognise that the
Group’s success and sustainability
is also directly linked to our ability
to recruit, retain, motivate, educate
and develop a diverse and talented
workforce. We are committed to
creating a safe and inclusive workplace
culture in which diversity is valued, and
diverse experiences are appreciated.
To those ends, the Group has
implemented a formal Diversity Policy,
together with diversity and inclusion
training for all senior managers
within the business. The Group’s
recruitment processes have been
reviewed and guidance issued to all
locations to minimise unconscious
bias and promote diverse hiring. Our
progress will be tracked by monitoring
against diversity targets based on local
university graduation rates. A women’s
mentorship programme has also been
established to support and guide
women within the organisation and
advise on strategies for success.
To prepare the next generation of
women to succeed in the automotive
industry, the Group has awarded 55
scholarships for female students
enrolling to study STEM subjects
at leading universities in Germany,
Poland, Mexico, the US and China, to
help with tuition, room board, and other
educational costs.
In addition, these scholarship recipients
are connected to local TI facilities for
internships and other extracurricular
learning opportunities.
Ultimately, we aspire to be a company
that is environmentally and socially
responsible, and a valued member
of our local communities around
the globe.
TI Fluid Systems plc | Annual Report & Accounts 2022
15
15
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernanceFinancial Our strengths
What enables us to succeed and fulfil our purpose?
Leading technology
Technology leader in highly-engineered automotive fluid systems
• Opened the first of five e-Mobility Innovation Centres (eMICs) in Germany in
2022, with additional eMICs planned for the US, South Korea, Japan and China
in 2023 and 2024, to support engineering and lab work with our customers
to simulate, design, process, prototype, product test and vehicle test thermal
systems for EVs
• Award-winning product innovations and technologies aligned with automotive
industry megatrends of emissions reduction, fuel efficiency and electrification
• Extensive knowledge of materials and manufacturing processes, together with
the optimal level of vertical integration
• Industry recognised innovation awards for plastic fuel tank technologies,
e.g. pressurised fuel tanks for hybrid electric vehicles (HEVs)
• Winning new business awards to design, engineer and supply thermal
management products for battery electric vehicles (BEVs) with high-volume,
global-leading OEMs, with a combination of traditional and lightweight materials
• Global capability to manufacture multi-layer nylon lines and modular assembles
31%
of BEV launches in 2022 have
TIFS content
76%
awards won in 2022 were on
HEV and BEV platforms
€1.3bn
lifetime revenue of awards won
in 2022 on BEV platforms only
Significant growth potential
Significant growth opportunities aligned with electrification, including
thermal management
• Opportunity to increase content per vehicle in growing HEV and BEV markets as
EVs require extensive thermal management for the safe and efficient functioning
of battery, chassis, electric motor and electronics, as well as traditional passenger
cabin comfort lines
• Ability to use existing brake line and ICE products (fuel pump, fuel tank and
powertrain), as well as thermal management technology for HEVs
• The Group is well positioned for growth in thermal management for HEVs and
BEVs due to:
− Existing expertise to design and engineer performance-critical components
and modules to meet customer specifications using in-house ‘know-how’
− Introduction of nylon as a lightweight solution to thermal requirements that can
operate at high temperatures, providing a significant weight-saving advantage
− Existing nylon extrusion and quick-connector capabilities and capacity in each
region, optimising costs and reducing supply chain risk and carbon emissions
related to transport
− Long-standing customer relationships and viewed as a trusted and strategic
partner to OEMs
− Ability to produce from existing and efficient manufacturing locations close to
customers
− BEV awards during 2022 accounted for €1.3 billion of lifetime revenue
• Continuing to collaborate in developing integrated and efficient modular solutions
with key customers on design and engineering for HEVs and BEVs, thanks to our
close relationships and fluid management systems know-how
1616
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Strategic
Strong customer relationships
Strong customer relationships and global optimised footprint
• Strong, diversified, global customer and supplier relationships established and
strengthened over a century
− Embedded, long-term global customer engineering collaboration provide
business award opportunities
• Highly-diversified customer base
• Facilities in every major automotive manufacturing market
• Footprint includes regional manufacturing centres and assembly locations in
close proximity to customers, understanding their local needs and providing
logistics competitiveness and close customer service
• Significant amount of revenue generated from global OEM platforms
(i.e. platforms produced in three or more regions)
• Well positioned through the global manufacturing footprint to cost-effectively
expand fluid-handling content, business and infrastructure to OEMs transitioning
to the EV market
• Locations predominantly managed by local staff with strong stakeholder
relationships and performance responsibility
Long-term performance
Global market leader with strong market positions and relevant technology
• Customer, platform, regional and product diversity
• Leading supplier of brake and fuel lines, with approximately 29% share of the
global brake and fuel line market and #1 market position, globally
• Leading supplier of plastic fuel tanks, with approximately 16% of the global plastic
fuel tank market
• Products, typically, single-sourced for the life of the programme
• Competitive global manufacturing footprint with flexible cost structure and,
approximately, 69% of employees located in low-cost countries
Management team with solid automotive experience and long track record
of strong revenue growth, profitability and cash flow generation
• History of achieving leading financial metrics, with profitability metrics above
industry average
− Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income
− Adjusted Free Cash Flow
• Strong industry reputation for technology innovation and product quality
• Financial discipline in quoting new contracts and capital allocation
• Continuous focus on business improvement efficiencies and managing
fixed costs
• Flexible organisation responding quickly to challenging situations such as
COVID-19, supply disruptions and cost inflation
People and Sustainable Mindset
• Management team with solid automotive experience and track record of
innovation, business resilience and financial performance together with a culture
of innovation, learning, inclusion and diversity
• Commitment to operate in a sustainable manner by reducing greenhouse
gas emissions, increasing energy efficiency eliminating landfill waste, and
conserving water
Revenue by Customer
VW Group
RNM Alliance
Stellantis Group
KIA-Hyundai Group
BMW
GM
Mercedes-Benz
Great Wall
Toyota Group
Ford
Honda
Other
€3,268m
Total 2022 Revenue
1717
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewGovernanceFinancial Our products
9
10
Internal combustion engine (ICE) vehicle
11
2
1
3
4
Hybrid electric vehicle (HEV)
6
4
2
1
8
3
5
Autonomous electric vehicle (AEV)
1818
9
10
12
6
2
1
8
5
3
4
Battery electric vehicle (BEV)
6
4
2
8
1
7
3
4
5
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Fluid Carrying Systems (FCS)
The FCS division manufactures brake lines, fuel lines, brake and fuel
bundles, A/C lines and assemblies, battery coolant lines and thermal
management modules.
1 Under-Hood Thermal
2 A/C Cabin Climate
3 Brake and Fuel Bundle
4 Brake Bundle Assembly
Rubber Lines
Control Lines
Assembly
5 Chassis Thermal Plastic
6 Battery Thermal Plastic Lines
7 Autonomous Vehicle Thermal
8 Integrated Thermal Manifold
Manifolds
and Connectors
Plastic Lines
1.2 (ITMa)
Fuel Tank and Delivery Systems (FTDS)
The FTDS division manufactures plastic fuel tanks, plastic filler pipes
and electric fuel pumps and modules.
9 Brushless Fuel Pump
Module with Electronics
10 Plastic Fuel Filler Pipe and
Emissions Vent Line
11 ICE Plastic Fuel
Tank Assembly
12 HEV Pressure-Resistant Fuel
Tank Assembly
1919
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Our markets
Operational metrics
Global capacity
29%
98
Supplier of brake and fuel lines, globally
Manufacturing locations
No.1
#1 market position, globally,
in brake and fuel lines
25,600
Employees
7
Number of 20 top-selling
nameplates in China
Revenue by division
11
Number of the 20 top-selling
nameplates in North America
19
Number of the 20 top-selling
nameplates in Europe
57%
Fluid carrying systems
43%
Fuel tank and delivery systems
100
80
60
40
20
0
Global light vehicle production – by powertrain (millions)
1
.
5
9
.
2
4
9
1
.
3
9
.
0
9
8
.
8
8
8
4
.
7
8
.
3
8
8
1
.
5
8
.
4
2
8
2
.
7
7
.
6
4
7
7
.
4
5 8
.
1
8
.
9
6
7
.
3
4
7
.
8
6
6
.
6
0
7
5
.
7
6
.
4
9
5
.
2
4
6
6
.
1
6 6
8
5
.
.
3
6
5
.
5
4
5
1
.
7
5
.
0
2
9
.
2
3
9
0
.
1
9
.
4
6
9
1
.
7
9
1
.
5
9
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
BEV
PHEV
HEV
ICE (including Mild HEV)
2020
TI Fluid Systems plc | Annual Report & Accounts 2022
TI Fluid Systems plc | Annual Report & Accounts 2022 Global light vehicle production – by region 2000–2030 (millions)
1.7% Historical CAGR
100
80
.
2
4
6
6
.
1
6 6
8
5
.
60
.
3
6
5
.
5
4
5
1
.
7
5
1
.
3
8 9
8
8
.
4
.
7
8
1
.
5
9
.
2
4
9
.
0
9
8
2
.
7
6 7
4
7
.
7
.
4
5 8
.
1
8
.
9
6
7
.
3
4
7
5
.
7
6
.
4
9
5
.
6
0
8 7
6
6
.
2.1% CAGR
.
0
2
9
.
2
3
9
0
.
1
9
.
4
6
9
1
.
7
9
1
.
5
9
.
3
8
1 8
5
4 8
2
8
.
.
40
20
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Rest of World
Other APAC
China
Japan/South Korea
Europe
North America
2022 global light vehicle production
By region
Market segmentation*
Potential for increase in addressable market
18.1m
9%
Europe (including Middle East and Africa)
HEV was 9% of the global light vehicle production market in 2022
14.3m
North America
47.2m
Asia Pacific
2.8m
Latin America
Source: S&P Global Mobility Feb 2023 & company estimates
11%
BEV was 11% of the global light vehicle production market in 2022
17%
HEV is forecast to be 17% of the global light vehicle production
market by 2030 (11.1% CAGR 2022–2030)
45%
BEV is forecast to be 45% of the global light vehicle production
market by 2030 (22.2% CAGR 2022–2030)
* Source: S&P Global Mobility Jan 2023 & company estimates
2121
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Our markets
Continued
Long-term growth drivers in the market
Market driver
Impact
How we are responding
Electrification
Battery
Electric
Vehicle (BEV)
Hybrid Electric
Vehicle (HEV)
• In an effort to address climate change, many
governments have adopted requirements focused on
reducing exhaust emissions from vehicles, including,
in some jurisdictions, a phase out of sales of new
ICE vehicles
• To address emission reduction targets, OEMs are
increasingly adopting alternative powertrain and
propulsion technologies, including HEVs and BEVs
• S&P Global Mobility projects CAGRs of 11.1% and
22.2% in global HEV and BEV production, respectively,
between 2022 and 2030, and that HEVs and BEVs will
constitute, approximately, 17% and 45%, respectively, of
global vehicle production volume by 2030
• BEVs have additional thermal management
requirements. Based on recent platform launches and
current developments, we expect significantly higher line
and tubing content than traditional ICEs, depending on
vehicle size and system design
• As thermal components and systems in BEVs may
not be exposed to the same heat generated by ICEs,
the systems may utilise different materials, such as
nylon, which has an approximate 30% to 60% weight
advantage compared to rubber and aluminium lines
• The Group continues to develop products, such
as thermal modules, to support electrification,
which offers a significant content growth
opportunity for the Group as the potential
content per vehicle for HEVs and BEVs
exceeds that provided by ICE vehicles
• The Group is utilising its existing capabilities
to develop thermal lines for BEVs, including
integrated thermal manifolds
• The Group has existing material ‘know-
how’ in nylon and aims to utilise its existing
industrialised capacity to support nylon usage
to reduce vehicle weight and help extend
battery life (required for extended driving
range) of EVs
• Traditional vehicles with internal combustion engines
(ICE), typically, have two main thermal management
loops. HEVs generally contain traditional ICE fluid
systems and can have additional fluid-handling
systems to manage electrification-related component
temperatures, including advanced thermal management
systems for the chassis, power electronics, electric
motor drive and battery systems. As a result, HEVs may
have up to six thermal loops, a substantial increase in
potential content
• The Group is utilising its existing capabilities to
develop thermal lines for HEVs
• In addition to increased thermal management
requirements, the Group produces fuel tank
systems for HEVs, which can accommodate
increased fuel vapour pressure that builds up
during the period when the internal combustion
engine is not operating and is not available to
purge the fuel vapour
Autonomous
Electric
Vehicle (AEV)
• Autonomous electric vehicles increase the requirement
• The Group is actively working with OEMs
of thermal lines as more electronic components
require cooling
to utilise its existing capabilities to develop
thermal lines for AEVs
2222
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Long-term growth drivers in the market
Market driver
Impact
How we are responding
Internal
Combustion
Engine (ICE)
emissions
reduction
• In an effort to address climate change, governments
have adopted requirements focused on reducing exhaust
emissions from ICE vehicles as well as evaporative
emissions (permeation of fuel through the walls of the
fuel tank and other components)
• The Group’s ICE product offering includes
products that optimise the efficiency of the
internal combustion engine process, including
GDI fuel rails, fuel pumps and turbocharger
engine lines
• The Group has specific technology in fuel tanks
to reduce evaporative emissions. The six-layer
structure includes a barrier layer, which
captures the hydrocarbons inside the wall of the
fuel tank and prevents them from being emitted
into the environment
• The Group is the only supplier with a fully
integrated design, development, manufacturing
and supply capability for the fuel tank system.
The FTDS division made up 43% of the
Group’s revenue in 2022
Focus on
innovation and
modularity
• OEMs increasingly require global suppliers with a long-
term track record of providing high-quality products,
particularly for performance-critical components, such
as fluid storage, carrying and delivery systems, and
thermal management products and systems
• This is an opportunity for the Group to offer
modular systems and gain access to increased
market share with organic development of its
current product portfolio being augmented
through acquisitions or joint ventures
• As a result of more stringent regulatory requirements,
• The Group has robust technologies and
and rapidly changing consumer preferences, OEMs must
continue to innovate and are, therefore, becoming more
reliant on suppliers who can introduce new products
and technologies that meet design and validation
requirements in a short period of time
products aligned with automotive megatrends,
including new product offerings designed for
HEV and BEV applications
Efficient
utilisation of
ICE assets
• As the production of light vehicles migrates from ICE to
BEV, there will be a natural decline in the demand for ICE
products and, therefore, potential overcapacity
• HEV platforms will continue to be a transitional
technology that supports use of ICE assets
• During the migration to BEVs, there will be a
transition through HEVs that have both ICE
and EV components, which will increase the
accessible content for the Group’s products
• The response from existing ICE suppliers will
be to either exit the market or become one of
the remaining ICE suppliers. This dynamic will
present opportunities for the Group to leverage
its existing capacity and technology to gain
market share and leverage margin with minimal
capital outlay
2323
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Our markets
Continued
Long-term growth drivers in the market
Market driver
Impact
How we are responding
• Stakeholders, including OEM customers, increasingly
expect companies to have a strong approach to climate
change and environmental issues
• The Group contributes to the green economy
by manufacturing products that reduce ICE
emissions and support the transition to EVs
• Consistent with the science-based target
initiative (SBTi), the Group has adopted a new
CO2(e) emissions reduction target that calls for
a 50% reduction of Scope 1 and 2 emissions
and a 30% reduction of Scope 3 emissions, in
each case by 2030 on an absolute basis from a
2021 baseline
• The Group has developed a multi-year plan
to achieve its CO2(e) emissions reduction
goal through the significantly increased use
of renewable electricity, extensive energy
efficiency improvements, and supplier
engagement
• The Group has also introduced a number of
initiatives to enhance safety, reduce waste and
conserve water in its operations
• The Group has significant presence in the
world’s largest vehicle market, China, where it
has wholly-owned operations and makes up
20.6% of the Group’s 2022 revenue
• The Group is also managing its footprint to
adjust to regional market growth while also
optimising operational costs by expanding in
lower-cost countries
• According to S&P Global Mobility, global light vehicle
production grew at a compound annual growth rate
(CAGR) of 1.7% from 2000 to 2022, notwithstanding the
volume decline during the 2008–2009 global economic
downturn and the COVID-19 pandemic in 2020–2022. It
is forecast to grow at a CAGR of 2.1% from 2022 to 2030
• Prior to 2000, the more developed markets of North
America, Western Europe, South Korea and Japan
accounted for a substantial majority of global production.
However, since 2000, global light vehicle production
growth has largely been driven by emerging markets and,
in particular, China, where production volume grew at a
CAGR of 12.8% between 2000 and 2022
• According to S&P Global Mobility, approximately 31.7%
of global vehicle production in 2022 was generated in
China, with growth expected to continue in the long term
• The more developed markets of North America, Western
Europe, South Korea and Japan are expected to grow at
a CAGR of 1.1% with an increase of approximately 3.1
million units from 2022 to 2030, while emerging markets
are forecast to grow at a CAGR of 2.8% with an increase
of 11.6 million units during the same period
• Many OEMs are standardising vehicle platforms,
• The Group is already benefitting from this
globally, in an effort to reduce costs and become more
competitive
• By maximising the number of nameplates that can be
produced on each platform, and minimising differences
in platforms between regions, OEMs can reduce design
and development costs
• S&P Global Mobility projects that 71% of vehicle
platforms will be produced in two or more regions in 2029
• Accordingly, global design, manufacturing and supply
chain capabilities are significant factors for certain OEMs
when awarding contracts to suppliers
platform globalisation trend. In 2022, the Group
tracked 84% of its total revenue by individual
platform, of which approximately 90% was
from global platforms produced in two or
more regions
Increased
focus on
sustainability
Growth in
emerging
economies
Global platform
standardisation
2424
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Strategy in action:
Technology
To address fuel economy requirements, OEMs are
increasingly adopting alternative powertrain and
propulsion technologies, including HEVs and BEVs.
S&P Global Mobility projects CAGRs of 11.2% and 22.2%
in global HEV and BEV production, respectively, between
2022 and 2029, and that HEVs and BEVs will constitute
approximately 17% and 45%, respectively, of global
vehicle production volume by 2030.
Electrification offers a significant content growth
opportunity for the Group through the use of our existing
knowledge and technologies, as well as technology and
products gained through acquisitions and joint ventures,
to become the supplier of choice for EV thermal systems.
TI Fluid Systems plc | Annual Report & Accounts 2022
2525
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernanceFinancial Our markets
Continued
Strategy in action:
Innovation
e-Mobility Innovation Centres (eMICs)
2022 saw the launch of the first of five planned global
e-Mobility Innovation Centres.
The aim of the eMICs is to provide a collaborative space
to facilitate the next generation of design, prototyping and
testing of thermal management systems and components
for EVs, helping our OEM customers to bring EV platforms
to market more efficiently.
The first eMIC was opened in Germany in 2022, with
ongoing work to launch eMICs in the USA, China,
South Korea and Japan in 2023 and 2024 to support
all of our global customers.
2626
TI Fluid Systems plc | Annual Report & Accounts 2022
TI Fluid Systems plc | Annual Report & Accounts 2022 Strategy in action:
Transition
Managing the transition
The Group has had a strong history of supporting OEM
customers with fluid systems for ICE applications. Some
of these ICE technologies will be carried over to BEV
vehicles, such as brake lines and air conditioning systems.
For the Group’s products that are used exclusively for
ICE applications, such as fuel tanks and fuel lines, there
is expected to be a ramp down in demand, which will be
dependent on the speed of the BEV transition.
The Group has several years of booked demand in place
for ICE product lines, and the transition through HEV is
expected to provide a short-term opportunity to increase
ICE content. Ultimately, as the ICE elements reduce,
there will be an excess of capacity, which will lead to
consolidation to a core of trusted suppliers of ICE products
such as the Group. The Group’s existing ICE assets will
require minimal capital investment to continue in use,
which will liberate capital for the development of thermal
products for HEV and BEV applications.
TI Fluid Systems plc | Annual Report & Accounts 2022
27
OverviewStrategicGovernanceFinancialOverviewStrategicGovernanceFinancial Business model
We create value by leveraging our diversified customer and supply base,
global footprint and innovative approach to design and manufacture
products in a sustainable manner to support our customers to make
vehicles that meet market requirements.
Our key strengths
What we do
How we do it
The value
we create
The impact
we have
Leading technology
Award-winning products and technologies
aligned with automotive megatrends
of emissions reduction, fuel efficiency
and electrification
Growth potential
Significant growth opportunities aligned
with electrification, including thermal
management products for EVs
Global footprint
Manufacturing facilities and technology
innovation centres in all major automotive
regions to support global platforms
Strong relationships
Strong, diversified, global customer and
supplier relationships established and
strengthened over a century
Our people
Management team with solid automotive
experience and track record of innovation,
business resilience and financial
performance, together with a culture of
innovation, learning, inclusion and diversity
Sustainable mindset
Commitment to operate in a sustainable
manner by reducing greenhouse gas
emissions, increasing energy efficiency,
eliminating waste and conserving water
Design & Development
Design
Engineering
Prototyping
Testing
Manufacturing
Global
Footprint
Quality
Systems
Vertical
Integration
Experienced
Management
Safety
Waste
Elimination
Energy
Efficiency
Water
Conservation
CO2(e)
Reduction
Supplier
Management
Delivery
Just-in-time
Systems
Logistics
Returnable
Racks/Containers
Customer
Support
A sustainable
business that
creates
value for all
stakeholders
2828
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Our key strengths
What we do
How we do it
The value
we create
The impact
we have
Read more on our Take the Turn strategy
on pages 30–31
Read more on our products
on pages 18–19
Read more on our approach to
sustainability on pages 40–41
Our impact
Our business model allows us to fulfil
our larger purpose to help make vehicles
cleaner and greener to protect our
environment and make our world a better
place to live
TI Fluids is a supporter of the
UN Sustainable Development Goals
(‘SDGs’) and a signatory to the
UN Global Compact
Market positioning
Leading market positions in brake, fuel
and refrigeration lines, connectors and
assemblies, as well as for fuel tanks
and pumps
Well positioned to capture the growing
demand for integrated thermal management
modules and systems for EVs
Global footprint and workforce
Support our OEM customers globally with
98 manufacturing locations in 28 countries
near our customers to optimise logistics,
reduce supply disruption risk and minimise
environmental impacts
Our global workforce of 25,600 employees
is diverse and decentralised, providing
deep knowledge of each market and
customer needs
Innovative product development
Technology leader in highly engineered
automotive fluid systems.
Opened the first of five e-Mobility Innovation
Centres (eMICs) to provide a collaborative
space to develop, design, test and prototype
solutions with our customers
Existing blow moulding and multi-layer
nylon line technologies can be adapted
for EV thermal management systems,
providing lightweight solutions to improve
vehicle performance
Strong relationships
100-year history of excellence in designing,
manufacturing and delivering automotive
components and systems
Strong engineering relationships with
customers in each region
Long-standing, collaborative relationships
with key suppliers
Customers
We design, develop and deliver
high-quality, safety-critical products that
meet specific customer needs to support
cleaner and greener vehicles
Employees
We strive to provide our employees
with an inclusive and diverse working
environment, as well as opportunities to
grow and develop through a culture of
collaborative learning
Suppliers
We collaborate and support our supplier
base so they can provide high-quality
products that meet our advanced
technology requirements in a cost-
efficient manner
Shareholders
Our financial performance supports
our dividend policy of 30% of adjusted
net income, as well as long-term share
price growth
2929
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Our Take the Turn strategy
Our purpose is to help make vehicles cleaner and greener to protect our environment and make our world
a better place to live. To fulfil our purpose and achieve our strategic objective, we have structured our
Take the Turn strategy around the three strategic pillars:
Strategic pillar
Objectives
Commentary
Progress
Technology
Increase market
share of our
advanced
technology and
safety-critical
products, including
new thermal
management
products for EVs
Transformation
1. Strengthen the
Group’s position
as an advanced
technology leader
in thermal fluid
management for EV
platforms
2. Use our strength
in key products to
continue to drive
the Group’s market
share across all
product lines
3. Reduce
greenhouse gas
emissions from our
operations
We will develop innovative, cost-efficient thermal fluid management products and system
solutions in collaboration with our OEM customers to improve EV performance.
Launch to market a scalable thermal fluid management product portfolio building on existing
product, system and manufacturing capabilities.
Continue to pursue increased market share and growth of our entire range of advanced
products that support more efficient and cleaner ICE and HEV platforms, such as high
pressure tanks, brake/fuel lines, fuel pumps, etc.
The COP27 Conference, held in November 2022, clearly demonstrated the critical need for
both the public and private sectors to take urgent action by 2030 to limit global warming to 1.5
degrees Celsius using science-based targets as a first, critical step to a longer-term net zero
world. The Group is taking climate change impacts and these targets very seriously and has
performed extensive analysis of the ways that our business operations can support the effort
to limit global warming.
Operate our
business in a
sustainable
manner
4. Manage
resources for
a sustainable
transition of
the business to
support vehicle
electrification
and deliver strong
profitability and cash
flow generation
The Group has historically been capital efficient, and expenditure on capital investment
(capital assets plus research and development) is expected to remain at 4% to 5% of
revenue. While the Group’s overall level of capital investment is expected to remain at this
historic level, the allocation will shift to support investments in the thermal fluid management
business with a tight control on assets related to ICE. The Group has sufficient capacity
installed to accommodate the expected life of ICE products, so that any investment in future
ICE programmes is expected to be limited and linked to specific customer requirements
and volume commitments. In addition, there will be the opportunity to re-purpose some of
the blow moulding machines used to manufacture fuel tanks to produce Integrated Thermal
Manifold assemblies (ITMa).
The main asset of the Group is its people and their knowledge. As fewer human resources are
needed to support ICE-related projects, engineers and other personnel, with design, system
and programme management skills, will be reassigned to support the growth of the thermal
fluid management business for EV platforms.
Talent
5. Upskill through
the six mindsets for
success
Enhance our culture with six mindsets to ensure the organisation is ready to embrace the
knowledge and behaviour transition required to grow the business profitably and sustainably.
The six mindsets are: embrace change, become the expert, be a continuous learner,
innovate, win as a team, and own inclusion and engagement
Develop, promote
and retain our
workforce in
an inclusive
environment
6. Improve diversity
and inclusion
throughout the
organisation
We recognise our employees are also members of the communities in which we are located.
We aspire to be a company that is welcoming and seen as a valued member of our local
communities around the globe. We are committed to creating a safe and inclusive workplace
culture in which diversity is valued and diverse experiences are appreciated. Innovation,
creativity and respect are cornerstones of how we interact with customers and with
each other.
3030
The first of five global e-Mobility Innovation Centres (eMICs) was opened in 2022 in Rastatt, Germany. The aim of our eMICs is to provide
a collaborative space that facilitates the development of the next generation of thermal management systems and components for EVs.
These eMICs have design, prototyping, testing, and simulation capabilities all under one roof. The other four eMICs are being rolled out in
the US, China, South Korea and Japan in 2023 and 2024. This network of eMICs will support innovation in close collaboration with our OEM
customers in every major automotive market.
Launched and validated thermoplastic refrigerant lines (TPRLs), which are flexible and lightweight and, compared to traditional rubber and
aluminium lines, offer better performance, lower costs, and a reduced carbon footprint.
Thermal fluid management products are already coming to market and include Integrated Thermal Manifold assemblies (ITMas), which will
provide a one-piece, lightweight, blow-moulded plastic manifold to optimise complex line design and replace multiple-line bundle assemblies
of thermal loops for heating and cooling in the next generation of electric vehicles.
In addition to the ITMa, we have demonstrated further integration potential of compact module solutions, which include ‘fluid storage’ (a
coolant reservoir expansion tank), ‘fluid temperature control’ (heat exchangers/sensors), and ‘fluid delivery’ (pumps). Much like a fuel delivery
module today, these integrated thermal modular assemblies are very bespoke to each OEM vehicle or application and can be engineered for
various system types of multiple thermal loops.
We have determined that our previously-announced CO2(e) emissions reduction target (37% reduction of Scope 1 and 2 emissions from 2019
to 2039) is no longer in line with the current expectations. Consistent with the science-based target initiative (SBTi), we have now committed
to a 50% reduction of our Scope 1 and 2 emissions and a 30% reduction of our Scope 3 emissions, in each case by 2030 on an absolute
basis from a 2021 baseline. We have developed an achievement plan, which includes the significantly increased use of renewable electricity,
extensive energy efficiency improvements and supplier engagement. Importantly, we have modelled and sought to incorporate these
initiatives into our budget process in terms of operational costs, capital investments and human resources.
Capital expenditure within the FTDS division was less than 2% of sales for the year in 2022 compared to 2.8% for the Group and an average
from 2017–2021 of 3.3%.
growing thermal management activities.
TI Fluid Systems continuously reallocates globally longstanding competencies from our traditional business division FTDS into our rapidly
A Group-wide training resource has been rolled out to all staff in 2022 to provide access to a very broad range of learning pathways that will
enhance their ability in relation to the Group’s strategy.
The Group has implemented a formal Diversity Policy.
Diversity and inclusion training has been successfully delivered to senior managers within the business.
The Group’s recruitment processes have been reviewed and guidance issued to all locations to minimise unconscious bias and promote
diverse hiring. Our progress will be tracked by monitoring against diversity targets based on local university graduation rates.
To prepare the next generation of women to succeed in the automotive industry, the Group has awarded 55 scholarships for female students
enrolling to study STEM subjects at leading universities in Germany, Poland, Mexico, the US and China, to help with tuition, accommodation,
and other educational costs. In addition, these scholarship recipients are connected to local TI facilities for internships and other
extracurricular learning opportunities.
for success.
A women’s mentorship programme has been established to support and guide women within the organisation and advise on strategies
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Technology
We will develop innovative, cost-efficient thermal fluid management products and system
solutions in collaboration with our OEM customers to improve EV performance.
Launch to market a scalable thermal fluid management product portfolio building on existing
product, system and manufacturing capabilities.
2. Use our strength
Continue to pursue increased market share and growth of our entire range of advanced
products that support more efficient and cleaner ICE and HEV platforms, such as high
pressure tanks, brake/fuel lines, fuel pumps, etc.
1. Strengthen the
Group’s position
as an advanced
technology leader
in thermal fluid
management for EV
platforms
in key products to
continue to drive
the Group’s market
share across all
product lines
Increase market
share of our
advanced
technology and
safety-critical
products, including
new thermal
management
products for EVs
Transformation
3. Reduce
The COP27 Conference, held in November 2022, clearly demonstrated the critical need for
Operate our
business in a
sustainable
manner
greenhouse gas
both the public and private sectors to take urgent action by 2030 to limit global warming to 1.5
emissions from our
degrees Celsius using science-based targets as a first, critical step to a longer-term net zero
operations
world. The Group is taking climate change impacts and these targets very seriously and has
performed extensive analysis of the ways that our business operations can support the effort
to limit global warming.
4. Manage
resources for
a sustainable
transition of
the business to
support vehicle
electrification
The Group has historically been capital efficient, and expenditure on capital investment
(capital assets plus research and development) is expected to remain at 4% to 5% of
revenue. While the Group’s overall level of capital investment is expected to remain at this
historic level, the allocation will shift to support investments in the thermal fluid management
business with a tight control on assets related to ICE. The Group has sufficient capacity
installed to accommodate the expected life of ICE products, so that any investment in future
ICE programmes is expected to be limited and linked to specific customer requirements
and deliver strong
and volume commitments. In addition, there will be the opportunity to re-purpose some of
profitability and cash
the blow moulding machines used to manufacture fuel tanks to produce Integrated Thermal
flow generation
Manifold assemblies (ITMa).
The main asset of the Group is its people and their knowledge. As fewer human resources are
needed to support ICE-related projects, engineers and other personnel, with design, system
and programme management skills, will be reassigned to support the growth of the thermal
fluid management business for EV platforms.
Talent
5. Upskill through
Enhance our culture with six mindsets to ensure the organisation is ready to embrace the
the six mindsets for
knowledge and behaviour transition required to grow the business profitably and sustainably.
success
The six mindsets are: embrace change, become the expert, be a continuous learner,
innovate, win as a team, and own inclusion and engagement
Develop, promote
and retain our
workforce in
an inclusive
environment
and inclusion
throughout the
organisation
We aspire to be a company that is welcoming and seen as a valued member of our local
communities around the globe. We are committed to creating a safe and inclusive workplace
culture in which diversity is valued and diverse experiences are appreciated. Innovation,
creativity and respect are cornerstones of how we interact with customers and with
each other.
Strategic pillar
Objectives
Commentary
Progress
The first of five global e-Mobility Innovation Centres (eMICs) was opened in 2022 in Rastatt, Germany. The aim of our eMICs is to provide
a collaborative space that facilitates the development of the next generation of thermal management systems and components for EVs.
These eMICs have design, prototyping, testing, and simulation capabilities all under one roof. The other four eMICs are being rolled out in
the US, China, South Korea and Japan in 2023 and 2024. This network of eMICs will support innovation in close collaboration with our OEM
customers in every major automotive market.
Launched and validated thermoplastic refrigerant lines (TPRLs), which are flexible and lightweight and, compared to traditional rubber and
aluminium lines, offer better performance, lower costs, and a reduced carbon footprint.
Thermal fluid management products are already coming to market and include Integrated Thermal Manifold assemblies (ITMas), which will
provide a one-piece, lightweight, blow-moulded plastic manifold to optimise complex line design and replace multiple-line bundle assemblies
of thermal loops for heating and cooling in the next generation of electric vehicles.
In addition to the ITMa, we have demonstrated further integration potential of compact module solutions, which include ‘fluid storage’ (a
coolant reservoir expansion tank), ‘fluid temperature control’ (heat exchangers/sensors), and ‘fluid delivery’ (pumps). Much like a fuel delivery
module today, these integrated thermal modular assemblies are very bespoke to each OEM vehicle or application and can be engineered for
various system types of multiple thermal loops.
We have determined that our previously-announced CO2(e) emissions reduction target (37% reduction of Scope 1 and 2 emissions from 2019
to 2039) is no longer in line with the current expectations. Consistent with the science-based target initiative (SBTi), we have now committed
to a 50% reduction of our Scope 1 and 2 emissions and a 30% reduction of our Scope 3 emissions, in each case by 2030 on an absolute
basis from a 2021 baseline. We have developed an achievement plan, which includes the significantly increased use of renewable electricity,
extensive energy efficiency improvements and supplier engagement. Importantly, we have modelled and sought to incorporate these
initiatives into our budget process in terms of operational costs, capital investments and human resources.
Capital expenditure within the FTDS division was less than 2% of sales for the year in 2022 compared to 2.8% for the Group and an average
from 2017–2021 of 3.3%.
TI Fluid Systems continuously reallocates globally longstanding competencies from our traditional business division FTDS into our rapidly
growing thermal management activities.
6. Improve diversity
We recognise our employees are also members of the communities in which we are located.
The Group has implemented a formal Diversity Policy.
A Group-wide training resource has been rolled out to all staff in 2022 to provide access to a very broad range of learning pathways that will
enhance their ability in relation to the Group’s strategy.
Diversity and inclusion training has been successfully delivered to senior managers within the business.
The Group’s recruitment processes have been reviewed and guidance issued to all locations to minimise unconscious bias and promote
diverse hiring. Our progress will be tracked by monitoring against diversity targets based on local university graduation rates.
To prepare the next generation of women to succeed in the automotive industry, the Group has awarded 55 scholarships for female students
enrolling to study STEM subjects at leading universities in Germany, Poland, Mexico, the US and China, to help with tuition, accommodation,
and other educational costs. In addition, these scholarship recipients are connected to local TI facilities for internships and other
extracurricular learning opportunities.
A women’s mentorship programme has been established to support and guide women within the organisation and advise on strategies
for success.
3131
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial KPIs – financial and non-financial
Revenue
€3,268m
2018
2019
2020
2021
2022
3,473
3,411
2,815
2,957
3,268
Definition
Defined as revenue excluding the effects of
currency translation.
2022 performance
• In 2022, global light vehicle production grew by 6.7% to
82.4 million vehicles
• We delivered revenue of €3.3 billion (5.2% growth at
constant currency) compared to the prior year
• 150bps revenue underperformance at constant
currency compared to GLVP volume growth
Link to strategy
Objective 2 – Use our strength in
key products to continue to drive
the Group’s market share across
all product lines
Adjusted EBITDA
€333m
2018
2019
2020
2021
2022
Definition
484
498
331
353
333
Defined as profit or loss before tax for the period before
exceptional items, net finance expense, share of profits
or losses of associates, foreign exchange gains or
losses and depreciation, amortisation and impairments
of tangible and intangible assets adjusted for net
restructuring charges, associate dividends received and
the impact of any business acquisitions or disposals.
2022 performance
• Adjusted EBITDA was €333 million in 2022
• Adjusted EBITDA margin was 10.2% in 2022, a 170 bps
decrease from the prior year reflecting the net impact
of cost inflation in the year, customer driven schedule
volatility, which, impairs normal operating efficiency,
and business disruption in China
Link to strategy
Objective 4 – Manage resources
and deliver strong profitability
and cash flow generation
See Note 3 for reconciliations of IFRS reported measures to Alternative Performance measures
3232
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Adjusted EBIT
€180m
2018
2019
2020
2021
2022
173
213
180
374
340
Definition
Adjusted EBIT is defined as Adjusted EBITDA less
depreciation, amortisation and non-exceptional
impairment on tangible and intangible assets net
of depreciation and amortisation on purchase
price accounting.
2022 performance
• Adjusted EBIT was €180.0 million in 2022
• Adjusted EBIT margin of 5.5% was 170 bps decrease
from the prior year, reflecting the net impact of cost
inflation in the year, customer driven schedule volatility,
which, impairs normal operating efficiency, and
business disruption in China
Adjusted Basic EPS
8.5 Euro cents
2018
2019
2020
2.6
2021
11.2
2022
8.5
Definition
29.9
28.9
Defined as Adjusted Net Income divided by the weighted
average number of shares in the year.
Adjusted net income is defined as profit or loss for the
period attributable to the ordinary shareholders before
exceptional items are adjusted to reflect associate
dividends received and eliminate the impact of net
restructuring charges, foreign exchange gains or losses,
and the impact of any business acquisitions or disposals.
2022 performance
• Adjusted basic EPS was 8.5 Euro cents in 2022,
representing a decrease of 2.7 Euro cents over the prior
year, and reflecting the lower operating performance
Link to strategy
Objective 4 – Manage resources
and deliver strong profitability
and cash flow generation
Link to strategy
Objective 4 – Manage resources
and deliver strong profitability
and cash flow generation
3333
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial KPIs – financial and non-financial
Continued
Adjusted free cash flow
Customer satisfaction
€78m
2018
2019
2020
2021
2022
117
78
146
148
180
6.1 PPM
2018
2019
2020
2021
2022
5.9
3.8
7.7
5.0
6.1
Definition
Definition
Defined as cash generated from operating activities,
less cash used by investing activities, cash movements
in financial assets at fair value through profit or loss,
net cash flows relating to restructuring, settlement of
derivatives and the impact of any business acquisitions
or disposals.
2022 performance
• Adjusted free cash flow was €78 million in 2022,
representing a decrease of 33% over the prior year,
reflecting lower operating performance and higher
interest and tax payments
Defined as the quantity of non-conforming pieces rejected
by external customers versus pieces sold, measured in
parts per million (ppm).
2022 performance
• The global external quality rating for 2022 year end
was 6.1 ppm. This result is 0.9 ppm lower than our
benchmark global target of 7 ppm
Link to strategy
Objective 4 – Manage resources
and deliver strong profitability
and cash flow generation
Link to strategy
Objective 2 – Use our strength in
key products to continue to drive
the Group’s market share across
all product lines
See Note 3 for reconciliations of IFRS reported measures to Alternative Performance measures
3434
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 BEV and HEV Bookings
€2.6bn
2019
2020
2021
2022
1.2
1.4
1.7
2.6
Definition
New business awards in the year on vehicles with a
significant electrification element to the drive drain (BEV,
PHEV and self-charging HEV) measured as the amount
of the award over the vehicle production lifetime based on
current expected production volume.
2022 performance
• €2.6 billion of awards in the year, with BEV awards of
€1.3 billion and HEV awards of €1.3 billion.
Link to strategy
Objective 1 – Strengthen the
Group’s position as an advanced
technology leader in thermal fluid
management for EV platforms
Objective 2 – Use our strength in
key products to continue to drive
the Group’s market share across
all product lines
Energy Intensity
Intensity factor (CO2(e) T per €m revenue)
79.43 CO2(e) T
2018
00%
2019
2020
2021
2022
90.03
94.72
87.26
79.43
Definition
Energy Intensity is based on total carbon dioxide
equivalent emissions divided by revenue for the
corresponding year.
2022 performance
• 79.43 CO2(e) T per €m revenue
Link to strategy
Objective 3 – Reduce
greenhouse gas emissions from
our operations
3535
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Section 172 and stakeholder engagement
Engaging with, and considering the interests of, our
stakeholders is crucial for the long-term success and
sustainability of our business
Section 172(1) statement
The Board recognises that considering our
stakeholders in key business decisions
is crucial and will allow for the long-term
sustainability of the Group. Board Directors
are bound by their duties under the
Companies Act 2006 (the Act) to promote
the success of the Group for the benefit of
members as a whole. Section 172 requires
that Directors act in the way they consider, in
good faith, would be most likely to promote
the success of the Group for the benefit of its
stakeholders as a whole. Our shareholders,
together with our customers, employees,
suppliers and community, represent our key
Stakeholder engagement
How we engage with, and consider,
our key stakeholders
stakeholders. Engaging with, and giving
consideration to, these stakeholders is
central to our corporate purpose and strategy
to achieve the long-term success and
sustainability of our business. In doing so, the
Directors consider the likely consequences
of any decision in the long term: the interests
of employees; the need to foster sound
relationships with suppliers and customers
and others; the impact of our operations on
the community and the environment; the
desirability of maintaining our reputation for
high standards of business conduct; and
the need to act fairly. Throughout the year,
the Board’s decision making is required to
take into consideration the interests of these
wider stakeholders within the framework set
out in Section 172(1) of the Companies Act
2006. The following table summarises how
our Directors have, and how the Group as
a whole has, engaged with, and considered
the interests of, stakeholders and some of
the outcomes and actions arising from such
engagement and consideration.
Stakeholder
How we engage
Outcomes and actions
Shareholders
In addition to the
significant interest held
by funds managed by
Bain Capital (the ‘Bain
Shareholders’), our
shares are held by both
institutional and retail
investors with a range of
investment styles based
throughout the world.
Why we engage
• Quality of governance
• Effectiveness of
the Board and
management
• Growth potential and
profitability
• Share price
appreciation
• Dividends
• Executive Directors, supported by our
investor relations team, had numerous
one-on-one and group meetings and calls,
engaging with shareholders representing
over 80% of our current shareholders
(by shareholding value)
• The Company will hold its third Capital
Markets Day in 2023, to provide an
in-depth review of our business model,
strategy and product portfolio to all
shareholders
• Our Remuneration Chair met with
a significant number of our top 20
shareholders to gain their input on our
remuneration practices and policies
• On appointment, the Chair of the Board
wrote to the major ‘non-Bain’ shareholders
and, subsequently, met with many of
them to better understand their views
and perspectives
• All shareholders are kept informed of the
performance of the business on a regular
basis through trading updates in January,
May and November, the half- and full-year
announcements in August and March, and
our full Annual report in April
• Regular updates to the entire Board and Committees
by Executive Directors, advisers and brokers on share
performance, shareholder register and shareholder views
and sentiment
• The Board continued to review the development, and monitor
the implementation, of the Company’s strategy, with particular
emphasis on product development for HEV and BEV
platforms, in order to promote the sustainability and viability of
the business
• Review of trading updates and results announcements
resulted in additional information and reporting on
strategic progress
• Changes to the manner by which the Company implements
our remuneration policy based on shareholder feedback
• Changes to our LTIP metrics to better align with shareholder
interests, including ROCE and ESG performance targets
• Publishing our first Sustainability Report in December 2022
and publicly reporting our various sustainability data
through CDP
• Making Investor Presentations and recordings of Investor Q&A
available on our website
• Improve and adjust the focus of investor communications
based on feedback
• Engaged FTI Consulting to conduct an investor
perception survey
3636
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Stakeholder
How we engage
Outcomes and actions
Employees
We have a global
workforce made up of
25,600 employees and
contractors, including,
approximately, 4,100
salaried employees, who
work in 28 countries.
Why we engage
• To improve
motivation, morale
and productivity
through good
communication
• To foster retention
and reduce employee
turnover
• To identify issues and
solutions quickly
• To identify needs
for resources and
support
Customers
Our primary customers
are multinational and
local automotive OEMs
(original equipment
manufacturers).
Why we engage
• To drive revenue
growth and business
success
• To identify sourcing
opportunities
• To align product
and technology
development with
customer needs
• To effectively and
efficiently address
any supply or
quality issues
• Conducted an Ethics Sentiment Survey
• Introduced our ‘Six mindsets for success’ to enhance Group
• Held ‘All Employee’ meetings and calls
throughout the year to provide updates
on our Take the Turn strategy, financial
performance, leadership changes, and
environmental and safety initiatives
• Our designated Non-Executive Director
for workforce engagement attended an
All Employee meeting and reviewed our
survey results, employee feedback and
whistleblower reports
• Held several top management meetings
to review our Take the Turn strategy,
including the review and incorporation
of management input and ideas on our
technology and products, sustainability
and learning initiatives
culture and focus on strategic objectives
• Continued the roll out of our intelligent learning platform to
allow employees to increase their knowledge, learn new skills
and develop their career path
• Conducted ongoing inclusivity education for the Top 300
management
• Regular review of injury and turnover data with the Board to
ensure focus and support for safety training and protocols,
including hiring additional EHS personnel and the ongoing
expansion of the ISO 45001 safety management framework to
all locations
• Approved and adopted a Diversity Policy and issued gender
diversity targets to all locations based on university graduation
rates as well as updated HR procedures to eliminate hiring bias
and promote diversity
• Supported the implementation of work from home and hybrid
work arrangements
• Reviewed succession planning throughout the organisation
• We have extensive and regular
contact with our OEM customers at
all organisational levels, and in all
regions, regarding sourcing, commercial
matters, product performance and
quality, programme launches and the
development and planning of new
products
• With respect to significant commercial
matters and strategic initiatives, our
Executive Vice Presidents, CCO and
CEO communicate directly with senior
executives at our customers
• The Board receives regular updates from the Executive
Directors and other senior management on commercial
matters and customer relationships, including new business
awards and strategic development programmes
• In response to historic inflationary cost increases, successfully
negotiated and finalised multiple price adjustment and cost-
recovery arrangements with customers in all regions
• Approved a network of five e-Mobility Innovation Centres
(eMICs) in each major global automotive market, including
opening our first eMIC in 2022 in Germany, to support
collaboration with customers to design, prototype, and test
integrated thermal management products and systems
necessary to support the transition to EVs
• Our corporate purpose and business strategy has been
established and is monitored by the Board
• The Board reviews and approves major capital investment and
product development strategies to promote manufacturing
footprint and technology alignment with our customers,
including supporting new business and development activities
focused on EV platforms
• The annual budget and medium-term plan approved by the
Board incorporates our strategic growth with our customers,
including through medium-term product development and
technology alignment
• Approved ongoing restructuring plans that align with customer
manufacturing footprint and promote efficient supply
arrangements
• Support the implementation of a range of greenhouse
gas reduction initiatives in line with expectations and
similar programmes of our OEM customers
3737
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Section 172 and stakeholder engagement
Continued
Stakeholder
How we engage
Outcomes and actions
• Consistent with our Core Values, each
of our facilities around the world seeks
to be a responsible member of its
local community
• Strive to consistently operate our business
in a manner that minimises our impact on
the environment through energy efficiency,
waste reduction and conservation of
resources
• The expansion of our EHS group has
improved our processes to measure,
report and assess our greenhouse
gas emissions and the environmental
impact that our operations have on the
wider community
• Our Code of Business Conduct includes
policies and principles to promote
our reputation in our community for
high standards of business conduct,
including anti-corruption, anti-bribery,
fair competition (anti-trust), and positive
work environment and inclusion
(anti-discrimination and anti-harassment)
• Approved an updated greenhouse gas emissions reduction
target (including Scope 3) aligned with 1.5°C scenario and
SBTi, as well as budget plan to support renewable electricity,
energy efficiency, and human resources to support the
achievement of our GHG targets
• Published our first Sustainability report to communicate
our approach to sustainability, including CO2(e) data, water
conservation and waste reduction
• Developed and launched the production of advanced
products, such as thermal systems and high-pressure fuel
tanks, for BEV and HEV platforms, which contribute to a
cleaner world
• Recognised by the London Stock Exchange with the Green
Economy Mark in recognition of the positive environmental
impact our product technologies have by helping make cars
greener
• Established scholarships at leading universities in Germany,
Poland, Mexico, the US, and China for female students
enrolling to study STEM subjects, and made initial awards to
55 students
• Supported relief efforts and refugee assistance related to the
Russian war against Ukraine, including fundraising, logistics
support and assisting employees in Poland to, temporarily,
house refugees
• Our purchasing organisation has
• Coordinated closely with suppliers to manage supply
shortages and disruptions to ensure continued production
• Addressed requests for price increases in a fair and
consistent manner
• Managed supplier payments consistent with contractual terms
to avoid negative impact on our supply base
• Ongoing coordination with key suppliers to develop and
engineer their materials and components in order to allow, in
turn, the Group to provide products and systems that meet the
requirements for HEVs and BEVs
extensive and regular contact with our
suppliers regarding specific quoting and
sourcing opportunities, delivery logistics
and quality controls and testing
• Our engineering organisation works
closely with suppliers on development
activities, validation testing and
cost-reduction initiatives (value
engineering)
• We communicate our compliance
expectations and how to do business
with us through our Global Supplier
Requirements Manual, our dedicated
Supplier Portal on our website and our
purchasing terms and conditions
Community
As a global company,
our community
encompasses our
wider society and
environment, as well as
the local communities
in 28 countries around
the world in which we
operate.
Why we engage
• To promote our
reputation as a
responsible and
ethical business
• To attract, motivate
and retain employees
• To conserve
resources and reduce
our impact on the
environment to ensure
we are a sustainable
business
Suppliers
Our suppliers are
located around the
world and provide us
with raw materials,
including resin, steel and
aluminium, as well as
sub-components.
Why we engage
• To build strong,
collaborative and
strategic relationships
to obtain competitive
pricing, quality,
reliability of supply,
and logistics
efficiency
• To ensure we have
access to advanced
materials and
components that
meet our technical
requirements
• To ensure responsible
sourcing and ethical
business practices
and conduct by our
supply base
3838
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 TI Fluid Systems plc | Annual Report & Accounts 2022
3939
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernanceFinancial Sustainability
Our goal is to be a responsible
and sustainable business
that creates value for all of our
stakeholders.
Elaine Sarsynski
Chair, ESG Steering Committee
Our approach to sustainability
We are committed to enabling a sustainable future and improving the environmental and social well-being of the communities we operate in.
Our Take the Turn strategy addresses the transitional risks and opportunities associated with vehicle electrification as well as the need
to operate our business in a more sustainable manner to address climate change and maintain a diverse and talented workforce. Our
Take the Turn strategy reflects three main pillars that combine to drive sustainable growth: Technology (Electrification), Transformation
(Sustainability), and Talent (Learning).
Technology
At the heart of our Take the Turn strategy
is product development and engineering,
which supports the electrification of the
automotive industry. To meet the unique
requirements of hybrid electric vehicles
(HEVs) and battery electric vehicles
(BEVs), the Group is capitalising on our
extensive knowledge of fluid components,
lighter-weight materials, systems
architecture and manufacturing processes
to provide our OEM customers with
advanced designs and products, especially
thermal management systems, which are
efficient and cost effective.
Transformation
Climate change is a significant issue, and
the need to decarbonise our industry is
crucial. The Group is committed to being
an automotive industry leader to reduce
greenhouse gas emissions and build a
more sustainable future. While it is key that
our technology and advanced products
support the automotive industry’s transition
to cleaner and greener electric vehicles,
we recognise that we must transform
our business in line with new standards
and expectations of environmental
responsibility to deliver sustainable value
to our stakeholders – investors, customers,
suppliers, employees and the communities
we operate in.
Talent
The talent of our workforce is crucial to
us. The Group’s success is directly linked
to our ability to recruit, retain, motivate,
educate and develop a diverse and talented
workforce ready for the new electrified
future. In 2021, we introduced our ‘Fluid
Learning’ online learning platform, which
provides every salaried employee with
access to a variety of educational and
developmental tools to improve their
skills and abilities to be a valuable and
enthusiastic participant in our collaborative
organisation. In 2022, we expanded the
use of the online learning platform and
further encouraged our managers and
Directors to incorporate this tool into their
teams’ objectives.
4040
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Pursuant to the UK regulation, we are providing the following information in the Annual report.
Scope 1 emissions
Greenhouse gas emissions
Global: Scope 1 and 2 emissions (CO2eT)*
We are providing our Scope 1 & 2 emissions using the GHG Protocol for market-based
emissions. In 2022, we only had a 1% increase in emissions based on a 10.5% increase
in revenue. As we execute our renewable energy procurement strategy and our energy
conservation programmes, we expect to see year-over-year decreases in GHG emissions.
UK Total: Scope 1 and 2 emissions (CO2eT)
Our UK emissions have decreased by over 95% from our 2019 baseline year. This decrease
in emissions is principally driven by our largest energy consuming plant, transitioning to
purchasing 100% renewable electricity, and our other UK locations migrating to renewable
electricity in Q4 of 2021. In 2022, we had zero Scope 2 manufacturing emissions in the UK.
Intensity factor (CO2eT per million Euro revenue)
The Group’s intensity factor is shown on the right and is based on total carbon dioxide
equivalent emissions divided by revenue for the corresponding year. The increase from 2019 to
2020 in our CO2(e) intensity factor is a direct result of the temporary facility shutdowns due to
the COVID-19 pandemic. During these shutdowns, plants were still using some baseline level
of electricity and/or fuel for heat and/or air conditioning to protect our facilities and equipment.
This baseline use of electricity and/or fuel, coupled with lower sales volumes, slightly increased
our intensity factor. We have seen a two-year decrease in our energy intensity rate as we exit
COVID-19. We expect to see this trend continue as we work on energy efficiency projects and
increase procurement or renewable energy.
The Group has adopted a new CO2(e) emissions reduction target that calls for a 50% reduction
of Scope 1 and 2 emissions and a 30% reduction of Scope 3 emissions, in each case by
2030 on an absolute basis from a 2021 baseline. Our new targets have been submitted to the
Science-Based Target initiative (SBTi) for review and validation. Importantly, we have also
developed a renewable electricity plan and an energy-efficiency programme to support the
achievement of our target.
Diversity and inclusion
Women represented approximately 31% of the Group’s total salaried workforce, including 13%
of the Executive Committee with the CEO and 14 senior managers who report to the Executive
Committee.
At 31 December 2022
CEO
Executive Committee
Direct Reports to Executive Committee
Other Salaried
Grand Total
M
1
7
43
2,781
2,832
Percent
Men
100%
88%
75%
68%
69%
F
1
14
1,280
1,295
Percent
Women
Grand
Total
13%
25%
32%
31%
1
8
57
4,061
4,127
Global Scope 1 emissions (CO2eT)
2018
00%
2019
2020
2021
2022
39,170
30,680
27,763
30,383
UK Scope 1 emissions (CO2eT)
2018
00%
2019
2020
2021
2022
234
195
215
140
Scope 2 emissions
Global Scope 2 emissions (CO2eT)
2018
00%
2019
2020
2021
2022
267,913
235,947
230,279
229,185
UK Scope 2 emissions (CO2eT)
2018
00%
3,024
1,666
2019
2020
2021
328
2022
0
Energy intensity
Intensity factor (CO2eT per €m revenue)
2018
00%
2019
2020
2021
2022
90.03
94.72
87.26
79.43
Electricity Consumption
Global Electricity Consumption (kWh)
2018
00%
2019
2020
2021
2022
526,434,728
457,404,458
485,749,751
498,613,698
UK Electricity Consumption (kWh)
2018
00%
2019
2020
2021
2022
7,581,432
5,647,611
6,091,522
5,082,762
*2021 global Scope 1 and 2 emissions data was adjusted from prior reporting on account of minor corrections made as part of our continued efforts to improve validation
and reconciliation of data. Changes in Scope 1 emissions in 2021 were related to the use of an incorrect conversion factor for LPG in three plants. This resulted in a
reduction of 6,856 tonnes. Scope 2 changes were due to a billing adjustment at one plant. This resulted in an increase of 13 tonnes of emissions.
4141
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Principal risks and uncertainties
Operating in an increasingly risky and uncertain environment, the Group’s global
operations continue to be exposed to a number of risks, which could, either on their
own, or in combination with others, have an adverse impact on the Group’s results,
strategy, business performance and reputation, which, in turn, could impact upon
shareholder returns and the wider stakeholders. The following section highlights the
major risks that may affect the Group’s ability to deliver the strategy, as set out on
pages 30–31.
The management and mitigation strategy,
described in the principal risks section
below, help to reduce the impact or likelihood
of a major risk occurring. The Board also
recognises there could be risks that may
be unknown or that may be judged to be
insignificant at present, but may later prove to
be significant.
2022 has seen continued significant
challenges in the macro environment.
Russia’s invasion of Ukraine has sustained
for longer than the initial expectations of
many people, heightening concerns on the
wider geopolitical risks. The strict policies
against COVID-19 that China maintained for
most of the year, and the recent loosening of
these policies, have impacted operations in
Asia significantly, including disruption to our,
and the customers’, production activities.
Supply shortages have further expanded
and deepened, including energy and utilities.
Inflationary pressure has hit businesses and
consumers in many economies, and the
cost-of-living crisis increases cost of, and
competition for, workers across businesses.
In some industries, tense industrial relations
create a wide-ranging impact on society.
These macro environmental factors weigh
on the automotive industry, which already
has significant challenges arising from the
pivoting towards electrification, technology
transformation, supply chain issues and
vehicle affordability, etc. 2023 looks set to be
another challenging year.
The impact of the COVID-19 pandemic, and
recent events such as Russia’s invasion of
Ukraine, have dramatically demonstrated that
the world is more volatile than ever before.
With increasing economic challenges in many
countries, as well as supply shortages, the
resultant volatilities pose significant operating
performance challenges for us and the
automotive industry, generally. Disruption to
our customers’ production activity levels, the
efficiency and operations of the automotive
market supply chain and the availability of
materials and labour, remained significant
challenges throughout 2022 and will continue
into 2023 and even beyond.
4242
The Group remains vigilant to development in
the macro environment, and the management
of resilience (such as our liquidity and pivoting
to electrification) is an important focus area
during this time of heightening volatility
and uncertainty.
With significant inflationary pricing pressure
across all aspects of our operations, our ability
to manage the impact of cost increases, and
to recover through pricing and efficiency,
is critical. Furthermore, climate change
continues to drive the pace and potential
severity of many of the principal risks that
are already being managed. Specifically,
climate change affects our technology and
product-development risk as the rate of
vehicle electrification accelerates across
the industry, broadening our business
continuity risk as we seek to transition to
lower-carbon, more efficient manufacturing
operations and address physical risks to our
facilities. As we respond by actioning our
Take the Turn strategy, our technological
agility to develop and adapt our product
offerings to meet the EV requirements of our
customers is critical. Vehicle electrification
also results in a significant impact on
human resource management, as we need
to ensure that the Group has sufficient
salaried staff of an appropriate skill set,
such as product design and development.
Continual regulatory change further
complicates the risk landscape, and is now
a business constant that arises across all
aspects of the environmental, social and
governance spectrum.
Risk management framework and structure
Governance
Role
Outputs
Board
oversight
Audit
and Risk
Committee
Executive
Committee
Responsible for the Group’s system of risk
management and internal controls
Guidance and
direction
Supports the Board
Advises on the Group’s risk appetite,
tolerance and strategy, risk exposures and
future risk mitigation strategy
Guidance and
direction
Group’s risk governance body
Group risk register
Establishes formal procedures and
structure to manage risk
Principal risk
reviews
Oversees the internal control framework
Determines the nature and extent of
principal and other risks as well as risk
appetite
Identify and manage risks
Design and implement controls
Receive guidance
Report to Executive Committee
Supported by operational teams and
support functions
Audit and Board
reports
Divisions and
functions risk
registers
Divisional and
Corporate
Function
Leadership
teams
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Key developments in 2022
• Technology and product offerings, in a market pivoting towards
electrification, are critical to the Group’s success. The Global
Engineering function, headed by the Chief Technology Officer, was
reorganised during the year to centralise expertise, increase internal
and external collaboration and foster business opportunities. The
function implemented formal product technology and development
roadmaps in relation to thermal management (coolant and
refrigerant), to clearly outline the Group’s product development
strategy in the forthcoming years. The roadmaps were reviewed
and supported by the Board. The function also supported and drove
inorganic technology opportunities during the year
• A strategy for the global footprint of e-Mobility Innovation Centres
(eMICs) has been developed, which was reviewed and approved
by the Board. This is a strategic global investment to position the
Group as a best-in-class partner provider of thermal management
technologies, with a vision for footprint in five regional eMIC
locations. In addition, the Group increased its collaboration with
customers through joint development agreements, providing
competitive advantage in pioneering the development of the next
generation product portfolio
• The Group Quality function has been centralised, now headed by
a Quality Vice President, who has a global role that covers both
divisions. This ensures a more coordinated approach on managing
quality-related risks, as well as integrated expertise to strengthen
identification, review, working with customers and reporting of
quality-related matters. The Group Quality function applies a formal
and structured methodology, and reports regularly to the Executive
Committee and the Board on significant quality-related matters
• The Group Operations Committee, which was formed in the
middle of 2021 and is currently led by the divisional Executive
Vice Presidents, continued to work on strengthening internal
collaboration between different operational functions as well
as finance, HR and sustainability through regular meetings and
discussions of operational issues and performance indicators
• A new Group Internal Controls function, led by the Vice President
Risk & Global Controller, has been formed, separate from the
Internal Audit function, which now focuses on independent internal
audits as the third line of defence. The Group Internal Controls
function, with a newly appointed Group Head of Internal Controls,
launches and leads the internal control optimisation programme
to improve the robustness of the internal controls structure and
framework within the Group, working closely with respective
divisions, as well as supporting the Group’s initiative to strengthen
the risk management framework
• The Commercial and Business Development function, led by
the Chief Commercial Officer, was reorganised into a centralised
structure to strengthen the Group’s ability to deploy cross-divisional
development and growth opportunities. Plans to formalise key
processes around customer management, and upgrade the Group’s
customer relationship management system, have been developed
for implementation in 2023
• With respect to cyber security risks, the Group rolled out further
cyber security testing (including tabletop exercises) and an
education programme to strengthen the infrastructure and internal
awareness in managing cyber-related risks
• The Group engaged external consultancy in developing its
sustainable energy strategy, an important step to deliver our
sustainability targets. The Board has been actively involved
in this area through discussions and information updates in
Board meetings
Priorities for 2023 and 2024
The Board and executive management team
have set out plans to further strengthen the
Group’s enterprise risk management (ERM)
processes during 2023 and 2024 to be
supportive of the strategic change agenda.
Supported by the Group Internal Controls
function, and the Internal Audit function, and with
input from external advisers, the Group sets out
the following improvement priorities:
• Governance: Formalisation of ERM strategy
and approach, assessment of risk appetite,
building awareness towards a culture of risk-
informed decision making, and formalisation of
roles and responsibilities across the three lines
of defence
• Risk culture: Strengthening risk culture
to support the embedding of key risk
management principles into operations, and
initiation of role-appropriate risk management
training/education
• Infrastructure: Deployment of key risk
indicators and alignment to key performance
indicators, formalisation of process to assign
ownership of risks, and introduction of an
integrated risk-reporting process
• Process: Structured process to appraise
the risk environment on an ongoing basis,
development of risk taxonomy and a
consistent approach to risk assessment,
the periodic review of risk registers and
the formalisation of the process to identify
emerging risks on an ongoing basis
Other priority areas of improvement in 2023
include operational programme management,
procurement and product launch procedures, as
well as continuing to improve the robustness and
effectiveness of the Group’s IT infrastructure.
In addition, the 2023 plan for the Internal Audit
function demonstrates a gradual shift of focus
from internal control over financial reporting to
broader business risks, particularly some of the
key controls over principal risks.
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OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Principal risks and uncertainties
Continued
Principal risks
The Group considered its risks in the following risk categories:
The following chart shows the principal risk movement from the 2021
Annual report:
• External risks: Risks arising from the broader macroeconomic and
political climate, competitive pressures or regulatory matters
• Strategic risks: Risks that threaten the Group’s ability to deliver
expected strategic goals
• Operational risks: Risks that impact the day-to-day operations
arising from inadequate or failed internal procedures
l
a
c
i
t
i
r
C
j
r
o
a
M
The Board has the ultimate responsibility for identifying and managing
the Group’s principal risks. A robust assessment has been undertaken
to assess the relevance and appropriateness of our principal risks.
The assessment was performed against the risk categories above.
t
c
a
p
m
I
t
n
a
c
fi
n
g
S
i
i
3
1
1
3
5
7
2
8
8
e
t
a
r
e
d
o
M
r
o
n
M
i
4
6
6
7
Rare <10%
Unlikely 10-40%
Possible 40-60%
Likely 60-90%
Virtually certain >90%
Probability
1
Global light vehicle production volumes
2 Product quality
3 Competition and customer pricing pressure
4 Business continuity
5 Product development and changes in technology
2021
2022
6 Regulatory compliance
7 Talent attraction and retention
8 Cyber event
Members of the Executive Committee, divisional and corporate
function leadership teams have undertaken reviews of this risk
portfolio. As part of our top-down process, a review of the principal
risks was performed by the Board, which led to further review and
refinement by the Executive Committee. This process was supported
by the Group Internal Controls function led by Vice President Risk
& Global Controller, and the Internal Audit function led by the Group
Audit Director. This assessment required each risk owner to evaluate
material changes in the risk they manage, including changes in the
impact during the course of the year.
These individual responses were consolidated, and the Executive
Committee then discussed and reached a consensus regarding
the principal risks that can seriously affect the performance,
future prospects or reputation of the Group. The outputs from the
assessments were then presented to the Board for approval along with
the recommendation of principal risks to be included in the assessment
of the Group’s long-term viability.
During the 2022 assessment, the Board and the Executive Committee
decided that the risk associated with cyber threats, which was
previously subsumed within the principal risk for Business Continuity,
should be identified as a separate principal risk. This was primarily
driven by the increasing risk profile of cyber threats, particularly when
connected with geopolitical events. Following this, the scope of the
Business’s continuity principal risk focuses primarily on threats to
continuity arising from non-cyber matters.
44
TI Fluid Systems plc | Annual Report & Accounts 2022
Climate change and sustainability issues also
prompted increasing level of regulations and
requirements, especially for listed companies.
The use of plastic within the Group’s operation
is likely to become an area of increasing focus
that will need to be addressed as part of the
Group’s sustainability strategy.
Currently widening geopolitical tensions
may result in further and more prolonged
global business disruptions. Competition
and political tension between countries
continues to increase whilst the geopolitical
tensions in Europe continue. The fragility of
international relations carries a consequential
adverse impact on the automotive supply
chain and world financial markets, such as the
availability of energy.
In the light of the process undertaken, the
Board believes that the current year risk
assessment has been sufficiently robust, and
confirms that are no new distinct risks that are
material to the Group at the date of this report.
Risk appetite
Risk appetite (the level of risk that the Board
is willing to take in pursuing the Group’s
objectives) is set, separately, for each
principal risk and varies for different types of
risk. Risks are measured based on impact on
revenue, profit, employees and the Group’s
reputation. The Group has a low appetite for
compliance-related risks, whilst it has a higher
appetite for strategic risks. Risk appetite is
assessed on a periodic basis, in consideration
of changes in conditions and circumstances,
as well as the impact of emerging and
other risks.
With significant changes facing the
automotive industry, the Group operates
in markets with high growth potential,
particularly in the space of electric vehicles,
which is continuously evolving and
developing. In the context of high risks of
volatility associated with potentially high
rewards, the Group is willing to accept a
certain level of risk in pursuing our strategic
goals. With respect to product development
and technological advancement to enable
the pivot towards electrification, the Group
aspires to be a leader in this area, and,
therefore, commits to invest into research
and development, and potential non-organic
approaches, to expand our product offering,
and to secure the future commercial viability
through next-generation products that meet
the electrification agenda and the ESG
criteria. As the industry is at the early phase
of electrification, product design, layout
and specification are subject to innovation
and change. Our risk appetite in this area is,
therefore, set as high.
In relation to operational risks, our aim is
to ensure the Group’s ability to provide the
required service level to our customers, as
well as to protect our assets and employees.
We carefully assess the right balance
between the costs of implementing and
maintaining internal control systems against
the corresponding benefits.
For compliance and external reporting
matters, our appetite for risk is low as we
regard it imperative to ensure that the content
of our financial and non-financial reporting is
fair, balanced and understandable. The Group
has no tolerance for breaches of regulatory
requirements or internal policies and
procedures, including delegation of authority.
Emerging risks
In the environment of fast-paced changes
in the risk landscape, the Board recognises
that an essential part of risk management is
the ability to monitor and respond to new and
emerging risks. Alongside the principal risks,
emerging risks are identified and considered
by the Board.
As the Board has continued to review and
refine the Group’s approach to vehicle
electrification, operational sustainability
and talent development – all of which are
embodied in the Take the Turn strategy – it
has been conscious of any development in
strategic risks that may need to be factored
into its consideration, in addition to the
those already identified as principal risks. If
the Group chooses to address the need to
enhance the Group’s product capabilities
other than organically (for instance through
mergers and acquisitions or joint venture
arrangements), this may necessitate
additional resources and expertise, and would
naturally entail risks relating to management,
execution and value delivery.
The Board remains acutely aware of the
changing market dynamics that will continue
to arise from climate change and the growing
demand for BEVs. The Board feels that the
Take the Turn strategy will position the Group
well to respond positively to these market
changes. However, it is recognised that
increased frequency of future climate-related
risk events (severe storms, floods, rising sea
levels etc.), and the transition to a low carbon
economy, may also adversely impact asset
values and financial performance over time
and, as such, will continue to be monitored
and mitigated where practical to do so.
4545
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Principal risks and uncertainties
Continued
Principal risks
Description
Impact
1
External
risk: Global
light vehicle
production
volumes
The Group has 98 manufacturing locations
in 28 countries on five continents and
a substantial amount of its revenue is
closely linked to the economic cycle, the
general macroeconomic environment
and the trends in product offerings from
vehicle manufacturers.
Historically, there has been close correlation between economic
growth and global light vehicle production volumes. The cost
structure of the business, operating across manufacturing
facilities in 98 locations with generally high levels of operational
gearing, means that a large reduction in revenue will have
an impact on profitability. The transition from ICEs as the
predominant vehicle powertrain towards HEVs and BEVs, will
continue to necessitate changes in our product portfolio offering.
2
Operational risk:
Product quality
The Group’s business is based on
the repeatable supply and delivery of
components and parts to an agreed
specification and time.
Failure to meet customer requirements or specifications can
have financial consequences, such as the loss of a customer,
warranty claims and product liability, and could, potentially, cause
long-term damage to the Group’s reputation.
3
Strategic risk:
Competition and
customer pricing
pressure
This risk encompasses a number of identified
global trends in the markets in which the
Group operates. The Group operates in a
dynamic competitive environment and faces
competition from other manufacturers and
suppliers of automotive components in each
of the market segments in which it operates.
The Group may be subject to pressure from
customers to reduce costs (and henceforth
prices) on contracts.
The Group’s customers face constant pressure to lower their
selling and production costs to be competitive against their peers,
and may require reductions in the selling price of the Group’s
systems and components over the term of a vehicle platform or
model. Commercial activity by competitors, or changes in their
products or technologies, could impact upon the Group’s market
share and profitability. The environment for bidding and securing
new contract awards from OEM customers is competitive with
the increasing need to balance the economics of recovering
current inflationary impacts with securing increased penetration
on new BEV business, and maintaining strong customer
relationships. Therefore, in facing inflationary input costs, the
Group’s ability to maintain margin could be significantly limited by
competitive pressure and contractual price reductions.
To aid the identification of, and references to,
principal risks, each principal risk has been
assigned a specific code from PR1 to PR8, as
shown in the following tables. For linkages to
the strategic objectives, refer to the strategic
objectives outlined below, with further details
on pages 30–31:
4646
• Strategic objective 1: Strengthen
the Group’s position as an advanced
technology leader in thermal fluid
management for EV platforms
• Strategic objective 2: Use our strength
in key products to continue to drive
the Group’s market share across all
product lines
• Strategic objective 3: Reduce greenhouse
gas emissions from our operations
Controls and mitigation
localised economic volatility
• The Group’s presence in 28 countries, supplying a wide range of customers, acts as a hedge to mitigate
Divisional Executive Vice
• The Group has an extensive manufacturing presence in emerging and other low-cost markets, which
currently have relatively low rates of light vehicle penetration per head of population and are believed to
have strong growth potential
• Although the Group’s products are primarily for light vehicles, it operates across both a broad geographic
footprint and a diversified range of vehicle platforms, brands and models
• A proportion of the Group’s workforce in a number of local markets are employed on temporary contracts,
which provides some flexibility in the cost base
• The Group monitors closely, and responds to any changes in, customer demand on a local or Group-wide
basis. Active development of new and enhanced products, in response to the transition to full electrification,
remains a major focus. More detail is given in the principal risk relating to product development and
Change in risk level:
changes in technology below
Ownership
Presidents,
Chief Commercial Officer
Link to strategic
objectives:
Objective 4
TS 16949
quality
raised by the customers
management’s priority
• The Group operates rigorous quality control systems designed to ensure a high-quality standard for all
Divisional Executive Vice
products, including testing and validation during the design and production phases
• The Group collaborates with key customers to evaluate and improve quality control standards and to
confirm the compliance of its manufacturing processes with customers’ quality standards
• Quality systems and processes, operated at local manufacturing level, are subject to oversight by divisional
quality teams. During 2022, the Group’s quality management function was integrated into a central function
to ensure more robust procedures for identifying and managing product quality concerns
• Where necessary, the Group’s manufacturing facilities maintain relevant industry accreditations, such as
Presidents
Link to strategic
objectives:
Objectives 1 and 2
• The Group monitors the field performance of its products in order to seek to continuously improve product
Change in risk level:
• The Group has formal procedures for identifying and reviewing all warranty issues, with regular reporting to
the Board and senior management. Rigorous analysis and testing are performed for all warranty concerns
• The Group seeks to offset pricing pressure by achieving improved operating efficiencies and cost
Chief Commercial Officer
reductions. Continuous operational improvements to drive higher process and cost efficiency is constantly
• A growing trend by some customers to standardise and globalise vehicle platforms has the potential to
minimise the Group’s exposure to the cancellation of any single vehicle platform or model
• The Group has a strong reputation and industry-leading technology, which supports its status as a key
supplier to its customers. The Group is considered to be a top supplier, or strategic supplier, by many of its
OEM customers
• The Group engages in extensive and regular dialogue, and has strong commercial and engineering
relationships with key customers. The effective management of customer relationships and commercial
Change in risk level:
activities is a significant focus area of management, which will be underpinned by the plan to implement a
robust customer relationship management solution in 2023
• The Group uses market intelligence and competitor analysis to support its market activities and inform
investment decisions. The Group also leverages a robust screening process to evaluate new business
Link to strategic
objectives:
Objectives 1, 2 and 4
proposals
of products
• The Group implemented a centralised Commercial and Business Development functional structure to
strengthen its ability to deploy cross-divisional development and growth opportunities
• Across the Group, there is an emphasis on research and development and improving the technical content
• The Group develops robust internal procedures to identify and evaluate the impact of inflationary cost
increases and cost recovery approach on a timely basis. The Group increasingly seeks greater flexibility
and agility in the pricing structure to more effectively react to cost pressures in an inflationary environment
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Principal risks
Description
Impact
1
External
risk: Global
light vehicle
production
volumes
The Group has 98 manufacturing locations
Historically, there has been close correlation between economic
in 28 countries on five continents and
a substantial amount of its revenue is
growth and global light vehicle production volumes. The cost
structure of the business, operating across manufacturing
closely linked to the economic cycle, the
facilities in 98 locations with generally high levels of operational
general macroeconomic environment
gearing, means that a large reduction in revenue will have
and the trends in product offerings from
an impact on profitability. The transition from ICEs as the
vehicle manufacturers.
predominant vehicle powertrain towards HEVs and BEVs, will
continue to necessitate changes in our product portfolio offering.
2
Operational risk:
Product quality
The Group’s business is based on
the repeatable supply and delivery of
components and parts to an agreed
specification and time.
Failure to meet customer requirements or specifications can
have financial consequences, such as the loss of a customer,
warranty claims and product liability, and could, potentially, cause
long-term damage to the Group’s reputation.
3
Strategic risk:
Competition and
customer pricing
pressure
This risk encompasses a number of identified
The Group’s customers face constant pressure to lower their
global trends in the markets in which the
selling and production costs to be competitive against their peers,
Group operates. The Group operates in a
and may require reductions in the selling price of the Group’s
dynamic competitive environment and faces
systems and components over the term of a vehicle platform or
competition from other manufacturers and
model. Commercial activity by competitors, or changes in their
suppliers of automotive components in each
products or technologies, could impact upon the Group’s market
of the market segments in which it operates.
share and profitability. The environment for bidding and securing
The Group may be subject to pressure from
new contract awards from OEM customers is competitive with
customers to reduce costs (and henceforth
the increasing need to balance the economics of recovering
prices) on contracts.
current inflationary impacts with securing increased penetration
on new BEV business, and maintaining strong customer
relationships. Therefore, in facing inflationary input costs, the
Group’s ability to maintain margin could be significantly limited by
competitive pressure and contractual price reductions.
STRATEGIC KEY
RISK KEY
Technology
Transformation
Talent
Increased
Decreased
No change
Read more on pages 30–31
Controls and mitigation
• The Group’s presence in 28 countries, supplying a wide range of customers, acts as a hedge to mitigate
localised economic volatility
• The Group has an extensive manufacturing presence in emerging and other low-cost markets, which
currently have relatively low rates of light vehicle penetration per head of population and are believed to
have strong growth potential
• Although the Group’s products are primarily for light vehicles, it operates across both a broad geographic
footprint and a diversified range of vehicle platforms, brands and models
• A proportion of the Group’s workforce in a number of local markets are employed on temporary contracts,
which provides some flexibility in the cost base
• The Group monitors closely, and responds to any changes in, customer demand on a local or Group-wide
basis. Active development of new and enhanced products, in response to the transition to full electrification,
remains a major focus. More detail is given in the principal risk relating to product development and
changes in technology below
Ownership
Divisional Executive Vice
Presidents,
Chief Commercial Officer
Link to strategic
objectives:
Objective 4
Change in risk level:
• The Group operates rigorous quality control systems designed to ensure a high-quality standard for all
products, including testing and validation during the design and production phases
Divisional Executive Vice
Presidents
• The Group collaborates with key customers to evaluate and improve quality control standards and to
confirm the compliance of its manufacturing processes with customers’ quality standards
• Quality systems and processes, operated at local manufacturing level, are subject to oversight by divisional
quality teams. During 2022, the Group’s quality management function was integrated into a central function
to ensure more robust procedures for identifying and managing product quality concerns
• Where necessary, the Group’s manufacturing facilities maintain relevant industry accreditations, such as
Link to strategic
objectives:
Objectives 1 and 2
TS 16949
• The Group monitors the field performance of its products in order to seek to continuously improve product
quality
Change in risk level:
• The Group has formal procedures for identifying and reviewing all warranty issues, with regular reporting to
the Board and senior management. Rigorous analysis and testing are performed for all warranty concerns
raised by the customers
• The Group seeks to offset pricing pressure by achieving improved operating efficiencies and cost
Chief Commercial Officer
Link to strategic
objectives:
Objectives 1, 2 and 4
Change in risk level:
reductions. Continuous operational improvements to drive higher process and cost efficiency is constantly
management’s priority
• A growing trend by some customers to standardise and globalise vehicle platforms has the potential to
minimise the Group’s exposure to the cancellation of any single vehicle platform or model
• The Group has a strong reputation and industry-leading technology, which supports its status as a key
supplier to its customers. The Group is considered to be a top supplier, or strategic supplier, by many of its
OEM customers
• The Group engages in extensive and regular dialogue, and has strong commercial and engineering
relationships with key customers. The effective management of customer relationships and commercial
activities is a significant focus area of management, which will be underpinned by the plan to implement a
robust customer relationship management solution in 2023
• The Group uses market intelligence and competitor analysis to support its market activities and inform
investment decisions. The Group also leverages a robust screening process to evaluate new business
proposals
• The Group implemented a centralised Commercial and Business Development functional structure to
strengthen its ability to deploy cross-divisional development and growth opportunities
• Across the Group, there is an emphasis on research and development and improving the technical content
of products
• The Group develops robust internal procedures to identify and evaluate the impact of inflationary cost
increases and cost recovery approach on a timely basis. The Group increasingly seeks greater flexibility
and agility in the pricing structure to more effectively react to cost pressures in an inflationary environment
• Strategic objective 4: Manage resources
for a sustainable transition of the business
to support vehicle electrification and deliver
strong profitability and cash flow generation
• Strategic objective 5: Upskill through the
six mindsets for success
• Strategic objective 6: Improve diversity
and inclusion throughout the organisation
4747
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Principal risks and uncertainties
Continued
Principal risks
Description
Impact
Controls and mitigation
4
Operational
risk: Business
continuity
The Group’s business is based upon reliable,
high-volume manufacturing across all its
locations in order to supply products to
customers, often on a just-in-time basis.
Business continuity encompasses a number
of areas of risk to the Group, including fire,
flood and other casualties, equipment
breakdown, key supplier failure or supply
chain disruptions, disruptions from events
such as COVID-19 shutdowns, maintaining
stable labour relations, and ensuring
the reliability of the Group’s business
management systems and IT infrastructure.
In addition, the Group is exposed to risks
from accidents and incidents arising from
health and safety failures.
A loss of production capability at a facility could lead to an
inability to supply customers, reduce volumes and/or increase
claims made against the business. In periods of high demand,
or in the event of supplier difficulties, availability of raw materials
may be constrained, which could interrupt production and/or
result in cost increases, all of which could have an impact on the
profitability of the Group’s operations. In certain circumstances,
the loss of a supplier, or supplier quality failing, could lead to an
inability to obtain materials and sub-components necessary to
supply products in a timely or efficient manner. As our product
portfolio pivots in response to the electrification trend, the
capability and capacity of our current supply base to respond
may heighten risk.
The loss or instability of systems capability at a Group facility
could impact the Group’s ability to operate one or more plants
and supply its customers. Injuries arising from health and safety
incidents could result in lost time, reduced employee morale and
possible changes in working practices. Serious incidents can
have a detrimental impact on the Group’s reputation.
5
Strategic
risk: Product
development
and changes in
technology
The automotive industry is subject to
changes in technology, and the Group’s
products are subject to changes in regulatory
requirements to reduce emissions and
increase fuel economy. Operating across
numerous markets and territories requires
compliance with a wide variety of regulations.
Changes in consumer demand, e.g. the
popularity of a particular vehicle type,
model, platform or technology, such as
HEVs and BEVs, may also impact demand
for the Group’s products. In addition, the
Group’s products have performance-
critical applications and high levels of
technical content and know-how. Product
development in this evolving environment
naturally entails the risk of changes in
product design, specification and range.
Failure to keep up with changes in technology in the light vehicle
automotive industry, or in competitive technologies, may render
certain existing products obsolete or less attractive, as well as
damage the Group’s market position and reputational strength.
Product development has a direct impact on the Group’s next
generation product offering, which significantly impacts the
Group’s future commercial viability. Changing environmental
regulations could affect demand for, and/or changes in, the
specifications of certain products.
Failure to comply with all relevant regulatory requirements
could affect the Group’s reputation and/or its ability to operate
in certain markets or territories. The Group’s technologies and
intellectual property rights also need to be kept current through
continuous improvement and research and development, and
are susceptible to theft, infringement, loss and/or replication by
competitors.
• The Group implemented business continuity planning (‘BCP’) at key locations to enhance the localised
Divisional Executive Vice
continuity planning strategy operated at the facilities
• The wide geographic spread of operations, purchasing and supply chain functions allows the Group to use
a range of techniques to address potential supply disruption, such as long-term purchase contracts, dual
sourcing, and ongoing research and development into alternative materials and solutions. The Group’s
global network of facilities also provides a degree of back-up capacity
• The Group maintains a scheduled programme of maintenance and inspection of all equipment
• In certain markets, the Group uses preferred suppliers for key components and materials
• The Group maintains casualty, property and business interruption insurance
• The Group participates in a number of works councils and other represented employee forums, and seeks
Change in risk level:
to establish and maintain good relationships with its employees and unions
Ownership
Presidents
Link to strategic
objectives:
Objectives 1 and 2
• The Group’s decentralised IT systems worldwide provide some resilience against the loss of production
or systems capability to the Group as a whole. Furthermore, the Group IT function maintains a formal
disruption recovery plan for the organisation. In response to COVID-19, our IT infrastructure has been
strengthened to support the seamless operation of our worldwide office and administrative functions under
• The Group has an embedded health and safety culture and operates a global health and safety policy, with
local health and safety operations in place in each manufacturing facility. Our health and safety protocols
were enhanced in response to COVID-19 to ensure a safer work environment and safeguards against
significant infection risk. Health and safety performance is monitored regularly by each division and by
remote working
the Group
• The Group has established a Global Operations Committee with representation from different functions, to
identify and discuss operational issues on a timely basis
• The Group operates in the automotive industry in which performance-critical technology evolves and
Chief Technology Officer
is adopted in a deliberate and measured manner. The Group’s products, materials and processes are
continually developed and enhanced through research and development and technical input
• The Group continues its commitment to invest significantly in alternative engineering solutions and the
development of more advanced designs and innovative products to ensure compliance with changes to
Link to strategic
objectives:
Objectives 1, 2 and 4
environmental regulations and customer demand
• The Group has developed, and is implementing, an engineering skills transition plan to ensure our
engineering resource has the necessary skills to support an enhanced electric vehicle product offering
• During 2022, the Group developed its strategy for a global footprint of e-Mobility Innovation Centres
(eMICs), which establishes an international network of technical centres focusing on research and
development. In addition, the Group has established regional application centres, which focus on
application engineering worldwide
• The Group developed formal product technology and development roadmaps in relation to thermal
management (coolant and refrigerant), to clearly outline the Group’s product development strategy in the
forthcoming years
• The Group seeks to maintain close relationships and technical partnerships with key customers, and enters
into joint development agreements with customers. In addition, the Group continues to explore non-organic
options to expand the Group’s technology platform and product offering
• The Group actively registers, manages and enforces its intellectual property rights
Change in risk level:
4848
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Principal risks
Description
Impact
4
Operational
risk: Business
continuity
The Group’s business is based upon reliable,
A loss of production capability at a facility could lead to an
high-volume manufacturing across all its
inability to supply customers, reduce volumes and/or increase
locations in order to supply products to
claims made against the business. In periods of high demand,
customers, often on a just-in-time basis.
or in the event of supplier difficulties, availability of raw materials
Business continuity encompasses a number
may be constrained, which could interrupt production and/or
of areas of risk to the Group, including fire,
result in cost increases, all of which could have an impact on the
flood and other casualties, equipment
profitability of the Group’s operations. In certain circumstances,
breakdown, key supplier failure or supply
the loss of a supplier, or supplier quality failing, could lead to an
chain disruptions, disruptions from events
inability to obtain materials and sub-components necessary to
such as COVID-19 shutdowns, maintaining
supply products in a timely or efficient manner. As our product
stable labour relations, and ensuring
the reliability of the Group’s business
portfolio pivots in response to the electrification trend, the
capability and capacity of our current supply base to respond
management systems and IT infrastructure.
may heighten risk.
In addition, the Group is exposed to risks
from accidents and incidents arising from
health and safety failures.
The loss or instability of systems capability at a Group facility
could impact the Group’s ability to operate one or more plants
and supply its customers. Injuries arising from health and safety
incidents could result in lost time, reduced employee morale and
possible changes in working practices. Serious incidents can
have a detrimental impact on the Group’s reputation.
5
Strategic
risk: Product
development
and changes in
technology
The automotive industry is subject to
Failure to keep up with changes in technology in the light vehicle
changes in technology, and the Group’s
automotive industry, or in competitive technologies, may render
products are subject to changes in regulatory
certain existing products obsolete or less attractive, as well as
requirements to reduce emissions and
damage the Group’s market position and reputational strength.
increase fuel economy. Operating across
Product development has a direct impact on the Group’s next
numerous markets and territories requires
generation product offering, which significantly impacts the
compliance with a wide variety of regulations.
Group’s future commercial viability. Changing environmental
Changes in consumer demand, e.g. the
regulations could affect demand for, and/or changes in, the
popularity of a particular vehicle type,
specifications of certain products.
model, platform or technology, such as
HEVs and BEVs, may also impact demand
for the Group’s products. In addition, the
Group’s products have performance-
critical applications and high levels of
technical content and know-how. Product
development in this evolving environment
naturally entails the risk of changes in
product design, specification and range.
Failure to comply with all relevant regulatory requirements
could affect the Group’s reputation and/or its ability to operate
in certain markets or territories. The Group’s technologies and
intellectual property rights also need to be kept current through
continuous improvement and research and development, and
are susceptible to theft, infringement, loss and/or replication by
competitors.
STRATEGIC KEY
RISK KEY
Technology
Transformation
Talent
Increased
Decreased
No change
Read more on pages 30–31
Controls and mitigation
• The Group implemented business continuity planning (‘BCP’) at key locations to enhance the localised
continuity planning strategy operated at the facilities
Ownership
Divisional Executive Vice
Presidents
• The wide geographic spread of operations, purchasing and supply chain functions allows the Group to use
a range of techniques to address potential supply disruption, such as long-term purchase contracts, dual
sourcing, and ongoing research and development into alternative materials and solutions. The Group’s
global network of facilities also provides a degree of back-up capacity
Link to strategic
objectives:
Objectives 1 and 2
• The Group maintains a scheduled programme of maintenance and inspection of all equipment
• In certain markets, the Group uses preferred suppliers for key components and materials
• The Group maintains casualty, property and business interruption insurance
• The Group participates in a number of works councils and other represented employee forums, and seeks
to establish and maintain good relationships with its employees and unions
Change in risk level:
• The Group’s decentralised IT systems worldwide provide some resilience against the loss of production
or systems capability to the Group as a whole. Furthermore, the Group IT function maintains a formal
disruption recovery plan for the organisation. In response to COVID-19, our IT infrastructure has been
strengthened to support the seamless operation of our worldwide office and administrative functions under
remote working
• The Group has an embedded health and safety culture and operates a global health and safety policy, with
local health and safety operations in place in each manufacturing facility. Our health and safety protocols
were enhanced in response to COVID-19 to ensure a safer work environment and safeguards against
significant infection risk. Health and safety performance is monitored regularly by each division and by
the Group
• The Group has established a Global Operations Committee with representation from different functions, to
identify and discuss operational issues on a timely basis
• The Group operates in the automotive industry in which performance-critical technology evolves and
is adopted in a deliberate and measured manner. The Group’s products, materials and processes are
continually developed and enhanced through research and development and technical input
• The Group continues its commitment to invest significantly in alternative engineering solutions and the
development of more advanced designs and innovative products to ensure compliance with changes to
environmental regulations and customer demand
• The Group has developed, and is implementing, an engineering skills transition plan to ensure our
engineering resource has the necessary skills to support an enhanced electric vehicle product offering
• During 2022, the Group developed its strategy for a global footprint of e-Mobility Innovation Centres
(eMICs), which establishes an international network of technical centres focusing on research and
development. In addition, the Group has established regional application centres, which focus on
application engineering worldwide
• The Group developed formal product technology and development roadmaps in relation to thermal
management (coolant and refrigerant), to clearly outline the Group’s product development strategy in the
forthcoming years
• The Group seeks to maintain close relationships and technical partnerships with key customers, and enters
into joint development agreements with customers. In addition, the Group continues to explore non-organic
options to expand the Group’s technology platform and product offering
• The Group actively registers, manages and enforces its intellectual property rights
Chief Technology Officer
Link to strategic
objectives:
Objectives 1, 2 and 4
Change in risk level:
4949
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Principal risks and uncertainties
Continued
Principal risks
Description
Impact
Controls and mitigation
6
External risk:
Regulatory
compliance
The Group has operations, globally.
The markets in which the Group operates
are covered by a range of different
regulatory systems and complex
compliance requirements, and may be
subject to cycles, structural change and
other external factors, such as changes
in tariffs, customs arrangements and
other regulations. As a listed company,
TI Fluid Systems plc is also subject to
increasing regulatory requirements.
Significant changes to the different regulatory systems and
compliance requirements, in and between the countries and
regions in which the Group operates, may have a negative impact
on the Group’s operations in a particular country or market.
The accelerating pace of change towards full electrification
of vehicles is expected to continue to bring tightening
legislative requirements.
7
Strategic risk:
Talent attraction
and retention
The future success of the Group is
dependent upon the continued services of
key personnel and the acquisition of new
talent to address the skills gap as our end
markets and product offerings change over
time. Succession and change management
planning is a routine consideration given
some of the Group’s key global positions at
all levels, including business unit, division
and Group.
The Group competes globally to attract and retain personnel in
a number of key roles. A lack of new talent with new skills, the
inability to retain and develop existing talent, replace retiring
senior management or effectively manage leadership transitions,
could hinder the Group’s operations and strategy delivery. A
loss of key personnel, with associated intellectual property and
expertise, could disrupt our business and strategy. In a number
of local markets, the Group may experience a shortage of skilled
and experienced personnel for certain key roles. Global social
trends and events may focus current and potential employees on
the desirability of our businesses as a place of employment.
8
External risk:
Cyber event
The Group is dependent on the robustness
and reliability of its internal and external IT
systems for day-to-day operations. Disruptive
cyber events (including malware attacks,
phishing, and password attack etc) remain
a serious threat to the smooth running of the
business. The level of cyber attack faced by
businesses has been increasing, and some
correlation with increasing.
Should the Group, or its key cloud service suppliers, be affected
by a cyber event (denial of service, data breach, compromise)
resulting from an external or internal threat, this could result
in suspension of critical business services and loss of data.
Subsequently, the Group could receive fines, suffer reputational
damage, and be unable to meet customer expectations
(leading to a loss of customer confidence). Prolonged outages
could further erode trust in the business, resulting in long-term
reputational damage.
The pandemic continues to affect our
operational dynamic with a higher level of
remote working becoming an established
practice. If uncontrolled, exposure through
unprotected mobile devices and remote
access can be significant.
5050
• The markets and any changes to the regulatory environment in which the Group operates, including tariffs
Chief Legal & ESG Officer
and trade policies, are continually monitored and assessed
• Changes to the Group’s investment strategy and cross-border relocation might result from a significant
change in the regulatory environment in a particular country or region
• Through the work of the ESG Steering Committee, the Board is actively monitoring the opportunities and
threats posed by climate change, to both the Group’s product offering and its operations, and proactively
refocusing development and engineering work in this area. The Board receives regular updates on changes
in regulatory requirements in relation to ESG (particularly the reporting requirements), and ensures that
appropriate measures are in place to comply with new and forthcoming requirements
• Where relevant or necessary, the Group obtains assistance from external experts and advisers in
considering and responding to new requirements
Change in risk level:
Ownership
and Company Secretary
Link to strategic
objectives:
Objective 4
• Focus throughout the Group on adherence to our Code of Business Conduct (‘COBC’), including ongoing
training and the review of policies and procedures
• During the year, the Group formed a separate Group Internal Controls function led by the Vice President
Risk & Global Controller, and implemented a formal three lines of defence structure for risk management
and controls. The Group Internal Controls function developed a roadmap for an internal control optimisation
programme to further strengthen the Group’s internal control environment through the three lines of
defence model, paving the way to meet the expected forthcoming requirements on internal control reporting
under the UK corporate governance reform
• The Group has in place incentive arrangements, including bonuses, pensions and long-term incentive plans
Chief IT, HR &
• The Group continues to enhance its activities to further embrace diversity and inclusion across its
operations. Culture awareness training is ongoing across our organisation
• A new, skills-focussed, training and development initiative was being rolled out across the Group in 2022
• The Group operates established recruitment and development programmes
• Succession plans continue to be reviewed for relevant key positions
• The wide organisation structure across the organisation’s geography provides some resilience to labour
issues in each location, as leadership and specialists travel to areas of need to provide support
The Company has an established cyber security programme, which aims to mitigate the risks and operational
Chief IT, HR &
disruption caused by cyber events. The programme is continually updated and tested, and includes:
Communications Officer
• backup processes, endpoint protection, encryption of data, enhanced cloud-based security tooling and
protection, web and email content protection
• use of cyber software to enhance protection
•
identity and access management and multi-factor authentication
• continued cyber security awareness training for all employees
• vulnerability and penetration testing for external and internal IT services and websites
• data security audits
Communications Officer
Link to strategic
objectives:
Objectives 5 and 6
Change in risk level:
Link to strategic
objectives:
Objective 4
Change in risk level:
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Principal risks
Description
Impact
6
External risk:
Regulatory
compliance
The Group has operations, globally.
Significant changes to the different regulatory systems and
The markets in which the Group operates
compliance requirements, in and between the countries and
are covered by a range of different
regulatory systems and complex
regions in which the Group operates, may have a negative impact
on the Group’s operations in a particular country or market.
compliance requirements, and may be
The accelerating pace of change towards full electrification
subject to cycles, structural change and
of vehicles is expected to continue to bring tightening
other external factors, such as changes
legislative requirements.
in tariffs, customs arrangements and
other regulations. As a listed company,
TI Fluid Systems plc is also subject to
increasing regulatory requirements.
7
Strategic risk:
Talent attraction
and retention
The future success of the Group is
The Group competes globally to attract and retain personnel in
dependent upon the continued services of
a number of key roles. A lack of new talent with new skills, the
key personnel and the acquisition of new
inability to retain and develop existing talent, replace retiring
talent to address the skills gap as our end
senior management or effectively manage leadership transitions,
markets and product offerings change over
could hinder the Group’s operations and strategy delivery. A
time. Succession and change management
loss of key personnel, with associated intellectual property and
planning is a routine consideration given
expertise, could disrupt our business and strategy. In a number
some of the Group’s key global positions at
of local markets, the Group may experience a shortage of skilled
all levels, including business unit, division
and experienced personnel for certain key roles. Global social
and Group.
trends and events may focus current and potential employees on
the desirability of our businesses as a place of employment.
8
External risk:
Cyber event
The Group is dependent on the robustness
Should the Group, or its key cloud service suppliers, be affected
and reliability of its internal and external IT
by a cyber event (denial of service, data breach, compromise)
systems for day-to-day operations. Disruptive
resulting from an external or internal threat, this could result
cyber events (including malware attacks,
in suspension of critical business services and loss of data.
phishing, and password attack etc) remain
Subsequently, the Group could receive fines, suffer reputational
a serious threat to the smooth running of the
damage, and be unable to meet customer expectations
business. The level of cyber attack faced by
(leading to a loss of customer confidence). Prolonged outages
businesses has been increasing, and some
could further erode trust in the business, resulting in long-term
correlation with increasing.
reputational damage.
The pandemic continues to affect our
operational dynamic with a higher level of
remote working becoming an established
practice. If uncontrolled, exposure through
unprotected mobile devices and remote
access can be significant.
STRATEGIC KEY
RISK KEY
Technology
Transformation
Talent
Increased
Decreased
No change
Read more on pages 30–31
Controls and mitigation
• The markets and any changes to the regulatory environment in which the Group operates, including tariffs
and trade policies, are continually monitored and assessed
• Changes to the Group’s investment strategy and cross-border relocation might result from a significant
change in the regulatory environment in a particular country or region
• Through the work of the ESG Steering Committee, the Board is actively monitoring the opportunities and
threats posed by climate change, to both the Group’s product offering and its operations, and proactively
refocusing development and engineering work in this area. The Board receives regular updates on changes
in regulatory requirements in relation to ESG (particularly the reporting requirements), and ensures that
appropriate measures are in place to comply with new and forthcoming requirements
Ownership
Chief Legal & ESG Officer
and Company Secretary
Link to strategic
objectives:
Objective 4
• Where relevant or necessary, the Group obtains assistance from external experts and advisers in
considering and responding to new requirements
Change in risk level:
• Focus throughout the Group on adherence to our Code of Business Conduct (‘COBC’), including ongoing
training and the review of policies and procedures
• During the year, the Group formed a separate Group Internal Controls function led by the Vice President
Risk & Global Controller, and implemented a formal three lines of defence structure for risk management
and controls. The Group Internal Controls function developed a roadmap for an internal control optimisation
programme to further strengthen the Group’s internal control environment through the three lines of
defence model, paving the way to meet the expected forthcoming requirements on internal control reporting
under the UK corporate governance reform
• The Group has in place incentive arrangements, including bonuses, pensions and long-term incentive plans
• The Group continues to enhance its activities to further embrace diversity and inclusion across its
operations. Culture awareness training is ongoing across our organisation
• A new, skills-focussed, training and development initiative was being rolled out across the Group in 2022
• The Group operates established recruitment and development programmes
• Succession plans continue to be reviewed for relevant key positions
• The wide organisation structure across the organisation’s geography provides some resilience to labour
issues in each location, as leadership and specialists travel to areas of need to provide support
Chief IT, HR &
Communications Officer
Link to strategic
objectives:
Objectives 5 and 6
Change in risk level:
The Company has an established cyber security programme, which aims to mitigate the risks and operational
disruption caused by cyber events. The programme is continually updated and tested, and includes:
Chief IT, HR &
Communications Officer
• backup processes, endpoint protection, encryption of data, enhanced cloud-based security tooling and
protection, web and email content protection
• use of cyber software to enhance protection
•
identity and access management and multi-factor authentication
• continued cyber security awareness training for all employees
• vulnerability and penetration testing for external and internal IT services and websites
• data security audits
Link to strategic
objectives:
Objective 4
Change in risk level:
5151
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Taskforce on Climate-Related Financial
Disclosures (TCFD)
Cause
Speed
Impacts
Unprecedented
Human influence is the
main driver of warming,
increasing frequency
and severity of extreme
weather
On course to reach
1.5°C of warming within
the next two decades –
current warming is 1.1°C
Every increment of
warming matters and
leads to more dangerous
and costly impacts
Temperature and
sea-level rise, glacial
retreat, ocean warming
and acidification
occurring at record rates
Transformational
Change
Limiting warming
to 1.5°C by the end
of century is within
reach but requires
transformational change
This is the make-or-break decade for limiting temperature rise to 1.5°C
IPCC. 2021© Climate Change 2021: The Physical Science Basis. Contribution of Working
Group I to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change
Climate-related risks,
opportunities, and
financial impacts
Background and framework
Governments, investors, and industry have
come to realise that urgent and impactful
action to address climate change is needed.
Automotive OEMs in every major market
have announced ambitious plans to address
climate change through the electrification
of the vehicle fleet and significant
decarbonisation of their own manufacturing
operations and supply bases. In addition to
public announcements and press coverage,
the Group’s commercial and engineering
teams are in regular contact with our OEM
customers; over the last several years, we
have seen, first hand, the growing investment,
activity and definition around both powertrain
electrification and supplier sustainability in
the form of advanced development activities
and quoting packages for BEV and HEV
programmes as well as business awards
that include supplier commitments to reduce
greenhouse gas emissions. Likewise,
investors, regulators and consumers have
clearly communicated the expectation that all
businesses must take demonstrable actions
to improve environmental sustainability
as well as climate-related analysis
and disclosures.
As a global supplier and leader in the
automotive industry, TI Fluid Systems is
committed to supporting vehicle electrification
with its advanced products and to reducing
CO2(e) emissions from its operations. The
financial impact of climate change on the
Group can be viewed as falling into the
following broad categories of risks and
opportunities:
• Vehicle electrification. The Group will
have market and technology risks and
opportunities as our OEM customers shift
to a lower carbon economy by increasing
the electrification of vehicles (i.e. HEVs
and BEVs replacing ICEs).
• Sustainability transition. The Group will
have operational risks and opportunities
as it strives to manufacture its products in
a more environmentally responsible and
sustainable manner.
• Direct climate impact. The Group will
have physical risks and opportunities from
climate change, such as flooding, sea level
rise, and changing water availability and
quality, which could affect some of the
Group’s global locations.
In keeping with the disclosure framework
recommended by the TCFD, the following
discussion of climate-related financial impact
will be organised around four elements:
strategy and financial planning, governance,
risk management, and metrics and targets.
Strategy and financial planning
The impacts of climate-
related risks and
opportunities on the Group’s
strategy, business and
financial planning
Vehicle electrification
The automotive industry is responding
to climate change, primarily, through the
electrification of vehicle powertrains. Over
the next decade, HEV and BEV platforms
are forecasted to grow dramatically, while
ICE platforms will decline. See our markets
on pages 20–21. This change in the market
is the most significant risk and the largest
opportunity for the Group.
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TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022
Our current sustainability initiatives, including
our CO2(e) emissions reduction targets, and
related financial analysis and planning are
based on a base-case scenario reflecting
the current commitment from the COP21
Paris Agreement to limit global temperature
increases over the next century to 2°C. In
the coming years, we expect to expand our
analysis to include a scenario reflecting the
risk of a 1.5°C and a 4°C global temperature
rise trajectory and associated acceleration
in global climate change mitigations for
disclosures in the future.
See Note 1.23 to Financial Statements on
page 135 for more information.
Direct impacts
The Group may have potential physical risks
from climate change, such as flooding, sea
level rise, and changing water availability
and quality, which could affect the Group’s
locations and operations and the need to re-
locate several facilities.
The Group has assessed, and will continue
to assess, all of its manufacturing locations
under 1.5°C, 2°C, and 4°C global temperature
rise. At this time, no short- or medium-term
physical risks have been identified. Several
long-term impacts have been identified.
See Climate-related physical risks on page 55
for more information.
Where we have identified long-term risks,
we expect that our existing business
processes will be sufficient to mitigate and
manage the risks. For example, we will locate
new manufacturing facilities (or relocate
existing facilities) through our property
lease acquisition and renewal procedures,
which are being updated to incorporate
climate-related issues. Of course, as our
understanding of the longer-term impacts of
climate change are better understood, we will
continue to further assess our risks and refine
our financial planning, as appropriate.
Electrification is at the heart of the Group’s
strategy. We recognise the risk of a declining
addressable market for our ICE products
(primarily the FTDS division) and the
opportunity of an increasing addressable
market for our thermal products (primarily the
FCS division) due to the increased content
in EVs. See our strategy on pages 30–31 for
more information.
The Group has modelled the potential
financial impact of the expected change in mix
between ICE, HEV and BEV platforms over
the medium and long term. Our markets on
pages 20–21.
Our analysis is based on current business
awards, S&P Global Mobility forecasted
production volumes and mix, and
management estimates, supported by third-
party analysis, for longer-term production
volumes and mix. The model also uses
management estimates of contribution
margin, fixed cost, research and development
expenditure, capital expenditure and working
capital. With respect to our FTDS division,
management has modelled the rate of decline
for ICE and HEV products after 2027 under
a scenario reflecting the current commitment
from the COP21 Paris Agreement to limit
global temperature increases over the next
century to 2°C. With respect to the FCS
division, a conventional single-scenario,
positive, long-term expected growth rate
was used to reflect the increased rate of BEV
adoption and the related opportunity for sales
growth in thermal management and other
BEV-specific product offerings.
A gradual decline in ICE and HEV platforms
is expected after 2028, as BEVs represent a
rapidly-increasing share of the market. During
this transition time, the FTDS division will
optimise the usage of its current investment
base for ICE and HEV products and new
capital investment will be limited to support
our customers in specific ICE and HEV
projects, with special focus on Asia, where our
plastic fuel tank business continues to grow
as the market converts from metal to plastic
tanks. FTDS technical and staff resources
will be gradually deployed to our FCS thermal
business. Our FTDS manufacturing footprint
will also be assessed with available capacity
expected to be used to support FCS thermal
business growth opportunities.
According to our modelling both of the
Group’s divisions (FTDS and FCS) are
expected to continue to have revenue growth
in the short and medium term (five years)
with outperformance of production volume in
line with past performance. In the long-term,
the Group expects a gradual and steady
reduction of FTDS revenues that will be offset
by increasing FCS revenues from our existing
thermal products for BEV platforms.
Revenue expansion from new thermal
products and systems, including opportunities
for M&A and/or joint venture for adjacent
thermal products, have not been taken into
consideration in the model and would create
further revenue growth opportunities.
Further details of how climate change has
been considered in our impairment testing
model are set out in Note 19 to Financial
Statements on pages 159–163.
Sustainability transition
In response to climate-related regulatory
requirements and the expectations of our
stakeholders, including our customers,
investors, and employees, the Group must
strive to manufacture our products in a more
environmentally responsible and sustainable
manner.
First and foremost, with analytical and
advisory support from Schneider Electric,
the Group has adopted a new CO2(e)
emissions reduction target that calls for a
50% reduction of Scope 1 and 2 emissions
and a 30% reduction of Scope 3 emissions,
in each case by 2030 on an absolute basis
from a 2021 baseline. Our new targets have
been submitted to the Science-Based Target
initiative (SBTi) for review and validation.
The Group will need to make operational
changes and investments to support reduced
CO2(e) emissions, as well as more efficient
use of water and the elimination of landfill
waste. In addition, the Group will need to
comply with enhanced disclosure and,
potentially, increased regulation and taxes
related to energy and CO2(e) emissions. Over
time, the Group may recognise lower energy
and operational costs from conservation
and efficiency investments, as well as
reputational benefits with our customers,
investors, employees and communities from
decarbonisation.
The Group has incorporated this necessary
transformation to more sustainable
operations into its strategy. We will not just
make products for a ‘greener world’, but
will transform business processes and
operations to become a more sustainable
and socially-responsible organisation.
For more information, see Sustainability
on pages 40–41 and our strategy on
pages 30–31.
Costs to support our sustainability initiatives
have been incorporated in our financial
planning and forecasted cash flows. These
costs include capital expenditure to improve
efficiencies in the production process as well
as reducing the Group’s carbon footprint,
and an additional budget for increasing the
mix of renewable energy within the Group’s
electricity consumption and purchasing
renewable energy attribute certificates.
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OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Taskforce on Climate-Related Financial
Disclosures (TCFD) Continued
Governance
The Group’s governance
around climate-related risks
and opportunities
Board of Directors
The Board of Directors, directly and
through its committees, provides
significant governance and oversight of
climate-related matters.
Over the course of several years, the
Board has reviewed, refined and approved
the Group’s strategy to address vehicle
electrification driven by climate change.
The Board provides ongoing oversight and
receives regular updates from executive
management on relevant metrics in order
to assess the execution of the strategy,
and whether any changes to the strategy
are needed, including engineering and
commercial resources, product portfolio and
technology roadmap, EV business awards
and opportunities, and the status of the
inorganic process.
The ESG Steering Committee of the Board
provides guidance and oversight on all
elements of the Group’s sustainability
programme, including the scope of
environmental initiatives to address the
sustainability transition driven by climate
change. The ESG Steering Committee
meets regularly with senior management
throughout the year and reports to the Board
on its activities and sustainability progress
by the Group. In particular, the ESG Steering
Committee reviewed and recommended the
adoption of the Group’s recently updated
Scope 1, 2, and 3 emissions reduction targets.
The Remuneration Committee of the Board,
with input from the ESG Steering Committee,
establishes performance targets for the
Company’s Annual Bonus and Long-Term
Incentive Plans, which align with both the
Group’s electrification strategy and its
sustainability transition in order to align senior
management with interests of the Group’s
wider stakeholders. The Remuneration
Committee regularly reports to the Board
on its activities. See the Statement by the
Chair of the Remuneration Committee on
pages 90–92.
In addition, the Board reviews and approves
the Group’s annual budget and medium-term
plan to ensure that the financial and human
resources needed to implement the Group’s
electrification strategy and environmental
initiatives are properly contemplated and
included in budgets and business planning.
We have established the following time
frames: short term 0–1 years, medium
term 1–5 years, and long term 6–15 years,
consistent with our most recent CDP public
disclosure. We fully understand that most
climate change will take place in what we have
defined as the long term time frame.
Management
Within the Group’s management organisation,
the Executive Committee (CEO and other
C-level Executives and EVPs), together with
the Global EHS Director and the VP Risk &
Global Controller, are primarily responsible
for identifying and assessing climate-related
impacts and leading the implementation
of the Group’s electrification strategy and
sustainability transition.
Several cross-functional teams, led by the
Global EHS Director, have been established
to manage specific aspects of the Group’s
environmental initiatives, including
arrangements to increase the Group’s use of
renewable-sourced electricity and identifying
capital expenditure and other energy
conservation projects to reduce the level of
the Group’s CO2(e) emissions. The Global
EHS Director, with support from the Group’s
risk management team, is responsible for
assessing potential direct physical climate-
related impacts.
Budgeting and action plans relating to
the Group’s electrification strategy and
environmental initiatives are communicated to
the entire organisation in a top-down manner
and are incorporated into the annual budget
and medium-term plan. Over the next several
years, we expect to conduct more quantitative
analysis for a more detailed assessment of
the potential financial impact.
Risk management
The processes used by
the organisation to identify,
assess, and manage
climate-related risks
Generally. At this stage, climate-related
risks appear to be included within
already-identified and assessed risk
categories: production volume, technology
change, regulation, manufacturing costs/
efficiency, and business continuity. In
other words, climate change appears to
be increasing the pace and intensity of
previously-identified risks rather than
presenting fundamentally new or different
risks to our business. For more information
on our process to identify and assess risks,
see our principal risks and uncertainties on
pages 42–51.
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TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 • Flooding risks: We identified 11 plants
and one office that we would expect to
experience annual coastal flooding in the
1.5°C scenario. We identified 12 plants and
two offices that would expect to experience
annual coastal flooding in the 2°C scenario
and an additional three plants and one
office that would be expected to experience
annual coastal flooding in the 4°C scenario.
Of those plant locations, all but three are in
areas that are currently planning, building,
or have in place, sea level rise defence
measures. The three unprotected plant
sites may need to be relocated in the next
10–15 years, which, would be considered
not to have a material impact on operations
or represent a material cost, and could
be accomplished as part of our normal
facilities and restructuring processes.
All office locations are situated in large
urban settings likely to be protected.
Read more in Sustainability on
pages 40–41
Vehicle electrification. We identify,
assess, and manage the impact of
vehicle electrification through our existing
commercial, engineering and purchase
processes. For the medium term, we work
closely with our OEM customers through our
commercial and engineering organisations to
understand their fluid system requirements,
and to identify advanced engineering and
quoting opportunities for upcoming vehicle
programmes. For the long term, we not only
utilise planning and development information
from our OEM customers, but also refer
to production volume forecasts from S&P
Global Mobility and other industry sources.
All quoting and pricing arrangements go
through our screening process to ensure that
business awards meet expected financial
metrics. Necessary capital investments must,
depending on magnitude, be approved by
various levels of management and, in certain
cases, the Board of Directors.
Sustainability transition. Environmental
initiatives to progress our sustainability
transition are identified, assessed and
managed by cross functional teams, led
by the Global EHS Director, who work with
division management, including regional and
plant-level management within our existing
facilities, manufacturing engineering and
capital expenditure processes. The Group’s
actions, with respect to the sustainability
transition, are being transitioned to a 1.5°C
scenario in conjunction with the submission of
our CO2(e) emissions reduction targets.
Direct climate impact. To identify and assess
direct physical impacts of climate change,
we modelled three scenarios with 1.5°C, 2°C
and 4°C global temperature increases. We
used the Intergovernmental Panel on Climate
Change IPCC Interactive Atlas to help predict
when temperatures would reach 1.5°C,
2°C and 4°C, respectively. We did this by
taking the median date using the 34 models
available for the 1.5°C and 2°C scenario and
20 models for the 4°C scenario. We estimated
the 2°C change to occur in 2040 and the 4°C
degree change to occur in 2068.
We then evaluated weather-related conditions
(wind/storm, hail, tornado, wildfire, and
lightning hazards) for the short and medium
term in collaboration with our global insurance
broker. We also modelled the overall risk
to water quality for our locations using the
Aqueduct Water Atlas Risk and sea level risk,
and associated predictions for annual coastal
flooding using sea level rise and coastal
flooding maps from Climate Central.
• Weather risks: None of our locations are
expected to have an increased impact from
climate-related weather conditions in the
short term. We would expect long-term
trends to increase severe weather events.
This has not been evaluated, but we are
continuing to look at methodology to
improve this evaluation
• Water risk: Of our current 129 locations,
30 are expected, in the long term, to
experience high, or extremely high,
overall water quality risk. One location is
currently experiencing difficulty in procuring
water. We have now established water
conservation targets for all locations,
globally
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OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Taskforce on Climate-Related Financial
Disclosures (TCFD) Continued
Metrics and targets
The metrics and targets used to assess
and manage relevant climate-related risks
and opportunities
Metrics
Vehicle electrification. The Group tracks its annual revenue, as well
as expected lifetime revenue for new business awards, by location,
division, country, and region as well as vehicle programme/platform
type (ICE, HEV and BEV) in order to monitor progress with respect to
our vehicle electrification strategy.
Sustainability transition. In 2022, the Group tracked the following
metrics to assess risks and opportunities in line with our sustainability
transition:
• Scope 1 CO2(e) emissions by location, division, country and region
• Scope 2 CO2(e) emissions by location, division, country and region
• Energy consumption including fuel and purchased or acquired
electricity
• Energy generated at our locations
• Water withdrawals, discharges and consumption
• Waste generated at our sites
Please note Scope 1 & 2 emissions are calculated using market and
location based GHG Protocol methodology. In our annual reporting we
provide market-based emission reporting. Location based reporting is
publicly available via our CDP disclosure.
We also monitor and review our ISS QualityScores as well as our rating
reports from CDP and EcoVadis.
Scope 3 CO2(e) emissions are relevant to our business. Consistent
with the GHG Protocol, we have developed a Scope 3 emissions
inventory for 2021 and 2022. Our 2021 baseline year Scope 3
emissions incorporated eight of the 15 Scope 3 categories defined by
the GHG Protocol.
Our total 2021 Scope 3 emissions was 1,206,839 tonnes of CO2(e).
This represents approximately 83% of our total emissions mass
in 2021. In 2022, our Scope 3 emissions was 1,227,738 tonnes of
CO2(e), representing 83% of our total group-wide emissions. A detailed
breakdown of our 2022 Scope 3 emissions is provided below.
Category of Emission
Purchase goods & services
Capital goods
Fuel & energy-related Activities
Upstream and downstream transport (combined)
Waste generated in operations
Business travel
Employee commuting
Upstream leased assets
1Processing of sold products
2Use of sold products
EoL of sold products
3Downstream leased assets
3Franchises
3Investments
2021
895,021
187,329
62,969
11,159
5,660
971
42,206
318
0
0
2022
934,094
135,586
66,908
39,325
4,031
2,354
43,618
360
0
0
1,206
1,462
0
0
0
0
0
0
Direct climate impact. Given the relatively gradual and long-term
nature of direct climate impact on our manufacturing facilities (weather,
water and flooding), we do not currently have applicable metrics as
these risks would be expected to be handled as part of our normal
footprint and facility management processes.
Targets
Vehicle electrification. The Group has established annual booking
targets for HEV and BEV programmes, which have been incorporated
into the Annual Bonus Plan as performance criteria. See the
Remuneration report on pages 96–105 for more information.
Sustainability transition. The Group updated its targets for the
absolute reduction of Scope 1, 2 and 3 CO2(e) emissions and also
established water conservation objectives. See Sustainability on
pages 40–41 for more information.
Direct climate impact. Given the relatively gradual and long-term
nature of direct climate impact on our manufacturing facilities (weather,
water and flooding), we do not currently have applicable targets as
these risks would be expected to be handled as part of our normal
footprint and facility management processes.
In accordance with Listing Rule 9.8.6 R(8), the table maps the
Company’s climate-related financial disclosures in the foregoing
section to the specific Recommendations and Recommended
Disclosures of the Task Force on Climate-Related Financial
Disclosure. The Company has reviewed the Task Force on Climate-
related Financial Disclosures - Implementing the Recommendations
of the Task Force on Climate-related Financial Disclosures, published
in October 2021. There is no specific automotive sector guidance,
as such, we have reviewed and considered the All Sector Guidance
contained in the document as we developed the current version of our
TCFD disclosure.
The Company’s disclosures are consistent with the TCFD
Recommendations and Recommended Disclosures, except in the one
instance noted (with the reasons for not including such disclosures,
steps being taken to make the disclosures in the future and expected
timeframe to make the disclosures are discussed in the paragraph
below and in the referenced pages).
We have begun the research and selection process for a consultant
to support our efforts to develop multiple scenarios. We anticipate
selecting a consultant in Q2 of 2023 and developing robust scenarios
for disclosure in our next annual report.
Read more in the Chair’s Introduction to Corporate Governance on
pages 70–71
Read more on the Board Succession in the Nomination Committee
report on pages 80–82
Read more on the Compliance Statements on pages 62–63
1 The processing of our products by our customers was not included in our Scope 3 emissions as we sell completed products that are simply assembled into vehicles.
The emissions from the assembly of our products are considered negligible.
2 Our products do not directly consume energy and, therefore, no indirect use phase emissions are included in our Scope 3.
3 TIFS has no downstream leased assets, franchises or investments.
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TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 TCFD Recommended Disclosures
Reference pages
Consistent
Governance
Describe the board’s oversight of climate-related
risks and opportunities
See Governance – Board of
Directors on pages 72–74
Consistent
Strategy
Describe management’s role in assessing and
managing climate-related risks and opportunities
See Governance –
Management on page 54
Describe the climate-related risks and
opportunities the organisation has identified over
the short, medium and long term
See Background and
Framework and Strategy
and Financial Planning on
pages 52–53
Consistent
Consistent
Describe the impact of climate-related risks and
opportunities on the organisation’s business,
strategy, and financial planning
See Strategy and Financial
Planning on pages 52–53
Consistent
Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C or
lower scenario
See Strategy and Financial
Planning on pages 52–53
Consistent except only
one scenario used for
sustainability transition
Risk management
Describe the organisation’s processes for
identifying and assessing climate-related risks
See Risk Management on
pages 54–55
Consistent
Describe the organisation’s processes for
managing climate-related risks
See Risk Management on
pages 54–55
Consistent
Describe how processes for managing climate-
related risks are integrated into the organisation’s
overall risk management
See Risk Management on
pages 54–55
Consistent
Metrics and targets
Disclose the metrics used by the organisation to
assess climate-related risks and opportunities
in line with its strategy and risk management
process
See Metrics and Targets on
page 56
Consistent
Disclose Scope 1, Scope 2, and, if appropriate,
Scope 3 greenhouse gas (GHG) emissions, and
the related risks
See Metrics and Targets on
page 56 and Sustainability
on pages 40–41
Consistent
Describe the targets used by the organisation to
manage climate-related risks and opportunities
and performance against targets
See Metrics and Targets on
page 56
Consistent
5757
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Chief Financial Officer’s report
We continue to make
impressive bookings in our
EV and HEV orders, recording
€1.3 billion of lifetime revenue
in each category in 2022 and
representing 76% of the total
new business wins.
Ron Hundzinski
Chief Financial Officer
Our revenue grew year over year despite some unfavourable mixed impacts in China, and we have made significant progress in our cost-recovery
efforts and maintained cash generation even with prolonged pressures on working capital. Our balance sheet remains strong, and our liquidity
position is healthy.
The Group continued to focus on strengthening operational performance and its underlying business, which will improve results in the medium
and longer term. Notably, we continue to make impressive bookings in our BEV and HEV orders, recording €1.3 billion of lifetime revenue in each
category in 2022, representing 76% of the total new business wins.
Our margin profile reflects the inflationary pressures that were present in all areas of our cost base, but an approximately 70% recovery of these
costs from our customer base offset a large portion.
Table 1: Key performance measures
€ millions
Adjusted measures*
Revenue
Adjusted EBITDA
Adjusted EBITDA Margin %
Adjusted EBIT
Adjusted EBIT Margin %
Adjusted Net Income
Adjusted Basic Earnings per Share
Adjusted Free Cash Flow
Statutory Measures
Revenue
Operating (Loss)/Profit
{Loss)/Profit for the Period
Basic (Loss)/Earnings per Share (€ cents)
Dividend (€ cents)
Constant
Currency %
Change
5.2%
Change
10.5%
Change
10.5%
2022
3,268.3
333.3
10.2%
180.0
5.5%
43.5
8.48
78.4
2022
3,268.3
(217.0)
(279.0)
(54.39)
2.54
2021
2,956.6
352.9
11.9%
212.6
7.2%
58.3
11.23
117.3
2021
2,956.6
126.8
16.0
2.76
3.39
*Adjusted measures are non-IFRS metrics and are reconciled in Note 3 and defined in the glossary in Note 37
Global light vehicle production (GLVP) remains a principal driver of the Group’s performance, and in 2022 increased to 82.4 million vehicles or
by 6.7% compared to the prior year. Post-pandemic volume recovery in the industry continues to be uneven, with different regions experiencing
different supply chain constraints in addition to challenging global macroeconomic conditions. Russia’s invasion of Ukraine created supply chain
issues in the automotive industry during the first half of the year, and this adversely impacted light vehicle production in Europe.
2022 revenue at actual rates increased by €311.7 million, or 10.5% year over year to €3,268.3 million, with growth in every significant region
except China, where the product mix was affected by the rapid transition to BEV platforms from domestic OEMs fuelled by government incentives
and unexpected COVID-19 related closures. Growth included a positive currency impact of €149.9 million, mainly as a result of a stronger US
dollar exchange rate against the Euro throughout 2022. On a constant currency basis, revenue increased by €161.8 million or 5.2% year over
year, providing slightly lower growth in comparison to GLVP volumes at 150 bps in the year.
We generated Adjusted EBIT of €180.0 million with an adjusted margin of 5.5%. The adjusted margin is a reflection of the significant global
inflationary pressures, which resulted in higher operating costs, the impact of COVID-19 in China, and the volatility caused by continuing semi-
conductor shortages. Operating loss of €217.0 million (2021: €126.8 million profit) includes an exceptional impairment charge of €317.4 million.
This is covered in more detail in the Operating Profit, Adjusted EBITDA and Adjusted EBIT discussion in this report.
5858
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022
Adjusted Net Income was €43.5 million, compared to €58.3 million in the prior year. The reported loss for the year was €279.0 million
compared to €16.0 million profit in 2021, with 2022 being impacted by the €297.3 million exceptional impairment charge net of tax. Basic EPS
was (54.39) Euro cents (2021: 2.76 Euro cents) and Adjusted Basic EPS was 8.48 Euro cents, compared with 11.23 Euro cents in 2021.
The Group delivered Adjusted Free Cash Flow of €78.4 million (2021: €117.3 million). With financing net cash outflows amounting to €62.4 million
(2021: €122.5 million), including €12.6 million (2021: €45.0 million) in respect of dividend payments and a favourable currency impact of
€3.4 million (2021: €24.3 million); year-end net debt was €624.9 million (2021: €600.3 million), inclusive of cash balances of €491.0 million
(2021: €499.1 million).
Automotive markets
Global light vehicle production volumes increased by 6.7% in 2022 to 82.4 million vehicles as shown in Table 2, with Europe impacted by the
conflict in Ukraine, and Asia Pacific benefitting from the accelerated adoption of local BEVs in China due to time-limited government incentives.
Table 2: Global light vehicle production volumes: millions of units
Europe, including Middle East and Africa
Asia Pacific
North America
Latin America
Total global volumes
Sources: S&P Global Mobility February 2023 and Company estimates
Change percentages calculated using unrounded data
Revenue
Our revenue in each of the regions, and by segment, is included in Table 3.
Table 3: Revenue by region and by segment €m
2022
% Change
18.1
47.2
14.3
2.8
82.4
0.6%
8.2%
9.7%
8.4%
6.7%
Total Group revenue
By segment
FCS
FTDS
By region
Europe and Africa
Asia Pacific
North America
Latin America
2022
3,268.3
1,869.7
1,398.6
1,207.1
1,114.3
895.8
51.1
2021
2,956.6
1,603.5
1,353.1
1,138.4
1,058.1
713.6
46.5
Change
% Change
% Change
at constant
currency
Constant
currency
revenue growth
vs LVP growth
311.7
10.5%
5.2%
(150) bps
266.2
45.5
68.7
56.2
182.2
4.6
16.6%
3.4%
6.0%
5.3%
25.5%
9.9%
10.3%
(0.9)%
5.8%
(0.5)%
12.9%
(2.6)%
360 bps
(760) bps
520 bps
(870) bps
320 bps
(1,100) bps
In Europe and Africa, where we ceased operations in Russia due to its invasion of Ukraine, revenue at constant currency increased by 5.8% year
over year compared to a light vehicle production (LVP) volume change of 0.6%, giving an outperformance of 520bps. This outperformance was
driven by the successful launch of new HEV/BEV programmes for both FTDS and FCS.
In Asia Pacific, revenue at constant currency decreased by 0.5% year over year compared to an LVP volume increase of 8.2%, giving an
underperformance of 870bps. Underperformance in the region was entirely in China and was driven by COVID-19-related closures and transition
to BEVs by domestic OEMs, as previously highlighted and compounded by COVID-19-related closures towards the end of the year.
In North America, revenue at constant currency increased by 12.9% year over year compared to an LVP increase of 9.7%, reflecting an
outperformance of 320bps. Outperformance in this region was mainly driven by strong growth in FCS due to thermal business launches and
ramp ups. FCS outperformed the market in that region by 660bps.
FCS revenue increased by €174.8 million, or 10.3% at constant currency from the prior year to €1,869.7 million, giving an outperformance of
360bps when compared to GLVP growth. The strong FCS revenue increase is driven by successful launches of thermal programmes in Europe
and North America, as well as cost recoveries from customers.
FTDS revenue at constant currency decreased by 0.9% to €1,398.6 million, underperforming GLVP growth by 760 bps, primarily driven by the
growth in BEV production, which reduced the addressable market, and the impact of the COVID-19-related shutdowns in China, where key
manufacturing facilities are located. Revenue was also impacted by the planned exit of part of the business in Latin America.
5959
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Chief Financial Officer’s report
Continued
Revenue at actual rates increased by
10.5% to €3,268.3 million due to a net
positive currency exchange rate impact of
€149.9 million, compared with the prior year,
in addition to the regional volume differences.
Compared to the same period last year, the
US Dollar depreciated by 11% against the
Euro, and the Chinese Renminbi by 7.2%.
With just under half of the Group’s revenue
denominated in these currencies, these
foreign exchange rate movements against the
Euro had a significant positive impact on the
Group’s revenue performance. On a constant
currency basis, revenue increased by 5.2%.
Operating loss, Adjusted
EBITDA* and Adjusted EBIT*
We use several financial measures to manage
our business, including Adjusted EBITDA
and Adjusted EBIT, which are non-IFRS
measures, but are measures of profitability
that have been used consistently by the
Group and give insight into the underlying
operating performance of the business.
The metrics are also used in certain of our
compensation plans and to communicate to
our investors. A reconciliation between the
reported measures and Adjusted EBITDA and
Adjusted EBIT is shown in Note 3.
The operating loss of €217.0 million
(2021: €126.8 million profit) was principally
due to the exceptional impairment charge of
€317.4 million. This was recognised following
a full impairment review triggered by a
reduction in the projected GLVP volumes over
the five-year review period and rising discount
rates. Our full impairment review is included
in Note 19 and shows that goodwill arising
from the Bain acquisition of €217.1 million was
impaired and other assets including property,
plant and equipment, other intangibles and
right-of-use assets of €100.3 million were
also impaired. The impairment was primarily
caused by the reduction of medium-term
GLVP forecasts, impact of cost pressures,
and increases in discount rates arising from
the increase in interest rates. Operating profit
before exceptional items was €100.4 million,
€26.4 million lower than last year
(2021: €126.8 million), where the operating
gains from higher revenues were more
than offset by the impact of the adverse
macroeconomic pressures that we continue
to face, most notably the inflationary effects
on raw materials and energy costs not fully
recovered from customers.
The Group continues its business
rationalisation programme, with the cost
saving activity started in 2020 continuing into
2022, and, in this regard, we incurred further
restructuring charges of €22.8 million related
to permanent headcount reductions across all
our businesses and the planned closure and
downsizing of manufacturing plants in Europe,
North America and Latin America. At the end
of 2022, there was a restructuring provision of
€7.8 million (2021: €15.8 million). The closure
of two plants in Russia were included as part
of the restructuring activities.
Adjusted EBITDA was €333.3 million
(2021: €352.9 million) and Adjusted EBITDA
margin was 10.2% (2021: 11.9%), impacted
by higher input costs due to rapid and high
levels of inflation, which added €143 million of
commodities, energy, freight and labour costs,
which were offset by customer recoveries of
€101 million, an approximately 70% recovery
rate. The operating costs have been impacted
by macroeconomic challenges relating to
inflationary cost pressures, the conflict in
Ukraine, which has adversely affected the
supply chain, as well as persistent global semi
conductor shortages.
Adjusted EBIT was €180.0 million
(2021: €212.6 million) and Adjusted EBIT
margin was 5.5% (2021: 7.2%), mainly
reflecting the cost pressures discussed
above. During the year, there were
programme-specific impairment charges of
€1.4 million (2021: €2.0 million).
By segment, FCS-Adjusted EBIT was
€95.0 million (2021: €117.9 million)
with an Adjusted EBIT margin of 5.1%
(2021: 7.4%). This reflects the adverse
macroeconomic conditions experienced
in the year, particularly rising material and
labour costs, which were only partially offset
by savings from restructuring activities and
manufacturing efficiencies.
FTDS Adjusted EBIT was €85.0 million
(2021: €94.7 million) with an Adjusted EBIT
margin of 6.1% (2021: 7.0%). The margin
reflects the tough operating conditions,
particularly inflationary pressures, some
of which were partially mitigated by having
customer contracts with indexing clauses for
resin cost changes.
Net finance expense
Net finance expense, before exceptional
items for the year was €58.7 million, an
improvement of €1.3 million from the
prior year excluding exceptional items.
This was mainly due to lower capitalised
fee amortisation expense following the
refinancing carried out in April 2021, and
higher interest income due to higher interest
rates, which were partially offset by higher
interest expense, particularly on the US
Term Loan due to higher base lending rates
for the US LIBOR. The exceptional finance
expense in 2021 related to the write-off of
previously capitalised fees upon refinancing
in April 2021.
* See Non-IFRS measures in Note 3 and defined in the glossary in Note 37
** See Non-IFRS measures in Note 14 and defined in the glossary in Note 37
6060
Taxation
The Group income tax charge, before
exceptional items, is €23.4 million, down
€17.5 million from 2021. This lower income tax
charge results in a decrease in the Effective
Tax Rate to 56.1% (2021: 62.0%) on revised
Group Profit Before Tax of €41.7 million
(2021: €67.0 million). The high effective
tax rate is reflective of the mix effect of the
increase in the level of profits generating a tax
charge, and an increase in the level of losses
where no deferred tax asset is recognised.
See Note 13 for more details.
The 2022 exceptional impairment charge of
€317.4 million has an associated deferred
tax credit of €20.1 million, which results in an
effective tax rate of 6.3%. The lower effective
tax rate is due to the fact that the majority of
the impairment is related to goodwill, which
does not carry a deferred tax balance and,
therefore, this portion of the impairment is not
tax effected.
For 2021, the Group reported an exceptional
US refinancing charge of €11.8 million with
a corporate tax benefit of €1.8 million and
a deferred tax benefit of €1.0 million, which
results in an exceptional effective tax rate of
23.7% (the US 2021 effective tax rate).
Adjusted Net Income* and loss
for the year
Adjusted Net Income is a component of the
Adjusted Basic EPS calculation and is also
used to guide our dividend policy calculation.
Adjusted Net Income was €43.5 million
in 2022, compared to €58.3 million in
2021, primarily driven by the unrecovered
inflationary cost increases discussed.
The loss for the year was €279.0 million
(2021: €16.0 million profit) reflecting the lower
operating performance and the exceptional
impairment charge net of tax of €297.3
million (2021: €9.0 million charge relating to
refinancing).
Basic EPS and Adjusted
Basic EPS**
On a statutory basis, Basic Earnings per
Share (‘EPS’) was (54.39) Euro cents for
the year (2021: 2.76 Euro cents), reflecting
the significant impairment charge booked
in the year. Adjusted Basic EPS was
8.48 Euro cents per share for the year
(2021: 11.23 Euro cents per share) reflecting
the decrease in Adjusted Net Income as
noted above.
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Dividend
The Company’s dividend policy is to target
an annual dividend of approximately 30%
of Adjusted Net Income, one-third payable
following the half-year results and two-thirds
following the Group’s final results.
The Board has decided to recommend
a final dividend of 1.54 Euro cents per
share amounting to €7.9 million. This final
dividend, together with the 2022 interim
dividend of 1.00 Euro cents per share paid in
September 2022, makes a total dividend for
2022 of 2.54 Euro cents per share, totalling
€13.0 million. The total dividend is 30% of
Adjusted Net Income. Subject to shareholder
approval at the Annual General Meeting on
16 May 2023, the final dividend will be paid
on 23 June 2023 to those on the register on
26 May 2023, the Dividend Record Date and
will be converted to Sterling at a fixed rate on
the same date.
The Group continues to remain confident in
its business model, cost flexibility, strong cash
generation, experienced management team,
and successful transition to electrification.
Cash flow performance
The Group uses Adjusted Free Cash Flow as
its primary operating measure of cash flow
performance.
In 2022, we generated an Adjusted Free Cash
Flow of €78.4 million (2021: €117.3 million).
The Adjusted EBITDA generated by the
Group was used to fund investment in capital
equipment and intangibles. There was a
€5.7 million decrease in property, plant and
equipment and intangibles expenditure,
and tax cash payments were €4.2 million
higher. The outflow from working capital of
€22.6 million was driven by the increase in
working capital balances arising from higher
sales and the adverse impact from the
prolonged challenges in the macroeconomic
environment and the increasing inventory
valuation driven by raw materials inflation.
The net cash outflow on restructuring was
€23.6 million, predominantly severance
payments (2021: €21.3 million).
Free cash flows of €50.9 million (2021:
€111.5 million) were offset by cash
outflows from financing of €62.4 million
(2021: €122.5 million), resulting in a reported
decrease in cash and cash equivalents
of €11.5 million (2021: €11.0 million).
Financing outflows include €11.4 million
for the Group’s purchase of its own shares
(2021: €8.3 million) associated with the
Group’s liabilities under the long-term
incentive plans, scheduled repayments of
borrowing €5.5 million (2021: €22.1 million
including the net impact of the 2022
refinancing), and €32.9 million (2021:
* Defined in the glossary in Note 37
€31.6 million) lease principal repayments.
In December 2021, the Associate holding in
SeAH FS Co. Ltd was sold for €15.5 million;
the proceeds of this transaction are excluded
from the calculation of Adjusted Free
Cash Flow.
The 2022 total dividend cash
outflow amounted to €12.6 million
(2021: €45.0 million).
Retirement benefits
We operate funded and unfunded defined
benefit schemes across multiple territories
with the largest being the US pension and
retiree healthcare schemes, which represent
53% of our net unfunded position at
31 December 2022 (2021: 52%), and
Germany pension and retiree schemes
19% (2021: 20%). We also have funded
schemes in the UK and Canada, which were
fully funded at 31 December 2022 (2021:
1%). While all our major plans are closed to
new entrants, a few allow for future accrual.
Our schemes are subject to periodic actuarial
valuations. Our net unfunded position
improved by €23.9 million from 31 December
2021 to €104.2 million at 31 December
2022, primarily due to discount rates
differential year-on-year and overall pension
investment performance.
Net debt* and net leverage*
Net debt, a non-IFRS measure, as at
31 December 2022 was €624.9 million, an
increase of €24.6 million from the prior year
end mainly due to adverse foreign exchange
movements on the US Dollar Term Loan of
€16.4 million and lower cash compared to
the prior year.
The Group’s net leverage ratio, also a
non-IFRS measure, was 1.9 times
Adjusted EBITDA as at 31 December 2022
(31 December 2021: 1.7 times), reflecting the
lower Adjusted EBITDA and higher Net Debt.
The Group excludes IFRS 16 lease liabilities
from its net debt and net leverage ratio. If the
IFRS 16 lease liabilities were to be included,
the Group’s net debt would be €774.5 million
(31 December 2021: €750.2 million) and net
leverage ratio would be 2.3 times Adjusted
EBITDA (31 December 2021: 2.1 times).
Liquidity
Our principal sources of liquidity have,
historically, been cash generated from
operating activities and amounts available
under our credit facilities, which consist of a
revolving facility under our cash flow credit
agreement of $225.0 million (€210.8 million).
Total available liquidity (cash plus available
facilities) on 31 December 2022 was €699.9
million (31 December 2021: €695.3 million).
Outlook
The current S&P Global Mobility estimate for
GLVP in 2023 is 85.1 million units although
the Group remains slightly more cautious
anticipating circa 83.0 million units due
to the potential for demand moderation
combined with ongoing supply constraints.
The Group expects the first quarter of 2023
to be impacted by the disrupted situation
in China, but expect this to resolve for a
stronger second half of the year. Mindful of
the geopolitical uncertainty, and the ongoing
but improving global supply constraints, the
Group expects revenue growth at constant
currency to return to outperformance
compared to GLVP volume growth this year.
With a strong focus on cost management,
cost recoveries, and a more stable production
environment, the Group expects Adjusted
EBIT margin to expand above 6% this year.
Adjusted Free Cash Flow is expected to return
to approximately 30% of Adjusted EBITDA.
Looking to the medium term, the Group is
well placed to use its good position in the
automotive industry transition to electric
vehicles and expects strong new business
bookings driving future revenue growth and
outperformance, in addition to returning to
historic profit margins.
Ron Hundzinski
Chief Financial Officer
15 March 2023
6161
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Compliance statements
In addition, a reverse stress test was
performed as part of the review (see further
details in the Viability statement section
below), and indicates there would need
to be a catastrophic reduction in volumes
to exhaust all available liquidity (available
undrawn borrowing facility and cash and cash
equivalent), which the Directors considered to
be highly unlikely.
The going concern scenarios do not
indicate a material uncertainty, which may
cast significant doubt over the Company’s
and Group’s ability to continue as a going
concern. Based on these assessments, the
Directors have a reasonable expectation
that the Company has adequate resources
to continue in operational existence for the
foreseeable future, and, accordingly, have
adopted the going concern basis in preparing
the consolidated financial statements. This
disclosure has been prepared in accordance
with the Financial Reporting Council’s UK
Corporate Governance Code.
Viability statement
In accordance with paragraph 31 of the
UK Corporate Governance Code 2018, the
Directors have assessed the viability of
the Group over a five-year period to
31 December 2027, which aligns to the
internal planning horizon and to the same
data set used in the impairment review. The
Directors’ assessment has been made with
reference to the Group’s current position and
prospects, the Group’s existing committed
finance facilities, the Group’s strategy,
business model and the potential impact
of the principal risks and how these are
managed, as detailed in this Strategic report.
The Group has a formalised process of
budgeting, reporting and review along with
procedures to forecast its profitability, capital
position, funding requirement and cash
flows, which form the Budget for 2023 and
Medium-Term Plan for 2024–2027. These
plans provide the basis for the Directors to
assess the adequacy of resources available
to the Group to meet its strategic business
objectives, both in the short and long term.
The plans for the period commencing on
1 January 2023 were reviewed and approved
by the Board on 13 December 2022, and
formed the base case model to which
downside scenarios were applied.
In making their assessment, the Directors
have used a combination of scenarios
and stress tests to the Group’s financial
projections to 31 December 2027, which
models the principal risks likely to have a
significant financial impact. The severe yet
plausible downside scenario assumed:
• 10% lower annual global production
volumes compared to the current global
light vehicle production forecasts – volumes
used: 2023 76.5 million units, 2024
79.2 million units, 2025 81.6 million units,
2026 82.9 million units, 2027 84.0 million
units (Principal risk: Global light vehicle
production volumes)
• 5% further increase in direct costs due to
increased commodity pricing and costs
associated with purchasing energy to
meet our carbon reduction commitments
(Principal risk: Competitor and customer
pricing pressure)
• 0.5% further sales price reduction
(Principal risk: Competitor and customer
pricing pressure)
• €8 million unexpected facility disruption,
only partially recovered from insurance
(Principal risk: Business continuity)
•
incremental annual capital expenditure
of €10 million (Principal risk: Product
development and changes in technology)
The combination of the above was considered
appropriate to capture any sustained impact
arising from current geopolitical tensions and
emerging economic challenges. The other
principal risks were not considered to have a
significant sustained financial impact.
The impact of this scenario would be to
reduce available liquidity by €670 million at
the end of the review period compared to
the base case, which showed €970 million
available liquidity. The Directors considered
the beneficial impact arising from potential
further remediation actions, but these were
not factored into the downside scenarios,
allowing further room for prudence.
In all of the scenarios assessed, including
the severe, yet plausible, scenario, there is
no indication of potential breaches of the
covenant on leverage ratio, and there remains
sufficient liquidity headroom from the Group’s
current liquidity. In the severe, yet plausible,
scenario, €4m would be drawn from the
revolving facility in Q2 2027 and repaid by the
next quarter.
Going concern
At 31 December 2022, the Group’s external
financing arrangements comprised
unsecured Senior Notes of €600.0 million
(maturing on 15 April 2029), a Euro term loan
of €260.3 million (repayable in instalments
until 16 December 2026), a US Dollar
term loan of $294.8 million (repayable in
instalments until 16 December 2026) and a
revolving credit facility (‘RCF’) of $225.0m
(maturing 16 July 2026). The amount utilised
under the RCF, as at 31 December 2022,
was €1.9 million, with the available undrawn
amount at €208.9 million. The only covenant
measure that exists applies to the RCF and
is a leverage ratio, which must be below 3.8x
Adjusted EBITDA when the revolving facility is
drawn over 35%.
In addition, the Group held €491.0 million
of cash and cash equivalent as at
31 December 2022. Actual available
liquidity, including cash and revolving facility
on 31 December 2022, was, therefore,
€699.9 million, which provides a strong basis
for the Group’s liquidity during the review
period.
The Directors have reviewed the likely
performance of the Group and the Company
for the period to the end of 2024 by reference
to an outlook using the approved Budget and
Medium-Term Plan as a base case scenario
(volumes used: 2023 83.0 million units, 2024
86.3 million units). The volumes used were
reduced from externally-available data to
anticipate a slower recovery to normalised
production volumes in light of the microchip
supply issue and other challenges facing the
industry.
A severe, yet plausible, downside scenario,
mindful of developing geopolitical tensions
and emerging economic challenges, was
produced comprising a 10% reduction in
global light vehicle production volumes
against external data (volumes used: 2023
76.5 million units, 2024 79.2 million units),
a further 5% annual reduction in operating
margin due to increased costs, a further 0.5%
annual sales price reduction and a €8 million
business disruption from an unexpected plant
closure. These reflect the downside impact of
principal risks facing the business in respect of
global light vehicle production volumes, cost
pressures (commodities and energy costs),
customer price reduction pressures and the
impact of a business disruption. The downside
scenario showed the availability of liquidity
headroom without the use of the revolving
credit facility. There were no covenant
breaches in the review period.
6262
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 The adverse impact on the Group’s
performance and management’s response
to the business downturn caused by the
COVID-19 pandemic, and the extended
secondary impacts on the industry caused
by microchip shortages, are discussed in
the CEO’s statement on page 12 and in the
CFO’s report on pages 58–61. The longer-
term risks associated with climate change on
the business are considered to be outside the
time horizon of this review, but are modelled
in the impairment review (see Note 19 to the
financial statements). The base case already
includes additional capital expenditure
related to carbon reduction projects as well
as additional costs arising from increasing
energy costs.
Considering the Group’s current financial
position, the geographic spread of its
operations, its established customer
relationships, assessment of the principal
risks, headroom under the committed banking
facilities and the Board’s assessment of
the Group’s future, the Directors have a
reasonable expectation that the Group will
be viable and able to continue in operational
existence meeting its liabilities as they fall due
over the period of assessment.
The Strategic report, which has been
prepared in accordance with the requirements
of the Companies Act 2006, has been
approved by the Board and signed on its
behalf by
Matthew Paroly
Company Secretary
15 March 2023
A reverse stress test was also performed
to determine the level of global light vehicle
production volume, which would extinguish
all cash. It was found that a reduction of 33%
for each year compared to the base case
(volumes used: 2023 55.6 million units, 2024
57.7 million units, 2025 59.2 million units,
2026 59.7 million units, 2027 60.4 million)
for the five years under review, excluding
any mitigating actions, would be required
to use all the Group’s cash without utilising
the $225 million revolving credit facility. This
contrasts with the 2020 global light vehicle
production drop of 16.1% compared to 2019
– the Directors do not believe that a sustained
33% drop is likely and, therefore, do not
regard this as a plausible outcome.
As described in Note 28 to the financial
statements, the Group successfully refinanced
its borrowings on 16 April 2021 by issuing eight-
year unsecured senior notes, which were used
to repay portions of the USD and EUR secured
term loans. At the same time, the $225 million
revolving credit facility and the USD and EUR
term loans were repriced and the maturities
extended by two years from 2024 to 2026.
This transaction served to diversify, stagger
and extend the average maturity from four
years to seven years.These facilities are in
place until 2026 and it is assumed they will
be renewed.
The prospects of the Group in the timescale
of the review are likely to be influenced by
its ability to adapt to the speed at which its
customers migrate to vehicle electrification.
In the medium term, the Group is well placed
to pick up considerable business on hybrid
electric vehicles with high content from high
pressure tanks in addition to the traditional
brake and fuel line products. The Group has
also demonstrated its ability to supply its
thermal product knowledge to full electric
vehicles and management are preparing to
leverage its technology, products, engineering
capabilities, customer relationships and
global footprint, built over the last 100 years,
to put it in an ideal strategic position to quickly
adapt, grow and be a leader in this new era for
the automotive industry.
6363
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Non-financial information statement
Under the Non-Financial Reporting Requirements of the Companies Act 2006, the Group is required to disclose additional non-financial
information in certain specified categories. The table below highlights how we have met the requirements and where to locate the information.
Reporting requirement
Description
Business model
The Group uses non-financial information in all aspects of its business, from the development of its
business model and strategy to reviewing and measuring principal risks and the performance of the
business. Our key non-financial performance indicator is customer satisfaction (PPM), which measures
our product quality and, indirectly, customer satisfaction.
Business model
Our strategy
Key performance indicators
Principal risks and uncertainties
Audit & Risk Committee report
Environmental
matters
Our business strategy places a focus on developing and supplying leading technology products to
help our customers make more environmentally-friendly vehicles. In addition, our own impact on the
environment, including our greenhouse gas emissions, is being measured, and reduction initiatives
are underway. We also seek to ensure responsible sourcing through our Global Supplier Requirements
Manual as well as our purchasing terms and conditions, which can be found on our website.
Business model: Contribution to environmentally-friendly products
Energy consumption
Employees
We value our workforce. We are strongly committed to the engagement, development and recognition
of our employees and seek to provide a positive culture together with an inclusive work environment.
We have programmes to protect their health and safety.
Business Model: Employee skills and motivation
Principal risks and uncertainties: Succession of key personnel
Code of Business Conduct
Core Values
Corporate responsibility:
– Employment policies, culture, diversity and employee engagement
– Health and safety programmes
Talent in the workforce
Pages
28–29
30–31
32–35
42–51
83–89
28–29
40–41
37
28–29
50
38
1
37
49
17
6464
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Reporting requirement
Description
Pages
Business
practices and
social matters
The Group continues to develop and strengthen its culture of compliance and has articulated to
all employees that each employee is expected to conduct business in an ethical and legal manner
consistent with our Core Values, and in strict accordance with our Code of Business Conduct (COBC).
The Group conducts regular training on our COBC, which includes elements related to anti-trust and
anti-bribery (including the UK Bribery Act). We take the protection of human rights seriously and have
zero tolerance for the use of slave and child labour. We also seek to make a positive impact in the many
local communities in which we operate through local charitable and outreach activities.
Business model: Compliance with laws and regulations
Principal risks and uncertainties: External risk
– Code of Business Conduct
– Ethics and compliance
– Community involvement
– Whistleblowing
Details of the Group’s Tax Strategy, as well as our policy regarding Slavery and Human Trafficking,
can be found on our website.
29
46
38
37
38
79
6565
OverviewStrategicGovernanceTI Fluid Systems plc | Annual Report & Accounts 2022FinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewStrategicGovernanceFinancial Governance
report
Improving fuel economy
6666
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 In this section
Corporate Governance at a glance
Chair’s Corporate Governance statement
Board of Directors
Corporate Governance report
Nomination Committee report
Audit & Risk Committee report
Statement by the Chair of the Remuneration
Committee
Implementation of the remuneration policy
Annual report on remuneration
ESG Steering Committee report
Directors’ report
Statement of Directors’ responsibilities in
respect of the financial statements
68
70
72
75
80
83
90
93
96
106
108
111
6767
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Corporate Governance at a glance
Geographical split
1
1
3
American
British
Belgian
Dutch
5
Board composition
Board gender balance
Board independence
Meeting attendance
98%Board meeting attendance
Board meeting attendance
Manfred Wennemer (resigned 18 May 2022)
Tim Cobbold (Chair from 18 May 2022)
Julie Baddeley
Hans Dieltjens
Ron Hundzinski
Susan Levine
Jane Lodge (appointed 6 June 2022)
Elaine Sarsynski
Trudy Schoolenberg (appointed 6 September 2022)
John Smith
Stephen Thomas
2
Jeffrey Vanneste (resigned 6 June 2022)
3/3
7/7
7/7
7/7
6/7
7/7
3/3
7/7
2/2
7/7
7/7
2/2
The table above shows the Directors’ attendance at meetings of the Board and
Committee(s) of which they were members and they were eligible to attend in the
period from 1 January 2022 to 31 December 2022.
5
5
6
Female
Male
Executive Directors
Non-Executive Directors
Non-Executive Directors including Non-Executive Chair, who was independent on
appointment and continues to exercise objective judgement in line with the role
Board skills matrix
Tim
Cobbold
Trudy
Schoolenberg
Jane
Lodge
John
Smith
Julie
Baddeley
Elaine
Sarsynski
Stephen
Thomas
Susan
Levine
Hans
Dieltjens
Ron
Hundzinski
Director
Independence
SID*
Independent**
Areas of Expertise
Automotive Industry
Experience
CEO Experience
Environmental &
Sustainability
Financial & Accounting
IT & Cyber Security
Mergers & Acquisitions
Operations
Product Development &
Innovation
Risk & Compliance
Strategy
*Female SID
**60% Independent Board Chair + 55.6% INEDS
6868
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 The Board
Leadership, strategy and development; controls and values
Hans Dieltjens
Chief Executive Officer and President
Ron Hundzinski
Chief Financial Officer
Committees
Nomination
Committee
Chair
Tim Cobbold
Members
Julie Baddeley
Audit & Risk
Committee
Chair
Jane Lodge
Members
Elaine Sarsynski
Trudy Schoolenberg
John Smith
Key responsibilities
Evaluating the size, structure
and composition of the Board
Assisting the Board in relation
to the composition of the
Board, including evaluating the
balance of skills, knowledge,
experience and diversity
Consideration of succession
planning
Key responsibilities
Reviewing and monitoring
the integrity of the financial
statements
Ensuring effective systems
of internal controls, internal
audit and risk management are
maintained
Advising on the appointment
of the external auditors
and monitoring non-audit
work undertaken by the
external auditor
Tim Cobbold
Independent Non-Executive Chair
Elaine Sarsynski
Independent Non-Executive Director
Julie Baddeley
Independent Non-Executive Director
Trudy Schoolenberg
Senior Independent Director
Susan Levine
Non-Executive Director
John Smith
Independent Non-Executive Director
Jane Lodge
Independent Non-Executive Director
Stephen Thomas
Non-Executive Director
Remuneration
Committee
Chair
John Smith
Members
Julie Baddeley
Jane Lodge
Key responsibilities
Setting the Remuneration
Policy for all Executive
Directors and the Chair
Determine remuneration
packages, including
bonuses and awards, for
Executive Directors and
Senior Management in
consultation with the Chair
and Chief Executive Officer,
as appropriate
ESG Steering
Committee
Chair
Elaine Sarsynski
Members
Julie Baddeley
Susan Levine
Hans Dieltjens
Ron Hundzinski
Key responsibilities
Recommending the
overarching Environmental,
Social and Governance (ESG)
vision and strategy road map
to the Board in order to ensure
that sustainability priorities
are met
Monitoring the Group’s
corporate responsibility,
sustainability and stakeholder
engagement activities
Read more on
pages 80–82
Read more on
pages 83–89
Read more on
pages 90–92
Read more on pages
106–107
The Executive Committee
Although not a formal Committee of the Board, the Executive Committee is established and led by
the CEO, and is responsible for executing strategy and the day-to-day management of the business.
For the year ended 31 December 2022, the Company has applied all the main provisions of the UK Governance Code and has complied with all of the provisions.
Further details can be found in the Nomination Committee report on pages 80–82 and the Directors’ report on pages 108–110.
6969
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Chair’s Corporate Governance statement
At TI Fluid Systems, we recognise the importance
of effective oversight of our Corporate
Governance Framework as good governance is
central to the successful delivery of our strategy.
Tim Cobbold
Chair
Dear shareholder,
On behalf of the Board, I am pleased to
present the Group’s Corporate Governance
report for the year ended 31 December 2022.
We continue to implement our Take the Turn
strategy to capture opportunities related to
the industry’s transition to electrification and
focus on sustainability as we manage our ICE
business and make our operations cleaner
and more efficient. Governance remains a top
priority for the Board and executive leadership
in order to promote the strategic development
and sustainable success of the Group.
I can confirm that the Group is currently
in full compliance with the recommended
governance principles and practices set
forth in the UK Corporate Governance Code
2018 (the ‘UK Governance Code’) issued
by the Financial Reporting Council (FRC),
and associated guidance is available on the
FRC website at www.frc.org.uk.
Corporate Governance
The Group recognises the importance
of effective Corporate Governance in
supporting the long-term success and
sustainability of our business. Our robust
governance framework not only satisfies
the provisions of the UK Governance Code,
but also supports the effective operation
of our business, enabling us to deliver our
strategy. This section of the Annual Report
covers our governance arrangements, the
operation of the Board and its Committees,
and describes how the Board discharged its
collective responsibilities over the past year.
The Board’s decision making reflects the
balancing of stakeholder interests throughout
the year and how we have engaged is
explained in our Section 172(1) statement on
pages 36–39.
Shareholder engagement
In leading the Group, the Board has engaged
with our shareholders on many matters,
including sustainability and remuneration.
The Board has crucially focussed on
developing and refining the Take the Turn
strategy, overseeing its implementation
by management and providing input and
challenge. Clear and consistent management
and decisive decision making from the Board
and the entire management team allows for
the delivery of our strategic objectives and
sustained success for all our stakeholders.
Reverting to our face-to-face stakeholder
engagement and site visits has been crucial
for the Board, and stakeholders more broadly,
and has reaped clear benefits. The Executive
Directors have engaged in numerous
meetings with investors, employees,
customers and stakeholders more generally.
The Board recommends that investors
regularly review our website for trading
updates, press releases and virtual
Q&A sessions.
The Directors’ and Corporate Governance
reports which follow this introduction, further
explain how we are approaching important
governance issues.
Board and Committee
composition
We have a qualified and capable Board
comprised of Directors with a broad range
of relevant skills, independence, experience
and diversity. Full biographies of each of the
Directors in place on 31 December 2022 are
set out on pages 72–74.
2023 focus areas
• Monitor the Group’s near term
response to market conditions
• Induction of the new CFO, Alexander
De Bock and the embedding of our
two new Non-Executive Directors,
Jane Lodge and Trudy Schoolenberg
• Oversee our stakeholder
engagement on the Company’s
sustainability journey
• Enhance shareholder engagement
by holding an in-person Capital
Markets Event in 2023 and develop
engagement with customers and
investors at the new e-Mobility
Innovation Centre in Rastatt, Germany
7070
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 As I discussed in greater detail in my Chair’s
statement, our Board composition has
undergone several significant changes in
2022. The Nomination Committee was
supported by recruitment consultants in
facilitating a robust and transparent procedure
for the appointments of our two new
independent Non-Executive Directors, Jane
Lodge in June 2022 and Trudy Schoolenberg
in September 2022, and our new CFO,
Alexander De Bock, who is joining us in April
2023. The Nomination Committee sets out
its focus for 2023 on page 80, including
overseeing the process for the induction of our
new CFO. Board succession and composition
has been discussed at both Nomination
Committee and Board meetings.
To assist the Board in its oversight functions,
the Audit & Risk, Nomination, Remuneration
and ESG Steering Committees have met
and carried out their areas of responsibility
as noted on page 69. The Directors’
time commitments are in line with the
key institutional investor and investor
body guidelines.
The Board and its Committees have
responded to rapidly changing circumstances
and new challenges again this year by working
closely with management, reviewing trading
updates, analysing revised forecasts and
understanding issues impacting the business
and our performance.
Ongoing Board and
Committee evaluation
I am pleased to report the Board and its
Committees are operating effectively. That
said, and as noted previously, the Board
and its Committee performance has been
kept under ongoing review. In 2022, we
re-engaged our external advisor, Lintstock, to
conduct a review of the Board’s effectiveness,
in keeping with the recommendation of
the UK Governance Code, that externally
facilitated reviews be completed at least every
three years. We asked Lintstock to conduct
the review this year to help us follow-up on
areas for development identified in prior
evaluations and to consider additional areas
of Board performance with reference to
relevant external guidance and best practice.
More details can be found in the Directors’
report on pages 108–110.
Overall, the results of the Board effectiveness
review were positive with progress identified
in several key areas since the last evaluation
in 2021. The evaluation also highlighted a
number of ongoing priorities for the Board,
which we look forward to progressing in 2023.
The results of the evaluation process were
discussed at the Nominations Committee and
the Board. The areas of focus are noted in the
Nomination Committee report on page 80.
The Group has an exciting future, and we have
a strong and committed team to make the
most of the opportunities that lie ahead. The
challenges presented in 2022 have provided
further confidence in our resilience and the
corporate governance structure underpinning
us. Our resilience was demonstrated by a
comprehensive set of measures, including
cost reduction and cash management,
allowing the business to manage through a
difficult market environment. More detail can
be found in the Chief Financial Officer’s report
on pages 58–61.
Engagement by Chairs
As always, I, and all of our Committee Chairs,
are available for engagement and may be
reached through me at chairman@tifs.com.
Chief Financial Officer transition
A focus for the first half of 2023 will be the
handover of the CFO’s responsibility to
Alexander De Bock. I am sure that Alexander
will prove to be a highly effective CFO,
continuing the work of Ron Hundzinski, who
has been a valued colleague since he joined
the Group in 2020.
Finally, I look forward to working with the
Board and management team in realising
the Take the Turn strategy to position
the Group for long-term success as the
automotive industry transforms itself for a
sustainable future.
Tim Cobbold
Chair
7171
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Board of directors
Tim Cobbold
Independent
Non-Executive Chairman
Appointment: 4 November 2019
Nationality: United Kingdom
Hans Dieltjens
Chief Executive Officer
and President
Appointment: 18 October 2021
Nationality: Belgium
Skills and experience
Skills and experience
Tim was the Senior Independent Director from November 2019,
his appointment as Chair following the AGM on 18 May 2022.
He is a qualified Chartered Accountant and has a degree in
Engineering from Imperial College, London. He was formerly
Chief Executive Officer of Chloride Group plc, De La Rue plc
and UBM plc and he served as a Non-Executive Director of Drax
Group plc for nine years until September 2019.
External appointments:
Tim is currently a Non-Executive Director at Rotork plc following
his appointment in 2018.
Committee membership
N
Hans was appointed as Chief Executive Officer and President
in October 2021. Hans joined the Company in 1996 and
has gained broad commercial and operational experience
through his divisional leadership positions. Hans led the Global
Fuel Tank and Delivery Systems Division in developing and
manufacturing products that enhance vehicle performance and
safety while exceeding strict emissions regulations to preserve
the environment. In October 2021, Hans was appointed to the
role of Chief Operating Officer and President.
Committee membership
E
Ron Hundzinski
Chief Financial Officer
Appointment: 6 January 2020
Nationality: United States of America
Julie Baddeley
Independent
Non-Executive Director
Appointment: 3 August 2021
Nationality: United Kingdom
Skills and experience
Skills and experience
Julie was appointed as an Independent Non-Executive in
August 2021.
External appointments:
Julie is currently the Senior Independent Director and Chair
of the Remuneration Committee at Marshall of Cambridge
(Holdings) Ltd. as well as Chair of the Remuneration Committee
at Ebiquity Plc. She also chairs Chapter Zero, a network
established under the auspices of the World Economic Forum,
and is a By-Fellow at Hughes Hall College (Cambridge) and
Co-Director of the Hughes Hall Centre for Climate Change
Engagement.
Committee membership
E N R
Ron was appointed as Chief Financial Officer in January 2020.
Ron was previously Executive Vice President – Finance at
Tenneco, Inc. During the past 35 years, Ron has held a variety
of leadership positions in finance at Emerson Electric, GKN,
Meridian Automotive and BorgWarner. Ron served as Chief
Financial Officer and Executive Vice President of BorgWarner
from 2012 to 2018. In November 2022, it was announced that
Ron will be retiring from the Board in May 2023.
External appointments:
Ron is a Non-Executive Director of Gentherm.
Committee membership
E
KEY
A Audit & Risk Committee
N Nomination Committee
Chair
E ESG Steering Committee
R Remuneration Committee
7272
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Susan Levine
Non-Executive Director
Appointment: 11 December 2019
Nationality: United States of America
Jane Lodge
Independent
Non-Executive Director
Appointment: 6 June 2022
Nationality: United Kingdom
Skills and experience
Skills and experience
Susan was appointed as a Non-Executive Director in
December 2019.
External appointments:
Susan joined Bain Capital in 2006 and has been a Managing
Director since 2018. Prior to joining Bain Capital, Susan was
a Manager at Bain & Company. Susan is a Non-Executive
Director at Diversey. She serves on the Boards of the
Massachusetts Society for the Prevention of Cruelty to Children,
The Fessenden School, 3Point Foundation and the Board of
Governors for the Georgetown University Alumni Association.
She is also on the Board of Directors Academy, a non-profit
which provides corporate governance and training for future
board members from diverse backgrounds.
Committee membership
E
Jane was appointed as an Independent Non-Executive Director
in June 2022. During the past ten years, Jane has also served
on the boards of other leading companies in the FTSE 100 and
250 indices, including DCC plc, Costain Group plc, Devro plc,
and Sirius Minerals plc. Jane became a partner at Deloitte LLP
in 1986.
External appointments:
Jane is a Director and chairs the audit committees at FirstGroup
plc and Bakkavor plc, and chairs the remuneration committee at
Glanbia plc.
Committee membership
A R
Elaine Sarsynski
Independent
Non-Executive Director
Appointment: 14 August 2018
Nationality: United States of America
Trudy Schoolenberg
Independent
Non-Executive Director
Appointment: 5 September 2022
Nationality: The Netherlands
Skills and experience
Skills and experience
Elaine was appointed as a Non-Executive Director in August
2018. Elaine was previously President of MassMutual
Retirement Services and Chairwoman, CEO and President of
MassMutual International.
External appointments:
Elaine is currently a Non-Executive Director of Horace Mann
Educators Corporation. Elaine is also a Non-Executive Director
of Horizon Technology Finance Corporation and is a member of
its Audit Committee and Chair of its Nominating and Corporate
Governance Committee.
Committee membership
A
E
Trudy was appointed as an Independent Non-Executive
Director in September 2022. She was previously on the boards
of Avantium N.V., Spirax-Sarco Engineering plc, Low and
Bonar plc, and The Netherlands Petroleum Stockpiling Agency
(COVA). Trudy has a PhD in Technical Physics from the Delft
University of Technology (Netherlands) and holds a master’s
degree in Industrial Engineering.
External appointments:
Trudy currently serves on the boards of SPIE SA (Euronext
Paris), Elementis plc (FTSE listed) and Accsys Technologies plc
(AIM and Euronext listed).
Committee membership
N
7373
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Board of directors
Continued
John Smith
Independent
Non-Executive Director
Appointment: 24 October 2017
Nationality: United States of America
Stephen Thomas
Non-Executive Director
Appointment: 22 January 2015
Nationality: United States of America
Skills and experience
Skills and experience
John was appointed as an Independent Non-Executive Director
in October 2017. John has over 48 years of experience in the
automotive industry, including 42 years working with General
Motors in developing new technologies. John held a range of
senior positions with General Motors, most recently as Group
Vice President, Corporate Planning & Alliances.
Stephen was appointed as a Director of TI Fluid Systems in
July 2015 and was formally appointed as a Non-Executive
Director of the Company in October 2017. Stephen joined
Bain Capital in 2007 and has been a Managing Director since
2015. Prior to joining Bain Capital, Stephen was a Manager at
Bain & Company.
External appointments:
External appointments:
John is Principal of Eagle Advisors and is a Non-Executive
Director of American Axle & Manufacturing Holdings, serving on
its Audit Committee and as Chair of its Technology Committee.
Stephen is a Non-Executive Director of American Trailer Works,
FXI, US LBM and Arxada AG.
Committee membership
A R
Matthew Paroly
Company Secretary
Appointment: July 2014
Nationality: United States of America
Alexander De Bock
Chief Financial Officer elect
Nationality: Belgium
Skills and experience
Skills and experience
Matthew was appointed as Chief Legal Officer and Company
Secretary of TI Fluid Systems in July 2014. Matthew has more
than 30 years’ experience in private law practice and in-house
executive and legal positions with both public and private
companies. Prior to joining TI Fluid Systems, Matthew worked
with several automotive suppliers and manufacturers, including
Nexteer Automotive, Fisker Automotive, Meridian Automotive
Systems and Delphi Corporation. Matthew is a member of
the State Bar of Michigan. In 2021, Matthew was appointed
ESG Director.
Alex De Bock will succeed Ron Hundzinski as Chief Financial
Officer and an Executive Director of the Company in April.
Alex is currently CFO and Senior Vice President of ZF’s
Commercial Vehicle business, part of ZF Friedrichshafen AG.
Prior to joining ZF, he had been CFO of WABCO Holdings Inc.
Alex comes with 16 years of industry experience and began his
career at Arthur Andersen (now Deloitte) as a member of the
audit assurance practice and has a Master of Economics from
the University of Antwerp, Belgium.
KEY
A Audit & Risk Committee
N Nomination Committee
Chair
E ESG Steering Committee
R Remuneration Committee
7474
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Corporate Governance report
A summary of the main matters reserved for decision by the Board is set out below:
Strategy and management
• Oversight of the Group’s operations
• Approval of the long-term objectives and commercial
strategy review
Remuneration
• Determine the Remuneration Policy for Directors, Chief Executive
Officer and other senior executives
• Determine the remuneration of the Non-Executive Directors
• Approval of the annual financial budget and four-year
• Introduction of new share incentive plans or major changes to
Medium-Term Plan
existing plans
• Review of performance in light of the Group’s strategic aims,
• Approval of new incentive plans to be put to shareholders for
objectives, business plan and budgets
approval
Corporate structure and share capital
• Changes to the Group’s capital structure
• Major changes to the Group’s corporate structure
• Significant changes to the Group’s management and control
structure
• Issues of public debt by the Company
Delegation of authority
• Approval of the written division of responsibilities between the
Chair and the Chief Executive Officer
• Establishing Board Committees, approving their Terms of
Reference and receiving reports from the Board Committees
Financial reporting and controls
• Approval of financial statements
• Setting the Company’s dividend policy
Corporate governance
• Review the Group’s overall Corporate Governance structure
• Determining the independence of Non-Executive Directors
• Approval of significant changes in accounting policy
• Undertaking a formal and rigorous review of the Board’s
performance, that of its Committees and individual Directors and
the division of responsibilities
• Consider the balance of interests between shareholders,
employees, customers and the community
Internal controls
• Ensuring maintenance of a sound system of internal control and
risk management
• Approval of the Group’s compliance policies
Policies
• Approval of policies, including the Code of Business Conduct,
as well as the Anti-Corruption, Diversity and Inclusion, Health
& Safety, Environmental, Modern Slavery, Group Dealing and
Tax Strategy policies
Contracts
• Approval of major capital projects
Other areas
• Making of political donations
• Approval of larger-scale non-standard contracts
• Approve the overall levels of insurance for the Group
• Approval of acquisitions and joint ventures
• Appointment of external auditors
• Shareholder engagement and general meetings
• Annual budgets and financial expenditure and commitments
above levels set by the Board
Board membership
• Changes to the structure, size and composition of the Board
• Appointments to the Board, including selection and appointment
of the Chair, Chief Executive Officer, Senior Independent Director
and Company Secretary
• Membership and Chairs of Board Committees
• Approval of the continuation in office of Directors, including
Executive Directors
7575
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Corporate Governance report
Continued
All Directors are expected to attend all meetings of the Board, and any
Committees of which they are a member, and are expected to devote
sufficient time to the Company’s affairs to fulfil their duties as Directors.
Key Board roles and responsibilities
There is a clear division of responsibilities between the Chair and the
Chief Executive Officer which is written and approved by the Board.
The roles of the Chair and Chief Executive Officer are separately
held and the role of each is clear and distinct. The division of
responsibilities between the Chair and Chief Executive Officer is set
out in written Terms of Reference which, were adopted by the Board on
24 October 2017.
Board evaluation
The Nomination Committee initiated an externally facilitated annual
review of the effectiveness of the Board and Committees in December
2022. This was undertaken by the third-party advisory firm, Lintstock
(who have no connection with the Group, and are considered by
the Board to be independent). The review was additional to the UK
Governance Code recommendation requiring external reviews to be
undertaken at least every three years.
The review was designed to follow-up on areas for development
identified in last year’s internal evaluation and to consider additional
areas of Board and Committee performance with reference to relevant
external guidance and best practice.
More details of the outcome of this review can be found in the
Nominations Committee report on pages 80–82.
The role and structure of the Board
The Board is responsible for the leadership and oversight of the
Group and has overall authority for the management of the Group’s
business, strategy and culture. The Board is also responsible for
ensuring the maintenance of a sound system of internal controls and
risk management (including operational, financial and compliance
controls) and for reviewing the overall effectiveness of systems
in place, as well as for the approval of any changes to the capital,
corporate and/or management structure of the Group.
The Board operates in accordance with the Company’s Articles of
Association and the Board’s written ‘Delegation of Authority’, which
were approved by the Board in July 2015 and updated in October 2017.
The Board has established a number of Committees, as set out on
page 69. Each Committee has its own Terms of Reference, which are
reviewed at least annually.
The Board currently consists of ten members: the Independent
Non-Executive Chair, the Senior Independent Director, four other
Independent Non-Executive Directors, two Executive Directors
and two Non-Executive Directors (who are nominees of the Bain
Shareholders under the relationship agreement discussed on
page 78).
The Board generally meets five times a year, with additional ad-hoc
meetings called as and when circumstances require. There is an
annual calendar of agenda items to ensure that all matters are given
due consideration and are reviewed at the appropriate time in the
financial year.
In the period from 1 January 2022 to 31 December 2022, there
were seven Board meetings. In addition, in the same period, there
were six meetings of the Audit & Risk Committee, five meetings of
the Remuneration Committee, three meetings of the Nomination
Committee and five meetings of the ESG Steering Committee.
The table below shows the Directors’ attendance at meetings of
the Board and Committee(s) of which they were members and
they were eligible to attend in the period from 1 January 2022 to
31 December 2022:
Directors’ attendance at meetings of the Board and Committee(s)
Board
Audit & Risk
Remuneration
Nomination
ESG Steering
3/3
7/7
7/7
7/7
6/7
7/7
3/3
7/7
2/2
7/7
7/7
2/2
–
–
–
–
–
–
2/2
6/6
–
6/6
–
4/4
–
2/2
3/3
–
–
–
2/2
–
–
5/5
–
3/3
1/1
2/2
3/3
–
–
–
–
–
–
1/1
2/2
–
–
5/5
–
5/5
5/5
–
–
5/5
–
–
–
–
Manfred Wennemer (resigned 18 May 2022)
Julie Baddeley
Tim Cobbold (Chair from May 2022)
Hans Dieltjens
Ron Hundzinski
Susan Levine
Jane Lodge (appointed 6 June 2022)
Elaine Sarsynski
Trudy Schoolenberg (appointed 6 Sept 2022)
John Smith
Stephen Thomas
Jeffrey Vanneste (resigned 6 June 2022)
7676
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 A summary of the key areas of responsibility of the Chair and Chief Executive Officer are set out below:
Tim Cobbold
Chair
Responsibilities
Hans Dieltjens
Chief Executive Officer
Responsibilities
• Responsibility for the leadership and effective running of the
• Responsible for running the business of the Company and its
Board and chairing its meetings
subsidiaries
• Ensuring the Board, as a whole, plays a full and constructive
part in the development and determination of the Group’s
strategy and overall commercial objectives
• Setting the agenda for and frequency of meetings of the Board
and ensuring the Board receives accurate, timely and clear
information on which to base decisions
• Ensuring that adequate time is available for the Board to
consider all agenda items
• Promoting a culture of openness and debate and facilitate the
effective contribution and active engagement of all Directors
• Proposing and developing the Group’s strategy and overall
commercial objectives
• Regularly reviewing the Group’s operational performance,
cost control and operating efficiencies and recommending to
the Board the annual budget and financial plans for the Group
• Reporting to the Chair and the Board on the progress of the
strategy, the Group’s performance and operational matters
• Maintaining a dialogue with the Chair and the Board on
important and strategic issues facing the Group
• Providing a structure for the timely and accurate disclosure of
• Ensuring there is effective communication between the Group
information
and its shareholders and that the Board understands the
views of major investors in the Group
• Promoting the highest standards of integrity, probity and
corporate governance
• Ensuring constructive relations between the Non-Executive
and Executive Directors
• Regularly considering the Board’s succession planning and
composition
• Ensuring that the performance of the Board, its Committees
and individual Directors are formally and rigorously evaluated
at least once a year
• Providing an independent perspective and constructive
challenge
• Ensuring the Board’s strategies, objectives and decisions are
implemented in a timely and effective manner
• Developing senior talent and succession planning
• Progressing in conjunction with the Chief Financial
Officer and, where relevant, the Chair, the Company’s
communication programme with its shareholders
• Ensuring effective communication with shareholders,
employees and other stakeholders, in order to understand
their concerns and communicate issues to the Board
• Promoting and conducting the affairs of the Group with
the highest standards of integrity, probity and Corporate
Governance
• Safeguarding the reputation of the Group and managing the
Group’s risk profile
• Maintaining strong relationships with OEM customers
7777
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Corporate Governance report
Continued
Senior Independent Director
The UK Corporate Governance Code
recommends that the Board of Directors
of a company with a premium listing on
the Official List should appoint one of the
Non-Executive Directors to be the Senior
Independent Director, to act as a sounding
board for the Chair and to support him in
the delivery of his objectives. The Senior
Independent Director is also responsible
for leading the Non-Executive Directors in
monitoring and evaluating the performance of
the Chair and being available to shareholders
if they have any concerns, which contact
through the normal channels of the Chair,
the Chief Executive Officer or the Chief
Financial Officer has failed to resolve, or for
which such communication is inappropriate.
Trudy Schoolenberg agreed to serve as
the Company’s Senior Independent Non-
Executive Director from her appointment in
September 2022.
The Nomination Committee
The Nomination Committee is comprised
of the Independent Chair, the Senior
Independent Director and a Non-Executive
Director. The Nomination Committee Chair is
Tim Cobbold.
The main roles and responsibilities of the
Nomination Committee are set out in written
Terms of Reference and are available on the
Company’s website.
Details of the Nomination Committee’s
activities can be found in the Nomination
Committee report on pages 80–82.
The Audit & Risk Committee
The Audit & Risk Committee is comprised of
three Independent Non-Executive Directors.
The Audit & Risk Committee Chair is
Jane Lodge.
The main roles and responsibilities of the
Audit & Risk Committee are set out in written
Terms of Reference and are available on the
Company’s website.
Details of the Audit & Risk Committee’s
activities can be found in the Audit & Risk
Committee report on pages 83–89.
The Remuneration Committee
The Remuneration Committee is comprised
of three Independent Non-Executive
Directors. The Remuneration Committee
Chair is John Smith.
The main roles and responsibilities of the
Remuneration Committee are set out in
written Terms of Reference and are available
on the Company’s website.
Details of the Remuneration Committee’s
activities can be found in the Remuneration
Committee report on pages 90–105.
7878
The ESG Steering Committee
The ESG Steering Committee is comprised of
two Independent Non-Executive Directors and
two Executive Directors. The ESG Steering
Committee Chair is Elaine Sarsynski.
The main roles and responsibilities of the ESG
Steering Committee are set out in written
Terms of Reference and are available on the
Company’s website.
Details of the ESG Steering Committee’s
activities can be found in the ESG Steering
Committee report on pages 106–107.
Balance and independence
In accordance with Principle K of the
Corporate Governance Code, the Board and
its Committees have a combination of skills,
experience and knowledge of the Group. The
size, composition and length of service of the
Board is kept under review by the Nomination
Committee to ensure an appropriate balance
of skills and experience is maintained.
The Code recommends, in the case of
a FTSE 350 company, that at least half
the Board of Directors (excluding the
Chair) should comprise ‘independent’
Non-Executive Directors. The Board satisfies
that recommendation and comprises the
Non-Executive Chair, who is considered to
be independent, two Executive Directors
and seven Non-Executive Directors, of
whom five are considered to be independent.
The five Non-Executive Directors that are
considered to be independent in character
and judgement, and free of any business
or other relationship which could materially
influence their judgement, are Julie
Baddeley, Jane Lodge, Elaine Sarsynski,
Trudy Schoolenberg and John Smith.
As the Board composition changes over time
and when evaluating candidates for Board
membership, candidates are considered
on merit, taking account of their relevant
skills and experience as well as recognising
the benefits of diversity including gender,
nationality, ethnicity and age.
Disclosure of relationship
agreement with Bain
Details of substantial shareholdings in the
Company’s ordinary share capital are set out
in the Directors’ report on pages 108–110.
On 25 October 2017, the Company entered
into a relationship agreement with its largest
shareholders, the funds managed by Bain
Capital and BC Omega Holdco, Ltd. (the
‘Bain Shareholders’). The principal purpose
of the relationship agreement is to ensure
that following the Company’s Admission
and Listing, the Company is able to carry
on its business independently of the Bain
Shareholders, and that transactions and
relationships between the Company and the
Bain Shareholders are conducted at arm’s
length and on normal commercial terms.
The Board confirms that the Company and,
so far as it is aware, Bain Capital, BC Omega
Holdco, Ltd. and the Bain Shareholders
have complied with all of their respective
undertakings and obligations set forth in the
relationship agreement.
Under the relationship agreement, the Bain
Shareholders have a right to nominate for
appointment to the Board: (a) two Directors
for so long as the Bain Shareholders and their
associates’ shareholding in the Company
is equal to or more than 25%; and (b) one
Director for so long as the Bain Shareholders
and their associates’ shareholding in the
Company is equal to more than 10% but less
than 25%. The terms of the appointment
of these Directors under the relationship
agreement does not specify the amount
of time they are expected to devote to the
Company’s business.
However, it is estimated they will commit
a minimum of one day per month, which is
calculated based on the time required to
prepare for attending Board and Committee
meetings, and additional duties such as
attendance at the Annual General Meeting
and meetings with shareholders.
Length of appointment
Non-Executive Directors are appointed for
terms of three years, subject to the particular
Director being re-elected by shareholders,
for up to the normal maximum of three terms
(nine years).
Conflicts of interest
The Company’s Articles of Association set
out the policy for dealing with Directors’
conflicts of interest and are in line with the
Companies Act 2006. The Board has a
formal system in place for Directors to declare
conflicts of interest and for such conflicts to be
considered for authorisation.
Diversity
The Company’s Diversity and Inclusion
Policy confirms that the Company does not
discriminate on the grounds of gender, age,
ethnicity, sexual orientation, religion or belief,
disability, gender reassignment, marital or civil
partnership status, pregnancy or maternity,
race, colour, nationality, political affiliation,
socio-economic or veteran status. The
policy notes the Company strives to make
progress on diversity, equity and inclusion
in its workforce and treats all associates
with dignity and respect, and on a fair and
equitable basis.
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Whistleblowing
The Company has established procedures by
which employees may, in confidence, raise
concerns relating to fraud, non-compliance
or other illegal or unethical conduct in the
workplace. The Whistleblowing Policy applies
to all employees of the Group. The Audit &
Risk Committee is responsible for monitoring
the Group’s whistleblowing arrangements
and the policy is reviewed, periodically by
the Board. A new external provider has
been engaged to provide a confidential
approach with additional features and which is
available globally.
Shareholder engagement
Prior to the IPO, the Company’s shareholders
comprised funds managed by Bain Capital
and a number of members of management.
As a result of the IPO, a larger shareholder
base has developed. Investor relations activity
and a review of the shareholder register are
regular items in the Board information pack.
The Executive Directors regularly meet with
a large number of investors and have active
discussions with shareholders and investors,
both on an individual basis and through
roadshow events. The Company aims to
maintain a constructive dialogue with key
stakeholders, including institutional investors,
to discuss issues relating to the performance
of the Group, including strategy and new
developments. The annual Capital Markets
Event was held in April 2021 and the next
one will take place in 2023. The event will be
hosted by Hans Dieltjens. The Company has
an investor relations website, which is publicly
available and provides relevant information
to both institutional investors and private
shareholders, including performance updates
and announcements by the Company.
Annual General Meeting
The Company’s Annual General
Meeting (AGM) will take place on
16 May 2023. A separate notice
convening the AGM is being sent
out with this Annual Report and
Accounts. Separate votes are held
for each proposed resolution. All
Directors attend the meeting. Details
of the resolutions to be proposed and
an explanation of the items of special
business can be found in the circular
that contains the notice convening the
AGM, and it will be available on our
website with the proxy voting card for
all shareholders.
Directors’ duties – compliance
with Section 172 of the
Companies Act 2006
In accordance with the requirements of
Section 172 of the Companies Act 2006,
the Board seeks to promote the success of
the Company for the benefit of its members
as a whole and, in doing so, have regard
for the interests of stakeholders, including
customers, employees, suppliers, regulators
and the wider society in which it operates. A
summary of considerations undertaken by the
Board in accordance with Section 172 is set
forth on pages 36–39.
Approved by order of the Board
Tim Cobbold
Chair
15 March 2023
16 May 2023
Annual General Meeting
The Company’s Annual General Meeting
(AGM) will take place on 16 May 2023
Training and development
In preparation for admission, all Directors
received an induction briefing from the
Company’s legal advisers on the duties
and responsibilities as Directors of a
publicly quoted company. In addition, upon
their appointment, all Directors receive
an induction programme arranged by the
Company Secretary, including plant visits to
Germany and meetings with key members
of senior management in order to familiarise
themselves with the Group. Specific training
on Directors’ duties and the new Corporate
Governance requirements has been provided
to new Board members by our legal advisers,
and refresher training was provided in 2022.
Information and support
To enable the Board to function effectively,
and to assist the Directors in discharging
their responsibilities, full and timely access is
given to all relevant information to the Board.
In the case of Board meetings, this consists
of a formal agenda and a comprehensive
set of papers, including regular business
progress reports. An established procedure
is in place to ensure that such information
is provided to Directors in a timely manner
in advance of meetings. Specific business-
related presentations are given by senior
management when appropriate.
The Company Secretary works closely with
the Chair, the Chief Executive Officer and the
chairs of the Board Committees to ensure
that Board procedures, including setting
agendas and the timely distribution of papers,
are complied with and that there are good
communication flows between the Board
and its Committees, and between senior
management and Non-Executive Directors.
The Company Secretary is also available to
all Directors to provide advice and support,
including facilitating induction programmes.
All Directors are able to take independent
professional advice at the Company’s
expense in the furtherance of their duties
where considered necessary.
Election or re-election
of Directors
At the forthcoming Annual General Meeting
on 16 May 2023, all the current Directors,
with the exception of Ron Hundzinski, will
be offering themselves for re-election and
Jane Lodge, Trudy Schoolenberg and
Alex De Bock will be offering themselves for
election as they were appointed by the Board
during the year.
7979
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance
Nomination Committee report
During the year, the Committee focussed on its
core mission to ensure that our Board remains
fit for purpose with the optimal balance of skills,
knowledge, experience, and diversity.
Tim Cobbold
Nomination Committee Chair
Dear shareholder,
I am pleased to present the Nomination
Committee’s report for the year ended
31 December 2022, my first report to you as
Chair of the Nomination Committee, which I
initially joined in December 2019.
During the year, the Committee focussed
on its core mission to ensure that our Board
remains fit for purpose with the optimal
balance of skills, knowledge, experience, and
diversity. Importantly, and in line with the UK
Corporate Governance Code, the Committee
engaged in an ongoing succession planning
process through the recruitment and
nomination of new Board appointments,
including monitoring the balance of
Executive and Non-Executive Directors and
their independence.
The Committee met formally three times
during 2022 as well as numerous informal
update calls and correspondence. As
Chair, I regularly briefed the Board on key
Committee discussions and ensured that
the papers and reports presented to the
Committee were made available to all
Non-Executive Directors.
Having reviewed the Committee’s activities
over the last 12 months against its Terms
of Reference, I am happy to confirm that
the Committee has fully discharged its
responsibilities in line with its remit. The
current Terms of Reference of the Committee,
approved in October 2017 and confirmed
as appropriate each subsequent year, are
available to view on the Company’s website.
Board appointments
At the start of 2022, the Committee was
aware of the opportunity and need to evolve
the composition of the Board both in line with
the developing needs of the business and to
bring the Board’s composition in to line with
good governance standards. For the first time
the Committee prepared and considered a
Board skills matrix to provide a more process
driven approach to the role specifications for
new directors.
In line with the business’s Take the Turn
strategy, the goal of which is to take
advantage of the transition to electric
vehicles in the automotive industry, the
Board skills matrix was updated and it
became clear further Board expertise in
Product Development and Innovation
would be helpful. As a consequence, the
Committee decided to recruit an additional
independent non-executive director with
expertise in this area. In addition, through
2022, Manfred Wennemer (Chair of the
Board), Jeff Vanneste (Chair of the Audit
& Risk Committee) and Ron Hundzinski
(Executive Director and CFO) each made
the decision to step down from the Board.
These changes and the appointment of a new
director provided the opportunity to evolve the
composition of the Board.
The process by which I succeeded
Manfred Wennemer as Chair of the Board and
the Nomination Committee was explained in
the 2021 Annual Report.
In order to recruit a new Chair of the Audit
& Risk Committee and a new director with
Product Development and Innovation
expertise the Committee worked with an
external recruiter, Spencer Stuart, to develop
search criteria and then identify candidates.
Spencer Stuart has no connection with the
Group and is considered to be independent.
The Committee reviewed the background
and qualifications of candidates identified by
Spencer Stuart. Interviews then took place
with other Directors, senior management, and
external advisers and references were taken.
As a result of these processes, two new
Directors were recruited, nominated, and
appointed to the Board. Jane Lodge and
Dr Trudy Schoolenberg were appointed to the
Board as Non-Executive Directors in June
and September 2022, respectively.
Committee membership
Member since
Meetings
attended
Tim Cobbold (Chair) 10 December 2019
Julie Baddeley
6 June 2022
Trudy Schoolenberg 5 September 2022
1 March 2020
(resigned 5
September 2022)
Stephen Thomas
Meetings held during
the year
3/3
2/2
1/1
2/2
3
Committee areas of focus
• Board composition and independence
• Board appointments and the
induction process
• Board effectiveness
Committee 2022 highlights
• Nominated the appointment of
Alexander De Bock as Executive
Director and successor CFO
• Nominated the appointment of Jane
Lodge and Trudy Schoolenberg as new
independent NEDs
• Recommended new composition of
all Board committees, including new
Chairs of the Audit & Risk Committee
and the Remuneration Committee
• Nominated the appointment of
Trudy Schoolenberg to serve as SID
• Supported externally facilitated Board
self-evaluation
• Developed and updated our
Board Skill Matrix
• Supported the nomination for
appointment/re-appointment of
Directors standing at the 2022 AGM
Read more on pages 78–79.
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TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Jane will also chair the Company’s
Audit & Risk Committee. Jane brings with her
extensive boardroom knowledge, audit and
financial expertise and a broad understanding
of the manufacturing industry, all of which
will further strengthen and enhance the
capabilities of our Board. Jane’s has already
started to make an important and valuable
contribution to the Board.
Trudy provides a long-standing, background
in technology and product development
strong strategic, growth and operational
experience with which will complement and
strengthen the capabilities of the Board.
Trudy will also serve as the Company’s Senior
Independent Director (SID).
To assist in the process to recruit a new
Executive Director and CFO, the Committee
worked with an external recruiter, Russell
Reynolds, to develop search criteria and then
identify candidates. Russell Reynolds has no
connection with the Group and is considered
to be independent. The Committee reviewed
the background and qualifications of
candidates identified by Russell Reynolds.
Interviews then took place with other
Directors, senior management, and external
advisors and references were taken. As a
result, Alexander De Bock was appointed to
serve as Executive Director and the Group’s
Chief Financial Officer effective upon
Ron Hundzinski’s retirement in April 2023.
Alexander has financial expertise in both
public and private sectors, along with
significant experience in the automotive
industry and has acted as a public company
CFO. His skills and strength will help the
Group with the crucial task of progressing
our Take the Turn strategy as the automotive
industry transitions to vehicle electrification.
We look forward to welcoming Alexander to
the Board and our senior executive team.
And, of course, we are grateful to Ron for
his many contributions over the past several
years working with the team and our key
stakeholders to guide the Company through
an exceptionally challenging period for
the industry.
A new more formal director induction process
was developed during the year to better
introduce these new directors to the business
as a way of improving the speed with which
new directors are in a position to contribute.
Jane, Trudy and Alexander each enhance and
expand our Board’s experience and skill set.
Our Board Skills Matrix is set out on page 68.
In addition, biographies for the entire Board of
Directors can be found on pages 72–74.
Diversity
The Committee recognises the importance of
diversity and remains committed to having a
diverse Board. The new Board appointments
in 2022 provided the Committee with an
opportunity to improve diversity. As part
of the search processes, our recruiters,
Spencer Stuart and Russell Reynolds, were
instructed to ensure that the candidate pool
for each position should include a significant
proportion of both women and individuals
from recognised ethnic minorities.
As a result, two women and one man were
appointed. Women now comprise 50% of our
Board. Following changes to the composition
of Committees, women chair two Committees
and one serves as the SID. This demonstrates
a significant improvement in the gender
diversity of the Board as was committed to
in 2021.
However, the Committee recognises that
none of the successful candidates in 2022
were from a recognised ethnic minority and
that there is no such representation on the
Board. Candidates from ethnic minorities
were short-listed and interviewed on all
three occasions. However, as shareholders
would expect, neither the Committee nor
Board will appoint solely on the basis of
ethnicity. However, I and the Committee
remain conscious that following the Parker
Review there is an expectation that there will
be an individual from an ethnic minority on
the Board. The Committee has committed
to continue to work to meet this expectation
with each and every Board appointment going
forward whilst always appointing the person
judged to be the best candidate.
Of course, diversity does not apply only
to the Board but extends to the entire
management team and beyond. As such,
we are committed to demand that the senior
leadership achieve a broader, more diverse
management team, while ensuring that
promotions and appointments are made on
merit, and there is an appropriate balance
of skills and experience at all levels of the
organisation. To that end, gender diversity
targets have been established for all locations
based on local university graduation rates,
and that HR processes have been updated
to seek to eliminate unconscious bias and to
use widened search criteria to encourage a
diverse set of internal and external candidates
for open positions.
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OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance effectiveness was highly rated with progress
identified in several key areas since the last
evaluation in 2021. However, the evaluation
did highlight the following areas for improved
focus and ongoing prioritisation, which we will
use as a guide in 2023:
• Continue the Board’s focus on strategy and
product portfolio expansion to address the
transition to EVs
• Increase oversight of risk management
processes and plans
• Increase the Board’s ethnic diversity ideally
through Asian representation given the
business’s presence in Asia
• Maintain appropriate IT expertise and focus
on cybersecurity, information systems and
controls
• Better understand the views of, and the
Group’s engagement with, suppliers as key
stakeholders
Focus in 2023
The Nomination Committee plans to consider
the areas listed below during the year ahead:
• Review of the skills and independence of
each of the Non-Executive Directors
• Promote Board and Executive leadership
engagement and succession planning
• Oversee the process for the induction of
Alexander De Bock, our new CFO
• Encourage further action to promote a
positive culture across the organisation,
including diversity and inclusion
• Track actions to enhance areas highlighted
by the Board’s self-evaluation
As a Committee, we look forward to
implementing the actions noted for 2023 and
continuing to assist the Board in fulfilling its
corporate governance responsibilities.
Tim Cobbold
Nomination Committee Chair
15 March 2023
Nomination Committee report
Continued
Women represented approximately 31% of
the Group’s total salaried workforce, including
13% of the Executive Committee with the
CEO and 14 senior managers who report to
the Executive Committee.
Board independence
The Code requires that at least half the
Board, excluding the Chair, should consist
of Non-Executive Directors determined by
the Board to be independent. Throughout
the year, the Board has been fully compliant
on independence. At 31 December 2022,
the Board was comprised of ten Directors,
including the Independent Non-Executive
Chair, the Senior Independent Director, four
other Independent Non-Executive Directors,
two Executive Directors and two Non-
Executive Directors. The Board considers
that all of its independent Non-Executive
Directors continue to demonstrate the
required independence position. Neither the
Chair nor any of the non-executive directors
have exceeded the maximum nine-year
recommended term of service set out in
the Code. Details on length of tenure can
be found in the biographies of the Board of
Directors on pages 72–74.
The terms and conditions of the appointment
of Non-Executive Directors are available
for inspection at the Company’s registered
office during normal business hours and at
the AGM.
Board time commitment
The Nomination Committee is comprised of
non-executive directors Trudy Schoolenberg,
who is the Senior Independent Director, Julie
Baddeley and is chaired by Tim Cobbold who
was an Independent Non-Executive Directors
on appointment. Details of individual meeting
attendance and membership are listed at
the beginning of my report. Stephen Thomas
who was not an independent non-executive
director stepped down for the Committee
in September 2022. The Board regularly
assesses the most appropriate Committee
membership to allow the Committee to
operate effectively.
In June 2022, the Board approved changes
to the composition of its Committees
(Nomination, Remuneration, Audit & Risk
and ESG Steering) to ensure their members
had the relevant expertise. All Committees
will continue to be reviewed to monitor proper
alignment of individual Directors’ strengths
and utilisation of their skills. Details of the
membership of all Board Committees can be
found on pages 72–74.
Committee memberships
The Nomination Committee is comprised
of Non-Executive Directors Trudy
Schoolenberg, who is the Senior Independent
Director, Julie Baddeley and is chaired by
Tim Cobbold who was an independent
Non-Executive Directors on appointment.
Details of individual meeting attendance and
membership are listed at the beginning of
my report. Stephen Thomas who was not an
independent non-executive director stepped
down for the Committee in September 2022.
The Board regularly assesses the most
appropriate Committee membership to allow
the Committee to operate effectively.
In June 2022, the Board approved changes
to the composition of its Committees
(Nomination, Remuneration, Audit & Risk
and ESG Steering) to ensure their members
had the relevant expertise. All Committees
will continue to be reviewed to monitor proper
alignment of individual Directors’ strengths
and utilisation of their skills. Details of the
membership of all Board Committees can be
found on pages 72–74.
Annual Board and Committee
evaluation
In December 2022, the Committee initiated
an externally facilitated annual self-evaluation
of the effectiveness of the Board and
Committees. This process was facilitated
by a third-party advisory firm, Lintstock, who
has no connection with the Group and is
considered by the Board to be independent.
Specifically, an online confidential
questionnaire was developed by Lintstock
in collaboration with me, and supported by
the Company Secretary, to gather feedback
on the effectiveness and performance of the
Board in conjunction with the Code principles.
We have conducted an externally facilitated
evaluation in each of the last two years in
keeping with the UK Governance Code
recommendation that such evaluations be
undertaken at least every three years.
The review and evaluation was designed to
follow-up on areas for development identified
in prior evaluations and to consider additional
areas of Board and Committee performance
with reference to relevant external guidance
and best practice.
The results of the evaluation process were
discussed at the Nomination Committee
and the Board. In particular, the evaluation
indicated that the Nomination Committee is
judged to function well in terms of planning
succession to Board roles and other senior
positions. In addition, the Board’s overall
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TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Audit & Risk Committee report
I am pleased to present my first report
as Chair of the Audit & Risk Committee,
which outlines the Committee’s composition,
main responsibilities, and key areas of focus
during the year.
Jane Lodge
Audit & Risk Committee Chair
Dear shareholder,
I am pleased to present my first report as
Chair of the Audit & Risk Committee, on its
activities for the period ended 31 December
2022. During the year, the Committee
focused on its core responsibility to provide
an independent oversight in relation to the
integrity of financial reporting, the extent and
effectiveness of internal financial controls and
assurance processes, the monitoring of key
risk management systems and processes,
and assessment of the effectiveness and
independence of the Group’s External Auditor.
During 2022, the Committee, in addition
to usual agenda matters, was presented
with deeper insights into the Group’s cyber
security policies and procedures, spent
time assessing the internal audit plan of the
Group Assurance team, and considered
the management’s roadmap for its internal
control optimisation programme, in response
to the forthcoming enhanced internal control
reporting requirements as part of the UK
government’s proposals on ‘Restoring trust in
audit and corporate governance’.
Membership of the Audit &
Risk Committee
The Audit & Risk Committee comprises
Independent Non-Executive Directors of the
Company. Brief biographical information on
the members of the Audit & Risk Committee
are listed on pages 73–74, including details
of experience and competence relevant to
the sector. The Company Secretary, who is
also Chief Legal and ESG Officer, acts as
Secretary to the Committee.
The Audit & Risk Committee is ordinarily
scheduled, as approved by the Committee
members, to meet five times throughout the
annual cycle and its agendas include risk
assessment and management processes,
the programme of Internal Audit work,
in-depth discussions on key financials and
other risk areas, linked to both the Group’s
external reporting timetable and the internal
financial cycle.
Only Committee members have the right
to attend the meetings, but they invite the
Chief Executive Officer & President, the
Chief Financial Officer, the Vice President
Risk & Global Controller and other senior
finance personnel, together with other senior
representatives of the External and Internal
Auditors, to attend certain meetings. In
2022, the Chief IT, HR & Communications
Officer also attended some of the
Committee meetings.
The Committee, when necessary, will meet in
private with the Internal and External Auditor,
without management presence, as part of the
overall meeting structure. All other members
of the Board have an open invitation to attend
the meetings. As the Chair of the Committee,
I had a number of private discussions with
the External Auditor and Internal Audit
during 2022.
I report to the Group Board on the activities of
the Committee and make recommendations
to the Group Board as appropriate.
The role of the Audit &
Risk Committee
The primary function of the Audit & Risk
Committee, which has remained consistent
with prior years, is to assist the Board in
discharging its responsibilities with regard
to the quality and integrity of financial
reporting, risk management assessment and
the performance and effectiveness of both
External and Internal Audits. The Committee’s
role, authority, responsibilities and scope are
set out in the Terms of Reference, which are
available on the TI Fluid Systems plc website
(https://investors.tifluidsystems.com/~/
media/Files/T/Tiautomotive-IR/documents/
audit-and-risk-committee-terms-of-reference.
pdf). The Committee reviews the Terms of
Reference annually. The Terms of Reference
were last updated in October 2022.
8383
Committee membership
Jane Lodge (Chair)
(appointed 6 June 2022)
Jeffrey Vanneste (former chair,
stepped down on 6 June 2022)
John Smith
Elaine Sarsynski
Meetings
attended
2/2
4/4
6/6
6/6
Committee areas of focus
• Quality and integrity of external
financial reporting
• Risk management process
assessment
• Effectiveness and performance of
internal and external audit
Committee highlights
• Reviewed the scope of the Internal
Audit function focus with a gradual shift
from internal controls over financial
reporting to broader business risks
in 2023
• Considered management’s roadmap
for the internal control optimisation
programme
• Deeper discussions on the Company’s
risk management process and
structure, including management’s
plan to strengthen enterprise risk
management process and more
detailed disclosures of risks and
uncertainties on pages 42–51
• Deep-dive reviews of the Group’s
Information Technology General
Controls and proposed enhancement
programme, and cyber security policies
and procedures
Read more to disclosures of
Principal risks and uncertainties on
pages 42–51
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Audit & Risk Committee report
Continued
Committee’s evaluation
During the year, the Committee undertook
an annual evaluation of the effectiveness of
the Board and its committees in accordance
with the requirements of the 2018 Code and
recommendations of the Financial Reporting
Council’s (‘FRC’) Guidance on Board
Effectiveness.
The evaluation indicated that the Committee
continues to operate effectively and has the
skills and expertise required to perform its role
appropriately. Further details of the evaluation
are included on page 71.
Details of key activities
during the year
Oversight of financial reporting
The Committee acts in an oversight role
in respect of the Annual report and other
announcements with financial content, all
of which are prepared by management.
Throughout 2022, the Committee has
continued to be mindful of the potential
threats to financial reporting integrity posed
by the impact of the global pandemic, as well
as other challenges, on the organisation.
The Committee received reports on the
Annual and Interim financial statements
from management and the External
Auditor. The key audit matters identified by
PricewaterhouseCoopers LLP are set out
in its report on pages 114–116 and were
reviewed by the Committee in approving the
2022 audit scope and plan.
Following the UK government’s consultation
‘Restoring trust in audit and corporate
governance’, the Committee has continued
to focus on the impact of the proposals and
the Company’s responses and preparation
for the forthcoming changes. A significant
element has been on the possible impacts
of operating within a regime necessitating
a more formalised level of reporting on all
material internal controls, not just those
over financial reporting. Whilst we await
the final requirements to be formalised by
the Government and the regulator, Group
management have undertaken further steps
during 2022 to facilitate the transition that
may ultimately be necessary. These steps
include a formalised roadmap for internal
control optimisation over the next two years,
development of an improvement plan for
controls over information technology systems
and a comprehensive reassessment of the
robustness of the control standard framework
adopted by the Group. During the year, the
Group established a Group Internal Controls
function to enable the implementation of
a three-lines-of-defence structure on risk
management and controls. With input from
external advisers, the Group Internal Controls
function led a number of internal control
workshops with representations from all lines
of defence, to deep dive into the key priorities,
challenges and enablers for internal control
and process improvement. These workshops
identified certain key areas to consider in the
internal control optimisation programme,
particularly around effective definition of roles
and responsibilities across the three lines of
defence, resourcing and training needs, and
the scope to rationalise the level at which
certain processes and controls are carried
out to improve efficiency. The Group Internal
Controls function also initiated a specific
review of the Group’s entity-level controls,
and the preparatory work to develop a formal
audit and assurance policy. In addition, the
Group continued to improve its IT systems
and infrastructure to improve automation of
processes and controls.
Over the last 12 months, it has:
• considered the significant accounting
judgements and critical estimates made by
management in preparing the Interim and
Annual financial statements and agreed
their appropriateness
• examined key points of disclosure and
presentation to ensure the adequacy,
clarity and completeness of the financial
statements, including ensuring that
reporting and disclosure commitments
given to the Financial Reporting Council
have been maintained
• reviewed the content of the proposed
news releases issued in conjunction
with half-year and full-year results
as well as reviewing, on behalf of the
Board, the quarterly trading updates
issued in January 2022, May 2022 and
November 2022, respectively
• discussed audit reports with the External
Auditor, which highlighted key accounting
matters and significant judgements in
respect of each set of financial statements
• reviewed and discussed reports to support
management’s assessment of the going
concern judgement and the viability
statement set out on pages 62–63
• discussed the level of resources in finance
and non-finance functions and the impact
and experience of working protocols
arising from hybrid working, restructuring
actions and employee turnover across the
organisation’s sites
• sought re-assurances from the External
Auditor that an appropriate level of remote
collaboration with the Company and the
component audit teams continued to be
factored into the external audit and review
processes at both the half year and full
year, including, but not limited to, accessing
original documentation and meeting and
sign-off procedures with management.
Significant accounting matters
The issues and judgements considered
below were identified by the Committee as
significant to the preparation of the 2022
Financial Statements.
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TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Key accounting judgement
Work undertaken
Goodwill and intangible assets
impairment
All cash-generating units (‘CGUs’) containing goodwill
and intangible assets are tested for impairment, annually.
The determination of CGUs and the recoverable amount
requires judgement by management in both identifying
and valuing the relevant CGUs.
Key judgements and estimates are involved in
completion of impairment reviews, including cash flow
forecasts, discount rates and long-term growth rates.
A change in these assumptions can result in a material
change in the valuation of the assets.
Continued uncertainty about future automotive volumes,
supply chain capacity and resilience, the impact of
electrification trends, including the rate of change,
the extent and effectiveness of ongoing restructuring
actions, and possible strategic and operational impacts
of climate change developments, all necessitated
judgement and estimation.
In the light of the global volume and margin challenges
continued to be faced by the automotive industry due to
continued impact of COVID-19 (particularly in China),
continuing supply chain disruption, increasing inflationary
pressure and cost of living challenges, the prolonged
impact of Russia’s invasion of Ukraine and increases
in general level of interest rates, the 2022 impairment
review has been an area of particular focus.
Deferred tax asset recognition and
provision for uncertain tax positions
The Group has a wide geographic footprint and is subject
to tax laws in many jurisdictions.
Provisions are made for uncertain tax positions which
involve judgement and estimates by management as to
the likelihood of their realisation.
Recognition of deferred tax assets also involves
judgement as to their realisation, including whether
there will be sufficient taxable profits in future periods to
support recognition.
The extensive review carried out by management was reviewed by the
Committee at its January and March 2023 meetings. The Committee:
• reviewed the impairment methodology used by management including,
but not limited to, the determination of cash generating units (‘CGUs’), the
development of cash flow modelling based on the approved budget and
medium-term plan, and the consideration of both value in use and fair value
less costs to sell methodologies in estimating the recoverable amount
• challenged management’s treatment of future restructuring activities,
enhancing capital expenditure levels and working capital management
assumptions included within the impairment assessment
• understood the determination of discount rates and long-term growth rates
pertinent to CGUs ,ensuring appropriate consideration of inherent risk and
geography had been factored in, and in particular noted the impact of the
significant increase in discount rates during the year
• understood the business drivers underpinning the impairment charge recorded
in 2022, including changes from the prior year
• assessed the resultant impairment result, the proposed disclosures including
sensitivities and presentation on the income statement
• satisfied ourselves that relevant critical judgements and estimates had been
appropriately included in the financial statements and that the year-end result
announcement included appropriate and measured commentary about the
impairment
The impairment reviews were also an area of focus for PricewaterhouseCoopers
LLP and we considered their extensive work in this area.
We were satisfied with the approach taken by management and concluded
that the judgements and estimates used in the impairment assessment were
reasonable and the conclusion of an impairment charge of €317.4m was
appropriate.
The Committee reviewed summary reports from management in respect of
estimates of tax exposures to assess the reasonableness of the Group’s tax
provisions. Information provided has included specialist tax advice in applicable
jurisdictions and updates on specific ongoing audits.
The recognition of deferred tax assets was reviewed including the Company’s
assessment of the availability of future profits to support recoverability, including
the impact of continued future volume and trading uncertainties and consistency
of forecasts with the impairment assessment. We ensured that a measured
approach to the recognition of deferred tax assets was taken by management
and importantly, that there was consistency between financial projections
used for deferred tax asset recognition and those underpinning the group
impairment review.
PricewaterhouseCoopers LLP also reported to the Committee its findings in this
area, which have been reviewed and considered.
The Committee was satisfied with the judgements, estimates, and that
disclosures were reasonable and appropriate.
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OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Audit & Risk Committee report
Continued
Key accounting judgement
Work undertaken
Warranty provisions
The Group is subject to warranty claims in the event
that its products fail to perform as per specifications.
Warranty provisions are made to cover potential
exposures that relate to specific customer claims.
Key judgements are made in calculating the provision
and these are dependent on the specific facts and
circumstances involving the customer, complexity of
the issue and the negotiation process. The outcome of
claims is often difficult to predict and quantify.
The Committee considered the judgements made by management in assessing
the likelihood and quantification of material exposures. This included:
• understanding the nature of the specific claims or exposure
• assessing correspondence with, and reactions of, customers and regulators
(e.g. NHSTA)
• considering the impact of recall actions taken by customers
• probing management’s evaluation of the likelihood and quantum of exposure
and the status of negotiations with the customer
We obtained the External Auditor’s views in relation to the appropriateness of the
approach taken by management.
Taking into account the evidence presented and explanations given by
management, we concluded that the judgements taken in respect of warranty
matters were reasonable and appropriate.
Presentation of financial statements
The Board continues to use adjusted results as the
measure of ongoing performance of the Group and its
Divisions. This approach necessitates the exclusion of
certain items of income or charge that are regarded by
management to distort comparability of performance.
In considering the presentation of the 2022 financial statements the Committee
re-assessed the appropriateness of the non-IFRS measures used by the
Group and considered the extent and clarity of explanation supporting the use
of these measures. The Committee was satisfied that the 2022 Annual Report
disclosures were appropriate and a satisfactory balance between non-IFRS
measures and statutory measures had been maintained.
The Committee is satisfied that the judgements made are reasonable and that appropriate disclosures have been included in the
financial statements.
Other financial reporting matters
Review of going concern and viability
The Committee reviewed the assumptions
applied by management for going concern
and long-term viability assessment. The going
concern assessment included a downside
scenario, which was regarded as severe but
plausible. The results of this scenario show
that there is sufficient liquidity in the business
for a period of at least 12 months from the date
of approval of these financial statements, and
do not indicate any covenant breach during
the test period. The Committee, on behalf
of the Board, reviewed the assumptions and
sensitivities around the scenarios presented
by management and was satisfied with the
outcome of the assessment. More information
on the Group’s going concern can be found on
page 62.
The Committee also reviewed the Group’s
long-term viability assessment for the period
to 31 December 2027, which considered a
range of scenarios based on the potential
financial impact of the Group’s principal
risks materialising. The ARC challenged the
relevance and assumptions of the principal
risks to the Company’s long-term viability. The
Committee was satisfied with the outcome
of management’s assessment and was able
to make a recommendation to the Board on
the Group’s long-term viability. Further details
on the assessment of the Group’s long-term
viability are set out on pages 62–63.
New accounting standards and guidance
from the regulator
No new accounting standards were adopted
in 2022. However the Committee considered
management’s review of the key findings
within the various thematic reviews issued by
the Financial Reporting Council, to assess the
impact on financial reporting by the Company.
Comments raised by the regulator on the
Company’s previous financial statements are
also considered by the Committee, to ensure
that they have been appropriately taken into
account in the preparation of the 2022 Annual
report and financial statements.
External auditor
The Audit & Risk Committee is very aware
that the effectiveness and independence of
the External Auditor is central to ensuring the
integrity of the Group’s published financial
information.
During 2022, the Committee’s engagement
with the External Auditor has mainly
focused on:
• the review and approval of
PricewaterhouseCoopers LLP’s 2022 audit
plan, terms of engagement and fee for the
audit of the 2022 financial statements
• review of the independence,
objectivity and effectiveness of
PricewaterhouseCoopers LLP
• concluding a recommendation to the Board
to reappoint PricewaterhouseCoopers LLP
• satisfying ourselves that the level
of non-audit services provided by
PricewaterhouseCoopers LLP was
compliant with external regulation and
internal policies
• understanding the regulatory changes
impacting the 2022 External Audit and
the consequential fee implications of the
increase in work required
The Committee approved the proposed
external annual audit plan and its scope at its
meeting in October 2022. Our consideration
of the plan involved an assessment of the
size of entities covered and the level of
risk associated with those entities. The
Committee was satisfied that the proposed
risk-based approach was appropriate.
In its annual assessment of the effectiveness
of PricewaterhouseCoopers LLP, the
Committee had regard to a number of factors,
which include, but are not limited to:
• their feedback and insights on the Group’s
business, internal control systems and
attitude towards control
• the planning process and final audit plan for
the 2022 financial statements
• the quality of reporting to the Committee
• their performance during the 2022 half-year
review process
•
insight provided to the Committee about
the UK Government consultation on audit
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reform, and anticipated outcomes
• feedback from senior management on the
quality of engagement with them including
the output, presented to the Committee in
April 2022, from the annual PwC year-end
audit questionnaire
• results of audit quality inspection and
supervision by the Financial Reporting
Council
In summary, the Committee considers
both PricewaterhouseCoopers LLP
and its audit processes to be effective.
PricewaterhouseCoopers LLP have a
good understanding of the Group and its
businesses, including the financial reporting
and control challenges facing the Group. This
understanding is accompanied by a robust
challenge of the significant judgements made
by management.
Auditor independence and non-audit
services
In order to ensure the External Auditor’s
independence, the Committee, annually,
reviews the Company’s relationship with its
auditors and assesses the level of controls
and procedures in place to ensure the required
level of independence and that the Company
has an objective and professional relationship
with PricewaterhouseCoopers LLP.
The Committee has received confirmation
from PricewaterhouseCoopers LLP that
they remained independent and objective
within the context of applicable professional
standards throughout 2022.
In order to safeguard auditor independence,
the Committee has adopted a formal policy
governing the engagement of the External
Auditor. This policy effectively limits the use of
the External Auditor to work that is specifically
required by law or regulations to be carried out
by the statutory auditor and is of an assurance
nature only. All other non-audit services are
considered on a case-by-case basis in light of
prevailing regulations and ethical standards.
Any proposed non-audit service engagement
has to be approved by the Vice President
Risk & Global Controller on behalf of the
Committee. Approval is only given if it is
within acceptable financial parameters
and confirmation has been received from
PricewaterhouseCoopers LLP that the service
does not contravene regulatory independence
and ethical requirements. All non-audit
service engagements with fees in excess
of €0.2 million have to be approved by the
Committee Chair before commencement.
There were no significant engagements of
the External Auditor for non-audit services
during 2022. Details of all fees due to
PricewaterhouseCoopers LLP in 2022 can be
found in Note 34 to the Financial Statements.
Having considered all of the factors,
the Committee has concluded that
PricewaterhouseCoopers LLP remain
appropriately independent.
Taking all matters of effectiveness,
independence and objectivity into
consideration, the Committee has concluded
that it was appropriate to recommend to
the Board of Directors the reappointment
of PricewaterhouseCoopers LLP as the
Company’s auditors for 2023.
PricewaterhouseCoopers LLP was re-
appointed as the Company’s auditors
following a formal tender process in 2017. The
Company confirms that it complied with the
provisions of the Competition and Markets
Authority’s Statutory Audit Services for Large
Companies Market Investigation Order 2014
for the financial year under review.
Internal control and risk management
In 2022, the Group continued to refine its
processes and controls, globally, to reflect
changes to its internal control framework.
The Group’s system of internal controls, along
with its design and operating effectiveness,
is subject to review by the Audit & Risk
Committee, in addition to review by the
Internal and External Auditors. The Board
has established policies and procedures,
including delegations of authority, which have
been communicated across the Group.
The Group has a dedicated Internal Audit
function. The Audit & Risk Committee
considers and approves the Internal Audit
plan. Progress in respect of the plan is
monitored throughout the year and care is
taken to ensure that the Internal Audit function
has sufficient resources to complete the plan.
The audit plan may be reviewed during the
year as a result of the ongoing assessment
of the key risks or in response to the needs
of the Group. The Group Audit Director
reports, ultimately, to the Chair of the Audit
& Risk Committee, although they report on
a day-to-day basis to the Chief Financial
Officer. A report on completed Internal Audits
is presented to the Committee and, where
appropriate, action plans are reviewed.
As previously reported, 2021 has seen a
pivotal change in the focus of the Internal
Audit function in preparation for the
anticipated increase in regulatory focus
on the quality and effectiveness of internal
controls over financial reporting. This focus
continued into 2022 and indicated that,
whilst the risk of material error remains
low, improvement actions in terms of
documentation of controls performed and
review standards will be needed. These
areas are factored into the Group’s internal
control optimisation programme over the
next few years. In reviewing the 2023 internal
audit plan, the Committee expressed the
intention to gradually pivot into controls over
broader business risks, particularly those in
connection with principal risks.
The Committee considered the work of the
Internal Audit function and was satisfied that
the quality, experience and expertise of the
function are appropriate for the business.
The Committee received regular reports on
the findings of Internal Audit reviews and
monitored management’s responsiveness to
the findings.
The system of internal controls is designed
to manage, rather than eliminate, the risk
of failure to achieve business objectives,
and it can only provide reasonable, and
not absolute, assurance against material
misstatement or loss. The Board has
established a clear organisational structure
with defined authority levels. The day-to-day
running of the Group’s business is delegated
to the Executive Directors of the Group.
During 2022, the Group formed a separate
Group Internal Controls function led by
Vice President Risk & Global Controller,
and implemented a formal three-lines-of-
defence structure for risk management
and controls. The Group Internal Controls
function developed a roadmap for the internal
control optimisation programme to outline
the plan and steps in the next few years,
to further strengthen the Group’s internal
control environment through the three-lines-
of-defence model, paving the way to meet
the expected forthcoming requirements
on internal control reporting under the UK
corporate governance reform. The Committee
reviewed the roadmap and summary of
output from management’s discussions, and
approved the plan.
In executing the Committee’s remit for
monitoring the financial reporting process and
for reviewing the effectiveness of the Group’s
system of internal controls, the Committee
undertook the following review work:
• considered reports from Internal Audit
on the outcomes of the 2022 Internal
Audit plan with particular focus on the
deficiencies identified and their remediation
• reviewed with the Chief IT, HR &
Communications Officer the measures
and controls being implemented and
strengthened within the Group to help
mitigate the increasing risk posed by a
cyberattack, and actions taken to assure
the quality of the Group’s cyber security
programme (including tabletop exercises,
third-party assessments and testing, and
employee training programme)
• discussed the status and actions relating
to control issues raised via the Group’s
whistleblowing hotline
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OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Audit & Risk Committee report
Continued
• reviewed and approved the proposed
internal audit plan for 2023
• discussed with the External Auditor their
findings and perspectives on the Group’s
internal controls
The Board has overall responsibility for the
Group’s risk management framework. The
Board has delegated responsibility for review
of the risk management programme and
effectiveness of internal controls to the Audit
& Risk Committee. Further information on the
Group’s risks and uncertainties, which are
judged to have the most significant impact
on the Group’s long-term performance and
prospects, and the Group’s plan to strengthen
its enterprise risk management processes,
are set out on pages 42–51.
The Audit & Risk Committee has reviewed
management’s assessment of the Group’s
principal risks, the impact on the prospects
for the Group and the mitigating actions,
and the Board has confirmed that a robust
assessment of the Group’s principal risks
had been undertaken. This assessment
also included a discussion of emerging risks
potentially facing the Group.
Other matters
During the year, the Committee:
• received an overview report on the Group’s
2022 insurance renewal pricing
• reviewed and approved the parent
company profit and loss account for the
year on behalf of the Board pursuant
to compliance with s408 Companies
Act 2006
• reviewed a comment letter received from
the Financial Reporting Council regarding
the Group’s 2021 Annual report, which
contains a number of observations on
disclosures, but no questions or queries
were raised, and management’s responses
to the points raised
• discussed capital structure matters
with management, in particular, the
consideration of early repayment of debt
• reviewed the process used to assess and
identify disclosures made as part of the
TCFD report and considered the impact of
the TCFD disclosures on the assessment
on the Company’s approach to risk
management and long-term viability
Jane Lodge
Audit & Risk Committee Chair
15 March 2023
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TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 8989
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Statement by the Chair of the
Remuneration Committee
This year we have continued to evolve our
approach to remuneration to reflect the
experience of TIFS’ wider stakeholders
and our strategic priorities.
John Smith
Chair of the Remuneration Committee
Dear shareholders,
I was pleased to assume the role of
Remuneration Chair soon after Tim Cobbold
was appointed to Chair of TI Fluid Systems
Board on 18 May 2022. Tim’s letter to
shareholders in last year’s Directors’
Remuneration report explained, in detail,
the Company’s remuneration structure
and philosophy, which continued to apply
throughout 2022.
The challenges of the prior two years
continued to affect TIFS’ business in 2022,
including COVID-19 restrictions, material
shortages and frequent, often times ‘last
minute’ customer demand changes.
Extraordinary inflation drove unexpected and
dramatic price increases of the Company’s
purchased materials and energy costs,
adversely affecting the Company’s plans
and employees’ well-being. Despite this
unprecedented collection of operating
conditions, the management team performed
admirably, recovering a significant portion
of inflationary charges from customers, and
managing operations to an adjusted EBIT
margin of 5.5% and €78m in adjusted Free
Cash Flow at actual exchange rates.
More importantly for the Company’s future,
Management secured €1.9b in Battery
Electric and Plug-In Hybrid Vehicle (BEV/
PHEV) bookings, 56% of all bookings in 2022,
and continued, marked growth compared
to BEV/PHEV booking totals of €1.2b and
€950m in 2021 and 2020. As outlined in prior
reports, the Company’s success in securing
BEV/PHEV business forms a major part of
its long-term strategy, and, as such, BEV
and PHEV bookings have held significant
weighting in the Company’s annual bonus
plan. Further to this, management has
advanced its thermal products strategy, which
has given the Board added confidence in the
Company’s growth prospects, position in
the industry, and meaningful contributions to
the environment.
TI Fluid Systems’
remuneration approach
As outlined in the Company’s prior year
report, the Committee’s approach to
executive remuneration is based upon
the industry context in which the business
operates, the strategy of the business, the
arrangements in place for the wider workforce,
and an understanding of the remuneration
expectations of shareholders and society
more widely.
Wider workforce context
As noted, extraordinary inflation made 2022
a particularly challenging year for the wider
workforce. This challenge varied across the
Company’s 25,600 employees working in 28
countries. The Company increased wages in
April 2022 and implemented additional pay
increases for groups of employees based
on local management’s recommendations.
Management’s overriding approach
continues to be to provide fair and equitable
compensation consistent with market norms.
The Company also conducted a thorough
review of pay equity between men and
women in the same position, which resulted in
additional adjustments.
The Company continues to evaluate its
pay practices in relation to any government
published living wage for each country in
which it operates. While a living wage is not
published by many government authorities,
management uses a variety of non-official
sources to ensure our pay practices are
reasonable and can provide an appropriate
standard of living. During 2022, with the high
inflationary environment, published living
wage data was considered when establishing
2023 discretionary pay increase budgets
for employees.
Committee membership
John Smith (Chair)
Julie Baddeley
Jane Lodge
Tim Cobbold (former Chair)
Jeffrey Vanneste (former member)
Meetings
attended
5/5
2/2
2/2
3/3
3/3
Committee areas of focus
• Shareholder outreach
• Revamping measures to align with
strategy
• Review of wider workforce alignment
Committee highlights
• Alignment with shareholder
expectations and wider workforce
• Incentive measures aligned with
business strategy in both ABP and LTIP
• Major step forward in prioritising
sustainability initiatives in remuneration
plan design
Read more Directors’ report on
pages 93–105.
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TI Fluid Systems plc | Annual Report & Accounts 2022 Overall
The Committee considered management’s
ability to manage the continued COVID-19
challenges, labour and customer volume
volatility, in addition to the extraordinary
inflation challenges in 2022 in assessing
remuneration levels for the Executive
Directors. The Committee was satisfied that
the overall outcome was fair, appropriate,
proportionate, and in line with the pay culture
and approach at TI Fluid Systems. Full details
of the targets and performance against
those targets for both the 2022 Annual
Bonus Plan and the 2020 LTIP are set out on
pages 98–99.
CFO retirement
As previously announced, Ron Hundzinski,
the Company’s Chief Financial Officer is
retiring in April. In consideration of Ron’s
excellent support of the business and
assistance with the transition to our new Chief
Financial Officer, Alexander De Bock, the
Committee considers it appropriate to treat
Ron as a ‘good leaver’ for the purposes of
his outstanding LTIP grants. His LTIP awards
will be pro-rated for time and subsist to their
normal vesting date subject to the original
performance conditions. Ron will continue to
be subject to holding periods in accordance
with the Company’s Remuneration Policy.
Shareholder consultation
Following the AGM in May 2022, the votes
in favour of the Remuneration report were
98.2%. This result was achieved following
consultation with shareholders and making
certain modifications to the application of the
remuneration policy approved at the AGM in
May 2021.
Annual salary reviews
In April 2022, the Company processed pay
increases for its non-represented employees.
Employees represented by unions, or subject
to statutory pay increases, received pay
increases at the time and an amount agreed
in collective agreements or by government
regulation. Considering the economic
environment at the time of his appointment,
the Chief Executive Officer agreed to discount
his base salary by 11% for 2021 and by 5.7%
for 2022. The Chief Financial Officer received
an increase in line with the wider workforce.
Annual Bonus
The Annual Bonus targets for Executive
Directors in 2022 were based upon adjusted
EBIT margin (25% weighting), Adjusted
Free Cash Flow (also 25%), and BEV/PHEV
bookings (50%). The targets were set in
March 2022 and no adjustments were made
to them despite operating realities, such as
continued supply chain issues, customer
schedule changes and extraordinary inflation,
which had a negative impact compared to the
assumptions used during the development of
our budget.
The Company ended the year with an
adjusted EBIT margin of 5.5% and €78m
in adjusted Free Cash Flow. As noted
earlier in this report, our performance, when
considering the labour and material increases
alone, represented a good result and on
par with the Company’s automotive peers.
Nonetheless, such results did not reach
threshold levels for these measures.
Management delivered €1.9b in BEV and
PHEV lifetime sales bookings, €700m more
than the prior year. Over the 2020–2022 time
frame, management has secured €4.1b in
BEV/PHEV bookings, meaningfully securing
the Company’s future as a Tier 1 automotive
supplier for any likely mix of ICE and BEV/
PHEV production outcomes.
As a result, management achieved an overall
ABP award of 50% of maximum, which the
Remuneration Committee considered to
be appropriate. In approving this level of
award, the Remuneration Committee took
into account:
• Management’s performance in handling
perhaps the most difficult set of operating
conditions since the advent of COVID-19,
and the especially difficult task of obtaining
inflationary cost recovery from its
customers while also securing significant
new business awards, most importantly in
the BEV/PHEV segments
• That for the considerable number of
employees eligible for variable pay awards,
their pay-out will be in the range 11% to
100% of maximum, with an average 68%
of maximum, which will exceed the 50% to
Executive Directors.
The outturn for Executive Directors is in line
with that of the Executive Committee and all
other ABP participants.
LTIPs
The 2020 LTIP award, which vests in 2023,
is based 80% on cumulative adjusted
Free Cash Flow and 20% on relative total
shareholder return (TSR) over the three
years to December 2022. This combination
of metrics was selected as the Committee
and full Board wanted to underscore the
importance of managing the business
thoughtfully for cash, given the uncertain
economic and industry outlook created by the
COVID-19 crisis. As described in this year’s
Directors Remuneration report, management
responded to this approach, generating
over €300m of free cash flow in the three-
year period including €148m in 2020 alone,
the worst of the COVID-19 years in terms
of industry volumes. This exceptional level
of performance over the three-year period
resulted in this element paying out in full.
In contrast, the Company’s relative TSR
performance did not meet the Threshold value
and, therefore, lapsed in full.
The Committee considered a variety of
factors in approving an overall 2020 LTIP
vesting level of 80% maximum for Executive
Directors, including:
• Management’s consistent performance
over the past three years in managing
industry and economic volatility
• The share price is little changed compared
with the share price at the time of grant and
the Committee does not believe that the
management team have unduly benefited
from ‘windfall gains’
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OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Statement by the Chair of the
Remuneration Committee Continued
Remuneration in 2023
Executive base pay reviews
Base pay increases for non-represented
employees will be effective 1 April 2023,
one year following the last general increase.
Pay increases for employees represented
by unions, or subject to regulatory pay
adjustments, will be in accordance with
contractual agreements or governmental
regulation. Pay increases for 2022 and
2023 have nearly doubled compared to
traditional (‘pre-hyperinflation’) periods. From
1 January 2023, Hans Dieltjens will receive
his full salary having received a voluntarily
discounted salary since his appointment,
while no base pay increase will be applied to
Ron Hundzinski considering his retirement in
Q2 2023. The salary for our incoming CFO
Alexander De Bock has been set at €571k,
below that of Ron Hundzinski’s salary.
As extraordinary inflation impacts employees
at lower levels of the organisation, more
significantly than executives, the Executive
Committee’s base pay and Directors’ fee
increases, including the Chair, will be less
than the wider workforce.
Annual Bonus
The maximum opportunity for Hans Dieltjens
and Alexander De Bock, the Company’s new
Chief Financial Officer, will be 300% and
250% of base, respectively. The Committee
considered the Company’s strategic and
near-term plans and determined the 2023
ABP design will mirror that of the prior year.
Taking into account the importance of China
in terms of overall global production volumes,
the 2023 strategic metric based on BEV/
PHEV bookings will be split into (i) China; and
(ii) Non-China bookings. Full details on the
plan design can be found on page 103.
Long-term incentive
The maximum opportunity for Hans
Dieltjens and Alexander De Bock for
2023 will be 300% and 250% of base,
respectively. Taking into account historic
feedback from shareholders, the Committee
determined that Alexander De Bock’s LTIP
opportunity for 2023 would be set lower than
Ron Hundzinski’s opportunity as CFO.
The Committee consulted with shareholders
and determined the LTIP design for 2023
grants will be consistent with the prior year’s
plan design as it supports and rewards the
achievement of the Company’s strategic plan.
The Committee is mindful of shareholder
guidance around ‘windfall gains’ and has
full discretion to ensure that the level of any
vesting outcome is appropriate based on the
overall performance and the shareholder
experience. Full details on the plan design
can be found on pages 103–104.
Wider workforce compensation
The Executive team is committed to ensure
an equitable performance-driven pay culture
at all levels of the organisation. National pay
practices/rules, along with industry norms,
guide pay-for-performance decisions. As
stated above, pay increases for 2022 and
2023 have nearly doubled compared to
traditional (‘pre-hyperinflation’) periods,
reflecting the high inflation environment our
employees are experiencing.
Variable base pay programmes will continue
to exist in several countries, consistent with
local norms.
Remuneration adviser
During the year, we continued to work with
Deloitte LLP as our adviser on remuneration
matters. The Committee reviewed the
performance of Deloitte during the year
and were satisfied with the support and
advice provided.
Engagement with shareholders
As we prepared this year’s Directors
Remuneration report, I invited the Company’s
top shareholders to speak with me regarding
the remuneration practices of the Company.
Several conversations ensued, and I
very much appreciate their candour and
constructive views, which I shared with the
other Remuneration Committee members.
These discussions have provided excellent
context for the work that will begin later this
year on the Company’s remuneration policy,
which will be considered at the AGM in 2024.
Committee composition
Tim Cobbold succeeded Manfred
Wennemer as the Chair of the Board
of Directors following the AGM in May
2022. Julie Baddeley was appointed to
the Remuneration Committee in June
2022 replacing Tim Cobbold. Jane Lodge
joined the Board and was appointed to the
Remuneration Committee effective 6 June
2022, replacing Jeff Vanneste who stepped
down from the Board. I assumed the role of
Chair of the Committee in June 2022.
Committee performance
In accordance with good governance, the
Committee evaluated its performance during
2022 and determined that it is operating
effectively and achieving the appropriate
balance of supporting management while
ensuring shareholder’s expectations and
good governance are met. The Committee
also reviewed its performance against its
Terms of Reference and concluded that it
had fulfilled them during the year and that the
Terms remained applicable.
Respectfully submitted,
John Smith
Chair of the Remuneration
Committee
15 March 2023
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TI Fluid Systems plc | Annual Report & Accounts 2022 Implementation of the remuneration policy
Remuneration in brief
The table below summarises the Director’s Remuneration Policy, the remuneration outcomes in respect of 2022, and the implementation
of the Policy.
Element and Overview
of Policy
Base Salary
Set at a level that is market
competitive to attract and
retain executives, and
at a level that reflects an
individual’s experience,
role, competency, and
performance.
Outcomes in respect to 2022
Implementation for 2023
A 3.0% increase in annual base pay, which was in
line with the range of increases awarded to the US
workforce, was approved for the CFO and implemented
on 1 April 2022. No base pay increase was awarded to
the CEO during the year.
Hans Dieltjens was appointed as CEO on 1 October
2021 with a base pay of €910k. For 2022 Mr Dieltjens
volunteered to reduce his salary by 5.7% to €858k.
Annualised salaries for 2022 were as follows:
Hans Dieltjens will not receive an inflationary salary
increase for 2023 as his full salary of €910k was
restored with effect from 1 January 2023.
With the announcement that Ron Hundzinski intends to
retire, he will not receive an inflationary salary increase
in 2023.
The salary of our incoming CFO Alexander De Bock
has been set at €571k, below that of Ron Hundzinski’s
salary.
Benefits
Provide benefits packages
in line with practices
relative to the Company’s
wider workforce and the
Company’s comparator
group in the country in which
the Executive Director
resides.
Pension
Normal matching defined
contribution retirement
savings plan.
Executive Director
Hans Dieltjens
Ron Hundzinski
€1 = $1.05
2022
€000
858
618
Increase
In Salary
Nil
3.0%
Access to health insurance, vehicle, and perquisite
allowance.
No significant change for 2023. Benefits remain in line
with the Remuneration Policy.
Total matching contribution up to the 401k tax deferral
limit, resulting in Company matching contributions in
respect to services as an Executive Director as follows:
Executive Director
Hans Dieltjens
Ron Hundzinski
€1 = $1.05
Amount
€000
13
13
No substantial changes for 2023.
Pensions remain in line with the Remuneration Policy
and in line with the wider workforce in the US, which are
below typical pension provisions in Europe.
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OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Implementation of the remuneration policy
Continued
Element and Overview
of Policy
Annual Bonus
Plan (ABP)
Annual incentive of up to
300% of base pay based
on financial and strategic
targets measured over a
one-year period.
Until shareholding
guidelines are met, the
Committee may use its
discretion to pay up to the
first 100% of salary in cash,
with any element above
100% of salary deferred
into ordinary shares and
subject to a holding period of
two years.
Outcomes in respect to 2022
Implementation for 2023
Maximum opportunity for the CEO and CFO of 300%
and 250% of base pay, respectively.
Maximum opportunity for the CEO and new CFO of
300% and 250% of base pay, respectively.
Following the end of the financial year, the Committee
considered management’s performance relative to the
measures and targets set in the 2022 ABP. Despite
industry automotive build volumes, which again were
below expectations, management’s performance
achieved solid results, particularly in regard to BEV/
PHEV Bookings, which were considerably better than
the prior year and are anticipated to deliver significant
value for shareholders.
Following this review, the Committee determined that
Executive Directors would receive 2022 ABP awards of
50% of maximum.
Measure
Weight Achievement
Adj. EBIT Margin
Adj. Free Cash Flow
BEV/PHEV Bookings
Total
25%
25%
50%
100%
0%
0%
50%
50%
Further details are provided on page 98.
Reflecting this transitional time in the automotive
industry, with its accelerated shift to electric vehicle
propulsion systems, the strategic element of the
Company’s 2023 ABP will continue to have a weight
of 50%, while both adjusted EBIT Margin and adjusted
Free Cash Flow measures are equally weighted at 25%.
The Company’s Strategic Initiative in 2023 relates to
the achievement of new business wins in customer
BEV and PHEV related platforms, which continue
to set the foundation for long-term success as the
automotive industry continues its transformation.
Given China’s importance in terms of overall global
production volumes and BEV/PHEV units specifically,
the Remuneration Committee with encouragement from
shareholders, has earmarked a significant portion of
the strategic metric for improved bookings performance
in China.
The table below summarises the measures and
weightings of the Company’s ABP in 2023:
Measure
Adj. EBIT Margin
Adj. Free Cash Flow
BEV/PHEV Bookings China
BEV/PHEV Bookings Non-China
Total
Weight
25%
25%
20%
30%
100%
94
TI Fluid Systems plc | Annual Report & Accounts 2022 Element and Overview
of Policy
Long-Term Incentive
Plan (LTIP)
Annual conditional share
grant of up to 300% of base
pay. Vesting is subject to
performance conditions
measured over a three-year
period, with an opportunity
to earn up to a further 33%
of the maximum award
for outperformance (up
to 400% of base salary in
total). Awards are subject
to a post-vesting holding
period of two years.
Shareholder Guidelines
Executive Directors are
required to build up and
hold a shareholding equal to
500% of base and 400% of
base for the CEO and CFO,
respectively.
Outcomes in respect to 2022
Implementation for 2023
In 2022, a grant of conditional shares was made to the
Executive Directors as follows:
Executive Director
Hans Dieltjens
Ron Hundzinski
Position
CEO
CFO
% of
Salary
300%
300%
The Committee and Mr Dieltjens agreed to remove the
outperformance element of the LTIP valued at up to
100% of salary in light of UK remuneration practice.
In 2023, the Committee intends to make conditional
share grants of 300% and 250% of salary for both the
CEO and new CFO, respectively.
Consistent with commitment made and approach
taken in 2022, the Remuneration Committee and CEO
agreed that the outperformance element available
under the policy will not be applied in 2023. As
explained in the Remuneration Report last year, this
compromise was made to recognise UK shareholders
concerns over incentive quantum.
The performance measures for the 2022 LTIP are
as follows:
Performance measures for the 2023 LTIP are
intended to be:
Measure Weight
Measure
Adj. Return on Capital Employed
Sustainability: ISS Social Score (1)
Sustainability: CO2(e) Emission improvement (2)
Relative TSR Rank vs auto peers (3)
50%
10%
15%
25%
Adj. Return on Capital Employed
Sustainability: ISS Social Score (1)
Sustainability: CO2(e) Emission improvement (2)
Relative TSR Rank vs auto peers (3)
Total
100%
Total
Weight
50%
10%
15%
25%
100%
(1) Sustainability Social performance will be measured against
relative improvement on Social ‘S’ scoring as measured by
ISS against their Social score benchmark
(1) Sustainability Social performance will be measured against
relative Social ‘S’ scoring as measured by ISS against their
Social score benchmark
(2) CO2 equivalent emission improvement will be measured
(2) CO2 equivalent emission improvement will be measured
against 2019 levels
against 2021 levels
(3) Relative TSR Rank will be measured against automotive
(3) Relative TSR Rank will be measured against automotive
peers described on page 104
peers described on page 104
The following table outlines the shareholding levels of
Executive Directors as of 31 December 2022:
Shareholding guidelines will apply in accordance with
the Remuneration Policy.
Executive Director
Hans Dieltjens
Ron Hundzinski
(1) % of salary
Ownership
guideline (1)
Shares
owned (1)
500%
400%
196%
129%
The full Remuneration Policy, approved on 13 May 2021 at the 2021 Annual General Meeting, can be found in the 2020 Annual report on our
website at www.tifluidsystems.com in the Investor Relations section, under Reports and Presentations.
95
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Annual report on remuneration
UK corporate governance code and shareholder consultation
During the review of the Remuneration Policy, the Remuneration Committee considered a wide range of factors, including the views of guidance
from UK proxy bodies and institutional shareholders and the provisions of the UK Corporate Governance Code. The following table summarises
how the Remuneration Policy, and its operation, addresses the factors set out in the UK Corporate Governance.
Factor
Clarity
Simplicity
Risk
Predictability
Proportionality
Details
The Remuneration Committee is mindful of operating a Remuneration Policy that is transparent and clear for
both shareholders and participants.
We operate a standard UK incentive structure, which is appropriately aligned to our strategy and which has been
designed to avoid complexity.
Performance measures and targets are aligned with the Group’s strategy with appropriate regard to the risk
appetite of the Group. In addition, our Policy has a number of features to mitigate excessive risk-taking, including
LTIP holding periods, recovery provisions, and significant shareholding guidelines, which extend post-departure.
Our Remuneration Policy provides four illustrations of the application of the Policy. Payments are directly aligned
to the performance of the Group and the Executive Directors.
Targets under the ABP and LTIP reflect the Group’s strategic priorities and have been set at an appropriate level
so that full payout requires exceptional performance.
Alignment to Culture
The Remuneration Policy has been designed to support a high-performance culture with an appropriate reward
for superior performance.
In addition to considering the expectations of the UK Governance Code, the Committee took into account shareholder
feedback and developments in market practice when making decisions in respect of executive remuneration for 2022 and 2023.
Executive Directors and Non-Executive Directors Contracts
The Executive Directors of the Company have service contracts. Hans Dieltjens’ contract is dated 16 February 2021 and came into effect as
an Executive Director upon his ascension to Chief Executive Officer on 1 October 2021 and remains in effect until 1 March 2026. Alexander De
Bock has a service agreement dated 28 October 2022 which will come into effect when he joins as Chief Financial Officer of the Group and an
Executive Director of the Company in April 2023 and remains in remains in effect for an indefinite period of time. All Executive Directors’ contracts
are made through TI Group Automotive Systems L.L.C.
The Non-Executive Directors of the Company do not have service contracts but are appointed by letter of appointment. Each Non-Executive
Director’s term of office runs for an initial period of three years unless terminated earlier upon written notice or upon their resignation. The terms
of the Non-Executive Directors’ appointments are subject to their re-election by the Company’s shareholders at the Annual General Meeting
scheduled to be held on 16 May 2023 and to re-election at any subsequent Annual General Meeting at which the Non-Executive Directors stand
for re-election.
The date of appointment of each of the Directors is set out below:
Executive Directors
Hans Dieltjens
Alexander De Bock
Non-Executive Directors
Tim Cobbold
Julie Baddeley
Susan Levine
Jane Lodge
Elaine Sarsynski
Trudy Schoolenberg
John Smith
Stephen Thomas
Appointment Date
18 October 2021
6 April 2023
4 November 2019
3 August 2021
Unexpired term*
6 months **
6 months **
31 months
15 months
11 December 2019
At will, per Bain Relationship Agreement
6 June 2022
14 August 2018
5 September 2022
24 October 2017
26 months
16 months
30 months
6 months
22 January 2015
At will, per Bain Relationship Agreement
* Subject to election or re-election by shareholders at the upcoming Annual General Meeting and any subsequent Annual General Meeting.
** Each Executive Director has a 6-month termination notice provision under their service agreement.
96
TI Fluid Systems plc | Annual Report & Accounts 2022
Directors’ remunerations (audited results)/single figure table
The table below sets out a single figure for the total remuneration received by each Executive and Non-Executive Director (apportioned for time in
office) for the years ended 31 December 2022 and 31 December 2021:
Executive Directors
Basic
Salary (1)
Taxable
Benefits (1)(2)
Annual
Bonus (1)(3)
LTIP (1)(4)
Pension (1)
Other (1)(5)(6)
Total (1)
Fixed Pay (1)
Variable
Pay (1)
€000
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
Hans Dieltjens (7)(8)
Ron Hundzinski (8)
858
614
205
600
26
46
4 1,287
227
658
46
773
561 1,108
10
–
13
13
3
12
11
3 2,853
452
297 1,268 2,851 2,487
908
684
215 1,945
237
669 2,167 1,818
Non-Executive Directors
Fees (1)
Taxable
Benefits
Annual
Bonus
LTIP
Pension
Other
Total (1)
Fixed Pay (1)
Variable
Pay
€000
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
Tim Cobbold (9)
Trudy Schoolenberg (10)
John Smith
Elaine Sarsynski (11)
Julie Baddeley (12)
Jane Lodge (13)
Manfred Wennemer (9)
Jeffrey Vanneste (14)
Susan Levine (15)
Stephen Thomas (15)
303
49
120
120
120
69
149
51
–
–
146
–
117
117
49
–
386
117
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
303
49
120
120
120
69
149
51
–
–
146
303
146
–
117
117
49
–
386
117
–
–
49
120
120
120
69
149
51
–
–
–
117
117
49
–
386
117
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1) Figures in the table above are in respect to services for the time as an Executive Director or Non-Executive Director in 2022 and converted at the following exchange
rates: €1 = $1.05 and €1 = £0.85, except as otherwise noted
(2) Taxable benefits include perquisite allowance, car allowance, life insurance and tax assistance in accordance with the Remuneration Policy
(3) Awards in respect of 2022 will consist of a cash payment of 100% of base salary with the remainder of the bonus deferred into an award of shares, 50% of base salary
for Dieltjens and 25% of base salary for Hundzinski, to be held for two years but no further non-performance conditions. Additional detail can be found on page 98. The
total bonus paid in respect of 2021 to both Executive Directors was less than 100% of their base salary and therefore, the entire amount was paid in cash
(4) The value of the LTIP for 2022, which had a three-year performance period ending 31 December 2022, is estimated as the number of shares earned (400,548 for H
Dieltjens and 674,608 for R Hundzinski) multiplied by an illustrative share price of £1.30, based on the average share price over the final quarter of the 2022 financial
year. The value in the LTIP column for 2022 also includes payment of dividend equivalents for H Dieltjens (€46k) and R Hundzinski (€77k). The values in the LTIP
column for 2022 will be re-stated in next year’s Single Figure Table to reflect the share price on the date of vesting (16 March 2023)
The value of the LTIP for 2021, which had a three-year performance period ending 31 December 2021, is apportioned for H Dieltjens for his time as an Executive
Director. The values have been re-stated in this year’s Single Figure Table using the share price on the date of vesting (15 March 2022) of £1.83 at the following
exchange rates: €1 = $1.05 and €1 = £0.85. The value in the LTIP column for 2021 also includes payment of dividend equivalents, also apportioned for H Dieltjens
(€719) for his time as an Executive Director
(5) The value of medical coverage for 2022 was €11k for both Executive Directors. The value of medical coverage for 2021 in respect to services for the time as an
Executive Director was €3k for H Dieltjens, and €11k for R Hundzinski
(6) On joining the Group, in line with the Remuneration Policy, R Hundzinski received buyout awards to compensate him for forfeited incentives awarded to him by his
former employer. A restricted share award of 815,674 shares was granted on 27 March 2020 to compensate him for forfeited restricted share awards. The award vests,
subject to continued employment, in accordance with the original time frame: 361,635 shares on 27 March 2020, 361,635 shares on 5 February 2021 and 92,404
shares on 5 February 2022. The award which vested in 2022 (92,404) was valued on 5 February 2022 at the closing share price of £2.40 with a face value of £222k.
The award which vested in 2021 (361,635) was valued on 5 February 2021 at the closing share price of £2.658 with a face value of £961k
(7) As announced on 21 September 2021, Hans Dieltjens was appointed the Group’s new CEO effective 1 October 2021. As a result, the remuneration reported for 2021 is
in respect to services for the time as an Executive Director
(8) The Company has advanced and paid directly PAYE obligations to HMRC. These are shown net of repayments made to the Company by H Dieltjens and R Hundzinski
in respect of prior year foreign tax credits claimed. The net amounts of PAYE paid in 2022 were €20,267 for CEO H Dieltjens and €18,716 for CFO R Hundzinski (€1 =
£0.85). These amounts will be reimbursed to the Company by HMRC directly or by the Executive Director to the extent foreign tax credits used in their local tax filings
provide a benefit over and above their normal local tax obligations
(9) As announced on 25 January 2022, Tim Cobbold was appointed Chair of the Board effective 18 May 2022 following the AGM, succeeding Manfred Wennemer who
stepped down from the Board effective 18 May 2022
(10) As announced on 6 September 2022, Trudy Schoolenberg was appointed as Senior Independent Director, joining the Company on 5 September 2022
(11) As announced on 24 March 2022, Elaine Sarsynski was appointed an Independent Non-Executive Director, joining the Company on 23 March 2022
(12) As announced on 4 August 2021, Julie Baddeley was appointed an Independent Non-Executive Director, joining the Company on 3 August 2021
(13) As announced on 7 June 2022, Jane Lodge was appointed an Independent Non-Executive Director, joining the Company on 6 June 2022
(14) As announced on 9 December 2021, Jeffrey Vanneste stepped down from the Board effective 18 May 2022
(15) Susan Levine and Stephen Thomas represent funds managed by Bain Capital, the Company’s largest shareholder, and are not remunerated and receive no payment
from the Company with respect to their qualifying services as Non-Executive Directors
97
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Annual report on remuneration
Continued
Compensation attributed to share price growth
For the purposes of the Single Figure Table, the 2020 LTIP award has been valued using the average share price over the final quarter of the 2022
financial year (£1.30). This price is lower than the price used to determine the number of shares at grant and, therefore, none of the amount in the
table is attributable to share price appreciation.
Executive Director remuneration detail
Base salary (audited)
Base salaries are typically reviewed and eligible for adjustments once per year. Hans Dieltjens was appointed as CEO on 1 October 2021, at
which time his base salary was originally set at €910k, which was 16% lower than his predecessor. Considering the economic environment at that
time, Mr Dieltjens agreed to discount his salary by 11% (€810k annualised) for 2021 and by 5.7% (€858k annualised) for 2022.
Consistent with the pay practice of the wider workforce, the CFO received a 3% increase on 1 April 2022, which is consistent and within range of
pay increases provided to other US-based employees.
The table below outlines Executive Director annualised base salaries:
Executive Director
Hans Dieltjens (appointed CEO 1 October 2021)
Ron Hundzinski
€1 = $1.05
2022
€000
2021
€000
Increase
In Salary
910
Discounted to 858
910
Discounted to 810
618
600
Nil
3.0%
Pension (audited)
Executive Directors have a nominal matching defined contribution retirement savings plan consistent with the retirement savings plan offered to
all staff employees in the United States. For 2022, the total matching contribution resulted in contributions of €13,071 for both Mr Dieltjens and
Mr Hundzinski.
€1 = $1.05
Annual Bonus for 2022 Performance (audited)
In 2022, COVID-19-related supply-chain issues continued to adversely affect the business, and unexpected and significant inflation pressures
compounded the Company’s operating challenges. The Company was, again, challenged by customers modifying supply demands, frequently
causing misalignment with inventories and production needs. Unfortunately, we were unable to achieve the threshold level for our financial
measures of Adjusted EBIT Margin or Adjusted Free Cash Flow as a result.
Despite these operational challenges, the Company achieved €1.9b of lifetime sales bookings related to BEV/PHEV products, such as coolant or
heat pump components relevant to electric vehicle platforms, which fully aligns with our Company’s Take the Turn strategy. This strong booking
performance remains the key to the long-term success of the business and delivering value to shareholders.
The exceptional performance in delivering BEV/PHEV bookings resulted in an overall 2022 ABP achievement level of 50% of maximum.
The table below outlines the 2022 ABP measures and performance outcomes:
Measure
Adjusted EBIT Margin
Adjusted Free Cash Flow
BEV/PHEV Bookings
Total Achievement of Maximum
Weighting
25%
25%
50%
Threshold
30% of
maximum
Target
50% of
maximum
Maximum
100%
Actual
Performance (1)
Achievement
7.3%
€115m
€1.1b
7.6%
€121m
€1.2b
8.4%
€135m
€1.4b
5.4%
€68m
€1.9b
0.0%
0.0%
50.0%
50.0%
(1) Actual performance calculated using budget exchange rates consistent with exchange rates used in setting targets.
The following table outlines the Executive Directors’ 2022 ABP awards:
2022 Annual Bonus Awards
%
Achievement
of Maximum
50.0%
50.0%
Total Award
€000
1,287
773
Shareholding
Requirement
Met
Value Paid
in Cash
€000
Value Deferred
in Shares
€000
No
No
858
618
429
155
Executive Director
Hans Dieltjens
Ron Hundzinski
€1 = $1.05
98
TI Fluid Systems plc | Annual Report & Accounts 2022 LTIP Grants in 2022 and awards granted during the year (audited)
The Remuneration Policy provides for Long-Term Conditional Share Grants of 300% of base salary, with the potential to increase to 400% of
base salary with outperformance.
In 2022, both Mr Dieltjens and Mr Hundzinski received a grant of 300% of base salary. LTIP grants did not include the outperformance feature.
The following table sets out the performance conditions, which will be assessed over a three-year performance period (2022 to 2024):
Measure
Adjusted Return on Capital Employed
Sustainability: ISS Social Score
Sustainability: CO2(e) Emission Improvement
Number of Conditional Share Units Granted (% of base salary)
Weight
Threshold (1)
Maximum
H Dieltjens
R Hundzinski
50%
10%
15%
16%
4
20%
516,628
(150% of base)
361,238
(150% of base)
2
103,326
(30% of base)
72,248
(30% of base)
6.5%
9.5%
154,989
(45% of base)
108,372
(45% of base)
258,314
(75% of base)
180,619
(75% of base)
1,033,257
€2,225
722,477
€1,555
Relative TSR Ranks vs Auto Peer Group
25% 50th Percentile
75th Percentile
Total Shares Awarded
Face Value at Grant (000)(2)
(1) Threshold vests at 25% of maximum
(2) The face value of each award is calculated using the closing share price (£1.83) prior to the date of grant on 16 March 2022, which was also used to determine the
number of shares awarded (€1 = £0.85)
In line with the Remuneration Policy, vesting will occur on a straight-line basis from Threshold to Maximum, and a holding period of two years will
apply post vesting, subject to a two-year hold maximum post-termination.
2020 LTIP Vesting (audited)
The Company’s 2020 plan concluded in 2022. The majority of the plan was subject to the achievement of Adjusted Cumulative Free Cash
Flow targets with the remainder subject to relative TSR. This combination of measures was selected by the Committee to underscore the
importance of managing the business, thoughtfully, for cash, given the uncertain economic and industry outlook created by the COVID-19
crisis. Management were able to generate over €340m of free cash flow in the three-year period including €148m in 2020 alone, the worst of the
COVID-19 years in terms of industry volumes. This exceptional level of performance over the three-year period resulted in this element paying out
in full. Unfortunately, due to the general market dynamics related to COVID-19, supplier shortages, and automotive industry production volumes,
the Company’s TSR results were not achieved leading to zero vesting on the 2020 TSR performance measure.
As a result, 80% of the award to the Executive Directors and other members of the senior management team vested. The Committee considered
that this level of vesting was appropriate.
The table below outlines the vesting outcomes of the Company’s 2020 LTIP:
Measure
Basic LTIP
Adjusted Cumulative Free Cash Flow
Relative TSR Rank vs FTSE 250
Outperformance Plan (1)
Adjusted Cumulative Free Cash Flow
Weight
Threshold
Maximum
Achievement
80%
20%
100%
Total
€110m
Vests 20% of maximum
€260m
Vests 100% of maximum
€321m
100% of maximum
50th Percentile
Vests 25% of maximum
75th Percentile
Vests 100% of maximum
Below 50th Percentile
No Vesting
N/A
€285m
€321m
100% of maximum
80% of maximum
Final overall performance is measured using the management performance exchange rates of the plan year in which the targets were set.
(1) Not applicable to the current Executive Directors
Payments to past Directors (audited)
During the year, the Company has not made any payments to past Directors that have not been previously disclosed in prior Annual reports.
Payments for loss of office (audited)
During the year, the Company has not made any payments to past Directors for loss of office.
99
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance
Annual report on remuneration
Continued
Statement of Directors’ shareholdings and share interests (audited)
Interests of the Executive and Non-Executive Directors in the share capital of the Company as of 31 December 2022 are shown in the
table below:
Current
shareholding (1)
Beneficially
owned
Deferred
shares not
subject to
performance
conditions
LTIP interests
subject to
performance
conditions
Options
vested but not
exercised
Shareholding
requirements
as a % of base
salary
Shareholding
requirement
met? (2)
Options
unvested
Executive Directors
Hans Dieltjens
Ron Hundzinski
Non–Executive Directors
Tim Cobbold
Trudy Schoolenberg
John Smith
Manfred Wennemer
Jeffrey Vanneste
Elaine Sarsynski
Julie Baddeley
Jane Lodge
Susan Levine (3)
Stephen Thomas (3)
1,101,665
521,003
1,101,665
430,982
–
2,119,388
90,021
2,042,289
–
–
101,381
193,598
59,756
–
–
–
–
–
–
–
101,381
193,598
59,756
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
500%
400%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
No
No
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
(1) No share movement between year end and the date of publication
(2) Shareholding requirement measured by multiplying the current shareholding amount on 31 December 2022 by an illustrative share price of £1.30, based on the
average share price over the final quarter of the 2022 financial year, then dividing by the annualised base salary on 31 December
(3) Susan Levine and Stephen Thomas represent funds managed by Bain Capital, the Company’s largest shareholder, and are not remunerated and receive no payment
from the Company with respect to their qualifying services as Non-Executive Directors
Total Shareholder Return
The chart shows the Company’s Total Shareholder Return (‘TSR’) relative to the FTSE 250 Index, as well as a set of automotive peers.
The FTSE 250 Index was chosen as we are a constituent of the FTSE 250. In addition, we have shown the performance for the following set of
automotive peers to provide a relevant sector comparison.
Adient plc
Continental AG
American Axle & Manufacturing Holdings, Inc.
Cooper-Standard Holdings Inc.
Autoliv Inc.
BorgWarner Inc.
Brembo S.p.A.
Dana Incorporated
ElringKlinger AG
Lear Corporation
NORMA Group SE
Schaeffler AG
Valeo SA
The chart shows the total return to investors since the Company listed on the London Stock Exchange on 24 October 2017.
140
120
100
80
60
40
20
7
1
0
2
r
e
b
o
t
c
O
4
2
n
o
d
e
t
s
e
v
n
i
0
0
1
£
f
o
e
u
a
V
l
0
24 Oct
2017
31 Dec
2017
31 Dec
2018
31 Dec
2019
31 Dec
2020
31 Dec
2021
31 Dec
2022
TI Fluid Systems
FTSE 250
Auto Peers
100
TI Fluid Systems plc | Annual Report & Accounts 2022
Historical CEO payouts
The following table sets out details of the CEO’s single figure and incentive payouts for the last six financial years (apportioned for time in office):
Year
2022
2021
2021
2020
2019
2018
2017
CEO
Hans Dieltjens
Hans Dieltjens
William Kozyra
William Kozyra
William Kozyra
William Kozyra
William Kozyra
CEO single
figure of
total
remuneration
€000
Annual bonus
award
(% of
maximum)
Long Term
Incentive
vesting
(% of
maximum)
2,853
452
2,334
3,571
2,963
2,897
50.0%
37.4%
37.4%
75%
60%
60%
80.0%
13.4%
13.4%
0%
0%
0%
9,122
Not applicable
Not applicable
See notes under single figure table.
Mr Kozyra was CEO until 1 October 2021 at which time Hans Dieltjens became CEO.
Pay ratio data
The following table sets out pay ratio data in respect of the CEO’s total remuneration compared to the 25th percentile, median and 75th percentile
of UK employees.
Year
2022
2021
2020
2019
Method
Option A
Option A
Option A
Option A
Employee
Chief Executive Officer
UK employee at 25th percentile
UK employee at median
UK employee at 75th percentile
€1 = $1.05 = £0.85
25th percentile
pay ratio
Median
pay ratio
75th percentile
pay ratio
97:1
95:1
145:1
93:1
78:1
69:1
84:1
77:1
44:1
40:1
54:1
47:1
2022 single
figure
remuneration
€000
Salary
component
€000
2,853
30
37
65
858
28
35
49
Supporting information for reporting
The Regulations provide flexibility to adopt one of three methods of calculation and we have chosen Option A to calculate the CEO Pay Ratio as it
is the most statistically accurate manner to calculate the ratios and the recommended approach. Employees included in the pay ratio calculation
were active employees on 31 December 2022. The total pay and benefits of employees identified at the 25th, 50th, and 75th percentiles were
used to calculate the pay ratios to be consistent with the calculation of the CEO’s remuneration for the purposes of the Single Total Figure of
Remuneration (‘STFR’), found on page 97. Total pay and benefits for the UK comparison employees include base salary, bonus, pension benefits,
taxable benefits, and any share-based remuneration. Total pay and benefits were annualised to convert to full-time equivalent employee pay
and benefits.
101
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance
Annual report on remuneration
Continued
Factors influencing our CEO pay ratio
Our CEO pay ratio data compares the CEO’s remuneration to selected UK employees, as required by the regulations. Our UK workforce
represents approximately 1% of our total employee population and is largely made up of production-related employees in the manufacturing
industry. These employees have different eligibility to variable incentives than our US-based CEO. Taking this into account, the Committee
considers that the CEO pay ratios are appropriately aligned with our remuneration principles and are consistent with the relative roles and
responsibilities. A significant proportion of the CEO’s remuneration is delivered in variable pay, in line with our remuneration structure supporting
our high-performance culture with an appropriate reward for superior performance. As a result, the pay ratios are likely to fluctuate in line with
performance, depending on the outcome of incentive plans each year.
Year-on-year comparisons reflect the increase in performance-related pay outcomes in 2022 compared to 2021, which form a larger portion
of CEO pay. The pay ratios for 2021 were lower than 2020, mainly reflecting the lower outcome (37.4% of maximum) on the CEOs’ bonuses for
2021, in addition to the reduced overall quantum of pay for the new CEO. The pay ratios for 2020 increased compared to 2019, primarily reflecting
that the CEO received an annual bonus (75% of maximum) in respect of performance for 2020.
While the Company complies with all UK remuneration structure standards, we believe it is difficult to deduce relevant comparative information
from this pay ratio calculation, as we compare a US-based CEO against UK-based employees as required by the Companies Act 2006.
Percentage change in the remuneration of the Directors compared with employees
2021 to 2022
Avg.
Employee(1)
Hans
Dieltjens(2)
Ron
Hundzinski(3)
Tim
Cobbold
Trudy
Schoolenberg
John
Smith
Elaine
Sarsynski
Julie
Baddeley
Jane
Lodge
Manfred
Wennemer
Jeffrey
Vanneste
Stephen
Thomas(4)
Susan
Levine (4)
Salary/Fees (5)
9.3%
–
3.0%
3.0%
n/a 3.0%
3.0%
3.0%
Bonus (6)
Benefits (7)
33.7%
33.7%
33.7%
–
–
–
–
–
n/a
n/a
–
–
–
–
–
–
n/a
n/a
n/a
3.0%
3.0%
–
–
–
–
–
–
–
–
–
–
2020 to 2021
Salary/Fees (5)
Bonus (6)
Benefits (7)
2019 to 2020
Salary/Fees (5)
Bonus (6)
Benefits (7)
Avg.
Employee(1)
Hans
Dieltjens(2)
Ron
Hundzinski(3)
Tim
Cobbold
Trudy
Schoolenberg
John
Smith
Elaine
Sarsynski
Julie
Baddeley
Jane
Lodge
Manfred
Wennemer
Jeffrey
Vanneste
Stephen
Thomas(4)
Susan
Levine (4)
4.0%
–62.6%
–
n/a
n/a
n/a
5.0%
–57.3%
–
–
–
–
n/a
n/a
n/a
–
–
–
–
–
–
n/a
n/a
n/a
n/a
n/a
n/a
3.0%
–
–
–
–
–
–
–
–
–
–
–
Avg.
Employee(1)
Hans
Dieltjens(2)
Ron
Hundzinski(3)
Tim
Cobbold
Trudy
Schoolenberg
John
Smith
Elaine
Sarsynski
Julie
Baddeley
Jane
Lodge
Manfred
Wennemer
Jeffrey
Vanneste
Stephen
Thomas(4)
Susan
Levine (4)
5.2%
66.7%
–
n/a
n/a
n/a
n/a
n/a
n/a
–4.2%
n/a –4.2%
–4.2%
–
–
n/a
n/a
–
–
–
–
n/a
n/a
n/a
n/a
n/a
n/a
–4.2%
–4.2%
–
–
–
–
–
–
–
–
–
–
(1) Theoretical assumptions for ‘average employee’ were made as there are no employees of the PLC entity for comparison purposes
(2) As announced on 21 September 2021, Hans Dieltjens was appointed the Group’s new CEO effective 1 October 2021. In 2021, Mr Dieltjens had volunteered that
his salary would be discounted 11.0% relative to his full salary. In 2022, he had volunteered that his salary would be discounted 5.7% relative to his full salary. The
discounting of salary previous volunteered by Mr Dieltjens will end in 2023 and be returned to his full salary level. No inflationary increases were provided during these
periods. Additional details can be found in the Base salary section on page 98
(3) As announced on 18 November 2019, Ron Hundzinski was appointed the Group’s new CFO, effective 6 January 2020
(4) Stephen Thomas and Susan Levine represent funds managed by Bain Capital, the Company’s largest shareholder, and are not remunerated and receive no payment
from the Company with respect to their qualifying services as Non-Executive Directors
(5) The percentage change calculation is based on the year over year change in annualised Salary/Fees
(6) Annual bonus comparator group is all ABP eligible employees. The percentage change in the average employee’s bonus and that of the Executive Directors has been
calculated based on the change in the payout as a percentage of maximum for each year. Note that the figure for 2019 to 2020 was calculated using an alternative
approach and has been updated for consistency
(7) There were no material changes to the benefit programmes provided to the average employee, or that of the Executive Directors. Note that the figures presented in
prior reports were calculated using an alternative approach and have been updated for consistency
As there are no employees in the Parent PLC entity to be used as the ‘average employee’ for comparison, our voluntary disclosure is based on the
following assumptions. Base salary comparator group is all employees globally. Annual bonus comparator group is all ABP eligible employees.
The percentage change in annual bonus is based on the best available estimates at the time of publication. During 2022, the Company engaged
with employees through All Employee meetings, during which employees were able to comment and provide feedback on our approach to pay
practices. Furthermore, at local levels, ongoing discussions are held with representatives of employees (i.e. Works Councils and Unions) on a
variety of matters, including pay.
102
TI Fluid Systems plc | Annual Report & Accounts 2022 Relative importance of spend on pay
The table below sets out the relative importance of spend on pay in the 2022 and 2021 financial periods. All figures provided are taken from the
relevant Company’s accounts.
Profit distribution by way of dividend
Overall spend on pay including Executive Directors
Disbursements from profits
in financial year €m
2022
12.6
796.2
% change from
the prior year
-72.0%
8.3%
2021
45.0
734.9
Implementation of remuneration policy for Executive Directors in 2023
The following section summarises how remuneration arrangements will be operated from 1 January 2023 onwards.
Base salary
As outlined earlier in this report, the Company has elected to provide a general base pay increase in April 2023 for the wider workforce, but not for
the Executive Directors. In 2022, Hans Dieltjens volunteered that his salary would be set at €858k, which represented a 5.7% discount relative
to his full salary. For 2023 this discount will no longer apply, and he will receive his full salary of €910k. As Ron Hundzinski has announced his
intention to retire, he will not receive an inflationary salary increase for 2023. On appointment as CFO Alexander De Bock’s salary has been set at
€571k, which is below Ron Hundzinski’s salary.
The table below sets out the annualised base salary of the Chief Executive Officer and Chief Financial Officer in 2023 and the comparison with
the annual salary received in 2022.
Executive Director
Hans Dieltjens
Ron Hundzinski
Alexander De Bock
€1 = $1.05
2023
000
2022
000
Increase in
base salary
€910
Discount to salary is
no longer applied
€910
Discounted by 5.7%
to €858
€618
€571
€618
n/a
Nil
Nil
n/a
Benefits and pension
No changes in benefit and pension schemes. Please refer to the Remuneration Policy for details.
Annual bonus plan (‘ABP’)
The maximum opportunity for the year ending 31 December 2023 for the CEO and new CFO will be 300% and 250% of salary, respectively.
Taking into account his forthcoming retirement Ron Hundzinski will not be eligible for an annual bonus for 2023.
Consistent with the new Remuneration Policy, if the Executive Director has not achieved the shareholding guideline, any awards under the ABP
will consist of a cash payment of up to 100% of base salary with the remainder of the bonus (if any) deferred into an award of shares to be held for
two years, which will also be subject to malus and clawback provisions as detailed in the Policy.
The Remuneration Committee has elected to, again, use the performance measures from the 2022 ABP for the 2023 ABP for alignment with our
strategy and expectations of shareholders:
• 50% of the opportunity will continue to be based on the BEV/PHEV bookings for 2023 in line with the Company’s Take the Turn strategy to
reflect their strategic importance. Given China’s importance in terms of overall global production volumes and BEV/PHEV units specifically,
the Remuneration Committee with encouragement from shareholders, has earmarked a portion of the strategic metric for improved bookings
performance in China.
• The remaining 50% will, again, be split equally between Adjusted EBIT margin and Adjusted Free Cash Flow for 2023, reflecting the
importance of maximising current performance and managing profitability and cash through the period of transition.
• Specific targets will not be disclosed because the Remuneration Committee considers forward-looking targets to be commercially sensitive.
However, the Committee intends to disclose these retrospectively in next year’s Remuneration report to the extent that they do not remain
commercially sensitive.
Long-Term Incentive Plan (‘LTIP’)
It is intended that the Executive Directors will receive an LTIP grant in 2023 of 300% of salary for the CEO and 250% of salary for the new CFO.
The Committee is mindful of shareholder guidance around ‘windfall gains’ and has full discretion to ensure that the level of any vesting outcome
is appropriate based on the overall performance of the Group and the shareholder experience. As previously disclosed, the Remuneration
Committee and CEO reviewed the operation of the Remuneration Policy and agreed that the outperformance element available under the policy
will not be applied for the foreseeable future of Mr Dieltjens tenure as CEO. This compromise, on the part of Mr Dieltjens, was made in an effort
to recognise shareholders’ past concerns over incentive quantum. Taking into account his forthcoming retirement, Ron Hundzinski will not be
eligible for an LTIP award for 2023.
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OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Annual report on remuneration
Continued
The Committee has reviewed the performance measures and determined that the same broad framework that applied to the 2022 awards will
apply to the 2023 awards:
• 50% will be based on Adjusted Return on Capital Employed (ROCE) again in 2023, which replaced the Adjusted Free Cash Flow measure
previously used for the 2021 LTIP. This measure was selected as management of returns on capital, through the industry transition to electric
vehicles, which is seen as critical to a successful deployment of the strategy. It complements the significant proportion of the annual bonus
aligned to BEV/PHEV bookings by rewarding an ongoing, long-term attention to margin through the transition and beyond.
ROCE shall be calculated by averaging, over the performance period, Income divided by Investments for each year of the performance period,
where Income is defined as adjusted Earnings Before Interest and Taxes and Investment is defined as invested capital (including goodwill)
adjusted down for purchase price allocation (PPA). Investment does not include borrowings and debt like items net of cash, derivatives, tax
assets/liabilities. The Committee will determine, to what extent, any acquisitions not contemplated when setting the target should be included
in the calculation.
• 25% will be based on relative TSR. For 2023 the Remuneration Committee has determined that TSR will, again, be measured against a set of
automotive peers, whose performance is subject to the same economic factors as TI Fluid Systems. These peers have been defined as:
Adient plc
Continental AG
American Axle & Manufacturing Holdings, Inc.
Cooper-Standard Holdings Inc.
Autoliv Inc.
BorgWarner Inc.
Brembo S.p.A.
Dana Incorporated
ElringKlinger AG
Lear Corporation
NORMA Group SE
Schaeffler AG
Valeo SA
• The remaining 25% will be based on two sustainability measures: 15% will be based on progress during the performance period towards the
Group’s updated Scope 1 and 2 CO2(e) emissions reduction target and 10% will be based on the Company’s relative Social QualityScore
issued by ISS at the end of the performance period.
The following table sets out the performance measures applicable to the 2023 awards:
Measure
Adj. Return on Capital Employed
Sustainability: ISS Social Score (1)
Sustainability: CO2 Emission improvement (2)
Relative TSR Rank vs auto peers (3)
Total
Threshold
vests at 25%
of maximum
Maximum
vests at 100%
14%
3
20%
2
670,913
645,105
Median
Upper Quartile
Weight
50%
10%
15%
25%
100%
(1) Social performance will be measured against relative improvement on Social ‘S’ performance as measured by ISS against their Social score benchmark
(2) CO2 equivalent emission improvement will be measured against a 2021 baseline
(3) Relative TSR Rank will be measured against an automotive peer group described above
The Remuneration Committee reviews LTIP metrics and targets each year to ensure that they align with the Group’s strategic objectives and
are appropriate stretching. When considering the ROCE targets for 2023 the Committee took into account that supply chain challenges and
inflationary pressures, along with lowered industry volume projections for the next 4-5 years, will bring greater uncertainty compared to a year
ago. Therefore, the Committee believes that it is appropriate to lower the threshold target to 14%, with 70% of maximum paying out at a stretch
target of 17.1%, while maintaining the maximum target at 20%. All measures are assessed over a three-year performance period (2023 to 2025).
Buyout arrangements for new CFO
In line with the Remuneration Policy, on joining the Group our incoming CFO, Alexander De Bock, will receive buyout awards to compensate him
for forfeited incentives awarded to him by his former employer. The buyout awards are of equivalent value and will match the time horizons and
form of the awards forfeited. The following buyout has been agreed:
• Alexander will receive an equivalent cash payment to compensate him for his forfeited 2022 annual bonus from his previous employer, once
the final results are determined
• To replace forfeited cash-based long-term incentives, Alexander will receive the following cash payments:
•
CHF 616,830 due to be paid in May 2023
• CHF 200,000 due to be paid in March 2024
• CHF 133,260 due to be paid by May 2024
• CHF 204,000 due to be paid by May 2025
104
TI Fluid Systems plc | Annual Report & Accounts 2022
Implementation of non-executive director remuneration policy in 2023
Chairman and Non-Executive Director fees
Non-executive directors fee arrangements will increase by 3.0% in April 2023, well below that of the wider workforce in the UK. The Company
operates an all-inclusive non-executive director fee which includes any additional fees for responsibilities on committees. The table below
outlines non-executive fees for 2023 and 2022, with the expectation that directors will participate in various committees.
Role
Chairman
Senior Independent Director (SID)
Non-Executive Director (NED)
2023
000
£348
£132
£106
2022
000
£338
£128
£103
Remuneration Committee
Membership: The Remuneration Committee consists of three Non-Executive Directors: John Smith, Julie Baddeley, and Jane Lodge. Tim
Cobbold and Jeffrey Vanneste left this committee during 2022. There were 5 formal meetings of the Committee during the year.
The Board considers each Committee member to be independent in accordance with the UK Corporate Governance Code (the ‘Code’). The
Chairman of the Board, Chief Executive and/or other persons may also attend meetings of the Committee by invitation but will not be present
when matters relating to their own remuneration are discussed.
Role of the Remuneration Committee
The Remuneration Committee’s responsibilities are set out in its Terms of Reference, which are available to shareholders on request and on the
Company’s website. Its role includes:
• setting the Remuneration Policy for all Executive Directors of the Company, the Chairman of the Board and senior management
• within the terms of the Remuneration Policy and in consultation with the Chairman of the Board and/or Chief Executive Officer, as appropriate,
determine the total individual remuneration package of each Executive Director and the Chairman including bonuses, incentive payments, and
share options or other share awards
• approve the design of, and determine targets for, the ABP and LTIP and approve total annual payments made under such schemes
• ensure that contractual terms on termination, and any payments made, are fair to the individual and Company, that failure is not rewarded, and
that the duty to mitigate loss is fully recognised
In carrying out its duties, the Remuneration Committee considers any legal and regulatory requirements, including the UK Corporate Governance
Code and the UK Listing Rules. Determining the fees of the Non-Executive Directors is a matter for the Executive Directors and the Chairman.
Advisers to the Committee
The Committee receives advice and guidance on Executive Directors’ remuneration from the Chief Human Resources & Communications
Officer and the Company Secretary in respect of the UK Corporate Governance Code and share schemes.
The Company Secretary acts as Secretary to the Committee and ensures that the Remuneration Committee fulfils its duties under its terms of
reference and provides regular updates to the Remuneration Committee on relevant regulatory developments in the UK.
Following a competitive tender process in 2018, the Committee appointed Deloitte LLP as its independent advisers. Deloitte is a founding
member of the Remuneration Consultants Group and operates under the code of conduct in relation to executive remuneration consulting in the
UK. The Committee is satisfied that the advice received from Deloitte is objective and independent.
Total fees for the year in relation to executive remuneration consulting were £46,836, based on time and materials. In the year, Deloitte also
provided advice in relation to share schemes and employment taxes.
Statement of shareholder voting
The voting outcomes in respect of the Directors’ Remuneration report at the 2022 AGM and the Directors’ Remuneration Policy at the 2021 AGM
were as follows:
Resolution
Directors Remuneration Report
(2022 AGM)
Directors Remuneration Policy
(2021 AGM)
Votes For
459,365,144
% For
Votes Against
% Against Total Votes Cast
Votes withheld
98.20%
8,416,880
1.80%
490,659,606
22,877,582
368,648,750
75.34%
120,632,574
24.66%
489,281,324
1,625
Approval
This report was approved by the Board of Directors, on the recommendation of the Remuneration Committee, on 2 March 2023 and signed on its
behalf by:
John Smith
Chair of the Remuneration Committee
15 March 2023
105
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance ESG Steering Committee report
It is critical that we address climate change
not only by supporting vehicle electrification
with an expanded product portfolio but also by
decarbonising our own operations, reducing
waste, and conserving water.
Elaine Sarsynski
ESG Steering Committee Chair
Dear shareholder,
I am pleased to present the ESG Steering
Committee report for the year ended
31 December 2022.
The Committee supports the Board to fulfil
their oversight responsibilities with respect
to sustainability matters. The Committee’s
Terms of Reference are available on
our website.
We recognise that the Group, as a leader in
the automotive industry, has an obligation to
operate our business in an environmentally
responsible and sustainable manner
in order to provide long-term success
for all of our stakeholders. As such, our
Take the Turn strategy includes sustainability
as a core element.
From an environmental standpoint, it is
critical that we address climate change not
only by supporting vehicle electrification with
an expanded product portfolio, but also by
decarbonising our own operations, reducing
waste, and conserving water. In 2022, we
made great progress on all fronts.
First and foremost, with analytical and
advisory support from Schneider Electric, the
Group has adopted a new CO2(e) emissions
reduction target that calls for a 50% reduction
of Scope 1 and 2 emissions and a 30%
reduction of Scope 3 emissions, in each
case by 2030 on an absolute basis from a
2021 baseline. Our new targets and have
been submitted to the Science-Based Target
initiative (SBTi) for review and validation.
Importantly, we have also developed a
renewable electricity plan and an energy
efficiency programme to support achievement
of our target. We have also established water
conservation targets and are developing
waste reduction targets for all locations.
I am very happy to report that the Group
received a B grade for Climate Change from
CDP. This very good score recognises our
progress, going from a D to B in just two years.
On the social side, we have taken a
number of steps to support safety, diversity
and inclusivity.
We have implemented enhanced safety
processes to protect our workforce,
including expanding our ISO 45001 safety
management framework to cover an
additional 20 plants in 2022, with a goal of
having every manufacturing location included
by the end of 2024. We have hired additional
EHS personnel in every region to assist with
the training and implementation of our safety
programme. The Committee and the Board
regularly review the Group’s safety metrics.
To further support our employees, we have
continued diversity and inclusivity training
and assessments for the entire senior
management team. Furthermore, the
Group’s recruitment processes have been
reviewed and guidance issued to all locations
to minimise unconscious bias and promote
diverse hiring. Our progress will be tracked by
monitoring against gender diversity targets
based on local university graduation rates.
In order to connect to our larger communities
and prepare the next generation of women to
succeed in the automotive industry, the Group
has established scholarship programmes
in Germany, Poland, Mexico, the US, and
China for female students enrolling in
universities to study STEM subjects. In 2022,
the Group awarded 55 scholarships totalling
€120,000. These scholarship recipients
are also introduced to local TI facilities for
potential internships and other extracurricular
learning opportunities. Within the business, a
Women’s Mentorship programme has been
established to support and guide women on
strategies for success.
Committee membership
Elaine Sarsynski (Chair)
Julie Baddeley
Hans Dieltjens
Ron Hundzinski
2022 highlights
Meetings
attended
5/5
5/5
5/5
5/5
• Published the Group’s first stand-alone
2021 Sustainability report
• Supported the engagement of
Schneider Electric as an adviser to
help with the Group’s CO2(e) emissions
reduction target setting, Scope 3
measurement, renewable electricity
plan and energy efficiency initiatives
• Reviewed the Group’s diversity and
inclusion programme, including key
focus areas and metrics
• Recommended approval and adoption
of the Group’s new science-based
CO2(e) emissions reduction target
consistent with the 1.5°C scenario
• Progressed data collection for water
and waste
Focus for 2023
• Review implementation of the Group’s
renewable electricity plan and energy
efficiency initiatives
• Refine measurement of Scope 3
emissions
• Evaluate potential net zero pathway for
the Group
• Monitor progress on our CO2(e)
emissions reduction targets
• Support development of our supplier
sustainability policy and engagement
process to support Scope 3 reduction
106106
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Both environmental and social targets
continue to be included as a performance
element of our Long-Term Incentive Plan for
Executive Directors and senior management.
The alignment of remuneration with our
purpose and strategy ensures that we
will continue to focus on Taking the Turn
to develop and manufacture products to
support vehicle electrification in the most
sustainable way.
The Committee is very pleased with the
Company’s work this year to build a more
sustainable business. We will continue to
review measures and targets to gauge our
progress and ensure accountability at all
levels of our organisation.
I look forward to updating you on our
continuing sustainability journey.
Elaine Sarsynski
ESG Steering Committee Chair
15 March 2023
107107
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Directors’ report
Results and dividends
The results for the year are set out in the
consolidated statement of comprehensive
income on page 123. Two dividends were
paid in 2022 totalling 2.46 Euro cents per
share. The Group paid a dividend of 1.46
Euro cents per share, amounting to €7.5
million on 23 June 2022, based on the overall
strength of the Group’s financial position
and prospects at that time. The 2022 interim
dividend of 1.00 Euro cents per ordinary share
(0.85 pence per ordinary share), was paid on
16 September 2022 amounting to €5.1 million.
Employee Benefit Trust
Equiniti Trust (Jersey) Limited, as a Trustee
of the TI Fluid Systems Employee Benefit
Trust holds 7,678,528 being 1.48% of the
issued share capital of the Company at
31 December 2022 on trust for the benefit of
the employees of the Company. The voting
rights in relation to these shares are exercised
by the Trustee and the Trustee is obliged
to waive all dividends on the shares unless
requested to do otherwise by the Company in
writing.
Directors and Directors’ interests
The Directors who served the Company
during 2022 and at the date of this report are
listed on pages 72–74, which include brief
biographical details. Their remuneration and
interests in the share capital of the Company
are set out in the Report on Directors’
Remuneration on pages 96–105.
The Company has adopted best practice
guidelines and the 2018 UK Corporate
Governance Code. Executive, and
Non-Executive Directors, with the exception
of Ron Hundzinski, will offer themselves
for election and re-election at the 2023
Annual General Meeting. Jane Lodge,
Trudy Schoolenberg and Alex De Bock will
be offering themselves for election as they
were appointed by the Board during the year.
The rules for appointment and replacement
of Directors are contained in the Company’s
Articles. They include that the number of
Directors must not be less than two or more
than 15 in number and the Board may appoint
any person to be a Director. Any Director so
appointed by the Board shall hold office only
until the next general meeting and shall then
be eligible for election. Details of the Directors’
interest in the shares of the Company
are shown in the Report on Directors’
Remuneration on pages 96–105.
General information
The Company was incorporated and
registered in England and Wales on 22
January 2015 as a limited company with
the name Omega Holdco II Limited and with
registered number 09402231. It is domiciled
in England and Wales. On 27 September
2016, the Company changed its name to TI
Fluid Systems Limited and, on 18 October
2017, the Company was re-registered as a
public company limited by shares with the
name TI Fluid Systems plc. The Company
is premium listed on the London Stock
Exchange (TIFS). The Company’s registered
address is 4650 Kingsgate, Oxford Business
Park South, Cascade Way, Oxford OX4 2SU.
Subsidiaries
The Company’s subsidiary undertakings,
including its operating and non-operating
subsidiaries, are listed on pages 189–191.
Articles of Association
The Company’s Articles of Association
are available on request to the Company
Secretary at the registered address. Unless
expressly specified to the contrary in the
Articles, the Articles may be amended
by a special resolution of the Company’s
shareholders.
Issued share capital
On 31 December 2022, the Company had
520,269,141 ordinary shares of 1 pence each
in issue. There were no ordinary shares held in
Treasury, no restrictions on transfer of issued
shares, and no shares hold special rights
regarding the control of the company. All of
the issued ordinary shares carry voting rights
of one vote per share. There were no changes
in issued share capital during the year, see
Note 24 on page 166.
Voting
Subject to any special terms as to voting upon
which any shares may be issued, or may,
for the time being, be held, and to any other
provisions of the Articles of Association of the
Company (‘the Articles’), on a show of hands,
every member who is present in person
or by proxy or represented by a corporate
representative at a general meeting of the
Company, has one vote. On a poll, every
member who is present in person or by proxy
or represented by a corporate representative
has one vote for every share of which he or
she is the holder. In the case of joint holders
of a share, the vote of the senior who tenders
a vote, whether in person or by proxy, is
accepted to the exclusion of the votes of
the other joint holders and, for this purpose,
seniority is determined by the order in which
the names stand in the register in respect of
the joint holding.
The Directors present their Annual report
and the audited financial statements
for the Group for the year ended
31 December 2022. The Directors’
report comprises pages 108–111
and the sections of the Annual report
incorporated by reference as set out
below, which, taken together, contain the
information to be included in the Annual
report, where applicable, under Listing
Rule 9.8.4.
Future developments of our
business and the Group (Our
strategy)
Section 172(1) statement
Non-Financial Information
statement
Corporate Governance report
Board membership
Directors’ long-term incentives
Issued Share Capital
Dividends
Employee equality, diversity and
involvement
Information to the independent
auditor
Pages
30–31
36–38
64–65
75–111
72–74
99
108
108
109
110
Subsidiaries
189–191
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TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 36.72
8.81
4.83
3.05
36.72
8.81
5.32
3.73
Substantial shareholdings
At 31 December 2022, the following interests in 3% or more of the
Company’s ordinary share capital had been notified to the Company:
Shareholder
BC Omega Holdco Ltd
Liontrust Special Situations Fund
Number of
shares
Percentage
held (%)
191,064,632
45,856,405
EQMC Europe Development Capital Fund
25,129,463
Aberforth Smaller Companies Trust plc
15,852,286
At 10 March 2023, the following interests in 3% or more of the
Company’s ordinary share capital had been notified to the Company:
Shareholder
BC Omega Holdco Ltd
Liontrust Special Situations Fund
Number of
shares
Percentage
held (%)
191,064,632
45,856,405
EQMC Europe Development Capital Fund
27,656,071
Aberforth Smaller Companies Trust plc
19,394,686
Change of control
The Company has in place a number of agreements with advisers,
financial institutions and customers, which contain certain termination
rights which would have an effect on a change of control. The Directors
believe these agreements to be commercially sensitive and that their
disclosure would be seriously prejudicial to the Company; accordingly,
they do not intend to disclose specific details of these. In addition, all of
the Company’s share schemes contain provisions which, in the event
of a change of control, would result in outstanding options and awards
becoming exercisable, subject to the rules of the relevant schemes.
There are no agreements between the Company and its Directors or
employees providing for compensation for loss of office or employment
that occurs because of a takeover bid.
Directors’ indemnity
The Company’s Articles of Association provide, subject to the
provision of UK legislation, an indemnity for Directors and officers of
the Company and the Group in respect of liabilities they may incur in
the discharge of their duties or in the exercise of their powers, including
any liability relating to the defence of any proceedings brought against
them which relate to anything done or omitted, or alleged to have been
done or omitted, by them as officers or employees of the Company and
the Group.
Directors’ and officers’ liability insurance cover is in place in respect of
all the Company’s Directors.
Directors’ powers
As set out in the Company’s Articles of Association, the business of
the Company is managed by the Board who may exercise all powers
of the Company. The Directors were granted authority at the last
Annual General Meeting held in 2022 to allot relevant securities up
to a nominal amount of £1,734,230. At this year’s Annual General
Meeting, shareholders will be asked to grant an authority to allot
relevant securities up to the same nominal amount of £1,734,230, such
authority to apply until the end of next year’s Annual General Meeting
(or, if earlier, until the close of business on 16 August 2023).
Special resolutions will also be proposed to renew the Directors’
power to make non-pre-emptive issues for cash up to a nominal
amount of £520,269 being 10% of the Company’s issued ordinary
share capital at 4 April 2023 and, in connection with any such non-
pre-emptive issue, to issue a further 2% of the Company’s issued
share capital at 4 April 2023 (a nominal amount of £104,054) for the
purposes of a follow-on offer, provided that the Directors determine
that such follow-on offer is of a kind contemplated by the Pre-Emption
Group’s Statement of Principles (the ‘Pre-emption Principles’). This
authorisation will expire on the earlier of the conclusion of the Annual
General Meeting of the Company for 2024 (or, if earlier, until the close
of business on 16 August 2023). This disapplication authority is in
line with institutional shareholder guidance, and, in particular, with the
Pre-emption Principles. The Pre-emption Principles were revised in
November 2022 to allow the authority for an issue of shares otherwise
than in connection with a pre-emptive offer to be increased from 10%
to 20% of the Company’s issued ordinary share capital, provided
that the Company confirms that it intends to use the additional 10%
authority only in connection with an acquisition or specified capital
investment. In addition, the Pre-emption Principles allow for a further
2% of the Company’s issued share capital at 4 April 2023 (a nominal
amount of £104,054) for the purposes of a follow-on offer, provided the
Directors determine that such follow-on offer is of a kind contemplated
by the Pre-emption Principles. The Directors have no present intention
of exercising any such authority.
The Company was also authorised at the Annual General Meeting
held in 2022 to make market purchases of up to 52,026,914 ordinary
shares being 10% of the Company’s issued ordinary share capital at
5 April 2022 and sets the minimum and maximum prices that may be
paid. This authorisation will expire on the earlier of the conclusion of the
Annual General Meeting of the Company for 2023 (or, if earlier, until the
close of business on 16 August 2023).
Our people
The Group’s policy is to consider all job applications on a fair basis
free from discrimination in relation to age, sex, race, ethnicity, religion,
sexual orientation or disability not related to job performance. Every
consideration is given to applications for employment from disabled
persons, where the requirements of the job may be adequately covered
by a disabled person. Where existing employees become disabled,
it is the Group’s policy wherever practicable to provide continuing
employment under normal terms and conditions and to provide training
and career development wherever appropriate.
The Group places considerable value on the involvement of its
employees and encourages the development of employee involvement
in each of its operating companies through formal and informal
meetings. It is the Group’s policy to ensure that all employees are
made aware of significant matters affecting the performance of the
Group through the operation of employee forums, information bulletins,
informal meetings, team briefings, internal newsletters and the Group’s
website and intranet.
Diversity
Details of diversity can be found in the Nomination Committee report
on pages 80–82 in terms of the Board and senior leadership team
balance and their independence. Employee diversity information and
our Core Values details are in the our approach to sustainability on
pages 40–41.
Suppliers, customers and others
As set out in the Large Company Regulations, Schedule 7, Part 4,
paragraph 11B, the Directors confirm that they have regard to the
need to foster the company’s business relationships with suppliers,
customers and others, and the effect of that regard, including on the
principal decisions taken by the company during the financial year.
Details can be found as to how the Board fulfils this duty can be found
in the Section 172(1) statement on pages 36–39 and throughout the
Strategic Report located on pages 8–67.
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OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Directors’ report
Continued
Research and development
The Company’s primary activities in the field
of research and development are engineering,
prototyping, validation and testing
activities related to products and product
enhancements, with emphasis on HEV and
BEV applications. Details of the activities
can be found in Note 1.6 on page 129 and
expenditure in Note 6.2 on page 144 in the
Group Financial Statements.
the decisions taken during the year ended
31 December 2022
• Non-Financial Information Statement can
be found on pages 64–65
• Greenhouse gas emissions disclosure
can be found in the Our Approach to
sustainability on pages 40–41
• Task Force on Climate-related Financial
Disclosures (TCFD) can be found on
pages 52–57
Key performance indicators
Details of the Group’s key performance
indicators can be found on pages 32–35.
Principal risks and uncertainties
Details of the principal risks and uncertainties
faced by the Group can be found in the
Strategic Report on pages 42–51.
Financial instruments
An explanation of the Group’s treasury
policies and existing financial instruments are
set out in Note 1.10 on page 131 and Note 4
on pages 141–142 of the financial statements.
Details of how we use hedging to manage
foreign currency and interest rate risks can be
found in Note 4 in Group Financial Statements
on page 141–142.
Annual General Meeting
A separate notice convening the Annual
General Meeting of the Company to be
held on 16 May 2023 will be sent out to
shareholders with this Annual Report and
Accounts and will also be available on our
website.
Corporate Governance
The Company’s statement on Corporate
Governance can be found in the Corporate
Governance report on pages 75–111.
The Corporate Governance report forms part
of this Directors’ report and is incorporated
into it by cross reference.
Disclosure statements
In line with the Corporate Governance Code
2018 the disclosure statements have been
prepared and collated on page 70.
• Section 172(1) statement summarising
the key areas of disclosure in this Annual
Report required by the Non Financial
Directive can be found on pages 36–38.
The Board of Directors of TI Fluid Systems
plc consider, both individually and together,
that they have acted in the way they judge
to be in good faith and would be most likely
to promote the success of the Company
for the benefit of its members as a whole.
The Board decision-making process takes
into regard the stakeholders and matters
set out in Section 172(1) (a-f) of the Act in
Financial and business reporting
When reporting externally, the Board aims to
present a fair, balanced and understandable
assessment of the Group’s position and
prospects. During the year, the Board,
or Committees of the Board, have been
satisfied that appropriate procedures are
in place to enable it to state that this annual
report, taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the
Company’s position and performance,
business model and strategy. A statement
of this responsibility, together with additional
responsibilities of the Directors in respect of
the preparation of the Annual report, is set out
on page 111.
Going concern and viability
statements disclosures
We agree with the basis of the assessments
and the disclosures included on page 62.
Independent Auditors
The Auditors, PricewaterhouseCoopers LLP,
have indicated their willingness under section
489 of the Companies Act 2006 to continue
in office, and a resolution that they be re-
appointed will be proposed at the Annual
General Meeting.
Each of the persons who is a Director at
the date of approval of this Annual report
confirms that:
•
in so far as the Director is aware, there is
no relevant audit information of which the
Company’s Auditor is unaware; and
• the Director has taken all the steps
necessary to be aware of any relevant
audit information and to establish that
the Company’s Auditor is aware of
that information
This confirmation is given and should be
interpreted in accordance with the provisions
of s.418 of the Companies Act 2006.
By order of the Board
Matthew Paroly
Company Secretary
15 March 2023
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TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Statement of Directors’ responsibilities
in respect of the financial statements
Directors’ confirmations
The Directors consider that the Annual
Report and accounts, taken as a whole, is fair,
balanced and understandable and provides
the information necessary for shareholders
to assess the Group’s and Company’s
position and performance, business model
and strategy.
Each of the Directors, whose names and
functions are listed in the Board of Directors
section of this report confirm that, to the best
of their knowledge:
• the Group financial statements, which
have been prepared in accordance with
UK-adopted international accounting
standards, give a true and fair view of the
assets, liabilities, financial position and loss
of the Group;
• the Company financial statements, which
have been prepared in accordance with
United Kingdom Accounting Standards,
comprising FRS 101, give a true and fair
view of the assets, liabilities and financial
position of the Company; and
• the Strategic Report includes a fair review
of the development and performance of
the business and the position of the Group
and Company, together with a description
of the principal risks and uncertainties that
it faces.
This responsibility statement was approved
by the Board of Directors on 15 March 2023
and is signed on its behalf:
By order of the Board
Hans Dieltjens
Chief Executive Officer
and President
Ron Hundzinski
Chief Financial Officer
The Directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable law
and regulation.
Company law requires the Directors to
prepare financial statements for each financial
year. Under that law the Directors have
prepared the Group financial statements in
accordance with UK-adopted international
accounting standards and the Company
financial statements in accordance with
United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards, comprising FRS
101 “Reduced Disclosure Framework”, and
applicable law).
Under company law, Directors must not
approve the financial statements unless they
are satisfied that they give a true and fair
view of the state of affairs of the Group and
Company and of the profit or loss of the Group
for that period. In preparing the financial
statements, the Directors are required to:
• select suitable accounting policies and then
apply them consistently;
• state whether applicable UK-adopted
international accounting standards have
been followed for the Group financial
statements and United Kingdom
Accounting Standards, comprising
FRS 101 have been followed for the
Company financial statements, subject
to any material departures disclosed and
explained in the financial statements;
• make judgements and accounting
estimates that are reasonable and
prudent; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the Group
and Company will continue in business.
The Directors are responsible for
safeguarding the assets of the Group and
Company and hence for taking reasonable
steps for the prevention and detection of fraud
and other irregularities.
The Directors are also responsible for
keeping adequate accounting records that
are sufficient to show and explain the Group’s
and Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Group and Company
and enable them to ensure that the financial
statements and the Directors’ Remuneration
Report comply with the Companies Act 2006.
The Directors are responsible for the
maintenance and integrity of the Company’s
website. Legislation in the United Kingdom
governing the preparation and dissemination
of financial statements may differ from
legislation in other jurisdictions.
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OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022OverviewFinancialStrategicGovernance Financial
statements
Cost-effective, durable and
efficient performance
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TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 In this section
Independent auditors’ report to the members of
TI Fluid Systems plc
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Group Financial Statements
Company Balance Sheet
Company Statement of Changes in Equity
Notes to the Company Financial Statements
Group Financial Record
Shareholder information
114
122
123
124
125
126
127
184
185
186
194
196
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OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance Independent auditors’ report to the members
of TI Fluid Systems plc
• We also identified a further eight components (2021: six
components) where we performed targeted specified procedures
based on risk and materiality on the financial information. These
components are located in the USA and France.
• In addition the group audit team in the UK performed analytical
procedures on the components that are not in scope and audited
the Company and performed audit procedures on the consolidation
and accounting areas that are centralised. These areas included
goodwill, tangible and intangible assets impairment assessment,
specific aspects of warranty provisioning and accounting for
customer recoveries and settlements, corporate taxation and
retirement benefit obligations.
• This scope of work provided coverage of 77% (2021: 74%) of
revenue and 79% (2021: 72%) of net assets.
• As part of the group audit supervision process, the group
engagement team has performed a combination of in-person and
remote reviews for all components, which included meetings on
approach and conclusions with the component teams and review of
their audit files and final deliverables.
Key audit matters
• Goodwill, tangible and intangible assets impairment assessment
(Group)
• Carrying value of the Company’s investments in subsidiaries
(Company)
Materiality
• Overall Group materiality: €5.9 million (2021: €6.8 million) based
on 5% of a five year average of profit before tax, adjusted for
exceptional items (2021: 5% of a four year average of profit before
tax, adjusted for exceptional items).
• Overall Company materiality: €8.9 million (2021: €8.9 million) based
on 1% of net assets (2021: 1% of net assets).
• Performance materiality: €4.4 million (2021: €5.1 million) (Group)
and €6.7 million (2021: €6.7 million) (Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed
the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional
judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and
any comments we make on the results of our procedures thereon, were
addressed in the context of our audit of the financial statements as
a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
Report on the audit of the financial statements
Opinion
In our opinion:
• TI Fluid Systems plc’s Group Financial Statements and Company
Financial Statements (the “financial statements”) give a true and fair
view of the state of the Group’s and of the Company’s affairs as at 31
December 2022 and of the Group’s loss and the Group’s cash flows
for the year then ended;
• the Group Financial Statements have been properly prepared in
accordance with UK-adopted international accounting standards
as applied in accordance with the provisions of the Companies
Act 2006;
• the Company Financial Statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, including FRS 101
“Reduced Disclosure Framework”, and applicable law); and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual
Report & Accounts (the “Annual Report”), which comprise: the
Consolidated and Company Balance Sheet as at 31 December 2022;
the Consolidated Income Statement, the Consolidated Statement of
Comprehensive Income, the Consolidated and Company Statements
of Changes in Equity, and the Consolidated Statement of Cash Flows
for the year then ended; and the Notes to the financial statements,
which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit & Risk
Committee.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities
for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable
to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit
services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in Note 34 to the financial statements, we
have provided no non-audit services to the Company or its controlled
undertakings in the period under audit.
Our audit approach
Overview
Audit scope
• Following our assessment of the risks of material misstatement
of the Group Financial Statements we identified 19 components
(2021: 19 components) where we performed a full scope audit of
their complete financial information, either due to their size or risk
characteristics. These components are located in Belgium, Brazil,
China, Czech Republic, Germany, South Korea, Mexico, Poland,
Spain and Turkey. The one financially significant component within
the Group is located in China.
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TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Key audit matter
How our audit addressed the key audit matter
Goodwill, tangible and intangible assets impairment assessment (Group)
Refer to the Audit & Risk Committee report, Note 1 (Summary
of Significant Accounting Policies), Note 16 (Intangible Assets),
Note 17 (Property, Plant and Equipment), Note 18 (Leases) and
Note 19 (Impairments) to the Group Financial Statements. The
Group holds goodwill of €353.9 million (2021: €564.3 million),
intangible assets of €250.0 million (2021: €320.5 million), property,
plant and equipment of €531.4 million (2021: €595.4 million) and
right-of-use assets of €109.3 million (2021: €125.2 million) as at
31 December 2022.
All Cash Generating Units (CGUs) containing goodwill must be
tested for impairment annually and also when there are indicators of
impairment. Impairment exists when the carrying value of an asset
or cash generating unit exceeds its recoverable amount, which
is the higher of its fair value less costs of disposal and its value in
use (VIU).
The determination of the recoverable amount requires judgement
by management in valuing the relevant CGUs through valuation
models utilising discounted cash flow calculations and other
valuation methods. There are judgements and estimates involved
in management’s impairment assessment including cash flow
forecasts, discount rates and long term growth rates.
The cash flow forecasts used in the 2023 budget and medium
term outlook are significantly lower as compared to prior years
due to various factors including deterioration in external estimates
of global light vehicle volume, rapid increases in interest rates,
sustained inflationary pressure and impact from geo political
factors, supply chain volatility and the impact of climate change on
the business.
Management assessed the recoverable amount of the Group’s
CGUs on a VIU basis, as in the prior period, and found that it was
less than the carrying value owing to the various factors stated
above. Management reassessed the recoverable amount using
discounted cash flows determined according to market participant
assumptions. These include the costs and benefits of budgeted
(but not committed) restructuring activities and cash flows that are
generated from enhanced capital expenditure, and included an
estimate of costs to sell.
Management have used their own external expert to determine key
assumptions in the valuation including country specific discount
rates and long term growth rates. The same external expert
prepared the valuation models used to determine the fair value less
costs of disposal.
Management’s annual impairment assessment as at 31 December
2022 resulted in impairments in four CGUs, FCS-NA, FCS-EU,
FCS-LA and FTDS-EU, and are considered sensitive to reasonably
possible changes in key assumptions. In view of this management
has included sensitivity disclosures within the financial statements
including FTDS NA due to the low headroom observed in this CGU.
We assessed management’s impairment assessment and focused our
audit on challenging key judgements and estimates. Procedures we
performed included:
• confirming that the CGUs are the lowest level at which
management monitors performance for internal purposes and
that it is consistent with the way in which the Group’s results are
reported internally, as evidenced by our inspection of reporting to
divisional, Group and executive management;
• verifying the mathematical accuracy of the underlying
calculations in the model and agreeing the base case cash flow
forecasts to the latest medium term plan approved by the Board;
• evaluating the appropriateness of forecast cash flows by
understanding management’s process for forecasting, examining
support for forecast cash flows and assessing CGU specific cash
flow assumptions. We also assessed the exclusion of cash flows
dependent on enhancing capital expenditure and restructuring
activities in future periods for the VIU model;
• discussing with commercial management the expected future
business performance including the impact of climate change to
corroborate finance management’s explanations;
• on a sample basis, obtaining evidence in the form of award
documentation from customers for future business;
• evaluating management’s forecasting accuracy by comparing
previous periods outturns with forecasts made as part of the
Board approved medium term plans;
• validating the source of third party industry volume data for the
period to 2027 which management used to prepare their plans,
assessing the credibility of the source including comparison
to alternative sources of market information and evaluating
the appropriateness of the adjustment management made to
external volume data;
• agreeing management’s calculation of negative growth rates for
FTDS CGUs to the market projections the Group has received
from the external forecasting agency to predict the pace of
vehicle electrification, including in the period post 2027;
• challenging management’s assumptions with regards to the
recovery of climate change related costs and the operating
margin into the future;
• establishing that the medium term plan cash flows include
incremental costs associated with the Group’s commitment to
achieve published 2030 emissions reductions;
• engaging our valuation experts to assess the appropriateness
of discount rates, long term growth rates considering the risks
specific to the geographies and relevant industry of the CGUs
being assessed for impairment and valuation methodologies
used in determining the fair value less costs of disposal of
respective CGUs and the reasonableness of the enterprise value
as per the fair value model;
• evaluating management’s sensitivity analyses to ascertain the
impact of reasonably possible changes in key assumptions; and
• assessing the appropriateness of the related disclosures in the
financial statements.
Based on this work, we consider that the impairment loss recorded in
the year and the carrying value of goodwill are materially correct and we
believe that the disclosures in the financial statements are appropriate.
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of TI Fluid Systems plc Continued
Key audit matter
How our audit addressed the key audit matter
Carrying value of the Company’s investments in subsidiaries (Company)
Refer to Note 1 (Summary of Significant Accounting Policies)
and Note 4 (Investments in Subsidiaries) to the Company
Financial Statements. Investments in subsidiaries of
€922.1 million (2021: €912.5 million) are accounted for at cost
less provision for impairment in the Company Balance Sheet as at
31 December 2022.
We evaluated management’s determination of whether any
indicators of impairment existed by comparing the carrying value
of investments in subsidiaries to the market capitalisation of the
Group at 31 December 2022 and post year-end and by comparing
the performance of the Group in the year to previous budgets and
agreed that an impairment assessment is necessary.
Our procedures, in addition to the above key audit matter, included:
• comparing the carrying value of the investment in subsidiaries
with the carrying amount of investees’ net assets;
• comparing the carrying value of the investment in subsidiaries
with the equity value derived in the fair value report from the
management’s third party expert;
• considering what would be a reasonable control premium
that could be applied to the market capitalisation by reference
to those achieved in past transactions of similar sized
companies; and
• performing our own independent sensitivity analysis to
understand if reasonable possible changes in management’s
assumptions would result in an impairment.
As a result of our work, we did not identify any material impairment
and consider the carrying value of the investments in subsidiaries to
be supportable in the context of the Company Financial Statements
taken as a whole. We have assessed the disclosures provided and
consider them to be appropriate.
Our audit involves full scope audits of components in Belgium, Brazil,
China, Czech Republic, Germany, South Korea, Mexico, Poland, Spain
and Turkey and targeted specified procedures for the components in
the USA and France. Our specified procedures for components in the
USA covered all relevant financial statement line item assertions for all
material balances whilst our specified procedures for France covered
revenue and deferred income financial statement line item assertions
only. In addition the group audit team in the UK performed analytical
procedures on the components that are not in scope.
The group audit team in the UK performed audit procedures on the
consolidation and accounting areas that are centralised, including
goodwill, tangible and intangible assets impairment assessment,
specific aspects of warranty provisioning, accounting for customer
settlements and recoveries, corporate taxation and retirement benefit
obligations. This scope of work provided coverage of 77% (2021:
74%) of revenue and 79% (2021: 72%) of net assets. The coverage for
both the current and prior year is sufficient and in compliance with the
applicable auditing standards.
The investments of the Company are subject to an annual
review to identify the existence of any indicators of impairment.
Should indicators be identified, the carrying value is subject to
an impairment assessment with any resulting diminution of the
carrying value recognised in the Income Statement.
The carrying value significantly exceeded the market capitalisation
of the Group at 31 December 2022. Management has identified
it as an indicator of potential impairment. This necessitated an
impairment assessment to be performed, for which management
engaged a third party expert.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the Group and the
Company, the accounting processes and controls, and the industry in
which they operate.
Our approach to scoping was designed to achieve adequate
coverage across the consolidated financial statement line items
whilst addressing any location specific risks of material misstatement.
The Group operates two divisions, being Fluid Carrying Systems
(FCS) and Fluid Tank Delivery Systems (FTDS) across four
geographical territories of Europe and Africa, North America,
Asia Pacific and Latin America.
Each division consists of a large number of components spread across
multiple countries. Overall, the Group has 117 reporting components
across 28 countries. We identified one individually financially
significant component within the Group.
We have performed full scope audits on the financial information
of 19 components (2021: 19 components) and targeted specified
procedures based on risk and materiality on the financial information of
eight components (2021: six components).
116116
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 We issued formal written instructions to all component auditors setting
out the audit work to be performed by each of them and maintained
regular communication with the component auditors throughout
the audit cycle. Certain component teams have been able to visit
the locations in person where it has been safe to do so. Others have
adopted a hybrid or remote model of working. Our interaction with
component audit and local finance teams included a combination of
in-person and remote attendance at internal clearance meetings for
all components and attendance at external clearance meetings for all
material and significant components. We also attended regular video
conference calls with component audit teams to assess progress and
discuss specific accounting and auditing matters. We have reviewed
and assessed any matters reported to us by component teams.
Our work has included review of selected audit working papers for
all components with a particular focus on significant risk areas for
financially significant and material components.
In addition, senior members of the group engagement team visited
component teams in Mexico, South Korea, Spain and the USA.
These visits included meetings with component management,
discussions with the component teams and a review of their
workpapers on audit strategy, risk assessment and the results of audit
procedures performed. The group audit team has performed the audit
of the Company.
The impact of climate risk on our audit
There is significant interest from stakeholders including members
about how climate change will affect the Group’s businesses and
future financial performance. The Group’s strategy and Task Force
on Climate-related Financial Disclosures (TCFD) as set out within the
Strategic Report describe management’s view of how climate change
could impact the Group’s businesses.
In planning our audit, we considered the impact of climate change
risks and opportunities on the Group and the financial statements. As
part of our audit we made enquiries of management to understand the
process management adopted to assess the extent of the potential
impact of climate risk on the Group’s financial statements and
support the disclosures made within the financial statements. The
climate related risks identified are included within already existing and
assessed risk categories.
The future financial impacts are clearly uncertain given the timeframe
involved and their dependency on how Governments, global markets
and society respond to the issue of climate change. Accordingly,
financial statements cannot capture all possible future outcomes as
these are not yet known. We discussed with management and the
Audit & Risk Committee that the estimated impacts of climate change
will need to be frequently reassessed and the associated disclosures
should continue to evolve as the Group further develops its response to
the impacts identified.
Using our knowledge of the businesses and with assistance from
our internal climate change reporting team and valuation experts,
we assessed how the Group has considered the impact of climate
change risks and opportunities on the financial statements. We also
considered the consistency of the disclosures in relation to climate
change including the disclosures in the TCFD section within the
Annual Report with the financial statements and our knowledge
obtained from our audit. The goodwill, tangible and intangible assets
impairment assessment is a key area of the financial statements where
climate change was evaluated to have a significant potential impact.
The impact of climate change on the future demand of their products
has been considered by management in their impairment assessment
by incorporating a negative terminal growth rate for the FTDS division.
Management believes that there is no significant impact of climate
change on demand for the FCS division This has been incorporated
into the corresponding key audit matter above. We communicated
our findings to the Audit & Risk Committee and those charged
with governance.
Management has determined that their previously announced
CO2(e) emissions reduction target (37% reduction of scope 1 and
2 emissions from 2019 to 2039) is no longer in line with the current
expectations. They have now committed to a 50% reduction of
their scope 1 and 2 emissions and a 30% reduction of their scope
3 emissions by 2030 from a 2021 baseline. Whilst the Group has
stated its revised target, the pathway to these commitments is not
fully developed. Management has included the incremental cost to
achieve its 2030 targets in its forecasts, based on the assumption
that incremental costs related to scope 3 emissions will be passed
onto customers. We ensured that the medium term plan cash flows
include incremental costs associated with the Group’s commitment
to achieve the published 2030 emissions reductions and the related
effects have been appropriately reflected in determining asset values
and associated disclosures where values are determined through
modelling future cash flows, being goodwill, tangible and intangible
assets impairment assessment.
Our procedures did not identify any material impact in the context of
our audit of the financial statements as a whole for the year ended 31
December 2022 but as set out above the governmental and societal
responses to climate change risks are still developing, and are
interdependent upon each other, consequently financial statements
cannot capture all the relevant potential impacts.
117117
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance Independent auditors’ report to the members
of TI Fluid Systems plc Continued
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the
financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – Group
Financial statements – Company
Overall materiality
€5.9 million (2021: €6.8 million).
€ 8.9 million (2021: €8.9 million).
How we determined it
5% of a five year average of profit before tax, adjusted for
exceptional items (2021: 5% of a four year average of profit
before tax, adjusted for exceptional items).
1% of net assets (2021: 1% of net assets).
Rationale for
benchmark applied
Profit before tax adjusted for exceptional items is
a generally accepted auditing benchmark for profit
orientated businesses. Adjusting for exceptional items
provides a consistent year on year basis for determining
materiality. From 2020 the effects of the COVID-19
pandemic introduced volatility that has impacted this
benchmark. In response to this we have applied the
Group’s five year average profit before tax and exceptional
items as a basis to determine our 2022 materiality (2021:
four year average profit before tax and exceptional items)
as opposed to the in year profit before tax and exceptional
items. We have taken this judgement having considered
that the results for the current year are impacted by the
volatile market conditions due to the ongoing impact of
one-off events rather than a permanent change in the
profitability of the business.
As there is no trading activity within the
Company, net assets were considered an
appropriate benchmark. The higher Company
materiality level was used for the purposes
of testing balances not relevant to the Group
audit, such as investments in subsidiary
undertakings and intercompany balances.
For each component in the scope of our Group audit, we allocated a
materiality that is less than our overall Group materiality. The range
of materiality allocated across components was between €393,000
and €4,433,000.
In determining the performance materiality, we considered a number
of factors - the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls - and concluded that
an amount at the upper end of our normal range was appropriate.
We use performance materiality to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use
performance materiality in determining the scope of our audit and
the nature and extent of our testing of account balances, classes of
transactions and disclosures, for example in determining sample
sizes. Our performance materiality was 75% (2021: 75%) of overall
materiality, amounting to €4.4 million (2021: €5.1million) for the Group
Financial Statements and €6.7 million (2021: €6.7 million) for the
Company Financial Statements.
We agreed with the Audit & Risk Committee that we would report to
them misstatements identified during our audit above €0.29 million
(Group audit) (2021: €0.35 million) and €0.4 million (Company audit)
(2021: €0.4 million) as well as misstatements below those amounts
that, in our view, warranted reporting for qualitative reasons.
118118
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Conclusions relating to going concern
Reporting on other information
Our evaluation of the Directors’ assessment of the Group’s and the
Company’s ability to continue to adopt the going concern basis of
accounting included:
• understanding and evaluating the internal governance processes
around management’s going concern assessment;
• agreeing the underlying cash flow projections to management
approved forecasts, assessing how these forecasts are compiled
and assessing the historical accuracy of management’s forecasts;
• understanding and evaluating the key assumptions within
management’s forecasts;
• considering liquidity and available facilities by reference to
documents supporting those arrangements;
• assessing whether the severe but plausible scenario testing
performed by management appropriately considered the principal
risks facing the business;
• a stand back assessment of the Group’s liquidity and consideration
of all the evidence obtained; and
• assessing the adequacy of disclosures in the Going concern
statement in the Annual Report and found these appropriately reflect
the key areas identified.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group’s and the
Company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are authorised
for issue.
In auditing the financial statements, we have concluded that the
Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted,
this conclusion is not a guarantee as to the Group’s and the Company’s
ability to continue as a going concern.
In relation to the Directors’ reporting on how they have applied the
UK Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the Directors’ statement in the financial
statements about whether the Directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections of
this report.
The other information comprises all of the information in the Annual
Report other than the financial statements and our auditors’ report
thereon. The Directors are responsible for the other information,
which includes reporting based on the Task Force on Climate-related
Financial Disclosures (TCFD) recommendations. Our opinion on
the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit,
or otherwise appears to be materially misstated. If we identify an
apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material
misstatement of the financial statements or a material misstatement
of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report based on
these responsibilities.
With respect to the Strategic report and Directors’ Report,
we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit,
the information given in the Strategic report and Directors’ Report
for the year ended 31 December 2022 is consistent with the financial
statements and has been prepared in accordance with applicable
legal requirements.
In light of the knowledge and understanding of the Group and
Company and their environment obtained in the course of the audit, we
did not identify any material misstatements in the Strategic report and
Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
119119
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance Independent auditors’ report to the members
of TI Fluid Systems plc Continued
Corporate governance statement
The Listing Rules require us to review the Directors’ statements
in relation to going concern, longer-term viability and that part of
the corporate governance statement relating to the Company’s
compliance with the provisions of the UK Corporate Governance Code
specified for our review. Our additional responsibilities with respect
to the corporate governance statement as other information are
described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded
that each of the following elements of the corporate governance
statement, included within the Strategic report and Corporate
governance sections of the Annual Report, is materially consistent with
the financial statements and our knowledge obtained during the audit,
and we have nothing material to add or draw attention to in relation to:
• The Directors’ confirmation that they have carried out a robust
assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal
risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
• The Directors’ statement in the financial statements about whether
they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of any material
uncertainties to the Group’s and Company’s ability to continue to do
so over a period of at least twelve months from the date of approval
of the financial statements;
• The Directors’ explanation as to their assessment of the Group’s and
Company’s prospects, the period this assessment covers and why
the period is appropriate; and
• The Directors’ statement as to whether they have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the period of its
assessment, including any related disclosures drawing attention to
any necessary qualifications or assumptions.
Our review of the Directors’ statement regarding the longer-term
viability of the Group and Company was substantially less in scope
than an audit and only consisted of making inquiries and considering
the Directors’ process supporting their statement; checking that
the statement is in alignment with the relevant provisions of the UK
Corporate Governance Code; and considering whether the statement
is consistent with the financial statements and our knowledge and
understanding of the Group and Company and their environment
obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
• The Directors’ statement that they consider the Annual Report,
taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess the
Group’s and Company’s position, performance, business model
and strategy;
• The section of the Annual Report that describes the review of
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ responsibilities
in respect of financial statements, the Directors are responsible for
the preparation of the financial statements in accordance with the
applicable framework and for being satisfied that they give a true and
fair view. The Directors are also responsible for such internal control
as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are responsible
for assessing the Group’s and the Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Company or to
cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report
that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is
detailed below.
Based on our understanding of the Group and industry, we identified
that the principal risks of non-compliance with laws and regulations
related to the UK Bribery Act, and we considered the extent to
which non-compliance might have a material effect on the financial
statements. We also considered those laws and regulations that
have a direct impact on the financial statements such as the UK
Corporate Governance Code, the Companies Act 2006, the Listing
Rules of the UK Financial Conduct Authority and tax legislation.
We evaluated management’s incentives and opportunities for
fraudulent manipulation of the financial statements (including the risk
of override of controls), and determined that the principal risks were
related to fraudulent journal entries (for example journal entries to
increase revenue) and bias in relation to judgements and estimates,
particularly in the area of goodwill, tangible and intangible assets
impairment assessment. The group engagement team shared this risk
assessment with the component auditors so that they could include
appropriate audit procedures in response to such risks in their work.
Audit procedures performed by the group engagement team and/or
component auditors included:
effectiveness of risk management and internal control systems; and
• understanding and evaluating the key elements of the Group’s
• The section of the Annual Report describing the work of the
Audit & Risk Committee.
We have nothing to report in respect of our responsibility to report when
the Directors’ statement relating to the Company’s compliance with the
Code does not properly disclose a departure from a relevant provision
of the Code specified under the Listing Rules for review by the auditors.
internal control related to estimates;
• validating the support behind the assumptions and judgements
made by management including challenging against possible
alternatives, for example in relation to goodwill, tangible and
intangible assets impairment assessment;
120120
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 •
identifying and substantively testing higher risk journal entries, in
particular any posted with unusual account combinations, including
those that increased revenue, or were posted by unexpected users;
Other required reporting
Companies Act 2006 exception reporting
• having discussions with and corroborating key assertions made by
finance management with internal audit, the Group’s legal counsel
and senior group and divisional management including views on
accounting judgements and estimates, and considering known or
suspected instances of non-compliance with laws and regulation
and fraud;
• reading the minutes of the Board meetings to identify any
inconsistencies with other information provided by management;
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
• we have not obtained all the information and explanations we require
for our audit; or
• adequate accounting records have not been kept by the Company,
or returns adequate for our audit have not been received from
branches not visited by us; or
• certain disclosures of Directors’ remuneration specified by law are
• reviewing internal audit reports in so far as they related to the
not made; or
financial statements;
• reviewing legal expense accounts to identify significant legal
spend which may be indicative of serious breaches of laws and
regulations; and
• reviewing selected audit working papers for all components with a
particular focus on significant risk areas for financially significant and
material components.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to
events and transactions reflected in the financial statements. Also,
the risk of not detecting a material misstatement due to fraud is higher
than the risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain
transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items
for testing, rather than testing complete populations. We will often
seek to target particular items for testing based on their size or risk
characteristics. In other cases, we will use audit sampling to enable
us to draw a conclusion about the population from which the sample
is selected.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part
of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for
the Company’s members as a body in accordance with Chapter 3 of
Part 16 of the Companies Act 2006 and for no other purpose. We do
not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our
prior consent in writing.
• the Company Financial Statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
The Group in its current form came into existence in 2001 and we
have been its auditor since that year. The period of total uninterrupted
engagement is 22 years, covering the years ended 31 December 2001
to 31 December 2022. We were previously the auditors of the Group
from which this Group was demerged.
The Group listed on the London Stock Exchange in October 2017. Prior
to the listing, following an audit tender in 2017, we were re-appointed as
auditors by the Directors for the year ended 31 December 2017.
Other matter
In due course, as required by the Financial Conduct Authority
Disclosure Guidance and Transparency Rule 4.1.14R, these financial
statements will form part of the ESEF-prepared annual financial report
filed on the National Storage Mechanism of the Financial Conduct
Authority in accordance with the ESEF Regulatory Technical Standard
(‘ESEF RTS’). This auditors’ report provides no assurance over
whether the annual financial report will be prepared using the single
electronic format specified in the ESEF RTS.
Andrew Hammond (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
15 March 2023
121121
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance Consolidated Income Statement
For the year ended 31 December
2022
2022
2022
2021
2021
2021
Continuing operations
Note
Before
exceptional
items
€m
Exceptional
items (Note 9)
€m
Revenue
Cost of sales
Gross profit/(loss)
Distribution costs
Administrative expenses
Net foreign exchange losses
Other gains and losses
Operating profit/(loss)
Finance income
Finance expense
Net finance expense
Share of loss of associate
Profit/(loss) before income tax
Income tax (expense)/credit
Profit/(loss) for the year
Profit/(loss) for the year attributable to:
Owners of the Parent Company
Non-controlling interests
Total earnings per share (Euro, cents)
Basic
Diluted
5
6
6
6
4
11
12
12
20
13
26
14
14
3,268.3
(2,938.0)
330.3
(112.1)
(119.0)
(0.7)
1.9
100.4
5.7
(64.4)
(58.7)
–
41.7
(23.4)
18.3
18.2
0.1
18.3
–
(100.3)
(100.3)
–
(217.1)
–
–
(317.4)
–
–
–
–
(317.4)
20.1
(297.3)
(297.3)
(297.3)
Refer to Note 3 for reconciliation to adjusted performance measures (APMs).
After
exceptional
items
€m
3,268.3
(3,038.3)
230.0
(112.1)
(336.1)
(0.7)
1.9
(217.0)
5.7
(64.4)
(58.7)
–
(275.7)
(3.3)
(279.0)
(279.1)
0.1
(279.0)
(54.39)
(54.39)
Before
exceptional
items
€m
Exceptional
items (Note 9)
€m
After
exceptional
items
€m
2,956.6
(2,626.8)
329.8
(93.9)
(105.8)
(6.9)
3.6
126.8
3.1
(63.1)
(60.0)
(0.9)
65.9
(40.9)
25.0
23.3
1.7
25.0
–
–
–
–
–
–
–
–
–
(11.8)
(11.8)
–
(11.8)
2.8
(9.0)
(9.0)
(9.0)
2,956.6
(2,626.8)
329.8
(93.9)
(105.8)
(6.9)
3.6
126.8
3.1
(74.9)
(71.8)
(0.9)
54.1
(38.1)
16.0
14.3
1.7
16.0
2.76
2.73
122122
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Consolidated Statement of Comprehensive Income
For the year ended 31 December
(Loss)/profit for the year
Other comprehensive income
Items that will not be reclassified to profit or loss
– Remeasurements of retirement benefit obligations
– Income tax expense on retirement benefit obligations
Items that may be subsequently reclassified to profit or loss
– Currency translation
– Net investment hedges
Total other comprehensive income for the year
Total comprehensive income for the year
Attributable to:
– Owners of the Parent Company
– Non-controlling interests
Total comprehensive income for the year
Note
30
13
25
26
2022
€m
(279.0)
28.0
(6.9)
21.1
6.0
–
6.0
27.1
(251.9)
(252.0)
0.1
(251.9)
2021
€m
16.0
36.3
(6.8)
29.5
75.1
0.9
76.0
105.5
121.5
120.1
1.4
121.5
123123
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance Consolidated Balance Sheet
As at 31 December
Non-current assets
Intangible assets
Right-of-use assets
Property, plant and equipment
Deferred income tax assets
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Current income tax assets
Derivative financial instruments
Financial assets at fair value through profit or loss
Cash and cash equivalents
Total assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Equity attributable to owners of the Parent Company
Non-controlling interests
Total equity
Non-current liabilities
Trade and other payables
Borrowings
Lease liabilities
Deferred income tax liabilities
Retirement benefit obligations
Provisions
Current liabilities
Trade and other payables
Current income tax liabilities
Borrowings
Lease liabilities
Derivative financial instruments
Provisions
Total liabilities
Total equity and liabilities
Note
16
18
17
13
22
21
22
13
29
23
23
24
24
25
26
27
28
18
13
30
31
27
13
28
18
29
31
2022
€m
603.9
109.3
531.4
105.2
20.6
2021
€m
884.8
125.2
595.4
70.5
19.2
1,370.4
1,695.1
372.0
541.9
7.9
2.8
–
491.0
1,415.6
2,786.0
6.8
2.2
(55.4)
722.6
676.2
0.5
676.7
12.8
1,114.0
121.5
80.7
104.2
2.6
332.3
520.5
11.4
0.9
0.9
499.1
1,365.1
3,060.2
6.8
2.2
(61.4)
995.9
943.5
0.4
943.9
14.6
1,098.5
119.8
95.8
128.1
2.6
1,435.8
1,459.4
584.8
546.1
44.5
1.9
28.1
0.2
14.0
673.5
2,109.3
2,786.0
49.9
1.8
30.1
0.3
28.7
656.9
2,116.3
3,060.2
The Financial Statements on pages 122–195 were authorised for issue by the Board of Directors on 15 March 2023 and were signed on its
behalf by:
Hans Dieltjens
Chief Executive Officer and President
Ron Hundzinski
Chief Financial Officer
124124
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022
Consolidated Statement of Changes in Equity
For the year ended 31 December
Balance at 31 December 2022
6.8
2.2
(55.4)
Balance at 1 January 2022
(Loss)/profit for the year
Total other comprehensive income for the
year
Total comprehensive income for the year
Share-based expense
Issue of own shares from Employee
Benefit Trust
Vested share awards
Purchase of own shares
Dividends paid
Transactions with owners recognised
directly in equity
Note
Ordinary
shares
€m
6.8
–
–
–
–
–
–
–
–
–
7
24
24
15
Balance at 1 January 2021
Profit for the year
Total other comprehensive income for
the year
Total comprehensive income for the year
Decrease in share held by non-controlling
interests
Purchase of non-controlling interests
Share-based expense
Issue of own shares from Employee
Benefit Trust
Vested share awards
Purchase of own shares
Dividends paid
Transactions with owners recognised
directly in equity
Note
Ordinary
shares
€m
6.8
–
–
–
–
–
–
–
–
–
–
–
7
24
24
15
Share
premium
€m
Other
reserves
€m
Retained
earnings
€m
Share
premium
€m
Other
reserves
€m
Retained
earnings
€m
2.2
(61.4)
–
–
–
–
–
–
–
–
–
–
6.0
6.0
–
–
–
–
–
–
2.2
(137.7)
–
–
–
–
–
–
–
–
–
–
–
–
76.3
76.3
–
–
–
–
–
–
–
–
995.9
(279.1)
21.1
(258.0)
9.6
1.0
(1.9)
(11.4)
(12.6)
(15.3)
722.6
987.7
14.3
29.5
43.8
26.2
(15.5)
6.8
1.1
(0.9)
(8.3)
(45.0)
(35.6)
995.9
Balance at 31 December 2021
6.8
2.2
(61.4)
Non-
controlling
interests
€m
Total equity
€m
0.4
0.1
–
0.1
–
–
–
–
–
–
0.5
943.9
(279.0)
27.1
(251.9)
9.6
1.0
(1.9)
(11.4)
(12.6)
(15.3)
676.7
Non-
controlling
interests
€m
Total equity
€m
25.2
1.7
(0.3)
1.4
(26.2)
–
–
–
–
–
–
(26.2)
0.4
884.2
16.0
105.5
121.5
–
(15.5)
6.8
1.1
(0.9)
(8.3)
(45.0)
(61.8)
943.9
Total
€m
943.5
(279.1)
27.1
(252.0)
9.6
1.0
(1.9)
(11.4)
(12.6)
(15.3)
676.2
Total
€m
859.0
14.3
105.8
120.1
26.2
(15.5)
6.8
1.1
(0.9)
(8.3)
(45.0)
(35.6)
943.5
125125
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance Consolidated Statement of Cash Flows
For the year ended 31 December
Cash flows from operating activities
Cash generated from operations
Interest paid
Income tax paid on operating activities
Net cash generated from operating activities
Cash flows from investing activities
Payment for property, plant and equipment
Payment for intangible assets
Proceeds from the sale of property, plant and equipment
Proceeds from the sale of associated undertakings
Tax paid on the proceeds from the sale of associated undertakings
Interest received
Net cash used in investing activities
Net cash generated from operating and investing activities (‘Free Cash Flow’)
Cash flows from financing activities
Purchase of own shares
Purchase of non-controlling interests
Proceeds from new borrowings
Fees paid on proceeds from new borrowings
Voluntary repayments of borrowings
Scheduled repayments of borrowings
Lease principal repayments
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Currency translation on cash and cash equivalents
Cash and cash equivalents at the end of the year
Note
32
20
20
3
24
26
28.1
28.1
28.1
28.1
18
15
23
23
2022
€m
282.5
(56.7)
(58.3)
167.5
(90.8)
(27.1)
–
–
(3.0)
4.3
(116.6)
50.9
(11.4)
–
–
–
–
(5.5)
(32.9)
(12.6)
(62.4)
(11.5)
499.1
3.4
491.0
2021
€m
319.8
(50.6)
(54.1)
215.1
(88.2)
(35.4)
1.4
15.5
–
3.1
(103.6)
111.5
(8.3)
(15.5)
600.0
(15.3)
(600.0)
(6.8)
(31.6)
(45.0)
(122.5)
(11.0)
485.8
24.3
499.1
Material non-cash transactions in the year include new lease purchases for e-Mobility Innovation Centres (eMICs) in North America and Asia.
For further information see Note 18.
126126
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Notes to the Group Financial Statements
1. Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies
have been consistently applied to all the years presented, unless
otherwise stated.
1.1. Basis of Preparation
The consolidated Group financial statements for the year ended
31 December 2022 have been prepared in accordance with UK-
adopted International Accounting Standards and in conformity with
the requirements of the Companies Act 2006 and the Disclosure and
Transparency Rules of the Financial Conduct Authority.
The consolidated financial statements have been prepared under
the historical cost convention, except for the fair valuation of assets
and liabilities of subsidiary companies acquired, and financial assets
and liabilities at fair value through profit or loss (‘FVTPL’) (including
derivative instruments not in hedged relationships).
The preparation of financial statements in conformity with UK-
adopted International Accounting Standards requires the use of
estimates and assumptions that affect the reported amounts of assets
and liabilities and the reported amounts of revenue and expenses
during the reporting period. Although these estimates are based on
management’s reasonable knowledge, actual results may differ from
those estimates.
The areas involving a higher degree of judgement or complexity,
or areas where assumptions and estimates are critical to the
consolidated financial statements are disclosed in Note 1.4.
1.1.1. Going Concern
The Directors are of the opinion that the Group has adequate
resources to continue in operational existence for at least 12 months
from the date of approval of its consolidated financial statements.
The Group therefore continues to adopt the going concern basis in
preparing its consolidated financial statements. Further information on
the Group’s borrowings is given in Note 28.
Further details of the Going Concern and Viability statements are
disclosed in the Compliance statements. See pages 62–63.
1.1.2. Functional and Presentation Currency
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which each entity operates (the ‘functional currency’).
The functional currency of each Group company has been assessed
against the underlying transactions and economic conditions in which
it operates.
These financial statements are presented in Euros, which is the
Group’s presentation currency. All financial information presented
in Euros has been rounded to the nearest 100,000 except where
stated otherwise.
1.1.3. Changes in Accounting Policy and Disclosures
Changes in accounting policies and disclosures are set out below:
1.1.3.1. New and Revised International Financial Reporting
Standards (‘IFRS’) Affecting Amounts Reported in the Current
Year (and/or Prior Years)
There are no standards or IFRS IC interpretations effective in the
current year that would be expected to have a material impact on
the Group.
1.1.3.2. New and Revised IFRS in Issue but not yet Effective
A number of new standards, amendments to standards, and
interpretations are effective for annual periods beginning on or after
1 January 2023, or are not yet effective because they have not yet
been endorsed by the UK Endorsement Board. These have not been
applied in preparing the consolidated financial statements.
The Group has not applied the following new and revised standards that have been issued but are not yet effective or are not yet endorsed by the
UK Endorsement Board:
IFRS 17 ‘Insurance Contracts’1
IFRS 17 replaces IFRS 4 for all entities that issue insurance contracts.
Amendments to IAS 8: Accounting
Policies and Accounting Estimates1
Replaces the definition of accounting estimates and clarifies that a change in accounting estimate
that results from new information or new developments is not the correction of an error.
Amendments to IAS 1: Accounting
Policies1
Requires that an entity discloses its material accounting policies, instead of its significant
accounting policies.
Amendments to IAS 1: Non-current
liabilities with covenants 1
Clarifies how conditions, with which an entity must comply within twelve months after the reporting
period, affect the classification of a liability.
Amendment to IAS 12: Deferred Tax
Related to Assets and Liabilities Arising
from a Single Transaction1
Clarifies that the initial recognition exemption does not apply to transactions in which equal
amounts of deductible and taxable temporary differences arise on initial recognition.
Amendments to IAS 1: Classification of
Liabilities as Current or Non-Current2
Provides guidance on whether debt and other liabilities with an uncertain settlement date should be
classified as current or non-current.
Amendments to IFRS 16: Lease
Liability in a Sale and Leaseback2
Specifies how a seller-lessee should apply the subsequent measurement requirements in IFRS 16
to the lease liability that arises in a sale and leaseback transaction with variable payments that do
not depend on an index or rate.
1 Effective for the Group’s 2023 financial statements
2 Effective for the Group’s 2024 financial statements
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OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 1. Summary of Significant Accounting Policies
Continued
The new and revised standards disclosed above are not expected to
have a material impact on the Group. There are no other standards
or IFRS IC interpretations that are not yet effective that would be
expected to have a material impact on the Group.
1.2. Consolidation
1.2.1. Subsidiaries
Subsidiaries are all entities over which the Group has control. The
Group controls an entity when the Group is exposed to, or has rights
to variable returns from, its involvement with the Group and has
the ability to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that
control ceases.
The Group applies the acquisition method to account for business
combinations. The consideration transferred to the former owners of
the acquiree for the acquisition of a subsidiary is the fair value of the
assets transferred, the liabilities incurred, and any equity interests
issued by the Group. The consideration transferred includes the fair
value of any asset or liability resulting from a contingent consideration
arrangement.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their
fair values at the acquisition date. The Group recognises any
non-controlling interest in the acquiree on an acquisition-by-acquisition
basis, either at fair value or at the non-controlling interest’s
proportionate share of the recognised amounts of the acquiree’s
identifiable net assets.
Acquisition-related costs are expensed as incurred in accordance with
IFRS 3 ‘Business Combinations’.
Intercompany transactions and balances between Group companies
are eliminated. Profits and losses resulting from intercompany
transactions that are recognised in assets are eliminated. Accounting
policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
A list of subsidiaries and their countries of incorporation is presented
in Note 4 of the Parent Company’s financial statements. The term
‘Group’ means the Company and its consolidated subsidiaries and
undertakings.
1.2.2. Associates
Associates are all entities over which the Group has significant
influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates
are accounted for using the equity method of accounting, under which
the investment is initially recognised at cost, and the carrying amount
is increased or decreased to recognise the investor’s share of the profit
or loss of the investee after the date of acquisition. On 8 December
2021, the Group disposed in full of its only associated undertaking,
see Note 20 for further details.
1.3. Foreign Currencies
1.3.1. Foreign Currency Transactions
Transactions in foreign currencies are converted to the respective
functional currencies of Group entities at exchange rates at the dates
of the transactions. Monetary assets and liabilities denominated in
foreign currencies at the reporting date are converted to the functional
currency at the exchange rate at that date. Non-monetary items that
are measured at historical cost in a foreign currency are converted
using the exchange rate at the date of the transaction.
All transactional foreign currency differences are included in the
Income Statement.
1.3.2. Foreign Operations
Foreign operations are those subsidiaries whose functional currency
is not Euro. For the purposes of consolidation, income and expenses
of foreign operations are translated to Euro at average exchange
rates for the year, and assets and liabilities of foreign operations are
translated to Euro at exchange rates at the reporting date. Foreign
currency translation differences are recognised in the Statement of
Comprehensive Income.
The average and year-end exchange rates for the Group’s principal
currencies were:
Key Euro exchange
rates
2022
Average
US dollar
Chinese renminbi
Korean won
1.053
7.079
1,358
31
December
2022 Year
End
1.067
7.362
1,343
31
December
2021 Year
End
1.137
7.228
1,352
2021
Average
1.182
7.628
1,354
1.4. Critical Accounting Estimates and Judgement
The preparation of financial statements requires the use of accounting
estimates and for management to exercise judgement in applying the
Group’s accounting policies. Assumptions and accounting estimates
are subject to regular review, governed by Group-wide policies
and controls. Any revisions required to accounting estimates are
recognised in the year in which the revisions are made including all
future periods affected.
The judgement and estimates that have the most significant and
critical effect on the amounts included in the financial statements are
in relation to post-employment obligations, impairments of assets, and
recognition of deferred tax assets.
1.4.1. Critical Accounting Estimates
The critical accounting estimates below have a significant risk of
material adjustment to the carrying value of assets and liabilities in the
next financial year.
1.4.1.1. Post-employment obligations
Costs and obligations of the Group’s defined benefit plans are
calculated on the basis of a range of assumptions, including discount
rates, inflation rates, salary growth and mortality assumptions. Further
details, including a sensitivity analysis illustrating how changes in
the principal assumptions would impact the total defined benefit
obligation, are included in the Retirement Benefit Obligations note.
See Note 30.5.
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Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses.
In respect of equity accounted investees, the carrying amount of
goodwill is included in the carrying amount of the investment, and an
impairment loss on such an investment is not allocated to any asset,
including goodwill, that forms part of the carrying amount of the equity
accounted investee.
Goodwill is not amortised, but is subject to impairment testing which
is performed annually or when an impairment trigger event occurs.
The carrying value of goodwill is compared to the recoverable amount,
which is the higher of value-in-use and fair value less costs of disposal.
For the purposes of impairment testing, goodwill is allocated to each
of the Group’s cash-generating units (‘CGUs’) that are expected to
benefit from the synergies of the combination which generated the
goodwill. If the recoverable amount of the CGU is less than its carrying
amount, the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the CGU and then to the other
assets of the CGU pro-rata based on the carrying amount of each
asset in the CGU. CGUs comprise the two operating segments each
sub-divided into four geographic territories.
Any impairment loss for goodwill is recognised as an expense in the
Income Statement. Impairment losses recognised for goodwill are not
reversed in subsequent periods.
1.6 Intangible Assets
Research and development
Expenditure on research activities is recognised as an expense in the
year in which it is incurred.
Development activities involve a plan or design for the production of
new or substantially improved products and processes. Development
expenditure is capitalised where the costs can be measured reliably,
the product or process is technically and commercially feasible,
future economic benefits are probable, and the Group intends to
and has sufficient resources to, complete the project and to use or
sell the development asset. Expenditure capitalised includes the
cost of materials, direct labour, and overhead costs that are directly
attributable to preparing the asset for its intended use. Capitalised
development expenditure is measured at cost less accumulated
amortisation and impairment charges. Development expenditure,
which does not meet the criteria for recognition as an intangible asset,
is recognised in the Income Statement as incurred.
Computer software
Acquired computer software licences are capitalised on the basis of
the costs incurred to acquire and bring into use the specific software.
Costs associated with maintaining computer software programmes
are recognised as an expense as incurred.
1. Summary of Significant Accounting Policies
Continued
1.4.1.2. Impairments of assets
Management has designated the key input assumptions to the Group
impairment test as being critical estimates, due to the significant
impact they have on the outcome of the CGU recoverable amount
calculation. The key inputs are five-year forecast operating cash
flows, discount rates and long-term expected growth rates. Forecast
operating cash flows are based on the Group’s 2023 budget and
2024–2027 medium-term plan. Estimation is used in forecasting
global automotive production volumes, as well as pricing, operating
costs, capital expenditure and working capital assumptions used in
arriving at operating cash flows. CGU discount rates are established
using a weighted average cost of capital calculation. This includes
the estimation of certain country specific macroeconomic variables.
Long-term expected growth rates are typically based on country
specific inflation adjusted forecast GDP. In the current year, long-term
expected growth rates for the FTDS CGUs have been estimated
with reference to a longer-term outlook model, covering the period
2028–2035. Further discussion regarding how these critical estimates
have been made and sensitivity analysis of CGU recoverable amounts
to changes in these assumptions can be found in Note 19.
1.4.2 Critical Accounting Judgements
1.4.2.1 Deferred tax assets
Recognition of deferred tax assets is based on forecast future taxable
income and involves the exercise of management’s judgement
regarding the period over which recoverability is assessed, taking into
account factors such as regulations regarding the amount of tax losses
that can be utilised per year, and any restrictions on the amount of time
that tax losses can be carried forward. Typically losses are anticipated
to be utilised against profits arising within a period not exceeding
fifteen years. In some cases, tax regulations place significant
restrictions on the amount of losses that can be used in any year and in
these cases a longer time period may be utilised. The value of deferred
tax assets relating to utilisation of profits in excess of a fifteen year
period is approximately €6 million.
Management has looked at short and medium-term production
volume forecasts to assess the trading profits to support recognition
of the assets. The key input assumptions of trading profits over the
medium term, whilst consistent with the Group’s impairment test noted
in 1.4.1.2 above, are not considered to be critical estimates for the
recognition of deferred tax assets, as a reasonably possible change in
these input assumptions in the next financial year would not materially
change the underlying profitability trend or the carrying amount of
deferred tax assets in those jurisdictions in which the ability to recover
tax losses is limited.
1.5. Goodwill
Initial measurement
Goodwill is initially measured as the excess of the aggregate of the
consideration transferred and the amount of non-controlling interests
over the fair value of net identifiable assets acquired and liabilities
assumed. If the total of consideration transferred, non-controlling
interest recognised and previously held interest measured at fair value
is less than the fair value of the net assets of the subsidiary acquired, in
the case of a bargain purchase, the difference is recognised directly in
the Income Statement.
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OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance
1. Summary of Significant Accounting Policies
Continued
Amortisation
Amortisation is recognised in the Income Statement on a straight-line
basis over the estimated useful lives of intangible assets, other than
goodwill, from the date that they are available for use. The estimated
useful lives for the current year are as follows:
• Capitalised development expenses
5–10 years (over the life of
the production cycle)
• Computer software and licences
3–6 years
• Technology
• Customer platforms
8–10 years
11–25 years
Intangible assets that are under development are not amortised
until they are brought into use. They are reviewed for indications
of impairment to ensure that expectations of future economic
benefits remain valid. Where there is any indication to the contrary,
capitalisation ceases and costs are expensed.
1.7. Property, Plant and Equipment (‘PP&E’)
PP&E is stated at historical cost, which includes expenses directly
attributable to bringing assets into productive use including finance
charges, less accumulated depreciation. Assets acquired as part
of the acquisition of the Group were valued at fair value as part of
the acquisition accounting. Land is not depreciated. When major
components of an item of PP&E have different useful lives, they are
accounted for as separate items.
Depreciation of PP&E is calculated using the straight-line method,
reflecting expected patterns of consumption of the future economic
benefits embodied in the assets, to allocate their cost less residual
values over their estimated useful lives, as follows:
• Buildings
30–50 years
(or the period of the lease for improvements in leased buildings, and
where the lease period is shorter)
• Plant, machinery and equipment
3–20 years
Depreciation is not charged on assets in the course of construction.
Once completed these are transferred to the relevant category above
and depreciated accordingly.
Enhancement expenditure of PP&E items is capitalised only when
it is probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of replaced parts is derecognised. All
other repairs and maintenance are charged to the Income Statement
as incurred.
Gains and losses on disposals of PP&E are determined by comparing
the proceeds from disposal with the carrying amount, and are
recognised net within other income in the Income Statement.
Investment grants received against the cost of acquired PP&E assets
are included in payables as part of accrued expenses and credited to
the Income Statement on a straight-line basis over the useful lives of
the relevant assets.
1.8. Impairment of Non-Financial Assets
Assets that are subject to amortisation or depreciation are reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher
of an asset’s fair value less costs of disposal and value-in-use. For the
purposes of assessing impairment, assets are grouped at CGU level,
the lowest level for which there are separately identifiable cash flows.
Non-financial assets other than goodwill that have previously been
impaired are reviewed for possible reversal of the impairment at each
reporting date. See Note 19.
1.9. Right-of-Use Assets and Lease Liabilities
Right-of-use assets and lease liabilities are created for all leases on
the balance sheet, unless the lease term is short, or the underlying
asset has a low value (‘exempt leases’). Short-term leases are leases
with a lease term of 12 months or less. Payments associated with
exempt leases are recognised on a straight-line basis as an expense in
the Income Statement.
The Group first applied IFRS 16 ‘Leases’ on 1 January 2019, in
accordance with the simplified transition (modified retrospective)
approach permitted in the standard, with the cumulative effect of
initially applying the new standard recognised on that date. All lease
liabilities recognised on the balance sheet (‘non-exempt leases’),
were initially measured at the present value of their remaining lease
payments, discounted using the Group’s incremental borrowing rates
at that date. All right-of-use assets existing at that date were initially
measured at the amount of the lease liability after adjusting for any
prepaid or accrued lease expenses.
Since 1 January 2019, a right-of-use asset and a corresponding lease
liability has been recognised for all new non-exempt leases at the date
at which the underlying leased assets are made available for use by
the Group discounted using the Group’s incremental borrowing rate at
that date. Incremental borrowing rates depend on the term, country,
currency and start date of the lease. The incremental borrowing
rate is determined based on a series of inputs including the risk-free
rate based on government bond rates and a country-specific risk
adjustment incorporating a credit risk adjustment based on
entity-specific risk.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of
the following lease payments:
• fixed payments (including in-substance fixed payments), less any
lease incentives receivable
• variable lease payments that are based on an index or a rate
• the exercise price of a purchase option if the Group is reasonably
certain to exercise that option
• payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising that option
Future increases or decreases in rentals linked to a price index or rate
are not included in the lease liability until the change in cash flows
takes effect.
As a practical expedient, the Group has elected, by class of underlying
asset, not to separate non-lease components from lease components,
and instead accounts for each lease component and any associated
non-lease components as a single lease component.
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Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 1. Summary of Significant Accounting Policies
Continued
Right-of-use assets are measured at cost comprising the following:
the amount of the initial measurement of the lease liability, any lease
payments made at or before the commencement date less any lease
incentives received, any initial direct costs, and restoration costs.
In determining the lease term, management considers all facts and
circumstances that create an economic incentive to exercise an
extension option, or not exercise a termination option. Extension
options (or periods after termination options) are only included in
the lease term if the lease is reasonably certain to be extended (or
not terminated). The assessment is reviewed if a significant event
or a significant change in circumstances occurs which affects this
assessment and that is within the Group’s control.
After initial recognition, lease interest payable is charged to the Income
Statement over the lease term so as to produce a constant periodic
rate of interest on the remaining balance of the liability for each period.
The right-of-use asset is depreciated over the shorter of the asset’s
useful life and the lease term on a straight-line basis.
The carrying amount of lease liabilities is remeasured when there is
a change in the future lease payments due under a lease, due to a
change in the lease term or fixed lease payments under the lease,
including changes in the assessment to purchase the underlying
asset. A corresponding adjustment is also made to the right-of-use
asset. Lease liabilities are remeasured at the Group’s incremental
borrowing rates at the date of the change, except where changes in
lease payments result from a change in an index or a rate.
1.10. Financial Instruments
Financial assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets and financial liabilities, other than financial
assets and financial liabilities at ‘fair value through profit or loss’
(‘FVTPL’), are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial
assets or financial liabilities at FVTPL are expensed as incurred and
presented in the statement of cash flows alongside the financing
instruments to which they relate.
1.10.1. Financial Assets
Financial assets are classified into ‘financial assets at amortised cost’
and ‘financial assets at FVTPL’. The classification is determined at the
time of initial recognition and depends on the Group’s business model
for managing the financial assets and whether the contractual cash
flows represent solely payments of principal and interest.
Financial assets at amortised cost
Assets that are held for collection of contractual cash flows, where
those cash flows represent solely payments of principal and interest,
are measured at amortised cost. Interest income from these financial
assets is included in finance income using the effective interest rate
method. Any gain or loss arising on derecognition is recognised
directly in profit or loss and presented in other gains/(losses) together
with foreign exchange gains and losses. Impairment losses are
presented as a separate line item in the statement of profit or loss. The
Group’s financial assets at amortised cost comprise ‘trade and other
receivables excluding prepayments’ and ‘cash and cash equivalents’.
Financial assets at FVTPL
A financial asset is classified in this category if it does not meet
the criteria for recognition as a financial asset at amortised cost.
Derivatives are classified in this category unless they are designated
as in hedging relationships. These contracts are marked to market by
remeasuring them to fair value at the end of each reporting period. The
resulting gain or loss is recognised in the Income Statement as finance
income or expense.
Offsetting financial instruments
Financial assets and liabilities are offset, and the net amount reported
in the balance sheet, when there is a legally enforceable right to offset
the recognised amounts, and there is an intention to settle on a net
basis, or realise the asset and settle the liability simultaneously.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses
(‘ECL’) on financial assets at amortised cost. The amount of expected
credit losses is updated at each reporting date to reflect changes
in credit risk since initial recognition of the respective financial
instrument.
For trade receivables and contract assets, the Group recognises
expected credit losses that will result from all possible default events
over the expected life of a financial instrument, (‘lifetime ECL’). A
default on a financial asset occurs when the counterparty fails to make
contractual payments within 180 days of when they fall due. The Group
also assesses on a forward-looking basis the expected credit losses
associated with the trade receivables.
For all other financial instruments, the Group recognises lifetime ECL
only when there has been a significant increase in credit risk since
initial recognition. If the credit risk on the financial instrument has not
increased significantly since initial recognition, the Group measures
the loss allowance for that financial instrument at an amount equal to
the portion of lifetime ECL that is expected to result from default events
on the financial instrument that are possible within 12 months after the
reporting date.
In assessing whether the credit risk on a financial instrument has
increased significantly since initial recognition, the Group compares
the risk of a default occurring on the financial instrument at the
reporting date with the risk of a default occurring on the financial
instrument at the date of initial recognition. In making this assessment,
the Group considers an actual or expected significant deterioration
in the financial instrument’s external credit rating where available;
significant deterioration in external market indicators of credit risk for a
particular financial instrument, e.g. a significant increase in the credit
spread or the credit default swap prices for the debtor; indications that
any debtor is experiencing significant financial difficulty, default or
delinquency in payments; an increase in the probability that any debtor
will enter bankruptcy, or other financial reorganisation; and where
observable data indicate that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
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1.10.2. Financial Liabilities
Financial liabilities are classified as either ‘financial liabilities at
amortised cost’ or ‘financial liabilities at FVTPL’.
Financial liabilities are recognised initially on the date at which the
Group becomes party to the contractual provisions of the instrument.
Financial liabilities at amortised cost
The classification of financial liabilities at amortised cost is determined
at the time of initial recognition and depends on the Group’s business
model for managing the financial liabilities and whether the contractual
cash flows represent solely payments of principal and interest.
Financial liabilities at amortised cost, including borrowings and trade
and other payables excluding deferred income and lease liabilities, are
measured using the effective interest method, which calculates the
amortised cost of a financial liability and allocates interest expense
over its term. The effective interest rate discounts estimated cash
payments (including all issuance discounts and transactions costs)
through the expected life of the financial liability, to the net carrying
amount on initial recognition.
Borrowings, including extensions to existing agreements, are
recognised initially at fair value, net of discounts and transaction costs
incurred. Borrowings are subsequently carried at amortised cost.
Any difference between the net proceeds and the redemption value is
recognised in the Income Statement over the term of the borrowings
using the effective interest method. Interest arising on financial
instruments is recognised on an accruals basis.
In assessing whether a debt alteration is to be treated as a modification
or an extinguishment and new arrangement, an evaluation is made of
the qualitative factors such as the underlying parties to the transaction
and quantitative factors such as the impact on the net present value
of remaining cash flows. A gain or loss is recognised immediately
in the Income Statement at the date of the extinguishment of a
financial liability.
Financial liabilities at FVTPL
A financial liability is classified in this category if it does not meet
the criteria for recognition as a financial liability at amortised cost.
Derivatives are classified in this category unless they are designated
as in hedging relationships. The Group enters into conventional
derivative financial instruments to manage its exposure to foreign
exchange rate risks, mostly foreign exchange forward contracts.
Further details of derivative financial instruments are disclosed in
Notes 4 and 29. Derivatives are initially recognised at fair value at the
date the derivative contracts are entered into, and are subsequently
marked to market by remeasuring to their fair value at the end of each
reporting period.
1.10.3. Derivative instruments and hedge accounting
The Group has no derivatives designated as hedging instruments in
the current or prior year, however, the Group previously entered into
net investment hedges to manage its exposure to foreign currency risk.
These hedges were all terminated in 2020. From that date, gains and
losses which had been accumulated in equity are only released to the
Income Statement when the foreign operation to which they related is
partially disposed of or sold.
1.11. Inventories
Inventories are valued at the lower of cost, including an appropriate
proportion of overheads, and net realisable value, on the first-in
first-out principle. Net realisable value represents the estimated selling
price for inventories less all estimated costs of completion and costs
necessary to make the sale.
Tooling that is being manufactured for an external customer or supplier
is reported as an item of inventory until complete, and represents
the gross amount recoverable from the customer in respect of costs
incurred, less progress payments received.
For productive material, cost is standard cost, and for non-productive
material (including consumables) cost is actual cost. The standard
cost of finished goods and work in progress comprises raw materials,
direct labour, other direct costs and related production overheads all
at standard, based on normal operating conditions. Cash discounts,
trade discounts and rebates are deducted from the costs of purchase.
Other costs are included only to the extent that they are incurred in
bringing inventories to their present location and condition. Provision is
made for slow moving and obsolete inventory.
1.12. Trade and Other Receivables
Trade receivables are amounts due from customers for goods sold or
services performed in the ordinary course of business.
Trade and other receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest
method. The Group recognises expected credit losses that will result
from all possible default events over the expected life of a financial
instrument ‘lifetime ECL’ for all trade and other receivables.
1.13. Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances and call deposits
and money market funds with original maturities of three months
or less.
1.14. Share Capital
Ordinary shares of the Company are classified as equity. Costs
directly attributable to the issue of ordinary shares are recognised in
equity as a deduction, net of any tax effects from the proceeds.
1.15. Trade and Other Payables
Trade payables are obligations to pay for goods or services that have
been acquired in the ordinary course of business from suppliers.
Accrued expenses are recognised when ownership of goods or
services has been transferred but not invoiced. Trade and other
payables are recognised at amortised cost.
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1.16. Provisions
A provision is recognised if, because of a past event, the Group has a
present legal or constructive obligation that can be estimated reliably,
and it is probable that an outflow of economic benefits will be required
to settle the obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the
liability. The unwinding of the discount is recognised as a finance
expense. Provisions are not recognised for future operating losses.
Product warranties
A product warranty provision is recognised when specific events occur
with the underlying product, which results in an exposure to a probable
cash outflow. The provision is based on contractual considerations,
historical warranty data and expected outcomes against their
associated probabilities. Specific claims are provided for reflecting
management’s best estimates of potential exposure.
Restructuring
A provision for restructuring is recognised when the Group
has approved a detailed and formal restructuring plan, and the
restructuring either has commenced or has been announced publicly.
Asset retirement obligations
Provisions are recognised for the estimated costs of dismantling and
removing PP&E at the end of its operational life. Provisions for site
restoration in respect of contamination and lease dilapidations are
made in accordance with applicable legal requirements.
1.17. Revenue
IFRS 15 ‘Revenue from Contracts with Customers’ establishes
a single model to account for revenue arising from contracts with
customers. Revenue in the course of ordinary activities is measured
and recognised using the five-step approach outlined in IFRS 15:
1. Identify the contract with the customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the
contract
5. Recognise revenue when the entity satisfies the performance
obligations
Step 1:
To be recognised as a contract, there must be appropriate approval
from both parties and clear identification of each party’s rights under
the agreement. The payment terms should be evident, with collection
of consideration probable.
The Group’s customer arrangements take a variety of forms,
with typical contractual frameworks comprising: master terms
and conditions, programme award letters, purchase orders and
release orders.
For piece part revenue, volume requirements and mutually
enforceable terms are established on the customer issuance of
a release order and therefore this is the relevant accounting unit
of contract.
Tooling, prototype and development (‘TPD’) requirements are typically
specified in a purchase order or equivalent.
Step 2:
The performance obligation within a piece part release order is to
manufacture and deliver the specified volume of requested parts.
The performance obligation of a TPD order is to construct or undertake
the relevant tooling and development activities. Where the different
obligations are separable, in terms of both capability and within
the contractual documentation, they are accounted for as distinct
performance obligations. Further details regarding the nature of goods
and services sold are included in Note 2.
Step 3:
The fair value of consideration receivable is the transaction price
specified in the relevant release order or purchase order, net of returns,
discounts, sales taxes and volume rebates.
For piece part revenue, the price is fixed at the given release order
(contract) and does not include any element of variable consideration.
For TPD revenue, where there is any uncertainty over the amount of
consideration that will ultimately be recognised, the transaction price
is constrained until such uncertainty is resolved. Amounts invoiced in
excess of the transaction price will be reflected as pricing accruals or
revenue deferrals.
Step 4:
The transaction price established in step 3 is allocated to the distinct
performance obligations identified in step 2.
Step 5:
Revenue is recognised on satisfaction of the specified performance
obligations, consistent with the passing of control of the goods
and services.
For piece part revenue, control is deemed to have passed at the point
in time delivery of the parts specified in the applicable release order
is made.
Where consignment arrangements apply, revenue is only recognised
when control of the underlying inventory has passed to the customer.
For TPD activities, control is deemed to have passed once production
part approval process (‘PPAP’) or start of production (‘SOP’) has
been achieved, depending on the specific terms of the agreement.
Costs incurred up until this point are recognised as work-in-progress
on the Balance Sheet and reviewed regularly for impairment should
their future recovery become doubtful. Upfront deposits and progress
billings are recorded in deferred revenue, until point of recognition.
Contract Costs
Incremental costs incurred in obtaining a contract are capitalised and
amortised over the applicable programme life, with regular review for
impairment.
Other pre-contract costs and costs of fulfilment are expensed as
incurred unless future economic benefit is evident, or if applicable,
within the scope of other standards.
Impairment
Contract assets arise where a performance obligation has been
satisfied but amounts due have not been fully recognised within
trade receivables. Contract assets are reviewed for impairment in
accordance with IFRS 9 ‘Financial Instruments’.
Deferred income
Deferred income is recorded when consideration for goods or services
provided by the Group is received before the revenue is recognised.
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1.18. Other Gains and Losses
Other income includes government grants, gains and losses on
disposals of non-current assets, royalty income, income from
insurance claims, other rental income and other miscellaneous items.
Other net foreign exchange gains and losses arise on movements
in the fair value of foreign exchange forward contracts and the
revaluation of Group borrowings. A significant portion of the Group’s
external borrowings are denominated in US dollars, and are largely
on-lent to subsidiaries in the UK, whose functional currency is the
Euro. The net foreign exchange movement represents the impact of
currency movements on such loans, see Note 3.
1.19. Net Foreign Exchange Gains and Losses
Net foreign exchange gains and losses arise from US dollar
denominated net intercompany borrowings and cash balances in Euro
and Korean Won functional currency companies, see Note 4.
1.20. Employee Benefits
Short-term benefits
Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service is
provided. Accrued paid absence such as holiday pay entitlement is
charged to the Income Statement as earned. A liability is recognised
for the amount expected to be paid under bonus plans if the Group has
a present legal or constructive obligation to pay this amount because
of past service provided by the employee, and the obligation can be
estimated reliably.
Defined contribution plan
Payments to a defined contribution retirement benefit plan are
recognised as an expense when employees have rendered service
entitling them to the contributions. A defined contribution plan is a
post-employment benefit plan under which the Group may elect to
pay discretionary and fixed contributions to a separate trust and has
no legal or constructive obligation to pay further amounts in respect of
past service.
Defined benefit plan
A defined benefit plan provides an amount of benefit that an employee
will receive at a later date, usually dependent on one or more factors
such as age, periods of service and compensation. Defined benefit
arrangements in the Group include funded and unfunded pension
plans, post-employment healthcare, statutory termination indemnities
and long-service awards.
The liability recognised in the Balance Sheet in respect of defined
benefit plans is the present value of the defined benefit obligation
(‘DBO’) at the end of the reporting period less the fair value of plan
assets. Where the fair value of plan assets exceeds the present
value of the DBO, an asset is recognised only to the extent of future
economic benefits accruing to the Group either as cash refunds or as a
reduction in contributions.
The service cost of providing benefits for funded plans accruing during
the year and any past service costs are charged as an operating
expense. The interest cost or credit arising from the unwinding of
the discount on the net actuarial liability or asset is recognised in the
Income Statement as finance expense or income. Actuarial gains and
losses are recognised in other comprehensive income in the year in
which they arise.
The DBO is calculated annually by independent actuaries using
the projected unit credit method. The present value of the DBO is
determined by discounting the estimated future cash outflows using
interest rates of high-quality corporate bonds that are denominated in
the currency in which the benefits will be paid, and that have terms to
maturity approximating the terms of the related benefit obligation.
Defined benefit plans – funded
The Group operates funded pension plans in the US, Canada
and UK. The US plans are subject to annual actuarial review, whilst
the others are formally valued at least triennially. Assets are held in
trusts and are separately administered from the Group’s activities.
Assets include readily marketable equities, credit and diversified
growth/multi-strategy funds, and qualifying insurance policies, and
are valued at fair value. The Group makes contributions based on
actuarial advice sufficient to meet the liabilities of the plans.
Defined benefit plans – unfunded including healthcare
The Group operates unfunded employment benefit plans in certain
countries of which the most significant are post-employment
healthcare in the US, a closed arrangement, and pension plans in
Germany. Other liabilities include statutory termination indemnities
and long-service awards.
Share-based compensation
The fair value of equity-settled payments to employees is
determined at the date of grant using a Monte Carlo simulation and
Black-Scholes option-pricing models. The expense is recognised in
the Income Statement on the straight-line basis over the period that
the employees become entitled to the awards. The credit entry relating
to the awards is recorded in equity (Note 10).
The Group reviews the estimate of the number of shares expected to
vest at each balance sheet date with appropriate adjustments being
made during the year to reflect expected and actual forfeitures. The
total amount expensed is determined by reference to the fair value
of the options granted, including any market performance and any
non-vesting conditions, and excluding the impact of any service
and non-market performance vesting conditions. Non-market
performance and service conditions are included in assumptions
about the number of options that are expected to vest.
1.21. Income Tax
The tax expense for the year comprises current and deferred tax.
Tax is recognised in the Income Statement, except to the extent that it
relates to items recognised in other comprehensive income and equity.
Current tax
Current tax is the expected tax payable or receivable on the taxable
profit or loss for the period, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax payable in
respect of previous periods.
Uncertain tax positions
The Group operates in many jurisdictions and is subject to tax audits
which are often complex and can take several years to conclude.
Therefore, the accrual for current tax includes provisions for uncertain
tax positions, which require estimates for each matter and the
exercise of judgement in respect of the interpretation of tax laws and
the likelihood of challenge to historic positions. Management uses
in-house tax experts, professional advisers and previous experience
when assessing tax risks. Depending on their nature, estimates of
interest and penalties are included either in interest payable or in
tax liabilities. As amounts provided for in any year could differ from
eventual tax liabilities, subsequent adjustments may arise which have
a material impact on the Group’s tax rate and/or cash tax payments.
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The current income tax charge is calculated on the basis of the tax
laws enacted or substantively enacted at the reporting date in the
countries where the Group operates and generates taxable profits.
Management periodically evaluates positions taken in tax returns with
respect to situations in which the applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.
Deferred tax
Deferred income tax is measured using the tax rates and laws that
have been enacted or substantively enacted by the reporting date and
are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled. Deferred tax
liabilities are recognised for all taxable temporary differences except
for goodwill arising in a business combination. Deferred tax assets are
recognised for all deductible temporary differences to the extent that
it is probable that taxable profits will be available, against which those
deductible temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries and associates, except for deferred
income tax liabilities where the timing of the reversal of the temporary
difference is controlled by the Group and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against current
tax liabilities, and when the deferred income tax assets and liabilities
relate to income taxes levied by the same taxation authority, on either
the same taxable entity or different taxable entities, where there is an
intention to settle the balances on a net basis.
1.22. Adjusting Items
In addition to the results reported under IFRS, Management use
certain non-IFRS financial measures to monitor and measure the
performance of the business and operations and the profitability of the
divisions. Such measures are described more fully in Note 3. Adjusting
items used in the calculation of these measures include restructuring
costs, net foreign exchange gains and losses, costs associated with
business acquisitions or disposals and the profit or loss on disposal of
businesses, and exceptional items as detailed below.
Exceptional items are defined as those items that, by virtue of their
nature, size and expected frequency, warrant separate additional
disclosure in the consolidated financial statements in order to fully
understand the underlying performance of the Group. These may
include impairment charges, the costs of closure of locations or
income from the disposal of assets on closure of locations, the costs
of significant headcount reductions, transaction costs of a significant
and non-recurring nature, debt-refinancing costs including early
redemption premiums and the release of unamortised transaction
costs following voluntary repayments of borrowings, costs arising from
the acquisition or disposal of businesses including related contractual
management incentive charges, and the recognition of previously
derecognised deferred tax assets and the derecognition of previously
recognised deferred tax assets.
1.23. Climate Change
The Group assesses the potential impact of climate-related risks
based on the Task Force for Climate-related Financial Disclosure
(‘TCFD’) recommendations. These cover both transitional risks
such as legal, technological, and market changes, and physical
risks including direct damage to assets and supply chain disruption.
In recognition of the importance of climate change, the Group has
established an Environmental, Social and Governance (‘ESG’)
Committee. The Group has published science-based targets of 50%
reduction of Scope 1 and 2 emissions and a 30% reduction in Scope
3 emissions by 2030 based on absolute 2021 emission levels, and
is implementing initiatives to achieve the same, such as moving from
carbon-based fuels to renewable energy alternatives. Please refer to
TCFD disclosure for further details.
Throughout the Group’s medium-term planning horizon of five years
the impact of achieving the emissions reduction across both divisions
is principally based on different capital expenditure decisions and
certain incremental operating costs. The impact of changes in capital
equipment procurement decisions that improve energy efficiency
or reduce water consumption are incorporated into the Group’s
medium-term plan. Budgets for operational spending are determined
taking into account additional costs that may be required for ESG
initiatives, such as increasing the mix of renewable energy within the
Group’s electricity consumption. Such costs will be recognised on an
as incurred basis and are also incorporated into the Group’s
medium-term planning for both divisions.
Impairment testing of non-current assets including goodwill
specifically considers the potential impact on forecast operating cash
flows arising from future changes in climate change regimes. Full
details of this assessment are set out in Note 19 where assumptions
have been made regarding the volumes, and full recovery from
customers of incremental costs arising on the decarbonisation of
supply chains or imposition of carbon taxes.
In the case of the FTDS division, further transitional risks have been
factored into the Group’s annual impairment assessment by modelling
the impact of the market’s transition to electric powered vehicles in
the period beyond the Group’s medium-term horizon of five years
and the associated impact this may have on the division’s forecast
operating cash flows, as estimation uncertainty arises from the rate of
such market transition. Further discussion on the critical accounting
estimates and judgements made in the impairment test can be found
in Note 1.4.
The climate-related estimates and assumptions that have been
considered to be key areas of judgement or sources of estimation
uncertainty for the year ended 31 December 2022 are those relating
to the recoverable amount of non-current assets including goodwill.
These items are included within the key areas of judgement and key
sources of estimation uncertainty summarised and explained in detail
throughout the significant accounting policies.
Items that may be impacted by climate-related risks, but which are not
considered to be key areas of judgements or sources of estimation
uncertainty in the current financial year are outlined below:
Deferred tax assets – the recovery of deferred tax assets could be
impacted by climate-related matters to the extent they reduce the
Group’s 2023 budget and 2024 to 2027 medium-term plan results,
which is a key input for the forecast of taxable income to the extent
they reduce the forecast profits over the period of recovery.
Useful lives of assets – The useful lives of assets could be reduced
by climate-related matters, for example as a result of physical risks,
obsolescence or legal restrictions. The change in useful lives would
have a direct impact on the amount of depreciation or amortisation
recognised each year from the date of reassessment. The Directors’
review of useful lives has taken into consideration the impacts of the
Group’s decarbonisation commitments and has not had a material
impact on the results for the year.
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1. Summary of Significant Accounting Policies
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2. Segment Reporting
Notes to segment reporting
Inventory valuation – Climate-related matters may affect the value
of inventories as they could become obsolete as a result of a decline
in selling prices or a reduction in demand. After consideration
of the typical stock-turns of the inventory in relation to the rate
of change in the market, the Directors consider that inventory is
appropriately valued.
Recoverability of trade receivables and contract assets – The impact
of climate-related matters could have an impact on the Group’s
customers in the future, especially those customers in the FTDS
business. No material climate-related issues have arisen during
the year that have impacted our assessment of the recoverability
of receivables. Given the maturity time of trade receivables and
the majority of contract assets, climate change is unlikely to have a
material increase on counter party credit risk in that time.
Share-based payments – Executive leadership remuneration
packages are impacted and measured against a sustainability metric
set by the Remuneration Committee with input from the ESG Steering
Committee that align with both the Group’s electrification strategy and
sustainability transition in order to align with interests of the Group’s
wider stakeholders. This could impact the amount and timing of the
recognition of the share-based expense in the Income Statement. This
has had no material impact on the 2022 financial statements.
Defined benefit pension plans – Climate-related risks could affect the
financial position of defined benefit pension plans. As a result, this
could have implications on the expected return on plan assets and
measurement of defined benefit liabilities in future years.
In accordance with the provisions of IFRS 8 ‘Operating Segments’,
the Group’s segment reporting is based on the management approach
with regard to segment identification, under which information
regularly provided to the chief operating decision makers (‘CODM’)
for decision-making purposes forms the basis of the disclosure.
The Company’s CODM is the Chief Executive Officer (‘CEO’),
Chief Operating Officer and the Chief Financial Officer. The CODM
evaluates the performance of the Company’s segments primarily
on the basis of revenue, adjusted EBITDA and adjusted EBIT.
See Note 3.
Two operating segments have been identified by the Group: Fluid
Carrying Systems (‘FCS’) and Fuel Tank and Delivery Systems
(‘FTDS’). Inter-segment revenue is attributable solely to the ordinary
business activities of the respective segment and is conducted on an
arm’s-length basis.
Fluid Carrying Systems (‘FCS’)
FCS products include brake and fuel lines and bundles, thermal
management fluid systems (including HEV and BEV heating and
cooling lines), powertrain components and quick-connectors. There is
a high degree of vertical integration from the purchase of raw materials,
through tube manufacturing to the assembly of finished products.
Fuel Tank and Delivery Systems (‘FTDS’)
FTDS products include plastic fuel tanks, filler pipes, pumps and
modules and level sensors.
The Group recognises revenue on a point in time basis, when the
performance obligation to manufacture and deliver products has been
satisfied and control of the parts has transferred to the customer.
Volume requirements and delivery schedules are communicated
using frequent release orders with many customers utilising electronic
delivery interfaces to transmit such information and self-billing
processes to manage their payment obligations. Payment terms are
typically between 30 and 60 days from date of invoicing.
Tooling, Prototype and Development (‘TPD’)
Within both segments, further revenue streams are recognised for
distinct TPD services chargeable to a customer.
Revenue recognition for such activities occurs at the point in time
control of the goods and services is transferred to the customer.
This is typically Production Part Approval Process (‘PPAP’) or
Start of Production (‘SOP’), depending on the specific terms of the
agreement, as at this point all agreed upon specifications have been
met. Project durations vary depending on the scope and complexity
of requirements. Payment terms are typically 30 to 60 days after
customer acceptance.
Allocation of corporate costs
Corporate costs comprise costs of stewardship of the Group. Costs
incurred in administrative services performed at the corporate level
are allocated to divisions in line with utilisation of the services. Where
direct allocation is not possible, costs are allocated based on revenue
for the year.
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2.1. Revenue, Adjusted EBITDA and Adjusted EBIT by Segment:
Revenue
– FCS
– External
– Inter-segment
– FTDS – External
– Inter-segment
Inter-segment elimination
Total consolidated revenue
Adjusted EBITDA
– FCS
– FTDS
Adjusted EBITDA % of revenue
– FCS
– FTDS
Total
Adjusted EBIT
– FCS
– FTDS
Adjusted EBIT % of revenue
– FCS
– FTDS
Total
2022
€m
1,869.7
67.0
1,936.7
1,398.6
2.8
1,401.4
(69.8)
3,268.3
170.4
162.9
333.3
9.1%
11.6%
10.2%
95.0
85.0
180.0
5.1%
6.1%
5.5%
2021
€m
1,603.5
63.1
1,666.6
1,353.1
2.5
1,355.6
(65.6)
2,956.6
177.1
175.8
352.9
11.0%
13.0%
11.9%
117.9
94.7
212.6
7.4%
7.0%
7.2%
Restructuring costs of €22.8 million (€19.8 million in FCS and €3.0 million in FTDS) (2021: €26.8 million of which €15.3 million in FCS and
€11.5 million in FTDS) comprise announced headcount reductions and related costs of balancing production capacity with market requirements.
Please refer to Alternative Performance Measures (Note 3) for reconciliation to Income Statement.
137137
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance
2. Segment Reporting Continued
2.2 Revenue by Origin: Geography & Customer Concentration
Germany
Spain
Poland
Czech Republic
Belgium
France
Turkey
United Kingdom
Africa
Other
Europe and Africa
China
South Korea
Other
Asia Pacific
US
Mexico
Canada
North America
Latin America
Total
2022
€m
178.4
166.7
153.1
138.0
96.9
105.2
98.5
58.0
83.9
128.4
1,207.1
673.9
288.6
151.8
2021
€m
182.1
163.7
139.1
132.2
90.8
99.5
94.9
61.2
37.2
137.7
1,138.4
672.4
254.7
131.0
1,114.3
1,058.1
603.3
274.0
18.5
895.8
51.1
481.4
219.1
13.1
713.6
46.5
3,268.3
2,956.6
Four customers account individually for more than 10% of total revenue and collectively contributed 45.9% of total revenue across both reporting
segments in the year (2021: three customers contributed 34.9%). Revenue recognised for these customers by segment is as follows:
FCS
€m
852.4
FCS
€m
501.9
FTDS
€m
647.0
FTDS
€m
529.7
Total
€m
1,499.4
Total
€m
1,031.6
31 December 2022
Revenue
31 December 2021
Revenue
138138
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 2. Segment Reporting Continued
2.3 Non-Current Assets
Total non-current assets, other than financial instruments and deferred tax assets, by the location of assets is as follows:
Germany
Czech Republic
Poland
Spain
Turkey
Belgium
United Kingdom
Rest of Europe and Africa
Europe and Africa
US
Mexico
Rest of North America
North America
China
South Korea
Rest of World
Total
31 December 2022
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use assets
Non-current trade and other receivables
Total
31 December 2021
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use assets
Non-current trade and other receivables
Total
2022
€m
67.7
53.7
58.5
39.7
20.7
17.4
11.4
81.8
350.9
255.3
89.0
8.8
353.1
397.8
133.2
30.2
2021
€m
124.4
87.7
100.8
71.9
48.3
43.8
29.6
117.9
624.4
277.1
76.4
11.0
364.5
428.6
163.4
43.7
1,265.2
1,624.6
FTDS
€m
25.7
119.9
248.0
40.0
9.4
443.0
FTDS
€m
26.1
127.9
234.5
48.7
9.3
446.5
Total
€m
353.9
250.0
531.4
109.3
20.6
1,265.2
Total
€m
564.3
320.5
595.4
125.2
19.2
1,624.6
FCS
€m
328.2
130.1
283.4
69.3
11.2
822.2
FCS
€m
538.2
192.6
360.9
76.5
9.9
1,178.1
139139
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 3. Adjusting Items and Alternative Performance Measures
In addition to the results reported under IFRS, management use certain non-IFRS financial measures to monitor and measure the performance
of the business and operations and the profitability of the divisions. Such measures are also utilised by the Board as targets in determining
compensation of certain executives and key members of management, as well as in communications with investors. In particular, management
use Adjusted EBIT, Adjusted EBITDA, Adjusted Net Income, and Adjusted Free Cash Flow. These non-IFRS measures are not recognised
measurements of financial performance or liquidity under IFRS, and should be viewed as supplemental and not replacements or substitutes for
any IFRS measures.
Definitions for alternative performance measures are included in the Note 37 glossary.
Adjusted Performance Measures
Adjusted EBIT
Adjusted EBITDA
Adjusted net income
Adjusted free cash flow
For adjusted basic EPS please refer to Note 14.2.
3.1 Adjusting Items
Management exclude certain items in the derivation of alternative performance measures, as shown below:
Adjusting Items
Restructuring costs
Exceptional impairment charge
Net foreign exchange losses
Costs associated with business acquisitions or disposals
Loss on disposal of associate and other
Note
31
9
4
2022
€m
180.0
333.3
43.5
78.4
2022
€m
22.8
317.4
0.7
1.8
–
342.7
2021
€m
212.6
352.9
58.3
117.3
2021
€m
26.8
–
6.9
–
0.4
34.1
Restructuring costs comprise announced headcount reductions and related costs of balancing production capacity with market requirements.
The exceptional impairment charge relates to the write-down of goodwill, intangible assets, property, plant and equipment and right-of-use
assets, following the outcome of the 2022 annual impairment test. As a significant, non-recurring item, this charge has been excluded from our
alternative performance measures.
Net foreign exchange gains/losses on the foreign currency revaluation of intercompany loan and cash balances are included in adjusting items to
remove the impact of market volatility on our adjusted performance measures.
Costs associated with business acquisitions or disposals and, in the prior year, the loss on disposal of associate, have been excluded from the
alternative performance measures due to their ad-hoc non-recurring nature.
Reconciliations of adjusted performance measures to their statutory GAAP equivalent measures are provided below.
3.2 Adjusted Performance Measures
Adjusted EBITDA
Operating (loss)/profit
Depreciation and amortisation arising on purchase accounting
Adjusting items
Adjusted EBIT
Depreciation, amortisation and non-exceptional impairments on non-purchase accounting
Adjusted EBITDA
Note
3.1
2022
€m
(217.0)
54.3
342.7
180.0
153.3
333.3
2021
€m
126.8
51.7
34.1
212.6
140.3
352.9
140140
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 3. Adjusting Items and Alternative Performance Measures Continued
Adjusted Net Income
(Loss)/profit for the year
Non-controlling interests’ share of profit
Share of loss of associate
Exceptional tax credit
Exceptional finance expense
Adjusting items
Adjusted Net Income
Adjusted Free Cash Flow
Net cash generated from operating activities
Net cash used in investing activities
Free Cash Flow
Proceeds from the sale of associate
Cash received on movements of financial assets at FVTPL
Net restructuring cash spend
Tax paid on the gain on disposal of associated undertakings
Costs associated with business acquisitions or disposals
Adjusted Free Cash Flow
Note
26
20
9
12
3.1
14.2
Note
20
20
2022
€m
(279.0)
(0.1)
–
(20.1)
–
342.7
43.5
2022
€m
167.5
(116.6)
50.9
–
(0.9)
23.6
3.0
1.8
78.4
2021
€m
16.0
(1.7)
0.9
(2.8)
11.8
34.1
58.3
2021
€m
215.1
(103.6)
111.5
(15.5)
–
21.3
–
–
117.3
4. Financial Risk Management
The Board of Directors and key management have overall responsibility for the establishment and oversight of the Group’s risk management
policies, which are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor
risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the
Group’s activities.
The Group’s capital structure (comprising of debt (Note 28) and equity (Note 24) is regularly monitored to safeguard the Group’s ability to
continue as a going concern and to provide returns for shareholders and value added benefits for other stakeholders. The overall capital structure
of the Group is designed to meet the strategic objectives of the Company and its shareholders.
The Group tracks compliance with the financial covenant and the negative covenants in all borrowing facilities. The financial covenant applies
only to the revolving credit facility, which is undrawn (other than for letters of credit). In the event that it is drawn down and the aggregate principal
amount of all outstanding revolving credit facilities exceed 35% of the revolving credit commitments, then a First Lien Net Leverage Ratio of 3.8x
must not be exceeded. At 31 December 2022, the First Lien Net Leverage Ratio was 0.16x (31 December 2021: 0.11x). The negative covenants
restrict certain additional indebtedness, the granting of liens, and the placing of investments against specified basket limits. All basket limits allow
sufficient headroom to manage current and expected transactions.
The Group was in full compliance with its financial covenants in respect of its borrowings and committed facilities throughout each of the years
presented. The level of debt is monitored on an actual and projected basis to ensure continued compliance.
The Group has exposure to the following significant risks from its activities:
4.1 Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations.
The following categories comprise the main credit exposures of the Group:
• trade and other receivables excluding prepayments
• cash and liquid assets
• derivative financial instruments
The credit risk for trade and other receivables excluding prepayments is normally managed by the operating subsidiaries, by reference to credit
rating agencies and historic trading experience with customers. Further details are available in Note 22.
Cash, which is surplus to normal working capital needs, and any approved capital investments in the operating subsidiaries, is managed by
Group Treasury.
The use of derivative financial instruments is governed by Group policies and managed by Group Treasury. In most cases, the counterparties are
investment grade banks.
Guarantees issued by third parties comprise letters of credit and other bank guarantees, nearly all of which are of a standby nature. Most of the
issuing banks are rated investment grade and these ratings are monitored. If any of these banks became unable to meet their obligations under a
guarantee, it is expected that a similar guarantee could be issued by another bank or alternative security provided to the beneficiary.
141141
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance
4. Financial Risk Management Continued
4.2 Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will have
sufficient liquidity to meet its liabilities when due. The Group has
access to various forms of funding and these are considered sufficient
to meet anticipated liquidity requirements. The Directors believe that
there is currently no significant risk that the Group will be unable to
fund its planned commitments.
Cash flow forecasts of the Group’s liquidity requirements are
monitored regularly to ensure there is sufficient cash and undrawn
committed borrowing facilities to meet operational needs of the Group
over the medium term. Surplus cash generated by the operating
entities over and above balances required for normal working capital
and any approved investment is managed by Group Treasury.
The contracted maturity of the Group’s financial liabilities are disclosed
in Note 29.2.
4.3 Market Risk
Market risk, is the risk that changes in market prices, such as foreign
exchange rates and interest rates, will affect the Group’s income,
expenditure or the value of its holdings of financial instruments. The
Group enters into derivative contracts, and incurs financial liabilities, in
order to manage market risks.
4.3.1 Foreign Currency Risk
The Group is exposed to currency risk on revenue, purchases,
investments and borrowings that are denominated in a currency other
than the functional currencies of individual Group entities, which are
primarily Euro, US dollars, Chinese renminbi and Korean won. Where
possible, business entities sell in prices denominated in the same
currency as the majority of their costs, to produce a natural hedge. At
the reporting date, the majority of cash and cash equivalents in the
Group were denominated in Euro, Chinese renminbi and US dollars.
Net foreign exchange losses recognised in the year were €0.7 million
(2021: €6.9 million). These arise from US dollar denominated net
intercompany borrowings and cash balances in Euro and Korean
Won functional currency companies. In the prior year these primarily
related to losses on the Group’s unhedged US dollar denominated
intercompany borrowings in Euro functional currency companies.
The Group also uses forward foreign exchange contracts
not designated in hedge relationships to manage foreign
currency exposure. The nominal value of these derivatives as
at 31 December 2022 was €91.7 million (31 December 2021:
€166.8 million) and the aggregate fair value was a €2.6 million net
receivable (31 December 2021: a €0.6 million net receivable).
Sensitivity analysis
The Group’s exposure to a change in exchange rates is insignificant.
4.3.2 Interest Rate Risk
Most of the Group’s interest rate risk arises on its main external
borrowing facilities.
The Group borrowings include €600.0 million of unsecured Senior
Notes bearing a fixed interest rate of 3.75% per annum, a US term
loan which bears interest at US-dollar three-month LIBOR (minimum
0.5% p.a.) +3.25% p.a and a Euro term loan which bears interest at
three-month EURIBOR (minimum 0.0% p.a.) +3.25% p.a.
The Group also has a revolving credit facility (‘RCF’) of $225.0 million
which was undrawn during the current and prior year but for which
interest would be payable in a range of US dollar LIBOR +3.0% to
US dollar LIBOR + 3.75% p.a. (depending on total net leverage ratio).
The non-utilisation fee on this facility is 0.25% due to the total net
leverage ratio being less than or equal to 3.5:1. In the event the total
net leverage ratio is greater than 3.5:1, the non-utilisation fee will
increase to 0.375%.
Sensitivity analysis
If interest rates had been 100 bps higher or lower with all other
variables held constant, the pre-tax profit or loss on an annual basis
would be, respectively, €5.4 million lower or €5.4 million higher.
Transition to alternative benchmark interest rates
The Group monitors the market and the output from various
industry groups managing the transition to alternative benchmark
interest rates.
The Group’s only significant transition risk arises from the transition
from US dollar LIBOR to the Secured Overnight Financing Rate
(‘SOFR’),which will apply to the Group’s US dollar term loan
agreement, which incurs interest at US dollar three-month LIBOR
(minimum 0.5% p.a.) +3.25% p.a. The Group’s agreement contains
provision for transition to SOFR, which is due to take place at the latest
on 30 June 2023, or earlier at the joint election of the Company and
the lender.
The Group also has plans in place to amend the small number of
intercompany loan agreements impacted by the transition to SOFR,
which will be implemented as soon as the new benchmark rate is
in place.
The Group’s Euro term loan borrowings bears interest at three-month
EURIBOR (minimum 0.0%) +3.25% p.a as noted above. EURIBOR
has already been subject to a reform and is currently not intended
to be replaced with an alternative rate. The impact of the transition
to alternative benchmark rates on the Group’s cash and liquid
assets is not expected to be significant. The Group has no derivative
arrangements impacted by the transition, and no changes to the
interest rate risk management strategy are currently anticipated as a
result of the transition.
Other financial matters
In its normal course of business, the Group does not offer supplier
financing arrangements and has not engaged any financial provider to
provide these services to parties in the supply chain.
142142
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 5. Revenue
5.1. Geographic analysis: Revenue by origin
Europe and Africa
Asia Pacific
North America
Latin America
5.2. Geographic analysis: Revenue by destination
Europe and Africa
Asia Pacific
North America
Latin America
5.3. Transaction price allocated to started but incomplete performance obligations
Tooling, prototype and development revenue to be recognised within one year
Tooling, prototype and development revenue to be recognised in more than one year
2022
€m
1,207.1
1,114.3
895.8
51.1
3,268.3
2022
€m
1,207.8
1,118.6
873.9
68.0
3,268.3
2022
€m
31.8
14.7
46.5
2021
€m
1,138.4
1,058.1
713.6
46.5
2,956.6
2021
€m
1,127.2
1,063.2
719.2
47.0
2,956.6
2021
€m
47.9
16.7
64.6
143143
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 6. Cost of Sales, Distribution Costs and Administrative Expenses
6.1. Total cost of sales, distribution costs and administrative expenses
Cost of sales
Distribution costs
Administrative expenses
Total cost of sales, distribution costs and administrative expenses
2022
€m
2021
€m
3,038.3
2,626.8
112.1
336.1
93.9
105.8
3,486.5
2,826.5
In 2022 cost of sales and administrative expenses included €100.3 million and €217.1 million, respectively, in relation to exceptional impairment
charges. See Note 19.
The nature of costs included in cost of sales, distribution costs and administrative expenses is as follows:
Materials and other operating costs
Personnel costs
Depreciation, amortisation and non-exceptional impairment charges
Expense relating to short-term and low value leases
Utilities
Repairs and maintenance
Freight inward, including customs duties
Exceptional impairment charge
Total cost of sales, distribution costs and administrative expenses
Personnel costs include share-based compensation (Note 10).
Note
7.1
16/17/18
18
9/19
2022
€m
1,980.4
801.6
207.6
7.0
77.9
34.2
60.4
317.4
3,486.5
2021
€m
1,754.4
734.9
192.0
6.1
56.4
31.8
50.9
–
2,826.5
Administrative expenses comprise the costs of the Group’s administration, commercial and finance functions, along with all other corporate
operating costs.
6.2. Research and development expenditure
Research and development expenditure before third-party income, comprised:
Research and development expenses
Capitalised development costs
Total research and development expenditure
7. Personnel Costs and Numbers
7.1. Personnel costs
Wages and salaries (including employee severance amounts)
Social security costs
Share-based expense excluding social security costs
Pension and other post-employment costs: defined benefit current service cost
Pension and other post-employment costs: defined benefit past service costs and settlement and curtailment
(gains)/losses
Pension and other post-employment costs: defined contribution
Total personnel costs
Note
16.2
Note
10
30.2
30.2
2022
€m
48.1
23.3
71.4
2022
€m
659.9
118.6
9.6
7.9
0.8
4.8
2021
€m
40.1
27.4
67.5
2021
€m
608.8
109.4
6.8
5.9
0.1
3.9
801.6
734.9
Wages and salaries costs in the year include employee severance amounts totalling €16.2 million (2021: €23.8 million).
144144
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 7. Personnel Costs and Numbers Continued
7.2. Transactions with Key Management Personnel
Key management personnel comprise the Board of Directors and key officers who report directly to the Chief Executive Officer. The total number
of key management personnel was 17 (2021: 15).
At no time during 2022 or 2021 were any loans to key management personnel made by the Group.
Compensation of key management personnel
Short-term employee benefits
Post-employment benefits
Share-based expense
Total
2022
€m
9.4
0.2
4.9
14.5
2021
€m
8.9
0.1
4.1
13.1
There was €3.5 million of compensation outstanding at 31 December 2022 (2021: €5.2 million). In addition to salaries, the Group also provides
non-cash benefits to key management personnel and contributes to post-employment pension plans on their behalf.
7.3 Personnel numbers
Average monthly number of people employed by function
Direct production
Indirect operational
Commercial and administration
Total
2022
10,696
6,964
1,488
19,148
2021
12,037
7,181
1,510
20,728
In addition to the above, the Group employed an average of 6,402 agency and other temporary workers during the year (2021: 4,838) whose
costs were included in other operating costs.
8. Directors’ Remuneration
The Directors’ emoluments, fees, payments for service, compensation for cancelled shares under long-term incentive schemes and pension
benefits are disclosed in the Remuneration Report. See pages 90–105.
9. Exceptional Items
Cost of sales: exceptional expense:
Impairments of non-goodwill intangible assets
Impairments of property, plant and equipment
Impairments of lease right-of-use assets
Cost of sales: exceptional expense
Administrative expenses: impairment of goodwill
Finance expenses: unamortised transaction costs expensed on voluntary repayments of borrowings
Exceptional expense before income tax
Income tax credit
Exceptional expense after income tax
Note
16
17
18
19
16, 19
12, 28.1
13
2022
€m
23.6
58.3
18.4
100.3
217.1
–
317.4
(20.1)
297.3
2021
€m
–
–
–
–
–
11.8
11.8
(2.8)
9.0
The exceptional impairment charges during the year are detailed further in Note 19. Note 13 contains detail of the associated income tax impacts.
Exceptional finance expenses in the prior year of €11.8 million relates to the expensing of unamortised transaction costs following the voluntary
repayment and partial extinguishment of the Group’s Euro and US dollar term loans, see Note 28.
145145
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 10. Share-based Compensation
On 24 October 2017, the TI Fluid Systems plc Long-Term Incentive Plan was adopted. Under the plan, awards are granted annually with a
three-year vesting period. Vesting is contingent on the attainment of certain performance conditions over the three-year performance period as
well as the continued service of the award holder. The performance conditions applicable to awards outstanding as at 31 December 2022 are
summarised in the below tables:
2020 Conditional Share Awards
Tranche
Percentage of
award grant
Performance condition
Cumulative Adjusted Free Cash
flow (‘AFC’)
80%
Total Shareholder Return (‘TSR’)
20%
Threshold €110 million, maximum €260 million,
outperformance €285 million
Rank of the Company’s total shareholder return for the
performance period against the FTSE 250
Market based
Certain Executive Directors are entitled to bonus shares of up to 133% of their conditional share awards, subject to achieving an enhanced target
in relation to the relevant performance condition.
Performance condition
classification
Non-market based
2021 Conditional Share Awards – Executive Committee
Tranche
Percentage of
award grant
Performance condition
Performance condition
classification
Non-market based
Threshold €500 million, maximum €620 million,
outperformance €675 million
Rank of the Company’s total shareholder return for the
performance period against the FTSE 250
Market based
Average ISS Environmental and Social Quality Scores
during the performance period
Non-market based
Cumulative Adjusted Free Cash
flow (‘AFC’)
60%
Total Shareholder Return (‘TSR’)
20%
Environmental and Social (‘E&S’)
20%
2021 Conditional Share Awards – Other
Tranche
Percentage of
award grant
Performance condition
Performance condition
classification
Cumulative Adjusted Free Cash
flow (‘AFC’)
40%
Environmental and Social (‘E&S’)
10%
Threshold €500 million, maximum €620 million
Non-market based
Average ISS Environmental and Social Quality Scores
during the performance period
Non-market based
Time-based
50%
Continued service throughout the performance period Non-market based
2022 Conditional Share Awards – Executive Committee
Tranche
Return on Capital Employed
(‘ROCE’)
Percentage of
award grant
Performance condition
50%
Threshold 16%, maximum 20%
Performance condition
classification
Non-market based
Total Shareholder Return (‘TSR’)
25%
Sustainability: C02 Equivalent
Emission Improvement (‘CO2’)
Sustainability: ISS Social Score
(‘ISS’)
15%
10%
2022 Conditional Share Awards – Other
Rank of the Company’s total shareholder return for the
performance period against Automotive Peer Group
Market based
CO2 Equivalent Emission Improvement during the
performance period; Threshold 6.5%, maximum 9.5%
Non-market based
Average ISS Social Quality Scores during the
performance period; Threshold 4, maximum 2
Non-market based
Tranche
Return on Capital Employed
(‘ROCE’)
Percentage of
award grant
Performance condition
35%
Threshold 16%, maximum 20%
Performance condition
classification
Non-market based
Total Shareholder Return (‘TSR’)
17.5%
Sustainability: C02 Equivalent
Emission Improvement (‘CO2’)
Sustainability: ISS Social Score
(‘ISS’”)
Time-based
146146
10.5%
7%
30%
Rank of the Company’s total shareholder return for the
performance period against Automotive Peer Group
Market based
CO2 Equivalent Emission Improvement during the
performance period; Threshold 6.5%, maximum 9.5%
Non-market based
Average ISS Social Quality Scores during the
performance period; Threshold 4, maximum 2
Non-market based
Continued service throughout the performance period Non-market based
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 10. Share-based Compensation Continued
Award holders are entitled to a dividend equivalent payment, in respect of their awards, for all ordinary dividends that are declared and paid
between the award date and the settlement date. These may be paid in cash at the date of vesting, or paid in the form of additional conditional
awards, subject to the same conditions as the original grant.
As the awards are settled in shares of the Company, or cash at the discretion of the Company, they are accounted for as equity settled awards
under IFRS 2 and fair valued at date of grant using the Black–Scholes Option Pricing Model (AFC, E&S, Time-based, ROCE, CO2 and ISS
tranches) and Monte Carlo simulation (TSR tranche). The charge is recognised in the Income Statement on a straight-line basis over the vesting
period, with the anticipated number of awards vesting adjusted for management’s estimate of forfeiture rate and attainment of non-market based
performance conditions. Achievement of market based performance conditions is reflected in the initial fair value of the award.
The weighted average fair value of awards granted in the year was €1.75 (2021: €3.02).
The assumptions used for the grants in the year included a weighted average share price of €2.22 for ‘Executive Committee’ and €1.84 for
‘Other’ (2021: €3.33), expected option life of three years (2021: three years), expected volatility of 48.0% for ‘Executive Committee’ and 48.6%
for ‘Other’ (2021: 50.0%) and a weighted average risk-free interest rate of 1.41% for ‘Executive Committee’ and 1.47% for ‘Other’ (2021: 0.14%).
Awards made to Executive Directors are subject to a two-year holding period post vesting, for which the valuations have been discounted
accordingly.
The expected volatility is based on the historical volatility of the Company’s share price since its admission to trading on 25 October 2017.
The expected volatility of the comparator companies’ share prices and correlation to TIFS is measured over a three-year period, commensurate
with the expected term of the awards.
The risk-free rate of return is based on zero-coupon UK Government bond yields corresponding to the expected term.
As award holders are entitled to dividend equivalent compensation during the vesting period, no dividend yield assumption is required in the
valuation of these awards.
The table below provides a reconciliation of awards outstanding:
Outstanding at 1 January 2021
Granted during the year
Vested during the year
Cancelled during the year
Forfeited during the year
Outstanding at 31 December 2021
Granted during the year
Vested during the year
Forfeited during the year
Outstanding at 31 December 2022
Number of awards
17,949,339
5,892,871
(390,037)
(178,601)
(4,862,644)
18,410,928
7,406,928
(4,026,543)
(5,811,813)
15,979,500
The total share-based expense for the year was €10.2 million, including €0.6 million in relation to employers taxes (2021: €7.2 million and €0.4
million).
11. Other Gains and Losses
Government grant income
Rental income
Royalty income
Losses on disposal of PP&E, intangible assets, and right-of-use assets
Insurance claims
Loss on disposal of associated undertaking (Note 20)
Other miscellaneous items
Total other gain and losses
2022
€m
1.6
0.8
–
(0.3)
0.1
–
(0.3)
1.9
2021
€m
1.5
0.7
0.1
(0.6)
0.3
(0.2)
1.8
3.6
In the prior year, on 8 December 2021, the Group disposed of its investment in its associated undertaking realising a loss on disposal before tax of
€0.2 million. Refer to Note 20 for further details.
147147
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 12. Finance Income and Expense
Finance income
Interest on short-term deposits, other financial assets and other interest income
Fair value gains on derivatives and foreign exchange contracts not in hedged relationships
Finance income
Finance expense
Interest payable on term loans including expensed fees
Interest payable on unsecured senior notes including expensed fees
Net interest expense of retirement benefit obligations
Net interest expense related to specific uncertain tax positions
Interest payable on lease liabilities
Other finance expense
Finance expense before exceptional items
Unamortised transaction costs expensed on voluntary repayments of borrowings
Exceptional finance expense
Finance expense after exceptional items
Total net finance expense after exceptional items
Fees included in interest payable under the effective interest method
Fees included in interest payable on term loans
Fees included in interest payable on unsecured senior notes
Fees expensed in exceptional finance expense
Fees expensed in respect of term loans
Note
30.2
18.3
9,28.1
9,28.1
Note
28
28
Note
9,28.1
2022
€m
3.9
1.8
5.7
(28.3)
(23.7)
(2.8)
(0.1)
(9.3)
(0.2)
(64.4)
–
–
(64.4)
(58.7)
2022
€m
(3.5)
(1.2)
2022
€m
–
2021
€m
2.6
0.5
3.1
(33.5)
(16.7)
(2.5)
(0.6)
(9.8)
–
(63.1)
(11.8)
(11.8)
(74.9)
(71.8)
2021
€m
(4.4)
(0.8)
2021
€m
(11.8)
Exceptional finance expenses in the prior year of €11.8 million relates to the expensing to the income statement of unamortised transaction costs
following the voluntary repayment and partial extinguishment of the Group’s Euro and US dollar term loans. Refer to Note 28 for the finance
expense, and Note 13 for the income tax impact.
13. Income Tax
13.1. Income Tax (Expense)/Credit
Current tax on profit for the year
Exceptional – Current tax impact of US refinancing costs
Adjustments in respect of prior years
Total current tax expense
Origination and reversal of temporary deferred tax differences
Exceptional – deferred tax impact of US refinancing charge
Exceptional – deferred tax impact of impairment charge
Total deferred tax benefit
Income tax expense – Income Statement
Origination and reversal of temporary deferred tax differences
Income tax expense – Statement of Comprehensive Income
Total income tax expense
2022
€m
(66.0)
–
8.6
(57.4)
34.0
–
20.1
54.1
(3.3)
(6.9)
(6.9)
(10.2)
2021
€m
(68.1)
1.8
2.7
(63.6)
24.5
1.0
–
25.5
(38.1)
(6.8)
(6.8)
(44.9)
In 2022, the Group is reporting an exceptional impairment charge of €317.4 million with a deferred tax benefit of €20.1 million which results in
an exceptional effective tax rate of 6.3%. The low exceptional effective tax rate is due to the fact that the majority of the impairment is related to
goodwill that does not carry a deferred tax balance and therefore this portion of the impairment is not tax effected.
In 2021, the Group reported an exceptional US refinancing charge of €11.8 million with a current corporate tax benefit of €1.8 million and a
deferred tax benefit of €1.0 million which resulted in an exceptional effective tax rate of 23.7% (the US 2021 effective tax rate).
The table below analyses the constituent elements of the Group income tax charge separately identifying the tax charges recognised in respect
of entities that ordinarily pay tax or where the recognition of deferred tax assets is appropriate, the impact of entities where the level of tax losses
limits the payment of tax or restricts the deferred tax recognition in respect of the losses, the impact of withholding taxes suffered in the Group, tax
charges recognised in respect of unremitted overseas distributable reserves and the impact of purchase accounting adjustments.
148148
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 13. Income Tax Continued
Results excluding exceptional items
Adjustments:
Disposal of associated undertaking impact (Note 20)
Share of associate losses (Note 20)
Analysed as:
Tax charges (including deferred tax assets) recognised
Tax losses where no deferred tax assets recognised
Withholding tax and tax on unremitted distributable reserves
Annual amortisation and depreciation of assets with historic purchase price accounting
adjustments
2022
2021
Profit
before tax
€m
41.7
–
–
41.7
160.4
(64.4)
–
(54.3)
41.7
Tax
charge
€m
(23.4)
–
–
(23.4)
(27.1)
(1.5)
(8.3)
13.5
(23.4)
Profit
before tax
€m
65.9
0.2
0.9
67.0
166.7
(46.9)
–
(52.8)
67.0
Tax
charge
€m
(40.9)
3.1
–
(37.8)
(43.8)
(0.3)
(6.1)
12.4
(37.8)
The tax charge of €27.1 million for 2022 in the category analysed as ‘Tax charges (including deferred tax assets) recognised’ includes a material
one-time tax benefit related to the establishment of prior period deferred tax assets in certain territories in which the forecasts demonstrate
several years of continued future profitability and has consistent expectations of future financial performance.
The tax charge of €1.5 million for 2022 and €0.3 million for 2021 in the category analysed as ‘Tax losses where no deferred tax asset is
recognised’ is mainly related to the initial write-off of deferred tax assets in which forecasts have demonstrated that deferred tax assets will not be
utilised in future periods due to projected losses in certain territories.
The tax on the Group’s profit/(loss) before tax differs from the theoretical amount that would arise using the UK statutory tax rate applicable to
profits of the consolidated entities as follows:
Before
exceptional
items
€m
2022
Exceptional
items
€m
After
exceptional
items
€m
Before
exceptional
items
€m
2021
Exceptional
items
€m
After
exceptional
items
€m
Profit/(loss) before income tax
41.7
(317.4)
(275.7)
65.9
(11.8)
54.1
Income tax calculated at UK statutory tax rate of 19%
(2021: 19%) applicable to profits in respective countries
Tax effects of:
Overseas tax rates (excluding associates)
Income not subject to tax
Expenses not deductible for tax purposes – other & UK
non-deductible interest/expenses
Expenses not deductible for tax purposes – goodwill
impairment
Temporary differences on unremitted earnings
Specific tax provisions
Unrecognised current year deferred tax assets
Other taxes
Adjustment in respect of prior years – current tax
adjustments
Adjustment in respect of prior years – deferred tax
adjustments
Impact of changes in tax rate
Double Tax Relief and Other Tax Credits
Income tax (expense)/benefit – Income Statement
Deferred tax expense on remeasurement of retirement
benefit obligations
Income tax expense - Statement of Comprehensive
Income
Total tax (expense)/benefit
(7.9)
(3.6)
9.9
(17.1)
–
0.2
(3.6)
(9.1)
(10.1)
8.6
6.4
(0.4)
3.3
(23.4)
(6.9)
(6.9)
(30.3)
60.3
52.4
(12.5)
3.0
–
–
(41.2)
–
–
(2.0)
–
–
–
–
–
20.1
–
–
20.1
(0.6)
9.9
(5.9)
7.1
(17.1)
(16.6)
(41.2)
0.2
(3.6)
(11.1)
(10.1)
8.6
6.4
(0.4)
3.3
(3.3)
(6.9)
(6.9)
(10.2)
–
0.6
(2.9)
(7.1)
(10.7)
2.7
(0.3)
1.5
3.2
(40.9)
(6.8)
(6.8)
(47.7)
2.2
0.6
–
–
–
–
–
–
–
–
–
–
–
2.8
–
–
2.8
(10.3)
–
(5.3)
7.1
(16.6)
–
0.6
(2.9)
(7.1)
(10.7)
2.7
(0.3)
1.5
3.2
(38.1)
(6.8)
(6.8)
(44.9)
149149
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 13. Income Tax Continued
Other taxes comprised various local taxes of €1.7 million (2021: €2.2 million) together with taxes withheld on dividend, interest and royalty
remittances totalling €8.4 million (2021: €8.5 million).
In 2022, the Group reported an exceptional impairment charge of €317.4 million with a deferred tax benefit of €20.1 million. The majority of the
impairment charge is related to goodwill which is not tax deductible, and this results in a material unfavourable permanent tax adjustment.
Factors that may affect future tax charges include the continued non-recognition of deferred tax assets in certain territories as well as the
existence of tax losses in certain territories, which could be available to offset future taxable income in certain territories and for which no deferred
tax asset is currently recognised.
13.2. Current Income Tax Assets and Liabilities
Current income tax assets
Current income tax liabilities
2022
€m
7.9
(44.5)
(36.6)
2021
€m
11.4
(49.9)
(38.5)
Uncertain tax positions
The Group maintains a provision for uncertain tax positions. As at 31 December 2022 the balance was €32.6 million (2021 €36.0 million).
The Group is aware of an increase in global tax audit scrutiny and therefore continues to closely monitor tax uncertainties in all geographic
regions. As each uncertain tax provision is considered more likely than not to materialise, settlement of the issues that have been provided
should not result in a material impact to the effective tax rate.
However, in the event that a favourable conclusion is reached on an uncertain tax position, release of the provision would have a favourable
impact on the Group’s effective tax rate. In the event that a conclusion is reached that exceeds the amount provided for an uncertain tax position,
there would be an unfavourable impact on the Group’s effective tax rate. It is possible that certain tax issues related to the remaining uncertain tax
provisions could settle within the next twelve months although the timing of any settlements are not certain.
13.3. Deferred Tax Assets and Liabilities
Deferred tax assets
Deferred tax liabilities
2022
€m
105.2
(80.7)
24.5
2021
€m
70.5
(95.8)
(25.3)
The total deferred tax asset balance as at 31 December 2022 is €105.2 million. It is expected that €32.8 million of the deferred tax asset will be
recovered within the next twelve months and the remaining €72.4 million of the deferred tax asset will be recovered after twelve months.
The total deferred tax liability balance as at 31 December 2022 is €80.7 million. It is expected that €14.8 million of the deferred tax liability will be
settled within the next twelve months and the remaining €65.9 million of the deferred tax liability will be settled after twelve months.
13.3.1 Movement on Net Deferred Tax Assets/(Liabilities)
At 1 January
Income statement benefit
Exceptional income statement benefit – tax impact of impairment charge
Exceptional income statement benefit – tax impact of US refinancing charge
Tax on remeasurement of retirement benefit obligations
Transfer of uncertain tax position balance from deferred tax to current tax
Currency translation
At 31 December
2022
€m
(25.3)
34.0
20.1
–
(6.9)
2.0
0.6
24.5
2021
€m
(41.9)
24.5
–
1.0
(6.8)
0.6
(2.7)
(25.3)
Recognition of deferred tax assets is based on forecast taxable income and a key input is the Group’s 2023 budget and 2024 to 2027
medium-term plan. Estimation is used in the budget and plan in forecasting global automotive production, pricing and operating costs.
In addition, it requires the exercise of management’s judgement regarding the period over which recoverability is assessed taking into
account factors such as regulations regarding the amount of tax losses that can be utilised per year and any restrictions on the amount of
time that tax losses can be carried forward.
Typically losses are anticipated to be utilised against profits arising within a period not exceeding fifteen years. In some cases tax regulations
place significant restrictions on the amount of losses that can be used in any year and in these cases a longer time period may be utilised.
The value of deferred tax assets relating to utilisation of profits in excess of a fifteen year period is approximately €6 million.
The aggregate amount of tax liabilities not recognised with respect to temporary differences associated with investment in subsidiaries, branches
and associates, and interests in joint ventures is €nil.
150150
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 13. Income Tax Continued
13.3.2. Gross Deferred Tax Assets and Liabilities
The analysis of deferred tax assets and liabilities below represents gross amounts before netting of deferred tax assets and liabilities in certain tax
jurisdictions as reflected in the table in 13.3 above.
Assets
Liabilities
Provision
for pensions
and
employee
benefits
€m
Deferred
interest
deductions
€m
Tax losses
€m
Tax credits
€m
Excess
depreciation
on fixed
assets and
goodwill
€m
Other
specific
provisions
€m
Acquisition
related
intangible
assets
€m
Development
intangibles
€m
Loan fees
€m
Unremitted
earnings
€m
Total
€m
39.2
(3.1)
–
(6.8)
–
1.6
30.9
1.3
0.8
–
–
–
0.1
2.2
17.1
17.7
13.4
(28.3)
(17.5)
(57.0)
(1.5)
(26.3)
(41.9)
8.7
0.2
0.8
3.3
1.1
9.9
0.4
2.4
24.5
–
–
–
–
25.8
–
–
0.6
0.3
18.8
–
–
–
–
–
–
–
–
–
–
–
–
1.0
–
–
–
–
–
1.0
(6.8)
0.6
0.9
15.1
(2.2)
(27.2)
(0.6)
(17.0)
(2.9)
(50.0)
(0.1)
(0.2)
0.2
(2.7)
(23.7)
(25.3)
0.4
(0.5)
26.0
(5.9)
(5.6)
7.3
0.9
11.1
0.2
0.1
34.0
–
(6.9)
–
1.3
25.7
–
–
–
–
–
–
–
–
–
–
1.0
1.0
17.3
–
–
–
–
–
2.8
–
–
0.1
1.8
(0.5)
51.3
0.8
14.7
0.7
11.2
(1.5)
(4.1)
(0.1)
(16.2)
(1.1)
(37.2)
–
–
–
–
–
–
–
–
0.9
(22.7)
20.1
(6.9)
2.0
0.6
24.5
Gross deferred tax assets
and liabilities
At 1 January 2021
Included in the Income
Statement
Exceptional income statement
benefit – tax impact of
impairment charge
Included in Other
Comprehensive Income
Transfer of uncertain tax
position balance from current
tax to deferred tax
Currency translation
differences
At 31 December 2021
Included in the Income
Statement
Exceptional income statement
benefit – tax impact of
impairment charge
Included in Other
Comprehensive Income
Transfer of uncertain tax
position balance from deferred
tax to current tax
Currency translation
differences
At 31 December 2022
13.4. Unrecognised Deferred Tax Assets
Deferred income tax assets are recognised for deductible temporary differences, tax credits and tax losses carried forward to the extent that the
realisation of the related tax benefit through future taxable profits is probable. At 31 December 2022, the Group did not recognise deferred income
tax assets (net of specific tax provisions) of €221.4 million (2021: €215.2 million). This is principally represented by gross tax losses in respect of
which no deferred income tax asset was recognised (before the netting of specific provisions) amounting to €687.2 million (2021: €673.9 million)
that can be carried forward against future taxable income. All material tax losses referred to above can be carried forward without time limitation.
151151
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 14. Earnings Per Share
14.1. Basic and Diluted Earnings Per Share
Basic
Dilutive potential ordinary shares
Diluted
2022
2021
Loss
attributable to
shareholders
(€m)
Weighted
average number
of shares
(in millions)
Earnings Per
Share
(€, cents)
Profit
attributable to
shareholders
(€m)
Weighted
average number
of shares
(in millions)
Earnings Per
Share
(€, cents)
(279.1)
–
(279.1)
513.1
–
513.1
(54.39)
–
(54.39)
14.3
–
14.3
519.1
5.5
524.6
2.76
–
2.73
In 2022, dilutive potential ordinary shares of 7.3 million were not included in the calculation of diluted earnings per share in the year because they
were antidilutive, but could potentially dilute basic earnings in the future.
Potential ordinary shares are only treated as dilutive when their conversion to ordinary shares would decrease earnings per share, or increase loss
per share, from continuing operations.
For the purposes of calculating diluted and Adjusted diluted EPS, the weighted average number of ordinary shares is adjusted to include the
weighted number of ordinary shares that would be issued on the conversion of all potential ordinary shares expected to vest, which relate to the
Group’s long-term incentive plans.
14.2. Adjusted Earnings Per Share
Adjusted Net Income (€m)
Weighted average number of shares (in millions)
Adjusted Earnings Per Share (€, in cents)
2022
2021
Adjusted basic Adjusted diluted
Adjusted basic Adjusted diluted
43.5
513.1
8.48
43.5
513.1
8.48
58.3
519.1
11.23
58.3
524.6
11.11
Adjusted Net Income is based on the loss for the year attributable to shareholders of €279.1 million (2021: €14.3 million profit), after adding back
exceptional items net of tax, associate dividends received and eliminating the impact of net restructuring charges, foreign exchange gains or
losses, and the impact of any business acquisitions or disposals, totalling €322.6 million (2021: €44.0 million). These different profit measures are
fully reconciled in Note 3.
15. Dividends
The following dividends were declared and paid by the Group:
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year-ended 31 December 2021 of 1.46 Euro cents per share
One-off interim dividend of 6.74 Euro cents per share
Interim dividend for the year-ended 31 December 2022 of 1.00 Euro cents per share (2021: 1.93 Euro cents per share)
Total dividend
2022
€m
7.5
–
5.1
12.6
2021
€m
–
35.0
10.0
45.0
On 25 January 2021, the Group announced a one-off interim dividend of €35.0 million at 6.74 Euro cents per share, which was paid on
19 February 2021. This dividend is not considered part of the Group’s annual dividend cycle for the year ended 31 December 2021.
On 15 March 2022, the Group announced a final dividend of €7.5 million at 1.46 Euro cents per share, which was paid on 23 June 2022.
On 9 August 2022, the Group announced an interim dividend for the year-ended 31 December 2022 of €5.1 million (2021: €10.0 million) at
1.00 Euro cents per share (2021: 1.93 Euro cents per share), which was paid on 16 September 2022.
The Board has decided to recommend a final dividend of 1.54 Euro cents per share amounting to €7.9 million. Subject to shareholder approval
at the Annual General Meeting on 17 May 2023, the final dividend will be paid on 23 June 2023 to those on the register on 26 May 2023, the
Dividend Record Date, and will be converted to Sterling at a fixed rate on the same date. The proposed liability has not been recorded as a liability
at the balance sheet date in accordance with IAS 10 ‘Events after the reporting period’.
152152
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 16. Intangible Assets
Goodwill
Capitalised development expenses, computer software and licences, technology and customer platforms
Total intangible assets
16.1. Goodwill
Goodwill is deemed to have an indefinite useful life. It is carried at cost and reviewed annually for impairment.
2022
€m
353.9
250.0
603.9
Cost at 1 January 2022
Currency translation
Cost at 31 December 2022
Accumulated impairment at 1 January 2022
Impairment – exceptional charge
Currency translation
Accumulated impairment at 31 December 2022
Net book value at 31 December 2022
Cost at 1 January 2021
Currency translation
Cost at 31 December 2021
Accumulated impairment at 1 January 2021
Currency translation
Accumulated impairment at 31 December 2021
Net book value at 31 December 2021
16.2. Capitalised Development Expenses, Computer Software and Licences, Technology and Customer Platforms
Intangible assets are amortised over their useful economic life, which range from three to 25 years.
Cost at 1 January 2022
Accumulated amortisation
Net book value at 1 January 2022
Additions
Disposals
Amortisation charge
Impairments – exceptional charge
Currency translation
Net book value at 31 December 2022
Cost at 31 December 2022
Accumulated amortisation
Net book value at 31 December 2022
Capitalised
development
expenses
€m
Computer
software and
licences
€m
267.2
(161.0)
106.2
23.3
(1.8)
(26.2)
(11.1)
1.0
91.4
270.5
(179.1)
91.4
24.9
(15.4)
9.5
1.0
–
(4.3)
(0.6)
0.2
5.8
25.7
(19.9)
5.8
Technology
€m
137.8
(132.6)
5.2
–
–
(2.0)
–
0.3
3.5
138.5
(135.0)
3.5
Customer
platforms*
€m
481.9
(282.3)
199.6
–
–
(42.6)
(11.9)
4.2
149.3
492.2
(342.9)
149.3
*Customer platforms includes intangible assets relating to: customer platforms, aftermarket customer relationships, trade names and trademarks.
2021
€m
564.3
320.5
884.8
€m
747.6
11.4
759.0
(183.3)
(217.1)
(4.7)
(405.1)
353.9
€m
714.2
33.4
747.6
(178.3)
(5.0)
(183.3)
564.3
Total
€m
911.8
(591.3)
320.5
24.3
(1.8)
(75.1)
(23.6)
5.7
250.0
926.9
(676.9)
250.0
153153
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance
16. Intangible Assets Continued
Cost at 1 January 2021
Accumulated amortisation
Net book value at 1 January 2021
Additions
Disposals
Amortisation charge
Currency translation
Net book value at 31 December 2021
Cost at 31 December 2021
Accumulated amortisation
Net book value at 31 December 2021
Capitalised
development
expenses
€m
Computer
software and
licences
€m
254.4
(151.5)
102.9
27.4
(0.5)
(25.7)
2.1
106.2
267.2
(161.0)
106.2
23.3
(12.7)
10.6
1.8
–
(3.4)
0.5
9.5
24.9
(15.4)
9.5
Technology
€m
126.7
(119.8)
6.9
–
–
(2.1)
0.4
5.2
137.8
(132.6)
5.2
Customer
platforms
€m
455.2
(227.7)
227.5
–
–
(39.0)
11.1
199.6
481.9
(282.3)
199.6
Total
€m
859.6
(511.7)
347.9
29.2
(0.5)
(70.2)
14.1
320.5
911.8
(591.3)
320.5
The above amortisation charges for ‘technology’ and ‘customer platforms’ amounting to €44.6 million (2021: €41.1 million) arise from intangible
assets recognised through purchase price accounting. Amortisation charges are included within cost of sales.
As at 31 December 2022, goodwill of €353.9 million (2021: €564.3 million), technology of €3.5 million (2021: €5.2 million) and customer
platforms of €149.3 million (2021: €199.6 million) relate to assets that arose from purchase price allocations following historic acquisitions.
16.3 Impairment test
At 31 December 2022, management performed its annual impairment test in accordance with IAS 36 ‘Impairment of Assets’. As a result, goodwill
was impaired €217.1 million (2021: €nil) and other intangibles were impaired by €23.6 million (2021: €nil). Further details can be found in Note 19.
17. Property, Plant and Equipment
17.1 Movements in Property, Plant and Equipment
Cost
Accumulated depreciation
Net book value at 1 January 2022
Additions
Disposals
Impairments – non-exceptional
Impairments – exceptional items
Transfers between categories
Depreciation charge
Currency translation
Net book value 31 December 2022
Cost
Accumulated depreciation
Net book value at 31 December 2022
Land and
buildings
€m
Plant,
machinery and
equipment
€m
Assets
in the
course of
construction
€m
169.7
(46.0)
123.7
0.5
–
–
(6.3)
3.7
(6.7)
1.1
116.0
183.4
(67.4)
116.0
875.9
(460.5)
415.4
5.5
(4.9)
(1.0)
(52.0)
69.6
(93.7)
4.6
343.5
969.5
(626.0)
343.5
66.8
(10.5)
56.3
88.1
–
–
–
(73.3)
–
0.8
71.9
71.9
–
71.9
Total
€m
1,112.4
(517.0)
595.4
94.1
(4.9)
(1.0)
(58.3)
–
(100.4)
6.5
531.4
1,224.8
(693.4)
531.4
Included in land and buildings is a property (cost: €1.3 million, net book value: €0.7 million) that is let to an external party. The fair value of this
property at 31 December 2022 is €4.1 million (2021: €3.5 million). As at the year end, the property is in the process of being sold.
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Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 17. Property, Plant and Equipment Continued
As at 31 December 2022, land and buildings of €48.1 million (2021: €49.0 million) and plant, machinery and equipment of €4.9 million (2021:
€14.3 million) relate to asset valuations that arose from purchase price allocations following historic acquisitions.
Cost
Accumulated depreciation
Net book value at 1 January 2021
Additions
Disposals
Impairments – non-exceptional
Transfers between categories
Depreciation charge
Currency translation
Net book value at 31 December 2021
Cost
Accumulated depreciation
Net book value at 31 December 2021
17.2. Depreciation Charge
Land and
buildings
€m
Plant,
machinery and
equipment
€m
Assets
in the
course of
construction
€m
162.2
(37.7)
124.5
0.9
0.5
–
2.0
(4.9)
0.7
123.7
169.7
(46.0)
123.7
792.8
(392.1)
400.7
9.2
6.9
(1.9)
75.2
(85.2)
10.5
415.4
875.9
(460.5)
415.4
76.1
(10.5)
65.6
77.6
(11.1)
–
(77.2)
–
1.4
56.3
66.8
(10.5)
56.3
Total
€m
1,031.1
(440.3)
590.8
87.7
(3.7)
(1.9)
–
(90.1)
12.6
595.4
1,112.4
(517.0)
595.4
The above depreciation charge includes €9.4 million from ‘plant, machinery and equipment’ and €0.5 million from ‘land and buildings’ in relation to
the fair value uplift arising from purchase price accounting (2021: €10.8 million).
The total depreciation charge is analysed below:
Cost of sales
Distribution costs
Administrative expenses
Total depreciation charge
2022
€m
99.7
–
0.7
100.4
2021
€m
88.9
–
1.1
90.0
155155
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 18. Leases
18.1. Leasing Activities
The Group as lessee
The Group leases various manufacturing facilities, offices, plant and machinery and cars. Rental contracts are typically made for fixed initial
periods of one to ten years for manufacturing facilities and offices, and two to five years for plant and machinery, and cars. Many agreements also
have extension options, as described below, and contain a range of terms and conditions. The lease agreements do not impose any covenants,
but leased assets may not be used as security for borrowing purposes.
The Group as lessor
Property that is surplus to the Group’s requirements may be sub-let to third parties. The future aggregate minimum rentals receivable under
non-cancellable operating leases at 31 December 2022 was €0.6 million (2021: €0.4 million). During the year, a total of €0.8 million of rental
income was recognised in the Income Statement (2021: €0.7 million).
18.2. Amounts recognised in the Balance Sheet
The Balance Sheet shows the following amounts relating to the Group’s activities as a lessee:
Right-of-use assets
Non-current liabilities
Lease liabilities
Current liabilities
Lease liabilities
Total lease liabilities
18.2.1 Right-of-Use Assets
Movements in right-of-use assets in the year are disclosed below:
At 1 January 2022
Additions
Disposals
Remeasurements
Impairments – exceptional
Impairments – non-exceptional
Depreciation charge
Currency translation
Net book value at 31 December 2022
Cost
Accumulated depreciation
Net book value at 31 December 2022
2022
€m
109.3
2021
€m
125.2
121.5
119.8
28.1
149.6
30.1
149.9
Land and
buildings
€m
Plant,
machinery and
equipment
€m
115.6
37.9
(13.3)
1.3
(16.0)
(0.4)
(25.2)
2.7
102.6
201.5
(98.9)
102.6
9.6
4.7
–
–
(2.4)
–
(5.5)
0.3
6.7
19.8
(13.1)
6.7
Total
€m
125.2
42.6
(13.3)
1.3
(18.4)
(0.4)
(30.7)
3.0
109.3
221.3
(112.0)
109.3
The most significant additions in the year are for e-Mobility Innovation Centres (eMICs) in North America and Asia which collectively total
€24.4 million (2021: €nil).
The above depreciation charge includes a €0.2 million credit (2021: €0.3 million credit) in ‘land and buildings’ in relation to the fair value uplift
arising from purchase price accounting.
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Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 18. Leases Continued
As at 31 December 2022, land and buildings of €0.1 million (2021: €0.3 million) relate to asset valuations that arose from purchase price
allocations following historic acquisitions.
At 1 January 2021
Additions
Disposals
Remeasurements
Impairments
Depreciation charge
Currency translation
Net book value at 31 December 2021
Cost
Accumulated depreciation
Net book value at 31 December 2021
18.2.2 Lease liabilities
Movements in lease liabilities in the year are disclosed below:
At 1 January
Additions
Disposals
Remeasurements
Accrued interest
Repayments
Currency translation
At 31 December
Non-current
Current
At 31 December
Land and
buildings
€m
Plant,
machinery and
equipment
€m
116.3
12.2
(1.4)
7.7
(0.1)
(23.9)
4.8
115.6
197.6
(82.0)
115.6
Note
28.6
12
8.6
5.9
–
0.9
–
(5.8)
–
9.6
20.1
(10.5)
9.6
2022
€m
149.9
42.6
(14.3)
1.3
9.3
(42.2)
3.0
149.6
121.5
28.1
149.6
Total
€m
124.9
18.1
(1.4)
8.6
(0.1)
(29.7)
4.8
125.2
217.7
(92.5)
125.2
2021
€m
151.0
18.1
(1.4)
8.5
9.8
(41.4)
5.3
149.9
119.8
30.1
149.9
Extension options (or periods after termination options) are only included for valuation purposes in the lease term if the lease is reasonably certain
to be extended (or not terminated). Potential future cash outflows of €56.9 million (2021: €54.6 million) have not been included in the lease liability
because it is not reasonably certain that the leases will be extended (or not terminated).
The Group is also committed to €24.8 million of future lease payments, not yet commenced as at 31 December 2022 (2021: €2.0 million).
This includes €21.1 million in relation to locations for the Group’s e-Mobility Innovation Centres (eMICs) in North America and Asia.
The range of incremental borrowing rates applied to lease liabilities in the year by region was:
Europe and Africa
North America
Asia Pacific
Latin America
2022
Range
2021
Range
3.2% - 25.9%
3.3% - 23.2%
3.4% - 14.7%
3.4% - 12.6%
3.9% - 11.2%
3.5% - 12.5%
7.6% - 47.9%
7.6% - 47.9%
The weighted average incremental borrowing rate applied to the lease liabilities at 31 December 2022 is 6.7% (2021: 6.9%). The Group believes
that any reasonably possible change in the weighted average incremental borrowing rate would not cause the carrying value of lease liabilities or
the lease interest payable charged to the income statement to be materially different.
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OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 18. Leases Continued
The maturity of lease liabilities is:
Less than one year
Between one and three years
Between three and five years
Over five years
Total at 31 December 2022
Less than one year
Between one and three years
Between three and five years
Over five years
Total at 31 December 2021
The currency denomination of lease liabilities is:
US dollar
Euro
Chinese renminbi
Other
Total lease liabilities
18.3. Amounts recognised in the income and cash flow statements
The income statement includes the following amounts relating to leases:
Expense/(income)
Depreciation charge of right-of-use assets
Exceptional Impairment charge of right-of-use assets
Non-exceptional Impairment charge of right-of-use assets
Interest payable on lease liabilities
Expense relating to short-term and low value leases
Rental income as lessor
The total depreciation charge on right-of-use assets in 2022 and 2021 is all reported in cost of sales.
The statement of cash flows includes the following amounts relating to the Group’s activities as a lessee:
Cash paid for short-term and low value leases reported within cash generated from operations
Interest paid on lease liabilities reported within interest paid
Lease principal repayments reported separately in cash flows from financing activities
Total cash outflow as a lessee
158158
Total minimum
lease payments
€m
Interest
€m
Principal
€m
41.1
59.6
36.9
62.7
200.3
13.0
18.7
8.3
10.7
50.7
28.1
40.9
28.6
52.0
149.6
Total minimum
lease payments
€m
Interest
€m
Principal
€m
38.7
53.3
38.6
55.9
186.5
Note
9, 19
12
6.1
11
8.6
12.4
9.5
6.1
36.6
2022
€m
59.4
55.3
18.4
16.5
149.6
2022
€m
30.7
18.4
0.4
9.3
7.0
(0.8)
2022
€m
7.0
9.3
32.9
49.2
30.1
40.9
29.1
49.8
149.9
2021
€m
51.4
63.3
18.2
17.0
149.9
2021
€m
29.7
–
0.1
9.8
6.1
(0.7)
2021
€m
6.1
9.8
31.6
47.5
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022
19. Impairments
19.1. Impairment Tests for Goodwill and Intangibles
As part of the Bain Capital acquisition, the purchase of TIFS Holdings Ltd (‘TIFSHL’) on 30 June 2015, being the previous parent company of the
Group, and the consequent fair valuation of assets and liabilities, resulted in recognition of goodwill of €711.1 million and other intangible assets
of €663.2 million. The purchase of Millennium Industries Corporation on 16 February 2016 resulted in recognition of goodwill of €57.1 million and
other intangible assets of €72.6 million, included in the FCS North Americas CGU.
The non-goodwill intangible assets recognised from the acquisitions outlined above included €369.7 million and €57.1 million in relation to
customer platforms arising on the Bain and Millennium acquisitions respectively. These assets reflect the future revenue expected to arise from
customer platforms existing at the date of acquisition, based on platform lives and probabilities of renewals.
During 2020, an impairment loss of €304.6 million was recognised due to volume deterioration driven by the COVID-19 pandemic, with
€184.2 million allocated to goodwill and the remaining €120.4 million apportioned across other assets on a pro rata basis, as required by IAS 36
‘Impairment of assets’.
The impairment test for goodwill and intangible assets is conducted at the CGU level, which the Group defines as the intersection between the
two operating segments, FCS and FTDS, and the geographic sub-divisions, North America (‘NA’), Europe and Africa (‘EU’), Asia Pacific (‘AP’)
and Latin America (‘LA’). This is the level at which goodwill is monitored by management.
As observed in the external forecasts from S&P Global Mobility, since 2020, declining volume projections persisted for light vehicle production,
driven by reduction in production expectations of internal combustion engine (‘ICE’) light vehicles which exceeds the growth of BEV platform
production. Supply chain disruptions and semiconductor shortage issue remained, as well as the continued impact of the COVID-19 pandemic
(notably in China) and Russia’s invasion of Ukraine. The businesses have also faced significant inflationary pressures on input prices and
energy costs, and challenges in passing these on to customers, which has impacted our business and operating profit margin significantly. In
2022, increases in general levels of interest rates impacted the discount rates. This together with increases in cost of living in several countries
significantly impacted the level of consumer demand. The collective impact of these adverse events (particularly the disruptive effect of Russia’s
invasion, interest rate increases and cost of living crisis) became pronounced in the second half of 2022.
In the light of these factors and the limited level of headroom since the recognition of the impairment loss in June 2020, the results of the 2022
impairment test indicated that the carrying values of CGU assets were higher than their recoverable amounts for four of the CGUs, resulting in the
following impairment loss being recognised at 31 December 2022:
FCS North America
FCS Europe and Africa
FCS Latin America
FTDS Europe and Africa
Recoverable
amount
€m
Impairment of
goodwill
€m
Impairment of
other assets
€m
309.3
159.0
–
285.8
754.1
76.4
140.7
–
–
–
78.4
1.8
20.1
217.1
100.3
Total
exceptional
impairment
charge
€m
76.4
219.1
1.8
20.1
317.4
The ‘other asset’ impairment loss of €100.3 million was apportioned across the respective CGU asset categories on a pro rata basis, resulting in
the following asset class allocation:
Goodwill
Capitalised development expenses
Computer software and licences
Other intangible assets
Land and buildings
PP&E
Right-of-use assets
2022
impairment
charge
€m
217.1
11.1
0.6
11.9
6.3
52.0
18.4
317.4
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OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance
19. Impairments Continued
Following the impairment, the carrying values of goodwill and other intangible assets as at 31 December 2022 were as follows:
FCS
North America
Europe and Africa
Asia Pacific
Latin America
FTDS
North America
Europe and Africa
Asia Pacific
Latin America
2022
€m
Goodwill
€m
Other
intangibles
2021
€m
Goodwill
€m
Other
intangibles
83.6
–
244.6
–
–
–
25.7
–
353.9
63.5
21.2
61.6
–
5.1
58.6
40.0
–
250.0
150.1
140.7
247.4
–
–
–
26.1
–
564.3
73.1
42.3
77.2
0.1
6.6
76.0
45.2
–
320.5
The intangible assets above include customer platforms arising on the Bain and Millennium acquisitions with carrying values at 31 December 2022
of €114.5 million and €22.1 million respectively (2021: €145.8 million and €25.8 million) with remaining useful lives of 3.5 and 4.1 years.
19.2. 2022 Impairment Assessment
IAS 36 ‘Impairment of assets’ requires the recoverable amount to be determined based on the higher of value in use and fair value less costs
of disposal. In carrying out the 2022 annual impairment assessment, management considered both value in use and fair value less costs of
disposal to determine the recoverable amount. The resultant impairment loss is based on fair value less costs of disposal of the CGUs (prior year
assessment was based on value in use which indicated no impairment), which were estimated with the input of external experts, using a weighted
combination of the discounted cash flow method at 75% and guideline public company method at 25% (where fair values are determined by
referring to the historical and/or anticipated financial metrics of the CGUs by multiples, such as enterprise value to EBITDA, derived from an
analysis of certain guideline companies). These fair values are classified as Level 3 fair value measurement within the fair value hierarchy.
The basis of the fair value less costs of disposal valuation is forecast operating cash flows covering the years 2023-2027 from the Group’s latest
budget and medium-term plan (‘MTP’) approved by the Board of Directors, which utilises November 2022 S&P Global Mobility global light vehicle
production forecasts.
The S&P Global Mobility forecasts have been moderated to capture management’s best assessment of potential estimation error, in light of the
ongoing impact of global semiconductor shortages on the automotive manufacturing process and other macroeconomic factors. The Group is
therefore forecasting based on global automotive production volumes of 83.0 million in 2023, with a similar reduction from
S&P Global Mobility maintained across the MTP to 2027. This adjustment draws on management’s experience and judgement, with
consideration given to variances between historic forecasting and subsequent actual volumes retrospectively observed during periods of
fluctuating growth/decline in the market.
Volume forecasts are further adjusted for product mix, pricing assumptions and market outperformance to establish forecast sales values.
Contribution margin, fixed cost, research and development expenditure, capital expenditure and working capital management estimates are
then applied to arrive at the forecast operating cash flows for inclusion in the model. In following this approach, management carefully assessed
the cost recovery rates that are expected to be achieved in the future taking into consideration historical experiences. In addition, the impact of
cost increases arising from the continued effect of decarbonisation of the supply chain or carbon taxes, is assumed to be recovered from the
customer base.
Cash flows resulting from restructuring activities and cash flows that are generated from enhanced capital expenditure are reflected in the
forecasts. Cash flows from the Corporate function are allocated to CGUs based on their respective proportion of total Group revenue.
The five year operating cash flows were taken from the MTP and a further five years (extrapolated using the long-term expected growth rate), were
then discounted to present value using CGU specific discount rates and combined with a perpetuity value calculated by applying the long-term
expected growth rate to the terminal year cash flow forecast.
A single base set of 2023–2027 volume forecasts has been utilised, with a specific FTDS long-term expected negative growth rate being applied
in the long-term cash flow estimation, as further explained below.
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Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022
19. Impairments Continued
As outlined in Note 1, management have considered the potential impacts of climate change on the impairment assessment. Cost implications
of managing the impact of climate change have been incorporated into the forecast operating cash flows used in the impairment model. These
include capital investments to reduce the carbon output from the Group’s production processes and additional budget for increasing the mix of
renewable energy within the Group’s electricity consumption, in line with our commitment to a 50% reduction of Scope 1 and 2 emissions and a
30% reduction in Scope 3 emissions by 2030 based on absolute 2021 emission levels. As previously noted, other costs arising from the effects
of climate change are assumed to be recovered from customers. Climate change also poses transitional risks to the products that the Group
currently manufacture. This is particularly evident in the FTDS division, where existing products predominantly cater for internal combustion
engine (ICE) vehicle platforms. The impact of climate change on environmental regimes and automotive market trends has a significant bearing
on the rate of transition to battery electric vehicle (BEV) platforms. In some jurisdictions this transition will be mandated, as governments
announce deadlines for curtailing the production of ICE vehicles, in order to achieve commitments on emissions.
Whilst an increase in hybrid electric vehicle (HEV) production and their need for higher margin pressurised fuel tanks, offers mid-term
opportunities for the FTDS division, the eventual transition to BEV will result in a declining market for existing FTDS products. Management’s
forecasts suggest the peak in ICE and HEV vehicle production will occur in the mid-to late-2020s with BEV platforms subsequently driving future
growth in the automotive market.
The risk to future cash flows that can be achieved from the current FTDS technology and asset base has been captured in the impairment model
by applying a negative growth rate to the terminal year perpetuity calculation. This is to account for the expected decline in the volumes of ICE
and HEV vehicle after the MTP period (i.e. from 2028) due to the current climate change commitment from the COP21 Paris Agreement to limit
global temperature increases over the next century to 1.5 to 2 degrees Celsius and associated climate change mitigations, coupled with changing
customer behaviour in the future.
As the FCS division is less susceptible to future changes in platform mix that may arise as a result of climate change, it was not deemed
appropriate to apply a negative growth rate, and a conventional positive long-term expected growth rate is used in the perpetuity calculation.
The 2022 impairment assessment resulted in impairment losses in four CGUs, being FCS North America, FCS Europe and Africa, FCS
Latin America and FTDS Europe and Africa. These impairment losses are sensitive to reasonably possible changes in key assumptions. A low
headroom was observed in FTDS North America (€7.2 million), primarily impacted by the use of negative growth rates in the terminal year
perpetuity formula in response to the long-term forecast decline in ICE and HEV vehicle production.
The key assumptions used in the fair value less costs of disposal calculations are as follows:
• forecast operating cash flows
•
long-term expected growth rates
• discount rates
Forecast operating cash flows are established as described above, based upon the Budget and MTP approved by the Board of Directors, which
were prepared using external forecast volume data from S&P Global Mobility.
Long-term expected growth rates and discount rates are determined with input from external experts and utilise externally available sources of
information, adjusted where relevant for industry specific factors.
Long-term growth rates are based on long-term economic forecasts for growth in the automotive sector in the geographical regions in which the
CGUs operate. As described above, for FTDS specifically, negative growth rates have been used in the terminal year perpetuity calculation to
reflect the impact climate change may have on the rate of market transition to BEVs.
The negative growth rates utilise a long-term forecast prepared by management in conjunction with information from external sources, covering
the period from 2028 to 2035. Based on this, a long-term negative compound annual growth rate (CAGR) was calculated for each of the
FTDS CGUs, reflecting a forecast decline in ICE and HEV volumes to 35.8 million in 2035 (a reduction from the 39.9 million utilised in the 2021
impairment test).
These negative growth rates are then applied in perpetuity and therefore reflected in the expected cash generation from ICE and HEV sales from
2028 onwards.
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OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance
19. Impairments Continued
Discount rates are calculated for each division using a weighted average cost of capital specific to the geographical regions from which the cash
flows are derived, and reflect an appropriate company specific risk premium, with input from external experts.
The range of discount and growth rates used were as follows:
Discount rates
North America
Europe and Africa
Asia Pacific
Latin America
Long-term growth rates
North America
Europe and Africa
Asia Pacific
Latin America
2022
Post-tax
2021
Pre-tax
FCS
FTDS
FCS
FTDS Base
FTDS Down
14.00%
15.25%
13.00%
N/A
15.25%
15.00%
13.75%
23.75%
13.50%
14.75%
16.25%
16.25%
2022
16.00%
15.25%
16.40%
23.00%
16.00%
15.25%
16.40%
23.00%
2021
FCS
FTDS
FCS
FTDS Base
FTDS Down
2.00%
2.75%
5.00%
4.50%
(10.00)%
(9.75)%
(0.80)%
N/A
2.00%
2.75%
5.00%
4.50%
(8.30)%
(8.80)%
(5.00)%
N/A
(19.70)%
(20.90)%
(11.50)%
N/A
Discount rates used in the current year fair value less costs of disposal model were post-tax (prior year value in use model used pre-tax discount
rates). Discount rates and long-term growth rates are not applicable for FTDS Latin America as its cash flow model is based on forecast cash
flows ending in 2022, as the Group has ceased operations in this CGU.
For the prior year value in use model, Management prepared two negative growth rate scenarios for FTDS, to reflect potential variations in the
rate of market transition to BEV platforms. A probability weighted average of these two scenarios was used to establish the recoverable amount.
In the current year fair value less costs of disposal model, a single negative growth rate scenario has been used to establish the recoverable
amount. The estimation risk associated with this scenario has been assessed through sensitivity analysis, as outlined below.
Management considers the assumptions used in the impairment model to be critical accounting estimates, as there is a significant risk of a
material adjustment in the next twelve months to the carrying value of CGU net assets resulting from changes in these assumptions.
Sensitivity analysis
Where management believes a reasonably possible change in assumption could result in the recognition of additional impairment charges, or in
the reversal of previously recognised impairment charges, sensitivity analysis has been performed.
Based on the level of headroom in FCS Asia Pacific and FTDS Asia Pacific, management does not believe a reasonably possible change in
assumptions would impact the carrying value of CGU assets.
The Latin America CGUs in both FCS and FTDS were fully impaired in 2020 due to forecast operating losses, with a further minor impairment
loss in 2022. Although restructuring activities were subsequently implemented to mitigate these negative cash flows, uncertainty over the
longer-term economic viability of operations in this region lead management to conclude that it is appropriate to recognise the impairment losses.
Further sensitivity analysis has therefore been performed for FCS North America, FCS Europe and Africa, FTDS North Americas and FTDS
Europe and Africa.
162162
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022
19. Impairments Continued
The following table demonstrates the impact of changes in the long-term expected growth rates and discount rates, in isolation, for CGUs deemed
to be sensitive to such changes.
For FCS North America, should a reasonably possible change in input assumption trigger further impairment losses, this would initially be
allocated to the carrying value of goodwill of €83.6 million, with any excess then being allocated across other CGU assets on a pro rata basis.
FCS North America, FCS Europe and Africa, FTDS North America and FTDS Europe and Africa are also sensitive to changes in forecast
operating cash flows, which could be driven by factors such as reduced demand for products, failure to recover inflationary cost increases
and other potential cost pressures, such as the future imposition of carbon taxes. The table also demonstrates the impact of an isolated 10%
reduction in operating cash flow annually and into perpetuity.
Assumption
Impact of 100 bps change
Recoverable
amount
€m
309.3
159.0
31.0
285.8
Post-tax
discount rate
Long-term expected
growth rate
13.50%
14.75%
14.00%
15.25%
2.00%
2.75%
(10.00)%
(9.75)%
Discount
rate
€m
(30.0)
(20.0)
(3.0)
(10.0)
Long-term
expected
growth rate
€m
(20.0)
(10.0)
–*
–*
Impact of 10%
change
Operating
cashflow
€m
(40.0)
(30.0)
(8.0)
(20.0)
FCS North America
FCS Europe and Africa
FTDS North America
FTDS Europe and Africa
*Additional sensitivities were performed and disclosed below.
Specific to FTDS, the risks to the division beyond 2027 arising from climate change and the associated rate of consumer transition to
BEV vehicles has been captured by using the negative perpetuity growth rate discussed above. If we assume the 2035 volumes used
in the CAGR calculations are reached in 2031 and as such the negative trend is accelerated, this would result in the following impact on
headroom/(impairment):
FTDS North America
FTDS Europe and Africa
As calculated
€m
7.2
(20.1)
Accelerated
decline
€m
5.2
(40.1)
Impact
€m
(2.0)
(20.0)
This result highlights the sensitivity of the above CGUs to the rate of decline in long-term ICE and HEV sales, particularly in FTDS Europe
and Africa.
163163
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance
20. Investment in Associate
In the prior year, the Group held an investment in an associated undertaking, SeAH FS Co., Ltd (‘SeAH FS’) which it disposed on
8 December 2021, resulting in a loss on disposal as detailed below:
Loss on Disposal of Associate in Prior Year
Sale proceeds
Carrying value of the associate at the date of disposal
Profit on disposal of the associate before foreign exchange adjustments
Net investment hedge reclassified to the Income Statement on the disposal of the investment
Currency translation reclassified to the Income Statement on disposal of the investment
Loss on disposal of investment in associate before income tax
Taxation on disposal of the investment
Loss on disposal of the associate after income tax
The tax paid on the proceeds from the sale of the associated undertaking in 2022 was €3.0 million (2021: €nil).
The movements in the investments in the associate in the prior year were:
Balance at 1 January
Share of loss for the period
Disposal
Balance at 31 December
21. Inventories
Raw materials
Work-in-progress
Finished goods
Tooling under development
Consumables
Total inventories
2021
€m
15.5
(13.7)
1.8
(0.9)
(1.1)
(0.2)
(3.1)
(3.3)
2021
€m
14.6
(0.9)
(13.7)
–
2021
€m
151.5
40.2
32.3
73.7
34.6
332.3
2022
€m
181.0
50.8
36.8
68.7
34.7
372.0
Consignment inventories from external suppliers held on the Group’s premises at 31 December 2022 amounted to €25.3 million (2021: €25.4
million) and are excluded from the balances above.
The cost of inventories recognised as an expense in cost of sales during the year was €1,620.9 million (2021: €1,392.6 million), including €7.6
million related to write-downs of inventory to net realisable value (2021: €3.3 million).
22. Trade and Other Receivables
Trade receivables
Allowance for doubtful debts
Net trade receivables
Prepayments
Contract assets – accrued income
Other receivables
Total net trade and other receivables
Non-current
Current
2022
€m
465.4
(3.4)
462.0
68.1
29.9
2.5
562.5
20.6
541.9
2021
€m
454.0
(4.9)
449.1
61.4
25.9
3.3
539.7
19.2
520.5
Trade receivables disclosed above include amounts that are overdue at the balance sheet date for which the Group has not recognised an
allowance for doubtful debts because there is still a reasonable expectation of recovering these balances.
164164
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 22. Trade and Other Receivables Continued
22.1. Aged Analysis of Net Trade Receivables
Not overdue
Up to three months overdue
Three to six months overdue
Over six months overdue
Net trade receivables
22.2. Movement in Allowance for Doubtful Debts
At 1 January
Receivables provided for as uncollectible
Amounts written off during the year as uncollectible
Amounts reversed during the year
At 31 December
2022
€m
429.0
27.8
2.2
3.0
462.0
2022
€m
(4.9)
(1.3)
1.5
1.3
(3.4)
2021
€m
425.2
20.8
2.5
0.6
449.1
2021
€m
(4.2)
(1.5)
0.2
0.6
(4.9)
In determining the recoverability of a trade receivable, the Group considers all currently available and forward-looking information to assess the
credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting period. Receivables provided for as
uncollectible and charged to the Income Statement are included in administrative expenses.
A loss allowance is recognised at an amount equal to the lifetime expected credit losses (‘ECL’) over the life of the contract (lifetime ECL).
22.3. Credit Quality of Receivables
The Group has a large number of customers and considers credit ratings only in respect of major customers from either
Moody’s or Dun & Bradstreet. Those customers that have no credit rating are monitored as part of normal credit control procedures.
Credit rating
A – AAA
B – BBB
Counterparties without external credit rating
Not overdue trade receivables
22.4. Currency Risk of Trade Receivables and Other Receivables
Chinese renminbi
Euro
US dollar
Other currencies
Total net trade receivables and other receivables
22.5. Movement in Accrued Income
At 1 January
Unbilled performance
Transfers to receivables
Impairments through profit or loss
Other movements
Currency translation
At 31 December
2022
€m
156.9
210.0
62.1
429.0
2022
€m
126.7
144.4
119.9
71.0
462.0
2022
€m
25.9
10.7
(9.4)
–
2.5
0.2
29.9
2021
€m
160.0
154.0
111.2
425.2
2021
€m
155.6
117.7
114.7
64.4
452.4
2021
€m
19.6
11.5
(6.7)
(0.3)
0.7
1.1
25.9
165165
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 23. Cash and Liquid Assets
Cash at bank and in hand
Cash and cash equivalents in the Balance Sheet
Other deposits
Financial assets at FVTPL
Total cash and liquid assets
2022
€m
491.0
491.0
–
–
491.0
2021
€m
499.1
499.1
0.9
0.9
500.0
Other deposits in the prior year included €0.7 million pledged to provide a bank guarantee, as part of a total guarantee of €1.5 million to the
Spanish tax authorities in respect of a disputed assessment raised following a tax audit for the period 2013–2014. The guarantee was cancelled
and the deposit returned in the current year, following resolution of the dispute.
The credit risk on cash and cash equivalents is limited because the balances are predominantly held with financial institutions with investment-
grade ratings (BBB or above).
Cash and cash equivalent balances include €124.5 million (2021: €nil) invested in money market funds which may be redeemed daily on demand.
Cash and cash equivalent balances also include €1.4 million (2021: €2.2 million) held by subsidiaries as collateral primarily for letters of credit and
foreign exchange facilities.
24. Share Capital
Authorised, issued and fully paid-up
At 31 December 2021
At 31 December 2022
Number of
shares
Nominal value
of each share Ordinary shares Ordinary shares
€m
£m
520,269,141
520,269,141
£0.01
£0.01
5.2
5.2
6.8
6.8
Share
premium
€m
2.2
2.2
Total
€m
9.0
9.0
The Group holds shares in the TI Fluid Systems Employee Benefit Trust (‘EBT’) for the purpose of satisfying awards made to employees under
the TI Fluid Systems plc Long-Term Incentive Plan and Deferred Bonus Plan. Such shares are purchased on the open market and shown as a
deduction to equity in the Statement of Changes in Equity until utilised, without further adjustments to their carrying value. They are released to
satisfy the awards of equity-settled payments to employees on a first in first out basis. Shares held in the EBT are not treated as outstanding for
the purposes of calculating earnings per share and do not ordinarily rank for dividend.
The movements in ordinary shares held by the EBT in the current and prior year were as follows:
At 1 January 2021
Release to satisfy Deferred Bonus Plan
Release to satisfy vested conditional share awards
Market purchase
At 31 December 2021
Release to satisfy vested conditional share awards
Market purchase
At 31 December 2022
Number of
shares
1,499,907
(333,427)
(197,603)
2,962,296
3,931,173
(462,291)
4,209,646
7,678,528
The Company is a public limited company which is incorporated and domiciled in England and Wales, with registered number 09402231.
25. Other Reserves
At 1 January 2022
Currency translation attributable to owners of the Parent Company
Items that may be subsequently reclassified to profit or loss
At 31 December 2022
Net investment
hedges
€m
Currency
translation
reserve
€m
(9.1)
(52.3)
–
–
6.0
6.0
(9.1)
(46.3)
€m
3.3
(0.7)
(0.4)
8.3
10.5
(1.0)
11.4
20.9
Total
€m
(61.4)
6.0
6.0
(55.4)
166166
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 25. Other Reserves Continued
At 1 January 2021
Net investment hedge: foreign exchange on disposal of overseas operations
Currency translation attributable to owners of the Parent Company
Items that may be subsequently reclassified to profit or loss
At 31 December 2021
26. Non-Controlling Interests
At 1 January
Share of profit for the year
Currency translation
Total comprehensive income for the year
Reduction in non-controlling interests
At 31 December
Net investment
hedges
€m
Currency
translation
reserve
€m
(10.0)
(127.7)
0.9
–
0.9
(9.1)
–
75.4
75.4
(52.3)
2022
€m
0.4
0.1
–
0.1
–
0.5
Total
€m
(137.7)
0.9
75.4
76.3
(61.4)
2021
€m
25.2
1.7
(0.3)
1.4
(26.2)
0.4
The Group holds a 97% interest in Bundy India Ltd. Non-controlling interests at 31 December 2022 represent the remaining 3% in
Bundy India Ltd.
In the prior year the Group held a 73% interest in Hanil Tube Corporation, until 8 December 2021, when it purchased the remaining 27% for total
cash consideration of KRW 21,000 million (€15.5 million).
27. Trade and Other Payables
Trade payables
Accrued expenses
Contract liabilities – deferred income
Social security and other taxes
Other payables
Total trade and other payables
Non-current
Current
Other payables include net capital investment grant balances totalling €2.3 million (2021: € 1.7 million).
27.1 Movement in Contract Liabilities – Deferred Income
At 1 January
Additions
Utilisation
Releases
Currency translation
At 31 December
2022
€m
306.1
170.5
71.2
39.3
10.5
597.6
12.8
584.8
2022
€m
85.9
58.3
(61.6)
(12.5)
1.1
71.2
2021
€m
256.7
165.3
85.9
44.3
8.5
560.7
14.6
546.1
2021
€m
130.8
74.6
(105.4)
(17.7)
3.6
85.9
167167
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 28. Borrowings
Non-current:
Unsecured senior notes
Secured term loans and facilities
Total non-current borrowings
Current:
Secured term loans and facilities
Total current borrowings
Total borrowings
Unsecured senior notes
Secured term loans and facilities
Total borrowings
2022
€m
592.9
521.1
1,114.0
1.9
1.9
1,115.9
592.9
523.0
1,115.9
2021
€m
591.7
506.8
1,098.5
1.8
1.8
1,100.3
591.7
508.6
1,100.3
The main borrowing facilities are shown net of issuance discounts and fees of €20.6 million (2021: €24.6 million).
The contracted maturities of borrowings excluding issuance discounts and fees are disclosed in Note 29.2.
28.1 Movement in Total Borrowings
At 1 January 2022
Accrued interest
Scheduled payments
Fees expensed
Currency translation
31 December 2022
Unsecured
senior notes
€m
Term loans and
facilities
€m
591.7
22.5
(22.5)
1.2
–
592.9
508.6
24.8
(30.3)
3.5
16.4
523.0
Total
borrowings
€m
1,100.3
47.3
(52.8)
4.7
16.4
1,115.9
Accrued interest payable on the borrowings at 31 December 2022 of €4.8 million (31 December 2021: €4.7 million) is included in current trade
and other payables. Scheduled principal repayments of borrowings in the year were €5.5 million (2012: €6.8 million) relating to payments on the
Group’s term loans and facilities.
At 1 January 2021
Accrued interest
Scheduled payments
Fees expensed
New borrowings
Fees on new borrowings
Voluntary repayments of borrowings
Fees expensed on voluntary repayments of borrowings
Currency translation
31 December 2021
Unsecured
senior notes
€m
Term loans and
facilities
€m
Other loans
€m
–
15.9
(15.9)
0.8
600.0
(9.1)
–
–
–
591.7
1,076.6
29.1
(35.8)
4.4
–
(6.2)
(600.0)
11.8
28.7
508.6
0.1
–
(0.1)
–
–
–
–
–
–
–
Total
borrowings
€m
1,076.7
45.0
(51.8)
5.2
600.0
(15.3)
(600.0)
11.8
28.7
1,100.3
In the prior year, the Group successfully executed a refinancing of its external borrowings. It issued €600.0 million unsecured Senior Notes
maturing on 15 April 2029 and bearing an interest rate of 3.75% per annum, and its Euro and US dollar term loans were partly repaid and
extended to 16 December 2026. The margins on the term loans were also reduced. The refinancing was treated as a partial extinguishment of the
Group’s term loans, and as a result unamortised transaction costs were recognised as an exceptional finance expense in the prior year’s income
statement of €11.8 million.
28.2 Currency Denomination of Borrowings
US dollar
Euro
Total borrowings
The contracted maturities of borrowings excluding issuance discounts and fees are disclosed in Note 29.2.
168168
2022
€m
267.1
848.8
2021
€m
251.1
849.2
1,115.9
1,100.3
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 28. Borrowings Continued
28.3 Main Borrowing Facilities
The main borrowing facilities are comprised of unsecured Senior Notes and a package of secured loans consisting of a Euro term loan, a US
dollar term loan, and a revolving credit facility (which was undrawn during the year except for letters of credit).
The amounts outstanding under the agreements are:
Principal outstanding:
Unsecured senior notes
US term loan
Euro term loan
Total principal outstanding
Issuance discounts and fees
Main borrowings facilities
2022
€m
600.0
276.2
260.3
1,136.5
(20.6)
1,115.9
2021
€m
600.0
261.9
263.0
1,124.9
(24.6)
1,100.3
Unsecured Senior Notes
The unsecured Senior Notes bear an interest rate of 3.75% per annum and mature on 15 April 2029. Interest on the Notes is payable
semi-annually in arrears on 15 April and 15 October of each year.
Term loan
The principal outstanding of the US term loan in US dollars at 31 December 2022 is $294.8 million (2021: $297.8 million). The interest rate on the
loan is US-dollar three-month LIBOR (minimum 0.5% p.a.) +3.25% p.a and the amount repayable per quarter on the loan is $750,000 until the
final balance falls due on 16 December 2026.
The rate on the Euro term loan is three-month EURIBOR (minimum 0.0% p.a.) +3.25% p.a. and the amount repayable per quarter is €662,500
until the final balance falls due on 16 December 2026.
Revolving Credit Facility
The revolving credit agreement provides a facility of up to $225.0 million. Drawings under this facility bear interest in a range of US-dollar LIBOR
+3.0% to US-dollar LIBOR + 3.75% p.a. depending on the Group’s total net leverage ratio. The facility is available to be used to issue letters
of credit on behalf of TI Group Automotive Systems LLC, a subsidiary undertaking. The facility was undrawn at 31 December 2022 and 31
December 2021 (except for letters of credit see below). The revolving credit facility (‘RCF’) expires on 16 July 2026 and the non-utilisation fee is
0.25%. In the event the total net leverage ratio is greater than 3.5:1, the non-utilisation fee will increase to 0.375%.
The net undrawn facilities under the RCF are shown below:
RCF Agreement
Utilisation for letters of credit
Net undrawn revolving credit facility
2022
2021
$m
225.0
(2.0)
223.0
€m
210.8
(1.9)
208.9
$m
225.0
(1.9)
223.1
€m
197.9
(1.7)
196.2
Issuance discounts and fees
All capitalised fees are expensed using the effective interest rate method over the remaining terms of the facilities. Net issuance discounts and
fees at 31 December 2022 are €20.6 million (2021: €24.6 million).
28.4 Other Secured Loans
A subsidiary in Spain granted security over certain of its assets in return for credit facilities from its banks. The loan had total amortisation
repayments of €27,000 payable every six months. The facility expired on 15 June 2022 and there is therefore no balance outstanding at 31
December 2022 (2021: €27,000).
28.5 Total Undrawn Borrowing Facilities
Expiring within one year
Expiring after more than one year
Total at floating rate
All facilities are at floating rates.
2022
€m
11.1
208.9
220.0
2021
€m
10.8
196.2
207.0
169169
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 28. Borrowings Continued
28.6 Movements in Net Debt and Lease Liabilities
Cash and cash equivalents
Financial assets at FVTPL
Borrowings
Total net debt
Lease liabilities
Net debt and lease liabilities
Cash and cash equivalents
Financial assets at FVTPL
Borrowings
Total net debt
Lease liabilities
Net debt and lease liabilities
At 1
January
2022
€m
499.1
0.9
(1,100.3)
(600.3)
(149.9)
(750.2)
At 1
January
2021
€m
485.8
0.9
(1,076.7)
(590.0)
(151.0)
(741.0)
Cash
flows
€m
(11.5)
(0.9)
5.5
(6.9)
32.9
26.0
Cash
flows
€m
(11.0)
–
22.1
11.1
31.6
42.7
Non-cash changes
New
leases
€m
Fees
expensed
€m
Currency
translation
€m
Remeas-
urement and
disposals
€m
–
–
–
–
(42.6)
(42.6)
–
–
(4.7)
(4.7)
–
(4.7)
3.4
–
(16.4)
(13.0)
(3.0)
(16.0)
–
–
–
–
13.0
13.0
Non-cash changes
New
leases
€m
Fees
expensed
€m
Currency
translation
€m
Remeas-
urement and
disposals
€m
–
–
–
–
(18.1)
(18.1)
–
–
(17.0)
(17.0)
–
(17.0)
24.3
–
(28.7)
(4.4)
(5.3)
(9.7)
Cash flows from financing activities arising from changes in financial liabilities are analysed below:
At 31
December
2022
€m
491.0
–
(1,115.9)
(624.9)
(149.6)
(774.5)
At 31
December
2021
€m
499.1
0.9
(1,100.3)
(600.3)
(149.9)
(750.2)
2021
€m
(600.0)
15.3
600.0
6.8
31.6
53.7
22.1
31.6
53.7
Total
€m
491.0
494.4
2.8
988.2
–
–
–
–
(7.1)
(7.1)
2022
€m
–
–
–
5.5
32.9
38.4
5.5
32.9
38.4
Note
23
22
Assets at
amortised cost
€m
Assets at
FVTPL
€m
491.0
494.4
–
985.4
–
–
2.8
2.8
Proceeds from new borrowings
Fees paid on proceeds from new borrowings
Voluntary repayments of borrowings
Scheduled repayments of borrowings
Lease principal repayments
Cash outflows from financing activities arising from changes in financial liabilities
Borrowings cash flows
Lease liabilities cash flows
Cash outflows from financing activities arising from changes in financial liabilities
29. Fair Values of Financial Assets and Liabilities
29.1. Financial Instruments by Category
As at 31 December 2022:
Financial assets
Cash and cash equivalents
Trade and other receivables excluding prepayments
Derivative financial instruments:
Forward foreign exchange contracts (cash flow hedges)
Total at 31 December 2022
170170
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 29. Fair Values of Financial Assets and Liabilities Continued
Financial liabilities
Trade and other payables excluding deferred income, social security and other taxes
Borrowings:
– Term loans and facilities
– Unsecured senior notes
Lease liabilities
Derivative financial instruments:
Forward foreign exchange contracts (cash flow hedges)
Total at 31 December 2022
As at 31 December 2021:
Financial assets
Cash and cash equivalents
Financial assets at FVTPL
Trade and other receivables excluding prepayments
Derivative financial instruments:
– Forward foreign exchange contracts (cash flow hedges)
Total
Financial liabilities
Trade and other payables excluding deferred income
Borrowings:
– Term loans and facilities
– Unsecured senior notes
Lease liabilities
Derivative financial instruments:
– Forward foreign exchange contracts (cash flow hedges)
Total
Note
27
28
18
Note
23
23
22
Note
27
28
18
Liabilities at
amortised cost
€m
Liabilities at
FVTPL
€m
(487.1)
(523.0)
(444.0)
(149.6)
–
–
–
–
Total
€m
(487.1)
(523.0)
(444.0)
(149.6)
–
(1,603.7)
(0.2)
(0.2)
(0.2)
(1,603.9)
Assets at
amortised cost
€m
Assets at
FVTPL
€m
499.1
–
478.3
–
977.4
–
0.9
–
0.9
1.8
Liabilities at
amortised cost
€m
Liabilities at
FVTPL
€m
–
–
–
–
(474.8)
(508.6)
(604.5)
(149.9)
–
(1,737.8)
Total
€m
499.1
0.9
478.3
0.9
979.2
Total
€m
(474.8)
(508.6)
(604.5)
(149.9)
(0.3)
(0.3)
(0.3)
(1,738.1)
Fair value estimates of derivatives are based on relevant market information and information about the financial instruments, which are subjective
in nature. The fair value of these financial instruments is estimated by discounting the future cash flows to net present values using appropriate
market rates prevailing at the reporting date, which is a proxy for market price. All derivative items reported are within Level 2 of the fair value
hierarchy specified in IFRS 13 ‘Fair Value Measurement’; their measurement includes inputs other than quoted prices that are observable for the
asset or liability, either directly or indirectly.
The unsecured Senior Notes are quoted instruments and the fair value is calculated based on the market price. The fair value of the notes is within
Level 1 of the fair value hierarchy specified in IFRS 13 ‘Fair Value Measurement’.
The fair values of other non-derivative amounts are determined in accordance with generally accepted valuation techniques based on discounted
cash flow analysis. It is assumed that by their nature their carrying value approximates their fair value. These fair values are within Level 2 of the
fair value hierarchy specified in IFRS 13 ‘Fair Value Measurement’.
29.2 Contracted Maturities of Financial Liabilities
As at 31 December 2022:
Borrowings excluding issuance discounts and fees (discounted)
Impact of discounting: interest
Undiscounted contracted maturities of borrowings
Lease liabilities (discounted)
Impact of discounting: interest
Undiscounted contracted maturities of lease liabilities
Trade and other payables excluding deferred income, social security and
other taxes
Total undiscounted contracted maturities of financial liabilities
Less than
one year
€m
Between one
and three years
€m
Between three
and five years
€m
Over five
years
€m
5.5
59.1
64.6
28.1
13.0
41.1
480.3
586.0
10.9
117.2
128.1
40.9
18.7
59.6
6.7
194.4
520.1
80.5
600.6
28.6
8.3
36.9
–
637.5
600.0
29.1
629.1
52.0
10.7
62.7
–
691.8
Total
€m
1,136.5
285.9
1,422.4
149.6
50.7
200.3
487.0
2,109.7
171171
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 29. Fair Values of Financial Assets and Liabilities Continued
As at 31 December 2021:
Borrowings excluding issuance discounts and fees
Impact of discounting: interest
Undiscounted contracted maturities of borrowings
Lease liabilities (discounted)
Impact of discounting: interest
Undiscounted contracted maturities of lease liabilities
Trade and other payables excluding deferred income
Total undiscounted contracted maturities of financial liabilities
30. Retirement Benefit Obligations
30.1. Defined Benefit Arrangements
Less than
one year
€m
Between one
and three years
€m
Between three
and five years
€m
Over five
years
€m
5.3
41.1
46.4
30.1
8.6
38.7
466.4
551.5
10.6
81.5
92.1
40.9
12.4
53.3
8.4
153.8
509.0
80.8
589.8
29.1
9.5
38.6
–
628.4
600.0
51.6
651.6
49.8
6.1
55.9
–
707.5
Total
€m
1,124.9
255.0
1,379.9
149.9
36.6
186.5
474.8
2,041.2
Pension plans
The Group operates funded defined benefit pension plans in the US, Canada and the UK under broadly similar regulatory frameworks. All of the
plans provide benefits to members in the form of a guaranteed level of pension payable for life. The level of pensions provided is determined by
members’ length of service and, for most of these plans, pensionable remuneration. Plan assets are held in trusts from which all benefit payments
are made. The plans are governed by local regulations and practice, including the nature of the relationship between their trustees and the Group.
Responsibility for governance of the plans, including investment strategy and schedules of contributions, rests primarily with the trustees, some of
whom who are appointed by the Group and the remainder by the members in accordance with the rules of each plan.
The plan in the US is closed to both new entrants and future accrual. The active members are not required to make contributions to the plans.
Pensions in payment are not subject to inflationary increase. The plan in Canada remains open to new entrants, and is contributory. Pensions in
payment are subject to discretionary inflationary increase. The UK plan is closed to new entrants but remains open to future accrual. Pensions in
payment are subject to annual increase based on the UK Retail Prices Index.
Independent accounting valuations of all major defined benefit scheme assets and liabilities were carried out as at 31 December 2022.
The US pension plans are subject to annual actuarial valuation, and were most recently valued by independent qualified actuaries as at
1 January 2022. The Canadian pension plan is subject to actuarial valuation at least triennially, and was most recently formally valued as at
30 June 2021. The UK plan is subject to triennial actuarial valuation, and was most recently formally valued as at 6 April 2021. Employer funding
contributions to the US and other funded pension plans are agreed at each formal valuation, and for the year ended 31 December 2022 totalled
€2.0 million (2021: €3.4 million). Contributions for the 12 months ended 31 December 2023 are expected to amount to €0.8 million.
In this note the US plans are shown separately as ‘US pensions’, and the Canadian and UK plans are aggregated as ‘other pensions’.
Post-employment healthcare
The Group operates post-employment medical benefit schemes in a small number of territories, principally the US where the scheme was closed
to new entrants in 1992. These schemes are unfunded. The US scheme is subject to annual actuarial valuation, and was most recently valued
by independent qualified actuaries as at 1 January 2022. In this note the US scheme is shown separately as ‘US healthcare’, and the other
healthcare liabilities are aggregated within ‘other post-employment liabilities’.
Other post-employment arrangements
The Group operates certain other pension and retirement plans primarily in Germany, France, Italy, South Korea, Poland and Belgium, where
obligations are either partially funded or unfunded. In this note these plans are aggregated within ‘other post-employment liabilities’.
30.2. Defined Benefit Arrangements in the Primary Financial Statements
The net liability for defined benefit arrangements is as follows:
a. Balance Sheet
US pensions Other pensions
€m
€m
US healthcare
€m
(145.5)
117.9
–
(27.6)
(68.9)
77.7
(8.8)
–
(28.0)
–
–
(28.0)
Other post-
employment
liabilities
€m
(79.7)
31.1
–
(48.6)
Total
€m
(322.1)
226.7
(8.8)
(104.2)
Net liability
Present value of retirement benefit obligations
Fair value of plan assets
Asset ceiling
Net liability at 31 December 2022
172172
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 30. Retirement Benefit Obligations Continued
Net liability
Present value of retirement benefit obligations
Fair value of plan assets
Asset ceiling
Net liability at 31 December 2021
US pensions Other pensions
€m
€m
US healthcare
€m
(184.5)
150.7
–
(33.8)
(117.7)
126.5
(9.3)
(0.5)
(33.4)
–
–
(33.4)
The present value of retirement benefit obligations by member type is as follows:
Active members
Deferred members
Retirees
Total
The expected payments at 31 December 2022 for retirement benefit obligations are as follows:
2023
2024
2025
2026
2027
2028 onwards
Other post-
employment
liabilities
€m
(88.2)
27.8
–
(60.4)
2022
€m
102.6
55.8
163.7
322.1
Total
€m
(423.8)
305.0
(9.3)
(128.1)
2021
€m
134.2
87.5
202.1
423.8
Payments
expected
€m
24.4
23.2
23.1
23.1
23.6
576.8
The implied weighted average duration at 31 December 2022 of retirement benefit obligations are as follows (in years): US pensions 10.0
(2021: 12.2), Other pensions 16.0 (2021: 19.5) and US healthcare 7.8 (2021: 8.9).
b. Income Statement
Net (expense)/income recognised in the Income Statement is as follows:
Net (expense)/income
Current service cost
Past service cost
Settlement/curtailment loss
Net interest (expense)/income
Total expense for the year ended 31 December 2022
US
pensions
€m
Other
pensions
€m
US
healthcare
€m
–
–
–
(1.0)
(1.0)
(1.5)
–
(0.5)
0.2
(1.8)
–
–
–
(0.9)
(0.9)
Other post-
employment
liabilities
€m
(6.4)
(0.3)
–
(1.1)
(7.8)
Restructuring of the Group’s Bramalea Canada facility resulted in a settlement loss of €0.5 million in the year (2021: €0.9 million loss).
Net (expense)/income
Current service cost
Past service cost
Settlement/curtailment (loss)/gain
Net interest expense
Total expense for the year ended 31 December 2021
US
pensions
€m
Other
pensions
€m
US
healthcare
€m
–
–
(0.4)
(1.2)
(1.6)
(1.6)
–
(0.9)
–
(2.5)
–
–
–
(0.7)
(0.7)
Other post-
employment
liabilities
€m
(4.3)
0.6
0.6
(0.6)
(3.7)
Annuity and participant buyout offerings of the Group’s US pension plan resulted in a settlement loss of €0.4 million in 2021.
Total
€m
(7.9)
(0.3)
(0.5)
(2.8)
(11.5)
Total
€m
(5.9)
0.6
(0.7)
(2.5)
(8.5)
173173
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 30. Retirement Benefit Obligations Continued
c. Statement of Comprehensive Income
Remeasurements of retirement benefit obligations included in the Statement of Comprehensive Income are as follows:
(Expense)/income
US
pensions
€m
Other
pensions
€m
US
healthcare
€m
Other post-
employment
liabilities
€m
Return on assets excluding amounts recognised in the Income Statement
(37.3)
Changes in demographic assumptions
Changes in financial assumptions
Experience gains/(losses)
Change in asset ceiling
Total net Income for the year ended 31 December 2022
–
46.0
1.3
–
10.0
(43.5)
(0.8)
49.1
(3.2)
0.2
1.8
–
–
5.2
1.4
–
6.6
–
0.3
13.2
(3.9)
–
9.6
Income/(expense)
Return on assets excluding amounts recognised in the Income Statement
Changes in demographic assumptions
Changes in financial assumptions
Experience gains/(losses)
Change in asset ceiling
Total net income for the year ended 31 December 2021
30.3. Composition of Plan Assets
Plan assets are comprised as follows:
US
pensions
€m
Other
pensions
€m
US
healthcare
€m
Other post-
employment
liabilities
€m
13.7
(0.7)
11.0
(1.3)
–
22.7
3.0
1.4
4.9
3.6
(5.3)
7.6
–
(0.2)
0.5
1.3
–
1.6
0.1
–
3.4
0.9
–
4.4
Investment funds: Credit*
Investment funds: Equities*
Investment funds: Diversified growth/multi strategy*
Insurance contracts
Cash and cash equivalents
Plan assets as at 31 December 2022
Investment funds: Credit*
Investment funds: Equities*
Investment funds: Diversified growth/multi strategy*
Insurance contracts
Cash and cash equivalents
Plan assets as at 31 December 2021
US
pensions
€m
Other
pensions
€m
Other post-
employment
liabilities
€m
48.9
66.4
–
–
2.6
117.9
33.1
6.0
32.8
5.4
0.4
77.7
–
–
–
30.9
0.2
31.1
US
pensions
€m
Other
pensions
€m
Other post-
employment
liabilities
€m
65.7
83.7
–
–
1.3
150.7
41.6
8.8
68.2
7.7
0.2
126.5
–
–
–
27.6
0.2
27.8
Total
€m
(80.8)
(0.5)
113.5
(4.4)
0.2
28.0
Total
€m
16.8
0.5
19.8
4.5
(5.3)
36.3
Total
€m
82.0
72.4
32.8
36.3
3.2
226.7
Total
€m
107.3
92.5
68.2
35.3
1.7
305.0
*83% and 88% of the assets held by the retirement benefit plans as of 31 December 2022 and 31 December 2021, respectively, are in investment funds comprised of underlying equity, credit
and diversified growth assets with quoted market prices. Investment funds themselves are not considered quoted as they are pooled, commingled vehicles such as unit trusts and mutual
funds, whereby the pension scheme owns units in the fund alongside other investors. The remaining assets held by the plan are unquoted insurance policies, principal-interest guaranteed
insurance contracts and cash and cash equivalents.
174174
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 30. Retirement Benefit Obligations Continued
30.4. Net Defined Benefit Obligations
Movements in net defined benefit obligations
Note
30.2b
30.2b
30.2b
30.2b
30.2c
Note
30.2b
30.2b
30.2b
30.2b
30.2c
At 1 January 2022
Current service cost
Past service cost
Settlement/curtailment loss
Net interest (expense)/income
Remeasurements
Employer contributions
Employee contributions
Benefits and administration expenses paid
Currency translation
At 31 December 2022
Movements in net defined benefit obligations
At 1 January 2021
Current service cost
Past service cost
Settlement/curtailment loss
Net interest (expense)/income
Remeasurements
Employer contributions
Employee contributions
Benefits and administration expenses paid
Settlements/curtailments
Currency translation
At 31 December 2021
a. US pensions
Movements in net defined benefit obligations
At 1 January 2022
Net interest (expense)/income
Remeasurements
Employer contributions
Benefits and administration expenses paid
Currency translation
At 31 December 2022
Movements in net defined benefit obligations
At 1 January 2021
Settlement/curtailment loss
Net interest (expense)/income
Remeasurements
Employer contributions
Benefits and administration expenses paid
Settlements/curtailments
Currency translation
At 31 December 2021
Present value of
obligation
€m
Fair value of
plan assets
€m
Accounting
surplus
€m
Asset ceiling
€m
(423.8)
305.0
(118.8)
(9.3)
(7.9)
(0.3)
2.6
(10.4)
108.6
–
(0.4)
21.0
(11.5)
(322.1)
–
–
(3.1)
7.6
(80.8)
7.6
0.4
(17.2)
7.2
226.7
(7.9)
(0.3)
(0.5)
(2.8)
27.8
7.6
–
3.8
(4.3)
(95.4)
–
–
–
–
0.2
–
–
–
0.3
(8.8)
Present value of
obligation
€m
Fair value of
plan assets
€m
Accounting
surplus
€m
Asset ceiling
€m
(456.2)
299.1
(157.1)
(3.6)
(5.9)
0.6
(0.7)
(8.6)
24.8
–
(0.4)
22.7
24.7
(24.8)
(423.8)
–
–
–
6.1
16.8
7.0
0.4
(19.1)
(24.6)
19.3
305.0
(5.9)
0.6
(0.7)
(2.5)
41.6
7.0
–
3.6
0.1
(5.5)
(118.8)
–
–
–
–
(5.3)
–
–
–
–
(0.4)
(9.3)
Present value of
obligation
€m
Fair value of
plan assets
€m
(184.5)
(5.4)
47.3
–
9.8
(12.7)
(145.5)
150.7
4.4
(37.3)
1.2
(11.6)
10.5
117.9
Present value of
obligation
€m
Fair value of
plan assets
€m
(209.2)
156.9
(0.4)
(5.0)
9.0
–
10.9
24.6
(14.4)
(184.5)
–
3.8
13.7
2.5
(12.8)
(24.6)
11.2
150.7
Total
€m
(128.1)
(7.9)
(0.3)
(0.5)
(2.8)
28.0
7.6
–
3.8
(4.0)
(104.2)
Total
€m
(160.7)
(5.9)
0.6
(0.7)
(2.5)
36.3
7.0
–
3.6
–
(5.9)
(128.1)
Total
€m
(33.8)
(1.0)
10.0
1.2
(1.8)
(2.2)
(27.6)
Total
€m
(52.3)
(0.4)
(1.2)
22.7
2.5
(1.9)
–
(3.2)
(33.8)
175175
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 30. Retirement Benefit Obligations Continued
b. Other pensions
Movements in net defined benefit obligations
At 1 January 2022
Current service cost
Settlement/curtailment loss
Net interest (expense)/income
Remeasurements
Employer contributions
Employee contributions
Benefits and administration expenses paid
Currency translation
At 31 December 2022
Movements in net defined benefit obligations
At 1 January 2021
Current service cost
Settlement/curtailment loss
Net interest (expense)/income
Remeasurements
Employer contributions
Employee contributions
Benefits and administration expenses paid
Currency translation
At 31 December 2021
c. US healthcare and other post-employment liabilities
Movements in net defined benefit obligations
At 1 January 2022
Current service cost
Past service cost
Net interest (expense)/income
Remeasurements
Employer contributions
Employee contributions
Benefits paid
Currency translation
At 31 December 2022
Present value of
obligation
€m
Fair value of
plan assets
€m
Accounting
surplus
€m
(117.7)
(1.5)
2.6
(2.5)
45.1
–
(0.3)
2.2
3.2
(68.9)
126.5
–
(3.1)
2.7
(43.5)
0.8
0.3
(2.4)
(3.6)
77.7
8.8
(1.5)
(0.5)
0.2
1.6
0.8
–
(0.2)
(0.4)
8.8
Asset ceiling
€m
(9.3)
–
–
–
0.2
–
–
–
0.3
(8.8)
Present value of
obligation
€m
Fair value of
plan assets
€m
Accounting
surplus
€m
Asset ceiling
€m
(117.9)
115.4
(1.6)
(0.9)
(1.9)
9.9
–
(0.3)
3.1
(8.1)
(117.7)
–
–
1.9
3.0
0.9
0.3
(3.3)
8.3
126.5
(2.5)
(1.6)
(0.9)
–
12.9
0.9
–
(0.2)
0.2
8.8
(3.6)
–
–
–
(5.3)
–
–
–
(0.4)
(9.3)
Present value of
obligation
€m
Fair value of
plan assets
€m
Total other post-
employment
liabilities
€m
US healthcare
€m
(88.2)
(6.4)
(0.3)
(1.6)
9.6
–
(0.1)
7.0
0.3
(79.7)
27.8
–
–
0.5
–
5.6
0.1
(3.1)
0.2
31.1
(60.4)
(6.4)
(0.3)
(1.1)
9.6
5.6
–
3.9
0.5
(48.6)
(33.4)
–
–
(0.9)
6.6
–
–
2.0
(2.3)
(28.0)
Total
€m
(0.5)
(1.5)
(0.5)
0.2
1.8
0.8
–
(0.2)
(0.1)
–
Total
€m
(6.1)
(1.6)
(0.9)
–
7.6
0.9
–
(0.2)
(0.2)
(0.5)
Total
€m
(93.8)
(6.4)
(0.3)
(2.0)
16.2
5.6
–
5.9
(1.8)
(76.6)
176176
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Present value of
obligation
€m
(95.3)
(4.3)
0.6
0.6
(0.9)
4.3
–
(0.1)
6.8
0.1
(88.2)
Fair value of
plan assets
€m
26.8
–
–
–
0.3
0.1
3.6
0.1
(2.9)
(0.2)
27.8
Total other post-
employment
liabilities
€m
(68.5)
(4.3)
0.6
0.6
(0.6)
4.4
3.6
–
3.9
(0.1)
(60.4)
30. Retirement Benefit Obligations Continued
Movements in net defined benefit obligations
At 1 January 2021
Current service cost
Past service cost
Settlement/curtailment gain
Net interest (expense)/income
Remeasurements
Employer contributions
Employee contributions
Benefits paid
Currency translation
At 31 December 2021
d. Other post-employment liabilities
Unfunded German pension plans
Long-service awards in Germany and Poland
Statutory retiring indemnities in France, Italy, and South Korea
Retirement plans in Belgium
Unfunded arrangements under the US and UK pension plans
Other liabilities
Total other post-employment liabilities at 31 December
30.5. Principal Assumptions
The principal assumptions in measuring plan liabilities are as follows:
US Pensions
Discount rate
Mortality assumptions: life expectancy from age 65
Retiring at the end of the current reporting year:
Males
Females
Retiring 20 years after the end of the current reporting year:
Males
Females
US healthcare
€m
(33.8)
–
–
–
(0.7)
1.6
–
–
1.9
(2.4)
(33.4)
2022
€m
17.8
10.0
9.9
1.0
1.0
8.9
48.6
Total
€m
(102.3)
(4.3)
0.6
0.6
(1.3)
6.0
3.6
–
5.8
(2.5)
(93.8)
2021
€m
24.3
10.5
16.2
2.1
1.6
5.7
60.4
2022
5.35%
2021
2.80%
23
25
24
26
23
25
24
25
For US pensions, assumptions with regard to life expectancies from retirement at age 65 are based on Pri-2012 collar and gender-specific
mortality tables, adjusted and generationally projected using Scale MP-2020.
Other pensions
Discount rate
Inflation rate
Salary increases
Benefit increases
Mortality assumptions for other pensions: life expectancy from age 65
Retiring at the end of the current reporting year:
Males
Females
Retiring 20 years after the end of the current reporting year:
Males
Females
2022
4.95%
2.90%
3.03%
3.20%
23
25
24
26
2021
2.10%
3.49%
3.28%
3.40%
22
24
23
25
177177
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 30. Retirement Benefit Obligations Continued
US healthcare
Discount rate
Healthcare cost trend: Initial rate
Other post-employment liabilities
Discount rate
Inflation rate
Salary increases
Benefit increases
2022
5.30%
7.00%
2022
4.80%
2.06%
7.13%
2.26%
2021
2.60%
2.60%
2021
1.80%
1.38%
3.06%
1.97%
Changes in the principal assumptions would decrease/(increase) the total defined benefit obligation (DBO) as follows:
Decrease/(increase) in DBO
Discount rate
Inflation rate
Salary growth rate
Life expectancy
Healthcare cost trend: Initial rate
2022
Change in
assumption
Increase
€m
0.5%
0.5%
0.5%
1 year
0.5%
15.7
(4.9)
(2.2)
(8.7)
(0.9)
Decrease
€m
(17.2)
4.9
2.0
8.8
0.8
2021
Increase
€m
26.9
(9.4)
(2.9)
(15.1)
(1.3)
Decrease
€m
(30.2)
8.8
2.9
15.1
1.3
The sensitivity analysis above illustrates the change in each major assumption, whilst holding all others constant. The methods of calculating the
defined benefit obligation for this purpose are the same as used for calculating the end-of-year position.
30.6. Pension Plans – Risk Analysis
Asset volatility
Plan liabilities are calculated using a discount rate set with reference to corporate bond yields. If plan assets were
to underperform this yield, this would create a deficit. All the funded plans hold a proportion of equities, which are
expected to outperform bonds in the long term, but which are also likely to experience greater price volatility and
therefore risk in the short term. As plans mature, the Group’s strategy is to reduce the level of investment risk by
investing more in assets whose risk profile is a better match for the liabilities.
Changes in bond yields
A decrease in bond yields has the effect of increasing plan liabilities, although this is partially offset by an increase in
the value of the plans’ bond holdings.
Inflation risk
The Group’s pension obligations in Canada, the UK and Germany are inflation linked. Caps on the level of inflationary
increases are in place to protect the plans against above normal inflation. The US pension obligations are not inflation
indexed. The majority of the plan assets are not directly inflation indexed, meaning that an increase in inflation will
tend to increase the deficit.
Life expectancy
The majority of the plans’ obligations are to provide benefits for the life of each retired member and his/her spouse,
so increases in life expectancy result in an increase in the plans’ liabilities.
The investments of the funded plans are managed within an asset-liability matching framework that has been developed to achieve long-term
investments that align with the obligations of the plans. One objective is to match assets to the pension obligations by investing in annuities and
long-term fixed interest securities with maturities that match the benefit payments as they fall due in the appropriate currency. The plans actively
monitor how the duration and the expected yield of the investments match the expected cash outflows arising from the pension obligations.
The processes used to manage the risks have not changed from previous years.
Investments are diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. A large
portion of assets consist of bonds and equities, although the plans also hold investment funds and liability driven investments. Equities have been
shown to offer the best returns over the long term with an acceptable level of risk.
178178
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 31. Provisions
Movements in provisions are as follows:
At 1 January 2022
Provisions made during the year
Provisions reversed during the year
Provisions used during the year
Currency translation
At 31 December 2022
Total provisions:
Non-current
Current
Total provisions
Product
warranty
€m
Restructuring
€m
10.7
2.4
(6.3)
(2.1)
0.4
5.1
15.8
23.1
(0.3)
(30.0)
(0.8)
7.8
Other
€m
4.8
0.4
(0.4)
(1.2)
0.1
3.7
2022
€m
2.6
14.0
16.6
Total
€m
31.3
25.9
(7.0)
(33.3)
(0.3)
16.6
2021
€m
2.6
28.7
31.3
Product warranty
The majority of product warranty provisions relate to specific customer issues, and are based upon open negotiations and past customer claims
experience. Utilisation of the warranty provision is expected in 2023.
Restructuring
Restructuring provisions comprise announced headcount reductions and similar costs of balancing production capacity with market
requirements. Provisions made during the year of €23.1 million, less provisions reversed during the year of €0.3 million results in a net charge to
Income Statement of €22.8 million (2021: €26.8 million). A significant portion of the balance is expected to be utilised in 2023 with the remaining
residual amount in 2024.
Other provisions
Other provisions at 31 December 2022 comprise provisions for disputed claims for indirect taxes totalling €0.7 million (2021: €0.7 million) and
asset retirement obligations totalling €3.0 million (2021: €4.1 million). Asset retirement obligations are linked to the useful lives of the underlying
assets, with expected utilisation ranging from 2023 to 2025. The indirect tax provisions are expected to be utilised over the next five years.
32. Cash Generated from Operations
(Loss)/profit for the year
Income tax expense before exceptional items
Exceptional income tax credit
(Loss)/profit before income tax
Adjustments for:
Note
Depreciation, amortisation and non-exceptional impairment charges
16/17/18
Exceptional impairment charges
Net losses on disposal of PP&E, intangible and right-of-use assets
Loss on disposal of PP&E in restructuring costs
Loss on disposal of investment in associate before income tax
Share-based expense excluding social security costs
Net finance expense
Unremitted share of loss from associates
Net foreign exchange losses
Changes in working capital:
– Inventories
– Trade and other receivables
– Trade and other payables
Change in provisions
Change in retirement benefit obligations
Total
9
11
20
10
12
20
2022
€m
(279.0)
23.4
(20.1)
(275.7)
207.6
317.4
0.3
3.7
–
9.6
58.7
–
0.7
(34.0)
(16.3)
27.6
(14.4)
(2.7)
282.5
2021
€m
16.0
40.9
(2.8)
54.1
192.0
–
0.6
–
0.2
6.8
71.8
0.9
6.9
34.4
39.3
(83.0)
0.4
(4.6)
319.8
The changes in working capital (movements in inventories, trade and other receivables and trade and other payables) reflect a number of
non-cash transactions. The most significant of these arises from movements due to changes in foreign exchange rates, on translation of the
Group’s overseas operations into the Group’s presentation currency, Euro.
179179
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance 33. Commitments and Contingencies
33.1 Capital Commitments
Expenditure on non-current assets authorised and contracted for at the end of the year but not yet incurred is as below:
Intangible assets
Property, plant and equipment
Total
Refer to Note 18 for the Group lease commitments as a lessor and lessee.
33.2 Purchase Commitments
2022
€m
6.9
45.4
52.3
2021
€m
8.1
30.3
38.4
As part of its normal business practices, the Group enters into contracts with suppliers for purchases of raw materials, components and
services to facilitate adequate supply of these materials and services. These arrangements may contain fixed or minimum quantity purchase
requirements. These purchase commitments are off-balance sheet agreements to purchase goods or services that are enforceable and legally
binding on the Group.
The table below summarises the contractual purchase commitments as at the end of the year:
Less than one year
Between one year and five years
After five years
Total
2022
€m
109.2
6.9
2.4
118.5
2021
€m
73.0
5.4
1.8
80.2
Contingencies
The Group has contingent liabilities relating to legal and tax proceedings arising in the normal course of business. Management reviewed
known claims and litigation involving the Company and its subsidiaries at the end of the year. Based on the advice of legal counsel, appropriate
provisions have been made to cover the related risks. While the outcome of any proceedings in progress cannot be predicted, the Company does
not believe they will have a material impact on the Group’s financial position.
33.3 Subsidiary audit exemptions
The following UK subsidiary undertakings are exempt from the requirements of the UK Companies Act 2006, relating to the audit of individual
accounts by virtue of section 479A of the Act.
Name
Omega Acquisition Bidco Limited
TI Automotive Korean Won Hedgeco Ltd
TI Automotive Korean Won Hedgeco II Limited
TIFS Holdings Limited
TI Automotive Limited
TI Automotive Euro Holdings Limited
TI Automotive USA Holdings Limited
TI Group Automotive Systems Limited
TI Group Automotive Systems (Deeside) Limited
TI Automotive Holdings Limited
TI Automotive Czech Holdings (UK) Limited
TI Automotive German Holdings (UK) Limited
TI Group Automotive Systems (UK) Limited
TI Automotive (China) Limited
Hanil Tube Holdings Limited
TI Automotive Canada Holdings Limited
Omega Newco Sub I Limited
Omega Newco Sub II limited
TI Automotive Nominees Limited
TI Automotive Pension Plan Trustee Limited
Company Number
9402426
9855008
5633329
7060030
4097913
5265489
5265459
581742
3061637
4174232
6241709
6243326
784687
4081361
6258095
5546464
9402268
9402316
4234035
4310096
TI Fluid Systems plc will guarantee all outstanding liabilities that these subsidiaries are subject to as at 31 December 2022 in accordance with
section 479C of the UK Companies Act 2006, as amended by the Companies and Limited Liability Partnerships (Accounts and Audit Exemptions
and Change of Accounting Framework) Regulations 2012. In addition, TI Fluid Systems plc will guarantee any contingent and prospective
liabilities that these subsidiaries are subject to.
180180
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 34. Auditors’ Remuneration
Services provided by the Company’s Auditors and its associates
During the year, the Group obtained the following services from PricewaterhouseCoopers LLP, the Company’s Auditors:
Fees payable to the Company’s Auditor and its associates for the audit of the Parent Company and the Group financial statements
Fees payable to the Company’s Auditor and its associates for the audit of the Company’s subsidiaries
Other assurance services
Total
2022
€m
3.5
0.8
0.2
4.5
2021
€m
2.9
1.0
0.5
4.4
Other assurance services of €0.2 million (2021: €0.5 million) relate to the review of published half year interim reports, and in 2021 only,
refinancing activities.
35. Related Party Transactions
At 31 December 2022 there is no ultimate controlling party of TI Fluid Systems plc.
35.1. Transactions with Group Companies
Balances and transactions between Group companies have been eliminated on consolidation, and are not disclosed in this note except for
subsidiaries that are not wholly owned. Transactions with those companies are made on the Group’s standard terms of trade.
The Group holds 97% of the shares in Bundy India Ltd. At 31 December 2022, Bundy India Ltd had trade and loan receivables net of payables to
other Group undertakings amounting to €4.3 million (2021: €0.6 million net trade and loan payables) and made sales within the Group during the
year of €3.3 million (2021: €2.4 million).
35.2. Transactions with Related parties
Alfmeier Prazision SE is an existing supplier of the Group and was acquired by Gentherm Incorporated during the year, a company in which
Mr R Hundzinski is a director. For the period post acquisition of Alfmeier Prazision SE, now as a related party, the Group purchased goods
amounting to €4.9 million. These goods were purchased on an arm’s length basis.
During the year, Bain Capital, a significant shareholder of the Company, charged the Company €0.8 million (2021: €nil), which related to passed
through costs from a 3rd party provider.
36. Events After the Balance Sheet Date
There have been no events after the balance sheet date which require disclosure, or adjustment, to the Group’s year-end financial position.
181181
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance
37. Glossary of Terms
Adjusted Basic EPS
Adjusted Net Income divided by the weighted average number of shares in issue in the year.
Adjusted EBIT
Defined as Adjusted EBITDA less depreciation, amortisation and non-exceptional impairment on tangible and intangible assets net of
depreciation and amortisation on purchase price accounting.
Adjusted EBITDA
EBITDA adjusted for exceptional operating costs, net foreign exchange gains/(losses), net restructuring charges, associate share of profits or
losses, associate dividends received and the impact of any business acquisitions or disposals.
Adjusted Free Cash Flow
Free cash flow adjusted for cash movements in financial assets at fair value through the profit or loss, net cash flows relating to restructuring,
settlement of derivatives and the impact of any business acquisitions or disposals. The restructuring cash adjustment is made to align the
treatment of restructuring with the other adjusted measures.
Adjusted Net Income
Profit or loss for the year attributable to the ordinary shareholders before exceptional items adjusted to reflect associate dividends received and
eliminate the impact of net restructuring charges, foreign exchange gains or losses and the impact of any business acquisitions or disposals.
BEV
Battery Electric Vehicles.
CGU
Cash Generating Unit, being the management level of the Group, for example FCS North America.
Constant currency
The remeasurement of prior year results at current exchange rates to eliminate fluctuations in translation rates and achieve a like-for-like
comparison.
EBITDA
Profit or loss before tax, net finance expense, depreciation, amortisation and impairment of tangible and intangible assets, and associate share of
profits or losses.
EV
Electric Vehicles including BEV and HEV.
FCS
Fluid Carrying Systems, a division of the Group which supplies Brake and Fuel lines and Thermal products.
FHEV
Full Hybrid Electric vehicles, includes PHEV and self-charging HEV.
Free Cash Flow
The total of net cash generated from operating activities and net cash used by investing activities.
FTDS
Fuel Tanks and Delivery Systems, a division of the Group that supplies fuel tanks and fuel pumps and modules.
GLVP
Global Light Vehicle Production of light vehicles.
HEV
Hybrid Electric Vehicles, excluding mild hybrid vehicles.
ICE
Internal Combustion Engine vehicles.
LVP
Light Vehicle production used as a reference when referring to regional data.
182182
Notes to the Group Financial Statements ContinuedTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 MHEV
Mild Hybrid Electric Vehicles, which only have modest electrification.
Net debt
The total of current and non-current borrowings excluding lease liabilities, net of cash and cash equivalents and financial assets at fair value
through profit or loss.
Net leverage
Net debt divided by last 12 months’ Adjusted EBITDA.
OEM
Original Equipment Manufacturer, used to refer to vehicle manufacturers the main customers of the Group.
Operating profit margin
Operating profit expressed as a percentage of revenue.
PHEV
Plug in Hybrid Electric Vehicles.
Revenue outperformance
The growth in revenue at constant currency compared to the growth in global light vehicle production volumes.
SBTi
Science-Based Target Initiative which is used to refer to the climate change targets aligned to the Paris Agreement targets.
183183
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance Company Financial Statements
Company Balance Sheet
At 31 December
Non-current assets
Investments in subsidiaries
Current assets
Loans due from related parties
Trade and other receivables
Cash and cash equivalents
Total assets
Equity
Share capital
Share premium
Retained earnings
Total equity
Current liabilities
Trade and other payables
Loans due to related parties
Total liabilities
Total equity and liabilities
Note
4
5
6
7
7
8
9
2022
€m
922.1
922.1
1.3
0.2
0.9
2.4
924.5
6.8
2.2
890.7
899.7
2.4
22.4
24.8
24.8
924.5
2021
€m
912.5
912.5
16.3
0.3
7.3
23.9
936.4
6.8
2.2
886.7
895.7
0.9
39.8
40.7
40.7
936.4
As permitted by section 408 of the Companies Act 2006 the Company has elected not to present its own Income Statement for the year.
The profit for the year was €19.3 million (2021: €54.3 million).
The financial statements on pages 184–193 were authorised for issue by the Board of Directors on 15 March 2023 and were signed on its
behalf by:
Hans Dieltjens
Chief Executive Officer and President
Ron Hundzinski
Chief Financial Officer
184184
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Company Statement of Changes in Equity
For the year ended 31 December
Balance at 1 January 2022
Profit for the year
Total comprehensive income for the year
Share-based expense
Purchase of own shares
Issue of own shares from Employee Benefit Trust
Vested share awards
Dividends paid
Transactions with owners recognised directly in equity
Balance at 31 December 2022
Balance at 1 January 2021
Profit for the year
Total comprehensive income for the year
Share-based expense
Purchase of own shares
Issue of own shares from Employee Benefit Trust
Vested share awards
Dividend paid
Transactions with owners recognised directly in equity
Balance at 31 December 2021
Ordinary
shares
€m
6.8
Share
premium
€m
2.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.8
2.2
Ordinary
shares
€m
6.8
Share
premium
€m
2.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.8
2.2
Retained
earnings
€m
886.7
19.3
19.3
9.6
(11.4)
1.0
(1.9)
(12.6)
(15.3)
890.7
Retained
earnings
€m
878.7
54.3
54.3
6.8
(8.3)
1.1
(0.9)
(45.0)
(46.3)
886.7
Total
equity
€m
895.7
19.3
19.3
9.6
(11.4)
1.0
(1.9)
(12.6)
(15.3)
899.7
Total
equity
€m
887.7
54.3
54.3
6.8
(8.3)
1.1
(0.9)
(45.0)
(46.3)
895.7
185185
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance Notes to the Company Financial Statements
1. Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies
have been consistently applied to all the years presented, unless
otherwise stated.
1.1. Basis of Preparation
The financial statements of the Company have been prepared
in accordance with Financial Reporting Standard 101 ‘Reduced
Disclosure Framework’ and the UK Companies Act 2006.
Financial Reporting Standard 101 (‘FRS 101’) is a UK standard which
sets out a reduced disclosure framework for the financial reporting
requirements and disclosure exemptions of qualifying entities, which
otherwise apply the requirements of International Financial Reporting
Standards. The Company has prepared its financial statements
in accordance with FRS 101 to take advantage of the reduced
disclosures available as the Company meets the definition of a
qualifying entity.
Summary of disclosure exemptions
The following exemptions from the requirements of International
Financial Reporting Standards (‘IFRS’) have been applied in the
preparation of these financial statements in accordance with FRS 101:
• The following paragraphs of IAS 1 ‘Presentation of financial
statements’
− 10(d) (statement of cash flows)
− 10(f) (statement of financial position as at the beginning of the
preceding period)
− 16 (statement of compliance with all IFRS)
− 38A (requirement for minimum of two primary statements,
including cash flow statements)
− 38B–D (additional comparative information)
− 40A–D requirements for a third statement of financial position)
− 111 (cash flow statement information)
− 134–136 (capital management disclosures)
• Paragraph 38 of IAS 1 ‘Presentation of financial statements’
comparative information requirements in respect of paragraph 79
(a) (iv) of IAS 1 ‘Presentation of financial statements’
• IAS 7 ‘Statement of cash flows’
• Paragraphs 30 and 31 of IAS 8 ‘Accounting policies, changes in
accounting estimates and errors’ (requirement for the disclosure
of information when an entity has not applied a new IFRS that has
been issued but is not yet effective)
• IFRS 7 ‘Financial instruments: Disclosures’
• Paragraphs 17 and 18A of IAS 24 ‘Related party disclosures’ (key
management compensation)
• Paragraphs 91 to 99 of IFRS 13 ‘Fair value measurement’
(disclosure of valuation techniques and inputs used for fair value
measurement of assets and liabilities)
• The requirements in IAS 24 ‘Related party disclosures’ to disclose
related party transactions entered into between two or more
members of a group
The Company is eligible to apply the above exemptions as it is
included in the consolidated financial statements of TI Fluid Systems
plc who prepare financial statements under IFRS and include the
above disclosures. Where required, equivalent notes are given in the
consolidated financial statements of TI Fluid Systems plc.
The financial statements have been prepared under the historical
cost convention, except for financial assets and liabilities at fair value
through profit or loss (‘FVTPL’).
The preparation of financial statements in conformity with FRS 101
requires the use of estimates and assumptions that affect the reported
amounts of assets and liabilities and the reported amounts of revenue
and expenses during the reporting period. Although these estimates
are based on management’s reasonable knowledge of the amount,
event or actions, actual results may differ from those estimates.
1.1.1. Going Concern
After making enquiries, the Directors are of the opinion that the Group
has adequate resources to continue in operational existence for at
least 12 months from the date of approval of its financial statements.
The Company therefore continues to adopt the going concern basis in
preparing its financial statements. See Note 1.1.1 of the consolidated
financial statements for further information.
1.1.2. Functional and Presentation Currency
These financial statements are presented in Euro, which is the
Company’s functional currency. All financial information presented in
Euro has been rounded to the nearest 100,000 except where stated
otherwise.
1.2. Foreign Currencies
Transactions in foreign currencies are converted to the functional
currency at exchange rates at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies at the reporting
date are converted to the functional currency at the exchange rate at
that date. Non-monetary items that are measured at historical cost in
a foreign currency are converted using the exchange rate at the date of
the transaction.
All transactional foreign currency differences are included in the
Income Statement.
The average and year-end exchange rates for the Company’s principal
currencies are disclosed in the consolidated financial statements.
1.3. Investments in Subsidiaries
Subsidiaries are all entities (including structured entities) over which
the Company has control. The Company controls an entity when
the Company is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity.
Investments in subsidiaries are recorded in the Company’s Balance
Sheet at cost. The investments are subject to a periodic impairment
review, to identify the existence of any indicators of impairment.
Should indicators be identified, the carrying value is subject to an
impairment assessment with any resulting diminution of the carrying
value recognised in the Income Statement.
Acquisition-related costs are expensed as incurred in accordance with
IFRS 3 ‘Business Combinations’.
186186
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 1. Summary of Significant Accounting Policies
Continued
1.4. Financial Instruments
Financial assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets and financial liabilities, other than financial
assets and financial liabilities at ‘fair value through profit or loss’
(‘FVTPL’) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial
assets or financial liabilities at FVTPL are expensed as incurred.
1.4.1. Financial Assets
Financial assets are classified into ‘financial assets at amortised cost’
and ‘financial assets at FVTPL’. The classification is determined at the
time of initial recognition and depends on the Company’s business
model for managing the financial assets and whether the contractual
cash flows represent solely payments of principal and interest.
Financial assets at amortised cost
Assets that are held for collection of contractual cash flows, where
those cash flows represent solely payments of principal and interest,
are measured at amortised cost. Interest income from these financial
assets is included in finance income using the effective interest rate
method. Any gain or loss arising on derecognition is recognised
directly in profit or loss. The Company’s financial assets at amortised
cost comprise ‘loans due from related parties’, ‘other receivables’ and
‘cash and cash equivalents’.
Financial assets at FVTPL
A financial asset is classified in this category if it does not meet
the criteria for recognition as a financial asset at amortised cost.
Derivatives are classified in this category unless they are designated
as in hedging relationships.
Impairment of financial assets
The Company recognises a loss allowance for expected credit
losses (‘ECL’) on financial assets at amortised cost. The amount of
expected credit losses is updated at each reporting date to reflect
changes in credit risk since initial recognition of the respective
financial instrument.
For loans due from related parties, the Company recognises expected
credit losses that will result from all possible default events over the
expected life of a financial instrument ‘lifetime ECL’. The Company
also assesses on a forward-looking basis the expected credit losses
associated with the loans due from related parties.
For all other financial instruments, the Company recognises lifetime
ECL only when there has been a significant increase in credit risk
since initial recognition. If the credit risk on the financial instrument
has not increased significantly since initial recognition, the Company
measures the loss allowance for that financial instrument at an amount
equal to the portion of lifetime ECL that is expected to result from
default events on the financial instrument that are possible within 12
months after the reporting date.
In assessing whether the credit risk on a financial instrument has
increased significantly since initial recognition, the Company
compares the risk of a default occurring on the financial instrument at
the reporting date with the risk of a default occurring on the financial
instrument at the date of initial recognition. In making this assessment,
the Company considers an actual or expected significant deterioration
in the financial instrument’s external credit rating where available;
significant deterioration in external market indicators of credit risk for
a particular financial instrument e.g. a significant increase in the credit
spread or the credit default swap prices for the debtor, indications that
any debtor is experiencing significant financial difficulty, default or
delinquency in payments, an increase in the probability that any debtor
will enter bankruptcy, or other financial reorganisation, and where
observable data indicate that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
1.4.2. Financial Liabilities
Financial liabilities are classified as either ‘financial liabilities at
amortised cost’ or ‘financial liabilities at FVTPL’. Financial liabilities are
recognised initially on the date at which the Company becomes party
to the contractual provisions of the instrument.
Financial liabilities at amortised cost
The classification of financial liabilities at amortised cost is determined
at the time of initial recognition and depends on the Group’s business
model for managing the financial liabilities and whether the contractual
cash flows represent solely payments of principal and interest.
Liabilities at amortised cost, including ‘loans due to related parties’ and
trade and other payables, are measured using the effective interest
method, which calculates the amortised cost of a financial liability and
allocates interest expense over its term. The effective interest rate
discounts estimated cash payments (including all fees, transaction
costs and premiums) through the expected life of the financial liability,
to the net carrying amount on initial recognition.
Financial liabilities at FVTPL
A financial liability is classified in this category if it does not meet
the criteria for recognition as a financial liability at amortised cost.
Derivatives are classified in this category unless they are designated
as in hedging relationships.
1.5. Trade and Other Payables
Trade payables are obligations to pay for goods or services that have
been acquired in the ordinary course of business from suppliers.
Accrued expenses are recognised when ownership of goods or
services has been transferred but not invoiced. Trade and other
payables are recognised at amortised cost.
1.6. Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances and call deposits
with original maturities of three months or less.
1.7. Share Capital
Ordinary shares of the Company are classified as equity. Costs
directly attributable to the issue of ordinary shares and share options
are recognised in equity as a deduction, net of any tax effects from
the proceeds.
187187
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance Notes to the Company Financial Statements
Continued
2. Income Statement
As permitted by section 408 of the Companies Act 2006 the Company
has elected not to present its own Income Statement for the year. The
profit for the year was €19.3 million (2021: €54.3 million profit).
3. Directors’ Remuneration
The Company has no employees (2021: nil). Full information on
Directors’ remuneration is disclosed in the consolidated financial
statements. Non-Executive Director remuneration costs of €1.0
million (2021: €1.0 million) have been borne by the Company. All other
costs have been met by other subsidiaries of the Group.
1. Summary of Significant Accounting Policies
Continued
1.8. Taxation
The tax expense for the year comprises current and deferred tax. Tax
is recognised in the Income Statement, except to the extent that it
relates to items recognised in other comprehensive income and equity.
Current tax
Current tax is the expected tax payable or receivable on the taxable
profit or loss for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax payable in
respect of previous periods.
Deferred tax
Deferred income tax is measured using the tax rates and laws that
have been enacted or substantively enacted by the reporting date and
are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred tax liabilities are recognised for all taxable temporary
differences. Deferred tax assets are recognised for all deductible
temporary differences to the extent that it is probable that taxable
profits will be available against which those deductible temporary
differences can be utilised.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries and associates, except for deferred
income tax liabilities where the timing of the reversal of the temporary
difference is controlled by the Company and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred income tax assets and liabilities
relate to income taxes levied by the same taxation authority on either
the same taxable entity or different taxable entities where there is an
intention to settle the balances on a net basis.
1.9. Exceptional Items
Exceptional items are defined as those items that, by virtue of their
nature, size and expected frequency, warrant separate additional
disclosure in the financial statements in order to fully understand the
underlying performance of the Company.
1.10. Dividends
Receivable
Dividends from investments of the Company and dividends receivable
by the Company are recognised when the right to receive payment
is established.
Payable
Dividends payable to the Company’s shareholders are recognised
in the Statement of Changes in Equity in the period in which they
are approved.
188188
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 4. Investments in Subsidiaries
At 1 January
Share-based expense
At 31 December
2022
€m
912.5
9.6
922.1
2021
€m
905.7
6.8
912.5
Investments in subsidiary undertakings are recorded at cost, which was the fair value of the consideration paid. We have considered the carrying
value of investment in subsidiaries for potential impairment, given the recent quoted share price and market capitalisation of the Company. The
market capitalisation of the Company has been impacted by share price volatility over the last twelve months. The assessment for the Company
is based on fair value less cost of disposal of the businesses (as estimated in the Group impairment assessment) which, after adjusting for net
debt, results in a recoverable amount that exceeded the carrying value of the investment. Therefore, no impairment charge is recognised in
the Company.
The grant by the Company of share-based awards over its equity instruments to the employees of subsidiary undertakings in the Group is treated
as a capital contribution. The fair value of employee services received in the year of €9.6 million (2021: €6.8 million) measured by reference to the
grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to
equity. Refer to Note 10 of the consolidated financial statements for more information.
The Company’s subsidiary undertakings, including its operating and non-operating subsidiaries, are as follows:
Ownership
interest and
voting rights held
2022
Country of
incorporation
Ownership
interest and
voting rights held
2021 Address of registered office
Americas
TI Group Automotive Systems LLC*
TI Automotive LLC*
Hanil USA LLC*
Hutchings International Enterprises Inc. (Dormant)
Omega Newco Sub Inc.*
TI Automotive Ligonier Corporation*
TI Automotive Canada Inc.*
TI Group Automotive Systems S de RL de CV
US
US
US
US
US
US
Canada
Mexico
100%
100%
100%
100%
100%
100%
100%
100%
TI Automotive Reynosa S de RL de CV
Mexico
100%
TI-Hanil Mexico S de RL de CV
Mexico
100%
100% 2020 Taylor Road, Auburn Hills, MI 48326
100% 2020 Taylor Road, Auburn Hills, MI 48326
100% 50 Hanil Drive, Tallassee, Alabama, 36078
100% 2020 Taylor Road, Auburn Hills, MI 48326
100% 1209 Orange Street, City of Wilmington, New Castle 19801
100% 925 North Main Street, Ligonier, IN 46767
100% 316 Orenda Road, Bramalea, Ontario, Canada, L6T 1G3
100% Mike Allen S/N, Parque Industrial Reynosa – Seccion
Norte, Reynosa, Tamaulipas, Mexico 88780
100% Mike Allen S/N, Parque Industrial Reynosa – Seccion
Norte, Reynosa, Tamaulipas, Mexico 88780
100% Mike Allen S/N, Parque Industrial Reynosa – Seccion
Norte, Reynosa, Tamaulipas, Mexico 88780
Fabricaciones Electromecanicas SA de CV
(Dormant)
Mexico
100%
100% Via Jose Lopez Portillo 8-A, Tultitlan, Estado de Mexico,
Mexico 54940
Marwal de Mexico SA de CV
Mexico
100%
100% Via Jose Lopez Portillo 8-A, Tultitlan, Estado de Mexico,
Mexico 54940
TI Brasil Industria e Comercio Ltda
Brazil
100%
100% Rodovia Presidente Dutra, Km 145,7 Sao Jose dos
Campos, SP-Brasil CEP 12220-611
Bundy Colombia SAS
Colombia
100%
100% Carrera 13A No 6-98 Parque Industrial Montana,
Mosquero, Cundinamarca, 34225
TI Automotive Argentina SA
Argentina
100%
100% Uruguay 4351, Victoria, San Fernando, Buenos Aires,
Argentina, B1644 HKO
Europe and Africa
Omega Acquisition Bidco Ltd*
TI Automotive Korean Won Hedgco Ltd*
TI Automotive Korean Won Hedgco II Ltd*
Omega Newco Sub I Ltd (Dormant)**
Omega Newco Sub II Ltd (Dormant)**
TIFS Holdings Ltd*
UK
UK
UK
UK
UK
UK
100%
100%
100%
100%
100%
100%
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
189189
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance
Notes to the Company Financial Statements
Continued
4. Investments in Subsidiaries Continued
Ownership
interest and
voting rights held
2022
Country of
incorporation
TI Automotive Ltd*
TI Automotive Holdings Ltd*
TI Automotive Euro Holdings Ltd*
TI Automotive USA Holdings Ltd*
TI Group Automotive Systems Ltd*
TI Group Automotive Systems (Deeside) Ltd*
TI Group Automotive Systems (UK) Ltd*
TI Automotive Canada Holdings Ltd*
TI Automotive (China) Ltd*
TI Automotive Czech Holdings (UK) Ltd
TI Automotive German Holdings (UK) Ltd*
Hanil Tube Holdings Ltd
TI Automotive Finance plc*
TI Automotive Nominees Ltd (Liquidated)
TI Automotive Pension Plan Trustee Ltd
(Dormant)**
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
TI Group Automotive Systems (Belgium) SA*
Belgium
TI Automotive AC sro
TI Group Automotive Systems sro
TI Automotive France Holdings SAS
Czech Republic
Czech Republic
France
Ownership
interest and
voting rights held
2021 Address of registered office
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100%
100%
100%
100%
100%
100% 4650 Kingsgate, Cascade Way, Oxford Business Park
South, Oxford OX4 2SU
100% Rue Wérihet 61, B-4020 Wandre (Liège)
100% Belgická 4727/17, Rýnovice, 466 05 Jablonec nad Nisou
100% Belgická 4727/17, Rýnovice, 466 05 Jablonec nad Nisou
100% 1, avenue Ampère, Zone Industrielle, 51000 Châlons-en
Champagne, France
TI Automotive Fuel Systems SAS
France
100%
100% 1, avenue Ampère, Zone Industrielle, 51000 Châlons-en
TI Group Automotive Systems SAS
TI Automotive Holdings GmbH*
TI Automotive (Ettlingen) GmbH*
TI Automotive (Fuldabruck) GmbH*
TI Automotive (Heidelberg) GmbH*
TI Automotive Systems Germany GmbH*
TI Automotive Engineering Centre (Heidelberg)
GmbH*
TI Automotive Technology Center GmbH*
TI Automotive (Hungary) Kft
TI Automotive Italia Holdings Srl
TI Automotive Cisliano Srl
TI Automotive Brindisi Srl
TI Group Automotive Systems SpA
TI Poland sp.zo.o*
LLC TI Automotive
Hanil RUS LLC
190190
France
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Hungary
Italy
Italy
Italy
Italy
Poland
Russia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Russia
100%
Champagne, France
100% Z.I. Bld de l’industrie 37530 Nazelles-Negron, France
100% Dischingerstr. 11, 69123 Heidelberg
100% Hertzstrasse 24-30, 76275 Ettlingen
100% Industriestrasse 3, 34277 Fuldabruck
100% Dischingerstr. 11, 69123 Heidelberg
100% Dischingerstr. 11, 69123 Heidelberg
100% Dischingerstr. 11, 69123 Heidelberg
100% Lochfeldstraße 31, 76437 Rastatt
100% H-9027, Györ, Körtefa utca, 6.ép
100% Via Mosè Bianchi, 71-20149 Milano
100% Via Abbiategrasso, 20080 Cisliano (MI)
100% Via Pinan, 2-16012 Busalla (GE)
100% Via Pinan, 2-16012 Busalla (GE)
100% Bestwin´ska 143 a, Bielsko-Biala, 43-346, Poland
100% Russian Federation 188643, Leningradskaya region,
Vsevolozhsk, Vsevolozhskiy prospect, 113
100% Russian Federation 188643, Leningradskaya region,
Vsevolozhsk, Vsevolozhskiy prospect, 113
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 4. Investments in Subsidiaries Continued
Ownership
interest and
voting rights held
2022
Country of
incorporation
Ownership
interest and
voting rights held
2021 Address of registered office
TI-Hanil Slovakia s.r.o.
Slovakia
100%
100% Krásno nad Kysucou 2203, 023 02 Krásno nad Kysucou,
TI Automotive Slovakia s.r.o (Liquidated)
TI Automotive proizvodnja avtomobilskih delov,
d.o.o.
Slovakia
Slovenia
–
100%
100% Prilohy 46, Zavar, Slovakia, 91926
100% Belokranjska cesta 4, 8000 Novo mesto
Slovakia
TI Automotive Morocco Sarl
Morocco
100%
100% Zone Franche D’Exportation, Ilot 62, lot 2, PL1, 90090,
Morocco
South Africa
–
100%
Tangier, Morocco
100% Tangier Automotive City, Lot 111 -11bis, Tangier, Morocco
100% 62 Palmgate Crescent, Southgate Business Park,
Umbogintwini, 4026, South Africa
South Africa
100%
100% EW1 Building Zone 1A, Mdubu Road, Sunnyridge, East
TI Automotive Thermal Morocco Sarl***
TI Group Automotive Systems (South Africa) (Pty)
Ltd
TI Automotive Fuel Systems (South Africa) (Pty)
Ltd
TI Automotive Pamplona SL
TI Group Automotive Systems SA
TI Group Automotive Systems Spain Holdings S.L.
TI Group Automotive Systems AB
TI Otomotiv Sanayi ve Ticaret Ltd
Asia Pacific
Bundy Fluid Systems Co Ltd
Bundy Fluid Systems (Chongqing) Co Ltd
Bundy Fluid Systems (Shanghai) Co Ltd
TI Automotive (Tianjin) Co Ltd
TI Automotive Systems (Changchun) Co Ltd
TI Automotive Systems (Shanghai) Co Ltd
TI Fluid Systems (Chengdu) Ltd
Spain
Spain
Spain
Sweden
Turkey
China
China
China
China
China
China
China
Wuhan Bundy Fluid Systems Co Ltd
TI Automotive (Hong Kong) Holdings Ltd
China
Hong Kong
Bundy India Ltd
Hanil Tube India Private Ltd
India
India
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
97%
100%
London 5208, South Africa
100% Polígono Industrial Comarca 1, calle E, s/n. 31195
Berrioplano (Navarra), Spain
100% Carretera. San Adrián-La Roca, Km. 15,9, 08170
Montornés del Valles, Barcelona, Spain
100% Carretera. San Adrián-La Roca, Km. 15,9, 08170
Montornés del Valles, Barcelona, Spain
100% PO Box 904, 531 19 Lidkoping, Sweden
100% Nosab Sedir Cad. 203. Sok. No: 6 16140 Nilüfer Bursa
100% No. 57 Longhai Road ETDZ, Qinhuangdao City
100% Building C1, Zone C, Number 5 Workshop, Standard
Workshop Project Phase 1, Huachao Industrial Park,
Cuiyun Road, Northern New District, Chongqing
100% 34 Bundy Workshop, 409 Hua Jing Road, Waigaoqiao FTZ,
Shanghai
100% No.6 Xiang‘an Road, TEDA Tianjin
100% 2599 Zi Bo Rd., Economic Technological Development
Zone, Changchun
100% Bld 1, Bld 2, No 100 Yin Long Road, Jiading District,
Shanghai
100% No 1 Building, Aerospace Sega Science & Technology
Industrial Park, No 889 Wenbai Avenue, Baihe Subdistrict,
Economic & Technological Development Zone
(Longquanyi District), Chengdu, Sichuan
100% Wuhan Economic & Technological Development Zone
100% Suite 1B, 8/F., Sino Plaza, 255-257 Gloucester Road,
Causeway Bay, Hong Kong
97% Plot 2 GIDC Industrial Estate, Makarpura, Baroda, 390010,
India
100% B-75, SIPCOT Industrial Area, Chennai 600-058, Tamu
Nadu
PT TI Automotive Indonesia
Indonesia
100%
100% Jl. Cempaka Raya km.37, Jatimulya, Bekasi, Tambun
Selatan, Jawa Barat
TI Automotive Japan Ltd
Japan
100%
100% 3-29-1 Tsuruya-Cho, Kanagawa-ku, Yokohama-city,
Hanil Tube Corporation
TI Automotive Ltd (Korea)
TI Automotive (Thailand) Ltd
South Korea
South Korea
Thailand
100%
100%
100%
Kanagawa Pref, Japan, 221-0835
100% 17, Wonjeon-ro, Seo-gu, Incheon, Korea 22744
100% 708, Baeksuk-Dong, Cheonan City, Chungnam, 330220
100% 700/652 Moo 1, Amata Nakorn Industrial Estate, Tambon
PanThong, Amphur PhanThong, Chonburi, Thailand, 20160
TI Automotive ROH (Thailand) Ltd
Thailand
100%
100% 700/652 Moo 1, Amata Nakorn Industrial Estate, Tambon
PanThong, Amphur PhanThong, Chonburi, Thailand, 20160
* Companies identified by an asterisk, together with certain other smaller subsidiaries, are guarantors to the 2015 term loan agreements of TI Group Automotive Systems LLC.
** Companies that are dormant in the UK and are exempt from preparing individual financial statements by virtue of section 394A of Companies Act 2006.
*** The Company merged with TI Automotive Morocco Sarl.
All companies above are incorporated and unless dormant, operate principally in the country indicated. All companies operate in the global
automotive component supply sector. Omega Acquisition Bidco Ltd is the only immediate subsidiary of the Company.
191191
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance Notes to the Company Financial Statements
Continued
5. Loans Due from Related Parties
Loans due from related parties
2022
€m
1.3
2021
€m
16.3
Loans due from a related party at 31 December 2022 comprised one amount drawn against a Euro-denominated intercompany facility
agreement with a subsidiary undertaking totalling €1.3 million (2021: €16.3 million). The loan is repayable in full on demand and bears interest at a
fixed rate of 4.14% (2021: loans bearing interest at rates from 3.73% to 4.14%) according to the agreed facility.
6. Trade and Other Receivables
Other receivables
2022
€m
0.2
The Company has paid directly certain PAYE obligations of the CEO and CFO, which are recoverable in full. Details are disclosed in the
Remuneration Report. See pages 90–105.
7. Issued Share Capital
Authorised, issued and fully paid-up
At 31 December 2021
At 31 December 2022
Number of
shares
Nominal value
of each share
520,269,141
520,269,141
£0.01
£0.01
Ordinary
shares
£m
5.2
5.2
Ordinary
shares
€m
6.8
6.8
Share
premium
€m
2.2
2.2
2021
€m
0.3
Total
€m
9.0
9.0
The Company holds shares in the TI Fluid Systems Employee Benefit Trust (‘EBT’) for the purpose of satisfying awards made to employees
under the TI Fluid Systems plc Long-Term Incentive Plan and Deferred Bonus Plan. Such shares are purchased on the open market and shown
as a deduction to equity in the Statement of Changes in Equity until utilised, without further adjustments to their carrying value. They are released
to satisfy the awards of equity-settled payments to employees on a first-in first-out basis. Shares held in the EBT are not treated as outstanding
for the purposes of calculating earnings per share and do not ordinarily rank for dividend.
The movements in ordinary shares held by the EBT in the current and prior year were as follows:
At 1 January 2021
Release to satisfy Deferred Bonus Plan
Release to satisfy vested conditional share awards
Market purchase
At 31 December 2021
Release to satisfy vested conditional share awards
Market purchase
At 31 December 2022
Number of
shares
1,499,907
(333,427)
(197,603)
2,962,296
3,931,173
(462,291)
4,209,646
7,678,528
The Company is a public limited company which is incorporated and domiciled in England and Wales, with registered number 09402231.
8. Trade and Other Payables
Trade payables
Other payables
Accrued expenses
Total trade and other payables
2022
€m
1.0
1.1
0.3
2.4
€m
3.3
(0.7)
(0.4)
8.3
10.5
(1.0)
11.4
20.9
2021
€m
–
0.4
0.5
0.9
During the year, Bain Capital, a significant shareholder of the Company, charged the Company €0.8 million (2021: €nil) included within other
payables above, which related to passed through costs from a 3rd party provider.
192192
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 9. Loans Due to Related Parties
Loans due to related parties
2022
€m
22.4
2021
€m
39.8
Loans due to related parties at 31 December 2022 included €nil drawn against Euro-denominated intercompany facility agreements with
subsidiary undertakings (2021: €24.1 million). In the prior year the loans were repayable in full on demand and therefore have been classified as
currently payable. They bore interest at six-month EURIBOR plus a margin between 2.75% and 4.25%.
Additionally, at the year end, a subsidiary undertaking of the Company had loaned funds of €22.4 million to the Company’s Employee Benefit
Trust (EBT) (2021: €15.7 million), which is consolidated in accordance with Note 1.2 of the consolidated financial statements.
10. Contingent Liabilities
The following UK subsidiary undertakings are exempt from the requirements of the UK Companies Act 2006, relating to the audit of individual
accounts by virtue of section 479A of the Act.
Name
Omega Acquisition Bidco Limited
TI Automotive Korean Won Hedgeco Ltd
TI Automotive Korean Won Hedgeco II Limited
TIFS Holdings Limited
TI Automotive Limited
TI Automotive Euro Holdings Limited
TI Automotive USA Holdings Limited
TI Group Automotive Systems Limited
TI Group Automotive Systems (Deeside) Limited
TI Automotive Holdings Limited
TI Automotive Czech Holdings (UK) Limited
TI Automotive German Holdings (UK) Limited
TI Group Automotive Systems (UK) Limited
TI Automotive (China) Limited
Hanil Tube Holdings Limited
TI Automotive Canada Holdings Limited
Omega Newco Sub I Limited
Omega Newco Sub II limited
TI Automotive Nominees Limited
TI Automotive Pension Plan Trustee Limited
Company Number
9402426
9855008
5633329
7060030
4097913
5265489
5265459
581742
3061637
4174232
6241709
6243326
784687
4081361
6258095
5546464
9402268
9402316
4234035
4310096
TI Fluid Systems plc will guarantee all outstanding liabilities that these subsidiaries are subject to as at 31 December 2022 in accordance with
section 479C of the UK Companies Act 2006, as amended by the Companies and Limited Liability Partnerships (Accounts and Audit Exemptions
and Change of Accounting Framework) Regulations 2012. In addition, TI Fluid Systems plc will guarantee any contingent and prospective
liabilities that these subsidiaries are subject to.
11. Events After the Balance Sheet Date
There have been no events after the balance sheet date which require disclosure, or adjustment, to the Company’s year end financial position.
193193
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance Group Financial Record
Consolidated Income Statement
For the year ended 31 December
Revenue
Cost of sales
Exceptional items
Gross profit
Distribution costs
Administrative expenses before exceptional items
Exceptional items
Administrative expenses after exceptional items
Other income
Net foreign exchange (losses)/gains
Operating (loss)/profit
Finance income
Finance expense before exceptional items
Exceptional items
Finance expense after exceptional items
Net finance expense after exceptional items
Share of (loss)/profit of associates
(Loss)/profit before income tax
Income tax expense before exceptional items
Exceptional items
Income tax (expense)/credit after exceptional items
(Loss)/profit for the year
(Loss)/profit for the year attributable to:
Owners of the Parent Company
Non-controlling interests
2022
€m
3,268.3
(2,938.0)
2021
€m
2,956.6
(2,626.8)
Unaudited
2020
€m
2,814.5
(2,493.1)
2019
€m
3,411.1
(2,922.7)
(100.3)
230.0
(112.1)
(119.0)
(217.1)
(336.1)
1.9
(0.7)
(217.0)
5.7
(64.4)
–
(64.4)
(58.7)
–
(275.7)
(23.4)
20.1
(3.3)
(279.0)
(279.1)
0.1
(279.0)
–
329.8
(93.9)
(105.8)
–
(105.8)
3.6
(6.9)
126.8
3.1
(63.1)
(11.8)
(74.9)
(71.8)
(0.9)
54.1
(40.9)
2.8
(38.1)
16.0
14.3
1.7
16.0
(120.4)
201.0
(83.7)
(145.1)
(184.2)
(329.3)
8.5
27.2
(176.3)
3.5
(77.5)
–
(77.5)
(74.0)
(3.5)
(253.8)
(28.1)
29.7
1.6
(252.2)
(254.1)
1.9
(252.2)
–
488.4
(95.0)
(141.7)
–
(141.7)
6.7
0.5
258.9
15.0
(72.5)
–
(72.5)
(57.5)
0.3
201.7
(57.1)
–
(57.1)
144.6
141.6
3.0
144.6
2018
€m
3,472.8
(2,938.2)
–
534.6
(102.4)
(164.5)
–
(164.5)
12.2
1.2
281.1
14.3
(67.0)
(11.8)
(78.8)
(64.5)
0.5
217.1
(77.0)
–
(77.0)
140.1
137.8
2.3
140.1
194194
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Group Financial Record
Consolidated Balance Sheet
At 31 December
Non-current assets
Intangible assets
Right-of-use assets
Property, plant and equipment
Investments in associates
Derivative financial instruments
Deferred income tax assets
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Current income tax assets
Derivative financial instruments
Financial assets at fair value through profit or loss
Cash and cash equivalents
Total assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Equity attributable to owners of the Parent Company
Non-controlling interests
Total equity
Non-current liabilities
Trade and other payables
Borrowings
Lease liabilities
Derivative financial instruments
Deferred income tax liabilities
Retirement benefit obligations
Provisions
Current liabilities
Trade and other payables
Current income tax liabilities
Borrowings
Lease liabilities
Derivative financial instruments
Provisions
Total liabilities
Total equity and liabilities
2022
€m
603.9
109.3
531.4
–
–
105.2
20.6
1,370.4
372.0
541.9
7.9
2.8
–
491.0
1,415.6
2,786.0
6.8
2.2
(55.4)
722.6
676.2
0.5
676.7
12.8
1,114.0
121.5
–
80.7
104.2
2.6
Unaudited
2020
€m
883.8
124.9
590.8
14.6
–
62.4
18.9
2021
€m
884.8
125.2
595.4
–
–
70.5
19.2
2019
€m
1,182.2
161.4
715.0
19.2
–
25.1
21.6
2018
€m
1,229.8
–
706.5
19.6
5.4
34.9
14.8
1,695.1
1,695.4
2,124.5
2,011.0
332.3
520.5
11.4
0.9
0.9
499.1
1,365.1
3,060.2
6.8
2.2
(61.4)
995.9
943.5
0.4
943.9
14.6
1,098.5
119.8
–
95.8
128.1
2.6
351.4
534.8
13.7
0.4
0.9
485.8
1,387.0
3,082.4
6.8
2.2
(137.7)
987.7
859.0
25.2
884.2
20.0
1,069.3
122.4
–
104.3
160.7
4.9
367.1
574.5
13.7
18.4
0.9
411.7
1,386.3
3,510.8
6.8
2.2
352.8
578.3
4.4
8.5
1.2
360.1
1,305.3
3,316.3
6.8
1.4
(106.1)
(126.3)
1,261.7
1,164.6
24.5
1,189.1
12.3
1,148.5
138.0
–
128.5
153.7
5.0
1,175.7
1,057.6
22.5
1,080.1
17.1
1,179.3
–
45.3
141.6
148.2
4.9
1,435.8
1,459.4
1,481.6
1,586.0
1,536.4
584.8
546.1
44.5
1.9
28.1
0.2
14.0
673.5
2,109.3
2,786.0
49.9
1.8
30.1
0.3
28.7
656.9
2,116.3
3,060.2
614.1
40.7
7.4
28.6
0.2
25.6
716.6
2,198.2
3,082.4
611.2
48.7
2.4
28.7
25.4
19.3
735.7
2,321.7
3,510.8
608.4
60.2
4.4
–
2.8
24.0
699.8
2,236.2
3,316.3
The consolidated financial record presents the financial results for those businesses that were part of the Group for the years ended
31 December 2018 to 31 December 2022 inclusive.
195195
OverviewStrategicGovernanceFinancialTI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022FinancialOverviewStrategicGovernance Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Shareview for shareholders
0371-384-2030 (UK)
+44 (0)121-415-7047 (Overseas)
www.shareview.co.uk
Corporate calendar
Announcement of Final Results
16 March 2023
Annual General Meeting
16 May 2023
Announcement of Interim Results
8 August 2023
Shareholder information
Independent Auditors
PricewaterhouseCoopers LLP
One Chamberlain Square
Birmingham B3 3AX
www.pwc.co.uk
Bankers
BNP Paribas
10 Harewood Avenue
London NW1 6AA
www.bnpparibas.co.uk
Legal advisers to the Company
Latham & Watkins (London) LLP
99 Bishopsgate
London EC2M 3XF
www.lw.com
Joint corporate brokers
Goldman Sachs International
Plumtree Court
25 Shoe Lane
London EC4A 4AU
www.goldmansachs.com
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
www.jpmorgan.com
Peel Hunt LLP
100 Liverpool Street
London EC2M 2AT
www.peelhunt.com
Company registered number
09402231
Directors
Tim Cobbold
Independent Non-Executive Chairman
Hans Dieltjens
Chief Executive Officer and President
Ron Hundzinski
Chief Financial Officer
Julie Baddeley
Independent Non-Executive Director
Jane Lodge
Independent Non-Executive Director
Susan Levine
Non-Executive Director
Elaine Sarsynski
Independent Non-Executive Director
Trudy Schoolenberg
Independent Non-Executive Director
John Smith
Independent Non-Executive Director
Stephen Thomas
Non-Executive Director
Company Secretary
Matthew Paroly
Registered office
4650 Kingsgate
Cascade Way
Oxford Business Park South
Oxford OX4 2SU
United Kingdom
www.tifluidsystems.com
Corporate offices
2020 Taylor Road
Auburn Hills
Michigan 48326
United States of America
196196
TI Fluid Systems plc | Annual Report & Accounts 2022TI Fluid Systems plc | Annual Report & Accounts 2022 Cautionary statement regarding
forward-looking statements
This Annual Report contains certain
forward-looking statements with respect to
the financial condition, results of operations
and business of TI Fluid Systems plc (the
‘Company’). The words ‘believe’, ‘expect’,
‘anticipate’, ‘intend’, ‘estimate’, ‘forecast’,
‘project’, ‘will’, ‘may’, ‘should’ and similar
expressions identify forward-looking
statements. Others can be identified
from the context in which they are made.
By their nature, forward-looking statements
involve risks and uncertainties, and such
forward-looking statements are made
only as of the date of this Annual Report.
Accordingly, no assurance can be given that
the forward-looking statements will prove
to be accurate and you are cautioned not
to place undue reliance on forward-looking
statements due to the inherent uncertainty
therein. Past performance of the Company
cannot be relied on as a guide to future
performance. Nothing in this Annual Report
should be construed as a profit forecast.
The paper used in this report is
elemental chlorine free and is FSC®
certified. It is printed to ISO 14001
environmental procedures.
The Forest Stewardship Council® (FSC®)
is an international network which promotes
responsible management of the world’s
forests. Forest certification is combined with
a system of product labelling that allows
consumers to readily identify timber-based
products from certified sources.
The material in this Report has been
Carbon balanced.
Two projects are supported via Carbon
Footprint Ltd. Firstly, a tree planting scheme
in the UK, which supports a programme of
replanting to offset carbon use. Also, a project
to support biodiversity within the Amazon,
called the Portel-Pará REDD project, which
is working to prevent unplanned deforestation
in native forests, which has occurred due to
logging, squatting and attempts to implement
pastures. The project is expected to avoid
over 22 million tonnes of carbon dioxide
equivalent greenhouse gas emissions over
a 40-year period. This will be achieved by
managing the land in the form of a ‘private
conservation reserve’, through rigorous
monitoring and enforcement.
The production of this report supports the work of the
Woodland Trust, the UK’s leading woodland conservation
charity. Each tree planted will grow into a vital carbon store,
helping to reduce environmental impact as well as creating
natural havens for wildlife and people.
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TI Fluid Systems, Corporate Offices
2020 Taylor Road
Auburn Hills
Michigan 48326
United States of America
Tel: +1 248 296 8000
TI Fluid Systems plc, Registered Office
4650 Kingsgate
Cascade Way
Oxford Business Park South
Oxford OX4 2SU
United Kingdom
Tel: +44 (0) 1865 871820
www.tifluidsystems.com
Incorporated and domiciled in England and Wales
Registered number 09402231