SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the Month of February 2021

Commission File Number: 001-32294

 

 

 

TATA MOTORS LIMITED

(Translation of registrant’s name into English)

 

 

BOMBAY HOUSE

24, HOMI MODY STREET,

MUMBAI 400 001, MAHARASHTRA, INDIA

Telephone # 91 22 6665 8282 Fax # 91 22 6665 7799

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes  ☐            No  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes  ☐            No  ☒

Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes  ☐            No  ☒

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g 3-2(b): Not Applicable

 

 

 

TABLE OF CONTENTS

 

Item 1:     2021FY Q3 Interim Financial Statements

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.

 

Tata Motors Limited
By:		/s/ Hoshang K Sethna
Name:		Hoshang K Sethna
Title:		Company Secretary

Dated: February 1, 2021

    

Jaguar Land Rover Automotive plc
Interim Report
For the three and nine month period ended
31 December 2020
Company registered number: 06477691

Contents

 

Management’s discussion and analysis of financial condition and results of operations			7
Key metrics/highlights for Q3 FY21 results			7
Market environment			7
Total automotive industry car volumes			7
Jaguar Land Rover Q3 FY21 sales volumes year-on-year performance			7
Q3 FY21 revenue and profits			8
Cash flow, liquidity and capital resources			9
Debt			9
Risks and mitigating factors			10
Acquisitions and disposals			10
Off-balance sheet financial arrangements			10
Post balance sheet items			10
Related party transactions			10
Personnel			10
Board of directors			10
Condensed consolidated financial statements
Income statement			11
Statement of comprehensive income and expense			12
Balance sheet			13
Statement of changes in equity			14
Cash flow statement			15
Notes			16

Group, Company, Jaguar Land Rover, JLR plc and JLR refers to Jaguar Land Rover Automotive plc and its subsidiaries. Note 3 on page 13 defines a series of alternative performance measures below.

 

Adjusted EBITDA margin		measured as adjusted EBITDA as a percentage of revenue.
Adjusted EBIT margin		measured as adjusted EBIT as a percentage of revenue.
PBT		Profit/(loss) before tax.
PAT		Profit/(loss) after tax.
Net debt/cash		defined by the Company as cash and cash equivalents plus short-term deposits and other investments less total balance sheet borrowings.
Q3 FY21		3 months ended 31 December 2020
Q3 FY20		3 months ended 31 December 2019
Q2 FY21		3 months ended 30 September 2020
Q2 FY20		3 months ended 30 September 2019
YTD FY21		9 months ended 31 December 2020
YTD FY20		9 months ended 31 December 2019
China JV		Chery Jaguar Land Rover Automotive Co., Ltd.

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

Jaguar Land Rover Automotive plc generated strong profits and free cash flow in the third quarter of Fiscal 2020/21 as sales continued to recover quarter-on-quarter. Sales volumes and revenue were down year-on-year as a result of the ongoing impact of Covid-19. Profitability was significantly improved, primarily reflecting favourable sales mix, costs and certain reserve reversals including emissions and residual values in the US.

Key metrics for Q3 FY21 results, compared to Q2 FY21 and Q3 FY20, are as follows:

 

•

Retail sales 128,469 vehicles, up 13.1% quarter-on-quarter but 9.0% lower than pre-Covid levels a year ago (although China sales were up 19.1% year-on-year)

 

•

Wholesales (excl. China JV) of 102,580 vehicles, up 39.7% quarter-on-quarter but 21.1% lower than pre-Covid levels a year ago

 

•

Revenue of £6.0 billion, up 37.5% quarter-on-quarter, while down 6.5% year-on-year

 

•

PBT of £439 million, substantially higher than the PBT of £65 million in Q2 FY21 and £318 million in Q3 last year

 

•

Profit after tax (PAT) of £351 million (incl. £88 million tax charge), up from the £117 million in Q2 FY21 and similar to the £372 million (incl. £54 million tax credit) in Q3 FY20

 

•

Adjusted EBITDA margin 15.8%, compared to 11.1% in the prior quarter and 10.2% in Q3 last year

 

•

Adjusted EBIT margin 6.7%, up significantly compared to the 0.3% margin in Q2 FY21 and 2.7% in Q3 FY20

 

•

Positive free cash flow of £562 million was a Q3 record, following on from the positive free cash flow of £463 million in the prior quarter and significantly better than the break-even cash flow in Q3 FY20

 

•

Cash and short-term investments increased to £4.5 billion as a result of the positive free cash flow and $1.35 billion of 5 and 7 year debt issued in Q3. Total liquidity was £6.4 billion including a £1.9 billion undrawn credit facility

Market environment

 

•

New waves of Covid-19 have driven the reintroduction of more stringent restrictions, notably in the UK and in Europe. However, vaccination programmes are now being rolled out in many countries over the coming months following the respective approval of various vaccines

 

•

The UK and EU struck a post-Brexit trade agreement in late December which will avoid tariffs on the sale of automotive parts and finished vehicles between the EU and UK, subject to meeting rules of origin requirements. New documentation and customs processes have created short-term administrative frictions in the supply chain, which we are monitoring closely together with other Covid related supplier risks, which has the potential to impact production.

 

•

Financial markets have continued to rally, most recently on news of Covid-19 vaccines approved for use in many countries, the Brexit trade deal and a new US president.

 

•

In Q3 FY21 passenger car industry volumes continued to recover quarter-on-quarter in China and the US but declined in the UK and Europe as a result of stricter social distancing measures being re-introduced. With the exception of China, car industry sales volumes remain below pre-Covid levels of a year ago. The demand and sales of electrified vehicles (full battery electric (“BEV”), plug-in hybrids (“PHEV’”) and mild-hybrids (“MHEV”) continues to grow.

Total automotive industry car volumes (units)

 

Region		Q3 FY21				Q2 FY21				Qtr on Qtr				Q3 FY20				Year on year
China			6,782,000				5,508,000				23.1	%			6,198,000				9.4	%
Europe (excl. UK)			3,003,805				2,876,028				4.4	%			3,238,722				(7.3	%)
UK			387,408				590,154				(34.4	%)			448,869				(13.7	%)
US			4,193,326				3,898,750				7.6	%			4,299,864				(2.5	%)

The total industry car volume data above has been compiled using relevant data available at the time of publishing this Interim Report, compiled from national automotive associations such as the Society of Motor Manufacturers and Traders in the UK and the ACEA in Europe, according to their segment definitions, which may differ from those used by JLR.

Jaguar Land Rover Q3 FY21 sales volumes performance

Total retail sales (including the China JV) were 128,469 units, up 13.1% quarter-on-quarter as the recovery across most regions continued including in North America (up 31.7%), Overseas markets (up 26.6%), Europe (up 20.5%) and China (20.2%) with sales in the UK down 23.0% reflecting market seasonality. Demand for electrified vehicles continues to gather pace and 53% of our retail in the third quarter were electrified (6.1% BEV, 5.5% PHEV, 41% MHEV). Retail sales in Q3 FY21 declined 9.0% year-on-year due to the ongoing impact of Covid-19 with sales down across all regions except China (up 19.1%). Sales of the Land Rover Defender continued to ramp up, increasing to 16,286 vehicles in the third quarter, up 66.0% compared to the prior quarter. Retail sales of the all-electric Jaguar I-PACE rose to 7,807 vehicles in Q3 FY21, up 69.3% year-on-year.

 

7

Retails sales of the Jaguar XE and F-TYPE were also up year-on-year, 31.4% and 12.3% respectively. Sales of other models were lower year-on-year as a result of the impact of Covid-19.

Wholesales (excluding the China JV) totalled 102,580, up 39.7% quarter-on-quarter, with sales up in all regions most notably North America (up 71.9%). Year-on-year wholesales were down 21.1% with sales lower in each region with the exception of China where sales volumes continue to grow (up 19.6%). Wholesales of most models increased in Q3 FY21 compared to the prior quarter but continued to be lower year-on-year except for Jaguar I-PACE (6,334 units, up 83.0%) and the Land Rover Defender which wholesaled 16,043 units.

Jaguar Land Rover’s Q3 FY21 retail sales (including the China JV) by key region and model is detailed in the following table:

 

		Q3 FY21				Q2 FY21				Q-O-Q Change (%)				Q3 FY20				Y-o-Y Change (%)
UK			21,065				27,365				(23.0	%)			23,134				(8.9	%)
North America			33,270				25,262				31.7	%			40,187				(17.2	%)
Europe			24,832				20,613				20.5	%			29,683				(16.3	%)
China1			32,668				27,188				20.2	%			27,423				19.1	%
Overseas			16,634				13,141				26.6	%			20,795				(20.0	%)
Total JLR1			128,469				113,569				13.1	%			141,222				(9.0	%)
F-PACE			5,914				7,924				(25.4	%)			12,174				(51.4	%)
I-PACE			7,807				3,214				142.9	%			4,612				69.3	%
E-PACE1			5,406				7,027				(23.1	%)			9,581				(43.6	%)
F-TYPE			1,444				1,399				3.2	%			1,286				12.3	%
XE1			4,594				4,944				(7.1	%)			3,495				31.4	%
XF1			2,807				2,562				9.6	%			3,709				(24.3	%)
XJ			100				277				(63.9	%)			585				(82.9	%)
Jaguar1			28,072				27,347				2.7	%			35,442				(20.8	%)
Discovery Sport1			18,862				16,421				14.9	%			22,978				(17.9	%)
Discovery			4,831				6,147				(21.4	%)			9,820				(50.8	%)
Range Rover Evoque1			18,824				18,515				1.7	%			24,009				(21.6	%)
Range Rover Velar			10,717				11,016				(2.7	%)			14,397				(25.6	%)
Range Rover Sport			18,492				14,434				28.1	%			20,770				(11.0	%)
Range Rover			12,385				9,876				25.4	%			13,806				(10.3	%)
Defender			16,286				9,813				66.0	%			—				n/a
Land Rover1			100,397				86,222				16.4	%			105,780				(5.1	%)

 

1	Includes China JV retail volume in Q3 FY21: 18,267 units, up 13.9% quarter-on-quarter and 19.0% year-on-year

Q3 FY21 revenue and profits

For the quarter ended 31 December 2020, revenue was £6.0 billion, 37.5% higher quarter-on-quarter and only 6.5% lower year-on-year. The Company improved profit and margins in the third quarter with PBT of £439 million (15.8% adjusted EBITDA, 6.7% adjusted EBIT), significantly higher than the PBT of £65 million (11.1% adjusted EBITDA, 0.3% adjusted EBIT) in Q2 FY21 and the PBT of £318 million in Q3 FY20 (10.2% adjusted EBITDA, 2.7% adjusted EBIT), primarily reflecting the following factors:

 

Category		Qtr on Qtr £mils				Year on Year £mils
Volume			350				(254	)
Mix (incl. Emissins reserve)			189				235
Variable marketing (incl US residual)			(62	)			59
Material, manufacturing and warranty costs			56				23
Fixed costs (e.g. Marketing, D&A, furlough)			(205	)			51
FX impact & commodity hedges			46				7
Total PBT variance			374				121

Profit after tax (PAT) of £351 million (incl. £88 million tax charge) similar to the £372 million (incl. £54 million tax credit) in Q3 FY20

 

8

YTD FY21 revenue and profits

Revenue was £13.2 billion in YTD FY21 compared to £17.6 billion for the same period last year, generating PBT of £91 million compared to the PBT of £79 million in YTD FY20. The Adjusted EBITDA margin in YTD FY21 was 11.6% compared to 9.8% in YTD FY20 and the Adjusted EBIT margin in YTD FY21 was 0.2% compared to 1.2% in YTD FY20. The loss after tax in YTD FY21 was £180 million (including a £271 million tax charge) compared to PAT of £70 million in YTD FY20 (including a £9 million tax charge).

Cash flow, liquidity and capital resources

Q3 FY21 free cash flow was positive £562 million after £675 million of investment spending and £264 million of working capital inflows. The £562 million positive free cash flow in the third quarter builds on the positive free cash flow of £463 million generated in Q2 FY21 and was significantly better than near neutral free cash flow in the same quarter a year ago with investment spending £217 million lower. Of the £675 million total investment spending in Q3 FY21 £556 million was capitalised and £119 million of research and development costs were expensed through the income statement.

Total cash and cash equivalents, deposits and investments at 31 December 2020 was £4.5 billion (comprising £3.6 billion of cash and cash equivalents and £0.9 billion of short-term deposits and other investments). The cash and financial deposits include an amount of £309 million held in subsidiaries of Jaguar Land Rover outside of the United Kingdom. The cash in some of these jurisdictions is subject to impediments to remitting cash to the UK other than through annual dividends. As at 31 December 2020, the Company also had an undrawn revolving credit facility totalling £1.9 billion, maturing in July 2022, which combined with total cash of £4.5 billion resulted in total available liquidity of £6.4 billion.

Debt

The following table shows details of the Company’s financing arrangements as at 31 December 2020:

 

(£ millions)		Facility amount				Amount outstanding				Undrawn amount				Issuer
£400m 5.000% Senior Notes due Feb 2022			400				400				—				Jaguar Land Rover Automotive plc
£400m 3.875% Senior Notes due Mar 2023			400				400				—				Jaguar Land Rover Automotive plc
£300m 2.750% Senior Notes due Jan 2021			300				300				—				Jaguar Land Rover Automotive plc
$500m 5.625% Senior Notes due Feb 2023			366				366				—				Jaguar Land Rover Automotive plc
$700m 7.7500% Senior Notes due Oct 2025			512				512				—				Jaguar Land Rover Automotive plc
$500m 4.500% Senior Notes due Oct 2027			366				366				—				Jaguar Land Rover Automotive plc
$650m 5.875% Senior Notes due January 2028			476				476				—				Jaguar Land Rover Automotive plc
€650m 2.200% Senior Notes due Jan 2024			585				585				—				Jaguar Land Rover Automotive plc
€500m 5.875% Senior Notes due Nov 2024			450				450				—				Jaguar Land Rover Automotive plc
€500m 6.875% Senior Notes due Nov 2026			450				450				—				Jaguar Land Rover Automotive plc
€500m 4.500% Senior Notes due Jan 2026			450				450				—				Jaguar Land Rover Automotive plc
$200m Syndicated Loan due Oct 2022			146				146				—				Jaguar Land Rover Automotive plc
$800m Syndicated Loan due Jan 2025			586				586				—				Jaguar Land Rover Automotive plc
Fleet buyback facility due Dec 2021			113				110				3				Jaguar Land Rover Limited
China RMB 5b revolving facility due Jun 20231			563				563				—				Jaguar Land Rover (China) Investment Co., Ltd.
UKEF loan due Oct 2024			479				479				—				Jaguar Land Rover Automotive plc
Other2			40				40				—				Various JLR entities
Revolving 5 year credit facility			1,935				—				1,935				Jaguar Land Rover Automotive plc
Lease obligations3			500				500				—				Various JLR entities
Subtotal			9,119				7,181				1,938
Prepaid costs			—				(37	)			—
Fair value adjustments4			—				30				—
Total			9,119				7,174				1,938

 

1	The China RMB 5 billion 3-year syndicated revolving loan facility is subject to an annual confirmatory review. This is fully drawn, equivalent to GBP 563m at 31st December bookkeeping FX rates

2	Primarily an advance as part of a sale and leaseback transaction as well as parts factoring in China

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

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

 

9

Risks and mitigating factors

There are a number of potential risks which could have a material impact on the Group’s performance and could cause actual results to differ materially from expected and/or historical results, including those discussed on pages 19-22 of the Annual Report 2019-20 of the Group (available at https://www.jaguarlandrover.com/annual-report-2020) along with mitigating factors. The principal risks discussed in the Group’s Annual Report 2019-20 are competitive business efficiency, global economic and geopolitical environment (including Covid-19), brand positioning, distribution channels/retailer performance, IT systems and security, environmental regulations and compliance, supply chain disruptions, human capital, rapid technology change and unethical and prohibited business practices.

Acquisitions and disposals

There were no material acquisitions or disposals in Q3 FY21.

Off-balance sheet financial arrangements

At 31 December 2020, Jaguar Land Rover Limited (a subsidiary of the Company) had sold £188 million equivalent of receivables under a $700 million invoice discounting facility signed in March 2019.

Post balance sheet items

There were no material post balance sheet items in Q3 FY21.

Related party transactions

Related party transactions for Q3 FY21 are disclosed in note 26 to the condensed consolidated financial statements disclosed on page 29 of this Interim Report. There have been no material changes to the related party transactions described in the latest Annual Report.

Personnel

At 31 December 2020, Jaguar Land Rover employed 36,285 people worldwide, including agency personnel, compared to 38,778 at 31  December 2019.

Board of directors

The following table provides information with respect to the current members of the Board of Directors of Jaguar Land Rover Automotive plc:

 

Name		Position		Year appointed
Natarajan Chandrasekaran		Chairman and Director		2017
Thierry Bolloré		Chief Executive Officer and Director		2020
Prof Sir Ralf D Speth*		Vice Chairman and Director		2020
Andrew M. Robb		Director		2009
Nasser Mukhtar Munjee		Director		2012
Mr P B Balaji		Director		2017
Hanne Sorensen		Director		2018

 

*	Appointed as CEO and Director in 2010 and subsequently Vice Chairman and Director in 2020

 

10

Condensed Consolidated Income Statement

 

						Three months ended								Nine months ended
£ millions		Note				31 December 2020				31 December 2019				31 December 2020				31 December 2019
Revenue			5				5,982				6,398				13,193				17,558
Material and other cost of sales							(3,742	)			(4,141	)			(8,270	)			(11,142	)
Employee costs*			4				(595	)			(655	)			(1,522	)			(1,942	)
Other expenses			8				(913	)			(1,265	)			(2,531	)			(3,926	)
Exceptional items			4				(37	)			—				(37	)			(22	)
Engineering costs capitalised			6				192				344				570				1,036
Other income							58				71				139				112
Depreciation and amortisation							(515	)			(453	)			(1,475	)			(1,420	)
Foreign exchange gain and fair value adjustments							107				77				223				26
Finance income			7				2				16				9				41
Finance expense (net)			7				(67	)			(49	)			(176	)			(148	)
Share of loss of equity accounted investments							(33	)			(25	)			(32	)			(94	)
Profit before tax							439				318				91				79
Income tax (expense)/credit			13				(88	)			54				(271	)			(9	)
Profit/(loss) for the period							351				372				(180	)			70
Attributable to:
Owners of the Company							351				372				(180	)			69
Non-controlling interests							—				—				—				1

 

*	‘Employee costs’ excludes the exceptional item explained in note 4.

The notes on pages 16 to 33 are an integral part of these condensed consolidated financial statements.

 

11

Condensed Consolidated Statement of Comprehensive Income and Expense

 

		Three months ended								Nine months ended
£ millions		31 December 2020				31 December 2019 restated*				31 December 2020				31 December 2019 restated*
Profit/(loss) for the period			351				372				(180	)			70
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of net defined benefit obligation			(229	)			47				(1,176	)			(153	)
Income tax related to items that will not be reclassified			43				(9	)			223				26
			(186	)			38				(953	)			(127	)
Items that may be reclassified subsequently to profit or loss:
Gain on cash flow hedges (net)			309				596				634				605
Currency translation differences			(17	)			(41	)			(2	)			(22	)
Income tax related to items that may be reclassified			(58	)			(107	)			(120	)			(115	)
			234				448				512				468
Other comprehensive income/(expense) net of tax			48				486				(441	)			341
Total comprehensive income/(expense) attributable to shareholder			399				858				(621	)			411
Attributable to:
Owners of the Company			399				858				(621	)			410
Non-controlling interests			—				—				—				1

 

*	see note 1 for details of the restatement

The notes on pages 16 to 33 are an integral part of these condensed consolidated financial statements.

 

12

Condensed Consolidated Balance Sheet

 

As at (£ millions)		Note				31 December 2020				31 March 2020				31 December 2019
Non-current assets
Investments							351				399				423
Other financial assets			10				388				257				397
Property, plant and equipment			14				6,975				6,814				6,624
Intangible assets			14				6,139				6,278				6,145
Right-of-use assets							522				568				568
Pension asset			22				—				408				—
Other non-current assets			12				80				23				91
Deferred tax assets							437				523				544
Total non-current assets							14,892				15,270				14,792
Current assets
Cash and cash equivalents							3,637				2,271				1,991
Short-term deposits and other investments							859				1,393				1,910
Trade receivables							572				833				836
Other financial assets			10				390				383				347
Inventories			11				3,080				3,468				3,348
Other current assets			12				392				477				550
Current tax assets							34				9				12
Total current assets							8,964				8,834				8,994
Total assets							23,856				24,104				23,786
Current liabilities
Accounts payable							5,547				6,499				5,959
Short-term borrowings			18				1,123				526				629
Other financial liabilities			15				658				1,073				981
Provisions			16				864				944				863
Other current liabilities			17				895				716				636
Current tax liabilities							153				100				113
Total current liabilities							9,240				9,858				9,181
Non-current liabilities
Long-term borrowings			18				5,551				4,817				4,920
Other financial liabilities			15				525				778				689
Provisions			16				1,193				1,355				1,278
Retirement benefit obligation			22				827				28				764
Other non-current liabilities			17				467				533				521
Deferred tax liabilities							121				179				101
Total non-current liabilities							8,684				7,690				8,273
Total liabilities							17,924				17,548				17,454
Equity attributable to shareholders
Ordinary shares							1,501				1,501				1,501
Capital redemption reserve							167				167				167
Other reserves			20				4,256				4,880				4,657
Equity attributable to shareholders							5,924				6,548				6,325
Non-controlling interests							8				8				7
Total equity							5,932				6,556				6,332
Total liabilities and equity							23,856				24,104				23,786

The notes on pages 16 to 33 are an integral part of these condensed consolidated financial statements.

These condensed consolidated interim financial statements were approved by the JLR plc Board and authorised for issue on 25 January 2021.

Company registered number: 06477691

 

13

Condensed Consolidated Statement of Changes in Equity

 

(£ millions)		Ordinary shares				Capital redemption reserve				Other reserves				Equity attributable to shareholder				Non- controlling interests				Total equity
Balance at 1 April 2020			1,501				167				4,880				6,548				8				6,556
Loss for the period			—				—				(180	)			(180	)			—				(180	)
Other comprehensive expense for the period			—				—				(441	)			(441	)			—				(441	)
Total comprehensive expense			—				—				(621	)			(621	)			—				(621	)
Amounts removed from hedge reserve and recognised in inventory			—				—				(3	)			(3	)			—				(3	)
Balance at 31 December 2020			1,501				167				4,256				5,924				8				5,932

 

(£ millions)		Ordinary shares				Capital redemption reserve				Other reserves				Equity attributable to shareholders				Non- controlling interests				Total equity
Balance at 1 April 2019			1,501				167				4,305				5,973				6				5,979
Adjustment on initial application of IFRS 16 (net of tax)			—				—				(23	)			(23	)			—				(23	)
Adjusted balance at 1 April 2019			1,501				167				4,282				5,950				6				5,956
Profit for the period			—				—				69				69				1				70
Other comprehensive income for the period			—				—				341				341				—				341
Total comprehensive income			—				—				410				410				1				411
Amounts removed from hedge reserve and recognised in inventory			—				—				(43	)			(43	)			—				(43	)
Income tax related to amounts removed from hedge reserve and recognised in inventory			—				—				8				8				—				8
Balance at 31 December 2019			1,501				167				4,657				6,325				7				6,332

The notes on pages 16 to 33 are an integral part of these condensed consolidated financial statements.

 

14

Condensed Consolidated Cash Flow Statement

 

						Three months ended								Nine months ended
£ millions		Note				31 December 2020				31 December 2019				31 December 2020				31 December 2019
Cash flows from operating activities
Cash generated from operations			25				1,207				788				1,212				1,514
Dividends received							—				67				—				67
Income tax paid							(13	)			(27	)			(110	)			(89	)
Net cash generated from operating activities							1,194				828				1,102				1,492
Cash flows from investing activities
Investment in equity accounted investments							—				(67	)			—				(67	)
Purchases of other investments							(2	)			(4	)			(2	)			(9	)
Proceeds from sale of other investments							—				—				22				—
Investment in other restricted deposits							(2	)			(4	)			(23	)			(22	)
Redemption of other restricted deposits							11				13				35				27
Movements in other restricted deposits							9				9				12				5
Investment in short-term deposits and other investments							(879	)			(1,492	)			(2,425	)			(2,779	)
Redemption of short-term deposits and other investments							257				405				2,931				1,873
Movements in short-term deposits and other investments							(622	)			(1,087	)			506				(906	)
Purchases of property, plant and equipment							(385	)			(368	)			(836	)			(1,016	)
Proceeds from sale of property, plant and equipment							4				1				5				1
Net cash outflow relating to intangible asset expenditure							(169	)			(346	)			(591	)			(1,132	)
Finance income received							3				14				13				40
Acquisition of subsidiaries (net of cash acquired)							—				(3	)			—				(3	)
Net cash used in investing activities							(1,162	)			(1,851	)			(871	)			(3,087	)
Cash flows from financing activities
Finance expenses and fees paid							(85	)			(64	)			(238	)			(179	)
Proceeds from issuance of short-term borrowings							37				103				891				103
Repayment of short-term borrowings							(36	)			—				(288	)			(114	)
Proceeds from issuance of long-term borrowings							1,034				1,500				1,034				1,500
Repayment of long-term borrowings							(32	)			(386	)			(94	)			(386	)
Payments of lease obligations							(19	)			(17	)			(59	)			(50	)
Net cash generated from financing activities							899				1,136				1,246				874
Net increase/(decrease) in cash and cash equivalents							931				113				1,477				(721	)
Cash and cash equivalents at beginning of period							2,790				1,971				2,271				2,747
Effect of foreign exchange on cash and cash equivalents							(84	)			(93	)			(111	)			(35	)
Cash and cash equivalents at end of period							3,637				1,991				3,637				1,991

The notes on pages 16 to 33 are an integral part of these condensed consolidated financial statements.

 

15

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

 

1	Accounting policies

Basis of preparation

The financial information in these interim financial statements is unaudited and does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The condensed consolidated interim financial statements of Jaguar Land Rover Automotive plc have been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’ under International Financial Reporting Standards (‘IFRS’) as adopted for use in the UK. The balance sheet and accompanying notes as at 31 December 2019 have been disclosed solely for the information of the users.

The condensed consolidated interim financial statements have been prepared on a historical cost basis except for certain financial instruments held at fair value as highlighted in note 19.

The condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements for the year ended 31 March 2020, which were prepared in accordance with IFRS as adopted by the EU.

The annual consolidated financial statements of the company for the year ended 31 March 2021 will be prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.

The condensed consolidated interim financial statements have been prepared on the going concern basis as set out within the directors’ report of the Group’s Annual Report for the year ended 31 March 2020. The accounting policies applied are consistent with those of the annual consolidated financial statements for the year ended 31 March 2020.

The Group has been presenting gains and losses on effective cash flow hedges of inventory in the statement of other comprehensive income and expense as “not to be reclassified to income statement”. With wider industry practice emerging, clearer guidance now being available and with the present economic situation due to COVID-19, the Group has changed the presentation of these effective cash flow hedges of inventory to “may be reclassified to income statement”, from the year ended 31 March 2021 and accordingly reclassified the comparative amounts for the prior periods. The change in presentation is within the statement of other comprehensive income and expense and does not affect net income.

Estimates and judgements

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 March 2020.

Going concern

The Condensed Interim Financial Statements have been prepared on a going concern basis as the Directors consider that adequate resources exist for the Group to continue operating for the foreseeable future. As set out below the going concern assessment has been performed for a period of 15 months up to March 2022.

There is significant liquidity and financing headroom at 31 December 2020 and throughout the going concern forecast period. As at 31 December 2020 total available liquidity stood at £6 billion. As compared to the management estimates at 31 March 2020, the Group’s business performance is better for the nine months ended 31 December 2020, increasing the amount of headroom at 31 December 2020. Year to date wholesale volumes are slightly ahead of the 31 March 2020 base forecast, with a particularly strong recovery in China in the nine months ended 31 December 2020. The EBIT margin for the nine months ended 31 December 2020 was better than that forecast for the FY20 assessment.

The going concern assessment has been made utilising the models and assumptions from the assessment performed for the preparation of the FY20 financial statements, with the period to 31 March 2021 being updated for actual observed performance and trends, while the six months period to 30 September 2021 has been kept consistent with the FY20 assessment and the forecast extended to 31 March 2022 using the same basis of preparation. Details of the scenarios and assumptions used in the FY20 assessment are set out in note 2 to the annual financial statements.

The Group has modelled two scenarios in its assessment of going concern; a base case and a severe but plausible downside scenario. The base case takes into account the estimated impact of the COVID-19 global pandemic as well as other end market and operational factors throughout the going concern period and has been monitored against the actual results and cash generation in the period since 1 January 2021. The impact of COVID-19 remains uncertain; however, the directors have considered latest external market commentaries and industry forecasts in arriving at a severe but plausible downside scenario.

 

16

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

 

1	Accounting policies (continued)

 

This downside scenario assumes a 10% reduction in sale volumes in the three months to 31 March 2021, and a 15% reduction each month for the 12 months to 31 March 2022. Both reductions are relative to the base case volumes. In addition, the downside scenario includes other risk sensitivities considered in the ‘Severe scenario’ FY20 assessment, details of which are available in the FY20 Annual Report. This additional decline in cash flows over and above the base case has an impact on available UK liquidity (which excludes cash in subsidiaries outside of the UK, adjusted for intra-month volatility and excludes new funding) of about 20% over the going concern period when compared to the base scenario.

In the downside scenario there is sufficient liquidity in the forecast for the Group to operate and discharge its liabilities as they fall due, taking into account only cash generated from operations and the funding facilities existing on the date of authorisation of these interim financial statements, including the presently undrawn revolving credit facility. Consequently, the directors are confident that the Group will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the interim financial statements on a going concern basis.

 

2	Government grants

Employee costs for the three and nine month periods ended 31 December 2020 are net of government grants received in relation to employees placed on furlough under the Coronavirus Job Retention Scheme of £5 million and £182 million respectively (three and nine months ended 31 December 2019: £nil).

 

3	Alternative Performance Measures

In reporting financial information, the Group presents alternative performance measures (‘APMs’) which are not defined or specified under the requirements of IFRS. The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the business. The APMs used by the Group are defined below:

 

Alternative Performance Measure		Definition
Adjusted EBITDA		Adjusted EBITDA is defined as profit before: income tax expense; exceptional items; finance expense (net of capitalised interest) and finance income; gains/losses on debt and unrealised derivatives, realised derivatives entered into for the purpose of hedging debt, and equity or debt investments held at fair value; foreign exchange gains/losses on other assets and liabilities, including short-term deposits and cash and cash equivalents; share of profit/loss from equity accounted investments; depreciation and amortisation.
Adjusted EBIT		Adjusted EBIT is defined as for adjusted EBITDA but including share of profit/loss from equity accounted investments, depreciation and amortisation.
Profit before tax and exceptional items		Profit before tax excluding exceptional items.
Free cash flow		Net cash generated from operating activities less net cash used in automotive investing activities, excluding investments in consolidated entities and movements in financial investments, and after finance expenses and fees paid. Financial investments are those reported as Cash and Cash Equivalents, Short Term Deposits and Other Investments, and equity or debt investments held at fair value.
Total product and other investment		Cash used in the purchase of property, plant and equipment, intangible assets, investments in equity accounted investments and other trading investments, acquisition of subsidiaries and expensed research and development costs.
Operating cash flow before investment		Free cash flow before financing excluding total product and other investment.
Working capital		Changes in assets and liabilities as presented in note 25. This comprises movements in assets and liabilities excluding movements relating to financing or investing cash flows or non-cash items that are not included in adjusted EBIT or adjusted EBITDA.
Total cash and cash equivalents, deposits and investments		Defined as cash and cash equivalents, short-term deposits and other investments, marketable securities and any other items defined as cash and cash equivalents in accordance with IFRS.
Available liquidity		Defined as total cash and cash equivalents, deposits and investments plus committed undrawn credit facilities.
Retail sales		Jaguar Land Rover retail sales represent vehicle sales made by dealers to end customers and include the sale of vehicles produced by our Chinese joint venture, Chery Jaguar Land Rover Automotive Company Ltd.
Wholesales		Wholesales represent vehicle sales made to dealers. The Group recognises revenue on wholesales.

 

17

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

 

3	Alternative Performance Measures (continued)

 

The Group uses adjusted EBITDA as an APM to review and measure the underlying profitability of the Group on an ongoing basis for comparability as it recognises that increased capital expenditure year-on-year will lead to a corresponding increase in depreciation and amortisation expense recognised within the consolidated income statement.

The Group uses adjusted EBIT as an APM to review and measure the underlying profitability of the Group on an ongoing basis as this excludes volatility on unrealised foreign exchange transactions. Due to the significant level of debt and currency derivatives, unrealised foreign exchange distorts the financial performance of the Group from one period to another.

During the nine month period ended 31 December 2020, the definition of ‘Free cash flow’ was amended to exclude non-automotive investments and net investments in equity and debt investments held at fair value, which are deemed more financial investment in nature. The definition was also amended to exclude foreign exchange gains/losses on short-term deposits and cash and cash equivalents, therefore ensuring more consistent treatment since revaluation of other current assets and liabilities is already excluded. The Group considers these changes should provide greater clarity of Free Cash Flow more closely aligned to JLR’s competitors hence providing improved comparability for users of the APM. Free cash flow for the three and nine month periods ended 31 December 2019 prior to the change was £(144) million and £(927) million respectively.

During the nine month period ended 31 December 2020, the definitions of adjusted EBIT and adjusted EBITDA were amended to exclude foreign exchange gains and losses on revaluation of other assets and liabilities, including short-term deposits and cash and cash equivalents. The Group considers the amended APM to better measure the underlying operational profitability of the Group, and is consistent with the treatment of the revaluation of other balance sheet items such as that of debt and unrealised hedges. It also recognises that the Group may use cash and/or derivatives to hedge debt and/or working capital balance sheet exposures and therefore it is logical to present gains or losses on revaluation of all such items consistently, excluded from EBITDA. This is also consistent with the Group’s definition of Free Cash Flow. Adjusted EBIT for the three and nine month periods ended 31 December 2019 prior to the change was £210 million and £227 million respectively. Adjusted EBITDA for the three and nine month periods ended 31 December 2019 prior to the change was £688 million and £1,741 million respectively.

Free cash flow is considered by the Group to be a key measure in assessing and understanding the total operating performance of the Group and to identify underlying trends.

Total product and other investment is considered by the Group to be a key measure in assessing cash invested in the development of future new models and infrastructure supporting the growth of the Group.

Operating cash flow before investment is used as a measure of the operating performance and cash available to the Group before the direct cash impact of investment decisions.

Working capital is considered by the Group to be a key measure in assessing short-term assets and liabilities that are expected to be converted into cash within the next 12-month period.

Total cash and cash equivalents, deposits and investments and available liquidity are measures used by the Group to assess liquidity and the availability of funds for future spend and investment.

Reconciliations between these alternative performance measures and statutory reported measures are shown on the next pages.

 

18

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

 

3	Alternative Performance Measures (continued)

 

Adjusted

EBIT and Adjusted EBITDA

 

						Three months ended								Nine months ended
(£ millions)		Note				31 December 2020				31 December 2019 restated				31 December 2020				31 December 2019 restated
Adjusted EBITDA							946				651				1,529				1,716
Depreciation and amortisation							(515	)			(453	)			(1,475	)			(1,420	)
Share of loss of equity accounted investments							(33	)			(25	)			(32	)			(94	)
Adjusted EBIT							398				173				22				202
Foreign exchange gain on derivatives							7				12				10				13
Unrealised gain/(loss) on commodities							36				32				101				(12	)
Foreign exchange and fair value adjustments on loans							160				141				203				33
Foreign exchange loss on economic hedges of loans							(83	)			(44	)			(55	)			(31	)
Foreign exchange gain on balance sheet, cash and deposits revaluation							24				37				8				25
Finance income			7				2				16				9				41
Finance expense (net)			7				(67	)			(49	)			(176	)			(148	)
Fair value (loss)/gain on equity investments							(1	)			—				6				(22	)
Profit before tax and exceptional items							476				318				128				101
Exceptional items							(37	)			—				(37	)			(22	)
Profit before tax							439				318				91				79

Free cash flow

 

		Three months ended								Nine months ended
(£ millions)		31 December 2020				31 December 2019 restated				31 December 2020				31 December 2019 restated
Net cashed generated from operating activities			1,194				828				1,102				1,492
Purchases of property, plant and equipment			(385	)			(368	)			(836	)			(1,016	)
Net cash outflow relating to intangible asset expenditure			(169	)			(346	)			(591	)			(1,132	)
Proceeds from sale of property, plant and equipment			4				1				5				1
Investment in equity accounted investees			—				(67	)			—				(67	)
Acquisition of subsidiaries (net of cash acquired)			—				(3	)			—				(3	)
Finance expenses and fees paid			(85	)			(64	)			(238	)			(179	)
Finance income received			3				14				13				40
Free cash flow			562				(5	)			(545	)			(864	)

 

19