SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

Report of Foreign Issuer

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

of the Securities Exchange Act of 1934

For the Month of January 2023

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		2023 FY 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/ Mr Maloy Kumar Gupta
Name:		Mr Maloy Kumar Gupta
Title:		Company Secretary

Dated: January 26, 2023

Jaguar Land Rover Automotive plc

Interim Report

For the three and nine-month period ended

31 December 2022

Company registered number: 06477691

Contents

 

Market environment and business developments			3
Revenue and profits			3
Cash flow, liquidity and capital resources			4
Sales volumes			5
Funding and liquidity			6
Risks and mitigating factors			7
Acquisitions and disposals			7
Off-balance sheet financial arrangements			7
Personnel			7
Board of directors			7
Condensed consolidated financial statements			8

Group, Company, Jaguar Land Rover, JLR plc and JLR refers to Jaguar Land Rover Automotive plc and its subsidiaries. Note 2 to the accounts defines a series of alternative performance measures some of which are stated below, along with certain abbreviations.

 

Adjusted EBITDA margin		measured as adjusted EBITDA as a percentage of revenue.
Adjusted EBIT margin		measured as adjusted EBIT as a percentage of revenue.
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 FY23		3 months ended 31 December 2022
Q2 FY23		3 months ended 30 September 2022
Q3 FY22		3 months ended 31 December 2021
FY23 YTD		9-months ending 31 December 2022
FY22 YTD		9-months ending 31 December 2021
China Joint Venture		Chery Jaguar Land Rover Automotive Co., Ltd.

 

2

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

Revenue was £6.0 billion in Q3 FY23, up 28% year-on-year from Q3 FY22 reflecting favourable volume, model mix, pricing and FX, offset partially by planned marketing and product development costs. Wholesale volumes (excluding China Joint Venture) of 79,591 up 15.0% year-on-year and 5.7% on the prior quarter. Wholesale volumes are at their highest level since Q1 FY22, reflecting a gradual improvement in chip supplies while we are continuing to see strong customer demand with a new record order book of 215,000 units.

Market environment and business developments

 

•

The supply of semiconductors saw gradual improvement in the quarter, resulting in the highest level of wholesales since Q1 FY22 when we began to see the effects of the semiconductor shortages on our business.

 

•

The production ramp up of New Range Rover and New Range Rover Sport continued with 27,456 units wholesaled in the quarter, up from 13,537 in Q2.

 

•

Strong demand continues with client order book now at 215,000 units; our three most profitable models, the Range Rover, Range Rover Sport and Defender account for over 70% of the order book.

 

•

Although constraints continue, chip supply is expected to continue to gradually improve, and partnership agreements put in place with key chip suppliers are providing greater visibility over near-term supply.

 

•

Inflation continues to remain at elevated levels, exacerbated by the Ukraine conflict, higher energy prices and post Covid supply disruption. We are working to offset this through Refocus profitability improvement actions.

 

•

China was impacted by localised Covid-19 lockdowns during the first half of the quarter while the relaxation of Covid-19 policies from December led a surge in infection rates.

 

•

Increasing interest rates in 2022 (including the UK, USA and Europe) will flow through into financing costs for consumers and could impact future demand.

Revenue and profits, quarter ending 31 December 2022

 

•

Revenue was £6.0 billion in Q3 FY23, up 28.1% from Q3 FY22 reflecting favourable volumes, model mix, pricing and FX

 

•

Adjusted EBITDA1 was £716 million (EBITDA margin: 11.9%) in Q3 FY23, up from £565 million (EBITDA margin: 12.0%) in Q3 FY22

 

•

Adjusted EBIT1 was £225 million (3.7%) in Q3 FY23, up from £68 million (1.4%) in Q3 FY22

 

•

The profit before tax was £265 million in Q3 FY23 compared to a loss of £(9) million in Q3 FY22. The year-on-year improvement primarily reflects the following factors:

 

•

£276 million favourable volume and mix

 

•

£224 million favourable pricing and lower variable marketing costs

 

•

£(332) million increase in material and manufacturing costs as a result of inflationary pressures, offset slightly by a £70 million improvement in warranty costs

 

•

£(66) million increase in structural costs, reflecting SG&A (up £85m primarily for planned marketing), product development engineering £(20) million offset by £29 million favourable Labour & Overhead (L&OH) costs

 

•

£173 million for FX and commodities, including £259 million impact of a generally weaker pound on revenue and costs partially offset by £(230) million of realised hedges, and £139 million of FX revaluation

 

•

Profit after tax was £261 million (after a tax charge of £(4) million) for Q3 FY23, an improvement from £(67) million in Q3 FY22 (including a tax charge of £(58) million)

Revenue and profits, fiscal year to date

 

•

Revenue was £15.7 billion FY23 YTD, up from £13.6 billion FY22 YTD reflecting the increased volumes, strong model mix and pricing

 

•

Adjusted EBITDA1 was £1,536 million (EBITDA margin: 9.8%) FY23 YTD, up from £1,297 million FY22 YTD (EBITDA margin: 9.6%)

 

•

Adjusted EBIT1 was £83 million (Adjusted EBIT margin: 0.5%) FY23 YTD, up from £(159) million (Adjusted EBIT margin: -1.2%) FY22 YTD

 

•

PBT was a loss before tax of £(432) million (before £155m favourable pension related exceptional item) for FY23 YTD compared to a loss of £(421) million for FY22 YTD.

 

•

After the exceptional item, the FY23 YTD loss before tax was £(277) million . The £144 million year-on-year improvement primarily reflects the following factors:

 

•

The £155 million exceptional item related to changes to the defined benefit pension scheme

 

•

£347 million favourable volume and mix

 

•

£491 million favourable pricing and lower variable marketing costs

 

1	Please see note 2 of the financial statements for alternative performance measures

 

3

•

£(746) million increase in material and manufacturing costs as a result of inflationary pressures, offset by £91 million of favourable warranty to make overall contribution costs £(655) million higher

 

•

£(195) million increase in structural costs, including £(127) million increase in engineering costs expensed, £(95)m higher SG&A costs and £27m due to other costs including the non-recurrence of favourable changes to battery end of life reserves in Q2 FY22 and £29m lower labour and overhead costs.

 

•

FX and commodities are flat FY23 YTD (£1m favourable) as the £721 million impact of a generally weaker pound on revenue and costs is offset by £(535) million of realised hedges and £(185) million of revaluation (including commodity revaluation)

 

•

Profit after tax after exceptional items was a loss of £(319) million (including tax charge of £(42) million) for FY23 YTD, an improvement from £(734) million in FY22 YTD (including a tax charge of £(313) million)

Cash flow

 

•

Free cashflow2 was £490 million in Q3 FY23 compared to £164 million in Q3 FY22

 

•

Working capital movements in the quarter were £306 million after increases in payables of £417 million offset by lower receivables and higher inventory since 30 September 2022

 

•

Investment spending of £622 million in the quarter includes £446 million of engineering spend, of which 48% was capitalised, and £176 million of capital investments

 

 

•

FY23 YTD free cash flow1 was £(294) million in FY23 YTD compared to £(1,496) million for FY22 YTD

 

 

2	Please see note 2 of the financial statements for alternative performance measures

 

4

Sales volumes

Retail sales for the third quarter were 84,827 units, up 5.9% compared to the same quarter a year ago and 3.7% lower than from the prior quarter ending 30 September 2022.

Wholesale volumes³ in Q3 FY23 were 79,591 units in the period (excluding our China Joint Venture), up 15% compared to the same quarter a year ago ending 31 December 2021 and 5.7% compared to the quarter ending 30 September 2022. The production ramp up of new Range Rover and Range Rover Sport continued with 27,456 units wholesaled in the quarter, up from 13,537 in Q2.

 

 

Range Rover brand includes the models Range Rover, Range Rover Sport, Range Rover Velar and Range Rover Evoque. Discovery brand includes the models Discovery and Discovery Sport. Jaguar brand includes the Jaguar XE, XF, F-Type, E-Pace, F-Pace and I-Pace models.

 

 

5

Funding and liquidity

Total cash and cash equivalents, deposits and investments at 31 December 2022 were £3.9 billion (comprising £3.7 billion of cash and cash equivalents and £149 million of short-term deposits and other investments). The cash and financial deposits include an amount of £512 million held in subsidiaries of Jaguar Land Rover outside of the United Kingdom. The cash in some of these jurisdictions may be subject to impediments to remitting cash to the UK other than through annual dividends.

In December 2022, the Company completed a renewal of its undrawn revolving credit facility at £1.45 billion with the maturity date extended from March 2024 to April 2026. This was increased to £1.52 billion in January 2023.

An extension to the RMB 5 billion (c. £600 million equivalent) loan facility was signed in January 2023. The extension is for 3-years with an annual confirmatory review, the first being in January 2024.

The following table shows details of the Company’s financing arrangements at 31 December 2022:

 

£ millions		Facility amount				Amount outstanding				Undrawn amount
£400m 3.875% Senior Notes due Mar 2023			400				400				—
$500m 5.625% Senior Notes due Feb 2023			415				415				—
$700m 7.750% Senior Notes due Oct 2025			581				581				—
$500m 4.500% Senior Notes due Oct 2027			415				415				—
$650m 5.875% Senior Notes due Jan 2028			539				539				—
€650m 2.200% Senior Notes due Jan 2024			574				574				—
€500m 5.875% Senior Notes due Nov 2024			442				442				—
€500m 6.875% Senior Notes due Nov 2026			442				442				—
€500m 4.500% Senior Notes due Jul 2028			442				442				—
$500m 5.500% Senior Notes due Jul 2029			415				415				—
€500m 4.500% Senior Notes due Jan 2026			442				442				—
$800m Syndicated Loan due Jan 2025			662				662				—
China RMB 5,000m revolving facility due Jun 20231			596				596				—
UKEF amortising loan due Oct 2024			229				229				—
UKEF amortising loan due Dec 2026			500				500				—
Subtotal			7,094				7,094				—
Finance lease obligations2			714				714				—
Other3			35				35				—
Prepaid costs			(27	)			(27	)			—
Fair value adjustments4			(130	)			(130	)			—
Total			7,686				7,686				—
Undrawn RCF			1,450				—				1,450
Total including RCF			9,136				7,686				1,450

 

1	The China RMB 5 billion 3-year syndicated revolving loan facility is subject to an annual confirmatory review in June each year

2	Lease obligations accounted for as debt under IFRS 16

3	Primarily an advance as part of a sale and leaseback transaction

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

 

6

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, particularly those risks relating to continuing supply shortages of semiconductors, and those discussed on pages 36-39 of the Annual Report 2021/22 of the Group (available at www.jaguarlandrover.com/annual-report-2022) along with mitigating factors. The principal risks discussed in the Group’s Annual Report FY22 are competitive business efficiency, environmental regulations and compliance, supply chain disruptions, global economic and geopolitical environment, distribution channels/retailer performance, IT systems and security, manufacturing operations, brand positioning, rapid technology change and human capital.

Acquisitions and disposals

There were no material acquisitions or disposals in Q3 FY23.

Off-balance sheet financial arrangements

At 31 December 2022, Jaguar Land Rover Limited (a subsidiary of the Company) had sold £317 million equivalent of receivables under a $499.975 million invoice discounting facility signed in March 2021.

Personnel

At 31 December 2022, Jaguar Land Rover employed 39,526 people worldwide, including agency personnel, compared to 34,900 at 31 December 2021.

Board of directors

The following table provides information with respect to the members of the Board of Directors of Jaguar Land Rover Automotive plc as at 31 December 2022:

 

Name		Position		Year appointed
Natarajan Chandrasekaran		Chairman and Director		2017
Adrian Mardell		Interim Chief Executive Officer and Director		2022
Prof Sir Ralf D Speth*		Vice Chairman and Director		2020
Mr P B Balaji		Director		2017
Hanne Sorensen		Director		2018
Charles Nichols		Director		2022
Al-Noor Ramji		Director		2022

 

*	Previously appointed as CEO and Director in 2010 and subsequently Vice Chairman and Director in 2020

 

7

Condensed Consolidated Income Statement

 

£ millions		Note				Three months ended								Nine months ended
						31 December 2022				31 December 2021				31 December 2022				31 December 2021
Revenue			3				6,041				4,716				15,707				13,553
Material and other cost of sales							(3,707	)			(2,783	)			(9,681	)			(8,432	)
Employee costs			4				(654	)			(561	)			(1,828	)			(1,666	)
Other expenses			9				(1,180	)			(981	)			(3,369	)			(2,760	)
Exceptional items			4				—				—				155				—
Engineering costs capitalised			5				212				106				457				357
Other income			6				58				49				172				157
Depreciation and amortisation							(494	)			(483	)			(1,464	)			(1,435	)
Foreign exchange and fair value adjustments			7				103				37				(101	)			90
Finance income			8				22				2				40				5
Finance expense (net)			8				(139	)			(97	)			(376	)			(269	)
Share of profit/(loss) of equity accounted investments							3				(14	)			11				(21	)
Profit/(loss) before tax							265				(9	)			(277	)			(421	)
Income tax expense			14				(4	)			(58	)			(42	)			(313	)
Profit/(loss) for the period							261				(67	)			(319	)			(734	)
Attributable to:
Owners of the Company							261				(67	)			(319	)			(731	)
Non-controlling interests							—				—				—				(3	)

The notes on pages 13 to 33 are an integral part of these condensed consolidated financial statements.

 

8

Condensed Consolidated Statement of Comprehensive Income and Expense

 

		Three months ended								Nine months ended
£ millions		31 December 2022				31 December 2021				31 December 2022				31 December 2021
Profit/(loss) for the period			261				(67	)			(319	)			(734	)
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of net defined benefit obligation			(361	)			157				76				95
Income tax related to items that will not be reclassified			90				(39	)			(19	)			61
			(271	)			118				57				156
Items that may be reclassified subsequently to profit or loss:
Gain/(loss) on cash flow hedges (net)			1,047				(122	)			(445	)			(467	)
Currency translation differences			(23	)			(13	)			21				6
Income tax related to items that may be reclassified			(131	)			28				(110	)			100
			893				(107	)			(534	)			(361	)
Other comprehensive income/(expense) net of tax			622				11				(477	)			(205	)
Total comprehensive income/(expense) attributable to shareholder			883				(56	)			(796	)			(939	)
Attributable to:
Owners of the Company			883				(56	)			(796	)			(936	)
Non-controlling interests			—				—				—				(3	)

The notes on pages 13 to 33 are an integral part of these condensed consolidated financial statements.

 

9

Condensed Consolidated Balance Sheet

 

As at (£ millions)		Note				31 December 2022				31 March 2022				31 December 2021
Non-current assets
Investments in equity accounted investees							330				321				308
Other non-current investments							41				30				29
Other financial assets			11				201				185				188
Property, plant and equipment			15				5,976				6,253				6,381
Intangible assets			15				4,604				4,866				5,024
Right-of-use assets							637				568				592
Pension asset			23				719				434				—
Other non-current assets			13				107				35				77
Deferred tax assets							360				336				376
Total non-current assets							12,975				13,028				12,975
Current assets
Cash and cash equivalents							3,712				4,223				4,273
Short-term deposits and other investments							149				175				207
Trade receivables							929				722				682
Other financial assets			11				377				394				435
Inventories			12				3,290				2,781				2,484
Other current assets			13				600				493				556
Current tax assets							9				20				28
Assets classified as held for sale							28				4				26
Total current assets							9,094				8,812				8,691
Total assets							22,069				21,840				21,666
Current liabilities
Accounts payable							5,355				5,144				4,524
Short-term borrowings			19				1,659				1,779				1,403
Other financial liabilities			16				948				870				839
Provisions			17				1,042				989				1,080
Other current liabilities			18				891				674				641
Current tax liabilities							119				116				113
Liabilities directly associated with assets classified as held for sale							—				—				12
Total current liabilities							10,014				9,572				8,612
Non-current liabilities
Long-term borrowings			19				5,313				5,248				6,023
Other financial liabilities			16				1,337				871				717
Provisions			17				1,092				1,112				1,113
Retirement benefit obligation			23				27				25				257
Other non-current liabilities			18				419				404				414
Deferred tax liabilities							118				105				123
Total non-current liabilities							8,306				7,765				8,647
Total liabilities							18,320				17,337				17,259
Equity attributable to shareholders
Ordinary shares							1,501				1,501				1,501
Capital redemption reserve							167				167				167
Other reserves			21				2,081				2,835				2,733
Equity attributable to shareholders							3,749				4,503				4,401
Non-controlling interests							—				—				6
Total equity							3,749				4,503				4,407
Total liabilities and equity							22,069				21,840				21,666

The notes on pages 13 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 2023.

Company registered number: 06477691

 

10

Condensed Consolidated Statement of Changes in Equity

 

£ millions		Ordinary shares				Capital redemption reserve				Other reserves				Total equity
Balance at 1 April 2022			1,501				167				2,835				4,503
Loss for the period			—				—				(319	)			(319	)
Other comprehensive expense for the period			—				—				(477	)			(477	)
Total comprehensive expense			—				—				(796	)			(796	)
Amounts removed from hedge reserve and recognised in inventory			—				—				53				53
Income tax related to amounts removed from hedge reserve and recognised in inventory			—				—				(11	)			(11	)
Balance at 31 December 2022			1,501				167				2,081				3,749

 

£ millions		Ordinary shares				Capital redemption reserve				Other reserves				Equity attributable to shareholder				Non- controlling interests				Total equity
Balance at 1 April 2021			1,501				167				3,586				5,254				9				5,263
Loss for the period			—				—				(731	)			(731	)			(3	)			(734	)
Other comprehensive expense for the period			—				—				(205	)			(205	)			—				(205	)
Total comprehensive expense			—				—				(936	)			(936	)			(3	)			(939	)
Amounts removed from hedge reserve and recognised in inventory			—				—				103				103				—				103
Income tax related to amounts removed from hedge reserve and recognised in inventory			—				—				(20	)			(20	)			—				(20	)
Balance at 31 December 2021			1,501				167				2,733				4,401				6				4,407

The notes on pages 13 to 33 are an integral part of these condensed consolidated financial statements.

 

11

Condensed Consolidated Cash Flow Statement

 

£ millions						Three months ended								Nine months ended
		Note				31 December 2022				31 December 2021				31 December 2022				31 December 2021
Cash flows from operating activities
Cash generated from/(used in) operations			26				1,026				503				1,108				(176	)
Income tax (paid)/refunded							(32	)			53				(159	)			(74	)
Net cash generated from/(used in) operating activities							994				556				949				(250	)
Cash flows from investing activities
Purchases of other investments							—				(2	)			(3	)			(4	)
Investment in other restricted deposits							(4	)			(4	)			(21	)			(26	)
Redemption of other restricted deposits							17				16				31				34
Movements in other restricted deposits							13				12				10				8
Investment in short-term deposits and other investments							(541	)			(205	)			(849	)			(931	)
Redemption of short-term deposits and other investments							541				255				893				1,727
Movements in short-term deposits and other investments							—				50				44				796
Purchases of property, plant and equipment							(160	)			(137	)			(412	)			(545	)
Purchases of other assets acquired with view to resale							—				—				(24	)			—
Proceeds from sale of property, plant and equipment							—				—				—				4
Net cash outflow relating to intangible asset expenditure							(228	)			(162	)			(492	)			(420	)
Finance income received							20				2				35				6
Disposal of subsidiaries (net of cash disposed)							—				—				2				—
Net cash (used in)/generated from investing activities							(355	)			(237	)			(840	)			(155	)
Cash flows from financing activities
Finance expenses and fees paid							(136	)			(95	)			(352	)			(291	)
Proceeds from issuance of borrowings							—				660				594				2,096
Repayment of borrowings							(240	)			(94	)			(959	)			(857	)
Payments of lease obligations							(19	)			(18	)			(54	)			(54	)
Net cash (used in)/generated from financing activities							(395	)			453				(771	)			894
Net increase/(decrease) in cash and cash equivalents							244				772				(662	)			489
Cash and cash equivalents at beginning of period							3,555				3,537				4,223				3,778
Cash reclassified as held for sale							—				—				—				(16	)
Effect of foreign exchange on cash and cash equivalents							(87	)			(36	)			151				22
Cash and cash equivalents at end of period							3,712				4,273				3,712				4,273

The notes on pages 13 to 33 are an integral part of these condensed consolidated financial statements.

 

12

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. The information for the year ended 31 March 2022 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the year has been delivered to the Registrar of Companies. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement from section 498 (2) or (3) 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’) and UK-adopted international accounting standards. The balance sheet and accompanying notes as at 31 December 2021 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 20.

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 2022.

The accounting policies applied are consistent with those of the annual consolidated financial statements for the year ended 31 March 2022, as described in those financial statements.

Estimates and judgements

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

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimate uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 March 2022.

Going concern

The condensed consolidated interim financial statements have been prepared on a going concern basis, which the Directors consider appropriate for the reasons set out below.

The Directors have assessed the financial position of the Group as at 31 December 2022, and the projected cash flows of the Group for the twelve-month period from the date of authorisation of the condensed consolidated interim financial statements (the ‘going concern assessment period’).

The Group had available liquidity of £5.3 billion at 31 December 2022, £3.8 billion of which is cash with the remainder being the £1.45 billion undrawn RCF facility, which was renewed on 16 December 2022 with a maturity date of April 2026. Within the going concern assessment period there is a £1 billion minimum quarter-end liquidity covenant attached to the Group’s UKEF loans and forward start RCF facility. There is £2.2 billion of maturing debt in the going concern assessment period, and no new funding is assumed.

The Group has assessed its projected cash flows over the going concern assessment period. The base case uses assumptions consistent with the latest business plan and which are based on the Group’s most recent actual trading results which were in line with the forecasts from the previous quarter.

The base case assumes a gradual increase in wholesale volumes in each quarter of the going concern assessment period as a result of a production ramp up of the New Range Rover and New Range Rover Sport. New agreements with semiconductor suppliers are also expected to enable sales improvements in the second half of the fiscal year 2024.

The base case assumes optimisation of supply to prioritise production to the highest margin products and the Group’s expectations relating to prevailing financial conditions, including inflationary pressures on material costs.

 

13

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

 

1	Accounting policies (continued)

 

Going concern (continued)

The Group has also carried out a reverse stress test against the base case to determine the decline in wholesale volumes over a twelve-month period that would result in a liquidity level that breaches financing covenants. The Group’s order book remains very strong and so the reverse stress test assumes continued supply constraints resulting in demand that exceeds supply over the twelve-month period and assumes optimisation of supply to maximise production of higher margin products.

In order to reach a liquidity level that breaches covenants, it would require a sustained decline in wholesale volumes of more than 60% compared to the base case over a twelve-month period. The reverse stress test reflects the variable profit impact of the wholesale volume decline, and assumes all other assumptions are held in line with the base case. It does not reflect other potential upside measures that could be taken in such a reduced volume scenario; nor any new funding.

The Group does not consider this scenario to be plausible given that the stress test volumes are significantly lower than the volumes achieved during both the peak of the COVID-19 pandemic and the worst quarter of semiconductor shortages. The Group has a strong order bank and is confident that it can significantly exceed reverse stress test volumes.

The Group has considered the impact of severe but plausible downside scenarios, including scenarios that reflect a decrease in variable profit per unit compared with the base case to include additional increases in material and other related production costs. The expected wholesale volumes under all of these scenarios is higher than under the reverse stress test.

The Directors, after making appropriate enquiries and taking into consideration the risks and uncertainties facing the Group, consider that the Group has adequate financial resources to continue operating throughout the going concern assessment period, meeting its liabilities as they fall due. Accordingly, the Directors continue to adopt the going concern basis in preparing these condensed consolidated interim financial statements.

 

14

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

 

2	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/(loss) before tax and exceptional items		Profit/(loss) before tax excluding exceptional items.
Free cash flow		Net cash generated from operating activities less net cash used in 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.
Working capital		Changes in assets and liabilities as presented in note 26. 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.
Net debt		Total cash and cash equivalents, deposits and investments less total interest-bearing loans and borrowings.
Retail sales		Jaguar Land Rover retail sales represent vehicle sales (units) 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 (units) made to dealers. The Group recognises revenue on wholesales.

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

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

 

15

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

 

2	Alternative Performance Measures (continued)

 

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.

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.

Exceptional items are defined in note 4.

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

Adjusted EBIT and Adjusted EBITDA

 

£ millions						Three months ended								Nine months ended
		Note				31 December 2022				31 December 2021				31 December 2022				31 December 2021
Adjusted EBITDA							716				565				1,536				1,297
Depreciation and amortisation							(494	)			(483	)			(1,464	)			(1,435	)
Share of profit/(loss) of equity accounted investments							3				(14	)			11				(21	)
Adjusted EBIT							225				68				83				(159	)
Foreign exchange on debt, derivatives and balance sheet revaluation*			26				169				34				(61	)			16
Unrealised loss on commodities			26				(12	)			(17	)			(129	)			(18	)
Finance income			8				22				2				40				5
Finance expense (net)			8				(139	)			(97	)			(376	)			(269	)
Fair value gain on equity investments			26				—				1				11				4
Profit/(loss) before tax and exceptional items							265				(9	)			(432	)			(421	)
Exceptional items			4				—				—				155				—
Profit/(loss) before tax							265				(9	)			(277	)			(421	)

 

*

FY22 comparatives have been represented to align with the FY23 presentation change to combine foreign exchange on debt, derivatives and balance sheet revaluation into a single line. This has not resulted in any change to reported ‘Profit/(loss) before tax and exceptional items’ or ‘Profit/(loss) before tax’.

Free cash flow

 

						Three months ended								Nine months ended
£ millions						31 December 2022				31 December 2021				31 December 2022				31 December 2021
Net cash generated from/(used in) operating activities							994				556				949				(250	)
Purchases of property, plant and equipment							(160	)			(137	)			(412	)			(545	)
Net cash outflow relating to intangible asset expenditure							(228	)			(162	)			(492	)			(420	)
Proceeds from sale of property, plant and equipment							—				—				—				4
Purchases of other assets acquired with view to resale							—				—				(24	)			—
Disposal of subsidiaries (net of cash disposed)							—				—				2				—
Finance expenses and fees paid							(136	)			(95	)			(352	)			(291	)
Finance income received							20				2				35				6
Free cash flow							490				164				(294	)			(1,496	)

 

16

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

 

2	Alternative Performance Measures (continued)

 

Total product and other investment

 

						Three months ended								Nine months ended
£ millions		Note				31 December 2022				31 December 2021				31 December 2022				31 December 2021
Purchases of property, plant and equipment							160				137				412				545
Net cash outflow relating to intangible asset expenditure							228				162				492				420
Engineering costs expensed			5				234				211				730				598
Purchases of other investments							—				2				3				4
Total product and other investment							622				512				1,637				1,567

Total cash and cash equivalents, deposits and investments

 

As at (£ millions)						31 December 2022				31 March 2022				31 December 2021
Cash and cash equivalents							3,712				4,223				4,273
Short-term deposits and other investments							149				175				207
Total cash and cash equivalents, deposits and investments							3,861				4,398				4,480

Available liquidity

 

As at (£ millions)		Note				31 December 2022				31 March 2022				31 December 2021
Cash and cash equivalents							3,712				4,223				4,273
Short-term deposits and other investments							149				175				207
Committed undrawn credit facilities			19				1,450				2,015				2,015
Available liquidity							5,311				6,413				6,495

 

17

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

 

2	Alternative Performance Measures (continued)

 

Net debt

 

As at (£ millions)		Note				31 December 2022				31 March 2022				31 December 2021
Cash and cash equivalents							3,712				4,223				4,273
Short-term deposits and other investments							149				175				207
Interest-bearing loans and borrowings			19				(7,686	)			(7,597	)			(8,010	)
Net debt							(3,825	)			(3,199	)			(3,530	)

Retails and wholesales

 

		Three months ended								Nine months ended
Units		31 December 2022				31 December 2021				31 December 2022				31 December 2021
Retail sales			84,827				80,126				251,773				297,373
Wholesales*			79,591				69,182				226,713				217,656

 

*	Wholesale volumes exclude sales from Chery Jaguar Land Rover – Q3 FY23: 12,754 units, Q3 FY22: 13,928 units, Q3 FY23 YTD: 38,115 units, Q3 FY22 YTD: 40,846 units.

 

3	Disaggregation of revenue

 

		Three months ended								Nine months ended
£ millions		31 December 2022				31 December 2021				31 December 2022				31 December 2021
Revenue recognised for sales of vehicles, parts and accessories			5,946				4,430				15,281				12,685
Revenue recognised for services transferred			79				76				235				229
Revenue - other			232				194				647				568
Total revenue excluding realised revenue hedges			6,257				4,700				16,163				13,482
Realised revenue hedges			(216	)			16				(456	)			71
Total revenue			6,041				4,716				15,707				13,553

 

4	Exceptional items

 

		Three months ended								Nine months ended
£ millions		31 December 2022				31 December 2021				31 December 2022				31 December 2021
Employee costs excluding exceptional items			654				561				1,828				1,666
Impact of:
Exceptional items: past service credit			—				—				(155	)			—
Employee costs including exceptional items			654				561				1,673				1,666

The exceptional item recognised in the nine months ended 31 December 2022 is comprised of a pension past service credit of £155 million due to a change in inflation index from RPI to CPI. There was no exceptional item recognised in the nine months ended 31 December 2021.

 

18