TIDMTIFS
RNS Number : 8557H
TI Fluid Systems PLC
11 April 2022
11 April 2022
TI Fluid Systems plc
(the "Company")
Annual Report and Accounts 2021 and Annual General Meeting
2022
The Company announces that today it has released the below
listed documents:
-- Annual Report and Accounts for the financial year ended 31
December 2021 ('Annual Report and Accounts 2021')
-- Notice of the Annual General Meeting 2022 ('AGM')
-- Form of Proxy for the AGM
In accordance with Listing Rule 9.6.1, these documents have been
submitted to the National Storage Mechanism and will shortly be
available for inspection at new National Storage Mechanism ('NSM')
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on the
Company's website at www.tifluidsystems.com .
The AGM is scheduled to be held at 9:00 am on Wednesday 18 May
2022 at the offices of Latham & Watkins (London) LLP, 99
Bishopsgate, London EC2M 3XF and will start at 9 am. Shareholder
registration will be available from 8.30 am.
In December 2021, Jeffrey Vanneste, Independent Non--Executive
Director and current Chair of the Audit & Risk Committee,
indicated his intention to step down following the AGM but has
agreed, at the request of the Board, to stand for re--election in
order to provide additional time for an orderly transition to a new
Audit & Risk Committee Chair. The process to recruit a new
Audit and Risk Committee Chair is proceeding well, and an
appointment is expected to be made in due course, at which point
Jeff would step down from the Board.
Enquiries:
TI Fluid Systems plc +34 607 577 830
Pilar Riesco
Investor Relations
TI Fluid Systems plc +44 (0) 1865 871855
Matthew Paroly
Company Secretary
FTI Consulting +44 (0) 20 3727 1340
Richard Mountain
Nick Hasell
About TI Fluid Systems plc
TI Fluid Systems (LSE: TIFS) is a leading global manufacturer of
fluid storage, carrying and delivery systems primarily for the
light duty automotive market. With nearly 100 years of automotive
fluid systems experience, TI Fluid Systems has manufacturing
facilities in 104 locations in 29 countries serving all major
global OEMs.
Appendix
The information below, which is extracted from the Annual Report
and Accounts 2021, is included solely for the purpose of complying
with DTR 6.3.5 and the requirements it imposes on issuers as to how
to make public annual financial reports. It should be read in
conjunction with the Company's preliminary results announcement
released on 15 March 2022. This announcement is not a substitute
for reading the full Annual Report and Accounts 2021. Page, note
and section references in the text below refer to page numbers,
note and section references in the Annual Report and Accounts
2021.
Statement of Directors' responsibilities in respect of the
financial statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
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
international accounting standards in conformity with the
requirements of the Companies Act 2006. Additionally, the Financial
Conduct Authority's Disclosure Guidance and Transparency Rules
require the Directors to prepare the Group financial statements in
accordance with international financial reporting standards adopted
by the UK Endorsement Board.
The Directors have also chosen to prepare the Parent Company
financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards
and applicable law), including Financial Reporting Standard (FRS)
101 Reduced Disclosure Framework.
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 Company will
continue in business.
The Directors are also 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 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.
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 and Company financial statements, which have been
prepared in accordance with the relevant financial reporting
framework, give a true and fair view of the assets, liabilities,
financial position and profit of the Group and profit of the
Company
-- the Strategic Review 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 14 March 2022 and is signed on its behalf:
By order of the Board
Hans Dieltjens, Chief Executive Officer and President
Ronald Hundzinski, Chief Financial Officer
Principal risks and uncertainties
Strategic developments and market volatilities dominate our risk
landscape
The Board is responsible for the Group's system of risk
management and internal controls. The Audit & Risk Committee
supports the Board by advising on the Group's overall risk
appetite, tolerance and strategy, current risk exposures and future
risk strategy.
A review of the Group's risk management framework used to assess
and manage business-critical risks was presented to the Audit &
Risk Committee in March 2022. Our 2022 risk assessment focussed on
a management review process involving senior executive management
from both divisional and corporate functions. The Board and the
Audit & Risk Committee were satisfied that a balanced and
robust assessment of the Group's principal risks had been
undertaken.
The Group's global operations remain 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. The following section highlights the
major risks that may affect the Group's ability to deliver the
strategy, as set out on pages 26-27.
The management and mitigation activities described below will
help to reduce the impact or likelihood of the major risk
occurring, although the Board recognises it will not be possible to
eliminate these risks entirely. 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.
The impact of the COVID-19 pandemic over the last two years has
dramatically demonstrated that the world is more volatile than ever
before, and this volatility continues to provide many 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 resources, both human and material, remain
significant challenges. Nonetheless, we believe that the continuing
impact of COVID-19 into 2022 will not introduce new risks beyond
those risks that we have already identified.
In addition to those existing challenges the Group is now faced
with a period of significant inflationary pricing pressure across
all aspects of our operations. Furthermore, as described in our
TCFD commentary on pages 64-68, climate change, while not currently
expected to create fundamentally new risks to our business, is
certainly driving the pace and potential severity of many of the
principal risks that are already being managed. Specifically,
climate change is increasing our technology and product development
risk as the rate of vehicle electrification accelerates across the
industry and 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 (T3) strategy, our technological
agility to develop and adapt our product offerings to meet the EV
requirements of our customers will come under heightened pressure.
Vehicle electrification also has a significant human capital aspect
to it - the need to reskill and recruit engineering resource better
and more able to support necessary product development. Continual
regulatory change is now a business constant that arises across all
aspects of the environmental, social and governance spectrum.
The importance of certain constituent elements of our risk
profile, e.g. raw material sourcing and pricing, product offering,
financial resilience, and operational leverage, continue to take on
heightened relevance. However, we currently believe that none have
heightened into strategic long-term risks.
Developing risks
The Board recognises that an essential part of risk management
is the ability to monitor and respond to new and emerging
risks.
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
(T3) strategy - it has been conscious of any new strategic risks
that may need to be factored into its consideration, including, but
not limited to, the technological obsolescence risk associated with
the Group's ICE product lines (i.e., fuel tanks, fuel pumps, and
fuel lines), the need for rapid product portfolio changes along
with securing new product capabilities and the challenges of
securing the right talent and skills mix across the organisation.
If the Group chooses to address the need to enhance the Group's
product capabilities other than organically then this may
necessitate additional resources and expertise and would naturally
come with management and value delivery risk.
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 T3 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) 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.
Currently widening geopolitical fractures may result in global
business disruptions. Competition and political tension between the
United States and China is increasing whilst there are political
tensions within Europe. Russia's recent tragic military invasion of
Ukraine further demonstrates the fragility of international
relations and the consequential adverse impact on the automotive
supply chain and world financial markets. Therefore, potential
exists for these geopolitical tensions to lead to significant
disruptions in how the automotive sector operates and does business
and hence create risk for the Group.
On reflection, the Board continues to believe 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.
The Board expects executive management to enhance its current
enterprise risk assessment processes from 2022 onwards to be
supportive to the strategic change agenda and continuing volatile
operational risk landscape.
Principal risks
Global light vehicle production volumes
Description
The Group has 104 manufacturing locations in 29 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 the vehicle
manufacturers.
Impact
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 104 locations, 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.
Controls and mitigation
-- The Group's presence in 29 countries supplying a wide range
of customers acts as a hedge to neutralise 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 to response to the transition to full
electrification remains a major focus. More detail is given in the
Product Development and changes in technology section below
Product quality
Description
The Group's business is based on the repeatable supply and
delivery of components and parts to an agreed specification and
time.
Impact
Failure to meet customer requirements or specifications can have
financial consequences, such as the loss of a customer, warranty
claims and product liability, and cause long-term damage to the
Group's reputation.
Controls and mitigation
-- 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
-- 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
-- Where necessary, the Group's manufacturing facilities
maintain relevant industry accreditations, such as TS 16949
-- The Group monitors the field performance of its products in
order to seek to continuously improve product quality
Competition and customer pricing pressure
Description
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 on current contracts.
Impact
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.
Controls and mitigation
-- The Group seeks to offset pricing pressure by achieving
improved operating efficiencies and cost reductions
-- A growing trend by 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 engages in extensive and regular dialogue and has strong commercial and engineering relationships with key customers
-- The Group uses market intelligence and competitor analysis to
support its market activities and inform investment decisions
-- Across the Group there is an emphasis on research and
development and improving the technical content of products
-- The Group also leverages a robust screening process to evaluate new business proposals
-- The Group is considered to be a top supplier or strategic
supplier by many of its OEM customers
Business continuity
Description
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, exposure to price fluctuations of key raw materials,
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.
Impact
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 or result in
price 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 of systems capability at a Group facility, as a result
of IT failure or cyber-attack, 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,
reduce employee morale and possible changes in working practices.
Serious incidents can also have a detrimental impact on the Group's
reputation.
Controls and mitigation
-- The Group continues to expand its business continuity
planning ('BCP') to enhance the localised continuity planning
strategy operated at each facility
-- The Group's global network of facilities provides a degree of backup capacity
-- The Group maintains a scheduled programme of maintenance and inspection of all equipment
-- 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
-- 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
-- The Group continues to assess and strengthen its cyber
security programme. The Group has continued to expand its systems
penetration testing and data security audits
-- The Group's decentralised IT systems worldwide provide some
resilience against the loss of production or systems capability to
the Group as a whole
-- IT has a disruption recovery plan for the organisation
-- 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
-- In 2020 our health and safety protocols were enhanced in
response to COVID-19 such as to facilitate safe return to our
operating facilities when permitted. Our IT infrastructure has been
able to support the seamless operation of our worldwide office and
administrative functions when remote working has been in place
-- Health and safety performance is monitored regularly by each division and by the Group
Product development and changes in technology
Description
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 on
demand for the Group's products. In addition, the Group's products
have performance-critical applications and have high levels of
technical content and know-how.
Impact
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. 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. Changing
environmental regulations could affect demand for certain products.
The Group's technologies and intellectual property rights need to
be kept current through continuous improvement and research and
development and are susceptible to theft, infringement, loss and/or
replication by competitors.
Controls and mitigation
-- The Group is engaged in continued investment 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 actioning an engineering
skills transition plan to ensure our engineering resource has the
necessary skills to support an enhanced electric vehicle product
offering
-- The Group has an international network of technical centres
which focus on research and development
-- The Group seeks to maintain close relationships and technical partnerships with key customers
-- The Group has established regional application centres which
focus on application engineering worldwide
-- Both Group and divisional management monitor and assess
relevant regulatory requirements and the likelihood and impact of
any changes
-- The Group's products, materials and processes are continually
developed and enhanced through research and development and
technical input
-- The Group actively registers, manages and enforces its intellectual property rights
-- The Group operates in the automotive industry where
performance-critical technology evolves and is adopted in a
deliberate and measured manner
Operating globally and regulatory compliance
Description
The Group has operations globally, with manufacturing facilities
in 29 countries across five continents. The markets in which the
Group operates are covered by a range of different regulatory
systems and complex compliance requirements and may also be subject
to cycles, structural change and other external factors, such as
changes in tariffs, customs arrangements and other regulations. In
addition, operating across a number of territories exposes the
Group to currency exchange rate variations.
Impact
A substantial downturn in one or more key markets could have a
material adverse impact on the Group's profitability, cash flow and
carrying value of its assets. 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. High foreign exchange
volatility may increase financing costs.
Controls and mitigation
-- The Group's international footprint provides some protection
against a downturn in particular territories or regions
-- 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
-- The Board is actively monitoring the opportunities and
threats posed by climate change, via the ESG Steering Committee, to
both the Group's product offering and its operations and
proactively refocusing development and engineering work in this
area
-- The Group's treasury policy covers, inter alia, the use of
currency contracts, investment hedging policy and regular reporting
of foreign exchange exposure
-- Focus throughout the Group on adherence to our Code of
Business Conduct ('COBC'), including ongoing training and review of
policies and procedures
Key personnel dependencies
Description
The future success of the Group is dependent upon the continued
services of key personnel and the acquisition of new talent to
address 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.
Impact
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
know-how, 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.
Controls and mitigation
-- The Group applies bespoke terms and conditions of employment
for key personnel where appropriate
-- 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 equality and diversity across its operations. Culture
awareness training is ongoing across our organisation
-- A new, skills focussed, training and development initiative
is 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
Related Party Transactions
Related Party Transactions and Controlling Parties
Certain funds managed by Bain Capital, through BC Omega Holdco
Ltd, which represent affiliates of and funds advised by Bain
Capital LLC, have been the Group's ultimate controlling party since
incorporation up until 15 April 2021, when it was announced that
approximately 10% of the holding of BC Omega Holdco Ltd was sold,
via a placing, reducing its holding in the ordinary share capital
of TI Fluid Systems plc to 44.4%. TI Fluid Systems plc did not
receive any proceeds from the placing.
On 10 November 2021, an additional 7.7% of the holding in the
Group held by BC Omega Holdco Ltd was sold, via a placing, reducing
its holding in the ordinary share capital of TI Fluid Systems plc
to 36.7%.
As a result, at 31 December 2021 there is now no ultimate
controlling party of TI Fluid Systems plc.
The Group did not procure products and materials from companies
in which the funds managed by Bain Capital, had investment
interests in either the current or prior year, nor did it incur any
management charges.
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 held a 73% interest in Hanil Tube Corporation, until 8
December 2021 when the Group purchased the remaining 27% for a
total consideration in cash of KRW21,000 million (EUR15.5 million).
See Note 25 for further details. Hanil Tube Corporation made sales
within the Group during the year up to the point of this
transaction of EUR5.8 million (year-ended 31 December 2020: EUR6.8
million).
The Group holds 97% of the shares in Bundy India Ltd. At 31
December 2021, Bundy India Ltd had trade and loan receivables net
of payables to other Group undertakings amounting to EUR0.6 million
(2020: EUR4.1 million net trade and loan payables) and made sales
within the Group during the year of EUR2.4 million (2020: EUR6.1
million).
Transactions with Associate
The Group held one associated undertaking, SeAH FS Co., Ltd
('SeAH FS'). On 8 December 2021 the Group disposed in full of its
20% holding in the issued ordinary shares in the company for
KRW21,000 million (EUR15.5 million). Refer to Note 19 for further
details. Purchases from associates in the year up to the point of
disposal were EUR7.4 million (year-ended 31 December 2020: EUR8.1
million).
END
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