TI Fluid Systems Regulatory News (TIFS)

17 March 2020

TI Fluid Systems plc

Results for the 12 months ended 31 December 2019

TI Fluid Systems plc, a leading global manufacturer of automotive fluid storage, carrying and delivery systems for light vehicles announces its 2019 results.

*Management basis metrics are Non - IFRS measures as defined on pages 16 to 17

**Current year results include the impact of applying IFRS 16 whilst the prior year comparatives have not been restated

***IFRS 16 - Leases impact on Adjusted Free Cash Flow totalled €26.8m in 2019. Impacts on other measures are shown on page 18

Group Highlights:

• Successfully continuing to execute our organic growth strategy in the global automotive fluid systems market

• Strategic investment in a new thermal products facility in Morocco to primarily supply growing battery electric vehicle ('BEV') production

• Thermal product and system collaboration with key customers for BEVs

• Continuation of thermal product wins on several smaller regional BEVs

• First new business win with a Japanese customer using our plastic fuel tank Integrated Transfer System ('ITS') process technology for a large mild hybrid electric vehicle ('HEV') platform in North America

• Global light vehicle production volumes remained challenging, declining 5.6% year on year

• Revenue was 3.5% lower year on year, at constant currency and outperformed global light vehicle production volumes by 2.1%. At actual rates, revenue declined by 1.8% year on year

• Adjusted EBIT margin and operating profit margin primarily impacted by lower volumes, particularly in Fluid Carrying Systems ('FCS') with a weak China environment and cost increases in Europe

• Business strength through strong cash generation

• Adjusted Free Cash Flow of €171.5 million

• Strengthened balance sheet through secured term loan pay down with a €50 million voluntary payment in March 2019

• 2019 final dividend of 5.94 Euro cents per share, maintained at 2018 level, which represents a full year pay-out in excess of our 30% of Adjusted Net Income dividend policy. Dividend cover of 3.2 times Adjusted Basic EPS (2018: 3.3 times)

William L. Kozyra, Chief Executive Officer and President, commented:

"2019 represents steady progress in our organic growth strategy for fluid systems with the award of a high volume HEV fuel tank programme in North America. We also continue to invest in the business with our new thermal products facility in Morocco to primarily supply BEVs. The Group was successful in being awarded additional smaller regional EV programmes along with new collaboration projects with key customers, including in China, to reduce weight, and maximise power efficiency in the vehicle through thermal products and systems. We remain well positioned as a leading partner for our customer's thermal BEV needs. The Group remains well positioned for the automotive megatrends of reduced emissions and electrification.

The Group continued to outperform global light vehicle production, however, the global automotive market remains challenging given the uncertainty presented by the COVID-19 (coronavirus) outbreak to regional and global economies. We remain confident in our strategy, business model, operating flexibility and strength in our ability to generate positive free cash flow."

Results presentation

TI Fluid Systems plc will host a teleconference for analysts and investors at 9.00 am UK time on 17 March 2020.

Analysts wishing to join should contact FTI Consulting to register and may listen to the presentation live by using the details below.

Conference Call Dial-In Details:

UK: +44 (0) 330 336 9105

Conference Code: 1931880

The presentation will be available at 7:00 am UK time from www.tifluidsystems.com. An audio recording will be available on our website in due course.

Enquiries

TI Fluid Systems plc

David J Royce

Investor Relations

Tel: +1 (248) 376 8624

FTI Consulting

Richard Mountain

Nick Hasell

Tel: +44 (0)20 3727 1340

Chief Executive Officer's review

Our business continues to be resilient with strong margins and leading cash flow generation.

We are pleased to report overall solid performance in 2019 despite the challenging global vehicle production environment.

2019 performance

Global light vehicle production volume declined by 5.6% in 2019, compared to the prior year. We delivered revenue of €3.4 billion (-3.5% at constant currency), or 2.1% above global light vehicle production. If we include the impact of currency translation, revenue slightly declined by 1.8%.

We also continued to generate strong Adjusted EBITDA of €498 million (14.6% margin) and Adjusted EBIT of €340 million (10.0% margin). Profit for the year was €145 million (2018: €140 million) and Adjusted Free Cash Flow amounted to €172 million (2018: €146 million). These strong results compared well in our sector.

Our ability to maintain our strong financial performance with solid margins and excellent positive cash flow in the face of the prevailing market conditions demonstrates the Group's resilience and the strength of our strategy, business model and management focus.

Strategy update

In 2019, we continued our success as a leading global manufacturer of highly engineered fluid storage, carrying and delivery systems for light vehicles through the execution of our strategy. Our financial performance benefited from our commitment, focus and dedication to designing and producing products for greener vehicles. We also continue to benefit from operational flexibility and our balanced customer, platform and regional profile. We continue to be confident in our focus on electrification and our HEV and BEV strategy which is progressing well.

Use our strength in key product areas to drive the Group's market share

In 2019, we have worked to ensure the successful launch of the two significant high volume thermal product programmes for EV platforms that were awarded to us last year by two leading high volume OEMs. Based on expected orders for thermal products on these two BEV platforms, we anticipate that the Group will have an approximate 50% share of these combined BEV platforms, representing a total lifetime revenue opportunity of approximately €700 million. These thermal programmes are expected to last for the eight to ten year life of the BEV vehicle models. Production is expected to launch in 2020 for the first of these platforms. The Group also launched and won other smaller, regional BEV platforms in 2019.

Earlier this year, the Group set up a new facility in Tangier, Morocco, to support the launch of these and future thermal products for BEVs. The 7,700 square metre facility expanded the Group's extrusion capabilities, expertise and capacity. The Group's investment in Morocco also provides logistics savings as well as a competitive cost structure with access to highly qualified labour. Our expectation is that the business in Morocco will continue to grow with the strength of our longstanding global customers, which value Morocco's competitive export focus and strategic location. The facility marks the Group's second location in Morocco.

In addition, I am very pleased that our strategic investment in Morocco was done within the Group's overall capital expenditure target of 3-4% of revenue.

In 2019, the Group also won a notable programme with a Japanese OEM in North America for the supply of plastic fuel tanks. The total lifetime units of these fuel tanks is estimated at 710,000 based on customer planning volumes. A significant number of these tanks are for HEVs. We are pleased that this award, together with other recent fuel tank business awards, continue to demonstrate that our technology and advanced products are key elements that support the ongoing mission of our OEM customers to meet their stringent emission reduction and fuel efficiency targets. Our HEV fuel tank continues to be well recognised as an industry leading design and manufacturing product. Our win rate of HEV fuel tanks is increasing.

Maintain balanced customer, platform, regional and product diversification

The Group has highly diversified revenue with no dependency on one geography. In 2019, we generated approximately 40% of our revenue in Europe and Africa, 30% in Asia Pacific, 28% in North America and 2% in Latin America. This diversification continues to be a benefit for the Group.

We believe that the Group's long history of engineering and manufacturing high-quality, reliable, performance-critical products for global OEMs has built our positive reputation as an industry leader and allowed us to develop strong and lasting relationships with all of our customers. The Group has a highly diversified customer base of global and local OEMs with only three customers, individually, representing more than 10% of revenue in 2019.

Given our deep industry experience and history, we have gained familiarity with each of our customers' unique engineering, design and development processes. As a result, the Group is viewed as a 'trusted partner' by our OEM customers.

We continue to enhance our strategic position through collaboration and development projects with key customers for the design and engineering of thermal products for HEVs, BEVs and, most recently AEVs. These projects are across different platforms and regions, including China. We continue to work with the OEMs to reduce weight in the vehicle through thermal products and systems that take advantage of our technology and nylon capabilities.

Strengthen the Group's position as an advanced technology leader in fluid systems to meet industry megatrends

As the requirements of OEMs have continued to advance, the Group has capitalised on its knowledge of fluid components, lighter weight material and systems architecture to provide our OEM customers with more advanced designs and products to assist them to meet regulatory requirements and consumer expectations. Most of our products contribute to a cleaner world by making vehicles greener.

The Group continues to invest in its fluid management portfolio to include advanced products that are required to reduce emissions and improve fuel economy in vehicles such as pressurised fuel tanks and thermal management products.

The Group is the only global supplier with a fully integrated design, development, manufacturing and supply capability for the fuel tank system.

Capitalise on the Group's global scale, footprint and position

The Group has significant manufacturing presence in all of the major geographies for OEM vehicle production. In 2019, the Group had 108 locations across 28 countries on 5 continents. Being in close proximity to our OEM customers serves the Group very well.

With respect to China, we were able to successfully flex our cost base to mitigate the impact of the ongoing US-China trade conflict and protect our financial performance, particularly our Fluid Carrying Systems ('FCS') division which has had a large presence in China for decades. Our Fuel Tank & Delivery Systems ('FTDS') division continues to grow in China, benefiting from the ongoing conversion of heavy steel tanks to lighter weight plastic tanks as well as tighter emission standards that are creating higher demand for our partial and zero emission tanks.

In 2019, China made up 19% of the Group's revenue. China remains the world's largest vehicle market despite the short-term volatility in volumes.

Deliver strong growth, profitability and cash flow generation

The Group has a consistent record of delivering strong financial results.

In 2019, we successfully managed our fixed costs and profitability despite lower global light vehicle production volumes, particularly in China. We also successfully managed our net pricing and commodity cost impacts to maintain broadly consistent financial performance despite short-term market headwinds.

Looking ahead

We continue to build on and invest in our leadership in technology, global manufacturing and competitive cost structure to support long-term revenue growth, profitability and cash flow generation.

The impact of the current COVID-19 outbreak is highly uncertain at this time. We are taking a number of mitigation actions but some negative impact in the short-term appears likely. Over the longer term, we expect to benefit not only as global light vehicle production continues to grow, but also from increased demand for our advanced fluid handling products and systems and higher content opportunities driven by the underlying megatrends of emission reduction, increased fuel efficiency and electrification. These megatrends will continue to be front and centre for our sector.

We prioritise variable and fixed cost management and capital allocation to deliver sustainable growth.

We believe the Group's strong customer relationships, extensive global footprint and trusted reputation as a leading fluid systems provider has contributed to thermal BEV collaboration agreements, HEV and BEV production contracts and will support continued growth in these markets for many years to come.

I remain excited about the path we are on and the Group's future.

Our people

The Group relies on the skills and expertise of its excellent employees worldwide, and the results of 2019 would not have been achieved without the commitment and dedication of our entire global team, whom I would like to recognise and sincerely thank.

Protecting the health and safety of our people is our highest priority. We have taken proactive actions around the world, including travel restrictions and flexible work programmes. I am happy to report that, as I am writing this statement, we are not aware of any of our employees that have been infected with COVID-19.

We will continue to manage through the difficult environment in 2020.

Chief Financial Officer's Report

We are well placed to continue outperforming global light vehicle production and delivering strong financial performance.

 Table 1: Key Performance measures €m

*Management basis metrics are Non - IFRS measures as defined on pages 16 to 17

**Current year results include the impact of applying IFRS 16 whilst the prior year comparatives have not been restated. Impacts on our key measures are shown on page 18

Global light vehicle production has a significant influence on the Group's performance. In 2019, global light vehicle production decreased by 5.6% to 88.9 million vehicles compared to the prior year. Our revenue continued to outperform global light vehicle production.

Revenue decreased by €124.1 million, or 3.5% year over year on a constant currency basis, to €3.4 billion and exceeded the global light vehicle production change by 2.1% in 2019. If we include the positive impact of currency of €62.4 million, reported revenue declined by €61.7 million, or 1.8% year over year.

We generated Adjusted EBIT of €340.4 million with a margin of 10.0%, a reduction of 0.8% from the prior year Adjusted EBIT margin. The margin decline was primarily due to lower volumes in our FCS segment, particularly in China.

We delivered Adjusted Net Income of €150.3 million, compared to €155.2 million in the prior year. Profit for the year was €144.6 million compared to €140.1 million in 2018. Basic EPS was 27.24 Euro cents, an increase of 2.7% from the prior year, and Adjusted Basic EPS was 28.91 Euro cents, a decrease of 3.2% from 2018. 2019 was also another year of strong cash flow performance, where we delivered Adjusted Free Cash Flow of €171.5 million, €144.7 million excluding the €26.8 million impact of IFRS 16 - Leases.

The new accounting standard for Leases, IFRS 16, was adopted from 1 January 2019. The Group has applied the modified retrospective approach and therefore has not restated its comparative figures. Accordingly, some of the key performance measures presented above and in this report are not comparable with the prior year. Table 9 on page 18 details the impact of IFRS 16 on individual line items.

Automotive Markets

Global light vehicle production volumes softened by 5.6% in 2019 to 88.9 million vehicles as shown in table 2. The softening was across all major regions.

Table 2: Global light vehicle production volumes: millions of units

Revenue

Our revenue in each of the regions and by segment is included in table 3.

Table 3: Revenue by region and by segment €m

Group revenue in 2019 was €3.4 billion, a decrease of 3.5% year over year at constant currency and 2.1% better than the change in global light vehicle production. Favourable exchange rate movements of €62.4 million resulted in revenue being 1.8% lower than the prior year.

In Europe and Africa, revenue at constant currency was 2.1% lower than the prior year and outperformed light vehicle production in the region by 3.8%. Europe and Africa light vehicle production declined by 5.9%. Revenue outperformance was primarily due to new business launches and favourable programme ramp up impacts, particularly in FTDS, offset by lower volumes in FCS.

In Asia Pacific, revenue at constant currency declined by 1.5% and outperformed light vehicle production in the region by 4.7%. Asia Pacific light vehicle production declined by 6.2%. The weakness in light vehicle production was most notable for us in China. The Group generates 19% of its revenue in China, driven by our longstanding market position in our brake and fuel lines business within our FCS segment. Accordingly, FCS revenue was impacted by the volume declines in China. Despite this we continued to outperform in the region, primarily through continued new business success with our fuel tanks in FTDS in China where the Group is benefiting from the automotive megatrends of reduced evaporative emissions and fuel efficiency, driven by the ongoing switch from steel to plastic fuel tanks.

In North America, revenue at constant currency was 8.6% lower than the prior year, or 4.7% below light vehicle production volume. North America light vehicle production declined by 3.9%. Revenue was impacted by OEM programme relocations to Europe and China as well as mix, with the Group's lower exposure to SUVs and light truck programmes in this region.

FCS revenue at constant currency declined by 7.2% from the prior year to €1.9 billion. The FCS segment was particularly impacted by lower production in China and mix in North America.

FTDS revenue at constant currency increased by 1.6% to €1.5 billion. FTDS continued to benefit from new wins in Asia Pacific and resilient performance in Europe.

Currency exchange rates had a net favourable impact of €62.4 million on revenue compared with the prior year. This was mostly due to weakening of the Euro against a number of key currencies in countries where the Group has manufacturing operations. Accordingly, revenue declined by 1.8% to €3.4 billion at reported rates. Table 4 below sets out the movement in exchange rates most relevant to our operations.

Table 4: Exchange Rates

Operating profit, Adjusted EBITDA* and Adjusted EBIT*

We use several financial measures to manage our business, including Adjusted EBITDA and Adjusted EBIT, which are non-IFRS measures, but are measures of profitability that have been used consistently by the Group. The metrics are also used in certain of our compensation plans and to communicate to our investors. Table 5 shows a reconciliation between the reported measure, operating profit, Adjusted EBITDA and Adjusted EBIT.

Table 5: Calculation of Adjusted EBITDA* and Adjusted EBIT* €m

* See Non-IFRS measures

Operating profit of €258.9 million (2018: €281.1 million) was impacted by lower revenue and partially offset by the adoption of IFRS 16 which had a €5.5 million positive impact being the net of the operating lease charges and the additional depreciation on the right of use assets. As part of our ongoing pension management, we executed a voluntary lump sum buyout exercise in the US. This generated a €9.1 million settlement gain. Additionally a definitive ruling on a Brazilian indirect tax matter delivered a €4.8 million benefit to our operating profit. Both these 2019 gains offset higher costs and charges incurred in prior years.

Adjusted EBITDA was €497.8 million (2018: €484.3 million) and Adjusted EBITDA margin was 14.6% (2018: 13.9%) where the lower operating profit as a result of lower revenue was offset by the impact of adopting IFRS 16 which had a €37.2 million benefit due to the reversal of the operating lease charges. The main adjusting item relates to restructuring where we took action in our operations in Europe and North America.

Adjusted EBIT was €340.4 million (2018: €373.5 million) and Adjusted EBIT margin was 10.0% (2018: 10.8%). This change was impacted by conversion on lower revenue, partially offset by reductions in overhead costs and the adoption of IFRS 16. We continue to manage our costs in line with the reduced volumes in order to minimise the impact on margins. Depreciation relating to right-of-use assets recognised as part of IFRS 16 accounted for €31.5 million of the increase in the depreciation and impairment charge of PP&E.

By segment, FCS Adjusted EBIT was €199.4 million (2018: €241.0 million) with Adjusted EBIT margin of 10.4% (2018: 11.9%). FCS continues to achieve double digit margins despite the prevailing market environment. The year over year decline in margin reflected the volume reduction particularly in China, where we have a high market share, as well as increases in resin costs.

FTDS Adjusted EBIT increased by €8.5 million to €141.0 million (2018: €132.5 million) with Adjusted EBIT margin of 9.4% (2018: 9.2%). The increase in margin reflects the benefits of mix and strong operational performance.

Net finance expense

Net finance expense for the year was €57.5 million, a decrease of €7.0 million from the prior year.

We benefited from the full year impact of the interest savings following the repayment of the 8.75% unsecured senior notes in July 2018, and a further €50 million term loan repayment in March 2019. These benefits amounted to €4.5 million. In 2018, we incurred exceptional finance costs of €11.8 million associated with the repayment of the unsecured senior notes and additional term loan debt in July 2018. There was no equivalent charge in 2019. These benefits were partially offset by €10.5 million of interest on lease liabilities, which have been recognised following the adoption of IFRS 16.

Taxation

Income tax expense before exceptional items was €57.1 million (2018: €77.0 million), which represents an Effective Tax Rate of 28.3% (2018: 35.5%). The tax expense was €19.9 million lower than 2018 due to an overall decrease in taxable profits, and the €12.2 million net benefit arising from the completion of a prior year related Research & Experimentation claim in the US. Recognition of this claim favourably impacts the Effective Tax Rate by 5.2%.

The Adjusted Effective Tax Rate, which was calculated by adjusting for the impact of UK losses where no tax relief is available, and prior year tax movements, including the Research & Experimentation benefit, was 32.3% (2018: 32.2%). This remained largely consistent with the prior year as the global mix of profits and territories in which the Group operated remained broadly the same.

Table 6 shows the calculation of the Adjusted Effective Tax Rate.

Table 6: Calculation of Adjusted Effective Tax rate* €m

*See Non-IFRS measures

Adjusted Net Income* and profit for the year

Adjusted Net Income is a component of the Adjusted Basic EPS calculation and is also used to guide our dividend calculation. The calculation of Adjusted Net Income is shown in table 7a.

Table 7a: Adjusted Net Income* €m

Table 7b: Reconciliation of profit for the year to Adjusted Net Income* €m

*See Non-IFRS measures

Profit for the year increased by €4.5 million to €144.6 million, with lower operating profit as a result of conversion of lower sales, offset by lower fixed costs, finance expense and tax.

Adjusted Net Income was €150.3 million in 2019, a decrease of 3.2% from €155.2 million in 2018, primarily driven by exceptional finance expenses added back to profit in 2018 which did not recur in 2019, and the adoption of IFRS 16. Excluding IFRS 16 impacts, the result was €155.3 million in line with 2018, despite lower revenue. The Group incurred restructuring costs of €9.0 million in the year primarily related to operations in Europe and North America (2018: €7.1 million).

Basic EPS and Adjusted Basic EPS*

On a statutory basis, Basic Earnings per Share ('EPS') was 27.24 Euro cents (2018: 26.53 Euro cents), an increase of 2.7% from the prior year, reflecting the slightly higher statutory profit arising from lower operating profit as a result of lower trading volumes offset by lower net finance expense and tax. Adjusted Basic EPS calculation is based on Adjusted Net Income and the weighted average number of shares in issue. Adjusted Basic EPS was 28.91 Euro cents per share (2018: 29.87 Euro cents per share) reflecting the decrease in Adjusted Net Income as noted above. Weighted average shares outstanding in 2019 were 519.9 million (2018: 519.5 million). The prior year comparative has been re-presented to be consistent with the 2019 number.

*See Non-IFRS measures

Dividend

The Board's dividend policy is to target an annual dividend of approximately 30% of Adjusted Net Income, one third payable following half year results and two thirds following the Group's final results.

The Board has decided to recommend a final dividend of 5.94 Euro cents per share, amounting to €30.9 million. This final dividend together with the interim dividend of 3.02 Euro cents per share paid in August 2019, makes a total dividend for 2019 of 8.96 Euro cents per share and amounts to €46.6 million. The total annual dividend is 31% of Adjusted Net Income (2018: 30%). Subject to shareholder approval at the Annual General Meeting on 14 May 2020, the final dividend will be paid on 29 May 2020. The dividend will be converted to Sterling at a fixed rate on 24 April 2020, the Dividend Record Date.

Adjusted Free Cash Flow*

The Group uses Adjusted Free Cash Flow as its primary operating measure of cash flow performance.

Table 8a: Adjusted Free Cash Flow* €m

Table 8b: Reconciliation of Adjusted EBITDA to Adjusted Free Cash Flow* €m

*See Non-IFRS measures

In 2019, we generated Adjusted Free Cash Flow of €171.5 million (2018: €146.2 million). The adoption of IFRS 16 had a positive €26.8 million impact on Adjusted Free Cash Flow. The Adjusted EBITDA generated by the Group was used to fund increased investment in capital equipment and intangibles. There was a €7.5 million increase in property, plant and equipment and intangibles expenditure primarily related to investment in our HEV and BEV strategy and upcoming programme launches. The increase was offset by lower working capital outflows due to lower revenue. Cash spend on restructuring activities was €6.0 million (2018: €1.7 million).

Retirement benefits

We operate funded and unfunded defined benefit schemes across multiple jurisdictions with the largest being the US pension and retiree healthcare schemes. We also have major schemes in the UK, Canada and Germany. While all of our major plans are closed to new entrants, a few allow for future accrual. Our schemes are subject to periodic actuarial valuations. Our net unfunded position increased by €5.5 million to €153.7 million at the end of 2019 principally due to declining discount rates across many territories, of which all but approximately €13.1 million of the impact was offset by strong pension investment performance. Offsetting this increase was a €9.1 million gain on settlement arising from the voluntary lump sum buyout of two of our retirement plans in the US.

Net debt* and net leverage

Net debt, a non-IFRS measure, at the end of 2019 was €738.3 million, a decrease of €82.1 million from the prior year. In March 2019, the Group made a voluntary payment of $56.5 million (€50.0 million) against its USD term loan using cash from operations. The Group's net leverage ratio was 1.5 times Adjusted EBITDA as at 31 December 2019 (2018: 1.7 times).

The Group excludes IFRS 16 lease liabilities from its net debt and net leverage ratio. If the IFRS 16 lease liabilities were to be included, the Group's net debt would be €905 million and net leverage ratio would be 1.8 times Adjusted EBITDA.

*See Non-IFRS measures

Liquidity

Our principal sources of liquidity have historically been cash generated from operating activities and amounts available under our credit facilities, that currently consist of a revolving facility under our cash flow credit agreement of $125 million (€111.4 million) and an asset backed loan ('ABL') facility of $100 million (€89.1 million). The availability under both facilities as of 31 December 2019 was €177.2 million.

Outlook

Despite the forecasted decline in global light vehicle production volumes in 2020, we expect that our 2020 revenue will outperform global light vehicle production volumes similar to the prior year, excluding currency movements. We also anticipate that in 2020 our Adjusted EBIT margin will be a high single digit and that Adjusted Free Cash Flow conversion will be similar to the prior year. It is our plan to continue to reduce net leverage while maintaining a consistent dividend policy. However, importantly, our outlook for 2020 does not include the impact of the ongoing COVID-19 (coronavirus) outbreak, which is continuing to evolve. In the event that the COVID-19 outbreak becomes more widespread and/or continues for an extended period of time, the impact to the automotive industry and the Company will be difficult to predict. We will continue to take actions to mitigate the negative impact of COVID-19 as appropriate.

Non-IFRS measures

In addition to the results reported under IFRS, we use certain non-IFRS financial measures to monitor and measure performance of our business and operations and the profitability of our divisions. Such measures are also utilised by the Board as targets in determining compensation of certain executives and key members of management, as well as in our communications with investors. In particular, we use Adjusted EBIT, Adjusted EBITDA, Adjusted Net Income, Adjusted Basic EPS, Adjusted Free Cash Flow and Adjusted Effective Tax Rate. These non-IFRS measures are not recognised measurements of financial performance or liquidity under IFRS, and should be viewed as supplemental and not replacements or substitutes for any IFRS measures.

Adjusted EBITDA is defined as profit for the year adjusted for income tax expense, net finance expense, depreciation, amortisation and impairment of PP&E and intangible assets, net foreign exchange gains / (losses), restructuring costs and adjustment for associate income.

Adjusted EBIT is defined as Adjusted EBITDA less depreciation (including PP&E impairment) and amortisation (including intangibles impairment) arising on tangible and intangible assets before adjusting for any purchase price adjustments to fair values arising on acquisitions.

Operating profit margin is defined as operating profit expressed as a percentage of revenue.

Adjusted Net Income is defined as Adjusted EBITDA less net finance expense before exceptional items, income tax expense before exceptional items, depreciation and amortisation (including PP&E and intangible asset impairments) and non-controlling interests share of profit.

Adjusted Basic EPS is defined as Adjusted Net Income divided by the weighted average number of shares in issue in the year.

Free Cash Flow is defined as the total of net cash generated from operating activities and net cash used by investing activities.

Adjusted Free Cash Flow is defined as free cash flow adjusted for acquisitions, movements in financial assets at fair value through the profit or loss, cash payments related to IPO costs and cash received on settlement of derivatives.

Adjusted Income Tax before Exceptional items is defined as income tax before exceptional items adjusted for the tax impact of prior year tax provisions and adjustments.

Adjusted Profit before Income Tax is defined as profit before income tax adjusted for UK losses.

Adjusted Effective Tax Rate is defined as adjusted income tax before exceptional items as a percentage of adjusted profit before income tax.

Net debt is defined as the total of current and non-current borrowings excluding lease liabilities, net of cash and cash equivalents and financial assets at fair value through the profit and loss.

Impact of adopting IFRS 16 - Leases

Reconciliations of key performance metrics have been shown where appropriate to demonstrate the underlying performance on a like-for-like basis.

Table 9: Impact on 2019 results from adopting IFRS 16 €m

TABLE OF CONTENTS

Group Financial Statements

Consolidated Income Statement

For the year ended 31 December

Consolidated Statement of Comprehensive Income

For the year ended 31 December

Consolidated Balance Sheet

At 31 December

Consolidated Statement of Changes in Equity

For the year ended 31 December

Consolidated Statement of Cash Flows

For the year ended 31 December

1. General Information

The Group's full financial statements have been approved by the Board of Directors and reported on by the auditors on 16 March 2020. A copy of the statutory accounts for the year ended 31 December 2018 has been delivered to the Registrar of Companies, and those for the year ended 31 December 2019 will be delivered in due course. The independent auditors' report on the full financial statements for the year ended 31 December 2018 was unqualified and did not contain an emphasis of matter paragraph or any statement under section 498 of the Companies Act 2006.

2. Basis of Preparation

The consolidated financial information included within this announcement has been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, the UK Companies Act 2006 applicable to companies reporting under IFRS, and International Financial Reporting Interpretations Committee ('IFRS IC') interpretations issued and effective at the time of preparing the financial information. The financial information in this preliminary announcement does not, however comply with all disclosure requirements.

The consolidated financial information has been prepared under the historical cost convention, except for the fair valuation of assets and liabilities of subsidiary companies acquired, and financial assets and liabilities at fair value through profit or loss ('FVTPL') (including derivative instruments not in hedging relationships).

The preparation of the financial information in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management's reasonable knowledge of the amount, event or actions, actual results may differ from those estimates.

The Group has applied IFRS 16 'Leases' for the first time in the 2019 consolidated financial statements from its mandatory adoption date of 1 January 2019, using the simplified transition (modified retrospective) approach. Comparative amounts for the year ended 31 December 2018 have not been restated. All right-of-use assets previously treated as operating leases have been measured at the amount of the lease liability on adoption (adjusted for any prepaid or accrued lease expenses). The Group has applied the practical expedient to grandfather the definition of a lease on transition and has therefore applied IFRS 16 to all contracts entered into before 1 January 2019 and identified as leases, in accordance with IAS 17 and IFRIC 4. The Group recognised right-of-use assets of €146.3 million and lease liabilities of €147.0 million on transition.

3. Segment Reporting

In accordance with the provisions of IFRS 8 'Operating Segments', the Group's segment reporting is based on the management approach with regard to segment identification; under which information regularly provided to the chief operating decision maker ('CODM') for decision making purposes forms the basis of the disclosure. The Company's CODM is the Chief Executive Officer and the Chief Financial Officer. The CODM evaluates the performance of the Company's segments primarily on the basis of revenue, Adjusted EBITDA, and Adjusted EBIT, both non-IFRS measures.

Two operating segments have been identified by the Group: Fluid Carrying Systems ('FCS') and Fuel Tank and Delivery Systems ('FTDS').

Inter-segment revenue is attributable solely to the ordinary business activities of the respective segment and is conducted on an arm's-length basis.

4. Research and Development Expenditure

Research and development expenditure before third party income, comprised:

5. Finance Income and Expense

6. Income Tax

6.1. Income Tax Expense

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the UK statutory tax rate applicable to profits of the consolidated entities as follows: