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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 July 2017
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 theinformation 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
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| Item :1 |
Form 6-K dated July 26, 2017 along with the Press Release. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.
| Tata Motors Limited | ||
| By: | /s/ Hoshang K Sethna | |
| Name: | Hoshang K Sethna | |
| Title: | Company Secretary | |
Dated: July 26, 2017
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Jaguar Land Rover Automotive plc Annual Report 2016/17
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Jaguar Land Rover is one of the world’s leading producers of premium cars. Innovation and design give our customers experiences they love for life – anticipating and exceeding their needs and expectations. Quality and excellence are our hallmarks. Taking care of customers is paramount. The foundation of our success is our investment in products, plants and people. Our two iconic brands take the best of our British heritage of innovation and ingenuity to customers around the globe. We are developing and delivering for them new products that will shape the future of mobility.
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2 Jaguar Land Rover Automotive plc Annual Report 2016/17 CONTENTS 3 COMPANY OVERVIEW 3 Performance highlights 4 Chairman’s statement 5 Chief Executive Officer’s statement 6 Jaguar: the art of performance 7 Land Rover: above and beyond 8 STRATEGIC REPORT 10 Our vision 14 The way we do business 16 Managing key resources and impacts 18 Global footprint 20 Our blueprint for success 22 Great products 30 Customer First 32 Environmental innovation 34 Global growth 36 Global sales 38 Transformed cost structure and business excellence 40 Engaged, passionate people 46 Technology for good 48 Managing our risks and opportunities 50 Our approach to risk 52 Our principal risks 56 Financial review 56 Chief Financial Officer’s statement 57 Financial performance 60 GOVERNANCE 62 Introduction 63 Leadership 68 Effectiveness 69 Accountability 71 Investor relations engagement 72 Directors’ report 74 FINANCIAL STATEMENTS 76 Independent Auditor’s report 78 Consolidated ?nancial statements 78 Consolidated income statement 78 Consolidated statement of comprehensive income 79 Consolidated balance sheet 80 Consolidated statement of changes in equity 81 Consolidated cash ?ow statement 82 Notes to the consolidated ?nancial statements 137 Parent company ?nancial statements 137 Parent company balance sheet 138 Parent company statement of changes in equity 139 Parent company cash ?ow statement 140 Notes to the parent company ?nancial statements
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Company overview Strategic report Governance Financial statements 3 PERFORMANCE Our commitment to investing in the creation HIGHLIGHTS of new ideas and exceeding our customers’ expectations is what drives our growth today. Fiscal 2016/17 proved again that this is a winning formula and promises an even better tomorrow. Retail sales Revenue Profit before tax 604,009 units £24.3bn £1.6bn Fiscal 2016/17 604,009 Fiscal 2016/17 £24.3bn Fiscal 2016/17 £1.6bn Fiscal 2015/16 521,571 Fiscal 2015/16 £22.3bn Fiscal 2015/16 £1.6bn 462,209 Fiscal 2014/15 Fiscal 2014/15 £22.1bn Fiscal 2014/15 £2.6bn Great product Cash flow before Product awards investment investment 213 £3,733m £3,438m (FISCAL 2015/16: 150) (FISCAL 2015/16: £3,926M) (FISCAL 2015/16: £3,135M) Talent development: Supporting local economies: Global retail: 10,000 employees 40,265 people 2,726 retailers in further education employed globally worldwide (FISCAL 2015/16: 37,965) (FISCAL 2015/16: 2,720)
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4 Jaguar Land Rover Automotive plc Annual Report 2016/17 CHAIRMAN’S STATEMENT Earlier this year, I was Jaguar Land Rover is harnessing such honoured to be appointed technologies while continuing to do Chairman of Jaguar Land what it does best: to design, develop, Rover Automotive plc, one produce and sell highly desirable high-performance Jaguar models of the world’s most iconic and go-anywhere Land Rovers and automotive groups. Range Rovers that continue to delight customers across the world. These This company is a source of great characteristics have been exemplified pride for Tata Motors, where I am also this past year by the acclaim for the privileged to serve as Chairman. And it all-new Jaguar F-PACE, the Land Rover is a jewel in the crown of the wider Discovery and the Range Rover Velar. Tata Group. The company is also looking to make The products, the technologies and the an impact with the development of the services provided by Jaguar Land Rover all-electric Jaguar I-PACE. symbolise what we are trying to achieve The commitment to innovation that is at Tata globally. For Jaguar Land Rover always on display from Dr Ralf Speth represents world-class quality, reliability and his entire team is responsible for and performance – not least through bringing these vehicles to market. I “I salute the values the commitment and skills of its would also like to applaud the teams global workforce. and high standards for the innovation that is evident Jaguar Land Rover is also delivering in our engine-production facility in of the Jaguar Land in areas that reflect my priorities as Wolverhampton and vehicle assembly Executive Chairman of Tata Sons, the plants in the UK, Brazil, China and soon Rover employees, lead shareholder in Tata Motors and in Slovakia. other operating companies. Like Tata Above all, I salute the values and high as well as those Sons, Jaguar Land Rover is focused on standards of the Jaguar Land Rover growth, disciplined capital allocation employees, as well as those of our of our dealers, and maximising shareholder returns. dealers, suppliers and partners. The suppliers and In the past financial year, the company integrity and commitment to excellence has generated strong financial results of each of these groups is vital as we partners.” and achieved steady growth amid continue to put customers first. challenging market conditions. I look forward to working closely with Jaguar Land Rover has also continued Dr Speth and his team in the year ahead, to expand its product portfolio and in building on the quality that is and manufacturing footprint in a represented by Jaguar Land Rover. period of major structural change for all carmakers. Natarajan Chandrasekaran As in other sectors, the automotive Chairman industry is digitising rapidly. Jaguar Jaguar Land Rover Land Rover is embracing automation, Automotive plc connectivity, data-sharing and the 24 July 2017 new possibilities created by machine learning, the Internet of Things and other digital technologies. I am convinced that strong companies like Jaguar Land Rover can flourish as industries rapidly adopt next-generation technologies.
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Company overview Strategic report Governance Financial statements 5 CHIEF EXECUTIVE OFFICER’S STATEMENT Year award; and the Jaguar XF won Brexit and geopolitical Best Saloon Car at the Golden Steering landscape Wheel Awards in Germany. We are a British company with global In Fiscal 2016/17, we introduced the reach. We can continue to be the Jaguar F-PACE and launched the Jaguar beating heart of British manufacturing, XE in the US and the all-new long- the epicentre of premium car production. wheelbase Jaguar XFL for our Chinese Clarity is a prerequisite for business. customers. In November 2016, we International competitiveness is revealed the Jaguar I-PACE, our Battery paramount for the export industry. In Electric Vehicle (BEV). It is the first BEV the interest of a flourishing industry, that is consequent packaged, designed and to deliver maximum efficiency and and engineered using the effective effectiveness, the UK needs competitive degrees of freedom and considering political and economic conditions. Our customers are at the the required specifications of this new heart of everything we do. technology. As the ‘father of economics’, Adam Smith, first defined over 200 years ago, Our passion and our purpose Land Rover Discovery went on sale in it is free and fair trade, access to the are to meet and exceed their February 2017. It is the world’s most collective knowledge of the best talents aspirations; to delight them capable and most versatile SUV. In globally and removing red tape that lead March 2017, we launched the Range with experiences they will to greater national prosperity. The EU Rover Velar, the fourth Range Rover love for life. is a business opportunity. There is no model, which defines design excellence, credible alternative. In the worst case, We do not do ordinary. modernity and elegance combined the export industry will be hit twice and with innovative inner values like the We do create spectacular, will lose competitiveness. ‘Blade’ system. outstanding products. Special Vehicle Operations The future Jaguar Land Rover is an innovative complements perfectly with the very With significant global economic growth mobility company, shaping the special edition of the Range Rover forecast for the coming years, we technology revolution as we move SVAutobiography – the most powerful are cautiously optimistic that we can from the internal combustion engine Range Rover ever built. exploit the growing premium demand. to autonomous, connected and electrified vehicles. Business = People At Jaguar Land Rover, we are committed to growing our business It is the passion, imagination and Sustainable, pro?table growth responsibly and in ways that benefit engagement of our people that drive As we shape tomorrow, we continue to broader society – creating our own our future. At the end of the fiscal enjoy success today. Our vehicles are future in the world we want to live in. year, Jaguar Land Rover employed in high demand. This fiscal year marks 40,265 people. The pace of change has never been our seventh successive year of growth. greater. Our aim is to set it. This is a We reported retails of 604,009 units, a We encourage our people to advance time of great change. Time for Jaguar 16 per cent increase year on year with their skills. More than 30 per cent take Land Rover. revenues of £24.3 billion and profit advantage of what is already the best before tax of £1.6 billion. range of lifelong education schemes offered by the Jaguar Land Rover Product portfolio Academy and supported by Warwick Manufacturing Group and other Our product portfolio has received renowned universities. 213 awards. We are incredibly proud I want to take the opportunity to that the iconic DNA of both of our Professor Dr Ralf D. Speth brands and the compelling character thank all our employees, dealers and Chief Executive Officer of our products with the best British business partners for their contribution Jaguar Land Rover design and engineering integrity and commitment. Automotive plc make modern mobility so much more 24 July 2017 My special thanks go to Mr Ratan Tata colourful. To name highlights: the Jaguar for the confidence he has placed in us F-PACE won both the World Car of the and the supervisory board, chaired by Year and the World Car Design of the Mr Natarajan Chandrasekaran.
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6 Jaguar Land Rover Automotive plc Annual Report 2016/17 JAGUAR: IanCallum THE ART OF Chief Design Director PERFORMANCE Premium Sports Lifestyle XJ F-TYPE Coupe F-PACE XF F-TYPE Convertible XE XFL Recognising our achievements Jaguar XF named Best Jaguar F-TYPE wins Auto All-new Jaguar F-PACE scoops Saloon Car at the Golden Motor and Sport Auto the World Car of the Year, Steering Wheel Awards, awards, Germany World Car Design of the Germany Year and Women’s World Car of the Year awards 6
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Company overview Strategic report Governance Financial statements 7 LAND ROVER: Gerry McGovern ABOVE AND Chief Design Director BEYOND Premium Leisure Dual-purpose Range Rover Land Rover Discovery Land Rover Defender Range Rover Evoque Land Rover Discovery Sport Range RoverEvoque Convertible Range Rover Sport Recognising our achievements The Range Rover Vogue SE The new Discovery won The Range Rover Evoque was took the What Car? 2017 the SUV of the Year title named Industry Pioneer at Best Luxury SUV award at the Orient Auto Awards the Middle East Car of the Year Awards
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Jaguar Land Rover Automotive plc Annual Report 2016/17
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Company overview Strategic report Governance Financial statements 9 Strategic report Aresponsible business dedicated to excellence
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10 Jaguar Land Rover Automotive plc Annual Report 2016/17 OUR VISION We are entering the largest, fastest industrial revolution ever, driven by decarbonisation, air quality, digitisation, connectivity, automation and technology. Against this backdrop we see endless exciting opportunities to create a world in which we will live safer, better, more connected and mobile lives. Our road to a safer, better and more connected future
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Company overview Strategic report Governance Financial statements 11 Vision Our road to zero: Zero congestion, zero accidents, zero distractions The market shift Change in car Autonomous The growth of ownership connected smart cities Traditional car ownership technology Innovation in traffic will continue to decline in As vehicles feature more management technology crowded cities as higher autonomous driving will deliver greater running costs and new capabilities, consumers will car-to-car and car-to-mobility options attract be able to choose to hand infrastructure connectivity. people to car sharing and over control to the car, if By talking to each other, pay-per-use alternatives. they so wish. In doing so, to devices and even to Even customers in less customers will be freed to infrastructure, autonomous densely populated areas enjoy a more integrated vehicles, traffic signals, are likely to move to one and richer in-car street signs and roads will specific-purpose car entertainment experience. be able to predict hazards tailored to their needs. and prevent collisions. This is However, we expect this likely to lead to a significant change to be offset by reduction in congestion, increased sales of shared road accidents and vehicles and services as well fatalities, a drop in insurance as rising demand through premiums and less demand the growth in wealth and for automotive spare parts global consumption. and repairs. Our role within Premium Excellence and A new technology a changing world mobility dedicated leadership in business to delivering automotive Cars connect us to an ever-richer technology the world as well as customer We are working towards transporting us within experience global leadership in it. Jaguar Land Rover The evolution of mobility Connected Autonomous understands this change – behaviours and new Vehicles. Unrivalled driving and its potential to usage patterns will bring experiences, vehicle empower and support opportunities to serve our performance and capability our customers as never discerning customers as remain central to our before. We are already never before, creating value, strategy but it is through developing cars that predict personalisation and ever- our advancing technologies user preferences, offer richer experiences. Through that we will cultivate an customised entertainment InMotion, we already offer ever more luxurious and solutions, and analyse and new digital solutions and on- safer vehicle environment advise on traffic and driving demand services that meet for our customers. Jaguar conditions, putting our modern travel and transport Land Rover’s Advanced customers one step ahead. challenges. We want to Driver Assistance Systems, remain at the forefront of including autonomous Customer First innovation by emergency braking and creating visionary premium park assist, are our stepping products that respond to stones to full autonomy. changing lifestyles and mobility trends.
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12 Jaguar Land Rover Automotive plc Annual Report 2016/17 Vision Our road to zero: Zero emissions through the effective use and re-use of our resources The market shift The role of diesel Alternative Affordable energy Our latest EU6 diesel powered vehicles and low carbon engines are among the The long-term trend energy economy cleanest in the world, with for vehicles is towards The development of new up to 20 per cent lower alternative energy and away vehicle technologies CO2 emissions than petrol from fossil fuels. Electric will demand creative engines and with highly vehicles will require less and innovative change efficient filters that capture routine maintenance, as in renewable energy 99.9 per cent of particles. electric-based drivetrains generation, storage and This technology continues are simpler in design than distribution infrastructure. to be the most credible combustion engines. The increasing adoption of mass-market solution for Vehicles will also integrate battery electric vehicles will optimum fuel economy and ‘smart’ functionality, with materially increase energy to meet CO2 regulations active monitoring of all demand, strengthening as we transition to electric. wear and tear items. the need for a new holistic Modern diesel will bridge the The vehicle will let the energy strategy. gap until electrification, and, customer, as well as the in particular, until the range retailer, know exactly what and charging infrastructure, needs attention and when. become available. Software updates will be remotely downloaded via the internet. Our role within Making diesel Building a zero Driving a circular a changing world part of the long- tailpipe emissions energy economy term solution company We are committed to further We continue to invest We are introducing a range reducing our impact on the heavily in researching and of alternative powertrains environment and to look for developing new powertrain for 2018 and beyond. This efficient and sustainable technologies. As we includes full electric, hybrid energy solutions for our progressively reduce NOx and mild hybrid solutions. business. We are already emissions with every new By 2020, half of our range using renewable energy model year vehicle, our will be available with an and we embrace a circular strategy is to continue to alternative power option economy and a low carbon provide a range of cleaner to meet the differing needs solution strategy through diesel and petrol vehicles of our customers. We are closed-loop processes. that meet all legislative working towards integrating Our ambition is to look requirements and allow our connected and autonomous at new ways of providing customers to choose what technology with low carbon an end-to-end battery suits them best, based on ecosystems. In partnership electrification ecosystem – where they live and the with governments and from R&D, manufacturing, lifestyle they choose to lead. academia, we are also second-life energy usage exploring innovations such and recycling. This ambitious as car-to-home charging, goal will require many car-to-grid and battery years of collaboration with storage solutions to respond multiple partners, from to an increase in electric governments and suppliers vehicle sales. to specialist recyclers, but work is underway to make Jaguar Land Rover part of the solution.
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Company overview Strategic report Governance Financial statements 13 Sustainable growth Digital disruption New technology trends will be instrumental in realising sustainable growth opportunities across the industry. They will also introduce challenges such as demand for new skills and infrastructures to satisfy our customers’ changing behaviour, and the need for increased cyber security as connectivity and intelligent energy grids develop. We know that creating efficiencies is not enough to meet business Our road to zero is the objectives and the demands of a fast-changing landscape. Being innovation ambition guiding our agile, innovating and setting continuous improvement are central to our business strategy in order to shape the future and stay ahead. future. It’s one that will fuel our Our people drive our business and the success of Jaguar Land creative design process, disrupt Rover relies on having the right skills – recruiting and training our business model, and propel the best people as the demands of industry change. Progress in education and innovation will only be achieved through us to rethink, transform and collaboration with schools, universities and other institutions to grow our industry. address the challenges and changes we face in the long term. We won’t always know how or when we will get there, but every decision, strategy, investment, partnership choice or performance target is made with the ultimate goal of sustainable growth in mind.
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14 Jaguar Land Rover Automotive plc Annual Report 2016/17 THE WAY WE Our business blueprint DO BUSINESS represents the most important VALUE CREATION elements of who we are and what we stand for – from the products and services we Our purpose create to defining our wider role in society. Experiences people love, for life Our blueprint for success Great Customer Environmental products First innovation Transformed Engaged Global cost structure and Technology growth and business passionate for good excellence people Our values PioneeringIntegrityExcellenceUnityResponsibility Our strategic priorities Our strategic priorities act as a roadmap towards delivering on our vision and blueprint. They guide the actions we need to take around resources, investment, innovation and product creation. Creating the best Always being Targeting Investing in new quality customer better at what new growth technologies, skills experiences we do segments and services
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Company overview Strategic report Governance Financial statements 15 Forged over generations, our business model weaves together quality, excellence and creative passion. Applying Customer First principles to every part of the business Inputs strengthens our position as a global leader in premium products and services. Raw materials Suppliers Customer Premium Innovation, insights quality research customer and experiences technology Skills and people Financial services Design Investment and engineering Sales What we do network Designing and creating desirable premium Marketing products Logistics Manufacturing operations Reducing environmental impact Stronger communities Sustainable profitable growth Outputs
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16 Jaguar Land Rover Automotive plc Annual Report 2016/17 MANAGING KEY RESOURCES AND IMPACTS Investment Skills and people Considering our impacts Our business model is based on As the industry evolves, so do the reinvesting back into the company. demands on our people. This is why we in our decision-making This has seen us invest around invest more than £100 million a year in £16 billion over the last six years. training, education and skills, through Sustainable economic growth can only be our Jaguar Land Rover Academy and our Together with our partners we have also achieved by protecting the environment academic partners such as the Warwick invested £150 million in the National and the society in which we operate. Our Manufacturing Group. Automotive Innovation Centre. Due policy is that all our resources, operations, to open in 2018, this will be Europe’s We work hard to retain our experts products and services must recognise largest automotive research centre, and our leaders, while keeping one eye and prioritise the protection of the combining national and international on our future employment needs. environment, supporting our long-term expertise to provide exceptional goal of decoupling environmental impact We have created a talent pipeline based facilities for research and innovation. from our business growth. around the recruitment of more than 2,300 graduates and apprentices over Investment, innovation and a commitment the last ?ve years. to always putting our customers ?rst are just some of the factors that enable us to We are also committed to developing create value over the long term, while also the skills we need to ‘invent the future’ protecting the resources that are crucial to and ensure our expertise is used to meet our success. some of the biggest challenges and opportunities we all face, such as climate change and new mobility solutions.
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Company overview Strategic report Governance Financial statements 17 The future growth and profitability of the business relyon a range of financial, human and natural resources. Enhancing the proactive cost management and reducing ourenvironmental impact are fundamental to the long-term successof our business. Here we summarise how we achieve this. Customer Suppliers Raw materials insights An increasingly digital world offers new Our philosophy is to maintain a The principal materials and natural and exciting ways for us to reach out sustainable, resilient and ethical supply resources we need are steel, aluminium, to our consumers, to understand their chain, wherever we operate. We make plastics and water, all of which are current and future needs, and to deliver our standards clear to all of our tier one sourced ethically and in line with them. We are seizing this opportunity, suppliers, and collaborate on solutions relevant legislation. We constantly look increasing our investment in gathering at local, international and industry to reduce our environmental impact and, and analysing data to ensure we deliver level on environmental management, through technological innovation, are what our customers want. business ethics, human rights and world leaders in aluminium recycling. Through technologies like CloudCar working conditions. We aim to recycle 100 per cent of the and Connected Car diagnostics, we aluminium and steel scrap from our are pioneering the use of real-time manufacturing process. Our goal is zero data from our vehicles. These smart waste by 2020. technologies provide us with invaluable Using life-cycle assessments, we insights that enable us to create measure the environmental impact of enhanced products and more efficient our vehicles, enabling us to minimise processes, and to anticipate and deliver the carbon footprint from initial the services our customers need. It development to vehicle end-of-life. means our customers – just like us – For example, every Jaguar F-PACE can stay ahead of the game. contains more than 44kg of recycled and renewable materials. As a result, more than 8,000 tonnes of waste will be diverted from land?ll over the next six years. Through a range of initiatives, we have also achieved a 39 per cent reduction in water use per vehicle since 2007.
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18 Jaguar Land Rover Automotive plc Annual Report 2016/17 GLOBAL Our global growth has allowed us FOOTPRINT to become more agile and able to FISCAL 2016/17 adapt to changing market conditions. UNITED KINGDOM 1 Halewood 2 Solihull 3 Castle Bromwich 4 Whitley Vehicle Manufacturing Vehicle Manufacturing Vehicle Manufacturing Global Headquarters, Engineering and Design Range Rover Evoque Range Rover Jaguar XJ 5 Coventry Special Vehicle Operations Technical Centre Land Rover Discovery Sport Range Rover Sport Jaguar XF 6 Gaydon UK National Sales Centre, Design, Engineering Land Rover Discovery Jaguar XF Sportbrake and Test Facilities 7 Wolverhampton Engine Manufacturing Centre Jaguar XE Jaguar F-Type 8 Warwick Manufacturing Group Jaguar F-PACE Jaguar XE Advanced Research Centre Range Rover Velar Fiscal 2017/18 1 7 3 2 8 5 4 6
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Company overview Strategic report Governance Financial statements 19 SLOVAKIA CHINA Nitra (under construction) Changshu Vehicle Manufacturing Vehicle Manufacturing Land Rover Discovery Range Rover Evoque Land Rover Discovery Sport Jaguar XFL BRAZIL AUSTRIA INDIA Rio de Janeiro Graz (operational 2018) Pune Regional Business Vehicle Manufacturing Vehicle Assembly Office and Vehicle Manufacturing Jaguar I-PACE Fiscal 2017/18 Range Rover Evoque Jaguar XE Range Rover Evoque Land Rover Jaguar XJ Discovery Sport Land Rover Discovery Sport Jaguar XF
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20 Jaguar Land Rover Automotive plc Annual Report 2016/17
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Company overview Strategic report Governance Financial statements 21 Our blueprint for success Passion for innovation
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22 Jaguar Land Rover Automotive plc Annual Report 2016/17 Our blueprint for success GREAT Jaguar Land Rover is at the PRODUCTS cutting edge of automotive design, INTRODUCTION technology and innovation, creating class-leading products and services for our customers. Our vision In our quest for excellence, the only constant is our desire to keep innovating and pushing the boundaries. Exploring new ways of doing things heightens the excitement we feel – an emotion reflected in the originality and ingenuity of our creations. Our focus is on design, technology, research and engineering – making our cars smarter, cleaner, safer and even more beautiful. Our agility and emphasis on innovation enable us to fulfil the changing desires and needs of our customers and deepen our relationships with them. What we have done well Last year we launched 11 major model What we have learned Looking ahead innovations, including the Jaguar F-PACE and two new Land Rovers – Modern mobility is evolving rapidly Innovation is in our DNA and we the Discovery and Range Rover Velar. and we know that we must maintain are committed to developing the our levels of investment in research and technologies that will shape the Across our whole range we continue product innovation to stay ahead. future of mobility. Alongside our to make huge technological advances, continued advances in diesel and such as the introduction of the InControl Crucial to this is how we collaborate petrol technologies, we are working Touch Pro infotainment system. Offering with our global retailers, who are in the towards an autonomous, better-new levels of digital connectivity, it can vanguard of a digital revolution. We are connected and electrified future, in be tailored to drivers’ preferences and working together to digitise every step which customers have the broadest is revolutionising the way in which our of our customers’ journeys, developing range of choices, from ultra-clean customers engage and interact with new technologies befitting the cars that petrol engines to hybrids and full their vehicles. delight customers across the world. electric vehicles. Our online car-buying service allows That’s why we have pledged that by customers to browse models, book test 2020 half of our models will have drives and virtually design and spec a the option of electrification, a move new car, as well as arrange finance and spearheaded by our first full electric trade-ins. car, the Jaguar I-PACE. GREAT PRODUCTS AWARDS 2016/17 213 2015/16 150 2014/15 78 1,402
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Company overview Strategic report Governance Financial statements 23 A NEW BREED OF ELECTRIC Over the last ten years we have been car performance and SUV space, in desirable electric vehicles. As we investing heavily in the research and one electric package. continue to invest and innovate at development of ultra-clean petrol the cutting edge of low and zero On sale in 2018, the I-PACE and diesel engines, alongside hybrid emissions vehicle technology, the is actually far more than a and electric technologies. With the Jaguar I-PACE embodies the growing concept; it is a preview of our first I-PACE Concept, unveiled this year, choice we now offer our customers, production battery-powered car, it is true to say we’ve torn up the and our passion for meeting their and demonstrates our ongoing rule book to create a vehicle with individual needs. commitment to create exciting and supercar-inspired aesthetics, sports
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24 Jaguar Land Rover Automotive plc Annual Report 2016/17 Our blueprint for success JAGUAR Jaguar’s retail sales have increased THE ART OF 83 per cent this year, sustainable PERFORMANCE growth driven by an award-winning range of premium vehicles. F-TYPE SVR Since its launch in 2012, Jaguar’s all-aluminium two- This year, Jaguar Land Rover’s SVO launched the F-TYPE seater has firmly established itself as a success, winning SVR, packed with the latest cutting-edge technology nearly 160 awards worldwide. Today, the Jaguar F-TYPE and top-quality interior materials. Delivering even more offers a broader model range than ever, giving our customised options and exceptional performance, it is the customers even more choice in sports performance. most powerful Jaguar sports car yet. XFL With the appetite for long wheel based executive saloons of our Chinese customers, the car is fitted with region-in China increasing, Jaguar launched an extended version specific technology such as the air ionisation function of the XF in 2016. With a strategic focus on the needs that makes the air inside the car cleaner.
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Company overview Strategic report Governance Financial statements 25 F-PACE The F-PACE has rapidly become both the best-selling and fastest-selling Jaguar in our long history. It’s one of the most decorated models, winning, among many awards, the World Car of the Year, World Car Design of the Year and Women’s World Car of the Year titles. 2017 WORLD CAR DESIGN OF THE YEAR
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26 Jaguar Land Rover Automotive plc Annual Report 2016/17 Our blueprint for success LAND ROVER With significant investment in new products ABOVE AND and class-leading technology, this year has BEYOND been another one of huge achievement for Land Rover. We have collected many coveted awards and, for the first time, we have been included in Interbrand’s elite club of the world’s 100 most valuable brands. EVOQUE CONVERTIBLE Adding a new dimension to the Range Rover brand, the Evoque Convertible – designed, engineered and manufactured in the UK – has performed well since it went on sale in 2016 and continues to play a key role in Range Rover’s 45-year success story.
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Company overview Strategic report Governance Financial statements 27 LAND ROVER DISCOVERY With a new design, increased versatility and cutting-edge technology, the new Discovery is revolutionising the SUV category. So far it has won a string of awards, earned a five-star safety rating from Euro NCAP and, with strong initial sales, looks set to remain the world’s favourite family SUV.
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28 Jaguar Land Rover Automotive plc Annual Report 2016/17 Our blueprint for success SPECIAL Our Special Vehicle Operations (SVO) division VEHICLE takes luxury, technology and performance OPERATIONS to the highest levels. SVO’s state-of-the-art centre of excellence is dedicated to creating the individually tailored and exclusive vehicles that our customers desire. A GROWING DEMAND FOR PERSONALISATION With a commitment to outstanding quality and craftsmanship, the technical centre delivers unprecedented levels of personalisation and experience with an extended range of interior trim, leather and exterior colour options in unparalleled finishes.
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Company overview Strategic report Governance Financial statements 29 RECREATING THE XKSS SVO’s Classic Division is our true brand guardian, This year the Classic team began to rebuild the lost charged with preserving the heritage and values of our nine. Each vehicle comes with a price tag in excess of past in relevant ways for our customers today. £1 million, yet – as some of the rarest, most beautiful and most collectable cars in the world – all were sold Taking inspiration from 60 years ago, the Classic Division almost instantly. has recreated the Jaguar XKSS. The car was originally built in the mid-1950s as a road-going conversion of the Le Mans-winning D-type. In 1957, nine XKSS cars – from a production run of just 25 – were destroyed in a fire at Jaguar’s Coventry factory.
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30 Jaguar Land Rover Automotive plc Annual Report 2016/17 Our blueprint for success CUSTOMER In today’s competitive world, meeting our FIRST customers’ expectations is more important than ever. All our car owners expect and deserve a personal service. This is the essence of Customer First. Only by canvassing opinions, listening to ideas and acting on insights can we continue to produce vehicles that meet our customers’ needs and fulfil their dreams. Our vision What we have done well Putting the customer first sits at the Creating a culture with one focus MAKING OUR heart of everything we do. No plan, allows the whole business to CUSTOMERS FEEL no blueprint, no strategy is drawn understand how we can win the up at Jaguar Land Rover without our hearts and minds of our customers. SPECIAL customers as the starting point. Our online customer advisory boards When we discovered that one The importance of treating people allow us to interact directly with of our Jaguar XF customers with respect permeates our business. customers on the improvements in was terminally ill, we knew we Customer First is a culture that is not products and services they want to see. had to act. Global Customer just about how we treat those who Last year these discussions led to an Relations worked with a number buy our cars but also how we work increase in the number of Customer of different departments to bring together within Jaguar Land Rover. It First initiatives (see ‘Special Touches forward vehicle build and delivery ensures that colleagues can expect That Count’ below). for this Hungarian customer, the best from each other too. while the Jaguar Experience team arranged for him to visit the UK and enjoy a factory tour. SPECIAL TOUCHES THAT COUNT • Video capture – when servicing a customer’s car, we film the condition of parts such as tyres, brakes and exhaust, and email details to the customer. As well as demonstrating transparency and building trust, it also means customers can decide and approve any work to be done remotely • Pathfinder – this new diagnostic technology provides comprehensive data and allows technicians to pinpoint and correct problems more quickly • Encore service – to help customers get the most from a new car, they can enjoy a follow-up session with our retail partners to demonstrate its unique features • Rapid drop-off – when customers bring their car in for service or repair, we can take them back to work, home or wherever they are needed
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Company overview Strategic report Governance Financial statements 31 What we have learned Looking ahead Technological innovation and the We are rolling out our corporate availability of more data allow us to be identity programme to almost 900 of proactive and remain one step ahead, our retailers in the next 12 months. As anticipating and solving problems before well as presenting a consistent image they occur. This is why we are expanding and premium customer experience our Customer Relationship Management in existing stores, we will also be system. It provides us with a single opening Jaguar Land Rover boutiques. customer view and helps us develop a In addition, new digital technology more personal and individual relationship is creating innovative ways in which with the people who buy our cars. we can interact with our customers, helping us transform their experience. We have also learned that by For instance, customers across 1,500 deepening our Customer First culture retailers in 85 countries can now we are building loyalty, which in turn use ‘virtual reality’ to see some new strengthens the foundations for products before these become sustainable, profitable growth. available locally.
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32 Jaguar Land Rover Automotive plc Annual Report 2016/17 Our blueprint for success ENVIRONMENTAL INNOVATION Our vision What we have done well What we have learned Environmental sustainability is not just We are proud to have achieved a In order to manage the complexities about the final product impact, but also 32 per cent reduction in our European of reducing our environmental impact, about how it is made. This is why we fleet average tailpipe CO2 emissions as well as helping us to find new ways seek to reduce negative environmental in just eight years. In the same to make improvements, we are rolling impacts at every possible stage of a period, we have driven a 38 per cent out performance indicators across vehicle’s life cycle. improvement in our operational CO2 the whole of our supply chain. See our emissions, while all the electricity we sustainability report at www.jaguar. Our suppliers are critical partners on use to power our UK sites comes from com/about-jaguar/sustainability. this journey, developing closed-loop renewable sources. principles across resources and waste. While we are already world leaders in This vision also underpins our future Our Jaguar I-PACE Concept car is recycling and innovative closed-loop success, and helps us to create shared the embodiment of next-generation processes that enable us to put the value and deliver a cleaner, smarter and technology and a key milestone surplus aluminium back into our cars, brighter future. in bringing future-facing design we want to make our manufacturing and performance to the electric operations carbon neutral by 2020 vehicle market. and, through the use of more sustainable and recyclable materials, become a zero waste business. Looking ahead Reducing tailpipe CO2 and NOx emissions remains one of the biggest challenges facing the automotive industry, and one we intend to meet. Through a combination of low emission technologies and electrification, our target is to reduce our European fleet average tailpipe CO2 emissions by a further 25 per cent by 2020. Innovations in connected and UNLOCKING THE FULL VALUE autonomous vehicle technology are OF OUR MATERIAL RESOURCES key. They will bring new and different ways to enjoy and own a car, leading Aluminium is central to our lightweight vehicle design strategy. It provides to lower-carbon lifestyles, cleaner air the strength required for the highest levels of safety, performance and and safer roads. capability, while also helping us to deliver improvements in fuel economy and drive down emissions. Thanks to the work of the pioneering REALCAR (Recycled Aluminium Car) project, in one year alone (to April 2016) we were able to reclaim and recycle more than 50,000 tonnes of aluminium waste, feeding it back into our manufacturing process and preventing the associated CO2 from being released into the atmosphere.
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Company overview Strategic report Governance Financial statements 33 POWERED BY RENEWABLES We are committed to developing a utility system that Today in the UK, Jaguar Land Rover sources 100 per cent makes sure we have enough affordable energy today of the electricity to power its facilities from renewables. and in the future, because energy drives our business We make a wider contribution too, with renewable and our growth. energy from solar panels at our Engine Manufacturing Centre in Wolverhampton – one of the largest rooftop We want to run our business in an environmentally installations in Europe. responsible way. Energy consumption has a large part to play. We focus on our ability to reduce our burden on the As we grow and use more technology, our energy demand National Grid. We are also continually working to further is also expected to grow – even with increased energy reduce our energy consumption and to minimise our efficiency. This is why we are committed to investing in carbon emissions. our utility infrastructure and other innovations that will continue to power our business into an exciting future.
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34 Jaguar Land Rover Automotive plc Annual Report 2016/17 Our blueprint for success GLOBAL With record worldwide sales and new facilities GROWTH beginning production in Brazil, 2016 cemented our reputation as a truly global manufacturer. It’s a position we intend to develop, with the opening of further plants in Slovakia and Austria and the introduction of new models and initiatives that will ensure we keep pace with customers’ needs. Our vision With sales exceeding 600,000 vehicles for the first time, Fiscal 2016/17 proved to be an exceptional year for Jaguar Land Rover. To support this growing demand, and build a globally competitive business, we will continue to increase the number of manufacturing operations. Our overseas factories support the Company’s plants in the UK by providing additional production capacity, allowing us to reach new markets, bring more exciting vehicles closer to our customers around the world, and create a stronger, more agile and more sustainable business. What we have done well What we have learned Looking ahead We have strengthened our overseas The automotive landscape is changing We began construction of our operations with the introduction of faster today than ever before. Future £1 billion facility in Nitra, Slovakia, China’s first all-aluminium body shop mobility and transport needs will adapt in 2016. The factory will be at the to support production of the Jaguar as cities around the world adopt their forefront of aluminium manufacturing XFL. We have also launched our own regulations, while our customers and engineering expertise. It has been manufacturing plant in Brazil and started expect ever cleaner, safer and designed with the flexibility to enable building a new Slovakian facility. smarter vehicles. smart, connected technologies that ensure improved process efficiency Our future success will be based on and delivery. continuously anticipating new market trends, tapping into new growth For example, the paint shop will feature opportunities, and staying ahead of the highly automated processes that market by focusing on the innovation, deliver quality while minimising our design and creativity that our environmental impact. customers love. The Land Rover Discovery will be the first vehicle to be manufactured in Slovakia, complementing existing production in Solihull, UK.
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Company overview Strategic report Governance Financial statements 35 JAGUAR XFL China is an important barometer of success for any Our strategy in China is paying off. Retail sales were premium car maker and we have been working hard to 125,207 vehicles in Fiscal 2016/17, up 32 per cent grow our business in this critical market, both through compared to the 95,167 vehicles sold in the previous substantial investment and by working to better financial year, with notable increases in both locally understand our Chinese customers. produced and imported vehicles. There’s room for expansion too, and alongside plans to build an additional The Jaguar XFL has been designed in the UK exclusively 70,000 cars, we are also introducing further initiatives to for the Chinese market and built at the state-of-the-art ensure our Chinese buyers have a great choice of quality Chery Jaguar Land Rover plant in Changshu. vehicles, and easier ways to buy them.
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36 Jaguar Land Rover Automotive plc Annual Report 2016/17 Our blueprint for success GLOBAL Retail sales by region SALES Jaguar Land Rover retail sales were 604,009 cars in Fiscal 2016/17, up 16 per cent year on year with growth in China, North America, the UK and Europe. Total retail sales Balanced sales portfolio (Proportion of Fiscal 2016/17 retail sales) 604,009 units sold in Fiscal 2016/17 UK Europe China North America 21% 23% 16% 20% 21% year on year Overseas 15% Retail sales by region (000s of units) 141.0 124.8 Overall 123.5 Overall 124.7 Overall 125.2 Overall Overall 16% 24% 13% 32% 6% 107.4 99.6 95.2 94.7 Jaguar Jaguar Jaguar Jaguar 89.5 Jaguar 42% >99% 92% 93% 60% Land Rover Land Rover Land Rover Land Rover Land Rover 7% 1% 3% 20% 17% FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 UK North America Europe China Overseas Retail sales volumes were higher in as Europe with volumes of the Range Rover retail sales in China also grew year China, North America, the UK and Europe Rover also higher on the continent on year, supported by strong sales of but were slightly lower in Overseas compared to last year. Retail sales the Discovery Sport from the China joint markets, which include Brazil, South growth in North America also reflects venture and solid sales growth of Range Africa and Russia, compared to last year. the successful launch of the Jaguar XE Rover and Range Rover Sport. Total retail The Jaguar F-PACE was successfully in May 2016 and higher sales volumes sales from our China joint venture were launched in all markets in Fiscal of Range Rover Sport. 65,023 units in Fiscal 2016/17, more 2016/17 and retail sales of the Land than double the sales volume of Fiscal Sales growth in China was up 32 per Rover Discovery Sport grew strongly 2015/16. cent compared to last year, with retails across all key regions year on year. of all Jaguar models higher, including The introduction of the F-PACE and In addition, steadfast demand for the sales of the all-new long-wheelbase solid sales growth of XE, XF and Range Rover Sport, Evoque and Jaguar Jaguar XFL from our China joint venture, Discovery Sport in Overseas markets XF drove higher retails in the UK as well which began in September 2016. Land were more than offset by softer sales of other models.
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Company overview Strategic report Governance Financial statements 37 Retail sales by brand The global introduction of the Jaguar F-PACE and the launch of the Jaguar XE in North America as well as continued strong demand for the Land Rover Discovery Sport drove our retail sales growth. Jaguar sold 172,848 units in Fiscal 2016/17, a rise of 83 per cent from the previous year. This increase was helped by the introduction of the award-winning F-PACE and improved XF sales, supported by the launch of the all-new long- XE XF F-PACE wheelbase XFL. 45,469 25% 37,157 9% 67,955 RETAIL SALES STARTED IN MAY 2016 (FISCAL 2015/16: 36,452 UNITS) (FISCAL 2015/16: 34,182 UNITS) F-TYPE XJ 10,777 9% 11,489 2% (FISCAL 2015/16: 11,839 UNITS) (FISCAL 2015/16: 11,735 UNITS) Retail volumes for Land Rover rose by one per cent to 431,161 units in Fiscal 2016/17, as strong demand for the Discovery Sport offset the run-out of the Defender and Discovery. Sales of the new Discovery, which began in February Discovery Sport Range Rover Sport Range Rover Evoque 2017, totalled 4,862 units. 126,152 32% 89,746 3% 114,373 3% (FISCAL 2015/16: 95,889 UNITS) (FISCAL 2015/16: 86,915 UNITS) (FISCAL 2015/16: 110,533 UNITS) Discovery Range Rover Defender 42,023 18% 57,480 4% 1,380 CEASED PRODUCTION IN JANUARY 2016 (FISCAL 2015/16: 51,072 UNITS) (FISCAL 2015/16: 59,974 UNITS) (FISCAL 2015/16: 22,504 UNITS) Note: One Jaguar XK and seven Freelander retail sales were made in Fiscal 2016/17 but are not included in the analysis above as production of both ceased in 2014.
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38 Jaguar Land Rover Automotive plc Annual Report 2016/17 Our blueprint for success TRANSFORMED Stage one of our transformation is complete, COST STRUCTURE with costs reduced across the business AND BUSINESS through process excellence and architecture EXCELLENCE efficiencies. Now we are working to lead in electrification and achieve the scale to remain globally competitive. Our vision As we progress towards our goals of operational excellence and optimum business efficiency, our major transformation programme continues. Productivity and cost-management initiatives that maintain our investment levels and global competitiveness remain our focus. Our quest is to do more with less, through state-of-the-art facilities and new technologies, while increasing our efficiency and effectiveness right across the Company. What we have done well Process excellence is the bedrock of our business. The ‘Jaguar Land Rover Way’ and the Tata Business Excellence Model allow us to standardise best practice and continually enhance the way we work, while still allowing for flexibility and responsiveness so that we can exploit changes and new opportunities as they arise. What we have learned Looking ahead We know that a ‘go-look-see’ approach As we grow our global footprint, we are is invaluable in evaluating processes introducing our standardised framework and identifying and resolving issues to overseas sites as a way of directing and blockages. In 2016, a centralised cross-functional collaboration and governance programme was introduced ensuring the deployment of the right to further enhance training and capabilities needed to manufacture development, as well as to empower our products. leadership at all levels to experiment Expanding our capabilities in big with innovative solutions. data analytics enables us to be agile and adapt quickly to challenges and business drivers. We are also continuing to invest in advanced technologies to enhance the efficiency of our business, increasing cost savings.
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Company overview Strategic report Governance Financial statements 39 SMALL WISDOMS: INNOVATION FROM THE GROUND UP Jaguar Land Rover encourages its staff to continually This year, a team at our manufacturing plant in Castle challenge and drive change and innovation, whether that Bromwich, UK, implemented improvements to the Andon be in the design of our vehicles or in the way we work. pull-cord alert that notifies the supervisor of an issue This philosophy is at the heart of our Team Innovation on the production line. The team updated the system to Circles, where we ask our colleagues to think of provide a more accurate alert and quicker response time. themselves as ‘business owners’, and encourage them to Thanks to their efforts, when an Andon cord is activated suggest ideas to streamline processes, eliminate waste the issue and its location are sent to a central computer and reduce inefficiencies. that can rank more than 300 issues in order of productivity impact and issue an immediate alert to the right place. It The results have more than exceeded expectations with is now being installed across the Castle Bromwich site at implemented ideas generating £5.3 million in savings. a cost saving of £50,000 per block and £350,000 to the plant in total.
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40 Jaguar Land Rover Automotive plc Annual Report 2016/17 Our blueprint for success ENGAGED, As the automotive market shifts and PASSIONATE evolves, the passion, creativity and PEOPLE skills of our people are what make us the successful, sustainable business we are today. Our vision What we have learned We are committed to nurturing this We have identified five key areas where talent and investing in the education we need to attract the brightest and the and training of all our employees, while best in order to support our product and also helping to develop the workforce business ambitions: of tomorrow, addressing skills shortages • Virtual modelling – we increasingly and working to close the industry’s engineer in a virtual world, using gender gap. technology such as 3D printing, and What we have done well we need people who can combine skills in mathematics and engineering Each year we invest more than with creative flair WORKING £100 million in the Jaguar Land Rover Academy. • Data analysis – using and HAND-IN-HAND manipulating data to gain greater Today, nearly a quarter of our insights to help the Company Our success is built on employees are working towards a grow is an expanding need across partnerships – with our 40,000-qualification, from apprenticeships our business plus employees, customers and to doctorates. We have maintained • – new technology beyond. The engagement and a 2 per cent intake of graduates Hardware design enthusiasm of our many suppliers and apprentices as a proportion demands new industry roles, such are central to the story. of applications since 2013, and as chemists to develop future battery technology Many of these suppliers are small in 2016, 407 joined the Company. and medium-sized enterprises. In Fiscal 2016/17, we supported • Software design – developing smart These businesses are the more than 100 PhD projects. and secure technology and new ways lifeblood of the UK economy and We are also reaching out to untapped for people to use their cars make are crucial to our success. The talent through a number of education software engineers essential strength of our relationships is schemes. Many employees who have to our future something we are very proud of: been through these programmes have • Programme delivery – only with the we work hand-in-hand with our gone on to be award-winning engineers. highest-calibre project management suppliers. Our UK supply chain talent can we deliver lasting solutions has grown strongly, matching our Our work with partners and suppliers on time and within budget own growth story. UK-sourced on the National Automotive Innovation components have increased to Centre will create a state-of-the-art 50 per cent, creating £3.5 billion technology hub for industrial and per annum of additional UK academic research and development contracts, supporting 200,000 to foster new skills and engage future jobs and taking our total annual generations of engineers. manufacturing spend with UK suppliers to more than £6.5 billion. In the last five years, our investment has generated more than 60,000 new jobs in the UK supply chain.
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Company overview Strategic report Governance Financial statements 41 INNOVATION IS IN OUR DNA Looking ahead To help address industry shortages, At Jaguar Land Rover we value the environmentally considerate ways in the last four years we have reached power of new ideas. We structure of shipping our vehicle bodies around out to more than 2.5 million young ourselves so that innovation flows the world, they designed a reusable people to inspire them to consider freely through our organisation. structure with ingenious packing an automotive career. that allows vehicle bodies to overlap Our Innovista programme is designed without any possible damage. We are also supporting award-winning to maximise the expertise within STEM (science, technology, engineering the Company to meet some of The result is a cost saving of nearly and mathematics) education schemes the biggest challenges; to develop £1 million in shipping and material for children aged five and upwards. We new and exciting ideas that help waste costs, alongside a substantial will be increasing these inspirational us be more efficient and bring CO2 reduction. outreach programmes to align with the pioneering concepts into our product Through the passion and innovative future skills needs we have identified. development pipeline. thinking of our employees, our Our plan also includes initiatives that One particular team of engineers pioneers have delivered significant target untapped talent pools. exemplifies how we deliver benefits, not only for the business real change. In response to the need but also for the environment. to develop more cost-effective,
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42 Jaguar Land Rover Automotive plc Annual Report 2016/17 Our blueprint for success OUR Deep within Jaguar Land Rover’s engineering PIONEERS HQ, hundreds of technical wizards in areas from virtual reality to self-learning cars and acoustics are working on making our future even more awe-inspiring. JOHN PEPPERELL, 49 ORLA MURPHY, 25 DR THOMAS POPHAM, DAY JOB: SENIOR DAY JOB: AUDIO 33 BUSINESS AND PRODUCT CALIBRATION ENGINEER DAY JOB: TECHNICAL PLANNING MANAGER “My job is about the perception SPECIALIST, SELF- “A lot of what I do now is about of sound in the car. Today, I am LEARNING CAR PROJECT electronic adaption of the engine. working on zonal audio potential “We’re working on research In 15 years I think there will still of the future – where specific that uses machine-learning be conventional engines but by noise cancellation can create techniques to learn driver then hybrids will be ‘conventional’ different listening zones within preferences. Vehicle intelligence technology and we’ll be at the the car itself.” is going to be such a big front end of fuel cell technology.” improvement – especially as cars become ever more connected to each other and ‘the cloud’.”
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Company overview Strategic report Governance Financial statements 43 BRIAN WATERFIELD, 49 LINH NGUYEN SLATER, KRIS KOBYLINSKI, 30 LEE SKRYPCHUK, 35 DAY JOB: VIRTUAL 29 DAY JOB: RESEARCH DAY JOB: HUMAN REALITY TECHNICAL LEAD DAY JOB: HUMAN TECHNOLOGY DELIVERY MACHINE INTERFACE “Virtual engineering is the future. MACHINE INTERFACE MANAGER, SELF- SPECIALIST A physical test of a car relies SPECIALIST FOR SELF- LEARNING CAR PROJECT “I am working on what we call ‘off-on many external factors to get LEARNING CAR PROJECT “I lead the development of surface touch’ with a capacitive it right, but in the virtual world technologies that don’t exist yet system that senses your finger you’re not reliant on anything. “I’m involved in developing As we develop more ways to the interfaces for artificial in a team of machine-learning from 15-20cm away – so you can simulate, we will be able to intelligence in the self-learning engineers, big-data scientists wave your hand to open and close control time and space with any car. I conduct testing to ensure and human factors specialists. the sunroof for example – using a weather conditions.” the technical interfaces we design Our aim is to develop the first sensor in my hand. We are already are safe, usable and delightful truly intelligent car.” looking at the future today.” for our customers.”
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44 Jaguar Land Rover Automotive plc Annual Report 2016/17 Our blueprint for success WOMEN It doesn’t have IN OUR to be a man’s world Men dominate the UK automotive WORKPLACE industry, filling 91 per cent of engineering roles. There are fewer women in senior roles and there is a gender pay gap exacerbated by the low number of women coming into the industry and flourishing within it. But while attracting talent today is more competitive than ever, things are changing. Recruiting, training and retaining an engaged, skilled workforce aligned to Changing perceptions the needs of the business is at the heart of the industry of our success strategy. We stand by a belief that non-quota interventions – We are tackling, head-on, the attitude alongside targeted initiatives that that ours is a male-dominated, dirty, support lasting careers and tackle the ‘spanner and hammer’ industry. pay and skills gap – will help us create Working with external and internal the diverse, skills-based workforce ambassadors, governments, schools we need in a rapidly changing global and colleges, we are looking to change business environment. this image and inspire young people to explore the next generation of exciting career opportunities within engineering and Jaguar Land Rover. Since 2013, we have reached more than 2.5 million young people in the UK, and as a result our female graduate and apprentice intake is up 30 per cent. Equally impressive is the fact that women joining the graduate programme this year make up 29 per cent of the total hires by Jaguar Land Rover. A ?exible and supported work environment We believe going the extra mile for our employees will benefit a sustainable business such as ours by increasing talent retention and employee engagement, and helping to eliminate gender disparities. This is why we support flexible working hours, provide on-site childcare and offer a class-leading, 52-week, fully paid maternity leave. All this has helped increase the number of women coming through at the early and mid-stage career levels, and is making our succession pipeline more effective.
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Company overview Strategic report Governance Financial statements 45 UNTAPPED TALENT We launched our annual Young Women in the Know Then we aligned the programme with apprentice programme for 15 to 18-year-old students in 2013 to recruitment and in 2016 rolled out the course across encourage more females to apply for apprentice and the UK with the aim of reaching new talent for our graduate roles. pipeline programme. Since then, the programme has helped grow our female apprentice population from 8 per cent to 22 per cent. Product development We are proud to have so many leading The rise of the female guru We empower everyone to play a role in female design and engineering experts Women are dominating thought what we do and how we work, driving and support this with a consultancy leadership at Jaguar Land Rover. efficiencies and effectiveness across programme that encourages all women Even though the industry struggles to the business. in the business to contribute to the attract and encourage women into innovation and design of our products. leadership roles. We know it is important that our An excellent example of this is the workforce reflects the diversity of Jaguar F-PACE, where diversity of input In 2016, our leading female employees our customers. Women have a huge and a female perspective were critical won a fifth of all the awards for Autocar influence in the car purchasing process, parts of the product’s development and magazine’s most influential women in so it is crucial to have women in key it being named Supreme Winner at the the industry. decision-making roles, contributing Women’s World Car of the Year Awards. We are committed to promoting our to the better understanding of our female pioneers to help inspire future customers and helping create products talent into and within the Company they will love. and invest in the development of senior female talent through our Top Flight and Leadership Summit programmes, which prepare our brightest and best females for the highest leadership roles.
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46 Jaguar Land Rover Automotive plc Annual Report 2016/17 Our blueprint for success TECHNOLOGY As one of the world’s leading premium automotive FOR GOOD companies, we have a duty to use our engineering expertise to not only make the most desirable and capable cars, but also to improve society and the world we share. 6.3m For Jaguar Land Rover, engineering leadership lives impacted by isn’t just the business we are in – it’s the reason Jaguar Land Rover’s we are in business. corporate social responsibility activities Our vision Technology and engineering can have huge benefits for society, bringing solutions to countless everyday challenges. With our expertise, skills and knowledge in these fields, we are in an enviable position to address these challenges and make a real difference to the world around us. Our innovation and volunteering programmes leverage the skills of our employees to find solutions to improve the way we work. By continuing to apply these programmes to a wider social purpose, we are harnessing our technological expertise to help those in need. Jaguar Land Rover providing specially developed technology to help people in our local community – see opposite for details. What we have done well Contributing to society is central to who we are. Our commitment to corporate 2016 also brought a significant programmes, we can address an even social responsibility (CSR) was increase in the number of employees wider range of issues, such as in-car recognised in 2016, when we won Best volunteering to work in local search-and-rescue technology, and International Sustainability Programme communities and support education disability and hypermobility solutions. at the UK’s National CSR Awards. The programmes during work hours, rising We already lead the world in aluminium health and wellbeing technologies in our from 7,774 in Fiscal 2015/16 to nearly recycling. We’re now taking this vehicles, and our work in education and 10,000 in Fiscal 2016/17. technological expertise further, applying talent development received particular it to other materials. For example, the praise. Our Global CSR programme, What we have learned wheel arch liners, dashboard insulation, through which we apply our design and We are already sharing our engineering seating and trim in our vehicles use a technology expertise for social benefit, expertise and solutions to help solve felt made from 100 per cent recycled has now supported almost six million some of the biggest challenges in the materials. Working with universities and disadvantaged people in more than industry, such as recycling, cleaner air, other companies, we aim to pioneer 25 countries. vehicle safety and mobility solutions. even more sustainable materials for By broadening the scope of our the future. innovation, volunteering and education
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Company overview Strategic report Governance Financial statements 47 PROJECT HERO Land Rover has supported the International Federation of such as landslides, earthquakes and floods. Dramatic Red Cross and Red Crescent Societies (IFRC) for over 60 landscape changes can make maps redundant, which years. It is through this long-standing partnership that we adds to the danger and difficulty of finding and rescuing have collaborated with the Austrian Red Cross to develop survivors, so the drone’s bird’s-eye view will allow an advanced communication vehicle. Based on a bespoke rescuers to investigate an emergency scene from version of the new Land Rover Discovery, the vehicle a safe distance. includes the world’s first roof-mounted drone, and will Project Hero perfectly showcases how Jaguar Land be trialled by Red Cross emergency response teams. Rover’s engineering expertise can help to improve the With the drone airborne, live footage can be transmitted lives of others. to the Red Cross’s emergency response teams, helping them respond more quickly and effectively to disasters Looking ahead Last year we began working with Our apprentice engineers used their Improving the lives of others and the Countrymen’s Club, a charity expertise to develop a tractor simulator tackling social problems are central to that supports people who have that enables retired farmers to once again our responsible business programme. worked in outdoor industries such as experience something they loved. We have joined forces with Remap, a agriculture but now suffer from long-We have also designed a set of charity that matches skilled volunteers, term conditions including dementia, lightweight folding steps enabling people including engineers and technicians, Parkinson’s and depression. with MS or other mobility issues to get with individuals affected by disability. onto and ride horses unaided, an activity proven to have therapeutic benefits.
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48 Jaguar Land Rover Automotive plc Annual Report 2016/17
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Company overview Strategic report Governance Financial statements 49 Managing our risks and opportunities Future-proofing the business
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50 Jaguar Land Rover Automotive plc Annual Report 2016/17 Managing our risks and opportunities OUR We manage and monitor risk and the APPROACH factors that could impact our plans for TO RISK long-term sustainable growth. De?ning risk opportunities. The ultimate goal of risk management within Risks are uncertain events that could materially impact Jaguar Land Rover is to continually assess the control business objectives – negative for threats and positive environment to prevent and build resilience against any for opportunities. We recognise that risk is inherent in all internal or external shocks, both anticipated and unforeseen. business activities and must be balanced when assessing returns. Successful management of these risks is therefore Responsibility for risk key to accomplishing our strategic objectives and the long- The Board of Management is ultimately responsible for the term sustainable growth of our business. Enterprise risk management of risks within Jaguar Land Rover. However, the management (ERM) is used as a system to identify, assess, wider organisation is responsible for the proactive day-to-day control and continually monitor key risks that could affect management and control. Board of Management members our business objectives. review our key risks to monitor the progress of mitigating actions, identify new risks, agree changes to existing risk Risk management profiles, and undertake any additional actions to manage To achieve an informed understanding of our tolerance for risks that may be required as the business environment risk when delivering our overall business plan, we must changes. Principal risks and exceptions are reported to the be mindful that the objective of risk management is not Audit Committee regularly to assist in the decision-making necessarily to eliminate risk, but to ensure that the risks process and ensure adequate controls are in place to protect we do accept remain within a predetermined level of the business. acceptability and control while pursuing value-enhancing Our responsibility framework Jaguar Land Rover Automotive plc Board Audit Committee Board of Management First line Second line Third line of risk defence of risk defence of risk defence Control of risks Oversight and Independent con?rmation of controls controls assurance Business operations risk management ERM and oversight functions Internal/external audit
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Company overview Strategic report Governance Financial statements 51 Our approach to risk management Creating and sustaining The environment in which we Risk management: identification, value through ERM operate is dynamic, as are the assessment, evaluation, response risks we face and reporting The ERM framework helps us to identify new and evolving risks and We plan for certain known changes By continuing to monitor and assess opportunities so we can understand to the industry and the external risks as well as embedding the and manage risks that may materially environment while remaining management of such risks within our impact our business objectives. This sufficiently flexible for rapid and culture, we can identify new material framework supports and enables future unknown changes that are inherently risks and opportunities early on to value creation and also preserves the difficult to anticipate. Managing the take advantage of value-adding value of routine operations. changing environment in which we prospects and mitigate value-eroding operate and having the ability to threats. We also continue to evaluate The ERM framework is also an be resilient to sudden unforeseen and report risks and opportunities to effective communication tool used challenges support long-term enable us to prioritise effectively and by senior management to monitor sustainability of the business and formulate effective responses. and gain consensus on how to healthy profitable growth. effectively manage and control risks enterprise-wide. Our enterprise risk management (ERM) framework RISK AND RESILIENCE Organisation Process Robust tools Structured Continuous A cross-functional We embed risk and training reporting improvement network of risk management into We embed common Our risk reporting is Our risk management champions coordinates routine activities risk management structured to inform the process is designed to the identi?cation, enterprise-wide, tools, training, appropriate stakeholders enable the assimilation monitoring and supporting and ensuring techniques, language promptly to aid the of best practice from management of risks robust business and approaches to decision-making prior experience and within their respective decision-making. The engender cross- process. Reporting also external benchmarking, functional areas. A standardisation of risk functional consistency allows us to effectively leading to continuous central ERM team management processes of risk identi?cation, categorise risks so that improvement. This consolidates and reports across functions assessment, monitoring appropriate stakeholder process ensures that on risk information to the supports a consistency and reporting. This working groups discuss the risk management Board of Management, in our approach to ensures that risks relevant risks and ensure process becomes Audit Committee and the management of are appropriately that high-quality input is more efficient over time Jaguar Land Rover risk, facilitating its captured and calibrated received and appropriate and changes as the Automotive plc Board use and enhancing its consistently across mitigation strategies business grows. (‘JLR plc Board’). effectiveness. the organisation. are proposed.
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52 Jaguar Land Rover Automotive plc Annual Report 2016/17 Managing our risks and opportunities OUR Risks are identified, assessed and measured PRINCIPAL against a defined set of criteria to consider RISKS the likelihood of occurrence and potential impact to the business, facilitated by our enterprise risk management (ERM) framework. Plotting our principal risks on a risk map helps to visualise each risk profile as well as targeting to bring each risk back within a tolerable level. Principal risks at a glance The potential impact and likelihood of our key risks Our 10 principal risks Prior year ranking 4 1. Competitive 9 2 (3) 3 1 business efficiency Material 2. Globaleconomic 8 6 and geopolitical (1) 5 environment 7 3. Environmental Moderate regulations and (2) Impact compliance 10 4. Brandpositioning (4) 5. Rapidtechnology (New) Immaterial change 6. Informationand (New) cyber security 7. Exchangerate (6) ?uctuations Unlikely Possible Likely 8. Unethicaland Likelihood prohibited business (10) Key practice Risks that are highly likely to occur and could materially Current risks 9. Productliability (5) impact our ability to reach our business objectives. and recalls Risks that remain at tolerable levels but could Path to target 10. Patent and impact the business unless monitored and managed. intellectual property (9) net risk pro?le Risks that are unlikely to materialise and are unlikely (IP) protection to materially impact our business. Our 10 principal risks Changes to our principal risks Two principal risks introduced Two principal risks have moved during Fiscal 2016/17 into the top 10 listing out of the top 10 listing Our principal risks change as our business 5. Rapid technology change • Distribution channels evolves and the external environment 6. Information and cyber security • Global expansion changes. In Fiscal 2016/17, we have Recent events and increased focus have Plans and mitigating actions put in focused more emphasis on the potential raised the respective profiles of both place since Fiscal 2015/16 have proved impact of threats to internet-connected risks. Mitigating actions are in place effective in reducing our exposure to devices and rapid developments (as detailed on pages 54 to 55) to these risks, which are now back to more in technological advancements in address the higher intensity of risk to tolerable levels. sustaining competitiveness. the business as a result.
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Company overview Strategic report Governance Financial statements 53 Jaguar Land Rover classi?es risks into four broad categories to facilitate efficient risk management and formulate effective mitigation strategies. Our risk register details our principal risks as well as other notable risks that are reported to and monitored by the Board of Management. Other monitored risks by category Legal and Strategic Operational compliance Financial Changing customer Key skills gap Open source technology Liquidity expectations and trends Supply chain failure Trade barriers and Commodity prices Global expansion sanctions Business continuity Pension obligations Energy – security of supply Distribution channels Risk horizon Future risks We recognise the need to anticipate and prepare for future challenges and trends that may develop and that Strategic New Commodity Operational could materially affect our technology scarcity long-term business success. Our risk horizon enables us to proactively anticipate forthcoming issues to inform Competitors’ Skills gap and key expanding personnel our strategy creation process. portfolios Current Trading bloc Protocols governing dynamics new technologies (i.e. automation) Regional Legislation change recession (CO2 target, internal combustion engine restrictions) Legal and Financial compliance
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54 Jaguar Land Rover Automotive plc Annual Report 2016/17 Managing our risks and opportunities OUR The principal risks faced by Jaguar Land PRINCIPAL Rover are outlined below. The risks RISKS discussed are not exhaustive and Jaguar Land Rover may be subject to other risks not speci?cally outlined in this Annual Report. Prioryear Strategic Consequences Mitigations* Opportunities* ranking 2. Global economic and Given our global distribution of We continue to expand our Global economic growth in (1) geopolitical environment sales, changes in the external international footprint (e.g. developed and emerging environment could have a Slovakia manufacturing) and markets presents Our expanding global presence signi?cant impact on the maintain a balanced retail opportunities to extend increases our exposure to global demand for our vehicles sales pro?le across our key sales. Global growth creates changes in the global economic and our supply chain. This may sales regions. Furthermore, we opportunities both in new and geopolitical environment as affect our ?nancial results. continue to closely monitor and existing geographical well as other external factors (i.e. global geopolitical and markets as well as new and Brexit, political instability, wars, macroeconomic developments. existing segments. terrorism, natural disasters) that may impact our business. 4. Brandpositioning Our potential inability to Recent successful model Strengthen our brands (4) successfully position, maintain launches have broadened our by creating greater brand Brand positioning is becoming and build the strength of product range to existing and association through increasingly challenging as the our brands as well as failing new customers in established innovation and technological dynamics of the automotive to develop new products/ and emerging segments. In advancement into our market (i.e. automated technologies that meet addition, we regularly monitor expanding product portfolio driving, electri?cation, customer preferences, or the perception of our brands and services. digital connectivity) and suffering delayed product to quickly identify and address the competitive pressures launches could impact risks and opportunities that from existing automotive demand for our products. may arise. manufacturers and new disruptive entrants evolve. 5. Rapid technology change Any delay in the launch of We continue to invest Substantial changes to the (New) technologically intensive substantially in R&D and market (e.g. automation and The fast pace of technological products, or if the technology we also continue our electri?cation) enable us to development together with in our products becomes strategic focus on key focus on launching industry scarcity of specialist resources relatively obsolete, could technology areas including de?ning products ahead of could result in a signi?cant impact sales as customers autonomy, connectivity and our competition as well as change in the automotive move to purchase products electri?cation with the aim strengthening partnerships industry and increase the risk from our competitors. of launching our products with global technological of delivering superior products ahead of our competition. organisations and leading demanded by current and academic research teams. future customers. Operational Consequences Mitigations* Opportunities* Prioryear ranking 6. Information and cyber security The loss of sensitive and We strive to implement We aim to maintain a strong (New) personal data or a breach consistent security policies IT control environment, and New and emerging technologies in any safeguards aimed at and procedures as well as by monitoring and reacting bring unprecedented threats protecting this information educating staff, vendors and to emerging cyber threats we to internet-connected devices could lead to signi?cant suppliers to embed best strive to embed deeper, more including vehicles, while recent legal action combined with practices by implementing intelligent controls over time. global hacking incidents the imposition of regulation internal tools to detect impacting the geopolitical and associated ?nes. In and mitigate the current environment indicate an increase addition, we would likely and emerging cyber in the motivation to instigate experience negative press security threats. cyber attacks. and reputational impacts. 9. Product liability and recalls Increases in related costs and We regularly monitor the Enhanced vehicle connectivity (5) warranty claims as well as service data of our vehicles and digital capability provide Potential defects and quality longer-term impacts on sales to proactively manage recalls opportunities for us to identify de?ciencies could increase our due to adverse reputational and minimise warranty claims. and remedy potential faults exposure to risks associated effects could occur. In addition, We also issue technical more efficiently. with product liability. we could be the subject of class updates to our dealer network actions or other large-scale to manage identi?ed faults lawsuits as a consequence. and defects. * The mitigations and opportunities stated are merely examples and do not constitute an exhaustive list.
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Company overview Strategic report Governance Financial statements 55 Legal and Prioryear compliance Consequences Mitigations* Opportunities* ranking 3. and compliance Environmental regulations We may incur additional We have invested substantially Our development of battery (2) compliance costs, including in the development of electric products (starting We are subject to a rapidly incremental investment, to lightweight architecture, with the I-PACE in 2018) and evolving regulatory landscape avoid facing signi?cant civil our in-house four-cylinder the introduction of mild and with associated laws, regulations and regulatory penalties, and engines and electri?cation plug-in hybrid technologies and policies that all impact the our competitors may gain an technologies, including mild helps to achieve compliance vehicles we produce and our advantage by adopting new and plug-in hybrid as well as and aligns our products with manufacturing facilities (i.e. CO emissions and fuel efficient battery electric vehicles. We consumer demands. 2 emissions and fuel economy). technologies before we do. also retain an EU derogation permitting more lenient ?eet average CO2 targets under a certain sales threshold. 8. Unethical and prohibited Non-compliance with Our code of conduct sets We are committed to (10) business practices ethical and/or legal practices out the behaviours that conducting business in an Our continuing international may materially impact our we expect of our staff, ethical manner to instil expansion exposes us to increased reputation and could result including conforming to the a reputation of trust and diversity and complexity of legal in restrictions being placed highest moral and ethical reliance. Such qualities foster and other frameworks in a variety on our operations, causing standards and complying with greater business relationships of jurisdictions and, as such, we business disruption. applicable laws, including with the supplier base, become subject to maintaining anti-bribery, corruption and governments and partnerships legal and ethical standards competition laws, sanctions with other third parties. across the global locations in and export controls. which we operate. 10. Patent and intellectual Failure to protect our IP We have a dedicated team The development of (9) property (IP) protection increases the risk that third of in-house specialists that electri?cation, automation and Our substantial investment parties could copy features of manage matters relating connectivity are increasing in R&D generates IP and the our products from which we to IP to ensure that robust our stock of IP, which enables protection of this IP is necessary in derive competitive advantage. processes are followed to additional revenue streams order to prevent its unauthorised Furthermore, our infringement protect our IP, by means of through licensing and other use by third parties. Conversely, of any third-party IP could patents, registered designs, channels while enhancing our we need to ensure that we do not impair our ability to bring new trademarks and copyrights. pro?le as an innovator in the infringe the IP of third parties. products to market and expose automotive industry. us to infringement lawsuits. Consequences Mitigations* Opportunities* Prioryear Financial ranking 1. Competitive business efficiency If we are unable to deliver the We have launched certain We are developing real-time (3) We have initiated programmes desired bene?ts from these initiatives to reduce product analytical data tools to aid to optimise operating efficiency. programmes, our business and business complexity, to in the business decision-However, there is a risk that results may be adversely bene?t from economies of making process and realise these programmes do not impacted and our ability to scale, and we have robust greater degrees of efficiency. deliver projected efficiencies and compete successfully over the project management Furthermore, our expansion anticipated bene?ts may not longer term could be affected. processes in place to ensure plans present opportunities to accrue as expected. set targets are met. invest in world-class facilities and enhanced capabilities. 7. Exchange rate ?uctuations Generally, a stronger Pound Currency transaction risk We continue to investigate (6) Approximately 80 per cent of adversely impacts our is managed with ?nancial further opportunities to our revenue is derived from earnings because the value derivatives in line with the develop our international international sales (e.g. the US of overseas sales is eroded. hedging policy approved by the manufacturing footprint, and China) and we source a Structural misalignments in JLR plc Board. Also, we aim to which may result in greater signi?cant proportion of our the denomination of costs and align our sourcing base with natural hedging of our components from the Eurozone, revenues in different currencies our global sales pro?le and the currency exposures by aligning while our reporting currency is expose us to longer-term revaluation of our US Dollar the currency pro?le of cost Pounds Sterling. foreign exchange trends beyond debt provides a natural offset with sales. our hedging programme. to our US Dollar receivables.
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56 Jaguar Land Rover Automotive plc Annual Report 2016/17 Financial review CHIEF Record retail volumes of 604,009 FINANCIAL units and revenue of £24.3 billion OFFICER’S in Fiscal 2016/17 mark the STATEMENT seventh successive year of growth for Jaguar Land Rover. Jaguar Land Rover had a solid financial The income statement includes £4 billion, including investment in the year in Fiscal 2016/17, underpinned by adjustments for an accounting policy new Slovakia plant. record retail sales of 604,009 units, up change in Fiscal 2016/17 to reclassify Despite increased geopolitical 16 per cent year on year. The increase gains and losses on revenue and cost uncertainty (e.g. Brexit in the UK), in sales reflects the success of our new hedges from ‘Foreign exchange loss’ to major markets including China, the products, particularly in China, North ‘Revenue’ and ‘Material and other costs US, Europe and the UK continue to see America, the UK and Europe. of sale’ respectively, which we believe solid economic growth, with only some more appropriately reflects the intent Wholesales were 534,746 units, up markets such as the Middle East, of these hedges. 5 per cent year on year, generating Russia and Brazil showing more record revenues of £24.3 billion, Free cash flow (before financing) was fundamental weakness. up £2.1 billion compared to last £295 million after total investment Jaguar Land Rover’s planning target year (unconsolidated China Joint spending of £3.4 billion. We also paid is to achieve an 8–10 per cent EBIT Venture excluded). a £150 million dividend to our parent, margin in the medium term over our Tata Motors, and issued about Profit before tax was £1.6 billion, up five-year business plan, supported by £857 million of new bonds in Fiscal £53 million compared to a year ago. the continued launch of new products 2016/17. Total cash and financial The increase primarily reflects the and technologies to drive growth with deposits at 31 March 2017 was higher wholesales and £151 million greater operating leverage. However, £5.5 billion and total liquidity was of exceptional Tianjin Port explosion Jaguar Land Rover expects the incentive £7.4 billion including a £1.9 billion recoveries (compared to £157 million and growth cost pressures on margins undrawn revolving credit facility. of losses a year ago), offset partially by seen in Fiscal 2016/17 and historical higher costs for marketing (increased Jaguar Land Rover’s strategy continues seasonality of volume and profit by competitive conditions in the US and to be to achieve sustainable profitable quarter to continue in Fiscal 2017/18. some other markets) and other items growth by investing proportionally The ramp-up of exciting new products, (raw materials, launch and growth). more in new products, technology and including Land Rover Discovery, the Earnings before interest and taxes manufacturing capacity. Consistent Range Rover Velar and other new (EBIT) were £1.5 billion, representing with this, Fiscal 2017/18 investment models, are expected to drive solid a 6 per cent margin. spending is expected to be in excess of growth in Fiscal 2017/18 and beyond. Kenneth Gregor Chief Financial Officer Jaguar Land Rover Automotive plc 24 July 2017
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Company overview Strategic report Governance Financial statements 57 FINANCIAL Consolidated income statement PERFORMANCE Jaguar Land Rover once again achieved record retail sales and revenue in Fiscal 2016/17 and maintained a solid level of pro?t before tax. Revenue Revenue was £24.3 billion in Fiscal 2016/17, up from the £24.3bn Fiscal 2016/17 £24.3bn £22.3 billion in Fiscal 2015/16, primarily reflecting strong retail Fiscal 2015/16 £22.3bn sales of 604,009 units (including sales from the China joint FISCAL 2015/16: £22.3BN Fiscal 2014/15 £22.1bn venture), up 16 per cent on the 521,571 units in Fiscal 2015/16, and a more favourable foreign exchange environment with the weaker pound following the EU Referendum result in June 2016. EBITDA1 – Earnings before interest, tax, depreciation and amortisation EBITDA was £3.0 billion (12.1 per cent margin) in Fiscal 2016/17, Fiscal 2016/17 £3.0bn 12.1% £3.0bn down slightly from the EBITDA of £3.1 billion (14.1 per cent Fiscal 2015/16 £3.1bn 14.1% margin) in the previous ?scal year, as the higher revenue Fiscal 2014/15 £4.1bn 18.7% (12.1% Margin) was offset by higher marketing expense as well as higher manufacturing and other operating costs. FISCAL 2015/16: £3.1BN (14.1%) EBIT1 – Earnings before interest and taxes EBIT was £1.5 billion (6.0 per cent margin) in Fiscal 2016/17 Fiscal 2016/17 6.0% £1.5bn £1.5bn compared to £1.8 billion (8.0 per cent margin) in Fiscal Fiscal 2015/16 £1.8bn 8.0% 2015/16. The lower EBIT in Fiscal 2016/17 was driven by Fiscal 2014/15 £3.1bn 13.9% (6.0% Margin) higher depreciation and amortisation related to signi?cant FISCAL 2015/16: £1.8BN (8.0%) capital expenditure incurred in prior periods, partially offset by higher profits of £156 million from our China joint venture. PBT – Profit before tax PBT was £1.6 billion in Fiscal 2016/17, broadly in line with Fiscal 2016/17 £1.6bn £1.6bn the PBT of last year, as the lower EBIT and more unfavourable £1.6bn Fiscal 2015/16 revaluation of unrealised foreign currency debt and hedges were FISCAL 2015/16: £1.6BN Fiscal 2014/15 £2.6bn offset by lower net finance expense, favourable revaluation of commodity hedges and £151 million of further exceptional insurance and other recoveries related to Tianjin (compared to the £157 million net charge incurred in Fiscal 2015/16). PAT – Profit after tax PAT was £1.3 billion in Fiscal 2016/17, in line with the PAT Fiscal 2016/17 £1.3bn £1.3bn of last year. The effective tax rate in Fiscal 2016/17 was Fiscal 2015/16 £1.3bn 21.0 per cent compared to 15.7 per cent last year, primarily FISCAL 2015/16: £1.3BN Fiscal 2014/15 £2.0bn reflecting the non-recurrence of favourable deferred tax credits in Fiscal 2015/16 (£74 million related to UK Patent Box legislation). For further disclosure on our approach to tax, please see note 14 on page 100 of the financial statements. 1. Please see note 3 of the financial statements on page 93 for the definition of EBITDA and EBIT.
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58 Jaguar Land Rover Automotive plc Annual Report 2016/17 Financial review FINANCIAL Consolidated cash ?ow PERFORMANCE Free cash flow before financing was positive £295 million in Fiscal 2016/17 after total investment spending of £3.4 billion, funded primarily by the solid EBITDA1 and positive working capital movements. Consolidated cash ?ow (£ millions) 467 (199) (3,438) 1,855 1,610 841 (300) 836 295 PBT D&A Working Tax Total Free Changes Dividends, Change FY16/17 and other capital paid investment cash flow in debt interest in cash and and accruals and fees financial deposits Key drivers Total product Investment spending in Fiscal 2016/17 reached £3.4 billion (14.1 per cent Fiscal 2016/17 £3.4bn 14.1% and other investment2 of revenue), compared to the £3.1 billion (14.1 per cent) in the prior Fiscal 2015/16 £3.1bn 14.1% fiscal year. In Fiscal 2016/17, £368 million of investment spending Fiscal 2014/15 £3.1bn 14.2% was expensed in EBIT1 and the remaining £3.1 billion was capitalised. £3.4bn Research and development accounted for £1.8 billion (52.2 per cent) FISCAL 2015/16: £3.1BN of investment spending, while tangible and other intangible assets accounted for the remaining £1.6 billion (48.8 per cent). Working capital Positive working capital movements (including non-cash accruals) Fiscal 2016/17 £467m were £467 million during the year, primarily reflecting a £325 million Fiscal 2015/16 £547m adjustment to provisions (primarily related to warranty) and £467m £(77)m Fiscal 2014/15 favourable movements of £263 million in other assets and FISCAL 2015/16: £547M liabilities. The remaining £121 million reduction in working capital reflects a £628 million increase in inventory and £194 million related to trade receivables, partially offset by a £701 million improvement in accounts payable. Free cash flow Free cash flow was £295 million in Fiscal 2016/17 after £3.4 billion Fiscal 2016/17 £295m before financing3 of total investment spending, re?ecting solid pro?ts and Fiscal 2015/16 £791m £467 million of positive working capital movements, partially Fiscal 2014/15 £842m £295m offset by £199 million paid in tax. FISCAL 2015/16: £791M Change in cash and The net change in cash and ?nancial deposits in Fiscal 2016/17 Fiscal 2016/17 £5.5bn financial deposits was £836 million. The increase reflects free cash flow of Fiscal 2015/16 £4.7bn £295 million, an £841 million increase in debt (primarily Fiscal 2014/15 £4.3bn reflecting the c.£857 million of bonds issued in January 2017) £836m Cash and financial deposits (at 31 March) less a £150 million dividend paid to Tata Motors in June 2016 FISCAL 2015/16: £388M and finance expenses and fees of £150 million. 1. Please see note 3 of the financial statements on page 93 for the definition of EBITDA and EBIT. 3. Free cash flow reflects net cash generated from operating activities less net cash used in 2. Total product and other investment reflects net cash used in investing activities and expensed investing activities (excluding investments in short-term deposits) and including foreign R&D (not included in net cash used in investing activities) but excluding movements in other exchange gains/losses on short-term deposits. restricted deposits, movements in short-term deposits, finance income received, and proceeds from sale of property, plant and equipment.
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Company overview Strategic report Governance Financial statements 59 Capital structure At 31 March 2017 cash and financial deposits stood at £5.5 billion and we also had an undrawn committed revolving credit facility (RCF) of £1.9 billion, resulting in £7.4 billion of liquidity. Total debt outstanding at 31 March 2017 was £3.6 billion and we ended the year in a net cash position of £1.9 billion. Debt maturity and liquidity at 31 March 2017 (£ millions) 1 7,357 Total liquidity 1,870 Undrawn RCF 3,581 5,487 Total cash and financial deposits 562 801 558 401 401 300 400 3,423 Liquidity CY18 CY19 CY20 CY21 CY22 CY23 CY24 Total debt FY16/17 Bonds2 Other debt: Discounted receivables, finance leases and deferred fees (£158 million) Liquidity and net cash Borrowings and indebtedness Total cash and financial deposits at 31 March 2017 was £5.5 billion At 31 March 2017, we had £3.6 billion of debt outstanding, (23 per cent of revenue), comprising cash and cash equivalents comprising £3.4 billion of long-term unsecured bonds (less £28 of £2.9 billion and £2.6 billion of financial deposits. This compares million of deferred fees capitalised on the balance sheet), £179 million to total cash and financial deposits of £4.7 billion at the end of equivalent of short-term discounted receivables and £7 million of Fiscal 2015/16. The majority of cash at 31 March 2017 was held in finance leases. Of the £3.4 billion face value of bonds, £1.8 billion the UK with £683 million held in subsidiaries overseas. are denominated in US Dollars (of which £963 million have been designated as foreign currency hedges), £1.1 billion are denominated Our £1.9 billion committed revolving credit facility (RCF) remained in Pounds Sterling and £558 million are denominated in Euros. We also fully undrawn at 31 March 2017. With total cash of £5.5 billion and have a balanced pro?le of maturing debt, with 38 per cent of our debt the undrawn RCF of £1.9 billion, we had total liquidity of £7.4 billion maturing after ?ve years, 19 per cent in three to ?ve years and the at 31 March 2017 compared to the £6.5 billion of liquidity at the remaining 43 per cent maturing within three years. end of the previous ?scal year. In May 2016, we redeemed the remaining $84 million (£57 million In addition, drawings under our $350 million committed invoice equivalent) of 8.125 per cent US Dollar bonds maturing 2021 by discounting facility were $223 million (£179 million equivalent) exercising a call option, the majority of which were successfully at 31 March 2017, compared to $167 million (£116 million tendered and redeemed in March 2015. In January 2017, we issued equivalent) at 31 March 2016, and the $200 million uncommitted a €650 million seven-year bond with a coupon of 2.20 per cent and invoice discounting facility remained undrawn throughout the year. a £300 million four-year bond with a coupon of 2.75 per cent. In After total cash of £5.5 billion and total indebtedness of £3.6 billion, addition, we successfully undertook a consent solicitation in March we had net cash at 31 March 2017 of £1.9 billion compared to 2017 to align the terms of three of our older bonds to the terms of £2.2 billion at the end of Fiscal 2015/16. the Euro and Sterling bonds issued in January 2017. Please see note 25 on page 113 for further disclosure on our loans and borrowings. 5.5 4.7 2.2 1.9 5yr+ 0–3yr 38% £3.6bn 43% Net Debt (2.5) (3.6) Cash 3–5yr Debt 19% FY15/16 FY16/17 Net cash at 31 March (£ billions) Maturity of debt at 31 March 2017 1. FY (Fiscal Year) refers to a 12-month period ending on 31 March. CY (Calendar Year) refers to a 2. The face value of outstanding bonds is reflected and excludes £28 million of deferred fees 12-month period ending on 31 December. capitalised on the balance sheet.
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60 Jaguar Land Rover Automotive plc Annual Report 2016/17 Governance Effective leadership
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Company overview Strategic report Governance Financial statements 61
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62 Jaguar Land Rover Automotive plc Annual Report 2016/17 INTRODUCTION As Jaguar Land Rover continues to grow, TO GOVERNANCE effective governance is needed to be able to deliver our core values. It is the foundation on which we manage and control our business and also provides the platform for sustainable profitability. Leadership Accountability The Jaguar Land Rover Automotive Effective risk management is central to plc Board (‘JLR plc Board’) rigorously achieving our strategic objectives and challenges strategy, performance, is included in the responsibilities of the responsibility and accountability so JLR plc Board and its committees. that every decision we make is of the In this section, you will find information highest quality. about the responsibility and focus In this section, you will find information of the Audit, Remuneration and about the JLR plc Board and Board of Disclosure Committees. Management, the areas of focus for See page 69 the JLR plc Board, and the structure and role of our committees. Investor relations engagement See page 63 Maintaining strong relationships with our shareholder and bond investors is Effectiveness crucial to achieving our aims. We continuously evaluate the balance In this section, you will find information of skills, experience, knowledge and about how we engage with our independence of the directors. shareholder and bond investors. In this section, you will find information See page 71 about the induction and development of our directors, as well as what we believe to be the key considerations of measuring the effectiveness of the JLR plc Board and committees. See page 68
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Company overview Strategic report Governance Financial statements 63 LEADERSHIP JAGUAR LAND ROVER AUTOMOTIVE PLC BOARD NATARAJAN CHANDRASEKARAN PROFESSOR DR RALF D. SPETH NON-EXECUTIVE DIRECTOR CHIEF EXECUTIVE OFFICER AND CHAIRMAN Appointed: February 2017* Appointed: February 2010 Jaguar Land Rover roles/ Jaguar Land Rover roles/ committees: committees: • Chairman • Chief Executive Officer • Non-executive director • Board of Management • RemunerationCommittee member (appointed 26 April 2017) Experience Experience Mr Chandrasekaran is Chairman of the Board Professor Dr Speth has been Chief of Tata Sons, the holding company, and Executive Officer and Director at Jaguar promoter of more than 100 Tata operating Land Rover Automotive plc since February companies, including Tata Motors, Tata 2010. Prior to this he was Head of Global Power and Tata Consultancy Services (TCS) Operations at international industrial gases – of which he was Chief Executive from and engineering company the Linde Group. 2009–17. He joined the Tata Sons Board in October 2016 and was appointed Chairman Prof Dr Speth started his career at BMW, in January 2017. leaving after 20 years to join the Ford Motor Company’s Premier Automotive Group. NASSER MUKHTAR MUNJEE CHANDRASEKARAN ANDREW M. ROBB NON-EXECUTIVE RAMAKRISHNAN NON-EXECUTIVE INDEPENDENT INDEPENDENT DIRECTOR NON-EXECUTIVE DIRECTOR DIRECTOR Appointed: February 2012 Appointed: June 2013 Appointed: April 2009 Jaguar Land Rover roles/ Jaguar Land Rover roles/ Jaguar Land Rover roles/ committees: committees: committees: • Non-executive director • Non-executive director • Non-executive director • Audit Committee member • Chairman of the Audit Committee • Chairman of the Remuneration Committee Experience Experience Experience Mr Munjee was appointed to the Board of Tata Mr Ramakrishnan has been the Chief Mr Robb is also an independent director Motors Limited with effect from 27 June 2008. Financial Officer of Tata Motors Limited of Tata Steel Limited and Chairman of He is also on the Board of Tata Chemicals and is since 18 September 2007 and serves Tata Steel Europe. He was a director of Chairman of Tata Motor Finance. He is Chairman as its President. On 1 July 2015, he was Pilkington Group plc until 2003, having of DCB Bank and is also on the Board of several appointed Chief Financial Officer of the held the position of Finance Director from international companies operating in India, Tata Motors Group. He is responsible for 1989 to 2001. Prior to this, from 1983 he including ABB and Cummins. He is Chairman Finance, Accounts, Taxation, Business was Finance Director of the Peninsular of the Aga Khan Foundation (India) and is past Planning, Investor Relations, Treasury and and Oriental Steam Navigation Company. president of the Bombay Chamber of Commerce IT. He has also served as a Vice President Mr Robb has served on a number of PLC and Industry. He had a long career with HDFC in of the Chairman’s Office, and is currently boards as a non-executive director. India and continues on its Board. He established on the Board of many Tata Motors Group Infrastructure Development Finance Company in companies in India and overseas. India and was its CEO for seven years. * Natarajan Chandrasekaran takes over as Chairman from Cyrus Mistry who resigned in December 2016.
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64 Jaguar Land Rover Automotive plc Annual Report 2016/17 LEADERSHIP The Board of Management drives the Group’s BOARD OF strategy and goals, and makes decisions MANAGEMENT concerning operational planning issues. PROFESSOR DR RALF D. SPETH ANDY GOSS KENNETH IAN HARNETT HANNO KIRNER GROUP SALES GREGOR EXECUTIVE EXECUTIVE CHIEF EXECUTIVE OPERATIONS CHIEF FINANCIAL DIRECTOR, DIRECTOR, OFFICER DIRECTOR OFFICER HR AND GLOBAL CORPORATE PURCHASING AND STRATEGY Responsibilities Responsibilities Responsibilities Responsibilities Mr Goss is responsible Mr Gregor leads the Mr Harnett is Mr Kirner’s focus is on for Jaguar Land financial management responsible for human the development Rover’s sales, network of the business to resources and global of corporate and development, deliver shareholder purchasing, and is product strategy, customer service and value and the Group’s also responsible global financial Chery Jaguar Land growth ambitions. for all Jaguar Land services, IT, royal and Rover Automotive Co. Responsibilities Rover property diplomatic affairs Ltd. operations at a include corporate matters globally. and the Special Board level. finance, treasury, Operations division. financial reporting, accounting, tax, internal control and business support. GERD E. QING PAN NICK ROGERS WOLFGANG MÄUSER EXECUTIVE DIRECTOR, STADLER CHIEF DIRECTOR, GROUP EXECUTIVE MARKETING JAGUAR LAND ENGINEERING DIRECTOR, OFFICER ROVER CHINA MANUFACTURING Responsibilities Responsibilities Responsibilities Responsibilities Mr Mäuser leads global Mr Pan leads the Mr Rogers oversees all Mr Stadler delivers marketing activity development and aspects of the Group’s the manufacturing including brand expansion of the global engineering operations side of the positioning, current Jaguar Land Rover operations and business, ensuring and future product business in China, ensures the optimum efficiency planning, marketing directing Chery Jaguar development and to deliver world-class communications Land Rover Automotive delivery of new safety, quality, cost comprising customer Co. Ltd. operations and product technology and environmental relationship is responsible for the across Jaguar and standards. management, and Integrated Marketing, Land Rover. brand experience Sales and Service and strategies. Corporate functions in the market.
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Company overview Strategic report Governance Financial statements 65 FIRST LINE The First Line of Leadership comprises the OF LEADERSHIP Board of Management and leaders of the product creation, quality, legal and public relations functions to effectively lead the business to deliver its strategic objectives. KEITH BENJAMIN IAN CALLUM GERRY McGOVERN GRANT FIONA PARGETER DIRECTOR OF McPHERSON GLOBAL LEGAL DESIGN, JAGUAR LAND ROVER DIRECTOR OF GLOBAL PR DIRECTOR CHIEF DESIGN QUALITY AND COMMUNICATIONS OFFICER AUTOMOTIVE DIRECTOR SAFETY Responsibilities Responsibilities Responsibilities Responsibilities Responsibilities Mr Benjamin is Mr Callum is Instrumental in the Mr McPherson is Ms Pargeter responsible for positioning Jaguar as success of the Land responsible for leads product PR, all global legal a modern and relevant Rover brand, Mr leading significant corporate PR, internal matters: secretarial, brand while respecting McGovern improvement in communications, compliance and heritage and values is leading his team quality in all aspects CSR and government ethics, corporate through his visionary in the creation of a of our vehicles. affairs, promoting audit, security and leadership in design. new generation of He builds, leads, the Group as a investigations. Land Rovers. inspires and responsible, innovative empowers his and sustainable global team to deliver the company. best solutions.
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66 Jaguar Land Rover Automotive plc Annual Report 2016/17 LEADERSHIP THE ROLE OF THE JAGUAR LAND ROVER AUTOMOTIVE PLC BOARD AND THE BOARD OF MANAGEMENT Governance structure and ?ow of information Audit Committee The Jaguar Land Rover Automotive plc Board Remuneration Reviews the integrity of The JLR plc Board provides supervision and guidance to our Committee the ?nancial statements, management, particularly with respect to corporate governance, Determines the overall relationship with the business strategies and growth plans. It also considers the remuneration policy external auditors and identification of risks and their mitigation strategies, entry into and strategy. effectiveness of internal new businesses, product launches, demand fulfilment and capital For more information ?nancial controls. expenditure requirements, as well as the review of our business see page 70 For more information plans and targets. see page 69 For more information see page 63 Board of Management The leadership structure was changed during the fiscal year. The Examples of actions taken by the Board of Management are: Executive Committee was replaced by the Board of Management, • Reviewing and making decisions concerning operational planning which comprises a smaller membership of mainly former Executive associated with the latest five-year business plan of the Group; Committee members. The remaining members of the Executive • Evaluating the performance of the Group against budget and Committee now form the Senior Directors’ Forum, which is used to forecast; and cascade policy, strategy and detailed information from the Board • Reviewing and approving potential investments. of Management to the rest of the Group. The work of the Board of Management complements, enhances and supports the work of the The Board of Management is also responsible for overseeing the JLR plc Board, with the Board of Management operating under the implementation of appropriate risk assessment processes and direction and authority of the Chief Executive Officer. The JLR plc controls to identify, manage and mitigate the principal risks to the Board delegates to the Board of Management the execution of the Group. This includes the review, approval and communication of the Group’s strategy and the day-to-day management and operation of risk management policy and framework. the Group’s business. For more information see pages 64–66 Disclosure Committee Other examples of management committees Supports the JLR plc Board and Audit Committee in reviewing and • Product Committee approving the final form of quarterly and annual announcements • Health & Safety Committee and statements relating to the performance of the Group. • Security Committee For more information see page 70 • Unusual Events Committee • Financial Risk and Assurance Committee • Financial Risk Committee
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Company overview Strategic report Governance Financial statements 67 The key matters considered by the JLR plc Board during Fiscal 2016/17 included: Topic/activity Actions Progress Strategy Review of the business Analysed the automotive industry trends and retail outlook Monitored project development for the new and operating model and assessed the potential impact on the Group manufacturing facility in Slovakia and contract manufacturing with Magna Steyr in Austria Reviewed the Group’s performance against its competitors Discussion of the Group’s Supported continued investment to promote sustainable Strong cash generation capital structure business growth over the long term Issuance of €650 million seven-year 2.20 per cent and ?nancial strategy Utilised cash to implement ongoing programmes to and £300 million four-year 2.75 per cent bonds support business growth and alignment of previous bonds’ terms with these Considered and approved the Group’s debt new bonds funding arrangements Redemption of $84 million outstanding 8.125 per cent US Dollar bond in May 2016 Monitoring of opportunities Reviewed a number of opportunities in the ?scal year Announcement of investment in CloudCar Inc. for acquisitions and new Reviewed and approved, where appropriate, the business Announcement of InMotion start-ups revenue streams cases for internally developed future business Risk management and internal control Review the Group’s Clearly articulated the Group’s approach to risk Agreed Group-level risks and a robust set of mitigating principal risks and the Reviewed and updated approach to identify and manage activities, which are regularly monitored effectiveness of the principle risks Further developed the Group’s approach to risk systems of internal control and risk management Debated signi?cant and emerging risks, including political Considered movements in key risks resulting from uncertainty following the UK’s vote to leave the EU and changes to likelihood or business impact cyber security Leadership and people Review composition of Discussed the composition of the JLR plc Board and its The Board of Management and Senior Directors’ the JLR plc Board committees, including succession planning Forum have been implemented and replace the and committees Reorganised the leadership structure so that the Executive Executive Committee Committee was replaced by the Board of Management Review the development Ongoing commitment to maintaining a balance of Appointment of new members of the senior leadership of people and talent appropriate skills and experience among the Board of team in the ?scal year in the Group, including Management and associated committees succession planning for senior roles Discuss the results of the Conducted a thorough review of Pulse surveys to identify Proposed new approaches to pay and pensions, and employee engagement areas for improvement initiated a period of consultation with employees survey and devise strategic Encouraged interaction between employees across Increased engagement with employees across all areas actions arising from it the Group of the business Governance, stakeholders and shareholders Review the Group’s Considered sustainability, including the Group’s impact on Reviewed developments in corporate governance and purpose, goal, vision the community and the environment received key legal and regulatory updates and values Monitored and addressed regular health and safety updates Encourage strong Actively supported engagement opportunities Ongoing discussions at all levels of the business engagement with Regularly reviewed and acted upon feedback from with shareholders investors and key stakeholders Engagement with other stakeholders based stakeholders on feedback Financial performance Assessment of the Group’s Evaluated the Group’s performance against budget and forecast Reviewed and approved the latest five-year business plan ?nancial performance Reviewed the quarterly and annual results and associated for the Group presentations to investors Approved the Annual Report
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68 Jaguar Land Rover Automotive plc Annual Report 2016/17 The JLR plc Board will continue to consider the core areas described previously, including in particular: The JLR plc Board will continue to • Continued development of our • Leading innovation in powertrain consider the core areas as above, but product pipeline; technology, driver assistance, in particular will focus on: connectivity and mobility solutions; • The efficiency and quality of the new Slovakia plant and the • Developing our people and the contract manufacturing through our workforce of tomorrow; and agreement with • Ongoing review and monitoring of Magna Steyr; external risk factors, considering • Expanding the product development their impact on growth, particularly facilities and the ongoing investment in international markets. in UK manufacturing facilities; How we divide up our responsibilities Chairman of the JLR plc Board Chief Executive Officer Non-executive directors Responsible for leading the JLR Responsible for the day-to- Constructively challenge the Chief plc Board, its effectiveness and day leadership, management Executive Officer and the JLR plc governance. Also sets the agenda and control of the Group, for Board and monitors the delivery of to take full account of the issues recommending the Group the Group strategy within the risk and concerns of the directors and strategy to the JLR plc Board, and and controls environment set by ensures effective links between implementing the Group strategy the JLR plc Board. external stakeholders, the Board and decisions of the JLR plc Board. and management. EFFECTIVENESS Induction, development and support Evaluation All new directors receive a full, formal and tailored induction The JLR plc Board continuously assesses its effectiveness in upon joining the JLR plc Board. We also plan the JLR plc Board the following areas: calendar so that directors are able to visit the increasing • The flow and quality of information to the JLR plc Board; number of Jaguar Land Rover geographic locations and are briefed on a wide range of topics throughout the year. • The decision-making process and culture; and These topics range from those with particular relevance • The outcome of the decisions made by the JLR plc Board. for our business, such as global automotive demand, to The JLR plc Board and Audit Committee also provided direct more general matters such as developments in corporate feedback to management committees during the year. governance. We recognise that our directors have a range of experience, and so we encourage them to attend external seminars and brie?ngs that will assist them individually.
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Company overview Strategic report Governance Financial statements 69 ACCOUNTABILITY OUR COMMITTEES Audit Committee Role of the Audit Committee de?ciencies in the design or operation of • Monitors the integrity of the financial the Group’s internal control over financial statements, including the review of reporting, which are reasonably likely to significant financial reporting issues and adversely affect the Group’s ability to record, judgements alongside the ?ndings of the process and report ?nancial data. We external auditor receive reports from the external auditor and Corporate Audit with respect to these matters. • Oversees the relationship with the external auditor, external audit process, nature External audit and scope of the external audit and the We reviewed the signi?cant audit issues with appointment, effectiveness, independence the external auditor and how they have been and fees of the external auditor addressed in the ?nancial statements. • Monitors and reviews the effectiveness of We also evaluated the external auditor by Corporate Audit, ensuring coordination with reviewing the firm’s independence, its internal the activities of the external auditor quality control procedures, and any material issues raised by the most recent quality • Reviews the effectiveness of the Group’s control or peer review of the audit firms. systems for internal financial control, This included the findings of any enquiry or Composition of the Audit Committee: ?nancial reporting and risk management investigation carried out by government or Main activities of the Audit Committee professional bodies with respect to one or ANDREW ROBB CHAIRMAN during the year more independent audits performed the NASSER MUNJEE external auditor within the last ?ve years. Financial reporting During the year, we as the Audit Committee, Deloitte LLP have been the Group’s auditor met with the external auditor and since 2008, when the Group was acquired management as part of the Fiscal 2016/17 by Tata Motors Limited. Section 139(2) of annual and quarterly reporting approval the Indian Companies Act, 2013 mandates “The Audit Committee process. We reviewed the draft ?nancial all listed companies rotate their auditors statements and considered a number of once the auditor has served as an auditor continues to focus on supporting papers. This included reviewing for a period of 10 or more consecutive years. ensuring the Group’s information presented by management on Therefore, Tata Motors Limited, with the signi?cant accounting judgements to ensure support of the Group, has commenced an controls environment is all issues raised have been properly dealt audit tender process. Tata Motors Limited and robust given the growth with, reviewing presentation and disclosure to the Group met with a number of ?rms when of the business, as ensure adequacy, clarity and completeness, making the decision as to which firms should reviewing the documentation prepared to be invited to tender and consider the firms’ well as supporting the support the going concern statement given ability and appetite for the audit, ability to be process for the change on page 82 and reviewing external audit independent by the end of the ?scal year and reports. The key matters considered in the the non-audit services policy. The process in external auditors.” year were: the ongoing recognition and will be concluded prior to the Tata Motors Andrew M. Robb disclosure of the Tianjin incident; the issuance Limited AGM in August 2017 when a ?nal of debt; reviewing derivative hedging policy; recommendation will be made. Chairman of the Audit Committee signi?cant recalls for speci?c airbags (from Corporate Audit Takata); pension changes; and contractual and During the year, we regularly reviewed the regulatory provision requirements. adequacy of the Corporate Audit function, the Internal controls Corporate Audit charter, staffing and seniority We reviewed the effectiveness of ?nancial of the official heading the function, reporting reporting, internal control over ?nancial structure, budget, coverage and the frequency reporting and risk management procedures of corporate audits, the structure of Corporate within the Group (which extends to all trade Audit and approval of the audit plan. investments and joint venture companies), We also met with Corporate Audit and the with particular regard given to compliance external auditor on a one-to-one basis twice with the provisions of section 404 of the during the year. This forms an important part Sarbanes-Oxley Act and other relevant of our consideration and control, ensuring that regulations. The reviews also considered any they have an open and direct forum with the potential material weaknesses or signi?cant Audit Committee.
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70 Jaguar Land Rover Automotive plc Annual Report 2016/17 Disclosure Committee Composition of the Matters considered during the year in both the quarterly and annual Disclosure Committee: • Reviewed and updated the terms of ?nancial statements reference of the Committee CHIEF FINANCIAL OFFICER • Reviewed new disclosures in both the and his direct reports • Reviewed the audit and control ?ndings quarterly and annual ?nancial statements from the external auditor for appropriateness • Reviewed areas of key management • Considered the impact of new accounting judgement and signi?cant transactions, standards on the Group including their presentation and disclosure Remuneration Committee Composition of the Role of the Remuneration Committee—Retirementbene?ts. The Group has Remuneration Committee: • Set and monitor the strategy and policy a number of de?ned bene?t pension for the remuneration of the Board of schemes that are closed to new ANDREW ROBB CHAIRMAN Management and other senior executives employees. Executives who are members NATARAJAN CHANDRASEKARAN (‘the executives’) of these schemes will continue to accrue (appointed 26 April 2017) • Determine the design and eligibility for bene?ts, but most executives now either CYRUS MISTRY (resigned have defined contribution provisions or December 2016) annual and long-term incentive plans (LTIPs) elect to receive a cash allowance in lieu of for executives and approve payments under retirement benefits. The cash allowance the plans In addition to the Committee members, the is at the same level as the equivalent Chief Executive Officer is invited to attend • Determine performance measures and de?ned contribution provision. meetings, except where there is a con?ict targets for any performance-related—Otherbene?ts. Executives are eligible to of interest. The Remuneration Committee incentive plans participate in the Group’s management is supported by the Executive Director, • Oversee any major changes in remuneration car programme, medical arrangements, Human Resources & Global Purchasing and Remuneration policy and life insurance and disability plans. the HR Director, Performance Reward • Performance related elements: & Engagement. The remuneration policy is designed to attract, retain and motivate executives of the—Annual bonus. The Global Bonus Plan is highest quality, encouraging them to deliver designed to reward achievement of HIGHLIGHTS exceptional business performance aligned short-term ?nancial and strategic • Approval of the annual bonus to Jaguar Land Rover’s strategy and the measures to support the Group’s strategy. payout for Fiscal 2016/17 objective of delivering long-term sustainable Performance is measured against performance at 80 per cent of target growth in value. quanti?able one-year ?nancial and Executive remuneration consists of: operational targets. • Con?rmed July 2014 LTIP payment • Fixed elements:—Long-termincentive. The new LTIP at 104 per cent of award level—Salary. Designed to recruit and retain introduced in 2016 is designed to reward • Approval of the Fiscal 2017/18 individuals with the necessary knowledge, and encourage alignment with the Group’s salary increase budget of 4.0 per cent skills and experience to deliver the long-term sustainable growth strategy. (2.5 per cent merit, 1.5 per cent Group’s strategic objectives. Salary is Performance is measured over a three-development) reviewed annually and benchmarked year period against a balanced scorecard • Approval of July 2016 ?rst award against comparable roles in appropriate of quanti?able ?nancial and operational under the new LTIP with business- comparator groups (such as other UK targets aligned to long-term growth. speci?c performance measures engineering companies and European The previous LTIP was a phantom automotive companies). share plan with a three-year vesting • Con?rmed no material changes in period based on the Group’s financial Fiscal 2017/18 annual bonus or LTIP performance and linked to the share price performance measures of Tata Motors Limited.
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Company overview Strategic report Governance Financial statements 71 There is clear linkage between Jaguar Land Rover business 10% 10% strategy and the performance- 10% related elements of remuneration. 30% Bonus PBT 40% EBIT growth 25% Cash flow LTIP Volume growth performance Costs 10% Environmental innovation Quality performance Quality measures Volume Customer satisfaction 15% 20% 30% The overall objective is to deliver executive pay in line with a market median range for target 23% performance, with enhanced reward opportunity to re?ect 35% 35% exceptional business performance. 43% Maximum Target executive Base salary Base salary Overall remuneration is balanced, Benefits executive Benefits remuneration Annual bonus 8% Annual bonus with the majority linked to LTIP remuneration LTIP business performance and a heavier weighting on long-term performance compared to 12% 18% 27% short term. INVESTOR RELATIONS ENGAGEMENT Sole shareholder Bond investors Credit rating agencies Jaguar Land Rover Automotive plc As at 31 March 2017, we had As at 31 March 2017, Jaguar Land (and its subsidiaries) is a wholly owned approximately £3.4 billion of listed Rover Automotive plc had a credit subsidiary of Tata Motors Limited bonds outstanding. We maintain rating of BB+ (Stable Outlook) from (held through TML Holdings Pte. Ltd. regular dialogue with our bond S&P (upgraded from BB Stable Outlook (Singapore)) and the majority of the investors through quarterly in August 2016) and Ba1 (Positive JLR plc Board also reside as directors publication of operational and financial Outlook) from Moody’s (upgraded from on the board of Tata Motors Limited. results on the Group’s website Ba2 Positive Outlook in September Although we operate on a standalone, (http://www.jaguarlandrover.com) 2016). We maintain regular and open arm’s length basis, we maintain an open supported by live broadcasts via dialogue with both agencies, including and collaborative strategic relationship teleconference calls. The investor an in-depth annual review of our LTIP, with Tata Motors Limited and relations team also attends various so that an independent assessment of cooperate in numerous areas including bond conferences, held throughout our credit profile can be represented in engineering, research and development, the year, where investors have the the market for the benefit of current and sourcing and procurement. opportunity to meet with Jaguar and prospective investors as well as Land Rover representatives in supporting any future debt issuance. person to discuss recent results and other matters.
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72 Jaguar Land Rover Automotive plc Annual Report 2016/17 DIRECTORS’ REPORT The directors present their report and Branches Political involvement the audited consolidated ?nancial The Group has 11 branches that exist and contributions statements of the Group for the year and operate outside of the UK, based The Group respects an employee’s right ended 31 March 2017. Jaguar Land in Singapore, China and the United to use their own time and resources Rover Automotive plc is a public Arab Emirates. to participate as individual citizens in limited company incorporated under political and governmental activities of Research and development the laws of England and Wales. The their choice. The Group itself operates The Group is committed to an business address of the directors and under legal limitations on its ability to ongoing programme of expenditure senior management of the Group engage in political activities and, even on research and development is Abbey Road, Whitley, Coventry, where there are no legal restrictions, activities as disclosed in note 11 to CV3 4LF, England, United Kingdom. the Group does not typically make the consolidated ?nancial statements contributions to political candidates or Future developments on page 98. political parties, or permit campaigning Future developments impacting the Financial instruments on its property by political candidates Group are disclosed in the Strategic The disclosures required in relation to (including those who work for the Group) report on pages 10 to 59. the use of ?nancial instruments by the or persons working on their behalf. There Dividends Group and Company, together with have not been any political donations The directors proposed a dividend of details of the Group’s and Company’s in any of the periods covered by these £150 million (£0.10 per ordinary share) treasury policy and management, are financial statements. in May 2017. £60 million of the dividend set out in note 35 to the consolidated Going concern was paid in June 2017 (for each of the ?nancial statements on pages 124 to The Group’s business activities, together years ended 31 March 2016 and 2015, 131 and in note 53 on pages 144 to with the factors likely to affect its future £150 million was paid in June 2016 and 148 of the parent company financial development, performance and position, June 2015 respectively). statements. are set out in the Strategic report. The Directors Employee information ?nancial position of the Group is described Biographies of the directors currently The average number of employees on pages 56 to 59. In addition, note 35 serving on the JLR plc Board are set out within the Group is disclosed in to the consolidated ?nancial statements on pages 64 to 65. note 7 to the consolidated financial includes the Group’s objectives, policies statements on page 96. and processes for managing its exposures Directors’ indemnities to interest rate risk, foreign currency risk, The Group has made qualifying third- Apart from determining that an credit risk and liquidity risk. party indemnity provisions for the bene?t individual has the ability to carry of its directors during the year; these out a particular role, the Group Details of the Group’s financial remain in force at the date of this report. does not discriminate in any way. It instruments and hedging activities endeavours to retain employees if they are also provided in note 35 to the Material interests in shares become disabled, making reasonable consolidated ?nancial statements. Jaguar Land Rover Automotive plc is a adjustments to their role and, if wholly owned subsidiary of Tata Motors The JLR plc Board has a reasonable necessary, looking for redeployment Limited, held through TML Holdings Pte. expectation that the Group has adequate opportunities within the Group. The Ltd. (Singapore). resources to continue in operational Group also ensures that training, existence for the foreseeable future. Share capital career development and promotion Accordingly, the ?nancial statements Share capital remains unchanged. See opportunities are available to all set out on pages 78 to 148 have been note 29 to the consolidated ?nancial employees irrespective of gender, race, prepared on the going concern basis. statements for further details. age or disability. Events after the balance sheet date Corporate Governance Employee involvement Full details of signi?cant events since Statement Details of how the Group involves the balance sheet date are disclosed The Corporate Governance Statement its employees are contained in the in note 42 to the Group’s consolidated is set out on pages 62 to 73 and Strategic report on pages 10 to 59, ?nancial statements. is incorporated by reference into which are incorporated by reference this report. into this report.
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Company overview Strategic report Governance Financial statements 73 Code of Conduct directors must not approve the ?nancial statements, prepared in accordance Directors and employees are required statements unless they are satis?ed with IFRS as adopted by the European to comply with the Jaguar Land Rover that they give a true and fair view of the Union, give a true and fair view of the Code of Conduct, which is intended state of affairs of the Group and of the assets, liabilities, ?nancial position to help them put the Group’s ethical profit or loss of the Group for that period. and profit or loss of the Group and principles into practice. The Code of the undertakings included in the In preparing these ?nancial statements, Conduct clari?es the basic principles consolidation taken as a whole. International Accounting Standard 1 and standards they are required to requires that directors: Statement of disclosure follow and the behaviour expected of of information to auditors them. The Code of Conduct can be • Properly select and apply In the case of each of the persons who found at www.jaguarlandrover.com. accounting policies; are directors at the time when the Employees, contract staff, third parties • Present information, including report is approved under section 418 of with whom the Group has a business accounting policies, in a manner the Companies Act, 2006, the following relationship (such as dealers, suppliers that provides relevant, reliable, applies: so far as the directors are aware, and agents), and any member of the comparable and understandable there is no relevant audit information of public may raise ethical and compliance information; which the Group’s auditor is unaware; concerns to the Group’s global and the directors have taken necessary • Provide additional disclosures helpline or via group.compliance@ actions in order to make themselves when compliance with the speci?c jaguarlandrover.com. aware of any relevant audit information requirements in IFRS is insufficient and to establish that the Group’s auditor Slavery and human to enable users to understand the is aware of that information. trafficking statement impact of particular transactions, Pursuant to section 54 of the Modern other events and conditions on the Auditor Slavery Act 2015, the Group has Group’s financial position and financial At the completion of its audit tenure, published a slavery and human performance; and Deloitte LLP will stand down as auditor. A trafficking statement for the year formal selection process has commenced • Make an assessment of the Group’s ended 31 March 2017. The statement to identify a successor auditor and a ability to continue as a going concern. sets out the steps that the Group has resolution to appoint will be proposed at taken to address the risk of slavery The directors are responsible for the 2017 Tata Motors Limited Annual and human trafficking occurring within keeping adequate accounting records General Meeting. its own operations and its supply that are sufficient to show and explain Acknowledgement chains. This statement can be found the Group’s transactions and disclose The directors wish to convey their on the corporate website at with reasonable accuracy at any time appreciation to all employees for their www.jaguarlandrover.com. the ?nancial position of the Group and continued commitment, effort and enable them to ensure that the ?nancial Statement of directors’ contribution in supporting the delivery statements comply with the Companies responsibilities in respect of the Group’s record performance. The Act 2006. They are also responsible for of the directors’ report and directors would also like to extend their safeguarding the assets of the Group the financial statements thanks to all other key stakeholders for and hence for taking reasonable steps The directors are responsible for the continued support of the Group and for the prevention and detection of preparing the Annual Report and their con?dence in its management. fraud and other irregularities. the ?nancial statements in accordance The Annual Report on pages 10 to 148 with applicable law and regulations. The directors are responsible for the was approved by the JLR plc Board and maintenance and integrity of the Company law requires the directors authorised for issue on 24 July 2017 corporate and ?nancial information to prepare ?nancial statements for and signed on its behalf by: included on the Group’s website. each financial year. Under that law the Legislation in the UK governing the directors have elected to prepare the preparation and dissemination of ?nancial statements in accordance ?nancial statements may differ from with International Financial Reporting legislation in other jurisdictions. Professor Dr Ralf D. Speth Standards (IFRS) as adopted by the Chief Executive Officer European Union. Under company law the The directors con?rm that, to the Jaguar Land Rover best of their knowledge, the ?nancial Automotive plc
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74 Jaguar Land Rover Automotive plc Annual Report 2016/17 Financial statements Investing in innovation
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Company overview Strategic report Governance Financial statements 75
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76 Jaguar Land Rover Automotive plc Annual Report 2016/17 INDEPENDENT We have audited the financial This report is made solely to the statements of Jaguar Land Rover company’s members, as a body, in AUDITOR’S Automotive Plc for the year ended accordance with Chapter 3 of Part 16 REPORT TO 31 March 2017 which comprise the of the Companies Act 2006. Our audit Consolidated Income Statement, work has been undertaken so that we THE MEMBERS the Consolidated Statement might state to the company’s members OF JAGUAR of Comprehensive Income, the those matters we are required to state Consolidated and Parent Company to them in an auditor’s report and for LAND ROVER Balance Sheets, the Consolidated no other purpose. To the fullest extent and Parent Company Statements of permitted by law, we do not accept or AUTOMOTIVE PLC Changes in Equity, the Consolidated and assume responsibility to anyone other Parent Company Cash Flow Statements than the company and the company’s and the related notes 1 to 56. The members as a body, for our audit work, financial reporting framework that for this report, or for the opinions we has been applied in their preparation have formed. is applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
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Company overview Strategic report Governance Financial statements 77 Respective responsibilities of Opinion on ?nancial Matters on which we directors and auditor statements are required to report As explained more fully in the In our opinion: by exception Directors’ Responsibilities Statement, We have nothing to report in respect • the financial statements give a true the directors are responsible for the of the following matters where the and fair view of the state of the preparation of the financial statements Companies Act 2006 requires us to Group’s and of the parent company’s and for being satisfied that they give report to you if, in our opinion: affairs as at 31 March 2017 and a true and fair view. Our responsibility of the Group’s profit for the year • adequate accounting records have is to audit and express an opinion on then ended; not been kept by the parent company, the financial statements in accordance with applicable law and International • the Group financial statements have or returns adequate for our audit have Standards on Auditing (UK and Ireland). been properly prepared in accordance not been received from branches not Those standards require us to comply with IFRSs as adopted by the visited by us; or with the Auditing Practices Board’s European Union; • the parent company financial Ethical Standards for Auditors. statements are not in agreement with • the parent company financial statements have been properly the accounting records and returns; or Scope of the audit of the prepared in accordance with IFRSs ?nancial statements as adopted by the European Union • certain disclosures of directors’ and as applied in accordance with remuneration specified by law are not An audit involves obtaining evidence made; or about the amounts and disclosures the provisions of the Companies in the financial statements sufficient Act 2006; and • we have not received all the to give reasonable assurance that the • the financial statements have been information and explanations we financial statements are free from prepared in accordance with the require for our audit. material misstatement, whether requirements of the Companies caused by fraud or error. This includes Act 2006. an assessment of: whether the accounting policies are appropriate to Opinion on other matters the Group’s and the parent company’s circumstances and have been prescribed by the Companies consistently applied and adequately Act 2006 (Senior statutory auditor) disclosed; the reasonableness of In our opinion, based on the work For and on behalf of significant accounting estimates undertaken in the course of the audit: Deloitte LLP made by the directors; and the Statutory Auditor overall presentation of the financial • the information given in the Strategic Birmingham, UK statements. In addition, we read Report and the Governance Report 24 July 2017 all the financial and non-financial for the financial year for which the information in the annual report to financial statements are prepared identify material inconsistencies with is consistent with the financial the audited financial statements and statements; and to identify any information that is • the Strategic Report and the apparently materially incorrect based Governance Report have been on, or materially inconsistent with, prepared in accordance with the knowledge acquired by us in the applicable legal requirements. course of performing the audit. If we become aware of any apparent material In the light of the knowledge and misstatements or inconsistencies we understanding of the Company and its consider the implications for our report. environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic Report and the Governance Report.
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78 Jaguar Land Rover Automotive plc Annual Report 2016/17 Consolidated financial statements CONSOLIDATED For the year ended 31 March INCOME STATEMENT 2016* 2015* 2017 Restated Restated Note £m £m £m Revenue 5 24,339 22,286 22,106 Material and other cost of sales excluding exceptional item (15,071) (13,405) (13,347) Exceptional item 4 151 (157) –Material and other cost of sales 6 (14,920) (13,562) (13,347) Employee cost 7 (2,490) (2,321) (1,977) Other expenses 10 (5,376) (4,674) (4,109) Development costs capitalised 11 1,426 1,242 1,158 Other income 379 128 143 Depreciation and amortisation (1,656) (1,418) (1,051) Foreign exchange loss (216) (136) (216) Finance income 12 33 38 48 Finance expense (net) 12 (68) (90) (135) Share of pro?t/(loss) of equity accounted investments 15 159 64 (6) Pro?t before tax 13 1,610 1,557 2,614 Income tax excluding tax on exceptional item (292) (293) (576) Tax on exceptional item (46) 48 –Income tax expense 14 (338) (245) (576) Pro?t for the year 1,272 1,312 2,038 * Comparatives have been restated due to the change in accounting policy for presentation of foreign exchange gains and losses as set out in note 2. CONSOLIDATED STATEMENT For the year ended 31 March OF COMPREHENSIVE INCOME 2017 2016 2015 Note £m £m £m Pro?t for the year 1,272 1,312 2,038 Items that will not be reclassi?ed subsequently to pro?t or loss: Remeasurement of de?ned bene?t obligation 32 (895) 489 (355) Income tax related to items that will not be reclassi?ed 14, 20 143 (113) 71 (752) 376 (284) Items that may be reclassi?ed subsequently to pro?t or loss: (Loss)/gain on cash ?ow hedges (net) 35 (1,766) 55 (1,812) Currency translation differences 34 (1) 21 Income tax related to items that may be reclassi?ed 14, 20 329 (18) 363 (1,403) 36 (1,428) Other comprehensive (expense)/income net of tax (2,155) 412 (1,712) Total comprehensive (expense)/income attributable to shareholders (883) 1,724 326
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Company overview Strategic report Governance Financial statements 79 CONSOLIDATED As at 31 March BALANCE SHEET 2017 2016 2015 Note £m £m £m Non-current assets Investments 15 475 339 280 Other ?nancial assets 16 270 185 49 Property, plant and equipment 17 5,885 5,175 4,474 Intangible assets 18 6,167 5,497 4,952 Other non-current assets 19 80 45 26 Deferred tax assets 20 511 354 372 Total non-current assets 13,388 11,595 10,153 Current assets Cash and cash equivalents 21 2,878 3,399 3,208 Short-term deposits 2,609 1,252 1,055 Trade receivables 1,273 1,078 1,112 Other ?nancial assets 16 218 137 214 Inventories 23 3,464 2,685 2,416 Other current assets 19 517 411 396 Current tax assets 3 10 9 Total current assets 10,962 8,972 8,410 Total assets 24,350 20,567 18,563 Current liabilities Accounts payable 24 6,508 5,758 5,450 Short-term borrowings 25 179 116 156 Other ?nancial liabilities 26 2,139 962 923 Provisions 27 644 555 485 Other current liabilities 28 490 427 374 Current tax liabilities 144 57 69 Total current liabilities 10,104 7,875 7,457 Non-current liabilities Long-term borrowings 25 3,395 2,373 2,381 Other ?nancial liabilities 26 1,399 817 842 Provisions 27 988 733 639 Retirement bene?t obligation 32 1,461 567 887 Other non-current liabilities 28 362 204 118 Deferred tax liabilities 20 60 384 199 Total non-current liabilities 7,665 5,078 5,066 Total liabilities 17,769 12,953 12,523 Equity attributable to shareholders Ordinary shares 29 1,501 1,501 1,501 Capital redemption reserve 29 167 167 167 Reserves 30 4,913 5,946 4,372 Equity attributable to shareholders 6,581 7,614 6,040 Total liabilities and equity 24,350 20,567 18,563 These consolidated financial statements were approved by the JLR plc Board and authorised for issue on 24 July 2017. They were signed on its behalf by: Professor Dr Ralf D. Speth Chief Executive Officer Company registered number: 06477691
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80 Jaguar Land Rover Automotive plc Annual Report 2016/17 Consolidated financial statements CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Ordinary share redemption Capital Other Total capital reserve reserves equity £m £m £m £m Balance at 1 April 2016 1,501 167 5,946 7,614 Profit for the year – – 1,272 1,272 Other comprehensive expense for the year – – (2,155) (2,155) Total comprehensive expense – – (883) (883) Dividend – – (150) (150) Balance at 31 March 2017 1,501 167 4,913 6,581 Balance at 1 April 2015 1,501 167 4,372 6,040 Profit for the year – – 1,312 1,312 Other comprehensive income for the year – – 412 412 Total comprehensive income – – 1,724 1,724 Dividend – – (150) (150) Balance at 31 March 2016 1,501 167 5,946 7,614 Balance at 1 April 2014 1,501 167 4,196 5,864 Profit for the year – – 2,038 2,038 Other comprehensive expense for the year – – (1,712) (1,712) Total comprehensive income – – 326 326 Dividend – – (150) (150) Balance at 31 March 2015 1,501 167 4,372 6,040
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Company overview Strategic report Governance Financial statements 81 CONSOLIDATED CASH For the year ended 31 March FLOW STATEMENT 2016* Restated 2015* 2017 Restated Note £m £m £m Cash ?ows generated from operating activities Cash generated from operations 39 3,291 3,722 3,964 Dividends received 15 68 – –Income tax paid (199) (166) (389) Net cash generated from operating activities 3,160 3,556 3,575 Cash ?ows (used in)/generated from investing activities Investment in equity accounted investments 15 (12) – (124) Purchases of other investments (1) – –Investment in other restricted deposits (32) (30) (12) Redemption of other restricted deposits 51 27 19 Movements in other restricted deposits 19 (3) 7 Investment in short-term deposits (5,097) (4,147) (2,807) Redemption of short-term deposits 3,797 3,961 3,002 Movements in short-term deposits (1,300) (186) 195 Purchases of property, plant and equipment 39 (1,584) (1,422) (1,564) Proceeds from sale of property, plant and equipment 1 – 3 Cash paid for intangible assets 39 (1,473) (1,384) (1,206) Finance income received 33 40 48 Acquisition of subsidiary 37 – (11) – Net cash used in investing activities (4,317) (2,966) (2,641) Cash ?ows generated from/(used in) ?nancing activities Finance expenses and fees paid (150) (142) (230) Proceeds from issuance of short-term borrowings 488 551 592 Repayment of short-term borrowings (443) (599) (623) Proceeds from issuance of long-term borrowings 857 – 1,032 Repayment of long-term borrowings (57) (58) (653) Payments of lease obligations (4) (5) (6) Dividends paid 31 (150) (150) (150) Net cash generated from/(used in) ?nancing activities 541 (403) (38) Net (decrease)/increase in cash and cash equivalents (616) 187 896 Cash and cash equivalents at beginning of year 21 3,399 3,208 2,260 Effect of foreign exchange on cash and cash equivalents 95 4 52 Cash and cash equivalents at end of year 21 2,878 3,399 3,208 * Comparatives have been restated for the amendment in the current year to disclose separately ‘Effect of foreign exchange on cash and cash equivalents’ as a separate line item after ‘Cash and cash equivalents at beginning of year’. The line items of ‘cash flows from operating activities before changes in assets and liabilities’ in note 39 and ‘cash generated from operations’, ‘Net cash generated from operating activities’, and ‘Net increase in cash and cash equivalents’ in the consolidated cash flow statement were previously reported as £3,179 million, £3,726 million, £3,560 million and £191 million for the year ended 31 March 2016, and £4,093 million, £4,016 million, £3,627 million and £948 million for the year ended 31 March 2015. An adjustment of £4 million and £52 million was recorded to those line items for the years ended 31 March 2016 and 2015 respectively, to re?ect the removal of the foreign exchange gain on cash and cash equivalents from those line items to present this amount separately as described above. The line items of ‘Cash flows from operating activities before changes in assets and liabilities’, ‘Cash generated from operations’, ‘Net cash generated from operating activities’, and ‘Net increase in cash and cash equivalents’ were therefore restated as £3,175 million, £3,722 million, £3,556 million and £187 million for the year ended 31 March 2016, and £4,041 million, £3,964 million, £3,575 million and £896 million for the year ended 31 March 2015. There is no impact on cash and cash equivalents as previously reported for the years ended 31 March 2016 or 31 March 2015.
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82 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 BACKGROUND AND OPERATIONS Jaguar Land Rover Automotive plc (‘the Company’) and its subsidiaries are collectively referred to as ‘the Group’ or ‘JLR’. The Company is a public limited company incorporated and domiciled in the United Kingdom. The address of its registered office is Abbey Road, Whitley, Coventry, CV3 4LF, England, United Kingdom. The Company is a subsidiary of Tata Motors Limited, India and acts as an intermediate holding company for the Jaguar Land Rover business. The principal activity during the year was the design, development, manufacture and marketing of high-performance luxury saloons, specialist sports cars and four-wheel-drive off-road vehicles. These consolidated financial statements have been prepared in Pound Sterling (GBP) and rounded to the nearest million GBP (£ million) unless otherwise stated. Results for the year ended and as at 31 March 2015 have been disclosed solely for the information of the users. 2 ACCOUNTING POLICIES STATEMENT OF COMPLIANCE These consolidated and parent company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretation Committee (IFRS IC) interpretations as adopted by the European Union (EU) and the requirements of the United Kingdom Companies Act 2006 applicable to companies reporting under IFRS. The Company has taken advantage of section 408 of the Companies Act 2006 and, therefore, the separate financial statements of the Company do not include the income statement or the statement of comprehensive income of the Company on a stand-alone basis. BASIS OF PREPARATION The consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments which are measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for the assets. The principal accounting policies adopted are set out below. CHANGE IN PRESENTATION OF FOREIGN EXCHANGE GAINS AND LOSSES During Fiscal 2016/17, the Group reviewed the presentation of foreign exchange in the consolidated income statement following the continued increase in hedging activity, volatility in foreign exchange rates, and in anticipation of transition to IFRS 9. As a result, it is considered more appropriate to present realised foreign exchange relating to derivatives hedging revenue exposures as an adjustment to ‘Revenue’ and realised foreign exchange relating to derivatives hedging cost exposures to ‘Material and other cost of sales’. The prior year comparatives have been represented on this basis. Realised foreign exchange gains of £78 million and £240 million have been adjusted to ‘Revenue’ for the year ended March 2016 and 2015 respectively. Realised foreign exchange losses of £259 million and £162 million have been adjusted to ‘Material and other cost of sales’ for the year ended March 2016 and 2015 respectively. There is no impact upon the reported profit after taxation or reported equity in either of the financial years. GOING CONCERN The directors have considered the financial position of the Group at 31 March 2017 (net assets of £6,581 million (2016: £7,614 million, 2015: £6,040 million)) and the projected cash flows and financial performance of the Group for at least 12 months from the date of approval of these financial statements as well as planned cost and cash improvement actions, and believe that the plan for sustained profitability remains on course. The directors have taken actions to ensure that appropriate long-term cash resources are in place at the date of signing the accounts to fund Group operations. The directors have reviewed the financial covenants linked to the borrowings in place and believe these will not be breached at any point and that all debt repayments will be met. Therefore, the directors consider, after making appropriate enquiries and taking into consideration the risks and uncertainties facing the Group, that the Group has adequate resources to continue in operation as a going concern for the foreseeable future and is able to meet its financial covenants linked to the borrowings in place. Accordingly, the directors continue to adopt the going concern basis in preparing these consolidated and parent company financial statements.
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Company overview Strategic report Governance Financial statements 83 2 ACCOUNTING POLICIES (CONTINUED) BASIS OF CONSOLIDATION Subsidiaries The consolidated financial statements include Jaguar Land Rover Automotive plc and its subsidiaries. Subsidiaries are entities controlled by the Company. Control exists when the Company has power over the investee, is exposed or has rights to variable return from its involvement with the investee, and has the ability to use its power to affect its returns. In assessing control, potential voting rights that currently are exercisable are taken into account, as well as other contractual arrangements that may influence control. All subsidiaries of the Group given in note 43 to the parent company financial statements are included in the consolidated financial statements. Intercompany transactions and balances including unrealised profits are eliminated in full on consolidation. Joint ventures and associates (equity accounted investments) Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for decisions about the relevant activities of the entity, being those activities that significantly affect the Group’s returns. Associates are those entities in which the Group has significant influence, but not control or joint control. Significant influence is the power to participate in the financial and operating policy decisions of the investee and is presumed to exist when the Group holds between 20 and 50 per cent of the voting power of the investee. Joint ventures and associates are accounted for using the equity method and are recognised initially at cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s share of the income and expenses, other comprehensive income, and equity movements of equity accounted investments, from the date that joint control or significant influence commences until the date that joint control or significant influence ceases. When the Group’s share of losses exceeds its interest in an equity accounted investment, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. When the Group transacts with a joint venture or associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in its joint venture or associate. Dividends received are recognised when the right to receive payment is established. USE OF ESTIMATES AND JUDGEMENTS The preparation of ?nancial statements in conformity with IFRS requires the use of judgements, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the ?nancial statements and the reported amounts of revenues and expenses during the reporting period. Those that are signi?cant to the Group are discussed separately below. Judgements In the process of applying the Group’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements: Revenue from multiple element arrangements: Where a contractual arrangement consists of two or more separate elements that have value to a customer on a standalone basis, revenue is recognised for each element as if it were an individual contract. The total contract consideration is allocated between the separate elements. Sales of bundled offers generally involve service plans and data connectivity contracts with the vehicle. For offers that cannot be separated into identifiable components, revenues are recognised in full over the life of the contract. The Group makes judgements on what components can be separated and the appropriate margin used to defer that component (cost plus basis). Refer to note 5. Assessment of cash-generating units: The Group has determined that there is one cash-generating unit. This is on the basis that there are no smaller groups of assets that can be identified with certainty which generate specific cash flows that are independent of the inflows generated by other assets or groups of assets. Refer to note 18. Alternative performance measures (APMs): Management exercises judgement in determining the adjustments to apply to IFRS measurements in order to derive APMs that provide additional useful information on the underlying trends. Refer to note 3.
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84 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 ACCOUNTING POLICIES (CONTINUED) Estimates and assumptions: The areas where assumptions and estimates are significant to the financial statements are as described below. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Impairment of intangible and tangible fixed assets: The Group tests annually whether indefinite lived intangible fixed assets have suffered any impairment. The recoverable amount of the cash-generating unit is based on the higher of value in use and the fair value less cost of disposal. Value in use is calculated from cash flow projections generally over five years using data from the Group’s latest internal forecasts, and extrapolated beyond five years using estimated long-term growth rates. Key estimates and sensitivities for impairment are disclosed in note 18. Uncertain tax provisions: Tax provisions are recognised for uncertain tax positions where a risk of an additional tax liability has been identified and it is probable that the Group will be required to settle that tax. Measurement is dependent on management’s expectations of the outcome of decisions by tax authorities in the various tax jurisdictions in which the Group operates. This is assessed on a case by case basis using in-house experts, professional firms and previous experience. Refer to note 14. Product warranties: The Group provides product warranties on all new vehicle sales. Provisions are generally recognised when vehicles are sold or when new warranty programs are initiated. Based on historical warranty claim experience, assumptions have to be made on the type and extent of future warranty claims and customer goodwill, as well as on possible recall campaigns. These assessments are based on experience of the frequency and extent of vehicle faults and defects in the past. In addition, the estimates also include assumptions on the amounts of potential repair costs per vehicle and the effects of possible time or mileage limits. The provisions are regularly adjusted to reflect new information. Refer to note 27. Retirement benefit obligation: The present value of the post-employment benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost/ (income) for pensions include the discount rate, inflation and mortality assumptions. Any changes in these assumptions will impact upon the carrying amount of post-employment benefit obligations. Key assumptions and sensitivities for post-employment benefit obligations are disclosed in note 32. REVENUE RECOGNITION Revenue comprises the amounts invoiced to customers outside the Group and is measured at the fair value of the consideration received or receivable, net of discounts, sales incentives, dealer bonuses and rebates granted, which can be identified at the point of sale. Revenue is presented net of excise duty, where applicable, and other indirect taxes. Revenue is recognised when the risks and rewards of ownership have been transferred to the customer and the amount of revenue can be reliably measured with it being probable that future economic benefits will flow to the Group. The transfer of the significant risks and rewards are defined in the underlying agreements with the customer. No sale is recognised where, following disposal of significant risks and rewards, the Group retains a significant financial interest. The Group’s interest in these items is retained in inventory, with a creditor being recognised for the contracted buyback price. Income under such agreements, measured as the difference between the initial sale price and the buyback price, is recognised on a straight-line basis over the term of the agreement. The corresponding costs are recognised over the term of the agreement based on the difference between the item’s cost, including estimated costs of resale, and the expected net realisable value. If a sale includes an agreement for subsequent servicing or maintenance, the fair value of that service is deferred and recognised as income over the relevant service period in proportion with the expected cost pattern of the agreement.
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Company overview Strategic report Governance Financial statements 85 2 ACCOUNTING POLICIES (CONTINUED) COST RECOGNITION Costs and expenses are recognised when incurred and are classified according to their nature. Expenditures are capitalised, where appropriate, in accordance with the policy for internally generated intangible assets and represent employee costs, stores and other manufacturing supplies, and other expenses incurred for product development undertaken by the Group. GOVERNMENT GRANTS AND INCENTIVES Government grants are recognised when there is reasonable assurance that the Group will comply with the relevant conditions and the grant will be received. Government grants are recognised in the consolidated income statement, either on a systematic basis when the Group recognises, as expenses, the related costs that the grants are intended to compensate or, immediately, if the costs have already been incurred. Government grants related to assets are deducted from the cost of the asset and amortised over the useful life of the asset. Government grants related to income are presented as an offset against the related expenditure, and government grants that are awarded as incentives with no ongoing performance obligations to the Group are recognised as other income in the period in which the grant is received. Sales tax incentives received from governments are recognised in the consolidated income statement at the reduced tax rate, and revenue is reported net of these sales tax incentives. FOREIGN CURRENCY The Company has a functional currency of GBP. The presentation currency of the consolidated financial statements is GBP. The functional currency of the UK and non-UK selling operations is GBP, being the primary economic environment that influences these operations. This is on the basis that management control is in the UK, GBP is the currency that primarily determines sales prices and is the main currency for the retention of operating income. The functional currency of Chery Jaguar Land Rover Automotive Co. Ltd., the Group’s principal joint venture, is Chinese Yuan (CNY). The functional currency of Jaguar Land Rover Slovakia s.r.o is Euro. Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Foreign currency denominated monetary assets and liabilities are remeasured into the functional currency at the exchange rate prevailing on the balance sheet date. Exchange differences are recognised in the consolidated income statement as ‘Foreign exchange loss’. For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (non-GBP functional currency) are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity. INCOME TAXES Income tax expense comprises current and deferred taxes. Income tax expense is recognised in the consolidated income statement, except when related to items that are recognised outside of profit or loss (whether in other comprehensive income or directly in equity), or where related to the initial accounting for a business combination. In the case of a business combination, the tax effect is included in the accounting for the business combination. Current income taxes are determined based on respective taxable income of each taxable entity and tax rules applicable for respective tax jurisdictions. Deferred tax assets and liabilities are recognised for the future tax consequences of temporary differences between the carrying values of assets and liabilities and their respective tax bases, and unutilised business loss and depreciation carry-forwards and tax credits. Such deferred tax assets and liabilities are computed separately for each taxable entity and for each taxable jurisdiction. Deferred tax assets are recognised to the extent that it is probable that future taxable income will be available against which the deductible temporary differences, unused tax losses, depreciation carry-forwards and unused tax credits could be utilised.
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86 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 ACCOUNTING POLICIES (CONTINUED) Deferred tax assets and liabilities are measured based on the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, and on the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. EXCEPTIONAL ITEM Exceptional items by virtue of their nature, size or frequency are disclosed separately on the face of the consolidated income statement where this enhances understanding of the Group’s performance. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at cost of acquisition or construction less accumulated depreciation and accumulated impairment, if any. Cost includes purchase price, non-recoverable taxes and duties, labour cost and direct overheads for self-constructed assets and other direct costs incurred up to the date the asset is ready for its intended use. Interest cost incurred for constructed assets is capitalised up to the date the asset is ready for its intended use, based on borrowings incurred specifically for financing the asset or the weighted average rate of all other borrowings, if no specific borrowings have been incurred for the asset. Depreciation is charged on a straight-line basis over the estimated useful lives of the assets. Estimated useful lives of the assets are as follows: Class of property, plant and equipment Estimated useful life (years) Buildings 20 to 40 Plant, equipment and leased assets 3 to 30 Vehicles 3 to 10 Computers 3 to 6 Fixtures and ?ttings 3 to 20 The depreciation for property, plant and equipment with finite useful lives is reviewed at least at each year end. Changes in expected useful lives are treated as changes in accounting estimates. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease. Freehold land is measured at cost and is not depreciated. Heritage assets are not depreciated as they are considered to have a residual value in excess of cost. Residual values are reassessed on an annual basis. Depreciation is not recorded on assets under construction until construction and installation are complete and the asset is ready for its intended use. Assets under construction include capital prepayments. INTANGIBLE ASSETS Acquired intangible assets Intangible assets purchased, including those acquired in business combinations, are measured at acquisition cost, which is the fair value on the date of acquisition, where applicable, less accumulated amortisation and accumulated impairment, if any. Intangible assets with indefinite lives are reviewed annually to determine whether an indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.
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Company overview Strategic report Governance Financial statements 87 2 ACCOUNTING POLICIES (CONTINUED) For intangible assets with finite lives, amortisation is charged on a straight-line basis over the estimated useful lives of the acquired intangible assets as per the estimated amortisation periods below: Class of intangible asset Estimated amortisation period (years) Software 2 to 8 Patents and technological know-how 2 to 12 Customer-related – dealer network 20 Intellectual property rights and other intangibles 3 to indefinite The amortisation for intangible assets with finite useful lives is reviewed at least at each year end. Changes in expected useful lives are treated as changes in accounting estimates. Capital work-in-progress includes capital advances. Customer-related intangibles acquired in a business combination consist of dealer networks. Intellectual property rights and other intangibles mainly consist of brand names, which are considered to have indefinite lives due to the longevity of the brands. Internally generated intangible assets Research costs are charged to the consolidated income statement in the year in which they are incurred. Product development costs incurred on new vehicle platforms, engines, transmission and new products are recognised as intangible assets – when feasibility has been established, the Group has committed technical, financial and other resources to complete the development and it is probable that the asset will generate future economic benefits. The costs capitalised include the cost of materials, direct labour and directly attributable overhead expenditure incurred up to the date the asset is available for use. Interest cost incurred is capitalised up to the date the asset is ready for its intended use, based on borrowings incurred specifically for financing the asset or the weighted average rate of all other borrowings, if no specific borrowings have been incurred for the asset. Product development cost is amortised over a period of between two and ten years. Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment loss, if any. Amortisation is not recorded on product development in progress until development is complete. IMPAIRMENT Property, plant and equipment and intangible assets At each balance sheet date, the Group assesses whether there is any indication that any property, plant and equipment and intangible assets may be impaired. If any such impairment indicator exists, the recoverable amount of an asset is estimated to determine the extent of impairment, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, or earlier if there is an indication that the asset may be impaired. The estimated recoverable amount is the higher of value in use and fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset (or cash-generating unit) for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the consolidated income statement. An annual impairment review for heritage assets is performed and any impairment in the carrying value is recognised immediately in the consolidated income statement.
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88 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 ACCOUNTING POLICIES (CONTINUED) Equity accounted investments: joint ventures and associates The requirements of IAS 39 Financial Instruments: Recognition and Measurement are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in a joint venture or an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (the higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash on hand, demand deposits and highly liquid investments with an original maturity of up to three months that are readily convertible into known amounts of cash and that are subject to an insignificant risk of changes in value. INVENTORIES Inventories are valued at the lower of cost and net realisable value. Cost of raw materials and consumables are ascertained on a first-in, first-out basis. Costs, including fixed and variable production overheads, are allocated to work-in-progress and finished goods, determined on a full absorption cost basis. Net realisable value is the estimated selling price in the ordinary course of business less estimated cost of completion and selling expenses. Inventories include vehicles sold subject to repurchase arrangements. These vehicles are carried at cost to the Group and are amortised in changes in stocks and work-in-progress to their residual values (i.e. estimated second-hand sale value) over the term of the arrangement. PROVISIONS A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are held for product warranty, legal and product liabilities, residual risks and environmental risks as detailed in note 27 to the consolidated financial statements. LONG-TERM INCENTIVE PLAN (LTIP) The Group operates a share-based payment LTIP arrangement for certain employees. The scheme provides a cash payment to the employee based on a specific number of phantom shares at grant date and the share price of Tata Motors Limited at the vesting date, subject to profitability and employment conditions. These are accounted for as cash-settled arrangements, whereby a liability is recognised at fair value at the date of grant, using a Black-Scholes model. At each balance sheet date, until the liability is settled, the fair value of the liability is remeasured, with any changes in fair value recognised in the consolidated income statement. LEASES At the inception of a lease, the lease arrangement is classified as either a finance lease or an operating lease, based on the terms and substance of the lease arrangement. Assets taken on ?nance lease A finance lease is recognised as an asset and a liability at the commencement of the lease, at the lower of the fair value of the asset and the present value of the minimum lease payments. Initial direct costs, if any, are also capitalised and, subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each year during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
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Company overview Strategic report Governance Financial statements 89 2 ACCOUNTING POLICIES (CONTINUED) Assets taken on operating lease Leases other than finance leases are operating leases, and the leased assets are not recognised on the consolidated balance sheet. Payments made under operating leases are recognised in the consolidated income statement on a straight-line basis over the term of the lease in ‘Other expenses’. EMPLOYEE BENEFITS Pension schemes The Group operates several defined benefit pension schemes; the UK defined benefit schemes were previously contracted out of the second state pension scheme until 5 April 2016. The assets of the plans are generally held in separate trustee-administered funds. The plans provide for a monthly pension after retirement based on salary and service as set out in the rules of each scheme. Contributions to the plans by the Group take into consideration the results of actuarial valuations. The plans with a surplus position at the balance sheet date have been limited to the maximum economic benefit available from unconditional rights to refund from the scheme or reduction in future contributions. Where the subsidiary group is considered to have a contractual obligation to fund the pension plan above the accounting value of the liabilities, an onerous obligation is recognised. The UK defined benefit schemes were closed to new joiners in April 2010. For defined benefit schemes, the cost of providing benefits is determined using the projected unit credit method, with actuarial revaluations being carried out at the end of each reporting period. Defined benefit costs are split into three categories: • Current service cost, past service cost, and gains and losses on curtailments and settlements; • Net interest cost; and • Remeasurement. Remeasurement comprising actuarial gains and losses, the effect of the asset ceiling and the return on scheme assets (excluding interest) is recognised immediately in the consolidated balance sheet with a charge or credit to the consolidated statement of comprehensive income in the period in which they occur. Remeasurement recorded in the statement of comprehensive income is not recycled. Past service cost, including curtailment gains and losses, is generally recognised in profit or loss in the period of scheme amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability. The Group presents these defined benefit costs within ‘Employee costs’ in the consolidated income statement (see note 7). Separate defined contribution schemes are available to all other employees of Jaguar Land Rover. Costs in respect of these schemes are charged to the consolidated income statement as incurred. Post-retirement Medicare scheme Under this unfunded scheme, employees of some subsidiaries receive medical benefits subject to certain limits of amount, periods after retirement and types of benefits, depending on their grade and location at the time of retirement. Employees separated from the Group as part of an Early Separation Scheme, on medical grounds or due to permanent disablement, are also covered under the scheme. The applicable subsidiaries (and therefore, the Group) account for the liability for the post-retirement medical scheme based on an annual actuarial valuation. Actuarial gains and losses Actuarial gains and losses relating to retirement benefit plans are recognised in the consolidated statement of comprehensive income in the year in which they arise. Actuarial gains and losses relating to long-term employee benefits are recognised in the consolidated income statement in the year in which they arise. Measurement date The measurement date of all retirement plans is 31 March.
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90 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 ACCOUNTING POLICIES (CONTINUED) FINANCIAL INSTRUMENTS Classi?cation, initial recognition and measurement A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets are classified into categories: financial assets at fair value through profit or loss (which can either be held for trading or designated as fair value options); held-to-maturity investments; loans and receivables; and available-for-sale financial assets. Financial liabilities are classified into financial liabilities at fair value through profit or loss or classified as other financial liabilities. No financial instruments have been classified as held-to-maturity. Where the Group provides convertible loan notes to third parties, these are designated as fair value through profit or loss using the fair value option. Financial instruments are recognised on the balance sheet when the Group becomes a party to the contractual provisions of the instrument. Initially, a financial instrument is recognised at its fair value. Transaction costs directly attributable to the acquisition or issue of financial instruments are recognised in determining the carrying amount, if it is not classified as at fair value through profit or loss. Subsequently, financial instruments are measured according to the category in which they are classified. Financial assets and financial liabilities at fair value through profit or loss – held for trading: Derivatives, including embedded derivatives separated from the host contract, are classified into this category. Financial assets and liabilities are measured at fair value with changes in fair value recognised in the consolidated income statement with the exception of those derivatives that are designated as cash flow hedging instruments and for which hedge accounting is applied. Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and that are not classified as financial assets at fair value through profit or loss or financial assets available-for-sale. Subsequently, these are measured at amortised cost using the effective interest method less any impairment losses, if any. These include cash and cash equivalents, trade receivables, finance receivables and other financial assets. Available-for-sale financial assets: Available-for-sale financial assets are those non-derivative financial assets that are either designated as such upon initial recognition or are not classified in any of the other financial assets categories. Subsequently, these are measured at fair value and changes therein are recognised in other comprehensive income, net of applicable deferred income taxes, and accumulated in the investments revaluation reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in profit or loss. The Group does not hold any available-for-sale financial assets. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost. Embedded derivatives relating to prepayment options on senior notes are not considered as closely related and are separately accounted unless the exercise price of these options is approximately equal on each exercise date to either the amortised cost of the senior notes or the present value of the lost interest for the remaining term of the senior notes. Equity instruments An equity instrument is any contract that evidences residual interests in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Other ?nancial liabilities These are measured at amortised cost using the effective interest method. Determination of fair value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Subsequent to initial recognition, the Group determines the fair value of financial instruments that are quoted in active markets using the quoted bid prices (financial assets held) or quoted ask prices (financial liabilities held) and using valuation techniques for other instruments. Valuation techniques include discounted cash flow method and other valuation models.
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Company overview Strategic report Governance Financial statements 91 2 ACCOUNTING POLICIES (CONTINUED) Derecognition of ?nancial assets and ?nancial liabilities The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expires or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. Financial liabilities are derecognised when they are extinguished, that is when the obligation is discharged, cancelled or has expired. When a financial instrument is derecognised, the cumulative gain or loss in equity (if any) is transferred to the consolidated income statement. Impairment of ?nancial assets The Group assesses at each balance sheet date whether there is objective evidence that a financial asset, other than those at fair value through profit or loss, or a group of financial assets is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. Loans and receivables: Objective evidence of impairment includes default in payments with respect to amounts receivable from customers, significant financial difficulty of the customer or bankruptcy. Impairment loss in respect of loans and receivables is calculated as the difference between their carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. Such impairment loss is recognised in the consolidated income statement. If the amount of an impairment loss decreases in a subsequent year, and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. The reversal is recognised in the consolidated income statement. Equity investments: A significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists, the cumulative loss (measured as the difference between the acquisition cost and the current fair value), less any impairment loss on that financial asset previously recognised in profit or loss is removed from equity and recognised in profit and loss. Impairment losses recognised in the consolidated income statement on equity instruments are not reversed through the consolidated income statement. Hedge accounting The Group uses foreign currency forward contracts, foreign currency options and borrowings denominated in foreign currency to hedge its risks associated with foreign currency fluctuations relating to highly probable forecast transactions. The Group designates these foreign currency forward contracts, foreign currency options and borrowing denominated in foreign currency in a cash flow hedging relationship by applying hedge accounting principles under IAS 39. These are stated at fair value on the consolidated balance sheet at each reporting date. Changes in the fair value of these forward contracts, options and borrowings that are designated and effective as hedges of future cash flows are recognised in other comprehensive income (net of tax), and any ineffective portion is recognised immediately in the consolidated income statement. Amounts accumulated in other comprehensive income are reclassified to the consolidated income statement in the periods in which the forecasted transactions affect profit or loss. For options, the time value is not a designated component of the hedge, and therefore all changes in fair value related to the time value of the instrument are recognised immediately in the consolidated income statement. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised or no longer qualifies for hedge accounting. For forecast transactions, any cumulative gain or loss on the hedging instrument recognised in other comprehensive income is retained there until the forecast transaction affects profit or loss. If the forecast transaction is no longer expected to occur, the net cumulative gain or loss recognised in other comprehensive income is immediately transferred to the consolidated income statement.
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92 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 ACCOUNTING POLICIES (CONTINUED) NEW ACCOUNTING PRONOUNCEMENTS The following IFRS pronouncements have been issued by the IASB and have not yet been adopted: IAS 7 has been amended to require additional disclosure to help users evaluate changes in borrowings. The amendment is effective for annual periods beginning on or after 1 January 2017 and earlier application is permitted subject to EU endorsement. The Group expects to include a net debt reconciliation within its disclosures following the adoption of this amendment. IFRS 7 additional disclosure requirements are being assessed and disclosure will be given when IFRS 9 is adopted by the Group. IFRS 9 Financial Instruments addresses the classification, measurement and recognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income and fair value through profit or loss. The basis of classification depends on the entity’s business model and contractual cash flow characteristics of the financial asset. The Group has undertaken an assessment of classification and measurement and the Group does not expect a significant impact on the financial statements. The new impairment model requires the recognition of impairment provisions based on expected credit losses rather than only incurred credit losses as is the case under IAS 39. It applies to financial assets classified at amortised cost, contract assets under IFRS 15 Revenue from Contracts with Customers, lease receivables, loan commitments and certain financial guarantee contracts. The Group has undertaken an assessment of the impairment model and the Group does not expect a significant impact on the financial statements. The new hedge accounting rules will align the accounting for hedging instruments more closely with the Group’s risk management practices. As a general rule, more hedge relationships might be eligible for hedge accounting, as the standard introduces a more principles-based approach. The Group has undertaken an assessment of their IAS 39 hedge relationships against the requirements of IFRS 9 and have concluded that the Group’s current hedge relationships will qualify as continuing hedges upon the adoption of IFRS 9. The Group has identified a change with respect to treatment of the cost of hedging, specifically the time value of the foreign exchange options and foreign currency basis included in the foreign exchange forwards. The Group is undertaking an assessment to determine the impact on the financial statements. The Group anticipates that the time value of foreign exchange options and the foreign currency basis included in the foreign exchange forwards will now be recorded in a separate component of the statement of comprehensive income. Foreign exchange gains/losses for non-financial items will now be recognised as an adjustment to that non-financial item (i.e. inventory) when recorded on the consolidated balance sheet. The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group’s disclosures about its financial instruments particularly in the year of the adoption of the new standard. IFRS 15 Revenue from Contracts with Customers provides a new comprehensive framework for revenue recognition and establishes new principles and the disclosure requirements thereof. The new standard specifies a uniform, five-step model for revenue recognition, which is to be applied to all contracts with customers. The new disclosure requirements aim to create a more transparent view of how a company generates its revenue and aims to provide more consistent and standardised information to users of financial statements about the nature, timing and amount arising from an entity’s contracts with customers. Under IFRS 15, revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 Revenue and IAS 11 Construction Contracts and related interpretations (such as IFRIC 13 Customer Loyalty Programmes). The Group does not intend to early adopt IFRS 15 and therefore will adopt for Fiscal 2018/19, commencing 1 April 2018. The Group considers the profit impact of IFRS 15 to be immaterial to the financial statements. The main financial impact on the Group of IFRS 15 will be the presentation of the consolidated income statement with changes in classification arising from the new definitions of agent and principal, as well as some reclassification from ‘Other Income’ to ‘Revenue’ and additional revenue reductions relating to payments to customers. The other significant impact of IFRS 15 on the financial statements will be the extensive disclosure requirements of the standard, whereby additional numerical and narrative information will be required as well as more disaggregation of revenue compared to the current disclosures.
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Company overview Strategic report Governance Financial statements 93 2 ACCOUNTING POLICIES (CONTINUED) IFRS 16 specifies how to recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less, or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17. The standard replaces IAS 17 Leases and related interpretations (IFRIC 4, SIC-15, SIC-27). The standard is effective for annual periods beginning on or after 1 January 2019 and earlier application is permitted subject to EU endorsement and the adoption of IFRS 15. The Group has commenced an impact assessment project that has resulted in the identification of additional lease arrangements that existed in previous years. Consequently, the operating lease commitment note for 31 March 2017 reflects these additional arrangements identified (see note 36). IFRS 17 Insurance Contracts was published on 18 May 2017 and replaces IFRS 4, which currently permits a wide variety of practices in accounting for insurance contracts. For fixed-fee service contracts whose primary purpose is the provision of services, such as roadside assistance, entities have an accounting policy choice to account for them in accordance with either IFRS 17 or IFRS 15. As the standard applies to annual periods beginning on or after 1 January 2021, the Group has to complete its project on IFRS 15 before being able to determine the impact of IFRS 17. The Group does not consider that any other standards, amendments or interpretations issued by the IASB, but not yet applicable, will have a significant impact on the consolidated financial statements. 3 ALTERNATIVE PERFORMANCE MEASURES Many companies use alternative performance measures (APMs) to provide helpful additional information for users of their financial statements, telling a clearer story of how the business has performed over the period. Alternative performance measures are used by the Board of Management to monitor and manage the performance of the Group. These measures exclude certain items that are included in comparable statutory measures. The alternative performance measures used within this Annual Report are defined below. Alternative performance measure De?nition EBIT Pro?t before income tax expense, ?nance expense (net of capitalised interest), ?nance income, foreign exchange gains/ losses on ?nancing and unrealised derivatives, gains/losses on unrealised commodity derivatives, and exceptional items. EBITDA Pro?t before income tax expense, ?nance expense (net of capitalised interest), ?nance income, depreciation and amortisation, foreign exchange gains/losses on ?nancing and unrealised derivatives, gains/losses on unrealised commodity derivatives, share of pro?t/loss from equity accounted investments and exceptional items. Free cash ?ow before Net cash generated from operating activities less net cash used in investing activities excluding investments in short-?nancing term deposits and including foreign exchange gains/losses on short-term deposits and cash and cash equivalents. Total product and Cash used in the purchase of property, plant and equipment, intangible assets, investments in subsidiaries, joint other investment ventures and associates, and expensed research and development costs. The Group uses EBITDA as an alternative performance measure to review and measure the underlying profitability of the Group on an ongoing basis as it recognises that increased capital expenditure year on year will lead to an increase in depreciation and amortisation expense recognised within the consolidated income statement. Free cash flow before financing 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.
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94 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3 ALTERNATIVE PERFORMANCE MEASURES (CONTINUED) Reconciliations between these alternative performance measures and statutory reported measures are shown below. EBIT AND EBITDA Year ended 31 March 2017 2016 2015 Note £m £m £m EBITDA 2,955 3,147 4,132 Depreciation and amortisation 13 (1,656) (1,418) (1,051) Share of pro?t/(loss) of equity accounted investments 15 159 64 (6) EBIT 1,458 1,793 3,075 Foreign exchange (loss)/gain on derivatives 13 (11) 86 (166) Unrealised gain/(loss) on commodities 13 148 (59) (30) Foreign exchange loss on loans 13 (101) (54) (178) Finance income 12 33 38 48 Finance expense (net) 12 (68) (90) (135) Exceptional item 151 (157) – Pro?t before tax 1,610 1,557 2,614 The Group’s objective is to disclose alternative performance measures on a consistent basis. However, during 2017 it was considered appropriate to disclose an additional alternative performance measure, EBIT. This measure is consistent with other automotive companies as an indicator of operating performance. FREE CASH FLOW BEFORE FINANCING 2017 2016 2015 Year ended 31 March Note £m £m £m Net cash generated from operating activities 3,160 3,556 3,575 Net cash used in investing activities (4,317) (2,966) (2,641) Net cash (used in)/generated from operating and investing activities (1,157) 590 934 Adjustments for: Movements in short-term deposits 1,300 186 (195) Foreign exchange gain on short-term deposits 39 57 11 51 Foreign exchange gain on cash and cash equivalents 39 95 4 52 Free cash ?ow before ?nancing 295 791 842 TOTAL PRODUCT AND OTHER INVESTMENT 2017 2016 2015 Year ended 31 March Note £m £m £m Purchases of property, plant and equipment 1,584 1,422 1,564 Cash paid for intangible assets 1,473 1,384 1,206 Research and development expensed 11 368 318 253 Investment in equity accounted investments 12 – 124 Purchases of other investments 1 – –Acquisition of subsidiary – 11 – Total product and other investment 3,438 3,135 3,147
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Company overview Strategic report Governance Financial statements 95 4 EXCEPTIONAL ITEM The exceptional item of £151 million for the year ended 31 March 2017 relates to recoveries associated with the £157 million exceptional charge recognised in the prior year for stored vehicles damaged in the explosion at the port of Tianjin (China) in August 2015. These recoveries include amounts received for insurance, taxes and saleable vehicles. In addition to the exceptional item of £151 million, a further £35 million of insurance and vehicle recoveries were recognised in the year ended 31 March 2017 related to additional costs of £35 million incurred in the year ended 31 March 2017 that were associated with Tianjin, including lost and discounted vehicle revenue. The exceptional item of £157 million for the year ended 31 March 2016 related to the full financial year impact of the explosion at the port of Tianjin. A provision of £245 million against the carrying value of inventory (finished goods) was recorded in the second quarter ended 30 September 2015, based on the Group’s assessment of the physical condition of the vehicles involved. Subsequent to that, insurance proceeds of £55 million were received, together with the conclusion of further assessments of the condition of the remaining vehicles, which led to a reversal of £33 million of the initial provision. The original £157 million exceptional item was recorded as a provision against vehicle inventory involved in the explosion less recoveries as at 31 March 2016. 5 REVENUE 2016* restated 2015* 2017 restated Year ended 31 March £m £m £m Sale of goods 25,659 22,208 21,866 Realised revenue hedges (1,320) 78 240 Total revenues 24,339 22,286 22,106 * Comparatives have been restated due to the change in accounting policy for presentation of foreign exchange gains and losses as set out in note 2. 6 MATERIAL AND OTHER COST OF SALES 2016* 2015* 2017 restated restated Year ended 31 March £m £m £m Changes in inventories of finished goods and work-in-progress (754) (257) (236) Purchase of products for sale 1,144 876 864 Raw materials and consumables used 14,621 12,684 12,557 Realised purchase hedges (91) 259 162 Total material and other cost of sales 14,920 13,562 13,347 * Comparatives have been restated due to the change in accounting policy for presentation of foreign exchange gains and losses as set out in note 2.
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96 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7 EMPLOYEE NUMBERS AND COSTS Year ended 31 March 2017 2016 2015 £m £m £m Wages and salaries 1,915 1,738 1,500 Social security costs and benefits 294 274 240 Pension costs 281 309 237 Total employee costs 2,490 2,321 1,977 Average employee numbers for the year ended 31 March 2017 agency Non- Agency Total Manufacturing 18,988 2,770 21,758 Research and development 6,632 2,803 9,435 Other 7,430 1,070 8,500 Total employee numbers 33,050 6,643 39,693 Average employee numbers for the year ended 31 March 2016 agency Non- Agency Total Manufacturing 17,235 3,140 20,375 Research and development 6,060 3,115 9,175 Other 6,494 961 7,455 Total employee numbers 29,789 7,216 37,005 Average employee numbers for the year ended 31 March 2015 agency Non- Agency Total Manufacturing 14,504 3,688 18,192 Research and development 5,185 2,716 7,901 Other 5,213 821 6,034 Total employee numbers 24,902 7,225 32,127 8 DIRECTORS’ EMOLUMENTS 2017 2016 2015 Year ended 31 March £ £ £ Directors’ emoluments 3,957,673 3,613,282 2,925,327 Amounts receivable under long-term incentive scheme 537,445 197,782 –Post-employment benefits 873,214 786,351 1,475,732 The aggregate of emoluments received in the year and amounts accrued under the long-term incentive plan (LTIP) of the highest paid director was £4,393,459 (2016: £3,709,433, 2015: £2,824,297), together with a cash allowance in lieu of pension benefits of £873,214 (2016: £786,351, 2015: £1,475,732). During the year, £537,445 of LTIP awards (2016: £197,782, 2015: no LTIP awards) have accrued, which will become payable in future periods. There were no directors who were members of a defined benefit pension scheme or a defined contribution scheme during the years ended 31 March 2017, 2016 and 2015. No directors received any LTIP cash payments during the years ended 31 March 2017, 2016 and 2015.
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Company overview Strategic report Governance Financial statements 97 9 LONG-TERM INCENTIVE PLAN (LTIP) During the year ended 31 March 2017, the Group announced a new LTIP that provides a cash payment to certain employees based on the Group’s performance against long-term business metrics related to performance and strategic priorities (over a period of three years). This new LTIP benefit scheme has been accounted for in accordance with IAS 19 Employee Benefits. During the year ended 31 March 2016, the Group issued the final share-based payment LTIP arrangement based on the share price of Tata Motors Limited. The scheme provides a cash payment to the employee based on a specific number of phantom shares at the grant date and the share price of Tata Motors Limited at the vesting date. The cash payment is dependent upon continued employment for the duration of the three-year vesting period. 2017 2016 2015 Year ended 31 March number number number Outstanding at the beginning of the year 6,032,857 5,637,242 5,353,559 Granted during the year 974 2,317,710 2,315,618 Vested in the year (1,665,663) (1,690,151) (1,654,917) Forfeited in the year (252,947) (231,944) (377,018) Outstanding at the end of the year 4,115,221 6,032,857 5,637,242 The weighted average share price of the 1,665,663 phantom stock awards vested in the year was £4.75 (2016: £5.84, 2015: £5.89) . The weighted average remaining contractual life of the outstanding share-based payment awards is 0.8 years (2016: 1.4 years, 2015: 1.3 years). The amount charged in the year in relation to the share-based payment LTIP was £8 million (2016: £3 million, 2015: £16 million). The fair value of the balance sheet liability in respect of phantom stock awards outstanding at the year end was £16 million (2016: £16 million, 2015: £23 million). The fair value of the awards was calculated using a Black-Scholes model at the grant date. The fair value is updated at each reporting date as the awards are accounted for as cash-settled under IFRS 2 Share-based Payment. The inputs into the model are based on Tata Motors Limited historical data and the risk-free rate is calculated on government bond rates. The significant inputs used are: As at 31 March 2017 2016 2015 Risk-free rate 0.18% 0.51% 0.49% Dividend yield 0.04% 0.00% 0.39% Weighted average fair value per phantom share £4.69 £4.12 £6.14 10 OTHER EXPENSES 2017 2016 2015 Year ended 31 March Note £m £m £m Stores, spare parts and tools 197 150 123 Freight cost 925 858 673 Works, operations and other costs 2,321 2,065 1,808 Repairs 44 42 37 Power and fuel 71 61 57 Rent, rates and other taxes 64 50 57 Insurance 34 26 20 Impairment of tangible assets 17 12 – –Write-down of intangible assets 18 – 28 –Product warranty 27 823 583 543 Publicity 885 811 791 Total other expenses 5,376 4,674 4,109
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98 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11 RESEARCH AND DEVELOPMENT 2017 2016 2015 Year ended 31 March £m £m £m Total research and development costs incurred 1,794 1,560 1,411 Research and development expensed (368) (318) (253) Development costs capitalised 1,426 1,242 1,158 Interest capitalised 89 73 114 Research and development grants capitalised (89) (88) (69) Total internally developed intangible additions 1,426 1,227 1,203 During the year ended 31 March 2014, legislation was enacted to allow UK companies to elect for the Research and Development Expenditure Credit (RDEC) on qualifying expenditure incurred since 1 April 2013, instead of the previous super-deduction rules. In the year ended 31 March 2017, as a result of this election, £87 million (2016: £66 million, 2015: £66 million) of the RDEC – the proportion relating to capitalised product development expenditure and other intangible assets – has been offset against the cost of the respective assets. The remaining £38 million (2016: £38 million, 2015: £30 million) of the RDEC has been recognised as ‘Other income’. 12 FINANCE INCOME AND EXPENSE Year ended 31 March 2017 2016 2015 £m £m £m Finance income 33 38 48 Total ?nance income 33 38 48 Total interest expense on ?nancial liabilities measured at amortised cost (146) (143) (234) Unwind of discount on provisions (19) (21) (17) Interest capitalised 97 74 116 Total ?nance expense (net) (68) (90) (135) The capitalisation rate used to calculate borrowing costs eligible for capitalisation was 4.3 per cent (2016: 4.6 per cent, 2015: 5.8 per cent). During the year ended 31 March 2017, the Group repaid one tranche of debt (see note 25) and as a result a redemption premium of £2 million was incurred. During the year ended 31 March 2016, the Group repaid one tranche of debt (see note 25) and as a result a redemption premium of £2 million was incurred. During the year ended 31 March 2015, the Group repaid two tranches of debt (see note 25) and as a result a redemption premium of £77 million was incurred.
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Company overview Strategic report Governance Financial statements 99 13 PROFIT BEFORE TAX Expense/(income) in profit before tax includes the following: 2017 2016 2015 Year ended 31 March £m £m £m Foreign exchange loss on loans 101 54 178 Foreign exchange loss/(gain) on derivatives 11 (86) 166 Unrealised (gain)/loss on commodities (148) 59 30 Depreciation of property, plant and equipment 787 634 461 Amortisation of intangible assets (excluding internally generated development costs) 100 88 64 Amortisation of internally generated development costs 769 696 526 Operating lease rentals in respect of plant, property and equipment 75 57 48 Loss on disposal of property, plant, equipment and software 15 13 7 Auditor remuneration (see below) 5 6 4 During the year ended 31 March 2017, £64 million (2016: £101 million, 2015: £132 million) was received by a foreign subsidiary as an indirect tax incentive that requires the subsidiary to meet certain criteria relating to vehicle efficiency and investment in engineering and research and development. The incentive is provided as a partial offset to the higher sales taxes payable following implementation of new legislation in the year ended 31 March 2014. During the year ended 31 March 2017, £64 million (2016: £101 million, 2015: £132 million) has been recognised in revenue and £nil (2016, 2015: £nil) has been deferred to offset against capital expenditure, when incurred. During the year ended 31 March 2017, £4 million (2016: £62 million, 2015: £54 million) was received by a foreign subsidiary as an incentive for continuing trading in that country for the foreseeable future. As the receipt has no ongoing financial or operating conditions attached, the amount has been recognised as ‘Other Income’. The following table sets out the auditor remuneration for the year (rounded to the nearest £0.1 million): 2017 2016 2015 Year ended 31 March £m £m £m Fees payable to the Company’s auditor and its associates for the audit of the parent company and consolidated ?nancial statements 0.1 0.1 0.1 Fees payable to the Company’s auditor and its associates for other services: Audit of the Company’s subsidiaries 4.2 3.5 3.3 Total audit fees 4.3 3.6 3.4 Audit-related assurance services – 1.8 0.3 Other assurance services 1.0 0.1 0.7 Total non-audit fees 1.0 1.9 1.0 Total audit and related fees 5.3 5.5 4.4 Fees payable to Deloitte LLP and its associates for non-audit services to the Group are not required to be disclosed separately as these fees are disclosed on a consolidated basis.
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100 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 14 TAXATION JAGUAR LAND ROVER’S APPROACH TO TAX Introduction JLR’s business has grown significantly in recent years and continues to do so. Our operations are large and complex and, as a result, we operate through multiple companies, with activities, employees and assets located in numerous countries around the world. This, in turn, naturally drives an inherent level of complexity in our tax affairs. In relation to tax matters, just as for any other area of our business, JLR always strives to be a good, responsible corporate citizen and we are committed to complying with all applicable tax laws, both in letter and in spirit. We aim to be fair, honest, transparent and ethical in our conduct and for everything we do to stand the test of public scrutiny. Jaguar Land Rover’s key tax principles In 2013, the JLR plc Board formally adopted six key principles in relation to JLR’s approach to taxation matters and the conduct of our tax affairs. These principles continue to apply today; they apply equally to all companies within the Group, across all areas of our business activity and in all our territories of operation. JLR will conduct its tax affairs in a way that: 1. Is compliant with all legal and regulatory obligations and which adheres to the principles set out in the JLR Code of Conduct and Tata Code of Conduct; 2. Is aligned with the Group’s overall business strategy and growth objectives; 3. Proactively seeks to enhance shareholder value and optimise tax cost on a sustainable basis; 4. Is governed, managed and controlled within an appropriate risk management framework; 5. Is appropriately resourced and seeks to maximise operating efficiencies through the suitable use of automation and technology-based solutions; and 6. Maintains good, open, honest and professional working relationships with tax authorities globally and seeks to take a leading role in relation to matters of governmental tax policy relevant to JLR. Each principle is commented on further below: 1. Tax compliance This is considered the most fundamental and important of our six principles. JLR will always seek to comply with all applicable tax laws, both in terms of the letter and the spirit of the law, and to satisfy its global tax compliance obligations in a timely and accurate manner. In addition, we adhere to the JLR Code of Conduct and the Tata Code of Conduct, which set out the high, ethical standards of business behaviour expected from all companies and employees within our Group. 2. Business alignment JLR always aligns its tax affairs with the genuine business activities being undertaken by the organisation. We do not engage in any form of tax avoidance or artificial tax structuring and we do not operate or use any offshore tax havens. All JLR Group subsidiaries are located in countries where the business has significant physical and economic operations (i.e. employees, offices and revenue generating activity). 3. Enhancing shareholder value As a commercial organisation, JLR will always seek to effectively manage its tax liabilities, just as for any other business cost. In so doing, we always adhere to relevant tax laws and, in relation to transactions within the Group, we always seek to ensure that these are conducted on an arm’s length basis in accordance with Organisation for Economic Co-operation and Development (OECD) principles. Where governments or fiscal authorities have introduced particular tax reliefs, credits, incentives or exemptions to encourage specific types of economic activity (for example, investment in research and development), we will always seek to ensure that JLR claims the appropriate level of benefit for which it qualifies.
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Company overview Strategic report Governance Financial statements 101 14 TAXATION (CONTINUED) 4. Governance and risk management Tax risks arising within the Group are identified, assessed and managed by the central Tax function on an ongoing basis. A detailed tax update is taken to the JLR plc Board on an annual basis and tax risks are reported quarterly to the Financial Risk and Assurance Committee, chaired by the Chief Financial Officer. The JLR Tax Director also meets with the Chief Financial Officer on a biweekly basis to provide updates on all tax matters affecting the Group. JLR actively seek to minimise risk in relation to tax matters. We do this through a variety of processes and controls including, for example, tax risk assessments and health-check exercises for subsidiaries, online monitoring of compliance processes and an active Advance Pricing Agreement programme. 5. Tax resource Responsibility for the day-to-day management of JLR’s tax affairs rests with our central Tax function, led by the JLR Tax Director. The function comprises an appropriate blend of tax professionals with the necessary qualifications, training, skills and experience required to effectively undertake their roles. The Tax function also advises the JLR plc Board in relation to setting Group tax strategy and policy. In addition to the central Tax function, the business also has dedicated tax professionals embedded within the finance teams in key non-UK subsidiaries. Where appropriate, we look to implement technology-based solutions to streamline processes, drive efficiency and manage risk. 6. Relationships with governments and authorities In our dealings with tax authorities globally, including HMRC in the UK, we always look to maintain good, open, honest and professional working relationships, to engage proactively in relation to tax matters and to resolve any areas of dispute or differences of opinion as quickly as possible in order to reduce uncertainty and manage risk. We also actively engage in dialogue with governments, either directly or through appropriate representative bodies, in relation to matters of tax policy which affect our business. Amounts recognised in the consolidated income statement 2017 2016 2015 Year ended 31 March £m £m £m Current tax expense/(credit) Current year 301 180 350 Adjustments for prior years 22 (7) 15 Current tax expense 323 173 365 Deferred tax expense/(credit) Origination and reversal of temporary differences 115 163 294 Adjustments for prior years (34) (29) (83) Rate changes (66) (62) – Deferred tax expense 15 72 211 Total income tax expense 338 245 576 Prior year adjustments relate to differences between prior year estimates of tax position and current revised estimates or submitted tax computations. Amounts recognised in the consolidated statement of comprehensive income 2017 2016 2015 Year ended 31 March £m £m £m Deferred tax (credit)/expense on actuarial gains on retirement benefits (179) 97 (71) Deferred tax (credit)/expense on change in fair value of cash flow hedges (353) 11 (363) Deferred tax expense on rate changes 60 23 – (472) 131 (434) Total tax (credit)/expense (134) 376 142
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102 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 14 TAXATION (CONTINUED) Reconciliation of effective tax rate 2017 2016 2015 Year ended 31 March £m £m £m Profit for the year 1,272 1,312 2,038 Total income tax expense 338 245 576 Pro?t before tax 1,610 1,557 2,614 Income tax expense using the tax rates applicable to individual entities of 21.1% (2016: 20.9%, 2015: 22.7%) 340 325 593 Impact of UK Patent Box claims – (29) –Non-deductible expenses 37 35 28 Unrecognised tax assets 21 12 –Differences between current and deferred tax rates applicable – – (18) Changes in tax rates (66) (62) –Overseas unremitted earnings 50 13 40 Tax on share of (profit)/loss of equity accounted investments (32) (13) 1 Over provided in prior years (12) (36) (68) Total income tax expense 338 245 576 Included within ‘Over provided in prior years’ for the year ended 31 March 2017 is £21 million credit relating to revisions of prior year estimates of tax positions in various jurisdictions, principally the UK, to bring them into line with the latest estimates and currently filed tax positions. This is offset by £11 million relating to uncertain tax positions arising in relation to normal ongoing assessments of tax positions globally. Included within ‘Over provided in prior years’ for the year ended 31 March 2016 is £45 million credit relating to enhanced deductions under the UK Patent Box regime in respect of Fiscal 2013/14 and 2014/15. Included within ‘Over provided in prior years’ for the year ended 31 March 2015 is a reversal of £62 million credit relating to withholding tax released as a result of changes in tax rates and laws expected to apply to the future repatriation of intercompany dividends. The UK Finance Act 2015 was enacted during the year ended 31 March 2016, which included provisions for a reduction in the UK corporation tax rate from 20 per cent to 19 per cent with effect from 1 April 2017. The UK Finance Act 2016 was enacted during the year ended 31 March 2017, which included provisions for a further reduction in the UK corporation tax rate to 17 per cent with effect from 1 April 2020. Accordingly, UK deferred tax has been provided at a blended rate of 18.4 per cent on assets (2016: 19 per cent, 2015: 20 per cent) and 17.6 per cent on liabilities (2016: 18.6 per cent, 2015: 20 per cent), recognising the applicable tax rate at the point when the timing difference is expected to reverse.
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Company overview Strategic report Governance Financial statements 103 15 INVESTMENTS Investments consist of the following: 2017 2016 2015 As at 31 March £m £m £m Equity accounted investments 474 339 280 Other investments 1 – – Total investments 475 339 280 The Group has the following investments as at 31 March 2017: Proportion Principal place of of voting business and country Name of investment rights of incorporation Principal activity Registered office address Equity accounted investments Chery Jaguar Land Rover 50.0% China Manufacture and Room 1102, Binjiang, International Plaza, Automotive Co. Ltd. assembly of vehicles No 88 Tonggang Road, Changshu Economic and Technical Development Zone, Suzhou City, Jiangsu Province, China Spark44 (JV) Limited 50.0% England & Wales Provision of advertising Abbey Road, Whitley, Coventry, CV3 4LF, services England Jaguar Cars Finance Limited 49.9% England & Wales Non-trading 280 Bishopsgate, London, EC2M 4RB, England Synaptiv Limited 33.3% England & Wales Business and domestic 84 Kirkland Avenue, Ilford, Essex, England, software development IG5 0TN CloudCar Inc. 42.6% USA Automotive software 711 Centerville Road, Suite 400, development Wilmington, County of New Castle, Delaware 19808, USA Trading investments Jaguar Land Rover Schweiz AG 10.0% Switzerland Sale of automotive Badenerstrasse 600, 8048 Zurich vehicles and parts Switzerland Except for Spark44 (JV) Limited and CloudCar Inc., the proportion of voting rights disclosed in the table above is the same as the Group’s interest in the ordinary share capital of each undertaking. Chery Jaguar Land Rover Automotive Co. Ltd. is a limited liability company whose legal form confirms separation between the parties to the joint arrangement. There is no contractual arrangement or any other facts or circumstances that indicate that the parties to the joint control of the arrangement have rights to the assets or obligations for the liabilities relating to the arrangement. Accordingly, Chery Jaguar Land Rover Automotive Co. Ltd. is classified as a joint venture. During the year ended 31 March 2015, the Group increased its investment in Chery Jaguar Land Rover Automotive Co. Ltd. by £124 million to £195 million. No further increases to the investment were made during the years ended 31 March 2017 or 31 March 2016. During the year ended 31 March 2017, a dividend of £68 million was received from Chery Jaguar Land Rover Automotive Co. Ltd. (2016, 2015: no dividend).
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104 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 15 INVESTMENTS (CONTINUED) The following table sets out the summarised financial information of the Group’s individually material joint venture, Chery Jaguar Land Rover Automotive Co. Ltd.: 2017 2016 2015 As at 31 March £m £m £m Current assets 940 698 520 Current liabilities (934) (614) (347) Non-current assets 1,094 814 585 Non-current liabilities (176) (216) (193) Equity attributable to shareholders 924 682 565 Revenue 2,163 1,106 158 Profit/(loss) for the year 312 124 (13) Other comprehensive income for the year – – – Total comprehensive income/(expense) 312 124 (13) Included within the summarised financial information above are the following amounts: 2017 2016 2015 As at 31 March £m £m £m Cash and cash equivalents 621 450 295 Other current assets 320 248 225 Current financial liabilities (excluding trade and other payables and provisions) – (35) (56) Non-current financial liabilities (excluding trade and other payables and provisions) (175) (216) (193) Depreciation and amortisation (105) (58) (16) Interest income 11 8 8 Interest expense (8) (10) (3) Income tax (expense)/credit (103) (44) 6 Spark44 (JV) Limited’s total ordinary share capital is divided into A and B ordinary shares, with each class having 50 per cent voting rights and interest in returns (of which the Group holds 100 per cent of the B shares). The Group has an interest in 58 per cent of the allotted ordinary share capital, but only 50 per cent of the voting rights and interest in returns, since a number of A ordinary shares are held in trust. Therefore, Spark44 (JV) Limited is considered a joint venture. The Group has no additional rights or influence over Jaguar Cars Finance Limited other than the voting rights attached to the ordinary share capital. During the year ended 31 March 2017, the Group purchased 32 per cent of the ordinary share capital of CloudCar Inc. for £12 million. However, the Group has 43 per cent of the voting rights since a number of ordinary shares are in the form of options either available for issue or assigned to the employees of CloudCar Inc. During the year ended 31 March 2017, the Group purchased 33 per cent of the ordinary share capital of Synaptiv Limited for £0.2 million. No dividend was received in the year ended 31 March 2017 (2016, 2015: no dividend) from any of the individually immaterial equity accounted investments. The following table sets out the summarised financial information, in aggregate, for the share of investments in equity accounted joint ventures that are not individually material: Year ended 31 March 2017 2016 2015 £m £m £m Group’s share of profit for the year 3 2 1 Group’s share of other comprehensive income – – – Group’s share of total comprehensive income 3 2 1 Carrying amount of the Group’s interest 8 5 3
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Company overview Strategic report Governance Financial statements 105 15 INVESTMENTS (CONTINUED) The following table sets out the summarised financial information, in aggregate, for the share of investments in equity accounted associates that are not individually material: 2017 2016 2015 Year ended 31 March £m £m £m Group’s share of total comprehensive income – – –Investment in equity accounted associates 12 – – Carrying amount of the Group’s interest 12 – – The following reconciles the carrying amount of the Group’s interests in equity accounted investments: 2017 2016 2015 As at 31 March £m £m £m Net assets of material joint venture 924 682 565 Share of net assets of: Material joint venture 462 341 282 Individually immaterial joint ventures 8 5 3 Individually immaterial associates 12 – –Other (8) (7) (5) Carrying amount of the Group’s interests in equity accounted investments 474 339 280 As at 31 March 2017, an adjustment of £8 million (2016: £7 million, 2015: £5 million) has been made to derecognise profit that has not yet been realised on goods sold by the Group to Chery Jaguar Land Rover Automotive Co. Ltd. The following reconciles the Group’s share of total comprehensive income of equity accounted investments: 2017 2016 2015 Year ended 31 March £m £m £m Pro?t/(loss) of material joint venture 312 124 (13) Share of pro?t/(loss) of: Material joint venture 156 62 (7) Individually immaterial joint ventures 3 2 1 Share of pro?t/(loss) of equity accounted investments 159 64 (6) Currency translation differences 33 (3) 21 Total comprehensive income related to equity accounted investments 192 61 15 The Group’s share of capital commitments of its joint ventures at 31 March 2017 is £171 million (2016: £102 million, 2015: £19 million), and commitments relating to the Group’s interests in its joint ventures are disclosed in note 33. The contingent liabilities of its joint ventures at 31 March 2017 is £3 million (2016, 2015: £nil). The information above reflects the amounts presented in the financial statements of the equity accounted investments adjusted for differences in accounting policies between the Group and its equity accounted investments. All joint ventures are accounted for using the equity method and are private companies and there are no quoted market prices available for their shares. The Group has no additional rights or influence over Jaguar Land Rover Schweiz AG other than the voting rights attached to the ordinary share capital. During the year ended 31 March 2017, a dividend of £0.3 million (2016: £0.5 million, 2015: £nil) was received from Jaguar Land Rover Schweiz AG. During the year ended 31 March 2017, the Group invested £0.1 million in Splitting Fares Inc., £0.1 million in Sheprd Inc., £0.1 million in Gokid Corp. and £0.4 million in Parkt Inc.
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106 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 16 OTHER FINANCIAL ASSETS 2017 2016 2015 As at 31 March £m £m £m Non-current Restricted cash 5 21 18 Derivative ?nancial instruments 255 154 22 Other 10 10 9 Total non-current other ?nancial assets 270 185 49 Current Advances and other receivables recoverable in cash 2 8 19 Restricted cash 4 – –Derivative financial instruments 169 73 176 Accrued income 19 12 5 Other 24 44 14 Total current other ?nancial assets 218 137 214 As at 31 March 2017, £nil (2016: £nil, 2015: £16 million) of the non-current restricted cash is held as security in relation to vehicles ultimately sold on lease, pledged until the leases reach their respective conclusion. As of 31 March 2017, £4 million (2016: £19 million, 2015: £nil) of the non-current restricted cash is held as a financial deposit in relation to ongoing legal cases.
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Company overview Strategic report Governance Financial statements 107 17 PROPERTY, PLANT AND EQUIPMENT Land and Plant and Computers and ?ttings Fixtures Leased Heritage Under con-buildings equipment Vehicles assets vehicles struction Total £m £m £m £m £m £m £m £m £m Cost Balance at 1 April 2014 534 3,149 4 25 48 43 – 705 4,508 Additions 3 579 2 21 18 – 52 1,082 1,757 Transfers 277 733 – – – – – (1,010) –Disposals (10) (50) – (2) (1) – – – (63) Balance at 31 March 2015 804 4,411 6 44 65 43 52 777 6,202 Additions 40 589 1 33 22 3 – 659 1,347 Transfers 218 707 – – – – – (925) –Disposals (2) (46) – (1) (3) – – – (52) Balance at 31 March 2016 1,060 5,661 7 76 84 46 52 511 7,497 Additions – 1 2 29 13 – – 1,478 1,523 Transfers 114 856 – – – – – (970) –Disposals (10) (26) – (1) (3) – – – (40) Foreign currency translation – – – – – – – 1 1 Balance at 31 March 2017 1,164 6,492 9 104 94 46 52 1,020 8,981 Depreciation Balance at 1 April 2014 70 1,206 1 7 15 25 – – 1,324 Depreciation charge for the period 20 422 – 5 9 5 – – 461 Disposals (10) (46) – – (1) – – – (57) Balance at 31 March 2015 80 1,582 1 12 23 30 – – 1,728 Depreciation charge for the period 31 580 1 7 10 5 – – 634 Disposals (1) (36) – – (3) – – – (40) Balance at 31 March 2016 110 2,126 2 19 30 35 – – 2,322 Depreciation charge for the period 44 714 2 12 11 4 – – 787 Disposals (7) (16) – – (2) – – – (25) Impairment – 12 – – – – – – 12 Balance at 31 March 2017 147 2,836 4 31 39 39 – – 3,096 Net book value At 31 March 2015 724 2,829 5 32 42 13 52 777 4,474 At 31 March 2016 950 3,535 5 57 54 11 52 511 5,175 At 31 March 2017 1,017 3,656 5 73 55 7 52 1,020 5,885 As part of the Group’s physical verification process and review of future manufacturing activities, £12 million of plant and equipment has been identified as impaired and this has been recognised as an expense within ‘Other expenses’ in the year ended 31 March 2017 (2016, 2015: £nil).
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108 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 18 INTANGIBLE ASSETS Patents and property rights Intellectual Product Capitalised Software technological know-how Customer- and other development in product related intangibles progress development Total £m £m £m £m £m £m £m Cost Balance at 1 April 2014 363 147 89 618 1,767 2,415 5,399 Additions – externally purchased 103 – – 1 – – 104 Additions – internally developed – – – – 1,203 – 1,203 Capitalised product development – internally developed – – – – (1,388) 1,388 –Disposals (8) – (28) – – (159) (195) Balance at 31 March 2015 458 147 61 619 1,582 3,644 6,511 Additions – externally purchased 131 –—– – – 131 Additions – internally developed – – – – 1,227 – 1,227 Capitalised product development – internally developed – – – – (1,242) 1,242 –Disposals (10) – – – – (361) (371) Asset write-downs – – – – (28) – (28) Balance at 31 March 2016 579 147 61 619 1,539 4,525 7,470 Additions – externally purchased 100 – – 14 – – 114 Additions – internally developed – – – – 1,426 – 1,426 Capitalised product development – internally developed – – – – (809) 809 –Disposals (84) – – – – (138) (222) Balance at 31 March 2017 595 147 61 633 2,156 5,196 8,788 Amortisation and impairment Balance at 1 April 2014 95 85 46 – – 933 1,159 Amortisation for the year 47 14 3 – – 526 590 Disposals (3) – (28) – – (159) (190) Balance at 31 March 2015 139 99 21 – – 1,300 1,559 Amortisation for the year 71 14 3 – – 696 784 Disposals (9) – – – – (361) (370) Balance at 31 March 2016 201 113 24 – – 1,635 1,973 Amortisation for the year 83 14 3 – – 769 869 Disposals (83) – – – – (138) (221) Balance at 31 March 2017 201 127 27 – – 2,266 2,621 Net book value At 31 March 2015 319 48 40 619 1,582 2,344 4,952 At 31 March 2016 378 34 37 619 1,539 2,890 5,497 At 31 March 2017 394 20 34 633 2,156 2,930 6,167
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Company overview Strategic report Governance Financial statements 109 18 INTANGIBLE ASSETS (CONTINUED) Following a review of all product development in progress, £nil of costs were identified as being written-down and recognised as an expense within ‘Other expenses’ in the year ended 31 March 2017 (2016: £28 million, 2015: £nil). IMPAIRMENT TESTING The directors are of the view that the operations of the Group represent a single cash-generating unit. The intellectual property rights are considered to have an indefinite useful life on the basis of the expected longevity of the brand names. For the periods presented, the recoverable amount of the cash-generating unit has been calculated with reference to its value in use. The key assumptions of this calculation are shown below: As at 31 March 2017 2016 2015 Period on which management approved forecasts are based 5 years 5 years 5 years Growth rate applied beyond approved forecast period 1.9% 2.1% 2.2% Pre-tax discount rate 10.9% 11.2% 11.2% The growth rates used in the value in use calculation reflect those inherent within the Group’s business plan as approved by the JLR plc Board, which is primarily a function of the Group’s cycle plan assumptions, past performance and management’s expectation of future market developments through to 2021/22. The cash flows are then extrapolated into perpetuity assuming a growth rate of 1.9 per cent (2016: 2.1 per cent, 2015: 2.2 per cent). No reasonably possible change in any of the key assumptions would cause the recoverable amount to be less than the carrying value of the assets of the cash-generating unit. 19 OTHER ASSETS 2017 2016 2015 As at 31 March £m £m £m Current Recoverable VAT 243 218 221 Prepaid expenses 167 111 106 Research and development credit 97 82 69 Other 10 – – Total current other assets 517 411 396 Non-current Prepaid expenses 77 42 23 Other 3 3 3 Total non-current other assets 80 45 26
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110 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 20 DEFERRED TAX ASSETS AND LIABILITIES Significant components of deferred tax asset and liability for the year ended 31 March 2017 are as follows: Recognised in Recognised in other Opening balance or loss pro?t comprehensive income exchange Foreign Closing balance £m £m £m £m £m Deferred tax assets Property, plant and equipment 21 (9) – – 12 Provisions, allowances for doubtful receivables 224 (26) – 24 222 Derivative financial instruments 240 (22) 329 – 547 Retirement benefits 110 (1) 143 – 252 Unrealised profit in inventory 127 65 – – 192 Tax loss 175 34 – – 209 Other 50 22 – – 72 Total deferred tax asset 947 63 472 24 1,506 Deferred tax liabilities Intangible assets 946 49 – – 995 Overseas unremitted earnings 31 29* – – 60 Total deferred tax liability 977 78 – – 1,055 Presented as deferred tax asset** 354 511 Presented as deferred tax liability** (384) (60) * Included within £29 million is a reversal of £18 million relating to withholding tax incurred on intercompany dividends paid in the year. ** For balance sheet presentation purposes, deferred tax assets and deferred tax liabilities are offset to the extent that they relate to the same taxation authority and are expected to be settled on a net basis. At 31 March 2017, deferred tax assets of £511 million (2016: £354 million, 2015: £372 million) have been recognised in relation to deductible temporary differences, including unused tax losses, on the basis that it is probable that future taxable profits will be available against which those deductible temporary differences can be utilised. At 31 March 2017, the Group had unused tax losses and other temporary differences amounting to £104 million (2016: £76 million, 2015: £nil) for which no deferred tax asset arises. As at 31 March 2017, £3 million (2016: £6 million, 2015: £nil) of those tax losses are subject to expiry in future periods, with £1 million due to expire in each of the fiscal years 2018 to 2020. The remaining balance is not expected to expire. All deferred tax assets and deferred tax liabilities at 31 March 2017, 2016 and 2015 are presented as non-current.
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Company overview Strategic report Governance Financial statements 111 20 DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED) Significant components of deferred tax asset and liability for the year ended 31 March 2016 are as follows: Recognised in Recognised in other Opening balance or loss pro?t comprehensive income exchange Foreign Closing balance £m £m £m £m £m Deferred tax assets Property, plant and equipment 8 13 – – 21 Provisions, allowances for doubtful receivables 227 (3) – – 224 Derivative financial instruments 261 (3) (18) – 240 Retirement benefits 187 36 (113) – 110 Unrealised profit in inventory 146 (19) – – 127 Tax loss 220 (45) – – 175 Other 35 15 – – 50 Total deferred tax asset 1,084 (6) (131) – 947 Deferred tax liabilities Intangible assets 852 94 – – 946 Overseas unremitted earnings 59 (28)* – – 31 Total deferred tax liability 911 66 – – 977 Presented as deferred tax asset** 372 354 Presented as deferred tax liability** (199) (384) * Included within £28 million is a reversal of £39 million relating to withholding tax incurred on intercompany dividends paid in the year. ** For balance sheet presentation purposes, deferred tax assets and deferred tax liabilities are offset to the extent that they relate to the same taxation authority and are expected to be settled on a net basis. At 31 March 2016, the Group had temporary differences relating to undistributed profits of equity accounted investees amounting to £37 million for which no deferred tax liability has been recognised as it was not expected to reverse in the foreseeable future. Significant components of deferred tax asset and liability for the year ended 31 March 2015 are as follows: Recognised in Recognised in other Opening balance or loss pro?t comprehensive income exchange Foreign Closing balance £m £m £m £m £m Deferred tax assets Property, plant and equipment 74 (66) – – 8 Provisions, allowances for doubtful receivables 190 25 – 12 227 Derivative financial instruments – 31 230 – 261 Retirement benefits 135 (19) 71 – 187 Unrealised profit in inventory 138 8 – – 146 Tax loss 375 (155) – – 220 Other 15 20 – – 35 Total deferred tax asset 927 (156) 301 12 1,084 Deferred tax liabilities Property, plant and equipment 2 (2) – – –Intangible assets 713 139 – – 852 Derivative financial instruments 133 – (133) – –Overseas unremitted earnings 141 (82)* – – 59 Total deferred tax liability 989 55 (133) – 911 Presented as deferred tax asset** 284 372 Presented as deferred tax liability** (346) (199) * Included within £82 million is a reversal of £59 million relating to withholding tax incurred on intercompany dividends paid in the year, and £62 million relating to withholding tax released as a result of changes in tax rates and laws expected to apply to future repatriation of intercompany dividends. ** For balance sheet presentation purposes, deferred tax assets and deferred tax liabilities are offset to the extent that they relate to the same taxation authority and are expected to be settled on a net basis.
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112 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 21 CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of the following: 2017 2016 2015 As at 31 March £m £m £m Cash and cash equivalents 2,878 3,399 3,208 Included within the cash and cash equivalents balance of £2,878 million (2016: £3,399 million, 2015: £3,208 million) are amounts of £nil (2016: £12 million, 2015: £nil) which are not considered to be available for use by the Group at the balance sheet date. The balance at 31 March 2016 comprised £7 million relating to amounts held by solicitors to settle a capital commitment and £5 million relating to amounts that are required by local legislation to be held for use on specific marketing activities. 22 ALLOWANCES FOR TRADE AND OTHER RECEIVABLES Changes in the allowances for trade and other receivables are as follows: 2017 2016 2015 Year ended 31 March £m £m £m At beginning of year 60 11 8 Charged during the year – 49 3 Utilised during the year (1) – –Unused amounts reversed (13) – –Foreign currency translation 14 – – At end of year 60 60 11 23 INVENTORIES As at 31 March 2017 2016 2015 £m £m £m Raw materials and consumables 117 92 80 Work-in-progress 330 379 298 Finished goods 3,017 2,214 2,038 Total inventories 3,464 2,685 2,416 Inventories of finished goods include £326 million (2016: £250 million, 2015: £187 million), relating to vehicles sold to rental car companies, fleet customers and others with guaranteed repurchase arrangements. Cost of inventories (including cost of purchased products) recognised as an expense during the year amounted to £17,615 million (2016: £15,437 million, 2015: £15,041 million). During the year, the Group recorded an inventory write-down expense of £16 million (2016: £230 million, 2015: £40 million), excluding a reversal of a write-down recorded in a previous period in relation to the Tianjin incident of £94 million (2016, 2015: £nil). The write-down excluding this reversal is included in ‘Material and other cost of sales’. 24 ACCOUNTS PAYABLE As at 31 March 2017 2016 2015 £m £m £m Trade payables 4,384 3,899 3,483 Liabilities to employees 151 153 185 Liabilities for expenses 1,606 1,357 1,298 Capital creditors 367 349 484 Total accounts payable 6,508 5,758 5,450
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Company overview Strategic report Governance Financial statements 113 25 INTEREST BEARING LOANS AND BORROWINGS 2017 2016 2015 As at 31 March £m £m £m Short-term borrowings Bank loans 179 116 156 Short-term borrowings 179 116 156 Long-term borrowings EURO MTF listed debt 3,395 2,373 2,381 Long-term borrowings 3,395 2,373 2,381 Finance lease obligations (see note 36) 7 11 13 Total debt 3,581 2,500 2,550 EURO MTF LISTED DEBT The bonds are listed on the Luxembourg Stock Exchange multilateral trading facility (EURO MTF) market. Details of the tranches of the bonds outstanding at 31 March 2017 are as follows: • $500 million Senior Notes due 2023 at a coupon of 5.625 per cent per annum – issued January 2013 • $700 million Senior Notes due 2018 at a coupon of 4.125 per cent per annum – issued December 2013 • £400 million Senior Notes due 2022 at a coupon of 5.000 per cent per annum – issued January 2014 • $500 million Senior Notes due 2019 at a coupon of 4.250 per cent per annum – issued October 2014 • £400 million Senior Notes due 2023 at a coupon of 3.875 per cent per annum – issued February 2015 • $500 million Senior Notes due 2020 at a coupon of 3.500 per cent per annum – issued March 2015 • €650 million Senior Notes due 2024 at a coupon of 2.200 per cent per annum – issued January 2017 • £300 million Senior Notes due 2021 at a coupon of 2.750 per cent per annum – issued January 2017 Details of the tranches of the bond repaid in the year ended 31 March 2017 are as follows: • $84 million Senior Notes due 2021 at a coupon of 8.125 per cent per annum – issued May 2011 Details of the tranches of the bond repaid in the year ended 31 March 2016 are as follows: • £58 million Senior Notes due 2020 at a coupon of 8.250 per cent per annum – issued March 2012 Details of the tranches of the bond repaid in the year ended 31 March 2015 are as follows: • $326 million Senior Notes due 2021 at a coupon of 8.125 per cent per annum – issued May 2011 • £442 million Senior Notes due 2020 at a coupon of 8.250 per cent per annum – issued March 2012 The contractual cash flows of interest bearing debt (excluding finance leases) are set out below, including estimated interest payments, and assumes the debt will be repaid at the maturity date. As at 31 March 2017 2016 2015 £m £m £m Due in 1 year or less 321 233 279 Between 1 and 3 years 1,610 717 240 Between 3 and 5 years 848 857 1,403 More than 5 years 1,414 1,292 1,336 Total contractual cash ?ows 4,193 3,099 3,258 UNDRAWN FACILITIES As at 31 March 2017 and 2016, the Group has a fully undrawn revolving credit facility of £1,870 million. This facility is available in full until 2020. As at 31 March 2015, the Group had a fully undrawn revolving credit facility of £1,485 million and £1,290 million respectively in a facility split into three-year and five-year tranches available until 2016 and 2018.
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114 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 26 OTHER FINANCIAL LIABILITIES 2017 2016 2015 As at 31 March £m £m £m Current Finance lease obligations 2 5 4 Interest accrued 27 25 25 Derivative ?nancial instruments 1,760 666 697 Liability for vehicles sold under a repurchase arrangement 350 266 197 Total current other ?nancial liabilities 2,139 962 923 Non-current Finance lease obligations 5 6 9 Derivative ?nancial instruments 1,391 809 832 Other payables 3 2 1 Total non-current other ?nancial liabilities 1,399 817 842 27 PROVISIONS 2017 2016 2015 As at 31 March £m £m £m Current Product warranty 511 441 426 Legal and product liability 114 99 50 Provisions for residual risk 7 6 4 Provision for environmental liability 12 8 5 Other employee benefits obligations – 1 – Total current provisions 644 555 485 Non-current Product warranty 879 688 585 Legal and product liability 47 – –Provision for residual risk 27 13 16 Provision for environmental liability 22 23 26 Other employee benefits obligations 13 9 12 Total non-current provisions 988 733 639 Product Legal and Environmental Other employee bene?ts warranty product liability Residual risk liability obligations Total Year ended 31 March 2017 £m £m £m £m £m £m Opening balance 1,129 99 19 31 10 1,288 Provisions made during the year 846 119 18 3 3 989 Reclassification from accounts payable – 19 – – – 19 Provisions used during the year (581) (23) (5) – – (609) Unused amounts reversed in the period (23) (54) – – – (77) Impact of unwind of discounting 19 – – – – 19 Foreign currency translation – 1 2 – – 3 Closing balance 1,390 161 34 34 13 1,632
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Company overview Strategic report Governance Financial statements 115 27 PROVISIONS (CONTINUED) PRODUCT WARRANTY PROVISION The Group offers warranty cover in respect of manufacturing defects, which become apparent one to five years after purchase, dependent on the market in which the purchase occurred and the vehicle purchased. The estimated liability for product warranty is recognised when products are sold or when new warranty programmes are initiated. These estimates are established using historical information on the nature, frequency and average cost of warranty claims and management estimates regarding possible future warranty claims, customer goodwill and recall complaints. The discount on the warranty provision is calculated using a risk-free discount rate as the risks specific to the liability, such as inflation, are included in the base calculation. The timing of outflows will vary as and when a warranty claim will arise, being typically up to five years. LEGAL AND PRODUCT LIABILITY PROVISION A legal and product liability provision is maintained in respect of compliance with regulations and known litigations that impact the Group. The provision primarily relates to motor accident claims, consumer complaints, dealer terminations, employment cases, personal injury claims and compliance with regulations. The timing of outflows will vary as and when claims are received and settled, which is not known with certainty. RESIDUAL RISK PROVISION In certain markets, the Group is responsible for the residual risk arising on vehicles sold by dealers on leasing arrangements. The provision is based on the latest available market expectations of future residual value trends. The timing of the outflows will be at the end of the lease arrangements, being typically up to three years. ENVIRONMENTAL RISK PROVISION This provision relates to various environmental remediation costs such as asbestos removal and land clean-up. The timing of when these costs will be incurred is not known with certainty. 28 OTHER LIABILITIES 2017 2016 2015 As at 31 March £m £m £m Current Liabilities for advances received 92 139 183 Deferred revenue 167 93 54 VAT 171 131 88 Other taxes payable 38 35 27 Others 22 29 22 Total current other liabilities 490 427 374 Non-current Deferred revenue 338 170 96 Others 24 34 22 Total non-current other liabilities 362 204 118
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116 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 29 CAPITAL AND RESERVES 2017 2016 2015 As at 31 March £m £m £m Authorised, called up and fully paid 1,500,642,163 ordinary shares of £1 each 1,501 1,501 1,501 Total capital 1,501 1,501 1,501 The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. The capital redemption reserve of £167 million (2016, 2015: £167 million) was created in March 2011 on the cancellation of share capital. 30 OTHER RESERVES The movement of other reserves is as follows: Translation reserve Hedging reserve Retained earnings Total other reserves £m £m £m £m Balance at 1 April 2016 (363) (873) 7,182 5,946 Profit for the year – – 1,272 1,272 Remeasurement of defined benefit obligation – – (895) (895) Loss on effective cash flow hedges – (3,037) – (3,037) Currency translation differences 34 – – 34 Income tax related to items recognised in other comprehensive income – 583 143 726 Cash flow hedges reclassified to profit or loss – 1,271 – 1,271 Income tax related to items reclassified to profit or loss – (254) – (254) Dividend paid – – (150) (150) Balance at 31 March 2017 (329) (2,310) 7,552 4,913 Balance at 1 April 2015 (362) (910) 5,644 4,372 Profit for the year – – 1,312 1,312 Remeasurement of defined benefit obligation – – 489 489 Loss on effective cash flow hedges* – (126) – (126) Currency translation differences (1) – – (1) Income tax related to items recognised in other comprehensive income* – 18 (113) (95) Cash flow hedges reclassified to profit or loss* – 181 – 181 Income tax related to items reclassified to profit or loss* – (36) – (36) Dividend paid – – (150) (150) Balance at 31 March 2016 (363) (873) 7,182 5,946 Balance at 1 April 2014 (383) 539 4,040 4,196 Profit for the year – – 2,038 2,038 Remeasurement of defined benefit obligation – – (355) (355) Loss on effective cash flow hedges* – (1,734) – (1,734) Currency translation differences 21 – – 21 Income tax related to items recognised in other comprehensive income* – 347 71 418 Cash flow hedges reclassified to profit or loss* – (78) – (78) Income tax related to items reclassified to profit or loss* – 16 – 16 Dividend paid – – (150) (150) Balance at 31 March 2015 (362) (910) 5,644 4,372 * Comparative information for the years ended 31 March 2016 and 31 March 2015 has been restated; however, there was no impact upon the closing hedge reserve as reported.
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Company overview Strategic report Governance Financial statements 117 31 DIVIDENDS 2017 2016 2015 Year ended 31 March £m £m £m Dividend proposed for the previous year paid during the year of £0.10 (2016, 2015: £0.10) per ordinary share 150 150 150 Amounts recognised as distributions to equity holders during the year 150 150 150 Proposed dividend for the year of £0.10 (2016, 2015: £0.10) per ordinary share 150 150 150 In May 2017, the Company proposed an ordinary dividend of £150 million to its immediate parent TML Holdings Pte. Ltd. (Singapore). £60 million of this amount was paid in June 2017. 32 EMPLOYEE BENEFITS The Group operates defined benefit pension schemes for qualifying employees of certain of its subsidiaries. The UK defined benefit schemes are administered by a trustee that is legally separated from the Group. The trustee of the pension schemes is required by law to act in the interest of the fund and of all relevant stakeholders in the schemes, and is responsible for the investment policy with regard to the assets of the schemes and all other governance matters. The board of the trustee must be composed of representatives of the Group and scheme participants in accordance with each scheme’s regulations. Under the schemes, the employees are entitled to post-retirement benefits based on their length of service and salary. Through its defined benefit pension schemes, the Group is exposed to a number of risks, the most significant of which are detailed below. ASSET VOLATILITY The schemes’ liabilities are calculated using a discount rate set with reference to corporate bond yields; if the schemes’ assets underperform against these corporate bonds, this will create or increase a deficit. The defined benefit schemes hold a significant proportion of equity type assets, which are expected to outperform corporate bonds in the long term although introduce volatility and risk in the short term. The UK schemes hold a substantial level of index-linked gilts and other inflation and interest rate hedging instruments in order to reduce the volatility of assets compared to the liability value, although these will lead to asset value volatility. As the schemes mature, the Group intends to reduce the level of investment risk by investing more in assets that better match the liabilities. However, the Group believes that due to the long-term nature of the schemes’ liabilities and the strength of the supporting group, a level of continuing equity type investments is currently an appropriate element of the Group’s long-term strategy to manage the schemes efficiently. CHANGES IN BOND YIELDS A decrease in corporate bond yields will increase the schemes’ liabilities, although this is expected to be partially offset by an increase in the value of the schemes’ assets, specifically the bond holdings and interest rate hedging instruments. INFLATION RISK Some of the Group’s pension obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect the schemes against high inflation). As noted above, schemes hold a significant proportion of assets in index-linked gilts, together with other inflation hedging instruments and also assets that are more closely correlated with inflation. However, an increase in inflation will also create or increase the deficit to some degree. LIFE EXPECTANCY The majority of the schemes’ obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the schemes’ liabilities. This is particularly significant in the UK defined benefit schemes, where inflationary increases result in higher sensitivity to changes in life expectancy.
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118 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 32 EMPLOYEE BENEFITS (CONTINUED) The following tables set out the disclosures pertaining to the retirement benefit amounts recognised in the consolidated financial statements prepared in accordance with IAS 19: CHANGE IN PRESENT VALUE OF DEFINED BENEFIT OBLIGATION 2017 2016 2015 Year ended 31 March £m £m £m Defined benefit obligation at beginning of year 7,668 7,883 6,053 Current service cost 198 224 168 Interest expense 275 263 274 Actuarial (gains)/losses arising from: Changes in demographic assumptions (76) (36) (20) Changes in ?nancial assumptions 2,335 (569) 1,454 Experience adjustments (213) 63 101 Past service cost – – 1 Exchange differences on foreign schemes 5 3 –Member contributions 2 2 2 Benefits paid (225) (165) (149) Other adjustments – – (1) De?ned bene?t obligation at end of year 9,969 7,668 7,883 CHANGE IN FAIR VALUE OF SCHEME ASSETS 2017 2016 2015 Year ended 31 March £m £m £m Fair value of schemes’ assets at beginning of year 7,103 6,997 5,382 Interest income 258 233 246 Remeasurement gain/(loss) on the return of schemes’ assets, excluding amounts included in interest income 1,149 (52) 1,178 Administrative expenses (9) (8) (8) Exchange differences on foreign schemes 3 1 1 Employer contributions 227 95 346 Member contributions 2 2 2 Benefits paid (225) (165) (149) Other adjustments – – (1) Fair value of scheme assets at end of year 8,508 7,103 6,997 The actual return on the schemes’ assets for the year ended 31 March 2017 was £1,407 million (2016: £181 million, 2015: £1,424 million). Amounts recognised in the consolidated income statement consist of: 2017 2016 2015 Year ended 31 March £m £m £m Current service cost 198 224 168 Past service cost – – 1 Administrative expenses 9 8 8 Net interest cost (including onerous obligations) 17 30 28 Components of de?ned bene?t cost recognised in the consolidated income statement 224 262 205
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Company overview Strategic report Governance Financial statements 119 32 EMPLOYEE BENEFITS (CONTINUED) Amounts recognised in the consolidated statement of comprehensive income consists of: 2017 2016 2015 Year ended 31 March £m £m £m Actuarial gains/(losses) arising from: Changes in demographic assumptions 76 36 20 Changes in ?nancial assumptions (2,335) 569 (1,454) Experience adjustments 213 (63) (101) Remeasurement gain/(loss) on the return of schemes’ assets, excluding amounts included in interest income 1,149 (52) 1,178 Change in restriction of pension asset recognised (as per IFRIC 14) – 1 2 Change in onerous obligation, excluding amounts included in interest expense 2 (2) – Remeasurement (loss)/gain on de?ned bene?t obligation (895) 489 (355) Amounts recognised in the consolidated balance sheet consist of: 2017 2016 2015 As at 31 March £m £m £m Present value of unfunded de?ned bene?t obligations (2) (1) (1) Present value of funded de?ned bene?t obligations (9,967) (7,667) (7,882) Fair value of schemes’ assets 8,508 7,103 6,997 Restriction of pension asset recognised (as per IFRIC 14) and onerous obligations – (2) (1) Net retirement bene?t obligation (1,461) (567) (887) Presented as non-current liability (1,461) (567) (887) The most recent actuarial valuations of the schemes’ assets and the present value of the defined benefit liability for accounting purposes were carried out at 31 March 2017 by a qualified independent actuary. The present value of the defined benefit liability, and the related current service cost and past service cost, were measured using the projected unit credit method. The principal assumptions used in accounting for the pension schemes are set out below: Year ended 31 March 2017 2016 2015 % % % Discount rate 2.6 3.6 3.4 Expected rate of increase in compensation level of covered employees 3.7 3.5 3.6 In?ation increase 3.2 3.0 3.1 For the valuation at 31 March 2017 and 31 March 2016, the mortality assumptions used are the SAPS base table, in particular S2NxA tables and the Light table for members of the Jaguar Executive Pension Plan. A scaling factor of 120 per cent for males and 110 per cent for females has been used for the Jaguar Pension Plan, 115 per cent for males and 105 per cent for females for the Land Rover Pension Scheme, and 95 per cent for males and 85 per cent for females for the Jaguar Executive Pension Plan. For the valuation at 31 March 2015, the mortality assumptions used are the SAPS base table, in particular S1NxA tables and the Light table for members of the Jaguar Executive Pension Plan. A scaling factor of 115 per cent has been used for the Jaguar Pension Plan, 110 per cent for the Land Rover Pension Scheme, and 105 per cent for males and 90 per cent for females for the Jaguar Executive Pension Plan. There is an allowance for future improvements in line with the CMI (2014) projections and an allowance for long-term improvements of 1.25 per cent per annum (2016, 2015: CMI (2014) projections with 1.25 per cent per annum improvements).
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120 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 32 EMPLOYEE BENEFITS (CONTINUED) The assumed life expectations on retirement at age 65 are: As at 31 March 2017 2016 2015 years years years Retiring today: Males 21.5 21.5 21.4 Females 24.5 24.4 23.9 Retiring in 20 years: Males 23.3 23.2 23.1 Females 26.3 26.2 25.8 The Group noted that on 27 March 2017, a new mortality projection model (CMI (2016)) was released that potentially indicated a small reduction in longevity of, on average, 0.5 years compared to current assumptions. The Group considered adopting the new mortality tables and noted that there was uncertainty about the appropriate level of initial mortality improvements, both for the general population and when applying the model to other populations. On this basis, following discussion with and recommendation by the Group’s pension advisor, it is considered that the CMI (2014) mortality tables represent the Group’s best estimate of the future longevity of its defined benefit schemes’ members both during and after employment as at 31 March 2017. The sensitivity analysis below is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognised within the consolidated balance sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to previous periods. Assumption Change in assumption Impact on scheme liabilities Impact on service cost Discount rate Increase/decrease by 0.25% Decrease/increase by c.£550 million Decrease/increase by c.£10 million Inflation rate Increase/decrease by 0.25% Decrease/increase by c.£490 million Decrease/increase by c.£10 million Mortality Increase/decrease by 1 year Decrease/increase by c.£290 million Decrease/increase by c.£10 million
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Company overview Strategic report Governance Financial statements 121 32 EMPLOYEE BENEFITS (CONTINUED) The fair value of scheme assets is represented by the following major categories: 2017 2016 2015 Quoted* £m Unquoted Total Quoted* Unquoted Total Quoted* Unquoted Total As at 31 March £m £m % £m £m £m % £m £m £m % Equity instruments Information technology 142 – 142 2% 125 – 125 2% 118 – 118 1% Energy 61 – 61 1% 53 – 53 1% 70 – 70 1% Manufacturing 104 – 104 1% 98 – 98 1% 96 – 96 1% Financials 164 – 164 2% 178 – 178 3% 184 – 184 3% Other 452 – 452 5% 437 – 437 6% 417 – 417 6% 923 – 923 11% 891 – 891 13% 885 – 885 12% Debt instruments Government 2,929 – 2,929 34% 2,590 – 2,590 36% 2,699 12 2,711 39% Corporate bonds (investment grade) 20 2,071 2,091 25% 158 1,461 1,619 23% 38 1,198 1,236 18% Corporate bonds (Non-investment grade) 123 414 537 6% 165 280 445 6% 54 476 530 7% 3,072 2,485 5,557 65% 2,913 1,741 4,654 65% 2,791 1,686 4,477 64% Property funds UK – 190 190 2% 67 115 182 3% 131 113 244 3% Other – 156 156 2% 76 48 124 2% 52 17 69 1% – 346 346 4% 143 163 306 5% 183 130 313 4% Cash and cash equivalents 93 – 93 1% 170 – 170 2% 130 – 130 2% Other Hedge funds – 403 403 5% – 373 373 5% – 392 392 6% Private markets – 174 174 2% – 80 80 1% – 56 56 1% Alternatives 327 379 706 8% 347 88 435 6% 170 146 316 5% 327 956 1,283 15% 347 541 888 12% 170 594 764 12% Derivatives Foreign exchange contracts – 17 17 – – (9) (9) – – (13) (13) –Interest rate and inflation – 289 289 4% – 203 203 3% – 441 441 6% – 306 306 4% – 194 194 3% – 428 428 6% Total 4,415 4,093 8,508 100% 4,464 2,639 7,103 100% 4,159 2,838 6,997 100% * Quoted prices for identical assets or liabilities in active markets. As at 31 March 2017, the schemes held Gilt Repos, the net value of these transactions is included in the value of Interest rate and inflation derivatives. The value of the funding obligation for the Repo transactions is £843 million at 31 March 2017 (2016: £373 million, 2015: £nil). The split of Level 1 assets is 66 per cent (2016: 63 per cent, 2015: 59 per cent), Level 2 assets 27 per cent (2016: 31 per cent, 2015: 37 per cent) and Level 3 assets 7 per cent (2016: 6 per cent, 2015: 4 per cent). Private market holdings are classified as Level 3 instruments. Included in the value for Interest rate and inflation derivatives are Repo transactions, as noted above. Jaguar Land Rover contributes towards the UK defined benefit schemes. Following the 5 April 2015 valuations, it is intended to eliminate the pension scheme funding deficits over the 10 years following the valuation date. As at 31 March 2017, there is no additional liability; however, following the changes to the defined benefit schemes’ rules in April 2017, an additional obligation may arise in the future. The current agreed contribution rate for defined benefit accrual is 31 per cent of pensionable salaries in the UK. Deficit contribution levels remain in line with prior expectation for 2016–2018 and then increase to £58 million per annum to March 2025. The average duration of the benefit obligations at 31 March 2017 is 21.6 years (2016: 20.5 years, 2015: 23.5 years).
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122 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 32 EMPLOYEE BENEFITS (CONTINUED) On 3 April 2017, Jaguar Land Rover approved and communicated to its defined benefit schemes’ members that the defined benefit schemes’ rules were to be amended with effect from 6 April 2017 so that, among other changes, retirement benefits will be calculated on a career average basis rather than based upon a member’s final salary at retirement. As a result of the remeasurement of the schemes’ liabilities, a past service credit of £437 million has arisen and has been recognised in Fiscal 2017/18. Excluding this past service credit but allowing for the new benefit structure from 6 April 2017, the expected net periodic pension cost for the year ended 31 March 2018 is £249 million. The Group expects to pay £302 million to its defined benefit schemes, in total, for the year ended 31 March 2018. DEFINED CONTRIBUTION SCHEMES The Group’s contribution to defined contribution schemes for the year ended 31 March 2017 was £57 million (2016: £47 million, 2015: £33 million). 33 COMMITMENTS AND CONTINGENCIES In the normal course of business, the Group faces claims and assertions by various parties. The Group assesses such claims and assertions and monitors the legal environment on an ongoing basis, with the assistance of external legal counsel wherever necessary. The Group records a liability for any claims where a potential loss is probable and capable of being estimated and discloses such matters in its financial statements, if material. For potential losses that are considered possible, but not probable, the Group provides disclosure in the consolidated financial statements but does not record a liability unless the loss becomes probable. Such potential losses may be of an uncertain timing and/or amount. The following is a description of claims and contingencies where a potential loss is possible, but not probable. Management believes that none of the contingencies described below, either individually or in aggregate, would have a material adverse effect on the Group’s financial condition, results of operations or cash flows. LITIGATION AND PRODUCT RELATED MATTERS The Group is involved in legal proceedings, both as plaintiff and as defendant. There are claims and potential claims as at 31 March 2017 of £7 million (2016: £6 million, 2015: £11 million) against the Group which management has not recognised, as settlement is not considered probable. These claims and potential claims pertain to motor accident claims, consumer complaints, employment and dealership arrangements, replacement of parts of vehicles and/or compensation for deficiency in the services by the Group or its dealers. The Group has provided for the estimated cost of repair following the passenger safety airbag issue in the United States, China, Canada, Korea, Australia and Japan. The Group recognises that there is a potential risk of further recalls in the future; however, the Group is unable at this point in time to reliably estimate the amount and timing of any potential future costs associated with this warranty issue. OTHER TAXES AND DUTIES During the year ended 31 March 2015, the Group’s Brazilian subsidiary received a demand for 167 million Brazilian Real (£43 million at 31 March 2017 exchange rate) in relation to additional indirect taxes (PIS and COFINS) claimed as being due on local vehicle and parts sales made in 2010. The matter is currently being contested before the Brazilian appellate authorities. Professional legal opinions obtained in Brazil fully support that the basis of the tax authority’s assertion is incorrect and, as a result, the likelihood of any settlement ultimately having to be made is considered remote. Accordingly, no provision has been recognised in the financial statements and the matter is disclosed here purely for the purposes of completeness. The Group has no other significant tax matters in dispute as at 31 March 2017, 2016 or 2015 where a potential loss was considered possible.
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Company overview Strategic report Governance Financial statements 123 33 COMMITMENTS AND CONTINGENCIES (CONTINUED) COMMITMENTS The Group has entered into various contracts with vendors and contractors for the acquisition of plant and equipment and various civil contracts of capital nature aggregating to £2,047 million (2016: £797 million, 2015: £814 million) and £31 million (2016: £12 million, 2015: £nil) relating to the acquisition of intangible assets. Commitments and contingencies also includes other contingent liabilities of £82 million (2016: £28 million, 2015: £2 million). These mainly related to government body investigations with regards legislation and regulation compliance, support provided to the dealer network, termination clauses and supply chain arrangements. The timing of any outflow will vary as and when claims are received and settled, which is not known with certainty. The remaining financial commitments, in particular the purchase commitments and guarantees, are of a magnitude typical for the industry. Inventory of £nil (2016, 2015: £nil) and trade receivables with a carrying amount of £179 million (2016: £116 million, 2015: £156 million) and property, plant and equipment with a carrying amount of £nil (2016, 2015: £nil) and restricted cash with a carrying amount of £nil (2016, 2015: £nil) are pledged as collateral/security against the borrowings and commitments. Commitments related to leases are set out in note 36. Stipulated within the joint venture agreement for Chery Jaguar Land Rover Automotive Co. Ltd. is a commitment for the Group to contribute a total of CNY 3,500 million of capital, of which CNY 2,875 million has been contributed as at 31 March 2017. The outstanding commitment of CNY 625 million translates to £73 million at 31 March 2017 exchange rate. 34 CAPITAL MANAGEMENT The Group’s objectives when managing capital are to ensure the going concern operation of all subsidiary companies within the Group and to maintain an efficient capital structure to support ongoing and future operations of the Group and to meet shareholder expectations. The Group issues debt, primarily in the form of bonds, to meet anticipated funding requirements and maintain sufficient liquidity. The Group also maintains certain undrawn committed credit facilities to provide additional liquidity. These borrowings, together with cash generated from operations, are loaned internally or contributed as equity to certain subsidiaries as required. Surplus cash in subsidiaries is pooled (where practicable) and invested to satisfy security, liquidity and yield requirements. The capital structure and funding requirements are regularly monitored by the JLR plc Board to ensure sufficient liquidity is maintained by the Group. All debt issuance and capital distributions are approved by the JLR plc Board. In addition, covenants (such as Adjusted EBITDA to interest ratios) related to the Group’s financing arrangements are regularly monitored and compliance is certified annually. The following table summarises the capital of the Group: As at 31 March 2017 2016 2015 £m £m £m Short-term debt 181 121 160 Long-term debt 3,400 2,379 2,390 Total debt* 3,581 2,500 2,550 Equity 6,581 7,614 6,040 Total capital 10,162 10,114 8,590 * Total debt includes finance lease obligations of £7 million (2016: £11 million, 2015: £13 million).
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124 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 35 FINANCIAL INSTRUMENTS This section gives an overview of the significance of financial instruments for the Group and provides additional information on balance sheet items that contain financial instruments. The details of significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument, are disclosed in note 2. (A) FINANCIAL ASSETS AND LIABILITIES The following table shows the carrying amounts and fair value of each category of financial assets and liabilities as at 31 March 2017: Financial assets and ?nancial Derivatives instruments in cash ?ow Fair value through Total receivables Loans and relationship hedging pro?t and loss carrying value Total fair value £m £m £m £m £m Cash and cash equivalents 2,878 – – 2,878 2,878 Short-term deposits 2,609 – – 2,609 2,609 Trade receivables 1,273 – – 1,273 1,273 Other financial assets – current 49 133 36 218 218 Other financial assets – non-current 15 205 50 270 270 Total ?nancial assets 6,824 338 86 7,248 7,248 Financial liabilities and ?nancial Derivatives Other instruments in cash ?ow Fair value through Total liabilities ?nancial relationship hedging pro?t and loss carrying value Total fair value £m £m £m £m £m Accounts payable 6,508 – – 6,508 6,508 Short-term borrowings 179 – – 179 179 Long-term borrowings 2,432 963 – 3,395 3,489 Other financial liabilities – current 379 1,517 243 2,139 2,139 Other financial liabilities – non-current 8 1,379 12 1,399 1,399 Total ?nancial liabilities 9,506 3,859 255 13,620 13,714 The following table shows the carrying amounts and fair value of each category of financial assets and liabilities as at 31 March 2016: Financial assets and ?nancial Derivatives instruments in cash ?ow Fair value through Total receivables Loans and relationship hedging pro?t and loss carrying value Total fair value £m £m £m £m £m Cash and cash equivalents 3,399 – – 3,399 3,399 Short-term deposits 1,252 – – 1,252 1,252 Trade receivables 1,078 – – 1,078 1,078 Other financial assets – current 64 54 19 137 137 Other financial assets – non-current 31 143 11 185 185 Total ?nancial assets 5,824 197 30 6,051 6,051
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Company overview Strategic report Governance Financial statements 125 35 FINANCIAL INSTRUMENTS (CONTINUED) Financial liabilities and ?nancial Derivatives Other instruments in cash ?ow Fair value through Total liabilities ?nancial relationship hedging pro?t and loss carrying value Total fair value £m £m £m £m £m Accounts payable 5,758 – – 5,758 5,758 Short-term borrowings 116 – – 116 116 Long-term borrowings 2,373 – – 2,373 2,398 Other financial liabilities – current 296 563 103 962 962 Other financial liabilities – non-current 8 752 57 817 817 Total ?nancial liabilities 8,551 1,315 160 10,026 10,051 The following table shows the carrying amounts and fair value of each category of financial assets and liabilities as at 31 March 2015: Financial assets and ?nancial Derivatives instruments in cash ?ow Fair value through Total receivables Loans and relationship hedging pro?t and loss carrying value Total fair value £m £m £m £m £m Cash and cash equivalents 3,208 – – 3,208 3,208 Short-term deposits 1,055 – – 1,055 1,055 Trade receivables 1,112 – – 1,112 1,112 Other financial assets – current 38 175 1 214 214 Other financial assets – non-current 27 20 2 49 49 Total ?nancial assets 5,440 195 3 5,638 5,638 Financial liabilities and ?nancial Derivatives Other instruments in cash ?ow Fair value through Total liabilities ?nancial relationship hedging pro?t and loss carrying value Total fair value £m £m £m £m £m Accounts payable 5,450 – – 5,450 5,450 Short-term borrowings 156 – – 156 156 Long-term borrowings 2,381 – – 2,381 2,459 Other financial liabilities – current 226 669 28 923 923 Other financial liabilities – non-current 10 789 43 842 842 Total ?nancial liabilities 8,223 1,458 71 9,752 9,830 OFFSETTING Certain financial assets and financial liabilities are subject to offsetting where there is currently a legally enforceable right to set off recognised amounts and the Group intends to either settle on a net basis or to realise the asset and settle the liability simultaneously. Derivative financial assets and financial liabilities are subject to master netting arrangements whereby in the case of insolvency, derivative financial assets and financial liabilities can be settled on a net basis.
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126 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 35 FINANCIAL INSTRUMENTS (CONTINUED) The following table discloses the amounts that have been offset in arriving at the consolidated balance sheet presentation and the amounts that are available for offset only under certain conditions as at 31 March 2017: amount of Gross Gross Gross recognised set-off in presented in Net amount amount not offset in collateral Cash Net amount recognised amount the balance sheet the balance sheet the balance sheet (received)/ pledged offsetting after £m £m £m £m £m £m Financial assets Derivative financial assets 424 – 424 (419) – 5 Cash and cash equivalents 2,909 (31) 2,878 – – 2,878 3,333 (31) 3,302 (419) – 2,883 Financial liabilities Derivative financial liabilities 3,151 – 3,151 (419) – 2,732 Short-term borrowings 210 (31) 179 – – 179 3,361 (31) 3,330 (419) – 2,911 The following table discloses the amounts that have been offset in arriving at the consolidated balance sheet presentation and the amounts that are available for offset only under certain conditions as at 31 March 2016: amount of Gross Gross Gross recognised set-off in presented in Net amount amount not offset in collateral Cash Net amount recognised amount the balance sheet the balance sheet the balance sheet (received)/ pledged offsetting after £m £m £m £m £m £m Financial assets Derivative financial assets 227 – 227 (227) – –Cash and cash equivalents 3,507 (108) 3,399 – – 3,399 3,734 (108) 3,626 (227) – 3,399 Financial liabilities Derivative financial liabilities 1,475 – 1,475 (227) – 1,248 Short-term borrowings 224 (108) 116 – – 116 1,699 (108) 1,591 (227) – 1,364 The following table discloses the amounts that have been offset in arriving at the consolidated balance sheet presentation and the amounts that are available for offset only under certain conditions as at 31 March 2015: amount of Gross Gross Gross recognised set-off in presented in Net amount amount not offset in collateral Cash Net amount recognised amount the balance sheet the balance sheet the balance sheet (received)/ pledged offsetting after £m £m £m £m £m £m Financial assets Derivative financial assets 198 – 198 (198) – –Cash and cash equivalents 3,301 (93) 3,208 – – 3,208 3,499 (93) 3,406 (198) – 3,208 Financial liabilities Derivative financial liabilities 1,529 – 1,529 (198) – 1,331 Short-term borrowings 249 (93) 156 – – 156 1,778 (93) 1,685 (198) – 1,487
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Company overview Strategic report Governance Financial statements 127 35 FINANCIAL INSTRUMENTS (CONTINUED) Fair value hierarchy Financial instruments held at fair value are required to be measured by reference to the following levels: • Quoted prices in an active market (Level 1): this level of hierarchy includes ?nancial instruments that are measured by reference to quoted prices (unadjusted) in active markets for identical assets or liabilities; • Valuation techniques with observable inputs (Level 2): this level of hierarchy includes ?nancial assets and liabilities measured using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and • Valuation techniques with signi?cant unobservable inputs (Level 3): this level of hierarchy includes ?nancial assets and liabilities measured using inputs that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. There has been no change in the valuation techniques adopted or any transfers between fair value levels in either current or prior financial periods as presented. The financial instruments that are measured subsequent to initial recognition at fair value are classified as Level 2 fair value measurements, as defined by IFRS 13, being those derived from inputs other than quoted prices that are observable. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. Fair value of forward derivative financial assets and liabilities are estimated by discounting expected future contractual cash flows using prevailing market interest rate curves from Reuters. Commodity swap contracts are similarly fair valued by discounting expected future contractual cash flows. Option contracts on foreign currency are entered into on a zero cost collar basis and fair value estimates are calculated from standard Black-Scholes options pricing methodology, using prevailing market interest rates and volatilities. Additionally, a credit valuation adjustment/debit value adjustment is taken on derivative financial assets and liabilities and is calculated by discounting the fair value gain or loss on the financial derivative using credit default swap (CDS) prices quoted for the counterparty or Jaguar Land Rover respectively. CDS prices are obtained from Reuters. The long-term unsecured listed bonds are held at amortised cost. Their fair value for disclosure purposes is determined using Level 1 valuation techniques, based on the closing price as at 31 March 2017 on the Luxembourg Stock Exchange multilateral trading facility (EURO MTF) market. Fair values of cash and cash equivalents, short-term deposits, trade receivables and payables, short-term borrowings and other financial assets and liabilities (current and non-current excluding derivatives) are assumed to approximate to cost due to the short-term maturing of the instruments and as the impact of discounting is not significant. Management uses its best judgement in estimating the fair value of its financial instruments. However, there are inherent limitations in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented above are not necessarily indicative of all the amounts that the Group could have realised in a sales transaction as of the respective dates. The estimated fair value amounts as at 31 March 2017, 2016 and 2015 have been measured as at the respective dates. As such, the fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year end. (B) FINANCIAL RISK MANAGEMENT The Group is exposed to foreign currency exchange rate, commodity price, interest rate, liquidity and credit risks. The management of foreign currency exchange rate risk is discussed in the Strategic report. The Group has a risk management framework in place, which monitors all of these risks as discussed below. This framework is approved by the JLR plc Board. (C) FOREIGN CURRENCY EXCHANGE RATE RISK The fluctuation in foreign currency exchange rates may have a potential impact on the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity and the consolidated cash flow statement, where any transaction references more than one currency or where assets/ liabilities are denominated in a currency other than the functional currency of the respective consolidated entities.
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128 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 35 FINANCIAL INSTRUMENTS (CONTINUED) Considering the countries and economic environment in which the Group operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in US Dollar, Chinese Yuan and Euro against the functional currency of the Company and its subsidiaries (considered to be GBP and Euro). Hedge accounting exposures The Group uses foreign currency contracts to hedge its risk associated with foreign currency fluctuations relating to highly probable forecast transactions. The fair value of such contracts designated in the hedge relationship as at 31 March 2017 was a net liability of £2,558 million (2016: £1,118 million, 2015: £1,263 million). Cash flow hedges are expected to be recognised in profit or loss during the years ending 31 March 2018 to 31 March 2022. The Group also has a number of foreign currency options that are entered into as an economic hedge of the financial risks of the Group. The time value of options is excluded from the hedge relationship and thus the change in time value is recognised immediately in the consolidated income statement. Changes in the fair value of foreign currency contracts, to the extent determined to be an effective hedge, are recognised in the consolidated statement of comprehensive income, and the ineffective portion of the fair value change is recognised in the consolidated income statement. Accordingly, the fair value change of net loss of £2,887 million (2016: loss of £126 million (restated), 2015: loss of £1,734 million (restated)) was recognised in other comprehensive income. Cash flow hedges reclassified to the consolidated income statement were a loss of £1,271 million (2016: loss of £181 million (restated), 2015: gain of £78 million (restated)). The loss due to hedge ineffectiveness where forecast transactions are no longer expected to occur was £40 million (2016: £2 million, 2015: £5 million), which has been recognised in ‘Foreign exchange loss’ in the consolidated income statement. The loss on derivative contracts not eligible for hedging was £18 million (2016: gain of £88 million, 2015: loss of £161 million), which has been recognised in ‘Foreign exchange loss’ in the consolidated income statement. The total loss reported in other comprehensive income for cash flow hedges was £1,766 million (2016: gain of £55 million, 2015: loss of £1,812 million). A 10 per cent depreciation/appreciation in Sterling against the foreign currency underlying such foreign currency contracts (excluding US Dollar bonds designated in a cash flow hedging relationship) would have resulted in an approximate additional (loss)/gain of (£1,684) million/£1,609 million (2016: (£1,824) million/£1,690 million, 2015: £(1,382) million/£1,251 million) in equity and a gain/(loss) of £116 million/(£30) million (2016: £60 million/£54 million, 2015: £165 million/(£91) million) in the consolidated income statement. In addition to using foreign currency derivative contracts to economically hedge future revenue in US Dollars, the Group issues bonds denominated in US Dollars to give a degree of natural hedging of future sales revenues. During the year, the Group designated US Dollar bonds, with a principal amount of $1.2 billion in a cash flow hedge relationship against forecast US Dollar revenue between the periods 2018 to 2020. As a result, a loss of £150 million has been recognised within other comprehensive income. Balance sheet exposures The Group is also exposed to fluctuations in exchange rates, which impact the valuation of foreign currency denominated assets and liabilities of its National Sales Companies and also foreign currency denominated balances on the Group’s balance sheet at each reporting period end. The following table sets forth information relating to foreign currency exposure as at 31 March 2017: US Dollar Chinese Yuan Euro Others* Total £m £m £m £m £m Financial assets 1,122 490 1,135 405 3,152 Financial liabilities (2,893) (415) (2,598) (356) (6,262) Net exposure (liability)/asset (1,771) 75 (1,463) 49 (3,110) A 10 per cent appreciation/depreciation of the US Dollar would result in an additional loss/gain of £93 million in equity and a loss/ gain of £84 million in the consolidated income statement. A 10 per cent appreciation/depreciation of the Chinese Yuan would result in an increase/decrease in the Group’s net profit before tax and total equity by approximately £8 million, and a 10 per cent appreciation/depreciation of the Euro would result in an decrease/increase in the Group’s net profit before tax and total equity by approximately £146 million respectively for the year ended 31 March 2017.
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Company overview Strategic report Governance Financial statements 129 35 FINANCIAL INSTRUMENTS (CONTINUED) The following table sets forth information relating to foreign currency exposure as at 31 March 2016: US Dollar Chinese Yuan Euro Others* Total £m £m £m £m £m Financial assets 664 666 621 384 2,335 Financial liabilities (2,367) (571) (1,670) (326) (4,934) Net exposure (liability)/asset (1,703) 95 (1,049) 58 (2,599) A 10 per cent appreciation/depreciation of the US Dollar and Euro would result in an decrease/increase in the Group’s net profit before tax and total equity by approximately £170 million and £105 million respectively for the year ended 31 March 2016. A 10 per cent appreciation/depreciation of the Chinese Yuan would result in an increase/decrease in the Group’s net profit before tax and total equity by approximately £10 million. The following table sets forth information relating to foreign currency exposure as at 31 March 2015: US Dollar Chinese Yuan Euro Others* Total £m £m £m £m £m Financial assets 727 742 483 312 2,264 Financial liabilities (2,139) (756) (1,098) (182) (4,175) Net exposure (liability)/asset (1,412) (14) (615) 130 (1,911) A 10 per cent appreciation/depreciation of the US Dollar, Chinese Yuan and Euro would result in a decrease/increase in the Group’s net profit before tax and total equity by approximately £141 million, £1 million and £62 million respectively for the year ended 31 March 2015. *Others include Japanese Yen, Russian Rouble, Singapore Dollar, Swiss Franc, Australian Dollar, South African Rand, Thai Baht, Korean Won etc. (D) COMMODITY PRICE RISK The Group is exposed to commodity price risk arising from the purchase of certain raw materials such as aluminium, copper, platinum and palladium. This risk is mitigated through the use of derivative contracts and fixed price contracts with suppliers. The derivative contracts do not qualify for hedge accounting as the commodity exposure does not meet the hedge accounting requirements of IAS 39. The total fair value gain on commodities of £106 million (2016: loss of £113 million, 2015: loss of £38 million) has been recognised in ‘Other income’ in the consolidated income statement. The losses reported do not reflect the purchasing benefits received by the Group (which are included within ‘Material and other cost of sales’). A 10 per cent appreciation/depreciation of all commodity prices underlying such contracts would have resulted in a gain/loss of £57 million (2016, 2015: £52 million). (E) INTEREST RATE RISK Interest rate risk is the risk that changes in market interest rates will lead to changes in interest income and expense for the Group. In addition to issuing long-term fixed-rate bonds, the Group has other facilities in place which are primarily used to finance working capital that are subject to variable interest rates. When undertaking a new debt issuance, the JLR plc Board will consider the fixed/floating interest rate mix of the Group, the outlook for future interest rates and the appetite for certainty of funding costs. The risk estimates provided assume a parallel shift of 100 basis points interest rate across all yield curves. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The year-end balances are not necessarily representative of the average debt outstanding during the year. As at 31 March 2017, net financial liabilities of £179 million (2016: £116 million, 2015: £156 million) were subject to the variable interest rate. An increase/decrease of 100 basis points in interest rates at the balance sheet date would result in an impact of £2 million (2016: £1 million, 2015: £2 million) in the consolidated income statement and £nil (2016, 2015: £nil) in equity.
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130 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 35 FINANCIAL INSTRUMENTS (CONTINUED) (F) LIQUIDITY RISK Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s policy on liquidity risk is to maintain sufficient liquidity in the form of cash and undrawn borrowing facilities to meet the Group’s operating requirements with an appropriate level of headroom. The following are the undiscounted contractual maturities of financial liabilities, including estimated interest payments: Carrying amount Contractual cash ?ows 1 year or less 1 to <2 years 2 to <5 years and over 5 years As at 31 March 2017 £m £m £m £m £m £m Financial liabilities Long-term borrowings 3,395 3,982 133 687 1,748 1,414 Short-term borrowings 179 179 179 – – –Finance lease obligations 7 11 2 2 2 5 Other financial liabilities 380 386 360 13 13 –Accounts payable 6,508 6,508 6,508 – – –Derivative financial instruments 3,151 3,992 1,950 1,294 748 – Total contractual maturities 13,620 15,058 9,132 1,996 2,511 1,419 Carrying amount Contractual cash ?ows 1 year or less 1 to <2 years 2 to <5 years and over 5 years As at 31 March 2016 £m £m £m £m £m £m Financial liabilities Long-term borrowings 2,373 2,935 107 107 1,429 1,292 Short-term borrowings 116 116 116 – – – Finance lease obligations 11 14 5 2 3 4 Other ?nancial liabilities 293 316 276 12 28 – Accounts payable 5,758 5,758 5,758 – – – Derivative financial instruments 1,475 1,882 725 698 459 – Total contractual maturities 10,026 11,021 6,987 819 1,919 1,296 Carrying amount Contractual cash ?ows 1 year or less 1 to <2 years 2 to <5 years and over 5 years As at 31 March 2015 £m £m £m £m £m £m Financial liabilities Long-term borrowings 2,381 3,066 111 110 1,510 1,335 Short-term borrowings 156 156 156 – – – Finance lease obligations 13 15 6 5 4 –Other financial liabilities 223 235 210 12 13 – Accounts payable 5,450 5,450 5,450 – – – Derivative financial instruments 1,529 1,903 753 616 534 – Total contractual maturities 9,752 10,825 6,686 743 2,061 1,335
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Company overview Strategic report Governance Financial statements 131 35 FINANCIAL INSTRUMENTS (CONTINUED) (G) CREDIT RISK The majority of the Group’s credit risk pertains to the risk of financial loss arising from counterparty default on cash investments. All Group cash is invested according to strict credit criteria and actively monitored by Group Treasury in conjunction with the current market valuation of derivative contracts. To support this, the JLR plc Board has implemented an investment policy that places limits on the maximum cash investment that can be made with any single counterparty depending on their published external credit rating. To a lesser extent the Group has an exposure to counterparties on trade receivables. The Group will seek to mitigate credit risk on sales to third parties through the use of payment at the point of delivery, credit insurance and letters of credit from banks that meet internal rating criteria. None of the financial instruments of the Group result in material concentrations of credit risks. Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. Financial assets None of the Group’s cash equivalents, including term deposits with banks, are past due or impaired. Regarding other financial assets that are neither past due nor impaired, there were no indications as at 31 March 2017 (2016, 2015: no indications) that defaults in payment obligations will occur. The Group has reviewed trade and other receivables not yet due and not impaired and no material issues have been identified. Trade and other receivables past due and impaired are set out below: Gross 2017 Impairment 2017 Gross 2016 Impairment 2016 Gross 2015 Impairment 2015 As at 31 March £m £m £m £m £m £m Not yet due 1,185 – 967 – 1,070 –Overdue <3 months 92 4 145 31 56 –Overdue 3–6 months 1 1 22 22 4 2 Overdue >6 months 57 55 12 7 12 9 Total 1,335 60 1,146 60 1,142 11 Included within trade receivables is £179 million (2016: £116 million, 2015: £156 million) of receivables that are part of a debt factoring arrangement. These assets do not qualify for derecognition due to the recourse arrangements in place. The related liability of £179 million (2016: £116 million, 2015: £156 million) is in short-term borrowings. Both the asset and associated liability are stated at fair value.
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132 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 36 LEASES LEASES AS LESSEE The future minimum non-cancellable finance lease rentals are payable as follows: As at 31 March 2017 2016 2015 £m £m £m Less than one year 2 5 4 Between one and five years 4 5 9 More than five years 5 4 – Total lease payments 11 14 13 Less future finance charges (4) (3) – Present value of lease obligations 7 11 13 The above leases relate to amounts payable under the minimum lease payments on plant and equipment. The carrying value of these assets as at 31 March 2017 was £7 million (2016: £11 million, 2015: £13 million). The Group leased certain of its manufacturing equipment under finance leases that mature between 2017 and 2030. The Group will take ownership of all assets held under finance lease at the end of the lease term. The future minimum non-cancellable operating lease rentals are payable as follows: As at 31 March 2017 2016 2015 £m £m £m Less than one year 75 49 47 Between one and five years 209 72 60 More than five years 164 33 26 Total lease payments 448 154 133 The Group leases a number of buildings, plant and equipment and IT hardware and software under operating leases, certain of which have a renewal and/or purchase option in the normal course of business. LEASES AS LESSOR The future minimum lease receipts under non-cancellable operating leases are as follows: As at 31 March 2017 2016 2015 £m £m £m Less than one year – 2 2 Between one and five years 1 1 –More than five years 10 10 – Total lease receipts 11 13 2 The above leases relate to amounts receivable in respect of land and buildings and fleet car sales. The average lease life is 48 years.
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Company overview Strategic report Governance Financial statements 133 37 ACQUISITION OF SUBSIDIARY On 16 April 2015, the Group acquired 100 per cent of the share capital of Silkplan Limited, obtaining control of Silkplan Limited (prior to the entity being struck off). The amounts recognised in respect of the assets acquired are set out in the table below: £m Recognised amounts of assets acquired Property, plant and equipment 11 Total identi?able assets 11 Total consideration 11 Satis?ed by: Cash 11 Total consideration transferred and cash out?ow arising on acquisition 11 No goodwill arose on the acquisition. Silkplan Limited contributed £nil revenue and £nil to the Group’s profit for the period between the date of acquisition and 31 March 2016. 38 SEGMENT REPORTING Operating segments are defined as components of the Group about which separate financial information is available that is evaluated regularly by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Group operates in the automotive segment. The automotive segment includes all activities relating to design, development, manufacture and marketing of vehicles including financing thereof, as well as sale of related parts and accessories from which the Group derives its revenues. The Group has only one operating segment, so no separate segment report is given. The geographic spread of sales by customer location and non-current assets is as disclosed below: UK US China Europe Rest of of world Rest Total £m £m £m £m £m £m 31 March 2017 Revenue 5,557 4,638 4,684 5,273 4,187 24,339 Non-current assets 11,714 10 11 158 159 12,052 31 March 2016 Revenue (restated)* 4,529 4,300 4,839 4,109 4,509 22,286 Non-current assets 10,475 18 16 26 137 10,672 31 March 2015 Revenue (restated)* 3,564 3,262 7,573 3,200 4,507 22,106 Non-current assets 9,357 16 11 10 32 9,426 * Comparatives have been restated due to the change in accounting policy for presentation of foreign exchange gains and losses as set out in note 2. In the table above, non-current assets includes property, plant and equipment and intangible assets.
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134 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 39 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (A) RECONCILIATION OF PROFIT BEFORE TAX TO CASH GENERATED FROM OPERATIONS 2016* 2015* 2017 Restated Restated Year ended 31 March Note £m £m £m Pro?t for the year 1,272 1,312 2,038 Adjustments for: Depreciation and amortisation 1,656 1,418 1,051 Impairment of tangible assets 10 12 – –Write-down of intangible assets 10 – 28 –Loss on disposal of assets 13 15 13 7 Foreign exchange loss on loans 13 101 54 178 Income tax expense 14 338 245 576 Finance expense (net) 12 68 90 135 Finance income 12 (33) (38) (48) Foreign exchange loss/(gain) on derivatives 13 11 (86) 166 Foreign exchange gain on short-term deposits (57) (11) (51) Foreign exchange gain on other restricted deposits (7) – –Foreign exchange gain on cash and cash equivalents (95) (4) (52) Unrealised (gain)/loss on commodities 13 (148) 59 30 Share of (profit)/loss of equity accounted investments 15 (159) (64) 6 Exceptional item (151) 157 –Other non-cash adjustments 1 2 5 Cash ?ows from operating activities before changes in assets and liabilities 2,824 3,175 4,041 Trade receivables (194) 34 (281) Other ?nancial assets 21 (12) (4) Other current assets (34) 30 26 Inventories (628) (451) (242) Other non-current assets (25) (18) (15) Accounts payable 701 443 418 Other current liabilities 63 52 (21) Other ?nancial liabilities 80 71 13 Other non-current liabilities and retirement bene?t obligation 158 255 (102) Provisions 325 143 131 Cash generated from operations 3,291 3,722 3,964 * Comparatives have been restated for the amendment in the current year to disclose separately ‘Effect of foreign exchange on cash and cash equivalents’ as a separate line item after ‘Cash and cash equivalents at beginning of year’. The line items of ‘Cash flows from operating activities before changes in assets and liabilities’ in note 39 and ‘Cash generated from operations’, ‘Net cash generated from operating activities’, and ‘Net increase in cash and cash equivalents’ in the consolidated cash flow statement were previously reported as £3,179 million, £3,726 million, £3,560 million and £191 million for the year ended 31 March 2016, and £4,093 million, £4,016 million, £3,627 million and £948 million for the year ended 31 March 2015. An adjustment of £4 million and £52 million was recorded to those line items for the years ended 31 March 2016 and 2015 respectively to re?ect the removal of the foreign exchange gain on cash and cash equivalents from those line items to present this amount separately as described above. The line items of ‘Cash flows from operating activities before changes in assets and liabilities’, ‘Cash generated from operations’, ‘Net cash generated from operating activities’, and ‘Net increase in cash and cash equivalents’ were therefore restated as £3,175 million, £3,722 million, £3,556 million and £187 million for the year ended 31 March 2016, and £4,041 million, £3,964 million, £3,575 million and £896 million for the year ended 31 March 2015. There is no impact on cash and cash equivalents as previously reported for the years ended 31 March 2016 or 31 March 2015. (B) CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES Purchases of property, plant and equipment and cash paid for intangible assets are presented net of £nil (2016: £33 million, 2015: £14 million) of capital government grants received.
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Company overview Strategic report Governance Financial statements 135 40 RELATED PARTY TRANSACTIONS The Group’s related parties principally consist of Tata Sons Limited, subsidiaries and joint ventures of Tata Sons Limited, which includes Tata Motors Limited (the ultimate parent company), subsidiaries, joint ventures and associates of Tata Motors Limited. The Group routinely enters into transactions with its related parties in the ordinary course of business, including transactions for the sale and purchase of products with its joint ventures and associates. Transactions and balances with the Group’s own subsidiaries are eliminated on consolidation. The following table summarises related party transactions and balances not eliminated in the consolidated financial statements. All related party transactions are conducted under normal terms of business. The amounts outstanding are unsecured and will be settled in cash. immediate With With Tata or ultimate parent Sons Limited and its subsidiaries, and its ventures of With joint associates With subsidiaries and joint ventures and joint the Group of the Group ventures associates For the year ended £m £m £m £m 31 March 2017 Sale of products 568 – 3 49 Purchase of goods 2 – – 85 Services received 124 4 172 108 Services rendered 88 – – 2 Trade and other receivables 70 – 2 34 Accounts payable 3 – 47 27 31 March 2016 Sale of products 315 – 2 48 Purchase of goods – – – 118 Purchase of property, plant and equipment – – 6 –Services received 85 – 146 103 Services rendered 64 – – 2 Trade and other receivables 71 – 1 28 Accounts payable 2 – 7 36 31 March 2015 Sale of products 149 – – 65 Purchase of goods – – – 51 Services received 46 – 141 105 Services rendered 23 – – 3 Trade and other receivables 47 – – 27 Accounts payable – – 27 38
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136 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 40 RELATED PARTY TRANSACTIONS (CONTINUED) Compensation of key management personnel Year ended 31 March 2017 2016 2015 £m £m £m Short-term benefits 14 16 17 Post-employment benefits 1 1 2 Share-based payments 3 2 7 Other long-term employee benefits 1 – –Compensation for loss of office 1 – 1 Total compensation of key management personnel 20 19 27 In addition to the compensation noted above, a loan of £0.7 million was granted to a member of key management personnel in the year ended 31 March 2014. This loan is for a term of eight years and is interest bearing at the HMRC official rate. Refer to note 32 for information on transactions with post-employment benefit plans. 41 ULTIMATE PARENT COMPANY AND PARENT COMPANY OF LARGER GROUP The immediate parent undertaking is TML Holdings Pte. Ltd. (Singapore) and the ultimate parent undertaking and controlling party is Tata Motors Limited, India, which is the parent of the smallest and largest group to consolidate these financial statements. Copies of the Tata Motors Limited, India consolidated financial statements can be obtained from the Group Secretary, Tata Motors Limited, Bombay House, 24, Homi Mody Street, Mumbai-400001, India. 42 SUBSEQUENT EVENTS On 3 April 2017, Jaguar Land Rover approved and communicated to its defined benefit pension schemes’ members that the defined benefit schemes’ rules were to be amended with effect from 6 April 2017 so that, among other changes, retirement benefits will be calculated on a career average basis rather than based upon a member’s final salary at retirement. As a result of the remeasurement of the schemes’ liabilities, a past service credit of £437 million has arisen and has been recognised in Fiscal 2017/18. The $350 million committed invoice discounting facility was renegotiated to a $295 million uncommitted invoice discounting facility effective 31 May 2017 which expires in April 2019. In May 2017, the Company proposed an ordinary dividend of £150 million to its immediate parent TML Holdings Pte. Ltd. (Singapore). £60 million of this amount was paid in June 2017.
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Company overview Strategic report Governance Financial statements 137 Parent company financial statements PARENT COMPANY As at 31 March BALANCE SHEET 2017 2016 2015 Note £m £m £m Non-current assets Investments 43 1,655 1,655 1,655 Other ?nancial assets 44 3,423 2,392 2,404 Other non-current assets 45 4 6 5 Deferred tax assets 46 – 1 8 Total non-current assets 5,082 4,054 4,072 Current assets Other ?nancial assets 44 365 211 66 Other current assets 45 2 2 3 Total current assets 367 213 69 Total assets 5,449 4,267 4,141 Current liabilities Other ?nancial liabilities 47 29 26 31 Deferred ?nance income 2 2 3 Current income tax liabilities 3 5 12 Total current liabilities 34 33 46 Non-current liabilities Long-term borrowings 48 3,395 2,373 2,381 Deferred ?nance income 32 25 28 Total non-current liabilities 3,427 2,398 2,409 Total liabilities 3,461 2,431 2,455 Equity attributable to equity holders of the parent Ordinary shares 49 1,501 1,501 1,501 Capital redemption reserve 49 167 167 167 Retained earnings 320 168 18 Equity attributable to equity holders of the parent 1,988 1,836 1,686 Total liabilities and equity 5,449 4,267 4,141 The Company has elected to take the exemption under section 408 of the Companies Act 2006 from presenting the parent company income statement. The profit for the Company for the year was £302 million (2016: £300 million, 2015: £151 million). These parent company financial statements were approved by the JLR plc Board and authorised for issue on 24 July 2017. They were signed on its behalf by: Professor Dr Ralf D. Speth Chief Executive Officer Company registered number: 06477691
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138 Jaguar Land Rover Automotive plc Annual Report 2016/17 Parent company financial statements PARENT COMPANY STATEMENT OF CHANGES IN EQUITY Ordinary share redemption Capital and loss Pro?t Total capital reserve reserve equity £m £m £m £m Balance at 1 April 2016 1,501 167 168 1,836 Profit for the year – – 302 302 Total comprehensive income – – 302 302 Dividend paid – – (150) (150) Balance at 31 March 2017 1,501 167 320 1,988 Balance at 1 April 2015 1,501 167 18 1,686 Profit for the year – – 300 300 Total comprehensive income – – 300 300 Dividend paid – – (150) (150) Balance at 31 March 2016 1,501 167 168 1,836 Balance at 1 April 2014 1,501 167 17 1,685 Profit for the year – – 151 151 Total comprehensive income – – 151 151 Dividend paid – – (150) (150) Balance at 31 March 2015 1,501 167 18 1,686
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Company overview Strategic report Governance Financial statements 139 PARENT COMPANY For the year ended 31 March CASH FLOW STATEMENT 2017 2016 2015 £m £m £m Cash ?ows (used in)/generated from operating activities Pro?t for the year 302 300 151 Adjustments for: Income tax credit (1) – – Dividends received (300) (300) (150) Finance income (132) (136) (227) Finance expense 131 135 225 Cash flows used in operating activities before changes in assets and liabilities – (1) (1) Other ?nancial assets (949) 62 (383) Other current liabilities (1) (3) 2 Net cash (used in)/generated from operating activities (950) 58 (382) Cash ?ows from investing activities Finance income received 136 133 222 Dividends received 300 150 150 Net cash generated from investing activities 436 283 372 Cash ?ows generated from/(used in) ?nancing activities Finance expenses and fees paid (136) (133) (220) Proceeds from issuance of long-term borrowings 857 – 1,032 Repayment of long-term borrowings (57) (58) (653) Dividends paid (150) (150) (150) Net cash generated from/(used in) ?nancing activities 514 (341) 9 Net decrease in cash and cash equivalents – – (1) Cash and cash equivalents at beginning of year – – 1 Cash and cash equivalents at end of year – – –
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140 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS 43 INVESTMENTS Investments consist of the following: 2017 2016 2015 As at 31 March £m £m £m Cost of unquoted equity investments at beginning and end of year 1,655 1,655 1,655 The Company has not made any investments or disposals of investments in the year. The Company has the following 100 per cent direct interest in the ordinary shares of a subsidiary undertaking: Principal place of business and country Subsidiary undertaking of incorporation Registered office address Jaguar Land Rover Holdings Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England The shareholding above is recorded at acquisition value in the Company’s accounts. Details of the indirect subsidiary undertakings are as follows, each being a 100 per cent indirect interest in the ordinary share capital of the Jaguar Land Rover Holdings Limited: Principal place of business and country Name of company of incorporation Registered office address Jaguar Land Rover Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England Jaguar Land Rover North America, LLC. USA 555, MacArthur Blvd., Mahwah, New Jersey 07430, USA Jaguar Land Rover Deutschland GmbH Germany Am Kronberger Hang 2a, 65824 Schwalbach/Ts, Germany Jaguar Land Rover Belux N.V. Belgium Generaal Lemanstraat 47, 2018 Antwerpen, Belgium Jaguar Land Rover Austria GmbH Austria Siezenheimer Straße 39a, 5020 Salzburg, Austria Jaguar Land Rover Italia SpA Italy Via Alessandro Marchetti, 105-00148, Roma, Italy Jaguar Land Rover Australia (Pty) Limited Australia Level 1, 65 Epping Road, North Ryde, New South Wales 2113, Australia Jaguar Land Rover España S.L. Spain Torre Picasso, Plaza Pablo Ruiz Picasso, 1—Planta 42, 28020 Madrid, Spain Jaguar Land Rover Nederland B.V. The Netherlands PO Box 40, Stationsweg 8, 4153 RD Beesd, Netherlands Jaguar Land Rover Portugal Veiculos e Pecas, Lda. Portugal Edi?cio Escritorios do Tejo, Rua do Polo Sul, Lote 1.01.1.1 -3°B-3, Parish of Santa Maria dos Olivais, Municipality of Lisboa, Portugal Jaguar Land Rover (China) Investment Co., Ltd. (formerly China Room 713, 7F No. 6 Jirong Road (Area C1, Plot 001), Jaguar Land Rover Automotive Trading (Shanghai) Co., Ltd.) Shanghai, China Free Trade Zone Shanghai Jaguar Land Rover Automotive Service Co. Ltd. China Room E16, Floor 2, 477, Fute West 1st Road, Shanghai Free Trade Zone, PRC Jaguar Land Rover Japan Limited Japan Garden City Shinagawa Gotenyama Bldg. 9F, 6-7-29 Kita-Shinagawa, Shinagawa-ku, Tokyo 141-0001, Japan Jaguar Land Rover Korea Co. Ltd. Korea 25F West Mirae Asset Center 1 Building 67 Suha-dong, Jung-gu Seoul 100-210, Korea Jaguar Land Rover Canada ULC Canada 75 Courtneypark Drive West, Unit 3 Mississauga, ON L5W 0E3, Canada Jaguar Land Rover France SAS France Z.A. Kléber—Bâtiment Ellington, 165 Boulevard de Valmy, 92706 Colombes, Cedex, France Jaguar e Land Rover Brasil Indústria e Comércio de Brazil Avenida Ibirapuera 2332, Torre I—10° andar-Moema Veículos Ltda. 04028-002, São Paulo-SP-Brazil Jaguar Land Rover Limited Liability Company Russia 28B, Building 2 Mezhdunarodnoe Shosse 141411, Moscow Russian Federation Jaguar Land Rover (South Africa) Holdings Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England Jaguar Land Rover (South Africa) (Pty) Ltd South Africa 28 Victoria Link, Route 21 Corporate Park, Nellmapius Drive, Irene X30, Centurion, Tshwane, Gauteng, South Africa Jaguar Land Rover India Limited India Bombay House, 24, Homi Mody Street, Mumbai-400001, India
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Company overview Strategic report Governance Financial statements 141 43 INVESTMENTS (CONTINUED) Principal place of business and country Name of company of incorporation Registered office address Daimler Transport Vehicles Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England S.S. Cars Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England Lanchester Motor Company Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England The Daimler Motor Company Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England The Jaguar Collection Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England Jaguar Land Rover Pension Trustees Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England JLR Nominee Company Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England Jaguar Cars Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England Land Rover Exports Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England Land Rover Ireland Limited Ireland c/o LK Shields Solicitors, 39/40 Upper Mount Street, Dublin 2, Ireland Jaguar Cars South Africa (Proprietary) Ltd South Africa Simon Vermooten Road, Silverton, Pretoria 0184, South Africa Jaguar Land Rover Slovakia s.r.o. Slovakia 811 06 Bratislava, Slovakia Jaguar Land Rover Singapore Pte. Ltd. Singapore 138, Market Street, CapitaGreen, Singapore Jaguar Racing Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England InMotion Ventures Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England Jaguar Land Rover Colombia SAS Colombia CL 67735 OFE, 1204 Bogotan, Cundinamarka 1 3192 900 Colombia InMotion Ventures 1 Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England InMotion Ventures 2 Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England InMotion Ventures 3 Limited England and Wales Abbey Road, Whitley, Coventry, CV3 4LF, England Details of the indirect holdings in equity accounted investments are given in note 15 to the consolidated financial statements. 44 OTHER FINANCIAL ASSETS 2017 2016 2015 As at 31 March £m £m £m Non-current Receivables from subsidiaries 3,423 2,392 2,404 Current Receivables from subsidiaries 365 211 66 45 OTHER ASSETS 2017 2016 2015 As at 31 March £m £m £m Non-current Prepaid expenses 4 6 5 Current Prepaid expenses 2 2 3 46 DEFERRED TAX ASSETS AND LIABILITIES As at 31 March 2017, the Company has recognised a deferred tax asset of £nil (2016: £1 million, 2015: £8 million) in relation to tax losses.
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142 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED) 47 OTHER FINANCIAL LIABILITIES As at 31 March 2017 2016 2015 £m £m £m Current Interest payable 27 22 24 Other 2 4 7 Total current other ?nancial liabilities 29 26 31 48 INTEREST BEARING LOANS AND BORROWINGS 2017 2016 2015 As at 31 March £m £m £m EURO MTF listed debt 3,395 2,373 2,381 Long-term borrowings 3,395 2,373 2,381 EURO MTF LISTED DEBT The bonds are listed on the Luxembourg Stock Exchange multilateral trading facility (EURO MTF) market. Details of the tranches of the bonds outstanding at 31 March 2017 are as follows: • $500 million Senior Notes due 2023 at a coupon of 5.625 per cent per annum – issued January 2013 • $700 million Senior Notes due 2018 at a coupon of 4.125 per cent per annum – issued December 2013 • £400 million Senior Notes due 2022 at a coupon of 5.000 per cent per annum – issued January 2014 • $500 million Senior Notes due 2019 at a coupon of 4.250 per cent per annum – issued October 2014 • £400 million Senior Notes due 2023 at a coupon of 3.875 per cent per annum – issued February 2015 • $500 million Senior Notes due 2020 at a coupon of 3.500 per cent per annum – issued March 2015 • €650 million Senior Notes due 2024 at a coupon of 2.200 per cent per annum – issued January 2017 • £300 million Senior Notes due 2021 at a coupon of 2.750 per cent per annum – issued January 2017 Details of the tranches of the bond repaid in the year ended 31 March 2017 are as follows: • $84 million Senior Notes due 2021 at a coupon of 8.125 per cent per annum – issued May 2011 Details of the tranches of the bond repaid in the year ended 31 March 2016 are as follows: • £58 million Senior Notes due 2020 at a coupon of 8.250 per cent per annum – issued March 2012 Details of the tranches of the bonds repaid in the year ended 31 March 2015 are as follows: • $326 million Senior Notes due 2021 at a coupon of 8.125 per cent per annum – issued May 2011 • £442 million Senior Notes due 2020 at a coupon of 8.250 per cent per annum – issued March 2012 The contractual cash flows of interest bearing borrowings are set out below, including estimated interest payments, and assumes the debt will be repaid at the maturity date: 2017 2016 2015 As at 31 March £m £m £m Due in 1 year or less 142 117 123 Between 1 and 3 years 1,610 717 240 Between 3 and 5 years 848 857 1,403 More than 5 years 1,414 1,292 1,336 Total contractual cash ?ows 4,014 2,983 3,102
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Company overview Strategic report Governance Financial statements 143 49 CAPITAL AND RESERVES 2017 2016 2015 As at 31 March £m £m £m Authorised, called up and fully paid 1,500,642,163 ordinary shares of £1 each 1,501 1,501 1,501 Total capital 1,501 1,501 1,501 The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. The capital redemption reserve of £167 million (2016, 2015: £167 million) was created in March 2011 on the cancellation of share capital. 50 DIVIDENDS Year ended 31 March 2017 2016 2015 £m £m £m Dividend proposed for the previous year paid during the year of £0.10 (2016, 2015: £0.10) per ordinary share 150 150 150 Amounts recognised as distributions to equity holders during the year 150 150 150 Proposed dividend for the year of £0.10 (2016, 2015: £0.10) per ordinary share 150 150 150 In May 2017, the Company proposed an ordinary dividend of £150 million to its immediate parent TML Holdings Pte. Ltd. (Singapore). £60 million of this amount was paid in June 2017. 51 COMMITMENTS AND CONTINGENCIES The Company had no commitments or contingencies at 31 March 2017, 2016 or 2015. 52 CAPITAL MANAGEMENT The Company’s objectives when managing capital are to ensure the going concern operation of all subsidiary companies within the Group and to maintain an efficient capital structure to support ongoing and future operations of the Group and to meet shareholder expectations. The Company issues debt, primarily in the form of bonds, to meet anticipated funding requirements and maintain sufficient liquidity. The Company also maintains certain undrawn committed credit facilities to provide additional liquidity. These borrowings, together with cash generated from operations, are loaned internally or contributed as equity to certain subsidiaries as required. Surplus cash in subsidiaries is pooled (where practicable) and invested to satisfy security, liquidity and yield requirements. The capital structure and funding requirements are regularly monitored by the JLR plc Board to ensure sufficient liquidity is maintained by the Group. All debt issuance and capital distributions are approved by the JLR plc Board. In addition, covenants (such as Adjusted EBITDA to interest ratios) related to the Company’s financing arrangements are regularly monitored and compliance is certified annually. 2017 2016 2015 As at 31 March £m £m £m Long-term borrowings 3,395 2,373 2,381 Total debt 3,395 2,373 2,381 Equity 1,988 1,836 1,686 Total capital 5,383 4,209 4,067
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144 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED) 53 FINANCIAL INSTRUMENTS This section gives an overview of the significance of financial instruments for the Company and provides additional information on balance sheet items that contain financial instruments. The details of significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument, are disclosed in note 2 to the consolidated financial statements. (A) FINANCIAL ASSETS AND LIABILITIES The following table presents the carrying amounts and fair value of each category of financial assets and liabilities as at 31 March 2017: Financial assets Fair value through Total receivables Loans and pro?t and loss carrying value fair value Total £m £m £m £m Other financial assets – current 365 – 365 365 Other financial assets – non-current 3,423 – 3,423 3,423 Total financial assets 3,788 – 3,788 3,788 Financial liabilities Fair value through Total receivables Loans and pro?t and loss carrying value fair value Total £m £m £m £m Other financial liabilities – current 29 – 29 29 Long-term borrowings 3,395 – 3,395 3,489 Total financial liabilities 3,424 – 3,424 3,518 The following table presents the carrying amounts and fair value of each category of financial assets and liabilities as at 31 March 2016: Financial assets Fair value through Total receivables Loans and pro?t and loss carrying value fair value Total £m £m £m £m Other financial assets – current 211 – 211 211 Other financial assets – non-current 2,392 – 2,392 2,392 Total financial assets 2,603 – 2,603 2,603 Financial liabilities Fair value through Total receivables Loans and pro?t and loss carrying value fair value Total £m £m £m £m Other financial liabilities – current 26 – 26 26 Long-term borrowings 2,373 – 2,373 2,398 Total financial liabilities 2,399 – 2,399 2,424
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Company overview Strategic report Governance Financial statements 145 53 FINANCIAL INSTRUMENTS (CONTINUED) The following table presents the carrying amounts and fair value of each category of financial assets and liabilities as at 31 March 2015: Financial assets Fair value through Total receivables Loans and pro?t and loss carrying value fair value Total £m £m £m £m Other financial assets – current 66 – 66 66 Other financial assets – non-current 2,404 – 2,404 2,404 Total financial assets 2,470 – 2,470 2,470 Financial liabilities Fair value through Total receivables Loans and pro?t and loss carrying value fair value Total £m £m £m £m Other financial liabilities – current 31 – 31 31 Long-term borrowings 2,381 – 2,381 2,459 Total financial liabilities 2,412 – 2,412 2,490 Fair value hierarchy Financial instruments held at fair value are required to be measured by reference to the following levels: • Quoted prices in an active market (Level 1): This level of hierarchy includes ?nancial instruments that are measured by reference to quoted prices (unadjusted) in active markets for identical assets or liabilities; • Valuation techniques with observable inputs (Level 2): This level of hierarchy includes ?nancial assets and liabilities measured using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and • Valuation techniques with signi?cant unobservable inputs (Level 3): This level of hierarchy includes ?nancial assets and liabilities measured using inputs that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. The long-term unsecured listed bonds are held at amortised cost. Their fair value (disclosed above) is determined using Level 1 valuation techniques, based on the closing price as at 31 March 2017 on the EURO MTF market. There has been no change in the valuation techniques adopted or any transfers between fair value levels in either current or prior periods as presented. Fair values of cash and cash equivalents, short-term deposits, trade receivables and payables, short-term borrowings and other financial assets and liabilities (current and non-current excluding derivatives) are assumed to approximate to cost due to the short-term maturing of the instruments and as the impact of discounting is not significant. Management uses its best judgement in estimating the fair value of its financial instruments. However, there are inherent limitations in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented above are not necessarily indicative of all the amounts that the Company could have realised in a sales transaction as of respective dates. The estimated fair value amounts as of 31 March 2017, 2016 and 2015 have been measured as of the respective dates. As such, the fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year end.
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146 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED) 53 FINANCIAL INSTRUMENTS (CONTINUED) (B) FINANCIAL RISK MANAGEMENT The Company is exposed to foreign currency exchange rate, commodity price, interest rate, liquidity and credit risks. The management of foreign currency exchange rate risk is discussed in the Strategic report. The Company has a risk management framework in place that monitors all of these risks as discussed below. This framework is approved by the JLR plc Board. (C) FOREIGN CURRENCY EXCHANGE RATE RISK The fluctuation in foreign currency exchange rates may have potential impact on the income statement and statement of changes in equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the Company. As at 31 March 2017, 2016 and 2015, there are no designated cash flow hedges. The Company’s operations are subject to risks arising from fluctuations in exchange rates. The risks primarily relate to fluctuations in the GBP:US Dollar rate as the Company has US Dollar assets and liabilities and a GBP functional currency. The following analysis has been calculated based on the gross exposure as of the parent company balance sheet date which could affect the income statement. The following table sets forth information relating to foreign currency exposure as at 31 March 2017: US Dollar Euro £m £m Financial assets 1,783 560 Financial liabilities (1,783) (560) Net exposure asset – – A 10 per cent appreciation/depreciation of the US Dollar and Euro would result in an increase/decrease in the Company’s net profit before tax and net assets by approximately £nil and £nil respectively. The following table sets forth information relating to foreign currency exposure as at 31 March 2016: US Dollar Euro £m £m Financial assets 1,610 –Financial liabilities (1,609) – Net exposure asset 1 – A 10 per cent appreciation/depreciation of the US Dollar would result in an increase/decrease in the Company’s net profit before tax and net assets by approximately £nil. The following table sets forth information relating to foreign currency exposure as at 31 March 2015: US Dollar Euro £m £m Financial assets 1,565 –Financial liabilities (1,564) – Net exposure asset 1 – A 10 per cent appreciation/depreciation of the US Dollar would result in an increase/decrease in the Company’s net profit before tax and net assets by approximately £nil.
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Company overview Strategic report Governance Financial statements 147 53 FINANCIAL INSTRUMENTS (CONTINUED) (D) INTEREST RATE RISK Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rates. The Company is presently funded with long-term fixed interest rate bonds. The Company is subject to variable interest rates on certain other debt obligations. As at 31 March 2017, net financial assets of £335 million (2016: £34 million, 2015: £34 million) were subject to the variable interest rate. An increase/decrease of 100 basis points in interest rates at the balance sheet date would result in an impact of £3 million (2016, 2015: £nil). The risk estimates provided assume a parallel shift of 100 basis points interest rate across all yield curves. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The year-end balances are not necessarily representative of the average debt outstanding during the year. (E) LIQUIDITY RISK Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s policy on liquidity risk is to ensure that sufficient borrowing facilities are available to fund ongoing operations without the need to carry significant net debt over the medium term. The quantum of committed borrowing facilities available to the Company is reviewed regularly and is designed to exceed forecast peak gross debt levels. The following are the undiscounted contractual maturities of financial liabilities, including estimated interest payments: Carrying amount Contractual cash ?ows 1 year or less 1 to <2 years 2 to <5 years and over 5 years As at 31 March 2017 £m £m £m £m £m £m Financial liabilities Long-term borrowings 3,395 3,982 133 687 1,748 1,414 Other ?nancial liabilities 29 35 12 10 13 – Total contractual maturities 3,424 4,017 145 697 1,761 1,414 Carrying amount Contractual cash ?ows 1 year or less 1 to <2 years 2 to <5 years and over 5 years As at 31 March 2016 £m £m £m £m £m £m Financial liabilities Long-term borrowings 2,373 2,935 107 107 1,429 1,292 Other ?nancial liabilities 26 52 14 10 28 – Total contractual maturities 2,399 2,987 121 117 1,457 1,292 Carrying amount Contractual cash ?ows 1 year or less 1 to <2 years 2 to <5 years and over 5 years As at 31 March 2015 £m £m £m £m £m £m Financial liabilities Long-term borrowings 2,381 3,066 111 110 1,510 1,335 Other ?nancial liabilities 31 44 20 11 13 – Total contractual maturities 2,412 3,110 131 121 1,523 1,335
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148 Jaguar Land Rover Automotive plc Annual Report 2016/17 NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED) 53 FINANCIAL INSTRUMENTS (CONTINUED) (F) CREDIT RISK Financial instruments that are subject to concentrations of credit risk consist of loans to subsidiaries, based in a variety of geographies and markets. Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. Financial assets None of the Company’s cash equivalents or other financial receivables, including time deposits with banks, are past due or impaired. Regarding other financial assets that are neither past due nor impaired, there were no indications as at 31 March 2017 (2016, 2015: no indications) that defaults in payment obligations will occur. 54 RELATED PARTY TRANSACTIONS The Company’s related parties principally consist of Tata Sons Limited, subsidiaries and joint ventures of Tata Sons Limited, which includes Tata Motors Limited (the ultimate parent company), subsidiaries, associates and joint ventures of Tata Motors Limited. The Company routinely enters into transactions with these related parties in the ordinary course of business. The following table summarises related party transactions and balances: With immediate With subsidiaries parent £m £m 31 March 2017 Loans to subsidiaries 3,788 – 31 March 2016 Loans to subsidiaries 2,603 – 31 March 2015 Loans to subsidiaries 2,470 – Compensation of key management personnel 2017 2016 2015 Year ended 31 March £m £m £m Short-term benefits 5 4 3 Post-employment benefits 1 1 2 Total compensation of key management personnel 6 5 5 Apart from the five directors, the Company did not have any employees and had no employee costs in the years ended 31 March 2017, 2016 and 2015. All directors’ costs are fully recharged to Jaguar Land Rover Limited. 55 ULTIMATE PARENT COMPANY AND PARENT COMPANY OF LARGER GROUP The immediate parent undertaking is TML Holdings Pte. Ltd. (Singapore) and ultimate parent undertaking and controlling party is Tata Motors Limited, India, which is the parent of the smallest and largest group to consolidate these financial statements. Copies of the Tata Motors Limited, India consolidated financial statements can be obtained from the Group Secretary, Tata Motors Limited, Bombay House, 24, Homi Mody Street, Mumbai-400001, India. 56 SUBSEQUENT EVENTS In May 2017, the Company proposed an ordinary dividend of £150 million to its immediate parent TML Holdings Pte. Ltd. (Singapore). £60 million of this amount was paid in June 2017.
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Jaguar Land Rover Automotive plc Annual Report 2016/17