Edgar Filing: TATA MOTORS LTD/FI

Form 6-K

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 August 2018

Commission File Number: 001-32294

LOGO

TATA MOTORS LIMITED

(Translation of registrant’s name into English)

BOMBAY HOUSE

24, HOMI MODY STREET,

MUMBAI 400 001, MAHARASHTRA, INDIA

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

(Address of principal executive office)

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

Form 20-F ☒ Form 40-F ☐

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

Yes ☐ No ☒

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

Yes ☐ No ☒

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

Yes ☐ No ☒

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

TABLE OF CONTENTS


Item 1:
		2019FY Q1 Interim Financial Statements

SIGNATURE

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


Tata Motors Limited

By:		/s/ Hoshang K Sethna
Name:		Hoshang K Sethna
Title:		Company Secretary

Dated: August 1, 2018

2019FY Q1 Interim Financial Statements

LOGO

Jaguar Land Rover Automotive plc

Interim Report

For the three month period ended

30 June 2018

Company registered number: 06477691

Contents


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

Key metrics/highlights for Q1 FY19 results			4
Market environment			4
Total automotive industry car volumes			4
Jaguar Land Rover Q1 FY19 sales volumes year-on-year performance			4
Q1 FY19 Revenue and profits			5
Cash flow, liquidity and capital resources			6
Debt			6
Risks and mitigating factors			7
Acquisitions and disposals			7
Off-balance sheet financial arrangements			7
Post balance sheet items			7
Related party transactions			7
Employees			7
Board of directors			7

Condensed consolidated financial statements

Income statement			8
Statement of comprehensive income and expense			9
Balance sheet			10
Statement of changes in equity			11
Cash flow statement			12
Notes			13

Group, Company, Jaguar Land Rover, JLR plc and JLR refers to Jaguar Land Rover Automotive plc and its subsidiaries. Note 3 on page 15 defines a series of alternative performance measures


EBITDA margin		measured as EBITDA as a percentage of revenue.

EBIT margin		measured as EBIT as a percentage of revenue.

		In this Interim Report underlying EBITDA and EBIT excludes the one-off credit relating to changes made to the Company’s pension plans in Q1 FY18 and recoveries in Q1 FY18 and throughout FY17 relating to the Tianjin port explosion.

PBT		profit before tax.

PAT		profit after tax.

Net debt/cash		defined by the Company as cash and cash equivalents plus short-term deposits less total balance sheet borrowings (as disclosed in note 17 to the condensed consolidated financial statements).

Q1 FY19		3 months ending 30 June 2018.

Q1 FY18		3 months ended 30 June 2017.

China JV		Chery Jaguar Land Rover Automotive Co., Ltd.

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

Jaguar Land Rover achieved retail sales of 145,510 (including China JV sales) in Q1 FY19, up 5.9% year on year, primarily reflecting the introduction of the new Range Rover Velar and the Jaguar E-PACE. However, wholesales (including the China JV) were 131,560, 13,590 units lower than retails reflecting de-stocking to re-balance inventories and the impact of the duty change in China, effective 1^st July 2018, which also drove higher incentives in that market.

The lower wholesales and higher China incentives combined with unfavourable balance sheet currency revaluation and higher depreciation and amortisation from continuing investment led to a pre-tax loss for the quarter of £264 million. Earnings before interest, tax and depreciation (EBITDA) were £325 million (6.2% margin).

Key metrics/highlights for Q1 FY19 results, compared to Q1 FY18, are as follows:

•

Retail sales of 145.5k units (including the China JV), up 5.9%

•

Wholesales of 131.6k units (including the China JV), down 5.0%

•

Revenue of £5.2 billion, down from £5.6 billion

•

Loss before tax £264 million, compared to £571 million PBT after the £437 million exceptional pension credit in Q1 FY18 (Q1 FY18 PBT before exceptional items £133 million)

•

Loss after tax £210 million, compared to PAT (after exceptional items) of £452 million in Q1 FY18

•

EBITDA margin was 6.2% and EBIT margin was (3.7)%

•

Free cash flow was negative £1.7 billion after total product and other investment spending of £1.1 billion and £1.0 billion of seasonal working capital outflows

Market environment

Most major economies continued to show solid growth in Q1 FY19, while weaker economic performance and continued uncertainty over Brexit is impacting growth in the UK.

Q1 FY19 automotive industry volumes were up in China (7.0% albeit with higher incentives in advance of a lower duty rate effective 1 July), in the US (2.1% albeit with continuing high incentives), Europe (3.7%) and in the UK (2.4%. Sales grew in Europe and in the UK despite continuing uncertainty around diesel, down 25.8% in the UK but offset by increased sales of petrol’s and electric vehicles.

Total automotive industry car volumes (units)


	Q1 FY19		Q1 FY18		Change (%)
China		5,678,000		5,305,300		7.0	%
Europe (excluding UK)		3,002,721		2,895,138		3.7	%
UK		595,505		581,795		2.4	%
US		4,482,404		4,392,154		2.1	%
Other markets (excl. South Korea)		3,142,011		2,907,693		8.1	%

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

Jaguar Land Rover Q1 FY19 sales volumes year-on-year performance

Retail sales were 145,510 units (including the China JV), up 5.9%, driven by the introduction of the Range Rover Velar (up 15.5k units), new Discovery (up 1.6k units), Jaguar E-PACE (11.3k units) and the refreshed Range Rover Sport (up 0.5k units) partially offset by lower retails of other models, notably Evoque, Discovery Sport and Jaguar F-PACE. There is strong demand for the Jaguar I-PACE battery electric vehicle which is now on sale with c. 5.5 months order cover. By region, retail sales were up in Overseas markets (20.3%), the UK (14.3%), North America (8.8%), China (2.5%), but down in Europe (7.3%).

Wholesales totalled 131,560 units (including the China JV), down 5.0% as the introduction of the Range Rover Velar, Jaguar E-PACE and refreshed Range Rover Sport were offset by lower sales of other models primarily relating to the China duty change and de-stocking to rebalance inventories. By region, JLR wholesales were up in Overseas markets (29.3%) but down in other markets including Europe (16.3%), the UK (14.8%), North America (6.4%) and China (3.7%),

Jaguar Land Rover’s Q1 FY19 retail sales (including the China JV) by key region and model is detailed in the following table:


	Q1 FY19		Q1 FY18		Change (%)
UK		26,386		23,083		14.3	%
North America		30,886		28,393		8.8	%
Europe		31,104		33,536		(7.3	%)
China¹		34,358		33,514		2.5	%
Overseas		22,776		18,937		20.3	%

Total JLR		145,510		137,463		5.9	%

F-PACE		13,038		17,648		(26.1	%)
I-PACE		195		—		n/a
E-PACE		11,314		—		n/a
F-TYPE		2,065		2,737		(24.6	%)
XE¹		8,091		8,858		(8.7	%)
XF¹		8,047		9,592		(16.1	%)
XJ		1,374		2,431		(43.5	%)

Jaguar¹		44,124		41,266		6.9	%

Discovery Sport¹		24,194		28,035		(13.7	%)
Discovery		10,902		9,272		17.6	%
Range Rover Evoque¹		17,010		24,813		(31.4	%)
Range Rover Velar		15,626		112		>99	%
Range Rover Sport		20,354		19,903		2.3	%
Range Rover		13,300		14,062		(5.4	%)
Discontinued Models		—		—		n/a

Land Rover¹		101,386		96,197		5.4	%

Total JLR		145,510		137,463		5.9	%

¹	China JV retail volume in Q1 FY19 was 21,181 units (9,635 units of Discovery Sport, 3,316 units of Evoque, 4,468 units of Jaguar XFL and 3,762 units of Jaguar XEL). China JV retail volume in Q1 FY18 was 20,309 units (10,637 units of Discovery Sport, 4,694 units of Evoque, 4,978 units of Jaguar XFL)

Q1 FY19 revenue and profits

For the quarter ended 30 June 2018, revenue was £5.2 billion, down £377 million year on year, primarily reflecting the change in China import duty effective 1^st July 2018 and de-stocking.

The loss before tax was £264 million, compared to PBT of £133 million (excluding the £437m exceptional pension credit) in Q1 FY18, primarily reflecting:

•

Lower sales and higher incentives in China in advance of the reduction on import duty (£110 million)

•

Other market equation — mainly de-stocking and WLTP (£69 million)

•

FX balance sheet revaluation (£189 million) less favourable net FX hedging (£138 million)

•

Higher manufacturing, commodity and warranty costs (£90 million)

•

Higher depreciation and amortisation (£99 million)

EBITDA was £325 million (6.2% margin) and the loss before interest and tax (EBIT) was £194 million (-3.7% margin) in the quarter, compared to EBITDA of £442 million (7.9% margin) and EBIT of £69 million (1.2% margin) in Q1 FY18. The loss after tax (PAT) was £210 million this quarter, compared to the restated PAT of £452 million (after the £437 million pension credit) in Q1 FY18.

Cash flow, liquidity and capital resources

Free cash flow was negative £1.7 billion after £1.1 billion of total product and other investment spending and £1.0 billion of seasonal working capital outflows in Q1 FY19. In the quarter, £967 million of investment spending was capitalised and £99 million was expensed through the income statement.

Cash and financial deposits at 30 June 2018 stood at £2.8 billion (comprising £1.3 billion of cash and cash equivalents and £1.5 billion of other financial deposits) after the free cash flow, a £34 million net increase in the utilisation of a short-term debt facility and £225 million dividend paid to our parent TML Holdings Pte. Ltd. The cash and financial deposits include an amount of £386 million held in subsidiaries of Jaguar Land Rover outside of the United Kingdom. The cash in some of these jurisdictions is subject to impediments to remitting cash to the UK other than through annual dividends. As at 30 June 2018, the Company also had an undrawn revolving credit facility totalling £1.9 billion, maturing in July 2022, and £25 million equivalent of an unutilised short-term uncommitted receivable factoring facility.

Debt

The following table shows details of the Company’s financing arrangements as at 30 June 2018:


(£ millions)	Facility amount		Amount outstanding			Undrawn amount
£400m 5.000% Senior Notes due Feb 2022**		400		400			—
£400m 3.875% Senior Notes due Mar 2023**		400		400			—
£300m 2.750% Senior Notes due Jan 2021		300		300			—
$500m 5.625% Senior Notes due Feb 2023*		381		381			—
$700m 4.125% Senior Notes due Dec 2018**		534		534			—
$500m 4.250% Senior Notes due Nov 2019**		381		381			—
$500m 3.500% Senior Notes due Mar 2020**		381		381			—
$500m 4.500% Senior Notes due Oct 2027		363		363			—
€650m 2.200% Senior Notes due Jan 2024		578		578			—
Revolving 5 year credit facility		1,935		—			1,935
Invoice discounting facilities***		225		200			25
Finance lease obligations		19		19			—

Subtotal		5,897		3,937			1,960

Prepaid costs		—		(23	)		—

Total		5,897		3,914			1,960

*	Issued by Jaguar Land Rover Automotive plc and guaranteed by Jaguar Land Rover Limited, Jaguar Land Rover Holdings Limited, Land Rover Exports Limited, JLR Nominee Company Limited and Jaguar Land Rover North America LLC.

**	Issued by Jaguar Land Rover Automotive plc and guaranteed by Jaguar Land Rover Limited and Jaguar Land Rover Holdings Limited.

***	$295 million uncommitted receivables factoring facility with Jaguar Land Rover Limited as the borrower and guaranteed by Jaguar Land Rover Holdings Limited.

Risks and mitigating factors

There are a number of potential risks which could have a material impact on the Group’s performance and could cause actual results to differ materially from expected and/or historical results, including those discussed on pages 80-83 of the Annual Report 2017-18 of the Group (available at www.jaguarlandrover.com) along with mitigating factors. The principal risks discussed in the Group’s Annual Report 2017-18 are competitive business efficiency, global economic and geopolitical environment, brand positioning, environmental regulations and compliance, diesel uncertainty, unethical and prohibited business practices, information and cyber security, rapid technology change, exchange rate fluctuations and product liability and recalls.

Acquisitions and disposals

There were no material acquisitions or disposals in Q1 FY19.

Off-balance sheet financial arrangements

In Q1 FY19 the Company had no off-balance sheet financial arrangements (see note 22) other than to the extent disclosed in the condensed consolidated financial statements in this Interim Report, starting on page 8.

Post balance sheet items

There were no material post balance sheet items in Q1 FY19.

Related party transactions

Related party transactions for Q1 FY19 are disclosed in note 25 to the condensed consolidated financial statements disclosed on page 28 of this Interim Report. There have been no material changes in the related party transactions described in the latest annual report.

Employees

At the end of Q1 FY19, Jaguar Land Rover employed 43,116 people worldwide, including agency personnel, compared to 40,857 at the end of Q1 FY18.

Board of directors

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


Name	Position	Year appointed as Director, Chief Executive Officer
Natarajan Chandrasekaran	Chairman	2017
Professor Dr. Ralf D. Speth	Chief Executive Officer and Director	2010
Andrew M. Robb	Director	2009
Nasser Mukhtar Munjee	Director	2012
Mr P B Balaji	Director	2017

Condensed Consolidated Income Statement


			Three months ended
(£ millions)	Note		30 June 2018			30 June 2017 *Restated
Revenue		5		5,222			5,599
Material and other cost of sales excluding exceptional item				(3,366	)		(3,565	)
Exceptional item		4		—			1
Material and other cost of sales				(3,366	)		(3,564	)
Employee costs				(733	)		(656	)
Employee costs - pension past service credit		21		—			437
Other expenses				(1,270	)		(1,278	)
Engineering costs capitalised		6		426			355
Other income				57			61
Depreciation and amortisation				(549	)		(450	)
Foreign exchange (loss)/gain				(70	)		2
Finance income		7		10			9
Finance expense (net)		7		(21	)		(21	)
Share of profit from equity accounted investments				30			77

(Loss)/profit before tax				(264	)		571

Income tax credit/(expense)		12		54			(119	)

(Loss)/profit for the period				(210	)		452

Attributable to:
Owners of the Company				(211	)		452
Non-controlling interests				1			—

*	See note 2 for details of the restatement due to changes in accounting policies.

The notes on pages 13 to 28 are an integral part of these consolidated financial statements.

Condensed Consolidated Statement of Comprehensive Income and Expense


	Three months ended
(£ millions)	30 June 2018			30 June 2017 *Restated
(Loss)/profit for the period		(210	)		452
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit obligation		305			(119	)
Gain on effective cash flow hedges of inventory		19			—
Income tax related to items that will not be reclassified		(58	)		19

		266			(100	)

Items that may be reclassified subsequently to profit or loss:
(Loss)/gain on cash flow hedges (net)		(269	)		1,168
Currency translation differences		12			(2	)
Income tax related to items that may be reclassified		51			(220	)

		(206	)		946

Other comprehensive income net of tax		60			846

Total comprehensive (expense)/income attributable to shareholders		(150	)		1,298

Attributable to:
Owners of the Company		(151	)		1,298
Non-controlling interests		1			—

*	See note 2 for details of the restatement due to changes in accounting policies.

The notes on pages 13 to 28 are an integral part of these consolidated financial statements.

Condensed Consolidated Balance Sheet


As at (£ millions)	Note		30 June 2018		31 March 2018 *Restated
Non-current assets
Equity accounted investments				532		516
Other financial assets		9		302		414
Property, plant and equipment				7,486		7,417
Intangible assets				6,921		6,763
Other non-current assets				113		82
Deferred tax assets				461		413

Total non-current assets				15,815		15,605

Current assets
Cash and cash equivalents				1,294		2,626
Short-term deposits and other investments				1,498		2,031
Trade receivables				1,182		1,612
Other financial assets		9		449		494
Inventories		10		4,052		3,767
Other current assets		11		688		630
Current tax assets				20		10

Total current assets				9,183		11,170

Total assets				24,998		26,775

Current liabilities
Accounts payable				6,336		7,614
Short-term borrowings		17		733		652
Other financial liabilities		14		1,252		1,189
Provisions		15		770		758
Other current liabilities		16		573		547
Current tax liabilities				124		160

Total current liabilities				9,788		10,920

Non-current liabilities
Long-term borrowings		17		3,162		3,060
Other financial liabilities		14		359		281
Provisions		15		1,058		1,055
Retirement benefit obligation		21		109		438
Other non-current liabilities				456		454
Deferred tax liabilities				524		583

Total non-current liabilities				5,668		5,871

Total liabilities				15,456		16,791

Equity attributable to shareholders
Ordinary shares				1,501		1,501
Capital redemption reserve				167		167
Reserves		19		7,868		8,308

Total equity attributable to shareholders				9,536		9,976

Non-controlling interests				6		8

Total equity				9,542		9,984

Total liabilities and equity				24,998		26,775

*	See note 2 for details of the restatement due to changes in accounting policies.

The notes on pages 13 to 28 are an integral part of these consolidated financial statements.

These condensed consolidated interim financial statements were approved by the JLR plc Board and authorised for issue on 31 July 2018.

Company registered number: 06477691

Condensed Consolidated Statement of Changes in Equity


(£ millions)	Ordinary share capital		Capital redemption reserve		Other reserves			Equity attributable to Shareholders			Non- controlling interests			Total equity
*Balance at 1 April 2018 Restated**		1,501		167		8,308			9,976			8			9,984
Adjustment on initial application of IFRS 9 (net of tax)		—		—		(27	)		(27	)		—			(27	)

Adjusted balance at 1 April 2018		1,501		167		8,281			9,949			8			9,957

(Loss)/profit for the period		—		—		(211	)		(211	)		1			(210	)
Other comprehensive income for the period		—		—		60			60			—			60

Total comprehensive (expense)/income		—		—		(151	)		(151	)		1			(150	)

Amounts removed from hedge reserve and recognised in inventory		—		—		(46	)		(46	)		—			(46	)
Income tax related to amounts removed from hedge reserve and recognised in inventory		—		—		9			9			—			9
Distribution to non-controlling interest		—		—		—			—			(3	)		(3	)
Dividend		—		—		(225	)		(225	)		—			(225	)

Balance at 30 June 2018		1,501		167		7,868			9,536			6			9,542


(£ millions)	Ordinary share capital		Capital redemption reserve		Other reserves *Restated			Equity attributable to Shareholders *Restated			Non- controlling interests			Total equity *Restated
Balance at 1 April 2017		1,501		167		4,913			6,581			—			6,581
Profit for the period		—		—		452			452			—			452
Other comprehensive income for the period		—		—		846			846			—			846

Total comprehensive income		—		—		1,298			1,298			—			1,298

Dividend		—		—		(150	)		(150	)		—			(150	)

Balance at 30 June 2017		1,501		167		6,061			7,729			—			7,729

*	See note 2 for details of the restatement due to changes in accounting policies.

The notes on pages 13 to 28 are an integral part of these consolidated financial statements.

Condensed Consolidated Cash Flow Statement


			Three months ended
(£ millions)	Note		30 June 2018			30 June 2017
Cash flows used in operating activities
Cash used in operations		24		(698	)		(256	)
Dividends received				22			—
Income tax paid				(82	)		(104	)

Net cash used in operating activities				(758	)		(360	)

Cash flows used in investing activities
Purchases of other investments				—			(20	)
Investment in other restricted deposits				(3	)		(2	)
Redemption of other restricted deposits				12			3
Movements in other restricted deposits				9			1
Investment in short-term deposits				(648	)		(1,072	)
Redemption of short-term deposits				1,230			1,197
Movements in short-term deposits				582			125
Purchases of property, plant and equipment				(435	)		(478	)
Cash paid for intangible assets				(532	)		(403	)
Finance income received				10			9

Net cash used in investing activities				(366	)		(766	)

Cash flows used in financing activities
Finance expenses and fees paid				(31	)		(24	)
Proceeds from issuance of short-term borrowings				197			136
Repayment of short-term borrowings				(163	)		(147	)
Payments of finance lease obligations				(1	)		(1	)
Dividends paid				(225	)		(60	)

Net cash used in financing activities				(223	)		(96	)

Net decrease in cash and cash equivalents				(1,347	)		(1,222	)
Cash and cash equivalents at beginning of period				2,626			2,878
Effect of foreign exchange on cash and cash equivalents				15			(19	)

Cash and cash equivalents at end of period				1,294			1,637

The notes on pages 13 to 28 are an integral part of these consolidated financial statements.

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

1	Accounting policies

Basis of preparation

The financial information in these interim financial statements is unaudited and does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The condensed consolidated interim financial statements of Jaguar Land Rover Automotive plc have been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’ under International Financial Reporting Standards (‘IFRS’) as adopted by the European Union (‘EU’).

The condensed consolidated interim financial statements have been prepared on a historical cost basis except for certain financial instruments held at fair value as highlighted in note 18.

The condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements for the year ended 31 March 2018, which were prepared in accordance with IFRS as adopted by the EU.

The condensed consolidated interim financial statements have been prepared on the going concern basis as set out within the directors’ report of the Group’s Annual Report for the year ended 31 March 2018.

The accounting policies applied are consistent with those of the annual consolidated financial statements for the year ended 31 March 2018, as described in those financial statements except as described below.

Change in accounting policies

The Group has had to change its accounting policy and make material retrospective adjustments as a result of adopting the following new standards:

•

IFRS 9 ‘Financial Instruments’

•

IFRS 15 ‘Revenue from contracts with customers’

The impact of the adoption of these standards and the new accounting policies are disclosed in note 2.

Estimates and judgements

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

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 March 2018.

2	Change in accounting policies

This note explains the impact of the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on the group’s financial statements which have been applied from 1 April 2018.

IFRS 9 Financial Instruments addresses the classification, measurement and recognition of financial assets and financial liabilities and introduces a new impairment model for financial assets and new rules for hedge accounting.

The Group has undertaken an assessment of classification and measurement on transition and has not identified a material impact on the financial statements given that equity investments which are not equity accounted are valued at fair value through profit or loss.

The Group has undertaken an assessment of the impairment provisions, especially with regards to trade receivables and has applied the simplified approach under the standard. For all principal markets, the Group operates with major financial institutions who take on the principal risks of sales to customers and consequently the Group receive full payment for these receivables between 0–30 days. Therefore the Group has concluded that there is no material impact under the standard for remeasurement of impairment provisions.

The Group has undertaken an assessment of its hedge relationships and has concluded that the Group’s current hedge relationships qualified as continuing hedges upon the adoption of IFRS 9. The Group has identified a change with respect to the 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 and cross-currency interest rate swaps. The time value of foreign exchange options and the foreign currency basis included in the foreign exchange forwards and cross-currency interest rate swaps is now 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 and this adjustment has been made on a prospective basis from 1 April 2018. A transition adjustment has been recognised for this.

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

2	Change in accounting policies (continued)

As required under the transition rules of IFRS 9, comparative periods have been restated only for the retrospective application of the cost of hedging approach for the time value of the foreign exchange options and also voluntarily application for foreign currency basis included in the foreign exchange forwards and cross-currency interest rate swaps. Accordingly, the information presented for prior periods is not wholly comparable to the information presented for current year. The financial impact of this change is as follows:


Balance sheet item (£ millions)	Change as at 31 March 2018 as a result of adoption of IFRS 9	Reason for change
Retained earnings	(22)	Time value of options recognised in Cost of Hedge Reserve as per IFRS 9.
Hedge reserve	64	Basis spread adjustment recognised as a separate component of OCI.
Cost of hedge reserve	(46)	Time value of options and basis spread adjustment recognised as a separate component of OCI.

In addition, under the published change issued by the IASB in February 2018 regarding the modification of financial liabilities, an additional charge of £5 million has been recognised for the financial year ended 31 March 2018 representing the loss recognised on the modification of the Group’s undrawn revolving credit facility.

The income statement impact for the adoption of IFRS 9 was a reduction in ‘profit before tax’ of £24 million and a £20 million reduction in ‘profit after tax’ for the 3 month period ended 30 June 2017.

IFRS 15 Revenue from Contracts with Customers replaces IAS 18 Revenue and IAS 11 Construction Contracts and related interpretations (such as IFRIC 13 Customer Loyalty Programmes).

The Group has applied the modified retrospective application approach and has not restated prior comparative financial information.

The primary impact on the Group relates to consideration payable to customers, which the standard defines as discounts, rebates, refunds or other forms of disbursement to customers (such as retailers) or end customers (as part of the overall distribution chain), where a service is not received in return and, if a service is received in return, where it cannot be fair-valued. The treatment of such items is a reclassification of marketing expenses to revenue reductions and this totalled £23 million for the 3 month period ended 30 June 2018.

Other specific impacts on the Group relates to the treatment of associated vehicle sale performance obligations, and the assessment of principal versus agent in providing or arranging for storage, freight and in-transit insurance alongside the sale of a vehicle. These transport arrangements are made when delivering vehicles to retailers across the global network. The Group has determined that it is an agent in providing these services, and has amended the presentation of these amounts from a gross basis (i.e. revenues and costs separately) to a net basis (where consideration received will be presented net of associated costs in the income statement). The financial impact of this change is a reclassification of costs against revenue of £79 million for the 3 month period ended 30 June 2018.

The Group has reclassified royalty income and incremental income from customers from ‘Other income’ to ‘Revenue’ and this totalled £35 million for the 3 month period ended 30 June 2018. The result of the changes discussed above has not materially impact profit before tax or the Group’s EBIT for the 3 month period ended 30 June 2018.

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

3	Alternative Performance Measures

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

The APMs used within this Annual Report are defined below.


Alternative Performance Measure				Definition

EBITDA				EBITDA is defined as profit before income tax expense, exceptional items, finance expense (net of capitalised interest), finance income, gains/losses on unrealised derivatives and debt, gains/losses on realised derivatives entered into for the purpose of hedging debt, share of profit/loss from equity accounted investments, depreciation and amortisation.

EBIT				EBIT is defined as for EBITDA but including share of profit/loss from equity accounted investments, depreciation and amortisation.

Free cash flow				Net cash generated from operating activities less net cash used in investing activities (excluding movements in short-term deposits) and after finance expenses and fees and payments of lease obligations. Free cash flow before financing also includes foreign exchange gains/losses on short-term deposits and cash and cash equivalents.

Total product and other investment				Cash used in the purchase of property, plant and equipment, intangible assets, investments in subsidiaries, equity accounted investments and other trading investments and expensed research and development costs.

Operating cash flow before investment				Fee cash flow before financing excluding total product and other investment.

Working capital				Changes in assets and liabilities as presented in note 24. This comprises movements in assets and liabilities excluding movements relating to financing or investing cash flows or non-cash items that are not included in EBIT or EBITDA.

Retail sales				Jaguar Land Rover retail sales represent vehicle sales made by dealers to end customers and include the sale of vehicles produced by our Chinese joint venture, Chery Jaguar Land Rover Automotive Company Ltd.

Wholesale sales				Wholesales represent vehicle sales made to dealers. The Group recognises revenue on wholesales.

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

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

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

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

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

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

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

3	Alternative Performance Measures (continued)

Reconciliations between these alternative performance measures and statutory reported measures are shown below.

EBIT and EBITDA


			Three months ended
(£ millions)	Note		30 June 2018			30 June 2017 *Restated
EBITDA				325			442
Depreciation and amortisation				(549	)		(450	)
Share of profit from equity accounted investments				30			77

EBIT				(194	)		69

Foreign exchange (loss)/gain on derivatives				(10	)		65
Unrealised gain/(loss) on commodities				1			(8	)
Foreign exchange (loss)/gain and fair value adjustments on loans				(53	)		34
Foreign exchange gain/(loss) on economic hedges of loans				3			(15	)
Finance income		7		10			9
Finance expense (net)		7		(21	)		(21	)
Pension past service credit				—			437
Exceptional item				—			1

(Loss)/profit before tax				(264	)		571

*	See note 2 for details of the restatement due to changes in accounting policies.

Retail and wholesales


	Three months ended
Units	30 June 2018		30 June 2017
Retail sales		145,510		137,463
Wholesales		108,788		117,916

*	Wholesale volumes exclude sales from Chery Jaguar Land Rover – Q1 FY19 22,772 units, Q1 FY18 20,560 units.

Free cash flow


			Three months ended
(£ millions)	Note		30 June 2018			30 June 2017
Net cash used in operating activities				(758	)		(360	)
Net cash used in investing activities				(366	)		(766	)

Net cash used in operating and investing activities				(1,124	)		(1,126	)

Finance expenses and fees paid				(31	)		(24	)
Payments of finance lease obligations				(1	)		(1	)
Adjustments for
Movements in short-term deposits				(582	)		(125	)
Foreign exchange gain/(loss) on short term deposits		24		49			(13	)
Effect of foreign exchange on cash and cash equivalents				15			(19	)

Free cash flow				(1,674	)		(1,308	)

Total product and other investment


			Three months ended
(£ millions)	Note		30 June 2018		30 June 2017
Purchases of property, plant and equipment				435		478
Cash paid for intangible assets				532		403
Research and development expensed		6		99		94
Purchases of other investments				—		20

Total product and other investment				1,066		995

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

4	Exceptional item

The exceptional item within ‘Material and other cost of sales’ of £1 million for the quarter ended 30 June 2017 relates to the recovery of import duties and taxes following the explosion at the port of Tianjin (China) in August 2015 which led to a reversal of the initial provision recorded in the quarter ended 30 September 2015.

5	Disaggregation of revenue

The table below provides a further breakdown of the revenue from continuing operations:


(£ millions)	Three months ended
(£ millions)	30 June 2018			30 June 2017
Vehicles, parts and accessories		5,229			5,782
Other		254			248

Total revenue recognised at a point in time		5,483			6,030

Revenue recognised over time		11			7
Realised revenue hedges		(272	)		(438	)

Total revenue		5,222			5,599

6	Research and development


(£ millions)	Three months ended
(£ millions)	30 June 2018			30 June 2017
Total research and development costs incurred		525			449
Research and development expensed		(99	)		(94	)

Development costs capitalised		426			355

Interest capitalised		24			22
Research and development expenditure credit		(29	)		(22	)

Total internally developed intangible additions		421			355

7	Finance income and expense


	Three months ended
(£ millions)	30 June 2018			30 June 2017
Finance income		10			9

Total finance income		10			9

Total interest expense on financial liabilities measured at amortised cost		(47	)		(39	)
Interest income on derivatives designated as a fair value hedge of financial liabilities		2			—
Unwind of discount on provisions		(6	)		(5	)
Interest capitalised		30			23

Total finance expense (net)		(21	)		(21	)

The capitalisation rate used to calculate borrowing costs eligible for capitalisation during the three months ended 30 June 2018 was 4.0% (three months ended 30 June 2017: 4.0%).

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

8	Allowances for trade and other receivables

Changes in the allowances for trade and other receivables are as follows:


(£ millions)	Three months ended			Year ended
(£ millions)	30 June 2018			31 March 2018
At beginning of period/year		50			60
Charged during the period/year		1			3
Utilised during the period/year		(1	)		(4	)
Unused amounts reversed during the period/year		—			(1	)
Foreign currency translation		(3	)		(8	)

At end of period/year		47			50

9	Other financial assets


As at (£ millions)	30 June 2018		31 March 2018
Non-current
Warranty reimbursement and other receivables		113		116
Restricted cash		5		6
Derivative financial instruments		177		286
Other		7		6

Total other non-current financial assets		302		414

Current
Warranty reimbursement and other receivables		87		98
Restricted cash		4		12
Derivative financial instruments		261		264
Contract assets		38		35
Other		59		85

Total other current financial assets		449		494

10	Inventories


As at (£ millions)	30 June 2018			31 March 2018
Raw materials and consumables		122			93
Work-in-progress		348			335
Finished goods		3,613			3,339
Inventory basis adjustment (see note 2)		(31	)		—

Total inventories		4,052			3,767

11	Other current assets


As at (£ millions)	30 June 2018		31 March 2018
Recoverable VAT		392		329
Prepaid expenses		182		177
Research and development credit		114		114
Other		—		10

Total other current assets		688		630

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

12	Taxation

Recognised in the income statement

The income tax for the three month period ended 30 June 2018 and 30 June 2017 is charged at the estimated effective tax rate expected to apply for the applicable financial year ends.

13	Capital expenditure

Capital expenditure in the three month period was £327 million (three month period to 30 June 2017: £526 million) on property, plant and equipment and £439 million (three month period to 30 June 2017: £371 million) was capitalised as intangible assets (excluding research and development expenditure credits). There were no impairments, material disposals or changes in use of assets.

14	Other financial liabilities


As at (£ millions)	30 June 2018		31 March 2018
Current
Finance lease obligations		3		3
Interest accrued		51		32
Derivative financial instruments		681		668
Liability for vehicles sold under a repurchase arrangement		517		479
Other		—		7

Total current other financial liabilities		1,252		1,189

Non-current
Finance lease obligations		16		16
Derivative financial instruments		335		257
Other		8		8

Total non-current other financial liabilities		359		281

15	Provisions


As at (£ millions)	30 June 2018		31 March 2018
Current
Product warranty		626		613
Legal and product liability		126		119
Provision for residual risk		7		7
Provision for environmental liability		11		11
Other employee benefits obligations		—		8

Total current provisions		770		758

Non-current
Product warranty		988		980
Legal and product liability		15		24
Provision for residual risk		32		28
Provision for environmental liability		16		16
Other employee benefits obligations		7		7

Total non-current provisions		1,058		1,055

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

15	Provisions (continued)


(£ millions)	Product warranty			Legal and product liability			Residual risk			Environmental liability			Other employee benefits obligations			Total
Balance at 1 April 2018		1,593			143			35			27			15			1,813
Provision made during the period*		201			10			5			1			1			218
Provision used during the period		(186	)		(13	)		(1	)		(1	)		(8	)		(209	)
Unused amounts reversed in the period		—			(1	)		(1	)		—			(1	)		(3	)
Impact of discounting		6			—			—			—			—			6
Foreign currency translation		—			2			1			—			—			3

Balance at 30 June 2018		1,614			141			39			27			7			1,828

*	Included in ‘Provisions made during the period’ is £(3) million arising in connection with warranty arrangements with suppliers that are classified in ‘Other financial assets’.

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 liability 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.

Other employee benefits obligations

This provision relates to the LTIP scheme for certain employees.

16	Other current liabilities


As at (£ millions)	30 June 2018		31 March 2018
Liabilities for advances received		37		40
Contract liabilities		273		244
VAT		132		195
Other taxes payable		99		43
Other		32		25

Total current other liabilities		573		547

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

17	Interest bearing loans and borrowings


As at (£ millions)	30 June 2018		31 March 2018
Short-term borrowings
Bank loans		200		155
Current portion of long-term EURO MTF listed debt		533		497

Total short-term borrowings		733		652

Long-term borrowings
EURO MTF listed debt		3,162		3,060

Total long-term borrowings		3,162		3,060

Finance lease obligations		19		19

Total debt		3,914		3,731

18	Financial instruments

The condensed consolidated interim financial statements have been prepared on a historical cost basis except for certain financial instruments held at fair value. These financial instruments are classified as level 2 fair value measurements, as defined by IFRS 13, being those derived from inputs other than quoted prices which are observable. There have been no changes in the valuation techniques used or transfers between fair value levels from those set out in note 35 to the annual consolidated financial statements for the year ended 31 March 2018.

The following tables show the carrying amounts and fair value of each category of financial assets and liabilities, other than those with carrying amounts that are reasonable approximations of fair values.


	30 June 2018				31 March 2018
As at (£ millions)	Carrying value		Fair value		Carrying value		Fair value
Short-term deposits and other investments		1,498		1,498		2,031		2,031
Other financial assets - current		449		449		494		494
Other financial assets - non-current		302		302		414		414

Total financial assets		2,249		2,249		2,939		2,939

Short-term borrowings		733		736		652		655
Long-term borrowings		3,162		3,138		3,060		3,090
Other financial liabilities - current		1,252		1,252		1,189		1,189
Other financial liabilities - non-current		359		359		281		281

Total financial liabilities		5,506		5,485		5,182		5,215

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

19	Reserves

The movement in reserves is as follows:


(£ millions)	Translation reserve			Hedging reserve			Cost of hedging reserve			Retained earnings			Total reserves
*Balance at 1 April 2018 Restated**		(333	)		(281	)		(46	)		8,968			8,308
Adjustment on initial application of IFRS 9 (net of tax)		—			(29	)		2			—			(27	)

Adjusted balance at 1 April 2018		(333	)		(310	)		(44	)		8,968			8,281

Loss for the period		—			—			—			(211	)		(211	)
Remeasurement of defined benefit obligation		—			—			—			305			305
Loss on effective cash flow hedges		—			(539	)		—			—			(539	)
Gain/(loss) on effective cash flow hedges of inventory		—			33			(14	)		—			19
Income tax related to items recognised in other comprehensive income		—			96			3			(55	)		44
Cash flow hedges reclassified to profit and loss		—			268			2			—			270
Income tax related to items reclassified to profit or loss		—			(51	)		—			—			(51	)
Amounts removed from hedge reserve and recognised in inventory		—			(51	)		5			—			(46	)
Income tax related to amounts removed from hedge reserve and recognised in inventory		—			10			(1	)		—			9
Currency translation differences		12			—			—			—			12
Dividend		—			—			—			(225	)		(225	)

Balance at 30 June 2018		(321	)		(544	)		(49	)		8,782			7,868


(£ millions)	Translation reserve			Hedging reserve *Restated			Cost of hedging reserve *Restated			Retained earnings *Restated			Total reserves *Restated
Balance at 1 April 2017		(329	)		(2,232	)		(75	)		7,549			4,913
Profit for the period		—			—			—			452			452
Remeasurement of defined benefit obligation		—			—			—			(119	)		(119	)
Gain on effective cash flow hedges		—			747			25			—			772
Income tax related to items recognised in other comprehensive income		—			(141	)		(5	)		19			(127	)
Cash flow hedges reclassified to profit and loss		—			394			3						397
Income tax related to items reclassified to profit or loss		—			(75	)		—			—			(75	)
Currency translation differences		(2	)		—			—			—			(2	)
Dividend		—			—			—			(150	)		(150	)

Balance at 30 June 2017		(331	)		(1,307	)		(52	)		7,751			6,061

*	See note 2 for details of the restatement due to changes in accounting policies.

20	Dividends

During the three months ended 30 June 2018, an ordinary share dividend of £225 million was proposed and paid. During the three months ended 30 June 2017, an ordinary share dividend of £150 million was declared. £60 million of this amount was paid in June 2017.

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

21	Employee benefits

The Group has pension arrangements providing employees with defined benefits related to pay and service as set out in the rules of each scheme. The following table sets out the disclosure pertaining to employee benefits of the JLR Automotive Group plc which operate defined benefit pension schemes.


	Three months ended			Year ended
(£ millions)	30 June 2018			31 March 2018
Change in defined benefit obligation
Defined benefit obligation at beginning of the period		8,320			9,969
Current service cost		43			217
Past service credit		—			(437	)
Interest expense		54			241
Actuarial losses arising from:
- Changes in demographic assumptions		—			(210	)
- Changes in financial assumptions		(383	)		(353	)
- Experience adjustments		—			(99	)
Exchange differences on foreign schemes		1			(3	)
Member contributions		1			4
Plan settlements		—			(21	)
Benefits paid		(220	)		(988	)

Defined benefit obligation at end of period		7,816			8,320

Change in plan assets
Fair value of plan assets at beginning of the period		7,882			8,508
Interest income		52			218
Remeasurement gain on the return of plan assets, excluding amounts included in interest income		(78	)		(116	)
Administrative expenses		(2	)		(9	)
Exchange differences on foreign schemes		1			(1	)
Employer contributions		71			287
Member contributions		1			4
Plan settlements		—			(21	)
Benefits paid		(220	)		(988	)

Fair value of scheme assets at end of period		7,707			7,882

Amount recognised in the consolidated balance sheet consist of
Present value of defined benefit obligations		(7,816	)		(8,320	)
Fair value of scheme assets		7,707			7,882

Net liability		(109	)		(438	)

Non-current liabilities		(109	)		(438	)

The range of assumptions used in accounting for the pension plans in both periods is set out below:


	Three months ended			Year ended
	30 June 2018			31 March 2018
Discount rate		2.9	%		2.7	%
Expected rate of increase in benefit revaluation of covered employees		2.3	%		2.3	%
RPI Inflation rate		3.1	%		3.1	%

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

21	Employee benefits *(continued)*

For the valuations at 30 June 2018 and 31 March 2018, the mortality assumptions used are the SAPS base table, in particular S2PxA tables and the Light table for members of the Jaguar Executive Pension Plan.

For the Jaguar Pension Plan, scaling factors of 113 per cent to 119 per cent have been used for male members and scaling factors of 102 per cent to 114 per cent have been used for female members.

For the Land Rover Pension Scheme, scaling factors of 108 per cent to 113 per cent have been used for male members and scaling factors of 102 per cent to 111 per cent have been used for female members.

For the Jaguar Executive Pension Plan, an average scaling factor of 95 per cent has been used for male members and a scaling factor of 85 per cent has been used for female members.

There is an allowance for future improvements in line with the CMI (2017) projections and an allowance for long-term improvements of 1.25 per cent per annum.

Following consultation with employees, on 3 April 2017, the Group 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. As a result, among other changes, future retirement benefits will be calculated each year and revalued until retirement in line with a prescribed rate 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 arose and was recognised in the three month period ended 30 June 2017.

22	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 of £17 million (31 March 2018: £17 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

Contingencies and commitments include tax contingent liabilities of £42 million (31 March 2018: £42 million). These mainly relate to tax audits and tax litigation claims.

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 £962 million (31 March 2018: £853 million) and £16 million (31 March 2018: £15 million) relating to the acquisition of intangible assets.

Commitments and contingencies also includes other contingent liabilities of £138 million (31 March 2018: £149 million). 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.

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

22	Commitments and contingencies (continued)

Inventory of £nil (31 March 2018: £nil) and trade receivables with a carrying amount of £200 million (31 March 2018: £155

million) and property, plant and equipment with a carrying amount of £nil (31 March 2018: £nil) and restricted cash with a

carrying amount of £nil (31 March 2018: £nil) are pledged as collateral/security against the borrowings and commitments.

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 30 June 2018. The outstanding commitment of CNY 625 million translates to £72 million at 30 June 2018 exchange rate.

The Group’s share of capital commitments of its joint venture at 30 June 2018 is £131 million (31 March 2018: £159 million) and contingent liabilities of its joint venture 30 June 2018 is £1 million (31 March 2018: £1 million).

23	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.

The following table summarises the capital of the Group:


As at (£ millions)	30 June 2018		31 March 2018 *Restated
Short-term debt		736		655
Long-term debt		3,178		3,076

Total debt*		3,914		3,731

Equity attributable to shareholders		9,536		9,976

Total capital		13,450		13,707

*	See note 2 for details of the restatement due to changes in accounting policies.

*	Total debt includes finance lease obligations of £19 million (31 March 2018: £19 million).

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

24	Notes to the consolidated cash flow statement

Reconciliation of (loss)/profit for the period to cash generated from operations


(£ millions)	Three months ended
(£ millions)	30 June 2018			30 June 2017
Cash flows used in operating activities
(Loss)/profit for the period		(210	)		452
Adjustments for:
Depreciation and amortisation		549			450
Loss on sale of assets		—			3
Foreign exchange loss/(gain) and fair value adjustments on loans		53			(34	)
Income tax (credit)/expense		(54	)		119
Finance expense (net)		21			21
Finance income		(10	)		(9	)
Foreign exchange (gain)/loss on economic hedges of loans		(3	)		15
Foreign exchange loss/(gain) on derivatives		10			(65	)
Foreign exchange (gain)/loss on short term deposits		(49	)		13
Foreign exchange (gain)/loss on cash and cash equivalents		(14	)		19
Unrealised (gain)/loss on commodities		(1	)		8
Share of profit from equity accounted investments		(30	)		(77	)
Fair value gain on equity investment		(1	)		—
Pension past service credit		—			(437	)
Exceptional item		—			(1	)
Other non-cash adjustments		1			—

Cash flows generated from operating activities before changes in assets and liabilities		262			477

Trade receivables		430			96
Other financial assets		38			5
Other current assets		(56	)		43
Inventories		(314	)		(296	)
Other non-current assets		(11	)		(9	)
Accounts payable		(1,088	)		(488	)
Other current liabilities		23			(67	)
Other financial liabilities		32			16
Other non-current liabilities and retirement benefit obligations		(23	)		17
Provisions		9			(50	)

Cash used in operations		(698	)		(256	)

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

24	Notes to the consolidated cash flow statement (continued)

Reconciliation of movements of liabilities to cash flows arising from financing activities


(£ millions)	Short-term borrowings			Long-term borrowings			Finance lease obligations			Total
Balance at 1 April 2017		179			3,395			7			3,581
Proceeds from issue of financing		136			—			—			136
Repayment of financing		(147	)		—			(1	)		(148	)
Foreign exchange		(9	)		(7	)		—			(16	)
Long-term borrowings revaluation in hedge reserve		—			(52	)		—			(52	)

Balance at 30 June 2017		159			3,336			6			3,501

Balance at 1 April 2018		652			3,060			19			3,731
Proceeds from issue of financing		197			—			—			197
Repayment of financing		(163	)		—			(1	)		(164	)
Foreign exchange		46			9			—			55
Interest accrued		—			—			1			1
Fee amortisation		1			1			—			2
Long-term borrowings revaluation in hedge reserve		—			84			—			84
Fair value adjustment on loans		—			8			—			8

Balance at 30 June 2018		733			3,162			19			3,914

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

25	Related party transactions

The Group’s related parties include 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 these related parties in the ordinary course of business including transactions for the sale and purchase of products and services 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 condensed interim financial statements. All related party transactions are conducted under normal terms of business. The amounts outstanding are unsecured and will be settled in cash.


			2018								2017
Three months ended 30 June (£ millions)	With ventures of the Group		With Tata Sons Limited and its subsidiaries and joint ventures		With associates of the Group		With immediate or ultimate parent and its subsidiaries, joint ventures and associates		With joint ventures of the Group		With Tata Sons Limited and its subsidiaries and joint ventures		With immediate or ultimate parent and its subsidiaries, joint ventures and associates
Sale of products		144		1		—		21		162		1		15
Purchase of goods		—		—		—		49		—		—		25
Services received		—		102		1		32		40		44		28
Services rendered		31		—		—		—		25		—		—
Trade and other		86		2		—		34		92		1		34
receivables		86		2		—		34		92		1		34
Accounts payable		—		38		—		61		3		23		14
Interest paid		—		—		—		1		—		—		—
Dividend received		22		—		—		—		—		—		90
Dividend paid		—		—		—		225		—		—		60

Compensation of key management personnel

Three months ended 30 June (£ millions)

2018

2017

Key management personnel remuneration

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