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ENGINEERING
TRANSFORMATION
Dowlais Group plc
2024 Annual Report
Contents
Strategic Report
We are Dowlais
1
Purpose, strategy, values
2
Our business model
3
Investment case
4
Chair’s statement
6
Section 172 statement
7
CEO’s statement
8
Lead, Transform, Accelerate
10
Market review
14
Key performance indicators
21
Financial review
23
Operating reviews
26
GKN Automotive
26
GKN Powder Metallurgy
29
Sustainability
34
Our approach to sustainability
34
Planet and climate
38
TCFD
42
SECR
53
People and society
56
Risk management
63
Viability statement
71
Non-financial and sustainability information
statement
72
Corporate Governance
Chair’s letter
73
Board of Directors
75
Our governance framework
77
How our Board works
79
The Board’s role in our purpose, our culture
and our people
82
Stakeholder engagement and considering
stakeholders in our decisions
84
Audit Committee report
88
Nomination Committee report
93
Remuneration Committee report
95
Directors’ Report
113
Financial Statements
Auditor’s report
118
Consolidated Financial Statements
128
Notes to the Consolidated Financial
Statements
132
Company Financial Statements
173
Alternative Performance Measures
182
Shareholder information
187
Glossary
188
2024 Reporting suite
See our 2024 Sustainability Report
Financial highlights
£4,937m
(2023: £5,489m)
Adjusted
1
Revenue,
representing 6.4%
year-on-year decline
2
£324m
(2023: £355m)
Adjusted
1
Operating
Profit representing 4.2%
year-on-year decline
2
6.6%
(2023: 6.5%)
Adjusted
1
Operating
Profit Margin,
representing 10 bps
year-on-year expansion
2
£4,337m
(2023: £4,864m)
Statutory revenue,
representing 11%
year-on-year decline
£(106)m
(2023: £(450)m loss)
Statutory operatingloss
£15m
(2023: £93m)
Adjusted
1
Free
CashFlow
11.4p
(2023: 13.8p)
Adjusted
1
earnings
per share
4.2p
Full-year dividends per
share (subject to final
dividend approval by
shareholders)
Sustainability highlights
B
rating from CDP
3
for
our2023 climate
changedisclosures
Gold
EcoVadis medal for
both businesses,
improving on
priorratings
<0.1
Group Accident
Frequency Rate (AFR)
1. All adjusted financial measures and an explanation about our use of Alternative Performance
Measures (APMs) can be found on page 182 to 186. Throughout the Strategic Report on pages
1 to 72, all references to performance measures are on an adjusted basis, unless specifically
stated otherwise.
2. At constant currency, as defined on page 184.
3. Formerly the Carbon Disclosure Project.
Visit our website: dowlais.com
Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
#1
global drive
system
supplier
1
#1
sinter metals
supplier
DOWLAIS AT A GLANCE
We are a specialist
engineering group
focused on the
automotive sector
We generate growth
through a portfolio of
transformative and
innovative businesses
We develop exceptional
products that drive
transformation in
our world
WE ARE
79
manufacturing
facilities
>29,000
employees globally
2
22
countries
>90%
of global
OEMs
1
served
~45%
of all light vehicles
1
worldwide contain
ourtechnology
£4,937m
2024 adjusted revenue
REVENUE BY REGION
42%
Americas
32%
Europe
3
12%
Rest of Asia
14%
China
1. See Glossary on page 188
2. Total employees of the Group’s undertakings, including its non-consolidated joint ventures. 3. Includes Europe, Middle East and Africa (EMEA).
1Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
PURPOSE, STRATEGY, VALUES
STRATEGIC FRAMEWORK
We have a clear purpose: Engineering transformation for a sustainable world. This forms part of our wider Strategic Framework within which
our purpose, our strategy and our values are aligned.
OUR PURPOSE
Engineering transformation for a sustainable world.
OUR STRATEGY
We are a portfolio of market-leading, high-technology engineering businesses
that advance the world’s transition to sustainable vehicles.
Lead
Market leadership and industry-leading
financial performance.
Transform
Technological innovation to
enable a net zero economy.
Accelerate
Sustainable organic growth
and disciplined M&A.
OUR VALUES
Agility
We have a lean central structure and fast, clear
decision making; we move at pace and respond
quickly to opportunity.
Accountability
We make things happen, get things done
anddeliver on our commitments; we are
accountable for our actions and act
responsiblyandwith integrity.
Ambition
We set ambitious goals to realise the
fullpotentialofour businesses; we find
opportunities toapply our expertise in new
waysand innewmarkets.
2Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
OUR BUSINESS MODEL
CREATING VALUE IN
ENGINEERING TRANSFORMATION
Dowlais’ value proposition
– A highly experienced team
ofautomotive leaders.
– A diversified portfolio of market-
leading businesses.
– A relentless focus on achieving
industry-leading financial
performance.
– Strong commitment
tosustainability.
– Flexibility to complement organic
growth with strategic acquisitions.
– A culture of fast, bold
decision making.
Focused strategy for growth
– Lead
Market leadership and
industry-leading financial
performance.
– Transform
Technological innovation to
enable a net zero economy.
– Accelerate
Sustainable organic growth
and disciplined M&A.
What sets our businesses apart
– Trusted brands with strong heritage
– Market-leading positions.
– Compelling product portfolios aligned
to the transition to electrification.
– Industry-leading technologies.
– Strong, lasting relationships with
globalcustomers.
– Talented and committed workforce.
– Global vertically integrated.
manufacturingfootprint, delivering
quality products at scale.
– Sustainable practices embedded
throughout our operations.
Value created and shared
– Our People: inspired by our shared
purpose and proud of our inclusive
working environment.
– Society and Communities:
supporting anature-positive,
netzero and justtransition.
– Our Customers: long-lasting
technology partnerships.
– Our Suppliers: growing together
responsibly.
– Our Investors: a clear dividend
policyand a commitment to
generate value.
Inspired by our values
– Agility
– Accountability
– Ambition
D
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F
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S
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O
N
G
-
T
E
R
M
V
A
L
U
E
C
R
E
A
T
I
O
N
THE FUTURE
OF AUTOMOTIVE
THE TRANSITION
TO SUSTAINABLE
MOBILITY
D
R
I
V
E
N
B
Y
LEAD
TRANSFORM
ACCELERATE
BUSINESS INVESTMENT
SHAREHOLDER RETURNS
STAKEHOLDER VALUE
Dowlais is a
portfolio of
market-leading,
high-technology
engineering
businesses that
advance the
world’s transition
to sustainable
vehicles
Guided by our purpose
Engineering
transformation for
asustainable world
GKN
AUTOMOTIVE
GKN
POWDER
METALLURGY
See pages 84 to 87 for more
information about ourstakeholders
3Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Dowlais is a world-class business, well-positioned to deliver attractive shareholder returns. Following a significant
and successful transformation, we now comprise two premium, market-leading businesses. With an experienced
management team and a clear strategy, we are focused on creating superior shareholder value through industry-
leading financial performance and technology innovation.
1
Well-diversified portfolio of market-leading businesses
Our key advantages
OUR INVESTMENT PROPOSITION
Driveline product group
Sideshafts | Propshafts
ePowertrain product group
AWD Systems | eDrive Systems
ePowertrain Components
GKN Powder Metallurgy
Sintered Metal Components
Metal Powders
Additive Manufactured Components
GKN Automotive
A global leader in
sideshafts, propshafts,
AWD systems and
advanced differentials,
with a core sideshaft
portfolio twice the
sizeof its nearest
competitor. The
business supplies
90%of global OEMs,
with no single customer
representing more
than 12% of revenues.
GKN Powder
Metallurgy
A global leader in
sintered metal
components and the
largest producer of iron
powder. The business
boasts a geographically
diverse presence,
arobust product
portfolio and a well-
diversified customer
base, with no single
customer accounting
for more than 7% of
revenues.
12%
Other
7%
10%
11%
12%
7%
Other
3%
4%
4%
4%
Revenue by region
Americas
EMEA
China
Rest of Asia
43%
36%
13%
8%
43%
36%
13%
8%
30%
42%
15%
13%
Revenue by region
Americas
EMEA
China
Rest of Asia
42%
30%
15%
13%
Customer Diversification Customer DiversificationRevenue share by region Revenue share by region
4Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
INVESTMENT CASE
4
Sustainability is central to our
customerofferings
Sustainability is embedded in our purpose of
engineering transformation for a sustainable world.
– People: Committed to providing a safe, inclusive
workplace and protecting human rights across
ouroperations.
– Supply Chain: Focused on maintaining integrity
andethical standards throughout our supply chain.
– Environment: Dedicated to reducing our
environmental footprint and contributing
tosustainable manufacturing.
See pages 34 to 62 for more information on our
approach to sustainability
Disciplined Capital Allocation Policy
Dowlais maintains a strong balance sheet and a
disciplined capital allocation strategy to drive
shareholder returns:
– Capex: Targeting capital expenditure of 1.0x-1.2x
depreciation in the medium term.
– Leverage: Target leverage ratio of 1.0x-1.5x.
Adjusted leverage ratio for 2024 was 1.7x, slightly
above the target.
– Dividends: Dividend policy targeting a sustainable
and progressive annual dividend of approximately
30% of adjusted profit after tax, with an FY24
dividend of 4.2p.
– Share Buyback: Additional excess cash is expected
to be returned to shareholders. In April 2024, we
commenced a £50 million share buyback program, of
which £31.7 million was completed prior to its
termination, following the announcement of the
recommended combination with American Axle &
Manufacturing Holdings, Inc. (“AAM”).
3
Resilient cost base with strong margins
and free cash flow potential
Since 2019, both our businesses have undertaken
significant efforts to localise their supply chains and
reduce the impact of geopolitical risk. The Group
nowoperates largely local-for-local supply chains,
withproduction centres focused on serving their
respective regions.
We successfully navigated the post-Covid inflationary
environment, fully offsetting inflation through customer
recoveries. In 2024, amidst marketvolatility driven by a
slowdown in BEV adoption, weproactively managed
costs, mitigating the margin drop-through from the
30% assumed in our financial model to just 6%and
expanding our margin by 10bps.
Margin profile:
– GKN Automotive: Achieved an adjusted operating
margin of 6.8% in 2024, as stringent cost
management along with performance initiatives and
pricing recovery mitigated impact of lower volumes.
– GKN Powder Metallurgy: Delivered an adjusted
operating margin of 9.1%, placing it in the top
quartile of automotive suppliers.
Free cash flow growth
The Group has strong cash flow generation potential
and it is well-positioned to improve adjusted free
cashflow largely driven by:
– Margin expansion and operational efficiencies.
– Reduced capex requirements as new Hungary plant
and expanded Mexico plant become fully operational.
– Lower restructuring spend as self-help projects are
completed by 2026.
– Elimination of cash losses following the disposal of
GKN Hydrogen.
2
Well-positioned to capture growth across
automotive industry trends
GKN Automotive
The core sideshaft business works with all types
ofpowertrains, including electric, hybrid, and traditional
engines. As more vehicles adopt electricpowertrains,
demand for larger joints and higher installation rates
presents a growth opportunity. While propshafts and
AWD systems, which make up 23% of GKN Automotive’s
revenue, are mainly tied to ICE and hybrid vehicles, our
ePowertrain components business – accounting for 11%
of revenue - has potential for growth with new EV
platforms. Additionally, our strong market position in
China, representing 14% of our revenue, gives us a
unique advantage in expanding alongside the fast-
growing Chinese OEM market.
57%
of GKN Automotive’s
2024 revenue was on
powertrain-agnostic
sideshaft portfolio
+4.3%
2021-2024 compound
annual growth rate
(“CAGR”)
for sideshaft revenue
outside China, in line with
market growth rate
GKN Powder Metallurgy
The business has a strong and diversified core
portfolio, serving both industrial and automotive
markets. It has also developed significant opportunities
to generate incremental growth, including expanding
into high-potential EV-ready product categories, such
as iron powder for LFP batteries and sintered magnets
for electric motors.
5Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
CHAIR’S STATEMENT
PROVING OUR
RESILIENCE IN
A DYNAMIC
MARKET
Together, these actions leave us better positioned to
navigate any further market volatility and deliver sustainable,
profitable growth and cash generation. You can read more
about how we have executed our strategic objectives on
pages 10 to 13. Dowlais finishes the year as a stronger, more
resilient and more focused business. I am confident we can
continue to build on that in 2025.
Recommended combination with AAM
On 29 January 2025, we announced the recommended
combination of Dowlais with AAM.
As stated in the rule 2.7 announcement regarding the
proposed combination, the directors believe that the
combination represents an attractive opportunity to
accelerate the realisation of shareholder value through the
establishment of a global, automotive supplier with market-
leading capabilities, better positioned together to navigate
both the short-term challenges and long-term market
dynamics in the automotive sector.
Further details on the proposed transaction can be found at
dowlais.com.
Capital allocation and dividend
As a Board, we remain committed to delivering shareholder
value. We commenced a £50 million share buyback
programme in the year, of which over £31.7 million
wasreturned to shareholders. We only terminated the
programme following the agreement of the terms of
theproposed combination with AAM.
The Board is also recommending a final dividend of 2.8
pence per share, resulting in a total dividend for the year
of4.2 pence per share.
Our stakeholders including our people
In more challenging times, it is important we remain focused
on the interests of all our stakeholders. The Board takes this
responsibility seriously, and throughout the year we have
ensured that the Company’s key stakeholders have been
carefully considered in our decision-making processes.
Our people are not only a significant stakeholder in our
business, they are our most important asset. They are crucial
to the future success of our business and delivering our
strategy. The Board was pleased to be able to meet
employees from across our Automotive and Powder
Metallurgy businesses during the year, including when
wevisited our operations in Italy in February 2024. You can
read more about this on page 83. Whenever I meet with our
employees, I am struck by their pride in our business and
their drive to deliver for our customers.
The health and safety of our people is always our number
one priority as a Board. We receive regular updates on the
Group’s health and safety management and performance
throughout the year. This year, the Group’s health and safety
has been an area of continued focus for us. Although we met
our target, of an AFR of less than 0.1, the number of lost-time
accidents experienced within the Group increased this year,
which is disappointing. As a result, we commissioned an
independent review of the health and safety performance
ofour Automotive business, which will help inform how
wedrive continuous improvement in our procedures,
management system and culture.
“Our business and our peoplehave
performed well, in whathasbeen a
challenging marketenvironment.”
Strategic progress
As a Group, we have made good progress this year despite
the many challenges that we faced, as volatility in the global
transition to EVs saw significant drops in production volumes
across a number of our customers’ vehicle platforms. This
volatility significantly impacted our ePowertrain product
group, where high-value content on a small number of
vehicle platforms created a significant revenue headwind.
We have not stood still, but have focused on what we can
control, continued to execute our strategy and taken actions
to transform our business. This included disposing of our
loss-making Hydrogen business, commencing a strategic
review of our Powder Metallurgy business and continuing
toexecute our strategy to accelerate the transition in
ourAutomotive business toward a powertrain-agnostic
businessmodel.
Simon Mackenzie Smith
Chair
6Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
The wider automotive market volatility we have seen this
year can make life difficult for our operational teams, who
must remain agile and respond rapidly in what continues
tobe a dynamic environment. Their ability to do this has
enabled us to increase our operating margin despite a
decline in revenue, an achievement of which we can all
beproud.
In addition, the Board is cognisant that our ongoing
restructuring activities have an impact on our people. It is
testament to the talent and hard work of our people that,
despite these challenges, we have continued to deliver
onour strategic goals and met the exacting standards
expected by our customers. The Board would like to express
its thanks to everyone in our global workforce, who has
worked tirelessly throughout the year, during which their
flexibility and resilience have been more important than ever.
More details on how we as a Board have engaged with
ourworkforce are set out on page 82, and I look forward
tocontinuing to meet the many talented people that work
in our operations throughout 2025.
Board and governance
Ensuring our Board has an appropriate range of skills,
experience and expertise remains a key focus, and I
continueto believe that our Board comprises the right
mixoftalented, experienced and diverse individuals.
Following Alexandra Innes and Geoffrey Martin stepping
down from the Board, the Nomination Committee
commenced a process to review the Board’s composition.
That process has paused following the announcement of
therecommended combination with AAM.
You can find further information on the Committee’s
activities throughout the year in our Nomination Committee
Report on pages 93 to 94.
Section 172 statement
Throughout the year, the Directors continued to
discharge their duties in accordance with section 172 of
the Companies Act. This includes the need to consider
the interests of the Company’s wider stakeholders.
Details of our stakeholder groups can be found on
pages 84 to 86, and further details on how the
Directors have discharged their duties can be
foundonpage 87.
Looking ahead
2024 was a challenging year for the Group, as factors
largely beyond our control resulted in significant
headwinds. However, as a Board, we remain proud
ofwhat the Company achieved against a difficult
industry backdrop.
Looking ahead to the remainder of this year, as a Board
we remain relentlessly focused on how to generate and
unlock value for our shareholders.
To that end, the Board and I look forward to engaging
with shareholders and other stakeholders in the coming
weeks and months, and to continued progress for our
businesses this year.
7Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
CEO’S STATEMENT
Liam Butterworth
Chief Executive Officer
CEO’S
STATEMENT
2024 was another year of challenges and volatility in the
Automotive industry, yet despite this we delivered on our
updated guidance. We took decisive actions to align our
operations with long-term value creation. This included the
strategic decision to right size our eDrive systems business,
alongside a comprehensive review of Powder Metallurgy,
disposal of our Hydrogen business, and continuing the
execution of our restructuring programs. These initiatives
underscore our commitment to strengthening the Group’s
financial resilience and unlocking shareholder value.
The proposed combination with American Axle &
Manufacturing Holdings represents a significant opportunity
to accelerate the execution of our strategy by leveraging
scale, capabilities, and the outstanding management teams
of both companies. We are confident that these actions,
combined with the significant synergies and benefits of this
transaction, will continue to drive value for our shareholders
and create a stronger foundation for the future.
I would like to thank everyone for their significant
contribution to achieving these results and look forward
tothe year ahead.
Q
What happened in the automotive industry
in2024, and what did that mean for Dowlais?
The year was characterised by rapid change in our industry
as there was a marked slowdown in the global shift towards
electric vehicle adoption as, especially in Europe, both
political, and financial support, was pared back. Manufacturers
have raised concerns about the financial burden of the shift,
and consumers continue to be concerned about issues such
asbattery range, the availability of infrastructure needed to
support electric mobility, and the total cost of EV ownership.
Our forward-thinking approach, and insight as a supplier to
more than 90% of the global OEMs, means the business was
in a strong position to react appropriately and in a timely
manner to this shift.
Q
How would you characterise Dowlais
2024performance?
We delivered on our revised guidance through
strongexecution. Our market-leading Driveline business
demonstrated resilience, slightly outperforming the market
outside of China. Whereas in China, we remained laser
focused on our ‘China for China’ strategy and made
significant progress with all of the leading Chinese OEM’s.
We took decisive actions to align our operations with
long-term value creation. This included the strategic
decision to right size our eDrive systems business, which
faced significant headwinds due to ongoing volatility in BEV
production schedules, contributing to the majority of the
Group’s 6.4% adjusted revenue decline year-on-year.
We optimised capital allocation as we disposed of our
Hydrogen business, conducted a comprehensive review
ofPowder Metallurgy, and continued the flawless execution
of our restructuring programs. All these initiatives highlight
our commitment to strengthening the Group’s financial
resilience and unlocking value from our portfolio.
Our proactive cost management and pricing recovery efforts
enabled us to improve adjusted operating margin by 10bps,
offsetting the impact from lower volume, demonstrating our
disciplined approach and operational agility.
“I am pleased to present our
secondAnnualreport to all of
our stakeholders, andIam proud
of what Dowlais achieved
throughout2024.”
8Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Q
How do you see Dowlais’ outlook for 2025
andbeyond?
1
As we look ahead, current industry forecasts project a flat
GLVP in 2025, or a 0.9% decline excluding China. Additionally,
industry projections for GLVP excluding China suggest a
decline of 3.1% in H1 before rebounding 1.4% in H2.
Based on these external forecasts and our current order
book, we anticipate adjusted Group revenue to range from
flat to a mid-single digit decline in 2025, with an adjusted
operating margin between 6.5% and 7.0% in constant
currency, as restructuring savings and ongoing performance
initiatives are expected to offset the impact of lower
volumes, alongside commercial recoveries achieved in 2024.
In line with industry trends outside China, Group adjusted
revenue in constant currency is expected to be stronger in
H1, while adjusted operating profit margin will improve in H2,
reflecting the phasing of restructuring benefits. Adjusted
free cash flow for 2025 is projected to be slightly higher than
the prior year, following a similar phasing as operating profit
due to working capital seasonality and restructuring cash
outflows, which will be more weighted towards H1. The
Group expects to deliver significantly higher adjusted free
cash flow during 2026, as global footprint-related
restructuring initiatives come to an end in 2025.
This outlook does not factor in the impact of any potential
import tariffs imposed by the United States or any other
country.
Q
Two years on from the demerger and operating
as a standalone business: anything you would have
done differently or are you happy with the outcome?
I am very satisfied with the decisions we have taken since
ouradmission to the main market of the LSE in 2023.
Thestrategy we developed has enabled us to navigate
thechallenges of the industry whilst driving the business
forward and taking decisions that are for the long-term
benefit of the Group, its employees and its shareholders.
Automotive markets have been challenging, with volatility
invehicle production and the pace of EV transition
impacting our financial performance. However, we
haveremained focused on what we can control and
beendisciplined and agile in our decision-making.
Q
How do you create a business positioned
towinin such a volatile market environment?
We have an outstanding product portfolio, with market-
leading positions in our key segments. We are geographically
aligned with our ‘local for local’ strategy, which enables
ustomaintain production schedules and avoid or
minimisedisruptions.
We have a highly talented workforce and management
teamthat can respond to this fast-moving market and
makedecisions quickly.
Looking ahead, the current market plays very much to
ourstrengths as a manufacturer of powertrain-agnostic
products. This means we can supply a portfolio of products at
competitive costs, whatever engine type powers the vehicle.
“We have an outstanding product
portfolio, with market-leading
positions in our key segments.
Weare geographically aligned
with our ‘local for local’ strategy
which enables us to maintain
production schedules and
avoidrminimise disruptions.”
Liam Butterworth
Chief Executive Officer
1. See page 116 for directors confirmations made in accordance with Rule 28.1(c)(i) of the Takeover Code.
9Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
LEAD, TRANSFORM, ACCELERATE
STRATEGIC PROGRESS
The Dowlais Board remains focused on its commitment to maximise the full
value of the Group for the benefit of its shareholders by considering all
available options. In 2024, we took decisive actions to position the Group
for sustainable profitable growth and improved margins.
+10bps
adjusted operating
marginexpansion
£4.8bn
of forecast lifetime
revenuebooked by
GKNAutomotive
1.2x
book-to-bill ratio for
GKNAutomotive
56%
of new business wins
inPowder Metallurgy
attributed to EV
orpropulsion
agnosticproducts
Our overall strategy remains unchanged
and focused on three pillars:
Lead, Transform, Accelerate.
Lead: We aim to lead in both market position and
financialperformance by consistently prioritising operational
excellence. This is achieved through implementing best in class
manufacturing, commercial, and procurement processes, as
well as maintaining strict discipline in managing working capital.
Transform: Continuous improvement and agility are
centralto our operations. We are digitising and optimising
manufacturing processes, improving our production footprint
to enhance competitiveness, and driving innovation in
ourproduct portfolio to support the transition to
electrifiedmobility.
Accelerate: We are positioning for organic growth while
remaining open to value-accretive M&A opportunities at the
appropriate time. Our approach is prudent and disciplined,
targeting opportunities that align with our portfolio strategy
and deliver shareholder value.
2024 Group performance
Our long-term financial priorities and the metrics for measuring
the success of our business remain unchanged, focusing on
margin expansion, cash generation, and portfolio transition.
Margin expansion: In 2024, the Group navigated a
volatilemarket environment, with ePowertrain performance
significantly impacted by BEV production volatility.
Thisresulted in adjusted revenue of £4,937 million, a 6.4%
declineyear-on-year. Despite lower volumes, proactive cost
management, performance initiatives and pricing recoveries
helped deliver an adjusted operating margin of 6.6%, a
10bps increase from the prior year. Through these actions,
the Group effectively limited the constant currency drop-
through margin to 6%, significantly better than the 30%
drop-through assumed in our financial model,
demonstrating resilience and operational agility.
10Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT
Dowlais Group plc 2024 Annual Report
GKN AUTOMOTIVE
GKN Automotive continued its momentum from last
year in driving operational improvements. In 2024,
thebusiness launched 130 new programs and had
aquality defect rate of three parts per million
rejected(PPM), well within its target range. The
business announced the creation of an end-to-end
production site in Alamance, North Carolina and
streamlined itsmanufacturing footprint by closing its
plant in Roxboroand its advanced engineering centre
in Abingdon, UKand proposing the wind-down and
ultimate closure of its all-wheel drive facility in Köping,
Sweden. GKN Automotive has continued to enhance
operational efficiencies by making good progress
intwo main restructuring initiatives; relocating
production from its Mosel plant in Germany to
itsnewly opened facility in Hungary and further
expanding production capacity in Mexico. Both
projects have progressed according to plan.
#1
automotive
sideshafts and
propshafts
supplier
#1
AWD systems
and advanced
differentials
supplier
>90%
of global
lightvehicle
manufacturers
served
See pages 26 to 28 for more information on
GKN Automotive’s performance in 2024
Cash generation: The Group reported an adjusted free cash
flow of £15 million for the period, down from £93 million in
the prior year. This decline was primarily due to lower
earnings from volume weakness, higher interest payments
reflecting the annualisation of the post-demerger capital
structure, and higher restructuring outflows, as previously
communicated, partially offset by lower capital expenditure.
Net debt stood at £968 million, up from £847 million in 2023,
with a leverage ratio of 1.7x, above the prior year-end
position of 1.4x.
Portfolio transition: In a volatile market environment,
marked by growing uncertainty around the pace and scale
ofBEV adoption, we continue to take a disciplined approach to
investing in our portfolio. Our focus remains on transitioning to
a powertrain-agnostic business model thatisresilient to global
market fluctuations and well-positioned to deliver sustainable,
profitable growth and cash generation. Significant progress
has been made in securing new business that supports this
transition across the Group. The Automotive segment
delivered a strong performance, achieving bookings
withforecast lifetime revenue exceeding £4.8 billion,
distributedacross a diverse range of products, customers,
and geographies. 40% of those bookings were on electric
orfull hybrid platforms. We continued to make significant
progress in China by working closely with Chinese OEMs.
In2024, 42% of the Automotive segment’s China revenue
came from Chinese OEMs, up from 27% in 2021. In Powder
Metallurgy the order book grew by 2%, with 56% of new
business wins attributed to EV or propulsion-agnostic
products, demonstrating the business’s alignment with
evolving market demands and its strategic focus on
supporting the electrification transition.
This progress underscores our commitment to adapting to
market shifts while remaining focused on delivering value
through a balanced and forward-looking portfolio strategy.
Strategy and unlocking value in our portfolio
The Dowlais Board remains focused on its commitment to
maximising the full value of the Company for the benefit of
its shareholders by considering all available options. In 2024,
we took decisive actions to position the Group for
sustainable profitable growth and improved margins:
GKN Automotive: In a volatile market environment with
growing uncertainty around the pace and scale of the BEV
adoption, our goal remains unchanged: transitioning to a
powertrain-agnostic business model better suited to
navigating market volatility and delivering sustainable,
profitable growth and cash generation. As part of this
strategy, we made the decision to right size engineering
investment in the business’ eDrive systems product line to
optimise capital allocation. This decision, involving some
restructuring-related cash outflows, will be implemented
primarily in 2025. In 2024, gross engineering spend on the
ePowertrain product line totalled approximately £95 million,
and this is expected to reduce to approximately £60 million
by the end of 2025, the net benefit of which in 2025 will be
approximately £10 million due to the impact of cessation of
approximately £30 million of customer-funded engineering.
This proactive step reflects our strategy of balancing
disciplined investment with long-term profitability, ensuring
that the Group is better positioned to navigate the
increasing volatility in BEV market.
GKN Powder Metallurgy: At the start of 2024, we
established a new leadership team and developed a clear
strategic and commercial plan to accelerate the business’
portfolio transition. In August, we commenced a strategic
review of the business, considering a range of options,
including a potential sale. Following the announcement of
the recommended combination of Dowlais with AAM, should
the recommended combination proceed, GKN Powder
Metallurgy would become part of the combined group,
where it would form part of a wider vertically integrated
metal forming product line, reinforcing the combined
group’s position in the market.
GKN Hydrogen: As previously communicated, in early 2024
Dowlais started a process to identify suitable investment
partners for the Hydrogen business. In July 2024, the Group
disposed of its entire interest in its GKN Hydrogen business
to Langley Holdings plc, for nominal consideration.
Thistransaction resulted in a loss on disposal of £18 million,
ofwhich £10 million was incurred in the first half, and has
eliminated future cash losses associated with the funding
ofthe Hydrogen operations. In the 12 months ended
31 December 2023, Hydrogen operations contributed
£5 million of revenue, £15 million of adjusted operating losses
and £23 million of cash losses.
11Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
STRATEGIC PROGRESS CONTINUED
Engineering transformation for a sustainable world
Sustainability is a core priority for Dowlais, and we continued
to make substantial progress in the year, understanding
andaddressing our sustainability-related impacts, risks
andopportunities. We have already achieved significant
progress against our science-based climate targets.
GKN Automotive made significant progress on its ambitious
sustainability roadmap in 2024, developing net zero
strategies for its top 20 sites. The business signed its first
virtual power purchase agreement (VPPA) with Recurrent
Energy, covering 65% of its European energy needs.
Itimplemented a new data platform to increase the
robustness and reliability of environmental data across
itsglobal network, continued to work with its global supply
base, developed sustainability e-learning for its employees
globally and launched its Future Talent STEM programme
atseveral key sites. The progress made by the business
in2024 was recognised by multiple awards from global
OEMs, and a Gold EcoVadis rating, placing it in the top
5%ofcompanies rated.
GKN Powder Metallurgy maintained its benchmark position
in sustainability within the industry. In 2024, the business
achieved Gold EcoVadis rating, placing it in the top 5%
ofglobal companies. Alongside this award, further progress
was made in 2024 on the use of renewable energy with
over180k MWh of renewable energy sourced in 2024,
and~35% reduction in scope 1 and 2 (market-based)
emissions intensity. This is a source of commercial advantage
as more and more customers are requiring products made
from renewable energy as part of their Science Based
Targets initiative (SBTi) commitments. Inits Bruneck site,
surplus heat from sinter furnaces isprovided tothe city as
part of its commitment totheenvironment.
GKN POWDER METALLURGY
GKN Powder Metallurgy also made significant progress
in 2024. The business continued to focus on inflation
recovery and operational efficiency. It fully offset
commodity and energy inflation by pricing initiatives,
surcharge pass-through agreements and operational
efficiencies. The business continued to optimise its
manufacturing footprint and closed a site in Wisconsin,
USA. Quality standards remained high, with a defect
rate of two PPM, consistent with 2023 levels.
#1
sintered metal
components
supplier
#1
iron powder
supplier
>10m
components
produced
perday
See pages 29 to 33 for more information on
GKN Powder Metallurgy’s performance in 2024
Operational highlights
Our businesses continued to demonstrate positive
operational performance throughout 2024.
Health and safety continue to be the Group’s highest
priority. The Group had an Accident Frequency Rate (AFR)
of<0.10 for the second year in row. Both our businesses
areimplementing additional measures to ensure AFR
remains well within our target range.
12Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Across the Group, we have completed a detailed human
rights risk assessment and have identified our salient human
rights risks. Other achievements include updating our
sustainability data processes and starting our double
materiality assessment, to be ready for reporting and
compliance requirements under EU Corporate Sustainability
Reporting Directive.
Dividend
The Board has recommended a final dividend of 2.8 pence
per ordinary share. This dividend is in line with the Group’s
dividend policy to target a sustainable and progressive
annual dividend of approximately 30% of adjusted profit
after tax. Although the Group’s current leverage of 1.7x is
slightly above our target range, the Board believes this is a
temporary situation, primarily due to market volatility
affecting our ePowertrain product line, and it expects
leverage to return to within its target range by the medium
term. Subject to approval by shareholders, the final dividend
will be paid on 29 May 2025 to shareholders on the register
on 22 April 2025. A Dividend Reinvestment Plan (DRIP)
isprovided by Equiniti Financial Services Limited. The
DRIPenables the Company’s shareholders to elect to
havetheir cash dividend payments used to purchase
theCompany’s shares. More information can be found
atwww.shareview.co.uk/info/drip. The deadline to elect
toparticipate in the DRIP is 7 May 2025.
Share buy-back
On 29 January 2025, following the announcement regarding
the recommended cash and share combination with AAM,
Dowlais has cancelled the previously announced share
buyback programme of its ordinary shares for up to
amaximum aggregate consideration of £50 million with
immediate effect. As at 28 January 2025, the Company
hadpurchased 48,749,412 shares under the programme
foratotal consideration of £31,714,469, excluding stamp
dutyandfees.
Recommended Combination with AmericanAxle & Manufacturing Holdings, Inc.
On 29 January 2025, the Boards of Dowlais and AAM announced that they had reached an agreement on the terms
ofarecommended cash and share combination of Dowlais with AAM (the “Combination”). The Combination, which is
expected to be implemented by way of a Court-sanctioned scheme of arrangement under Part 26 of the Companies
Act2006, remains subject to shareholder approvals, receipt of regulatory clearances, and other customary closing conditions.
Under the terms of the Combination, Dowlais shareholders will be entitled to receive 0.0863 new AAM shares and 42
pencein cash per Dowlais share, in addition to the final dividend of 2.8 pence per Dowlais Share, which the Board aretoday
recommending. Upon completion, Dowlais shareholders will own approximately 49% of the Combined Group, with AAM
shareholders owning approximately 51%. As stated in the rule 2.7 announcement regarding the Combination, the directors
believe that the proposed combination with AAM is an attractive opportunity to accelerate the realisation of shareholder
value through the establishment of a global automotive supplier with market-leading capabilities, better positioned
together to navigate both the short-term challenges and long-term market dynamics inthe automotive sector.
Further details on the Combination, including the full terms and conditions, are set out in the 2.7 announcement dated
29 January 2025, which is available on Dowlais’s website at https://www.dowlais.com. Subject to satisfaction of all relevant
conditions, completion of the transaction is expected to occur in 2025.
13Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
MARKET REVIEW
GLOBAL AUTOMOTIVE
MARKET OVERVIEW
Dowlais’ businesses are market
leaders in the automotive sector,
with more than 95% of Group
revenues directly attributable
to the sale of automotive
components. GKN Automotive
predominantly supplies
components directly to OEMs
as a Tier 1 supplier, while GKN
Powder Metallurgy serves both
OEMs and Tier 1 suppliers.
>95%
of Group revenues are directly
attributable to the sale of
automotivecomponents
A
Light vehicle
production decline
The vast majority of components supplied
by GKN Automotive and GKN Powder
Metallurgy are for light vehicles, which
comprises passenger cars and light trucks
weighing up to 6 tonnes.
In 2024, global light vehicle production
(“GLVP”) was estimated at 89.5 million units,
reflecting a 1.1% decline year-on-year.
GLVP has faced significant headwinds
inrecent years. Whilst in 2023, GLVP grew
byapproximately 10%, this momentum
reversed in 2024 as inventory replenishment
neared completion, consumer demand
softened due to high interest rates and
inflation, and BEV penetration slowed amid
the withdrawal of government subsidies.
Regionally, Asia remained the largest
producer of light vehicles in 2024, with
Chinaproducing 30.1 million vehicles and
the rest of Asia 21.6 million vehicles. EMEA
produced 19.4 million vehicles, followed by
the Americas at 18.4 million vehicles. While
China’s production grew 3.6% year-on-year,
production declined by 4.1%, 4.5% and
1.0%in EMEA, the rest of Asia and the
Americas, respectively.
14Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
B
Volatility in 2024
production forecasts
The production outlook for 2024
remainedvolatile throughout the year.
Atthe beginning of the year, S&P projected
a very modest decline in GLVP. However,
subsequent multiple downward revisions
toforecasts for Europe, North America, and
Japan/Korea led to a worsening outlook.
3.3%
year-on-year decline in GLVP excluding China
C
2025 outlook:
Growth amidst
challenges
For 2025, S&P now forecasts a flat GLVP
at89.5 million vehicles. Excluding China,
a0.9%decline is projected. This reduction is
primarily due to regulatory challenges such
as stricter CO
2
emissions rules in Europe, the
threat of potential US tariffs and a slowdown
in BEV adoption.
Regional production is also unevenly
distributed across the two halves of 2025.
S&P projects production in China to increase
by 7.6% in the first half of the year and
decline by 2.8% year-over-year in the
second half. In contrast, excluding China,
production is forecast to decline by 3.1% in
the first half and then rebound by 1.4% in the
second half.
In the medium-term S&P projects GLVP
togrow at a CAGR of 1.2% and reach
approximately 96 million units in 2030.
GVLP
GVLP ex-china
S&P forecast evolution for YoY growth in GLVP in 2024 (%)
-4.5
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
Feb-25Dec-24Sep-24Jun-24Mar-24Jan-24
2023 2024 2025 2026 2027
2029
2028
2030
S&P forecast for GLVP growth (million units)
90.5 89.5 89.5 91.1 93.4 94.2
95.6
96.3
15Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
MARKET REVIEW CONTINUED
KEY TRENDS RELEVANT TO
DOWLAIS AND HOW WE
ARE RESPONDING
The automotive market is constantly
evolving, and we are proactively staying
ahead of the shifting market trends.
1
Slowdown in EV adoption
2024 saw a material slowdown in BEV adoption, complicating auto
manufacturers’ long-term planning and investment decisions. Global
BEV production penetration reached 13% of light vehicle production
in2024, an increase of only 1.3 ppt year-on-year.
This deceleration was particularly evident in Europe, where BEV
production declined by 7% year-on-year, with sales in Germany
experiencing a significant drop following the withdrawal of EV
subsidies. US BEV production also declined by 7% year-on-year
reflecting consumer resistance due to the relative higher prices of
BEVs,insufficient charging infrastructure and elevated insurance costs.
Conversely, nearly all BEV growth in 2024 came from China, where
BEVproduction increased by 16%, driving the global BEV production
growthrate of 9%.
At the start of 2024, S&P had forecasted BEV penetration of
approximately 44% by 2030. However, this has since been revised
downwards to 33%, with some analysts projecting BEV penetration
aslow as 30% by 2030.
While we remain committed to the transition to BEV, the pace
ofchange is expected to be slower than initially anticipated.
7%
year-on-year
declinein BEV
production in Europe
Jan-24 forecast
Jan-25 Forecast
BEV Penetration Forecast Evolution
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
20302029202820272026202520242023
16Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
How Dowlais is responding
GKN Automotive has a propulsion source
agnostic core sideshaft portfolio, which
accounted for 57% of GKN Automotive’s 2024
revenue. Over the last few years, its sideshaft
portfolio has tracked the GLVP market outside
China. While its propshaft and AWD system
portfolios are for ICE platforms, they are
concentrated on SUVs and pick-up trucks in
North America and Southeast Asia, where
electrification is progressing more slowly.
Whileits ePowertrain components portfolio
iscompatible with both ICE and BEV platforms,
itprimarily serves BEV platforms and is well
positioned to capitalise on any acceleration in
electrification. We have taken decisive actions
toaddress the decline in eDrive systems revenue,
which now accounts for only 1% of GKNAutomotive
revenues, including reducing the engineering
spend and maintaining disciplined investments
in programs that meettarget profit margins.
As BEV adoption slows, hybrids — both HEVs
(Hybrid Electric Vehicles) and PHEVs (Plug-in
Hybrid Electric Vehicles) — are increasingly
being used as transitional technologies.
Governments and consumers view hybrids as
acompromise that reduce emissions without
thecharging infrastructure challenges associated
with BEVs. Dowlais’ powertrain-agnostic products,
such as sideshafts and ePowertrain components,
are compatible with hybrids, allowing the company
to benefit from this transitional phase.
While 54% of revenue in GKN Powder Metallurgy
comes from ICE platforms, the slowdown in
electrification provides a near-term tailwind.
Thebusiness is actively expanding its product
portfolio to increase its offering of EV ready
andpropulsion agnostic products.
33%
Projected BEV penetration
in 2030 – down from 44%
projected a year ago
57%
of GKN Automotive’s 2024
revenue was from its
powertrain-agnostic
sideshaft portfolio
17Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
MARKET REVIEW CONTINUED
Light Vehicle Production by Region (million units)
20242014
0
5
10
15
20
25
30
35
RoWJapan/KoreaNorth AmericaEuropeChina
2
Changing customer landscape
China remains a key driver of GLVP. Over the past decade,
itsshare of global production has increased from 26% to 33%,
while Europe, North America and Japan/Korea have seen
their share decline. Within China, domestic OEMs have
gained significant market share at the expense of global
OEMs. Despite slowing domestic demand, Chinese OEMs
have maintained momentum through strong export growth.
Chinese OEMs’ share of GLVP has increased from 13% in 2019
to 23% in 2024.
How Dowlais is responding
SDS, our automotive joint venture with HASCO, which
celebrated its 35
th
anniversary last year, continues to be
highly successful. We work with all the leading Chinese
OEMs and are profitably growing our market share
with many of them across our entire product portfolio.
Also in China, we rigorously prioritise profitable growth
over volume, with our JV margins already at target
levels. As Chinese OEMs expand globally, we are well
positioned to become their supplier of choice even
outside China.
18Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
ACCELERATING SUPPORT
FOR CHINESE OEMS
GLOBALLY
FOCUS ON: CHINA
China continues to lead the world in the transition to electric
vehicles, and this key market was an area of particular focus
during the year. GKN Automotive’s presence in China is via
its joint venture SDS with local partner HUAYU Automotive
Systems Co. Ltd (HASCO). SDS has continued to grow and
remains the leading supplier of driveline products to the
Chinese market, with ten manufacturing facilities located in
the country. Chinese OEMs continue to become more global
in their ambitions, and the business made good progress in
profitably increasing sales with this group of customers,
leveraging its strong and longstanding relationships.
ENGINEERING TRANSFORMATION
19Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
SDS, GKN Automotive’s joint venture in China with local
partner HASCO, maintained its market-leading position
throughout 2024. It is the number one supplier of sideshafts
in China, partnering with the majority of ChineseOEMs.
Itsrevenue with Chinese OEMs increased to42% in 2024,
anotable increase from 2021. The local order book for
thebusiness has also continued to improve. In 2024,
thebusiness had a book-to-bill ratio of 1.5x,
asignificantimprovement over recent years.
SDS’ continued progress is supported by GKN Automotive’s
world-leading Driveline and ePowertrain technology portfolios.
It successfully completed 57 programme launches in 2024.
The introduction of new digital platforms has enabled
customers of SDS to access inventory status updates and
production plans at any time, supporting SDS to improve the
traceability of its parts and enhance the transparency and
security of its supply to customers.
As a result of SDS’ customer-centric approach, the joint
venture secured significant new business wins with key
Chinese OEMs in 2024, including a major new 3-in-1 eDrive
system, entirely developed locally by SDS engineering teams
in China. SDS was also recognised by its customers with
several accolades, including Excellent Supplier, Excellent
Quality Performance and Lean Development awards.
In 2024, Chinese exports of passenger vehicles increased
approximately 20% year-on-year. GKN Automotive’s
globalnetwork and reputation for quality, reliability and
collaboration makes it a partner of choice for Chinese OEMs
as they continue to rapidly expand globally. Together SDS
and GKN Automotive are able to offer competitive, world-
leading technologies tailored specifically to meet the
requirements of Chinese OEMs. In 2024, SDS and GKN
Automotive continued to showcase their industry-leading
solutions, with successful customer technology events held
at both BYD and Chery’s headquarters. Outside of China,
GKN Automotive further expanded its commercial team,
hosting key Chinese customer visits across its global footprint,
showcasing the breadth of its operations, qualityof delivery
and agile and responsive ways of working.
FOCUS ON: CHINA CONTINUED
42%
share of SDS
revenue with
Chinese OEMs
1
st
Tier 1
automotive
supplier to
establish a joint
venture in China
>35 yrs
of successful
joint venture
with HASCO
1.5x
book-to-bill ratio
20Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
KEY PERFORMANCE INDICATORS
MEASURING OUR PERFORMANCE
Financial KPIs
Our financial KPIs are Alternative Performance Measures (APMs), which are explained on pages 182 to 186.
Adjusted
revenue
Adjusted
operating
profit
Adjusted
operating
margin
Adjusted free
cash flow
Net leverage
ratio
Adjusted
earnings
pershare
£4,937m
(2023: £5,489m)
£324m
(2023: £355m)
6.6%
(2023: 6.5%)
£15m
(2023: £93m)
1.7x
(2023: 1.4x)
11.4p
(2023: 13.8p)
Definition Definition Definition Definition Definition Definition
External revenue including
theGroup’s share of revenue
ofequity accounted
investments (EAIs).
Statutory operating profit,
adjusted forsignificant or
volatile items, non-trading or
non-recurring items, certain fair
value items released tothe
income statement relating to
historical acquisitions, and
adjusted profit from EAIs.
Adjusted operating profit
asapercentage of
adjustedrevenue.
Cash generated from
tradingoperations, after
accounting for all trading
costs,restructuring, pension
contributions and tax payments,
but before any cash flows
related to financing activities,
adjusted for demerger-related
cash flows and for cash held in
disposed businesses.
Net debt divided by last
12 months’ adjusted EBITDA.
Adjusted profit after tax
divided by the weighted
average number of ordinary
shares in issue during the
financial period.
Progress in 2024 Progress in 2024 Progress in 2024 Progress in 2024 Progress in 2024 Progress in 2024
Our revenue declined 6.4%
year-on-year at constant
currency, as a result of
declinesin GLVP and significant
production declines for certain
platforms containing high-value
ePowertrain products.
Adjusted operating profit
declined 4.2% year-on-year
atconstant currency, as a
resultof the significant
declinein revenue.
Despite the significant revenue
decline, the impact on margins
was limited by outstanding
operational performance, and,
as such our adjusted operating
margin grew 10bps year-on-
year aswe continue to aim for
industry-leading financial
performance.
Free cash flow remained
positive, despite the fall in
operating profit and continued
investment in our operations.
Higher net debt of £968 million,
combined with lower adjusted
EBITDA, led to a higher leverage
ratio of 1.7x.
Notwithstanding the reduction
in our share capital as a result of
our share buyback programme,
adjusted earnings per share
reduced as a result of the
decline in adjusted
operatingprofit.
21Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Non-financial KPIs
Accident
frequency rate
Scope 1 and 2
CO
2
emissions
EV-related
medium-term
order book
<0.1
(2023: <0.1)
476k
(2023: 683Kt C0
2
e)
43%
(2023: 49%)
Method of calculation Method of calculation Method of calculation
Number of lost-time accidents
(whether serious orminor)
divided by the total number
ofhours worked multiplied
by200,000.
Our emissions data is reported
in accordance with the
reporting requirements of the
Greenhouse Gas Protocol (GHG
Protocol), Revised Edition and
the Environmental Reporting
Guidelines, including the SECR
guidance dated March2019.
The percentage of GKN
Automotive’s forecast revenue
in four years’ time (2028) from
the supply of products for use
in EVs and full hybrids, based
oncurrently awarded business.
Does not include GKN Powder
Metallurgy, aftermarket or
cylinder liners order book.
Progress in 2024 Progress in 2024 Progress in 2024
We are committed to
protecting our employees and
workers from injury and harm,
focusing on continuous
improvement to provide a safe
and healthy workplace for all.
Our AFR for 2024 was 0.097, a
slight deterioration on our 2023
performance of 0.08. An
independent health and safety
review was commenced, to help
drive performance
improvements.
We reduced our Scope 1
and2emissions by 30%, with
emissions falling from 682,761
tonnes in 2023, to 476,245
tonnes in 2024 which led
toa21.8% reduction in
emissionsintensity.
Our strategy to smoothly
navigate the EV transition
means our goal is for this KPI
tobroadly track the market
penetration rate of EVs.
Current 2028 forecasts are for
that penetration rate to be 53%.
As such, our order book is
weighted slightly more to
non-EVs than current medium-
term industry forecasts suggest.
We use our KPIs to track our success in delivering
our strategy
We report our key performance indicators (KPIs), which we consider the most important
metrics to track our performance. The Board reviews these KPIs annually and regularly
monitors progress during the year. Some KPIs are directly linked to our executive directors’
remuneration.
Financial progress
Our financial KPIs track how our financial performance meets our strategic goals. This includes
our strategy to achieving industry-leading financial performance by driving margin
expansion, increasing earnings per share and generating cash, whilst maintaining prudent
levels of leverage.
Health and safety
The health and safety of our people is our number one priority. Our Accident Frequency
Rateis our key health and safety KPI and reflects accidents that have resulted in time off work.
Other health and safety metrics we monitor include our major Accident Frequency Rate and
Accident Severity Rate, each of which reflects whether or not any accidents result in more
serious injuries. All lost-time accidents are reported to the Board on a regular basis.
Carbon emissions
To track our performance towards our net zero targets, we treat our Scope 1 and Scope 2
emissions as a KPI. These are emissions generated in our own operations or in generating the
energy we use, so are directly influenced by our actions. Our Scope 3 emissions are largely
outside our control, but we expect them to reduce significantly over time as the automotive
industry continues to transition to EVs.
Transition to sustainable mobility
Tracking the percentage of GKN Automotive’s medium-term order book, which relates
tobookings for EV programmes, reflects the importance of our strategy to successfully
navigate the wider EV transition. Our goal is to smoothly track that transition, so we aim
forthis KPI to broadly track the forecast market penetration rate of EVs.
KEY PERFORMANCE INDICATORS CONTINUED
22Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
FINANCIAL REVIEW
“The Group’s performance was
impacted by lower volumes,
leading to a year-on-year
decline in key metrics. However,
ongoing operational efficiency
improvements and a continued
focus on cost management
partially mitigated this impact.”
Revenue
Adjusted revenue in the year was £4,937 million, a decline
of6.4% at constant currency, primarily driven by weakness
inthe ePowertrain product line, which accounted for
approximately 70% of the adjusted revenue decline.
Translational foreign exchange headwinds were £199 million
higher compared to the prior year, resulting in a reported
adjusted revenue decline of 10%. Foreign exchange
headwinds were largely due to the British pound sterling
strengthening against several currencies, (at average
exchange rates) particularly the US Dollar, the Euro and
theChinese Renminbi.
Roberto Fioroni
Chief Financial Officer
FINANCIAL
REVIEW
The decrease in adjusted operating profit was primarily
driven by lower revenue and partially offset by
approximately £70 million of commercial recoveries,
whichare largely one-off in nature, and £27 million of
efficiencies related to our footprint restructuring initiatives.
In line with our financial model, approximately £31 million of
price reductions were offset by other ongoing performance
initiatives. This led to lower drop-through margins of 6% at
constant currency, demonstrating our commitment to
effectively managing our cost base.
The statutory operating loss in the year was £106 million
(2023: loss of £450 million), with the primary adjustments
between adjusted and statutory operating profit being
amortisation of acquisition-related intangible assets of
£191 million (2023: £197 million), restructuring costs of
£145 million (2023: £120 million) and a loss on derivatives
of£71 million (2023: gain of £16 million). A full reconciliation
between adjusted and statutory operating profit is provided
in the notes to the Consolidated Financial Statements.
Translational foreign exchange impact
The difference in reported and constant currency values
relates to translational foreign exchange impacts as further
set out on in the Alternative Performance Measures section.
When considering the sensitivity of potential 2025 full-year
adjusted operating profit to translational foreign exchange
movements, we expect that a 10% strengthening of certain
underlying currencies against British pound sterling would
increase adjusted operating profit as follows: US Dollar
approximately £20 million and Chinese Renminbi
approximately £10 million.
We are not providing specific guidance in relation to foreign
exchange for the 2025 financial year. However, using the
spot exchange rates at 24 February 2025 including £1=$1.26,
£1=€1.21 and £1=CNY9.16 and applying them to a
representative income statement profile for the year,
weexpect no impact on year-on-year adjusted revenue
andapositive impact on adjusted operating profit of
approximately £3 million. The above spot rates and
assumptions reflect a point in time, and it is reasonable
toexpect spot rates to fluctuate, especially for emerging
markets currencies.
Statutory revenue (which excludes revenues from non-
consolidated joint ventures including the Group’s major
automotive joint venture in China) in the period was
£4,337 million (2023: £4,864 million) with a reported
declineof 11%.
The regional breakdown of Group adjusted revenues in the
year is shown below.
Adjusted Revenue share by region
Adjusted revenue share by region 2024 2023
Americas 42% 40%
Europe, Middle East & Africa 32% 34%
China
1
14% 14%
Rest of Asia 12% 12%
1. China revenues reflect joint venture shareholding percentages.
Operating profit
Adjusted operating profit for the year decreased by 4.2%
atconstant currency to £324 million and margin improved
by10bps. Foreign exchange headwinds in the year were
£16 million higher than the prior year, resulting in a
reportedadjusted operating profit decline of 8.7%.
23Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
FINANCIAL REVIEW CONTINUED
Dowlais has a clear capital allocation framework, which sets out how we intend to use our capital andapply any excess cash available
after paying an appropriate dividend in line with our statedpolicy.
OPERATING CASH FLOW
EXCESS CASH
BUSINESS INVESTMENT
DIVIDEND
DELEVERAGING M&A
ADDITIONAL SHAREHOLDER
RETURNS
Maintain ratio at 1.0x
to 1.5x net debt: EBITDA
A disciplined, prudent approach to
exploring M&A where it will create value
Return excess capital to shareholders,
byshare buy-backs or special dividends
A sustainable and progressive dividend policy, targeting
approximately 30% of adjusted profit after tax
Capital to sustain organic growth, support transitionto EV
andincrease competitiveness ofmanufacturing footprint
Overview
£ millions Adjusted
1
Statutory
2024 2023 Change Constant FX
1
2024 2023 Change
Revenue 4,937 5,489 -10% -6.4% 4,337 4,864 -11%
Automotive 3,954 4,437 -11% -7.2% 3,391 3,843 -12%
Powder Metallurgy 983 1,047 -6.1% -2.7% 946 1,016 -6.9%
Hydrogen – 5 -100% -100% – 5 -100%
Operating expenses (426) (483) 12% 9.1% (813) (809) -0.5%
EBITDA 600 639 -6.1% -2.0% n/a n/a n/a
Depreciation and amortisation
2
(276) (284) 2.8% 0.7% (449) (459) 2.2%
Operating profit/(loss) 324 355 -8.7% -4.2% (106) (450) 76%
Operating margin 6.6% 6.5% 10bps 10bps -2.4% -9.3% 690bps
Net finance costs (109) (91) -20% -23% (109) (72) -51%
Profit/(loss) before tax 215 264 -19% -14% (215) (522) 59%
Tax (54) (66) -18% -14% 47 27 74%
Profit/(loss) after tax 161 198 -19% -14% (168) (495) 66%
Non-controlling interest (5) (6) -17% -17% (5) (6) -17%
Profit/(loss) attributable to owners 156 192 -19% -14% (173) (501) 65%
Weighted average shares 1,373 1,390 -1.2% n/a 1,345 1,362 -1.2%
Basic EPS 11.4p 13.8p -17% n/a (12.6)p (36.0)p 65%
Free cash flow 15 93 -84% n/a n/a n/a n/a
Capex 191 295 -35% n/a 191 295 -35%
Net debt 968 847 14% n/a n/a n/a n/a
Leverage 1.7x 1.4x 0.3x n/a n/a n/a n/a
1. Adjusted financial measures are defined and reconciled to statutory measures in the Alternative Performance Measures section, which also sets out the
definition and basis of calculation of constant currency.
2. Statutory depreciation and amortisation includes amortisation of intangible assets acquired in business combinations, as disclosed in Note 6a of the
consolidated financial statements.
Net finance costs
The Group’s adjusted net finance charges of £109 million
(2023: £91 million) represent £121 million of finance costs
(2023: £100 million) and £12 million of finance income
(2023: £9 million).
The finance costs include interest on bank borrowings of
£89 million (2023: £63 million), interest on the Group’s
pension schemes of £15 million (2023: £17 million) and finance
lease charges of £6 million (2023: £6 million). The increase in
interest charges on bank borrowings compared to the prior
period reflects a full-year impact of the post demerger
capital structure and draw-down on the revolving credit
facility in the period. The Group’s effective interest rate
onbank borrowings was 6.3%.
In the prior year, statutory finance income included the
benefit of the one-off foreign exchange gains of £22 million
on loans with the Melrose group up to the date of demerger.
In 2025, adjusted net finance charges are expected to
beinthe range of between £110 million and £120 million.
Tax
The results for the period show an adjusted tax charge of
£54 million (2023: £66 million), arising on an adjusted profit
before tax of £215 million (2023: £264 million). The Group’s
current adjusted effective tax rate (ETR) is 25% (2023: 25%)
inline with our expectations.
Earnings per share
In accordance with the Group’s measures of performance,
the Group also presents its earnings per share (EPS) on an
adjusted basis. Adjusted EPS for the year was 11.4 pence per
ordinary share (2023: 13.8 pence). The decline is largely
driven by lower earnings, higher foreign exchange
headwinds and finance costs, as they reflect the full
yearimpact of the post demerger capital structure.
Statutory basic EPS was a loss of 12.6 pence per share
(2023:loss of 36.0 pence) and included the impact of
adjusting items such as amortisation of acquisition-related
intangible assets and restructuring costs as shown in Note 6.
24Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Free cash flow
Adjusted free cash flow for the period was £15 million,
downfrom £93 million in 2023. This decrease is largely
drivenby lower adjusted EBITDA, higher interest payments
and higher restructuring payments, partially offset by lower
capital expenditure. Working capital was also lower in the
second half of the year as a result of proactive measures
toadjust our working capital requirements to match lower
volumes. The year-end working capital movement was
negative compared to the previous year due to the
timingofcash outflows.
Interest payments, totaling £94 million, were £26 million
higher than the previous year due to the annualisation of
thepost-demerger capital structure. Capital expenditure
decreased by £104 million to £191 million, as it was adjusted
to align with lower volumes and no material expenditure was
incurred on new production facilities, primarily associated
with our footprint restructuring initiatives. Restructuring
cash outflows of £106 million, related to continued
performance improvements and footprint restructuring
initiatives, were £36 million higher than the prior year
andinline with our guidance communicated in H1 2024.
Restructuring cash outflows in 2025 are expected to be
inthe range of £120 million to £130 million, an increase
compared to 2024, largely due to costs related to the
rightsizing of the engineering spend in eDrive systems.
Taxoutflows in the year were £56 million compared to
prioryear outflows of £61 million. Tax outflows in 2025
areexpected to be slightly higher due to a legislative
withdrawal of patent box tax relief previously claimed
inItalyand the settlement of a tax audit in Germany.
Liquidity and leverage
The Group’s primary sources of liquidity are cash
generatedfrom operating activities and funds available
under its multi-currency term loan, revolving credit facility
and US private placement notes. At 31 December 2024, the
Group’s cash and cash equivalents balance, net of overdrafts
was £323 million (31 December 2023: £313 million), while
therevolving credit facility had available headroom of
£534 million (31 December 2023: £590 million), translating
toatotal liquidity position of £857 million (31 December
2023: £903 million).
In 2024, the Group successfully refinanced part of its debt
through issuance of US$500 million (~£399 million) of notes
inthe US private placement market. The notes have
maturities in the range of 5-12 years. Following the note
issuance, $400 million of the term loan debt has been repaid.
Post refinancing, the Group continues to be funded through
two core banking facilities comprised of a multi-currency
revolving credit facility and term loan facility, and the US
private placement notes resulting in a combined debt
facilities of approximately £1.8 billion. The revolving credit
and term loan facilities have an initial maturity date of
20 April 2026. The Group has the option to extend the
maturity of the revolving credit facility by up to two years,
atits sole discretion.
As at 31 December 2024, the Group had 46% of its drawn
debt at fixed interest rate. This is made up of the US private
placement notes and interest rate swaps. The maturity dates
of the interest rate swaps are aligned with those of the
underlying debt facilities. Post refinancing, the Group’s
effective interest rate is expected to be 6.3%, in line with
prior years.
The Group’s net debt at 31 December 2024 was £968 million,
an increase from £847 million at 31 December 2023, as a
resultof funding the operational needs of the business. This,
combined with lower Adjusted EBITDA resulted in a leverage
ratio of 1.7x Adjusted EBITDA, an increase from 1.4x for the
year ended 31 December 2023. The Group’s leverage ratio is
comfortably below the covenant requirement under its debt
facilities of 3.5x. The Group’s interest cover covenant (which
measures Adjusted EBITDA to net interest charge over the
preceding 12 months and requires a ratio of at least 4.0x)
on31 December 2024 was 6.8x, reflecting comfortable
headroom above the covenant.
Retirement benefit obligations
The Group operates several defined benefit pension
schemes. The Group’s assets and liabilities under these
schemes were calculated as at 31 December 2024 to reflect
the latest assumptions and are summarised below.
Position at 31 December 2024
£ millions Assets Liabilities
Accounting
surplus/
(deficit)
UK plans
1
613 (584) 29
European plans 16 (385) (369)
US plans 76 (111) (35)
Other Group pension schemes 12 (21) (9)
Total Group pension schemes 717 (1,101) (384)
1. UK plans primarily relate to the GKN Group Pension Schemes No. 2 and
No. 3 and also include a legacy UK post-retirement medical scheme.
The Group’s most significant defined benefit pension plans
are the GKN Group Pension Scheme No. 2 and the GKN
Group Pension Scheme No. 3, which constitute the majority
of the UK plans. These defined benefit schemes are closed
tonew entrants and to the accrual of future defined benefits
for current members. In 2024, the Group contributed
£15 million to scheme No. 3, as part of its asset-backed
funding arrangements. As at 31 December 2024, these
schemes had a net surplus of £31 million (2023: deficit of
£5 million), with an additional £2 million of liabilities relating
to a legacy post-retirement medical scheme (31 December
2023: £2 million). The UK schemes were last subject to their
triennial statutory valuation in April 2022. The next triennial
valuation is due in April 2025.
The most significant of the Group’s other pension liabilities
are the future payment obligations under the German GKN
pension plans, which provide benefits dependent on final
salary and service, and which are generally unfunded and
closed to new entrants. At period end, the future obligations
associated with these plans represented an unfunded
liability of £361 million (31 December 2023: £390 million).
Pension cash outflows in relation to the defined benefit
pension schemes were £44 million (2023: £39 million). The
fullyear amount is expected to be approximately £40 million
in 2025.
25Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
GKN AUTOMOTIVE
AUTOMOTIVE
OPERATING REVIEW
Visit gknautomotive.com to learn more
GKN Automotive is a global automotive technology
business at the forefront of innovation.
It specialises in designing, developing and producing market-leading
drivelinesystems. GKN Automotive is the world leader in sideshafts, propshafts,
all-wheel-drive (AWD) systems and advanced differentials, on which it has built
itseDrive system capability, which was launched over 20 years ago and has since
been used inover 2.5 million electrified vehicles worldwide.
>24,000
employees
1
48
manufacturing facilities
1. Total employees of the Group’s undertakings within GKN
Automotive, including its non-consolidated joint ventures.
GKN Automotive Product Portfolio
Sideshafts
Propshafts
Driveline product group ePowertrain product group
AWD Systems
eDrive Systems
ePowertrain Components
New business wins
In 2024, GKN Automotive continued to secure significant
wins and contract awards worth more than £4.8 billion in
lifetime revenue, with a book-to-bill ratio of 1.2x. Of these
new business wins, 40% relate to electric or full hybrid
platforms. The awards cover a broad range of global OEMs,
and Chinese OEMs, including a 3-in-1 eDrive system for a
major Chinese OEM through Automotive’s joint venture SDS.
However, the high-performance SUV vehicle programme
referenced in the Group’s interim results announcement on
12 September 2023, for which Automotive had been
contracted to supply a 3-in-1 eDrive system, was indefinitely
postponed, in another sign of the continuing uncertainty in
the BEV marketplace.
The business’ order book remains aligned to the evolving
vehicle portfolio of its customers, 28% of its current 2028
order book now relates to battery electric vehicles, 15% to
hybrid electric vehicles and 57% to internal combustion
engine vehicles.
Technology and product portfolio
GKN Automotive is the global leader in drive systems,
withfive global technology centres, a global engineering
organisation and dedicated vehicle testing facilities. It has
the most comprehensive drive system portfolio in the
industry, transferring the torque to and balancing the
torquebetween the wheels to ensure superior performance,
efficiency and reliability.
In 2024, the business expanded its market-leading sideshaft
portfolio, bringing multiple new programmes into mass
production with products designed to match the increased
requirements of electrified vehicles. With over 100 joint
types and sizes matching the broad variety of powertrains
and its unique drive system expertise, it is the world leader
in this market.
26
CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT
Automotive overview
£ millions Adjusted
1
Statutory
2024 2023 Change Constant FX
1
2024 2023 Change
Revenue 3,954 4,437 -11% -7.2% 3,391 3,843 -12%
Driveline 2,278 2,448 -6.9% -3.2% 2,268 2,436 -6.9%
ePowertrain 1,049 1,329 -21% -18% 1,049 1,329 -21%
China 553 582 -5.0% -0.9% – – –
Other
2
74 78 -5.1% -1.3% 74 78 -5.1%
Operating profit/(loss) 268 306 -12% -8.5% (2) 30 -107%
Operating margin 6.8% 6.9% -10bps -10bps -0.1% 0.8% -90bps
1. Adjusted financial measures are defined and reconciled to statutory measures in the Alternative Performance Measures section, which also sets out the
definition and basis of calculation of constant currency.
2. Other revenue includes revenue from Cylinder Liners.
Adjusted revenue declined 7.2% year-on-year to
£3,954 million largely due to the impact of volume weakness
and product mix in the ePowertrain product line. Driveline
adjusted revenue declined 3.2%, slightly outperforming a
declining global light vehicle production outside China of
3.3%, as it continued to demonstrate the resilience of its
broad portfolio and scale across customers, platforms and
geographies. Automotive’s China business declined 0.9%,
underperforming the 3.6% growth in local light vehicle
production. The ePowertrain product line continued to be
impacted by volatility in BEV production volumes, with an
18% year-on-year revenue decline, driven by low double-
digit decline in AWD systems, high single-digit decline in
ePowertrain components and significant decline in eDrive
systems. Automotive’s adjusted operating margin was
6.8%,a decline of 10bps year-on-year but an improvement
of80bps from the first half, as the impact from lower
volumeswas partially offset by pricing recoveries,
ongoingcommercial initiatives and restructuring
benefits,which helped to limit the negative impact
fromthedrop-through margin to 7%.
Ongoing performance initiatives resulted in £125 million
ofrestructuring costs during the year (2023: £109 million) with
a £95 million cash outflow (2023: £58 million cash outflow).
In response to the reduced pace of BEV penetration, the
Automotive business intensified its focus on its advanced
torque management products for both ICE and electric
vehicles, building on its strong heritage and market-leading
position. It has adapted its ePowertrain components portfolio
to best support the drive system architectures of electrified
vehicles through compactness, control performance and cost.
Recognising the need for a more sustainable approach to
eDrive systems, we also made the decision to right-size our
engineering investment in this area, ensuring resources are
focused on profitable and scalable opportunities. With an
increased focus on torque management components, the
business accelerated its innovation pipeline with a key
focuson the physical integration of functions into compact
product solutions and next generation electronics to address
future architectural safety and security requirements.
GKNAutomotive remains a strong partner in systems
engineering and systems integration support for its customers
with industry-leading software and electronics capabilities.
Operational excellence
GKN Automotive continued to drive sustainable margin
improvement, by taking decisive action to increase the
competitiveness of its global manufacturing footprint
remaining fully aligned to the regional requirements of
itscustomers. In 2024, it announced the creation of an
end-to-end production site in Alamance, North Carolina
andthe subsequent closure of its plant in Roxboro,
theclosure of its advanced engineering centre in
Abingdon,UKand the proposed closure of its primarily
all-wheel drive site in Köping, Sweden. In parallel, the
business continued to expand its new production facility
inMiskolc, Hungary as it continued to transfer Driveline
assembly capabilities from Mosel, Germany.
The business successfully completed 130 new programme
launches during the year, while it continued to enhance the
productivity and efficiency of its operational capabilities.
Thebusiness continued to focus on behavior-based safety
initiatives and increased its emphasis on psychosocial risk
assessment. With a PPM (parts rejected per million
manufactured) defect rate of three, GKN Automotive
againdemonstrated its excellent quality performance.
Sustainability
GKN Automotive made significant progress on its
sustainability roadmap in 2024, developing net zero
strategies for its top 20 sites. The business signed its
firstvirtual power purchase agreement (VPPA) with
Recurrent Energy, covering 65% of its European energy
load.It implemented a new data platform to increase the
robustness and reliability of environmental data across its
global network, continued to work with its global supply
base, developed sustainability e-learning for its employees
globally and launched its Future Talent STEM programme in
a number of key sites. The progress made by the business in
2024 was recognised by several awards from global OEMs,
and a gold EcoVadis rating, placing it in the top 5% of
companies rated.
27Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
FOCUS ON: MEXICO
GKN Automotive’s plants in Celaya and Villagran, Mexico,
which are located within 10km of each other, are key
manufacturing hubs for its market-leading sideshaft
technology for both ICE vehicles and EVs.
Established in 1979, Celaya incorporates both machining
andprecision forging operations and employs more than
1,700employees across 86,900m
2
. Focused on machining and
assembly, Villagran employs more than 1,500 people
andismade up of two co-located plants within its
96,640m
2
footprint.
The Mexico operations underwent a comprehensive footprint
transformation programme between 2020 and 2024, including
the addition of a 54,000m
2
building extension in Villagran and
the transfer from operations in the USA of an annual
production volume of 3.8 million sideshafts and 2 million
propshafts. The final stages of this transfer involved the
transfer of over 120 machines, the validation of over 350 part
numbers and the hiring and training of more than 300 people.
Its Mexico operations showcase GKN Automotive’s focus
onthe vertical integration of its facilities, bringing together
forging, heat treatment, machining and assembly to drive
greater efficiencies and security of supply.
The two plants have taken measures to simplify and localise
their supply chain, increasing resilience, reducing risk and
contributing to the organisation’s focus on the long-term
sustainability of its business.
In line with GKN Automotive’s target to increase its use
ofrenewable electricity globally to 75% by 2030, I-REC
certification, the internationally used standard to certify the
renewable origin of electricity, will be introduced in Mexico
in2025. In addition, with an ongoing focus on increasing the
diversity and size of its talent pool, GKN Automotive has more
than doubled its female employee base in Mexico from 10% to
23% since 2020.
Capacity shift from US to enhance efficiency and scale
0
20
40
60
80
100
Share of Mexico in North American Production
79%59%
20252019
Sideshafts Propshafts
20252019
100%
23%
3.8m 2.0m
capacity shifted from US to Mexico
Capacity shift from US to enhance efficiency and scale
ENGINEERING TRANSFORMATION
Vertically Integrated
Forging
Heat treatment
Machining
Assembly and localised supply chains
driving efficiencies
28Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
GKN POWDER METALLURGY
POWDER METALLURGY
OPERATING REVIEW
Visit gknpm.com to learn more
GKN Powder Metallurgy is solving complex challenges in
automotive and industrial markets through best-in-class
sustainable and innovative powder metallurgy technology.
It is a world-class supplier of metal powder and sintered metal components.
Thebusiness comprises three focused divisions under one brand: GKN Powders/
Hoeganaes, GKN Sinter Metals, and GKN Additive, supplying metal powders,
high-precision powder metal solutions and 3D-printed parts.
GKN Powder Metallurgy ProductPortfolio
Sintered Metal Components
Metal Powders
Additive Manufactured Components
>5,000
employees
1
31
manufacturing facilities
1. Total employees of the Group’s undertakings within GKN
Automotive, including its non-consolidated joint ventures.
Adjusted revenues were
£983 million for the year, a decline
of 2.7% year-on-year, largely driven
by lower volumes in Sinter Metals
in North America and Europe,
partially offset by growth in China.
Adjusted revenue in the Sinter Metals product line was 3.4%
lower compared to prior year mainly as result of customer/
platform mix in North America. The Additive product line
performed strongly during the year with significant growth
in metallic products resulting in 15% increase year-on-year.
Adjusted revenue in the Powder product line was 2.3% lower
than in 2023, mainly driven by lower surcharges and volumes
in North America offset by growth in China.
Adjusted operating profit for the year was £89 million
(2023: £96 million), resulting in an adjusted operating margin
of 9.1%. Operating margin was broadly similar to the prior
year as the business successfully offset lower volume with
pricing initiatives, surcharge pass-through agreements and
operational efficiencies.
29Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT
Dowlais Group plc 2024 Annual Report
Powder Metallurgy overview
£ millions Adjusted
1
Statutory
2024 2023 Change Constant FX
1
2024 2023 Change
Revenue 983 1,047 -6.1% -2.7% 946 1,016 -6.9%
Sinter 744 800 -7.0% -3.4% 744 800 -7.0%
Additive 30 26 15% 15% 30 26 15%
Powder 209 221 -5.4% -2.3% 172 190 -9.5%
Operating profit/(loss) 89 96 -7.3% -3.1% 22 (409) n/m
2
Operating margin 9.1% 9.2% -10bps -10bps 2.3% -40.3% n/m
2
1. Adjusted financial measures are defined and reconciled to statutory measures in the Alternative Performance Measures section, which also sets out the definition and basis of calculation of constant currency.
2. Not meaningful.
Commercial progress
In 2024, GKN Powder Metallurgy achieved significant
commercial progress under the leadership of its new
CEO,Jean-Marc Durbuis, who introduced a focused
commercial strategy and strengthened the team.
Thebusiness secured £113 million in new business wins
(based onpeak year revenue), reflecting a 2% year-on-year
increase. Approximately 56% of these awards were for EV
orpropulsion-agnostic products. The extension of ICE and
hybrid programs provided tailwinds for the core portfolio,
with notable contract extensions and growing platform
lifetimes supporting long-term value.
The business made advancements in key growth areas,
including battery and electronics, x-by-wire, drivetrain,
andthermal management, with commercial successes
acrossthese segments. In LFP batteries, GKN achieved
breakthroughs with high-quality iron powder required
forthe LFP battery market and announced a strategic
collaboration with First Phosphate in Canada to supply
material for their cathode production. Progress was also
made in developing low heavy rare earth and rare earth-free
magnets for EV motors, with a new production line expected
to launch in H2 2025.
Beyond automotive, the business continued to diversify
intoindustrial markets, representing ~20% of revenue.
Notably, revenues from metal additive manufacturing
morethan doubled from a low base, driven by thermal
management components for advanced AI infrastructure.
These achievements underline GKN Powder Metallurgy’s
ability tonavigate market shifts and expand its portfolio
intohigh-potential growth areas.
30Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Operations
GKN Powder Metallurgy operates globally with
31 manufacturing plants and two technology centres across
11 countries, maintaining a strong focus on safety, quality,
and sustainability. In 2024, the business achieved significant
progress in these areas, including significant reduction in
itsaccident frequency rate compared to last year. Quality
standards remained high, with a defect rate of two parts
permillion rejected (PPM), consistent with 2023 levels.
Sustainability efforts continued to lead the industry, with
thebusiness achieving an EcoVadis Gold rating, placing
itinthe top 5% of global companies. The use of renewable
energy increased with over 180k MWh of renewable energy
sourced in 2024 leading to ~35% reduction in scope 1 and 2
(market-based) emissions intensity. Notably, the Bruneck
sitecontributed surplus heat from sinter furnaces to the
localcommunity.
The business delivered continuous improvements through
itsdecentralised CIMS program, and 46 automation projects
were implemented across 15 plants, driving productivity gains.
Despite reduced light vehicle volumes in the second half
of2024 due to higher inventory levels, Powder Metallurgy
mitigated the impact through operational flexibility and
smart automation. The year also saw the closure of the
Wisconsin site and significant progress on a new powder
bonding facility in North America, set to enhance customer
support and strengthen the business’s operational footprint.
31Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
RESILIENT PORTFOLIO
STRATEGY FOR
SUSTAINABLE GROWTH
POWDER METALLURGY
GKN Powder Metallurgy is dedicated to achievingsustainable
and profitable growth through a resilient and balanced
portfolio strategy.
By maintaining a forward-looking approach and consistent
prioritisation of innovation, the business is well-positioned
to navigate global market developments while capitalising
onopportunities forlong-term value creation.
ENGINEERING TRANSFORMATION
32Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
GKN Powder Metallurgy’s portfolio strategy is built upon three foundational pillars that foster agility
andpositions the business for continued success in a dynamic and changingmarket environment:
Strengthening the core
2
Diversification for stability
3
Investing in growth
The business is strengthening its leading position
initscore market through portfolio adaptation and
focuson high-growth regions. This approach includes
delivering powertrain-agnostic products for a wide
range of vehicle architectures and expanding the
portfolio of components for BEVs and Hybrid EVs.
These efforts directly support the automotive
industry’s transition toelectrification. Key EV
component groups are:
The business is focused on portfolio diversification
toenhance stability and mitigate risk. The business
isaccelerating growth in complementary areas such
asporous metal solutions, additive manufacturing
(including both metal and polymer 3D printing), and
metal injection moulding (MIM). These technologies
are instrumental in meeting the demands of industrial
applications and emerging sectors.
The business is committed to innovation by investing
ingrowth technologies that offer the promise of
significant long-term returns. This includes advancing
the development and application of permanent
magnets, essential for various industrial and mobility
solutions, and the innovation of advanced battery
materials to support energy storage and sustainable
mobility.
Battery & Electronics
X-by-Wire
Drivetrain
Thermal Management
~9%
Revenue CAGR for Additive
Manufacturing between 2022-2024
Supply agreement signed
with First Phosphate
Canada to supply high
quality Ancorsteel for
cathode production
By combining its market-leading core business with strategic diversification and a focus on innovation, GKN Powder Metallurgy has confidently adapted to evolving market conditions while
building the foundations for sustained growth. This strategy enables the business to support its customers in achieving their innovation and sustainability objectives, driving long-term value
for all stakeholders.
A legacy of process innovation and sustainability
As a global market leader, recognised for world-class manufacturing expertise and co-design capabilities, GKN Powder Metallurgy collaborates closely with its customers to develop
advanced systems that deliver exceptional performance while aligning with the shared objective of achieving zero emissions.
Its low-waste, cost-effective manufacturing processes meet the highest quality standards, reflecting its unwavering commitment to resource efficiency and environmental stewardship.
This dedication is exemplified by its EcoVadis Gold Rating, underscoring our leadership in sustainable practices.
Looking ahead, the business remains steadfast in strengthening its leadership position, driving innovation, and ensuring sustainable growth across its portfolio.
1
ENGINEERING TRANSFORMATION
33Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Sustainability goes hand in hand with our commitment to
engineering excellence.
As a supplier to over 90% of global OEMs, we play an essential role
inthe transition to sustainable mobility, delivering the technological
innovation required to enable a net zero economy.
ENGINEERING TRANSFORMATION
FORASUSTAINABLEWORLD
OUR APPROACH TO SUSTAINABILITY
How Dowlais meets the needs of customers:
Comparative life-cycle greenhouse gas emissions of a mid-size battery electric
vehicle (BEV) and internal combustion engine (ICE) vehicle
50
60
Scope 3
Downstream
Vehicle manufacturing
will become the largest
emission driver
Scope 3
Downstream
Vehicle
manufacturing
Vehicle
manufacturing
Scope 1&2
Scope 1&2
40
30
20
10
tCO
2
BEV
tCO
2
ICE
Downstream (car use)
is the largest emission
driver today
Sources: IEA analysis based on IEA (2020). Argonne National Laboratory (2020)
We have set ourselves ambitious science-based targets
to reduce our own carbon footprint, which are also our
customer’s Scope 3 emissions. We are making good
progress on meeting those ambitious goals.
Using green steel and recycled materials in our
products puts us ahead of the field in our sector.
Forexample, GKN Automotive’s European supply
chaintypically achieves a carbon footprint of
1.5kgCO
2
e per kilogram, less than half that of
Chinesesuppliers.
We signed our first virtual power purchase agreement
(VPPA) to secure supply of renewable electricity.
Wehave also published our first Transition Plan,
demonstrating how we will reach the targets by 2050.
For more on how we reduce emissions see pages 38 and 39.
21%
of energy consumed in 2024 is
from renewable sources
>206k
tonnes CO
2
e reduction in Scope 1
and 2 emissions on a market basis
-21.8%
reduction in Scope 1 and 2
emissions intensity on a
marketbasis.
1
Reducing carbon emissions
The business case for sustainability is self-evident. As the following diagram shows,
ourimpacts directly contribute to the emissions of our customers. The move to electric
vehicles (EVs) will only accelerate this trend.
Emission Scopes Life-cycle Stages
Scope 1 & 2 Battery Manufacturing
Vehicle Manufacturing
Fuel/Electricity Production
Scope 3 Downstream Tailpipe Emissions
Maintenance
End-of-Life
In addition, as both a Tier 1 and Tier 2 supplier, we know that our customers cannot meet
theirenvironmental, social and governance (ESG) goals, without us meeting ours. We see
acompetitive advantage in building sustainability into our customer relationships.
We have identified the areas where our customers need to see the most urgent action,
whichaligns with our most material issues, and are pleased that, in 2024, we made substantive
progress in all areas.
34Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
2
Product safety and quality
3
Meeting regulatory & reporting requirements
Product safety is a non-negotiable requirement in the automotive industry. Our customers,
along with the end users of the vehicles featuring our products, rely on us to ensure
their safety. To meet this responsibility, we embed safety processes across all aspects
of our operations. From the earliest stages of design and development, safety is
prioritised, and our sourcing and supplier quality assurance processes ensure that
ourpartners uphold the same high standards.
100%
product portfolio (by
revenue) certified to
ISO 9001 or IATF 16949
>2 billion
parts produced in 2024
by both businesses
One
safety-related
product recall
in 2024
Global regulations on non-financial reporting and compliance are becoming
increasingly stringent and interconnected. We need to meet these rules, but
importantly so do our customers, and they rely on the information we provide.
Inaddition to customer requirements, we are preparing for compliance with the
EU’ssuite of reporting requirements, the Chinese Sustainability Disclosure Standards,
and alignment with the work of the International Sustainability Standards Board.
Best ESG report
at 2024 Corporate and
Financial Awards
‘B’
CDP Climate disclosure
‘C’
CDP Water Security
disclosure
For more on product safety and quality, see page 62. For TCFD disclosures and SECR tables, see pages 42 to 55 and for full SASB disclosures
seeour2024 Sustainability Report.
4
Resilient and ethical supply chains
5
Technological innovation, optimised design
One of our core values is Accountability and, with global supply chains that span
theworld, we are committed to ensuring ethical practices at every level. We want
todifferentiate ourselves not just by what we do, but how we do it.
This year, we completed a formal review to identify the salient human rights risks
within our operations and supply chains, strengthened our policies and processes to
monitor current mitigation measures, and we developed further mitigation measures
to address the risks more effectively.
Our key strengths are long-standing relationships with suppliers and our global
footprint, which equips us to navigate market fluctuations without increasing the
risksto workers in our supply chain.
We are an engineering company and innovation is crucial to our progress. Our advanced
technologies, particularly for EVs, enable customers to make sustainable choices as
they embrace a digital, electrified, and greener future.
Understanding the environmental impact of our products across their entire life cycle
— from manufacturing to the use phase — is essential for driving sustainability in our
sector. We can provide customers with full life-cycle assessments (LCAs) for products,
along with accurate carbon footprinting.
Our innovations drive efficiencies for customers too. One of GKN Automotive’s flagship
technologies, the Disconnect AWD, reduces AWD emissions by 80% compared to
conventional systems, while GKN Powder Metallurgy’s thermal cooling systems — for
energy-intensive AI computing solutions — can reduce energy consumption by 30%.
For more on responsible sourcing and human rights, see page 62. For more on product sustainability, see page 40.
35Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
OUR SUSTAINABILITY COMMITMENTS
ADDRESSING OUR MOST MATERIAL ISSUES
Health and safety
We are committed to protecting ouremployees and
contractors from injury and harm, focusing on continuous
improvement toprovide a safe and healthy workplace for
all and maintain a market leading accident frequency
rate(AFR).
AFR of
<0.1
Product safety and quality
We are committed to maintaining the highest standards
in product safety and quality to ensure the safety of end
users and maintain the trust of our customers.
100%
of manufacturing sites certified to
ISO 9001 or IATF 16949
Climate change
We are committed to avoiding negative impacts of
climate change by cutting our emissions in line with the
best science, to achieve Net Zero 2050, with ambitious
absolute Scope 1 and Scope 2 2030 reduction targets.
Net Zero
by 2050 backed by science-based targets
Diversity, equity & inclusion
We are committed to being a diverse, equitable and
inclusive organisation and are setting our tone from
thetop with clear business unit goals.
Over 40% of the Board are women
At least one of the senior Board positions
(Chair, CEO, CFO or SID) isawoman
At least one member of the Board is
fromanethnic minority background
Ethics and integrity
We are committed to maintaining the highest standards
of business ethics, meeting our legal obligations and
conducting ourselves with integrity.
Comprehensive, clear, and well-communicated policies,
targeted at the compliance and ethical risks we face.
Zero tolerance
foranymaterial deviations to ethical or
compliancepolicies
Responsible sourcing
We are committed to high standards of sourcing in a
complex, global supply chain, meeting the expectations
of customers and employees.
In 2024, we completed a comprehensive human rights
riskreview, and in 2025, we commit to developing a
“beyond compliance” strategy for human rights and
responsible sourcing.
Maintain zero
substances
classified as “conflict minerals” knowingly sourced
OUR COMMITMENTS
36Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
MANAGING SUSTAINABILITY
SUSTAINABILITY FRAMEWORK
Our purpose
ENGINEERING TRANSFORMATION FOR A SUSTAINABLE WORLD
Our
sustainability
pillars and
material
topics
PLANET AND CLIMATE
Our products and operations
underpin Dowlais’
technological innovation to
enable a net zero economy.
PEOPLE AND SOCIETY
Our business practices ensure
safety and wellbeing while
contributing to the communities
where we operate.
GOVERNANCE
Our business processes and
internal controls ensure we
do the right thing for
customers and suppliers.
– Climate change
– Product sustainability
– Natural resources
– Health, safety
andwellbeing
– DE&I, talent and fair
working practices
– Community
– Product safety
andquality
– Responsible sourcing
and human rights
– Ethics and integrity
MATERIALITY AS THE FOUNDATION OF OUR APPROACH
Governance
It is vital that sustainability is not an isolated activity,
butisembedded in all areas of the business. Our
governanceframework, see page 43, demonstrates
howspecific sustainability responsibilities are shared
acrossthe organisation.
The Board has decided that all ESG-related policies are
aretained matter, while relevant sub-committees take
responsibility for relevant areas.
For example, the Remuneration Committee is responsible
forensuring the appropriate integration of sustainability
priorities into the executive remuneration structure.
Double materiality
This year, we have also completed a double materiality
assessment (DMA)* which will underpin a refreshed strategy,
aligning with potential future obligations under the European
Union’s Corporate Sustainability Reporting Directive (CSRD).
We will disclose the findings of the DMA in next year’s
report. A fuller description of the process we followed can
be found in our 2024 Sustainability Report, which is available
at www.dowlais.com.
In 2025, we will take this work and ensure all the relevant
narrative and data disclosure points have been identified,
inaddition to working towards any appropriate assurance
processes, including any required by CSRD.
The Group’s Sustainability Committee, chaired by the chief
executive, is responsible for implementing the business’s
sustainability strategy into its operations, ensuring
compliance with policies and regulations while driving
progress toward our ambitious objectives.
A full report on the work of the committee is available in
our2024 Sustainability Report.
* With reference to the ESRS adopted by the EU Commission in July 2023
and applied the guidance available from EFRAG, Implementation
Guidance: EFRAG IG 1 Materiality Assessment and Implementation
Guidance: EFRAG IG 2 Value Chain. The DMA has been performed
onaconsolidated level which covers Dowlais Group plc and our
business units.
37Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Single materiality
Materiality assessments have long underpinned
successfulsustainability strategies. We completed our
impact materiality analysis in 2023, and we have continued
touse these findings to guide our work.
The 2023 assessment, which leveraged years of extensive
work across our businesses, identified the key sustainability
areas (our materiality topics) where our activities have the
greatest impact on, and are most affected by, the
environment, people and society. This process highlighted
our most significant economic, social and environmental
impacts, risks and opportunities, forming the foundation
forour Group’s sustainability strategy.
Our materiality assessment informed the creation of our
sustainability framework, which enables both robust internal
conversations about progress in particular topics, as well as
helping stakeholders, including customers, navigate the
various issues we are managing.
A full description of our 2023 assessment can be found
inour2023 Sustainability Report, which is available at
www.dowlais.com.
PLANET AND CLIMATE
We are committed to accelerating the transition to sustainable
vehicles while ensuring it is achieved in a positive and
responsible manner for both the climate and the health
ofour planet’s ecosystems.
Climate change
The impacts of climate change are already being felt by
theworld economy, with an increasing number and severity
of extreme weather events. Our own operations were not
immune, with flooding in Brazil affecting our operations at
Porto Alegre and Charquedas, as well as the homes of many
of our employees. Action to reduce emissions has never
been more urgent.
The Group’s ambitions are captured in our science-based
targets, which are set at a business unit level, reflecting the
difference in operational activity. The targets for both businesses
have now been validated by the SBTi, giving us confidence that
our ambitions are in line with urgency of the transition.
We are making significant progress towards our 2030 goals. In
2024, we saw a reduction in our Scope 1 and 2 emissions by 30%,
due to increased renewable electricity from 11% in 2023 to 21% in
2024. Which has led to a 21.8% reduction in emissions intensity.
This year we were delighted that our carbon disclosure score
from CDP (formerly the Carbon Disclosure Project) improved
to a B, reflecting the work we have done since the creation of
the business to improve our carbon disclosures.
Data accuracy is vitally important, and a key milestone in 2024
was the development of our Group-level Basis of Reporting
(BoR). The BoR provides a clear framework and definitions for
energy and emissions-related metrics that all sites can refer to,
ensuring consistency across the Group. The businesses are
currently training relevant staff at sites to align with the BoR,
and implementing necessary changes to our systems, ensuring
that data collected in 2025 will be fully aligned with this new
standard. We are confident that this will greatly enhance the
quality of the emissions data we gather, enabling more
accurate reporting and informed decision making.
Securing renewable electricity, whilst also insulating the
business from price volatility, is a critical challenge. VPPAs
offer a unique opportunity to achieve both goals and,
thisyear, we signed our first VPPA with a large solar
development in Spain.
For more details on VPPAs, see page 39.
This year we have published our second Task Force on Climate
related Financial Disclosures Statement see pages 42 to 52 and
have also published our first transition plan, outlining the
steps we will take to achieve the necessary emission
reductions to meet both near-term and net zero targets.
See pages 22 to 23 of our 2024 Sustainability Report for our transition plans
GKN Automotive
GKN Automotive designs its products to meet the highest
international standards, actively minimising the carbon
footprint of its customers’ vehicles. There has been consistent
progress in all areas, including improving energy efficiency
and purchasing more renewable electricity.
The business has developed net zero strategies for its top
20sites, focusing on three key pillars: improving energy
efficiency through optimised processes, fuel switching
fromfossil fuels to cleaner alternatives, and implementing
market-based measures like purchasing clean electricity.
It is on target to secure 50% renewable electricity by 2025
and 75% by 2030, with some sites already reaching 100%.
GKN Automotive’s science-based targets
45%
reduction in
absolute Scope
1 and 2 GHG
emissions by
2030 from a
2021 base year
25%
reduction in
absolute Scope
3 GHG emissions
by 2030 from a
2021 base year
Net zero
GHG
A commitment to reach
net zero GHG emissions
across the value chain
by2045
Energy efficiency measures remain central to its
decarbonisation efforts. Upgrades tocompressed air systems
and installation of heat pumps are already delivering significant
energy savings.
With a strong focus on renewable electricity, efficiency
improvements, and strategic partnerships, GKN Automotive
is set to remain a leader in sustainable manufacturing and
operational practices, continuing to innovate in both
environmental performance and product development.
GKN Powder Metallurgy
GKN Powder Metallurgy is actively reducing its environmental
impact and contributing to global efforts to combat climate
change. Its ambitious 2030 GHG reduction targets and 2050
net zero goal were validated by SBTi in 2024, and the business
has developed an action plan to achieve these milestones.
Through continuous improvements in production efficiency,
ithas already reduced emissions intensity by 30% since 2020.
Over 90% of GKN Powder Metallurgy’s Scope 1 emissions
come from natural gas use, particularly in older gas-powered
equipment and sintering furnaces. The business is phasing
out inefficient equipment while optimising furnace loading
and monitoring. Where economically viable, it will replace
older furnaces with electric or more energy-efficient models
to drive significant emissions reductions.
GKN Powder Metallurgy’s science-based targets
42%
reduction in
absoluteScope
1 and 2 GHG
emissions by
2030 from a
2022 base year
25%
reduction in
absoluteScope
3 GHG emissions
by 2030 from a
2022 base year
Net zero
GHG
A commitment to reach
net zero GHG emissions
across the value chain
by2050
To address Scope 2 emissions, GKN Powder Metallurgy is
expanding its renewable electricity procurement strategy.
Bythe end of 2024, 40% of its sites had green energy contracts
inplace, cutting emissions by 60,000 tCO
2
e annually. In 2025, this
reduction is expected to reach 90,000 tCO
2
e. The business is
also exploring VPPAs as a cost-effective way to secure more
renewable electricity.
In addition to operational improvements, GKN Powder
Metallurgy is developing sustainability-focused product
solutions, including EV-specific metallic components, differential
gears for battery EVs, and powders for lithium iron phosphate
(LFP) batteries. These innovations will help lower Scope 3
emissions while supporting the transition to greener energy.
38Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
CASE STUDY: VPPAS
ENGINEERING TRANSFORMATION
GKN Automotive has an ambitious target for 50% of its
electricity to come from renewable sources by 2025.
Thisincreases to 75% by 2030.
To help achieve that goal, the business has signed a
10-year Virtual Power Purchase Agreement (VPPA), which
willcover approximately 30% of their global demand – a
significant contribution.
VPPAs are a complex financial agreement between the
developer or owner of a large renewable electricity asset,
suchas a wind or solar farm, and a large business that is keen
tosecure renewable electricity.
GKN Automotive partnered with Recurrent Energy, a subsidiary
of Canadian Solar Inc, which is building a new large-scale solar
farm in Seville, Spain. The development is scheduled to come
on stream in 2026 and will supply approximately 200,000 MWh
of renewable electricity every year.
How does a VPPA work?
1. A large corporate buyer, who wants
to secure renewable electricity,
agrees to pay a fixed fee to a large
solar or wind farm developer in one
part of the world (in this case, Spain).
2. The corporate buyer continues
tosource local electricity in the
usualway, but also receives the
income from the renewable
development, offsetting the
localprocurement price.
3. The corporate buyer also receives
renewable energy certificates (RECs),
which it can use to claim carbon
reductions against the electricity
used locally.
GKN AUTOMOTIVE VPPAS
What is a Virtual Power Purchase Agreement (VPPA)?
Solar Farm
Operator
Grid/
Electricity
Market
Corporate
Buyer
Utility
R
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39Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Product sustainability is a vital element in
ouroffering to our customers. By integrating
circular economy principles into raw material
choices, design and manufacturing,
wereduce environmental impact while
delivering products with reduced
emissionsand waste.
Increased customer requests for life-cycle assessments
(LCA)and product carbon footprint (PCF) data reflect
theintegration of sustainability considerations into
productdevelopment.
When assessing the sustainability of our products, we
focuson several key factors. These include their role in
de-carbonising the automotive sector, which is central to our
strategy, as well as how we source materials and manage our
supply chain.
Additionally, we consider product longevity and recyclability
at end-of-life, the use of fewer input materials (e.g. lighter or
thinner parts), and compliance with international standards
for substances of concern.
GKN Automotive
GKN Automotive’s strategy for achieving product sustainability
focuses on eliminating critical materials, reducing embedded
carbon, and enhancing product efficiency.
The use of renewable energy, sustainable materials like
green steel, and recycled content in its supply chain
alreadypositions GKN Automotive ahead of the curve,
withcontinuous efforts to improve and meet the highest
environmental standards.
This approach can significantly reduce the carbon footprint
of components. GKN Automotive’s European supply chain
typically achieves a carbon footprint of 1.5 kg CO
2
e per kg
ofpart, less than half of that from Chinese suppliers.
One of the most important steps the business takes is to
supply products that reduce the footprint of finished
automotive products. One example is GKN Automotive’s
Disconnect AWD technology, which reduces AWD-related
CO
2
emissions by 80% compared to conventional systems.
Additionally, the new generation AWD components are
30%more efficient and 20% lighter than previous models,
contributing to significant reductions in both energy
consumption and material usage. These improvements have
also increased product durability by 25%, with components
now achieving over 200,000 miles. This means less material
and energy are embedded into products that last longer,
enhancing both environmental and customer value.
GKN Automotive also has a business re-manufacturing
sideshafts, which results in dramatically lower environmental
impacts than manufacturing new products. For further
details on its sideshaft re-manufacturing capabilities see
page 25 of our 2024 Sustainability Report.
GKN Powder Metallurgy
As one of its main raw materials is iron scrap, GKN Powder
Metallurgy has circular economy principles embedded
inproduct offering. The business is committed to using
recycled iron in all its base iron products, buying back green
scrap, powder and selected sintered scrap from customers
to re-mill and reuse, thus extending the life-cycle of
materials and reducing waste.
One notable example of GKN Powder Metallurgy’s
sustainability efforts is its thermal hardware, used in
high-end computing systems, particularly those employed
inAI technologies. These components significantly reduce
energy consumption by improving the thermal performance
of the systems. As a result, cooling energy requirements are
lower, allowing the systems to run faster and more efficiently.
Forsystems with heat dissipation exceeding 1 kW, GKN
Powder Metallurgy’s components can reduce energy
consumption by up to 30%, resulting in more efficient
overallsystem performance.
In addition to product innovations, GKN Powder Metallurgy
has made significant strides in educating employees on
product sustainability. The business’s employees undergo
sustainability training through the internal iLearn tool, which
covers key topics such as greenhouse gas emissions, carbon
footprint and ESG reporting.
PRODUCT SUSTAINABILITY
ENGINEERING
TRANSFORMATION
Advancing mobility
with electromechanical
braking systems
By requiring less energy and reducing solid dust
emissions, electromechanical braking systems are
driving sustainability in the automotive industry.
GKN Powder Metallurgy is at the forefront of this
innovation, co-developing components that maximise
efficiency, minimise noise and enhance safety. With
first-off-tool prototypes slated for testing in 2025 and
production scheduled for 2026, these brakes are set to
deliver up to a 32% improvement in energy recovery
and a 5 g/km reduction in CO
2
emissions.
Every car features four brakes, one on each wheel,
highlighting the enormous market potential for these
innovations. Their integration into BEV, hybrid and ICE
platforms not only supports sustainability but also
boosts overall efficiency, positioning them as a key
advancement in the future of mobility.
40Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Dowlais is committed to protecting and operating
inharmony with the natural environment. While our
dependency on natural resources is limited, as reflected
inour materiality assessments, we recognise our
responsibility to minimise our impact on the surrounding
ecosystem. We are actively working towards improving
ourknowledge in this area.
In 2023, we carried out a Group-wide assessment of our
water and waste data collection processes, as part of our
preparation for CSRD reporting and, in 2024, we developed
aGroup-level Basis of Reporting (BoR), which aims to provide
all our sites with clear definitions of waste and water metrics
collected. The necessary system changes are being
implemented in 2024 to ensure that the systems are
alignedwith BoR for data collected in 2025 onwards.
Water
In our materiality assessment, water ranked lower
comparedto other priorities as water is not a critical
resource for production, and no water stress risks were
identified at sites evaluated in 2024 under our TCFD
physicalclimate risk assessment. Nevertheless, we
recognisethe global importance of water and its value to
our customers. Dowlais is committed to treating freshwater
as the vital natural resource it is and to contributing to its
sustainable management.
Our primary focus is to enhance resilience against water-
related risks, mitigate impacts on availability and quality,
andfoster responsible water practices. A comprehensive
Group Water Policy underpins this commitment, advocating
for sustainable and equitable water usage. This includes
understanding usage patterns, ensuring sound
governance,and monitoring water quality in high-risk
areas.All manufacturing sites adhere to environmental
management systems certified to ISO 14001 or equivalent,
ensuring compliance with water-related legal obligations
across 100% of our products. Additionally, our health and
safety framework ensures all workers have access to safe
water, sanitation and hygiene, further supporting fair
practices and community resilience.
GKN Powder Metallurgy has our most water-intensive
operations, and most water is recycled, with replacements
required only for evaporation and maintenance losses. In
2024, the business implemented several initiatives to reduce
water withdrawal and optimise water usage. For example, at
their site in North Carolina, USA, replacing the cooling tower
and adjusting operations to run 20 days a month instead of
full-time resulted in a 14% reduction in monthly water intake.
Process improvements, such as gradually ramping up water
circulation pumps, reduced usage during start-up.
In 2024, Dowlais participated in the CDP Water Security
questionnaire to provide detailed insights to customers
andstakeholders, ensuring transparency and alignment with
global water stewardship goals. We were pleased to receive
a ’C’ and are working to improve on that score in future years.
Waste
Dowlais recognises that the materials we use, and the
wastewe generate during our processes, can have a negative
impact on the natural environment. From sourcing the right
materials, using only what we need and responsibly
disposing of our waste, we are committed to reducing
ourwaste footprint in all our activities.
One of the key challenges we faced on understanding our
waste footprint stemmed from variation in waste definitions
and understanding across geographies, which resulted in
unreliable data. Last year, we assessed waste data collection
processes across our businesses, and this year, we have
improved our waste management disclosures by setting
Group-level definitions for various waste streams collected
by the businesses, ensuring a clean data flow from site level
to the Group. The relevant colleagues who capture this data
are currently being trained by the businesses, and system
changes to reflect the new guidelines will be implemented
intime for the FY2025 reporting cycle.
Our businesses are actively encouraged to reduce
theamount of waste they generate and to divert waste
fromlandfill.
To support this, we have implemented a Group-level target
to divert 100% of all (solid, non-hazardous) waste from landfill
by 2030.
Aligning with the Group target, in 2024, 97.3% of waste
produced by GKN Automotive has been diverted from
landfill and 97.02% from GKN Powder Metallurgy.
Biodiversity
We are dedicated to protecting biodiversity and
minimisingthe potential environmental impact of our
operations. OurGroup Biodiversity Policy outlines our
commitment toadopting a “No Net Loss” principle,
activelyseeking opportunities to reduce deforestation,
andoffsetting anypotential negative impacts through
reforestation andregeneration initiatives. Additionally,
weprioritise the preservation of High Conservation Areas
and the protection of threatened and endangered species.
All our businesses are required to comply with and respect
local biodiversity laws. To enhance our understanding of
nature-related risks, we have initiated efforts to align with
the recommendations of the Taskforce on Nature-related
Financial Disclosures (TNFD) and strengthen our approach
tobiodiversity conservation.
NATURAL RESOURCES
41Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
TASKFORCE ON CLIMATE RELATED FINANCIAL
DISCLOSURES STATEMENT
Introduction
Climate-related thinking has become increasingly
embedded in our organisation, with relevant climate-related
risks and opportunities incorporated within our business
strategy, as highlighted with Group Principal Risk 7 (Technology
and industry evolution) on page 69 and Risk8(Sustainability)
on page 70.
The report covers the Group as a whole, and all business
locations and climate-related risks and opportunities within
the Group.
We have made substantial progress in our climate
management over the course of the year. GKN Powder
Metallurgy’s near-term and net zero targets have been
approved by the Science Based Targets initiative (SBTi),
which alongside GKN Automotive’s validated targets means
that both our business units are committed to emissions
reductions. We have reviewed our physical and transition
climate-related risks and opportunities, updated where
necessary to reflect any movements, and have started to
estimate the potential impacts of several key risks and
opportunities through financial quantification to better
inform our strategic decision making. Many of these
developments supported our second annual CDP submission
for FY2024. In addition, we have expanded our focus on
nature, starting to identify our key nature-related impacts,
dependencies, risks and opportunities (collectively referred
to as “nature-related issues”) following the LEAP Approach,
as recommended by the Taskforce on Nature-related
Financial Disclosures (TNFD). Our findings have informed the
double materiality assessment undertaken in preparation for
reporting under the requirements of the CSRD.
Connectivity between TCFD, CFD and other disclosures
Dowlais confirms that it has aligned with the requirements
ofUK Listing Rule 6.6.6(8) and the Companies Act 2006
requirements as amended by the Companies (Strategic
Report) (Climate-related Financial Disclosures) Regulations
2022, by including climate-related financial disclosures
consistent with the 11 TCFD recommendations and
recommended disclosures as detailed in ‘Recommendations
of the Task Force on Climate-related Financial Disclosures’,
2017, with additional guidance from ‘Implementing the
Recommendations of the Task Force on Climate-related
Financial Disclosures’, 2021.
Governance
Board oversight of climate change
Sustainability is central to our purpose at Dowlais.
Ourbusinesses enable the transition to a cleaner, more
sustainable world. Dowlais has established best-practice
climate-related governance structures to support its
strategy of developing exceptional products that advance
the world’s transition to sustainable vehicles.
The Board is responsible for oversight of climate-related risks
and opportunities within its overarching responsibility for
the Group strategy and overseeing performance. ESG and
our approach to climate change sits within the scope of
matters reserved for the Board, with the Board’s approval
required for the Company’s publicly stated ESG targets
including emissions reduction and other climate-related
targets, and for key climate-related policies.
The Board’s responsibilities include oversight of and
ultimateresponsibility for the Group’s sustainability strategy,
targets (including validated SBTs), disclosures, and reporting,
including climate change, identifying and considering
climate-related risks and opportunities, and alignment
withTCFD recommendations. Whilst the Board has overall
responsibility for managing the Group, day-to-day
management responsibilities are delegated to the CEO
andExecutive Committee, who have in turn established
theGroup’s Sustainability Committee.
The Board is also responsible for risk management,
supported by the Audit Committee. The Board defines risk
appetite and monitors the management of the Group’s
principal risks. The Group’s principal risks and uncertainties,
set out on pages 65 to 70, have been determined by the
Audit Committee and approved by the Board. Sustainability
risk, including a failure to comply with stakeholder
expectations, is a Group principal risk.
Frequency of climate governance processes at Board level
Given its importance, climate change (and sustainability
more generally) is a standing agenda item for each Board
meeting, and a quarterly report (or more frequent if
required) is prepared and presented by the Chief People,
Sustainability and Communications Officer. The report
provides an update on climate-related risks and
opportunities, progress against the climate-related targets
of the Dowlais businesses and any significant emissions
reduction programmes underway.
In 2024, the Board has overseen work to embed the Group
Sustainability Approach that was first developed in 2023. This
has included the validation of GKN Powder Metallurgy’s SBTi
targets, our ongoing energy efficiency and electrification
programme, and the identification of net zeropathways to
inform our net zero strategy. We intend topublish a full net
zero transition plan next year, aligned tothe
recommendations of the Transition Plan Taskforce.
Management oversight of climate change
The Group’s Sustainability Committee is responsible for
implementing the Group’s sustainability strategy into its
operations, including the Group’s approach to climate
change. The Sustainability Committee is chaired by the
Group’s Chief Executive Officer and its members include
theChief People, Sustainability and Communications Officer;
the Director of Sustainability; business unit Chief Executive
Officers and relevant supporting sustainability experts.
CLIMATE FINANCIAL DISCLOSURE STATEMENT
42Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Business unit Chief Executive Officers have responsibility for
implementing the Group sustainability strategy within their
respective businesses. With support from sustainability
leads, the business unit CEOs liaise with regional and
divisional leads to capture information on emissions and
details of any actions, such as strategic or financial planning,
required to address climate-related issues before each
Group Sustainability Committee meeting.
Site managers across the Group report to the regional
anddivisional leads to inform this update. As such, the
business unit CEOs, through the Sustainability Committee,
can escalate material sustainability and climate-related
risksand opportunities to the Board as appropriate,
ensuringthat the implications of these are considered by
theBoard when setting the Group’s strategy and, where
relevant, financial plans, to address climate-related risks
andpursue opportunities.
Frequency of climate governance processes at
management level
The Sustainability Committee meets at least quarterly to
discuss and review climate performance and data against
targets, and to consider climate-related risks and
opportunities. The Committee met five times in 2024, with
climate-related discussions covering the validation of GKN
Powder Metallurgy’s near-term and net zero targets by the
SBTi; the development of transition plans and the net zero
strategies for the business units and the Group overall; and
data readiness assessments for future compliance with CSRD.
Our sustainability and climate change governance structure
is summarised in the figure on the right.
The Board
Responsible for setting the Group’s sustainability strategy, including climate change and oversight of climate-related risks
and opportunities, and for approving key policies and targets and monitoring business unit performance
Audit Committee
The Committee ensures
effective risk management,
including climate-related
risks. Oversees the integrity
of the Group’s reporting,
including reporting
andauditing of climate-
related data.
Group Executive Committee
Supports the CEO in the day-to-day
management of the Group including
overseeing the implementation of
strategic and operational plans.
Remuneration
Committee
Responsible for setting
executive remuneration
policy, which supports
theexecution of
businessstrategy.
Includesappropriate
integration ofsustainability
priorities intoexecutive
remunerationstructure
Business unit CEOs and executive
teams
Deliver operational ESG initiatives to
meettheir business’s sustainability
targetsand commitments.
Nomination Committee
Considers Board and senior
management diversity as part
of appointments and
succession planning.
Sustainability Committee
Supports in the development and
day-to-day deliveryof the Group’s
sustainability strategy.
Disclosure Committee
The Committee monitors
theexistence of inside
information and its
disclosureto the market.
CEO
Chairs the Sustainability Committee and is responsible for delivery of the Group’s sustainability strategy.
Our sustainability and climate governance framework
43Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
TCFD CONTINUED
Recommendation Recommended disclosures Reference CA 414CB
1
Governance
Disclose the organisation’s governance around
climate-related risks and opportunities.
– a) Describe the Board’s oversight of climate-related risks and opportunities
Page 42 CA s414CB(a)
– b) Describe management’s role in assessing and managing climate-related risks andopportunities
Page 42 to 43 CA s414CB(a)
Strategy
Disclose the actual and potential impacts of
climate-related risks and opportunities on the
organisation’s businesses, strategy and financial
planning where such information is material.
– a) Describe the climate-related risks and opportunities the organisation has identified over the
short, medium and long term
Page 48 to 52 CA s414CB(d)
– b) Describe the impact of climate-related risks and opportunities on the organisation’s
businesses, strategy and financial planning
Page 48 to 52 CA s414CB(e)
– c) Describe the resilience of the organisation’s strategy, taking into consideration different
climate-related scenarios, including a 2°C or lower scenario
Page 46 CA s414CB(f)
Risk Management
Disclose how the organisation identifies, assesses,
and manages climate-related risks.
– a) Describe the organisation’s processes for identifying and assessing climate-related risks
Page 45 CA s414CB(b)
– b) Describe the organisation’s processes for managing climate-related risks
Page 46 CA s414CB(b)
– c) Describe how processes for identifying, assessing, and managing climate-related risks are
integrated into the organisation’s overall risk management
Page 46 CA s414CB(c)
Metrics and Targets
Disclose the metrics and targets used to assess
andmanage relevant climate-related risks and
opportunities where such information is material.
– a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities
in line with its strategy and risk management process
Page 47 CA s414CB(h)
– b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and
the related risks
Page 47 CA s414CB(h)
– c) Describe the targets used by the organisation to manage climate-related risks and
opportunities and performance against targets
Page 47 CA s414CB(g)
1. Companies Act 2006, s414CB(2a)-(2h).
44Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Risk Management
Identifying and assessing risk
Overall responsibility for risk management within the Group
resides with the Board, which determines the overall risk
strategy and approach to risk management. Business unit
management teams, under the leadership of business unit
CEOs, are responsible for oversight and management of risk
within their business unit.
Each site, location and function within a business unit
maintains a risk register to track relevant site-related risks.
These local and functional risk registers are consolidated up
to the business unit level, and each business unit maintains a
business unit risk register capturing the principal risks that it
faces. The business-level risk registers are reviewed regularly
by the business executive teams, and then consolidated at
Group level, with Group principal risks presented to the
Audit Committee as part of the annual reporting process.
As set out in our Risk Policy, all risks including climate-related
risks are assessed on a five-point scale for both the
probability of the risk occurring and its potential impact
(thefinancial and reputational outcome of the risk
occurring), providing an overall risk score between 1 and 25.
The risk score is calculated by multiplying the probability
rating by the impact rating to achieve an overall low,
medium, high or severe descriptive risk rating, through
which risks can be prioritised.
Probability
Rating Criteria
1
Rare – Highly unlikely, but it may occur in
exceptionalcircumstances. It could happen,
butprobably never will.
2
Unlikely – Not expected, but there’s a slight
possibility it may occur at some time.
3
Possible – The event might occur at some time as
there is a history of casual occurrence.
4
Likely – There is a strong possibility the event will
occur as there is a history of frequent occurrence.
5
Almost Certain – Very likely. The event is expected to
occur in most circumstances as there is a history of
regular occurrence.
Identifying and assessing climate risks
andopportunities
With the help of external sustainability consultants, two
separate assessments were conducted to identify climate-
related risks and opportunities, to reflect the differences in
physical and transition risks and opportunities. Existing and
emerging risks, and all risk and opportunity categories of the
TCFD guidance have been considered, although not all are
applicable to the Group. Both risk assessments considered
how each risk could impact revenue, assets and other costs.
– A location-specific assessment has been conducted
toidentify our physical climate-related risks, using the
Location Risk Intelligence Tool by Munich Re, a geospatial
modelling software that captures current and potential
future physical climate-related risk exposure. Potential
physical risks were assessed at our 31 most financially
material sites, which together made up over 80% of Group
sales. In addition, this year we expanded our assessment to
adjacent freight infrastructure that we rely on, particularly
sea freight, in order to assess how physical climate-related
risks may impact imports and exports of goods to and
Impact
Nature of risk/rating 1 2 3 4 5
Financial
Minimal or trivial
impact of <£1m
Financial impact of
£1m-£5m
Financial impact of
£5m-£10m.
Financial impact of
£10m-£50m.
Financial impact
>£50m.
Regulatory/
reputational
Regulator is aware,
but no impact.
‘Slap on the wrists’.
Not in the public
domain.
Small fines or
written warnings.
Customers aware.
Large fines
andwritten
judgements.
Publicawareness
but limited long-
term impact on
reputation.
Significant adverse
regulatory
judgement and/or
fines. National
press coverage
and significantly
tarnished
reputation.
Loss of licence or
ability to operate.
Very significant
fines or criminal
proceedings.
Strategic/
operational
Inconvenience,
butno impact on
ability to achieve
objectives.
Disruption to
activities but
limited to the
immediate term.
No longer-term
impact on ability
to achieve
objectives.
Considerable issue
but short term.
Only relatively
minor concern
about longer-term
business
prospects.
Significant impact.
Casts significant
doubt on the
ability to meet
objectives and
places the future
of the business
inperil.
Failure of
thebusiness.
Unableto
achieve
corporate
objectives.
from sites. However, this will require further analysis
todetermine whether it is potentially finally material,
whichwe plan to undertake through 2025. As such,
thismay be included in our climate risk register in
our2025Annual Report.
– Our transition risks and opportunities were identified
through a comprehensive assessment, which involved a
combination of interviews with key stakeholders, several
internal functions and rigorous desktop research. This
Group-wide assessment captured our operations,
customers and supply chain.
Once identified, risks and opportunities were prioritised
todetermine which have a material financial impact on the
organisation using both likelihood (the probability of the
riskoccurring) and impact (the financial and reputational
outcome of the risk occurring), resulting in a combined risk
register with a low, medium, high or severe risk rating for
each time horizon and scenario. This year, we focused on
enhancing our understanding of the potential financial
impacts of several key climate-related risks and
opportunities through financial quantification techniques,
which has been reflected in our risk assessment and overall
risk ratings.
45Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
TCFD CONTINUED
The identification and assessment of climate-related
risksand opportunities will be undertaken each year in
preparation for our climate-related financial disclosures,
andgoing forward, our CSRD reporting requirements.
Integrating climate into wider risk management
After the climate-related risks and opportunities have been
assigned a risk rating, those rated the highest are collated
into a ‘climate risk register’; they are then considered by the
Audit Committee meeting as part of the preparation of this
statement. The risk register is subsequently reviewed and
signed off by the Board, with climate-related risks
consolidated into a single sustainability principal risk.
Thisincorporates climate change into the overall risk
management process by allowing a Group-level view of
climate-related risk, but also helps us to understand the
specific risks and opportunities that individual divisions face.
Management of risk
With Dowlais’ support, each business unit invests in and
implements appropriate systems and processes to manage
their climate-related risks and continually reviews these
inline with evolving expected practices. Group risk
management frameworks are in place for identifying
principal risks and opportunities appropriate to each
business and its stakeholders, which include climate-related
risks. The executive management team of each business unit
regularly reviews any significant climate-related issues, risks
and opportunities related to the business. These reviews
consider the level of climate-related risk that the business
isprepared to take in pursuit of its business strategy. Any
risk rated severe is deemed unacceptable and requires
additional action.
Strategy
Scenario analysis
Scenario analysis has been conducted to assess the resilience
of the Group’s business model and strategy under various
climate scenarios. Reflecting the differences between
physical and transition risks and opportunities, difference
scenarios have been applied, in both cases to provide
comparisons of ambitious, baseline and optimistic scenarios.
Physical risks were assessed under the Shared Socio-
economic Pathways (SSPs) identified in the latest Assessment
Report (AR6) of the Intergovernmental Panel on Climate
Change (IPCC). The SSPs align to the Radiative Concentration
Pathways (RCPs), which are associated with mean average
surface temperature increases, from which the impact on
earth’s physical processes can be modelled.
– SSP 1-2.6: A climate-positive pathway in an increasingly
sustainable world, aligned to RCP2.6 in which average
surface temperature warming is limited to 1.3°C to 2.4°C
by2100.
– SSP 2-4.5: A baseline scenario that extrapolates past
andcurrent global developments into the future, linked
toRCP4.5 with a mean surface temperature increase of
2.7°C by 2100.
– SSP 3-7.0: Characterised by a revival of nationalism and
conflicts that push global issues to the background,
aligned to RCP7.0 with mean surface temperate increases
of 3.6°C by 2100.
– SSP 5-8.5: Characterised by the intensification of fossil
fuelexploitation aligned to RCP8.5 in which mean surface
temperatures increase by 4.4°C by 2100.
Climate-related transition risks and opportunities are
assessed under the following scenarios from the International
Energy Agency (IEA), which are far more descriptive and
useful for modelling more positive climate outcomes,
making them more appropriate for transition risks and
opportunities.
– Net Zero 2050 (NZE): An ambitious scenario that sets out
a narrow but achievable pathway for the global energy
sector to achieve net zero CO
2
emissions by 2050. This
meets the TCFD requirement of using a “below 2°C”
scenario, and is included as it informs the decarbonisation
pathways used by the Science Based Targets initiative,
which validates corporate net zero targets and ambition.
– Stated Policies Scenario (“STEPS”): A scenario which
represents the roll forward of already announced policy
measures. This scenario outlines a combination of physical
and transition risk impacts as temperatures rise by around
2.4°C by 2100 from pre-industrial levels, with a 50%
probability. This scenario is included as it represents a
basecase pathway with a trajectory implied by today’s
policy settings.
Climate-related risks and opportunities were assessed over
the following timescales, which allow us to consider the
lifespan of our assets and infrastructure as well as any
longer-term regulatory changes and to consider our near
and long-term SBTi commitments:
– Short term: 0-2 years (aligned with short-term business
actions and financial planning.
– Medium term: 3-6 years (aligned with GKN Automotive’s
and GKN Powder Metallurgy’s near-term emissions
reduction targets to 2030).
– Long term: 7-26 years (aligned to GKN Automotive’s net
zero by 2045 target, and GKN Powder Metallurgy’s net
zero by 2050 targets).
Climate-related risks and opportunities
Seven climate-related risks and four climate-related
opportunities that could have a material impact on the
Group have been identified and are summarised on a net
(mitigated) basis in the tables on pages 48 to 52. On the
basis of our analysis of each climate-related risk and
opportunity, under appropriate scenarios over time to 2050,
considering the existing and planned mitigations and the
potential financial impacts, we believe that the overall
climate-related risk exposure for Dowlais is medium, and
theGroup is financially resilient and strategically robust to
climate change. Our current understanding of these climate-
related risks is that any impacts on assets are limited, and
risks can be accommodated in our business as-usual activity
considering our existing and planned mitigation strategies.
Dowlais will continue to develop this analysis as new data
becomes available, both internally and externally, whilst
continuing to monitor our risk exposures and action plans
through the Group’s risk management framework. The
opportunities identified continue to be developed in
linewith the Company’s strategy and objectives.
46Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Metrics and targets
Climate-related metrics
We have continued efforts to enhance our data capture
andmanagement process during the year, particularly in
preparation for the reporting and assurance requirements
under CSRD. The environmental metrics we capture, which
cover waste, water and product sustainability, are available
in the ESG disclosures section of our Sustainability Report.
We publicly report our Scope 1, 2 and 3 emissions,
whichcanbe found in our SECR disclosures on pages
53to55. Calculations were made in accordance with the
requirementsof the Greenhouse Gas Protocol Corporate
Accounting and Reporting Standard, which covers the
accounting and reporting of seven greenhouse gases.
Anoperational control approach was adopted, with all
material emissions sources reported.
We have identified metrics to track each climate-related risk
and opportunity, which are included in the tables below.
Climate-related targets
Science-based emissions targets have been adopted as the
most relevant to our climate-related risk, particularly relating
to carbon pricing risks, and in order to directly manage our
contribution to global climate change. Our business unit’s
validated SBTi targets are summarised in the table below.
Over 99.9% of the Group’s emissions footprint is covered
byvalidated SBTi targets, providing a pathway to significant
emissions reductions to 2030, and supporting the Group’s
commitment to reach net zero emissions by 2050. Net zero
strategies are being developed for each business unit and
will be consolidated into a full Group-wide net zero
transition plan, aligned to the recommendations of the
Transition Plan Taskforce, to be published in full next year.
Our actions to reduce Scope 1 emissions include
electrifyingour equipment and improving energy and
process efficiency. Our actions to reduce Scope 2 emissions
focus on procuring renewable energy instruments. Our
actions to reduce Scope 3 emissions most significantly
focuson our transition to electric vehicles, as well as a
programme of product innovation, collaboration, and
supplychain engagement. Further details are included
inourTransition Plan summary in our 2024 Sustainability
Report (pages 22 to 23).
In line with the SBTi, our targets do not include the use of
carbon credits. Whilst no such action is planned currently,
wemay consider using offsets as an option for additional
emission reductions beyond the science-based targets.
Progress against these targets will be monitored through
ourannual carbon footprint results, which will be collated
bythe Sustainability Committee and presented to the
Boardannually through the governance structures
describedin page 43. We are pleased to report that
bothBusiness Units have continued to progress against
thetargets.
GKN Automotive’s Scope 1 and 2 market-based emissions
have decrease by 19%, and Scope 3 footprint has decreased
by 29% compared to its 2021 base year. Similarly, GKN
Powder Metallurgy’s Scope 1 and 2 market-based emissions
have decreased by 31%, and Scope 3 footprint has decreased
by 23% compared to its 2022 base year. Please see our SECR
disclosures on pages 53 to 54.
In addition, climate-related performance targets are
incorporated into Executive Director remuneration. In
2023,aportion of the annual bonus was awarded against
objectives relating to the submission of the Business Unit’s
targets to the SBTi, and again in 2024 a portion of the bonus
was linked to external validation of the Scope 1 and 2
footprint. Further information is available in our
Remuneration Report on page 105.
Near-term Net zero
GKN Automotive
– 45% reduction in absolute Scope 1
and 2 GHG emissions by 2030 from
a 2021 base year.
– 25% reduction in absolute Scope 3
GHG emissions by 2030 from a
2021 base year.
A commitment to
reach net zero GHG
emissions across the
value chain by 2045.
GKN Powder Metallurgy
– 42% reduction in absolute Scope 1
and 2 GHG emissions by 2030 from
a 2022 base year.
– 25% reduction in absolute Scope 3
GHG emissions by 2030 from a
2022 base year
1
.
A commitment to
reach net zero GHG
emissions across the
value chain by 2050.
1. Covering fuel- and energy-related activities, upstream transportation and distribution, downstream transportation and distribution, and processing of
sold products.
47Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Key transition risks
TCFD
category Risk description Area
Potential impact
onthebusiness
Mitigation
/actions tomanage risk
Metrics used to
track risk
NZE STEPS
Short
term
(2024-
2025)
Medium
term
(2026-
2030)
Long
term
(2031-
2050)
Short
term
(2024-
2025)
Medium
term
(2026-
2030)
Long
term
(2031-
2050)
Technology & industry evolution (Group Principal Risk 7) Rating Rating Rating Rating Rating Rating
Technology Dowlais has market-leading
technologies in the automotive
industry and navigating the EV
transition is core to our strategy.
Inability to maintain sufficient
technological differentiation, or
adapt to technological change in
key markets, particularly the major
shift in the automotive markets
resulting from electrification, is a
risk. Products and technologies
may over time become obsolete
or un-competitive and will need
to be replaced. Disruptive
innovation by competitors, or the
development of new technologies
that eliminate or reduce demand
for certain products, is also a risk.
Own
operations
– Adverse effect on
revenue,revenue growth
orprofit margins.
– Increased costs of R&D
andengineering to keep
pace with technological
innovation.
– Reduction in demand for
products or failure to have
product portfolio that meets
market expectations.
– Erosion of reputation
asatechnology leader
inproductmarkets.
– Damage to our ability to
attract and retain talent.
– Close relationships with our
customers to understand their
development roadmap and
invest in technologies that
willbe used on next
generationplatforms.
– Horizon-scanning to
identifynew technologies
andmonitoring of competing
technologies, including via
teardown and testing.
– Significant investment in
engineering and R&D,
particularly in EV and propulsion
source agnostic components.
– Significant patent portfolio
andprocesses for protecting
our innovation.
– Focus on building a culture of
innovation and attracting the
best engineering talent.
– Revenue
– % revenue
fromEVs
– Revenue growth
– Revenue growth
from EV-
relatedsales
– Profit margin
– Profit margin
from EVs
– % total research
&development
(R&D)
– expenditure on
climate-related
R&D
Climate performance
Market,
Reputation
Failing to reduce emissions in our
own operations in line with market
and customer expectations could
damage our reputation and ability
to win business, and impact
investor and OEM attempts to
meet their own net zero targets,
as our customers, investors,
analysts and regulators are placing
an increasing focus on our ability
to operate sustainably.
Own
operations,
Upstream,
Downstream
– Increased shareholder
concern could lead to
increased cost of capital
andloss of investment.
– Failure to maintain customer
expectations on sustainability
performance could lead to
loss of trust, competitive
advantage and ultimately
contracts.
– Reducing our emissions is a core
part of our strategy.
– Dedicated resources centrally
and in each business to manage
our decarbonisation activities.
– Clear net zero ambition with
near-term and net zero
targetsvalidated by the SBTi
forboth business units. Net
zero transition plans are
beingdeveloped.
– Clear communication
throughdedicated
sustainability report that meets
stakeholder requirements.
– Scope 1-3
emissions
– ESG rating
agency scores
– Revenue
CLIMATE-RELATED RISKS AND
OPPORTUNITIES
48Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Score Risk or Opportunity Rating
1-4 Low
5-9 Medium
10-19 High
20-25 Severe
TCFD
category Risk description Area
Potential impact
onthebusiness
Mitigation / actions
tomanage risk
Metrics used to
track risk
NZE STEPS
Short
term
(2024-
2025)
Medium
term
(2026-
2030)
Long
term
(2031-
2050)
Short
term
(2024-
2025)
Medium
term
(2026-
2030)
Long
term
(2031-
2050)
Regulatory disclosures Rating Rating Rating Rating Rating Rating
Policy &
Legal,
Reputation
As a global business, we face
arange of local and regional
reporting requirements.As
investors and governments put
greater emphasis on transparency
in performance, there is a risk of
failing to meet disclosure
expectations across all the
territories we operate in, import
from and export to increases.
Own
operations
– Failure to comply with
allrelevant disclosure
regulations could result in
fines from regulatory bodies.
– Litigation due to lack of
compliance could result in
loss of trust from customers
and investors.
– Continuous improvement in
sustainability reporting to align
with external frameworks and
rating agencies.
– Appropriate resourcing
incentral functions.
– ESG rating
agency scores
Regulation including carbon pricing
Policy &
Legal,
Reputation
Carbon pricing and other taxes
related to emissions of GHGs
arelikely to increase as the
climatecrisis worsens. This can
affect all parts of our value chain,
from the prices our customers
areable to pay for our products,
through to our own operating
cost, and the costs we incur from
our supply chain.
We have a very minor exposure
tothe EU’s Emissions Trading
Scheme currently, and are
investigating our exposure to
theCarbon Border Adjustment
Mechanism, which is expected
tobe phased in from 2026.
Own
Operations,
Upstream,
Downstream
– Price of carbon related
toGHG emissions in own
operations increases opex.
– Increasing regulations
onexisting products
(e.g.carbon intensity)
increases costs and exposes
the business to litigation.
– Greater costs associated with
emissions reduction activities.
– Higher costs associated with
carbon tax on Scope 3
emissions, for example CBAM
(Carbon Border Adjustment
Mechanism)exposure on
importedgoods.
– Higher costs of purchased
goods and services as
suppliers pass on costs.
– Monitor current and
futuretaxes/carbon pricing
costs/obligations.
– Reduce Scope 1-2 emissions
(inline with our SBTi validated
targets and net zero transition
plan, under development).
– Reduce Scope 3 emissions
(inline withSBTI validated
targets and net zero transition
plan, under development) and
evaluate our imported goods
to ensure pricing efficiency
with CBAM.
– Complete LCAs so we can
support our customer’s
transition roadmaps.
– Work with suppliers to
ensurethey contribute
toourreduction efforts.
– Scope 1,2,3
emissions
– Renewable
energy sourced
– Profit margin
49Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Score Risk or Opportunity Rating
1-4 Low
5-9 Medium
10-19 High
20-25 Severe
TCFD
category Risk description Area
Potential impact
onthebusiness
Mitigation/actions
tomanage risk
Metrics used to
track risk
NZE STEPS
Short
term
(2024-
2025)
Medium
term
(2026-
2030)
Long
term
(2031-
2050)
Short
term
(2024-
2025)
Medium
term
(2026-
2030)
Long
term
(2031-
2050)
Renewable energy costs Rating Rating Rating Rating Rating Rating
Market To meet our net zero
commitments, we must secure
adequate supplies of renewable
heat and electricity. However,
asdemand for clean energy
increases, there is a risk that the
costs and volatility of sourcing
energy at requisite volumes in
allour global markets increase
exponentially due to a shortage
ofsupply.
Own
operations
– Increased operating costs
– Upfront costs for installation
of onsite renewables
– Current and planned initiatives
to reduce energy
consumption.
– Increased use of onsite
renewables to reduce reliance
on external supply.
– Operating
expenditure
(opex)
– Capital
expenditure
(capex)
– % of renewable
energy
Volatility in the global electric vehicle transition
Market Volatility in electric vehicle
production volumes, due
tobothweakening of the
regulatoryposition in
severalmarkets as well as
strongcompetition from markets
such as China, has impacted sales
performance particularly of the
ePowertrain product group,
affecting the Group’s overall
financial performance. This is a
current impact for the business
and the risk is expected to
decrease over in the medium
andlonger term as the trends
towards EVs mature.
Own
Operations,
Downstream
– Adverse effect on revenue,
revenue growth and profit
margins as demand for
products fall or fail to grow
– Falling share price and
decreasing shareholder
confidence, which may affect
access to capital
– Reputational impacts that
may exacerbate lost sales
andlost market share
– R&D losses where new
products fail to gain traction
– Transitioning to a fully or
majority EV/ICE agnostic
product line that is resistant
tomarket volatility
– Political lobbying to support
the electric vehicle transition
– Similar engagement with other
market players in support of
the electric vehicle transition
– Maintaining and protecting
trusted customer relationships
– Continuous scanning to remain
up to date with trends and
changes in the market and
theregulatory landscape.
– Revenue and %
revenue from EVs
– Revenue growth
including from
EV-related sales
– Profit margin
including
fromEVs
– % total research
&development
– expenditure
onclimate-
related R&D
TCFD CONTINUED
50Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Score Risk or Opportunity Rating
1-4 Low
5-9 Medium
10-19 High
20-25 Severe
Key physical risk
TCFD
category Risk description Area
Potential impact
onthebusiness
Mitigation / actions
tomanage risk
Metrics used to
track risk
SSP1-2.6 SSP5-8.5
Short
term
(2024-
2025)
Medium
term
(2026-
2030)
Long
term
(2031-
2050)
Short
term
(2024-
2025)
Medium
term
(2026-
2030)
Long
term
(2031-
2050)
Damage or disruption to operations caused by severe precipitation events Rating Rating Rating Rating Rating Rating
Physical
(acute)
Severe precipitation events
havethe potential to cause flash
flooding that may damage group
assets or disrupt operations.
This risk has manifested this year
with a period of severe rains in
southern Brazil that lead to severe
flooding in proximity to two of our
Automotive manufacturing
facilities. However, due to the
dedicated of the teams involved,
we were able to minimise the
financial impacts of the events
wellbelow what was initially
predicted, and as such financial
losses associated with the event
were substantially below the
Group materiality threshold.
Own
Operations
– Productivity losses
– Asset damage costs
– Increased insurance costs
– Business continuity manuals
and crisis management teams
are established at all sites.
– Business continuity procedures
include ongoing preventative
actions, steps to be taken
inthe first hour, in the first
24hours, and following
theincident.
– All sites carry relevant
insurance policies, which
willcover damages from
rainand flash food events
andproductivity losses
asnecessary.
– Specific measures are in place
for sites with greater exposure,
such as Integrated Spill
Prevention and Stormwater
Plans, which include monitoring
stormwater for quality
andcontaminants, and
engagement with local
authorities managing
floodplains.
– Number of days
lost due to
disruptions
51Dowlais Group plc 2024 Annual Report
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Score Risk or Opportunity Rating
1-4 Low
5-9 Medium
10-19 High
20-25 Severe
Key transition opportunities
TCFD
Category
Opportunity description Area Potential impact on the business Strategy/actions to exploit opportunity Metrics used
totrack
opportunity
Technology & industry evolution
Products &
Services,
Markets
Despite the slight slow down in the EV transition that is
currently being experienced, as the transition regains
traction and progresses in the medium and long term,
there is an opportunity for the Group and its
businesses to exploit the growing market for
technologically leading EV components.
Own
operations
– Potential revenue and profit growth from
coreportfolio.
– Potential revenue and profit growth from new
product segments.
– Overall positive effect on revenue, revenue
growthand profit margins.
– Identify the opportunity areas through
closecustomer relationships and strategic
portfoliomanagement.
– Invest in high potential products and divert R&D
resources to the opportunities that can add value.
– We protect our innovations through a carefully
managed portfolio of patents.
– We consider inorganic growth opportunities
whenappropriate, such as strategic partnerships
and M&A.
– Revenue
– Revenue growth
– Profit margin
Climate performance
Markets The businesses are well prepared to meet client
expectations relating to climate performance. A
focuson decarbonising the business would successfully
enhance its reputation amongst clients and other
stakeholder in the future, especially if it achieves its
targets and goals before competitors.
Own
operations
– Improving our sustainability performance
couldmake us more attractive to investors.
– Customer expectations on sustainability
performance within their supply chain are
increasing exponentially. By providing evidence
ofits strong sustainability credentials, Dowlais can
strengthen ties with existing and new customers
ultimately growing revenue and market share.”
– Clear net zero ambition with near-term and net
zero targets validated by the SBTi for both
business units.
– Net zero transition plans are being developed.
– Investment in LCA.
– Promotion of success in this area with
ourcustomers.
– Scope 1,2,3
emissions
– Order book
Enhanced sustainability reporting
Markets As a global business, we face a range of local and
regional reporting requirements.By meeting
investorand government expectations, we have
theopportunity to demonstrate transparency to
allstakeholders.
Own
operations
– Increased shareholder confidence could lead
togreater investment opportunities.
– Winning new business with customers, as they
haveconfidence in our ambitions, resilience and
ability to execute.
– Continuous improvement in sustainability
reporting to align with external frameworks
andrating agencies.
– Scope 1,2,3
emissions
– ESG rating
agency scores
– Cost of capital
Supporting the energy transition
Resource
efficiency,
Energy
Source,
Resilience
Opportunities to reduce operating costs through
improving production efficiency, transitioning to
greenenergy and improving business resilience
through generation of ownrenewable energy,
asaresult ofmeeting climate-related targets.
Own
operations
– Reduced production costs by improving
operational efficiency, material efficiency
andrecyclability of products.
– Reduced operating costs longer term
throughtransition to green energy sources.
– Reduced impact of carbon pricing in own
operations and reduced energy bills through
generation of own renewable energy on site
– Energy efficiency and renewable energy targets
built into our operational excellence principles.
– Capital allocated to support operational efficiency
andrenewable energy goals.
– Governance to monitor and support initiatives.
– Employee awareness and engagement.
– Scope 1,2,3
emissions
– Energy
consumption
TCFD CONTINUED
52Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
STREAMLINED ENERGY AND CARBON REPORTING
Total energy consumption and GHG emissions for the period 1 January 2024 to 31 December 2024
Energy consumption (MWh)
UK
2024
Global (excl. UK)
2024
Total
2024
UK
2023
Global (excl. UK)
2023
Total
2023
Change
(2024/23)
Total operational energy consumption 679 1,921,206 1,921,885 647 2,066,179 2,066,826 -7.0%
Total renewable energy consumption – 269,908 269,908 – 144,697 144,697 86.5%
Share of renewable electricity in total electricity mix 0% 21% 21% – 10% 10% 103.6%
Energy consumption intensity – – 443 – – 425 4.3%
Fuels
Total fuels consumption 259 628,476 628,735 219 656,313 656,532 -4.2%
Non-renewable fuels consumption 259 628,476 628,735 219 656,313 656,532 -4.2%
Renewable fuels consumption – – – – – – –
Electricity
Total electricity consumption 420 1,290,325 1,290,745 428 1,408,344 1,408,772 -8.4%
Renewable electricity consumption (self-generated, purchased or acquired) – 269,908 269,908 – 144,697 144,697 86.5%
Non-renewable electricity consumption (purchased or acquired) 420 1,020,417 1,020,837 428 1,263,647 1,264,075 -19.2%
Steam
Steam consumption (purchased or acquired) – 2,405 2,405 – 1,522 1,522 58.0%
Operational emissions (tCO
2
e)
1
Scope 1: Direct GHG emissions
2
173 119,858 120,031 41 123,060 123,101 -2.5%
Scope 2: Indirect GHG emissions (location-based)
3
74 421,754 421,828 89 531,769 531,858 -20.7%
Total purchased electricity 74 421,322 421,396 89 531,496 531,585 -20.7%
Steam (purchased or acquired) – 432 432 – 273 273 58.0%
Scope 2: Indirect GHG emissions (market-based) 162 356,052 356,214 88 559,572 559,660 -36.4%
Total purchased electricity 162 355,620 355,782 88 559,299 559,387 -36.4%
Steam (purchased or acquired) – 432 432 – 273 273 58.0%
Total Scope 1 and Scope 2 emissions (location-based) 247 541,612 541,859 130 654,829 654,959 -17.3%
Total Scope 1 and Scope 2 emissions (market-based) 335 475,910 476,245 129 682,632 682,761 -30.2%
Emissions intensity
4
(market-based) 110 140 -21.8%
Total Scope 3 emissions
5
15,384,804 14,230,328 8.1%
Total emissions
Total Scope 1, Scope 2 (location-based) and Scope 3 emission 15,929,663 14,885,287 7.0%
Total Scope 1, Scope 2 (market-based) and Scope 3 emissions 15,861,049 14,913,089 6.4%
1. CO
2
e – carbon dioxide equivalent, this figure includes GHGs in addition to carbon dioxide
2. Scope figures include emissions from fuel used on premises, transport emissions from owned or controlled vehicles, losses of refrigerant, and process and fugitive emission.
3. Scope 2 figures include emissions from electricity and heat purchased.
4. Company’s chosen intensity measurement: emissions reported above normalised tonnes CO
2
e per £m revenue. The data has been standardised from the source units in which it was initially collected. The revenue figures used to
calculate the intensity ratio include continuing operations under operational control only.
5. Please see page 55 for the full breakdown of Scope 3 upstream emissions.
STREAMLINED ENERGY AND CARBON REPORTING
53Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Methodology
This section has been prepared for the reporting period
of1 January 2024 to 31 December 2024. We report on all
thematerial emission sources in line with an operational
control approach method, as required in Part 7 under
theCompanies Act 2006 (Strategic Report and Directors’
Reports) Regulations 2013 and under the UK’s Streamlined
Energy and Carbon Reporting (SECR) requirements.
Theseemission sources fall within our Consolidated
FinancialStatements. We do not have responsibility for
anyemission sources that are not included in our
Consolidated Financial Statements.
Our energy consumption and emissions data is reported
inaccordance with the reporting requirements of the
Greenhouse Gas Protocol (GHG Protocol), Revised Edition
and the Environmental Reporting Guidelines, including
theSECR guidance dated March 2019. The GHG Protocol
standard covers the accounting and reporting of seven
Greenhouse gases covered by the Kyoto Protocol.
Thestatement of alignment with the GHG Protocol
andstatement on SECR disclosures can be found in our
Annual and Sustainability reports. We currently disclose
Scopes 1 and 2 and select Scope 3 GHG emissions,
representing a breakdown of the Group’s emissions
bytypeand intensity measurement.
Emission factors from the UK Government’s GHG Conversion
Factors for Company Reporting 2023 (the Department for
Environment, Food and Rural Affairs (DEFRA) factors) have
been used to calculated Scope 1 emissions. Scope 2
emissions associated with the GHG Protocol “location-based”
method have been calculated using International Energy
Agency (IEA) country-specific emission factors. Scope 2
emissions associated with the GHG Protocol “market-based”
method have been calculated using residual mix emission
factors from Association of Issuing Bodies 2022 (AIB) where
applicable. In the absence of residual mix emission factor
availability, IEA country-specific emissions factors have
beenused in line with the GHG Protocol guidance. If sites
generate their own renewable electricity or purchase
electricity backed by contractual instruments (such as
Renewable Energy Guarantee Origin), this has been
takeninto consideration within the calculations.
Energy efficiency action
A number of approaches were in place during the year to
lower our energy consumption, including:
– Upgrades to compressed air systems, including new
master control installations and compressor replacements
across multiple sites.
– Heat pump installations across the business.
– Solar PV installations at multiple sites, including in Italy,
Germany, China and India.
– Installation of heat recovery furnaces.
– Installation of EV charging points on site.
– Enhanced sintering processes to increase efficiency.
– Installation of an improved and more efficient building
heating system in Italy.
– Multi stacking to achieve maximum load capacity in
ourfurnaces.
– Shift pattern adjustment to fully utilise equipment and
shut down underutilised equipment.
– Extensive awareness training on energy management.
– Peak load management.
– Slag door improvements for energy reduction.
– LED lighting installation.
– Recycling of heat waste wherever possible.
– Efficient belt loading of products.
– Double layer sintering wherever possible.
– Shut off furnaces and implementation of weekend energy
saving mode.
– Use of automation loading units for direct loading.
Scope 1 & 2 emissions
Proportionally, renewable energy consumption increased to
21% of total energy consumption (from 10% in 2023), a result
of the procurement of energy attribute certificates (EACs)
for energy use at sites in Germany, Italy, China and USA.
Theproportion of renewable energy will continue to
increase as further renewable energy instruments are
procured, including GKN Automotive’s VPPA (see page 39).
Meanwhile, total electricity and fuel consumption decreased,
in part due to energy efficiency actions taken as detailed
above, leading to an overall decrease in non-renewable
electricity consumption of 19% as well as a fall in our Scope 1
and Scope 2 market-based emissions.
Scope 3 emissions
Dowlais carried out a full assessment of our value chain
emissions in 2024. Scope 3 emissions increased 8.1% year-on-
year, primarily due to an increase in purchased goods and
services emissions. Excluding the increase in purchased
goods and services emissions, the Group’s scope 3 emissions
decreased by 2%. This reflected a 2% fall in its use of sold
products, which contributes 78% of total scope 3 emissions,
linked to a decrease in sold products.
Our emissions associated with purchased goods and services
increased as a result of an enhancement of our measurement
methodology. We applied more accurate emission factors
toour spend data, resulting in greater granularity of data
which will allow us to more accurately track our emissions
reduction initiatives and their effect on our scope 3
emissions in the future.
Processing of sold products remains GKN Powder Metallurgy’s
most material category of scope 3 emissions. However,
similarly to the use of sold products emissions, these have
fallen principally due to the decrease in sold products.
SUSTAINABILITY CONTINUED
54Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Scope 3 categories
Group Dowlais HQ GKN Auto GKN PM
tCO
2
e 2024 2023 2024 2023 2024 2023 2024 2023
Category 1: Purchased goods and services 2,506,955 1,025,380 1,317 803 2,372,991 885,623 132,647 138,954
Category 2: Capital goods 15,635 12,171 11 110 – – 15,624 12,061
Category 3: Fuel-and-energy-related activity 116,372 125,554 – – 66,971 66,705 49,400 58,849
Category 4: Upstream logistics 85,981 129,970 – – 69,447 112,703 16,534 17,267
Category 5: Waste generated in operations 4,960 7,162 – – 3,275 4,262 1,685 2,900
Category 6: Business travel 13,284 10,812 389 128 10,674 8,178 2,221 2,506
Category 7: Employee commuting 26,953 29,302 19 15 20,560 22,415 6,373 6,872
Category 8: Upstream leased assets 12,438 26,973 – – 12,438 26,973 – –
Category 9: Downstream logistics 196,117 243,719 – – 185,431 232,366 10,686 11,353
Category 10: Processing of sold products 345,986 428,473 – – 147,493 154,183 198,493 274,290
Category 11: Use of sold products 11,969,218 12,164,245 – – 11,969,218 12,164,245 – –
Category 12: End-of-life treatment of sold products 4,233 9,472 – – 2,981 9,472 1,252 –
Category 13: Downstream leased assets – – – – – – – –
Category 14: Franchises – – – – – – – –
Category 15: Investments 86,672 17,095 – – 86,410 16,900 262 195
Scope 3 total 15,384,804 14,230,328 1,736 1,056 14,947,889 13,704,025 435,177 525,247
Three categories contributed a combined 96% of Scope 3
emissions in 2024 (2023: 96%). Identifying our carbon
hotspots has enabled us and our business units to develop
adecarbonisation roadmap. The three categories are:
– Use of sold products (78% of scope 3) – only relevant to
GKN Automotive and calculated using sales records with
volume of product sold, type of vehicle and lifetime
mileage data. Emissions were approximated using the
proportionate weight of the product by weight of vehicle.
At present, calculation of use of sold products is estimated
based on several assumptions; however, Dowlais will strive
to improve the accuracy of its emissions data over time
and subject to data availability. Emissions associated with
use of sold products decreased year-on-year.
– Purchased goods and services (16% of scope 3) – as previously
disclosed, purchased goods and services emissions increased
substantially year-on-year for GKN Automotive due to an
update to the methodology used for greater granularity
andaccuracy of data. GKN Powder Metallurgy’s emissions
were calculated using a mix of average data and purchase
data by spend of raw materials, components and services.
GKN Powder Metallurgy’s emissions associated with
purchased powdered metal were approximated using
emissions figures associated with its own powdered metal
production, which applies meaningfully similar processes
tothose of its competitors. The remaining purchased
goodsand services emissions were estimated using EEIO
(Environmentally extended input–output) models; as
moregranular data becomes available we will refine this
methodology and look to move towards a greater coverage
using an “average data based” approach.
– Processing of sold products (2% of scope 3) – calculated
using an average data approach. Processing of sold
products is GKN Powder Metallurgy’s most material
category, due to the processing of its sold powdered
metal. Emissions were approximated using emissions
associated with its own sintering and processing of
powdered metals operations, which are meaningfully
similar to those of its competitors. GKN Automotive
usedpeer-reviewed scientific literature to estimate an
emissions intensity metric, which was applied to weight of
sold products. This category also decreased year-on-year
due to efficiencies in production processes, a reduction in
sales volume and better granularity of data.
Dowlais continues to take actions to increase the accuracy of
its greenhouse gas emissions measurement.
55Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
PEOPLE AND SOCIETY
MAKING A POSITIVE IMPACT
ON OUR PEOPLE AND SOCIETY
Our people are our most important asset. With over
29,000employees, operating in 22 countries, we are
committed to ensuring their safety at all times, reducing
thenumber and severity of any accidents, as well as
providing opportunities for them to grow. We operate in a
sector with structural issues around diversity, especially on
gender, and we are committed to having an inclusive and
equitable environment in which everyone can reach their
fullpotential, as well as ensuring fair working practices for
everyone involved in our operations and supporting the
communities where we operate.
Health, safety and wellbeing
We work hard to create and maintain a safe and healthy
workplace that is free from injuries, fatalities and illness.
Thisis accomplished through implementing safety
management plans, developing training requirements
foremployees and contractors, and conducting regular
audits of operational practices.
The health and safety of Dowlais employees, contractors and
visitors is our top priority. We are committed to protecting
our employees from injury and harm, with a focus on
continuous improvement to ensure a safe and healthy
workplace for all.
We uphold the highest operational health and safety
standards and maintained an accident frequency rate
ofbelow 0.1, with zero fatalities across both employees
andcontractors in 2024 (as in 2023 and 2022). We are,
however, disappointed that there has been a slight
deterioration in performance. As a result, we commissioned
anindependent review of the health and safety of our
Automotive business, which will help inform how we
drivecontinuous performance improvements in our
procedures, management system and culture.
At the heart of our proactive approach to safety
management is our Health and Safety Policy, which
requiresthat all manufacturing sites be certified to ISO
45001, whichensures that each location is operating a
robustsafety management system, covering all relevant
aspects, including occupational health, exposure to
hazardous substances and ergonomics. We maintained
100%compliance on ISO 45001 certifications at our
manufacturing sites in 2024, covering allour products
andsales. The comprehensive policy also covers our
commitment to behaviour-based safety and
theimportanceof raising concerns.
Group accident frequency rate
<0.1
Workforce who received training in 2024
72%
Sites certified to ISO 45001
100%
The Group recognises the importance of employees’ mental,
social, and physical health and is committed to reducing
stress and promoting overall wellbeing. Employee wellbeing
programmes are implemented at the business level to
ensure maximum impact and cultural alignment.
“There is simply nothing more
important than the safety of
our employees, contractors
and visitors, and we will
always maintain the highest
standards possible.”
Liam Butterworth
Chief Executive Officer
56Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Diversity, equity and inclusion
Dowlais is dedicated to fostering diversity, equity
andinclusion (DE&I) across all levels of its operations,
acknowledging the value diverse perspectives bring to
innovation and success. Recognising the historical gender
imbalance in automotive and engineering sectors, Dowlais
has committed to equitable access to opportunities and the
fair treatment of all employees, irrespective of gender, race,
ethnicity, or other personal characteristics.
Our Code highlights the importance of diversity and
inclusion and is supported by our Diversity, Equity and
Inclusion Policy, which applies to all business units and
employees. It is reviewed by our Nomination Committee and
reported on to the Board, which has ultimate responsibility
over DE&I issues. We have also adopted a Board Diversity
Policy, which outlines the Group’s recognition of the value
ofdiversity to its long-term success and commitment to
ensuring the Board’s membership and the pipeline for
succession planning is diverse.
Copies of these policies can be found on our website
at dowlais.com/our-company/policies/
At a Group level, we have prioritised setting the right
tonefrom the top and are proud that our Board meets the
diversity targets set by the FTSE Woman Leaders Review,
the Parker Review and the UK Financial Conduct Authority.
As at 31 December 2024, over 40% of the Board were female,
with the post of senior independent director also being held
by a woman. We also have one director from an ethnic
minority background. A full breakdown of Board and
Executive Committee diversity is available on page 58.
GKN Automotive is working towards its commitment to
achieve 33% female representation on their Executive
Committee by 2030. They are currently at 10%. Underpinning
this is a plan which includes monitoring the percentage of
female representation every year at more senior levels and
interim milestones to help monitor progress and identify
barriers. They completed a Gender Pay Gap Review in2023
and refined their DE&I strategy in 2024.
GKN Powder Metallurgy actively monitors diversity KPIs,
withwomen comprising 17% of the workforce. The Global
PMDE&I Committee, plant-level DE&I committees, and
management teams work collaboratively to implement and
advance the company’s DE&I strategy. Training systems are
in place to educate and protect employees, with hotline
access, a contractual grievance process for unionised
locations, and harassment and discrimination training
conducted during onboarding and biannually. Additional
measures include diversity and unconscious bias training,
and anti-sexual harassment compliance training. These
efforts underline the company’s commitment to creating
aninclusive, respectful, and equitable workplace.
Talent
Having the right talent at the right levels is essential to
oursuccess.
Our workforce comprises a wide variety of roles, including
those that work on our manufacturing and assembly lines
and in supporting operational roles such as logistics,
maintenance and supply chain; engineering and other
technical roles in our commercial, procurement and
programme management teams; and those that work in
supporting functions such as finance, human resources and
information technology.
Whatever their role, everyone who works for Dowlais and its
businesses has an important part to play in delivering our
strategy and achieving our purpose, and it is critical that we
have the right people in these roles and give them the tools
they need to succeed.
Internal mobility is actively encouraged. In 2024, GKN
Automotive filled 289 positions internally (2023: 354),
spotlighting opportunities in newsletters circulated
company-wide. GKN Powder Metallurgy similarly filled 147
(2023: 132) vacancies with internal candidates, reflecting our
commitment to fostering career growth.
Our commercial success depends on anticipating both
short- and long-term employment needs and skill
requirements to meet the demands of a rapidly evolving
industry. We actively invest in developing talent and
nurturing the next generation of engineers and leaders.
Through mentorship, training programmes and
opportunities for growth, we strive to create a culture where
individuals can thrive and contribute meaningfully to our
success. We employ exceptional people and believe in
empowering them to reach their full potential through a
commitment to career development and lifelong learning.
Fair working practices
Our employment practices and culture support fairness for
all employees, ensuring that they feel represented and
empowered to speak up on any issues they observe.
Our Code lays out our expectations for how all employees
can conduct themselves in accordance with our values, and
our Whistleblowing Policy encourages a culture of speaking
up to report concerns.
See page 62 for further information on our approach to Ethics,
Compliance and Integrity.
We aim to comply with all legal obligations relating to our
workforce, including those relating to pay, working hours
and practices, rest breaks and family leave. The rights of
workers to participate in collective bargaining and their
freedom of association is respected across all businesses.
Workers are entitled to join or form trade unions of their
ownchoosing and to bargain collectively where legally
permissible within their jurisdiction.
57Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Group diversity data
This page contains certain diversity-related data required to be disclosed in accordance with Dowlais’ legal, regulatory and
disclosure obligations.
Group employee gender diversity
Male Female % Male % Female
Employees of the Group
1
19,475 3,852 83.5% 16.5%
Senior leadership gender diversity
Details of gender diversity within Dowlais’ executive management are set out below, including data required to be disclosed
in accordance with section 414C of the Companies Act 2006, in each case as at 31 December 2024.
Male Female % Men % Female
Directors of the Company 4 3 57% 43%
Executive Committee 3 1 75% 25%
Executive Committee and direct reports
2
10 7 59% 41%
Senior managers
3
133 25 84% 16%
Gender and ethnicity disclosure requirements
In accordance with Listing Rule 6.6.6R(10), the tables below set out data relating to gender identity and ethnic background
within the Group’s leadership positions, in each case as at 31 December 2024.
Gender identity
Number of
Board members
Percentage of
the Board
Number of senior
positionson board
(CEO, CFO, SID and Chair)
Number in executive
management
Men 4 57% 3 3
Women 3 43% 1 1
Not specified/prefer not to say – – – 0
Ethnic background
4
Number of
Boardmembers
Percentage of
theBoard
Number of senior
positions on board
(CEO, CFO, SID and Chair)
Number in executive
management
Percentage of
executive
management
White British or other white
(includingminority-white groups) 6 86% 4 4 100%
Mixed/multiple ethnic groups – – – – –
Asian/Asian British 1 14% – – –
Other ethnic groups including Arab – – – – –
Not specified/prefer not to say – – – – –
Notes and definitions
1. Reflecting the requirements of section 414C of the
Companies Act 2006, the total number of employees of
the Group only includes employees of the undertakings
included in the consolidation, and not its associated
companies not included in the consolidation. For this
reason, the number of employees referenced here is lower
than the over 29,000 employees referred to elsewhere in
this report, as this larger number includes employees of
the Group’s non-consolidated joint ventures.
2. “Executive Committee and direct reports” comprises the
Executive Directors, other Executive Committee members
(including the General Counsel & Company Secretary) and
their direct reports (being those individuals for whom they
have direct line management responsibility, excluding
administrative and support roles).
3. “Senior managers” comprises the Executive Committee,
business unit CEOs and all directors of the Group’s
subsidiary undertakings. This reflects the requirements
ofsection 414C of the Companies Act 2006. Directors of
the Group’s subsidiary undertakings include employees
ofvarying levels of seniority and are not necessarily
representative of the Group’s senior management.
4. “Executive management” for these purposes comprises
the Executive Committee (being the most senior
executive body below the Board). This reflects the
requirements of Listing Rule 6.6.6R(10). For the purposes
ofcollecting the data required to be disclosed by Listing
Rule 6.6.6R(10), Board members were asked to provide
data relating to their gender and ethnicity as part of a
Board skills matrix exercise. Other employees were asked
to provide data relating to their gender and ethnicity on
avoluntary basis, in which the individual self-reports their
ethnicity and gender identity. In each case, the data is
aligned with the definitions set out in the Listing Rules.
PEOPLE AND SOCIETY CONTINUED
58Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Community
Community investment is driven at group level, and our
shared commitment to positively contribute to the
communities where we operate unites us, whilst recognising
that the methods to achieve these goals can differ across
countries, sites, and departments. Each business has the
autonomy to decide which specific causes it wishes to
support, in alignment with our overall mission.
Our approach to supporting our communities includes
directfinancial, equipment donations, and encouraging
volunteering support. Our businesses support many
international, national and local charities and community
organisations, and many of our sites have long-standing
relationships with charitable and community organisations
based locally to their operations. This year Dowlais has
elected two charities to partner with and support at group-
level alongside with current partnership with Dowlais Rugby
Club in Dowlais, Wales.
During 2024, community giving by our businesses totalled
more than £820,000. In 2024, all businesses participated in a
wide range of community development initiatives, providing
significant investment in both volunteering time and
material resources.
Having engaged all its sites to understand current
volunteering activity and charitable partnerships, in
2023GKN Automotive launched a new charitable giving
framework and network of local community champions.
Theframework lays out roles and responsibilities, budgets,
processes and the causes GKN Automotive is focused on
toenable site autonomy.
GKN Automotive has also set a target for all sites to have at
least one charitable partnership that aligns with its strategic
purpose by 2025. A key focus of GKN Automotive’s
community work is to empower, educate and develop
pathways to increase the number of girls pursuing STEM
subjects and careers. The business has developed a global
philanthropic STEM programme launched in 2024. Initially
focusing on Mexico, Poland and India, the programme aims
to support future STEM talent while increasing its
community outreach work in these countries.
Key KPIs focus on the percentage of sites engaging with local
community organisations rather than monetary spend, with
atarget to increase site participation globally reaching 100%
by 2025.
In 2024, GKN Powder Metallurgy engaged in diverse
community initiatives across its global locations, focusing
oneducation, disaster relief, environmental conservation,
and social support. In the USA, efforts included partnerships
with schools to hire skilled trade graduates, outreach to
colleges, and prioritising veterans for job opportunities,
alongside activities such as beach cleanups and DE&I
projects with the Girl Scouts. In India, the team donated
science labequipment to rural schools, provided school
supplies toorphanages, and participated in charitable
events liketheRunathon of Hope and Diwali celebrations
with orphanedchildren.
Community giving in 2024
£820,000
Italian colleagues supported local schools, firedepartments,
sports, music groups, and participation inthe National Food
Collection. In China, the business sponsored scholarships at
Central-South University, while, in Brazil, food donation
campaigns supported flood relief efforts. These initiatives
highlight GKN Powder Metallurgy’s dedication to fostering
positive impacts within its communities worldwide.
59Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
CASE STUDIES
SUPPORTING OUR COMMUNITIES
Floods impact our communities
Earlier in the year, heavy rains and severe floods
affectedthe state of Rio Grande do Sul in Brazil,
resultingin widespread damage, landslides and loss
oflife. The flooding impacted GKN Automotive’s
operations at Porto Alegre and Charqueadas, along
withits employees and customers in the region.
Our top priority being the safety
and wellbeing of our employees,
regional leaders across our
operations and HR teams worked
together to assist our employees
and their families experiencing
extremely challenging times.
Prioritising the safety
of our people
In the immediate aftermath of the
flooding, GKN Automotive chartered
asmall plane to help a group of employees
who were stranded far from home to get
back to their families.
£100k
donated to organisations
providing emergency
housing,food, medication
andother much-needed
supporton the ground.
Managing the ongoing impact
Damage to bridges and infrastructure in the region
made commuting to our sites very difficult, even when
the flood water had subsided. Our teams worked hard
to ensure we safely maintained production, with some
colleagues travelling longdistances to ensure
production continued.
60Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Inclusive dining,
empowering lives
GKN Powder Metallurgy is a
proud sponsor of PizzAut – an
inclusive restaurant in Italy where
the staff is made up entirely of
autistic employees. Its innovative
social inclusion model has
helped many autistic children
gain dignity and autonomy
through work.
A “sanctuary”
for women
The team at Dowlais HQ
assembledcare packages
containing essential winter and
hygiene items to supportthe 24/7
drop-in service of Marylebone
Project, the UK’s only women-only
homelessness service, offering
safety and support 365 days a year
for women facing homelessness.
Additionally, a cash donation was
made to the project, which was
matched by Big Give, bringing the
total contribution to £15,000.
Rescue team celebrates 10 years
GKN Automotive site in Oleśnica, Poland, celebrated 10 years of its Little Rescuer Academy-a
programme designed to offer local children a chance to learn about first aid and safety in an
engaging, interactive way. Since its initiation in 2014, the Academy has had an enormously positive
impact on the local community and has helped to train 10,000 children in Oleśnica and nearby towns.
Culture for a cause
Colleagues at our sites in India celebrated Diwali with orphaned children,
spreading joy and festive spirit. Funds were raised to organise puppet and
magic shows, as well as to gift new clothes to the children, making the
celebration even more special.
SUPPORTING OUR COMMUNITIES
61Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
SUSTAINABILITY GOVERNANCE
Product safety and quality
All over the world hundreds of millions of people rely
onourproducts to keep them safe every day. A rigorous
focuson product safety and quality is non-negotiable in
theautomotive industry and is part of our culture and
embedded in all aspects of our design and
manufacturingprocesses.
Our Product Safety Policy mandates that all our businesses
follow relevant industry standards relating to product safety.
Crucial to our approach is ensuring that all our manufacturing
sites are covered by Quality Management Systems and we
are proud that 100% of the Group’s operations are certified
to either ISO 9001 or IATF 16949 standards. Manufacturing
sites are audited for every year against the standard and
re-certified every three years. In 2024 we had one product-
safety related recall.
Responsible sourcing and human rights
We are committed to respecting human rights through
ourprocesses, behaviours, operations and conduct,
including in our supply chain. We recognise all human
rightsset out in the United Nations Universal Declaration
ofHuman Rights, the ten principles of the United Nations
Global Compact and the International Labour Organization’s
Declaration on Fundamental Principles and Rights at Work.
Recognising the critical importance of sourcing responsibly
and upholding our human rights commitments, which
wasclearly identified in our materiality assessments,
weconducted a comprehensive human rights risk review
in2024. This review aimed to identify key risks and implement
measures to address them across our operations and supply
chains, reflecting the global reach of our supply networks.
Full details of the review and the formal identification
ofoursalient human rights risks is available in our 2024
Sustainability Report.
We engage with our suppliers on the sustainability of their
operations and their own supply chains. Our Responsible
Sourcing Policy sets clear expectations for suppliers,
requiring compliance with local environmental laws
andregulations, proactive efforts to decarbonise their
operations, and a focus on circular economy principles
whendesigning and delivering products. It also aligns with
our Group policies on water, biodiversity, conflict minerals,
and human rights to ensure a fully integrated approach.
GKN Automotive has implemented a number of measures
toidentify, assess, and mitigate labour and human rights
risks, including modern slavery, in its operations and
supplychain. Key actions include adherence to a
strengthened Supplier Code of Conduct, covering
expectations on social and environmental standards,
andtraining over 90% of senior procurement teams
onsustainability and responsible sourcing.
In GKN Powder Metallurgy, purchasing staff are trained on
astandard process that requires checks on whether critical
suppliers comply with ISO 14001 and ISO 45001. In 2024, the
business also began work with NQC to improve monitoring
of suppliers.
In 2025, building on the work to identify our salient human
rights, we will refresh our strategy and approach, to ensure
we move beyond compliance and address some of the
systematic issues in global supply chains.
Ethics, compliance and integrity
At Dowlais, one of our core values is Accountability. Being
accountable means being responsible for our actions, but
italso means acting responsibly. Maintaining the highest
standards of business ethics, meeting our legal obligations
and conducting ourselves with integrity, are all core to what
we do at Dowlais. We have a strong track record in this regard,
and we intend to maintain it. We expect our people to
dothe right thing at all times, whether that is in how they
perform their role, how they interact with each other in the
workplace, and how they represent Dowlais as a Group.
Webelieve in doing the right things in the right way,
actingwith integrity and respect in all our business dealings.
Our Code
Our Code is our employee code of conduct, which sets out
the standards of behaviour we expect of all our employees.
Our Code is made available to all employees across the group
and is the subject of training and awareness campaigns. A
copy of Our Code is available at dowlais.com.
Legal compliance
As Dowlais businesses operate globally, we are subject to
numerous laws and regulations that apply in the countries in
which we are based or operate. It is Dowlais’ policy to always
comply with the laws and regulations to which we are
subject, including those relating to bribery and corruption,
competition, and data privacy. But complying with the law is
not enough. We expect our people to go further, to always
behave with the highest ethical standards and conduct
themselves in a way that reflects Dowlais’ values. This
meansbeing honest and transparent, conducting ourselves
professionally, acting with integrity, being trustworthy and
keeping our promises, and when we make mistakes, being
open and not covering them up.
Speaking Up – Our approach to whistleblowing
We also recognise that however hard we try to do the
rightthing, sometimes things do go wrong. We therefore
encourage a culture of speaking up in which we ask our
people to bring issues of concern to our attention, and we
are clear that these concerns will be listened to, investigated
and dealt with properly and sensitively. Our Whistleblowing
Policy sets out our policy in this area, and in order to
encourage our people to speak up, we maintain a
confidential and anonymous Employee Disclosure Hotline
and Portal, which can be used to report issues of concern.
This is open 24 hours a day, seven days a week, and is
hostedby an external, independent company. This service
ispromoted at all sites, and calls are monitored by our Legal
and HR functions and regularly reviewed by our Executive
Committee. In 2024, we received 88 disclosures through our
Whistleblowing procedures, all of which were thoroughly
investigated. No material, ethical or compliance violations
were identified.
“At Dowlais, one of our core values is
Accountability. Being accountable
means being responsible for our
actions, but it also means
actingresponsibly.”
Liam Butterworth
Chief Executive Officer
62Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
OUR APPROACH TO RISK
Understanding the risks and uncertainties
we face is critical to the operation of
ourbusinesses.
We take a proactive approach to risk
management and have adopted a
framework that provides the Board and
management with a comprehensive view of
the Group’s risk profile, enabling risks to be
properly identified, assessed and treated,
whether by mitigation, elimination or other
management action. This helps us navigate
these risks appropriately and effectively,
sothat we can achieve our strategy.
Risk management framework and governance
We have a clear risk management framework, which is
setout in our Risk Policy and processes, to identify, assess
and mitigate the risks we face. Continual assessment and
management of risk are embedded in our businesses and
are regularly reviewed by management. We sought to
further embed and strengthen our approach to risk
management during 2024. This included reviewing
ourRiskPolicy to ensure that it remained fit for purpose.
Aspart of this review, we refined how we determine the
financial impact of the risk assessment and ensure that our
business units are accurately assessing the risks against the
Board’s defined risk appetite.
Responsibility for risk management across the Group is
summarised opposite.
RISK MANAGEMENT
Audit Committee
Monitors the Group’s risk
management processes
– Monitors the Group’s risk management processes and controls.
– Monitors, oversees and reviews the effectiveness of the Group’s
internalcontrols and risk management systems and processes.
– Makes recommendations to the Board on risk appetite, controls
andmitigation, and the Group’s principal and emerging risks.
Executive Committee
Develops the Group’s risk
management processes and
manages Group risks
– Develops the Group’s risk management processes and controls.
– Engages in risk identification, analysis, evaluation and treatment,
includingemerging risks, at Group level.
– Oversees and challenges risk mitigation plans and supports those
responsiblefor risk management within the business units.
Business unit
executive teams
Responsible for risk
management in their
business unit
– Engage in risk identification, analysis, evaluation and treatment for their
businessunits.
– Develop risk management processes and controls at business unit level.
Business unit
managers and
controllers
Day-to-day risk management
– Engage in risk identification, analysis, evaluation and treatment within their
areaof responsibility.
– Comply with risk mitigation plans and controls.
Board
Overall responsibility
for risk management
– Approves the Group’s risk management strategy and policy.
– Determines an acceptable risk appetite for the Group.
– Reviews reports and recommendations from the Executive Committee
andtheAudit Committee on risk governance, processes and controls.
– Determines and assesses the Group’s principal and emerging risks.
63Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
RISK MANAGEMENT CONTINUED
Risk appetite
Our risk appetite for each of our principal risks is determined
by the Board. This appetite defines the level of risk we are
willing to accept in order to achieve our strategy. The Board
has also assessed whether or not our principal risks are within
this risk appetite. We use the following terminology to
categorise our risk appetite levels.
Averse
– A strong unwillingness to accept risk,
irrespective of the reward.
Cautious
– A reluctance to accept risk, but careful
acceptance of certain risk with
appropriate controls.
Moderate
– A willingness to accept a reasonable level
of risk.
Open
– A willingness to accept a greater level of
risk, reflecting a higher potential reward.
Hungry
– A willingness to pursue high-risk or
unproven options with the potential for
very high reward.
Details of the risk appetite that the Board has determined for
each of the Group’s principal risks are set out on pages 65 to
70. The Board’s risk appetite review demonstrated that the
Group is currently operating in line with its risk appetite.
Risks are monitored continuously by the businesses to
ensure they remain within risk appetite and are
appropriately treated if this ceases to be the case.
Riskappetite is reviewed at least annually by management,
the Audit Committee and the Board.
Identification and assessment of principal and
emerging risks
Our approach to risk identification is a combined “top-
down”and “bottom-up” approach, in which our executive
management teams identify strategic and emerging risks
affecting our businesses and the Group, but also review risks
that are identified, tracked and reported at a site, plant or
functional level. These risks are consolidated into a Group
Risk Register in which the Group’s material strategic,
financial, operational and compliance risks are identified,
assessed and monitored by the Executive Committee.
During the year, the Board undertook a robust assessment
ofthe Group’s principal risks, risk trends and mitigation
plans, further details of which are set out 65 to 70.
The Board has also undertaken a robust assessment of the
Group’s emerging risks, which are separately identified and
monitored by the Executive Committee. The Group views
emerging risks as those that are unlikely to materialise in
theshort term or cannot be fully assessed yet, but which
may become more material in the future. The Group’s
assessment of emerging risks includes “horizon-scanning”
ofpotential new risk areas, consideration of emerging risks
affecting other industry participants and other industries,
and potential economic, political, environmental, social,
legaland technological changes. These risks are closely
monitored but typically do not require mitigation activities
at this early stage.
Changes to principal risks during 2024
We did not identify any new principal risks during 2024.
However, for three of our principal risks the residual risk
exposure has slightly increased from 2023, and, for one
principal risk, the residual risk has slightly decreased from
last year.
As a global business with cross-border supply chains, and
with demand for our products heavily influenced by
macroeconomic conditions, we are susceptible to economic
and political risk. This is now our highest-rated principal risk
area, reflecting an increasingly volatile global
macroeconomic and political risk environment. Global
security risks include war in Europe and the continued
security threat of Russia, conflict in the Middle East and
tensions between China and Taiwan. Political change in the
US and political instability in major European economies also
represent economic risks. Finally, the trend toward a more
protectionist global economic environment, with the
increased imposition of tariffs and other trade barriers,
appears set to continue.
Continued automotive market volatility, both in terms of
global light vehicle production and product, platform and
propulsion-source mix, is reflected in our assessment of an
increase in competition and automotive market risk this year.
This volatility has materially impacted our financial
performance this year; a decline in vehicle production on key
programmes, reduced revenue and changes in demand
created operational inefficiencies that need to be managed
or offset. In addition, although we have invested significantly
to improve our production footprint, the continued
stagnation of global light vehicle production growth places
pressure on our fixed cost base, with increasingly limited
ability to flex our workforce and operations.
People-related risks also slightly increased, particularly
therisk of talent attraction and retention. This reflects the
challenges that the Group has faced this year, the impact of
the announced strategic review of our Powder Metallurgy
business, the reduction of investment in eDrive systems and
the wider challenges in the automotive sector.
Finally, the impact of industry evolution in the form of
electrification was substantial on the Group’s business in
2023, with a decline in demand for certain EV models having
an impact on the Group’s performance. However, as we have
taken steps to improve resilience in our businesses and
ensure that our product portfolio is increasingly propulsion
agnostic, we consider that technology and industry
evolution risk in our business has slightly reduced.
64Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
OUR PRINCIPAL RISKS AND UNCERTAINTIES
Principal risks
Following the review described above, the Board considers the
following risks to be the principal risks and uncertainties faced by
theGroup, including those that might threaten the Group’s strategy,
business model, future performance, solvency, liquidity or reputation.
No new principal risks were identified during 2024, but there have
been some small changes in the risk profile of certain risks, as
described on page 64 and shown in the heat map opposite.
Number Risk title Residual risk
exposure
Risk appetite
2 Economic and
political
High
Moderate
1 Information and
cyber security
High
Cautious
3 Supply chain
Medium
Cautious
4 Competition and
automotive market
Medium
Moderate
5 Operational
delivery
Medium
Cautious
6 Product quality
andsafety
Medium
Averse
7 Technology and
industry evolution
Medium
Open
10 People
Medium
Cautious
9 Legal and ethical
Medium
Averse
8 Sustainability
Medium
Cautious
Our principal risks have been assessed in accordance with our
RiskPolicy for potential impact and probability, with the impact
assessment relating to the potential financial, reputational, strategic
and operational impact on the Group. This assessment reflects the
impact after consideration of the relevant mitigation and controls (the
residual risk). The Group’s resulting risk profile is summarised in the
chart on this page.
These principal risks do not comprise an exhaustive list of risks
associated with the Group. While the Board has carried out a robust
assessment of these risks, additional risks may also materialise and
result in an adverse effect on the Group.
Arrows denote the changes to our principal risks in comparison to 2023.
5
2
1
4
10
7
3
6
9
8
Impact
ModerateLowVery Low High Very High
Probability
Rare Possible Likely Almost CertainUnlikely
Risk rating
Low
Medium
Severe
High
65Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
RISK MANAGEMENT CONTINUED
Risk description Potential impact Examples of how we mitigate this risk
Economic and political
We operate in numerous countries and are, therefore, exposed
to and potentially affected by global economic and political
conditions, and events in those countries that are outside of
our control. Macroeconomic conditions that impact our
businesses include monetary policy, inflation or deflation,
theavailability of capital, levels of business and consumer
confidence, fluctuations in commodity prices and economic
growth or contraction. Other risks include global, regional
ornational events such as war, political unrest or instability,
orlegislative or political acts of states, governments or
supranational organisations such as the imposition of tariffs,
trade controls or other policy changes.
– Reduction of, or volatility in, demand for passenger vehicles,
which in turn affects demand for our products.
– A reduction in availability or increase in the costs of the goods
and services we purchase.
– A volatile trading environment and disruption in supply
chains that may impact our operations or those of customers
or suppliers.
– Increases in the cost of production or making certain product
or geographic markets less accessible to us.
– A resulting impact on our ability to deliver on our strategy to
lead in our chosen markets and create sustainable growth.
– Through our strategy of leading in our chosen markets, as
market-leading businesses are more resilient and can more easily
respond to macroeconomic shocks.
– A geographically diversified business model that allows
continued supply in case of localised disruption.
– Regular monitoring of demand forecasts, orders and other
indicators to ensure we can respond quickly to changes in
tradingconditions.
– Agreements that enable some element of workforce-level
flexibility to adapt to short-term fluctuations in demand.
– Active monitoring of the global trade environment and
regulatory landscape and reacting quickly to changes in
government policy.
– Through our strategy of localising suppliers in regions wherever
possible, mitigating the impact of trade barriers. Appropriate
tariff mitigation actions where required.
– Committed debt facilities, to enable the Group to withstand
material economic shocks.
Risk trend vs 2023:
Slight increase
Risk appetite: Moderate
Strategy: Lead, Transform, Accelerate
Values: Agility
Information and cyber security
Cyber security and the protection of information remains an
area of significant importance and risk. Like many businesses,
we increasingly face the risk of cyber attacks and other
information security risks. The risk is potentially enhanced
bythe scale and complexity of our operations and the
“just-in-time” nature of the automotive supply chain and the
increasing digital dependency and interconnected systems
used in the automotive sector. This risk includes potential loss
of confidentiality, integrity and availability of our information
through malicious or accidental means, the risk of theft,
fraud(including phishing) and ransomware attacks.
– Loss of confidentiality, integrity and availability of information.
– Inability to protect our technology or intellectual property.
– Inability to operate business as usual due to unavailability of
IT or other systems.
– Loss of production resulting from non-availability of
manufacturing and related systems including operational
technology.
– Inability to meet customer and supplier contractual
requirements related to information security, and breach of
contract claims by customers and suppliers.
– Inability to deliver on our strategy.
– Adverse publicity and damage to our reputation.
– This year we have enhanced our cyber security governance by
introducing a cross-business cyber security forum to share and
learn best practice from all relevant stakeholders across our Group.
– Dedicated information security functions and teams in all
business units.
– Accredited information security management systems at key
sites, including the Trusted Information Security Assessment
Exchange (TISAX) accreditation.
– Extensive information security policies and procedures, which are
regularly reviewed against best practice.
– Extensive employee training and awareness programmes to
reduce the risk of phishing and other methods of attack.
– Infrastructure resilience, cyber controls and vulnerability
management processes.
– Regular technical penetration testing.
– Through our value of Agility, allowing us to respond rapidly
toincidents when they arise.
Risk trend vs 2023:
No change
Risk appetite: Cautious
Strategy: Lead, Transform
Values: Agility, Accountability
66Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Risk description Potential impact Examples of how we mitigate this risk
Supply chain
We operate within complex supply chains and have a large
number of suppliers, some of whom are critical to our
operations. Replacing suppliers in the automotive industry is
atime-consuming process. Increases in the cost of materials or
production may be difficult to pass on to customers and may
erode margins. We are contractually responsible for the quality
and delivery of the products we supply and may not be able
topass on contractual liabilities to our suppliers. In addition,
supply chain disruption could result from matters outside our
control, such as geopolitical events, wars, epidemics, accidents
or natural catastrophes.
– Inadequate quality or unsafe products.
– An inability to operate the Group’s facilities or supply its
products, resulting in the same potential impacts as set out
under the Operational Delivery risk below.
– Increased costs due to inflation or commercial pricing
pressure, which may not be possible to pass on to the Group’s
customers impacting our ability to deliver industry leading
financial performance.
– Becoming uncompetitive having adverse impact on our
ability to win new business.
– Our reputation as a market-leading and financially stable
business, allowing us to partner with strong and stable suppliers.
– Developing long-term relationships with key suppliers.
– Identification of high-risk suppliers, based on penetration rate,
criticality of supply and financial strength monitoring.
– Dual sourcing and validation approvals and mitigation plans for
sole-source suppliers.
– Supplier quality and capacity audits, and inspections.
– Robust contracts with suppliers.
– Sales, inventory and operational planning processes.
– Supplier regional localisation activities.
– Through our value of Agility, resulting in an agile culture enabling
us to flex operations where required.
Risk trend vs 2023:
No change
Risk appetite: Cautious
Strategy: Lead, Transform
Values: Agility
Competition and automotive market
We operate primarily in the global automotive market, in
whichcompetition is strong and high levels of efficiency and
operational excellence are required to succeed. Many of our
customers are large, demanding organisations with significant
purchasing power, who can develop and introduce
competitors to put pressure on our pricing. Global demand for
the Group’s products can be volatile and fluctuate significantly
due to factors outside the Group’s control, including consumer
demand and the success or failure of particular vehicle brands,
platforms or name plates.
– Losing business to competitors.
– Being forced to accept lower returns to remain competitive.
– The insolvency of a single large customer could have a
significant impact on revenue.
– The merger of two or more customers could introduce
additional pricing pressure.
– Unexpected significant falls in demand for our products,
orvolatility in demand, without commercial or
contractualrecourse.
– Inability to deliver our strategy of creating industry-leading
financial performance.
– Through our strategy of leading in our chosen markets. Market-
leading businesses are more resilient to the commercial pressures
that come with operating in a highly competitive automotive
industry, and can more easily respond to demand volatility.
– Strong customer relationship management, building multiple-
level relationships with our customers. Increased market-
penetration activity through customer intimacy plans and
customer intelligence.
– Through our Accelerate strategy for sustainable growth through
selective customer and market growth, prioritising margin and
cash generation.
– IP-protected technological development to aid margin retention.
– Competitor benchmarking and product teardown/analysis to
ensure we have intelligence on competing customer technology.
– Through our value of Agility, which is reflected in flexibility across
our operations to adapt to demand fluctuations.
Risk trend vs 2023:
Slight increase
Risk appetite: Moderate
Strategy: Lead, Transform, Accelerate
Values: Agility, Ambition
67Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
RISK MANAGEMENT CONTINUED
Risk description Potential impact Examples of how we mitigate this risk
Operational delivery
Our manufacturing operations and processes are complex and
our customers’ delivery expectations are demanding. The
failure of key equipment, systems or other disruption at a site
or production line could cause significant interruptions, and
some operations may represent a “single point of failure”
dueto our vertically integrated manufacturing structure.
Inaddition, we design and manufacture products that are
critical to the launch of global vehicles and other programmes.
Many of these products are complex and engineered
specifically to meet our customers’ needs, which presents
therisk that we are unable to meet customer expectations
andour contractual requirements.
– Loss or damage to our plants, facilities and assets.
– Inability to operate our manufacturing operations.
– Contractual claims from our customers for losses resulting
from the unavailability or late delivery of our products or for
delays or cancellations of programme launches.
– Loss of existing customers.
– Reputational damage and adverse impact on ability to win
new business.
– Resulting inability to deliver our strategy of creating industry-
leading financial performance.
– Business continuity and disaster recovery plans in place and
tested for critical locations.
– Regular evaluation of the operational risks facing sites and
functions.
– Crisis management plans and systems.
– Property damage and business interruption insurance.
– Sophisticated programme and resource management systems
and regular high-risk programme and gate reviews, with a focus
on flawless programme launch.
– Thorough design validation and production validation testing
with customer sign off.
– An Agile, Accountable and Ambitious workforce, who do what it
takes to meet our delivery obligations.
Risk trend vs 2023:
No change
Risk appetite: Cautious
Strategy: Lead, Transform
Values: Agility, Accountability, Ambition
Product quality and safety
Product quality and safety is at the heart of the global
automotive industry. As a trusted supplier to the world’s
leading vehicle manufacturers and other customers, it is
imperative that our products are safe to use and meet quality
requirements. A defect in the design or manufacturing process,
a failure of controls, or the inadequate performance of our
suppliers could result in us supplying products that are unsafe
or of inadequate quality. Many of our automotive products are
considered safety critical and are the subject of vehicle safety
and industry regulations.
– Warranty and other contractual claims from our customers
for losses caused by the replacement or unavailability of
ourproducts.
– The cost of product recalls and other field service actions,
ifproducts need to be replaced or repaired in the field.
– Material product liability claims from customers or third
parties in the event of any death, injury or damage to people
or property caused by our products.
– Loss of existing customers.
– Reputational damage and adverse impact on our ability to
win new business.
– Resulting inability to deliver our strategy of creating industry-
leading financial performance.
– Extensive product safety and quality policies and procedures.
– Dedicated quality and safety functions.
– Extensive product monitoring and testing.
– Rapid cascading of lessons learned within operations.
– Management of significant/critical characteristics to identify and
cascade them to the point of use on the shop floor.
– Core process audits.
– Product safety training and awareness.
– Dedicated product safety governance and oversight with
independent reporting lines.
– Through our value of Accountability, with a workforce that is
accountable and works responsibly and with integrity.
Risk trend vs 2023:
No change
Risk appetite: Averse
Strategy: Lead
Values: Accountability
68Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Risk description Potential impact Examples of how we mitigate this risk
Technology and industry evolution
We have market-leading technologies in the sectors in which
we operate and successfully navigating the EV transition is core
to our strategy. However, there remains a risk that we may be
unable to maintain sufficient technological differentiation, or
adapt to technological change in our key markets, particularly
the major shift in the automotive markets resulting from
electrification. There is a risk that parts of our product portfolio
and technologies may over time become obsolete or
uncompetitive and will need to be replaced. We may also face
disruptive innovation by competitors, or the development of
new technologies that eliminate or reduce demand for certain
products, or which give our competitors an advantage.
– Increased costs of engineering, research and development in
order to keep pace with technological innovation.
– Inability to compete with competitors who use more efficient
methods of design or manufacture.
– Reduction in demand for our products or a failure to offer a
product portfolio that meets market expectations.
– Erosion of our reputation as a technology leader in our
product markets.
– Damage to our ability to attract and retain talent.
– Adverse effect on revenue, revenue growth, or profit margins.
– Resulting inability to achieve our strategy of leading in our
chosen markets, deliver industry leading financial
performance and sustainable growth.
– Ensuring that the portfolio is increasingly propulsion agnostic by
reducing investment in products that are specific to a particular
propulsion source (whether ICE or EV).
– Close relationships with our customers to understand their
development roadmap and invest in technologies that will be
used on next-generation platforms.
– Horizon-scanning to identify new technologies and monitoring of
competing technologies, including via teardown and testing.
– Significant investment in engineering and R&D, particularly in
propulsion-source-agnostic components.
– Significant patent portfolio and processes for protecting
ourinnovation.
– Through our value of Ambition, with focus on building a culture of
innovation and attracting the best engineering talent.
– Monitoring innovative design and manufacturing tools including
artificial intelligence and adopting where appropriate.
Risk trend vs 2023:
Slight decrease
Risk appetite: Open
Strategy: Transform, Accelerate
Values: Agility, Ambition
People
Our most valuable assets are our people. They are our only
truly sustainable source of competitive advantage and our
strategy and performance depend on attracting and retaining
the right people in the right roles and creating the right
environment for them to succeed. Competition for talent
andskills is intense and the Group may not be successful
inattracting or retaining qualified personnel, particularly
inleadership or technical roles. In addition, we are an
industrialised manufacturing business with a resulting risk of
accident and injury to employees and contractors. Our people
work in environments where maintaining the highest standards
of operational health and safety is critical.
– Reduced levels of operational performance.
– Increased costs of hiring and retention.
– Ineffective strategic decision making and loss of
competitiveadvantage.
– Liabilities resulting from health and safety incidents.
– The cost of defending legal actions, claims and prosecutions
by regulators or third parties.
– Fines and criminal penalties.
– Adverse publicity and damage to our reputation.
– Succession planning at Executive Director and senior
management level, led by the Nomination Committee in
conjunction with the Board.
– Regularly evaluating remuneration against market trends and
ensuring appropriate remuneration packages and long-term
incentives are offered.
– Diversity and inclusion initiatives across all businesses to maintain
a diverse talent pipeline.
– Monitoring our workforce via regular review of KPIs and annual
employee engagement surveys.
– Robust health and safety policies, processes, procedures and
standards in all businesses and manufacturing sites certified to
international safety standards, including ISO 45001.
– Extensive health and safety training and awareness programmes.
– Fostering a culture in which our people act with integrity,
including working safely and respecting colleagues in line with
our value of Accountability.
Risk trend vs 2023:
Slight increase
Risk appetite: Cautious
Strategy: Accelerate
Values: Agility, Accountability, Ambition
69Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
RISK MANAGEMENT CONTINUED
Risk description Potential impact Examples of how we mitigate this risk
Legal and ethical
Laws and regulations are becoming more complex and
pervasive, and the levels of fines and penalties – and the
appetite of government agencies to prosecute businesses for
compliance failings – are increasing. Our geographic breadth,
scale and complexity presents a risk that we may fail to fully
comply with certain laws and regulations. Even where our
conduct is lawful, any ethical misconduct (or the perception
thereof) could cause harm. Finally, we have an extensive
intellectual property portfolio, but it may not be sufficient
toprevent competitors from replicating our products, and we
may face claims by third parties, including for actual or alleged
infringement of their intellectual property rights.
– Costs of defending legal actions, claims and prosecutions by
regulators or third parties.
– Fines and criminal penalties, and contractual penalties
andliabilities.
– Suspension or revocation of licences or privileges or
debarment from government or public sector contracts.
– Failure to identify and protect the technology that
wedevelop or inability to prevent third-party use of
ourtechnology.
– Adverse publicity and reputational damage.
– Through our value of Accountability, fostering a culture in which
people act responsibly and with integrity at all times.
– Actively fostering a culture of the highest ethical standards, as set
out in Our Code and our Supplier Code of Conduct.
– Legal teams embedded in and close to our businesses, regular
monitoring and review of legal and regulatory matters and
horizon-scanning for upcoming legal risks.
– Group-wide legal and compliance policies.
– Due diligence procedures and screening systems for third parties
such as customers, suppliers and other counterparties.
– A culture of “speaking up”, with an employee hotline and online
portal, allowing employees to report anonymously and without
fear of retaliation.
– Mandatory, regular compliance training for relevant employees.
– Leadership compliance and ethics assurance programmes.
Risk trend vs 2023:
No change
Risk appetite: Averse
Strategy: Lead
Values: Accountability, Ambition
Sustainability
Sustainability is a key focus for our investors, customers and
other stakeholders. Expectations continue to rapidly evolve
and become more onerous. Failure to meet our stakeholders’
expectations on sustainability, environmental, social and
governance-related matters may expose us to reputational
orfinancial risk or result in an inability to meet our customers’
expectations. This includes risks associated with investor
sentiment, evolving customer requirements, supply chain
trends and social attitudes toward the environmental impact
ofproducts, and the Group’s ability to attract and retain talent.
– Limiting the number and types of debt and equity investors
who are willing or able to invest in the Group.
– Inability to meet our customer expectations on sustainability
performance, with potential for resulting loss of business or
inability to secure new business.
– Loss of key talent and other employees who increasingly
wantto work for a socially responsible and sustainability-
focused organisation.
– Increased cost of meeting ESG expectations.
– Breach of laws and regulations.
– Adverse publicity and reputational damage.
– Sustainability Committee as part of our governance structure.
– Executive team accountability for ESG with dedicated
representation on this topic.
– Reporting on ESG in a transparent way with appropriate data
collection and verification.
– Sustainability strategy integrated with business unit strategies,
accountable at business unit, CEO and executive team level.
– Science-based targets established and net zero roadmaps
indevelopment.
– Through our value of Accountability, resulting in a culture where
our people work to deliver and act responsibly and with integrity.
Risk trend vs 2023:
No change
Risk appetite: Cautious
Strategy: Lead, Transform
Values: Accountability, Ambition
70Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
VIABILITY STATEMENT
Assessment of prospects
In accordance with the requirements of the UK Corporate
Governance Code, the Directors have assessed the
prospects of the Company, considering the potential
impactof the principal risks facing the Group.
The Directors’ assessment of the Group’s viability has
beenmade over a three-year period, which is considered
tobe appropriate for this assessment as it is consistent
withthe Group’s detailed planning cycle and current
financing arrangements.
The Directors’ assessment has been made by reference to
the Group’s financial position as at 31 December 2024 and its
prospects, the Group’s strategy, the Directors’ risk appetite
and the Group’s principal risks and their management, all of
which are described in the Strategic Report.
The Directors’ assessment of the Group’s viability is
underpinned by a paper prepared by management, which is
supported by comprehensive and detailed analysis and
modelling. The model underpinning this statement is
stress-tested, based on severe but plausible scenarios
developed by considering how the Group’s principal risks
(set out on page 65), together with climate-related risks (set
out on pages 48 to 52), could impact the Group’s viability.
The key assumptions driving the output from the model
relate to forecast revenue, drop-through operating margin
and cash generation over the viability period. The base
model includes three years of forecast data from the Group’s
business units. The three downside scenarios that have been
modelled were:
1. An economic shock/downturn. Prolonged global
downturnin economic conditions, higher unemployment
and inflation resulting in reduced customer confidence
and lower spending. Includes the risk of adverse changes
in the financial markets which could prevent the Group
from accessing capital either when required or at an
appropriate rate.
2. Losing a key market/product/customer. This scenario
envisages Dowlais being unable to adapt to technological
change or experiencing a significant reduction in demand
for global light vehicles.
3. Significant contract delivery issues. This scenario envisages
the risk that the Group’s products fail resulting in warranty
claims and reputational impact, as well as modelling the
impact of a moderately severe cyber attack.
Each scenario has been carefully considered both
individually and in combination by the Directors, together
with the impact of expected achievable mitigating actions
on the working capital model. Although considered unlikely,
if all four scenarios were to occur simultaneously,
a. liquidity would be significantly reduced over
theviability period when compared to our base
casescenario;
b. the Group would still be able to continue operating
(and no covenants etc. would be breached); and
c. the Group would consider implementing relevant
mitigating actions including deferral of capital
expenditure, delay of cash restructuring spend,
working capital actions, strategic restructuring
including labour management, reduction of
discretionary spending and short-term delay
orcancellation of dividend payments.
These scenarios sensitise the main assumptions noted above,
considering the medium-term impact of continued
implications on supply chains resulting from the current
global macroeconomic uncertainty and ongoing inflationary
pressures on input costs.
Finally, the model has been used to perform a reverse stress
test to determine the level of revenue/volume reduction
that would use up all available cash, and the Directors are
satisfied that the conditions required to prevent the Group
from continuing to operate are sufficiently remote so as to
not affect the overall conclusions reached.
On the basis of the above assessment, the Directors confirm
that they have a reasonable expectation that the Group will
continue in operation and meet its liabilities, as they fall due,
up to 31 December 2027.
In reaching this conclusion, the Directors have also
considered the implications in a viability context of the
proposed acquisition of the Group by AAM which was
announced on 29 January 2025. As set out in the rule 2.7
announcement, the Directors believe that the proposed
combination with AAM is an attractive opportunity to
accelerate the realisation of shareholder value through the
establishment of a global, automotive supplier with market-
leading capabilities, better-positioned together to navigate
both the short-term challenges and long-term market
dynamics in the automotive sector. On that basis, the Board
believes this supports its viability assessment, in the event
the combination proceeds. The combination is expected to
close during the fourth quarter of 2025, subject to the
approval and availability of the Court, the approval of the
Company’s shareholders and AAM shareholders, as well as
customary closing conditions, including regulatory
clearances in Europe and the US.
The scenarios modelled in the viability assessment were
based on the Group remaining an independent entity and,
therefore, remain appropriate should the proposed
combination not proceed. Accordingly, the Directors believe
the conclusion that the Group and the Company is viable
remains appropriate in the circumstances of the proposed
combination completing.
71Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NON-FINANCIAL AND SUSTAINABILITY
INFORMATION STATEMENT
Reporting
requirements
Most relevant
Dowlaispolicies
For more information on the impact
andoutcomes
Environmental
matters
– Our Code
– Environmental Policy
– Biodiversity Policy
– Water Policy
– Energy Policy
Sustainability (pages 34 to 62)
Stakeholders and s. 172 statement (page 7 and
pages 84 to 87), and the section on society and
communities (pages 56 to 62)
Planet and climate (page 38), product
sustainability (page 40) and natural resources
(page 41)
Task Force on Climate-related Financial
Disclosures (TCFD) Report (pages 42 to 52) and
Streamlined Energy and Carbon Reporting
(pages 53 to 55)
The Company’s
employees
– Our Code
– Health and Safety Policy
– Diversity, Equity and
Inclusion Policy
– Whistleblowing Policy
Sustainability (pages 34 to 62)
People and society (pages 56 to 62), in particular
the sections on health, safety and wellbeing
(page 56), and diversity, equity and inclusion
(pages 57)
Stakeholders and s. 172 statement (page 7 and
pages 84 to 87), and the section on our people
(page 56 to 58)
Social matters
– Our Code
– Sustainability Policy
– Responsible
SourcingPolicy
– Product Safety Policy
Sustainability (pages 34 to 62)
People and society (pages 56 to 62), in particular
the sections on community and product safety
(page 59 and 62)
Stakeholders and s. 172 statement (page 7 and
pages 84 to 87), and the section on people and
society (pages 56 to 62)
Human rights
– Our Code
– Human Rights Policy
– Anti-Slavery and Human
Trafficking Policy
Sustainability (pages 34 to 62)
People and society (pages 56 to 62), in particular
the section on responsible sourcing and human
rights (page 62)
Stakeholders and s. 172 statement (page 7 and
pages 84 to 87)
Reporting
requirements
Most relevant
Dowlaispolicies
For more information on the impact
andoutcomes
Anti-corruption
and
anti-bribery
matters
– Our Code
– Anti-Bribery and
Corruption Policy
– Anti-Money Laundering
Policy
– Anti-Facilitation of Tax
Evasion Policy
– Conflict of Interest Policy
Sustainability (pages 34 to 62)
People and society (pages 56 to 62), in particular
the section on ethics, compliance and integrity
(page 62)
Business model
Our business model (page 3)
Principal risks
Risk management (pages 63 to 70), in particular
our principal risks of product quality and safety
(page 68), people (page 69) and sustainability,
legal and ethical (page 70)
Key transition risks (pages 48 to 52)
Non-financial
KPIs
Non-financial KPIs (page 22), being our AFR,
Scope 1 and 2 emissions, and EV-related
medium-term order book
Task Force on Climate-related Financial
Disclosures (TCFD) report (pages 42 to 52) and
Streamlined Energy and Carbon Reporting
(pages 53 to 55)
Climate-related
disclosures
Task Force on Climate-related Financial
Disclosures (TCFD) report (pages 42 to 52)
Streamlined Energy and Carbon Reporting
(pages 53 to 55)
This Strategic Report has been prepared in accordance with the requirements of the
Companies Act 2006 and has been approved and signed on behalf of the Board.
Liam Butterworth
4 March 2025
The information below summarises how we comply with non-financial performance and sustainability reporting requirements and is produced to comply with sections 414CA
and 414CB of the Companies Act 2006. It sets out where relevant information relating to non-financial and sustainability matters can be found in our Strategic Report.
72Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
CHAIR’S LETTER
Simon Mackenzie Smith
Chair
GOVERNANCE
REPORT
Our focus throughout the year
Throughout the year, the Board has remained focused
ondelivering the Group’s strategic priorities and seeking
torealise value for our shareholders whilst furthering the
interests of all our stakeholders. The Board reviewed the
Group and business unit strategies throughout the year,
including at several Board meetings at which discussion
wasfocused on medium- and long-term strategy. We
continue to recognise the importance of our governance
framework in ensuring effective decision making, which is
even more important in an increasingly fast-moving and
dynamic environment.
You can read more about our governance framework on
page 77 and the key decisions and areas of discussion that
the Board focused on during the year on page 80.
Relationship with shareholders and
otherstakeholders
The Board recognises the importance of engaging with our
shareholders and other stakeholders and our section 172
statement, which can be found on page 84 to 87, sets out
how we have engaged with our key stakeholders during the
year and how the Board has considered their interests in its
decision making.
Throughout the year, we continued our comprehensive
investor relations activities, led by our CEO and CFO, which
included meetings with our major shareholders and potential
investors to provide us with the opportunity to obtain direct
feedback on our business, strategy and performance. The
Board receives an update on investor relations at each Board
meeting. Both Celia Baxter, our Senior Independent Director,
and I are available to meet with shareholders, and we have
met with shareholders when requested.
On 29 January 2025, the Board announced its
recommendation of a share and cash combination of the
Company and AAM. The transaction is expected to close
during the fourth quarter of 2025, subject to the approval of
both Dowlais’ and AAM’s shareholders, as well as customary
closing conditions, including merger control and other
regulatory clearances.
Leadership
During the year, we have continued to focus on Board
composition, skills and succession planning and you can read
more about this is the Nomination Committee Report on
pages 93 to 94.
Both Alexandra Innes and Geoffrey Martin stepped down
from the Board at the end of the AGM on 21 May 2024, and,
during the year, the Board reviewed its own composition,
including succession plans for the Executive Directors, to
ensure it remained appropriate for the Group. Details of
thecurrent Board’s skills and experience can be found on
page 79.
Annual General Meeting
Our Annual General Meeting will be held on 21 May 2025 and
will provide the Board an opportunity to further engage with
shareholders and answer any questions about the business.
Simon Mackenzie Smith
Chair
4 March 2025
“Our robust governance
frameworkensures we can
continue to make effective
decisions in a dynamic
environment.”
Dear shareholder
On behalf of the Board, I am pleased to present the
Group’sGovernance Report for the financial year ended
31 December 2024.
The Board recognises the importance of having an effective
governance framework and is committed to maintaining
thehighest standards of corporate governance, which
willsupport the delivery of our strategy. Pages 73 to 117
ofthisreport form our Corporate Governance Statement.
73Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Code section Location of information and how the application of the Code Principles shaped
governance actions and outcomes in the year
Leadership and
Purpose
– Board biographies (pages 75 to 76)
– Board operation and key areas of discussion (pages 79 to 81)
– The Company’s purpose, values, and strategy (pages 2, and 73 to 82)
– The promotion of the long-term sustainable success of the Company as described in the
s. 172 statement (page 7 and 87)
– Assessment and monitoring of culture (page 82 to 83)
– Employee engagement (page 82)
Divisions of
Responsibilities
– Our governance framework (pages 77 to 78)
– The balance of executive and non-executive directors (pages 75 to 76, and 79)
– Independence, sufficient time and the process for approving external appointments (page 81)
Composition,
Succession
andEvaluation
– Governance Report (pages 73 to 87)
– Promoting and embedding diversity and inclusion (page 94)
– Monitoring the balance of Board members’ skills, experience and knowledge
(page 79 and 93)
– Board evaluation process and outcomes (page 81)
– Nomination Committee Report (pages 93 to 94)
Audit, Risk and
Internal Control
– Audit Committee Report (pages 88 to 92)
– The evaluation of risk management and internal controls including process and outcomes
(page 92)
– The linking of principal risks with strategy and its assessment by the Board
(page 65 to 70, and 92)
Remuneration
– Remuneration Report (pages 95 to 112)
– Assessment of the alignment of purpose, values and strategy with remuneration
(pages 95 to 97, and pages 99 to 103)
– Executive, senior management and wider workforce remuneration (pages 95 to 97, and 110)
Compliance with the UK Corporate
Governance Code
The Board confirms that, save as set out below, Dowlais
complied with all of the provisions set out in the UK
Corporate Governance Code 2018 (the Code) for the
period under review.
Dowlais did not comply with Provision 32 of the Code
throughout the whole of the period under review.
Provision 32 requires that the Remuneration Committee
be comprised of a minimum of three independent
Non-Executive Directors, with the Chair of the Board
also able to be a member if they were independent
onappointment.
Following Alexandra Innes stepping down from the
Board, between 21 May 2024 and 2 March 2025, the
Remuneration Committee was made up of two
Independent Non-Executive Directors and the Chair of
the Board, who was independent upon appointment.
This was considered by the Board to be an acceptable
interim structure whilst the Nomination Committee
undertook a review of the Board’s composition, the
potential appointment of additional Non-Executive
Directors and Committee membership.
In light of the recommended combination with AAM,
the Nomination Committee’s review has been paused
and, therefore, cognisant of the requirements of the
Code, on 3 March 2025 the Board, at the
recommendation of the Nomination Committee,
agreed that Philip Harrison should be appointed as
amember of the Remuneration Committee with
immediate effect.
Details of how we have applied the principles set out in
the Code and how governance operates at Dowlais are
set out in the table opposite. A copy of the Code can
be found at frc.org.uk
74Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
BOARD OF DIRECTORS
Simon Mackenzie Smith
Chair
Liam Butterworth
Chief Executive Officer
Roberto Fioroni
Chief Financial Officer
Celia Baxter
Senior Independent Director
Committee membership
RN
Committee membership
None
Committee membership
R A N
Committee membership
None
OUR BOARD OF DIRECTORS
Liam is an experienced leader in the automotive
industry. He started his career in 1986 at Lucas
Industries as an apprentice toolmaker before
moving into sales and marketing. He joined FCI
Automotive in 2000 in France, where he lived
for 18 years. From 2008, Liam was CEO of FCI
Automotive and led the sale of the business
toDelphi Automotive plc in 2012, which he
thenjoined as SVP and the president of its
Powertrain Division. He subsequently became
group CEO of Delphi Technologies plc in 2017
leading its demerger from Aptiv plc (formerly
Delphi Automotive) and admission to the New
York Stock Exchange. In 2018, he became CEO
of GKN Automotive before its demerger from
Melrose Industries PLC and became CEO of
Dowlais Group plc on its listing on the LSE in
April 2023.
Appointed: 10 February 2023
Other directorships and appointments:
A non-executive director of United Utilities
Group PLC; chair of the ESG Committee and a
member of the Audit, and Nomination
Committees. Anon-executive director of
United Utilities Water Limited.
Simon has a wealth of experience in corporate
finance and M&A, with an investment banking
career spanning over 35 years. He has advised
on some of the UK’s largest mergers and
acquisitions including Royal Dutch Shell plc’s
$52 billion takeover of BG Group Plc in 2016.
Before retiring in 2021, he was chair of
Corporate and Investment Banking UK
andIreland at Bank of America Merrill Lynch.
Simonjoined Merrill Lynch in 1996 from
Morgan Grenfell. He qualified as a chartered
accountant with KPMG in 1985.
Appointed: 9 February 2023
Other directorships and appointments:
Anon-executive director of Interpath
Advisory. Chair of the Trustees of the
children’s mental health charity Place2Be.
Celia brings a global perspective and deep
understanding of industrial companies and
organisations that have grown by acquisition.
She spent her executive career in human
resources, beginning her career with Ford
Motor Company before moving to KPMG.
Shehas also held executive HR positions with
Tate & Lyle plc, Enterprise Oil Plc and Hays Plc.
Most recently in her executive career, she was
director of Group HR at Bunzl PLC where she
was responsible for HR and sustainability
across the group. Previously Celia was an
independent director for NV Bekaert SA,
aleader in steel wire transformation and
coatings, and RHI Magnesita NV, a global
leader in refractories, and was senior
independent director and chair of the
Remuneration Committee at Senior Plc. She
was also an independent director and chair of
the Remuneration Committee at DS Smith plc.
Appointed: 20 February 2023
Other directorships and appointments:
Senior independent director and chair of
theRemuneration Committee of discoverIE
Group plc.
Roberto has extensive experience in the
automotive industry. Roberto joined GKN
Automotive in 2019 and was instrumental in
the development and execution of GKN
Automotive’s margin expansion plan. Roberto
joined from WABCO, a NYSE-listed leading
player in braking and steering systems for
commercial vehicles, where he was chief
financial officer. Prior to that, Roberto was VP
of finance for Goodyear’s Europe, Middle East
and Africa business unit and also held several
senior positions during a 13-year career with
General Electric (GE) across its GE Security and
GE Consumer & Industrial divisions, as well as
with GE Corporate.
Appointed: 10 February 2023
Other directorships and appointments: None
75Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Philip Harrison
Independent Non-Executive Director
Shali Vasudeva
Independent Non-Executive Director
Fiona MacAulay
Independent Non-Executive Director
Committee membership
RA N
Committee membership
R N
Committee membership
A N
Shali has extensive experience of technology,
operational resilience and cyber and business
transformation, spanning the UK, Europe
andAsia. Shali is currently the group chief
operations and technology officer at The
Hiscox Group leading on IT, data, cyber
security and operational resilience, digital
strategy, property and procurement. Prior to
this, she was the chief operating officer at AXA
Insurance UK & Ireland. Shali spent the first
phase of her career in leadership roles in the
outsourcing sector with Cap Gemini and
Capita Business Services. She subsequently
held executive operational roles at Prudential
Assurance UK and senior roles at both
Resolution Life Group Holdings and The
Hiscox Group.
Appointed: 20 February 2023
Other directorships and appointments:
Group chief operations and technology
Officer at The Hiscox Group.
Philip has extensive international financial
leadership experience across a range of
sectors and at all points in the business cycle.
He is chief financial officer at Balfour Beatty
plc, a role he has performed since 2015. Philip
began his career with Texas Instruments
before moving to Rank Xerox and then to
Compaq, where he remained following the
merger with Hewlett Packard. He has also
held board and executive committee
positions as group finance director at VT
Group Plc and Hogg Robinson Group Plc.
Philip is a Fellow ofthe Chartered Institute of
Management Accountants.
Appointed: 10 February 2023
Other directorships and appointments:
Chieffinancial officer of Balfour Beatty plc.
Fiona is an experienced board director within
the resources and industrials sectors, with
particular experience in ESG topics. She has
held senior roles across both large and small
cap companies, having begun her career as a
geologist with Mobil North Sea Limited in
1985 and worked in a number of UK and
International Companies including
AmeradaHess and the BG Group.
Latterly,Fiona was chief operating officer
ofRockhopper Exploration Plc and chief
executive officer of Echo Energy Plc before
transitioning to a non-executive portfolio
career in 2019.
Appointed: 20 February 2023
Other directorships and appointments:
Senior independent director and
Remuneration Committee chair of Ferrexpo
Plc. Senior independent director of Chemring
Group PLC. Non-executive director of Costain
Group PLC, where she is chair of the
Remuneration Committee.
Key
Committee Chair
R
Remuneration Committee
A
Audit Committee
N
Nomination Committee
76Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
OUR GOVERNANCE FRAMEWORK
The Board
Dowlais’ Board is responsible for promoting the long-term sustainable success of the Group and generating value for shareholders.
The Board oversees the performance of Dowlais and sets our purpose, values and strategy, ensuring that our culture is aligned to each of them.
Audit Committee
The Committee ensures the integrity
of the financial reporting and audit,
oversees the Group’s internal control
and risk management systems and
monitors the effectiveness of
internal and external audit.
Remuneration Committee
The Committee determines
remuneration policies and monitors
their effectiveness, establishes
policies and practices that are
designed to support the Company’s
strategy and promote the long-term
sustainable success of the business,
and sets the remuneration of the
Company’s Chair, Executive Directors
and senior management.
Nomination Committee
The Committee leads the process for
Board appointments, ensures
succession plans are in place for the
Board and senior management, and
oversees the development of a
diverse pipeline for succession.
Disclosure Committee
The Committee monitors the
existence of inside information and
its disclosure to the market.
CEO
Responsible for the day-to-day management of the Group
Group Executive Committee
Supports the CEO in the day-to-day management of
the Group including overseeing the implementation of
strategic and operational plans.
Business unit CEOs and executive teams
Responsible for the management of their
business unit and achieving their
business-specific targets.
Sustainability Committee
Supports the development and day-to-day deliveryof
the Group’s sustainability strategy.
See page 88 See page 95 See page 93
See page 79
See page 42 to 43 for a summary of the Committee’s work
77Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Division of responsibilities
The Chair is responsible for:
– Leading the Board and providing effective and
ethicalleadership.
– Promoting a culture of openness and debate by facilitating
the contribution of Non-Executive Directors, in particular,
and ensuring constructive relations between Executive
and Non-Executive Directors.
– Ensuring effective decision making and governance by
ensuring effective information flows and sufficient time for
discussion at Board meetings.
– Ensuring effective communication with key stakeholders,
including shareholders.
– Overseeing each Director’s induction and ongoing training.
– Leading the Board and Committee evaluation process.
The CEO is responsible for:
– Day-to-day management of the Group’s business in line
with the strategic and commercial objectives agreed by
the Board.
– In conjunction with the wider executive team,
implementing the decisions of the Board and its
Committees and ensuring the Board is aware of Executive
Directors’ views on business issues.
– In conjunction with the Chair, ensuring effective
communication with key stakeholders.
The Senior Independent Director is responsible for:
– Providing a sounding board for the Chair and serving as an
intermediary for the other Directors and shareholders
when necessary.
– Being available to shareholders if they have concerns
which contact through the normal channels of Chair, CEO
or other Executive Directors has failed to resolve or for
which such contact is inappropriate.
– Leading meetings of the Non-Executive Directors without
the Chair present at least annually to appraise the Chair’s
performance, taking into account the view of Executive
Directors, and on such other occasions as are deemed
appropriate.
– Being responsible for an orderly succession process for
theChair.
– Assisting in the maintenance of the stability of the Board
and Company, particularly during periods of stress.
The Non-Executive Directors are responsible for:
– Constructively challenging and helping to develop
proposals on strategy.
– Scrutinising the performance of management in meeting
agreed goals and objectives and monitoring the reporting
of performance.
– Supporting the Executive Directors in instilling
appropriateculture, values and behaviours in the
boardroom and beyond.
The Company Secretary advises the Board on
matters of procedure and governance, including:
– Providing all required information to the Board on a
timelybasis.
– Enabling information flows between senior management,
the Board and its Committees.
– Providing support to the Chair and Non-Executive Directors.
– Being responsible for compliance with relevant statutory
and regulatory requirements.
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HOW OUR BOARD WORKS
Board composition
As at 4 March 2025, the Board comprised the Chair, who
wasindependent upon appointment, four Independent
Non-Executive Directors and two Executive Directors.
TheBoard’s biographies can be found on pages 75 to 76.
Board leadership and purpose
The Board is collectively responsible for promoting the
long-term sustainable success of the Group and for
generating value for shareholders. The Board sets the
strategy and holds management to account for its delivery,
and oversees the performance of the Group, with a view to
ensuring success over the longer term. Furthermore, the
Board is responsible for setting the tone from the top and
ensuring that the Group’s culture aligns with its strategy,
purpose and values.
Whilst day-to-day responsibility for the management of the
Group has been delegated to the Executive Directors of the
Company, there are a number of key matters that are
reserved for the Board as a whole. These include:
– Establishing the Group’s purpose, values and strategy.
– Determining the basis on which the Group generates or
preserves value over the longer term.
– Approving the Group’s annual operating and capital
expenditure budget.
– Approving changes relating to the Group’s capital structure.
– Approving any significant restructuring or reorganisation
including material acquisitions, disposals or joint ventures.
– Approving material changes to the Group’s policies
relating to governance, compliance, controls and ESG.
– Approving the Group’s sustainability targets.
– Ensuring effective communications with shareholders.
Full details of the matters reserved for the Board can be found
atdowlais.com
Directors’ skills and experience:
3
3
4
1
2
3
1
Finance
Sustainability
Marketing and sales
Legal and regulatory
Risk
IT/cyber security
People
Skill categories
Automotive/engineering
and manufacturing
5
Board skills and experience and diversity
Gender diversity
Male – 57%
Female – 43%
Ratio
4
3
Ethnic diversity
White – 86%
Asian – 14%
Ratio
6
1
Nationalities
British – 86%
Italian – 14%
Ratio
6
1
Board attendance and activities
The Board held seven scheduled meetings during the
year.Details of individual attendance for each of the Board
scheduled meetings is set out to the right. In addition, a
number of ad-hoc meetings were held to discuss specific
items. Any Director who is unable to attend a Board meeting
has the opportunity to review the papers and provide
contributions outside of the meeting.
The Board receives regular reports from the CEO, CFO, Chief
People, Sustainability and Communications Officer and the
General Counsel and Company Secretary at its meetings. In
addition, the Chair meets with the Non-Executive Directors
privately without executive management present, including
either immediately prior to or after each Board meeting.
Director Board Audit Nomination Remuneration
Simon Mackenzie Smith 7/7 3/3 6/6
Liam Butterworth 7/7
Roberto Fioroni 7/7
Celia Baxter 7/7 3/3 3/3 6/6
Philip Harrison 7/7 3/3 3/3
Fiona MacAulay 7/7 3/3 6/6
Shali Vasudeva
7/7 3/3 3/3
Alexandra Innes
1
3/3 1/1 2/2
Geoffrey Martin
1
3/3
1. Alexandra Innes and Geoffrey Martin stepped down from the Board at
the conclusion of the AGM on 21 May 2024.
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HOW OUR BOARD WORKS CONTINUED
Key decisions and areas of discussion
Throughout the year, the Board has reviewed and discussed a wide range of topics which are set out in the table below. Further information on the nature and outcomes of the
Board’s discussions on a number of these matters and the relevant stakeholders considered are set out in our s.172 statement on page 87.
Group strategy
– Reviewed and discussed the individual strategies of the Group’s business units and the overall Group strategy.
– Approved the disposal of the Group’s Hydrogen business.
– Approved undertaking a strategic review of GKN Powder Metallurgy.
– Approved the reduction of engineering investment in eDrive systems.
– Received regular automotive market updates.
– Reviewed and discussed the operational performance of the Group by business unit.
– Discussed and approved the Group’s sustainability strategy.
Financials and
performance
– Received updates on the financial performance of the business units and the Group as a whole.
– Approved the Company’s final results, Annual Report and Accounts and half-year results.
– Recommended a final dividend to shareholders for approval at the Company’s first AGM and approved the interim dividend.
– Approved the commencement of a £50 million share buyback programme (which was subsequently terminated on 29 January 2025 in light of the proposed
combination with AAM).
– Approved the refinancing of part of the Group’s existing debt by way of issuance of $500 million of notes in a US private placement.
– Approved the annual budget for 2025 and the Group’s five-year financial plan.
Risk and compliance
– Carried out a robust assessment of the Group’s principal and emerging risks and approved the Group’s risk appetite.
– Received a cyber security update and adopted a new cyber-security governance model.
– Annual approval of Board designated policies.
People, culture
andvalues
– Reviewed health and safety dashboards from across the business.
– Received people-related updates relating to the Group’s global workforce.
– Received a report from the Group’s Workforce Advisory Panel.
– Approved the Group’s Slavery and Human Trafficking Statement.
– Approved the rules of the 2024 Omnibus Share Plan, as recommended by the Remuneration Committee, subject to shareholder approval.
– Received an update on the Group’s defined benefit pension schemes.
Sustainability
– Approved the Group’s high priority material ESG targets.
– Approved the Group’s first Sustainability Report.
– Received an update on the Group’s double materiality process and our climate change ambitions.
– Received an ESG update that included an update on the Group’s assessment of its salient human rights risks across its operations.
Governance
– Received reports from each Committee Chair after scheduled Committee meetings.
– Received updates on key regulatory and corporate governance developments.
– Received an update on the actions coming out of the 2023 Board and Committee performance review.
– Discussed the outcome of the 2024 Board and Committee performance review and agreed the actions for 2025.
– Reviewed and approved the Schedule of Matters Reserved and Board Committee Terms of Reference.
Shareholder and
stakeholder engagement
– Received updates on and discussed investor relations matters.
– Reviewed feedback from the proxy agencies and investors regarding the proposed resolutions at the 2024 AGM.
– Received an update on the development of Group’s charitable giving strategy.
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Board induction and training
The standing agendas for the Board and its Committees
include briefings on a range of topics including regulatory
and corporate governance requirements, which ensure the
Board is kept up to date with developments in these areas.
The Directors also have access to the Company Secretariat
for advice and assistance and independent, professional
advice should this be necessary to discharge their
responsibilities. During the year, the Board received
updateson the automotive market and industry and on
cyber security from third-party experts. Board members are
asked to identify any areas where they feel further training
would be beneficial as part of the annual performance
evaluation process.
A comprehensive and formal induction programme, which
will be facilitated by the Company Secretary in consultation
with the Chair, will be provided to any new Directors that
areappointed.
Independence, time commitment and
externaldirectorships
All Directors have service agreements or letters of
appointment and details of their terms are set out in the
Remuneration Report. The service agreements and letters of
appointment are available for inspection at the Company’s
registered office during normal business hours.
The Board has reviewed the independence of its Non-
Executive Directors and considers each of the Non-Executive
Directors, including the Chair, to be independent. Approval
of any Director’s appointment as a director of another
company is a matter reserved for the Board.
The Chair and the Non-Executive Directors are expected to
devote sufficient time to carrying out their duties which is
expected to be approximately 20 days per year, or such
additional time as may be required. The Board considers that
all the Directors have sufficient time to perform their duties.
Board effectiveness and performance
The Board agreed that the 2024 Board and Committee performance review should be conducted by way of a questionnaire,
facilitated by the Company Secretary. The objective of the review was to highlight what has been working well and what needed
tobe focused on in 2025. Thequestionnaires for the Board and each Committee were circulated to the Board and respective
Committee members for completion, and the findings were shared with the Chair before being discussed by the Board.
Overall, the results of the review were positive in respect of both the Board and its Committees and progress had been made
ina number of areas including those identified in the 2023 Board performance review process and discussions with regards
tothe future strategy of the Group. The review concluded that the Board has a good mix of experience, knowledge and
expertise and was sufficiently diverse. The Board and Committee operations had worked well during the year, andthe
Boardreceived quality information on a timely basisalongside comprehensive meeting agendas.
The actions that were agreed for the Board and each Committee as part of this performance review are summarised below
and will be monitored during 2025.
Board
– Continue to focus on business strategy and creating shareholder value, including reviewing
development opportunities within the Automotive business.
– Ensure Board members have opportunities to increase their knowledge of the Group’s operations
including visiting new sites and meeting the employees at those sites, reviewing operational plans and
how these will be delivered, and receiving updates on external changes within the industry.
– Ensure the Board has opportunities to interact with members of senior management both inside and
outside of formal meetings.
– Focus on monitoring culture and behaviours throughout the organisation.
Audit
– Continued focus on the key topics for the Committee including the going concern review, adjusting
items, risk management, internal controls and their effectiveness, and the new Code requirements
relating to risk management and internal controls.
– Receive updates on the operation of the Automotive Shared Services Centre.
– Focus on non-financial assurance to ensure the Board is comfortable with the operational controls within
the businesses.
Nomination
– Continued focus on succession planning both at Executive Director and executive team level and for
other senior positions within the Group.
– Continue to monitor the Board composition and skills to ensure it remains appropriate.
Remuneration
– Review remuneration targets and ensure they reflect current market practice and are appropriate for
the corporate structure of the Group.
– Continue to ensure remuneration outcomes adequately reflect Company performance.
It is the Board’s intention to carry out an externally facilitated performance review in 2025, in line with the requirements of the Code.
Re-election of Directors
Upon the recommendation of the Nomination Committee, the Board has recommended the re-election of the Directors to
shareholders at the 2025 AGM. Consequently, in accordance with the Code, all current Directors will offer themselves for
re-election at the 2025 AGM, which will take place on 21 May 2025.
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Defining our culture
The Board oversees the Group’s purpose and our organisational
culture. By having the right culture we can ensure the successful
delivery of our purpose and our strategy. Culture is about how
people act and behave, and we believe our culture reflects
both our purpose and our values of Agility, Accountability and
Ambition. We believe our culture encourages our people to:
– Move at pace and taking decisions clearly and quickly.
– Deliver on their commitments.
– Act responsibly and with integrity.
– Look for new opportunities.
– Respect and protect each other.
– Behave ethically and lawfully.
– Care for our communities and our world.
Further details of our values and the standards and behaviours
that are expected of everyone who works for Dowlais and its
businesses are set out in Our Code, which has been adopted
by the Board and is supported by a range of policies that cover
areas such as health and safety, diversity and inclusion and
whistleblowing. To help us monitor the culture of the Group,
the Board receives an update on people related topics from
our Chief People, Sustainability and Communications Officer
ateach scheduled Board meeting. This includes the results
ofengagement surveys and other employee engagement
activities, talent management and health and safety within our
business units. The Board also uses other methods to monitor
the culture of our organisation and ensure that it reflects our
purpose and our values. They include:
– Engaging directly and indirectly with the workforce, as
described in more detail within the ’Workforce
engagement’ section and on pages 56 to 57, and 84 to 87.
– Reviewing whistleblowing reports and the outcome of
internal investigations where appropriate.
– Monitoring relevant KPIs such as health and safety and
quality performance data.
THE BOARD’S ROLE IN OUR PURPOSE,
OUR CULTURE AND OUR PEOPLE
Workforce engagement
The Board has established a Workforce Advisory Panel
(WAP)as the mechanism by which it monitors employee
engagement. The WAP is chaired by the Chief People,
Sustainability and Communications Officer. Other members
include the Group General Counsel and Company Secretary,
the Chief HR Officers of each business unit and the Group HR
Manager. The WAP can invite additional persons to attend
meetings as and when considered appropriate or necessary.
The WAP meets at least twice a year to review all workforce
engagement mechanisms adopted by each business unit,
relations between each business unit and relevant employee
representative bodies and to ensure the views of the
workforce are taken into account in executive decision
making within each business unit.
The WAP is responsible for ensuring the Board understands
the views of the workforce as a whole and for assisting the
Board in ensuring that the workforce’s interests are duly
considered in its decision making. This is done through
theChair of the WAP formally reporting to the Board on its
activities at least once a year and ensuring that these topics
are well understood by the Board at all times. During the
year, the Board received an update from the WAP, which
covered the outcomes of the GKN Automotive annual
engagement survey and an update on areas of focus for
theGKN Powder Metallurgy workforce and how they are
being addressed.
In addition to the WAP, the Board also engages with the
workforce in a number of other more informal ways including
direct interaction with employees when visiting the Group’s
sites, and, where appropriate, engaging with employee
representatives. This helps ensure that the Board can receive
“unfiltered” views direct from employees, in addition to the
information provided via the WAP.
See page 84 to 87 for examples of how our people
have been reflected in Board decision making
Further information about our people and culture
can be found on pages 56 to 62.
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ENGAGING WITH OUR WORKFORCE
The Board believes that visits to our engineering and
manufacturing facilities are important in the assessment and
monitoring of our culture, engaging with our employees and
understanding our products, customers and suppliers.
During the year, the Dowlais Board visited our Automotive
manufacturing plant in Bruneck, which manufactures eDrive
systems and ePowertrain components, and our state-of-the-
art Powder Metallurgy plant in Sand in Taufers, which
produces sintered metal components. The February
Boardmeeting was held at the Automotive plant.
The visit allowed the Board to engage directly with a range
of employees from the two businesses, which helps ensure
that they understand the views of our people and the
culture that is embedded across our sites. The visits
includeda review of workforce-focused initiatives at the
sites, in particular on health and safety, which remains the
Board’s number one priority.
The visit to the Automotive site in particular was very timely,
as the site has faced a significant impact from the reduction
in anticipated demand for eDrive systems during 2024. This
has impacted all our workforce at the site, as the sudden
reduction in demand has led to workforce reductions and
“short-time” working practices being required. The Board
recognises the impact these measures have on our people
and the communities in which we operate.
The Powder Metallurgy plant in Sand in Taufers was
experiencing good demand for its products at the time
theBoard visited, and local management discussed with the
Board the different challenges which this presented, and the
need for workforce flexibility and responsiveness. Due to the
different levels of demand experienced in their businesses,
the Automotive and Powder Metallurgy management
hadbeen supporting each other by transferring workers
between their sites, to minimise the impact of demand
volatility on our people.
During the visits, the Board was very impressed with the
passion and commitment of our employees, their deep
affinity with their businesses and their pride in a job well
done. High standards of health and safety awareness were
also evident amongst the workforce, which was reflected in
the good health and safety performance of both these sites
this year.
The Board was also able to witness first-hand the ingenuity
of our engineering teams, including in particular the highly
automated production lines, which are the result of our
manufacturing engineering expertise, and the renewable
energy heating system that has been implemented at the
Automotive site.
VISITING OUR EPOWERTRAIN AND SINTER
METALS SITES IN ITALY
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Ensuring we properly consider our stakeholders’ interests, by appropriate levels of engagement, is crucial to the long-term success of theGroup.
Our Board has identified the Company’s key stakeholder groups, which are set out below.
Stakeholder group Why we engage How we engage The impact of that engagement
Our Investors
Our shares are held by institutional and
retail investors from across the world.
Other key stakeholders include our
lenders, covering analysts, proxy
advisers and rating agencies.
– To ensure access to equity and
debtcapital.
– To comply with our regulatory
obligations.
– To drive high-quality governance
and effective management.
– To ensure our business and
performance are well understood.
– Our shareholders own our Company,
making them our key stakeholder.
– The CEO and CFO meet regularly with our shareholders,
both on a one-to-one and group basis, and our investor
relations team maintains a two-way dialogue between our
investors, management and the Board.
– We have a dedicated investor relations function, which was
expanded in 2024.
– We host conference calls for investors and analysts alongside
the publication of full-year and half-year results, following
which we undertake in-person and virtual investor
roadshows, followed by formal feedback gathering
frominvestors.
– We proactively engage with the sell-side equity research
community.
– The Chair meets with major shareholders on request,
and the whole Board meets with shareholders at our AGM.
– We considered the views of our investors in key decisions
we took, including the disposal of GKN Hydrogen and
thestrategic review of GKN Powder Metallurgy.
– The Board reviewed and approved all trading
updates,results announcements and similar shareholder
communications.
Our People
We have a global workforce made
upof over 29,000 employees. We
alsoengage with our non-employee
workers, and those who no longer
workfor us but are members of our
pension schemes.
– Our employees are a key
strategicasset.
– To improve workforce motivation,
morale and productivity.
– To improve employee retention
andreduce turnover.
– To identify solutions to problems
weface.
– To identify the needs of our
workforce.
– We undertake engagement surveys in all business units,
withAutomotive and Powder Metallurgy both undertaking
surveys in 2024.
– The Board met with employees when they visited GKN
Automotive Brunico in February.
– Regular town-hall and ‘skip-level’ meetings are hosted by
business unit leadership teams.
– The Group operates a Workforce Advisory Panel to review
employee engagement across its business units.
– We consult with unions and employee representative bodies
on relevant decisions, including the proposed wind-down of
our AWD manufacturing facility in Köping, Sweden.
– When considering the disposal of GKN Hydrogen, we
sought to ensure that we could find a new owner for the
business who would allow the business to continue as a
going concern and protect as many jobs as possible. We
sought assurances from the new owner that this would be
the case.
– We have been actively engaging with our workforce in
Sweden regarding the potential wind-down of our AWD
facility there. Consultation with the workforce is ongoing
and we will ensure their views are reflected in the actions
we take.
– We negotiated successful agreements with
recognisedtrade unions and workers representatives
across our business.
OUR STAKEHOLDERS AND HOW
WE ENGAGE WITH THEM
ENGAGING WITH OUR STAKEHOLDERS
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Stakeholder group Why we engage How we engage The impact of that engagement
Our Customers
Our major customers are light vehicle
manufacturers. We also have many
customers at other tiers of the
automotive supply chain or in
otherindustries.
– To help maintain our
market-leading positions.
– To identify and secure new
businessopportunities and
ensureour products meet our
customers’ needs.
– To ensure uninterrupted supply
andaddress issues or concerns
where they arise.
– We operate account teams dedicated to each of our
vehicleOEM customers and have regular contact with
ourcustomers at all levels of our business.
– On significant commercial matters, our Chief Commercial
Officers, Account Team Vice Presidents and other senior
leaders communicate directly with senior executives at
ourcustomers.
– We host customer-focused “Drive” events, to give our
customers the opportunity to see our products in action.
– The Board receives regular updates from the Executive
Committee and business unit CEOs on customer topics.
– We engaged proactively and constructively with
ourcustomers on a fair recovery of inflationary and
other costs.
– We reflect our customers’ views and long-term planning
when considering our future investments, including in
EV-specific technologies.
Our Suppliers
We operate in global supply chains,
work with hundreds of suppliers who
provide us with raw materials,
sub-components and services we
needto deliver our products and run
our business.
– To obtain competitive pricing,
quality and reliability of supply.
– To access advanced materials
andcomponents.
– To ensure we have reserved
manufacturing capacity where
weneed it.
– To ensure responsible sourcing
practices in our supply chains.
– We aim to build deep relationships with our strategic
suppliers, managed by dedicated procurement teams
who are specialists in the products and services we source.
– We invite our strategic suppliers to supplier conferences,
sothey can understand our strategy and what we need
from them.
– We undertake supplier audits and inspections to ensure our
suppliers are meeting their obligations.
– There were no new major supplier quality concerns in
the year.
– We proactively engage with our strategic suppliers on
their sustainability roadmaps, to work toward a more
sustainable supply chain.
– Our business units addressed requests for price increases
in a fair and consistent manner.
Society and Communities
As a global business, we understand
that we have an impact on society,
theenvironment and the local
communities in the countries in
whichwe operate. Across the world,
hundreds of millions of people use
vehicles containing our products
everyday.
– To maintain our reputation as a
responsible and ethical business.
– To attract, motivate and retain
employees at all levels of the
organisation.
– To conserve resources and reduce
our impact on the environment.
– Regular meetings with key local stakeholders in the locations
in which we are based, and membership of local community
organisations and forums.
– We support local charities and not-for-profit organisations
by donations and volunteering.
– We participate in university and educational partnerships
and supporting employment and apprenticeship schemes.
– GKN Automotive launched a global charitable giving
framework to encourage charitable and community
activities at all its sites.
– GKN Automotive also launched a global STEM
programme, initially focusing on Poland, India and Mexico.
– As a Group, we made cash donations of around £820,000
to charities and good causes in 2024.
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ENGAGING WITH OUR STAKEHOLDERS CONTINUED
Stakeholder group Why we engage How we engage The impact of that engagement
Governments, Regulators and
Non-Government Organisations
As a global business, we interact with
governments, regulators and other
organisations in the markets and
territories in which we work.
– To allow us access to opportunities.
– To help protect our reputation
andto be a responsible
corporatecitizen.
– To fulfil our legal obligations.
– To maintain our “licence to operate”.
– We engage with governments on key local and national
issues that affect our industry and our business.
– We engage in regular dialogue with relevant tax authorities,
including with HMRC in the UK with whom we
communicate frequently.
– We are a member of numerous industry bodies and trade
associations in the automotive industry.
– We paid approximately £56 million of corporate income
taxes in 2024.
– We maintained positive relations with governmental and
regulatory agencies in the territories in which we operate.
Our Joint
Venture Partners
We operate parts of our business
through joint ventures and seek to
create long-lasting and mutually
beneficial relationships with our joint
venture partners.
– To ensure our joint ventures
aresuccessful.
– To protect our
market-leading positions.
– Our management teams meet regularly with management
teams from our joint venture partners.
– We have seats on the boards of our material joint ventures,
and we engage constructively and positively in joint venture
board and shareholder meetings.
– We interface with our joint ventures at all levels of our
organisation where necessary.
– We engaged closely with our joint venture
partnerHASCO in China on future strategy for our
SDSjoint venture.
– We built relationships with new members of management
at HASCO.
– We continued to successfully operate our other long-
running joint ventures.
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Reflecting stakeholders and section 172 factors in Board decisions
Section 172(1) of the Companies Act 2006 provides that each director must ensure that they act in the way they consider, in good faith, would most likely promote the Company’s success for
the benefit of its members as a whole, and in doing so have regard (among other matters) to: (a) the likely consequences of any decision in the long term; (b) the interests of the Company’s
employees; (c) the need to foster business relationships with suppliers, customers and others; (d) the impact of operations on the community and the environment; (e) the desirability of
maintaining a reputation for high standards of business conduct; and (f) the need to act fairly between shareholders of the Company.
Examples of decisions taken by the Board in 2024 and the stakeholders and other section 172 factors that the Board considered when taking those decisions are set out below. These examples
demonstrate how the Board, both individually and collectively, has had regard to the matters set out in section 172(1)(a) to (f) when performing its duty under section 172, during the year
ended 31 December 2024.
Topic/area Board decision Stakeholders and 172 factors considered
Strategic review
of GKN Powder
Metallurgy
– The Board took a decision to commence and announce a strategic review of our Powder Metallurgy business at its August meeting.
In doing so, the Board considered the impact of the decision on relevant stakeholders. Whilst the purpose of the review is primarily
to maximise returns for our investors, the Board was also mindful of a range of other stakeholders including employees, customers,
suppliers and joint venture partners, and we communicated with each of stakeholder group as appropriate to ensure they
understood the scope and potential outcomes of the review.
– Our Investors, Our People,
OurCustomers, Our Suppliers, Our Joint
Venture Partners
– Long-term consequences
USPP refinancing
– In October, the Board approved the refinancing of the Group’s existing debt, by way of the issuance of $500 million of notes in aUS
private placement (USPP). The USPP provided the Group with a more diverse funding structure and balanced debt maturity profile.
In approving the USPP refinancing, the Board considered relevant stakeholders including existing debt and equity investors and
the long-term consequences of the decision, which were particularly important given the much longer maturity profile of the USPP
debt in comparison to the debt being refinanced.
– Our Investors
– Long-term consequences
Rightsizing
investment in
eDrive systems
– The Board approved the decision to reduce investment and resources in eDrive systems, reflecting the uncertainty in the market.
In doing so, the Board was mindful to consider the impact on a range of stakeholders, including those employees in our
engineering functions who were affected by this decision. The Board also carefully considered the long-term consequences of
thedecision on the Group’s cost base and growth prospects, along with its desire to move to an increasingly propulsion-agnostic
product portfolio.
– Our Investors, Our People,
OurCustomers, Our Suppliers, Our Joint
Venture Partners
– Long-term consequences
Disposal of GKN
Hydrogen
– We disposed of our GKN Hydrogen business to Langley Holdings plc in July 2024. In approving the disposal, the Board was mindful
of the interests of a wide range of stakeholders. The Board considered that the disposal was in the best interests of our
shareholders, following the Board’s determination that further investment was not in shareholders’ interests due to a reassessment
of the longer-term prospects of the business in light of the wider hydrogen market. To ensure that the interests of all stakeholders
were maximised, the Board prioritised the disposal of the business as a going concern, in order to preserve employment, support
the communities in which the business operates and protect that the interests of the business’s customers and suppliers.
– Our Investors, Our People, Our
Customers, Our Suppliers, Society
andCommunities, Environment,
Governments, Regulators and NGOs
– Long-term consequences, Reputation
forhigh standards of business conduct
Dividend and
share buyback
– The Group’s final dividend was considered and approved at the March meeting, along with the commencement of a £50 million
share buyback programme. In approving these capital returns, the Board was mindful of balancing the interests of investors in
receiving an attractive dividend, with the longer-term capital requirements and growth opportunities of our businesses. The Board
also recognised that shareholders have differing views on the value of dividends and share buybacks and on how the Group uses its
cash, and its decision sought to achieve an appropriate balance between the interests of shareholders.
– Our Investors
– Long-term consequences, Acting fairly
forshareholders
Cyber governance
framework
– As part of our continued efforts to improve our risk management procedures, the Board approved the adoption of a new cyber-
security governance model at its August meeting. This framework was designed to reflect the Group’s operating model and build
on the existing good work in our business units. In doing so, the Board sought to ensure that our model was proportionate,
sufficiently flexible to adapt to future changes in the Group, but also robust enough to appropriately mitigate this risk.
– Our Investors, Our People
– Long-term consequences, Reputation
forhigh standards of business conduct
CONSIDERING STAKEHOLDERS IN OUR DECISIONS
87Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
AUDIT COMMITTEE REPORT
Philip Harrison
Chair of the Audit Committee
AUDIT
COMMITTEE
REPORT
The Committee held three meetings in 2024, with
furtherdetails on meeting attendance available on
page79. In March 2025, the Committee met to review
the Group’s full-year financial results and this Annual
Report and Accounts.
Throughout the year, the Committee focused on
monitoring the integrity of the Group’s financial
reporting, considering management’s significant
accounting judgements and the policies being applied,
and the findings of the statutory audit. The Committee
also focused on risk management, including the Group’s
principal and emerging risks and the internal controls
environment, which we continue to make progress in
enhancing.
Philip Harrison
Chair of the Audit Committee
4 March 2025
Composition of the Committee
The Committee is comprised of three independent Non-
Executive Directors: Philip Harrison as Chair, Celia Baxter and
Shali Vasudeva. The biographies of the Committee members
are set out on pages 75 to 76. Philip Harrison has recent and
relevant financial experience, and the Board has determined
that the Committee as a whole has competence in relation
to the sectors in which the Group operates.
Key responsibilities of the Committee
The Committee’s key responsibilities and objectives are set
out in its terms of reference and include:
– Reviewing and monitoring the integrity of the financial
statements of the Company and any formal
announcements relating to the financial performance of
the Group. This includes providing advice to the Board as
to whether the Annual Report and Accounts are fair,
balanced and understandable and providing the
information necessary for shareholders to assess the
Company’s performance, business model and strategy.
– Reviewing, challenging and reporting to the Board on the
going concern assumption and the assessment forming
the basis of the longer-term viability statement.
– Reviewing and, where necessary, challenging the
consistency of accounting policies, the methods used to
account for significant or unusual transactions and
compliance with accounting standards.
– Developing, implementing and monitoring the Group’s
policy on external audit.
– Monitoring and evaluating the independence and
effectiveness of the external audit function and approving
the external audit plan and fee.
– Taking into account relevant UK laws, regulations, the
ethical standards and other professional requirements and
the relationship with the auditor as a whole.
– Developing and overseeing the selection process for the
appointment of the external auditor and in respect of an
external audit tender, making a recommendation to the
Board on the appointment of the external auditor
following on from such tender process.
– Reviewing and where necessary challenging the provision
of non-audit services by the external auditor.
“Effective oversight of the Group’s
processes relating to financial
reporting, risk management and
internal controls is critical to our
future success.”
Dear shareholder
I am pleased to present the Committee’s report for the year
ended 31 December 2024.
This report aims to give shareholders an insight into how
theCommittee has fulfilled its responsibilities during 2024,
its first full year following the demerger and listing of the
Group in April 2023.
The Committee plays a key role in supporting the Board
tofulfil its responsibilities in relation to the integrity of the
Group’s financial reporting, risk management and internal
control systems. The Committee also oversees the
effectiveness of the internal audit function and the
relationship with our external auditor, Deloitte.
88Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
– Monitoring and reviewing the effectiveness of the
internal control and risk management framework and
review its effectiveness.
– Reviewing the Company’s procedures for detecting
fraud, and its systems and controls for the prevention
ofbribery.
– Reviewing the adequacy and security of the Company’s
whistleblowing arrangements for its employees,
contractors and external parties.
– Monitoring and evaluating the independence and
effectiveness of the internal audit function and
approving the internal audit plan and fee.
The Committee’s terms of reference can be viewed
at dowlais.com.
Priorities for 2025
In 2025, the Committee’s priorities will include the following:
– Conduct a competitive tender for the provision of
external audit services for FY26.
– Continue to focus on information and cyber-security
risk, monitoring the evolving landscape to assess
impact on the cyber-security risk position and
adjustpriorities as necessary.
– Consider the outcomes of the Group’s expanded
assurance processes relating to certain existing non-
financial controls, where BDO have been engaged to
report to the Committee in 2025.
– Focus on maturing the Group’s risk management and
internal control processes in line with the changes to the
UK Corporate Governance Code. Continue to monitor
and assess the evolving landscape of risk management
and internal controls, with a focus on Provision 29 of the
new Code.
Main activities
In 2024, the Committee focused on the following areas:
Topic/area Discussions/decisions
Financial
reporting
– Reviewed and recommended to the Board for approval the half-year and full-year Financial
Statements and the Annual Report for the year ended 31 December 2023.
– Reviewed and approved TCFD disclosures as part of the Annual Report for the year ended
31 December 2023.
External audit
– Received reports from the external auditor relating to the half-year and full-year
FinancialStatements.
– Reviewed and approved the auditor’s letter of engagement.
– Reviewed management’s letter of representation for the half-year and full-year
FinancialStatements.
– Reviewed and approved the auditor’s half-year and full-year plan and fee proposal. Oversaw
the rotation of the audit partner and reappointment of Deloitte as the external auditor.
– Approved the Non-Audit Services Policy.
– Discussed the plan for the audit tender.
Internal audit
– Received regular reports from the internal auditor.
– Approved the Internal Audit Charter.
– Discussed the scope of internal audit and reviewed and approved the proposed internal audit
plan for 2025.
Risk management
and internal
controls
– Reviewed the Group’s risk management process.
– Reviewed and approved an updated Group Risk Management Policy
– Undertook a robust assessment of the Group’s principal and emerging risks, which has been
recommended to the Board.
– Received updates on the appointment of BDO who have been appointed to provide
non-financial assurance services covering legal & regulatory risk and ethics risk, product safety
and warranty risk, business continuity risk & crisis management risk and health and safety and
environmental risk.
– Reviewed cyber-security reporting data as part of the Group’s new cyber-risk
governanceframework.
Compliance
– Received and reviewed regular reports on the Group’s whistleblowing procedures and
anti-bribery and corruption compliance programme.
– Received and reviewed an annual fraud prevention report.
Annual review of
terms of reference
– Reviewed the Committee terms of reference to ensure they reflect the requirements of the
2024 UK Corporate Governance Code.
89Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
AUDIT COMMITTEE REPORT CONTINUED
How we work
The Committee met three times in 2024, with meetings
scheduled at appropriate times in the financial reporting
cycle. This enabled the Committee to review the Annual
Report and Financial Statements, the Interim Financial
Statements and the audit plan ahead of the year-end
auditand to maintain a view of the internal financial
controlsand processes throughout the year. Individual
member attendance at these meetings can be found on
page 79.
The Chair of the Board, Chief Executive Officer, Chief
Financial Officer, Group Financial Controller and General
Counsel and Company Secretary attend Committee
meetings on a regular basis and the Chair of the Board
attended all scheduled Committee meetings in 2024.
Representatives from BM Howarth Ltd, the Group’s
internalauditor, and Deloitte LLP (Deloitte), the Group’s
external auditor, attend all meetings by standing invitation.
The Committee holds a closed session with the representatives
from the internal auditor and external auditor, without
executive management present, at each meeting.
Committee evaluation
During the year, the Committee undertook an effectiveness
review, which was carried out internally. Further details of the
review can be found on page 81.
Significant issues considered in relation to
theFinancial Statements for the year ended
31 December 2024
Asset impairment indicators, including goodwill
The Group tests goodwill annually for impairment and as
required if there are indications that goodwill might be
impaired. In preparing the impairment assessments,
management makes certain assumptions over the growth
rates, operating margins, discount rates and long-term
growth rates to be applied. The Group’s impairment testing
utilised cash flow projections supported by the Group’s 2025
budget and 2026–2029 strategic plan.
The Committee reviewed the output of the impairment
assessment, challenging management over the assumptions
made and conclusions reached. Management concluded
that sufficient headroom existed for both the Automotive
and Powder Metallurgy groups of cash generating units and,
therefore, no impairment was required.
The Committee agreed with these conclusions and has
reviewed the sensitivity disclosures, included within Note 12,
and considers them appropriate.
The Committee also assessed whether the recommended
cash and share offer from AAM for the Group was an
indicator of impairment. The Committee concluded that
itremains appropriate to support the carrying value of the
Group’s assets based on the value in use assessment having
considered the implied current and future earnings
multiples, together with the strategic rationale for the
combination and opportunity to accelerate the realisation
ofshareholder value.
Alternative Performance Measures
The Board considers the adjusted results to be an important
measure used to monitor how the businesses are performing
as this provides a meaningful reflection of how the
businesses are managed and measured on a day-to-day
basis and achieves consistency and comparability between
reporting periods. Whilst the Group has a defined policy
over the treatment of adjusting items, there is still some
judgement to be applied as to the classification of these
items, specifically regarding restructuring costs. The
Committee reviewed management’s paper outlining the
nature of such items, challenging the application of policy
and consistency of treatment, ensuring that there is
sufficient disclosure to explain the nature of these items.
Retirement benefit obligations
The Group has a number of defined benefit pension plans
that are significant in size. As at 31 December 2024, the
Group’s retirement benefit obligation was a net deficit of
£384 million (2023: £459 million). The valuation of each plan
issensitive to the discount rate, inflation rate and mortality
assumptions made by management. The Committee has
reviewed the assumptions made and the sensitivity
disclosures included within Note 24 and considers
themappropriate.
Financial reporting
The Committee has reviewed and recommended the
approval of the Group’s half-year and full-year Financial
Statements, taking into consideration the areas of significant
accounting judgements, going concern and viability.
AttheBoard’s request, at its meeting in March 2025, the
Committee considered whether the Annual Report, when
taken as a whole, was fair, balanced and understandable and
provided the information necessary for shareholders to
assess the Company’s performance, business model and
strategy.
The Committee reviewed the effectiveness of the processes
adopted by management in preparing this Annual Report,
which included:
– Ensuring that all contributors involved in preparing the
Annual Report understood the requirements for creating a
report that is “fair, balanced, and understandable”.
– Regular engagement with senior management to seek
feedback on proposed content and changes.
– Consultation with external parties, including corporate
reporting specialists, remuneration advisers and the
external auditor.
– Verification of non-financial information, key performance
indicators and statements contained within the Annual
Report.
– Use of cold readers, including an external independent
proofreader.
– Senior management review to ensure overall balance,
consistency and a fair reflection of the performance of the
Group.
The Committee reviewed the form, content and consistency
of the narrative in the Annual Report and Financial
Statements and the associated processes and controls ahead
of recommending approval of the Annual Report and
Financial Statements to the Board.
90Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
A longer-term viability review was undertaken by
management, covering the three-year period to
31 December 2027, including its going concern assessment.
The Committee reviewed and considered management’s
assessment, challenging the key assumptions used and the
downside scenarios applied in relation to the Group’s key
risks. Based on its review, the Committee considers it
appropriate to prepare the Consolidated Financial
Statements on the going concern basis and approved the
Viability Statement. The Viability Statement and the going
concern disclosure can be found on page 71.
External audit
During the period, the Committee oversaw the work
undertaken by the Group’s external auditor Deloitte. The
Committee approved the external audit plan for the full-year
Financial Statements, terms of engagement and the
proposed audit fees.
The Committee conducted a review of the effectiveness of
Deloitte at its November meeting, which covered its work
during the 2023 full-year audit, 2024 half-year review and the
subsidiary audit process. The review took the form of a
questionnaire that was circulated by the Company Secretary
to members of the Committee, members of senior
management and the finance teams in our business units.
The review process was designed to assess the performance,
effectiveness, independence and resources of the auditor.
The review concluded that the auditor was effective,
objective and had maintained independence.
Alongside the results of the effectiveness review, the
Committee received a confirmation of independence from
the auditor for the year ending 31 December 2024 at its
March 2025 meeting.
In accordance with the FRC’s Ethical Standard, the lead audit
partner should rotate every five years. Including his tenure at
Melrose Industries PLC, the lead partner, Edward Hanson,
completed his fifth year and stepped down at the end of the
2023 financial year audit. Deloitte proposed a number of
candidates to succeed him and a new partner, John Charlton,
was appointed as lead partner for 2024 financial year.
In accordance with section 489 of the Companies Act 2006, a
resolution proposing the reappointment of Deloitte as
Group auditor will be put to shareholders at the 2025 AGM.
There are no contractual obligations in place that would
restrict the Group’s choice of auditor.
The Committee is conscious that, as a public interest entity
(PIE), Dowlais Group plc is subject to the rules of the
Competition and Markets Authority’s Statutory Audit
Services for Large Companies Market Investigation
(Mandatory Use of Competitive Processes and Audit
Committee Responsibilities) Order 2014. Although Dowlais
only became a PIE upon its creation in 2023, Deloitte has
audited the Group’s business units since 2016, first in its
capacity as auditor of GKN plc and subsequently in its
capacity as auditor of Melrose Industries PLC. Therefore, it is
considered appropriate to conduct a full competitive tender
for the provision of external audit services for the year
ending 31 December 2026. At the November meeting, the
Committee considered the firms proposed to be invited to
tender for the provision of external audit services and
commenced the tender process in January 2025. In light of
the proposed combination with AAM, the Committee will
defer the tender process until the second half of 2025.
Non-audit services
The Committee has adopted a non-audit services policy,
which governs the provision of non-audit services and is
designed to safeguard the independence and objectivity of
the external auditor. The policy complies with the FRC’s 2024
Revised Ethical Standard and details the circumstances in
which the auditors may be permitted to undertake non-
audit services for the Group and which services are
prohibited.
The Audit Committee has pre-approved the use of the
auditor for non-audit services where they are included in the
policy’s list of permitted non-audit services and:
– They are approved by the CFO and do not exceed
£25,000; or
– They are approved by the Chair of the Audit Committee
or their designate and do not exceed £50,000.
All requests for permitted non-audit services are assessed
with regards to whether the provision could impair the
external auditor’s independence or objectivity and the
safeguards in place to mitigate such threats; whether the
skills and experience of the external auditor makes it the
most suitable supplier of the services; and the nature of the
non-audit services and fees (both individual and aggregate).
The total fees for non-audit services provided by the
external auditor must not exceed 70% of the average of the
statutory audit fee for the Company, of its controlled
undertakings and of the Consolidated Financial Statements
paid to the auditor in the last three consecutive financial
years.
During the period ended 31 December 2024, the external
auditors undertook non-audit work relating to a review of
the Group’s interim report and assurance services relating to
certain regulatory compliance matters across several
different components. Details of the fees of £0.5 million paid
to the external auditors are set out in Note 7 to the Financial
Statements.
Internal audit
The Group’s internal audit function, which is outsourced to
BM Howarth, supported where needed by EY, provides
independent risk-based and objective assurance, advice and
insight on the Group’s governance, risk management and
control processes. The Committee oversees the work of
internal audit including receiving regular reports, approving
the internal audit plan and scope of work. The Committee
approved the Internal Audit Charter at its November
meeting and has reviewed and agreed the plan for 2025.
During the year, BM Howarth conducted 23 audits across the
Group’s sites and evaluated the reliability and integrity of
financial information as reported to the Dowlais central
finance function; accounting procedures and internal
controls affecting financial statements; and compliance with
accounting policies and procedures as set out in the Group’s
Accounting Policy and Procedures. The key findings of each
internal audit were discussed and agreed with management
from the business units and representatives from the Dowlais
central finance function.
BM Howarth provides regular reports to the Committee on
the activities that it has undertaken, which has enabled the
Committee to review the effectiveness of the Internal Audit
function on an ongoing basis during the period.
91Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
AUDIT COMMITTEE REPORT CONTINUED
Internal controls
The Committee is responsible for reviewing and monitoring
the Group’s internal control and risk management systems.
Features of the Group’s internal control environment include:
– A comprehensive system of financial reporting, business
planning and forecasting.
– A defined delegation of authority structure, with clearly
defined matters reserved for the Board, Executive
Committee members, Group central functions and other
defined levels of authority.
– Formal documentation of Group policies and procedures,
including those relating to accounting, audit, compliance,
ethics, governance, legal, risk, secretariat, tax and treasury.
– The close oversight of the Executive Committee in
day-to-day operations, including regular meetings with
business unit management teams and senior managers to
review operational activities.
– Regular reporting on the effectiveness of the Group’s
internal controls to the Committee and the Board.
– Internal assurance processes, including rigorous financial
assurance processes in each business unit and an annual
legal and compliance assurance process.
– Regular Board review of Group strategy, including
forecasts of the Group’s future performance.
– Extensive employee training programmes, targeted at key
risk areas.
– Review by the Committee of internal audit reports and
reports from the external auditor.
The Group’s internal controls were reviewed by the
Committee throughout the year and subject to a formal
review by the Committee in March 2025. This included a
review of:
– The key areas of the Group’s control environment,
including governance, financial and reporting, legal and
compliance and operational-related controls.
– Identified control failures during the year, underlying
causes and lessons learned, although no significant failings
or weaknesses were identified.
– Improvements, which included the ongoing expansion of
assurance processes related to the Group’s non-financial
controls in areas such as legal and compliance, health and
safety and business continuity.
The review also involved discussion by the Committee
withexecutive management. As part of the review, the
Committee concluded that there were no material
weaknesses in the Group’s internal controls. The findings
ofthe review were then shared with the Board.
Risk management
The Committee is responsible for monitoring the Group’s
risk management processes and controls and making
recommendations to the Board regarding risk appetite,
riskcontrols and risk mitigation. This includes reviewing
theGroup’s risk management framework, its principal and
emerging risks, key controls and their oversight at least once
per year.
The Group’s risk management systems were reviewed by
theCommittee throughout the year and subject to a formal
review by the Committee in March and November 2024.
Aspart of its review, the Audit Committee considered the
detective and remedial controls that relate to those risks
andwhether these are operating effectively.
In August and November 2024, the Committee assessed the
Group’s principal risks and risk appetite. During the August
meeting, as part of the half-year review, the Group’s
principal risks were confirmed as unchanged from those
approved by the Board in March. At the November meeting,
the Committee reviewed a comprehensive Group risk
register developed by the executive team. This register
incorporated risk assessments from the executive team,
Group function leads and business unit reviews. Using this
register, the Group’s principal risks were analysed and
evaluated, leading to some adjustments in risk levels.
As part of the review, the Committee concluded that the
Group’s risk management systems were appropriate. The
findings of the review were then shared with the Board.
An overview of the Group’s risk management processes and
the Group’s principal risks are described in more detail on
pages 63 to 70.
Whistleblowing
The Committee oversees the Group’s whistleblowing
arrangements. The Company’s Whistleblowing Policy
encourages employees and others to “speak up” and raise
any issues of concern they may have, including any potential
illegal or unethical practices. A confidential whistleblowing
hotline, which is externally managed, is available and issues
can be raised anonymously. Any potential concerns that are
raised, either via the hotline or by other means, are followed
up and investigated as appropriate. The Committee receives
a whistleblowing report at each meeting that includes
details of ongoing investigations and the outcomes of
closed investigations. In 2024, 88 whistleblowing disclosures
were made across the Group. Each disclosure is investigated
with any appropriate response measures taken. No material
compliance or control failures were identified as a result of
such disclosures.
Anti-bribery and corruption and fraud
The Group has a zero-tolerance approach to bribery and
corruption, and the Committee has oversight of the Group’s
anti-bribery and corruption systems and controls. The
Group’s anti-bribery and corruption compliance framework
includes extensive measures to combat the risk of bribery
and corruption, including risk assessments, mandatory
training programmes, supplier, agent, intermediary and
counterparty due diligence and approval processes,
donations and sponsorship procedures and gifts and
hospitality procedures. The Committee receives a report at
each meeting that details any current bribery and corruption
investigations or incidents and any relevant outcomes. No
incidents of bribery and corruption involving the Group or
its employees were identified in the year.
The Committee is also responsible for reviewing the
Group’sprocedures for detecting and preventing fraud.
TheCommittee received an annual fraud prevention report
at its November meeting, which provided the Committee
with an update on the Group’s fraud prevention procedures,
incidents investigated in the year and planned improvements.
92Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Simon Mackenzie Smith
Chair of the Nomination Committee
NOMINATION
COMMITTEE
REPORT
Composition of the Committee
Excluding the Chair, who was independent on
appointment,the Committee comprises solely Independent
Non-Executive Directors: Simon Mackenzie Smith as Chair;
Celia Baxter, Philip Harrison, Fiona MacAulay and Shali
Vasudeva. The biographies of the Committee members are
set out on pages 75 to 76. Alexandra Innes stepped down
from the Board and, therefore, the Committee with effect
from the conclusion of our first AGM on 21 May 2024.
Key responsibilities of the Committee
The Committee’s key responsibilities and objectives are set
out in its terms of reference and include:
– Monitoring the membership of the Board (including
structure, size, composition, skills, knowledge, experience
and diversity) and recommending any adjustments it
thinks necessary to the Board.
– Leading the process for appointments to the Board.
– Ensuring plans are in place for orderly succession to the
Board and senior management positions.
– Overseeing a diverse pipeline for succession for the Board
and senior management team.
– Approving the Company’s Diversity, Equity and Inclusion Policy.
– Overseeing the Board and Committee evaluation process.
The Committee’s terms of reference can be viewed
at dowlais.com
How we work
The Committee meets at least twice per year, with additional
meetings to take place as necessary. The Committee
heldthree meetings during the year and further details
regarding meeting attendance can be found on page 79.
The Chief Executive Officer, General Counsel and
CompanySecretary and Chief People, Sustainability
andCommunications Officer attend Committee meetings
where necessary and appropriate.
Board composition and succession planning
The Board continues to recognise the importance of
ensuring well-considered succession plans are in place and
the Committee has continued to focus on Board composition
and succession planning during the year, both for executive
and non-executive roles.
The Committee discussed succession plans for the Group
CEO and CFO at its June and November meetings and
received an update with regards to the succession plans for
the CEOs of GKN Automotive and GKN Powder Metallurgy
at its November meeting. The Committee continues to focus
on developing a diverse pipeline at both Board and senior
management level.
Throughout the year, the Committee continued to review
and monitor the Board’s composition, skills and balance as
awhole, which has included discussing the potential to
appoint additional non-executive directors following
Alexandra Innes and Geoffrey Martin stepping down from
the Board at the conclusion of the AGM on 21 May 2024.
Inlight of the recommended share and cash combination
with AAM that was announced on 29 January 2025, the
Committee has paused discussions regarding the Board’s
composition, potential appointment of additional non-
executive directors and Committee membership.
The Committee has recommended to the Board the
re-election of the current directors to shareholders at the
2025AGM, having had due regard for each directors’
performance and ability and why their contribution is
important to the Company’s long-term sustainable success.
“We have continued to focus on
Board composition and our senior
management talent to ensure we
have the skills and capabilities we
need both now and in the future.”
Dear shareholder
I am pleased to present the Committee’s report for the year
ended 31 December 2024. This report describes how the
Committee has fulfilled its responsibilities.
Our focus during the year has been on board composition,
Executive Director succession planning and diversity and
inclusion. The Committee also agreed the Board and
Committee performance review process, the outcomes
ofwhich are set out on page 81 of this report.
Simon Mackenzie Smith
Chair of the Nomination Committee
4 March 2025
93Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOMINATION COMMITTEE REPORT CONTINUED
Main activities
During the year, the Committee has focused on the following areas:
Topic/area Discussion/decision
Board composition
and succession
planning
– Continued the process of reviewing the Board composition and the potential
appointment of one or more additional non-executive directors.
– Discussed CEO and CFO succession plans.
– Received an update on succession planning for the CEOs of our business units.
Diversity and inclusion
– Received an update on diversity and inclusion at a senior management level, reviewed
senior management gender and ethnicity and discussed potential diversity targets.
Board and Committee
evaluation process
– Approved the process for the annual Board and Committee performance review.
Annual review of
terms of reference
– Reviewed the Committee terms of reference to ensure they reflect the requirements
of the 2024 UK Corporate Governance Code.
Board diversity, equity and inclusion
The Board believes that an individual’s skills, experience and
expertise are key to determining any appointment to the
Board, irrespective of any personal characteristic, trait or
orientation. However, the Board also understands the
valueof diversity to the Group’s long-term success and,
accordingly, both the Board and the Committee place great
emphasis on ensuring that the Board’s membership and the
pipeline for succession planning is diverse.
The Board has adopted a Board diversity policy that applies
to the Board and its Committees and outlines the Group’s
commitment to making appointments on the basis of merit,
whilst taking into account various factors including the
relevant balance of skills, knowledge and experience needed
to ensure a rounded Board. The Nomination Committee
leads the Board appointment process and, as set out in
thepolicy, takes into consideration characteristics such
asethnicity, sexual orientation, disability, age, nationality,
educational, professional and socioeconomic background
and gender in order to encourage a diverse range of
candidates. The policy can be viewed at dowlais.com.
At its November meeting, the Committee received an
update on diversity within our senior management team
andwill review and discuss diversity data at business unit
level in 2025.
In accordance with Listing Rule 6.6.6, we confirm that as at
31 December 2024, our Board composition was 43% women.
We have a female senior independent director who is also
chair of our Remuneration Committee, and one of our
Boarddirectors is from a minority ethnic background.
As at 31 December 2024, 41% of Dowlais’ senior management
team and direct reports were women. We continue to be
supportive of the FTSE Women Leaders Review on gender
diversity and the Parker Review on ethnic diversity, and we
have already met the Parker Review objective of having one
Board member from a minority ethnic background by 2024.
The Group’s diversity data can be found on page 58.
Board and Committee performance review
The Committee discussed the proposal for the 2024 Board
and Committee performance review at its June meeting
andagreed that it should be conducted by way of a
questionnaire facilitated by the Company Secretary.
Committee members had the opportunity to review
andprovide feedback on the content of the evaluation
questionnaires and reviewed the agreed timetable for
theevaluation. The Committee also agreed the proposed
annualevaluation process for the chair of the Board and
theindividual directors. It is intended that the 2025
annualperformance review will be externally facilitated,
inaccordance with the requirements of the UK Corporate
Governance Code.
See pages 81 for further details of the Board and Committee
performance review process
Looking ahead to 2025
Although the Committee has paused its review of the
Board’s composition in light of the announcement of
therecommended combination with AAM, it continues
torecognise the importance of having the right balance
ofskills, knowledge and experience within the Company’s
leadership team and will continue to monitor this
during2025.
94Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
The Committee remains confident that the remuneration
structure in place supports a management team that is
committed to delivering strong performance.
Alignment of incentives to strategy
Our Remuneration Policy is purposefully structured to create
a direct and tangible link between incentive measures and
strategic business priorities, and the Committee continued
to believe that the incentive metrics for 2024 should be:
– Adjusted operating profit, entity cash flow and strategic
objectives for the annual bonus plan, continuing to reflect
the significance of profitable cash generation.
– Adjusted earnings per share (EPS) growth and total
shareholder return (TSR) for the performance share
awards, reflecting the importance of sustainable
growthtolong-term value creation and alignment
withshareholder interests.
Further information about the measures and targets set
forthe 2024 incentives is provided on pages 105 to 107.
2024 remuneration considerations and decisions
The key areas of discussion and decisions of the Committee
during the year can be summarised as:
– Ensuring there is appropriate balance between the
business need for meaningful incentivisation for
management and the wider context in which the business
operates, taking into account the differing expectations
ofstakeholders.
– Reviewing the Directors’ Remuneration Report and
Directors’ Remuneration Policy and approving it for
inclusion in the 2023 Annual Report.
– Monitoring the external environment including the
remuneration implications of the new UK Corporate
Governance Code, updated investor guidelines as well as
trends and developments in market practice.
– Approving awards of performance shares to the Executive
Directors and other senior executives.
– Approving targets for the 2024 annual bonus and
performance share awards including appropriately
stretching strategic and ESG objectives.
– Reviewing the salaries of the Executive Directors, taking
into account salary increases implemented across the
wider workforce.
– Commissioning an independent review of the TSR peer
group for future performance share awards to ensure it
remains appropriate and robust.
– Approving the first awards under the unified “omnibus”
share plan (OSP) following its approval at the 2024 AGM.
– Considering whether the formulaic outcome of the 2024
annual bonus was aligned with business performance and
the stakeholder experience over the relevant period.
“Remuneration remains key to
incentivising strong performance
and retention of our skilled
workforce in turbulent times.”
Introduction
On behalf of the Board, I am pleased to present the
Directors’ Remuneration Report for the Company for
theyear ended 31 December 2024.
Our first Directors’ Remuneration Policy received strong
shareholder support and was approved (99.4% in favour of
votes cast) by shareholders at the 2024 AGM. The first
Directors’ Remuneration Report also received strong support
from shareholders (94.7% in favour of votes cast). Both the
Policy and its implementation in 2024 were designed to
create a direct and tangible link between incentive measures
and strategic business priorities.
Celia Baxter
Chair of the Remuneration Committee
REMUNERATION
COMMITTEE
REPORT
95Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
REMUNERATION COMMITTEE REPORT CONTINUED
Business highlights in 2024
2024 was a challenging year for the Group, as factors largely
beyond our control resulted in significant headwinds. You
can read about our business performance during 2024 in
more detail in the Strategic Report starting on page 6.
Highlights for 2024 include:
– Delivered on our revised guidance and performed slightly
ahead of market expectations, despite operating in a
volatile and challenging environment.
– A decrease in adjusted revenue, down 6.4% on prior year
on a constant currency basis.
– A decrease in adjusted operating profit, down 4.2% on
prior year on a constant currency basis.
– Despite lower volumes, proactive cost management,
performance initiatives and commercial recoveries helped
deliver an adjusted operating margin of 6.6%, a 10bps
increase on prior year.
– Adjusted free cash flow of £15m and increased net debt of
£968m.
– Gold EcoVadis rating for Automotive, improving on prior
rating, and a Gold rating for Powder Metallurgy.
– Elimination of cash losses following the disposal of GKN
Hydrogen. Strategic decisions to right size our eDrive
systems business.
– Commenced a strategic review of our Powder
Metallurgybusiness.
– A £50m share buyback programme of which over £31m
wascompleted.
– Continuing to execute our strategy to accelerate the
transition in our Automotive business toward a powertrain-
agnostic business model.
Bonus and performance share outcomes
In line with the financial performance outcomes described in
the Strategic Report, adjusted operating profit and entity
cash flow were below the threshold bonus targets, details
ofwhich are set out on pages 105 to 106. Combined with
performance against the strategic objectives, this led to
aformulaic outcome of 20% of maximum annual bonus
opportunity for the Executive Directors.
The Policy, as approved by shareholders, permits the
payment ofa bonus for strategic objectives independent of
financial performance. Notwithstanding this feature, the
Committee is conscious of the sensitivity involved with
paying a bonus when financial targets have not been
achieved and has considered this very carefully. In particular,
the Committee considered the importance of the Executive
Directors’ strategic objectives and noted their relevance to
external stakeholders. Objectives relating to the future
strategic direction of the business units and the operational
and financial resilience of the Company are crucial to the
Company’s medium and long-term performance, as
areenvironmental commitments. The delivery of these
objectives is key to future financial success and ensure
thatDowlais is well positioned to maximise opportunities
asthe automotive market starts to recover from the current
downturn.
The first performance share award granted to Executive
Directors is not scheduled to vest until 2026, so there were
no long-term incentive outcomes in 2024.
Full details of the 2024 remuneration paid to Directors
andthe basis for its determination are set out on pages
104to 107.
Stakeholder experience in 2024
When making remuneration decisions the Committee
considered the experience of a wide range of the Group’s
key stakeholders during the 2024 financial year.
– Good health and safety performance across the Group,
with an AFR of less than 0.1 for a second year in a row,
better than our target.
– Good quality performance, with low single-digit PPM
defect rates.
– Progress on our ESG strategy and development of
transition plans, with Gold EcoVadis ratings for
Automotiveand Powder Metallurgy.
– A full-year dividend per share of 4.2p (subject to final
approval by shareholders).
– Over £31m returned to shareholders through the share
buyback programme.
The Committee reviewed the evidence of performance and
considered the context of the wider experience of our key
stakeholders. It determined that the Group made good
progress in 2024 despite the many challenges, as volatility
inthe global transition to EVs saw significant drops in
production volumes across our customers’ vehicle platforms.
Despite this, the Group continued to execute its strategy,
taking actions to transform the business, including disposal
of the loss-making Hydrogen business, commenced a
strategic review of the Powder Metallurgy business and
accelerated the transition in the Automotive business
toward a powertrain-agnostic business model.
The Group also took decisive actions to align operations with
long-term value creation, including the strategic decision to
right size the eDrive systems business which faced significant
headwinds due to ongoing volatility in BEV production
schedules, contributing to the majority of the Group’s
6.4%adjusted revenue decline year-on-year.
Proactive cost management and pricing recovery efforts
enabled the Group to improve adjusted operatingmargin
by 10bps, offsetting the impact from lowervolume and
demonstrating a disciplined approach andoperational agility.
The Committee concluded the annual bonus outcome for
2024 appropriately reflected the Company’s performance.
It was, therefore, not felt necessary to apply any discretion
toamend the outcome. The Committee also concluded that
the remuneration framework had operated as intended,
both in terms of appropriately incentivising corporate
performance and in respect of quantum.
Policy application in 2025
Consistent with policy and practice for the wider workforce
the Committee carefully considered whether any increases
should be awarded to Executive Directors’ salaries in 2025.
Factors considered in making the decision included planned
salary increases for the wider employee population, personal
performance of the executives, investors’ views and the
external environment (including volatility in the automotive
sector, tariffs and current uncertainties). The Committee also
considered Company performance and the prevailing global
talent market for capable senior talent in the automotive
sector.
96Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
The Committee concluded that 2025 salaries for Executive
Directors should be increased by 3%, an increase that took
into account the average increase of 3% that had been
budgeted for the wider workforce in the UK.
The structure, performance measures and weightings of
the2025 annual bonus plan remain unchanged from 2024,
except that adjusted free cash flow will replace entity cash
flow to better align with external reporting.
Despite the agreement between the boards of Dowlais and
American Axle & Manufacturing (AAM), the Committee set
the 2025 annual bonus targets in the ordinary manner on the
basis that Dowlais continues to operate independently until
such time as shareholders approve the Combination. In
setting stretching performance targets for 2025, the
Committee considered the Board approved budget,
long-term strategy, analyst consensus and the continued
headwinds in the automotive sector. 2025 annual bonus
targets are considered commercially sensitive and will be
disclosed in the 2025 Annual Report.
In line with the Policy, Executive Directors who do not meet
the minimum shareholding requirement will be required to
defer 30% of their annual bonus award into shares of the
Company for two years, which will be subject to malus and
clawback provisions.
During 2024, the Committee noted that the current TSR peer
group of 11 companies was relatively small, and certain
constituent companies had material operations in non-
automotive sectors. The Committee commissioned an
independent review of the peer group to consider its
appropriateness with the intention of increasing the number
of constituents and ensuring that those included in the peer
group had similar exposure to the short- and long-term
opportunities and challenges in the automotive sector. The
Committee approved an updated peer group of 28
companies for the 2025 performance share award, which
included a higher number of global automotive peers. The
constituents of the new TSR peer group can be found on
pages 107 and 108. Other than this change in peer group, the
structure, performance measures and weightings of the 2025
performance share awards remain unchanged. The
Committee reviewed and set EPS growth targets that
accurately reflect the current business environment whilst
continuing to be sufficiently stretching.
Consistent with good practice, the Committee noted the
share price performance since the 2024 performance share
awards were granted. The Committee also noted that
despite the challenging market environment, Dowlais and
the Executive Directors delivered a robust performance in
2024. After much discussion, the Committee concluded that
the 2025 performance share awards should be made at the
same level as 2024. However, the Committee noted that it
has discretion within Policy to scale back vesting to avoid
windfall gains.
Employee pay and engagement
We operate a range of engagement mechanisms across the
business, overseen by a Workforce Advisory Panel (WAP)
toensure effectiveness. The primary methods include
engagement surveys, skip-level meetings and employee
town-halls (both local and global). Further details are
provided on page 110.
Whilst we have not directly consulted on executive
remuneration, the wider workforce can ask questions and
provide feedback on this topic through our engagement
mechanisms referred to above.
In addition to the WAP, the Board also engages with the
workforce in a number of other more informal ways including
direct interaction with employees when visiting the Group’s
sites, and where appropriate engaging with employee
representatives. This helps ensure that the Board can also
receive “unfiltered” views direct from employees.
Recommended cash and share combination
withAAM
On 29 January 2025, the boards of Dowlais and AAM reached
an agreement and recommended the share and cash
combination of the Company with AAM.
The Committee took into account the interests of
shareholders and employees when considering the
remuneration proposals contemplated in the event
shareholders approve the proposed combination of Dowlais
and AAM. Those remuneration proposals are set out in the
Cooperation Agreement between the Company and AAM,
available at dowlais.com.
As at 4 March 2025, shareholder approval of the proposed
combination of the Company and AAM has not yet been
obtained. The Committee has, therefore, been operating in
compliance with the Takeover Code during this offer period
and has continued to act independently in relation to
remuneration matters as set out in this report.
Engagement with shareholders
Shareholder views continue to be welcomed and are an
important consideration, together with emerging trends,
best practices and investor guidelines.
I would like to take the opportunity to thank our
shareholders for their continued engagement and support
for Committee decision making. At our AGM in May 2025,
shareholders will be asked to vote on the Remuneration
Report, and I hope that the Committee will once again have
your support.
As Committee Chair, I continue to be available to engage
with shareholders who wish to discuss the application of our
Policy, or any of the content set out in this report.
Celia Baxter
Chair of the Remuneration Committee
4 March 2025
97Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
REMUNERATION COMMITTEE REPORT CONTINUED
REMUNERATION AT A GLANCE
Summary of the Directors’ Remuneration Policy application in 2024 and 2025
The information below summarises how the Remuneration Policy, approved by shareholders at their AGM in May 2024, was applied in 2024 and will apply in 2025.
Element 2024 2025 2026 2027 2028 Application for 2024 Application for 2025
Base salary Base salaries from 1 January 2024:
– CEO: £921,200
– CFO: £652,100
Increases of 3% applied so that salaries from 1 January 2025 are:
– CEO: £948,900
– CFO: £671,700
(Average budgeted increase for UK workforce as a whole is 3%)
Benefits
Provide market-competitive and cost-effective benefits enabling the
recruitment and retention of Executive Directors
Benefits will operate in line with the Policy
Retirement
benefits
Employer contributions:
– CEO: 12% of salary
– CFO: 12% of salary
No change from the Policy
Annual bonus
Maximum annual bonus opportunities:
– CEO: 200% of salary
– CFO: 150% of salary
2024 performance measures:
– 40% adjusted operating profit
– 40% entity cash flow
– 20% strategic/ESG objectives
No change from the Policy
Cash flow measure changed to adjusted free cash flow for 2025 to align
with corporate reporting
Performance
shares
2024 performance share award levels:
– CEO: 300% of salary
– CFO: 200% of salary
2024 performance measures:
– 50% adjusted EPS annual growth
– 50% TSR ranking against comparator group
– Vested awards are subject to a 2-year holding period
No change from the Policy
No changes to performance measures for 2025, but TSR comparator
group realigned and expanded to 28 European and US companies in the
automotive parts and equipment industry sector
Share ownership
requirements
Minimum share ownership requirement:
– CEO: 300% of salary
– CFO: 300% of salary
No change from the Policy
What performance means for Executive Directors’ pay in 2024
Remuneration packages are designed to ensure strong alignment between individual pay and Company performance. Performance against financial targets in 2024 has been impacted by the
significant challenges and uncertainties affecting the automotive sector as a whole, and this has been reflected in the incentive outcomes, as set out in the Annual Report on Remuneration.
Deferral period
Holding periodVesting period
Fixed pay
Variable pay
Single total figure of remuneration for 2024 (audited)
£368,480 £1,063,359
CEO
Single total figure of remuneration for 2024 (audited)
£195,630 £761,967
CFO
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Dowlais Group plc 2024 Annual Report 98
Set out below are the key elements of our Directors’ Remuneration Policy applicable from
21 May 2024 when the policy was approved by our shareholders. The full Policy can be found
in the 2023 Annual Report.
Remuneration Policy table (approved 2024)
Fixed remuneration
Base salary
Purpose and
link to strategy
To recruit and retain Executive Directors of the calibre and talent required
to deliver Dowlais’ strategic objectives and priorities.
Operation Salaries are normally reviewed annually, typically any increase with effect from
1 January. Ordinarily, when reviewing salaries, the Committee will consider
factors including:
– Business performance.
– The complexity and international spread of the business.
– Personal performance, skills and expertise.
– Independently sourced data for relevant comparator groups.
– Salary increases awarded to the Dowlais executive management team and the
wider Dowlais Group workforce.
Maximum
opportunity
There is no formal maximum limit and, ordinarily, salary increases will be
nohigher than the average increases for employees across the wider
Group.However, increases may be higher to reflect a change in the
scopeofan individual’s role, responsibilities or experience, or in other
exceptionalcircumstances.
Should a new Executive Director have a base salary set below the previous
incumbent’s level, or below market level, the Committee reserves the right
tomake phased increases, which may be above the wider employee level,
subject to the individual’s development in role.
Performance
framework
The results of an individual’s annual performance assessment and business
performance are considered when reviewing salary levels.
Benefits
Purpose and
link to strategy
To recruit and retain Executive Directors of the calibre and talent required to
deliver Dowlais’ strategic objectives and priorities with market-competitive
and cost-effective benefits, which are consistent with an individual’s role and
the location in which they operate.
Operation Executive Directors are eligible to receive benefits consistent with other Group
employees and market practice, which may vary by location. This typically
includes, but is not limited to:
– Car benefit.
– Private medical insurance (including eligibility for the Executive Director’s
spouse or partner and eligible dependent children).
– Health checks.
– Life assurance.
– Group income protection.
– Directors’ and Officers’ liability insurance and the indemnity provided by the
Company in the form provided to all Directors.
Executive Directors based in the UK are eligible to participate in any all-employee
share schemes which may be established by the Group, on the same terms as
other employees.
In line with the policy for other employees, Executive Directors may be eligible
to receive relocation allowances and international transfer-related benefits
where appropriate.
Other limited benefits may be provided to new Executive Directors
basedonindividual circumstances as deemed necessary and appropriate by
theCommittee.
Maximum
opportunity
Whilst there is no maximum level of benefits prescribed, they are generally set
at an appropriate market-competitive level determined by the Committee.
Performance
framework
None.
Retirement benefits
Purpose and
link to strategy
Provide market-competitive post-employment benefits (or cash equivalent)
to recruit and retain Executive Directors of the calibre required to deliver
Dowlais’ strategic objectives and priorities.
Operation Executive Directors are eligible to receive a company contribution to an
individual defined contribution pension arrangement, which they may elect
toreceive as a cash payment in lieu of such contributions.
Base salary is the only element of remuneration that is used to determine such
retirement benefits.
Maximum
opportunity
The maximum contribution of 12% of base salary for Executive Directors is
inline with that available to the wider workforce in the country where the
Executive Directors are based for employment purposes, currently being
theUnited Kingdom.
Performance
framework
None
DIRECTORS’ REMUNERATION POLICY
99Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
REMUNERATION COMMITTEE REPORT CONTINUED
Variable remuneration
Annual bonus plan
Purpose and
link to strategy
To incentivise and reward execution of the business strategy on an annual
basis. Considers individual behaviours and contributions. The use of deferral
into the Company’s shares delivers longer-term shareholder alignment.
Operation Performance measures, targets and weightings will typically be set by the
Committee at the start of the year to align with the Company’s strategy and
goals. After the end of the year, the Committee determines the extent to which
these have been achieved.
Once set, performance measures and targets will generally remain unaltered
unless events occur which, in the Committee’s opinion, make it appropriate to
make adjustments to the performance conditions so that they maintain their
commercial relevance.
Performance is assessed on an annual basis, using a combination of the payouts
for performance against each of the targets.
The Committee has discretion to adjust the formulaic bonus outcomes
bothupwards and downwards (including to zero) to ensure alignment
withpay for performance, taking into account shareholder and broader
stakeholder experience.
Executive Directors will be required to defer 30% of their annual bonus into a
share-based award for a period of two years, where they do not meet the
minimum shareholding requirement.
Dividend equivalent payments will normally accrue on deferred bonus awards
during the deferral period, to the extent the awards vest. The calculation of
these payments may assume the reinvestment of dividends.
Annual bonuses and deferred bonus shares are subject to malus and clawback
provisions (see page 101 for details).
Maximum
opportunity
The maximum bonus opportunities are 200% of salary for the CEO and 150% for
the CFO.
Performance
framework
Performance measures may be a mix of financial and non-financial metrics,
although it is expected that the majority will be financial metrics.
Financial performance will be assessed against one or more key metrics of the
business, determined on an annual basis. The weighting between metrics will be
determined by the Committee each year according to business priorities.
For financial targets, not more than 25% of the potential bonus opportunity will
be payable for achieving threshold performance rising on a graduated scale to
100% of potential bonus opportunity for maximum performance. Threshold
performance is the level of performance required for the bonus to start paying.
For non-financial targets, the structure of the target will vary based on the nature
of the target set, and it will not always be practicable to set targets using a
graduated scale, so payout may take place in full if specific criteria are met in full.
The Committee will provide appropriate levels of disclosure on a retrospective
basis of the targets used in the annual bonus plan in the subsequent Directors’
Remuneration Report.
The financial performance measures for 2024 are adjusted operating profit and
entity cash flow with each determining up to 40% of the maximum potential
bonus opportunity. The remaining 20% of the bonus opportunity will be
determined by reference to non-financial strategic objectives.
100Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Share ownership requirements
Purpose and
link to strategy
To align Executive Directors’ interests with those of shareholders.
Operation Executive Directors are expected to build and maintain a minimum shareholding
in the Company over time expressed as a multiple of salary (300% for both CEO
and CFO). Executive Directors have five years from the Company’s listing date,
20 April 2023, or the date of their appointment, whichever is later, to meet
therequirement.
Until the relevant share ownership requirements have been met, Executive
Directors are required to hold all Dowlais shares acquired under company share
awards and from deferred annual bonuses (net of income tax).
Unvested deferred bonus awards (which are not subject to performance
conditions) and vested performance share awards, which are subject to a
holding period, will count towards these shareholding requirements on a
net-of-tax basis.
Executive Directors will normally be required to continue to hold 100% of the
in-employment shareholding requirement (or, if lower, their actual shareholding
on cessation) for a two-year period after leaving the Group. During this period,
former Directors will be required to fully cooperate with the implementation of
such arrangements as the Committee may reasonably expect in order to
enforce this requirement.
Malus and clawback
Purpose and
link to strategy
To align Executive Directors’ interests with those of shareholders and prevent
payment for failure.
Operation All variable pay will be subject to malus and clawback.
The Committee or relevant body may apply malus and/or clawback provisions
at any time up until:
– the second anniversary of the date of payment of a cash bonus or grant of a
deferred bonus award; and/or
– the fifth anniversary of the date of grant of an OSP award.
The Committee or relevant body may apply these malus or clawback provisions
where it considers there are exceptional circumstances such as:
– material misstatement of the financial results of a member of the
DowlaisGroup;
– either the assessment of the performance conditions relating to, or the
calculation of the number of shares subject to, a performance share award,
orthe assessment of the bonus by reference to which a deferred bonus award
is granted being based on an error or inaccurate or misleading information;
– gross misconduct by the relevant Executive Director;
– serious reputational damage to the Company; and/or
– the Company becoming insolvent or suffering a similar corporate failure.
Performance share awards
Purpose and
link to strategy
To incentivise and reward long-term performance and align the interests of
Executive Directors with those of shareholders. The post-vesting holding
period delivers longer-term shareholder alignment.
Operation Under the Omnibus Share Plan (OSP), awards may be granted in the form of
conditional share awards, nil- or nominal-cost options or forfeitable shares.
Awards granted under the OSP (excluding deferred bonus awards) vest at the
end of a performance period determined by the Committee, subject to the
achievement of stretching performance targets.
Awards to Executive Directors are subject to performance conditions set by
theCommittee. Awards are usually granted annually to Executive Directors
andnormally have at least a three-year performance period and a further
post-vesting holding period of two years.
The performance conditions are reviewed before each award cycle to ensure
they remain appropriately stretching.
The Committee may adjust upwards or downwards (including to zero) the
extent to which an award vests if it considers that the extent to which the award
would otherwise vest is not a fair reflection of the performance of the Company,
the Executive Director’s performance and/or such other factors as the
Committee may consider relevant.
Dividend equivalent payments will normally accrue on awards, to the extent
theawards vest, during the vesting period and post-vesting holding period
applicable to the awards. The calculation of these payments may assume the
reinvestment of dividends.
Awards are also subject to malus and clawback provisions (see page 101
fordetails).
Maximum
opportunity
The maximum annual award is 300% of salary for the CEO and 200% of salary for
the CFO in respect of any financial year of the Company.
Performance
framework
Vesting of performance share awards is subject to continued employment and
the achievement of stretching targets.
Performance measures may be a mix of financial and non-financial measures.
For financial targets, not more than 25% of the total award will vest for threshold
performance rising on a graduated scale to 100% of the total award for
maximum performance. Threshold performance is the level of performance
required for the award to start to vest.
For non-financial targets, the structure of the target will vary based on the
nature of the target set, and it will not always be practicable to set targets
usinga graduated scale, so vesting may take place in full if specific criteria are
met in full.
Further details, including the performance targets attached to the performance
share awards in respect of each year, are disclosed in the Directors’
Remuneration Report (see pages 106 and 107).
101Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
REMUNERATION COMMITTEE REPORT CONTINUED
Basis of calculations and assumptions
Minimum Fixed pay only – base salary, benefits and retirement benefits, being the
onlyelements of the Executive Directors’ remuneration package not linked
toperformance. Based on basic salary and retirement benefits applicable from
1 January 2025 and the value of other benefits provided in 2024.
Mid Includes fixed pay, plus a payout of 50% of maximum under the 2025 annual
bonus plan and mid-point performance vesting for the performance shares
awarded in 2025 (62.5% of the maximum award).
Maximum Includes fixed pay, plus full payout of annual and long-term incentives.
Maximum
including share
price growth
All elements the same as Maximum but assumes a 50% share price appreciation
over the performance period.
Service contracts
The Company’s policy is for Executive Directors to be employed on the terms of service
agreements, which may be terminated by either the Executive Director or the Company
onthe giving of not less than 12 months’ written notice (subject to certain exceptions).
The table below sets out the dates of Executive Directors’ service contracts, which are
available for inspection at the Company’s registered office.
Name Position Contract date Notice period
Liam Butterworth Chief Executive Officer 1 March 2023 12 months
Roberto Fioroni Chief Financial Officer 1 March 2023 12 months
Notes
Geoffrey Martin informed the Board that he would not stand for election as a Director at the 2024 AGM and,
therefore, retired from office with effect from the conclusion of the meeting on 21 May 2024. His notice period
was 1 month.
Projected total remuneration scenarios
The charts below illustrate what could be received by each Executive Director under the
Policy. These charts are illustrative, as the actual value will depend on business performance
and share price performance. The maximum performance also includes an additional bar,
which shows the impact of a 50% share price growth on the performance share outcome over
the relevant performance period to show how the package value is aligned to shareholders.
The chart reflects projected remuneration for the 2025 financial year.
CEO projected scenario
CFO projected scenario
Fixed pay
Annual bonus
Performance shares
Share price growth
0m
1.3m
2.6m
4m
5.3m
6.6m
8m
Max including
share price growth
MaxMidMin Max including
share price growth
MaxMidMin
15%19%29%100%
21%25%37%100%
26%
20%
32%
25%
26%32%
24%
46%
39%49%
18%
35%43%
39%
£1,094
£784
£7,262
£3,822
£5,839
£3,807
£3,135
£2,127
102Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Non-Executive Directors’ terms of appointment
The Non-Executive Directors and the Chair were each appointed by a letter of appointment,
which are available for inspection at the Company’s registered office. In each case, either
party may terminate the appointment on six months’ written notice, or, if earlier, with the
consent of the Board.
Name Position Date of appointment
to the Board
Current letter of
appointment expires
Simon Mackenzie
Smith
Chair 9 February 2023 9 February 2026
Celia Baxter Senior Independent
Non-Executive Director
20 February 2023 20 February 2026
Philip Harrison Independent Non-
Executive Director
10 February 2023 10 February 2026
Fiona MacAulay Independent Non-
Executive Director
20 February 2023 20 February 2026
Shali Vasudeva Independent Non-
Executive Director
20 February 2023 20 February 2026
Notes
Alexandra Innes informed the Board that she would not stand for election as a Director at the 2024 AGM and,
therefore, retired from office with effect from the conclusion of the meeting on 21 May 2024.
Discretions retained by the Committee
The Committee operates the Group’s variable pay plans according to their respective rules,
their respective ancillary documents and the UK FCA’s Listing Rules. In administering these
plans, the Committee may apply certain operational discretions.
These include the following:
– Who participates in the plan.
– Determining the timing of grants of awards and/or payments.
– Determining the quantum of an award and/or payment.
– Determining the extent of vesting based on the assessment of performance.
– Determining the status of leavers and, where relevant, the extent of vesting.
– Determining the extent of vesting of awards under share-based plans in the event of a
change of control.
– Making appropriate adjustments required in certain circumstances (for example rights
issues, corporate restructuring events, variation of capital and special dividends).
– What the weighting, measures and targets should be for the annual bonus plan and
performance share awards from year to year.
– Adjusting existing targets if events occur that cause the Committee to determine that the
targets set are no longer appropriate and that amendment is required so the relevant
award can achieve its original intended purpose, provided that the new targets are not
materially less difficult to satisfy.
The Committee also retains discretion to make non-significant changes to the Policy
withoutreverting to shareholders (for example, for regulatory, tax, legislative or
administrative purposes).
103Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
REMUNERATION COMMITTEE REPORT CONTINUED
Salaries for 2024 (audited)
2024 annual salary levels for the Executive Directors applied from 1 January 2024. Total
basesalary paid in the 2024 financial year period is for the period from 1 January 2024 to
31 December 2024. The comparable prior year data relates to the date the Dowlais demerger
took place (20 April 2023).
Annual base
salary as of
1 January 2024
Annual base
salary as of
20 April 2023
Total base
salary paid in
2024
Liam Butterworth, CEO £921,200 £890,000 £921,200
Roberto Fioroni, CFO £652,100 £630,000 £652,100
Notes
Geoffrey Martin, Executive Director, informed the Board that he would not stand for election as a Director at
the2024 AGM and therefore retired from office with effect from the conclusion of the meeting on 21 May 2024.
He did not receive any remuneration from the Company in 2024.
2025 salaries
The Committee carefully considered whether any increases should be awarded to Executive
Directors’ salaries in 2025. Factors that have been taken into account when considering the
pay review for Directors included investors’ expectations and external environment,
Company performance, planned salary increases for the wider employee population,
personalperformance of the executives, competitive market positioning of the current
salaries and total remuneration packages and the current talent market.
The Committee resolved that 2025 salaries for Executive Directors should be increased by 3%,
an increase that took into account the average increase of 3% that will be awarded to the
wider workforce in the UK.
Annual base
salary as of
1 January 2025 % increase
Liam Butterworth, CEO £948,900 3%
Roberto Fioroni, CFO £671,700 3%
Benefits for 2024 (audited)
2024 benefits for the CEO and CFO included car allowance, private medical insurance
(including spouse or partner and eligible dependent children), health checks, life assurance,
membership of a Group income protection plan, and reimbursement of expenses properly
incurred in the ordinary course of business, which are deemed to be taxable benefits.
Geoffrey Martin did not receive any Company benefits in 2024.
2025 benefits
Benefits for 2025 remain in line with the Policy.
Single figure of remuneration – Executive Directors (audited)
The following table shows a single total figure of remuneration for each Executive Director in
respect of qualifying services for the 2024 financial year (1 January 2024 to 31 December 2024).
The comparable prior year data covers the period from the date the Dowlais demerger took
place (20 April 2023) to the end of the 2023 financial year (31 December 2023).
Geoffrey Martin, who was appointed Executive Director of Dowlais, did not receive any
remuneration from the Company in connection with his appointment. He did not stand for
election as a Director at the 2024 AGM and, therefore, retired from office with effect from
21 May 2024. Given this, he is excluded from the table below.
Liam Butterworth Roberto Fioroni
£’000 2024 2023 2024 2023
Salary 921 619 652 438
Benefits 31 21 32 21
Retirement benefits 111 74 78 53
Total fixed remuneration 1,063 714 762 512
Annual bonus¹ 368 1,127 196 598
Performance share award² – – – –
Total variable remuneration 368 1,127 196 598
Total remuneration 1,431 1,841³ 958 1,110³
Notes
1. 30% of the total annual bonuses for 2023 and 2024 were deferred into shares of the Company for a period of
two years.
2. There were no performance share awards vesting in 2023 and 2024. Awards granted on 2 May 2023 are
scheduled to vest in Q2 2026; the awards granted on 22 May 2024 are scheduled to vest in Q1 2027.
3. Prior to Admission, the Executive Directors and selected senior employees participated in the GKN Automotive
long-term participation cash bonus scheme. Payments under the scheme were triggered by the demerger and
the value of payment was based on the value created between the date of grant and the date of Admission
and so relate to performance prior to listing over a number of years. The awards were cash-settled, with
executives being required to reinvest 15% of the net cash proceeds in shares as soon as practical following
Admission. There are no outstanding awards under the scheme, which terminated on the date of Admission.
Upon Admission, Liam Butterworth received a gross payment of £12,000,000, of which £954,000 was reinvested
into Dowlais shares on 24 April 2023 at a price of £1.224 per share. Roberto Fioroni received a gross payment of
£4,200,000, of which £333,900 was reinvested into Dowlais shares on 24 April 2023 at a price of £1.224 per share.
The shares will be required to be held in accordance with the minimum shareholding guidelines outlined in the
Remuneration Policy.
ANNUAL REPORT ON REMUNERATION
104Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
20% of the Executive Directors’ 2024 annual bonus opportunity is linked to the achievement
of strategic objectives, which focused on key strategic priorities for 2024.
At its meeting in February 2025, the Committee considered the level of achievement against
the strategic objectives for 2024. The table below summarises the performance outcomes.
Objective Description of performance Summary of performance achieved
Group strategy
and key
leadership
transition
Weighting
(% of max. bonus
opportunity)
10%
1. Align with the Board of
Directors5yr strategic plan for
Dowlais Group.
2. Clear strategic path forward for
Automotive and Powder
Metallurgy portfolio to position
Dowlais for mid-term growth.
3. Successful on-boarding of new
Investor Relations function and
CEO for Powder Metallurgy along
with key talent upgrades where
necessary.
– Full alignment with the Board of
Directors undertaken during 2024.
Completed a full strategic review
process of the Powder
Metallurgybusiness.
– Approach from American Axle during
2024 resulted in the Board announcing
in January 2025 that they had reached
agreement on a recommended cash
and share offer to be made by AAM
forthe entire issued and to be issued
ordinary share capital of Dowlais.
– Successful onboarding of new
talentcompleted.
Committee determination:
All three objectives achieved
Hydrogen
Weighting
(% of max. bonus
opportunity)
5%
– Secure investment in the
Hydrogen business, either via a
full divestment, majority equity
sale or through a partial equity
sale that subsidises the cash
requirements of the business for
at least 2 years or, if this fails,
initiate and execute plan to wind
down the business.
– Offer from Langley Holdings, the Group
disposed of GKN Hydrogen operations
eliminating future cash losses
associated with the business.
Committee determination:
Objective achieved
ESG
Weighting
(% of max. bonus
opportunity)
5%
– Receive limited assurance from
Dowlais’ auditors on FY24
business unit greenhouse gas
emissions across Scope 1 and
Scope 2, as defined by the
Greenhouse Gas Protocol.
– Completed Basis of Reporting
document, which set out the
Governance, data flow, boundaries,
andthe precise definitions for the
metrics. Included detailing the precise
conversion of metrics and the
conversion factors to calculate
emissions from particular types of
fuel(e.g. BTU of natural gas to CO
2
e).
Deloitte assurance process began in
October 2024.
Committee determination:
Objective achieved
Retirement benefits for 2024
Both Executive Directors received retirement benefits at the rate of 12% of annual base salary,
which comprised cash payments in lieu of pension contributions. Executive Directors do not
participate in defined benefit pension plans.
The retirement benefit for Executive Directors is in line with that available to the wider
workforce in the country where they are based for employment purposes, currently being
the United Kingdom. Total cash allowance paid in 2024 is for the period from 1 January 2024
to 31 December 2024.
Total cash
allowance paid
in 2024
Liam Butterworth, CEO £110,544
Roberto Fioroni, CFO £78,252
Notes
Geoffrey Martin, Executive Director, informed the Board that he would not stand for election as a Director at
the2024 AGM and therefore retired from office with effect from the conclusion of the meeting on 21 May 2024.
He did not receive any remuneration or retirement benefits from the Company in 2024.
2025 retirement benefits
Retirement benefits for 2025 remain in line with the Policy.
Annual bonus for 2024 (audited)
The 2024 annual bonus plan was based on performance for the period 1 January 2024 to
31 December 2024. 80% of the bonus opportunity was determined by performance against
financial targets and 20% was based upon the achievement against strategic objectives.
The maximum annual bonus opportunity for the Executive Directors from Admission was
200% of salary for the CEO and 150% of salary for the CFO. Geoffrey Martin did not participate
in the 2024 annual bonus plan.
2024 annual bonus performance points and outcomes
Performance measures Threshold (25% of max) Maximum (100%) Achieved
Adjusted operating profit¹ £340m £390m £332m
Entity cash flow² £65m £105m £0m
Strategic objectives Fully achieved
Notes
1. Adjusted operating profit is an Alternative Performance Measure, defined and reconciled to statutory
measures in the Alternative Performance Measure section on page 182 on a constant currency basis.
2. Entity cash flow is defined as being adjusted free cash flow (as defined in the Alternative Performance
Measures section on page 186) of £15 million adjusted for lease principal payments of £24 million, on a
constantcurrency basis.
105Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
REMUNERATION COMMITTEE REPORT CONTINUED
2025 annual bonus
In line with the Policy and unchanged from 2024, for 2025 the threshold and maximum annual
bonus opportunities for the Executive Directors will be:
Performance will be based on Group financial performance targets and strategic objectives.
The performance measures and percentage weightings will be:
– adjusted operating profit (40%);
– adjusted free cash flow (40%); and
– strategic/ESG objectives (20%).
2025 annual bonus targets are considered commercially sensitive and will be disclosed in the
2025 Annual Report. When setting the financial targets, the Committee noted that they had
been set absent of clarity about the potential scale and impact of tariffs. Rather than delay
setting targets, the Committee agreed it would review the impact of tariffs when
determining the bonus outcome.
In line with the Policy, Executive Directors who do not meet the minimum shareholding
requirement will be required to defer 30% of their annual bonus award into shares of the
Company for two years, subject to continued employment and malus and clawback
provisions.
Long-term incentive awards vesting
No Dowlais long-term incentive awards vested in 2024. Performance share awards were
granted under the OSP in May 2024, as set out in the section below.
Performance share awards made in 2024 (audited)
Performance share awards are used as a long-term incentive for senior managers in the
Group, with awards vesting after three years, and held for a further two years by the
Executive Directors. The CEO and CFO were granted awards with a face value of 300% of
salary and 200% of salary, respectively. Geoffrey Martin did not participate in any long-term
incentive plan of the Company for 2024.
The table below sets out details of awards made on 22 May 2024:
Executive Director
End of
performance
period
Type of
award
1
Nature of award
Number of
shares subject
to award
Grant
price
2
Face value
atgrant
Liam Butterworth 31 Dec 2026 PS Conditional shares 3,437,598 £0.8039 £2,763,600
Roberto Fioroni 31 Dec 2026 PS Conditional shares 1,622,273 £0.8039 £1,304,200
Notes
1. PS = performance share.
2. Consistent with good practice, long-term incentive awards are ordinarily granted shortly after full-year results
are announced, but in 2024 awards were delayed by the need to obtain shareholder approval at the May 2024
AGM to grant using the new OSP. To ensure participants were in the same position they would have been had
the 2024 grant not been delayed, the Committee granted by reference to the closing share price averaged
over the three dealing days immediately preceding 26 March 2024 (that is when the awards would ordinarily
have been granted).
The Policy as approved by shareholders permits the payment ofa bonus for strategic
objectives independent of financial performance. Notwithstanding this feature, the
Committee is conscious of the sensitivity involved with payinga bonus when financial targets
have not been achieved and has considered this very carefully. In particular, the Committee
considered the importance of the Executive Directors’ strategic objectives and noted their
relevance to external stakeholders. Objectives relating to the future strategic direction of the
business units and the operational and financial resilience of the Company are crucial to the
Company’s medium and long-term performance, as are environmental commitments. The
delivery of these objectives is key to future financial success and ensure that Dowlais is well
positioned to maximise opportunities as the automotive market starts to recover from the
current downturn.
On balance, and after detailed consideration, the Committee concluded that the formulaic
annual bonus outcome of 20% of maximum based on the delivery of strategic objectives
reflects the commitment and performance of our Executive Directors in extremely tough
market conditions and that there is no basis for operating discretion in respect of this outcome.
The table below summarises the formulaic performance outcome against the 2024 annual
bonus targets and the resulting bonuses, including the portion payable in cash in 2024 and
the portion deferred into shares for a further two years to be released in 2027, subject to
continued employment and malus and clawback provisions. Deferral provisions apply to 30%
of the 2024 bonus paid.
Outcomes
Liam
Butterworth,
CEO
Roberto
Fioroni,
CFO
Adjusted operating profit (as a proportion of the maximum opportunity) 0/40 0/40
Entity cash flow (as a proportion of the maximum opportunity) 0/40 0/40
Strategic objectives (as a proportion of the maximum opportunity) 20/20 20/20
Total (as a proportion of the maximum opportunity) 20/100 20/100
Maximum bonus opportunity as a % of salary 200% 150%
Value of bonus paid in cash £257,936 £136,941
Value of bonus deferred into shares £110,544 £58,689
Overall award level £368,480 £195,630
When deciding the level of annual bonus, the Committee considered the experience of
theGroup’s key stakeholders during 2024 (as summarised on page 96). The Committee
concluded that the outcome of the 2024 annual bonus appropriately reflected the
Company’s performance in 2024. Consequently, it was not felt necessary to apply any
discretion to amend the formulaic outcome of the overall award level.
Deferral policy
In line with the Deferral policy, as the Executive Directors have not yet met their minimum
personal shareholding requirements, 30% of the 2024 annual bonuses have been deferred for
two years into shares of the Company, subject to continued employment and malus and
clawback provisions, providing further alignment to long-term performance.
106Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Performance measures for the 2024 performance share awards
The performance share awards granted in 2024 have two performance measures that
carryequal weighting: adjusted EPS and relative TSR. The Committee’s policy is that no
adjustments for exchange rate movements are made to EPS over the performance period
asthese are of a long-term nature and fluctuations are more likely to average out over the
period.
Target Ranges
Measure Weighting Threshold
(25% vesting)
Maximum
(100% vesting)
Adjusted EPS
annual growth¹
50% 5% annual compound
growth over 3 years
15% annual compound growth
over 3 years
TSR ranking² 50% Median ranking against
comparator group
Upper quartile ranking (orhigher)
against comparator group
Notes
1. Up to 50% of the 2024 performance share award vests by reference to the Group’s adjusted EPS annual
compound growth averaged over the three complete financial years ending 31 December 2026. If EPS average
annual compound growth is less than 5%, there will be no vesting of the EPS element of the award; 25 per cent
of the EPS element of the award will vest if EPS average annual compound growth is 5%; and 100 per cent of the
EPS element of the award will vest if EPS average annual compound growth is 15% or more. Vesting between
Threshold and Maximum will be on a straight-line basis.
2. Up to 50% of the 2024 performance share award will vest by reference to the Company’s TSR performance, as
compared to that of a comparator group consisting of 12 EU automotive and UK industrials companies.
TSR comparator group for 2024 awards
European automotive sector UK industrials sector
Valeo Spirax Sarco
Schaeffler¹ IMI
Continental Rotork
Gestamp Tyman¹
OPmobility
2
Weir
Forvia Hill & Smith
Notes
1. Tyman was acquired by Quanex Building Products Corporation in August 2024, and Schaeffler merged with
Vitesco Technology Group in October 2024. In line with good practice, both Tyman and Schaeffler will,
therefore, be excluded from the comparator group when assessing TSR performance.
2. In March 2024, Plastic Omnium renamed itself OPmobility.
TSR for Dowlais and the comparator group was baselined by averaging closing share prices
over the one-month period ending on 31 December 2023. To align with the Company’s
financial year end, TSR performance measurement is averaged over the one-month period
from 1 December to 31 December 2026 (for both Dowlais and the comparator group).
The TSR element of the award will not vest if the Company performs below the median
constituent of the comparator group; 25 per cent of the TSR element of the award will vest
ifthe Company performs in line with the median constituent of the comparator group; and
100 per cent of the TSR element of the award will vest if the Company performs equal to or
outperforms the upper quartile of the comparator group. Vesting between Threshold and
Maximum will be on a straight-line basis.
In determining the vesting levels and any adjustment which should apply, the Committee will
also consider wider factors to ensure outcomes are a fair reflection of the performance of the
Company and the experience of stakeholders.
Details of performance against each of the measures and the level of any adjustment
appliedby the Committee, if applicable, will be fully disclosed in the 2026 Directors’
Remuneration Report.
The awards are in respect of the performance period from 1 January 2024 to 31 December
2026 and are scheduled to vest following the announcement of the FY26 results. Malus and
clawback provisions and a two-year post-vesting holding period apply to these awards.
2025 performance share awards
In line with the Policy, the CEO and CFO will each be granted an award with a face value of
300% of salary and 200% of salary, respectively.
The structure, performance measures and weightings of the 2025 performance share awards
will remain unchanged from 2024. The Committee reviewed and set EPS growth targets that
accurately reflect the current business environment whilst continuing to be sufficiently stretching.
To enable a more appropriate comparison with companies facing similar sectoral challenges
and opportunities as Dowlais, the Committee decided that for awards granted in FY25
onwards TSR performance will be assessed against a comparator group consisting of
European and US companies in the “Automotive Components and Equipment” sector.
Toreflect good practice and mitigate the impact of any future mergers and takeovers,
theCommittee also decided to increase the number of comparator companies from 11 to 28.
TSR comparator group for 2025 awards
Automotive components and equipment sector
European companies US companies
Continental Lear Corporation
Forvia SE BorgWarner Inc.
Valeo SE Dana Incorporated
Schaeffler AG American Axle & Manufacturing Holdings
Adient plc Nexteer Automotive Group Limited
Gestamp Automocion, S.A. Visteon Corporation
OPmobility SE Patrick Industries, Inc.
Autoliv, Inc PHINIA Inc.
107Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
REMUNERATION COMMITTEE REPORT CONTINUED
Payments for loss of office and to past Directors (audited)
There were no payments to Directors for loss of office and no payments to past Directors during 2024.
Total shareholder return (TSR)
The chart shows the monthly value, from the time of demerger to 31 December 2024, of £100
invested in Dowlais shares on 20 April 2023, compared to £100 invested in the FTSE 250 Index
on the same date. The FTSE 250 Index was chosen as the comparator because the Company is
a constituent of this index.
£20
£40
£60
£80
£100
£120
£140
Dowlais (£100 investment)
Total Share Return of Dowlais vs FTSE 250
Dec-24Aug-24Apr-24Dec-23Aug-23Apr-23
FTSE 250 index (£100 investment)
Automotive components and equipment sector continued
European companies US companies
CIE Automotive, S.A. Cooper-Standard Holdings Inc.
Garrett Motion Inc. Modine Manufacturing Company
Dometic Group AB Gentex Corporation
Autoneum Holding AG Superior Industries International, Inc.
CIR S.p.A – Compagnie Industriali Riunite
SAF – Holland SE
ElringKlinger AG
Sogefi S.p.A.
Before approving the 2025 performance share awards, the Committee noted the share price
performance since the 2024 performance share awards were granted and the financial
performance of Dowlais and the Executive Directors. After much discussion, the Committee
concluded that the 2025 long-term incentive awards should be made at the same level as
2024. However, the Committee noted that it has discretion within policy to scale back vesting
to avoid windfall gains.
For the 2025 award, the following performance measures will be used:
Target ranges
Measure Weighting Threshold
(25% vesting)
Maximum
(100% vesting)
Adjusted EPS
annual growth¹
50% 5% annual compound
growth over 3 years
15% annual compound growth
over 3 years
TSR ranking² 50% Median ranking against
comparator group
Upper quartile ranking (orhigher)
against comparator group
Notes
1. Up to 50% of the 2025 performance share awards vest by reference to the Group’s adjusted EPS annual
compound growth averaged over the three complete financial years ending 31 December 2027. The targets
reflect accurately the current business environment whilst continuing to be sufficiently stretching. Vesting
between Threshold and Maximum will be on a straight-line basis.
2. Up to 50% of the 2025 performance share award will vest by reference to the Company’s TSR performance,
ascompared to that of a comparator group consisting of 28 European and US automotive components and
equipment sector companies measured over a three-year performance period from 1 January 2025 to
31 December 2027. TSR for Dowlais and the comparator group will be baselined by averaging closing share
prices over the one-month period ending on 31 December 2024. TSR performance measurement is averaged
over the one-month period from 1 December to 31 December 2027 (for both Dowlais and the comparator
group of companies). Vesting between Threshold and Maximum will be on a straight-line basis.
In determining the vesting levels and any adjustment that should apply, the Committee will
also consider wider factors to ensure outcomes are a fair reflection of the performance of the
Company and the experience of stakeholders.
108Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Chief Executive Officer’s pay compared with employee pay
On 31 December 2024, Dowlais employed 184 individuals in the UK; the average monthly
headcount for 2024 as a whole was 213. Despite this being below the threshold for disclosure
purposes, in the interests of transparency the Committee has chosen to provide pay ratios of
the CEO’s total remuneration to the remuneration of UK employees at the lower quartile,
median and upper quartile. The total remuneration for each quartile employee, and the salary
component within this, is also outlined below.
25
th
percentile Median 75
th
percentile
Year Method pay ratio pay ratio pay ratio
2024
1
Option A 26:1 16:1 10:1
2023
1, 2
Option A 64:1 35:1 22:1
Notes
1. 2023 and 2024 CEO single figures do not include any long-term incentive component as the first performance
share award was made to the CEO in 2023 and will be included, subject to vesting, within the 2026 single figure
of remuneration.
2. 2023 remuneration is based on earnings from the date of Admission (20 April 2023) until the end of the financial
year (31 December 2023) and the 2023 bonus pro-rated for that period.
Year 25
th
percentile Median 75
th
percentile
2024 salary
1
£49,536 £77,250 £113,269
2024 total remuneration
1
£55,480 £90,388 £143,286
2023 salary
2
£28,668 £44,139 £66,164
2023 total remuneration
2
£28,847 £53,258 £85,359
Notes
1. 2024 remuneration is based on earnings for the full financial year (1 January to 31 December 2024).
2. 2023 remuneration is based on earnings from the date of Admission (20 April 2023) until the end of the financial
year (31 December 2023) and the 2023 bonus pro-rated for that period.
Methodology
In line with the approach taken in 2023, we have chosen to use Option A as our preferred
methodology to calculate the CEO pay ratio, as this produces the most meaningful data that
is representative of the remuneration levels for UK employees.
Remuneration was calculated in line with the methodology used to determine the single total
figure of remuneration for the CEO, as presented in this report. Remuneration figures are
determined with reference to the financial year ending on 31 December 2024. The
remuneration covers salary, benefits and retirement benefits from 1 January to 31 December
2024, and bonus in respect of 2024, which will be paid in March 2025. Where required, actual
remuneration was converted into a full-time equivalent by pro-rating earnings to reflect
full-time contractual working hours.
Given that the Dowlais demerger took place on 20 April 2023, comparable prior year data
reflects earnings for the period from the date of Admission (20 April 2023) to the end of the
financial year (31 December 2023) and bonus in respect of 2023 pro-rated for this period.
Chief Executive Officer – historical remuneration information
The table below shows the remuneration of the Chief Executive Officer for the 2024 financial
year covering the period from 1 January 2024 to 31 December 2024.
Year 2024 2023²
Chief Executive Officer Liam Butterworth Liam Butterworth
Single figure of total remuneration (£’000) 1,431 1,841
Annual bonus outcome (% of maximum) 20% 91%
Performance share award vesting (% of maximum)¹ n/a n/a
Notes
1. No performance share awards vested in 2023 or 2024. The first performance share awards were granted on
2 May 2023 and so are not scheduled to vest until Q2 2026.
2. Prior year data for 2023 covers the period between Admission (20 April 2023) and the end of the financial year
(31 December 2023).
Relative importance of spend on pay
The table below shows the spend on pay and dividends to shareholders for the 2024 financial
year covering the period from 1 January 2024 to 31 December 2024.
Year 2024 2023
Total employee costs¹ £1,089m £1,206m
Dividends² £58m £58m
Notes
1. Total employee costs are presented in line with the Note 7 to the Financial Statements.
2. Dividends are presented in line with the Note 10 to the Financial Statements.
109Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
REMUNERATION COMMITTEE REPORT CONTINUED
The Committee determined that the identified employees are reasonably representative,
since the structure of their remuneration arrangements is in line with that of the majority
ofemployees in the UK. The Committee believes that the median pay ratio for the 2024
financialyear is consistent with the pay, reward and progression policies for the Company’s UK
employees as a whole. It should be noted, however, that the CEO’s 2024 remuneration does not
include any long-term incentives vesting and as such, the pay ratio may change in future years.
Percentage change in remuneration
The table below sets out how the change in remuneration for each Director between 2023
and 2024 compared to a wider UK employee comparator group.
Change in 2024 against 2023
Salary / fees¹
(% change)
Benefits²
(% change)
Bonus³
(% change)
Executive Directors
Liam Butterworth 3.5% 4.2% -77.3%
Roberto Fioroni 3.5% 7.4% -77.3%
Chair and Non-Executive Directors
Simon Mackenzie Smith 0% n/a n/a
Celia Baxter 0% n/a n/a
Philip Harrison 0% n/a n/a
Fiona MacAulay 0% n/a n/a
Shali Vasudeva 0% n/a n/a
Average for all UK employees
6,7
4.1% 12.6% -40.0%
Notes
1. Change in salary/fees for Directors is shown as the change from the post-demerger annual rate of salary
applicable for 2023 to the rate applicable for 2024.
2. Change in benefits for Directors is shown as annualised value of post-demerger benefits for 2023 compared
with the full value of benefits in 2024. The percentage increase in excess of that driven by the 3.5% salary
increase applicable from 1 January 2024 is entirely due to a 20% year-on-year increase in the cost of private
medical insurance. There was no change to the benefits package offered to Directors in 2024.
3. Change in bonus for the Executive Directors is shown as the full value of the payments made in respect of 2023
and 2024.
4. Geoffrey Martin did not receive any remuneration from Dowlais in 2023 and 2024. He stepped down from the
Board with effect from 21 May 2024, immediately following the AGM.
5. Alexandra Innes did not stand for election as a Director at the 2024 AGM and, therefore, retired from office
with effect from the conclusion of the meeting on 21 May 2024.
6. No other individuals are employed by the same entity as Directors. Consequently, no data for this entity is
presented. Therefore, the table above shows a comparison to the average remuneration for all UK employees
of Dowlais (excluding the Directors).
7. Change in salary for UK employees is the average increase awarded to the UK workforce in 2024. Change in
benefits for UK employees is calculated as the change in the average value of a UK employee’s benefits in
respect of 2023 and 2024, and is driven by a combination of salary increases, changes in the workforce and an
increase in the cost of private medical insurance. There was no change to the benefits package offered to UK
employees in 2024. Change in bonus for UK employees is calculated as the change in the average full year
payments made in respect of 2023 and 2024.
Consideration of workforce pay and approach to engagement
The Board receives verbal updates on employee engagement quarterly, with a detailed
update, including employee survey results, presented annually. In addition, the Group
operates a Workforce Advisory Panel (WAP) whose purpose is to ensure suitable engagement
with our workforce, ensuring that employee engagement mechanisms are regularly reviewed
and remain effective.
The role of the WAP includes:
– reviewing all employee engagement activities undertaken by the business units to ensure
they are achieving their aims;
– enabling management to understand the views of their colleagues across the business;
– reviewing relations between each business unit and relevant employee-representative
bodies to ensure they are effective;
– ensuring that the views of the workforce are being taken into account in executive
decisionmaking;
– considering methods by which engagement with the workforce could be improved;
– ensuring that the Board understands the views of the workforce as a whole;
– assisting the Board in ensuring that the interests of the workforce are duly considered by
the Board in its decision making.
Although the mechanisms differ across the business, the primary methods of engagement
comprise engagement surveys, skip-level meetings and employee town-halls (both local and
global). Whilst we have not directly consulted on executive remuneration, the wider
workforce can ask questions and provide feedback on this topic through our engagement
mechanisms referenced above.
In addition to the WAP, the Board also engages with the workforce in a number of other more
informal ways including direct interaction with employees when visiting the Group’s sites and,
where appropriate, engaging with employee representatives. This helps ensure that the
Board can receive “unfiltered” views direct from employees, in addition to the information
provided via the WAP
To ensure that the remuneration-related decisions are fair and appropriate, the Committee
considered employees’ pay increases when determining the appropriate salary levels for
the Executive Directors and fees for the Chair. In addition, the Committee was provided
with an update on bonus outcomes for the wider employee population, which were taken
into account to ensure that the bonus outcomes are appropriately reflecting business
performance at all levels in the organisation. Furthermore, the Committee approved the
terms and details of the 2024 share awards made to the executives and the wider
workforcepopulation.
110Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
“Single figure” of remuneration – Non-Executive Directors (audited)
The table below shows the total remuneration received by the Non-Executive Directors for the
2024 financial year covering the period from 1 January 2024 to 31 December 2024. This consists
entirely of fees; no benefits or other forms of remuneration were received during this period.
Given that the Dowlais demerger took place on 20 April 2023, comparable prior year data
relates to fees received during the period from the date of Admission (20 April 2023) to the
end of the financial year (31 December 2023).
Non-Executive Director
2024 total
remuneration
(1 Jan -31 Dec 24)
£’000
2023 total
remuneration
(20 April-31 Dec 23)
£’000
Simon Mackenzie Smith £400 £278
Celia Baxter £135 £94
Philip Harrison £100 £70
Alexandra Innes¹ £35 £63
Fiona MacAulay £90 £63
Shali Vasudeva £90 £63
Notes
1. Alexandra Innes did not stand for election as a Director at the 2024 AGM and, therefore, retired from office
with effect from the conclusion of the meeting on 21 May 2024.
Statement of Directors’ shareholding and share interests (audited)
Total shareholding of Directors on 31 December 2024 is shown below.
Director
Shares
beneficially
owned
Shares not
subject to
performance
Shares subject
to
performance
Total
interest
Shareholding
required (%
salary)
Share
ownership
as a % of
2024 salary¹
Share
ownership
requirement
met?
Chair
Simon
Mackenzie
Smith
163,392 – – 163,392 n/a – n/a
Executive
Directors
Liam
Butterworth
2,331,984 – 5,557,174 7,889,158 300% 164% No
Roberto
Fioroni
1,153,116 – 2,622,522 3,775,638 300% 114% No
Non-
Executive
Directors
Celia
Baxter
119,421 – – 119,421 n/a – n/a
Philip
Harrison
60,119 – – 60,119 n/a – n/a
Fiona
MacAulay
12,182 – – 12,182 n/a – n/a
Shali
Vasudeva
24,215 – – 24,215 n/a – n/a
Notes
1. Share ownership as % of 2024 salary is based on salary at 31 December 2024 and the average mid-market
closing share price between 1 December and 31 December 2024 of £0.6466.
Remuneration Committee advisers
During 2024, Willis Towers Watson (WTW) was the independent remuneration adviser to
theCommittee. WTW was appointed by the Committee in May 2023 following a tender and
selection process.
WTW is a member of the Remuneration Consultants Group and voluntarily operates under
itscode of conduct when providing advice on executive remuneration in the UK. The
Committee is comfortable that the WTW engagement partner and team providing
remuneration advice to the Committee do not have connections with Dowlais or its individual
Directors that may impair their independence and objectivity.
The total fees paid to WTW for the provision of independent advice to the Committee in
2024 were £58,000 charged on a fixed fee as well as time and materials basis. During 2024,
WTW also provided other services to Dowlais entities, including incentive valuations and
other general remuneration data and advice. Remuneration advice is provided by an entirely
separate team within WTW.
2024 Non-Executive Directors’ remuneration
The Chair was entitled to receive a fee of £400,000 per annum and was inclusive of all
Committee roles. The base fee for each other Non-Executive Director was £70,000 per
annum.
Additional fees were payable as follows:
– £20,000 per annum for the Senior Independent Director;
– £25,000 per annum for chairing the Audit Committee;
– £25,000 per annum for chairing the Remuneration Committee;
– £15,000 per annum for membership of the Audit Committee;
– £15,000 per annum for membership of the Remuneration Committee; and
– £5,000 per annum for membership of the Nomination Committee.
There were no increases to fees in 2024.
2025 Non-Executive Directors’ remuneration
Fees were increased by an average of 3% with effect from 1 January 2025, the first change
since the demerger in April 2023. The Chair’s fee increased to £412,000 per annum and the
base fee for each other Non-Executive Director increased to £72,100 per annum.
Additional fees were increased as follows:
– £20,600 per annum for the Senior Independent Director;
– £25,750 per annum for chairing the Audit Committee;
– £25,750 per annum for chairing the Remuneration Committee;
– £15,450 per annum for membership of the Audit Committee;
– £15,450 per annum for membership of the Remuneration Committee; and
– £5,150 per annum for membership of the Nomination Committee.
111Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
REMUNERATION COMMITTEE REPORT CONTINUED
How we work
The Committee ordinarily plans to meet at least twice a year and between 1 January 2024
and31 December 2024 has held six meetings. Individual attendance at these meetings can
befound on page 79.
Each member of the Committee is an independent Non-Executive Director, which is
essentialfor ensuring that the remuneration for Executive Directors and senior executives
isdetermined by individuals who are impartial and have no personal financial stake in the
decisions made, aside from their interests as shareholders. The Committee operates without
any potential conflicts of interest related to cross-directorships and there is no day-to-day
involvement in running the business.
The Committee consults with the Chief Executive Officer, who may attend meetings of
theCommittee by invitation, but is not involved in deciding his own remuneration. The
Committee also receives support from the Chief People, Sustainability and Communications
Officer, the Group General Counsel and Company Secretary, and WTW, the independent
remuneration adviser to the Committee.
No-one is permitted to be involved in discussions or decisions regarding their own
remuneration or conditions of service.
Statement of voting at the AGM
The Directors’ Remuneration Policy and the 2023 Directors’ Remuneration Report were
approved by shareholders at the 2024 AGM.
Each of these resolutions received a significant vote in favour by shareholders and the
Committee is grateful for this support and endorsement by our shareholders. The votes
received were:
Resolution For % Against % Withheld
To approve the Directors’
Remuneration Report 900,041,179 94.66% 50,757,715 5.34% 137,532
To approve the Directors’
Remuneration Policy 887,847,035 99.36% 5,723,411 0.64% 57,365,980
Approval of the Directors’ Remuneration Report
The Directors’ Remuneration Report was approved by the Board on 4 March 2025.
Signed on behalf of the Board
Celia Baxter
Chair of the Remuneration Committee
4 March 2025
Executive Directors are expected to build and maintain a holding in Dowlais shares with a
value equivalent to 300% of base salary. Executive Directors have five years from the
Company’s listing date, 20 April 2023, or the date of their appointment, whichever is later, to
meet the requirement.
Until the share ownership requirements have been met, Executive Directors are required to
hold all Dowlais shares acquired under performance share and/or deferred annual bonus
awards (net of income tax and National Insurance contributions).
Executive Directors will normally be required to continue to maintain the in-employment
shareholding requirement (or, if lower, their actual shareholding on cessation) for a two-year
period after leaving the Group.
Remuneration Committee governance
Composition of Committee
The Committee is comprised of three independent Non-Executive Directors and the Chair
ofthe Board, who was considered independent on appointment: Celia Baxter as Chair, Fiona
MacAulay, Philip Harrison and Simon Mackenzie Smith.
Key responsibilities of the Committee
The Board holds the ultimate responsibility for the remuneration of executives and assigns
this duty to the Remuneration Committee. The main role of the Committee is to align with
the Group’s strategy by ensuring its execution is supported by the overarching Remuneration
Policy, as described earlier in this report. Additionally, it decides on the individual
remuneration packages, which include service contracts and retirement benefits, for each
Executive Director and the top executives, as well as the fees paid to the Chair.
The Committee’s key responsibilities and objectives are set out in its terms of reference and
include:
– Designing the Remuneration Policy.
– Implementing the Remuneration Policy.
– Ensuring that compensation remains competitive within a suitable governance structure.
– Developing the incentive plans.
– Establishing incentive objectives and deciding on award levels.
– Overseeing all share awards across the Group.
The Committee is aware of the importance of the wider context in which it operates in
discharging these responsibilities.
During the year, the Committee undertook a review of its terms of reference to ensure they
reflect the requirements of the 2024 UK Corporate Governance Code. The Committee’s
terms of reference can be viewed at dowlais.com.
112Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
DIRECTORS’ REPORT
Under the terms of the recommended cash and share
combination with AAM, between the date of the rule 2.7
announcement (29 January 2025) and the closing date of
thetransaction, excluding the final dividend in respect of the
period 1 January 2024 to 31 December 2024, AAM reserves
the right to reduce the consideration payable in respect of
each share in the Company by the amount of all or part of
any such dividend or other distribution.
Share capital, control of the Company and
significant shareholders and agreements
As at close on 31 December 2024, the Company had
1,352,695,566 ordinary shares of £0.01 each in issue, all fully
paid up and listed on the London Stock Exchange. No shares
were held in treasury. There are no special control rights,
restrictions on voting rights, restrictions on share transfers
orlimitations on the holding of any class of shares and the
Company is not aware of any agreements between holders
of securities that may result in restrictions on the transfer of
securities or that might result in restrictions on voting rights.
Subject to applicable statutes, rights attached to any class
ofshare may be varied with the written consent of the
holders of at least three quarters in nominal value of the
issued shares of that class, or by a special resolution passed
at a general meeting of the shareholders. Subject to the
provisions of the Companies Act 2006, any resolution passed
by the Company under the Companies Act 2006, shares may
be issued with such rights and restrictions as the Company
may by ordinary resolution decide, or (if there is no such
resolution or so far as it does not make specific provision)
asthe Board may decide.
At the 2024 AGM, the Company received shareholder
approval to make market purchases of its own shares up
toamaximum of 139,327,352 ordinary shares (10% of the
Company’s issued ordinary share capital as at 2 April 2024),
subject to customary limitations on the minimum price
applicable to each purchase. A resolution to renew this
authority will be put to shareholders at the AGM to be
heldin May 2025.
Further to the announcement on 21 March 2024, the
Company commenced a share buyback programme on
4 April 2024 of its ordinary shares for up to a maximum
aggregate consideration of £50 million. The purpose of
theshare buyback programme was to reduce Dowlais’
sharecapital and therefore the shares purchased under
theprogramme have been cancelled. Following the
announcement regarding the recommended combination
with AAM on 29 January 2025, the Company cancelled the
share buyback programme with immediate effect. During
the year ended 31 December 2024, the Company purchased
and cancelled 40,577,961 ordinary shares of 1 penny each
atan average price of 64.6p for a total consideration of
£26,208,054.29. Between 1 January 2025 and 28 January 2025,
the Company purchased and cancelled 8,171,451 ordinary
shares of 1 penny each at an average price of 67.4p for a
totalconsideration of £5,506,414.47, excluding stamp duty
and fees.
As at 28 February 2025 the persons listed in the table below
had disclosed an interest in the issued ordinary share capital
of the Company in accordance with the requirements of
rules 5.1.2 or 5.1.5 of the Financial Conduct Authority’s
Disclosure Guidance and Transparency Rules (DTRs). The
Company’s major shareholders have the same voting rights
as other shareholders. The Company does not know of any
arrangements the operation of which may result in a change
in its control.
Information provided to the Company pursuant to the DTRs
is published on a Regulatory Information Service and on the
Company’s website. As at 28 February 2025, the following
information has been received, in accordance with DTR 5,
from holders of notifiable interests in the Company’s issued
share capital. The information provided below was correct
atthe date of notification; however, the date it was received
may not have been within the current financial year. It should
be noted that these holdings are likely to have changed
since the Company was notified. However, notification
ofanychange is not required until the next notifiable
thresholdis crossed.
Introduction
Dowlais Group plc is a public limited
companyincorporated in England and
Walesunder the Companies Act 2006
withregistered number 14591224.
This Directors’ Report and the Strategic Report on pages 1 to
117 (inclusive) together comprise the ‘management report’
for the purposes of Disclosure Guidance and Transparency
Rule 4.1.5R. This Directors’ Report contains information to be
given in accordance with the Companies Act 2006. Relevant
information below, which is contained elsewhere in this
Annual Report, is incorporated by cross reference.
Dividends
In respect of the period 1 January 2024 to 31 December 2024,
the Board has recommended a final dividend of 2.8 pence
per ordinary share which, together with the interim dividend
of 1.4 pence per ordinary share paid on 4 October 2024,
gives a total dividend for the year of 4.2 pence per ordinary
share. Subject to shareholder approval, the final dividend will
be paid on 29 May 2025 to shareholders on the register on
22 April 2025.
The Company offers a DRIP which gives shareholders the
opportunity to use their dividend payments to purchase
further ordinary shares in the Company. Further details
about the DRIP can be found within the Shareholder FAQs
inthe Investors section of the Company’s website.
The Company may, by ordinary resolution, declare dividends
not exceeding the amount recommended by the Board.
Subject to the Companies Act 2006, the Board may pay
interim dividends and any fixed rate dividend, whenever
thefinancial position of the Company, in the opinion of
theBoard, justifies its payment.
113Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
DIRECTORS’ REPORT CONTINUED
At no time during the year did any of the Directors have
amaterial interest in any significant contract with the
Company or any of its subsidiaries. A qualifying third-party
indemnity provision, as defined in section 234 of the
Companies Act 2006, is in force to the extent permitted
bylaw for the benefit of each of the Directors in respect
ofliabilities incurred as a result of their office. The Company
maintains a Directors’ and Officers’ liability insurance policy,
and the cover in place is reviewed annually. Qualifying
pension scheme indemnity provisions (as defined by
section235 of the Companies Act 2006) were in force during
the course of the financial year ended 31 December 2024 for
the benefit of the Group’s two UK pension scheme corporate
trustees: GKN 2 Trustee 2024 Limited and GKN 3 Trustee
2024 Limited, and two legacy pension scheme corporate
trustees: GKN 2 Trustee 2018 Limited and GKN 3 Trustee
2018 Limited. All such indemnities and provisions remain in
force at the date of this Annual Report.
The Directors may exercise all the powers of the Company,
subject to the Articles of Association, legislation and
regulation. This includes the ability, subject to shareholder
approval at the Company’s AGM each year, to exercise the
authority to allot or purchase the Company’s shares. Further
details of the powers of the Directors can be found in the
Articles of Association.
The Company’s Articles of Association may only be
amendedby special resolution at a general meeting of
theshareholders.
Conflicts of interest
The Company has formal procedures in place for identifying
and managing potential and actual conflicts of interest. All
Directors are required to avoid situations in which they have,
or could have, a direct or indirect interest that conflicts, or
possibly may conflict, with the interests of the Company.
Under the Articles and as permitted by the Companies Act,
the Board may authorise any matter that would otherwise
involve a Director breaching their statutory duty to avoid
conflicts of interest and may attach to any such authorisation
such conditions and/or restrictions as the Board deems
appropriate. Situations considered by the Board and
authorisations given are recorded in the Board minutes
andin a register of conflicts maintained by the Company
Secretary and are reviewed annually by the Board. The
Boardbelieves that this system operates effectively.
Name Role Effective date
of resignation
Simon
Mackenzie
Smith
Chair –
Celia Baxter
Independent Non-Executive
Director
–
Philip
Harrison
Independent Non-Executive
Director
–
Alexandra
Innes
Independent Non-Executive
Director
21 May 2024
Fiona
MacAulay
Independent Non-Executive
Director
–
Shali
Vasudeva
Independent Non-Executive
Director
–
Geoffrey
Martin
Executive Director 21 May 2024
Liam
Butterworth
CEO –
Roberto
Fioroni
CFO –
The interests of Directors who served during the year and
their immediate families in the shares of Dowlais, along with
details of Executive Directors’ conditional share awards, are
contained in the Directors’ Remuneration Report set out
onpage 95 to 112. Further information regarding employee
share schemes is provided in Note 23 to the Financial
Statements on page 160. The appointment and retirement
of Directors is governed by the Company’s Articles of
Association, the UK Corporate Governance Code 2018
(superseded by the UK Corporate Governance code 2024
from 1 January 2025), the Companies Act 2006 and other
related legislation. In accordance with the Articles of
Association of the Company, all Directors will submit
themselves for re-election at the Company’s
forthcomingAGM.
Notifiable
interests
Voting
rights
% of
capital
disclosed
Nature of
holding as per
disclosure
FIL Limited 69,978,321 5.02% Indirect
Select Equity
Group, L.P.
69,054,820 4.96% Direct
T. Rowe Price
Associates, Inc.
64,501,836 4.63% Indirect
The Capital Group
Companies, Inc.
64,259,387 4.62% Indirect
Change of control
The Company’s subsidiary, GKN Industries Limited is
partytothe Group’s senior borrowing facilities, being
the:(i)£450,000,000, $660,000,000 and €550,000,000
senior term and revolving facilities agreement; and (ii)
US$500,000,000 note purchase agreement relating to
theGroup’s US private placement of notes. Each of these
facilities contain provisions under which, in the event of a
change of control of the Company, GKN Industries Limited
may be required to repay all outstanding amounts
borrowed. Companies in the GKN Automotive and
GKNPowder Metallurgy businesses are party to supply
contracts with customers, certain of which contain provisions
which would entitle the customer to terminate the contract
in the event of a change of control of the Company, or
whichprovide for different rights or remedies on such
atermination than would apply to a termination in other
circumstances. All the Company’s share schemes contain
provisions relating to a change of control. Outstanding
awards normally vest and become exercisable on a change
of control subject to the satisfaction of any performance
conditions at that time. There are no agreements providing
for compensation for the Directors or employees of the
Company on a change of control.
Board of Directors
The Directors who served during the financial year are set
out below. Alexandra Innes and Geoffrey Martin stepped
down from the Board at the conclusion of the AGM on
21 May 2024. The biographical details of the current
servingDirectors are set out on pages 75 to 76.
114Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Anti-bribery and corruption
We have a zero-tolerance approach to bribery and
corruption across the Group. It is Group policy to comply
with all anti-bribery and corruption laws in the countries in
which the Group operates or which otherwise apply to the
Group, and to adopt procedures that robustly and visibly
ensure compliance. Key controls include our Anti-Bribery and
Corruption Policy and our Whistleblowing Policy; our due
diligence procedures; our rigorous and regular training of
colleagues on bribery risks; and our annual bribery and
corruption risk assessments by each business unit.
Auditor
Resolutions to reappoint Deloitte LLP as auditor of the
Company and to authorise the Audit Committee to
determine its remuneration will be proposed at the
2025AGM.
The Directors who held office at the date of approval of this
Directors’ report confirm that, so far as they each are aware,
there is no relevant audit information (being information
needed by the external auditor in connection with preparing
their audit report) of which the Company’s external auditor is
unaware, and each Director has taken all the steps that he or
she is obliged to take as a Director in order to make himself/
herself aware of any relevant audit information and to
establish that the Company’s auditor is aware of that
information. This confirmation is given pursuant to Section
418 of the Companies Act 2006.
AGM
The AGM of Dowlais Group plc will be held at the offices of
Investec Bank plc, 30 Gresham Street, London EC
2V 7QN,
United Kingdom, on 21 May 2025 at 2pm. Please see the
Notice of Meeting, together with explanatory notes and
guidance on how to access the meeting, for further
information.
Branches outside of the UK
The Group has no branches outside of the United Kingdom.
Additional disclosures
The Company has chosen, in accordance with section
414C(11) of the Companies Act 2006 and Schedule 7, Part 1,
Paragraph 1A of the Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008, to
include certain matters in its Strategic Report that would
otherwise be required to be disclosed in this Directors’
Report. Other information that is relevant to the Directors’
Report, and which is incorporated by reference into this
report, can be located as follows:
page
Events after the reporting period
172
Future developments
9, 11, 14 to 18, 27, and 33
Risk Management
45 to 46, and 63 to 64
Research and development
26 to 27, 33, and 40
Financial instruments and
financialrisk management
164 to 169
GHG emissions, energy
consumption, and energy
efficiency action
38, and 53 to 55
Corporate governance report
73 to 117
Workforce engagement
56 to 57, and 82 to 83
Employment policies
56 to 57
Stakeholder engagement
7, and 84 to 87
Related-party transactions
172
Political donations
It is the Group’s policy not to make political donations, as set
out in our Anti-Bribery and Corruption Policy, and no political
donations were made in the year.
Going concern, longer-term prospects and
viability statement
An overview of the business activities of the Group,
includinga review of the key business risks that the Group
faces, is given in the Strategic Report on pages 65 to 70. The
scenarios considered and assessment made by the Directors
with respect to the Company’s viability are set out on page
71. The Directors have reviewed the Group’s cash flow
forecasts, financial position and exposure to the principal
risks and have formed the view that the Group will generate
sufficient cash to meet its ongoing requirements for at least
12 months from the date the Financial Statements have been
authorised. The Directors believe that it is appropriate to
adopt the going concern basis of accounting in preparing
the Group’s Consolidated Financial Statements.
Modern Slavery Act
As required by section 54(1) of the Modern Slavery Act 2015,
our Slavery and Human Trafficking Statement is reviewed
and approved by the Board on an annual basis and published
on our Group website. Dowlais has made a statement on
behalf of the Group for the year ended 31 December 2023.
The Group adheres to high ethical standards and is
committed to respecting fundamental human rights in its
business operations and value chain. It is a requirement of
the Group’s Human Rights Policy that the Group takes steps
to combat slavery and human trafficking in its businesses and
supply chains. Further details can be found in our Slavery and
Human Trafficking Statement and Anti-Slavery and Human
Trafficking Policy on our website.
115Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
DIRECTORS’ REPORT CONTINUED
Disclosures required pursuant to the Listing Rules can be found on the following pages:
Listing rule Information to be included Disclosure
6.6.1 (1)
Interest capitalised by Group
Not applicable
6.6.1 (2)
Unaudited financial information (UKLR 6.2.23R)
Not applicable
6.6.1 (3)
Long-term incentive scheme information (LR 9.3.3R)
Details can be found on pages 106 to 108 of the Directors’ Remuneration Report.
6.6.1 (4)
Waiver of emoluments by a Director
Not applicable
6.6.1 (5)
Waiver of future emoluments by a Director
Not applicable
6.6.1 (6)
Non-pre-emptive issues of equity for cash
None
6.6.1 (7)
Non-pre-emptive issues of equity for cash in relation to major subsidiary undertakings
None
6.6.1 (8)
Listed company is a subsidiary of another company
Not applicable
6.6.1 (9)
Contracts of significance involving a Director or a Controlling Shareholder
Not applicable
6.6.1 (10)
Contracts for the provision of services by a Controlling Shareholder
None
6.6.1 (11)
Shareholder waiver of dividends
The trustees of the Dowlais Group plc Employee Share Trust have a dividend waiver in place in
respect of Ordinary Shares in the Company which are its beneficial property.
The trustees of a legacy Melrose Industries PLC Employee Share Trust have a dividend waiver in
place in respect of Ordinary Shares in the Company which are its beneficial property.
6.6.1 (12)
Shareholder waiver of future dividends
The trustees of the Dowlais Group plc Employee Share Trust have a dividend waiver in place in
respect of Ordinary Shares which are its beneficial property.
The trustees of a legacy Melrose Industries PLC Employee Share Trust have a dividend waiver in
place in respect of Ordinary Shares which are its beneficial property.
6.6.1 (13)
Ability to act independently from any Controlling Shareholder
Not applicable
Dowlais Profit Forecast
The statement under the heading “How do you see Dowlais
outlook for 2025 and beyond?” on page 9 (the “Dowlais Profit
Forecast”) constitutes a profit forecast for the purposes of
Rule 28 of the City Code on Takeovers and Mergers. The
Board confirms that, as at the date of this report, the Dowlais
Profit Forecast is valid and has been properly compiled on the
basis of the assumptions set out below and that the basis of
the accounting used is consistent with Dowlais’ accounting
policies, which are in accordance with IFRS. The Dowlais Profit
Forecast is based upon Dowlais’ current internal financial
forecasts for the 12-month periods ending 31 December 2025
and 31 December 2026, prepared in accordance with Dowlais
normal forecasting procedures and processes.
These procedures take into consideration multiple factors
including historical financial performance (including that set
out in Dowlais’ financial statements for the financial year
ended 31 December 2024) (the “2024 Financial Statements”),
anticipated changes in Dowlais’ operations, sales forecasts
and forecasts of customer demand for light vehicles and
management judgement. In particular, the Dowlais Profit
Forecast is based upon the most recent GLVP forecasts
published by S&P Global on 18 February 2025 and Dowlais’
current order book. As stated in the Dowlais Profit Forecast,
it does not reflect any impact of any changes in import tariffs
imposed by the United States, or any other country adopted
in 2025 or which may be adopted thereafter.
The basis of accounting used for the Dowlais Profit Forecast
is consistent with the accounting policies of Dowlais which
are in accordance with IFRS and are those applied in
preparing the 2024 Financial Statements. The Dowlais Profit
Forecast has been prepared on the basis referred to above
and subject to the principal assumptions set out below. The
Dowlais Profit Forecast is inherently uncertain and there can
be no guarantee that any of the principal assumptions below
will not occur and/or, if they do, their effect on Dowlais’
results of operations, financial condition, or financial
performance, may be material. The Dowlais Profit Forecast
should therefore be read in this context and construed
accordingly.
116Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
In preparing the parent company financial statements, the
Directors are required to:
– select suitable accounting policies and then apply them
consistently;
– make judgements and accounting estimates that are
reasonable and prudent;
– state whether applicable UK Accounting Standards have
been followed, subject to any material departures
disclosed and explained in the financial statements; and
– prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
company will continue in business.
In preparing the Group Financial Statements, International
Accounting Standard 1 requires that directors:
– properly select and apply accounting policies;
– present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
– provide additional disclosures when compliance with the
specific requirements of the financial reporting framework
are insufficient to enable users to understand the impact
of particular transactions, other events and conditions on
the entity’s financial position and financial performance;
and
– make an assessment of the Company’s ability to continue
as a going concern.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
includedon the Company’s website. Legislation in
theUnited Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
– the Financial Statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the
consolidation taken as a whole;
– the Strategic Report and the Directors’ Report (which
together comprise the ‘management report’ for the
purposes of Disclosure Guidance and Transparency Rule
4.1.5R) together include a fair review of the development
and performance of the business and the position of the
Company and the undertakings included in the
consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face; and
– the Annual Report and Financial Statements, taken as a
whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the
Company’s position and performance, business model
andstrategy.
This responsibility statement was approved by the Board of
Directors on 4 March 2025 and is signed on its behalf by:
Chief Executive Officer
Liam Butterworth
4 March 2025
Chief Financial Officer
Roberto Fioroni
4 March 2025
The principal assumptions assumed in the Dowlais
ProfitForecast are: (a) there will be no material change to
macroeconomic, political, inflationary, regulatory or legal
conditions in the markets or regions in which Dowlais
operates, including changes in import or export tariffs; (b)
there will be no material change in current interest rates,
economic growth, inflation expectations or foreign
exchange rates compared with Dowlais’ estimates; (c) there
will be no material change in accounting standards; (d) there
will be no material change in market conditions in relation to
customer demand or the competitive environment; (e) there
will be no material litigation or regulatory investigations, or
material unexpected developments in any existing litigation
or regulatory investigation, in relation to any of Dowlais’
operations, products or services; (f) there will be no business
disruptions that materially affect Dowlais, its customers,
operations, supply chain or labour supply, including natural
disasters, acts of terrorism, cyber-attack and/or
technological issues; (g) there will be no material
acquisitions, disposals, distribution partnerships, joint
ventures or other commercial agreements, other than those
already assumed within the forecast; (h) there will be no
material change in the existing operational strategy of
Dowlais; (i) there will be no material changes in Dowlais’
accounting policies and/or the application thereof; (j) there
are no material strategic investments or capital expenditure
in addition to those already planned; and (k) there will be no
material change in the management of Dowlais.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors are required to prepare the Group Financial
Statements in accordance with United Kingdom adopted
international accounting standards. The Directors have
chosen to prepare the parent company financial statements
in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards
and applicable law), including FRS 102 “The Financial
Reporting Standard applicable in the UK and Republic of
Ireland”. Under company law the Directors must not approve
the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the company
and of the profit or loss of the Company for that period.
117Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF DOWLAIS GROUP PLC
We have audited the financial statements which comprise:
– the Consolidated Income Statement;
– the Consolidated Statement of Comprehensive Income;
– the Consolidated Statement of Cash Flows;
– the Consolidated and parent company Balance Sheets;
– the Consolidated and parent company Statements of
Changes in Equity;
– notes 1 to 31 of the Consolidated Financial Statements; and
– notes 1 to 10 to the Company Financial Statements.
The financial reporting framework that has been applied in
the preparation of the Group financial statements is
applicable law and United Kingdom adopted international
accounting standards. The financial reporting framework
that has been applied in the preparation of the parent
company financial statements is applicable law and United
Kingdom Accounting Standards, including FRS 102
“TheFinancial Reporting Standard applicable in the UK
andRepublic of Ireland” (United Kingdom Generally
Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further
described in the auditor’s responsibilities for the audit
ofthefinancial statements section of our report.
We are independent of the Group and the parent company
in accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including
the Financial Reporting Council’s (the ‘FRC’s’) Ethical
Standard as applied to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements. The non-audit services provided to
the Group and parent company for the year are disclosed in
note 7 to the financial statements. We confirm that we have
not provided any non-audit services prohibited by the FRC’s
Ethical Standard to the Group or the parent company.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Report on the audit of the
financialstatements
1. Opinion
In our opinion:
– the financial statements of Dowlais Group plc (the
‘parent company’) and its subsidiaries (the ‘Group’)
give a true and fair view of the state of the Group’s
and of the parent company’s affairs as at
31 December 2024 and of the Group’s loss for the
year then ended;
– the Group financial statements have been properly
prepared in accordance with United Kingdom
adopted international accounting standards;
– the parent company financial statements have been
properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice,
including Financial Reporting Standard 102 “The
Financial Reporting Standard applicable in the UK
and Republic of Ireland”; and
– the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
118Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
– impairment of goodwill and other acquired intangible assets; and
– classification of adjusting items.
Within this report, key audit matters are identified as follows:
– Newly identified
–
Increased level of risk
–
Similar level of risk
–
Decreased level of risk
Materiality
– The materiality that we used for the Group financial statements was £18.0 million which was determined based on a combination of revenue, adjusted
profit before tax and adjusted operating profit
Scoping
– We used component auditors to test specific account balances in 23 reporting units across 13 countries and centrally performed audits on three reporting
units at group level including the parent company. This covered 98% of Group revenue, 92% of adjusted operating profit and 85% of net assets.
Significant changes in our approach
– We no longer consider the recognition and disclosure of the Group’s demerger accounting transactions as a key audit matter for FY24 as the demerger
transaction concluded in the prior financial period.
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s
and parent company’s ability to continue to adopt the going
concern basis of accounting included:
– obtaining an understanding of the relevant controls
relating to the Group’s budgeting and forecasting
process;
– challenging the inputs and assumptions in the Group’s
going concern assessment with reference to external data
and information from internal industry specialists;
– challenging the length of the going concern period
considered with reference to the term loan maturity in
April 2026;
– considering the parent company’s ability to continue to
adopt the going concern basis of accounting following the
recommendation by the Dowlais Board to shareholders of
a cash and share offer from American Axle &
Manufacturing Holdings Inc. (“AAM”);
– assessing the requirements of the financial covenants and
the potential risk for a covenant breach; and
– considering the consistency of management’s disclosure
of the Group’s going concern and long-term viability in
the 2024 Annual Report.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
orconditions that, individually or collectively, may cast
significant doubt on the Group’s and parent company’s
ability to continue as a going concern for a period of at
leasttwelve months from when the financial statements
areauthorised for issue.
In relation to the reporting on how the Group has applied
the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the
directors’ statement in the financial statements about
whether the directors considered it appropriate to adopt
the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on:
theoverall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit
ofthe financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion
on these matters.
119Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
5.1. Impairment of goodwill and other acquired intangible assets
Key audit matter description
Risk appetite: Similar level of risk
How the scope of our audit responded to the key audit matter
Goodwill of £1,093 million (2023: £1,107 million) and other intangible acquired assets of £987 million
(2023: £1,197 million) were recorded on the balance sheet at 31 December 2024, with the movements
inthe year the result of amortisation recognised on other acquired intangibles, and foreign exchange.
Asrequired by IAS 36 Impairment of assets (“IAS 36”) management performs an impairment review for
all goodwill balances on an annual basis and for other assets whenever an indication of impairment is
identified. This review identified the following groups of Cash Generating Units (“CGUs”):
– Automotive (goodwill £1,014 million, other acquired intangible assets £562 million); and
– Powder Metallurgy (goodwill £79 million, other acquired intangible assets £425 million).
Impairment of goodwill and other acquired intangible assets has been identified as a key audit matter
as a result of the quantitative significance of the balances, and the application of management
judgement and estimation in performing impairment reviews. Given an impairment was recognised
against the goodwill balance held in the Powder Metallurgy group of CGUs in the prior year, with
current year headroom reflective of stable financial performance over the last 12 months in addition
tofavourable discount rate movements and amortisation of other acquired intangible assets, our key
area of challenge was the Automotive group of CGUs. The Group’s impairment review was based on
acomparison of the carrying value and recoverable value, determined using the higher of the
value-in-use and fair value less costs to sell.
As disclosed on page 13, on 29 January 2025, the Dowlais Board recommended a cash and share
offerfrom AAM to shareholders for the Group. Under the terms of the combination each Dowlais
shareholder will receive 0.0863 shares in AAM, 42.0p in cash and 2.8p dividend for each share of
Dowlais. The recommended equity and cash offer based on the AAM share price at the offer date
implies an equity value of £1.2 billion, lower than Group net assets of £2.3 billion. The Board considered
that theequity component of the offer is expected to benefit existing shareholders through growth in
thecombined group.
After considering the terms of the offer, the Board considers the valuation based on the Board
approved forecasts to be the appropriate approach for determining recoverable value of the Group
on a standalone basis at the balance sheet date.
We have identified revenue and operating margin assumptions used in the estimation of forecast
future cash flows used in the value-in-use method as areas that involve management judgement,
specifically assumptions relating to future volumes and product mix, pricing reductions and the ability
of the business to recover additional costs due to inflation through procurement and productivity
saving initiatives.
Based on the above, management’s assessment of the Automotive group of CGUs using the value-in-
use method has demonstrated headroom above carrying value of £363 million (2023: £449 million
headroom). Further details are included in note 12 to the Group financial statements in relation to the
sensitivities reflecting the risks inherent in the valuation of goodwill and other non-current assets, and
also in notes 2 and 3 to the Group financial statements in relation to the key sources of estimation
uncertainty for these businesses. Refer also to page 90 of the Audit Committee report.
We obtained an understanding of the relevant controls over the valuation of goodwill and other
acquired intangible assets, in particular controls over the forecasts that underpin the value in use
models and controls around management’s preparation of impairment models.
We assessed management’s impairment paper, underlying analysis and supporting financial
models, and challenged the reasonableness of the assumptions that underpin management’s
forecasts. Specifically, our work included:
– performing sensitivity analysis to identify the key assumptions that have a significant effect on
the value-in-use determined for the CGUs;
– evaluating the integrity of the impairment models through testing of the mathematical accuracy,
checking the application of the input assumptions and testing their compliance with IAS 36;
– evaluating historical forecasting accuracy of revenue and operating profit discounted cash flows
by comparing to actual results;
– challenging management’s assumptions within the impairment models, particularly forecast
revenue volumes and mix, pricing reductions, and savings from procurement and productivity
initiatives through:
– inspection of internal reporting data supporting achievement of key assumptions;
– inquiries with key management personnel, including visits by the group audit team to key
component locations;
– tracing a sample of revenue, pricing reductions, and savings from procurement and
productivity initiatives recognised in FY24 through to supporting evidence, including publicly
available volume forecast data; and
– calculating a reasonable best case and reasonable worst case from the ranges identified in our
audit work and comparing this with the headroom in the models;
– engaging with internal industry specialists to assess future market trends and benchmark against
management’s assumptions;
– assessing the methodology selected by management to estimate recoverable amount (value in
use) against the requirements of IAS 36, in particular, we considered the reasons for a lower
implied market valuation and offer. Our work included:
– increasing the extent of our testing on value in use, and selecting top-up samples
whereappropriate;
– involving our internal accounting, auditing and valuation specialists to support in evaluating
work performed and considering alternative approaches, including assessing the valuation
bridge between the equity value implied by the transaction and the value in use considering
consensus analyst outlooks, forecast results and industry peer comparative data
– assessing the appropriateness of the disclosures including those in respect of reasonably
possiblechanges to key assumptions in notes 3 and 12 to the Group financial statements and
re-performing the calculations that underpin those disclosures.
Key observations
We determined that the assumptions applied in the impairment model were within an acceptable range, and that the recoverable amount adopted was
reasonable. We are satisfied with management’s conclusion that while the recommended AAM offer price is potentially contradictory information, value
in use is appropriate to measure the recoverable value of goodwill. The disclosures in notes 3 and 12 in respect of reasonably possible changes to key
assumptions are appropriate.
AUDITOR’S REPORT CONTINUED
120Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
5.2. Classification of adjusting items
Key audit matter description
Risk appetite: Similar level of risk
How the scope of our audit responded to the key audit matter
In addition to the statutory results, the Group continues to present adjusted profit measures which are
before the impact of adjusting items. Judgements made by management regarding the classification
of adjusting costs and income therefore have a significant impact on the presentation of the Group’s
results. As set out in note 6 to the Group financial statements, adjustments of £430 million
(2023: £805 million) have been made to the operating loss of £106 million (2023: £450 million operating
loss) to derive an adjusted operating profit of £324 million (2023: £355 million). These adjustments
include restructuring charges of £145 million (2023: £120 million) and one-off credits of £27 million
(2023: £17 million).
We identified a key audit matter in respect of the classification of items recorded as adjusting,
including consideration of the use of ‘non-GAAP’ or ‘Alternative Performance’ measures in the context
of ESMA’s Guidelines on Alternative Performance Measures. In particular, this relates to the material
ramp-up and ramp-down costs included within restructuring charges, driven by activities of the
Automotive segment’s operations in Mexico, Germany and Hungary where we assessed that an
increased level of judgement had been applied by management, the complexity of the calculations
supporting the items is higher and subject to greater estimation uncertainty and that there was
therefore increased risk of bias, fraud or error.
While the key measure used by management to monitor performance is adjusted operating profit,
adjusted profit before tax is also a key measure used in communication with shareholders. There is a
risk that costs or income may be classified as adjusting which are trading or recurring items, and
therefore distort the reported adjusted profit, whether due to manipulation or error. Consistency in
the identification and presentation of the adjusted costs or income is important for the comparability
of year-on-year reporting.
Explanations of each adjustment are set out in note 6 to the Group financial statements, and also in
note 3 to the Group financial statements in relation to the critical judgements involved in determining
adjusting items. Refer also to page 90 of the Audit Committee report.
We obtained an understanding of the relevant internal controls over the classification of adjusting
items in the financial statements.
We evaluated the appropriateness of the inclusion of items, both individually and in aggregate,
within adjusted results. Our work included:
– assessing the consistency of items included year-on-year, the content and application of
management’s accounting policy, challenging the nature of these items in comparison to ESMA
guidance and FRC guidance, and challenging in particular the inclusion of those items that recur
annually;
– agreeing a sample of transactions included within adjusting items through to underlying financial
records and other supporting evidence to test that the amounts disclosed were accurate and
represented incremental costs incurred as a direct result of the relevant restructuring project,
and assessing whether the recognised costs meet the recognition criteria set out in IAS 37
Provisions;
– evaluating the nature of adjusting items in order to assess whether they are disclosed in
accordance with the Group’s accounting policy, and also to assess consistency of adjusting items
between periods in the Group financial statements;
– challenging management’s recognition of fair value provision releases recognised and other
one-off credits within adjusted profit against the original charges recognised within adjusting
items; and
– assessing whether the disclosures within note 6 to the Group financial statements provide
sufficient detail for the reader to understand the nature of these items and how adjusted results
reconcile to statutory results.
Key observations
Whilst we note that the majority of adjusting items recur from period to period, their classification is consistent with the Group’s policy.
121Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be
changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements Parent company financial statements
Materiality
– £18.0 million (2023: £20.0 million)
– £12.6 million (2023: £14.0 million)
Basis for
determining
materiality
– We determined current year materiality using a number of measures, including revenue, adjusted profit before tax and
adjusted operating profit. Current year materiality represents 0.4% of Group revenue, 8.4% of Group adjusted profit
before tax and 5.6% of the Group adjusted operating profit. In the prior year we determined materiality based on 0.4%
of Group revenue.
– We determined materiality based on net assets,
which was then capped at 70% of Group
materiality.
Rationale for the
benchmark applied
– We used revenue, adjusted profit before tax and adjusted operating profit to reflect the performance metrics that are
key to the stakeholders of the Group.
– The parent company is primarily an investment
holding company and net assets is considered the
most appropriate benchmark.
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the
financial statements as a whole.
Group financial statements Parent company financial statements
Performance
materiality
– 70% (2023: 70%) of Group materiality
– 70% (2023: 70%) of parent company materiality
Basis and rationale
for determining
performance
materiality
In determining performance materiality, we considered the following factors:
– the assessment of the complexity of the Group and nature of the Group’s business model;
– the de-centralised nature of the Group’s control environment and its variation across the Group; and
– our past experience of the audit of the subsidiaries of the Group, which has indicated a low number of corrected and
uncorrected misstatements identified in prior periods.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.9 million (2023: £1.0 million), as well as differences below that threshold that,
in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the
financial statements.
AUDITOR’S REPORT CONTINUED
122Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
7. An overview of the scope of our audit
7.1. Identification and scoping of components
In order to determine the scoping of components we
considered the structure of the Group, including how
itisorganised, and assessed the audit risks.
The Group operates across two segments: GKN Automotive
and GKN Powder Metallurgy following the disposal of the
Hydrogen business during the year. Each operating segment
consists of a number of individual reporting units and
manages operations on a geographical and functional basis,
maintaining their own accounting records and controls and
using an integrated consolidation system to report to the
UKhead office. Our risk assessment considered the structure
of each operating segment, including Group-wide and
segment-wide controls, and taking into account the scope
ofthe operations of the shared service centre in the
Automotive division.
In addition to the operating segments above, the Group has
a number of central cost centres which report to the Board
and include head office companies for corporate functions
and costs.
In scoping the group audit, we have considered specific
audit risks and account balances of interest, so that our audit
work was appropriately focused on areas representing the
greatest risk of material misstatement to the Group financial
statements. This resulted in us directing component auditors
to audit specified account balances and transactions (“SAB”)
for 23 reporting units across 13 countries. In the prior year we
selected 7 reporting units where we requested component
auditors to perform a full scope audit, in addition to 16
reporting units whereby component auditors were directed
to audit to a SAB scope, across 12 countries. For entities in
the Automotive segment where certain transactions are
recorded through the shared service centre, we instructed
aseparate component team in Portugal, where the shared
services centre is located, to audit those balances that are
inscope for the audit.
Centrally we performed audit procedures on certain
balances within three reporting units including the parent
company which included centrally managed balances being
treasury, post-employment benefit obligations, litigation
and claims, goodwill, tax and head office costs.
Additionally, we performed analytical procedures on the
residual balances not covered by the above procedures. Our
analysis provided us with sufficient evidence to conclude
that no significant risks of material misstatement were
identified in these areas.
Audit procedures performed by the component and Group
teams covered 98% (2023: 77%) of revenue and 92%
(2023: 81%) of adjusted operating profit and 85% (2023: 94%)
of net assets.
Revenue
Specific account balances
and transactions – 98%
Review at group level – 2%
Revenue
Operating profit
Operating profit
Specific account balances
and transactions – 92%
Review at group level – 8%
Net Assets
Net Assets
Specific account balances
and transactions – 85%
Review at group level – 15%
123Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
7.2. Our consideration of the control environment
The Group has a tiered management structure that includes
head-office and divisional management functions providing
support to and oversight of the operational component-
level finance teams. The Automotive division operates a
shared service centre, and for a number of reporting units,
certain finance functions are performed by the shared
service centre.
With the involvement of IT audit specialists in the UK and in
the relevant countries, we obtained an understanding of the
relevant IT environment. The Group operates a diverse IT
infrastructure globally, and is reliant on the effectiveness of a
number of IT applications and controls, with varying levels of
maturity, to ensure that financial transactions are processed
and recorded completely and accurately.
Given this, our original audit strategy was to test a limited
number of controls for the purposes of our work and perform
a mostly substantive audit and to test general IT controls
(“GITC”) for those systems on which we were able to place
reliance. However, as a result of deficiencies identified
during the course of this testing in certain geographies took
a substantive audit approach in certain components where
we had originally planned to rely on controls.
For all SAB components, we obtained an understanding of
the relevant controls associated with the financial reporting
process, areas of significant risk, and in relation to significant
accounting estimates. In certain reporting units we tested
and relied on controls relating to revenue, trade receivables
and inventory. We reported our observations from this work,
none of which constituted significant deficiencies in internal
control, with management and the Audit Committee. Also
refer to pages 91 and 92 of the Audit Committee report.
7.3. Our consideration of climate-related risks
In planning our audit, we have considered the potential
impact of climate change on the Group’s business and its
financial statements.
The Group continues to develop its assessment of the
potential impacts of climate change which is currently
premised upon an analysis of physical and transition risks
over a short, medium and long-term horizon as explained in
the Strategic Report on pages 48 to 52.
As a part of our audit, we have obtained management’s
climate-related risk assessment and held discussions with the
head of sustainability and finance management to
understand the process of identifying climate related risks,
the determination of mitigating actions and the impact on
the Group’s financial statements.
The key areas in the Consolidated Financial Statements
considered were:
– going concern and viability of the Group over the next
three years;
– cash flow forecasts used in the impairment assessments of
non-current assets including goodwill and other intangible
assets; and
– carrying value and useful economic lives of property, plant
and equipment.
Management concluded there was no material impact
arising from climate change on the judgements and
estimates made in the financial statements as explained in
notes 2 and 12.
We performed our own qualitative risk assessment of the
potential impact of climate change on the Group’s account
balances and classes of transaction and did not identify any
reasonably possible risks of material misstatement.
With the involvement of climate change and sustainability
specialists, we evaluated management’s risk assessment
process in respect of the potential impact of climate change
in judgements and estimates relevant to the Consolidated
Financial Statements and evaluated the appropriateness of
management’s Task Force on Climate-Related Financial
Disclosures. We also read the climate-related disclosures in
the Strategic Report to consider whether it is materially
consistent with the financial statements and our knowledge
obtained in the audit.
7.4. Working with other auditors
We provided detailed referral instructions to all component
auditors, encompassing our risk assessments, planned
procedures, and performance materiality thresholds.
Opencommunication channels were maintained, allowing
forongoing dialogue and feedback on risk assessments,
audit plans, and timelines. Regular communication through
conference and video calls, particularly with locations
relevant to significant and higher audit risks, ensured
continuous alignment and information sharing.
We conducted on-site visits to component locations in
Germany, Poland, Mexico, the USA, China, Hungary, and
theshared service centre in Portugal during 2024.
In addition to the above, the Group audit partners
(includingthe senior statutory auditor) held Group-wide,
divisional and individual planning and close meetings which
covered all businesses. Each division has a dedicated senior
member of the Group audit team responsible for the
supervision and direction of components, including
whereappropriate sector-specific expertise.
We included the component audit teams in our Group audit
team briefing, discussed and reviewed their risk assessment,
and reviewed documentation of the findings from their
work. We also reviewed the audit work papers supporting
component teams’ reporting to us using remote shared
desktop technology and on-site visits where needed.
8. Other information
The other information comprises the information included
inthe annual report, other than the financial statements and
our auditor’s report thereon. The directors are responsible
for the other information contained within the annual report.
Our opinion on the financial statements does not cover
theother information and, except to the extent otherwise
explicitly stated in our report, we do not express any form
ofassurance conclusion thereon.
Our responsibility is to read the other information and,
indoing so, consider whether the other information is
materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated.
If we identify such material inconsistencies or apparent
material misstatements, we are required to determine
whether this gives rise to a material misstatement in the
financial statements themselves. If, based on the work
wehave performed, we conclude that there is a material
misstatement of this other information, we are required
toreport that fact.
We have nothing to report in this regard.
AUDITOR’S REPORT CONTINUED
124Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement, the directors are responsible for the preparation
of the financial statements and for being satisfied that they
give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group’s and the parent
company’s ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors
either intend to liquidate the Group or the parent company
or to cease operations, or have no realistic alternative but to
do so.
10. Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions
of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
11. Extent to which the audit was considered
capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect
material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related
toirregularities
In identifying and assessing risks of material misstatement in
respect of irregularities, including fraud and non-compliance
with laws and regulations, we considered the following:
– the nature of the industry and sector, control environment
and business performance including the design of the
Group’s remuneration policies, key drivers for directors’
remuneration, bonus levels and performance targets;
– results of our enquiries of management, internal audit,
legal counsel, operational staff, the directors and the
AuditCommittee about their own identification and
assessment of the risks of irregularities, including those
that are specific to the Group’s sector;
– any matters we identified having obtained and reviewed
the Group’s documentation of their policies and
procedures relating to:
– identifying, evaluating and complying with laws and
regulations and whether they were aware of any
instances of non-compliance;
– detecting and responding to the risks of fraud and
whether they have knowledge of any actual, suspected
or alleged fraud;
– the internal controls established to mitigate risks of
fraud or non-compliance with laws and regulations; and
– the matters discussed among the audit engagement team
including component audit teams and relevant internal
specialists, including tax, valuations, financial instruments,
pensions and IT specialists regarding how and where fraud
might occur in the financial statements and any potential
indicators of fraud.
As a result of these procedures, we considered the
opportunities and incentives that may exist within the
organisation for fraud and identified the greatest potential
for fraud in the following areas:
– impairment of goodwill and other acquired intangible
assets; and
– the classification of adjusting items.
In common with all audits under ISAs (UK), we are also
required to perform specific procedures to respond
totherisk of management override.
We also obtained an understanding of the legal and
regulatory frameworks that the Group operates in, focusing
on provisions of those laws and regulations that had a direct
effect on the determination of material amounts and
disclosures in the financial statements. The key laws and
regulations we considered in this context included the UK
Companies Act, UK Listing Rules, pensions legislation and
taxlegislation.
In addition, we considered provisions of other laws and
regulations that do not have a direct effect on the financial
statements but compliance with which may be fundamental
to the Group’s ability to operate or to avoid a material
penalty. These included the environmental regulations
inthejurisdictions the Group operates in.
125Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
11.2. Audit response to risks identified
As a result of performing the above, we identified
impairment of goodwill and other acquired intangible assets
and the classification of adjusting items as key audit matters
related to the potential risks of fraud. The key audit matters
section of our report explains the matters in more detail and
also describes the specific procedures we performed in
response to those key audit matters.
In addition to the above, our procedures to respond to risks
identified included the following:
– reviewing the financial statement disclosures and testing
to supporting documentation to assess compliance with
provisions of relevant laws and regulations described as
having a direct effect on the financial statements;
– enquiring of management, the Audit Committee and
in-house and external legal counsel concerning actual and
potential litigation and claims;
– performing analytical procedures to identify any unusual
or unexpected relationships that may indicate risks of
material misstatement due to fraud;
– reading minutes of meetings of those charged with
governance, reviewing internal audit reports and
reviewing correspondence with HMRC; and
– in addressing the risk of fraud through management
override of controls, testing the appropriateness of journal
entries and other adjustments; assessing whether the
judgements made in making accounting estimates are
indicative of a potential bias; and evaluating the business
rationale of any significant transactions that are unusual or
outside the normal course of business.
We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members
including internal specialists and component audit teams,
and remained alert to any indications of fraud or non-compliance
with laws and regulations throughout the audit.
Report on other legal and
regulatory requirements
12. Opinions on other matters prescribed by
theCompanies Act 2006
In our opinion the part of the directors’ remuneration
report to be audited has been properly prepared in
accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the
course of the audit:
– the information given in the strategic report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with
the financial statements; and
– the strategic report and the directors’ report
havebeen prepared in accordance with applicable
legal requirements.
In the light of the knowledge and understanding
oftheGroup and the parent company and their
environment obtained in the course of the audit,
wehave not identified any material misstatements
inthe strategic report or the directors’ report.
13. Corporate Governance Statement
The Listing Rules require us to review the directors’
statement in relation to going concern, longer-term viability
and that part of the Corporate Governance Statement
relating to the Group’s compliance with the provisions of the
UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit,
wehave concluded that each of the following elements
of the Corporate Governance Statement is materially
consistent with the financial statements and our
knowledge obtained during the audit:
– the directors’ statement with regards to the
appropriateness of adopting the going concern
basisof accounting and any material uncertainties
identified on page 115;
– the directors’ explanation as to its assessment of the
Group’s prospects, the period this assessment covers
and why the period is appropriate on page 71;
– the directors’ statement on fair, balanced and
understandable set out on page 117;
– the board’s confirmation that it has carried out a
robust assessment of the emerging and principal
risks set out on page 64;
– the section of the annual report that describes
thereview of effectiveness of risk management
andinternal control systems set out on page 91
and92; and
– the section describing the work of the Audit
Committee set out on page 89 and 90.
AUDITOR’S REPORT CONTINUED
126Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
14. Matters on which we are required to report
byexception
14.1. Adequacy of explanations received and
accountingrecords
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
– we have not received all the information and explanations
we require for our audit; or
– adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
– the parent company financial statements are not in
agreement with the accounting records and returns.
We have nothing to report in respect of
thesematters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to
report if in our opinion certain disclosures of directors’
remuneration have not been made or the part of the
directors’ remuneration report to be audited is not in
agreement with the accounting records and returns.
We have nothing to report in respect of
thesematters.
15. Other matters which we are required to address
15.1. Auditor tenure
The company was incorporated on 13 January 2023.
Following the recommendation of the Audit Committee,
wewere appointed by the Board of Directors in 2023 to audit
the financial statements for the year ending 31 December
2023 and subsequent financial periods.
We were appointed in 2016 for other Group entities, which
were then part of the Group headed by GKN plc, to audit
the financial statements for the year ended 31 December
2016, and continued in our appointment throughout the
period they were part of this Group, and subsequently
whenthey were part of the Group headed by Melrose
Industries PLC. The period of total uninterrupted
engagement is therefore nine years, covering the
yearsending 31 December 2016 to 31 December 2024.
15.2. Consistency of the audit report with the additional
report to the Audit Committee
Our audit opinion is consistent with the additional report
tothe Audit Committee we are required to provide in
accordance with ISAs (UK).
16. Use of our report
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the company’s members those
matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s
members as a body, for our audit work, for this report,
or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA)
Disclosure Guidance and Transparency Rule (DTR) 4.1.15R
– DTR 4.1.18R, these financial statements will form part of
theElectronic Format Annual Financial Report filed on the
National Storage Mechanism of the FCA in accordance with
DTR 4.1.15R – DTR 4.1.18R. This auditor’s report provides
noassurance over whether the Electronic Format Annual
Financial Report has been prepared in compliance with
DTR4.1.15R – DTR 4.1.18R.
John Charlton (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
4 March 2025
127Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
Year ended Year ended
31 December 31 December
2024 2023
Notes£m£m
Revenue
4, 5
4,337
4,864
Cost of sales
(3,691)
(4,107)
Gross profit
646
757
Share of results of equity accounted investments
14
61
51
Operating expenses
7
(813)
(809)
Impairment of goodwill
12
–
(449)
Operating loss
5, 6
(106)
(450)
Finance costs
8
(131)
(101)
Finance income
8
22
29
Loss before tax
(215)
(522)
Tax
9
47
27
Loss after tax for the year
(168)
(495)
Attributable to:
Owners of the parent
(173)
(501)
Non-controlling interests
5
6
(168)
(495)
Earnings per share
–
Basic
11
(12.6)p
(36.0)p
–
Diluted
11
(12.6)p
(36.0)p
Adjusted
(1)
results
Adjusted revenue
5
4,937
5,489
Adjusted operating profit
5, 6
324
355
Adjusted profit before tax
6
215
264
Adjusted profit after tax
6
161
198
Adjusted basic earnings per share
11
11.4p
13.8p
Adjusted diluted earnings per share
11
11.4p
13.8p
1. Defined in the summary of material accounting policies (Note 2).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 31 December
2024 2023
Notes£m£m
Loss after tax for the year
(168)
(495)
Items that will not be reclassified subsequently to theIncomeStatement:
Net remeasurement gain/(loss) on retirement benefit obligations
24
37
(22)
Income tax (charge)/credit relating to items that will not be reclassified
9
(9)
4
Items that may be reclassified subsequently to theIncomeStatement:
28
(18)
Currency translation
(68)
(152)
Impact of hyperinflationary economies
9
8
Share of other comprehensive expense fromequityaccountedinvestments
14
(3)
(32)
Gain arising on hedging instruments designatedashedgeofnetinvestment
25
4
20
Fair value gain on hedging instruments designatedascashflowhedges
25
2
1
Cumulative gain on hedging instruments reclassifiedtotheIncome Statement
25
(3)
–
Income tax credit relating to items that may be reclassified
9
6
4
(53)
(151)
Other comprehensive expense for the year
(25)
(169)
Total comprehensive expense for the year
(193)
(664)
Attributable to:
Owners of the parent
(198)
(668)
Non-controlling interests
5
4
(193)
(664)
128Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended Year ended
31 December 31 December
2024 2023
Notes£m£m
Net cash from operating activities
27
120
239
Investing activities
Purchase of property, plant and equipment
(188)
(279)
Proceeds from disposal of property, plant and equipment
4
33
Purchase of computer software and capitalised development costs
(3)
(16)
Disposal of business, net of cash disposed
(10)
–
Dividends received from equity accounted investments
14
70
63
Interest received
8
5
Net cash used in investing activities
(119)
(194)
Financing activities
Cash settlements with Related Parties
(1)
–
(1,096)
Drawings on borrowing facilities
921
1,313
Repayment of borrowing facilities
(792)
(124)
Costs of raising debt finance
(2)
(12)
Repayment of principal under lease obligations
28
(24)
(25)
Purchase of own shares under share buy-back
26
(26)
–
Purchase of own shares by Employee Benefit Trust
26
–
(7)
Dividends paid to non-controlling interests
(2)
(7)
Dividends paid to equity shareholders
10
(58)
(19)
Net cash from financing activities
17
23
Net increase in cash and cash equivalents, net of bank overdrafts
18
68
Cash and cash equivalents, net of bank overdrafts at the beginning of the year
(2)
27
313
263
Effect of foreign exchange rate changes
27
(8)
(18)
Cash and cash equivalents, net of bank overdrafts at the end of the year
27
323
313
1. Related Parties comprised Melrose Industries PLC, the ultimate parent company prior to demerger on the 20 April 2023 and other non-Group entities controlled by Melrose Industries PLC.
2. Cash and cash equivalents, net of overdrafts at 1 January 2023 includes a £7 million bank overdraft presented in loans with Related Parties.
As at 31 December 2024, the Group had net debt of £968 million (31 December 2023: £847 million). A definition and reconciliation of the movement in net debt is shown in Note 27.
129Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
31 December 31 December 31 December
2024
2023
(1)
2022
(1)
Non-current assetsNotes£m£m£m
Goodwill and other intangible assets
12
2,129
2,365
3,095
Property, plant and equipment
13
1,676
1,751
1,821
Interests in equity accounted investments
(1)
14
385
397
441
Loans receivable from Related Parties
(2)
–
–
2,826
Deferred tax assets
22
157
146
99
Derivative financial assets
25
9
8
9
Other financial assets
25
–
28
–
Retirement benefit surplus
24
34
27
42
Other receivables
17
13
12
21
Current assets
4,403
4,734
8,354
Inventories
16
431
510
498
Trade and other receivables
17
485
628
638
Derivative financial assets
25
9
45
24
Current tax assets
25
21
20
Other financial assets
25
18
–
–
Cash and cash equivalents
18
336
313
270
1,304
1,517
1,450
Total assets
5
5,707
6,251
9,804
Current liabilities
Trade and other payables
19
961
1,179
1,188
Interest-bearing loans and borrowings
20
13
2
–
Loans payable to Related Parties
(2)
–
–
2,176
Lease obligations
28
29
25
25
Derivative financial liabilities
25
32
4
10
Current tax liabilities
65
100
109
Provisions
21
142
136
140
1,242
1,446
3,648
Net current assets/(liabilities)
62
71
(2,198)
31 December 31 December 31 December
2024
2023
(1)
2022
(1)
Non-current liabilitiesNotes£m£m£m
Other payables
19
18
18
28
Interest-bearing loans and borrowings
20
1,291
1,158
–
Lease obligations
28
103
126
134
Derivative financial liabilities
25
14
4
2
Deferred tax liabilities
22
199
248
293
Retirement benefit obligations
24
418
486
503
Provisions
21
117
182
186
2,160
2,222
1,146
Total liabilities
5
3,402
3,668
4,794
Net assets
2,305
2,583
5,010
Equity
Issued share capital
26
14
14
–
Own shares
26
(7)
(7)
–
Translation reserve
26
(133)
(81)
69
Hedging reserve
26
–
1
–
Retained earnings
(1)
2,392
2,620
4,902
Equity attributable to owners of the parent
2,266
2,547
4,971
Non-controlling interests
39
36
39
Total equity
2,305
2,583
5,010
1. Interests in equity accounted investments and retained earnings at 31 December 2022 and 2023 have been
restated to reflect a previously unidentified omission in the acquisition accounting of an equity accounted
investment. Further details are set out in Note 1.3.
2. Related Parties comprised Melrose Industries PLC, the ultimate parent company prior to demerger on
20 April 2023 and other non-Group entities controlled by Melrose Industries PLC.
The Consolidated Financial Statements were approved and authorised for issue by the Board of
Directors on 4 March 2025 and were signed on its behalf by:
Roberto Fioroni
Chief Financial Officer
4 March 2025
130Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity
attributable
Issued share Share premium Translation Hedging Retained to owners Non-controlling Total
capitalaccountOwn sharesreservereserveearningsof the parent interestsequity
£m£m£m£m£m£m£m£m£m
At 1 January 2023 (as previously reported)
–
–
–
69
–
4,885
4,954
39
4,993
Restatement of equity accounted investments
(1)
–
–
–
–
–
17
17
–
17
At 1 January 2023 (as restated)
–
–
–
69
–
4,902
4,971
39
5,010
Loss for the year
–
–
–
–
–
(501)
(501)
6
(495)
Other comprehensive (expense)/income
–
–
–
(150)
1
(18)
(167)
(2)
(169)
Total comprehensive (expense)/income
–
–
–
(150)
1
(519)
(668)
4
(664)
Dividends paid to Related Parties
(2)
–
–
–
–
–
(1,675)
(1,675)
–
(1,675)
Transactions with Related Parties
(2)
–
–
–
–
–
(57)
(57)
–
(57)
Effect of change of ultimate holding company
(3)
14
1,070
–
–
–
(1,084)
–
–
–
Purchase of own shares by Employee Benefit Trust
(4)
–
–
(7)
–
–
–
(7)
–
(7)
Capital reduction
–
(1,070)
–
–
–
1,070
–
–
–
Dividends paid to equity shareholders
–
–
–
–
–
(19)
(19)
(7)
(26)
Equity-settled share-based payments
–
–
–
–
–
2
2
–
2
At 31 December 2023
(1)
14
–
(7)
(81)
1
2,620
2,547
36
2,583
Loss for the year
–
–
–
–
–
(173)
(173)
5
(168)
Other comprehensive (expense)/income
–
–
–
(52)
(1)
28
(25)
–
(25)
Total comprehensive (expense)/income
–
–
–
(52)
(1)
(145)
(198)
5
(193)
Dividends paid to equity shareholders
–
–
–
–
–
(58)
(58)
(2)
(60)
Purchase of own shares under share buy-back
(5)
–
–
–
–
–
(26)
(26)
–
(26)
Equity-settled share-based payments
–
–
–
–
–
1
1
–
1
At 31 December 2024
14
–
(7)
(133)
–
2,392
2,266
39
2,305
1. Interests in equity accounted investments and retained earnings at 1 January 2023 have been restated to reflect a previously unidentified omission in the acquisition accounting of an equity accounted investment. Further details
are set out in Note 1.3.
2. Related Parties comprised Melrose Industries PLC, the ultimate parent company prior to demerger on 20 April 2023 and other non-Group entities controlled by Melrose Industries PLC.
3. Following the demerger, the issued share capital and share premium account of Dowlais Group plc were recognised in the Consolidated Financial Statements. See Note 2 for details of application of merger accounting.
4. On 31 May 2023 an Employee Benefit Trust (EBT) established for the benefit of certain employees of the Group purchased shares in the capital of the Company to be held for the purpose of settling awards vesting under the
Group’s share incentive schemes.
5. On 4 April 2024 the Group commenced a share buy-back programme under which shares in the capital of the Company totalling £26 million (2023: £nil) have been purchased. All shares purchased under this programme have
beencancelled.
Further information on issued share capital and reserves is set out in Note 26.
131Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate information
Dowlais Group plc comprises the GKN Automotive and GKN Powder Metallurgy businesses along
with certain Corporate functions, together referred to as the “Group”. GKN Automotive is a global
technology and systems engineer which designs, develops, manufactures and integrates an
extensive range of driveline technologies, including electric vehicle components. GKN Powder
Metallurgy is a global leader in precision powder metal parts for the automotive and industrial
sectors, as well as the production of powder metal. GKN Hydrogen formed part of the Group,
offering reliable and secure hydrogen storage solutions, until its sale on 29 July 2024 to Langley
Holdings plc.
1.1 Corporate structure
Dowlais Group plc was incorporated as a public company limited by shares in the United Kingdom
on 13 January 2023 under the Companies Act 2006 and is registered in England & Wales. On
28 February 2023, Melrose Industries PLC (“Melrose”) transferred the entire shareholding of GKN
Industries Limited and GKN Powder Metallurgy Holdings Limited to Dowlais Group plc such that
all the entities within the Group became owned directly or indirectly by Dowlais Group plc.
On 20 April 2023, Melrose made a distribution to its shareholders of Dowlais Group plc shares with one
Dowlais share issued for every Melrose share held. On the same day, Dowlais Group plc shares were
admitted to the premium listing segment of the Official List of the Financial Conduct Authority (FCA)
and to trading on the London Stock Exchange’s main market for listed securities.
Prior to 20 April 2023, the ultimate parent company and controlling party of the Group was Melrose
Industries PLC, a public company limited by shares and incorporated in England & Wales.
Subsidiaries of Melrose Industries PLC prior to the date of the demerger which do not form part of
the Dowlais Group are considered non-Group entities. Melrose Industries PLC and other non-Group
entities controlled by Melrose Industries PLC are Related Parties of the Group up to the date of the
demerger on 20 April 2023.
1.2 Basis of Preparation
The comparative information presented for 31 December 2022 and results up to 28 February 2023
in this set of accounts show an aggregation of the GKN Automotive, GKN Powder Metallurgy and
GKN Hydrogen businesses along with certain Corporate functions, which formed the operating
segments of the Group. The aggregation has been prepared as though the post-demerger legal
structure of the Group was in place at the beginning of the comparative period under the
principles of merger accounting (see Note 2).
1.3 Restatement of equity accounted investments
During the year, a previously unidentified omission was noted with respect to the acquisition
accounting for the Group’s investment in Shanghai GKN HUAYU Driveline Systems (“SDS”). SDS
was acquired in 2018 and is held as an equity accounted investment. At the time of acquisition,
intangible assets relating to customer programmes were identified and recorded as part of the
carrying value of the investment as required by IAS 28 Investments in Associates and Joint
Ventures, however no corresponding deferred tax liability was recorded.
Had the deferred tax liability been recorded at the time of acquisition, this would have had no effect
on the fair value of the investment initially recorded on acquisition. Due to the unwind of the underlying
deferred tax liability, reflecting the amortisation of the related intangible assets, this would have increased
the share of profits of equity accounted investments by £3 million each year since then, with a
corresponding increase to the investment in equity accounted investments.
As the cumulative effect of this on the opening balance sheet in 2022 is considered material, it has
been restated. As a result, interests in equity accounted investments have increased by £17 million
being the net impact of the increase to goodwill of £36 million and the remaining deferred tax
liability of £19 million, with a corresponding credit to retained earnings. The Income Statements
for comparative periods have not been restated on the basis the impact is not considered to be
material to the results reported for the comparative periods.
The impact of the restatement on the Consolidated Financial Statements is set out in the
table below.
As reported
Adjustment
As restated
31 December 2022
Equity accounted investments
424
17
441
Retained earnings
(4,885)
(17)
(4,902)
31 December 2023
Equity accounted investments
380
17
397
Retained earnings
(2,603)
(17)
(2,620)
1.4 New Standards, Amendments and Interpretations affecting amounts, presentation or
disclosure reported in the current year
The following amendments to IFRS Accounting Standards have been applied for the first time by the
Group. Their adoption has not had any material impact on the disclosures or on the required amounts
reported in these Consolidated Financial Statements, except as noted below:
– Amendments to IAS 1 Classification of Liabilities as Current or Non-current
– Amendments to IAS 1 Non-current Liabilities with Covenants
– Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements - The Group has provided the
required disclosures around the effects of supplier finance arrangements on the entity’s liabilities
and cash flows and any exposure to the Group’s concentration of liquidity risk as a result of being
party to such arrangements in Note 25.
– Amendments to IFRS 16 Lease Liability in a Sale and Leaseback
1.5 New and revised IFRS Accounting Standards in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not applied the following new
and revised IFRS Accounting Standards that have been issued but are not yet effective:
– Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture
– Amendments to IAS 21 Lack of Exchangeability
– Amendments to IFRS 9 Amendments to the Classification and Measurement of
Financial Instruments
The Directors do not expect that the adoption of the Standards listed above will have a material
impact on the financial statements of the Group in future periods.
132Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
2. Summary of material accounting policies
Basis of accounting
The Consolidated Financial Statements have been prepared in accordance with the requirements
of the Companies Act 2006 and United Kingdom adopted international accounting standards.
The Consolidated Financial Statements are presented in pounds Sterling and, unless stated
otherwise, rounded to the nearest million. They have been prepared under the historical cost
convention, as modified by the revaluation of certain financial assets and financial liabilities
(including derivative instruments).
Merger accounting
As set out in Note 1.1 above, the Group was separated from Melrose during the prior year.
The demerger took place while the business was under Melrose ownership and therefore the
Directors assessed that the transaction was under common control and outside of the scope of
IFRS 3 Business Combinations.
IFRS is not prescriptive as to the accounting for such transactions, and under IAS 8 Accounting
Polices, Changes in Accounting Estimates and Errors, the Directors used guidance in UK GAAP
(FRS 102) to apply merger accounting. The effects of this accounting on the Consolidated Financial
Statements for the prior year were as follows:
– The value of the assets and liabilities of the business were transferred to Dowlais at book value
on the date of the transaction with no adjustments required to estimate fair value.
– The results of the Group for the year ended 31 December 2023 have been presented for a
continuous period to include both pre- and post-demerger trading.
– Prior year opening reserves are presented as a translation reserve and a single remaining balance
of shareholders’ funds.
– The comparative for earnings per share has been calculated as if the current share structure has
always existed in accordance with IAS 33.26.
– Costs relating to the demerger are charged to the Income Statement.
Alternative performance measures
The Group presents Alternative Performance Measures (“APMs”) in addition to the statutory results.
These are presented in accordance with the Guidelines on APMs issued by the European Securities and
Markets Authority (“ESMA”). APMs used by the Group are set out in the Alternative Performance
Measures section on pages 182 to 186 and the reconciling items between statutory and adjusted results
are listed below and described in more detail in Note 6.
Adjusted revenue includes the Group’s share of revenue from equity accounted investments
(“EAIs”).
Adjusted profit measures exclude items which are significant in size or volatility or by nature are
non-trading or non-recurring, and include adjusted profit from EAIs.
On this basis, the following are the principal items included within adjusting items impacting
operating profit:
– Amortisation of intangible assets that are acquired in a business combination, excluding
computer software and development costs;
– Significant restructuring project costs and other associated costs, including losses incurred
following the announcement of closure for identified businesses and pre-operational losses for
new operating sites, arising from significant strategy changes that are not considered by the
Group to be part of the normal operating costs of the business;
– Acquisition and disposal related gains and losses;
– Costs relating to or resulting from the demerger of the Group from Melrose Industries PLC;
– Impairment charges that are considered to be significant in nature and/or value to the trading
performance of the business;
– Movement in derivative financial instruments not designated in hedging relationships, including
revaluation of associated assets and liabilities;
– Removal of adjusting items, interest and tax on equity accounted investments to reflect
operating results; and
– The net release of loss-making contract provision fair value items booked on acquisitions.
Further to the adjusting items above, adjusting items impacting profit before tax include:
– The fair value changes on cross-currency swaps, relating to cost of hedging which are not
deferred in equity;
– The movement in loans with Related Parties as a result of changes in foreign currency exchange
rates; and
– The fair value changes on remeasurement of non-trading financial assets.
In addition to the items above, adjusting items impacting profit after tax include:
– The net effect on tax of significant restructuring from strategy changes that are not considered
by the Group to be part of the normal operating costs of the business;
– The net effect of significant new tax legislation; and
– The tax effects of adjustments to profit before tax, described above.
The Board considers the adjusted results to be an important measure used to monitor how the
businesses are performing as this provides a meaningful reflection of how the businesses are
managed and measured on a day-to-day basis and achieves consistency and comparability
between reporting periods. The policy above is consistent with that used in the comparative year.
The adjusted measures are used to partly determine the variable element of remuneration of
senior management throughout the Group and are also in alignment with performance measures
used by certain external stakeholders.
Adjusted profit is not a defined term under IFRS and may not be comparable with similarly
titled profit measures reported by other companies. It is not intended to be a substitute for,
or superior to, GAAP measures. All APMs relate to the current year results and comparative
years where provided.
133Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
2. Summary of material accounting policies continued
Going concern
The Consolidated Financial Statements have been prepared on a going concern basis as the
Directors consider that adequate resources exist for the Company to continue in operational
existence for a period of not less than 12 months from the date of this report.
In reaching this conclusion, the Directors have also considered the implications in a going concern
context of the proposed acquisition of the Group by AAM which was announced on 29 January
2025. As set out in the rule 2.7 announcement, the Directors believe that the proposed combination
with AAM is an attractive opportunity to accelerate the realisation of shareholder value through
the establishment of a global, automotive supplier with market-leading capabilities, better-
positioned together to navigate both the short-term challenges and long-term market dynamics
in the automotive sector. On that basis, the Directors believe this supports its going concern
assessment, in the event the combination proceeds. The combination is expected to close during
the fourth quarter of 2025, subject to the approval and availability of the Court, the approval of the
Company’s shareholders and AAM shareholders, as well as customary closing conditions, including
regulatory clearances in Europe and the US.
The Group’s liquidity and funding arrangements are described in the Financial Review on page 25.
Financing headroom of £0.7 billion existed at 31 December 2024 (2023: c. £0.6 billion) and is forecast
to remain at similar or improved levels throughout the going concern period. Forecast covenant
compliance is considered further below.
Covenants
The current facility has two financial covenants being a net debt to adjusted EBITDA
(“leverage”) covenant and an interest cover covenant, both of which are tested half yearly,
in June and December.
The financial covenants for the year end and going concern period are as follows:
31 December 30 June 31 December
2024 2025 2025
Net debt to adjusted EBITDA
3.50x
3.50x
3.50x
Interest cover
4.00x
4.00x
4.00x
Testing
In concluding that the going concern basis is appropriate, the Directors have modelled the impact
of a ‘worst case scenario’ to the ‘base case’ by including an aggregation of the same three plausible
but severe downside risks also applied to the Group’s Viability Statement. The scenarios modelled
were based on the Group remaining an independent entity and, therefore, remain appropriate
should the proposed combination not proceed.
The base case takes into account the estimated impact of end market and operational factors,
including supply chain and inflationary challenges throughout the going concern period. Climate
related risks have also been considered, including estimating the expected transition from internal
combustion engines to electric vehicles and considering potential risks to the Group’s
infrastructure resulting from extreme weather or climate events.
As set out in more detail in the Viability Statement (on page 71), the three downside scenarios
modelled were (i) economic shock/downturn, (ii) losing a key market, product or customer and
(iii) significant contract delivery issues, including a cyber attack scenario.
Throughout the period covered, after applying the ‘worst case scenario’, financing headroom was
at least £425 million (2023: £400 million), the Group’s leverage was no higher than 2.9x (2023: 2.8x),
and the interest covenant remained above 4.0x, indicating that the Group would comfortably
remain within covenant limits. Finally, a reverse stress test was performed which demonstrated that
a significant reduction in revenue and operating profit in 2025, still assuming no mitigating actions,
would be required before the Group breached its leverage and interest covenants.
Even after applying significant downside risk scenarios in aggregation, under the ‘worst case
scenario’, no covenant is forecast to be breached at the relevant testing dates being 30 June 2025
and 31 December 2025, and the Group would not expect to require any additional sources of
finance. Testing at 30 June 2026 is also expected to be favourable under the terms of
existing facilities.
Consideration of climate change
In preparing the financial statements, the Directors have considered the impact of climate change,
particularly in the context of the risks identified in the TCFD disclosure on pages 42 to 55. There
has been no material impact identified on the financial reporting judgements and estimates. In
particular, the Directors considered the impact of climate change in respect of the following areas:
– going concern and viability of the Group over the next three years;
– cash flow forecasts used in the impairment assessments of non-current assets including goodwill
and other intangible assets; and
– the carrying value and useful economic lives of property, plant and equipment.
Whilst there is currently no medium-term impact expected from climate change, the Directors are
aware of the ever-changing risks that may result from climate change and will regularly assess these
risks against judgements and estimates made in preparation of the Group’s financial statements.
134Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Business combinations and goodwill
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of
acquisition is measured at the fair value of assets transferred, the liabilities incurred or assumed
at the date of exchange of control and equity instruments issued by the Group in exchange for
control of the acquiree. Control is achieved where the Group has the power to govern the
financial and operating policies of an investee entity so as to obtain benefits from its activities.
Costs directly attributable to business combinations are recognised as an expense in the Income
Statement as incurred.
The acquired identifiable assets and liabilities are measured at their fair value at the date of
acquisition except those where specific guidance is provided by IFRS. Non-current assets and
directly attributable liabilities that are classified as held for sale in accordance with IFRS 5 Non-
current assets held for sale and discontinued operations, are recognised and measured at fair value
less costs to sell. Also, deferred tax assets and liabilities are recognised and measured in accordance
with IAS 12 Income taxes, liabilities and assets related to employee benefit arrangements are
recognised and measured in accordance with IAS 19 (revised) Employee benefits and liabilities
or equity instruments related to the replacement by the Group of an acquiree’s share-based
payments awards are measured in accordance with IFRS 2 Share-based payment.
Any excess of the cost of the acquisition over the fair values of the identifiable net assets acquired
is recognised as goodwill. If the initial accounting for a business combination is incomplete by the
end of the reporting period in which the combination occurs, the Group reports provisional
amounts where appropriate. Those provisional amounts are adjusted during the measurement
period, or additional assets or liabilities recognised, to reflect new information obtained about facts
and circumstances that existed as of the acquisition date that, if known, would have affected the
amounts recognised at that date.
The measurement period is the period from the date of acquisition to the date the Group obtains
complete information about facts and circumstances that existed as of the acquisition date and is
subject to a maximum period of one year.
Goodwill on acquisition is initially measured at cost, being the excess of the sum of the
consideration transferred, the amount of any non-controlling interest in the acquiree and the fair
value of the acquirer’s previously held equity interest in the acquiree over the acquirer’s interest
in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial
recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is
reviewed for impairment annually or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired.
If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets
exceeds the sum of the consideration transferred, the amount of any non-controlling interest in
the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree,
the excess is recognised immediately in profit or loss as a bargain purchase gain.
As at the acquisition date, any goodwill acquired is allocated to the cash-generating units acquired.
Impairment is determined by assessing the recoverable amount of the cash-generating unit to
which goodwill relates. Where the recoverable amount of the cash-generating unit is less than the
carrying amount, an impairment loss is recognised in the Income Statement and is not subsequently
reversed. When there is a disposal of a cash-generating unit, goodwill relating to the operation
disposed of is taken into account in determining the gain or loss on disposal of that operation.
The amount of goodwill allocated to a partial disposal is measured on the basis of the relative
values of the operation disposed of and the operation retained.
Equity accounted investments
A joint venture is an entity which is not a subsidiary undertaking but where the interest of the
Group is that of a partner in a business over which the Group exercises joint control with its partners
over the financial and operating policies. In all cases voting rights are 50% or lower.
Associated undertakings are entities that are neither a subsidiary nor a joint venture, but where the
Group has a significant influence.
The results, assets and liabilities of equity accounted investments are accounted for by
applying the equity method of accounting. The Group’s share of equity includes goodwill arising
on acquisition.
When a Group entity transacts with an equity accounted investment of the Group, profits and
losses resulting from the transactions with the equity accounted investments are recognised in
the Income Statement only to the extent of interests in equity accounted investments that are
not related to the Group.
Revenue
Revenues are recognised at the point of transfer of control of goods, as the Group does not
currently generate any revenue that qualifies to be recognised over time.
The nature of agreements into which the Group enters means that certain of the Group’s
arrangements with its customers have multiple elements that can include a combination of:
– Sale of products; and
– Design and build.
Contracts are reviewed to identify each performance obligation relating to distinct goods and the
associated consideration. The Group allocates revenue to multiple element arrangements based
on the identified performance obligations within the contracts in line with the policies below.
A performance obligation is identified if the customer can benefit from the goods on their own
or together with other readily available resources, and it can be separately identified within the
contract. This review is performed by reference to the specific contract terms.
135Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
2. Summary of material accounting policies continued
Sale of products
This revenue stream accounts for the majority of Group sales.
Invoices for goods are raised and revenue is recognised when control of the goods is transferred
to the customer. Dependent upon contractual terms this may be at the point of despatch or
acceptance by the customer. Revenue recognised is the transaction price as it is the observable
selling price per product.
Cash discounts, volume rebates and other customer incentive programmes are based on certain
percentages agreed with the Group’s customers, which are typically earned by the customer over
an annual period. These are allocated to performance obligations and are recorded as a reduction
in revenue at the point of sale based on the estimated future outcome. Due to the nature of these
arrangements an estimate is made based on historical results to date, estimated future results
across the contract period and the contractual provisions of the customer agreement.
Many Automotive and Powder Metallurgy businesses recognise an element of revenue via a
surcharge or similar raw material cost recovery mechanism. The surcharge is generally based
on prior period movement in raw material price indices applied to current period deliveries.
Participation fees are payments made to original equipment manufacturers relating to long-term
agreements. They are recognised as contract assets to the extent that they can be recovered from
future sales over the programme life, generally up to seven years.
Design and build
This revenue stream affects a discrete number of Automotive businesses. Generally, revenue is
only recognised on the sale of product as detailed above, however, on occasions cash is received
in advance of work performed to compensate the Group for costs incurred in design and
development activities. The Group performs an assessment of its performance obligations to
understand multiple elements. As there is generally only one performance obligation, any cash
received in advance is deferred on the Balance Sheet and allocated across the deliveries required
under the contract.
Finance costs
Issue costs of loans
The finance cost recognised in the Income Statement in respect of the issue costs of borrowings
is allocated to periods over the terms of the instrument using the effective interest rate method.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time to get ready for their
intended use or sale, are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale. Investment income earned on the temporary
investment of specific borrowings pending their expenditure on qualifying assets is deducted
from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the Income Statement in the period in which they are
incurred and accrued on a time basis, by reference to the principal outstanding and the effective
interest rate applicable.
Finance income
Finance income is recognised when it is probable that the economic benefits will flow to the Group
and the amount of income can be measured reliably. Finance income is accrued on a time basis,
by reference to the principal outstanding and the effective interest rate applicable.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment
in value.
The initial cost of an asset comprises its purchase price or construction cost, any costs directly
attributable to bring the asset into operation, and any material borrowing costs on qualifying
assets. Qualifying assets are defined as an asset or programme where the period of capitalisation
is more than 12 months. Purchase price or construction cost is the aggregate amount paid and the
fair value of any other consideration given to acquire the asset.
Where assets are in the course of construction at the balance sheet date, they are classified as
capital work-in-progress and presented within Plant and equipment. Transfers are made to other
asset categories when they are available for use, at which point depreciation commences.
Right-of-use assets arise under IFRS 16 Leases and are depreciated over the shorter of the
estimated life and the lease term.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset
as follows:
Freehold buildings and long leasehold property
over expected economic life not exceeding 50 years
Short leasehold property
over the term of the lease
Plant and equipment
3-15 years
The estimated useful lives of property, plant and equipment are reviewed on an annual basis and, if
necessary, changes in useful lives are accounted for prospectively. No depreciation is charged on
freehold land.
136Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
The carrying values of property, plant and equipment are reviewed annually for indicators of
impairment, or if events or changes in circumstances indicate that the carrying value may not
be recoverable. If such indication exists an impairment test is performed and, where the carrying
values exceed the estimated recoverable amount, the assets are written down to their recoverable
amount. The recoverable amount of property, plant and equipment is the greater of net selling
price and value in use. In assessing value in use, 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. For an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for the cash-generating unit
to which the asset belongs.
An item of property, plant and equipment is derecognised upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any gain or loss
arising on derecognition of the asset (calculated as the difference between the net disposal
proceeds or costs and the carrying amount of the item) is included in the Income Statement
in the period that the item is derecognised.
Intangible assets
Intangible assets are stated at cost less accumulated amortisation and accumulated
impairment losses.
On acquisition of businesses, separately identifiable intangible assets are initially recorded at their
fair value at the acquisition date.
Access to the use of brands and intellectual property are valued using a “relief from royalty”
method which determines the net present value of future additional cash flows arising from
the use of the intangible asset.
Customer relationships and contracts are valued on the basis of the net present value of the
future additional cash flows arising from customer relationships with appropriate allowance for
attrition of customers.
Technology assets are valued using a replacement cost approach, or a “relief from royalty” method.
Amortisation of intangible assets is recorded in administration expenses in the Income Statement
and is calculated on a straight-line basis over the estimated useful lives of the asset as follows:
Customer relationships and contracts
20 years or less
Brands and intellectual property
20 years or less
Technology
9 years or less
Computer software
5 years or less
Development costs
6 years or less
Where computer software is not integral to an item of property, plant or equipment, its costs are
capitalised and categorised as intangible assets. Computer software is initially recorded at cost.
Where these assets have been acquired through a business combination, this will be the fair value
allocated in the acquisition accounting. Where these have been acquired other than through a
business combination, the initial cost is the aggregate amount paid and the fair value of any other
consideration given to acquire the asset.
Intangible assets (other than computer software and development costs) are tested for impairment
annually or more frequently whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Impairment losses are measured on a similar basis to
property, plant and equipment. Useful lives are also examined on an annual basis and
adjustments, where applicable, are made on a prospective basis.
Research and development costs
Research costs are expensed as incurred.
Costs relating to clearly defined and identifiable development projects are capitalised when
there is a technical degree of exploitation, adequacy of resources and a potential market or
development possibility in the undertaking that are recognisable; and where it is the intention to
produce, market or execute the project. A correlation must also exist between the costs incurred
and future benefits and those costs must be able to be measured reliably. Capitalised costs are
expensed on a straight-line basis over their useful lives of 6 years or less. Costs not meeting such
criteria are expensed as incurred.
Inventories
Inventories are valued at the lower of cost and net realisable value and are measured using a first
in, first out or weighted average cost basis. Cost includes all direct expenditure and appropriate
production overhead expenditure incurred in bringing goods to their current state under normal
operating conditions. Net realisable value is based on estimated selling price less costs expected
to be incurred to completion and disposal. Provisions are made for obsolescence or other expected
losses where considered necessary.
Cash and cash equivalents
Cash and cash equivalents may comprise cash in hand, balances with banks and similar institutions,
and short-term deposits which are readily convertible to cash and are subject to insignificant risks
of changes in value.
For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding bank overdrafts.
137Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
2. Summary of material accounting policies continued
Loans with Related Parties
Loans with Related Parties consisted of loans with the previous ultimate parent Melrose Industries
PLC and other non-Group entities owned by Melrose Industries PLC prior to the demerger on
20 April 2023. Loans receivable from and payable to Related Parties are accounted for as financial
assets and financial liabilities respectively as set out below.
Leases
Where a lease arrangement is identified, a liability to the lessor is included in the Balance Sheet
as a lease obligation calculated at the present value of minimum lease payments. A corresponding
right-of-use asset is recorded in property, plant and equipment. The discount rate used to
calculate the lease liability is the Group’s incremental borrowing rate, unless there is a rate
implicit in the lease. The incremental borrowing rate is used for the majority of leases.
Incremental borrowing rates are based on the term, currency, country and start date of the
lease and reflect the rate the Group would pay for a loan with similar terms and security.
Following initial recognition, the lease liability is measured at amortised cost using the effective
interest rate method. Where there is a change in future lease payments due to a rent review,
change in index or rate, or a change in the Group’s assessment of whether it is reasonably certain
to exercise a purchase, extension or break option, the lease obligation is remeasured. A
corresponding adjustment is made to the associated right-of-use asset. Right-of-use assets are
depreciated over the shorter of the estimated useful life of the asset and the lease term.
Lease payments are apportioned between finance costs and a reduction in the lease obligation so
as to reflect the interest on the remaining balance of the obligation. Finance charges are recorded
in the Income Statement within finance costs.
Leases with a term of 12 months or less and leases for low value are not recorded on the Balance
Sheet. Lease payments for these leases are recognised as an expense in the Income Statement on
a straight-line basis over the lease term. Expenses relating to variable lease payments which are
not included in the lease liability, due to being based on a variable other than an index or rate,
are recognised as an expense in the Income Statement.
Financial instruments – assets
Classification and measurement
All financial assets are classified as either those which are measured at fair value, through profit
or loss or other comprehensive income, and those measured at amortised cost.
Financial assets are initially recognised at fair value. For those which are not subsequently measured
at fair value through profit or loss, this includes directly attributable transaction costs. Trade and
other receivables, contract assets and amounts due from equity accounted investments are
subsequently measured at amortised cost.
Recognition and derecognition of financial assets
Financial assets are recognised in the Balance Sheet when the Group becomes a party to the
contractual provisions of the instrument. Financial assets are derecognised when, and only when,
a) the contractual rights to the cash flows from the financial asset expire or are settled, b) the Group
transfers to another party substantially all of the risks and rewards of ownership of the financial
asset, or c) the Group, despite having retained some, but not all, significant risks and rewards of
ownership, has transferred control of the asset to another party.
Impairment of financial assets
For trade receivables and contract assets, the simplified approach permitted under IFRS 9 Financial
Instruments is applied. The simplified approach requires that at the point of initial recognition the
expected credit loss across the life of the receivable must be recognised. As these balances do not
contain a significant financing element, the simplified approach relating to expected lifetime losses
is applicable under IFRS 9.
Derivatives over own equity
The Group holds a derivative asset over its own equity as a result of a contract for its own shares to
be returned to it at nil cost under certain circumstances dependent on the Company’s share price
at a future date. As a transaction with a shareholder, the asset was initially recognised directly in
equity at the fair value of the shares expected to be returned. Following initial recognition, the
derivative asset is held on the Balance Sheet at fair value. Gains and losses arising on the
remeasurement of the asset are recognised immediately in the Income Statement.
Trade and other receivables
Trade and other receivables that are held within a business model whose objective is to hold
the receivables in order to collect contractual cash flows, and where the contractual terms of
the receivables give rise to cash flows that are solely payments of principal and interest on the
principal amount outstanding, are measured and carried at amortised cost using the effective
interest method, less any impairment. For trade receivables, the carrying amount is reduced by
a loss allowance for expected credit losses. Subsequent recoveries of amounts previously written
off are credited against the allowance account and changes in the carrying amount of the allowance
account are recognised in the Income Statement.
Trade receivables that are assessed not to be impaired individually are also assessed for
impairment on a collective basis. In measuring the expected credit losses, the Group considers all
reasonable and supportable information such as the Group’s past experience at collecting receipts,
any increase in the number of delayed receipts in the portfolio past the average credit period, and
forward looking information such as forecasts of future economic decisions.
Other receivables are also considered for impairment. The Group recognises the expected lifetime
credit loss when there has been a significant increase in credit risk (such as changes to credit ratings
or when the contractual payments are overdue by more than 30 days) since initial recognition.
However, if the credit risk has not increased significantly since initial recognition, the Group
measures the loss allowance at an amount equal to the 12-month expected credit loss. The
carrying amount is reduced by any loss arising which is recorded in the Income Statement.
138Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Financial instruments – liabilities
Recognition and derecognition of financial liabilities
Financial liabilities are recognised in the Balance Sheet when the Group becomes a party to the
contractual provisions of the instruments and are initially measured at fair value, net of transaction
costs. The Group derecognises financial liabilities when the Group’s obligations are discharged,
significantly modified, cancelled or they expire.
Classification and measurement
Non-derivative financial liabilities are subsequently measured at amortised cost using the effective
interest method, with interest expense recognised on an effective interest rate basis. The effective
interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant periods. The effective interest rate is the rate that discounts
estimated future cash payments throughout the expected life of the financial liability, or, where
appropriate, a shorter period to the gross carrying amount of the financial liability.
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value of the consideration received net
of associated issue costs. After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest rate method.
Derivative financial instruments
The Group uses derivative financial instruments to manage its exposure to interest rate, foreign
exchange rate and commodity risks, arising from operating and financing activities. The Group
does not hold or issue derivative financial instruments for speculative trading purposes. Derivative
financial instruments are recognised and stated at fair value in the Balance Sheet. Their fair value is
recalculated at each reporting date. The accounting treatment for the resulting gain or loss will
depend on whether the derivative meets the criteria to qualify for hedge accounting and are
designated as such.
Where derivatives do not meet the criteria to qualify for hedge accounting, any gains or losses
on the revaluation to fair value at the period end are recognised immediately in the Income
Statement. Where derivatives do meet the criteria to qualify for hedge accounting, recognition
of any resulting gain or loss on revaluation depends on the nature of the hedge relationship and
the item being hedged.
Derivative financial instruments with maturity dates of less than one year from the period end
date are classified as current in the Balance Sheet. Derivatives embedded in non-derivative host
contracts are recognised at their fair value in the Balance Sheet when the nature, characteristics and
risks of the derivative are not closely related to the host contract. Gains and losses arising on the
remeasurement of these embedded derivatives at each balance sheet date are recognised in the
Income Statement.
Hedge accounting
In order to qualify for hedge accounting, the Group is required to document from inception
the relationship between the item being hedged and the hedging instrument, along with its risk
management objectives and its strategy for undertaking various hedge transactions. Furthermore,
at the inception of the hedge and on an ongoing basis, the Group documents that the hedge will
be highly effective, which is when the hedging relationships meet all of the following hedge
effectiveness requirements:
– there is an economic relationship between the hedged item and the hedging instrument;
– the effect of credit risk does not dominate the value changes that result from that economic
relationship; and
– the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the
hedged item that the Group actually hedges and the quantity of the hedging instrument that
the Group actually uses to hedge that quantity of hedged item.
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof)
ceases to meet the qualifying criteria (after rebalancing, if applicable). This includes instances when
the hedging instrument expires or is sold, terminated or exercised. The discontinuation is
accounted for prospectively. The Group designates certain hedging instruments as either cash
flow hedges or hedges of net investments in foreign operations. No hedge accounting was in
place within the Group prior to the demerger from the Melrose Industries PLC group.
Cash flow hedges
Derivative financial instruments are classified as cash flow hedges when they hedge the Group’s
exposure to the variability in cash flows that are either attributable to a particular risk associated
with a recognised asset or liability, or a highly probable forecasted cash flow.
The Group designates the full change in the fair value of interest rate swap contracts as the
hedging instrument for variable interest rate exposure on debt. The effective portion of any
gain or loss from revaluing the derivative financial instrument is recognised in the Statement of
Comprehensive Income and accumulated in equity. The gain or loss relating to the ineffective
portion is recognised immediately in the Income Statement.
Amounts previously recognised in the Statement of Comprehensive Income and accumulated in
equity are recycled to the Income Statement in the periods when the hedged item is recognised
in the Income Statement or when the forecast transaction is no longer expected to occur.
Hedges of net investments in foreign operations
Debt financial instruments are classified as net investment hedges when they hedge the
Group’s net investment in foreign operations. The effective element of any foreign exchange
gain or loss from revaluing the debt at a reporting period end is recognised in the Statement
of Comprehensive Income. Any ineffective element is recognised immediately in the
Income Statement.
Gains and losses accumulated in equity are recognised immediately in the Income Statement when
the foreign operation is disposed.
139Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
2. Summary of material accounting policies continued
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a
result of a past event, it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation and a reliable estimate can be made of the amount of
the obligation. If the effect of the time value of money is material, provisions are determined by
discounting the expected future cash flows at a rate that reflects the current market assessment
of the time value of money and, where appropriate, the risks specific to the liability. Where
discounting is used, the increase in the provision due to the passage of time is recognised as
a finance cost.
Pensions and other retirement benefits
The Group operates defined benefit pension plans and defined contribution plans, some of which
require contributions to be made to administered funds separate from the Group.
For the defined benefit pension and retirement benefit plans, plan assets are measured at fair value
and plan liabilities are measured on an actuarial basis and discounted at an interest rate equivalent
to the current rate of return on a high-quality corporate bond of equivalent currency and term to
the plan liabilities. Any assets resulting from this calculation are limited to past service cost plus the
present value of available refunds and reductions in future contributions to the plan. The present
value of the defined benefit obligation, and the related current service cost and past service cost,
are measured using the projected unit credit method.
The service cost of providing pension and other retirement benefits to employees for the period is
charged to the Income Statement.
Net interest expense on net defined benefit obligations is determined by applying discount rates
used to measure defined benefit obligations at the beginning of the year to net defined benefit
obligations at the beginning of the year. The net interest expense is recognised within finance costs.
Remeasurement gains and losses comprise actuarial gains and losses, the effect of the asset ceiling
(if applicable) and the return on plan assets (excluding interest). Remeasurement gains and losses,
and taxation thereon, are recognised in full in the Statement of Comprehensive Income in the
period in which they occur and are not subsequently recycled.
Actuarial gains and losses may result from differences between the actuarial assumptions
underlying the plan obligations and actual experience during the period or changes in the actuarial
assumptions used in the valuation of the plan obligations.
For defined contribution plans, contributions payable are charged to the Income Statement as an
operating expense when employees have rendered services entitling them to the contributions.
Foreign currencies
The individual financial statements of each Group company are presented in the currency of the
primary economic environment in which it operates (its functional currency). For the purpose of
the Group’s Consolidated Financial Statements, the results and financial position of each Group
company are expressed in pounds Sterling, which is also the presentation currency.
In preparing the financial statements of the individual companies, transactions in currencies other
than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange
prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities
that are denominated in foreign currencies are retranslated at the rates prevailing on the balance
sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are
translated at the rates prevailing at the date when the fair value was determined. Non-monetary
items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of
monetary items, are included in the Income Statement for the period. Exchange differences
arising on the retranslation of non-monetary items carried at fair value are included in the Income
Statement for the period except for differences arising on the retranslation of non-monetary items
in respect of which gains and losses are recognised directly in equity. For such non-monetary items,
any exchange component of that gain or loss is also recognised directly in equity.
For the purpose of presenting the Group’s Consolidated Financial Statements, the assets and
liabilities of the Group’s foreign operations 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, unless exchange rates fluctuate significantly during that period, in which case the exchange
rates at the date of transactions are used. Exchange differences arising, if any, are recognised in the
Statement of Comprehensive Income and accumulated in equity (attributed to non-controlling
interests as appropriate). Such translation differences are recognised as income or as expenses in
the period in which the related operation is disposed of. Any exchange differences that have
previously been attributed to non-controlling interests are derecognised but they are not
reclassified to the Income Statement.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as
assets and liabilities of the foreign entity and translated at the rate prevailing at the balance
sheet date.
Hyperinflation
During 2022 Turkey’s economy became hyperinflationary. IAS 29 Financial Reporting in
Hyperinflationary Economies requires affected entities to present their financial statements
reflecting the general purchasing power of the relevant functional currency in terms of the
measuring unit current at the end of the reporting period. The Group applies the Turkey Domestic
Producer Price Index (D-PPI), which was 3,747 (31 December 2023: 2,915) as at the end of the year,
to the results of the Group’s operations in Turkey whose functional currency is the Turkish Lira.
140Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Taxation
The tax expense is based on the taxable profits for the period and represents the sum of the tax
paid or currently payable and deferred tax.
Taxable profit differs from net profit as reported in the Income Statement because it excludes
items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group’s liability for current tax is calculated using
tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
A tax provision is recognised for those matters for which the tax determination is uncertain but it is
considered probable that there will be a future outflow of funds to a tax authority. The provisions
are measured at the best estimate of the amount expected to become payable. The assessment is
based on the judgement of tax professionals within the Group supported by previous experience
in respect of such activities and in certain cases based on specialist independent advice.
Deferred tax is provided, using the liability method, on all temporary differences at the balance
sheet date between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences except:
– where the deferred tax liability arises on the initial recognition of goodwill or an asset or liability
in a transaction that is not a business combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss; and
– where the timing of the reversal of the temporary differences associated with investments in
subsidiaries and interests in equity accounted investments can be controlled and it is probable
that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of
unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will
be available against which the deductible temporary differences, and carry-forward of unused tax
assets and unused tax losses can be utilised except:
– where the deferred tax asset arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; and
– in respect of deductible temporary differences associated with investments in subsidiaries and
interests in equity accounted investments, deferred tax assets are only recognised to the extent
that it is probable that the temporary differences will reverse in the foreseeable future and
taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to allow all or
part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the
year when the asset is realised or the liability is settled, based on tax rates and tax laws that have
been enacted or substantively enacted at the relevant 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.
Tax relating to items recognised directly in other comprehensive income is recognised in the
Statement of Comprehensive Income and not in the Income Statement.
Revenues, expenses and assets are recognised net of the amount of sales tax except:
– where the sales tax incurred on a purchase of goods and services is not recoverable from the
taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of
the asset or as part of the expense item as applicable; and
– where receivables and payables are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as
part of receivables or payables in the Balance Sheet.
Share-based payments
The Group has applied the requirements of IFRS 2 Share-based payment. The Group issues
equity-settled share-based payments to certain employees. Equity-settled share-based payments
are measured at fair value of the equity instrument excluding the effect of non-market based
vesting conditions at the date of grant. The fair value determined at the grant date of the equity-
settled share-based payments is expensed on a straight-line basis over the vesting period, based
on the Group’s estimate of shares that will eventually vest and adjusted for the effect of non-
market based vesting conditions. Fair value is measured by use of a Monte Carlo pricing model.
Government grants
Government grants are not recognised in the Income Statement until there is reasonable
assurance that the Group will comply with the conditions attached to them and that the grants
will be received. Government grants are recognised in the Income Statement on a systematic basis
over the periods in which the Group recognises the related costs for which the grants are intended
to compensate.
Specifically, government grants where the primary condition is that the Group should purchase,
construct or otherwise acquire non-current assets (including property, plant and equipment) are
recognised as deferred government grants in the Balance Sheet and transferred to the Income
Statement on a systematic and rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or
for the purpose of giving immediate financial support to the Group with no future related costs are
recognised in the Income Statement in the period in which they become receivable.
141Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
3. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in Note 2, the Directors
are required to make judgements, estimates and assumptions about the carrying amounts of assets
and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experiences and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised if the revision
affects only that period, or in the period of revision and future periods if the revision affects both
current and future periods.
Critical accounting judgements
Adjusting items
Judgements are required as to whether items are disclosed as adjusting, with consideration given
to both quantitative and qualitative factors. Further information about the determination of
adjusting items is included in Note 2.
There are no other critical judgements other than those involving estimates, that have had
a significant effect on the amounts recognised in the Consolidated Financial Statements.
Those involving estimates are set out below.
Key sources of estimation uncertainty
Assumptions concerning the future and other key sources of estimation uncertainty at the balance
sheet date, that may have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year, are discussed below.
Assumptions used to determine the recoverable amount of goodwill and other assets
Determining whether the goodwill of groups of cash-generating units (“CGUs”) is impaired
requires an estimation of its recoverable amount which is compared against the carrying value.
The recoverable amount is deemed to be the higher of the value in use and fair value less costs to
sell. For the year ended 31 December 2024, impairment testing has been performed for each group
of CGUs using the value in use method based on estimated discounted cash flows.
The impairment tests concluded that there was headroom of £363 million for the Automotive
group of CGUs, and headroom of £41 million for the Powder Metallurgy group of CGUs.
The models used to calculate value in use for each group of CGUs are particularly sensitive to
key assumptions around discount rates, long-term growth rates and underlying assumptions
underpinning forecasts including the impact of macroeconomic conditions such as interest rates
and inflation on future sales and input prices which drive forecast operating margins and ultimately
cash flows.
Details of the key assumptions supporting the impairment tests, together with sensitivity analysis
in respect of those key assumptions, are set out in Note 12. Whilst actual movements might be
different to sensitivities shown, these are considered to reflect a reasonably possible change that
could occur.
Assumptions used to determine the carrying amount of the Group’s net retirement benefit obligations
The Group’s pension plans are significant in size. The defined benefit obligations in respect of the
plans are discounted at rates set by reference to market yields on high quality corporate bonds.
Estimation is required when setting the criteria for bonds to be included in the population from
which the yield curve is derived. The most significant criteria considered for the selection of bonds
to include are the issue size of the corporate bonds, quality of the bonds and the identification of
outliers which are excluded. In addition, assumptions are made in determining mortality and
inflation rates to be used when valuing the plan’s defined benefit obligations. At 31 December 2024,
the retirement benefit obligation was a net deficit of £384 million (2023: £459 million).
Further details of the assumptions applied and a sensitivity analysis on the principal assumptions
used to determine the defined benefit liabilities of the Group’s obligations are shown in Note 24.
Whilst actual movements might be different to sensitivities shown, these are considered to reflect
a reasonably possible change that could occur.
142Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
4. Revenue
An analysis of the Group’s revenue, presented by destination, is as follows:
Powder
Automotive Metallurgy Hydrogen Total
Year ended 31 December 2024 £m £m £m £m
UK
196
13
–
209
Rest of Europe
993
339
–
1,332
North America
1,495
406
–
1,901
South America
176
16
–
192
Asia
516
170
–
686
Africa
15
2
–
17
Revenue
3,391
946
–
4,337
Powder
Automotive Metallurgy Hydrogen Total
Year ended 31 December 2023 £m £m £m £m
UK
180
12
–
192
Rest of Europe
1,312
360
4
1,676
North America
1,606
446
1
2,053
South America
144
17
–
161
Asia
588
180
–
768
Africa
13
1
–
14
Revenue
3,843
1,016
5
4,864
The Group derives its revenue from the transfer of goods at a point in time.
For the year ended 31 December 2024, the Group has identified two major customers (defined as
customers that individually contributed at least 10% of the Group’s revenue) primarily reported
within the Automotive division that accounted for approximately 11% and 10% of the Group’s total
revenue recognised in the year (2023: two customers that accounted for approximately 12% and
14% of the Group’s total revenue for 2023).
5. Segment information
Segment information is presented in accordance with IFRS 8 Operating Segments which requires
operating segments to be identified on the basis of internal reports about components of the
Group that are regularly reported to the Group’s Chief Operating Decision Maker (“CODM”), which
has been deemed to be the Group’s Board, in order to allocate resources to the segments and
assess their performance.
The operating segments are as follows:
Automotive – a global technology and systems engineer which designs, develops, manufactures
and integrates an extensive range of driveline technologies, including electric vehicle components.
Powder Metallurgy – a global leader in precision powder metal parts for the automotive and
industrial sectors, as well as the production of powder metal.
Hydrogen – offering reliable and secure hydrogen storage solutions, the business was sold on
29 July 2024.
In addition, central corporate cost centres are also reported to the Board. The central corporate
cost centres contain the Group head office costs and charges related to the divisional management
long-term incentive plans.
Reportable segment results include items directly attributable to a segment as well as those which
can be allocated on a reasonable basis. Inter-segment pricing is determined on an arm’s length
basis, in a manner similar to transactions with third parties.
The Group’s geographical segments are determined by the location of the Group’s non-current
assets and, for revenue, the location of external customers. Inter-segment sales are not material
and have not been disclosed.
The following tables present the segment revenues and operating profits as regularly reported to
the CODM, as well as certain asset and liability information regarding the Group’s operating
segments and central cost centres.
a) Segment revenues
The Group has assessed that the disaggregation of revenue recognised from contracts with
customers by operating segment is appropriate as this is the information regularly reviewed by the
CODM in evaluating financial performance.
Powder
Automotive Metallurgy Hydrogen Total
Year ended 31 December 2024
Notes
£m £m £m £m
Adjusted revenue
3,954
983
–
4,937
Equity accounted investments
14
(563)
(37)
–
(600)
Revenue
4
3,391
946
–
4,337
Powder
Automotive Metallurgy Hydrogen Total
Year ended 31 December 2023
Notes
£m £m £m £m
Adjusted revenue
4,437
1,047
5
5,489
Equity accounted investments
14
(594)
(31)
–
(625)
Revenue
4
3,843
1,016
5
4,864
143Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
5. Segment information continued
b) Segment operating profit
Powder
Automotive Metallurgy Hydrogen
Corporate
(2)
Total
Year ended 31 December 2024 £m £m £m £m £m
Adjusted operating profit/(loss)
268
89
(9)
(24)
324
Items not included in adjusted operating profit
(1)
:
Amortisation of intangible assets acquired
in business combinations
(143)
(48)
–
–
(191)
Restructuring costs
(125)
(17)
–
(3)
(145)
Movement in derivatives and associated financial
assets and liabilities
(3)
–
–
(68)
(71)
Equity accounted investments adjustments
(26)
(2)
–
–
(28)
Impairment of assets
–
–
(10)
–
(10)
Business disposal related losses
–
–
(8)
–
(8)
Litigation costs
–
–
–
(3)
(3)
Demerger costs
–
–
–
(1)
(1)
Net release of certain fair value items
27
–
–
–
27
Operating (loss)/profit
(2)
22
(27)
(99)
(106)
Finance costs
(131)
Finance income
22
Loss before tax
(215)
Tax
47
Loss after tax for the year
(168)
1. For further details on adjusting items, refer to Note 6.
2. Corporate adjusted operating loss of £24 million, includes a charge of £nil in respect of divisional management
long-term incentive plans.
Powder
Automotive Metallurgy Hydrogen
Corporate
(2)
Total
Year ended 31 December 2023 £m £m £m £m £m
Adjusted operating profit/(loss)
306
96
(15)
(32)
355
Items not included in adjusted operating profit
(1)
:
Impairment of goodwill
–
(449)
–
–
(449)
Amortisation of intangible assets acquired in
business combinations
(146)
(51)
–
–
(197)
Restructuring costs
(109)
(10)
(1)
–
(120)
Movement in derivatives and associated financial
assets and liabilities
(3)
–
–
19
16
Equity accounted investments adjustments
(30)
–
–
–
(30)
Demerger costs
–
–
–
(42)
(42)
Net release of certain fair value items
12
5
–
–
17
Operating profit/(loss)
30
(409)
(16)
(55)
(450)
Finance costs
(101)
Finance income
29
Loss before tax
(522)
Tax
27
Loss after tax for the year
(495)
1. For further details on adjusting items, refer to Note 6.
2. Corporate adjusted operating loss of £32 million, includes a charge of £8 million in respect of divisional
management long-term incentive plans.
144Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
c) Segment total assets and liabilities
Total assets
Total liabilities
31 December 31 December 31 December 31 December
2024
2023
(1)
2024 2023
£m £m £m £m
Automotive
4,123
4,578
1,655
2,059
Powder Metallurgy
1,185
1,268
373
404
Hydrogen
–
14
–
6
Corporate
399
391
1,374
1,199
Total
5,707
6,251
3,402
3,668
1. Interests in equity accounted investments at 31 December 2023 have been restated to reflect a previously
unidentified omission in the acquisition accounting of an equity accounted investment. Further details are set
out in Note 1.3.
d) Segment capital expenditure and depreciation
Depreciation of Depreciation of
Capital expenditure
(1)
owned assets
(1)
leased assets
31 December 31 December 31 December 31 December 31 December 31 December
2024 2023 2024 2023 2024 2023
£m £m £m £m £m £m
Automotive
194
217
187
187
14
15
Powder
Metallurgy
43
42
46
50
11
10
Hydrogen
–
3
–
–
–
–
Total
237
262
233
237
25
25
1. Including computer software and development costs. Capital expenditure excludes lease additions.
e) Geographical information
The Group operates in various geographical areas around the world. The parent company’s country
of domicile is the UK and the Group’s revenues and non-current assets in the rest of Europe and
North America are also considered to be material.
The Group’s revenue from external customers and information about specific segment assets
(non-current assets excluding deferred tax assets, non-current derivative financial assets, other
financial assets, retirement benefit surplus and non-current other receivables) by geographical
location are detailed in the following table:
Revenue
(1)
from
external customers
Segment assets
Year ended Year ended
31 December 31 December 31 December 31 December
2024 2023 2024
2023
(2)
£m £m £m £m
UK
209
192
520
633
Rest of Europe
1,332
1,676
1,521
1,637
North America
1,901
2,053
1,285
1,298
Other
895
943
864
945
Total
4,337
4,864
4,190
4,513
1. Revenue is presented by destination.
2. Interests in equity accounted investments at 31 December 2023 have been restated to reflect a previously
unidentified omission in the acquisition accounting of an equity accounted investment. Further details are set
out in Note 1.3.
145Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
6. Reconciliation of adjusted profit measures
As described in Note 2, adjusted profit measures are an alternative performance measure used by
the Board to monitor the operating performance of the Group.
a) Operating profit
Year ended Year ended
31 December 31 December
2024 2023
Notes £m £m
Operating loss
(106)
(450)
Amortisation of intangible assets acquired in business combinations
a
191
197
Restructuring costs
b
145
120
Movement in derivatives and associated financial assets and liabilities
c
71
(16)
Equity accounted investments adjustments
d
28
30
Impairment of assets
e
10
–
Business disposal related losses
e
8
–
Litigation costs
f
3
–
Demerger costs
g
1
42
Impairment of goodwill
h
–
449
Net release of certain fair value items
i
(27)
(17)
Total adjustments to operating loss
430
805
Adjusted operating profit
324
355
a. The amortisation charge on intangible assets acquired in business combinations of £191 million
(2023: £197 million), is excluded from adjusted results due to its non-trading nature and to
enable comparison with companies that grow organically. However, where intangible assets
are trading in nature, such as computer software and development costs, the related
amortisation is not excluded from adjusted results.
b. Costs associated with restructuring projects in the year totalling £145 million (2023: £120 million)
are shown as adjusting items due to their size and non-trading nature. During the year these
included:
– A charge of £125 million (2023: £109 million) within the Automotive division, primarily relating
to significant footprint consolidation actions as the business continues to address its cost
base and deliver transformational programmes. Significant costs incurred include direct
costs relating to the closure of an Automotive plant in Roxboro, North Carolina and direct
costs of expansion in Mexico as new product lines are added to the facility, and continued
transfer of manufacturing from Mosel, Germany to Miskolc, Hungary. Further costs have
also been incurred reflecting the Group’s strategic decision to right size its engineering
investment in the ePowertrain product line, with a primary focus on eDrive systems, to
optimise capital allocation.
– A charge of £17 million (2023: £10 million) within the Powder Metallurgy division relating to
the optimisation of headcount and reorganisation of activities under the new commercial
strategy.
c. Movements in the fair value of derivative financial instruments (primarily forward foreign
currency exchange contracts where hedge accounting is not applied) entered into to mitigate
the potential volatility of future cash flows, on long-term foreign currency customer and supplier
contracts, including foreign exchange movements on the associated financial liabilities, are
shown as an adjusting item. This totalled a charge of £71 million (2023: credit of £16 million).
Movements in fair value are treated as an adjusting item due to their volatility distorting the
adjusted operating profit. Any gains and losses on settlement are recorded in underlying results
to give a better understanding of how the gains and losses on currency contracts relate to the
trading cash flows.
d. The Group has a number of equity accounted investments (“EAIs”) in which it does not hold full
control, the largest of which is a 50% interest in Shanghai GKN HUAYU Driveline Systems
(“SDS”), within the Automotive business. EAIs in the Group generated £600 million
(2023: £625 million) of revenue in the year, which is not included in the statutory results but is
shown within adjusted revenue so as not to distort the operating margins reported in the
businesses when the adjusted operating profit earned from these EAIs is included.
In addition, the profits and losses of EAIs, which are shown after amortisation of intangible
assets arising on acquisition, interest and tax in the statutory results, are adjusted to show the
adjusted operating profit consistent with the adjusted operating profits of the subsidiaries of
the Group. The revenue and profit of EAIs are adjusted because they are considered to be
significant in size and are important in assessing the performance of the business.
e. An impairment charge totalling £10 million (2023: £nil) was recorded against the value of
inventory and property, plant and equipment held by the Hydrogen division to write down
the assets to £nil reflecting their anticipated recoverable value, following the decision made in
June 2024 to close or dispose of the business.
On 29 July 2024 the Group disposed of the Hydrogen business to Langley Holdings plc for
nominal consideration, recognising a loss of £8 million. Further details are provided in Note 15.
These items have been excluded from adjusted results due to their non-trading nature.
f. Litigation costs of £3 million (2023: £nil) which relate to a legacy legal claim in respect of a prior
business disposal have been treated as an adjusting item due to their historical and non-
trading nature.
g. One-off costs relating to the demerger of the Group from Melrose Industries PLC of £1 million
were incurred during the year (2023: £42 million). Costs incurred were incremental costs
directly associated with the transaction. These items have been excluded from adjusted results
due to their non-recurring nature. Minimal demerger costs are expected to be incurred going
forward.
h. In the prior year an impairment charge of £449 million was recognised in relation to goodwill held
in the Powder Metallurgy cash-generating unit (“CGU”). No impairment charge has been
recorded in the current year in relation to goodwill as set out in Note 12.
i. Certain items previously recorded as fair value items on historical acquisitions, have been
resolved for more favourable amounts than first anticipated. The net release of such fair value
items in the year of £27 million related to a warranty provision (2023: £17 million relating to loss
making contracts). These items are considered significant in size and therefore shown as
adjusting to avoid positively distorting the adjusted results.
146Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
b) Profit before tax
Year ended Year ended
31 December 31 December
2024 2023
Notes £m £m
Loss before tax
(215)
(522)
Adjustments to operating loss as above
430
805
Fair value changes on other financial assets
j
10
1
Equity accounted investments – interest
d
1
2
Interest on tax provision released
k
(11)
–
Net foreign exchange movements
on loans with Related Parties
l
–
(22)
Total adjustments to loss before tax
430
786
Adjusted profit before tax
215
264
j. The fair value changes on other financial assets relate to the valuation of the derivative over
own equity. It is presented as an adjusting item due to its volatility and non-trading nature.
k. A settlement agreement has been reached with German tax authorities in respect of the years
2010 to 2021 resulting in a tax provision release of £45 million (2023: £nil) and associated
accrued interest of £11 million (2023: £nil). These items are considered material and have been
treated as adjusting items to avoid positively distorting the adjusted results.
l. In the prior year, the movement in loans with Related Parties as a result of changes in foreign
currency exchange rates up to the date of demerger was shown as an adjusting item due to its
volatility and non-recurring nature. Related Parties comprised Melrose Industries PLC, the
ultimate parent company prior to demerger on 20 April 2023 and other non-Group entities
controlled by Melrose Industries PLC.
c) Profit after tax
Year ended Year ended
31 December 31 December
2024 2023
Notes £m £m
Loss after tax
(168)
(495)
Adjustments to loss before tax as above
430
786
Tax effect of adjustments to loss before tax
9
(50)
(87)
Equity accounted investments – tax
d
(12)
(11)
Exceptional tax credit
k
(45)
–
Tax effect of significant restructuring
9
6
5
Total adjustments to loss after tax
329
693
Adjusted profit after tax
161
198
7. Expenses
Year ended Year ended
31 December 31 December
2024 2023
Operating expenses comprise: £m £m
Selling and distribution costs
(30)
(38)
Administration expenses
(1)
(783)
(771)
Total operating expenses
(813)
(809)
1. Includes £402 million (2023: £326 million) of adjusting items (Note 6).
Year ended Year ended
31 December 31 December
2024 2023
Operating loss is stated after charging/(crediting): £m £m
Cost of inventories recognised as an expense
3,691
4,107
Impairment of goodwill
–
449
Amortisation of intangible assets acquired in business combinations
191
197
Depreciation of property, plant and equipment
244
252
Impairment of property, plant and equipment
(1)
31
1
Amortisation of computer software and development costs
14
10
Lease expense
(2)
1
1
Staff costs
1,089
1,206
Research and development costs
(3)
126
151
Profit on disposal of property, plant and equipment
(4)
–
(18)
Expense of writing down inventory to net realisable value
19
15
Impairment of inventory prior to business disposal
6
–
Reversals of previous write-downs of inventory
(9)
(8)
Impairment recognised on trade receivables
4
4
Impairment reversed on trade receivables
(4)
(1)
1. Includes £27 million (2023: £nil) of impairment presented within restructuring costs and £4 million (2023: £nil) of
impairment related to the disposal of the Hydrogen business.
2. Includes costs relating to short-term leases.
3. Research and development costs include staff costs totalling £114 million (2023: £119 million) which are also
included in staff costs.
4. There were no profits on disposal of property, plant and equipment during the year (2023: £8 million of
adjusting items and £10 million in adjusted operating profit).
147Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
7. Expenses continued
An analysis of staff costs and employee numbers is as follows:
Year ended Year ended
31 December 31 December
2024 2023
Staff costs during the year (including Executive Directors) £m £m
Wages and salaries
878
985
Social security costs
190
202
Pension costs (Note 24)
–
defined benefit plans
6
6
–
defined contribution plans
14
12
Share-based compensation expense (Note 23)
1
1
Total staff costs
1,089
1,206
Year ended Year ended
31 December 31 December
2024 2023
Number Number
Average monthly number of persons employed (including Executive
Directors)
Automotive
18,630
18,264
Powder Metallurgy
5,371
5,544
Hydrogen
48
85
Corporate
32
19
Total average number of persons employed
24,081
23,912
The analysis of auditor’s remuneration is as follows:
Year ended Year ended
31 December 31 December
2024 2023
Fees payable to the Company’s auditor for the audit of the Company’s annual £m £m
accounts
1.8
2.0
Fees payable to the Company’s auditor and their associates for other audit
services to the Group:
The audit of the Company’s subsidiaries
2.9
3.1
Total audit fees
4.7
5.1
Audit-related assurance services:
Review of the half year interim statement
0.5
0.5
Total audit-related assurance services
0.5
0.5
Total audit and audit-related assurance services
5.2
5.6
Total audit and non-audit fees
5.2
5.6
Details of the Company’s policy on the use of the auditors for non-audit services and how auditor’s
independence and objectivity were safeguarded are set out in the Audit Committee report on
page 91. No services were provided pursuant to contingent fee arrangements.
8. Finance costs and finance income
An analysis of finance costs and income is as follows:
Year ended Year ended
31 December 31 December
2024 2023
Finance costs and income £m £m
Interest on bank loans and overdrafts
(89)
(63)
Interest on loans due to Related Parties
(1)
–
(8)
Amortisation of costs of raising finance
(5)
(3)
Net interest cost on pensions
(15)
(17)
Lease interest
(6)
(6)
Unwind of discount on provisions
(1)
–
Fair value changes on other financial assets
(2)
(10)
(1)
Other finance costs
(5)
(3)
Total finance costs
(131)
(101)
Foreign exchange movements on loans with Related Parties
(1), (2)
–
22
Other finance income
(3)
22
7
Total finance income
22
29
Total net finance costs
(109)
(72)
1. Related Parties comprised Melrose Industries PLC, the ultimate parent company prior to demerger on 20 April
2023 and other non-Group entities controlled by Melrose Industries PLC.
2. Foreign exchange movements on loans with Related Parties and fair value changes on other financial assets are
shown as adjusting items (Note 6).
3. Other finance income includes £11 million (2023: £nil) relating to the release of a significant tax provision which
has been classified as an adjusting item (Note 6).
148Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
9. Tax
Year ended Year ended
31 December 31 December
2024 2023
Analysis of tax credit in the year: £m £m
Current tax
Current year tax charge
19
55
Adjustments in respect of prior years
–
(2)
Total current tax charge
19
53
Deferred tax
Origination and reversal of temporary differences
(62)
(111)
Adjustments in respect of prior years
22
27
Tax on the change in value of derivative financial instruments
(14)
–
Adjustments to deferred tax attributable to changes in tax rates
–
1
Recognition of previously unrecognised deferred tax assets
(6)
–
Non-recognition of deferred tax
(6)
3
Total deferred tax credit
(66)
(80)
Tax credit for the year
(47)
(27)
Year ended
31 December
2024
Analysis of tax credit for the year:
£m
£m
Tax charge in respect of adjusted profit before tax
54
66
Tax credit recognised as an adjusting item
(101)
(93)
Total tax credit
(47)
(27)
The tax charge of £54 million (2023: £66 million) arising on adjusted profit before tax of £215 million
(2023: £264 million), results in an effective tax rate of 25% (2023: 25%).
The £101 million (2023: £93 million) tax credit recognised as an adjusting item includes £50 million
(2023: £87 million) in respect of tax credits on adjustments to loss before tax of £430 million
(2023: £786 million), £12 million (2023: £11 million) in respect of the tax on equity accounted
investments and other adjusting tax credits of £39 million (2023: charge of £5 million). These other
adjusting tax credits comprise a £45 million credit in respect of the release of a provision in
Germany following the settlement of a tax audit issue relating to the years 2010 to 2021 and a
£6 million charge in relation to restructuring activities (2023: £5 million).
The United Kingdom’s Finance (No.2) Act 2023 (as amended by Schedule 12 Finance Act 2024)
legislates for the UK’s application of the Organisation for Economic Co-operation and
Development’s Global Anti-Base Erosion Model Rules (Pillar Two), in general to accounting periods
beginning on or after 31 December 2023. However, specific provisions of the UK’s Pillar Two
legislation interact with the date of the Group’s demerger from Melrose Industries PLC (20 April
2023), such that Pillar Two will not apply to the Group until the accounting period beginning
1 January 2025. The Group’s underlying effective tax rate may be impacted, from 2025 onwards,
by Pillar Two. Upon a review of the Group’s results for the year ended 31 December 2024 and their
interaction with the Pillar Two rules (had they been in force in relation to the Group for that year),
the Group currently considers that the impact of Pillar Two on its 2025 global tax position will not
be material.
The tax credit for the year can be reconciled to the loss before tax per the Income Statement as
follows:
Year ended Year ended
31 December 31 December
2024 2023
£m £m
Loss before tax:
(215)
(522)
Tax credit on loss before tax at the weighted average rate of 19% (2023: 25%)
(41)
(131)
Tax effect of:
Disallowable expenses and other permanent differences within adjusted profit
7
(23)
Disallowable items included within adjusting items
22
104
Temporary differences not recognised in deferred tax
(6)
3
Recognition of previously unrecognised deferred tax assets
(6)
–
Tax credits, withholding taxes and other rate differences
(6)
(7)
Adjustments in respect of prior years
22
25
Tax (credit)/charge classified within adjusting items
(39)
5
Effect of changes in tax rates
–
(3)
Total tax credit for the year
(47)
(27)
The reconciliation has been performed at a blended Group tax rate of 19% (2023: 25%) which
represents the weighted average of the tax rates applying to profits and losses in the jurisdictions
in which those results arose in the year.
Tax charges/(credits) included in other comprehensive income are as follows:
Year ended Year ended
31 December 31 December
2024 2023
£m £m
Deferred tax on retirement benefit obligations
9
(4)
Deferred tax on foreign exchange gains and losses
(6)
(4)
Total charge/(credit) for the year
3
(8)
149Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
10. Dividends
Year ended Year ended
31 December 31 December
2024 2023
£m £m
Interim dividend
19
19
Final dividend
39
–
Dividends paid to Related Parties
–
1,675
58
1,694
An interim dividend of 1.4 pence per ordinary share (2023: 1.4 pence) was declared by the Board on
13 August 2024 and paid on 4 October 2024, totalling £19 million (2023: £19 million).
A final dividend of 2.8 pence per ordinary share (2023: 2.8 pence) is proposed by the Board,
totalling £38 million (2023: £39 million).
On 23 February 2023, prior to the demerger, GKN Industries Limited declared a dividend of
£1,675 million (72.83 pence per ordinary share) in favour of its immediate parent undertaking GKN
Enterprise Limited, a member of the Melrose Industries PLC group. The dividend was credited to
the loan balance with Related Parties which was subsequently cash settled at the date of demerger.
During the current year, the Group commenced a share buy-back programme under which
£26 million of cash has been used to acquire shares in the Company. All shares acquired in this way
have been cancelled.
11. Earnings per share
Year ended Year ended
31 December 31 December
2024 2023
Earnings attributable to owners of the parent £m £m
Net loss attributable to shareholders
(173)
(501)
Adjustments for earnings attributable to shares subject to recall
4
10
Earnings for basis of earnings per share
(169)
(491)
Year ended Year ended
31 December 31 December
2024 2023
Number Number
Weighted average number of ordinary shares (million)
1,373
1,390
Adjustment for shares subject to recall (million)
(28)
(28)
Weighted average number of ordinary shares for the purposes of basic
earnings per share (million)
1,345
1,362
Weighted average number of ordinary shares for the purposes of diluted
earnings per share (million)
1,345
1,362
On 3 April 2024, the Group commenced a share buy-back programme, with 41 million shares
purchased and cancelled by 31 December 2024 at a total cost of £26 million.
Year ended Year ended
31 December 31 December
2024 2023
Earnings per share pence pence
Basic earnings per share
(12.6)
(36.0)
Diluted earnings per share
(12.6)
(36.0)
Year ended Year ended
31 December 31 December
2024 2023
£m £m
Adjusted earnings attributable to shareholders
(1)
156
192
Adjustment for earnings attributable to shares subject to recall
(3)
(4)
Adjusted earnings for the basis of adjusted earnings per share
153
188
Adjusted earnings per share
Year ended Year ended
31 December 31 December
2024 2023
pence pence
Adjusted basic earnings per share
11.4
13.8
Adjusted diluted earnings per share
11.4
13.8
1. Adjusted earnings for the year ended 31 December 2024 comprises adjusted profit after tax (see Note 6c) of
£161 million (2023: £198 million), net of an allocation of profit to non-controlling interests of £5 million
(2023: £6 million).
150Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
12. Goodwill and other intangible assets
Customer Brands and
relationships intellectual Computer Development
Goodwill and contracts property Technology software costs Total
Cost £m £m £m £m £m £m £m
At 1 January 2023
1,605
1,789
183
404
98
112
4,191
Additions
–
–
–
–
12
4
16
Disposals
–
–
–
–
(5)
–
(5)
Impact of hyperinflationary economies
2
3
–
–
–
–
5
Reclassification
–
–
–
–
3
(3)
–
Exchange adjustments
(51)
(73)
–
(2)
(2)
(4)
(132)
At 31 December 2023
1,556
1,719
183
402
106
109
4,075
Additions
–
–
–
–
–
3
3
Disposals
–
–
–
–
(19)
(2)
(21)
Impact of hyperinflationary economies
1
3
–
–
–
–
4
Exchange adjustments
(27)
(36)
–
(1)
(2)
–
(66)
At 31 December 2024
1,530
1,686
183
401
85
110
3,995
Amortisation and impairment
At 1 January 2023
–
(672)
(44)
(226)
(84)
(70)
(1,096)
Charge for the year:
Adjusted operating profit
–
–
–
–
(5)
(5)
(10)
Adjusting items
–
(140)
(9)
(48)
–
–
(197)
Impairments
(1)
(449)
–
–
–
–
–
(449)
Disposals
–
–
–
–
5
–
5
Reclassification
–
–
–
–
(1)
1
–
Exchange adjustments
–
30
–
2
3
2
37
At 31 December 2023
(449)
(782)
(53)
(272)
(82)
(72)
(1,710)
Charge for the year:
Adjusted operating profit
–
–
–
–
(6)
(8)
(14)
Adjusting items
–
(136)
(8)
(47)
–
–
(191)
Disposals
–
–
–
–
19
2
21
Exchange adjustments
12
14
–
1
1
–
28
At 31 December 2024
(437)
(904)
(61)
(318)
(68)
(78)
(1,866)
Net book value
At 31 December 2024
1,093
782
122
83
17
32
2,129
At 31 December 2023
1,107
937
130
130
24
37
2,365
1. The goodwill impairment charge of £449 million recognised in the year ended 31 December 2023 was
presented within adjusting items (Note 6).
The goodwill generated as a result of acquisitions represents the premium paid in excess of the fair
value of all net assets, including intangible assets identified at the point of acquisition. As merger
accounting was applied on demerger of the Group from Melrose, goodwill relating to historical
acquisitions was transferred at book value based on the goodwill that arose on the original
acquisition. No additional goodwill was created as a result of the demerger. Further details
are set out in Note 2.
Goodwill acquired in business combinations, net of impairment, has been allocated to the
businesses, each of which comprises several cash-generating units (“CGUs”). Goodwill is allocated
to the Automotive and Powder Metallurgy groups of CGUs, which each represent reportable
segments, as this is the level where resources are allocated and where there is consistent senior
management review and oversight.
Year ended Year ended
31 December 31 December
2024 2023
Goodwill £m £m
Automotive
1,014
1,028
Powder Metallurgy
79
79
Total
1,093
1,107
Impairment testing
The Group tests goodwill annually or more frequently if there are indications that goodwill might
be impaired. The date of the annual impairment test is 31 October, aligned with internal forecasting
and review processes. In accordance with IAS 36 Impairment of Assets, the Group values goodwill at
the recoverable amount, being the higher of the value in use or fair value less costs to sell. For the
current year, impairment tests for both groups of CGUs were performed by applying a value in use
approach (2023: value in use).
Based on impairment testing completed for the year ended 31 December 2024 no impairment was
identified in respect of either the Automotive or the Powder Metallurgy group of CGUs (2023: no
impairment identified in respect of the Automotive group of CGUs, however an impairment of
£449 million was identified with respect to the Powder Metallurgy group of CGUs).
Significant assumptions and estimates
The basis of the impairment tests and the key assumptions are set out in the tables below:
2024
2023
Pre-tax Long-term Years in Pre-tax Long-term Years in
Groups of CGUs discount rates growth rates forecast discount rates growth rates forecast
Automotive
12.5%
3.5%
5
13.3%
3.3%
5
Powder Metallurgy
12.6%
3.5%
5
13.4%
3.3%
5
151Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
12. Goodwill and other intangible assets continued
Risk adjusted discount rates
Cash flows within the groups of CGUs are discounted using a post-tax discount rate specific to each
group of CGUs. Discount rates reflect the current market assessments of the time value of money
and the territories in which the group of CGUs operates. In determining the cost of equity, the
Capital Asset Pricing Model (“CAPM”) has been used. Under CAPM, the cost of equity is determined
by adding a risk premium, based on an industry adjustment (“Beta”), to the expected return of the
equity market above the risk-free return. The relative risk adjustment reflects the risk inherent in
each group of CGUs relative to all other sectors and geographies on average.
The cost of debt is determined using a risk-free rate based on the cost of government bonds and
an interest rate premium equivalent to a corporate bond with a credit rating similar to the rating of
the Group.
The pre-tax discount rate for each group of CGUs is derived such that when applied to pre-tax cash
flows it gives the same result as when the observable post-tax weighted average cost of capital is
applied to post-tax cash flows.
Assumptions applied in financial forecasts
The Group prepares cash flow forecasts derived from financial budgets and medium-term
forecasts. Each forecast has been prepared using a cash flow period deemed most appropriate
by management, considering the nature of each group of CGUs. The key assumptions used in
forecasting cash flows relate to future budgeted revenue and operating margins likely to be
achieved and the expected rates of long-term growth by market sector. Underlying factors in
determining the values assigned to each key assumption are shown below.
Revenue growth and operating margins
Revenue growth assumptions in the forecast period are based on financial budgets and
medium-term forecasts by management, taking into account industry growth rates and
management’s historical experience in the context of wider industry and economic conditions.
Projected sales are built up with reference to markets and product categories. They incorporate
past performance, historical growth rates, projections of developments in key markets, secured
orders and orders forecast to be achieved in the short to medium-term given trends in the
relevant market sector. Revenue assumptions take account of relevant external market data,
where available, and also consider the potential continued impact of recent macroeconomic
and political instability.
Operating margins have been forecast based on historical levels achieved considering the likely
impact of changing economic environments and competitive landscapes on volumes and revenues
and the impact of management actions on costs. Projected margins reflect the impact of all
committed and initiated projects to improve operational efficiency and leverage scale.
Forecasts for other operating costs are based on inflation forecasts and supply and demand factors,
which take account of climate change implications for affected markets. Overall, climate risk
exposure is considered to be relatively low across the divisions in the short and medium-term
but starts to increase in the longer-term, for example through increasing likelihood of flooding risk
or increasing wildfire risk. Impairment testing includes short to medium-term planning (five years)
for each of the groups of CGUs, which addresses known risks from climate change and other
environmental factors impacting forecast costs as well as the opportunities in associated markets
as they prepare for change, for example, transition to electrification in Automotive which is
expected to impact revenues.
Across the Group, the key driver for growth in operating margin is the Group’s ability to optimise
performance. This includes manufacturing optimisation and automation, making supply chain
savings, commercial activities to align sales prices with inflationary pressures, and restructuring
activities to ensure the Group is operating an efficient cost base.
For Automotive, sector growth is driven by global demand for a large range of cars, ranging
from smaller low-cost cars to larger premium vehicles. Demand is influenced by technological
advancements, particularly in electric and full hybrid vehicles, market expectations for global
vehicle production requirements, fuel prices, raw material input costs and expectations of their
recovery, consumer spending, credit availability, and other macroeconomic factors.
For Powder Metallurgy, growth is dependent on trends in the automotive and industrial markets.
Market expectations for global light vehicle production requirements, raw material input costs and
technological advancements, particularly in additive manufacturing, influence demand for these
products along with other macroeconomic factors.
Long-term growth rates
Long-term growth rates are based on long-term forecasts for growth in the sectors and
geographies in which the group of CGUs operates. These rates are determined using forecasts
that reflect the international presence and the markets in which each business operates.
152Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Sensitivity analysis
The models used to calculate value in use for each group of CGUs are particularly sensitive to
key assumptions around discount rates, long-term growth rates and underlying assumptions
underpinning forecasts including the impact of macroeconomic conditions such as interest rates
and inflation on future sales and input prices which drive forecast operating margins and ultimately
cash flows.
Automotive group of CGUs – sensitivity analysis
The forecasts show headroom of £363 million above the carrying amount for the Automotive group
of CGUs. Sensitivity analysis has been carried out and a reasonably possible increase in the discount
rate from 12.5% to 13.8%, would reduce headroom to £nil. Further increases in the discount rate to
14.2% would result in an impairment charge of c.£90 million being recognised in 2025.
Management does not believe reasonably possible changes in the long-term growth rate of 3.5%
would result in headroom being eroded to £nil, however for indication purposes, a decrease in the
long-term growth rate to 2.5% would result in a reduction of headroom by £200 million. Operating
margin assumptions are a key driver of business value and a 17% reduction in the terminal operating
profit would reduce operating profit margin by 1.4 percentage points, resulting in headroom of
£nil. An additional reduction in the terminal operating profit, representing a total reduction of 20%,
would reduce operating profit margin by 1.7 percentage points, resulting in an impairment charge
of c.£80 million in 2025.
Powder Metallurgy group of CGUs – sensitivity analysis
The forecasts show headroom of £41 million above the carrying amount for the Powder Metallurgy
group of CGUs. Sensitivity analysis has been carried out and a reasonably possible increase in the
discount rate from 12.6% to 13.1%, would reduce headroom to £nil. Further increases in the discount
rate to 13.6% would result in an impairment charge of c.£39 million being recognised in 2025.
The value of the Powder Metallurgy group of CGUs remains sensitive to and dependent upon the
underlying forecast and financial assumptions in the future. Operating margin assumptions are a
key driver of business value and a reduction in the terminal operating profit by 6% would reduce
the operating margin by 0.5 percentage points, resulting in headroom of £nil. An additional
reduction in the terminal operating profit, representing a total reduction of 12%, would reduce
operating profit margin by 1.0 percentage points, resulting in an impairment charge of c.£38 million
in 2025. A reasonably possible decrease in growth rates from 3.5% to 2.8% would result in headroom
of £nil. A further decrease in growth rate to 2.0% would result in an impairment charge of
c.£37 million being incurred.
For all sensitivities, it is assumed that all other variables remain unchanged.
Allocation of significant intangible assets
The allocation of significant customer relationships and contracts, brands, intellectual property and
technology is as follows:
Customer relationships and contracts
Remaining amortisation period
Net book value
31 December 31 December 31 December 31 December
2024 2023 2024 2023
Years Years £m £m
Automotive
6
7
396
501
Powder Metallurgy
11
12
386
436
Total
782
937
Brands, intellectual property and technology
Remaining amortisation period
Net book value
31 December 31 December 31 December 31 December
2024 2023 2024 2023
Years Years £m £m
Automotive
14
15
166
214
Powder Metallurgy
14
15
39
46
Total
205
260
153Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
13. Property, plant and equipment
Land and Plant and
buildings equipment Total
Cost £m £m £m
At 1 January 2023
659
2,005
2,664
Additions
10
263
273
Disposals
(24)
(40)
(64)
Transfer
71
(71)
–
Impact of hyperinflationary economies
1
2
3
Exchange adjustments
(30)
(88)
(118)
At 31 December 2023
687
2,071
2,758
Additions
15
242
257
Disposals
(13)
(33)
(46)
Disposal of business
(2)
(5)
(7)
Transfer
50
(50)
–
Lease reassessments
(11)
1
(10)
Impact of hyperinflationary economies
4
8
12
Exchange adjustments
(26)
(55)
(81)
At 31 December 2024
704
2,179
2,883
Accumulated depreciation and impairment
At 1 January 2023
(121)
(722)
(843)
Charge for the year
(30)
(222)
(252)
Disposals
10
38
48
Impairments
(1)
–
(1)
Exchange adjustments
6
35
41
At 31 December 2023
(136)
(871)
(1,007)
Charge for the year
(30)
(214)
(244)
Disposals
10
32
42
Disposal of business
2
5
7
Impairments
(1)
(9)
(22)
(31)
Impact of hyperinflationary economies
(3)
(4)
(7)
Exchange adjustments
5
28
33
At 31 December 2024
(161)
(1,046)
(1,207)
Net book value
At 31 December 2024
543
1,133
1,676
At 31 December 2023
551
1,200
1,751
1. Impairments in the current year are presented as adjusting items and comprise £27 million (2023: £nil) of
restructuring costs and £4 million (2023: £nil) impairment of assets (see Note 6).
Assets under the course of construction at 31 December 2024 totalled £176 million
(31 December 2023: £158 million). Assets under the course of construction are presented as plant
and equipment until the point at which the asset is ready for use. Transfers of £50 million
(2023: £71 million) between asset classes were recorded on completion of construction projects.
The basis of testing for impaired assets, which resulted in a charge totalling £31 million
(2023: £1 million), primarily used fair value less costs to sell methodology which was classified as a
level 3 fair value under the IFRS 13 fair value hierarchy.
Property, plant and equipment includes the net book value of right-of-use assets as follows:
Land and buildings Plant and equipment Total
Right-of-use asset £m £m £m
At 1 January 2023
114
30
144
Additions
9
18
27
Depreciation
(14)
(11)
(25)
Disposals
(1)
–
(1)
Exchange adjustments
(6)
(2)
(8)
At 31 December 2023
102
35
137
Additions
10
13
23
Depreciation
(13)
(12)
(25)
Reassessments
(11)
1
(10)
Impairments
(5)
–
(5)
Impact of hyperinflationary economies
2
–
2
Exchange adjustments
(7)
(1)
(8)
At 31 December 2024
78
36
114
154Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
14. Equity accounted investments
31 December 31 December
2024
2023
(1)
Aggregated amounts relating to equity accounted investments: £m £m
Share of non-current assets
256
291
Share of current assets
445
453
Share of current liabilities
(288)
(298)
Share of non-current liabilities
(28)
(49)
Interests in equity accounted investments
385
397
1. Interests in equity accounted investments at 31 December 2023 have been restated to reflect a previously
unidentified omission in the acquisition accounting of an equity accounted investment. Further details are set
out in Note 1.3.
Year ended Year ended
31 December 31 December
2024 2023
Group share of results £m £m
Revenue
600
625
Operating costs
(511)
(544)
Adjusted operating profit
89
81
Adjusting items
(20)
(21)
Net finance income
1
2
Profit before tax
70
62
Tax
(1)
(9)
(11)
Share of results of equity accounted investments
61
51
1. The tax charge for the year includes a charge of £12 million (2023: £11 million) in respect of adjusted operating
profits and a credit of £3 million (2023: £nil) in respect of adjusting items.
Year ended Year ended
31 December 31 December
2024
2023
(1)
Group share of equity accounted investments £m £m
At 1 January
397
441
Share of results of equity accounted investments
61
51
Dividends paid to the Group
(70)
(63)
Exchange adjustments
(3)
(32)
At 31 December
385
397
1. Interests in equity accounted investments at 31 December 2023 have been restated to reflect a previously
unidentified omission in the acquisition accounting of an equity accounted investment. Further details are set
out in Note 1.3.
Within the Group’s share of equity accounted investments there is one significant joint venture,
held within the Automotive segment, Shanghai GKN HUAYU Driveline Systems Co Limited (“SDS”).
Shanghai GKN
HUAYU Driveline Group Amortisation of
Systems Co 50% share acquisition Intra-Group sales Total Group
Limited of SDS intangibles elimination share of SDS
Year ended 31 December 2024 £m £m £m £m £m
Revenue
1,102
551
–
(37)
514
Operating profit
138
69
(20)
–
49
Interest income
4
2
–
–
2
Tax
(18)
(9)
3
–
(6)
Profit after tax
124
62
(17)
–
45
Year ended 31 December 2023
Revenue
1,188
594
–
(38)
556
Operating profit
142
71
(21)
–
50
Interest income
6
3
–
–
3
Tax
(20)
(10)
–
–
(10)
Profit after tax
128
64
(21)
–
43
Shanghai GKN
HUAYU Driveline Group
Systems Co 50% share Fair value Total Group
Limited of SDS adjustments share of SDS
31 December 2024 £m £m £m £m
Non-current assets
138
69
163
232
Current assets
734
367
–
367
Current liabilities
(472)
(236)
–
(236)
Non-current liabilities
(8)
(4)
(16)
(20)
Net assets
392
196
147
343
31 December 2023
Non-current assets
152
76
184
260
Current assets
796
398
–
398
Current liabilities
(506)
(253)
–
(253)
Non-current liabilities
(44)
(22)
(19)
(41)
Net assets
398
199
165
364
155Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
15. Disposals
On 29 July 2024, the Group completed the disposal of the GKN Hydrogen business to Langley
Holdings plc, for nominal consideration.
Classes of assets and liabilities disposed of as a result of the Hydrogen disposal were as follows:
Hydrogen
disposal
£m
Trade and other receivables
3
Cash and cash equivalents
9
Total assets
12
Trade and other payables
4
Lease obligations
1
Total liabilities
5
Net assets
7
An impairment charge totalling £10 million (2023: £nil) was recorded against the value of inventory
and property, plant and equipment held by the Hydrogen division to write down the assets to £nil
reflecting their anticipated recoverable value, following the decision made in June 2024 to close or
dispose of the business.
Year ended
31 December
2024
£m
Proceeds received on disposal
–
Net assets disposed of
7
Disposal transaction costs
1
Loss on disposal of business
8
16. Inventories
31 December 31 December
2024 2023
£m £m
Raw materials
240
288
Work in progress
105
123
Finished goods
86
99
431
510
In 2024 the write down of inventories to net realisable value amounted to £19 million
(2023: £15 million). The reversal of write downs amounted to £9 million (2023: £8 million).
Write downs and reversals in both years relate to ongoing assessments of inventory obsolescence,
excess inventory holding and inventory resale values across all of the Group’s businesses.
The Directors consider that there is no material difference between the net book value of
inventories and their replacement cost.
17. Trade and other receivables
31 December 31 December
2024 2023
Current £m £m
Trade receivables
384
476
Allowance for expected credit loss
(15)
(16)
Other receivables
82
151
Prepayments
25
10
Contract assets
9
7
485
628
Trade receivables are non interest-bearing. Credit terms offered to customers vary upon the
country of operation but are generally between 30 and 90 days.
31 December 31 December
2024 2023
Non-current £m £m
Other receivables
8
6
Contract assets
5
6
13
12
As described in Note 25, certain businesses participate in receivables working capital programmes
and have the ability to choose whether to receive payment earlier than the normal due date, for
specific customers on a non-recourse basis. As at 31 December 2024, eligible receivables under
these programmes have been factored and derecognised in line with the derecognition criteria
of IFRS 9 Financial Instruments.
An allowance has been made for expected lifetime credit losses with reference to past default
experience and management’s assessment of credit worthiness over trade receivables, an analysis
of which is as follows:
Powder
Automotive Metallurgy Total
£m £m £m
At 1 January 2023
6
7
13
Income Statement charge
3
–
3
At 31 December 2023
9
7
16
Income Statement charge/(credit)
1
(1)
–
Exchange adjustments
(1)
–
(1)
At 31 December 2024
9
6
15
156Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
The concentration of credit risk is limited due to the large number of unrelated customers. Credit
control procedures are implemented to ensure that sales are only made to organisations that are
willing and able to pay for them. Such procedures include the establishment and review of
customer credit limits and terms. The Group does not hold any collateral or any other credit
enhancements over any of its trade receivables nor does it have a legal right of offset against
any amounts owed by the Group to the counterparty.
The ageing of impaired trade receivables past due, provision and recoverable amounts are
as follows:
Gross Provision Recoverable
31 December 2024 £m £m £m
Current
348
–
348
0 – 30 days
19
(8)
11
31 – 60 days
4
–
4
60+ days
13
(7)
6
384
(15)
369
Gross Provision Recoverable
31 December 2023 £m £m £m
Current
444
–
444
0 – 30 days
21
(9)
12
31 – 60 days
4
–
4
60+ days
7
(7)
–
476
(16)
460
The Directors consider that the carrying amount of trade and other receivables approximates to
their fair value.
The Group’s contract assets comprise the following:
Participation fees Other Total
£m £m £m
At 1 January 2023
10
10
20
Additions
–
1
1
Reclassification
–
(3)
(3)
Utilised
(1)
(3)
(4)
Exchange adjustments
(1)
–
(1)
At 31 December 2023
8
5
13
Additions
5
–
5
Utilised
(1)
(2)
(3)
Exchange adjustments
–
(1)
(1)
At 31 December 2024
12
2
14
An assessment for impairment of contract assets has been performed in accordance with policies
described in Note 2. No such impairment has been recorded.
Participation fees
Participation fees are described in the accounting policies in Note 2 and are considered to be a
reduction in revenue for the related customer contract. Amounts are capitalised and ‘amortised’
to match to the related performance obligation.
18. Cash and cash equivalents
31 December 31 December
2024 2023
£m £m
Cash and cash equivalents
336
313
Cash and cash equivalents comprises cash at bank and in hand which earns interest at floating rates
based on daily bank deposit rates. The carrying amount of these assets is considered to be equal to
their fair value.
19. Trade and other payables
31 December 31 December
2024 2023
Current £m £m
Trade payables
577
698
Accruals and other payables
325
440
Customer advances and contract liabilities
11
4
Other taxes and social security
47
33
Deferred government grants
1
4
961
1,179
As at 31 December 2024, and as described in Note 25, included within trade payables were invoices
on supplier finance facilities of £148 million (2023: £106 million).
Trade payables are non-interest-bearing. Normal settlement terms vary by country and the
average credit period taken for trade payables is 85 days (2023: 89 days).
31 December 31 December
2024 2023
Non-current £m £m
Other payables
9
13
Customer advances and contract liabilities
9
5
18
18
The Directors consider that the carrying amount of trade and other payables approximates to their
fair value. Non-current other payables fall due for payment within one to two years.
157Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
20. Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group’s interest-bearing loans
and borrowings. Details of the Group’s exposure to credit, liquidity, interest rate and foreign
currency risk are included in Note 25.
Current
Non-current
Total
31 December 31 December 31 December 31 December 31 December 31 December
2024 2023 2024 2023 2024 2023
Floating rate obligations £m £m £m £m £m £m
Bank borrowings – US Dollar loan
–
–
319
584
319
584
Bank borrowings – Sterling loan
–
–
240
285
240
285
Bank borrowings – Euro loan
–
–
339
298
339
298
Unamortised finance costs
–
–
(4)
(9)
(4)
(9)
Other loans and
bank overdrafts
13
2
–
–
13
2
Fixed rate obligations
US Private Placement
–
–
399
–
399
–
Unamortised finance costs
–
–
(2)
–
(2)
–
Total interest-bearing loans
and borrowings
13
2
1,291
1,158
1,304
1,160
The Group’s committed bank facility includes a multi-currency denominated term loan of
£100 million and €100 million as well as a multi-currency denominated revolving credit facility of
£350 million, US$660 million and €450 million.
During the year the bank facility’s term loan of US$400 million was repaid. US$500 million US Private
Placement (USPP) was issued at fixed interest rates with tranches maturing between 5 and 12 years.
The current facilities have two financial covenants being a net debt to adjusted EBITDA covenant
and an interest cover covenant, both of which are tested half yearly, in June and December. Further
details on the covenants and covenant compliance for the year ended 31 December 2024 are
contained in Note 25.
Loans drawn under these facilities are guaranteed by Dowlais Group plc and certain of its
subsidiaries. There is no security over any of the Group’s assets in respect of these facilities.
At 31 December 2024, the term loans were fully drawn at £100 million and €100 million (2023: fully
drawn at £100 million and €100 million and US$400 million). A further £140 million
(2023: £185 million), US$400 million (2023: US$345 million) and €310 million (2023: €244 million)
were drawn on the multi-currency revolving credit facility. There are also a number of uncommitted
overdraft, guarantee and borrowing facilities made available to the Group.
The bank margin on the bank facility depends on the Group’s leverage. The average interest rate
payable on the debt facilities, net of the impact of interest rate hedging, was 6.32% for the year
(2023: 6.38% for the period from the initial drawdown of the debt facilities to 31 December 2023).
21. Provisions
Loss- Property Warranty
making related Environmental related
contracts costs and litigation costs Restructuring Other Total
£m £m £m £m £m £m £m
At 1 January 2024
17
5
46
141
78
31
318
Utilised
(6)
–
(5)
(19)
(105)
(7)
(142)
Charge to operating profit
(1)
–
–
5
19
122
2
148
Release to operating profit
(2)
–
–
(6)
(52)
(7)
(3)
(68)
Unwind of discount
–
–
–
–
1
–
1
Transfers
–
–
1
5
5
1
12
Exchange adjustments
(1)
(1)
(1)
(3)
(4)
–
(10)
31 December 2024
10
4
40
91
90
24
259
Current
3
1
18
41
66
13
142
Non-current
7
3
22
50
24
11
117
10
4
40
91
90
24
259
1. Includes £125 million of adjusting items and £23 million recognised in adjusted operating profit.
2. Includes £34 million of adjusting items and £34 million recognised in adjusted operating profit.
Loss-making contracts
Provisions for loss-making contracts are considered to exist where the Group has a contract under
which the unavoidable costs of meeting the obligations exceed the economic benefits expected to
be received under it. This obligation has been discounted and will be utilised over the period of the
respective contracts, which is up to five years.
Calculation of loss-making contract provisions is based on contract documentation and delivery
expectations, along with an estimate of directly attributable costs and represents management’s
best estimate of the unavoidable costs of fulfilling the contract.
Utilisation during the year of £6 million has been reported within adjusted operating profit in
Automotive (2023: £10 million in Automotive and £1 million in Powder Metallurgy).
Property related costs
The provision for property related costs represents dilapidation costs for ongoing leases and
is expected to result in cash expenditure over the next six years. Calculation of dilapidation
obligations are based on lease agreements with landlords and external quotes or, in the absence
of specific documentation, management’s best estimate of the costs required to fulfil obligations.
Environmental and litigation
Environmental provisions relate to the estimated remediation costs of pollution, soil and
groundwater contamination at certain sites and amounted to £15 million (2023: £16 million).
Liabilities for environmental costs are recognised when environmental remediation works are
probable and the associated costs can be reasonably estimated. The majority of the provision
is anticipated to be utilised over the next 13 years.
158Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Litigation provisions amounting to £25 million (2023: £30 million) relate to estimated future costs
and settlements in relation to legal claims and associated insurance obligations. The Group has on
occasion been required to take legal or other actions to defend itself against proceedings brought
by other parties. Provisions are made for the expected costs associated with such matters, based
on past experience of similar items and other known factors, considering professional advice
received. This represents management’s best estimate of the likely outcome. The timing of
utilisation of these provisions is frequently uncertain, reflecting the complexity of issues and the
outcome of various court proceedings and negotiations. Contractual and other provisions
represent management’s best estimate of the cost of settling future obligations and reflect
management’s assessment of the likely settlement method, which may change over time. However,
no provision is made for proceedings which have been, or might be, brought by other parties
against Group companies unless management, considering professional advice received, assess
that it is more likely than not that such proceedings may be successful.
Warranty related costs
Provisions for the expected cost of warranty obligations under local sale of goods legislation are
recognised at the date of sale of the relevant products and subsequently updated for changes in
estimates as necessary. The provision for warranty related costs represents the best estimate of the
expenditure required to settle the Group’s obligations, based on past experience, recent claims
and current estimates of costs relating to specific claims. Warranty terms are, on average, between
one and five years.
During the year, a warranty provision recorded as a fair value item on historical acquisitions, was
resolved for a more favourable amount than first anticipated. The related release of £27 million was
recognised within adjusting items.
Restructuring
Restructuring provisions relate to committed costs in respect of restructuring programmes (as
described in Note 6), usually resulting in cash spend within three years. A restructuring provision is
recognised when the Group has developed a detailed formal plan for the restructuring and has
raised a valid expectation in those affected that it will carry out the restructuring by either starting
to implement the plan or by announcing its main features to those affected by it. The measurement
of a restructuring provision includes only the direct expenditures arising from the restructuring,
which are those amounts that are necessarily entailed by the restructuring programmes.
Other
Other provisions include long-term incentive plans for senior management and the employer tax
on equity-settled incentive schemes which are expected to result in cash expenditure over the
next one to five years.
Where appropriate, provisions have been discounted using discount rates depending on the
territory in which the provision resides and the length of its expected utilisation.
22. Deferred tax
The following are the major deferred tax assets and liabilities recognised by the Group and
movements thereon during the current and prior year.
Deferred tax
assets
Deferred tax liabilities
Accelerated
capital
Tax losses and allowances and Deferred tax on Total deferred Total net
other assets other liabilities intangible assets tax liabilities deferred tax
£m £m £m £m £m
At 1 January 2023
300
(131)
(363)
(494)
(194)
Credit to Income Statement
15
16
49
65
80
Credit to equity
–
8
–
8
8
Exchange adjustments
(12)
5
11
16
4
At 31 December 2023
303
(102)
(303)
(405)
(102)
(Charge)/credit to
Income Statement
(13)
30
49
79
66
Charge to equity
–
(3)
–
(3)
(3)
Exchange adjustments
(9)
2
4
6
(3)
At 31 December 2024
281
(73)
(250)
(323)
(42)
Deferred tax assets and liabilities are recognised on the Balance Sheet, after offset of balances
within territories in accordance with IAS 12, as follows:
31 December 31 December
2024 2023
£m £m
Deferred tax asset
157
146
Deferred tax liability
(199)
(248)
(42)
(102)
A deferred tax asset of £63 million (2023: £72 million) has been recognised in respect of £209 million
(2023: £234 million) of tax losses. No asset has been recognised in respect of the remaining losses
of £424 million (2023: £382 million) due to the divisional and geographic split of anticipated future
profit streams. Most of these losses may be carried forward indefinitely subject to certain continuity
of business requirements. Where losses are subject to time expiry, a deferred tax asset is
recognised to the extent that sufficient future profits are anticipated to utilise these losses.
In addition to the corporate income tax losses included above, a deferred tax asset of £27 million
(2023: £24 million) has been recognised on tax credits (primarily US) and US state tax losses.
Deferred tax assets have also been recognised on Group retirement benefit obligations at
£54 million (2023: £53 million).
There are no material unrecognised deferred tax assets at 31 December 2024 (2023: £nil), other than
the losses referred to above. No deferred tax is recognised on the unremitted earnings of overseas
subsidiaries except where the distribution of such profits is planned. If these earnings were remitted
in full, tax of £56 million (2023: £59 million) would be payable.
159Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
23. Share-based payments
During the year, the Company recognised a charge of £1 million (2023: £1 million) in respect of the
Group’s share incentive schemes.
The share-based payment arrangements are as follows:
2023 Performance Share Plan (PSP)
Date of grants
2 May 2023, 10 October 2023, 15 November 2023
Number of share awards granted
6,223,292
Contractual life
3 years
Vesting condition
Three years’ service, achievement of target growth in
earnings per share and achievement of a total shareholder
return ranking against comparator group.
Each employee share award converts into one ordinary share of the Company on vesting.
No amounts are paid or payable by recipient on receipt of the award. The awards carry neither
rights to dividends nor voting rights. Awards are forfeited if the employee leaves the Company
before the share awards vest.
Details of the share options outstanding during the year are as follows:
31 December 31 December
Number of share options 2024 2023
Outstanding at the beginning of the year
6,149,660
–
Granted during the year
–
6,223,292
Forfeited during the year
(377,297)
(73,632)
Outstanding at the end of the year
5,772,363
6,149,660
Fair value of share options and assumptions
The inputs into the Monte Carlo pricing model that were used to fair value the plan at the grant
dates were as follows:
Valuation
assumptions
Weighted average share price
£1.31
Weighted average exercise price
nil
Expected volatility
38.65%
Expected life at inception
3 years
Risk free interest rate
3.78%
Expected dividend yield
3.2%
2024 Omnibus Share Plan (OSP)
Date of grants
24 May 2024
Number of share awards granted
9,921,488
Contractual life
3 years
Vesting condition
Three years’ service, achievement of target growth in
earnings per share and achievement of a total shareholder
return ranking against comparator group.
Each employee share award converts into one ordinary share of the Company on vesting.
No amounts are paid or payable by recipient on receipt of the award. The awards accrue dividend
equivalents but do not carry voting rights. Awards are forfeited if the employee leaves the
Company before the share awards vest.
Details of the share options outstanding during the year are as follows:
31 December 31 December
Number of share options 2024 2023
Outstanding at the beginning of the year
–
–
Granted during the year
9,921,488
–
Forfeited during the year
–
–
Outstanding at the end of the year
9,921,488
–
Fair value of share options and assumptions
The inputs into the Monte Carlo pricing model that were used to fair value the plan at the grant
dates were as follows:
Valuation
assumptions
Weighted average share price
£0.72
Weighted average exercise price
nil
Expected volatility
33.67%
Expected life at inception
3 years
Risk free interest rate
4.37%
Expected dividend yield
n/a
Due to the short listing period of the Company’s shares, expected volatility was determined using
an average of the historic volatility of the Company’s peer group share prices.
Other share-based payment arrangements
Since April 2023, the Company has received services from Melrose Industries PLC under a
Transitional Service Agreement (TSA) as part of the demerger process for which consideration
was settled in shares of the Company. A charge of £1 million in respect of these services was
recognised in the prior year, in demerger costs, as equivalent to the value of services rendered.
Certain services under the TSA have ceased during the current year resulting in a current year
charge of £nil.
160Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
24. Retirement benefit obligations
Defined contribution plans
The Group operates defined contribution plans for qualifying employees across several
jurisdictions. The assets of the plans are held separately from those of the Group in funds under the
control of Trustees.
The total costs charged during the year of £14 million (2023: £12 million) represent contributions
payable to these plans by the Group at rates specified in the rules of the plans.
Defined benefit plans
The Group sponsors defined benefit plans for qualifying employees of certain subsidiaries. The
funded defined benefit plans are administered by separate funds that are legally separated from
the Group. The Trustees of the funds are required by law to act in the interest of the fund and of all
relevant stakeholders in the plans. The Trustees of the pension funds are responsible for the
investment policy with regard to the assets of the fund.
The most significant defined benefit pension plans in the Group at 31 December 2024 were:
UK: GKN Group Pension Schemes (No.2 and No.3)
The GKN Group Pension Schemes (Numbers 2 and 3) are disclosed within the Automotive segment.
These schemes are funded, closed to new members and were closed to future accrual in 2017.
The valuation of the schemes was based on the latest triennial statutory actuarial valuation as of
5 April 2022, updated to 31 December 2024 by independent actuaries. The next triennial valuation
of the schemes will take place during 2025.
US: GKN Automotive and GKN Powder Coatings Pension Plans
The GKN Automotive and GKN Powder Coatings Pension Plans are funded plans, closed to new
members and closed to future accrual. The valuation of these plans was based on a full actuarial
valuation as of 1 January 2024, updated to 31 December 2024 by independent actuaries.
Germany: GKN Germany Pension Plans
The GKN Germany Pension Plans provide benefits dependent on final salary and service with the
Company. The plans are generally unfunded and closed to new members.
Other plans include a number of funded and unfunded defined benefit arrangements and retiree
medical insurance plans, predominantly in the US and Europe.
The cost of the Group’s defined benefit plans is determined in accordance with IAS 19 (revised 2011)
Employee Benefits, using the advice of independent professionally qualified actuaries on the basis
of formal actuarial valuations and using the projected unit credit method. In line with normal
practice, statutory scheme valuations are undertaken triennially in the UK and annually in the US
and Germany.
Contributions
The Group contributed £44 million (2023: £39 million) to defined benefit pension plans and
post-employment plans in the year ended 31 December 2024. In 2025, the Group expects to
contribute c.£36 million to the plans including a deficit reduction payment of c.£7 million related to
the GKN Group Pension Scheme No. 3. The annual deficit reduction payment is of a variable amount
contingent on the funding valuation of the scheme at 31 December and is capped at the lower of
£15 million or the deficit on the scheme.
Actuarial assumptions
The major assumptions used by the actuaries in calculating the Group’s pension liabilities are as set
out below:
Rate of increase of
pensions in Price inflation
payment Discount rate (RPI/CPI)
31 December 2024 % per annum % %
GKN Group Pension Schemes (No.2 – No.3)
2.5
5.5
3.0/2.7
GKN US plans
n/a
5.5
n/a
GKN Europe plans
2.0
3.4
2.0/2.0
31 December 2023
GKN Group Pension Schemes (No.2 – No.3)
2.5
4.5
3.0/2.6
GKN US plans
n/a
4.8
n/a
GKN Europe plans
2.1
3.3
2.1/2.1
Mortality
GKN Group Pension Schemes (No.2 – No.3)
The GKN Group Pension Schemes (No.2 – No.3) use the SAPS “S3PA” base tables with scheme-
specific adjustments. The base table mortality assumption for each of the UK schemes reflects best
estimate results from the most recent mortality experience analyses for each scheme. Weighting
factors vary by scheme.
Future improvements for all UK plans are in line with the 2023 Continuous Mortality Investigation
(“CMI”) core projection model (SK = 7.0, A = 0%, w2022 =w2023= 15%) with a long-term rate of
improvement of 1.25% p.a. for both males and females.
GKN US Consolidated Pension Plan
GKN US Pension and Medical Plans use base mortality tables (PRI 2012) as used in the 2024 funding
valuation. Future improvements for all US plans are in line with MP2021.
GKN Germany Pension Plans
All German plans use the Richttafeln 2018 G tables, with no adjustment.
161Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
24. Retirement benefit obligations continued
The following table shows the future life expectancy of individuals aged 65 at the year end and the
future life expectancy of individuals aged 65 in 20 years’ time.
GKN Group
Pension Schemes GKN US GKN Germany
(No2.–No.3) Pension Plan Pension Plans
Years Years Years
Male today
20.9
19.7
20.9
Female today
23.2
21.7
24.3
Male in 20 years’ time
21.9
21.2
23.6
Female in 20 years’ time
24.5
23.1
26.5
Balance Sheet disclosures
The amounts recognised in the Consolidated Balance Sheet in respect of defined benefit plans
were as follows:
31 December 31 December
2024 2023
£m £m
Present value of funded defined benefit obligations
(686)
(786)
Fair value of plan assets
717
775
Funded status
31
(11)
Present value of unfunded defined benefit obligations
(415)
(446)
Asset ceiling
–
(2)
Net liabilities
(384)
(459)
Analysed as:
Retirement benefit surplus (non-current assets)
(1)
34
27
Retirement benefit obligations (non-current liabilities)
(418)
(486)
Net liabilities
(384)
(459)
1. Includes a surplus relating to the GKN Group Pension Scheme (No.2) of £33 million (2023: £25 million) and the
Japan Employee plan of £1 million (2023: £2 million).
A retirement benefit surplus is recognised in relation to the GKN Group Pension Scheme (No.2) as
the Group has an unconditional right to a refund of surplus assets when there are no remaining
members of the scheme.
The net retirement benefit obligation is attributable to Automotive: liability of £360 million
(2023: £430 million) and Powder Metallurgy: liability of £24 million (2023: £29 million).
The plan assets and liabilities at the year end were as follows:
UK Plans US Plans European Plans Other Plans Total
31 December 2024 £m £m £m £m £m
Plan assets
613
76
16
12
717
Plan liabilities
(584)
(111)
(385)
(21)
(1,101)
Net assets/(liabilities)
29
(35)
(369)
(9)
(384)
The plan assets and liabilities at the previous year end were as follows:
UK Plans US Plans European Plans Other Plans Total
31 December 2023 £m £m £m £m £m
Plan assets
665
73
16
21
775
Plan liabilities
(672)
(118)
(416)
(26)
(1,232)
Asset ceiling
–
–
–
(2)
(2)
Net liabilities
(7)
(45)
(400)
(7)
(459)
The major categories and fair values of plan assets at the end of the year for each category were as
follows:
31 December 31 December
2024 2023
£m £m
Equities
28
56
Government bonds
339
404
Corporate bonds
112
85
Property
5
7
Insurance contracts
11
13
Multi-strategy/Diversified growth funds
182
116
Private equity
9
15
Other
(1)
31
79
Total
717
775
1. Primarily consists of cash collateral and other assets associated with liability driven investments in the
UK schemes.
The assets were well diversified and the majority of plan assets had quoted prices in active markets.
All government bonds were issued by reputable governments and were generally AA rated or
higher. Interest rate and inflation rate swaps were also employed to complement the role of fixed
and index-linked bond holdings for liability risk management.
The Trustees continually review whether the chosen investment strategy is appropriate with a view
to providing the pension benefits and to ensure appropriate matching of risk and return profiles.
The main strategic policies included maintaining an appropriate asset mix, managing interest rate
sensitivity and maintaining an appropriate equity buffer. Investment results are regularly reviewed.
162Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Movements in the present value of defined benefit obligations during the year:
Year ended Year ended
31 December 31 December
2024 2023
£m £m
At 1 January
1,232
1,240
Current service cost
6
6
Interest cost on obligations
49
53
Remeasurement gains – demographic
(6)
–
Remeasurement (gains)/losses – financial
(89)
18
Remeasurement losses – experience
–
1
Benefits paid out of plan assets
(68)
(67)
Curtailments
1
–
Settlements
(5)
–
Past service cost
1
–
Exchange adjustments
(20)
(19)
At 31 December
1,101
1,232
The defined benefit plan liabilities were 17% (2023: 17%) in respect of active plan participants, 22%
(2023: 23%) in respect of deferred plan participants and 61% (2023: 60%) in respect of pensioners.
The weighted average duration of the defined benefit plan liabilities at 31 December 2024 was
12 years (31 December 2023: 13 years).
Movements in the fair value of plan assets during the year:
Year ended Year ended
31 December 31 December
2024 2023
£m £m
At 1 January
775
779
Interest income on plan assets
34
36
Loss on plan assets, excluding interest income
(60)
(3)
Contributions
44
39
Benefits paid out of plan assets
(68)
(67)
Plan administrative costs
(2)
(3)
Settlements
(5)
–
Exchange adjustments
(1)
(6)
At 31 December
717
775
The actual return on plan assets was a loss of £26 million (2023: gain of £33 million).
Income Statement disclosures
Amounts recognised in the Consolidated Income Statement in respect of these defined benefit
plans were as follows:
Year ended Year ended
31 December 31 December
2024 2023
Included within operating loss: £m £m
–
current service cost
6
6
–
plan administrative costs
2
3
–
curtailments and past service cost
(1)
2
–
Included within net finance costs:
–
interest cost on defined benefit obligations
49
53
–
interest income on plan assets
(34)
(36)
1. Curtailments and past service costs relate to benefits provided as a result of redundancies and a pension
scheme wind up following site closures and have been presented as adjusting items within restructuring costs.
Statement of Comprehensive Income disclosures
Amounts recognised in the Consolidated Statement of Comprehensive Income in respect of these
defined benefit plans were as follows:
Year ended Year ended
31 December 31 December
2024 2023
£m £m
Loss on plan assets, excluding interest income
(60)
(3)
Remeasurement gain arising from changes in demographic assumptions
6
–
Remeasurement gains/(losses) arising from changes infinancialassumptions
89
(18)
Change in unrecognised asset due to asset ceiling
2
–
Remeasurement losses arising from experience adjustments
–
(1)
Net remeasurement gain/(loss) on retirement benefit obligations
37
(22)
Risks and sensitivities
The defined benefit plans expose the Group to actuarial risks, such as longevity risk, inflation risk,
interest rate risk and market (investment) risk. The Group is not exposed to any unusual, entity
specific or plan specific risks.
A sensitivity analysis on the principal assumptions used to measure the plan liabilities at the year
end was as follows:
Increase/
Decrease/ (decrease) to
(increase) to profit before
plan liabilities tax
Change in assumption £m £m
Discount rate
Increase by 0.5 ppts
61
2
Decrease by 0.5 ppts
(67)
(1)
Inflation assumption
(1)
Increase by 0.5 ppts
(43)
n/a
Decrease by 0.5 ppts
40
n/a
Assumed life expectancy at age 65 (rate of mortality)
Increase by 1 year
(39)
n/a
Decrease by 1 year
38
n/a
1. The inflation sensitivity encompasses the impact on pension increases and salary increases, where applicable.
163Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
24. Retirement benefit obligations continued
The sensitivity analysis above was determined based on reasonably possible changes to the
respective assumptions, while holding all other assumptions constant. There has been no
change in the methods or assumptions used in preparing the sensitivity analysis from prior years.
Sensitivities are based on the relevant assumptions and membership profile as at 31 December 2024
and are applied to obligations at the end of the reporting period. Whilst the analysis does not take
account of the full distribution of cash flows expected, it does provide an approximation to the
sensitivity of assumptions shown. Extrapolation of these results beyond the sensitivity figures
shown may not be appropriate and the sensitivity analysis presented may not be representative of
the actual change in the defined benefit obligation as it is unlikely that the change in assumptions
would occur in isolation of one another as some of the assumptions may be correlated.
The Group is aware of the 2023 ruling in the Virgin Media vs NTL Pension Trustee case, including
the 2024 court of appeal ruling published on 25 July 2024, which ruled that certain amendments
made to the NTL Pension Plan were invalid because they were not accompanied by the correct
actuarial confirmation. The trustees, having reviewed the relevant amendments, do not consider
it necessary to make any adjustments as a result of the Virgin Media case.
25. Financial instruments and risk management
The table below sets out the Group’s accounting classification of each category of financial assets
and liabilities and their carrying values at 31 December 2024 and 31 December 2023:
Current Non-current Total
31 December 2024 £m £m £m
Financial assets
Classified as amortised cost:
Cash and cash equivalents
336
–
336
Net trade receivables
369
–
369
Classified as fair value:
Derivative over own equity
(1)
18
–
18
Derivative financial assets
Foreign currency forward contracts
9
6
15
Interest rate swaps
–
3
3
Financial liabilities
Classified as amortised cost:
Interest-bearing loans and borrowings
(13)
(1,291)
(1,304)
Lease obligations
(29)
(103)
(132)
Other financial liabilities
(778)
(8)
(786)
Classified as fair value:
Derivative financial liabilities
Foreign currency forward contracts
(32)
(14)
(46)
31 December 2023
Financial assets
Classified as amortised cost:
Cash and cash equivalents
313
–
313
Net trade receivables
460
–
460
Classified as fair value:
Derivative over own equity
(1)
–
28
28
Derivative financial assets
Foreign currency forward contracts
43
4
47
Interest rate swaps
2
4
6
Financial liabilities
Classified as amortised cost:
Interest-bearing loans and borrowings
(2)
(1,158)
(1,160)
Lease obligations
(25)
(126)
(151)
Other financial liabilities
(1,063)
(11)
(1,074)
Classified as fair value:
Derivative financial liabilities
Foreign currency forward contracts
(4)
(1)
(5)
Interest rate swaps
–
(3)
(3)
1. Included within other financial assets .
164Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
The fair value of the derivative financial instruments is derived from inputs other than quoted prices
that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices) and they are therefore categorised within level 2 of the fair value hierarchy set out in
IFRS 13 Fair Value Measurement. The Group’s policy is to recognise transfers into and out of the
different fair value hierarchy levels at the date of the event or change in circumstances that caused
the transfer to occur. There have been no transfers between levels during the current year.
The fair value of the derivative over own equity is derived from unobservable inputs and as such is
classified as level 3 of the fair value hierarchy set out in IFRS 13. Inputs to the valuation include the
terms of the contract under which the asset arises, the Company’s current share price and expected
volatility in the share price. The asset value is most sensitive to movements in the Company’s share
price. A 10% reduction in the Company’s share price would result in a £2 million reduction in the fair
value of the asset.
As detailed in the accounting policies (Note 2) the asset was initially recorded directly in equity in
the prior year with subsequent revaluations recognised in the Income Statement. In the current
year a loss of £10 million (2023: £1 million) was presented as an adjusting item within interest
expense in relation to fair value changes on the derivative. The asset is expected to be settled by
receipt of the Company’s shares during 2025.
Fair values
Set out below is a comparison of the carrying amounts and fair values of the Group’s non-current
interest-bearing loans and borrowings.
Carrying amount Fair value
31 December 2024 £m £m
Floating rate obligations
894
901
Fixed rate obligations
397
455
Management consider all other financial assets and liabilities to have carrying values that are
reasonable approximations of their fair values. In the prior year, management considered all
financial assets and liabilities to have a carrying value which approximated fair value.
Credit risk
The Group’s principal financial assets are cash and cash equivalents, trade receivables and
derivative financial assets which represent the Group’s maximum exposure to credit risk in relation
to financial assets .
The Group’s credit risk on cash and cash equivalents and derivative financial assets is limited
because the ultimate counterparties are banks with investment grade credit ratings assigned
by international credit rating agencies. Exposure is managed on the basis of risk rating and
counterparty limits. The value of credit risk in derivative assets is modelled using publicly
available inputs as part of their fair value.
The Group’s credit risk is therefore primarily attributable to its trade receivables. The
amounts presented in the Consolidated Balance Sheet are net of an allowance for expected credit
losses, estimated by the Group’s management based on prior experience and their assessment of
the current economic environment. Note 17 provides further details regarding the recovery of
trade receivables.
Capital risk
The Group manages its capital to ensure that entities in the Group will be able to continue as a
going concern. The capital structure of the Group consists of net debt, as disclosed in Note 27,
and equity attributable to the owners of the parent, comprising issued share capital, reserves
and retained earnings as disclosed in the Consolidated Statement of Changes in Equity.
Liquidity risk management
Overview of banking facilities
The Group’s committed bank facilities include a multi-currency denominated term loan of
£100 million and €100 million as well as a multi-currency denominated revolving credit facility of
£350 million, US$660 million and €450 million. Details of amounts drawn under these facilities at
year end are included in Note 20.
The revolving credit and term loan facilities have an initial maturity date of 20 April 2026, the
Group has the option to extend the maturity of the revolving credit facility by up to two years,
at its sole discretion.
During the year the bank facility’s term loan of US$400 million was repaid. US$500 million US Private
Placement (USPP) was issued at fixed interest rates with tranches maturing between 5 and 12 years.
Loans drawn under these facilities are guaranteed by Dowlais Group plc and certain of its
subsidiaries. There is no security over any of the Group’s assets in respect of these facilities.
Cash amounted to £336 million at year end (2023: £313 million) and is offset against interest-bearing
loans and borrowings of £1,304 million (2023: £1,160 million) to arrive at the Group net debt position
of £968 million (2023: £847 million). The combination of this cash and the headroom on the revolving
credit facility allows the Directors to consider that the Group has sufficient access to liquidity for its
current needs. The Board takes careful consideration of counterparty risk with banks when deciding
where to place cash on deposit.
165Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
25. Financial instruments and risk management continued
Covenants
The committed bank funding and USPP have two financial covenants, being a net debt to
adjusted EBITDA covenant and an interest cover covenant, both of which are tested half-yearly
in June and December.
The net debt to adjusted EBITDA covenant test level is 3.50x and as at 31 December 2024, the
Group’s net debt leverage was 1.7x (2023: 1.4x).
The interest cover covenant test level is 4.0x and as at 31 December 2024, the Group’s interest
cover was 6.8x (2023: not applicable as the test did not come into effect until June 2024).
Interest rates on the USPP are fixed subject to the Group maintaining an investment grade credit
rating. Should the credit rating of the Group fall below investment grade, an additional 1% is added
to the interest rate until the Group’s credit rating returns to investment grade.
Maturity of financial liabilities (excluding currency contracts)
The table below shows the maturity profile of anticipated future cash flows, including interest, on
an undiscounted basis in relation to the Group’s financial liabilities. The amounts shown therefore
differ from the carrying value and fair value of the Group’s financial liabilities.
Interest-bearing Interest rate
loans and derivative Finance lease Other financial Total financial
borrowings financial liabilities obligations liabilities liabilities
£m £m £m £m £m
Within one year
90
–
35
778
903
In one to two years
944
–
27
8
979
In two to five years
189
–
47
–
236
After five years
365
–
54
–
419
Total anticipated cash flows
1,588
–
163
786
2,537
Effect of financing
(284)
–
(31)
–
(315)
31 December 2024
1,304
–
132
786
2,222
Within one year
78
–
31
1,063
1,172
In one to two years
76
2
26
11
115
In two to five years
1,279
1
47
–
1,327
After five years
–
–
92
–
92
Total anticipated cash flows
1,433
3
196
1,074
2,706
Effect of financing
(273)
–
(45)
–
(318)
31 December 2023
1,160
3
151
1,074
2,388
Working capital
The Group has a small number of uncommitted working capital programmes, which provide
favourable financing terms on eligible customer receipts and competitive financing terms to
suppliers on eligible supplier payments.
Businesses that participate in these customer related finance programmes have the ability to
choose whether to receive payment earlier than the normal due date, for specific customers on
a non-recourse basis. As at 31 December 2024, the drawings on these facilities were £168 million
(2023: £178 million).
Some suppliers may utilise the Group’s supplier finance programmes, which are provided by
a limited number of the Group’s relationship banks. There is no cost to the Group for providing
these programmes to its suppliers. These arrangements do not change the date suppliers are due
to be paid by the Group, and therefore there is no additional impact on the Group’s liquidity. These
programmes allow suppliers to choose, at their sole discretion, whether they want to accelerate the
payment of their invoices, by the financing banks, for an interest cost which is competitive and
based on the credit rating of the Group as determined by the financing banks funding each
programme. The amounts owed to the banks are included in trade payables on the Balance Sheet
and the cash flows are presented in cash flows from operating activities. The arrangements do not
change the timing of the Group’s cash outflows.
Payment dates for trade payables under supplier finance arrangements, and comparable trade
payables which are not financed, are generally between 60 and 120 days. Payment terms vary
across the Group depending on individual supplier agreements and the jurisdictions under which
the purchases are made. The total of supplier invoices under these facilities as at 31 December 2024
was £148 million (2023: £106 million). Movement on this balance in the year includes a £7 million
non-cash increase due to exchange rate movements. Of the balance at 31 December 2024,
£79 million had been paid by the facilitating banks to suppliers.
Finance cost risk management
The bank margin on the bank facility depends on the Group’s leverage. Management performs
periodic reviews of the Group’s interest rate exposure and fix a proportion of the exposure as
deemed necessary at that time. As at 31 December 2024, 46% of the Group’s interest exposure
was fixed (2023: 55%).
Interest rate risk
Cash flow hedges
Interest rate swaps are designated as cash flow hedges and are used to hedge against the risk
of interest rate fluctuation on the floating rate debt. The fair value of the interest rate swaps as
at 31 December 2024, was an asset of £3 million (31 December 2023: net asset of £3 million). During
the year movements on the interest rate swaps comprised a credit of £2 million (2023: £1 million)
booked to derivatives gains on hedge relationships within other comprehensive income, £8 million
credit (2023: £6 million) booked to interest in the Income Statement, and a cash inflow of £10 million
(2023: £4 million).
There is an economic relationship between the hedged item and the hedging instrument in
relation to SOFR and EURIBOR interest cash flows. The Group has established a hedge ratio of 1:1
for the hedging relationships based on the notional of the hedging instrument and the hedged
item. Group management performs periodic prospective effectiveness assessments to determine
hedge effectiveness.
166Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Hedge ineffectiveness may occur due to:
– Differences in the timing of the cash flows of the hedged items and the hedging instruments;
– The counterparties’ credit risk differently impacting the fair value movements of the hedging
instruments and hedged items;
– Changes to the forecasted amount of cash flows of hedged items and hedging instruments; or
– Mismatches in payment frequency and/or reset dates.
During the year ended 31 December 2024, some of the critical terms of the interest rate swaps and
the hedged items were not perfectly matched; however, this did not give rise to any
ineffectiveness through the Consolidated Income Statement in the year (2023: £nil).
Interest rate sensitivity analysis
Assuming the net debt, inclusive of interest rate swaps, held as at the balance sheet date was
outstanding for the whole year, a one percentage point rise in market interest rates for all
currencies would decrease profit before tax by the following amounts:
Year ended Year ended
31 December 31 December
2024 2023
£m £m
Sterling
3
3
US Dollar
1
1
Euro
3
1
On the basis of the floating-to-fixed interest rate swaps in place at the balance sheet date, a one
percentage point fall in market interest rates for all currencies would have a pre-tax impact of
decreasing Group equity by £4 million (2023: £18 million).
Exchange rate risk management
The Group trades in various countries around the world and is exposed to movements in a number
of foreign currencies. The Group therefore carries exchange rate risk that can be categorised into
three types: transaction, translation and disposal related risk as described in the paragraphs below.
The Group’s policy is designed to protect against the majority of the cash risks but not the
non-cash risks.
The most common exchange rate risk is the transaction risk the Group takes when it invoices a
customer or purchases from suppliers in a different currency to the underlying functional currency
of the relevant business. The Group’s policy is to review transactional foreign exchange exposures,
and place appropriate hedging contracts, quarterly on a rolling basis. To the extent the cash flows
associated with a transactional foreign exchange risk are committed, the Group will hedge up to
100% at the time that the cash flow becomes committed. For forecast and variable material cash
flows, the Group hedges a proportion of the expected cash flows on a phased basis over a time
horizon of up to two years in accordance with the Group’s treasury policy.
The average time horizons for GKN Automotive and GKN Powder Metallurgy reflect the long-term
nature of the contracts within these divisions. Typically, in total the Group hedges a minimum of
70% of foreign exchange exposures expected over the following year, and 40% to 60% of exposures
between one and two years. This policy reduces, but does not eliminate, the cash risk.
The translation rate risk is the effect on the Group’s results in the year due to the movement in
exchange rates used to translate results in foreign currencies into Sterling from one period to the
next. No specific exchange instruments are used to protect against the translation risk because
until foreign currency is converted to Sterling, this is a non-cash risk to the Group.
Finally, exchange rate risk arises when a business that reports in a currency, other than Sterling,
is sold. The proceeds for those businesses may be received in a foreign currency and therefore
an exchange rate risk may arise on conversion of the foreign currency proceeds into Sterling.
Protection against this risk is considered on a case-by-case basis and, if appropriate, hedged at
that time.
As at 31 December 2024, the Group held foreign exchange forward and swap contracts to mitigate
expected exchange rate fluctuations on future cash flows from sales to customers and purchases
from suppliers. The fair value of all foreign exchange forward and swap contracts across the Group
was a net liability at 31 December 2024 of £31 million (2023: net asset of £42 million).
The following table shows the maturity profile of undiscounted contracted gross cash flows of
derivative financial liabilities used to manage currency risk:
Cash inflows Cash outflows Total
Year ended 31 December 2024 £m £m £m
Within 1 year
Foreign exchange forward contracts
319
(347)
(28)
Foreign exchange swap contracts
1
(1)
–
In one to two years
Foreign exchange forward contracts
189
(195)
(6)
Year ended 31 December 2023
Within 1 year
Foreign exchange forward contracts
72
(74)
(2)
Foreign exchange swap contracts
9
(9)
–
In one to two years
Foreign exchange forward contracts
54
(54)
–
Hedge of net investment in foreign operations
The interest-bearing loans as at 31 December 2024 (Note 20) include US Dollar borrowings of
US$900 million (2023: US$745 million) and Euro borrowings of €410 million (2023: €344 million), which
have been designated as hedges of the Group’s net investments in US Dollar and Euro
denominated subsidiaries respectively. These borrowings are used to hedge the Group’s exposure
to the foreign exchange risk on these investments. Gains or losses on the retranslation of these
borrowing are recorded in other comprehensive income to offset any gains or losses on translation
of the net investments in the subsidiaries.
There is an economic relationship between the hedged item and the hedging instrument as the
net investment creates a translation risk that matches the risks of foreign exchange fluctuation on
the borrowings. The Group has established a hedge ratio of 1:1 as the underlying risk of the hedging
instrument is identical to the hedged risk component. The Group performs periodic prospective
effectiveness assessments to determine hedge effectiveness.
167Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
25. Financial instruments and risk management continued
Foreign currency sensitivity analysis
Currency risks are defined by IFRS 7 Financial instruments: Disclosures as the risk that the fair value
or future cash flows of a financial asset or liability will fluctuate because of changes in foreign
exchange rates.
The following table details the transactional impact of hypothetical changes in foreign exchange
rates on financial assets and liabilities at the balance sheet date, illustrating the increase in Group
operating profit caused by a 10% strengthening of the US Dollar, Euro and Mexican Peso against
Sterling compared to the year-end spot rate. The analysis assumes that all other variables, in
particular other foreign currency exchange rates, remain constant. The Group operates in a range
of different currencies, and those with a notable impact are shown below:
Year ended Year ended
31 December 31 December
2024 2023
£m £m
US Dollar
1
3
Euro
(2)
1
Mexican Peso
4
4
The following table details the impact of hypothetical changes in foreign exchange rates
on financial assets and liabilities at the balance sheet date, illustrating the decrease in the
Group’s equity caused by a 10% strengthening of the US Dollar and Euro against Sterling.
The analysis assumes that all other variables, in particular other foreign currency exchange rates,
remain constant.
31 December 31 December
2024 2023
£m £m
US Dollar
(12)
(12)
Euro
(7)
(11)
In addition, the change in equity due to a 10% strengthening of the US Dollar against Sterling for
the translation of net investment hedging instruments would be a decrease of £71 million (2023:
decrease of £58 million) and for the Euro, a decrease of £34 million (2023: decrease of £30 million).
However, there would be no overall effect on equity because there would be an offset in the
currency translation of the foreign operations.
Fair value measurements recognised in the Balance Sheet
Foreign currency forward contracts are measured using quoted forward exchange rates and yield
curves derived from quoted interest rates matching the maturities of the contracts.
Interest rate swap contracts are measured using yield curves derived from quoted interest and
foreign exchange rates.
Derivative financial assets and liabilities are presented within the Balance Sheet as:
31 December 31 December
2024 2023
£m £m
Non-current assets
9
8
Current assets
9
45
Current liabilities
(32)
(4)
Non-current liabilities
(14)
(4)
Hedge accounted derivatives
The Group designates interest rate swaps as cash flow hedges to mitigate interest rate risk. Under
the swaps, the Group pays fixed rate interest and receives floating rate interest. The following table
sets out details of the Group’s material cash flow hedging instruments where hedge accounting is
applied at the balance sheet date:
Average fixed rate
Notional principal
Fair value of assets/(liabilities)
31 December 31 December 31 December 31 December 31 December 31 December
2024 2023 2024 2023 2024 2023
Cash flow hedging Instruments % % £m £m £m £m
US Dollar Interest rate swaps
Within one year
–
–
–
–
–
2
In two to five years
3.48%
3.43%
200
470
3
3
EUR interest rate swaps
In two to five years
–
3.48%
–
174
–
(2)
Total
200
644
3
3
All cash flow hedging instruments are booked in the Balance Sheet as derivative financial assets or
derivative financial liabilities.
The fair value of derivative financial instruments is derived from inputs other than quoted prices
that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices) and they are therefore categorised within Level 2 of the fair value hierarchy set out in
IFRS 13. The Group’s policy is to recognise transfers into and out of the different fair value hierarchy
levels at the date the event or change in circumstances that caused the transfer to occur. There
have been no transfers between levels in the year.
168Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
The following table sets out details of the Group’s material hedging relationships at the balance
sheet date where hedge accounting is applied:
Balance in hedging and Balance in hedging and
Change in fair value for translation reserves for translation reserves for
calculating ineffectiveness continuing hedges discontinued hedges
31 December 31 December 31 December 31 December 31 December 31 December
2024 2023 2024 2023 2024 2023
£m £m £m £m £m £m
Cash flow hedge – interest
rate risk
Hedged items
Floating rate borrowings
(2)
(1)
n/a
n/a
n/a
n/a
Hedging instruments
US Dollar Interest rate swaps
1
4
2
4
–
–
Euro Interest rate swaps
1
(3)
–
(3)
(2)
–
Net investment hedge
Hedged items
Net assets of
designated investments
(4)
(20)
(24)
(20)
–
–
Hedging instruments
US Dollar debt
(13)
15
2
15
–
–
Euro debt
17
5
22
5
–
–
A debit balance of £2 million (2023: £nil) is held in the cash flow hedge reserve relating to the
discontinued hedges of Euro interest rate swaps which were closed out during the year. This
amount will be charged to the Income Statement over the remainder of the cash flows of the
hedged item until 2026.
Impact of hedging on equity
The following table sets out the reconciliation for each component of the hedging reserve and the
analysis of associated other comprehensive income.
Total hedging
Cash flow hedge Net investment recognised in
reserve hedge reserve equity
£m £m £m
At 1 January 2024
1
15
16
Effective portion of changes in fair value arising from:
Fair value gain on interest rate swaps
2
–
2
Foreign currency revaluation of the US Dollar debt
–
(13)
(13)
Foreign currency revaluation of the Euro debt
–
17
17
Cumulative gain on interest rate swaps reclassified to the
Income Statement
(3)
–
(3)
Tax impact
–
(1)
(1)
At 31 December 2024
–
18
18
Amounts reclassified to other finance income in the Income Statement of £3 million (2023: £nil)
relate to the settlement of US Dollar interest rate swaps where the hedged item was no longer
expected to occur as a result of replacing floating rate US Dollar debt with fixed rate USPP.
169Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
26. Issued share capital and reserves
Share capital
31 December 31 December
2024 2023
Share Capital £m £m
Allotted, called-up and fully paid
1,352,695,566
(2023: 1,393,273,527) ordinary shares of 1p each
14
14
14
14
On 3 April 2024, the Group commenced a share buy-back programme, under which 40,577,961 of
the Company’s shares have been purchased and cancelled as at 31 December 2024 at a total cost
of £26 million.
On 13 January 2023 the Company was incorporated with an initial share capital of one ordinary
£1 share issued at par. A further 49,999 ordinary £1 shares were issued at par on 19 January 2023
for cash consideration.
On 28 February 2023 the Company subdivided the 50,000 issued £1 ordinary shares into 5,000,000
ordinary shares of £0.01 (one pence) each.
On 28 February 2023 the Company issued 1,388,273,527 ordinary shares of £0.01 each to Melrose
Industries PLC (“Melrose”) in consideration for the entire shareholding of GKN Industries Limited
and GKN Powder Metallurgy Holdings Limited. This resulted in a total issued share capital of
1,393,273,527 ordinary shares of £0.01 each.
As permitted under sections 611(4) and 615 of the Companies Act 2006, the issue of ordinary shares
and the cost of investments in GKN Industries Limited and GKN Powder Metallurgy Holdings
Limited was measured at the cost of those investments in the transferor company (Melrose). The
value of the consideration for the shares allotted was the amount by which the value of the assets
transferred exceeds the value of any liabilities assumed by the Company as part of the
consideration for the assets transferred. The value of the GKN Industries Limited and GKN Powder
Metallurgy Holdings Limited was £1,084 million and this was initially recognised as share capital of
£14 million and share premium of £1,070 million.
On 20 April 2023, Melrose made a distribution to its shareholders of the Company’s shares with one
Dowlais share issued for every Melrose share held. On the same day, the Company’s shares were
admitted to the premium listing segment of the Official List of the Financial Conduct Authority
(FCA) and to trading on the London Stock Exchange’s main market for listed securities.
Share premium
On 1 August 2023, the Company undertook a court-approved capital reduction in accordance
with section 645 of the Companies Act 2006, through which the Company’s share premium of
£1,070 million was cancelled in full. The Order of the High Court of Justice, Chancery Division, was
registered at Companies House and became effective from 3 August 2023. In accordance with IS
2008 No 1915 The Companies (Reduction of Share Capital) Order 2008 this resulted in a credit to
the distributable reserves of the Company of £1,070 million.
Own shares
On 31 May 2023 an Employee Benefit Trust (EBT) established for the benefit of certain employees
of the Group purchased 5,575,630 shares in the capital of the Company at a cost of £7 million to be
held for the purpose of settling awards vesting under the Group’s share incentive schemes.
In the current year, 52,559 shares were issued by the EBT to employees under the Restricted Share
Award section of the Performance Share Plan (PSP). No shares were purchased by the EBT in the
current year. At the year-end, 5,523,071 (2023: 5,575,630) shares were held by the EBT.
Translation reserve
The translation reserve contains exchange differences on the translation of subsidiaries with a
functional currency other than pound Sterling together with exchange differences arising on
debt financial instruments which have been designated as hedges of net investment.
Hedging reserve
The hedging reserve contains the effective portion of any gains or losses from revaluation of
interest rate swap contracts which have been designated as cash flow hedging instruments.
27. Cash flow statement
Reconciliation of operating loss to net cash from operating activities:
Year ended Year ended
31 December 31 December
2024 2023
Notes £m £m
Operating loss
(106)
(450)
Adjusting items
6
430
805
Adjusted operating profit
6
324
355
Adjustments for:
Depreciation & impairment of property, plant and equipment
244
253
Amortisation of computer software and development costs
14
10
Share of adjusted operating profit of equity accounted investments
14
(89)
(81)
Gain on disposal of non-current assets
–
(10)
Share-based payment expense
23
1
1
Restructuring costs paid and movements in provisions
(154)
(100)
Demerger costs paid
(4)
(48)
Defined benefit pension costs charged
8
9
Defined benefit pension contributions paid
(44)
(39)
Change in inventories
60
(36)
Change in receivables
86
6
Change in payables
(176)
48
Corporation tax paid
(56)
(61)
Interest paid on loans and borrowings
(88)
(62)
Interest paid on lease obligations
(6)
(6)
Net cash from operating activities
120
239
170Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Reconciliation of cash and cash equivalents, net of bank overdrafts
31 December 31 December
2024 2023
£m £m
Cash and cash equivalents per Balance Sheet
336
313
Bank overdrafts
(13)
–
Cash and cash equivalents, net of bank overdrafts per Statement of Cash Flows
323
313
Reconciliation of liabilities arising from financing activities
As at 31 December 2023, liabilities arising from financing activities, as defined by IAS 7 Statement of
Cash Flows, totalled £1,311 million comprising; interest-bearing loans and borrowings of
£1,160 million and lease obligations of £151 million.
During the year, cash transactions on financing balances totalled a net cash inflow £103 million. This
comprised net drawdowns on external debt facilities of £129 million, a cash outflow of £2 million
relating to the costs of raising debt finance and the repayment of finance lease principal of
£24 million.
Non-cash transactions included a £6 million reduction in liabilities due to foreign exchange
movements, £5 million increase in liabilities due to the amortisation of debt issue costs, £11 million
increase in lease liabilities due to new leases and the reassessment of existing lease liabilities and a
£1m reduction in lease liabilities due to the disposal of the Hydrogen business.
As at 31 December 2024, liabilities arising from financing activities, as defined by IAS 7, totalled
£1,423 million comprising interest-bearing loans and borrowings of £1,291 million and lease
obligations of £132 million.
Net debt reconciliation
Net debt at the balance sheet date consists of interest-bearing loans and borrowings and cash
and cash equivalents. This measure is aligned with the Group’s banking covenants. Currency
denominated balances within net debt are translated to Sterling at the balance sheet rate.
Net debt is an alternative performance measure as it is not defined in IFRS. The most directly
comparable IFRS measure is the aggregate of interest-bearing loans and borrowings (current and
non-current) and cash and cash equivalents.
A reconciliation from the most directly comparable IFRS measure to net debt is given below:
31 December 31 December
2024 2023
£m £m
Interest-bearing loans and borrowings – due within one year
(13)
(2)
Interest-bearing loans and borrowings – due after one year
(1,291)
(1,158)
Total debt
(1,304)
(1,160)
Less:
Cash and cash equivalents
336
313
Net debt
(968)
(847)
The table below shows the key components of the movement in net debt:
At 31 December Other non-cash Effect of foreign At 31 December
2023 Cash flow movements exchange 2024
External debt (excluding bank £m £m £m £m £m
overdrafts)
(1,160)
(127)
(5)
1
(1,291)
Cash and cash equivalents, net
of bank overdrafts
313
18
–
(8)
323
Net debt
(847)
(109)
(5)
(7)
(968)
28. Commitments
Amounts payable under lease obligations:
31 December 31 December
2024 2023
Minimum lease payments £m £m
Amounts payable:
Within one year
35
31
After one year but within five years
74
73
Over five years
54
92
Less: future finance charges
(31)
(45)
Present value of lease obligations
132
151
Analysed as:
Amounts due for settlement within one year
29
25
Amount due for settlement after one year
103
126
Present value of lease obligations
132
151
It is the Group’s policy to lease certain of its property, plant and equipment. The average lease
term is ten years. Interest rates are fixed at the contract date. All leases are on a fixed repayment
basis and no arrangements have been entered into for contingent rental payments.
The Group’s obligations under lease arrangements are secured by the lessors’ rights over the
leased assets.
The table below shows the key components in the movement in lease obligations.
31 December 31 December
2024 2023
£m £m
At 1 January
151
159
Additions
23
27
Interest charge
6
6
Reassessment of lease obligation
(12)
(1)
Payment of principal
(24)
(25)
Payment of interest
(6)
(6)
Disposal of business
(1)
–
Exchange adjustments
(5)
(9)
At 31 December
132
151
171Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
28. Commitments continued
Capital commitments
At 31 December 2024, the Group had committed expenditure of £26 million (2023: £42 million)
relating to the acquisition of new plant and machinery.
29. Related Parties
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out
below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures:
Year ended Year ended
31 December 31 December
2024 2023
£m £m
Short-term employee benefits
3
19
Share-based payments
–
1
3
20
Transactions between companies within the Group, which are Related Parties, have been
eliminated on consolidation and are not disclosed in this note. Sales to and purchases from Group
companies are priced on an arm’s length basis and generally are settled on 30 day terms.
In the ordinary course of business, sales and purchases of goods take place between subsidiaries
and equity accounted investment companies priced on an arm’s length basis. Sales by subsidiaries
to equity accounted investments in the year totalled £7 million (2023: £9 million). Purchases by
subsidiaries from equity accounted investments totalled £12 million (2023: £10 million). At
31 December 2024 there were no amounts receivable from equity accounted investments
(2023: £nil) and amounts payable to equity accounted investments totalled £3 million
(2023: £2 million).
Transactions and balances between the Group and Melrose Industries PLC, the ultimate parent
company prior to demerger on 20 April 2023, and other non-Group entities controlled by Melrose
Industries PLC, were classified as Related Party transactions up until the date of demerger. In the
prior year Income Statement, an interest expense of £8 million was recorded in respect of these
Related Party transactions. A further charge of £57 million was recognised in the Statement of
Changes in Equity relating to reorganisation in respect of Related Parties. This charge included the
initial recognition of a derivative over own equity of £29 million, reorganisational steps taken as part
of the demerger, as well as other income and charges with entities in the Melrose Industries PLC
group prior to the demerger on 20 April 2023.
Dividends of £1,675 million were paid to GKN Enterprise Limited, a member of the Melrose
Industries PLC group on 23 February 2023 (Note 10).
30. Contingent liabilities
As a result of historical acquisitions, certain contingent legal and warranty liabilities were identified
as part of the fair value review of these acquisition balance sheets. Whilst it is difficult to reasonably
estimate the timing and ultimate outcome of these claims, the Directors’ best estimate has been
included in the Consolidated Balance Sheet where they existed at the time of acquisition and hence
were recognised in accordance with IFRS 3 Business combinations. Where a provision has been
recognised, information regarding the different categories of such liabilities and the amount and
timing of outflows is included within Note 21.
Given the nature of the Group’s business many of the Group’s products have a large installed base,
and any recalls or reworks related to such products could be particularly costly. The costs of
product recalls or reworks are not always covered by insurance. Recalls or reworks may have a
material adverse effect on the Group’s financial condition, results of operations and cash flows.
The Group has contingent liabilities representing guarantees and contract bonds given in the
ordinary course of business on behalf of trading subsidiaries. No losses are anticipated to arise on
these contingent liabilities. The Group does not have any other significant contingent liabilities.
31. Post balance sheet events
On 29 January 2025, the Boards of Dowlais and American Axle & Manufacturing Holdings, Inc. (AAM)
reached an agreement and recommended the share and cash combination of the Company with
AAM. The transaction is expected to close during the fourth quarter of 2025, subject to the
approval of Dowlais shareholders and AAM shareholders, as well as customary closing conditions,
including regulatory clearances in Europe and the US. As a result of the recommended
combination, the Group’s share buy-back program has been terminated.
172Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
COMPANY BALANCE SHEET
Notes
31 December
2024
£m
31 December
2023
£m
Fixed assets
Investment in subsidiaries 4 1,084 1,085
Other financial assets 5 – 28
1,084 1,113
Current assets
Other financial assets 5 18 –
Total assets 1,102 1,113
Creditors:
Amounts falling due within one year 6 (161) (50)
Net current liabilities (143) (50)
Total assets less current liabilities 941 1,063
Capital and reserves
Issued share capital 7 14 14
Own shares (7) (7)
Retained earnings 934 1,056
Shareholders’ funds 941 1,063
The Company reported a loss for the year ended 31 December 2024 of £39 million (2023: £26 million).
The financial statements were approved by the Board of Directors on 4 March 2025 and were signed on its behalf by:
Roberto Fioroni
Chief Financial Officer
4 March 2025
Registered number: 14591224
173Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
Issued share
capital
£m
Share premium
account
£m
Own shares
£m
Retained
earnings
£m
Shareholders’
funds
£m
At 13 January 2023 – – – – –
Loss for the period (Note 3) – – – (26) (26)
Total comprehensive loss – – – (26) (26)
Issue of shares 14 1,070 – – 1,084
Capital reduction – (1,070) – 1,070 –
Transactions with shareholders
(1)
– – – 29 29
Purchase of own shares by Employee Benefit Trust
(2)
– – (7) – (7)
Dividends paid – – – (19) (19)
Equity-settled share-based payments – – – 2 2
At 31 December 2023 14 – (7) 1,056 1,063
Loss for the year (Note 3) – – – (39) (39)
Total comprehensive loss – – – (39) (39)
Purchase of own shares under share buy-back – – – (26) (26)
Dividends paid – – – (58) (58)
Equity-settled share-based payments – – – 1 1
At 31 December 2024 14 – (7) 934 941
1. The Company entered into an agreement with Melrose Industries PLC, the Company’s then ultimate parent (prior to the demerger on 20 April 2023) in its capacity as shareholder. Under the terms of the agreement, shares in the
Company may be returned to the Company at nil cost. See Note 1 for further details.
2. On 31 May 2023 the Company gave a loan to the Group’s Employee Benefit Trust (the ‘Trust’) to enable the Trust to purchase the Company’s shares. These shares are to be held in the Trust for the purpose of settling awards vesting
under the Company’s share incentive schemes.
174Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1. Material accounting policies
Basis of accounting
Dowlais Group plc (the “Company”) is a public company limited by shares. The Company is
incorporated in the United Kingdom under the Companies Act 2006 and registered in England and
Wales. The address of the Company’s registered office is 2
nd
Floor Nova North, 11 Bressenden Place,
London, United Kingdom, SW1E 5BY.
The principal activity of the Company is to act as the ultimate parent holding company for the
Company’s direct and indirect subsidiaries (referred to as the “Dowlais Group”). The nature of the
Group’s operations and its principal activities are set out in the Strategic Report.
The Company was incorporated as a public limited company on 13 January 2023 with the name
Dowlais Group Headquarters plc. The Company subsequently changed its name to Dowlais Group
plc on 3 February 2023. The comparative period for 2023 comprises 353 days.
The Financial Statements have been prepared under the historical cost convention, modified to
include certain items at fair value, and in accordance with Financial Reporting Standard 102 (FRS
102), the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the
Companies Act 2006.
The functional currency of the Company is considered to be pounds Sterling because that is the
currency of the primary economic environment in which the Company operates.
Dowlais Group plc meets the definition of a qualifying entity under FRS 102 and has therefore
takenadvantage of the disclosure exemptions available to it in respect of its separate Financial
Statements. Dowlais Group plc is consolidated in its Group Financial Statements. Exemptions have
been taken in these separate Company Financial Statements in relation to share-based payments,
presentation of a cash flow statement, the remuneration of key management personnel and
financial instruments.
Going concern
The Financial Statements have been prepared on a going concern basis as the Directors consider
that adequate resources exist for the Company to continue in operational existence for a period
ofnot less than 12 months from the date of this report.
In reaching this conclusion, the Directors have also considered the implications in a viability
contextof the proposed acquisition of the Group by AAM which was announced on 29 January
2025. As set out in the rule 2.7 announcement, the Directors believe that the proposed combination
with AAM isan attractive opportunity to accelerate the realisation of shareholder value through
the establishment of a global, automotive supplier with market-leading capabilities, better-
positioned together to navigate both the short-term challenges and long-term market dynamics
inthe automotive sector. On that basis, the Directors believe this supports its going concern
assessment, in the event the combination proceeds. The combination is expected to close during
the fourth quarter of 2025, subject to the approval and availability of the Court, the approval of the
Company’s shareholders and AAM shareholders, as well as customary closing conditions, including
regulatory clearances in Europe and the US.
The Group’s liquidity and funding arrangements are described in the Financial Review on page 25.
Financing headroom of c. £0.7 billion existed at 31 December 2024 (2023: c.£0.6 billion) and is
forecast to remain at similar or improved levels throughout the going concern period. Forecast
covenant compliance is considered further below.
Covenants
The Group’s current borrowing facilities have two financial covenants being a net debt to adjusted
EBITDA (“leverage”) covenant and an interest cover covenant, both of which are tested half yearly,
in June and December.
The financial covenants at the year end and for the going concern period are as follows:
31 December
2024
30 June
2025
31 December
2025
Net debt to adjusted EBITDA 3.50x 3.50x 3.50x
Interest cover 4.00x 4.00x 4.00x
Testing
In concluding that the going concern basis is appropriate, the Directors have modelled the impact
of a ‘worst case scenario’ to the ‘base case’ by including an aggregation of the same three plausible
but severe downside risks also applied to the Group’s Viability Statement. The scenarios modelled
in the going concern assessment were based on the Group remaining an independent entity and,
therefore, remain appropriate should the proposed combination not proceed.
The base case takes into account the estimated impact of end market and operational factors,
including supply chain and inflationary challenges throughout the going concern period. Climate
related risks have also been considered, including estimating the expected transition from internal
combustion engines to electric vehicles and considering potential risks to the Group’s
infrastructure resulting from extreme weather or climate events.
As set out in more detail in the Viability Statement (on page 71), the three downside scenarios
modelled were (i) economic shock/downturn, (ii) losing a key market, product or customer and
(iii)significant contract delivery issues, including a cyber attack scenario.
Throughout the period covered, after applying the ‘worst case scenario’, financing headroom was
at least £425 million (2023: £400 million), the Group’s leverage was no higher than 2.9x (2023: 2.8x)
and the interest covenant remained above 4.0x, indicating that the Group would comfortably
remain within covenant limits. Finally, a reverse stress test was performed which demonstrated that
a significant reduction in revenue and profit in 2025, still assuming no mitigating actions, would be
required before the Group breached its leverage and interest covenants.
Even after applying significant downside risk scenarios in aggregation, under the ‘worst case
scenario’, no covenant is forecast to be breached at the relevant testing dates being 30 June 2025
and 31 December 2025, and the Group would not expect to require any additional sources
offinance. Testing at 30 June 2026 is also expected to be favourable under the terms of
existingfacilities.
Investments in subsidiaries
Investments in subsidiaries are held at cost less any accumulated impairment losses.
Impairment of assets
Assets are assessed for indicators of impairment at each balance sheet date. If there is objective
evidence of impairment, an impairment loss is recognised in profit or loss.
Financial instruments
Financial assets and financial liabilities are recognised in the Balance Sheet when the Company
becomes a party to the contractual provisions of the instrument. Financial liabilities are classified
according to the substance of the contractual arrangements.
175Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
1. Material accounting policies continued
Financial assets and liabilities
All financial assets and liabilities are initially measured at transaction price (including
transactioncosts).
Financial assets and liabilities are only offset in the Balance Sheet when, and only when, there exists
a legally enforceable right to set off the recognised amounts and the Company intends either to
settle on a net basis, or to realise the asset and settle the liability simultaneously.
Financial assets are derecognised when, and only when, a) the contractual rights to the cash flows
from the financial asset expire or are settled, b) the Company transfers to another party
substantially all of the risks and rewards of ownership of the financial asset, or c) the Company,
despite having retained some, but not all, significant risks and rewards of ownership, has transferred
control of the asset to another party.
Financial liabilities are derecognised only when the obligation specified in the contract is
discharged, cancelled or expires.
Derivatives over own equity
The Company holds a derivative asset over its own equity as a result of a contract for its own shares
to be returned to it at nil cost under certain circumstances. The derivative asset is held on the
Balance Sheet at fair value, with gains and losses arising on its remeasurement recognised
immediately in the Income Statement. As the derivative arose from a transaction with a shareholder
acting in its capacity as owner, the initial value of the asset was recognised directly in equity at the
fair value of the shares expected to be returned.
Share-based payments
The Company issues equity-settled share-based payments to certain employees. The required
disclosures are included in the Group Consolidated Financial Statements.
Equity-settled share-based payments are measured at fair value of the equity instrument excluding
the effect of non-market based vesting conditions at the date of grant. The fair value determined
at the grant date of the equity-settled share-based payments is expensed on a straight-line basis
over the vesting period, based on the Company’s estimate of shares that will eventually vest and
adjusted for the effect of non-market based vesting conditions. Fair value is measured by use of a
Monte Carlo pricing model.
Where equity-settled share-based payments are made available to employees of the Company’s
subsidiaries, these are treated as increases in equity over the vesting period of the award with a
corresponding increase in the Company’s investment in subsidiaries.
Taxation
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be
paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted
by the balance sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not
reversedat the balance sheet date where transactions or events that result in an obligation to
paymore tax in the future or a right to pay less tax in the future have occurred. Timing differences
are differences between the Company’s taxable profits and its results as stated in the Financial
Statements that arise from the inclusion of gains and losses in tax assessments in periods different
from those in which they are recognised in the Financial Statements.
Own shares
Own shares represent the shares of the Company that are held by the Employee Benefit Trust.
Ownshares are recorded at cost and deducted from equity.
2. Critical accounting judgements and key sources of estimation uncertainty
There were no critical accounting judgements that would have a significant effect on the amounts
recognised in the Company Financial Statements or key sources of estimation uncertainty at the
balance sheet date that would have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year.
3. Result for the period
As permitted by section 408 of the Companies Act 2006 the Company has elected not to present
its own Profit and Loss Account for the period. Dowlais Group plc reported a loss for the financial
year ended 31 December 2024 of £39 million (2023: £26 million).
The auditor’s remuneration for audit services to the Company is disclosed in Note 7 to the Group
Consolidated Financial Statements.
Directors’ remuneration is disclosed in the Directors’ Remuneration Report on pages 95 to 112.
There were no other employees of the Company in the period.
4. Investment in subsidiaries
£m
At 13 January 2023 –
Additions 1,085
At 31 December 2023 1,085
Impairment charge (1)
At 31 December 2024 1,084
176Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
The Directors believe that the carrying values of the investments are supported by their underlying
net assets or the future cashflows expected to be generated by these businesses, therefore no
further impairment is considered to be necessary.
The following subsidiaries and significant holdings were owned by the Company as at
31 December 2024:
Equity interest % Class of share held
Brazil
Rua Joaquim Silveira 557, Parque Sao Sebastiao, 91060-320 Porto Alegre, RS
GKN do Brasil Limitada 100 Common
Av. da Emancipacao no. 4.500, Bairro Jardim Santa Clara, Hortolandia, Sao
Paulo
GKN Sinter Metals Ltda 100 Common
Canada
55 University Avenue, Suite 600, Toronto M5J 2H7, Canada
GKN Sinter Metals – St Thomas Ltd 100 Common
China
950 KangQiao Road, Pudong New Area, Shanghai
Shanghai GKN HUAYU Driveline Systems Company Limited 50
Registered
investment
Zijin Kechuang Center 4 Level, 416 Room, Economy Development Zone,
Lishui, Nanjing
Nanjing FAYN Piston Ring Company Limited 19.79
Registered
investment
No. 8, Kangmin Rd, Yizheng
GKN Sinter Metals Yizheng Co Ltd 100
Registered
investment
18 North Shitan Road, North Industrial Park, Development Zone,
Danyang,Jiangsu
GKN Danyang Industries Company Limited 100
Registered
investment
Xiguo Industrial Zone, Mengzhou City, Henan Province, 454750
GKN Zhongyuan Cylinder Liner Company Limited 59
Registered
investment
No. 1 Cuigu, Northern New Zone, Chongqing, 401122
GKN HUAYU Driveline Systems (Chongqing) Co. Ltd 34.5
(1)
Ordinary
898 Kangshen Road, Pudong, Shanghai
Shanghai GKN Driveline Sales Co Ltd 49 Ordinary
Wuping East Road, Shengfang Town, Bazhou City, Hebei Province,065701 Common
GKN (Bazhou) Metal Powder Company Limited 40
Registered
investment
Equity interest % Class of share held
Unit A, 6/F, Building A1#, No. 2555 Xiupu Road, Pudong New Area,
Shanghai,201315
GKN China Holding Co Ltd 100
Registered
investment
Factory No. 1, No. 2188 Zhongxi Road, Pinghu, Jiaxing, ZhejiangProvince
GKN HUAYU Driveline Systems (Pinghu) Co., Ltd. 50
(2)
Registered
investment
Colombia
Calle 32 No. 15 – 23 Barrio Rincon de Girón, Girón Santander
Transejes Transmisiones Homocineticas de Colombia SA 49 Ordinary
France
5-7 rue Charles-Edouard Jeanneret, 78300, Poissy
GKN Driveline SA 100 Ordinary
GKN Freight Services EURL 100 Ordinary
GKN Automotive SAS 100 Ordinary
GKN Automotive Management SAS 100 Ordinary
7 rue de la Briqueterie, 02240 Ribemont
GKN Driveline Ribemont SARL 100 Ordinary
Germany
Carl-Legien-Strasse 10, 63073 Offenbach am Main
GKN Driveline Deutschland GmbH 100 Ordinary
GKN Automotive Management GmbH 100 Ordinary
Hafenstrasse 41, 54293 Trier
GKN Driveline Trier GmbH 100 Ordinary
Hauptstrasse 130, 53797 Lohmar
GKN Driveline International GmbH 100 Ordinary
Nussbaumweg 19-21, 51503 Roesrath
GKN Driveline Service GmbH 100 Ordinary
Pennefeldsweg 11 – 15, 53177 Bonn
GKN Powder Metallurgy GmbH 100 Ordinary
Hungary
3561 Felsőzsolca , Gyár út 1, Hungary
GKN Automotive Hungary Korlátolt Felelősségű Társaság 100 Ordinary
India
146 Mumbai Pune Road, Pimpri, Pune 411 018
GKN Sinter Metals Private Limited 100 Ordinary
270, Sector-24, Faridabad 121 005, (Haryana)
GKN Driveline (India) Limited 97.03 Ordinary
Ground Floor, East Wing, Salarpuria Supreme S.No.92/5, Munnekolalu Village,
Varthur Hobli, Bangalore, Bangalore, KA560037
GKN Automotive Bengaluru Private Limited (India) 100 Ordinary
177Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
4. Investment in subsidiaries continued
Equity interest % Class of share held
Italy
Via dei Campi della Rienza 8, 39031 Brunico, BZ
GKN Driveline Brunico SpA 100 Ordinary
Via Delle Fabbriche 5, 39031 Brunico, BZ
GKN Sinter Metals SpA 100 Ordinary
Japan
Senri Life Science Center, Bldg.12F, 1-4-2 ShinSenri Higashi-machi,
Toyonaka-city, Osaka
GKN Powder Metallurgy Japan KK 100 Ordinary
2388 Ohmiya-cho, Tochigi City, Tochigi, 328-8502
GKN Driveline Tochigi Holdings KK 100 Ordinary
GKN Driveline Japan Ltd 100 Ordinary
Malaysia
43-2, Plaza Damansara, Jalan Medan Setia 1, Bukit Damansara,
50490 Kuala Lumpur, Wilayah Persekutuan
GKN Driveline Malaysia Sdn Bhd 68.42 Ordinary
Mexico
Carretera Panamericana km 284, Celaya, Guanajuato, C.P. 38110
GKN Driveline Celaya SA de CV 100 Ordinary
GKN Driveline Mexico Trading SA de CV 100 Ordinary
Av. DR. Jesus Valdes Sanchez 104, San Jose Agua Azul,
Apaseo El Grande, Guanajuato
GKN Sinter Metals Mexico S. De. R. L. De. C. V. 100
Membership
interest
GKN Sinter Metals Mexico Services S. De R. L. De. C. V. 100
Membership
interest
Netherlands
2
nd
Floor Nova North, 11 Bressenden Place, London, SW1E 5BY,
UnitedKingdom
GKN UK Holdings BV 100 Ordinary
Poland
Ul. B. Krzywoustego 31 G, 56-400 Oleśnica
GKN Driveline Polska Sp z o o 100 Ordinary
Portugal
Rua Dr. Eduardo Santos Silva, 261 - Fracção BL, 4200-283, Porto,Portugal
GKN Automotive Portugal, Limitada 100 Quota
Romania
Str. Urziceni no. 33, Alexandru Ioan Cuza Hall, Buzau, Buzau County
Hoeganaes Corporation Europe SA 100 Ordinary
Str. Urziceni no. 33, Alexandru Ioan Cuza Hall, Buzau, Buzau County
GKN Specialty Products Europe S.R.L. 100 Ordinary
Equity interest % Class of share held
Slovenia
Rudniska cesta 20, Zrece 3214
GKN Driveline Slovenija d o o 100 Ordinary
Spain
Avenida de Citroen s/n, 36210 Vigo
GKN Driveline Vigo, SA 100 Ordinary
Sagarbidea 2, 20750 Zumaia
GKN Driveline Zumaia, SA 100 Ordinary
Pol. Ind. Can Salvatella, Avenida Arrahona 54-56,
08210 Barbera del Valles, Barcelona
GKN Ayra Servicio, SA 100 Ordinary
Sweden
SE – 731 29, Köping
GKN Driveline Köping AB 100 Ordinary
Taiwan
14 Kwang Fu Road, Hsin-Chu Industrial Park, Hukou, Hsin Chu 30351
Taiway Limited 36.25 Common Stock
Thailand
Eastern Seaboard Industrial Estate, 64/9 Moo 4, Tambon Pluakdaeng,
Amphur Pluakdaeng, Rayong 21140
GKN Driveline (Thailand) Limited 100 Ordinary
Turkey
Organize Sanayi Bolgesi 20, Cadde No: 17, 26110, Eskisehir
GKN Eskisehir Automotive Products Manufacture and Sales A.S. 100 Ordinary
Yakuplu Mah. Haramidere Sanayi Sitesi, J Blok, No. 106-107-108,
Beylikdüzü, İstanbul
GKN Sinter Istanbul Metal Sanayi Ve Ticaret Anonim Şirketi 100 Ordinary
United Kingdom
2660 Kings Court, Birmingham Business Park, Birmingham,
West Midlands, B37 7YE
GKN Hybrid Power Limited 100 Ordinary
GKN Freight Services Limited 100
Ordinary and
cumulative
preference
GKN Driveline UK Limited 100 Ordinary
GKN Automotive Limited 100
Ordinary and
Preference
GKN Cylinder Liners UK Limited 100 Ordinary
178Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Equity interest % Class of share held
2
nd
Floor Nova North, 11 Bressenden Place, London, SW1E 5BY
GKN EVO eDrive Systems Limited 100 Ordinary
Dowlais Group Headquarters Limited * 100 Ordinary
GKN 2 Trustee 2018 Limited 100 Ordinary
GKN 3 Trustee 2018 Limited 100 Ordinary
GKN 2 Trustee 2024 Limited 100 Ordinary
GKN 3 Trustee 2024 Limited 100 Ordinary
GKN UK Investments Limited 100 Ordinary
GKN USD Investments Limited 100 Ordinary
GKN Ventures Limited 100 Ordinary
GKN Sinter Metals Limited 100 Ordinary
GKN Euro Investments Limited 100 Ordinary
GKN Firth Cleveland Limited 100 Ordinary
G.K.N. Group Services Limited 100
Ordinary and
redeemable
preference
GKN Overseas Holdings Limited 100 Ordinary
G.K.N. Powder Met. Limited 100 Ordinary
GKN U.S. Investments Limited 100 Ordinary
GKN Service UK Limited 100 Ordinary
GKN Sheepbridge Limited 100 Ordinary
GKN Sheepbridge Stokes Limited 100 Ordinary
GKN Industries Limited * 100 Ordinary
G.K.N. International Trading (Holdings) Limited 100 Ordinary
GKN Marks Limited 100 Ordinary
Dowlais Industries Limited 100 Ordinary
GKN Driveline Birmingham Limited 100 Ordinary
GKN Birfield Extrusions Limited 100 Ordinary
GKN Countertrade Limited 100 Ordinary
GKN Automotive Holdings Limited 100 Ordinary
Ball Components Limited 100 Ordinary
Dowlais Automotive Limited 100 Ordinary
c/o Brodies LLP, Capital Square, 58 Morrison Street, Edinburgh, EH38BP
GKN Investments III LP 100
Membership
interest
GKN Investments III GP Limited 100 Ordinary
Rhodium Building, Central Boulevard, Blythe Valley Park,
Solihull, B90 8AS
GKN Powder Metallurgy Holdings Limited * 100 Ordinary
Equity interest % Class of share held
Unit 5, Kingsbury Business Park, Kingsbury Road, Minworth, Sutton Coldfield,
B76 9DL
GKN Driveline Service Limited 100 Ordinary
United States
2710 Gateway Oaks Drive, Suite 150 N, Sacramento, CA, 95833
Product Slingshot, Inc. (dba Forecast 3D) 100 Common stock
2711 Centerville Road, Suite 400, Wilmington, Delaware, 19808
XIK, LLC 100
Membership
interest
GKN Driveline Newton LLC 100
Membership
interest
251 Little Falls Drive, Wilmington, Delaware, 19808
GKN America Corp 100 Common stock
GKN North America Investments Inc 100 Ordinary
GKN North America Services, Inc 100 Common stock
GKN Freight Services, Inc 100 Common stock
GKN Driveline North America, Inc. 100 Common stock
Hoeganaes Corporation 100 Common stock
GKN Powder Metallurgy Holdings, Inc. 100 Common stock
GKN Specialty Products Americas Corp. 100 Common stock
GKN Sinter Metals, LLC 100
Membership
interest
50 West Broad Street, Suite 1330, Columbus OH 43215
GKN Driveline Bowling Green, Inc 100 Common stock
9 E. Loockerman Street, Suite 311, Dover DE 19901
GKN Cylinder Liners, LLC 100
Membership
interest
Notes:
* Investment held directly by the Company. All other investments are indirectly held.
1. The Group owns 9% directly with a total effective ownership of 34.5% in the company.
2. The Group indirectly has a total effective ownership of 50% in the company.
179Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
5. Other financial assets
31 December
2024
£m
31 December
2023
£m
At 1 January (2023: at 13 January) 28 –
Additions – 29
Revaluation (10) (1)
At 31 December 18 28
The Company holds a derivative asset over its own equity as a result of a contract for its own
sharesto be returned to it at nil cost under certain circumstances. The derivative asset is held on
the Balance Sheet at fair value, with gains and losses arising on its remeasurement recognised
immediately in the Income Statement. As the derivative arose from a transaction with a shareholder
acting in its capacity as owner, the initial value of the asset was recognised directly in equity at the
fair value of the shares expected to be returned. Further details are provided in Note 25 to the
Consolidated Financial Statements.
6. Creditors
31 December
2024
£m
31 December
2023
£m
Amounts falling due within one year:
Amounts owed to Group undertakings 160 47
Other taxes and social security – 1
Accruals and other creditors 1 2
161 50
Interest is charged on certain amounts owed to group undertakings and is calculated using rates
derived from SONIA (Sterling Overnight Index Average) 1 month swap rate curves. All amounts
owed to group undertakings are repayable on demand.
7. Issued share capital
Authorised Share Capital
31 December
2024
£m
31 December
2023
£m
Allotted, called-up and fully paid
1,352,695,566 (2023: 1,393,273,527) Ordinary shares of 1p each 14 14
14 14
On 3 April 2024, the Group commenced a share buy-back programme, under which 40,577,961 of
the Company’s shares have been purchased and cancelled as at 31 December 2024 at a total cost
of£26 million.
Share capital
On 13 January 2023 the Company was incorporated with an initial share capital of one ordinary
£1share issued at par.
On 19 January 2023 the Company issued, for cash consideration, a further 49,999 ordinary
£1sharesat par.
On 28 February 2023 the Company subdivided the 50,000 issued £1 ordinary shares into 5,000,000
ordinary shares of £0.01 (one pence) each.
On 28 February 2023 the Company issued 1,388,273,527 ordinary shares of £0.01 each to Melrose
Industries PLC (“Melrose”) in consideration for the entire shareholding of GKN Industries Limited
and GKN Powder Metallurgy Holdings Limited. This resulted in a total issued share capital of
1,393,273,527 ordinary shares of £0.01.
As permitted under sections 611(4) and 615 of the Companies Act 2006, the issue of ordinary shares
and the cost of investments in GKN Industries Limited and GKN Powder Metallurgy Holdings
Limited has been measured at the cost of those investments in the transferor company (Melrose).
The value of the consideration for the shares allotted is the amount by which the value of the assets
transferred exceeds the value of any liabilities assumed by the Company as part of the
consideration for the assets transferred. The value of the GKN Industries Limited and GKN Powder
Metallurgy Holdings Limited was £1,084 million and this was initially recognised as share capital of
£14 million and share premium of £1,070 million.
On 20 April 2023, Melrose made a distribution to its shareholders of the Company’s shares with one
Dowlais share issued for every Melrose share held. On the same day, the Company’s shares were
admitted to the premium listing segment of the Official List of the Financial Conduct Authority
(FCA) and to trading on the London Stock Exchange’s main market for listed securities.
180Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Share premium
On 1 August 2023, the Company undertook a court-approved capital reduction in accordance
withsection 645 of the Companies Act 2006, through which the Company’s share premium of
£1,070 million was cancelled in full. The Order of the High Court of Justice, Chancery Division, was
registered at Companies House and became effective from 3 August 2023. In accordance with IS
2008 No 1915 The Companies (Reduction of Share Capital) Order 2008 this resulted in a credit to
the distributable reserves of the Company of £1,070 million.
Own shares
On 31 May 2023 an Employee Benefit Trust (EBT) established for the benefit of certain employees
ofthe Group purchased 5,575,630 shares in the capital of the Company at a cost of £7 million to be
held for the purpose of settling awards vesting under the Group’s share incentive schemes.
In the current year, 52,559 shares were issued by the EBT to employees under the Restricted Share
Award section of the Performance Share Plan (PSP). No shares were purchased by the EBT in the
current year. At the year-end, 5,523,071 (2023: 5,575,630) shares were held by the EBT.
8. Contingent liabilities
Dowlais Group plc, and certain other group subsidiary companies, has guaranteed loans drawn
under the Senior Term and Revolving Facilities Agreement and the US Private Placement (USPP).
Details of the debt facilities and amounts drawn as at 31 December 2024 are provided in Note 20
tothe Consolidated Financial Statements. No liability has been recognised in respect of these
guarantees as the likelihood of the guarantees being called is considered remote.
9. Related Party transactions
The Company has taken the exemption in FRS 102.33 Related Party information not to disclose
intercompany balances and transactions in the period with fully owned subsidiary undertakings.
10. Post balance sheet events
On 29 January 2025, the Boards of Dowlais and American Axle & Manufacturing Holdings, Inc.
(AAM)reached an agreement and recommended the share and cash combination of the Company
with AAM. The transaction is expected to close during the fourth quarter of 2025, subject to the
approval of Dowlais shareholders and AAM shareholders, as well as customary closing conditions,
including regulatory clearances in Europe and the US. As a result of the recommended
combination, the Group’s share buy-back program has been terminated.
181Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
In accordance with the Guidelines on APMs issued by
theEuropean Securities and Markets Authority (“ESMA”),
additional information is provided on the APMs used by
theGroup below.
In the reporting of financial information, the Group uses
certain measures that are not required under IFRS. These
additional measures (commonly referred to as APMs)
provide additional information on the performance of the
business and trends to stakeholders. These measures are
consistent with those used internally, and are considered
important in understanding the financial performance and
financial health of the Group.
APMs are considered to be an important measure to monitor
how the businesses are performing because this provides a
meaningful comparison of how the business is managed and
measured on a day-to-day basis and achieves consistency
and comparability between reporting periods.
These APMs may not be directly comparable with similarly
titled measures reported by other companies and they
arenot intended to be a substitute for, or superior to,
IFRSmeasures. All Income Statement and Cash Flow
measures are provided for continuing operations.
ALTERNATIVE PERFORMANCE MEASURES (“APMS”)
APM
Closest equivalent
statutory measure
Reconciling items to
statutory measure Definition and purpose
Income Statement measures
Adjusted revenue Revenue Share of revenue
of equity
accounted
investments
(Note 5)
Adjusted revenue includes the Group’s share of revenue of equity
accounted investments (EAIs). This enables comparability between
reporting periods and consistency with internal reporting.
Adjusted revenue
Year ended
31 December 2024
£m
Year ended
31 December 2023
£m
Revenue 4,337 4,864
Share of revenue of equity
accounted investments (Note 5) 600 625
Adjusted revenue 4,937 5,489
Adjusting items None Adjusting items
(Note 6)
Those items which the Group excludes from its adjusted profit metrics
inorder to present a further measure of the Group’s performance.
These include items which are significant in size or volatility or by nature
are non-trading or non-recurring, any onerous contract provision released
to the Income Statement that was previously a fair value item booked on
an acquisition and includes adjusted profit from EAIs.
This provides a meaningful comparison of how the business is
managedand measured on a day-to-day basis, provides consistency and
comparability between reporting periods and is used to partly determine
the variable element of remuneration of senior management throughout
the Group.
Adjusted
operating profit
Operating loss
1
Adjusting items
(Note 6)
The Group uses adjusted profit measures for consistency with internal
reporting and to provide a useful and more comparable measure of the
ongoing performance of the Group. Adjusted measures are reconciled to
statutory measures by removing adjusting items, the nature of which are
disclosed above and further detailed in Note 6.
Adjusted operating profit
Year ended
31 December 2024
£m
Year ended
31 December 2023
£m
Operating loss (106) (450)
Adjusting items to operating loss
(Note6) 430 805
Adjusted operating profit 324 355
182Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
APM Closest equivalent statutory measure Reconciling items to statutory measure Definition and purpose
Income Statement measures continued
Adjusted
operating margin
Operating margin
2
Share of revenue of equity
accounted investments (Note 5)
andadjusting items (Note 6)
Adjusted operating margin represents adjusted operating profit as a percentage of adjusted revenue.
TheGroup uses adjusted profit measures to provide a useful and more comparable measure of the ongoing
performance of the Group to both internal and external stakeholders.
Adjusted profit
before tax
Loss before tax Adjusting items (Note 6) Profit before the impact of adjusting items and tax. As discussed above, adjusted profit measures are used to
provide a useful and more comparable measure of the ongoing performance of the Group to both internal and
external stakeholders. Adjusted measures are reconciled to statutory measures by removing adjusting items,
the nature of which are disclosed above and further detailed in Note 6.
Adjusted profit before tax
Year ended
31 December 2024
£m
Year ended
31 December 2023
£m
Loss before tax (215) (522)
Adjusting items to loss before tax (Note 6) 430 786
Adjusted profit before tax 215 264
Adjusted profit
after tax
Loss after tax Adjusting items (Note 6) Profit after tax but before the impact of the adjusting items. As discussed above, adjusted profit measures are
used to provide a useful and more comparable measure of the ongoing performance of the Group to both
internal and external stakeholders. Adjusted measures are reconciled to statutory measures by removing
adjusting items, the nature of which are disclosed above and further detailed in Note 6.
Adjusted profit after tax
Year ended
31 December 2024
£m
Year ended
31 December 2023
£m
Loss after tax (168) (495)
Adjusting items to loss after tax (Note 6) 329 693
Adjusted profit after tax 161 198
183Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
APMS CONTINUED
APM Closest equivalent statutory measure Reconciling items to statutory measure Definition and purpose
Income Statement measures continued
Constant currency Income Statement, which is
reported using actual average
foreign exchange rates
Constant currency foreign
exchange rates
The Group uses GBP-based constant currency models to measure performance. These are calculated by
applyingfixed exchange rates to local currency reported results for the current and prior periods. This gives a
GBP-denominated Income Statement which excludes any translational variances attributable to foreign exchange
rate movements.
Adjusted EBITDA
for covenant
purposes
Operating loss
1
Adjusting items (Note 6),
depreciation of property,
plantand equipment and
amortisation of computer
software and development
costs, share of non-controlling
interests and other
adjustments required
forcovenant purposes
Adjusted operating profit for 12 months prior to the reporting date, before depreciation and impairment of
property, plant and equipment and before the amortisation and impairment of computer software and
development costs.
Adjusted EBITDA for covenant purposes is a measure used by external stakeholders to measure performance.
Adjusted EBITDA for covenant purposes
Year ended
31December2024
£m
Year ended
31 December 2023
£m
Adjusted operating profit 324 355
Depreciation of property, plant and equipment and amortisation
of computer software and development costs 258 263
Non-controlling interests (8) (8)
Other adjustments required for covenant purposes
3
(24) (18)
Adjusted EBITDA for covenant purposes 550 592
Net finance
charges for interest
cover covenant
purposes
Finance costs net of finance
income
Net interest cost on pensions,
fair value changes on other
financial assets, amortisation
ofcosts of raising finance
andunwind of discount
onprovisions
Net finance costs for 12 months prior to the reporting date, excluding net interest cost on pensions, fair value
changes on other financial assets, amortisation of costs of raising finance and unwind of discount on provisions.
Net finance charges for interest cover purposes is a measure used by external stakeholders to measure performance.
Net finance charges for interest cover covenant purposes
Year ended
31 December 2024
£m
Total finance costs (131)
Total finance income 22
Net finance costs (109)
Adjusted for:
Net interest cost on pensions 15
Fair value changes on other financial assets 10
Amortisation of costs of raising finance 5
Other adjustments required for interest cover covenant purposes
4
(2)
Net finance costs for interest cover covenant purposes (81)
Bank covenant
definition of
interest cover
None Not applicable Interest cover for bank covenant testing purposes is calculated by dividing adjusted EBITDA for covenant purposes
by net finance charges for interest cover covenant purposes. This measure is used for bank covenant testing.
Interest cover
Year ended
31 December 2024
£m
Adjusted EBITDA for covenant purposes 550
Net finance charges for interest cover covenant purposes 81
Interest cover 6.8x
184Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
APM Closest equivalent statutory measure Reconciling items to statutory measure Definition and purpose
Income Statement measures continued
Adjusted tax rate Effective tax rate Adjusting items, adjusting
taxitems and the tax
impactofadjusting items
(Note 6 and Note 9)
The income tax charge for the Group excluding adjusting tax items, and the tax impact of adjusting items, divided
by adjusted profit before tax.
This measure is a useful indicator of the ongoing tax rate for the Group to external stakeholders.
Adjusted tax rate
Year ended
31 December 2024
£m
Year ended
31 December 2023
£m
Tax credit per Income Statement 47 27
Adjusted for:
Tax impact of adjusting items (50) (87)
Tax impact of EAIs (12) (11)
Other adjusting tax (credits)/charges (39) 5
Adjusted tax charge (54) (66)
Adjusted profit before tax 215 264
Adjusted tax rate 25% 25%
Adjusted basic
earnings per share
Basic earnings per share Adjusting items
(Note 6 and Note 11)
Profit after tax attributable to owners of the parent and before the impact of adjusting items, divided by the
weighted average number of ordinary shares in issue during the financial period.
This measure is useful in showing the current performance of the Group to external stakeholders.
Adjusted diluted
earnings per share
Diluted earnings per share Adjusting items
(Note 6 and Note 11)
Profit after tax attributable to owners of the parent and before the impact of adjusting items, divided by the
weighted average number of ordinary shares in issue during the financial period adjusted for the effects of any
potentially dilutive options.
This measure is useful in showing the current performance of the Group to external stakeholders.
Balance Sheet measures
Working capital Inventories, trade and other
receivables less trade and
other payables
Not applicable Working capital comprises inventories, current trade and other receivables, non-current other receivables, current
trade and other payables and non-current other payables.
This measure provides additional information in respect of working capital management to external stakeholders.
Net debt Cash and cash equivalents,
interest-bearing loans and
borrowings and finance-
related derivative instruments
Reconciliation of net debt
(Note 27)
Net debt comprises cash and cash equivalents, interest-bearing loans and borrowings and cross-currency swaps,
where applicable.
Net debt is one measure that could be used to indicate the strength of the Group’s Balance Sheet position and is a
useful measure of the indebtedness of the Group.
Bank covenant
definition of net
debt at average
rates and leverage
Cash and cash equivalents
lessinterest-bearing loans
andborrowings
Impact of foreign exchange
and adjustments for bank
covenant purposes
Net debt (as above) is presented in the Balance Sheet translated at period end exchange rates.
For bank covenant testing purposes net debt is converted using average exchange rates for the previous 12 months.
Leverage is calculated as the bank covenant definition of net debt divided by adjusted EBITDA for leverage
covenant purposes. This measure is used for bank covenant testing.
Net debt
31December2024
£m
31 December 2023
£m
Net debt at closing rates (Note 27) (968) (847)
Impact of foreign exchange 7 (10)
Bank covenant definition of net debt at average rates (961) (857)
Leverage 1.7x 1.4x
185Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
APMS CONTINUED
APM Closest equivalent statutory measure Reconciling items to statutory measure Definition and purpose
Cash Flow measures
Free cash flow Net increase/decrease in
cashand cash equivalents
(net of bank overdrafts)
Net cash from/(used in)
financing activities
Free cash flow represents cash generated after all trading costs including restructuring, pension contributions,
taxand interest payments but before any cash flows associated with financing activities.
This measure is a useful metric for monitoring cash management within the Group and is consistent with
internalreporting.
Free cash flow
Year ended
31 December 2024
£m
Year ended
31 December 2023
£m
Net cash from operating activities 120 239
Net cash used in investing activities (119) (194)
Free cash flow 1 45
Adjusted free
cashflow
Net increase/decrease in cash
and cash equivalents (net of
bank overdrafts)
Free cash flow, as defined
above, adjusted for demerger
and business disposal related
cash flows
Adjusted free cash flow represents free cash flow adjusted for demerger and business disposal related cash flows.
This measure is a useful metric for monitoring cash management within the Group and is consistent with
internalreporting.
Adjusted free cash flow
Year ended
31 December 2024
£m
Year ended
31 December 2023
£m
Free cash flow 1 45
Demerger LTIP payments
5
3 37
Other cash demerger items 1 11
Cash on disposal of business 10 –
Adjusted free cash flow 15 93
Capital
expenditure
(capex)
None Not applicable Calculated as the purchase of owned property, plant and equipment and computer software and expenditure on
capitalised development costs during the period, excluding any assets acquired as part of a business combination.
Net capital expenditure is capital expenditure net of proceeds from disposal of property, plant and equipment.
Capital
expenditure to
depreciation ratio
None Not applicable Net capital expenditure divided by depreciation of owned property, plant and equipment and amortisation of
computer software and development costs.
This measure is a useful metric for monitoring the investment in capital expenditure within the Group and is
consistent with internal reporting.
1. Operating loss is not defined within IFRS but is a widely accepted profit measure being loss before finance costs, finance income and tax.
2. Operating margin is not defined within IFRS but is a widely accepted profit measure being derived from operating loss
1
divided by revenue.
3. Included within other adjustments required for covenant purposes are dividends received from equity accounted investments, the removal of adjusted operating profit of equity accounted investments, IFRS 2 related charges and
non-cash finance costs.
4. Other adjustments required for interest cover covenant purposes primarily relate to the exclusion of interest payable on non-recourse factoring arrangements and adjusting interest items.
5. Demerger LTIP payments relate to the cash payment of the divisional long-term incentive plans, which were put in place under management of Melrose Industries PLC and crystallised on demerger on 20 April 2023.
186Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Please contact the registrar at the above address to advise of
a change of address or for any enquiries relating to dividend
payments, lost share certificates or other share registration
matters. The registrar provides online facilities at shareview.
co.uk. Once you have registered you will be able to access
information on your Dowlais Group plc shareholding, update
your personal details and amend your dividend payment
instructions online without having to call or write to the registrar.
Share dealing services
The registrar offers a real-time telephone and internet
dealing service for the UK. Further details including terms
and rates can be obtained by logging on to the website at
shareview.co.uk/dealing or by calling 0371 384 2030. Lines
are open between 8.30am and 5.30pm (UK time), Monday
toFriday (excluding public holidays in England and Wales).
Information on how to manage your shareholdings can be
found at help.shareview.co.uk. The page at this web address
provides answers to commonly asked questions regarding
shareholder registration, links to downloadable forms and
guidance notes. If your question is not answered by the
information provided, you can send your enquiry via secure
email from these web pages. You will be asked to complete
a structured form and to provide your shareholder
reference, name and address. You will also need to provide
your email address if this is how you would like to receive
your response.
Alternatively, you can telephone 0371 384 2030. Lines are open
between 8.30am and 5.30pm (UK time), Monday to Friday
(excluding public holidays in England and Wales). For call
charges, please check with your provider as costs may vary.
Dividends
Shareholders who wish to have their dividends paid
directlyinto a bank or building society account should
contact the registrar. In addition, the registrar is now able
topay dividends to over 90 different countries. This service
enables the payment of your dividends directly into your
bank account in your home currency. For international
payments, a charge is deducted from each dividend
payment to cover the costs involved. Please contact
theregistrar to request further information.
This report includes certain forward-looking statements.
These forward-looking statements involve known and
unknown risks and uncertainties, many of which are beyond
Dowlais’ control and all of which are based on Dowlais’
current beliefs and expectations about future events.
Forward-looking statements are sometimes identified by the
use of terminology such as “believe”, “expects”, “may”, “will”,
“would”, “could”, “should”, “shall”, “risk”, “intends”, “expects”,
“estimates”, “projects”, believes”, “aims”, “plans”, “predicts”,
“seeks”, “goal”, “continues”, “assumes”, “positioned”,
“anticipates” or “targets” or the negative thereof, other
variations thereon or comparable terminology. These
forward-looking statements include matters that are not
historical facts, statements regarding the intentions, beliefs
or current expectations concerning, amongst other things,
the future results of operations, financial condition,
prospects, growth, strategies, dividend policy and industry
of Dowlais and commitments, ambitions and targets relating
to ESG matters. These forward-looking statements and other
statements contained in these results regarding matters that
are not historical facts involve predictions. No assurance can
be given that such future results will be achieved, and actual
events or results may differ materially as a result of risks and
uncertainties facing Dowlais. Such risks and uncertainties
could cause actual results to vary materially from the future
results indicated, expressed or implied in such forward-
looking statements. Forward-looking statements contained
in this report speak only to the date of this report. Dowlais
and its Directors expressly disclaim any obligation or
undertaking to update these forward-looking statements
toreflect any change in their expectations or any change
inevents, conditions, or circumstances on which such
statements are based unless required to do so by
applicable law.
Pages 1 to 117 consist of a Strategic Report and Directors’
Report (including the Directors’ Remuneration Report) that
have been drawn up and presented in accordance with and
in reliance upon applicable English company law. The liability
of the directors in connection with such reports shall be
subject to the limitation and restrictions provided by, and
shall be no greater than is required by, applicable English
company law.
Financial diary
21 May 2025
Annual
General
Meeting
7 August 2025*
Announcement
of half-year
results for thesix
months ended
30 June 2025
4 March 2026*
Announcement
of full-year
results for the
year ended
31 December 2025
* Provisional date
Annual General Meeting
The AGM of the Company will be held on Wednesday
21 May 2025 at 2pm UK time at the office of Investec Bank
plc, 30 Gresham St, London EC
2V 7QN. Further details
regarding the format, location and business to be
transacted at the meeting will be disclosed within
the2025Notice of AGM.
Company website
The Company’s website at dowlais.com contains the latest
information for shareholders, including press releases and an
updated financial diary. Email alerts of the latest regulatory
announcements about the Company may be obtained by
registering for the email news alert service on the website.
Registered office
Dowlais Group plc, 2
nd
Floor Nova North, 11 Bressenden Place,
London, England, SW1E 5BY.
Share price information
The latest price of the Company’s ordinary shares is available
on londonstockexchange.com. Dowlais’ ticker symbol is DWL.
It is recommended that you consult your financial adviser
and verify information obtained before making any
investment decision.
Registrar
The Company’s registrar is Equiniti Limited who can be
contacted at Aspect House, Spencer Road, Lancing, West
Sussex, BN99 6DA.
SHAREHOLDER INFORMATION
187Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
AAM
American Axle & Manufacturing Holdings Inc.
Automotive
The GKN Automotive business operated by the Group.
Board
The board of directors of the Company.
BoR
Basis of Reporting
bps
Basis points
book-to-bill ratio
In respect of a period, the ratio of forecast lifetime revenue
awarded in that period to revenues earned in that period.
BEV
Battery electric vehicles
CEO
Chief Executive Officer
Company
Dowlais Group plc
CFO
Chief Financial Officer
CSRD
EU Corporate Sustainability Reporting Directive
Dowlais
Dowlais Group plc
demerger
The demerger of the Company from Melrose, which took place
on 20 April 2023.
DMA
Double materiality assessment
drop-through margin
Drop-through margin is the operating profit margin at
whichincremental sales volumes contribute incremental
operating profit.
DTR
The disclosure guidance and transparency rules made by
theFCA under Part VI of the Financial Services and Markets
Act2000.
EBITDA
Earnings before interest, tax, depreciation and amortisation
EMEA
Europe, Middle East and Africa
EPS
Earnings per share
GLOSSARY OF TERMS AND DEFINITIONS
ESG
Environmental, social and governance.
EVs
Battery electric vehicles and full hybrid vehicles.
FX
Foreign exchange
Group
The Company, its direct and indirect subsidiaries,
andotherinvestments.
H1 and H2
The first or second half (as applicable) of the relevant
financialyear.
Hydrogen
The GKN Hydrogen business previously operated by the Group.
IFRS
International Financial Reporting Standards
LFP
Lithium iron phosphate
M&A
Mergers and acquisitions
market
Global light vehicle market
Melrose
Melrose Industries PLC
OEM
Original equipment manufacturer, typically of light vehicles.
Powder Metallurgy
The GKN Powder Metallurgy business operated by the Group.
Q1, Q2, Q3 or Q4
The first, second, third or fourth quarter (as applicable)
oftherelevant financial year.
SBTi
Science Based Targets initiative
S&P
S&P Global
SUV
Sport utility vehicle
TCFD
Taskforce for Climate-related Financial Disclosures
US
Unites States of America
vehicle production volumes
Global light vehicle production volumes.
year-on-year
In comparison to the immediately preceding period.
188Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Advanced
differentials
Torque management components enabling specific advanced
driving features such as mechanical and electronic limited slip
differentials, locking differentials and disconnect devices.
AWD All wheel drive
AWD systems Torque management components (being a power take-off unit and
rear drive unit) for AWD vehicles with an East-West/transverse
engine layout.
BEV Battery electric vehicle, a light vehicle without an ICE that uses a
battery to store the electricity needed to power the vehicle.
Constant velocity
joint
A type of joint that allows a driveshaft to transfer torque via a
variable angle at a constant rotational speed.
Driveline A product group of GKN Automotive that comprises sideshafts
andpropshafts.
Drive systems Sideshafts, propshafts and AWD systems.
Drivetrain The components of a light vehicle which transfer torque from the
power source to the wheels.
eDrive System The electric drive unit that is used to power BEVs, FCEVs and
(alongwith an ICE) HEVs.
ePowertrain A product group of GKN Automotive that includes AWD systems,
ePowertrain components and eDrive systems.
EVs Electrified light vehicles, including BEVs, FCEVs and HEVs (but not
including mild hybrids).
FCEV Fuel cell electric vehicle, a light vehicle without an ICE that uses a
fuel cell to generate the vehicle’s power.
Global OEM An OEM that produces light vehicles in more than one country and
produces more than 100,000 light vehicles each year.
GLVP Global light vehicle production
Technical, automotive industry and Dowlais terms used in this report
HEV Hybrid electric vehicle, a light vehicle that uses both an ICE and a
high voltage electric motor to produce torque.
ICE Internal combustion engine and an ICE vehicle means a light vehicle
powered by an ICE.
LFP Lithium iron phosphate
Light vehicle Passenger cars and light trucks up to 6 tonnes in weight.
Market Unless otherwise specified, means the global light vehicle market.
Mild hybrid An ICE vehicle that features a low-voltage electric motor to provide
supplementary power to the ICE and ancillary vehicle equipment.
OEM Original equipment manufacturer of light vehicles.
Powertrain The drivetrain and the power source of a light vehicle.
PPM Parts per million, a measures of defects per component manufactured.
Propshaft Propeller shaft, a type of driveshaft used to transfer torque from the
front of the vehicle to the rear, or vice versa.
Propulsion-source
agnostic
The product is not only for use in an EV or ICE vehicle, but can be
used in both.
Sideshaft A type of driveshaft used to transfer torque directly to the wheels of
the vehicle and which typically features two constant velocity joints.
SUV Sport utility vehicle, a type of light vehicle.
Tier 1, Tier 2,
Tier 3, etc.
The tiers of supplier in the automotive supply chain, in which Tier 1
suppliers supply the OEM directly, Tier 2 suppliers supply Tier 1
suppliers, and so on.
Torque Rotational force, which in a light vehicle is generated by the engine
or drive system.
189Dowlais Group plc 2024 Annual Report
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
2
nd
Floor Nova North, 11 Bressenden Place
London, United Kingdom, SW1E 5BY
DowlaisGroupplc
www.dowlais.com