PLASTIC_OMNIUM_AUTOMOTIVE - Accounts

Turnover fell by 8% in 2019 to £349,069,000 but with an increase in operating profit to £20,971,000 (2018 £14,185,000) closer to our expectations for the business.The tide of post-start-up losses at Warrington plant was almost stemmed with a significant improvement in performance. The Edison Road tailgate plant progressed slightly accompanied by a further strong performance at Measham plant. The net result progressed to £17,404,000 (2018 £11,202,000).

Risks and uncertainties

Covid-19

The company is impacted by the Covid-19 pandemic. In strict compliance with the measures announced by the U.K. government and based on the shutdowns of carmakers’ plants, the company closed its own production plants in late March 2020. A progressive re-opening is planned commencing late May 2020 adapted around the re-opening of customers’ car production plants.

The company is implementing all measures to protect the employees, to ensure the continuity of its operations by liaising closely with customers, and to maintain the robustness of its financial structure. Necessary actions are being taken to adapt to the new situation with the greatest possible degree of flexibility including the furloughing of most employees in plants, R&D and administrative centres.

Automotive program risk

The automotive sector depends upon many factors such as economic activity, car manufacturing strategies, access to credit and supplier risk. This list is by no means exhaustive, publicity surrounding diesel vehicles remains adverse. Furthermore, the success of an individual vehicle can have a material impact on sales and financial results. Whilst the company has limited scope for diversifying its customer base, the group of which it is a member supplies nearly all global car manufacturers. These relationships, in turn, benefit the company, both in terms of development and production work.

Future development and production commitments are subject to a rigorous approval process, using skills and expertise and critical judgement from across the group. Following launch, a project is then subject to regular and structured review, including operational and financial monitoring.

Supplier risk

The automotive sector has a tightly managed supply chain involving closely interdependent partners, and accreditation of suppliers only occurs if they meet strictly defined criteria. Supplier monitoring is ongoing and the company draws upon support from specialist purchasing teams within the group.

Brexit

The terms of the UK’s potential withdrawal from the European Union remain to be determined. The risks to the company remain those of the ‘no deal’ exit scenario and include short-term disruption to a largely EU-based supply chain, exchange rate volatility, the impact of export tariffs on finished vehicles and the availability of labour. Extensive detailed planning and risk-mitigation took place well in advance of the first potential exit date and supported extensively by PO Group. It remains the case that we still cannot predict the final outcome but we consider the company is well placed to handle the potential impacts.

Key performance indicators

The directors consider the operating result together with the change in the intra-group financial debt, prior to any receivables sales, to be key performance indicators. This latter indicator is effectively a measure of the company’s net cash flow, given the existence of group-wide cash pooling and intra-group debt accounts. As noted above, the 2019 operating profit was £20,971,000 compared with £14,185,000 in 2018. In 2019 the intragroup financial debt prior to factoring impacts, dividends and IFRS 16 newly-capitalised leasing debt and measured on a basis comparable to 2018, decreased by £28,038,000 (£20,396,000 reduction in 2017).

By order of the board

The directors present their annual report and financial statements for the year ended 31 December 2019.

The principal activity of the company continued to be that of the development, manufacture and marketing of plastic injection parts for the automotive industry.

The profit for the year, after taxation, amounted to £17,404,000 (2018 - £11,202,000).

Ordinary dividends were paid amounting to £6,300,000. The directors do not recommend payment of a final dividend.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

The directors confirm that the company has Directors' and Officers' Insurance in place.

Compagnie Plastic Omnium (the company’s intermediate parent company listed on the Euronext Paris stock exchange) operates a cash pooling system organised around Plastic Omnium Finance. Liquidity, currency and interest rate risks are managed on behalf of, and in association with, subsidiaries. The company participated in a non-recourse sale of receivables, co-ordinated by Plastic Omnium Finance, selling £5,399,000 of receivables at 31 December 2019.

Compagnie Plastic Omnium manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business.

The company is exposed to interest rate risk on part of its intra-group borrowings with Plastic Omnium Finance, based on 3 month LIBOR and EURIBOR rates fixed at the end of each quarter. The non-recourse receivables sale facility carries interest charges linked to 2 month LIBOR and EURIBOR.

The company is exposed to currency movements, essentially on the Euro. These are generally in respect of components specified by customers and sourced from Euro zone suppliers. The company aims to achieve a natural hedge as far as possible, including payments by customers in Euros. The remaining exposure is closely monitored including via short and medium term forecast with net future requirements generally hedged via the Group Treasury Department of Plastic Omnium Finance.

Receivables balances are monitored very closely on an ongoing basis, with overdues subject to regular Group reporting . Where appropriate dedicated monitoring systems are also employed. Provision is made for doubtful debts where necessary. The sale of receivables noted above had the effect of significantly reducing credit risk.

The company uses forward foreign exchange contracts and currency deposits to hedge exchange rate risk on net Euro purchases. Hedging instruments are taken out via Plastic Omnium Finance.

The company continues to invest significantly in the development of new products and has full access to extensive research facilities within the Plastic Omnium Group.

Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment within the company continues and that the appropriate training is arranged. It is the policy of the company that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.

The company places considerable value on the involvement of its employees and has continued its previous practice of keeping them informed on matters affecting them as employees and on the various factors affecting the performance of the company. This is achieved through formal and informal meetings and a company newsletter. Employee representatives are consulted regularly on a wide range of matters affecting their current and future interests.

The company currently has development projects extending to 2022 prior to production launches, with further prospects at pre-nomination stages. The production life of parts currently in production and under development is generally 3-5 years from start of production.

Mazars LLP were the independent auditor to the company during the year and a resolution to re-appoint Mazars LLP as auditor will be proposed at the forthcoming annual meeting.

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. 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. In preparing these 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 in IFRSs 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.

In the case of each of the persons who are directors of the company at the date when this report was approved:

- so far as each of the directors is aware, there is no relevant audit information (as defined in the Companies Act 1985) of which the company's auditor is unaware; and

- each of the directors has taken all the steps that he ought to have taken as a director to make himself aware of any relevant audit information (as defined) and to establish that the company's auditor is aware of that information.

The Company participates in a group-wide overnight cashpooling system to help optimize net cash/debt positions and assist in currency risk management. Plastic Omnium Finance acts as an internal bank to the Group and as such the company’s finances are intrinsically linked to those of the Group. On 21st April 2020 Compagnie Plastic Omnium published 2020 Q1 turnover data including details of Covid-19 related measures. The statement advised of confirmed and undrawn credit facilities of EUR1.3Bn with an average maturity of 5 years. The Company’s principal customers are also significant customers of other non-UK Group companies.

Detailed forecasts of month-by-month results, balance sheets and cashflow to the end of the financial year are prepared each month and are subject to detailed review within the Group, as are monthly actual results. In addition to annual budgets, reviewed at the highest Group level, strategic plans are prepared annually looking ahead at least 3 years. Following the Covid-19 pandemic cash forecasting requirements have become more stringent combined with very tight controls on purchasing and headcount. The company is also reducing the cash impact of the shutdown via UK government support initiatives, with the vast majority of employees furloughed until the progressive restart of production from late May 2020. The company entered this unprecendented period following its two strongest years of cash generation, with in excess of £28M positive cashflow in 2019 and £20.4M in 2019 giving a strong foundation from which to face the current turbulence.

Having made appropriate extensive reviews and taking into account the risks and uncertainties facing the company, the directors are of the opinion that the company has sufficient resources to continue in operation as a going concern for the foreseeable future and is able to meet its liabilities as they fall due. Accordingly the directors continue to adopt the going concern basis in preparing these financial statements.

We have audited the financial statements of Plastic Omnium Automotive Ltd (the 'company') for the year ended 31 December 2019 which comprise the income statement, the statement of financial position, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 31 December 2019 and of its profit for the year then ended;

•     have been properly prepared in accordance with IFRSs as adopted by the European Union; and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

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 company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of matter - Impact of the outbreak of COVID-19 on the financial statements

In forming our opinion on the company financial statements, which is not modified, we draw your attention to the directors’ view on the impact of the COVID-19 as disclosed on page 6, and the consideration in the going concern basis of preparation on page 15 and non- adjusting post balance sheet events on page 39.

Since the balance sheet date there has been a global pandemic from the outbreak of COVID-19. The potential impact of COVID-19 became significant in March 2020 and is causing widespread disruption to normal patterns of business activity across the world, including the UK and mainland Europe.

The full impact following the recent emergence of the COVID-19 is still unknown. It is therefore not currently possible to evaluate all the potential implications to the company and group’s trade, customers, suppliers and the wider economy.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. 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.

In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. 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.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our 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 company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

• the financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

As explained more fully in the directors' responsibilities statement set out on page 5, 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 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 company or to cease operations, or have no realistic alternative but to do so.

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 Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of the audit 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.

The income statement has been prepared on the basis that all operations are continuing operations.

The company has no recognised gains or losses other than the profit for the financial year.

Plastic Omnium Automotive Ltd is a private company limited by shares incorporated in England and Wales. The registered office is Westminster Industrial Estate, Huntingdon Way, Measham, Swadlincote, Derbyshire, DE12 7DS.

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, (except as otherwise stated).

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared on a historical cost basis and on a going concern basis. The principal accounting policies adopted are set out below.

The directors have at the time of approving the financial statements, a reasonable expectation that the truecompany has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements, as detailed in the Director's Report on page 6.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Projects with a Start of Production date before 01/01/2018:

Tooling

Revenue up to the value of cost is recognised as incurred during the development phase. Profit is then recognised after the start of production, normally over 3 years unless the economic useful life is less.

Development

Revenue financed in the piece price is recognised when invoiced. Any lumpsum invoicing is recognised over 3 years after the start of production, unless the economic useful life is less.

Projects with a Start of Production date after 01/01/2018:

The company has been applying IFRS 15 Revenue from Contracts with Customers since 1 January 2018. In this context, the accounting treatment selected until 31 December 2017 for costs and products related to activities carried out during the project phase of automotive contracts has been amended.

The project phase corresponds to the period during which the company is working on the development of the part to be produced, on the design and manufacture of specific tooling to be used in production as well as on the organization of future production processes and logistics. It begins with the appointment of the company for the vehicle and the product concerned and is completed when the normal production volume is reached.

The accounting treatment applied since 1 January 2018 is based on the identification by the company in most cases of two performance obligations, distinct from the production of parts, under the Design activity and certain specific tooling whose control is transferred to clients.

The costs related to performance obligations are recognised in inventories during the project phase and then in expenses when their control is transferred to the client, i.e. at the start of production.

Revenue related to those same obligations are recognised at the start of production. Payments received prior to the start of production are recorded in customer advances.

The company has also examined the concepts specified or introduced by IFRS 15, such as the concept of “agent versus principal”.

Projects with a Start of Production date before 01/01/2018:

Tooling and engineering costs, covered by a customer order, are recognised based on the stage of completion. Costs incurred in excess of sales are recognised in cost of sales and additionally in sales and debtors until such time as the corresponding revenues are recognised. Tooling and engineering reimbursed by the customer over serial production units are recognised upon invoicing based on actual production volumes.

Development costs for ‘development units’ not covered by a contractual volume undertaking from the customer are recognised as intangible assets in progress during the development phase and are transferred to intangible assets at the start of production. Capitalised development costs are amortised at the latest 3 months after the start of series production. Amortisation is calculated on a straight-line basis over the estimated period of series production, generally 3-5 years. Development costs paid by the customer during the development phase are held as customer advances in liabilities and recognised as revenues over the same period in which the corresponding intangible asset development costs are amortised. Development costs reimbursed by the customer over serial production units are recognised upon invoicing based on actual production volumes.

Projects with a Start of Production date after 01/01/2018:

Development costs incurred during the project phase and related to the execution of the contract with the customer not fulfilling a performance obligation are recognized as intangible assets. These internal and external costs relate to the work on the organization of purchasing, logistics and industrial processes to produce the parts that will be ordered by customers.

They are depreciated over the expected production period, typically three years for appearance parts.

The amortization of development hours is booked under Research and Development costs.

These assets are subject to annual impairment tests.

Revenue received from customers related to these costs are recorded in turnover from the start of series life over the production period. Payments received before the start of life are recorded in customer prepayments.

The accounting treatment of costs that meet a performance obligation is described in the notes.

Furthermore, under IFRS 15, costs incurred prior to the award of the contract, whether or not the contract is obtained, are recognized as an expense for the period.

Property, plant and equipment are initially measured at cost, or production cost for assets manufactured by the company (or by a subcontractor) for its own use, or at fair value in the case of assets acquired without consideration, and subsequently net of depreciation and any impairment losses. Freehold land is shown at a revalued amount.

Maintenance and repair costs to restore or maintain the future economic benefits expected based on the asset's estimated level of performance at the time of the acquisition are recognised as an expense.

Depreciation

Depreciation is recognised on all tangible fixed assets, other than freehold land, at rates calculated to write off the cost, less estimated residual value based on prices prevailing at the date of acquisition, of each asset evenly over its expected useful life, as follows:

Freehold land is not depreciated.

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the income statement.

In accordance with IAS16, Property, Plant and Equipment, for property and major functional assemblies such as paint lines and presses, each significant part of the asset is depreciated separately over its specific estimated useful life.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

In the case of right-of-use assets, expected useful lives are determined by reference to comparable owned assets or the lease term, if shorter.

At each reporting end date, the company reviews the carrying amounts of its tangible and intangible assets, as well as tooling and development inventories, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Raw materials and supplies

Raw materials and supplies are measured at cost, determined by the weighted average cost method. A provision for impairment is recorded when the estimated selling price of the related finished products in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale is less than the carrying amount of the raw materials or supplies.

Finished and semi-finished products

Finished and semi-finished products are measured at standard cost of production, adjusted annually. Cost includes raw materials, and direct and indirect production costs. It does not include any administrative overheads or data processing costs that do not contribute to bringing the products to their present location and condition, or any research and development or distribution costs.

At each balance sheet date, the carrying amount of finished and semi-finished products is compared to their net realisable value, determined as explained above and a provision for impairment is recorded when necessary. A provision for slow-moving inventory is recorded for any references for which no or few movements have been recorded during the year and are not expected to be sold in the foreseeable future.

Projects - tools and development

These inventories correspond to costs incurred by the company in order to satisfy a performance obligation in connection with automobile projects.

The cost of inventories is compared at the balance sheet date to the net realizable value. If it exceeds the net realizable value, a loss is recorded to bring the inventories to their net realizable value.

IFRS 13 establishes a single source of guidance for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The resulting calculations under IFRS 13 affected the principles that the Company uses to assess the fair value, but the assessment of fair value under IFRS 13 has not materially changed the fair values recognised or disclosed. IFRS 13 mainly impacts the disclosures of the Company. It requires specific disclosures about fair value measurements and disclosures of fair values, some of which replace existing disclosure requirements in other standards.

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

Financial assets are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument. Financial assets are classified into specified categories, depending on the nature and purpose of the financial assets.

At initial recognition, financial assets classified as fair value through profit and loss are measured at fair value and any transaction costs are recognised in profit or loss. Financial assets not classified as fair value through profit and loss are initially measured at fair value plus transaction costs.

Financial assets are classified as at FVTPL when the financial asset is held for trading. This is the case if:

•     the asset has been acquired principally for the purpose of selling in the near term, or

•     on initial recognition it is part of a portfolio of identified financial instruments that the manages together and has a recent actual pattern of short-term profit taking, or

•     it is a derivative that is not designated and effective as a hedging instrument.

Financial assets at FVTPL are stated at fair value with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Interest and dividends are included in 'Investment income' and gains and losses on remeasurement included in 'other gains and losses' in the statement of comprehensive income.

Financial assets with fixed or determinable payments and fixed maturity dates that the Company has the positive intent and ability to hold to maturity are classified as held to maturity investments.

Held to maturity investments are measured at amortised cost using the effective interest method less any impairment, with revenue recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.

Debt instruments are classified as financial assets measured at fair value through other comprehensive income where the financial assets are held within the company’s business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt instrument measured at fair value through other comprehensive income is recognised initially at fair value plus transaction costs directly attributable to the asset. After initial recognition, each asset is measured at fair value, with changes in fair value included in other comprehensive income. Accumulated gains or losses recognised through other comprehensive income are directly transferred to profit or loss when the debt instrument is derecognised.

Financial assets classified as available for sale are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income. Where an AFS financial asset is disposed of or determined to be impaired, the cumulative gain or loss previously recognised in other comprehensive income is reclassified to profit or loss.

Dividends and interest earned on AFS financial assets are included in the investment income line item in the statement of comprehensive income.

Financial assets, other than those measured at fair value through profit or loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.

The company recognizes financial debt when the company becomes a party to the contractual provisions of the instruments. Financial liabilities are classified as either 'financial liabilities at fair value through profit or loss' or 'other financial liabilities'.

Financial liabilities are classified as measured at fair value through profit or loss when the financial liability is held for trading. A financial liability is classified as held for trading if:

•     it has been incurred principally for the purpose of repurchasing it in the near term, or

•     on initial recognition it is part of a portfolio of identified financial instruments that the manages together and has a recent actual pattern of short-term profit taking, or

•     it is a derivative that is not designated and effective hedging instrument.

Financial liabilities at fair value through profit or loss are stated at fair value with any gains or losses arising on remeasurement recognised in profit or loss.

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Finance leases are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield 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 period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the net carrying amount on initial recognition.

Financial liabilities are derecognised when, and only when, the company’s obligations are discharged, cancelled, or they expire.

Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

The company uses derivative instruments traded on organised markets or over-the-counter to manage its exposure to currency risks arising in the normal course of trading. In accordance with IAS39, these hedging instruments are recognised in the balance sheet and measured at fair value. When formal hedging agreements are in place the changes in their fair value are recognised in income or expense.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability. A derivative is presented as a non-current asset or liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are classified as current.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. 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 company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of inventories or non-current assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

At inception, the company assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the company recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within property, plant and equipment, apart from those that meet the definition of investment property.

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish or restore the underlying asset and the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other property, plant and equipment. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the company's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the company is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the company's estimate of the amount expected to be payable under a residual value guarantee; or the company's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The company has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the operating profit, for transactions relating to operating activities, and in financial income or expenses for financial transactions, for the period.

Other research and development costs

Other research and development costs are generally recognised as an expense when incurred, unless of a material value in which case the profit is recognised in the year in which production commenced.

Start-up costs

The start-up costs of new production capacity or techniques and organisation expense are recognised as an expense for the period in which they are incurred.

Provisions for liabilities and charges

Provisions for liabilities and charges are recorded when the company has a present obligation and it is probable that an outflow of resources embodying economic benefits will be required to settle the

obligation and no equivalent benefit is expected to be received in return. They are recognised within current liabilities because the obligation is generally expected to be settled within one year.

Forthcoming requirements:

Adoptions of the following mentioned standards, amendments and interpretations in future years are not expected to have a material impact on the Company’s financial statements:

Amendments to IAS 1 Presentation of Financial Statements - 1 January 2020

Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - 1 January 2020

Amendments to IFRS 3 Business Combinations - 1 January 2020

Revised Conceptual Framework for Financial reporting - 1 January 2020

New currently effective requirements:

Adoptions of the following mentioned standards, amendments and interpretations in the current year have not had a material impact on the Company’s financial statements:

IFRIC 23 Uncertainty over Tax Treatments - 1 January 2019

Amendments to IFRS 9 Prepayment Features with Negative Compensation - 1 January 2019

Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures - 1 January 2019

Amendments to IAS 19 Plan Amendment, Curtailment or Settlement - 1 January 2019

Annual Improvements to IFRS standards (2015-2017) - 1 January 2019

IFRS 16 "Leases" has been applied by the company for the first time as at 1 January 2019 using the simplified retrospective method for the transition. The 2018 financial statements have not been restated and the new accounting treatment is applied to leases in progress as at 1 January 2019.

Contracts with an initial duration of less than or equal to twelve months have not been capitalised.

The main changes induced by IFRS 16 are as follows:

• recognition from 1 January 2019, as property, plant and equipment, of right-of-use leased assets under leases that meet the capitalisation criteria defined by IFRS 16;

• recognition from 1 January 2019 of a financial liability for the obligation to pay rent during the term of these leases;

• recognition of an depreciation expense for the right to use the asset and a financial expense relating to the interest on the lease debt, which partly replace the operating expense previously recognised in respect of rents;

• cash flow statement: debt repayment payments affect the flow of financing.

As part of the implementation of this new standard, the company measures whether a contract is a lease under IFRS 16 by assessing, at the date of entry of the said contract, whether the latter relates to a specific asset, whether the company obtains substantially all the economic benefits associated with the use of the asset and has the ability to control the use of this asset.

The company has implemented a tool to perform, for each contract complying with the IFRS 16 capitalisation criteria, an evaluation of the rights-of-use and the related financial debt in accordance with IFRS 16. The lease term used corresponds to the duration of the lease contract, taking into account an option to renew or terminate when its exercise is reasonably certain. The discount rate used to calculate the rent debt is determined, for each property, according to the marginal rate of debt at the date of commencement of the contract. This rate corresponds to the interest rate that the lessee would obtain at inception of the lease to finance the acquisition of the leased property. This rate is obtained by adding the rate for government bonds with durations similar to the leased goods and the credit spread of the entity.    

The amount recognized as of 1 January 2019 in rights-of-use and financial debt amounts to £16.6 million. 80% of the initial rights-of use-assets comprise real estate rentals for industrial sites, storage and administrative premises, the balance mainly corresponds to industrial equipment and vehicles. On transition to IFRS 16 the weighted average incremental borrowing rate applied to lease liabilities recognised under IFRS 16 was 3.77%.

The impact on the company financial statements are shown below and explained in the following notes:

First application of IFRS 16 - Transition from 31 December 2018 to 1 January 2019:

The preparation of the financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses and commitments. These estimates and assumptions are reviewed at regular intervals. Actual results may differ from these estimates, if the underlying assumptions are changed to reflect actual experience or changes in circumstances or economic conditions. Management consider there to be no material critical judgements or estimates.

An analysis of the company's revenue is as follows:

The average monthly number of persons employed by the company during the year was:

Their aggregate remuneration comprised:

No pension contributions were received by directors.

The charge for the year can be reconciled to the profit per the income statement as follows:

The intangible assets comprise development costs. These are recognised at the start of production of the part in question and are amortised straight-line over the estimated period of series production (generally 3 years).

Property, plant and equipment includes right-of-use assets, as follows.

Included in additions for 2019 is £16,575 initial recognition of right-of-use assets related to the first adoption of IFRS16 as at 1 January 2019 (also see note 2).

Credit risk refers to the risk that a customer or counterparty to a financial instrument fails to meet its contractual obligations, resulting in financial loss to the company, and arises principally from the company’s receivables from customers. Customers that wish to trade on credit terms are subject to credit verification procedures and receivable balances are monitored on an ongoing basis.

The concentration of credit risk is subject to ongoing monitoring in conjunction with the Group. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.

The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the company's maximum exposure to credit risk.

Inventories are stated net of a provision of £5,790,000 (2018 - £4,168,000)

Trade debtors are stated net of a provision of £ nil (2018: £4,000) and the sale of receivables of £5,399,000 and € nil (2018: £23,149,000 and €17,160,000).

At 31 December 2019 trade debtors and amounts due from group undertakings included non-GBP denominated balances of €19,406,000 (2018: €16,252,000) within trade debtors and € 13,175,000 (2018: €26,641,000) due from group undertakings. All other receivables were GBP denominated.

The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.

The Group’s principal financial assets are bank balances and cash and trade and other receivables. Receivables balances are monitored very closely on an ongoing basis, with overdues subject to regular Group reporting at the highest level. Where appropriate, dedicated monitoring systems are also employed. Provision is made for doubtful debts where necessary.

Borrowings are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:

Liquidity Risk

The company needs to have access, at all times, to adequate financial resources not only to finance operations and the investments required to support its growth, but also to withstand the effects of any exceptional development. Liquidity is managed by the Group on behalf of subsidiaries and needs are met by long-term financing on the capital markets, ensuring that all of the Group’s net debt can be maintained over a long period, as well as through short-term commercial paper programs.

The company’s intra-group debt, prior to any sales of receivables, is a key performance indicator and is subject to very close monitoring.

The company’s financial obligations outside of the Group consist of trade creditors and other creditors. All of these are payable within 12 months.

Liquidity Risk Management

Liquidity is managed via a group deposit/loan facility at LIBOR linked interest rates and denominated in GBP and EUR as required by the company. A credit line is agreed annually with the Plastic Omnium Group, if required, the company can apply for a revision to the agreed limit. The company participates in a GBP and a EUR cash-pooling system managed by Plastic Omnium Finance.

Foreign Currency Risk

The company operates internationally giving rise to exposure from changes in foreign exchange rates principally with the Euro and the indirectly with the US Dollar in respect of the price of oil and its impact upon derived products (see Commodities risk). The company systematically hedges its Euro via forward exchange contracts and holdings of currency deposits to meet estimated on net requirements, in agreement with the Group Treasury Department of Plastic Omnium Finance, with whom the duration of hedging arrangements are also agreed. At 31 December 2019 the company had no unsettled forward exchange contracts (2018: € nil). At 31 December 2019 the company held a deposit of €13,175,000 (2018: €26,517,000) within the intra-group deposit/loan facility.

Interest Rate Risk

The company is exposed to interest rate risk on its intra-group debt and factoring facilities. Interest is paid on the daily value-dated net intra-group debt/factored balances at margins of up to approximately 2.1% above 3 month LIBOR or EURIBOR fixed on the 25th of March, June September and December for the forthcoming quarter. Intra-group deposits are remunerated on the same basis but at Libor or EURIBOR less 0.2%. A 1% rise/fall in interest rates would have decreased/ increased profit for the year and equity by approximately £540,000 (2018: £630,000).

Commodity Risk - Plastic

The company is exposed to the risk of price fluctuations in the price of raw materials used in injection moulding, where the supply contracts contain oil price indexation clauses. The risk is largely mitigated via offsetting provisions in customer contracts.

Financial Risk Management

Financial risks include market risk (principally foreign currency risk), credit risk, liquidity risk and interest risk. The Group seeks to minimise the effect of these risks by developing and applying policies and procedures which are regularly reviewed for appropriateness and effectiveness. The Group’s principal financial instruments comprise cash held in current accounts, trade receivables, amounts recoverable under contracts, trade payables and other payables that arise directly from its operations.

Included in Other Payables are Customer Prepayments of £39,402,000 (2018: £23,434,000)

At 31 December 2019 trade creditors and amounts owed to group undertakings included EUR denominated balances of €17,864,000 (2018: €17,304,000) and €1,164,000 (2018: € 409,000) respectively. Aside from USD $1,000 (2018 USD $1,000), all remaining current liabilities were GBP denominated.

The directors consider that the carrying amount of trade payables approximates to their fair value.

Lease liabilities are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:

The fair value of the company's lease obligations is approximately equal to their carrying amount.

The company leases plant and equipment with a carrying value of £16,689,000 (2018 – £245,000) under a finance lease agreement expiring within 6 years. Lease terms are negotiated on an individual basis.

At 31 December 2019 the company has a deferred tax provision of £4,495,000 (2018: £5,173,000) being the full potential deferred tax provision and arising applying an enacted tax rate of 17% to short-to-medium term timing differences, principally accelerated capital allowances and intangible asset deduction timing differences expected to reverse.

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon during the current and prior reporting period.

Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

The total costs charged to income in respect of defined contribution plans is £6,174,000 (2018 - £5,805,000) which represents contributions payable to the scheme by the company at rates specified in the rules of the plan. At 31 December 2019 £6,631 remained outstanding in respect of contributions to be paid over to the scheme for newly auto-enrolled employees with unexpired opt-out periods (2018: £31,576).

The retained earnings represent profits and losses retained in the previous and current period.

Operating lease payments represent rentals payable for certain properties, plant and equipment.

Amounts recognised in profit or loss as an expense during the period in respect of lease arrangements are as follows:

The following is a reconciliation of total operating lease commitments at 31 December 2018 (as disclosed in the financial statements to 31 December 2018) to the lease liabilities recognised at 1 January 2019:

'000

Total operating lease commitments disclosed at 31 December 2018    19,162

Discounted using incremental borrowing rate                (2,785)

Total lease liabilities recognised under IFRS at 1 January 2019        16,377

At 31 December 2019 the company had capital commitments as follows:

Compagnie Plastic Omnium (the Plastic Omnium group holding company) operates a global cash management system around Plastic Omnium Finance, which manages currency, interest rates and liquidity risks in liaison with and on behalf of all subsidiaries.

To maintain ready access to sufficient financial resources to carry out its business operations, fund the investments required to drive growth and respond to exceptional circumstances, the Group raises both capital and debt financing on the capital markets. The capital structure of the Group consists of debt, cash and cash equivalents and equity comprising issued share capital, reserves and retained earnings. The company is not subject to any externally imposed capital requirements.

The company is not subject to any externally imposed capital requirements.

Since the Balance Sheet date, there has been a global outbreak of coronavirus (COVID-19). On 11 March, the World Health Organisation declared the outbreak of coronavirus (COVID-19) a pandemic. Many countries, including the UK, have reacted to contain and delay the spread of the virus, which included extensive social distancing, business closures and travel bans. In accordance with general consensus financial reporting opinion across Europe the directors considered the financial impact of this pandemic and have concluded that the matter is a non-adjusting PBSE.

Please refer to the Directors’ Report on page 6 for further information.

The remuneration of the directors, who are key management personnel, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.

The ultimate parent company of Plastic Omnium Automotive Limited is Burelle S.A. During the year the company entered into transactions with members of Burelle S.A group, who are related parties:

At the reporting date, the following amounts were owed by and to members of the Burelle SA group who are related parties:

At the reporting date, the following amounts were owed by and to members of the Burelle SA group who are related parties:

The company's share capital is held by Plastic Omnium Auto Exteriors SA. The ultimate parent company is Burelle S.A., incorporated in France, which is also the largest group in which the results of the company are consolidated. The smallest group in which they are consolidated is that headed by Plastic Omnium Auto Exteriors SA.

The consolidated accounts of these groups are available to the public and may be obtained from Burelle S.A.'s principal place of business, 1 allée Pierre Burelle, 92300 Levallois-Perret, France.