CONSTELLIUM_UK_LIMITED - Accounts

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

The principal activity of the company is that research and development of aluminium products and the hosting of employees. These activities are expected to continue into the future.

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

The loss for the financial year amounted to £891,000 (2018: a loss of £24,839). The increased loss recorded in the current year is largely due to the impairment of the intangible asset detailed in note 11. No dividend was proposed during the year (2018: £nil).

The company has entered into indemnity arrangements for the benefit of all its directors in relation to certain losses and liabilities which they may incur to third parties in the course of acting as directors of the company and in compliance with the requirements of the Companies Act 2006. This insurance was in place for the full year ended year ended 31 December 2019 and remains in place at the date of signing of these financial statements.

The directors have taken advantage of the exemption to prepare a strategic report in accordance with section 414B of the Companies Act 2006 which states that a company is entitled to small companies exemption in relation to the strategic report for a financial year if it would be considered a small company but for being or having been a member of an ineligible group.

COVID-19 Pandemic

The World Health Organisation (WHO) declared a health emergency on 30 January 2020 which escalated to level of global pandemic on 11 March 2020 due to the rapid development of the COVID-19 outbreak. As at the reporting date, the company’s management has assessed the impact on its operations and has taken a series of preventive measures to ensure the health and safety of its employees, customers and wider community. By reacting and implementing these measures in a timely fashion, the company has managed to successfully maintain its operations throughout the pandemic. As a result, the company considers this outbreak to be a non-adjusting post balance sheet event.

The company continues to be funded by the group and will continue to bid for government funding on its research and development programs where available.

In 2020, the company, along with a consortium of automotive manufacturers and suppliers, was successful in its application to the Advanced Propulsion centre for grant funding to cover part of the cost of the £15m ALIVE ((Aluminium Intensive Vehicle Enclosures) project which takes place over the next 3 years.

At the time of approving these financial statements, how the company and its performance in the future will be affected by the macro economic issue, which is Covid 19, can not be ascertained with certainty.

Management however has taken appropriate action to adopt a new style of working and remain confident that the business will be able to overcome any presented challenges and certainly continue as a going concern. Furthermore, the nature of the entity is a cost plus entity hence remains able to recharge expenses incurred to group companies.

The company's ultimate parent undertaking has indicated that for at least twelve months from the date of approval of these financial statements, it will continue to make available such funds as are needed by the company to pay its liabilities as they fall due and in particular will not seek repayment of the amounts currently made available. The directors therefore believe that it remains appropriate to prepare the financial statements on a going concern basis. Further details on going concern have been included in note 1.2.

In accordance with the company's articles, a resolution proposing that PricewaterhouseCoopers LLP, Independent Auditors, be reappointed as auditors of the company will be put at a General Meeting.

In the case of each director in office at the date the Directors’ Report is approved:

•     so far as the director is aware, there is no relevant audit information of which the company’s auditors are unaware; and

•     they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the company’s auditors are aware of that information.

This report has been prepared in accordance with the provisions applicable to companies entitled to the small companies exemption.

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

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law). 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 the financial statements, the directors are required to:

•     select suitable accounting policies and then apply them consistently;

•     state whether applicable United Kingdom Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements;

•     make judgements and accounting estimates that are reasonable and prudent; and

•     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors 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 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.

In our opinion, Constellium UK Limited’s financial statements:

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

•     have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law); and

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

We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), which comprise: the Balance sheet as at 31 December 2019; the Profit and loss account, the Statement of comprehensive income, the Statement of changes in equity for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which 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.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the company’s ability to continue as a going concern.

Reporting on other information

The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance 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 an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of 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 based on these responsibilities.

With respect to the Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included.

Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report certain opinions and matters as described below.

Directors’ Report

In our opinion, based on the work undertaken in the course of the audit, the information given in the Directors’ Report for the year ended 31 December 2019 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.

In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we did not identify any material misstatements in the Directors’ Report.

Responsibilities of the directors for the financial statements

As explained more fully in the Statement of directors' responsibilities in respect of the financial statements set out on page 3, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they 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.

Auditors’ 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 auditors’ 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 auditors’ report.

Use of this report

This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Other required reporting

Companies Act 2006 exception reporting

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 company, or returns adequate for our audit have not been received from branches not visited by us; or

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

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

We have no exceptions to report arising from this responsibility.

Entitlement to exemptions

Under the Companies Act 2006 we are required to report to you if, in our opinion, the directors were not entitled to take advantage of the small companies exemption from preparing a strategic report. We have no exceptions to report arising from this responsibility.

The profit and loss account has been prepared on the basis that all operations are continuing operations.

These financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.

Constellium UK Limited is a private company limited by shares incorporated in England and Wales. The registered office is Grenville Court, Britwell Road, Burnham, Buckinghamshire, SL1 8DF.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

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 £ 000.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

FRS 102 allows a qualifying entity certain disclosure exemptions, subject to certain conditions, which have been complied with, including notification of, and no objection to, the use of exemptions by the Company’s shareholders.

The Company has taken advantage of the exemption, under FRS 102 paragraph 1.12 (e), from disclosing the Company key management personnel compensation, as required by FRS 102 paragraph 33.7.

The company has taken advantage of the exemption under section 7 of FRS 102 and para 3.17 (d) from preparing the statement of cash flows.

At the time of approving these financial statements, how the company and its performance in the future will be affected by the macro economic issuetrue, which is Covid 19, can not be ascertained with certainty.

Management however has taken appropriate action to adopt a new style of working and remain confident that the business will be able to overcome any presented challenges and certainly continue as a going concern. Furthermore, the nature of the entity is a cost plus entity hence remains able to recharge expenses incurred to group companies.

The company's ultimate parent undertaking has indicated that for at least twelve months from the date of approval of these financial statements, it will continue to make available such funds as are needed by the company to pay its liabilities as they fall due and in particular will not seek repayment of the amounts currently made available.

The directors consider that this should enable the company to continue in operational existence for the foreseeable future by meeting its liabilities as they fall due for payment. As with any company placing reliance on other group entities for financial support, the directors acknowledge that there can be no certainty that this support will continue although, at the date of approval of these financial statements, they have no reason to believe that it will not do so.

Based on the undertakings from the parent company the directors believe that it remains appropriate to prepare the financial statements on a going concern basis.

Turnover represents rechargeable costs excluding Value Added Tax in respect of hosting employees.

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.

At each reporting period end date, the company reviews the carrying amounts of its intangible assets 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.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired.

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.

Cash at bank and in hand are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including creditors and loans from fellow group companies, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

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

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 profit and loss account 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.

The costs of short-term employee benefits are recognised as a liability and an expense.

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.

The Company participates in a defined contribution scheme. Defined contribution schemes are externally funded, with the assets of the scheme held separately from those of the Company in separate trustee administered funds and contributions to such schemes are charged to the profit and loss account as they become payable.

The cost of providing benefits under defined benefit plans is determined separately for each plan using the projected unit credit method.

The change in the post employment benefit obligation arising from employee service during the year is recognised as an employee cost. The cost of plan introductions, benefit changes, settlements and curtailments are recognised as an expense in measuring profit or loss in the period in which they arise.

The net interest element is determined by multiplying the post employment benefit obligation by the discount rate, taking into account any changes in post employment benefit obligation during the period as a result of contribution and benefit payments. The net interest is recognised in profit or loss as other finance revenue or cost.

Remeasurement changes comprise to gains and losses on post employment benefit schemes, the effect of the asset ceiling and the return on the post employment benefit obligation excluding amounts included in net interest. These are recognised immediately in other comprehensive income in the period in which they occur and are not reclassified to profit and loss in subsequent periods.

The post employment benefit liability in the balance sheet comprises the total for each plan of the present value of the post employment benefit obligation (using a discount rate based on high quality corporate bonds).

Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the Monte Carlo model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

Government grants towards costs relating to the LEAAST, CAAHS, BicycAL, AL-ULEV and Liberate projects are recognised as income over the periods necessary to match them with related costs and are deducted in reporting the related expense.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience 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 where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

At the year end, an impairment review has been carried out on the recognised intangible assets of the company. As a result, the directors judge that the company is now unlikely to receive future economic benefit on the assets recognised and therefore felt it prudent to impair these assets down to £nil.

All other estimates have been disclosed in the accounting policies (Note 1).

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

Grants received from the UK Government are in respect of the development of sustainable aluminium recycling solutions.

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2018 - 2).

The average monthly number of persons (including directors) employed by the company during the year was:

Their aggregate remuneration comprised:

The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

At the year end an impairment review has been carried out on the recognised intangible assets of the company. As a result, the directors judge that the company is now unlikely to receive future economic benefit on the assets recognised and therefore felt it prudent to impair these assets down to £nil.

Debtors disclosed above are measured at amortised cost.

Amounts owed by group undertakings are unsecured and payable on demand.

The company participates in a group cash pool. On amounts owed by the group cash pool of £1,267,000 (2018: £858,000) interest is receivable at 1 month LIBOR minus 0.25%. All other amounts owed by the group undertakings are interest-free.

Amounts due to group undertakings are unsecured and payable on demand.

Deferred tax is not recognised in respect of tax losses of £4,109,457 (2018: £3,419,000) as it is not probable that they will be recovered against the reversal of deferred tax liabilities or future taxable profits.

The parent company grants equity-settled Restricted Stock Units (RSUs) and Performance Stock Units (PSUs) to selected employees of the company.

These units will vest after three years from the grant date if the following conditions are met:

• A vesting condition under which the beneficiaries must be continuously employed by the Company through the end of the vesting period (3 years); and

• For PSUs granted in 2017, 2018 and 2019, a performance condition, contingent on the Total Stockholder Return (TSR) performance of Constellium over the measurement periods compared to the TSR of a specified group of peer companies. PSUs will ultimately vest, depending on the TSR performance at each testing period, based on a vesting multiplier in a range from 0 to 3;

• For PSUs granted in 2017 and 2018, a performance condition, contingent on the TSR performance of Constellium over the three-year measurement period compared to the TSR of specified indices. PSUs will ultimately vest based on a range from 0 to 2.

The weighted average stock prices at the date of exercise for plans that vested during the year were £Nil (2018 - £Nil).

The options outstanding at 31 December 2019 have no exercise price and a remaining contractual life of between 1 and 3 years.

The weighted average fair value of options granted in the year was determined using the Monte Carlo option pricing model. The Monte Carlo model is considered to apply the most appropriate valuation method due to the options having multiple sources of uncertainty or with complicated features.

The expected life used in the model has been adjusted, based on management’s best estimate, for the effect of non-transferability, exercise restrictions, and behavioural considerations.

Non-vesting conditions and market conditions are taken into account when estimating the fair value of the option at grant date. Service conditions and non-market performance conditions are taken into account by adjusting the number of options expected to vest at each reporting date.

During the year, the company recognised total share-based payment expenses of £279,000 (2018 - £190,000) and employer's NICs of £24,000 which related to equity settled share based payment transactions.

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 charge to profit and loss in respect of defined contribution schemes was £192,000 (2018 - £135,000).

Other post employment benefit schemes

The company has a constructive obligation to continue to make payments for health care insurance premiums for retired key personnel. No other post retirement benefits are provided.

The present value of the obligation has been calculated using the discounted cash flow model, based on life expectancy in the UK, age related insurance premium increases and inflation.

Assumed life expectations on retirement at age 65:

Included in administrative expenses is the release of £142,571 (2018 - £144,462) of the provision relating to premiums paid in the year. Included in finance costs is £15,946 (2018 - £14,122) relating to the unwinding of the discount factor.

The amounts included in the balance sheet arising from the company's obligations in respect of defined benefit plans are as follows:

The defined benefit obligations arise from plans which are wholly unfunded.

Operating lease payments represent rentals payable by the company for employee vehicles. Leases are fixed for 3 years at which point the vehicles are returned to the lessor.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

The ultimate parent undertaking is Constellium S.E., a company incorporated in France.

Constellium S.E. is the parent undertaking of the largest and smallest group of undertakings to consolidate these financial statements at 31 December 2019. The consolidated financial statements of Constellium S.E. are available at the following address:

40-44 rue Washington

75008 Paris

France

COVID-19 Pandemic

The World Health Organisation (WHO) declared a health emergency on 30 January 2020 which escalated to level of global pandemic on 11 March 2020 due to the rapid development of the COVID-19 outbreak. As at the reporting date, the company’s management has assessed the impact on its operations and has taken a series of preventive measures to ensure the health and safety of its employees, customers and wider community. By reacting and implementing these measures in a timely fashion, the company has managed to successfully maintain its operations throughout the pandemic. As a result, the company considers this outbreak to be a non-adjusting post balance sheet event.