SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER 

Pursuant to Rule 13a-16 or 15d-16 

under the Securities Exchange Act of 1934

 

For the Month of June, 2021

 

Commission File Number: 001-37668

 

FERROGLOBE PLC 

(Name of Registrant)

 

5 Fleet Place 

London, EC4M7RD 

(Address of Principal Executive Office)

 

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

 

Form 20-F  x Form 40-F  ¨

 

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

 

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

 

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

 

Yes  ¨ No  x

 

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

 

 

 

 

 

 

2021 Annual General Meeting of Ferroglobe PLC

 

On June 4, 2021, Ferroglobe PLC ("Ferroglobe" or the "Company") released its Notice of 2021 Annual General Meeting ("2021 AGM") and Annual Report and Accounts for the fiscal year ended December 31, 2020. The 2020 AGM will be held at 13:00 British Summer Time (BST) on Tuesday June 29, 2021 at Ferroglobe PLC, 13 Chesterfield Street, London, W1J 5JN, United Kingdom.

 

Exhibits

 

Reference is made to the Exhibit Index included hereto.

 

 

 

 

EXHIBIT INDEX

 

Exhibit
No.
  Description
99.1  Notice of Annual General Meeting dated June 4, 2021
    
99.2  Ferroglobe PLC Annual Report and Accounts for the fiscal year ended December 31, 2020
    
99.3  Extracts from the 2020 Form 20-F
    
99.4  Form of Proxy Card for 2021 Annual General Meeting

 

 

 

 

SIGNATURES

 

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

 

Date: June 10, 2021

 

  FERROGLOBE PLC
   
   
  By: /s/ Marco Levi
    Name:  Marco Levi
    Title:    Chief Executive Officer

 

 

 

 

Exhibit 99.1

 

 

FERROGLOBE PLC

 

(a public limited company having its registered office at 5 Fleet Place, London, EC4M 7RD, United

Kingdom and incorporated in England and Wales with company number 9425113)

 

4 June 2021

 

Dear Shareholder

 

2021 Annual General Meeting of Shareholders of Ferroglobe Plc (“Ferroglobe” or the “Company”)

 

I am pleased to enclose the notice of Ferroglobe’s annual general meeting of its shareholders (the “Annual General Meeting” or “AGM”), to be held at 13:00  (British Summer Time) on Tuesday, 29 June 2021 at the Company’s offices at 13 Chesterfield Street, London, W1J 5JN, United Kingdom. The accompanying notice of Annual General Meeting (“Notice”) describes the meeting, the resolutions you will be asked to consider and vote upon and related matters.

 

Our preference had been to welcome shareholders in person to our 2021 Annual General Meeting, particularly given the constraints we faced in 2020 due to the COVID-19 pandemic. However, at present, gatherings are limited to up to six persons from different households. We are therefore proposing to hold the Annual General Meeting at 13 Chesterfield Street, London, W1J 5JN, United Kingdom with the minimum attendance required to form a quorum. Shareholders will not be permitted to attend the Annual General Meeting in person but can be represented by the Chair of the meeting acting as their proxy. This means that shareholders will not be able to attend the meeting in person and anyone who attempts to do so will be turned away. Given the constantly evolving nature of the situation, should circumstances change before the time of the Annual General Meeting, we want to ensure that we are able to adapt arrangements and to welcome shareholders to the Annual General Meeting, within safety constraints and in accordance with government guidelines. Should we consider that it has become possible to do so, we will provide any updates on our Annual General Meeting on our website at https://investor.ferroglobe.com/annual-general-meetings as early as is possible before the date of the meeting. Please note that if the situation in the U.K. does not change, it will not be possible for you to do so.

 

Your vote is important, regardless of the number of shares you own. We therefore strongly encourage you to place your vote by proxy on the resolutions in the Notice. You may vote via the internet, by phone or by mail by signing, dating and returning your proxy card in the envelope provided. Given the restrictions on attendance, please appoint the “Chairman of the Meeting” as your proxy, rather than another person who will not be permitted to attend. To ensure your vote is counted, please ensure that your proxy vote is submitted through the relevant channels by not later than 00:01 BST on Monday, 28 June 2021.

 

If you have questions on any matter which you would otherwise put to the Company at the AGM, please email them to the Company using the ‘Contact Us’ form on the Company’s corporate website at https://investor.ferroglobe.com/contact-us and we will respond to you directly.

 

Recommendation

 

We consider all resolutions proposed to shareholders at the Annual General Meeting to be standard business. You will find an explanation of each resolution within the Explanatory Notes on pages 3 to 8 of this pack. The Company’s board of directors (the “Board”) considers that all the resolutions to be put to the Annual General Meeting are in the best interests of the Company and its shareholders as a whole and are most likely to promote the success of the Company. The Board unanimously recommends that you vote in favour of each of the proposed resolutions, as the members of the Board intend to do in respect of their beneficial holdings.

 

Thank you for your continued support of Ferroglobe.

 

Yours sincerely,

 

Javier López Madrid

Executive Chairman

 

 

 

 

FERROGLOBE PLC

 

(a public limited company having its registered office at 5 Fleet Place, London, EC4M 7RD, United

Kingdom and incorporated in England and Wales with company number 9425113)

 

NOTICE OF 2021 ANNUAL GENERAL MEETING OF SHAREHOLDERS

 

To the holders of ordinary shares of Ferroglobe Plc (“Ferroglobe” or the “Company”):

 

Notice is hereby given that Ferroglobe’s Annual General Meeting of shareholders will be held on Tuesday, 29 June 2021 at 13:00  (British Summer Time), at the offices of the Company at 13 Chesterfield Street, London, W1J 5JN, United Kingdom (“U.K.”).

 

The business of the Annual General Meeting will be to consider and, if thought fit, pass the resolutions below. All resolutions will be proposed as ordinary resolutions. Explanations of the resolutions are given in the explanatory notes on pages 3 to 8 of this Annual General Meeting notice and additional information on voting at the Annual General Meeting can be found on pages 8 to 9. All resolutions will be put to vote on a poll, where each shareholder has one vote for each share held.

 

Certain of the resolutions that shareholders of the Company will be asked to consider may not be familiar to them because, unlike many companies with shares traded on the NASDAQ Capital Market (“NASDAQ”), the Company is incorporated under the laws of England and Wales and is therefore subject to the U.K. Companies Act 2006 (the “Companies Act”). The Companies Act obliges the Company to propose certain matters to shareholders for approval that would generally not be subject to periodic approval by shareholders of companies incorporated in the United States but would be considered routine items for approval by shareholders of companies incorporated in England and Wales.

 

ORDINARY RESOLUTIONS:

 

U.K. Annual Report and Accounts 2020

 

1THAT the directors’ and auditor’s reports and the accounts of the Company for the financial year ended 31 December 2020 (the “U.K. Annual Report and Accounts”) be received.

 

Directors’ 2020 Remuneration Report

 

2THAT the directors’ annual report on remuneration for the year ended 31 December 2020 (excluding, for the avoidance of doubt, any part of the Directors’ remuneration report containing the directors’ remuneration policy), as set out on pages 30 to 31 and 44 to 55 of the U.K. Annual Report and Accounts be approved.

 

Directors’ Election

 

3THAT Belen Villalonga be elected as a director.

 

4THAT Silvia Villar-Mir de Fuentes be elected as a director.

 

5THAT Nicolas De Santis be elected as a director.

 

6THAT Rafael Barrilero Yarnoz be elected as a director.

 

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Directors’ Re-election

 

7THAT Javier López Madrid be re-elected as a director.

 

8THAT Marco Levi be re-elected as a director.

 

9THAT Marta Amusategui be re-elected as a director

 

10THAT Bruce L. Crockett be re-elected as a director.

 

11THAT Stuart E. Eizenstat be re-elected as a director.

 

12THAT Manuel Garrido y Ruano be re-elected as a director.

 

13THAT Juan Villar-Mir de Fuentes be re-elected as a director.

 

Appointment of Auditor

 

14THAT Deloitte LLP be appointed as auditor of the Company to hold office from the conclusion of the Annual General Meeting until the conclusion of the next general meeting at which accounts are laid before the Company.

 

Remuneration of Auditor

 

15THAT the Audit Committee of the Board be authorised to determine the auditor’s remuneration.

 

Thomas Wiesner

Company Secretary

 

4 June 2021

 

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Explanatory notes to the resolutions

 

Resolution 1 (U.K. Annual Report and Accounts 2020)

 

The Board is required to present at the Annual General Meeting the U.K. Annual Report and Accounts for the financial year ended 31 December 2020, including the Directors’ Report, the Auditor’s Report on the U.K. Annual Report and Accounts and those parts of the Directors’ Remuneration Report which have been audited.

 

Resolution 1 is an advisory vote. In the event that the AGM proceeds as a closed meeting as currently envisaged, shareholders may pose relevant and appropriate questions on the U.K. Annual Report and Accounts (whether addressed to the Board or its auditors) by email to the Company Secretary in advance of the meeting as set out in the letter under cover of which this Notice is sent.

 

Resolution 2 (directors’ annual remuneration report)

 

Resolution 2 is an advisory vote to approve the directors’ annual remuneration report for the year ended 31 December  2020. The directors’ remuneration report is set out on pages 30 to 31 and 44 to 55 of the U.K. Annual Report and Accounts. It provides information on the remuneration of the directors for 2020 and that proposed for 2021; it includes a statement by the Acting Chairman of the Compensation Committee but excludes the directors’ remuneration policy which was approved by shareholders at the AGM in 2019.

 

Resolutions 3 to 13 (directors seeking election or re-election)

 

In line with best practice in corporate governance, all our directors retire annually and, if agreed with them that they will continue in office, they offer themselves for re-election by the shareholders. Any director appointed by the Board since the last Annual General Meeting must stand for election at the next Annual General Meeting. Belen Villalonga, Silvia Villar-Mir de Fuentes, Nicolas De Santis, and Rafael Barrilero Yarnoz were appointed by the Board on 13 May 2021 following the last Annual General Meeting and now stand for election.

 

The biographies of the directors standing for election or re-election at the Annual General Meeting are set out below to enable shareholders to make an informed decision on their election or re-election, as appropriate. The biographies give the date of appointment of each director to the Board or Committees of Ferroglobe, as appropriate. Several of our directors have also held roles at Grupo FerroAtlántica S.A.U. (“FerroAtlántica”) or Globe Speciality Metals, Inc. (“Globe”). On 23 December 2015 FerroAtlántica merged with Globe through corporate transactions (the “Business Combination”) to form the Ferroglobe group of companies under Ferroglobe’s ownership.

 

Javier López Madrid has been Executive Chairman of the Company since 31 December 2016 and Chairman of our Nominations Committee since 1 January 2018. He was first appointed to the Board on 5 February 2015 and was the Company’s Executive Vice-Chairman from 23 December 2015 until 31 December 2016.

 

He has been Chief Executive Officer of Grupo VM since 2008, is a member of the World Economic Forum, Group of Fifty and a member of the Board of several non profit organizations. He is the founder and largest shareholder of Financiera Siacapital and founded Tressis, Spain’s largest independent private bank.

 

Mr. López Madrid holds a Masters in law and business from ICADE University.

 

Marco Levi was appointed Chief Executive Officer of the Company on 13 January 2020 and appointed to its Board of Directors on 15 January 2020.

 

Dr Levi previously served as President and CEO of Alhstrom-Munksjö Oyj, a global fiber materials company listed in Finland, where he led a successful transformation of the business by refocusing its product portfolio towards value-added specialty products. Prior to that, Dr. Levi was Senior Vice President and Business President of the $3 billion emulsion polymers division of chemicals manufacturer Styron, including during the period in which Styron was acquired by Bain Capital from Dow Chemical Company. Dr. Levi previously had spent over twenty-two years at Dow in various departments and roles, ultimately serving as general manager of the emulsion polymers business.

 

Dr. Levi is also a Non-Executive Director of Schweitzer-Mauduit International, Inc, the leading global performance materials company, listed on the New York Stock Exchange. Dr Levi holds a doctorate in industrial chemistry from the Università degli Studi di Milano, Statale, in Italy.

 

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Marta Amusategui was appointed to our Board of Directors as a Non-Executive Director on 12 June 2020, when she also joined the Company’s Audit Committee.

 

Ms. Amusategui has substantial experience in executive and non-executive roles, with a background in business strategy, banking and finance. She is founder and partner of Abrego Capital S.L, providing strategic and financial advisory services, and co-founder and member of the Board of Observatorio Industria 4.0, the professional forum leveraging knowledge and experience to assist businesses, specifically those in the secondary sector, in their digital transformation. She began her career in management consulting and investment banking, serving as Country Executive Officer and General Manager with Bank of America in Spain from 2003 to 2008.

 

Ms Amusategui has been a member of the Board of Eland Private Equity, S.G.E.L.C., S.A., a private equity management company specializing in renewable energies since 2009. She has also held other Board positions in the past, including that of Nasdaq-listed Telvent GIT S.A., the global IT solutions and business information services provider, where she became an independent director from early 2010 until its de-listing following acquisition in December 2011. She is currently a member of McKinsey & Co Spanish Alumni Council.

 

Ms Amusategui holds an Industrial Engineering degree (MSc equivalent) from Universidad Pontificia de Comillas, Madrid, Spain and an MBA from INSEAD, Fontainebleau, France. She holds a number of academic appointments, including lecturing on Managerial Competencies, CUNEF, Madrid, Spain, Startup Financing at the Three Points Digital Business School, Grupo Planeta in Barcelona, Spain, and Risk Management, ICADE Business School, Madrid.

 

Rafael Barrilero Yarnoz was appointed to our Board of Directors as a Non-Executive Director on 13 May 2021.

 

Mr. Barrilero is a senior advisor at Mercer Consulting. Mr. Barrilero Yarnoz has developed his career as a partner of the firm and as a member of the executive committee, leading the advisory talent and reward service for the boards of the main companies and multinationals. He has also led the business throughout the EMEA.

 

Previously, Mr. Barrilero led the Watson Wyatt consulting firm in Madrid. He began his career as a lawyer at Ebro Agricolas focused on labour law, before serving as Ebro’s head of human resources. He has a law degree from Deusto and a Masters in Financial Economics from ICADE, as well as a masters in human resources by Euroforum-INSEAD.

 

Bruce L. Crockett was appointed to our Board of Directors as a Non-Executive Director on 23 December 2015. He has been a member of our Audit Committee from that date and has served on our Compensation Committee since 1 January 2018. On 13 May 2021, he was appointed as our Senior Independent Director.

 

Mr. Crockett holds a number of other Board and governance roles. He has been Chairman of the Invesco Mutual Funds Group Board of Directors and a member of its Audit, Investment and Governance Committees, serving on the board since 1991, as Chair since 2003 and on the Board of predecessor companies from 1978. Since 2013, he has been a member of the Board of Directors and, since 2014, Chair of the Audit Committee of ALPS Property & Casualty Insurance Company.  He has been Chairman of, and a private investor in, Crockett Technologies Associates since 1996. He is a life trustee of the University of Rochester.

 

Mr. Crockett was a member of the Board of Directors of Globe from April 2014 until the closing of the Business Combination, as well as a member of Globe’s Audit Committee. He was formerly President and Chief Executive Officer of COMSAT Corporation from 1992 until 1996 and its President and Chief Operating Officer from 1991 to 1992, holding a number of other operational and financial positions at COMSAT from 1980, including that of Vice President and Chief Financial Officer. He was a member of the Board of Directors of Ace Limited from 1995 until 2012 and of Captaris, Inc. from 2001 until its acquisition in 2008 and its Chairman from 2003 to 2008.

 

Mr. Crockett holds an A.B. degree from the University of Rochester, B.S. degree from the University of Maryland, an MBA from Columbia University and an Honorary Doctor of Law degree from the University of Maryland.

 

Nicolas De Santis was appointed to our Board of Directors as a Non-Executive Director on 13 May 2021.

 

Mr. De Santis is a technology entrepreneur, strategist and author with substantial experience in executive and non-executive roles. Mr. De Santis is currently the Chief Executive Officer of Corporate Vision, a strategy and innovation consultancy and incubator which advises multinational corporations and start-ups globally on digital business transformation (including artificial intelligence and machine learning), business strategy, branding, business model innovation, sustainability strategies and corporate culture.

 

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Previously Mr. De Santis served on the board of publicly traded Lyris Technologies (acquired by AUREA Software in 2015). He began his management career at Landor Associates (now WPP Group). As a technology entrepreneur, he co-founded several high-profile start-ups, including opodo.com, where he served as Chief Marketing Officer.

 

Mr. De Santis is a regular lecturer at business schools and universities on business strategy, global branding and European Affairs, including IE Business School, Madrid and the University of Wyoming. He is the author of Corporate Vision System, Futurize You Company, Innovate Culture & Manage Complexity.

 

Stuart E. Eizenstat was appointed to our Board of Directors as a Non-Executive Director on 23 December 2015. He has been a member of the Company’s Corporate Governance Committee since January 1, 2018 and was appointed to our Nominations Committee on 16 May 2018.

 

Mr. Eizenstat has been a Senior Counsel at Covington & Burling LLP in Washington, D.C. and Head of its international practice since 2001. He has served as a member of the Advisory Boards of GML Ltd. since 2003 and of the Office of Cherifien de Phosphates since 2010. He was a trustee of BlackRock Funds from 2001 until 2018.

 

Mr. Eizenstat was a member of Board of Directors of Globe from 2008 until the closing of the Business Combination and Chair of its Nominating Committee.  He was a member of the Board of Directors of Alcatel-Lucent from 2008 to 2016 and of United Parcel Service from 2005 to 2015. He has had an illustrious political and advisory career, including serving as Special Adviser to Secretary of State Kerry on Holocaust-Era Issues from 2009 to 2017 and Special Representative of the President and Secretary of State on Holocaust Issues during the Clinton administration from 1993 to 2001. He was Deputy Secretary of the United States Department of the Treasury from July 1999 to January 2001, Under Secretary of State for Economic, Business and Agricultural Affairs from 1997 to 1999, Under Secretary of Commerce for International Trade from 1996 to 1997, U.S. Ambassador to the European Union from 1993 to 1996 and Chief Domestic Policy Advisor in the White House to President Carter from 1977 to 1981. He is the author of “Imperfect Justice: Looted Assets, Slave Labor, and the Unfinished Business of World War II”; “The Future of the Jews: How Global Forces are Impacting the Jewish People, Israel, and its Relationship with the United States” and “President Carter: The White House Years.”

 

Mr. Eizenstat holds a B.A. in Political Science, cum laude and Phi Beta Kappa, from the University of North Carolina at Chapel Hill, a J.D. from Harvard Law School and nine honorary doctorate degrees and awards from the United States, French, German, Austrian, Belgian and Israeli governments.

 

Manuel Garrido y Ruano was appointed to our Board of Directors as a Non-Executive Director on 30 May 2017. He was a member of our Nominating and Corporate Governance Committee from 30 May 2017 until 31 December 2017, when he was appointed to our Corporate Governance Committee.

 

Mr. Garrido y Ruano has been Chief Financial Officer of Grupo Villar Mir since 2003 and a member of the Board or on the steering committee of a number of its subsidiaries in the energy, financial, construction and real estate sectors. He is Professor of Communication and Leadership of the Graduate Management Program at CUNEF in Spain. Mr. Garrido y Ruano was a member of the steering committee of FerroAtlántica until 2015, having previously served as its Chief Financial Officer from 1996 to 2003. He worked with McKinsey & Company from 1991 to 1996, specializing in restructuring, business development and turnaround and cost efficiency projects globally.

 

Mr. Garrido y Ruano holds a Masters in Civil Engineering with honors from the Universidad Politecnica de Madrid and an MBA from INSEAD.

 

Belen Villalonga was appointed to our Board of Directors as a Non-Executive Director on 13 May 2021, when she also joined the Company’s Audit Committee.

 

Ms. Villalonga is a Professor of Management and Organizations, a Yamaichi Faculty Fellow, and a Professor of Finance (by courtesy) at New York University’s Stern School of Business. Between 2001 and 2012 she was a faculty member at the Harvard Business School. Her teaching, research, and consulting activities are in the areas of corporate governance, strategy, and finance, with a special focus on family-controlled companies. Her award-winning research has been cited over 15,000 times in scholarly articles and international media outlets.

 

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Ms. Villalonga is an independent director and audit committee member (and former chair) at Grifols, a global leader in hemoderivatives that is part of Spain’s IBEX35 blue-chip index and is also listed on Nasdaq. She is also a member of the board and of the risk, audit, and compensation & talent management committees at Banco Santander International, the Santander group’s private banking subsidiary in the United States. She was also an independent director for 13 years at Acciona, a leader in the renewable energy and infrastructure industries, as well as at Talgo, a high-speed train manufacturer, where she chaired the strategy committee.

 

Ms. Villalonga holds a Ph.D. in Management and an M.A. in Economics from the University of California at Los Angeles, where she was a Fulbright Scholar. She also holds a Ph.D. in Business Economics from the Complutense University of Madrid.

 

Juan Villar-Mir de Fuentes was appointed to our Board of Directors as a Non-Executive Director on 23 December 2015.

 

Mr. Villar-Mir de Fuentes has been Vice Chairman of Inmobiliaria Espacio, S.A since 1996 and Vice Chairman of Grupo Villar Mir, S.A.U. since 1999. He has been a member of the Board of Directors of Obrascon Huarte Lain, S.A. since 1996, a member of the Audit Committee and, later, its Compensation Committee and its Chairman since 2016. He was a Board director and member of the Compensation Committee of Inmobiliaria Colonial, S.A from June 2014 to May 2017. He also was a member of the Board of Directors and of the Compensation Committee of Abertis Infraestructuras, S.A. between 2013 and 2016.

 

Mr. Villar-Mir de Fuentes is Patron and member of the Patronage Council of Fundación Nantik Lum and Fundación Princesa de Gerona.

 

Mr. Villar-Mir holds a Bachelor’s Degree in Business Administration and Economics and Business Management.

 

Silvia Villar-Mir de Fuentes was appointed to our Board of Directors as a Non-Executive Director on 13 May 2021.

 

Mrs. Villar-Mir de Fuentes currently serves on the board of directors of Grupo Villar Mir, a privately held Spanish group with investments across a broad range of diversified industries, which is the beneficial owner of approximately 54% of the Company’s share capital.

 

Mrs. Villar-Mir de Fuentes currently serves on the board of directors of Obrascón Huarte Lain, a Spanish multinational construction and civil engineering company, where she is a member of the audit committee.

 

Mrs. Villar-Mir de Fuentes is a summa cum laude graduate in Economics and Business Studies, with concentration in finance and accounting, from The American College in London, United Kingdom.

 

Resolution 14 (appointment of auditor)

 

At each general meeting at which accounts are laid before the shareholders, the Company is required to appoint an auditor to serve until the next such meeting. Deloitte LLP has served as the Company’s U.K. statutory auditor since 3 February 2016.

 

If this resolution does not receive the affirmative vote of a majority of the shares entitled to vote and represented by proxy or, where appropriate, present in person at the Annual General Meeting, the Board may appoint an auditor to fill the vacancy.

 

Resolution 15 (remuneration of auditor)

 

Under the Companies Act, the remuneration of the Company’s U.K. statutory auditor must be fixed in a general meeting or in such manner as may be determined in a general meeting. The Company asks its shareholders to authorise the Audit Committee to determine the remuneration of Deloitte LLP in its capacity as the Company’s U.K. statutory auditor under the Companies Act.

 

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Further notes:

 

1.Some of the resolutions are items that are required to be approved by shareholders periodically under the Companies Act and generally do not have an analogous requirement under United States laws and regulations. As such, while these resolutions may be familiar and routine to shareholders accustomed to being shareholders of companies incorporated in England and Wales, other shareholders may be less familiar with these routine resolutions and should review and consider each resolution carefully.

 

2.In accordance with the Articles, all resolutions will be taken on a poll. Voting on a poll will mean that each Ordinary Share represented in person or by proxy will be counted in the vote.

 

3.All resolutions will be proposed as ordinary resolutions, which means that such resolutions must be passed by a simple majority of the total voting rights of shareholders who vote on such resolutions, whether in person or by proxy. The results of the shareholders’ vote on resolutions 1 and 2 regarding receipt of the U.K. Annual Report and Accounts and approval of the Directors’ Annual Remuneration Report will not require the Board or any Committee thereof to take (or refrain from taking) any action. The Board values the opinion of shareholders as expressed through such resolutions and will carefully consider the outcome of the votes on resolutions 1 and 2.

 

4.Shareholders of record” are those persons registered in the register of members of the Company in respect of Ordinary Shares at 14:00 (British Summer Time) on 4 May 2021. If, however, Ordinary Shares are held for you in a stock brokerage account or by a broker, bank or other nominee, you are considered the “beneficial owner” of those Ordinary Shares.

 

5.Beneficial owners of Ordinary Shares as at 14:00 (British Summer Time) on 4 May 2021 have the right to direct their broker or other agent on how to vote the Ordinary Shares in their account and, subject as set out on in the Chairman’s letter on page 1 on the holding of a closed meeting, are also invited to attend the Annual General Meeting. However, as beneficial owners are not Shareholders of record of the relevant Ordinary Shares, they may not vote their Ordinary Shares at the Annual General Meeting unless they request and obtain a legal proxy from their broker or agent.

 

6.Any Shareholder of record attending the Annual General Meeting has the right to ask questions. The Company must cause to be answered any questions put by a Shareholder of record attending the meeting relating to the business being dealt with at the Annual General Meeting unless to do so would interfere unduly with the business of the meeting, be undesirable in the interests of the Company or the good order of the meeting, involve the disclosure of confidential information or if the information has already been given on the Company’s website. Please note that such attendance may not be permissible if the meeting is held as a closed meeting. In this case, questions may be posed using the contact link set out in the Chairman’s letter on page 1.

 

7.In accordance with the provisions of the Companies Act, and in accordance with the Articles, a Shareholder of record who is entitled to attend and vote at the Annual General Meeting is entitled to appoint another person as his or her proxy to exercise all or any of his or her rights to attend and to speak and vote at the Annual General Meeting and to appoint more than one proxy in relation to the Annual General Meeting (provided that each proxy is appointed to exercise the rights attached to different Ordinary Shares). Such proxies need not be Shareholders of record, but must attend the Annual General Meeting and vote as the Shareholder of record instructs. Further details regarding the process to appoint a proxy, voting and the deadlines therefor are set out in the “Voting Process and Revocation of Proxies” section below.

 

8.Pursuant to section 527 of the Companies Act 2006, shareholders meeting the threshold requirements set out in that section have the right to require the Company to publish on a website a statement setting out any matter relating to:

 

(a)the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the AGM; or

 

(b)any circumstance connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual accounts and reports were laid in accordance with section 437 of the Companies Act 2006.

 

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The Company may not require the shareholders requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Companies Act 2006. Where the Company is required to place a statement on a website under section 527 of the Companies Act 2006, it must forward the statement to the Company’s auditor no later than the time when it makes the statement available on the website. The business which may be dealt with at the AGM includes any statement that the Company has been required under section 527 of the Companies Act 2006 to publish on a website.

 

9.The results of the polls taken on the resolutions at the Annual General Meeting and any other information required by the Companies Act will be made available on the Company’s website as soon as reasonably practicable following the AGM and for a period of two years thereafter.

 

10.A copy of this Annual General Meeting notice can be found at the Company’s website, www.ferroglobe.com.

 

11.Recipients of this notice and the accompanying materials may not use any electronic address provided in this notice or such materials to communicate with the Company for any purposes other than those expressly stated.

 

12.In the event that the Annual General Meeting is not held as a closed meeting (as to which see the Chairman’s letter in page 1):

 

12.1To be admitted to the Annual General Meeting, please bring the Admission Ticket that you will have received through the post. You will need to be able to provide your photo identification at the registration desk.

 

12.2On arrival at the Annual General Meeting venue, all those entitled to vote will be required to register and collect a poll card. In order to facilitate these arrangements, please arrive at the Annual General Meeting venue in good time. You will be given instructions on how to complete your poll card at the Annual General Meeting.

 

VOTING PROCESS AND REVOCATION OF PROXIES

 

If you are a Shareholder of record, there are three ways to vote by proxy:

 

By Internet – You can vote over the Internet at www.envisionreports.com/GSM by following the instructions at such web address. You will need to enter your control number, which is a 15-digit number located in a box on your proxy card. We encourage you to vote by Internet even if you received this Annual General Meeting notice in the mail.

 

By Telephone – You may vote and submit your proxy by calling toll-free 1-800-652-8683 in the United States and providing your control number, which is a 15-digit number located in a box on your proxy card.

 

By Mail – If you received this Annual General Meeting notice by mail or if you requested paper copies of the Annual General Meeting notice, you can vote by mail by marking, dating, signing and returning the proxy card in the postage-paid envelope.

 

Telephone and Internet voting facilities for Shareholders of record will be available 24 hours a day and will close at 00:01 (British Summer Time) on Monday, 28 June 2021. Submitting your proxy by any of these methods will not affect your ability to attend the Annual General Meeting in-person and vote at the Annual General Meeting.

 

If your shares are held in “street name”, meaning you are a beneficial owner with your shares held through a bank or brokerage firm, you will receive instructions from your bank or brokerage firm, which is the Shareholder of record of your shares. You must follow the instructions of the Shareholder of record in order for your shares to be voted. Telephone and Internet voting may also be offered to shareholders owning shares through certain banks and brokers, according to their individual policies.

 

The Company has retained Computershare to receive and tabulate the proxies.

 

If you submit proxy voting instructions and direct how your shares will be voted, the individuals named as proxies must vote your shares in the manner you indicate.

 

A shareholder who has given a proxy may revoke it at any time before it is exercised at the Annual General Meeting by:

 

attending the Annual General Meeting and voting in person (assuming it is not held as a closed meeting);

 

8

 

voting again by Internet or Telephone (only the last vote cast by each Shareholder of record will be counted), provided that the shareholder does so before 00:01 (British Summer Time) on Monday, 28 June 2021.

 

delivering a written notice, at the address given below, bearing a date later than that indicated on the proxy card or the date you voted by Internet or Telephone, but prior to the date of the Annual General Meeting, stating that the proxy is revoked; or

 

signing and delivering a subsequently dated proxy card prior to the vote at the Annual General Meeting.

 

You should send any written notice or new proxy card to Proxy Services, c/o Computershare Investor Services, PO Box 30202 College Station, TX 77842-9909, USA.

 

If you are a registered shareholder you may request a new proxy card by calling Computershare at 1-866-490-6057 if calling from the United States, or +1-781-575-2780 from outside the United States, or you may also send a request via email to web.queries@computershare.com.

 

ANY SHAREHOLDER OWNING SHARES IN STREET NAME MAY CHANGE OR REVOKE PREVIOUSLY GIVEN VOTING INSTRUCTIONS BY CONTACTING THE BANK OR BROKERAGE FIRM HOLDING THE SHARES OR BY OBTAINING A LEGAL PROXY FROM SUCH BANK OR BROKERAGE FIRM AND – provided that the meeting is not held as a closed meeting, as to which see the Chairman’s letter on page 1 - VOTING IN PERSON AT THE ANNUAL GENERAL MEETING. YOUR LAST VOTE, PRIOR TO OR AT THE ANNUAL GENERAL MEETING, IS THE VOTE THAT WILL BE COUNTED.

 

Location of Annual General Meeting:

 

 

9

 

DOCUMENTS AVAILABLE FOR INSPECTION

 

Forms of appointment of the Non-Executive Directors, as well as a memorandum setting out the terms of the Executive Director’s contracts, will be available for inspection at the Company’s registered office during normal business hours and at the place of the Annual General Meeting from at least 15 minutes prior to the start of the meeting until the end of the Annual General Meeting.

 

By order of the Board,

 

Thomas Wiesner

Company Secretary

 

4 June 2021

 

10

 

Exhibit 99.2

 

 

 

Ferroglobe PLC 

Annual Report and Accounts 2020

 

 

 

 

Company Registration No. 09425113

 

Ferroglobe PLC

 

Annual Report and Financial Statements

 

Year ended 31 December 2020

 

 

 

 

Ferroglobe PLC

 

Annual report and financial statements 2020

 

Contents Page No.
Glossary and definitions 1
   
Officers and professional advisers 4
   
Introduction 5
   
Chairman’s letter to shareholders 6
   
Strategic report (including section 172 statement) 9
   
Directors’ report 17
   
The Board of Directors 24
   
Directors’ remuneration report 30
   
Independent auditor’s report to the members of Ferroglobe PLC 56
   
Consolidated financial statements 65
   
Notes to the consolidated financial statements 71
   
Parent company financial statements 158
   
Notes to the parent company financial statements 160
   
Appendix 1 — Non-IFRS financial metrics 167

 

 

 

 

Ferroglobe PLC

 

GLOSSARY AND DEFINITIONS

 

Unless the context requires otherwise, the following definitions apply throughout this U.K. Annual Report (including the Appendix, save as set out below):

 

“2020” the financial year ended 31 December 2020;
   
“2019 the financial year ended 31 December 2019;
   
“2021 AGM the Annual General Meeting of the Company, to be held in 2021;
   
“2020 Form 20-F” the Company’s Form 20-F for the fiscal year ended 31 December 2020;
   
“ABL RCF”

the Credit and Security Agreement for a new $100 million North American asset-based revolving credit facility dated as of 11 October 2019, entered into between Globe and QSIP Canada ULC, as borrowers, and PNC Bank, N.A., as lender and settled in March 2021;

   
“ABL Revolver”

credit available under the ABL RCF;

   
“Adjusted EBITDA” earnings before interest, tax, depreciation and amortisation, adjusted in accordance with Company’s adjustments announced as part of its earnings reports. Alternative Performance Measures are reconciled at Appendix 1;
   
“Alternative Performance Measures” the non-IFRS financial metrics reconciled at Appendix 1;
   
“Aon” Aon Plc;
   
“ARA”

this annual report and accounts for the financial year ended 31 December 2020;

   
“Articles” the Articles of Association of the Company, from time to time;
   
“Auditor” Deloitte LLP, the Company’s independent U.K. statutory auditor;
   
“Aurinka” Aurinka Photovoltaic Group, S.L.;
   
“Blue Power” Blue Power Corporation, S.L.;
   
“Board” the Company’s board of directors;
   
“Business Combination” the business combination of Globe and FerroAtlántica as the Company’s wholly owned subsidiaries on 23 December 2015;
   
“Business Combination Agreement” the definitive transaction agreement entered into on 23 February 2015 (as amended and restated on 5 May 2015) by, among others, the Company, Grupo VM, FerroAtlántica and Globe;
   
“Capital” net debt plus total equity. Alternative Performance Measures are reconciled at Appendix 1;
   
“CEO”, “Chief Executive Officer” or “Chief Executive the Chief Executive Officer of the Company, or where the context requires, of the relevant company or organization;
   
“Companies Act” the U.K. Companies Act 2006;

 

1 

 

 

“Company” or “Ferroglobe” Ferroglobe PLC, a company incorporated in England and Wales with registered number 09425113 and whose registered office is at 5 Fleet Place, London EC4M 7RD, United Kingdom or, where the context requires, the Group;
   
“Consolidated Financial Statements” (save in the supplemental attachment when it will have the meaning given below) these consolidated financial statements for the year ended 31 December  2020
   
“Compensation Committee” the compensation committee of the Company;
   
“EBITDA” earnings before interest, tax, depreciation and amortisation;
   
“EIP the Ferroglobe PLC Equity Incentive Plan, adopted by the Board on 29 May 2016 and approved by shareholders on 29 June 2016;
   
“EU” the European Union;
   
“Exchange Act” the U.S. Securities Exchange Act of 1934 (as amended);
   
“Executive Chairman” the executive chairman of the Company;
   
“Executive Directors” or “Executives”

the executive directors of the Company;

   
“FerroAtlántica” or “Grupo FerroAtlántica” or “Predecessor” Grupo FerroAtlántica, S.A.U. a joint stock company organised under the laws of Spain, including (where the context so requires), its subsidiaries and subsidiary undertakings;
   
“Free cash-flow” operating cash-flow less property, plant and equipment cash flows. Alternative Performance Measures are reconciled at Appendix 1;
   
“Globe” or “GSM” Globe Specialty Metals, Inc., a Delaware corporation, including (whether the context requires) its subsidiaries and subsidiary undertakings;
   
“Group” the Company and its subsidiaries;
   
“Grupo VM” Grupo Villar Mir, S.A.U.;
   
“IASB” International Accounting Standards Board;
   
“IFRS” International Financial Reporting Standards;
   
“Indenture” the indenture, dated as of 15 February 2017, among Ferroglobe and Globe as co-issuers, certain subsidiaries of Ferroglobe as guarantors, and Wilmington Trust, National Association as trustee, registrar, transfer agent and paying agent;
   
“KPI” key performance indicator;
   
“LIBOR”

the basic rate of interest payable in respect of the drawn amount of the ABL Revolver, interest under which is to be paid at the rate of LIBOR plus the applicable margin;

   
“NASDAQ” the NASDAQ Global Select Market;
   
“NASDAQ Rules” the NASDAQ Stock Market Rules;
   
“Net debt” bank borrowings, debt instruments, obligations under finance leases, and other financial liabilities, less cash and cash equivalents. Alternative Performance Measures are reconciled at Appendix 1;

 

2 

 

 

“Non-Executive Directors” or “NEDs” the non-executive directors of the Company;
   
“Notes” $350,000,000 aggregate principal amount of Senior Notes due 2022;
   
“Ordinary Shares” the ordinary shares of $0.01 each in the capital of the Company;
   
“Policy” the directors’ remuneration policy in force from time to time;
   
“Revolving Credit Facility Agreement” or “RCF

the credit agreement, dated 27 February 2018, as amended on or about 31 October 2018 and 22 February 2019 among Ferroglobe PLC, as Borrower, certain subsidiaries of Ferroglobe PLC from time to time party thereto as guarantors, the financial institutions from time to time party thereto as lenders, PNC Bank, National Association, as administrative agent, issuing lender and swing loan lender, PNC Capital Markets LLC, Citizens Bank, National Association and BMO Capital Markets Corp., as joint legal arrangers and bookrunners, Citizens Bank, National Association, as syndication agent, and BMO Capital Markets Corp., as documentation agent, as amended from time to time;

   
“Revolving Credit Facility” borrowings available under the RCF;
   
“SHA” the amended and restated shareholders agreement between Group VM and the Company dated 22 November 2017, as amended on 23 January 2018;
   
“SEC” the U.S. Securities and Exchange Commission;
   
“SOX” the U.S. Sarbanes-Oxley Act of 2002;
   
“SPE” Ferrous Receivables DAC, a special purpose entity domiciled and incorporated in Ireland to which trade receivables generated by the Company’s subsidiaries in the United States, Canada, Spain and France were sold;
   
“U.K.” the United Kingdom of Great Britain and Northern Ireland;
   
“U.S.” the United States of America;
   
“Working capital” inventories and trade and other receivables, less trade and other payables. Alternative Performance Measures are reconciled at Appendix 1;
   
“$” U.S. dollars.
 
In the separate attachment hereto only (and for the avoidance of doubt, not in the remainder of this U.K. Annual Report), the following phrase has the meaning given below:
   
“Consolidated Financial Statements” the audited consolidated financial statements of Ferroglobe and its subsidiaries as of 31 December 2020, 2019 and 2018 and for each of the years ended 31 December 2020, 2019 and 2018, including the related notes thereto, prepared in accordance with IFRS, as filed  on SEC Form 20-F.

 

3 

 

 

Ferroglobe PLC

 

Report and financial statements 2020

Officers and professional advisers

 

Directors  
J López Madrid  
M Amusategui (appointed 12 June 2020)
D G Barger  
B L Crockett  
S E Eizenstat  

M Garrido y Ruano

J M Alapont

(resigned 30 April 2021)
G Hamilton (resigned 31 May 2020)
M Levi (appointed 15 January 2020)
P Larrea Paguaga (resigned 10 January 2020)
J Villar-Mir de Fuentes  
Company Secretary  

Dorcas Murray

Thomas Wiesner

(resigned 30 October 2020)

(appointed 30 October 2020)

Registered Address  
5 Fleet Place  
London  
EC4M 7RD  
Auditor  
Deloitte LLP  
Statutory Auditor  

1 New St. Square

EC4A 3HQ London

 

 

4 

 

 

Ferroglobe PLC

 

Introduction

 

Ferroglobe PLC is a public limited company incorporated under the laws of England and Wales under Company Number: 09425113. Ferroglobe (encompassing its subsidiaries Globe and FerroAtlántica) is a global, leading producer of silicon metals and silicon and manganese based alloys, with a geographical reach building on Globe’s footprint in North America and FerroAtlántica’s footprint in Europe.

 

The Company was incorporated in 2015 and its Ordinary Shares are listed for trading on the NASDAQ in U.S. dollars under the symbol “GSM”.

 

The Company is subject to disclosure obligations in the U.S. and the U.K. While some of these disclosure requirements overlap or are otherwise similar, some differ and require distinct disclosures. Pursuant to the requirements of the Companies Act, this document includes our directors’ strategic report, directors’ report, remuneration report and required financial information (including our statutory accounts and statutory auditor’s report for the reporting period commencing 1 January 2020 and ending 31 December 2020), which together comprise our U.K. annual reports and accounts for the period ended 31 December 2020 (the “U.K. Annual Report”).

 

We are also subject to the information and reporting requirements of the Exchange Act, regulations and other guidance issued by the SEC and the NASDAQ listing standards applicable to foreign private issuers. In accordance with the Exchange Act, we are required to file annual and periodic reports and other information with the SEC, including, without limitation, our 2020 Form 20-F. Certain other announcements made by the Company are furnished to the SEC on Form 6-K. Our status as a foreign private issuer requires the Company to comply with various corporate governance practices under the SOX, as well as related rules subsequently implemented by the SEC. In addition, NASDAQ Rules permit foreign private issuers to follow home country practice in lieu of the NASDAQ corporate governance standards, subject to certain exemptions and except to the extent that such exemptions would be contrary to U.S. federal securities law.

 

We have provided as a separate attachment to the U.K. Annual Report extracts from the 2020 Form 20-F to assist shareholders in assessing the Group’s performance and results. This attachment does not form part of the financial statements. Investors may obtain the full 2020 Form 20-F, without charge, from the SEC at the SEC’s website at www.sec.gov or from our website at www.ferroglobe.com. Unless expressly stated otherwise, the information on our website is not part of this U.K. Annual Report and is not incorporated by reference herein.

 

The capitalised terms used throughout the U.K. Annual Report are defined in the Glossary and Definitions section of this U.K. Annual Report unless otherwise indicated. In the following text, the terms “we,” “our,” “the Company”, “our Company” and “us” may refer, as the context requires, to Ferroglobe or collectively to Ferroglobe and its subsidiaries. Throughout the U.K. Annual Report, rounding has been applied and numbers given and totals aggregated may differ in consequence.

 

5 

 

 

Chairman’s Letter to Shareholders

 

Dear fellow shareholders,

 

2020 was an extraordinary year for all of us. The worst pandemic in over a century has caused worldwide disruption and cost many lives. While the positive news around vaccinations gives us all hope for the future, the road to recovery remains uncertain.

 

The unprecedented impact of COVID-19 was felt throughout our Company and the broader value chain into which we are integrated. As a result, our sales declined 29% in 2020 compared with 2019. Despite the challenges caused by the pandemic we returned to positive adjusted EBITDA during Q4 2020. This achievement is the result of our team’s ability to make quick and decisive decisions on how we operated our assets, reduced costs, and managed cash throughout the year.

 

2020 was also a difficult year for our global workforce. The Board and I are extremely proud of their commitment and resilience which allowed us to operate the business and navigate the challenges we faced. Throughout the year, we forged ahead on the execution of a number of important initiatives centered on platform optimization and continued cost cutting. These efforts supported our ability to offset the precipitous decline in shipments across our product portfolio.

 

Strategic Turnaround Plan

 

Our financial performance over the past few years has reinforced the need for a comprehensive review of the business through a new lens. With the assistance of a top-tier consultant firm we conducted a deep and broad evaluation of our Company throughout 2020, with the goal of designing a strategic plan focused on bolstering the long-term competitiveness of the business and returning the Company to profitability by fundamentally changing the way we operate, both operationally and financially. This multi-year turnaround plan developed by management, and subsequently approved by the Board, impacts all the functional areas of the business as we drive change to ensure competitiveness throughout the cycle. In aggregate we target $180 million of EBITDA improvement supported by specific actions across a number of value creation areas: commercial excellence, footprint optimization, continuous plant efficiency, centralized procurement and reduction of corporate overheads. Additionally, we are targeting cash release of $70 million during this period through continued improvement of working capital management.

 

The majority of 2020 was spent on designing this plan and preparing for its execution. As of the first quarter of 2021, we are fully entrenched in the execution of the plan across all value creation areas. Although we are in the early days of execution of this plan, we are excited about the results already achieved. Equally, we are encouraged that the new strategy has reinvigorated our workforce as we collectively work towards a strong and more competitive Company that will create value for all stakeholders.

 

Comprehensive Financing Well Advanced

 

Over the past few years, we have commented on various financing and refinancing opportunities which we have been evaluating. However, as the operating environment evolved and our cash needs changed, we have been able to delay raising incremental capital. In 2020, we engaged with several financing parties with the goal of refinancing our existing senior unsecured notes, as well as raising incremental capital to help fund the execution of the transformation plan. The comprehensive financing has progressed well with a substantive support as evidenced by signing of a lock-up agreement in March 2021, and we expect to close the transaction in the third quarter of 2021. The closing of this refinancing is paramount for the implementation of the strategic turnaround plan, the extension of the maturity of our long-term financing, and enhancing the financial position of the Group.

 

2020 also saw the successful refinancing of our prior European accounts receivable securitization facility with a new factoring facility in Europe. The new facility has improved advance rates and utilises a different structure compared to the prior program which resulted in a cash release of approximately $19 million at closing and significantly lowered our financing costs.

 

6 

 

 

Health and Safety

 

Safety is always a priority for our business and during the year we continued to make improvements that will enhance our health and safety performance. We made several improvements to our policies and processes not only to help us manage the risks associated with the pandemic, but to ensure we protect our people from the risks inherent to our business. We created a new role at corporate level that is responsible for coordinating our safety management activity, training, and reporting. The new role will provide improved oversight of safety across the organization and ensure we deploy our resources effectively to meet our goal of zero harm. Whilst we still have a long journey to achieve the goal of zero harm, it is my priority that each employee returns home safe and healthy at the end of every working day.

 

Performance in 2020

 

The conditions for a gradual recovery were present at the start of 2020; however, the pandemic limited the improvement we expected. Across the year as a whole, we experienced a decline in revenue of 29%, from $1,615 million in 2019 to $1,144 million in 2020, while an operating loss of $355.6 million in 2019 improved to an operating loss of $184.4m in 2020, including impairment charges of $73.3 million related to the value of goodwill with respect to the Company’s US operations. There is more on the Company’s performance in respect of its key performance indicators in 2020 at page 167.

 

To adapt to the challenging operating environment in 2020 we implemented a number of capacity curtailments at certain locations during the second and third quarters. As market conditions began to improve during the middle part of the year, we restarted production at a number of these plants while retaining the ability to increase capacity as the market improves.

 

In addition to a number of cost saving initiatives throughout year we focused on reducing working capital. As part of our cash generating initiatives, we reduced working capital by $15 million in the fourth quarter.

 

As the year drew to a close, we benefited from improvements in both sales volumes and prices. The momentum seen in the fourth quarter has carried over into 2021 with both US and European indices showing solid improvement.

 

Board and Senior Management Changes

 

In January 2020, Marco Levi joined us as our new CEO. Marco is an exceptional leader, with over 30 years’ experience in process manufacturing industries, including chemicals, plastics, rubber and paper. He has a proven track record of successful business transformations and demonstrable talent in leading global, asset-rich, materials technology companies through cyclical downturns to sustainable growth and profitability. With Marco as the latest and key addition to our management team, I am confident we have the leadership team we need to address the challenges and opportunities we face in the months and years ahead.

 

As CEO, Marco succeeded Pedro Larrea Paguaga who stepped down in January 2020 to pursue other opportunities. The Board and I are grateful to Pedro for his commitment during his time in the business.

 

On 2 June 2020 we announced the resignation of Greger Hamilton from our Board of Directors on 31 May 2020 and that Don Barger would not stand for re-election at the Company’s 2020 AGM. Both Don and Greger served on the Board since the Company was formed in 2015. Greger was a key driver of the significant improvements we have seen to our control environment and Don oversaw a number of key remuneration initiatives, including the appointment of Marco Levi our CEO and Beatriz García-Cos our CFO. Don also oversaw the revision of our directors’ remuneration policy approved at the annual general meeting in 2019, which gained the support of over 90% of the shareholders who voted at that meeting. The Board and I are very grateful to Greger and Don for their respective contributions and wish both well for the future.

 

7 

 

 

Looking Ahead

 

We have set out on our journey to re-define the strategic vision and plan for the Company. The COVID-19 pandemic raises a number of uncertainties and risks but also presents us with opportunities as the global markets flex and settle. We will continue to monitor the situation closely and remain focused on our priority of recovering value for shareholders: strengthening our balance sheet, continuing to drive down cost and generating cash, with a firm belief in the underlying value of our business and asset base, the strength of our refreshed leadership team and the unique flexibility that our global production platform provides to take advantage of market recovery as it emerges.

 

I would like to finish by expressing my gratitude to our loyal and hard-working employees across the Group and to our customers, suppliers and other partners for their valued contributions. I would also like to thank you, our shareholders, for your continued support.

 

Javier López Madrid

Executive Chairman

 

8 

 

 

Strategic report

 

This strategic report for the financial year to 31 December 2020 has been prepared in compliance with Section 414C of the Companies Act to provide an overview of the Group’s business and strategy. It contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

 

For a supplementary description of our business (including our model, strategy and competitive strengths), risks associated with our business and our results of operations, see the following sections of the 2020 Form 20-F: Part I, Item 3, Section D, Risk factors; Item 4, Information on the Company; Item 5, Operating and Financial Review and Prospects; Item 7, Major Shareholders and Related Party Transactions and Item 11, Quantitative and Qualitative Disclosures About Market Risk. These sections are set out in a separate attachment to this U.K. Annual Report and do not form part of the financial statements.

 

Nature of the business

 

Ferroglobe is a global leader in the growing silicon and specialty metals industry with an expansive geographical reach. The Company is one of the world’s largest producers of silicon metal, silicon-based alloys and manganese-based alloys and has quartz mining activities, low-ash metallurgical quality coal mining activities and interests in hydroelectric power across the globe, with operating units in 9 countries across 5 continents.

 

The Group sells its products to a diverse base of customers worldwide, including manufacturers of aluminium, silicone compounds used in the chemical industry, ductile iron, automotive parts, photovoltaic (solar) cells, electronic semiconductors and steel and are key elements in the manufacture of a wide range of industrial and consumer products. Supplies to customers are made from our production centres in North America, Europe, South America, Africa and Asia. The Group’s manufacturing platform is flexible, enabling it to switch production between plants and products to enhance profitability and meet customer requirements. The Group’s ownership of sources of critical raw materials also contributes to reduced operating costs. Ferroglobe recycles and sells most of the by-products generated in its production processes.

 

Business model and strategy

 

We believe our vertically integrated business model and ownership of raw materials provides us with a cost advantage over our competitors. We are not reliant on any single supplier for our raw materials and currently own sources of these materials, which provides us with stable, long-term access to critical raw materials for our production processes and so enhances operational and financial stability.

 

As part of the strategy for delivering the objectives of the Company, the Group develops new products or new specifications on a continual basis. As a consequence of these efforts, investments may be made in facilities that allow the production of new products, such as higher-grade silicon metal, solar grade silicon metal or new foundry products.

 

The Group is continually pursuing growth opportunities by the acquisition of industrial facilities or companies that operate in the same sector and products and which are deemed to be potentially valuable for the Group.

 

Throughout 2020 we conducted a deep and broad evaluation of our Company with the goal of designing a strategic plan focused on bolstering the long term competitiveness of the business and returning the Company to profitability by fundamentally changing the way we operate, both operationally and financially. The multi-year turnaround plan we developed essentially impacts all the functional areas of our Company as we seek to drive changes that ensure competitiveness throughout the cycle. The key value drivers of our strategic plan are the following:

 

·Footprint optimization: One of the Company’s core advantages is our large and diverse production platform. While our asset footprint provides flexibility, at times we are restricted in our ability to quickly adapt to changing market conditions due to inherent constraints in curtailing capacity, particularly for shorter durations. Going forward, our goal is to ensure that the operating platform is more flexible and modular so shifts in production, based on needs and relative costs, are incorporated swiftly. Through this value creation driver we aim to shift our capacity footprint by optimizing production to the most competitive assets.

 

9 

 

 

·Continuous plant efficiency: We will continue to build on the success of our existing key technical metrics (KTM) programme, which consists of specific initiatives aimed at enhancing our process, minimizing waste, and improving the overall efficiency to drive down costs. The Company maintains a pipeline of initiatives developed through the sharing of best practices amongst our numerous sites and through new improvements identified by our research and development team. Under the strategic plan we have formalized the manner in which we execute such initiatives by creating operational and technical teams with the expertise critical for implementation. Furthermore, we are developing tools to track our key performance indicators in an ongoing effort to improve furnace level performance.

·Commercial excellence: We are focused on the design and delivery of commercial best practices that maximize profitable revenue, including programs aimed at consistently improve pricing, salesforce effectiveness, product mix, customer selection and focus. By organizing and analyzing client profitability we seek to optimize commercial opportunities. Our focus will be on portfolio and account management, ensuring we have the proper customer relationship management tools and clearly defined objectives for each of our customers. Front line management will require us to re-design our commercial coverage and operating model in-line with our product and customer priorities. On the pricing side, we seek to enhance communication and transparency amongst our internal teams to realize target margins on each sale.

·Centralized purchasing: We are reshaping the organization so that purchasing of many consumables can be done centrally and to support a procurement culture centered on buying better and spending better. This will enable us to improve its tracking of needs, enhance our ability to schedule purchases and enable us to benefit from bulk purchases. Buying better is a supply-led effort that focuses on price and volume allocation, negotiating prices and terms, managing price risks, pooling volumes and contracts, shifting volumes to best-price suppliers and leveraging procurement networks. Spending better is an operation-led effort to control demand, enforce compliance, reduce complexity, and perform value engineering to improve efficient spending. Through the principles of buying better and spending better, we aim to attain more than just cost reduction. Through the new organization, we seek to reduce supply chain risk, supporting continuous quality and service improvement, fostering better decision-making about suppliers and optimizing resource allocation

·Selling, general and administration & corporate overhead reduction: During our corporate review conducted in 2020, we identified significant opportunity for further cost improvement through permanent cost-cutting at the our plants, as well as at corporate levels. By tracking these costs vigorously and increasing accountability, we aim to bolster the overall cost structure at various levels. Through this value creation driver, we aim to create a culture focused on cost control and disciplines for deploying best practices to drive sound spending decisions without compromising our overall performance.

·Working capital improvement: Improving net working capital performance requires cross-functional cooperation and alignment. By increasing the collaboration amongst the global team, and having oversight and controls at the corporate level, we aim to make a significant improvement in our overall cash conversion cycle on sustainable basis. This value creation area touches on inventory management of our raw materials and finished goods, as well as monitoring and improving terms with both our suppliers and customers, commensurate with market levels.

·There is more information on the Group’s business, risks, key financials and organizational structure in Part I, Item 3, Item 4, Item 5 Information on the Company of the 2020 Form 20-F (as set out in the separate attachment to this U.K. Annual Report and not forming part of our financial statements). This, together with the information in this Strategic Report, and the Operating and Financial Review and Prospects section of the 2020 Form 20-F included in the separate attachment provides a fair review of the Company’s business and its development and performance during 2020.

 

Key Risks

 

We operate in a highly competitive industry.

 

The silicon metal market and the silicon based and manganese based alloys markets are global, capital intensive and highly competitive. Our competitors may have greater financial resources, as well as other strategic advantages, to maintain, improve and possibly expand their facilities, and, as a result, they may be better positioned than we are to adapt to changes in the industry or the global economy. Advantages that our competitors have over us from time to time, new entrants that increase competition in our industry, and increases in the use of substitutes for certain of our products could have a material adverse effect on our business, results of operations and financial condition.

 

10 

 

 

The proposed restructuring may not be completed, and even if it is completed, we expect to incur significant costs in implementing it.

 

We are proposing to implement a restructuring which contemplates the occurrence of three inter-conditional transactions:

 

the issuance of $60 million of new senior secured notes due June 30, 2025 (the “Super Senior Notes”);

 

the issuance of at least $40 million in new equity of Ferroglobe; and

 

the extension of the maturity to December 31, 2025 and amendment to other terms of the Notes.

 

A committee of holders of the Notes (the “Ad Hoc Group Noteholders”) has agreed to backstop the issuance of $60 million of Super Senior Notes and an affiliate of Tyrus Capital has agreed to backstop the issuance of up to $40 million in new equity of Ferroglobe. Such issuances are subject to certain conditions, and there can be no assurance that the proposed restructuring will be completed. Moreover, the extension of the maturity and amendment to other terms of the Notes will be implemented by an exchange offer, which will require the support of substantially all of the holders of the Notes. As of the date of this annual report, holders holding approximately 96% in aggregate principal amount of Notes have signed a lock-up agreement (the “Lock-Up Agreement”) with the Ad Hoc Group Noteholders, Grupo VM and affiliates of Tyrus Capital to support the proposed restructuring as set out in the Lock-Up Agreement, but there can be no assurance that such support will not be withdrawn prior to implementation of the proposed restructuring or that, if withdrawn, additional consents required to implement the proposed restructuring will be obtained. As a result of these uncertainties, we cannot assure you that the proposed restructuring will be implemented.

 

If we fail to implement the proposed restructuring, we will need to contemplate other means to restructure our balance sheet in light of the Notes maturing in 2022. Failure to implement a balance sheet restructuring will likely have a material adverse effect on our business, results of operation and financial condition.

 

Our business is particularly sensitive to increases in energy costs, which could materially increase our cost of production.

 

Electricity is one of our largest production components. The price of electricity is determined in the applicable domestic jurisdiction and is influenced both by supply and demand dynamics and by domestic regulations. Changes in local energy policy, increased costs due to scarcity of energy supply, climate conditions, the termination or non-renewal of any of our power purchase contracts and other factors may affect the price of electricity supplied to our plants and adversely affect our results of operations and financial conditions.

 

Because electricity is indispensable to our operations and accounts for a high percentage of our production costs, we are particularly vulnerable to supply limitations and cost fluctuations in energy markets.

 

Our business benefits from antidumping and countervailing duty orders and laws that protect our products by imposing special duties on unfairly traded imports from certain countries. If these duties or laws change, certain foreign competitors might be able to compete more effectively.

 

The current antidumping and countervailing duty orders may not remain in effect and continue to be enforced from year to year, the products and countries now covered by orders may no longer be covered, and duties may not continue to be assessed at the same rates. In the United States, rates of duty can change as a result of “administrative reviews” of antidumping and countervailing duty orders. These orders can also be revoked as a result of periodic “sunset reviews,” which determine whether the orders will continue to apply to imports from particular countries. Antidumping and countervailing duties in the European Union and Canada are also subject to periodic reviews. In the European Union and in Canada, such reviews can include interim reviews, expiry reviews and other types of proceedings that may result in changes in rates of duty or termination of the duties.

 

Changes in any of these factors could adversely affect our business and profitability. Finally, at times, in filing trade actions, we arguably act against the interests of our customers. Certain of our customers may not continue to do business with us as a result.

 

11 

 

 

Our business operations may be impacted by various types of claims, lawsuits, and other contingent obligations.

 

We are involved in various legal and regulatory proceedings including those that arise in the ordinary course of our business. We estimate such potential claims and contingent liabilities and, where appropriate, record provisions to address these contingent liabilities. The ultimate outcome of the legal matters currently pending against our Company is uncertain, and although such claims, lawsuits and other legal matters are not expected individually to have a material adverse effect, such matters in the aggregate could have a material adverse effect on our business, results of operations and financial condition. Furthermore, we could, in the future, be subject to judgments or enter into settlements of lawsuits and claims that could have a material adverse effect on our results of operations in any particular period. While we maintain insurance coverage in respect of certain risks and liabilities, we may not be able to obtain such insurance on acceptable terms in the future, if at all, and any such insurance may not provide adequate coverage against such claims.

 

Key Performance Indicators (“KPIs”)

 

The Board considered that the most important KPIs during 2020 were those set out below. Certain of these KPIs will also be a core area of focus during 2021.

 

At the corporate level, the principal KPIs that we use for measuring the overall performance of our business are:

 

Adjusted EBITDA

 

Adjusted EBITDA margin

 

Working capital improvement

 

Free cash-flow

 

Net Debt to Total Assets

 

Net Debt to Capital; and

 

Net Income.

 

Some of these measures are also part of our compensation structure for the key executives, as follows:

 

Adjusted EBITDA: EBITDA, adjusted in accordance with Company’s adjustments announced as part of its earnings reports.

 

Free cash-flow, which represents net cash provided by operating activities less payments for property, plant and equipment and, for the purposes of the annual bonus plan, includes cash from divestitures.

 

The following table sets out the Company’s performance in respect of these financial and non-IFRS measures in 2020. Refer to Appendix 1 for reconciliations of these non-IFRS measures.

 

Adjusted
EBITDA
   Adjusted
EBITDA
Margin
   Working
Capital
Improvement
   Free Cash-
Flow
 
($m)       ($m)   ($m) 
32.5   2.8%  116.0   8.9 
(2019: (29.2))  (2019 (1.8)%)  (2019: (117.8))  (2019: (101.5))

 

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Net
Income
   Net Debt to
Total Assets
   Net Debt to
Capital
 
($m)         
(246.3)  32.5%  54.5%
(2019: (280.6))  (2019: 27.8%)  (2019: 44.5%)

 

In addition to these financial KPIs, there are a number of non-financial performance measures which the Company uses to gauge its success such as customer attrition, inventory rotation /obsolescence, benchmark against competitors and others. Some of these are reflected in the annual bonus an equity plan objectives for senior management and are reviewed each year to ensure their continued relevance. In the financial year ended 31 December 2020, the annual bonus was subject to meeting certain financial conditions related to free cash flow and adjusted EBITDA. Further information on performance in respect of these performance measures is in the Directors Remuneration Report at page 30.

 

Details of the Group’s anti-bribery and corruption and environmental policies are below and details of its employment policies and greenhouse gas emissions are set out below and in the Directors’ Report.

 

Principal risks and uncertainties

 

The Company is exposed to a number of operational risks which are monitored on an ongoing basis and which are summarised in the supplementary attachment. The key financial risks related to credit risk and liquidity risk are highlighted in Note 27. There is more information on the Group’s, risks, in Part I, Item 3 Information on the Company of the 2020 Form 20-F (as set out in the separate attachment to this U.K. Annual Report and not forming part of our financial statements).

 

We did not maintain an effective control environment to enable the identification and mitigation of risk of the existence of potential material accounting errors. We have identified deficiencies in the principles associated with the control environment component of the COSO framework. There is more information on the Group’s controls and procedures in Part I, Item 15 Information on the Company of the 2020 Form 20-F (as set out in the separate attachment to this U.K. Annual Report and not forming part of our financial statements).

 

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Employees

 

As at 31 December 2020, the Group had:

 

8 directors, of whom seven are male and one is female;

 

345 senior managers, of whom 281 are male and 64 are female; and

 

3,383 employees (including the senior managers and 2 of the directors above), of whom 3,058 are male and 325 are female.

 

Environment and other social matters

 

Ferroglobe is committed to conducting its business in compliance with all applicable laws and regulations in a manner that has the highest regard for human rights, the environment and the health and safety and well-being of employees and the general public. During the year under review the Group’s employees were each asked to re-confirm in writing their commitment to the Company’s Code of Conduct which emphasizes the Group’s commitment to the highest standards of integrity, ethical behavior, transparency, safety and corporate citizenship. The Code of Conduct incorporates the Group’s key policies on matters including whistleblowing, anti-bribery and corruption, environmental impacts, health and safety and respect in the workplace and the conduct of national and international trade.

 

Section 172 (1) Statement

 

This section of the U.K. Companies Act sets out a number of matters to which directors of a U.K. company must have regard in discharging their duty to promote the success of the Company. As of this year, the strategic report must include a statement which describes how the directors have had regard to those matters when performing their duties. The Board welcomes this opportunity to throw more light on its governance structures and on how input from its stakeholders has informed and shaped its decision-making. In 2020 the Board exercised all their duties with regard to these and other factors as they reviewed and considered proposals from senior management and governed the Company through the Board and its Committees.

 

The factors which the directors must take account of can be summarised as:

 

the likely consequences of any decision in the long term

taking account of the interests of the Company’s employees and fostering business relationships with customers, suppliers and other relevant stakeholders, such as regulatory bodies, governments and local authorities

the impact of operations on the community and the environment

maintaining a high standard of business conduct

acting fairly between its members

 

In order to take account of these factors, the Board must be informed of them. This takes place directly and indirectly, through collaborative working with management and direct and indirect feedback, as illustrated below. The Company’s internal control framework, including the Company’s Sarbanes Oxley controls, and the work of the Internal Audit team assists in providing assurance to the Board on the information made available to it.

 

The likely consequences of any decision in the long-term

 

The governance structures of the Company include delegation of certain responsibilities of the Board to its key Committees and delegation of the Board’s authority for the executive management of the Company to its executive team, subject to clearly defined limits and regular monitoring by the Board and subject also to the reservation to the Board of any matter not expressly delegated in this way.

 

The Executives bring their annual plan to the Board for approval each year. This includes forecasts, expected revenues, costs and major expenditure and projects for the year ahead. Each year the Board also takes a day out of its board calendar to consider, with the majority of the management team, the Company’s strategic plan. In 2020 this strategy day was held in July. Throughout the year, the Board has received a number of reports on the Company’s capital structure and financing arrangements. Reports were made regularly to the Board by the management team members responsible for each function and region on their area of responsibility, their performance, priorities and key decisions and risks for the immediate future and medium term, giving assurance that proper consideration is made to the longer-term in decision making throughout the business.

 

14 

 

 

Staying informed on employee, customer, supplier, investor and other key stakeholders’ views

 

Our relationships with those who work for the Company and with the Company are key to our success. The Board stays up to date with views of our employees through a number of means: key members of the management team, including the VP People & Culture, usually attend the management presentation made at each Board meeting when their input is regularly solicited. They are also consulted in less formal settings. Prior to the Covid-19 pandemic, Directors had an annual schedule of visits to our facilities which enable them to spend time with our people on the ground and receive their direct feedback. In 2020 one output of these site visits has led to an increased focus at Board level on the importance of driving a unified brand and culture for Ferroglobe. There are other channels through which the Board or its Committees receives reports on employee views; these include the VP People & Culture’ normal attendance at Compensation Committee meetings and his annual report on pay and conditions across the Group; and the confidential whistleblowing hotline, reports to which are in turn reported to the Audit Committee at its scheduled meetings. In 2020 the CEO commenced town hall meetings, face to face and virtually, with employees across the Group to keep them updated on our financial and operational performance; employees are encouraged to raise questions as part of those sessions.

 

We build strong relationships with our customers and suppliers, including our joint venture partners, spending a lot of time with them to best understand their goals and how to develop our business in our respective interests. The Board is aware that many of our relationships are long-term and depend on mutual trust and collaboration. The Board gets feedback on customer and supplier issues on a regular basis: through the input of the Chief Commercial Officer and Marketing and VP Supply Chain Management who normally attend management presentations in the scheduled Board meetings and through presentations each has made to the Board on their areas of responsibility, priorities and challenges.

 

The Board is aware that the Company relies on the support of its shareholders and their views are important to it. The Board’s interactions with these stakeholders take place through a variety of channels. The Company’s major shareholder, Grupo VM, had during 2020 three representative directors on the Board through whom views and input can be provided or sought. The Board receives feedback from other shareholders and the investment community through the Company’s quarterly results presentations and one to one meetings the Executive Directors. The EVP Investor Relations is a regular attendee at Board meetings and shares themes or commentary made to the Executives and management by the Company’s investors and certain other stakeholders. Shareholders have the opportunity to attend the general meetings of the Company, including the AGM, and put questions to directors formally at the meeting and in a more relaxed environment before and afterwards. The Company also maintains an investor relations email address on its corporate website, questions posed to which are directed to its EVP Investor Relations and Company Secretary and, where relevant, would then be raised by them with the other Executive Directors or the Board.

 

Engaging with community and the environment

 

We engage with communities, government and regulators in the areas and countries in which we operate through a range of industry consultations, trade or industry bodies, conferences, forums and meetings. In 2020, examples of matters discussed included. In prior years we have engaged with local charities and community groups. We also routinely consult with the local, regional and central governments and their agencies on the proposed idling of our production facilities. These matters are reported to the Board, which is kept updated on the status of these discussions and their progress.

 

We recognise that our business has an impact on the environment and work with relevant authorities and industry experts to manage and minimise that impact. The Audit Committee of the Board receives regular updates on any allegations of non-compliance by the business with environmental laws and regulations, such as the allegations of violations of clean air legislation in the U.S.A. made by the U.S. Department of Justice in relation to the operations and construction of our Beverly facility. There is more on this in Note 24 of our financial statements.

 

There is more on our environmental impact on pages 18.

 

15 

 

 

Maintaining a high standard of business conduct

 

On behalf of the Company, the Board has adopted a number of policies which articulate the Company and the Board’s commitment to the highest standards of integrity, ethical behaviour, transparency, safety and corporate citizenship. These include, as their mainstay, the Company’s code of conduct which sets out the Company’s policies on bribery and corruption, whistleblowing, conflicts of interest and political and charitable contributions, as well as the importance of safeguarding the wellbeing of its employees and protecting its resources. The Code of Conduct is supported by further policies on whistleblowing, data protection and statements on trade compliance, tax and modern slavery. The Board has also adopted a corporate governance policy statement to protect the interests of minority shareholders (on which there is more on page 17 below).

 

The Code of Conduct is reviewed regularly and every employee of the Company and all of its Board members are asked to confirm their personal commitment to the Code on joining the Company and to re-confirm it each year thereafter. Employees have the opportunity to report suspected breaches of the Code, for which purpose a secure and confidential hotline has been established, administered by an independent third party. Allegations of breaches of the Code are normally reported to the Audit Committee at each of its scheduled meetings and regular updates on the status of follow-up actions and outcomes given.

 

Acting fairly between members

 

A significant number of the Company’s shares are held by Grupo VM, its major shareholder. The Company has a number of checks and balances in place throughout the Company’s governance framework to ensure that the interests of the majority and the minority shareholders are respected and the Board is very cognisant of its duties in this regard. These checks and balances include:

 

the Company’s shareholders agreement with Grupo VM which regulates Board appointments, including those nominated by Grupo VM, Grupo VM’s rights to transfer and pledge its shares, its pre-emption rights and standstill obligations and the confidentiality agreement with Grupo VM which regulates the use, disclosure and security of confidential information shared with Grupo VM or its representatives;

the Company’s Articles of Association which, among other things, require the approval of a majority of independent directors to any agreement or arrangement between the Company and Grupo VM;

the Board’s corporate governance policy first adopted in October 2017 under which the Board commits to maintain a majority of independent directors on the Board. This policy is typically scheduled to be reviewed by the Board at least every eighteen months;

the workings and functions of the Board’s key Audit and Compensation Committees which are made up exclusively of independent Board directors;

the Company’s related parties’ policy which stipulates how and in what way proposed related party transactions are to be submitted for consideration and approval by the Audit Committee of the Board and the Company’s register of related party transactions which is submitted to each scheduled meeting of the Audit Committee;

the presence of directors on the Board who were nominated by Grupo VM.

 

The Chief Legal Officer and Group Company Secretary has primary responsibility for advising the Board on its duties and on the Company’s governance framework and normally attends all meetings of the Board and its Committees.

 

The Strategic Report for the financial period ended 31 December 2020 has been reviewed and approved by the Board on 4 June 2021.

 

Javier Lopez Madrid

 

Director

 

16 

 

 

Directors’ report

 

The Directors present their report and the audited financial statements of the Group and Company for the year ended 31 December 2020. The Directors do not need to comply with Corporate Governance requirements.

 

The Directors’ Report comprises these pages (17 to 55) and the other sections and pages of the Annual Report cross-referred below which are incorporated by reference.

 

As permitted by legislation, certain disclosures normally included in the Directors’ Report have instead been integrated into the Strategic Report (pages 9 to 13). These disclosures include information relating to the Group’s principal risks and uncertainties.

 

Directors

 

The directors of the Company, who held office at any time during the year to 31 December 2020, were as follows:

 

Javier López Madrid Director and Executive Chairman
Marco Levi Director and Chief Executive Officer

José María Alapont

Donald G. Barger. Jr

Non-Executive Director

Non Executive Director

Bruce L. Crockett Non-Executive Director
Stuart E. Eizenstat Non-Executive Director

Manuel Garrido y Ruano

Greger Hamilton

Pedro Larrea Paguaga

Non-Executive Director

Non-Executive Director

Director and Chief Executive Officer

Marta de Amusategui y Vergara Non-Executive Director
Juan Villar-Mir de Fuentes Non-Executive Director

 

On 10 January 2020, Mr. Pedro Larrea Paguaga left the employment of the Company and its Board. On the same date, Dr. Marco Levi was appointed as CEO of the Company and on 15 January 2020 he was appointed to the Board.

 

On 31 May 2020 Greger Hamilton resigned from the Board. Donald Barger announced his intention to step down from the Board at the 2020 AGM.

 

On the 30 April 2021 José María Alapont resigned from the Board.

 

The biographies of our directors as at the date of this report are set out on pages 23 to 27. Details of the directors standing for election or re-election at our 2020 AGM will be set out in the notice of that meeting.

 

Directors’ indemnities

 

As required by the Articles, each director is indemnified in connection with his role as a director, to the extent permitted by law. As permitted by the Articles, the Company has purchased and maintained throughout the year under review directors’ and officers’ liability insurance.

 

Share repurchases

 

The Company has not acquired any of its own shares during the year ended 31 December 2020.

 

During 2019 the Company disposed of 8,040 shares held by it in treasury. These shares were transferred to employees in satisfaction of the Company’s obligations on the vesting of two conditional share awards granted in 2016 under the EIP and vesting on 5 December 2019. No further consideration was received for the transfer of these shares.

 

17 

 

 

Dividends

 

The Company has not declared any dividends during the year under review.

 

Political donations

 

During the year under review the Company has not made any political donations, incurred any political expenditure or made any contributions to an EU or non-EU political party.

 

Employee policies

 

Ferroglobe has a culture of continuous improvement through investment in people at all levels within the organisation. Its Code of Conduct (“Code”), which applies to all directors and employees of the Group, sets out Ferroglobe’s commitment to protecting, respecting and supporting its workforce. The Code was revised in 2017 to bring together Ferroglobe’s policies on key ethical, behavioural and compliance matters. Its roll-out across the Group globally was initiated in 2017, supported by mandatory training for all employees. In 2018, 2019 and 2020, Group personnel were requested to re-certify their knowledge of and continued compliance with the Code. The adoption of and training provided on the Code is consistent with our evolution to an organization with an integrated approach to human relations policies across the five continents in which the Group operates.

 

Those key policies include:

 

Health and safety, where Ferroglobe places high value on the well-being of all personnel and is committed to providing a healthy and safe working environment;

 

Respect in the workplace, promoting equality and diversity, rejecting harassment and bullying and supporting work-life balance;

 

Striving to conduct operations in a way that respects the human rights of personnel, suppliers and others with whom Ferroglobe works, including local communities;

 

Encouraging the reporting of wrongdoing or of any suspicions or concerns as to wrongdoing, any of which can be raised in confidence through the whistleblowing hotline which Ferroglobe has established in all countries in which it operates where it is lawful to do so.

 

Ferroglobe is committed to providing equal opportunities for all Group personnel and to creating an inclusive workforce by promoting employment equality. This includes pursuing equality and diversity in all its employment activities, including recruitment, training, career development and promotion and ensuring there is no bias or discrimination in the treatment of people. Ferroglobe opposes all forms of unlawful or unfair discrimination on the grounds of race, age, nationality, religion, ethnic or national origin, sexual orientation, gender or gender reassignment, marital status or disability. Wherever possible, vacancies are filled from within Ferroglobe and efforts are made to create opportunities for internal promotion.

 

Greenhouse gas emissions

 

The UK Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013 requires UK-based quoted companies to report global greenhouse gas (“GHG”) emissions data in the Annual Report and Accounts. Comparison year data for 2018, 2019 and 2020 is included in Table 2 in this report. As in 2017-2018, the 2019 GHG inventory was prepared in accordance with the Ferroglobe PLC Greenhouse Gas Inventory Management Plan (2017), prepared in consultation with ERM Group, Inc. and its UK affiliate (the “IMP”).

 

The Company has selected the Operational Control approach and criteria as the basis for reporting GHG emissions data, defining “Operational Control” to encompass facilities the Group owns and operates, facilities it leases and operates, and joint venture facilities it operates. All facilities within Ferroglobe’s Operational Control that are material to its Group-wide GHG emission inventory are included in reported figures. This approach means that the operations for which emissions are reported are substantially coextensive with operations comprised by Ferroglobe’s consolidated financial reporting. The Company does not have responsibility for any emission sources that are not included in its financial reporting.

 

18 

 

 

Table 1 sets forth the Company’s consolidated greenhouse gas emissions expressed in metric tonnes of carbon dioxide equivalent (CO2e). The figures reported below include all material direct (Scope 1) and indirect (Scope 2) emission sources for facilities within the Company’s Operational Control. Principal sources of Scope 1 emissions from operations at, or Scope 2 emissions imputed to, Ferroglobe-controlled facilities include:

 

Electricity purchased or produced by Ferroglobe facilities

Fuels purchased for consumption in stationary sources on-site at Ferroglobe facilities (e.g., natural gas, diesel, LPG)

Fuels purchased for consumption in mobile sources owned and operated by Ferroglobe

Process emissions associated with electric arc furnaces used for the production of silicon metal and ferroalloys.

 

Table 1. Company-wide Scope 1 and Scope 2 Emissions for 2020

 

Global GHG emissions data for period 1 January 2020 to 31 December 2020
Emissions From:  Tonnes of CO2e 
Combustion of fuel and operation of facilities
   1,701,763*
Electricity, heat, steam and cooling purchased for own use   1,282,333 
Company’s chosen intensity measurement:
Emissions reported above normalized to per tonne of product output
   4.92 

 

*In line with DEFRA Guidance, 788,321 tonnes of CO2e are not included in the above table, due to being biogenic in nature.

 

Table 2. Company-wide Scope 1 and Scope 2 Emissions Comparison for 2018-2019-2020

 

Global GHG emissions data for period 1 January to 31 December 2018-2020
Emissions From:  2018
Tonnes of CO2e
   2019
Tonnes of CO2e
   2020
Tonnes of CO2e
 
Combustion of fuel and operation of facilities
   3,248,196*   2,490,210**   1,701,763***
Electricity, heat, steam and cooling purchased for own use   2,479,290    1,929,965    1,282,333 
Company’s chosen intensity measurement:
Emissions reported above normalized to per tonne of product output
   5.01    4.99    4.92 

*In line with DEFRA Guidance, 1.5 million tonnes of CO2e are not included in the above table, due to being biogenic in nature. 

 

**In line with DEFRA Guidance, 944,997 tonnes of CO2e are not included in the above table, due to being biogenic in nature. 

***In line with DEFRA Guidance, 788,321 tonnes of CO2e are not included in the above table, due to being biogenic in nature.

 

Methodology

 

In preparing the IMP and this report, the Company has adhered to the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard – Revised Edition (2004) (the “GHG Protocol”) and the UK DEFRA’s Environmental Reporting Guidelines: Including mandatory greenhouse gas emissions reporting guidance (June 2013) (“DEFRA Guidance”). The Company reports material emissions of three out of the six Kyoto GHGs, viz. carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O). A fourth, sulfur hexafluoride (SF6), is present in electrical breakers at some Company facilities, but no emission of SF6 of have been observed. The two remaining Kyoto gases, perfluorocarbons (PFCs) and hydroflurocarbons (HFCs), are not reported since Company facilities do not emit or use materials containing them.

 

19 

 

 

Financial risk management objectives/policies and hedging arrangements

 

Please see Part I, Item 11 (Quantitative and Qualitative Disclosures About Market Risk) of the 2020 Form 20-F (as set out in the separate attachment to this U.K. Annual Report) for information on Ferroglobe’s financial risk management objectives/policies and hedging arrangements.

 

Post year-end events

 

Modification of contractual terms in REINDUS loan

 

On January 26, 2021 the Company received a decision from the Administration under which it has been agreed to extend the grace period and the term of the loan. New terms agreed contractually implies main loan will start to be repaid by 2023 and it will be completed by 2030, and interest rate will increase from 2.29% to 3.55%.

 

Repayment of North-American asset-based loan (ABL)

 

On March 16, 2021, the Company has repaid in its entirety the remaining balance at the date for an amount equal to $39,476 thousand, cancelling its obligations derived from the contract.

 

Note purchase agreement

 

In May 12, 2021 Ferroglobe Finance Company, PLC (a new, indirect subsidiary of the Company) entered into a Note Purchase Agreement with the members of the Ad Hoc Group relating to the issuance of an initial $40 million of aggregate $60 million new senior secured notes (the New $60 million Notes). The $40 million new senior secured notes were issued in May 2021.

 

In accordance with the terms of the transaction set out in the Lock-Up Agreement, all holders of the existing 9.375% Senior Notes due 2022 (the 2022 Senior Notes) will have the right to subscribe for a pro rata share of the New $60 million Notes.

 

Changes to the board of directors

 

On April 30, 2021, Mr. José María Alapont resigned from the Board of Directors.

 

On May 13, 2021, Belén Villalonga, Silvia Villar-Mir de Fuentes, Nicolas De Santis and Rafael Barrilero Yarnos were appointed to the Board.

 

Future developments

 

As part of its strategy to serve customers better, the Group develops new products or new specifications on a continuous basis. As a consequence of these efforts, investments have been made in facilities that allow the production of new products, such as higher-grade silicon metal, solar grade silicon metal, electrodes for use in silicon metals furnaces, high-value powders for use in Li-on batteries or new foundry products. Please see Part I, Item 4, Information on the Company of the 2020 Form 20-F by way of example of how the Group has developed proprietary technologies and has pursued innovation in the development of new products.

 

Research and development

 

Please refer to Part I, Item 4, Information on the Company of the 2020 Form 20-F (as set out in the separate attachment to this U.K. Annual Report) for information on Ferroglobe’s research and development activities and opportunities.

 

Overseas branches

 

The Company has no overseas branches.

 

Share capital structure and change of control provisions

 

The Company’s share capital comprises ordinary shares of $0.01 each, all of which bear the same rights and obligations. The Company’s issued share capital at 31 December 2020 is set out at Note 13 to the Consolidated Financial Statements.

 

20 

 

 

The rights attaching to the Ordinary Shares are set out in the Articles, a copy of which can be obtained from the Company Secretary on request. Each Ordinary Share has one vote attaching to it for voting purposes and all holders of Ordinary Shares are entitled to receive notice of and attend and vote at the Company’s general meetings. The Articles vest power in the directors to refuse to register transfers of Ordinary Shares in certain circumstances including where the instrument of transfer is not stamped or is in favour of more than 4 transferees. There are also restrictions in the Articles affecting the terms of tender offers and any scheme of arrangement, consolidation, merger or business combination designed to protect minority shareholders while Grupo VM and its associates hold ten percent or more of the Ordinary Shares.

 

Significant agreements affected by a takeover

 

There are no agreements between the Group and any of its employees or any director of the Company that provide for compensation to be paid to the employee or director for termination of employment or for loss of office as a consequence of a takeover of the Company, other than provisions that would apply on any termination of employment.

 

The Notes are subject to provisions allowing the lenders to terminate the facilities and demand repayment following a change of control, including the requirement to offer redemption of the Notes at 101% of par value in the event of a change of control. Grupo VM, the Company’s principal shareholder, has pledged its holding to secure its obligations to its lenders. The Company may experience a change of control and be required to offer redemption of the Notes at a cash purchase price equal to 101% of par value were this pledge to be enforced and more than 35% of the Ordinary Shares were acquired by a beneficial owner (or group acting together as beneficial owner) in circumstances where Grupo VM (and certain other ‘Permitted Holders’ as defined in the Notes) held a lesser percentage. Grupo VM’s percentage holding in the Company is currently approximately 54%. While Grupo VM maintains its current shareholding, a change of control cannot occur. On this basis, a change of control as defined in the Indenture is unlikely to occur but the matter it is beyond the Company’s control. If a change of control were to occur, the Company may not have sufficient financial resources available to satisfy all of its obligations.

 

Capital Raising and Extension of the Maturity of the Senior Notes

 

Beginning in 2020, we engaged in discussions with the Ad Hoc Group Noteholders to put forward a plan to refinance the Notes and restructure our balance sheet. On March 27, 2021, Ferroglobe and Globe and certain other members of our group entered into the Lock-Up Agreement with the Ad Hoc Group Noteholders, Grupo VM and affiliates of Tyrus Capital that set forth a plan to implement the restructuring. The principal elements of the restructuring, as set forth below, are inter-conditional and must be completed by September 28, 2021, unless extended by agreement.

 

Issuance of $60 million of new senior secured notes

 

We intend to issue $60 million of new senior secured notes (the “Super Senior Notes”) maturing on June 30, 2025, in two tranches: (i) $40 million which were issued in May 2021 and (ii) $20 million to be issued on the completion date of the proposed restructuring (the “Transaction Effective Date”). The Super Senior Notes will bear an interest rate of 9.0% per annum and will benefit from first-ranking security over substantially all of the assets. The holders of the Super Senior Notes will have super senior priority rights with respect to the proceeds from the enforcement of the collateral securing the Super Senior Notes pursuant to the provisions of an intercreditor agreement together with all amounts received or recovered by the security agent within the meaning of the intercreditor agreement and will have priority over the holders of the Amended Senior Notes (defined below).

 

In the event that any part or all of the initial tranche consisting of $40 million of the Super Senior Notes are redeemed prior to certain termination events under the Lock-Up Agreement, following any notice of redemption or acceleration, a make-whole premium of $17.5 million is payable (reduced pro rata if only a part of the $40 million in Super Senior Notes is redeemed). We will be able to redeem the Super Senior Notes (i) at par in the 15-month period commencing on the Transaction Effective Date, (ii) subject to a make-whole premium in the subsequent 9-month period, (iii) at 104.5% in the further subsequent one-year period and (iv) at par thereafter.

 

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The first tranche of $40 million of Super Senior Notes was issued to the Ad Hoc Group Noteholders. We intend to offer the holders of the Notes the right to subscribe for the Super Senior Notes. The Ad Hoc Group Noteholders have agreed to backstop any shortfall in the subscription for the Super Senior Notes subject to satisfaction of certain conditions set out in a new debt backstop letter.

 

Issuance of $40 million in new equity of Ferroglobe

 

We expect to issue at least $40 million of equity by launching an equity offering prior to the Transaction Effective Date. We will determine the specific choice of instrument and method of issuing this equity, taking into account the best interests of all of our shareholders. While we currently expect to conduct a pre-emptive rights issue or an offering of ordinary shares available to all shareholders, we will consider all available options, taking into account the best interests of all of our shareholders.

 

An affiliate of Tyrus Capital has agreed, subject to certain terms and conditions contained in the new equity backstop letter Exhibit 4.11 of the 2020 Form 20-F (as set out in the separate attachment to this U.K. Annual Report and not forming part of our financial statements), to backstop a shortfall of up to $40 million in the subscription for our ordinary shares at an issue price in an amount equal to the lower of (i) a 40% discount to the volume weighted average closing price of the ordinary shares over a number of trading days close to the Transaction Effective Date (adjusted to address any unusual trading activity), and (ii) the price per share offered in the equity raise by Ferroglobe, provided that the total number of shares issued (after giving effect to any shares issued in the equity raise) does not exceed the number of shares currently issuable without triggering pre-emption rights and that are not reserved for specific purposes.

 

Extension of the maturity date of the Notes from March 31, 2022 to December 31, 2025 and amendment of certain other terms

 

We intend to extend the maturity date of the Notes from March 31, 2022 to December 31, 2025 and amend certain other terms of the Notes. The extension of maturity and amendments will be implemented through an offer to exchange the Notes at par for new senior secured notes that will mature on December 31, 2025 (the “Amended Senior Notes”). As of the date of this annual report, holders holding over 96% in aggregate principal amount of Notes have signed the Lock-Up Agreement to support the maturity extension and amendment of the Notes. To the extent the holders of the Notes do not participate in the offer to exchange, the Notes will remain outstanding and will be due on March 31, 2022.

 

The Amended Senior Notes will have an interest rate per annum of 9.375% and will benefit from the same security as the Super Senior Notes, subject to the provisions of an intercreditor agreement pursuant to which the holders of the Amended Senior Notes will receive the proceeds from the enforcement of the collateral securing the Amended Senior Notes after the holders of the Super Senior Notes have been repaid in full. The covenants for the Amended Senior Notes will be more restrictive than the covenants in the indenture governing the Notes.

 

We will be able to redeem the Amended Senior Notes (i) subject to a make-whole premium in the one-year period commencing on the Transaction Effective Date, (ii) at 104.6875% in the first subsequent one-year period, (iii) at 102.34375% in the second subsequent one-year period, (iv) at 101% in the third subsequent one-year period and (v) at par thereafter.

 

Payments of dividends, distributions and advances by Ferroglobe’s subsidiaries will be contingent upon their earnings and business considerations and may be limited by legal, regulatory and contractual restrictions. For instance, the repatriation of dividends from Ferroglobe’s Venezuelan and Argentinean subsidiaries have been subject to certain restrictions and there is no assurance that further restrictions will not be imposed. Additionally, Ferroglobe’s right to receive any assets of its subsidiaries as an equity holder of such subsidiaries, upon their liquidation or reorganization, will be effectively subordinated to the claims of such subsidiaries’ creditors, including trade creditors.

 

Pursuant to the Lock-Up Agreement the Amended Senior Notes and, the $60 million Super Senior Notes will include change of control definitions compared with those contained in the indenture related to the Notes. Under the revised change of control provisions, no change of control shall occur or be deemed to occur by reason of among other matters, enforcement of remedies under the GVM pledge agreement or any disposal by Grupo VM of the Company´s shares for the purposes of repaying Grupo VM´s debt.

 

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Going concern

 

The directors acknowledge that there are events and conditions relating to the completion of the restructuring of the Notes, the potential repayment of the outstanding balance of the Notes should a change of control occur, and difficulties in forecasting net cash flows in the current economic conditions because of the Covid-19 pandemic, which together in aggregate give rise to a material uncertainty that may cast substantial doubt on the ability of the Group and Company to continue as a going concern for a period of twelve months following the date our consolidated financial statements are issued. Notwithstanding the material uncertainty described above, management believes that the Group has adequate resources and considers it likely that the exchange of the Notes and additional capital will be completed, that will allow the Group to continue in operational existence for the foreseeable future. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as going concern. There is more information on the material uncertainty and the basis of this assessment in Note 3.1 to the financial statements.

 

Statement of disclosure to the Company’s U.K. statutory auditor

 

In accordance with section 418 of the Companies Act, each director at the date of this Directors’ Report confirms that:

 

so far as he is aware, there is no relevant audit information of which the Auditor is unaware; and

 

he has taken all the steps he ought to have taken as a director to make himself aware of any relevant audit information and to establish that the Auditor is aware of that information.

 

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006. Deloitte LLP has indicated its willingness to continue in office, and a resolution that it be re-appointed is expected to be proposed at the 2021 AGM.

 

By order of the Board on 4 June 2021

 

Javier Lopez Madrid

 

Director

 

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The Board of Directors

 

Details of the members of the Board as at the date of this ARA are below.

 

Javier López Madrid

 

Javier López Madrid has been Executive Chairman of the Company since 31 December 2016 and Chairman of our Nominations Committee since 1 January 2018. He was first appointed to the Board on 5 February 2015 and was the Company’s Executive Vice-Chairman from 23 December 2015 until 31 December 2016.

 

He has been Chief Executive Officer of Grupo VM since 2008, is a member of the World Economic Forum, Group of Fifty and a member of the Board of several non profit organizations. He is the founder and largest shareholder of Financiera Siacapital S.L. and founded Tressis, Spain’s largest independent private bank.

 

Mr. López Madrid holds a Masters in law and business from ICADE University.

 

Marco Levi

 

Marco Levi was appointed Chief Executive Officer of the Company on 13 January 2020 and appointed to its Board of Directors on 15 January 2020. Dr. Levi previously served as President and CEO of Alhstrom-Munksjö Oyj, a global fiber materials company listed in Finland, where he led a successful transformation of the business by refocusing its product portfolio towards value-added specialty products. Prior to that, Dr. Levi was Senior Vice President and Business President of the $3 billion emulsion polymers division of chemicals manufacturer Styron, including during the period in which Styron was acquired by Bain Capital from Dow Chemical Company. Dr. Levi previously had spent over twenty-two years at Dow in various departments and roles, ultimately serving as general manager of the emulsion polymers business.

 

Dr. Levi is also a Non-Executive Director of Schweitzer-Mauduit International, Inc, the leading global performance materials company, listed on the New York Stock Exchange. Dr Levi holds a doctorate in industrial chemistry from the Università degli Studi di Milano, Statale,in Italy.

 

Bruce L. Crockett

 

Bruce L. Crockett was appointed to our Board of Directors as a Non-Executive Director on 23 December 2015. He has been a member of our Audit Committee from that date and has served on our Compensation Committee since 1 January 2018.

 

Mr. Crockett holds a number of other Board and governance roles. He has been Chairman of the Invesco Mutual Funds Group Board of Directors and a member of its Audit, Investment and Governance Committees, serving on the board since 1991, as Chair since 2003 and on the Board of predecessor companies from 1978. Since 2013, he has been a member of the Board of Directors and, since 2014, Chair of the Audit Committee of ALPS Property & Casualty Insurance Company.  He has been Chairman of, and a private investor in, Crockett Technologies Associates since 1996. He is a life trustee of the University of Rochester.

 

Mr. Crockett was a member of the Board of Directors of Globe from April 2014 until the closing of the Business Combination, as well as a member of Globe’s Audit Committee. He was formerly President and Chief Executive Officer of COMSAT Corporation from 1992 until 1996 and its President and Chief Operating Officer from 1991 to 1992, holding a number of other operational and financial positions at COMSAT from 1980, including that of Vice President and Chief Financial Officer. He was a member of the Board of Directors of Ace Limited from 1995 until 2012 and of Captaris, Inc. from 2001 until its acquisition in 2008 and its Chairman from 2003 to 2008.

 

Mr. Crockett holds an A.B. degree from the University of Rochester, B.S. degree from the University of Maryland, an MBA from Columbia University and an Honorary Doctor of Law degree from the University of Maryland.

 

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Stuart E. Eizenstat

 

Stuart E. Eizenstat was appointed to our Board of Directors as a Non-Executive Director on 23 December 2015. He has been a member of the Company’s Corporate Governance Committee since January 1, 2018 and was appointed to our Nominations Committee on 16 May 2018.

 

Mr. Eizenstat has been a Senior Counsel at Covington & Burling LLP in Washington, D.C. and Head of its international practice since 2001. He has served as a member of the Advisory Boards of GML Ltd. since 2003 and of the Office of Cherifien de Phosphates since 2010. He was a trustee of BlackRock Funds from 2001 until 2018.

 

Mr. Eizenstat was a member of Board of Directors of Globe from 2008 until the closing of the Business Combination and Chair of its Nominating Committee.  He was a member of the Board of Directors of Alcatel-Lucent from 2008 to 2016 and of United Parcel Service from 2005 to 2015. He has had an illustrious political and advisory career, including serving as Special Adviser to Secretary of State Kerry on Holocaust-Era Issues from 2009 to 2017 and Special Representative of the President and Secretary of State on Holocaust Issues during the Clinton administration from 1993 to 2001. He was Deputy Secretary of the United States Department of the Treasury from July 1999 to January 2001, Under Secretary of State for Economic, Business and Agricultural Affairs from 1997 to 1999, Under Secretary of Commerce for International Trade from 1996 to 1997, U.S. Ambassador to the European Union from 1993 to 1996 and Chief Domestic Policy Advisor in the White House to President Carter from 1977 to 1981. He is the author of “Imperfect Justice: Looted Assets, Slave Labor, and the Unfinished Business of World War II”; “The Future of the Jews: How Global Forces are Impacting the Jewish People, Israel, and its Relationship with the United States” and “President Carter: The White House Years.”

 

Mr. Eizenstat holds a B.A. in Political Science, cum laude and Phi Beta Kappa, from the University of North Carolina at Chapel Hill, a J.D. from Harvard Law School and nine honorary doctorate degrees and awards from the United States, French, German, Austrian, Belgian and Israeli governments.

 

Manuel Garrido y Ruano

 

Manuel Garrido y Ruano was appointed to our Board of Directors as a Non-Executive Director on 30 May 2017. He was a member of our Nominating and Corporate Governance Committee from 30 May 2017 until 31 December 2017, when he was appointed to our Corporate Governance Committee.

 

Mr. Garrido y Ruano has been Chief Financial Officer of Grupo VM since 2003 and a member of the Board or on the steering committee of a number of its subsidiaries in the energy, financial, construction and real estate sectors. He is Professor of Communication and Leadership of the Graduate Management Program at CUNEF in Spain. Mr. Garrido y Ruano was a member of the steering committee of FerroAtlántica until 2015, having previously served as its Chief Financial Officer from 1996 to 2003. He worked with McKinsey & Company from 1991 to 1996, specializing in restructuring, business development and turnaround and cost efficiency projects globally.

 

Mr. Garrido y Ruano holds a Masters in Civil Engineering with honors from the Universidad Politecnica de Madrid and an MBA from INSEAD.

 

Marta de Amusategui y Vergara

 

Marta de Amusategui y Vergara was appointed to our Board of Directors as a Non-Executive Director on June 12, 2020. She has been a member of our Audit Committee from that date.

 

Ms. Amusategui has substantial experience in executive and non-executive roles, with a background in business strategy, banking and finance. She is founder and partner of Abrego Capital S.L, providing strategic and financial advisory services, and co-founder and member of the Board of Observatorio Industria 4.0, the professional forum leveraging knowledge and experience to assist businesses, specifically those in the secondary sector, in their digital transformation. She began her career in management consulting and investment banking, serving as Country Executive Officer and General Manager with Bank of America in Spain from 2003 to 2008.

 

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Ms. Amusategui has been a member of the Board of Eland Private Equity, S.G.E.L.C., S.A., a private equity management company specializing in renewable energies, since 2009. Since 2020, she has been a member of the boards of directors of Observatorio Industria 4.0, Abrego Capital S.L. and Eccocar Sharing S.L. She has also held other Board positions in the past, including that of Telvent GIT S.A. (NASDAQ TLVT), the global IT solutions and business information services provider, where she became an independent director from early 2010 until its de-listing following acquisition in December 2011. She is currently a member of the McKinsey Alumni Council in Spain.

 

Ms. Amusategui holds an Industrial Engineering degree (MSc equivalent) from Universidad Pontificia de Comillas, Madrid, Spain, and an MBA from INSEAD, Fontainebleau, France. She holds a number of academic appointments, lecturing in Financing at the Three Points Digital Business School, Grupo Planeta, in Barcelona, in Managerial Competencies in CUNEF, in Madrid, and in Risk Management on the Non-Executive Directors Program at ICADE Business School, also in Madrid.

 

Juan Villar-Mir de Fuentes

 

Juan Villar-Mir de Fuentes was appointed to our Board of Directors as a Non-Executive Director on 23 December 2015.

 

Mr. Villar-Mir de Fuentes has been Vice Chairman of Inmobiliaria Espacio, S.A since 1996 and Vice Chairman of Grupo Villar Mir, S.A.U. since 1999. He has been a member of the Board of Directors of Obrascon Huarte Lain, S.A. since 1996, a member of the Audit Committee and, later, its Compensation Committee and its Chairman since 2016. He was a Board director and member of the Compensation Committee of Inmobiliaria Colonial, S.A from June 2014 to May 2017. He also was a member of the Board of Directors and of the Compensation Committee of Abertis Infraestructuras, S.A. between 2013 and 2016.

 

Mr. Villar-Mir de Fuentes is Patron and member of the Patronage Council of Fundación Nantik Lum and Fundación Princesa de Gerona.

 

Mr. Villar-Mir holds a Bachelor’s Degree in Business Administration and Economics and Business Management.

 

Belen Villalonga

 

Belen Villalonga is a Professor of Management and Organizations, a Yamaichi Faculty Fellow, and a Professor of Finance (by courtesy) at New York University’s Stern School of Business. Between 2001 and 2012 she was a faculty member at the Harvard Business School. Her teaching, research, and consulting activities are in the areas of corporate governance, strategy, and finance, with a special focus on family-controlled companies. Her award-winning research has been cited over 15,000 times in scholarly articles and international media outlets.

 

Ms. Villalonga is an independent director and audit committee member (and former chair) at Grifols, a global leader in hemoderivatives that is part of Spain’s IBEX35 blue-chip index and is also listed on Nasdaq. She is also a member of the board and of the risk, audit, and compensation & talent management committees at Banco Santander International, the Santander group’s private banking subsidiary in the United States. She was also an independent director for 13 years at Acciona, a leader in the renewable energy and infrastructure industries, as well as at Talgo, a high-speed train manufacturer, where she chaired the strategy committee.

 

Ms. Villalonga holds a Ph.D. in Management and an M.A. in Economics from the University of California at Los Angeles, where she was a Fulbright Scholar. She also holds a Ph.D. in Business Economics from the Complutense University of Madrid. In addition to the board of directors, Professor Villalonga joins the Company’s audit committee.

 

Silvia Villar-Mir de Fuentes

 

Silvia Villar-Mir de Fuentes currently serves on the board of directors of Grupo Villar Mir, a privately held Spanish group with investments across a broad range of diversified industries, which is the beneficial owner of approximately 54% of the Company’s share capital.

 

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Mrs. Villar-Mir de Fuentes currently serves on the board of directors of Obrascón Huarte Lain, a Spanish multinational construction and civil engineering company, where she is a member of the audit committee.

 

Mrs. Villar-Mir de Fuentes is a summa cum laude graduate in Economics and Business Studies, with concentration in finance and accounting, from The American College in London, United Kingdom.

 

Nicolas De Santis

 

Nicolas De Santis is a technology entrepreneur, strategist and author with substantial experience in executive and non-executive roles. Mr. De Santis is currently the Chief Executive Officer of Corporate Vision, a strategy and innovation consultancy and incubator which advises multinational corporations and start-ups globally on digital business transformation (including artificial intelligence and machine learning), business strategy, branding, business model innovation, sustainability strategies and corporate culture.

 

Previously Mr. De Santis served on the board of publicly traded Lyris Technologies (acquired by AUREA Software in 2015). He began his management career at Landor Associates (now WPP Group). As a technology entrepreneur, he co-founded several high-profile start-ups, including opodo.com, where he served as Chief Marketing Officer.

 

Mr. De Santis is a regular lecturer at business schools and universities on business strategy, global branding and European Affairs, including IE Business School, Madrid and the University of Wyoming. He is the author of Corporate Vision System®, Futurize You Company, Innovate Culture & Manage Complexity.

 

Rafael Barrilero Yarnoz

 

Rafael Barrilero Yarnoz is a senior advisor at Mercer Consulting. Mr. Barrilero Yarnoz has developed his career as a partner of the firm and as a member of the executive committee, leading the advisory talent and reward service for the boards of the main companies and multinationals. He has also led the business throughout the EMEA.

 

Previously, Mr. Barrilero led the Watson Wyatt consulting firm in Madrid. He began his career as a lawyer at Ebro Agricolas focused on labour law, before serving as Ebro’s head of human resources. He has a law degree from Deusto and a Masters in Financial Economics from ICADE, as well as a masters in human resources by Euroforum-INSEAD.

 

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Directors’ responsibilities

 

The directors are responsible for preparing the Company’s annual reports and financial statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The financial statements also comply with International Financial Reporting Standards as issued by the IASB. The directors have also chosen to prepare the parent company financial statements in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework. 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 the Group and of the profit or loss of the Group 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 is 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 entity’s ability to continue as a going concern.

 

In preparing the parent company financial statements the directors are required to:

 

Select suitable accounting policies and then apply them consistently;

 

Make judgments and accounting estimates that are reasonable and prudent; and

 

state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

 

Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue business

 

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 the Group and enable them to ensure that the financial statements and the directors’ remuneration report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.

 

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

Directors’ responsibility statement

 

To the best of each directors’ knowledge:

 

the financial statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

 

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this directors’ report and the strategic report include a fair review of the development or performance of the business and the position of the Company and its subsidiaries and subsidiary undertakings taken as a whole, together with a description of the principal risks and uncertainties that they face;

 

the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.

 

The responsibility statement was approved by the Board and signed on its behalf.

 

By order of the Board on 4 June 2021

 

Javier Lopez Madrid

 

Director

 

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Directors’ Remuneration Report 

Introduction

 

Dear Shareholder

 

As Chairman of the Compensation Committee (the Committee), and on behalf of the Board, I present the Directors’ Remuneration Report for the period ended 31 December 2020.

 

This report sets out both the Company’s annual report on remuneration (the ARR) for 2020 and the directors’ remuneration policy (the 2020 Policy or the Policy), which was put to shareholders at the 2019 AGM and approved by over 91% of the shareholders who voted on it. Thank you for your support. The 2020 Policy is included on pages 32 to 36 for your information and ease of reference.

 

The Policy

 

Under English law, a directors’ remuneration policy requires shareholder approval not less than once in every three years. The Committee concluded its review of the policy first approved in 2016 in early 2019 and determined, as the deterioration in market conditions in the second half of 2018 continued into 2019, that the then current remuneration framework achieved an appropriate balance of performance and reward. There are few changes between the version of the 2019 Policy included in the 2018U.K. Annual Report and Accounts and that in this report.

 

Management Changes

 

We welcomed Marco Levi as our CEO in January 2020. The Committee reviewed his proposed terms of employment and compensation package prior to his appointment to determine that they met the objectives of and complied with the Policy and, following some changes proposed by the Committee, recommended their approval to the Board. Consequent on the relocation of several members of management to Spain in 2019, Marco is employed in Spain under a contract of employment governed by Spanish law. This has necessitated some changes to the manner in which we have implemented the Policy, as detailed in this report. Marco Levi’s base salary is slightly higher than his predecessor but, taking account of base salary and benefits, both his overall fixed compensation and his total remuneration are lower, reflecting, among other things, the lower market capitalization of the Company, its financial performance at the date of appointment and market considerations in Madrid. A similar approach was taken in relation to the remuneration of the new CFO, Beatriz García-Cos, appointed in October 2019. Starting in 2020, we have continued the roll-out of this review and re-alignment of executive compensation in respect of other senior managers below Board level.

 

The Committee also evaluated the terms of settlement proposed with Pedro Larrea Paguaga as former CEO on his leaving the Company in January 2020. Pedro Larrea Paguaga’s service contract and the rules of the Company’s EIP and Annual Bonus Plan included express provision on the compensation payable and the treatment of Pedro Larrea Paguaga’s awards on leaving. Following evaluation by the Committee and recommendation to the Board, it was agreed with Pedro Larrea Paguaga that some reductions to this compensation would be made. Details of the compensation paid or payable to Pedro Larrea Paguaga are set out on page 47.

 

There were no increases in Executive Directors’ salaries in 2020 and, save for that implicit in the rebalancing of elements of the fixed remuneration payable to Marco Levi as compared with the former CEO, none to date or expected for 2021.

 

Annual Bonus awards for 2020

 

The annual bonus objectives for the Executives in 2020 were adjusted EBITDA in relation to 50% of the award and net cash-flow in relation to 50%. Bonuses were also subject to an underpin requiring measurable improvement in the Group’s health and safety record in 2020, with potential to reduce the overall award at the discretion of the Compensation Committee. The Company achieved 60% performance in respect of free cash-flowand 28% performance in respect of adjusted EBITDA, for a total bonus of 44% of target. As a result , the CEO recommended to the Committee that no annual bonuses be paid for 2020. The Committee approved this recommendation for sign-off by the Board and this outcome was duly approved. See the ARR for more on the 2020 annual bonus outturn.

 

LTIPs vesting in 2020

 

Awards granted to our Executive Directors in 2017 under the EIP came to the end of their performance period on 31 December 2019 and vested in 2020. The Committee assessed their performance at 38.80% of target, and the awards vested and became exercisable. To date, the award to our Executive Chairman have not been exercised; the award to our former CEO was exercised in 2021.

 

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Awards granted under the EIP to Javier López Madrid were made at 115%. The vesting of these awards is also subject to a cap set at eight times the value of the number of shares awarded, to mitigate the risk of an unjustified gain arising solely from share price appreciation. The performance conditions remain stretching and were unchanged from 2017, save for necessary adjustments to the make-up of the comparator group. See page 48 of the ARR for more information.

 

Non-Executive Directors and their remuneration

 

2020 was a challenging year for the Company and the Board met more frequently than anticipated in its usual annual calendar. Due to these exceptional requirements, the Board met 11 times in 2020, rather than the 7 times normally scheduled. No additional fees were paid to its Non-Executive Directors for the time and attention in preparing for and attending these meetings.

 

The Committee reviewed the structure of NED fees as part of its overall review of the Policy in 2020 and decided not to recommend any adjustment to the level or principles underlying NED fees, which remained unchanged in quantum from 2016.

 

In late 2020, the Committee undertook its annual review of its terms of reference and worked with the Corporate Governance Committee and the Board in considering whether responsibility for the oversight of NED fees should more properly sit with the Corporate Governance Committee to make recommendations to the Board. While this might be unusual in the U.K. it is more common in the U.S. where the Company is listed. It was decided that this change was appropriate in light of the overall governance regime to which the Company is subject by virtue of its listing on the Nasdaq Capital Market. Going forward, the Corporate Governance Committee will review and make recommendations to the full Board on the amount and type of compensation to be paid to the Company’s Non-Executive Directors. This change was effected in November 2020. To meet the requirements of U.K. corporate law, this report continues to advise on NED remuneration policy and practice in the relevant period and the Corporate Governance Committee has therefore reviewed and signed off on any aspect of NED remuneration disclosed in this report since the date its assumed oversight.

 

Looking forward to 2021

 

2020 has been challeging, particulary in light of the performance of the Company and the markets, and I am deeply greatful to the Board and management for their support.

 

We anticipated continued market challenges for our inudstry and business in early 2021; however, this uncertainty has significantly decreased due to the performance of the markets and the business with prices increasing. As a result, we decided to delay the determination of the terms of our annual bonus awards and the level of award and performance conditions of our EIP.

 

Signed on behalf of the Board.

 

Acting Chairman of the Compensation Committee 

4 June 2021

 

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The Policy

 

The following sections on pages 32 to 36 set out the directors’ remuneration policy that was approved at the 2019 Annual General Meeting. The approved Policy can be found in the Company’s U.K. Annual Report and Accounts for the period ended 31 December 2018 and on the Company’s website. The Policy is set out below for information only.

 

The following changes have been made to this section as compared with the same section in the U.K. Annual Report and Accounts 2019 to reflect application of the Policy in period from 1 January 2020 to date:

 

Following the re-allocation of oversight of Non-Executive Directors’ remuneration to the Board’s Corporate Governance Committee in late 2020 referred to in the Chairman’s statement on remuneration, that committee makes recommendations to the Board on matters relating to Non-Executive Director remuneration in accordance with the Policy and the Board makes final determination on such matters.

 

Following Marco Levi’s appointment as CEO on 10 January 2020 and to the Board on 15 January 2020, references to the application of the Policy to the CEO were updated throughout to refer to the Policy as applied to Marco Levi. Marco is based in Madrid, Spain and his service contract is accordingly governed by Spanish law. The section below on Operation of the Policy has been updated to reflect the CEO’s terms of employment and to remove references to the terms of employment of Pedro Larrea Paguaga, as former CEO.

 

Aim of the Policy

 

The overall aim of the Policy is to provide appropriate incentives that reflect the Company’s high-performance culture and values to maximise returns for shareholders.

 

In summary, our aim as regards Executive Directors is to provide remuneration which:

 

attracts, retains and motivates high calibre, high performing employees;

 

encourages strong performance and engagement, both in the short and the long term, to enable the Company to achieve its strategic objectives;

 

link a very significant proportion of pay to performance conditions measured over the short term and longer term;

 

set fixed pay levels at or around market norms to allow for a greater proportion of total remuneration opportunity to be in variable pay; and

 

create strong alignment between the interests of shareholders and executives through both the use of equity in variable incentive plans and the setting of shareholding guidelines for Executive Directors.

 

There are no material differences in the Policy for Executive Directors compared to that of senior management other than in terms of quantum and levels of participation in incentive plans reflecting the higher weighting to variable pay and ability to influence performance outcomes. For the wider employee population, the Company aims to provide remuneration structures and levels that reflect market norms for the location at which they are based.

 

Operation of the Policy

 

Throughout the Policy, reference is made to the authority, powers and discretions vested in the Committee. It is the Committee’s practice that, in relation to any significant decision in relation to the compensation of the Company’s Executive Directors or the second tier of executive management below them, the Committee makes recommendations to the Board which determines the final decision of the Company on such matters.

 

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The following table summarizes the Policy as applied to Executive Director remuneration:

 

Components of remuneration for Executive Directors

 

Element Purpose and link
to strategy
  Operation and maximum
opportunity
  Performance
framework and recovery
Salary A fixed salary commensurate with the individual’s role, responsibilities and experience, having regard to broader market rates.   Reviewed annually, taking account of Group performance, individual performance, changes in responsibility, levels of increase for the broader employee population and market salary levels.   Not applicable.
           
Pension and retirement benefits Attraction and retention of top talent; providing mechanism for the accumulation of retirement benefits.  

Executive Directors may be paid a cash allowance in lieu of pension.

 

The maximum cash allowance is 20% of base salary. This includes contributions to the U.S. tax-qualified defined contribution 401(k) plan.

  Not applicable.
           
Benefits Attraction and retention of top talent.   Benefits may include but are not limited to medical cover, life assurance and income protection insurance.   Not applicable.
           
      Relocation allowances may take into account a housing allowance, school fees, adviser fees for assistance with tax affairs and an expatriate allowance to cover additional expenditure incurred as a result of the relocation. Payment of such relocation allowances will be reviewed by the Committee on an annual basis    
           
      Benefits may include tax equalization provisions applicable if an Executive moves between jurisdictions with differing tax regimes at the Company’s request. If the Executive moves to an area of higher taxation, the Company may agree to make an annual or other regular payment in cash to compensate him or her for any additional tax burden. Where the Executive moves to a jurisdiction where his or her effective tax burden is lower than that to which he or she was subject prior to such move, the Executive’s compensation may be commensurately reduced to ensure that his or her net pay remains unaffected.    

 

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Element Purpose and link
to strategy
  Operation and maximum
opportunity
  Performance
framework and recovery
      Benefits will be provided as the Committee deems necessary including to take into account perquisites or benefits received from a prior employer or as is customary in the country in which an executive resides or is relocated from.    
           
      Benefits provided by the Company are subject to market rates and therefore there is no prescribed monetary maximum. The Company and the Committee keep the cost of the benefits under review.    
           
      The Company provides all Executive Directors with directors’ and officers’ liability insurance and will provide an indemnity to the fullest extent permitted by the Companies Act.    
           
Annual and other bonuses Short-term performance-based incentive to reward achievement of annual performance objectives.  

The annual bonus plan and all payments and awards under it are at the discretion of the Committee. Subject as aforesaid, the Committee will determine an Executive Director’s actual bonus amount, subject to the achievement of quantitative and qualitative performance criteria.

 

At least two-thirds of the bonus will be based on financial metrics with any balance based on non-financial metrics.

 

The maximum annual bonus opportunity that may be awarded to an Executive Director is normally 200% of salary. If the Committee provides higher annual bonus opportunities in any year its rationale will be clearly explained in the Annual Report on Remuneration for the relevant year. In these and other exceptional circumstances the limit will be 500% of salary.

 

No more than 25% of the maximum annual bonus payable for each performance condition will be payable for threshold performance.

 

The Committee will select the most appropriate performance measures for the annual bonus for each performance period and will set appropriately demanding targets.

 

Normally any bonus earned in excess of the target amount will be deferred for three years into shares in the Company. An Executive Director may be granted an additional long-term incentive award as described below of equal value (at maximum) to the amount of annual bonus deferred.

 

Recovery and recoupment will apply to all bonus awards for misstatement, error or gross misconduct.

 

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Element Purpose and link
to strategy
  Operation and maximum
opportunity
  Performance
framework and recovery
     

In addition or in place of an annual bonus, the Company may pay a retention bonus where it considers it necessary to retain key Executives in situations where the relevant Executive would otherwise leave the Company and his or her retention is critical to the Company’s performance and/or the achievement of strategic goals or key projects. The grant, terms and payment of any retention bonus are at the discretion of the Committee.

 

   
     

A retention bonus may be payable in cash or in shares and subject to such conditions as the Committee sees fit, including the Executive remaining with the Company for a defined period of time and/or meeting set performance criteria. The Committee would normally count any retention bonus awarded towards the 500% of salary limit.

 

   
           
Long-term incentive awards Focus Executive Directors’ efforts on sustainable strong long-term performance of the Company as a whole, and to aid in retention with multi-year vesting provision. Improves alignment of Executive Directors’ interests with those of the Company and shareholders.   Executive Directors are eligible for awards to be granted as decided by the Committee under the Company’s long-term incentive plan. All awards are subject to performance targets as determined by the Committee for each grant, performance against which is normally measured over a three-year period. Awards usually vest three years from the date of their grant.  

The Committee will select the most appropriate performance measures for long-term incentive awards for each performance period and will set appropriately demanding targets.

 

Recovery and recoupment will apply to all long-term incentive awards for misstatement, error or gross misconduct.

           
      The annual target award limit will not normally be higher than 300% of salary (based on the face value of shares at date of grant).    
           
      Maximum vesting is normally 200% of target (based on the face value of shares at date of grant).    
           
     

There is an exceptional annual target award limit in recruitment, appointment and retention situations of 500% of salary. 

   

 

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Element Purpose and link
to strategy
  Operation and maximum
opportunity
  Performance
framework and recovery
Share ownership guidelines Increases alignment between the Executive Directors and shareholders.   Executive Directors are strongly encouraged to hold a percentage of their salary in shares. This holding guideline could be achieved through the retention of shares on vesting/exercise of share awards and may also (but is not required to) be through the direct purchase of shares by the Executive Directors.   Not applicable.

 

Performance Criteria and Discretions

 

Selection of Criteria

 

The Committee annually assesses at the beginning of the relevant performance period which corporate performance measures, or combination and weighting of performance measures, are most appropriate for both annual bonus and long-term incentive awards to reflect the Company’s strategic initiatives for the performance period. The Committee has the discretion to change the performance measures for awards granted in future years based upon the strategic plans of the Company. The Committee sets demanding targets for variable pay in the context of the Company’s trading environment and strategic objectives and taking into account the Company’s internal financial planning and market forecasts. Any non-financial goals will be well defined and measurable.

 

Discretions retained by the Committee in operating its incentive plans

 

The Committee operates the Group’s various plans according to their respective rules. In administering these plans, the Committee may apply certain operational discretions. These include the following:

 

determine the extent of vesting based on the assessment of performance, including exercising its discretion to reduce payout as and where appropriate;

 

determine “good leaver” status (as described below) and where relevant extent of vesting;

 

where relevant determine the extent of vesting in the case of share-based plans in the event of a change of control in accordance with the rules of the various plans; and

 

make the appropriate adjustments required in certain circumstances (e.g. rights issues, corporate restructuring events, variation of capital and special dividends).

 

The Committee, acting fairly and reasonably, and after consulting plan participants, may adjust the targets and/or set different measures and alter weightings for the variable pay awards already granted (in a way that the alterations are intended to create an equivalent outcome for plan participants) only if (i) an unexpected event (whether a corporate or outside event) occurs which causes the Committee to reasonably consider that the performance conditions would not achieve their original purpose without alteration and (ii) the varied conditions are materially no more or less difficult to satisfy than the original conditions. Any changes and the rationale for those changes will be set out clearly in the Annual Report on Remuneration in respect of the year in which they are made.

 

Remuneration scenarios for the Executive Directors

 

The charts below show the level of remuneration potentially payable to each of Javier López Madrid as Executive Chairman and Marco Levi as CEO under different performance scenarios for the 2020 financial year same as 2019.

 

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In respect of the remuneration of the Executive Chairman:

 

 

 

In respect of the remuneration of the CEO:

 

 

 

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Assumptions

 

1.Fixed pay comprises base salary for 2020, benefits and a pension contribution of 20% of base salary for each of Javier Lopez Madrid and Marco Levi. Benefits comprise private health, income protection and life insurance arrangements at an estimated level of 5.46% of base salary for Javier Lopez Madrid and 4.52% of base salary for Marco Levi salary (excluding the one-off contribution towards relocation costs incurred in 2020) and an expatriate allowance of 20% of base salary in the case of Javier López Madrid.

 

2.On-target performance comprises fixed pay plus annual bonus of 100% of base salary and long-term incentives of 200% of base salary for the Executive Chairman and the CEO.

 

3.Maximum performance comprises fixed pay plus annual bonus of 150% of base salary for the Executive Chairman and the CEO and long-term incentives of 200% of base salary for each. Annual bonus awards and long-term inventive award levels have not yet been determined for 2021 and are illustrated at the levels awarded in 2019.

 

4.Maximum performance plus share price growth comprises the maximum performance scenario described above plus an assumed 50% share price growth over the performance period of the LTIP.

 

5.As described in the Policy, an additional long-term incentive award may be granted if part of the annual bonus is deferred, with the maximum value of such award equal to the amount of bonus deferred. As at 31 December 2020 no such awards have been made to the Executive Directors and none is to be made in respect of 2020.

 

6.The exchange rate used in these charts and throughout this report, save where stated otherwise, is the Group’s average GBP: USD exchange rate for the year to 31 December 2020 of GBP1=USD1.2838.

 

Approach to Recruitment Remuneration

 

The Committee expects any new Executive Directors to be engaged on terms that are consistent with the Policy as set out above.

 

The Committee recognises that it cannot always predict accurately the circumstances in which any new directors may be recruited. The Committee may determine that it is in the interests of the Company and shareholders to secure the services of a particular individual which may require the Committee to take account of the terms of that individual’s existing employment and/or their personal circumstances. Examples of circumstances in which the Committee expects it might need to do this are:

 

where an existing employee is promoted to the Board, in which case the Company will honour all existing contractual commitments including any outstanding annual bonus or long-term incentive awards or pension entitlements and will provide other benefits consistent with those provided to senior leaders in that employee’s home country or place of residence prior to appointment to the Board;

 

where an individual is relocating in order to take up the role, in which case the Company may provide certain one-off benefits in addition to benefits set out in the policy table such as reasonable relocation expenses, assistance with visa applications or other immigration issues and ongoing arrangements such as flights home and cost of education; and

 

where an individual would be forfeiting fixed or valuable variable remuneration in order to join the Company, in which case the Committee may award appropriate additional compensation in addition to the limit set out in the policy table. The Committee would look to replicate the arrangements being forfeited as closely as possibly taking into account the nature of the remuneration, performance conditions, attributed expected value and the time over which any variable pay would have vested or been paid.

 

In making any decision on any aspect of the remuneration package for a new recruit, the Committee would balance shareholder expectations, current best practice and the requirements of any new recruit and would strive not to pay more than is necessary to achieve the recruitment. The Committee would give full details of the terms of the package of any new recruit in the next remuneration report. Award levels under the Company’s variable incentive plans would not exceed those set out in the policy table, but their proportions can be altered for the first three years of employment.

 

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Executive Directors’ Service Contracts and Policy on Cessation

 

In order to motivate and retain the Executive Directors and other senior executives, most of whose backgrounds are in the United States and Europe, the Committee has taken account of market practices in those countries in formulating the Policy, including (a) determining the treatment of annual and retention bonuses and long-term incentive awards in case of termination of their employment by the Company without cause, (b) referencing past annual bonuses in calculating the amount of payment in lieu of notice, (c) determining the extent of vesting of long-term incentive awards in the event of a takeover or change of control and (d) determining that all long-term incentive awards granted to an executive in any financial year will be subject to achievement of performance targets.

 

Service contracts

 

Subject to the Approach to Recruitment Remuneration above, all Executive Directors have rolling service contracts for an indefinite term but a fixed period of notice of termination which would normally be 12 months. With respect to newly appointed directors, the Committee may, if it considers it necessary, agree a notice period in excess of 12 months (but not exceeding 24 months), provided it reduces to 12 months within a specified transition period of not exceeding 36 months. The service contract for Javier López Madrid is in accordance with this policy and his fixed period of notice of termination is 12 months. See below for more on Marco Levi’s service contract.

 

The Executive Chairman’s service contract may be terminated without notice and without further payment or compensation, except for sums accrued to the date of termination, for cause. In other circumstances, the Company may terminate his employment with immediate effect and make a payment in lieu of notice in the amount equivalent to the aggregate of (i) base salary, (ii) the average of annual bonuses in the last three years prior to termination, (iii) pension allowance plus (iv) cost of benefits, for the notice period (or if a notice has been served, for the unserved notice period). He would be entitled to an equivalent payment in the event of his resignation for good reason (as defined in the service contract). Similar provisions may apply in the event that he leaves following a change of control of the Company, but no additional entitlements would be expected to be set out in the Executive Director’s service contract beyond those described above. An Executive Director may also be entitled to certain amounts with respect to annual or retention bonuses and long-term incentive awards, as described below.

 

Marco Levi is employed under a service contract made under Spanish law (and in particular, the provisions of the Royal Decree 1382/1985 1st of August regarding senior management (“Alta Dirección”)). Spanish employment law imposes a number of mandatory requirements, including in relation to termination. The CEO’s service contract may be terminated without notice and without further payment or compensation, except for sums accrued to the date of termination, for cause (as defined in the service contract by reference to Spanish statutory law). If the dismissal is declared null or unfair by a definitive court or labour tribunal ruling, the CEO is entitled to receive a severance payment equal to six (6) months’ salary plus a payment equal to the Company’s costs in such six month period corresponding to the insurance and pension benefits in force at the time of termination. This severance compensation includes and absorbs the compensation and any statutory notice to which the Executive may otherwise be entitled by operation of law. In the event that the CEO is dismissed without cause, the CEO will similarly be entitled to receive a severance payment equal to 6 months’ salary plus an amount equal to the costs the Company would have incurred in providing pension, health insurance, income protection and life assurance benefits for the period of notice, in lieu of any statutory notice to which the CEO would otherwise be entitled. In addition, in accordance with Spanish law and as contemplated in the section Generally below, the CEO has enhanced post termination restrictive covenants. Under these provisions, the Company may be required to make an additional payment to ensure the enforceability of certain post-employment restrictions on competition for a period of six months from termination on terms which are customary in senior management employment relationships. The amount payable is 30% of the CEO’s salary at the date of termination and is deemed discharged at the rate of 15% of salary per annum throughout the employment relationship, such that on termination no further sums will be payable if an amount equal to 30% of salary has already been paid. The total amount payable on termination of the CEO’s service contract other than for cause is therefore less than 12 months’ salary and benefits.

 

Where an Executive Director’s service contract is terminated for “cause” or “good reason” as defined in the relevant director’s service contract, the provisions outlined below in relation to annual bonus awards and long-term incentive awards as described below will apply. Executive Directors’ service contracts (or a memorandum of the terms where the contract is unwritten) are available for inspection at the Group’s office at13 Chesterfield Street, London, W1J 5JN during normal business hours and at the Annual General Meeting.

 

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Generally

 

As circumstances may require, the Committee may approve compensation payments in consideration of statutory entitlements, for a release of claims, enhanced post-termination restrictive covenants (for example, as outlined above) or transitional assistance, such as outplacement services and payment of legal fees in connection with termination, the costs of short term accommodation or leasing arrangements, home relocation expenses including tax related expenses and other ancillary payments thereto.

 

Annual bonus awards (including retention awards)

 

In the event that an Executive Director’s employment is terminated without cause, by resignation by the Executive Director for good reason, or by reason of death, injury, disability or his employing company or the business for which he works being sold out of the Group, the Company will pay an annual bonus amount in respect of the financial year in which termination occurs subject to performance conditions being met at the end of the period and with pro-rating of the award determined on the basis of the period of time served in employment during the normal vesting period but with the Committee retaining the discretion in exceptional circumstances to increase the level of vesting within the maximum annual bonus amount as determined by the performance conditions. The Committee may, if it considers it appropriate in exceptional circumstances, measure performance to the date of cessation. In other circumstances, payment will be at the Committee’s discretion. The Committee will consider the period of the year worked and the performance of the Executive Director during that period when considering how to exercise its discretion.

 

The terms of any retention bonus agreed to be paid to an Executive Director may provide for such bonus to be payable on that Executive Director’s employment being terminated without cause, by resignation by the Executive Director for good reason, or by reason of death, injury, disability or his employing company or the business for which he works being sold out of the Group. In any such case, the retention bonus will become payable in such circumstances.

 

Long-term incentive awards

 

As a general rule, any unvested long-term incentive award (except deferred bonus awards see below) will lapse upon an Executive Director ceasing to be an employee or director in the case of voluntary resignation or dismissal for cause. However, if the cessation is without cause, by resignation by the Executive Director for good reason, or because of his death, injury, disability or his employing company or the business for which he works being sold out of the Group or in other circumstances at the discretion of the Committee, then the award will normally vest in full on the date when it would have ordinarily vested subject to the performance conditions being met. Where an award vests at the discretion of the Committee that award may be pro-rated taking into account the period of time served in employment during the normal vesting period of the award. The Committee can for any cessation measure performance up to the date of cessation and permit awards to vest early.

 

Deferred bonus awards vest in full upon cessation, other than in case of voluntary resignation by an Executive Director without good reason or dismissal for cause. Vested but unexercised awards held on cessation will remain capable of exercise for a limited period save in the case of dismissal for cause.

 

In the event of a takeover all awards will vest early to the extent that the performance conditions are determined as satisfied at that time on such basis as the Committee considers appropriate.

 

External appointments

 

Executive Directors may retain fees paid for external director appointments. These appointments are subject to disclosure to and approval by the Board and must be compatible with their duties as Executive Directors.

 

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Matters taken into consideration in determining policy and differences in the remuneration policy of the Executive Directors and employees

 

It is not the Committee’s practice to consult with employees on matters relating to executive pay. However, the Committee will consider pay structures, practices and principles across the Group on a regular basis and take these into account in any review of the Executive Directors’ current Policy or implementation thereof.

 

The Committee will consider feedback from shareholders and take into account the results of both advisory and binding votes concerning executive pay at the Annual General Meeting as well as ensuring it engages with shareholders on executive pay matters. The 2020 Policy has been formulated taking into account the Company’s understanding of current shareholder views on the Company’s remuneration policy and practices.

 

Directors’ Remuneration Policy for Non-Executive Directors

 

The following table summarizes the 2020 Policy as proposed to be applied to Non-Executive Director remuneration, subject to its approval:

 

Element Purpose and link
to strategy
Operation and maximum
opportunity
Performance framework
and recovery
Non-Executive Directors fees including Non-Executive Chairman

 

To appropriately remunerate the Non-Executive Directors

 

The Non-Executive Directors are paid a basic fee. Supplemental fees may be paid for additional responsibilities and activities, such as for the committee chairmen and other members of the main Board committees (e.g. audit, compensation, nominations and corporate governance) and the Senior Independent Director, to reflect the additional responsibilities as well as travel fees to reflect additional time incurred in travelling to meetings.

 

Not applicable

       
    These fee levels are reviewed periodically, with reference to time commitment, knowledge, experience and responsibilities of the role as well as market levels in comparable companies both in terms of size and sector.  

 

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Element

Purpose and link
to strategy
Operation and maximum
opportunity
Performance framework
and recovery
    The Company does not currently have a Non-Executive Chairman. If one were appointed his fee would be set at a level with reference to time commitment, knowledge, experience and responsibilities of the role as well as market levels in comparable companies both in terms of size and sector.  
       
    There is no maximum fee level or prescribed annual increase.  
       
Payment of expenses and benefits

 

To support the Non-Executive Directors in the fulfilment of their duties

 

Reasonable expenses incurred by the Non-Executive Directors in carrying out their duties may be reimbursed by the Company including any personal tax payable by the Non-Executive Directive as a result of reimbursement of those expenses. The Company may also pay an allowance in lieu of expenses and may arrange and pay for the provision of advice or assistance in relation to personal taxes for which the Non-Executive Director may be liable in connection with his or her appointment to the Board, if it deems this appropriate.

 

Not applicable

       
    The Company provides Non-Executive Directors with directors’ and officers’ liability insurance and an indemnity to the fullest extent permitted by the Companies Act.  

 

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Legacy Arrangements with Certain Non-Executive Directors

 

Prior to the Business Combination, in keeping with many other NASDAQ listed companies, Globe granted restricted stock units and share appreciation rights to its Non-Executive directors. Outstanding awards as at 31 December 2020 held by the Non-Executive Directors, who were previously Globe’s Non-Executive directors, are set out in the ARR.

 

It is noted that those Non-Executive Directors with restricted stock units and share appreciation rights may be regarded as not being independent by U.K. based proxy voting agencies although the Board considers them to be fully independent. It is a provision of this Policy that the Company may accelerate the vesting of or repurchase of these awards based on an independent valuation, if it deems it to be appropriate.

 

Letters of Appointment with Non-Executive Directors

 

The Company does not enter into service contracts with its Non-Executive Directors, rather the Company enters into letters of appointment for a rolling period of 12 months with each annual renewal being subject to re-election at each annual general meeting of the Company. No compensation for loss of office is payable in the event a Non-Executive Director is not re-elected. The Company may request that Non-Executive Directors resign with immediate effect in certain circumstances (including material breach of their obligations) in which case their appointment would terminate without compensation to the Non-Executive Director for such termination but with accrued fees and expenses payable up to the date of termination.

 

Appointment of Non-Executive Directors

 

For the appointment of a Non-Executive Chairman or other Non-Executive Directors, the fee arrangement would be in accordance with the approved Directors’ Remuneration Policy in place at that time.

 

Minor amendments

 

The Committee may make minor changes to the Policy, which do not have a material advantage or disadvantage overall to directors, to aid in its operation or implementation (including to take account of any change in legislative or regulatory requirements applicable to the Company) without seeking shareholder approval for a revised version of the Policy.

 

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Annual Report on Remuneration

 

Implementation of the Directors’ Remuneration Policy for the year ending 31 December 2021

 

This section sets out how the Committee intends to implement the Policy for the year ending 31 December 2021.

 

Base salary

 

Javier López Madrid was appointed as Executive Chairman with effect from 31 December 2016. Javier López Madrid’s salary was reviewed on his appointment and remains unchanged at £555,000 ($712,511) per annum.

 

Marco Levi was appointed as Chief Executive Officer on 10 January 2020 and to the Board of Directors on 15 January 2020. Marco Levi’s base salary as CEO is €600,000 ($670,091) per annum.

 

Neither Javier Lopez Madrid nor Marco Levi receive any additional fees or compensation for their respective roles on the Board.

 

Pension and benefits

 

In accordance with the Policy, both Executive Directors receive a pension contribution at the rate of 20% of base salary, payable as a cash allowance, and health insurance, income protection and life assurance benefits to the value of approximately 5.46% of salary for the Executive Chairman and 4.52% for the CEO. The Executive Chairman also receives an expatriate benefits allowance equal to 20% of base salary. The exceptional additional expatriate allowance of a further 20% of salary awarded to the Executive Chairman for a period of up to three years to 31 December 2019 ceased to be paid from 1 January 2019. Expatriate allowances are reviewed by the Committee on an annual basis. In the first year of his employment only, the CEO received a further allowance of up to €30,000 ($33,588) in respect of temporary housing and relocation costs during 2021.

 

The Company provides directors’ and officers’ liability insurance and an indemnity to the fullest extent permitted by the Companies Act.

 

Variable Remuneration

 

As at the date of this report, the objectives for the Annual Bonus plan for 2021 and the performance conditions for any grant under the Company’s Equity Incentive Plan in 2021 remain to be determined.

 

Annual bonuses

 

The bonus opportunity and performance measures for the annual bonus in 2021 will be determined later in the year, when we expect to have more clarity.

 

Long-term incentives

 

In the case of the Company’s long term incentive awards, the effect which the pandemic has had on share prices, the Committee has decided to delay the implementation of its variable compensation plans for 2021 until such time as it is feasible to set relevant and stretching targets, appropriately aligned to the Company’s strategic priorities and key financial performance indicators for 2021. As at the date of this report, the objectives for the performance conditions for any grant under the Company’s Equity Incentive Plan in 2021 remain to be determined; however, the Committee has determined that the reference share price for the Company’s Equity Incentive Plan in 2021 shall be the weighted average price of the first 15 trading days of the year, subject to the Committee’s discretion.

 

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Payments on Termination of Executive Director’s Employment - Audited

 

As stated in the 2019 Chairman’s letter on page 3 thereto, Pedro Larrea Paguaga left the Company on 10 January 2020 and resigned from the Company’s Board on the same day. In accordance with the Policy and his service agreement with the Company dated 28 June 2017, Pedro Larrea Paguaga has received during 2020 a payment in lieu of notice (PILON) totaling £843,475 (before deductions for tax and social security contributions)

 

ThePILON comprises:

Salary for the 12 months’ notice period in the Service Agreement (Notice Period) of £475,000;

Contractual entitlement to a sum equal to the average of the annual bonus amounts paid to Mr Paguaga during the last three completed financial years totalling £207,802

Pension allowance for the Notice Period of £95,000

The approximate cost to the Company of contractual private health and life insurance for the Notice Period of £20,000

£45,673 in accrued holiday pay.

 

As a term of the settlement reached with Mr. Larrea Paguaga and as is customary in the U.K. to protect the interests of the Company, the Company contributed £25,000 excluding VAT in respect of the costs of Mr. Larrea Paguaga’s solicitor on advising on his termination of employment and has agreed to assist with the reasonable costs of the provision of UK and Spanish tax advice to Mr. Larrea Paguaga for tax years falling in financial years ending 31 December 2018 and 2019, subject to that advice being provided by the Company’s usual tax adviser. It was agreed that no annual bonus for 2019 and no retention bonus would be payable to Mr. Larrea Paguaga, notwithstanding any prior commitment of the Company to do so.

 

In accordance with the rules of the Equity Incentive Plan, Mr. Larrea Paguaga will be treated as a good leaver in respect of his outstanding share awards.

 

Non-Executive Director share ownership guidelines

 

In 2018, the Non-Executive Directors reviewed the guidelines under which they had voluntarily agreed to apply on a cumulative basis at least a quarter of their normal annual gross fees to acquire shares under arrangements designed to ensure that shares can be purchased on a regular basis over a period of eight years and agreed several points of clarification, including that: .

 

Where more or fewer shares are acquired in any year, the value of shares to be acquired in subsequent years may be reduced or increased respectively such that on a cumulative basis the 25% test is satisfied;

 

Each Non-Executive Director agrees to retain his or her shares until the earlier of achieving a holding equal to twice his or her annual base fees being achieved or that director leaving the Board;

 

Where a director holds outstanding and exercisable share-based or phantom restricted stock awards, the shares or notional shares under award are to be taken into account in determining the relevant director’s holding and may be exercised and disposed of at any time (with consequent effect on the director’s holding).

 

The holdings for Executive and Non-Executive Directors as at 31 December 2020 are set out below.

 

Fees for the Non-Executive Directors

 

The fee structure and levels were set following the Business Combination. Fees are set and payable in Pounds sterling and are reviewed - but not necessarily increased - annually, with changes normally effective from 1 January in each year. The fees for 2021 are the same as those for 2020 and have not changed since 2016:

 

Non-Executive Director base fee £70,000 ($89,866)
Senior Independent Director £35,000 ($44,688)
Member of Audit Committee £17,500 ($22,344)
Member of Compensation Committee £15,500 ($19,790)
Member of Corporate Governance Committee £12,000 ($15,322)

Member of Nominations Committee 

£1,500 ($1,915 per meeting, subject to an annual cap of £10,000 ($12,768))1
Committee Chairman Two times membership fee
Travel fee (per meeting)  
Intercontinental travel £3,500 ($4,469)
Continental travel £1,500 ($1,915)

 

45 

 

 

Notes:

 

1.No fees are payable to the Chair of the Nominations Committee while the individual in that role is also an Executive Director

 

46 

 

 

Remuneration paid in respect of the year to 31 December 2020

 

Single Figure of Remuneration for the period – Audited

 

The table below shows the aggregate emoluments earned by the Executive Directors of the Company who served at any point in 2020 for the years ended 31 December 2020 and 31 December 2019. The emoluments shown for 2020 have been converted to USD at the Group’s average rate for year to 31 December 2020 of GBP1:USD1.2838. Those for 2019 were converted at the rate of GBP1:USD1.2768 in accordance with the 2019 U.K. Annual Report. Numbers given in Euros in any part of the Directors Remuneration Report are converted to USD at the Group’s rate of €1:USD1.142 and to GBP at the Group’s rate of €1:GBP0.8897.

 

Marco Levi was appointed as CEO in January 2020. He did not serve during - and therefore received no remuneration in respect of - the year ended 31 December 2019.

 

Executive  

Salary1

(USD 000s)

  

Benefits 2

(USD 000s)

  

Pension 3

(USD 000s)

  

Annual Bonus 4

(USD 000s)

  

Long-term

incentives 5

(USD 000s)

   Total (USD
000s)
 
Director  2020   2019   2020   2019   2020   2019   2020   2019   2020   2019   2020   2019 
Javier López Madrid   712    709    181    175    142    142    -    -    -    52    1,036    1,078 
Marco Levi   670    -    31    -    134    -    -    -    -    -    834    - 
Pedro Larrea Paguaga   19    606    5    200    4    121    -    -    -    39    28    966 

 

(1)No change in salary has been made year on year, any difference resulting in changes in the GBP: USD exchange rate.

(2)For Javier López Madrid, benefits include an expatriate allowance of 20% of salary (£110,000 ($142,502) in 2020), and medical insurance and life assurance coverage as benefits.

(3)For 2020 the pension for Javier López Madrid is 20% of base salary payable as a cash supplement.

(4)No annual bonus was awarded in respect of 2019 and 2020 and no amounts were deferred into shares.

(5)The performance period of the 2017 long-term incentive awards ended on 31 December 2019. As outlined below, the 2017 awards are expected to vest as to 38.80% in June 2020. The value shown in the table is an estimate using the average share price over the last three months of the financial year 2019 and includes the value of dividend equivalents. The performance period of the 2016 long-term incentive awards ended on 31 December 2018 and the awards vested as to 35.74% in December 2019. The value shown in the table reflects the share price as at the date of vesting and includes the value of dividend equivalents.

 

The table below shows the aggregate emoluments earned by the Non-Executive Directors of the Company who served at any time during 2020 for the years ended 31 December 2020 and 31 December 2019. The emoluments shown for 2020 have been converted to USD at the Group’s average yearly rate of GBP1:USD1.2838. Those for 2019 were converted at the rate of GBP1: USD1.2768 in accordance with the 2019 U.K. Annual Report.

 

47

 

 

  Fees ($’000)   Benefits ($’000)1   Total ($’000) 
Non-Executive Directors  2020   2019   2020   2019   2020   2019 
José María Alapont2   209.9    215.4    5.7    9.6    215.7    224.9 
Donald G Barger Jr   68.7    130.8    4.5    26.8    73.2    157.7 
Bruce L Crockett   145.2    131.5    4.5    31.3    149.6    162.8 
Stuart E Eizenstat   119.8    106.6    4.5    17.9    124.3    124.5 
Manuel Garrido y Ruano   105.3    104.7    1.9    13.4    107.2    118.1 
Greger Hamilton3   62.6    161.1    -    1.9    62.6    162.9 
Javier Monzón4   -    36.2    -    3.8    -    39.9 
Pierre Vareille5   -    48.9    -    5.7    -    54.6 
Juan Villar Mir de Fuentes   89.9    89.4    -    7.6    89.9    97.0 
Marta Amusategui   62.1    -    -    -    62.1    - 

 

(1)Benefits comprise travel allowances.

(2)José María Alapont was appointed as Senior Independent Director and Chairman of the Corporate Governance Committee in January 2019. He undertook additional duties in 2019 as a designated director of the Board for which he was paid additional fees totaling £9,139 in 2020 ($11,669).

(3)Greger Hamilton undertook additional duties in 2019 as a designated director of the Board for which he was paid additional fees totaling £9,139 in 2020 ($11,669).

(4)Javier Monzon resigned from the Board on 13 May 2019 and his fees and benefits for 2019 reflect the period to the date of his resignation.

(5)Pierre Vareille resigned from the Board on 14 May 2019 and his fees and benefits for 2019 reflect the period to the date of his resignation.

 

Annual bonus for the financial year to 31 December 2020 for the Executive Directors – audited

 

The target annual bonus opportunity for each of the Executive Directors was 100% of salary, with a maximum opportunity of 150%, and the performance measures for 2020 for each are detailed in the tables below.

 

Performance in respect of the performance metrics for 2020 is detailed in the table below.

 

Performance targets and performance for the Executive Directors in 2020 were:

 

Measure  Weighting (target % of award)   Threshold performance
(0% of target
paid)
  Target performance
(100% of target paid)
  Stretch performance
(150% of target paid)
  Actual Performance   Bonus outcome (as a percentage of target) 
Adjusted EBITDA   50%  $24.9 million  $31.1 million  $57.5 million   $32.5 million    28%
Net cash-flow1   50%  $23.4 million  $ 27.5 million  $50.9 million   $30.7 million     60%

 

1.Net cash flow is calculated as the difference between prior year and current year ending cash of $123.2m and $131.6m respectively adjusting for cash held in the SPV ($38.8m in 2019), cash released in the refinancing ($16.5m in 2020) and FX differences.

 

48

 

 

Long term incentive awards for the financial year ended 31 December 2020 – Audited

 

Awards vesting/ performance period ending in financial year 2020

 

The performance period of the 2018 LTIP awards ended on 31 December 2020. 60% of each award was determined by Ferroglobe’s Total Shareholder Return (TSR) performance. 50% of the TSR part of the award was calculated relative to a bespoke group of peers, and the other 50% relative to the S&P Global 1200 Metals and Mining Index in line with the prior year's award. Vesting of the remaining 40% of each award related to the Company’s return on invested capital (ROIC) over the performance period as compared with the bespoke comparator group of the Company’s peers and the Company’s net operating profit after tax (NOPAT) growth as compared to the same bespoke comparator group of the Company's peers. Vesting of these awards was calculated as follows:

 

   Weighting   Threshold (0%)  Target (100%)  Maximum (200%)  Actual   Vesting % 
Total shareholder
return relative to a bespoke group
1
   30%  Less than median (50th percentile)  50th percentile  90th percentile   Below lowest ranked    0%
TSR relative to
the S&P 1200
Metals and
Mining Index
2
   30%  Less than Index TSR  Equal to Index TSR  Equal to Index TSR + 25 percentage points   --93.1%    0%
Relative return
on invested capital ("ROIC")
3
   20%  Below percentile 25 (1.15%)  Median (2.24%)  Percentile 75 (3.33%) and above   -2.66%   0%
Relative net
operating profit after tax ("NOPAT") growth
3
   20%  Below percentile 25
(-99.3%)
  Median
(-88.6%)
  Percentile 75 (-74.9%) and above   -73.5%   200%
Weighted
average (max 200%)
                      40%

 

1 Between the 50th and 75th percentile, proportionate vesting of between target (100%) and 150% of target. Between 75th percentile and 90th percentile, proportionate vesting of between 150% and 200% of target

 

2 Equal to Index TSR + 15 percentage points, vesting of 150% of target. Straight line vesting between Index TSR and Index TSR +15 percentage points and between Index TSR+15 percentage points and Index TSR +25 percentage points

 

3 Percentile 25, vesting of 50% of target

 

As a result, the following awards are expected to vest in the normal course in 2021:

 

   Type of award  Grant date  Vesting date  Number of shares
awarded
   Percentage
of target
award
vesting (0% - 200%)
   Number of shares to
vest 1
   Estimated
value to of
award to
vest (USD)2
 
Javier López Madrid  LTIP Nil-cost option  21 March 2018  21 March 2021   113,121    40%   45,248    52,487 
Pedro Larrea Paguaga3  LTIP Nil-cost option  21 March 2018  21 March 2021   84,187    40%   33,674    39,062 

 

 

1The number of shares shown excludes dividend equivalents to be awarded in the form of shares.

 

2.The value shown in the table is an estimate using the average share price over the last three months of the financial year and includes dividend equivalents.

 

3.Pedro Larrea Paguaga is a ‘good leaver’ under the rules of the Equity Incentive Plan.

 

49

 

 

Deferred share bonus awards granted in financial year 2020

 

Under the terms of the Company’s annual bonus plan, where the annual bonus payable in any year exceeds 100% of the relevant Executive’s salary, the bonus is divided into 100% of salary paid in cash and the balance deferred into shares for a period of three years. As no annual bonuses were awarded or paid in respect of the financial year ended 31 December 2019, no amounts were deferrable into shares and no deferred share bonus plan awards were granted in 2020.

 

Long-term incentive awards granted in financial year 2020

 

On 16 December 2020 Javier López Madrid and Marco Levi were granted long-term incentive awards as set out in the table below.

 

   Type of award1  Basis of award (at max)2  Share value at grant   Number of shares at max   Face value of shares at max3   Performance period4 
Javier
López
Madrid
  Nil-cost option  200% of salary
of $712,250
  $1.05    1,355,915   $1,423,711    4 years to 31 December 2024 
Marco Levi  Nil-cost option  200% of salary
of $670,000
  $1.05    1,279,544   $1,343,521    4 years to 31 December 2024 

1.No price is normally payable on the exercise of the nil-cost option although the Company reserves the right to require the payment of the nominal cost of the shares as a condition of exercise if required to enable the issue or transfer of the shares.

2.Converted at GBP1:USD1.35 and EUR1:USD1.22, being the exchange rate on the date of grant.

3.The value shown in this column has been calculated by multiplying the number of shares that would vest at max by the share value at grant.

4.See below for details of the performance conditions applicable to the awards.

 

Vesting of 40% of the award was determined by reference to the average closing prices for the last 15 trading days of the year, with $1.05 representing the minimum with 0% of the component vesting, $1.75 representing 50% vesting and $2.45 representing 100% vesting, with straight-line analysis between such points. The final value for the share price component was $1.62.

 

Vesting of 30% of the award was determined by reference to adjusted EBITDA, with $24.9 million representing the minimum with 0% of the component vesting, $31.1 million representing 15% vesting and $60.6 million representing 100% vesting, with straight line analysis between such points. The final performance value was $32.5 million.

 

Vesting of 30% of the award was determined by reference to net cash flow, with $23.4 million representing the minimum with 0% of the component vesting, $27.5 million representing 15% vesting and $50.9 million representing 100% vesting. The final performance value was $10.6 million.

 

The awards vest four years from the date of grant, or 16 December 2024, and are subject to confirmation and modification by the Compensation Committee.

 

Directors’ shareholding and share interests – Audited

 

The table below sets out the number of shares held or potentially held by directors (including their connected persons where relevant) as at 31 December 2020.

 

50

 

 

Director  Beneficially owned shares   Number of shares under long term incentive
awards without performance conditions1
   Number of shares under long term incentive
awards with performance conditions2
   Target shareholding guideline (as a
% of salary or average gross annual fees as applicable)
   Percentage of Executive Director’s
salary held as shares as at 31 December 
20203
 
Javier López Madrid   66,797    22,829    725,178    200%   15%
Marco Levi   -    -    255,479    200%     
José María Alapont   15,000    -    -    -      
Bruce L. Crockett   6,000    2,527    -    200%     
Stuart E. Eizenstat   56,632    -    -    200%     
Manuel Garrido y Ruano   870    -    -    200%     
Marta de Mausategui y Vergara   78,220    -    -    200%     
Juan Villar Mir de Fuentes   -    -    -    200%     

1.See page 50 for details.

2.At target vesting. See page 51 for details.

3.Measured by reference to beneficially owned shares only and using the closing share price at 16 December 2020 of $1.610 and the annual salaries of the Executive Directors in USD as disclosed in this U.K. Annual Report and Accounts.

4.Including 24,497 shares awarded under the Equity Incentive Plan in 2016 which vested on 5 December 2019. See page 52 for details.

5.Including 18,231 shares awarded under the Equity Incentive Plan in 2016 which vested on 5 December 2019. See page 52 for details.

 

The Directors’ outstanding share awards as at 31 December 2020 were as detailed below:

 

Director  Award
type
  Grant
date
  Outstanding1   Subject to performance conditions2  Exercisable
as of 31
December 2020
   Exercised
during the
year to 31 December 
2020
   Future
vesting
   Vesting
date
 
Javier López Madrid  LTIP
Nil cost option
  01.06.17   154,703   Yes   Yes    -    60,0252    01.06.20 
   LTIP
Nil cost option
  21.03.18   113,121   Yes        -    113,121    21.03.21 
   Deferred Bonus Award:
Nil cost option
  14.06.18   22,829   No   -    -    22,829    14.06.21 
   LTIP
Nil cost option
  14.03.19   342,239   Yes   -    -    342,239    14.03.21 
   LTIP
Nil cost option
  16.12.20   1,355,915   Yes   -    -    1,355,915    16.12.24 
                                   
Marco Levi  LTIP
Nil cost option
  16.12.20   1,343,521   Yes   -    -    1,343,521    16.12.24 
                                   
Pedro Larrea Paguaga4  LTIP Nil cost option  01.06.17   115,134   Yes   Yes         44,6722    01.06.20 
   LTIP Nil cost option  21.03.18   84,187   Yes   -    -    84,187    21.03.21 
   Deferred Share Bonus Award  14.06.18   19,538   No   -    -    19,538    14.06.18 
   LTIP Nil cost option  14.03.19   254,679   Yes   -    -    254,679    14.03.21 
                                   
Donald G. Barger3  SAR  Various   2,303   No   Yes    -    -    - 
   RSU/C  Various   23,741   No   Yes    -    -    - 
                                   
Bruce L. Crockett3   NQ  Various   25,000   No   Yes    -           
   RSU/C  Various   2,527   No   Yes    -    -    - 
   SAR  Various   2,303   No   Yes    -    -    - 
                                   
Stuart E. Eizenstat3  SAR  Various   2,303   No   Yes    -    -    - 

 

51

 

 

1.Deferred share bonus awards at target granted to the Executive Directors only. Vested awards are shown without dividend equivalents consistent with prior year disclosures.

2.Subject to performance conditions and continued employment in the case of awards to the Executive Directors. See page 48 for performance conditions applicable to the awards granted in 2019. As outlined earlier in this ARR, the 2017 awards vested at 38.80% of target on 1 June 2020.

3.These incentive awards are legacy awards which the Company is authorised to honour following shareholder approval of the Policy in June 2019.

4.Certain of Pedro Larrea’s awards expired 12 months following his departure from the Company, pursuant to the terms of the Plan.

 

Total pension entitlements – Audited

 

Details of the value of pension contributions are provided in the Pensions column of the Single Figure of Remuneration table. Pension contributions are by way of a cash allowance or contribution to a 401(k) plan. There are therefore no specified retirement ages to disclose or consequences of early retirement.

 

52

 

 

Executive Chairman remuneration table

 

    20201    20192    20183    20174    20165 
    Javier López
Madrid
    Javier López
Madrid
    Javier López
Madrid
    Javier López
Madrid
    Alan
Kestenbaum
 
Executive Chairman’s remuneration6  $1,036,390   $1,078,784   $1,336,250   $2,106,244   $1,870,120 
Annual variable pay (including as a % of maximum)7  $0 (0)%  $0 (0)%  $0 (0)%   $935,423
(65.5
)%   $738,886
(17.5
)%
LTIP awards where vesting is determined by performance in the relevant year8   -    19.40%   17.87%   N/A    N/A 

 

1At the exchange rate of 1 GBP: 1.2838 USD used in the FY20 Report

2At the exchange rate of 1 GBP: 1.2772 USD used in the FY19 Report

3At the exchange rate of 1 GBP: 1.3356 USD used in the FY18 Report

4At the exchange rate of 1 GBP: 1.2886 USD used in the FY17 Report.

5At the exchange rate of 1 GBP: 1.3507 USD used in the FY16 Report.

6Remuneration comprises total remuneration as shown in the single figure table in the ARA for 2019, in the 2018 U.K. Annual Report and Accounts for 2018, in the 2017 U.K. Annual Report and Accounts for 2017 and the 2016 U.K. Annual Report and Accounts for 2016 and 2015. Remuneration reported for 2015 is for the period from consummation of the BCA on 24 December 2015 to 31 December 2015.

7Annual variable pay is the bonus amounts in respect of 2019 and 2018 shown in the single figure table on page 47 and, for each of those years, the percentage of maximum award it represents. Figures elsewhere in this report show bonus as a percentage of target.

8The number of shares subject to long term incentive awards where final vesting is determined by reference to performance ending in the year under review is shown as a percentage of maximum opportunity. No long-term incentive awards awarded to the relevant Executive Chairman vested in 2017, 2016 or 2015, save for those vesting on Alan Kestenbaum’s leaving the Company on 31 December 2016.

 

Percentage increase or reduction in the remuneration of the Executive Chairman

 

The following table shows the percentage change in 2020 in the Executive Chairman’s pay1 compared with 2019 and the average percentage change in the same period in amounts paid to European employees of the Group as a whole. European employees have been chosen as an appropriate group against which to make the comparison as our Executive Chairman as at 31 December 2019 was based in Europe.

 

Executive Chairman’s pay1  CEO  Average employee pay
2019 to 2020  2019 to 2020  2019 to 2020
4.9%  0%  0%

 

1The components of pay for these purposes includes salary, taxable benefits and annual variable pay

2Increase in Executive Chairman pay is entirily attributable to FOREX movement.

 

Relative importance of the spend on pay

 

The following table shows the Company’s actual spend on pay for all employees compared to distributions to shareholders in the financial year.

 

   1 January 2020 to 31
December 2020
   1 January 2019 to 31
December 2019
 
Employee costs   $214,782,000   $285,029,000 
Average number of employees    3,317    3,736 
Distributions to shareholders    -    - 

 

1.Including the costs of employees employed in FerroAtlantica SAU, whose shares were sold by the Company in 2019, resulting in an adjustment to the staff costs to $338,862,000 for 2018.
2.Including employees employed in FerroAtlantica SAU, as above.

 

53

 

 

External directorships during financial year 2020

 

Javier López Madrid

 

Chief Executive Officer of Grupo VM.

 

Non-Executive Chairman and investor of Siacapital S.L.

 

The Board was satisfied that under these arrangements the Executive Chairman had the necessary time to carry out his duties effectively during 20209.

 

Under the Policy, Executive Directors may retain fees paid for external director appointments. These appointments are subject to approval by the Board and must be compatible with their duties as Executive Directors.

 

Membership of the Committee

 

During the period from 1 January 2020 to 31 May 2020, the Committee comprised Donald G. Barger, Jr as chairman and members José María Alapont and Bruce L. Crockett. During the period from 31 May 2020 for 31 December 2020, the Committee comprises Messrs. Alapont and Crockett.

 

The Executive Chairman, Chief Executive Officer and other members of the management team may be invited to attend meetings to assist the Committee. Other Non-Executive Directors are normally invited to attend meetings to assist the Committee in its deliberations as appropriate. No Executive, however, is present during any decision making in relation to their own remuneration.

 

External advisors

 

Aon provides independent advice to the Committee and was appointed by the Committee in early 2016. The Committee seeks advice relating to Executive remuneration and Non-Executive Director remuneration and the wider senior management population from Aon. Aon also provided advice to management, to enable their support of the Committee, primarily in relation to remuneration reporting and the operation of incentive plans but does not provide any other services to the Company except for insurance broking services.

 

The Committee is satisfied that the advice received from Aon in relation to executive remuneration matters is objective and independent. Aon is a member of the UK Remuneration Consultants Group and abides by the Remuneration Consultants Group Code of Conduct, which requires its advice to be objective and impartial. The fees paid to Aon for advice provided directly to the Committee in 2020 were £33,827 ($43,298) (excluding VAT).

 

Statement of shareholder voting

 

The following table shows the results of the advisory vote on the 2020 Remuneration Report at the Annual General Meeting of 30 June 2020.

 

   For   % of votes
cast
   Against   % of votes
cast
   Withheld 
Remuneration Report   120,813,490    91.80    10,722,388    8.15    61,724 

 

54

 

 

Approval

 

This Directors’ Remuneration Report, including both the Policy and Annual Report on Remuneration has been approved by the Board.

 

Signed on behalf of the Board.

 

Acting Chairman of the Compensation Committee

 

4 June 2021

 

55

 

 

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FERROGLOBE PLC

 

Report on the audit of the financial statements

 

1.Opinion

 

In our opinion:

 

·the financial statements of Ferroglobe plc (the ‘parent company’) and its subsidiaries (the ‘group’) give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2020 and of the group’s loss for the year then ended;

 

·the group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB);

 

·the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and

 

·the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

 

We have audited the financial statements which comprise:

 

·the consolidated income statement;

·the consolidated statement of comprehensive income;

·the consolidated and parent company statement of financial position;

·the consolidated and parent company statements of changes in equity;

·the consolidated cash flow statement;

·the related notes 1 to 30 in respect of the group financial statements; and

·the related notes 1 to 11 in respect of the parent company financial statements.

 

The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law, international accounting standards in conformity with the requirements of the Companies Act 2006 and IFRSs as issued by the IASB. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).

 

2.Basis for opinion

 

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.

 

We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed entities, 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.

 

3.Material uncertainty relating to going concern

 

We draw attention to Note 3.1 where the directors acknowledge that certain events and conditions relating to the uncertainty over the completion of the restructuring of the Senior Notes, the potential repayment of the outstanding balance of the Senior Notes should a change of control occur, and the difficulties in forecasting net cash flows in the current economic conditions because of the Covid-19 pandemic, together in aggregate give rise to a material uncertainty that raises substantial doubt about the group’s and parent company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

 

56

 

 

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

 

Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of accounting included the following:

 

·We evaluated management’s future cash flow forecast, considering both the method adopted and the period covered by the forecast. We also considered the consistency of the forecast with other forecasts used for evaluating the recoverability of assets.

 

·Our challenge of management’s forecasts included evaluating key assumptions by reference to external industry data where available: The key assumptions were determined to be sales price and production volumes, as well as the assumed savings from the Group’s strategic improvement plan. We performed a retrospective review of assumptions compared with current and past performance and evaluated the accuracy of prior year forecasts against current year performance.

 

·We evaluated the sensitivity analysis performed by management, which included a ‘zero-cash’ sensitivity scenario, which was determined to be unlikely to materialise.

 

·We considered the impact of subsequent events on the going concern assessment, including the status of the refinancing process and remaining steps to complete, evaluating the likelihood and impact of a change of control on the Group’s financial position, cash received post-year end as part of the refinancing, as well as considering post-year end operating performance.

 

·We challenged management as to the appropriateness of disclosures made in the Annual Report and Accounts.

 

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

 

4.Summary of our audit approach

 

Key audit matters

The key audit matters that we identified in the current year were:

·    Going concern (see material uncertainty relating to going concern section);

·    Impairment of goodwill and property, plant and equipment (‘PP&E’) and carrying values of the parent company’s investments in its two subsidiaries.

Materiality The materiality that we used for the group financial statements was $9.1m ($17.1m for 2019), determined by reference to revenue. The assessed materiality represents approximately 1% of revenue.  
Scoping

As in the prior year, we focused our group audit scope primarily on the components in the following countries:

·   United States of America (‘USA’);

·   Spain;

·   France; and

·   Canada.

The components subject either to full scope audits or audits of specified balances represent 96% of the group’s revenue. FerroPem SAS in France, Grupo Ferroatlantica SAU in Spain and the parent company in the UK were all subject to full scope audit.

Lower materialities were applied to the procedures performed on components, ranging from $1.5m to $4.6m (2019: $3.4m to $10.3m).

Significant changes in our approach Our audit approach is broadly consistent with the approach performed in the previous year. Last year our audit report included a key audit matter in relation to the accounting treatment of receivables in the securitisation program, which is no longer applicable as the securitization program ended in 2020.

 

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5.Key audit matters

 

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.

 

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the material uncertainty relating to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.

 

5.1.Impairment of goodwill and property, plant and equipment (‘PP&E’) and carrying values of the parent company’s investments in its two subsidiaries

 

Key audit matter description

As described in Notes 4.4, 7, 8 and 9 to the financial statements, the Company’s evaluation of goodwill and property, plant and equipment for impairment involves the comparison of their carrying amounts with their recoverable amount at the end of the reporting period, or more frequently if there are indicators that the assets might have become impaired.

 

The recoverable amount is the higher of the fair value and the value in use. If the asset itself does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount for the asset’s cash-generating unit (“CGU”).

 

The value in use is developed as the present value of the future cash flows that are expected to be derived from continuing use of the asset and from its ultimate disposal at the end of its useful life, discounted at a rate which reflects the time value of money and the risks specific to the business to which the asset belongs.

 

The CGUs assessed for impairment included goodwill in the US CGU and assets in the Group’s US, Canada, Europe and South Africa CGUs. The estimation of the recoverable value of individual CGUs requires significant judgment in developing and applying key underlying assumptions concerning future market conditions, trading performance (sale prices, volumes, cost structure and capital expenditure or “capex”), as well as application of appropriate discount rates (weighted average cost of capital or “WACC”) and other factors (such as long-term growth rate). These inputs are estimated based on management’s business plans, which are subject to change as business conditions change, and therefore, could affect the fair values in the future.

 

As of December 31, 2020, the book value of the above-mentioned CGUs was $584,493 thousand, including goodwill and property, plant and equipment. The US CGU is the only CGU with a carrying value attributable to goodwill of $29,702 thousand (2019: $29,702 thousand).

 

As mentioned in Note 7, during the year ended December 31, 2020 no impairment has been recorded related to goodwill (2019: $174,008 thousand). As noted in Note 9, impairments of property, plant and equipment totalled $71,929 thousand and related to assets valued at fair value (2019: $1,224 thousand).

 

The recoverable amount of the Group’s CGUs is also used to evaluate the parent company’s investments in subsidiaries, which principally represent the US & Canadian CGUs for Globe Specialty Metals Inc (“GSM”) and the European and South African CGUs for Grupo Ferroatlantica SAU (“GFAT”), and are therefore subject to same levels of judgement and estimation uncertainty. As such, the impairment of the parent company’s investments in subsidiaries is a key audit matter for our audit of its separate financial statements.

 

The carrying value of the parent company’s investment in its two subsidiaries, GSM and GFAT, as at 31 December 2020 is $631,274 thousand (2019: $610,534 thousand) as detailed in Note 3 to the parent company Financial Statements. As noted in Note 3 to the parent company financial statements, no impairment has been recorded during the current year (2019: $437,596 thousand).

 

We identified impairment of goodwill and property, plant and equipment and the investments in subsidiaries of the parent company as a key audit matter because of the significant judgment and level of estimation involved in determining the recoverable amount.

 

A high degree of auditor judgement and an increased extent of audit effort, including the involvement of appropriate specialist support, was required to challenge management’s impairment assessment, including our evaluation of key assumptions, forecasts of future cash flows, discount rates (WACC) and other factors (such as long-term growth rate).

 

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How the scope of our audit responded to the key audit matter

Our audit procedures related to management’s assumptions and estimates in determining future cash flows (mainly sale prices, volumes, cost structure and capex), discount rates (WACC) and other factors (such as long-term growth rate) and included the following, among others:

 

• We assessed the design and tested the operating effectiveness of relevant controls over the development of the impairment assessment of long-lived assets;

 We considered the accuracy of past forecasts developed by management to assess the reliability of the forecasting process;

• We considered key assumptions applied in the development of the discounted future cashflows, including their consistency with the forecasts used in the assessment of the carrying value of the individual CGUs, as discussed above. We confirmed the cashflow forecasts were consistent with the most recent forecasts approved by the Board of Directors;

We discussed and challenged management on key assumptions underlying the forecast including evaluation of management’s forecasts by reference to prior year and 2021 year to date results, current order book, comparison with the approved budget and changes in the regulatory environment;

· We evaluated the volumes and prices projected for the period 2022-2025 using independent sources of information (such as analyst and industry reports or price reports, when available) and considered information that could be potentially contradictory to management's forecasts;

· With the assistance of our fair value specialists, we evaluated the discount rates (WACC), the long-term growth rate and the underlying sources of information. Our fair value specialists also assisted in testing the mathematical accuracy of the calculations and developing a range of independent estimates and comparing those to management’s discount rates;

· We have evaluated the sensitivity analysis disclosed by the Company over the US CGU by comparing the results of the impairment test with significant changes and modifications to the underlying inputs such as the net cash flows, the discount rates (WACC) and the long-term growth rate; and

· In respect of the parent company, we assessed that the valuation determined in the impairment assessment for goodwill and property, plant and equipment (‘PP&E’) was appropriately allocated in the value in use calculations performed for the two investments held by the parent company.

 

Key observations

The deficiencies identified in internal controls over the assessment of impairment of goodwill and PPE assets related to instances of both ineffective controls and controls that were not designed over the assumptions and inputs used in the impairment evaluation. We re-evaluated the nature and extent of substantive audit procedures performed as a result of the deficiencies identified.

 

From our substantive audit procedures performed, including our evaluation of the methodology, valuation and accuracy of the impairment test performed, we are satisfied that the Group’s goodwill and PPE assets at 31 December 2020 are recoverable. Additionally, we are satisfied that the carrying value of the investments in subsidiaries at 31 December 2020 are recoverable.

 

6.Our application of materiality

 

6.1.Materiality

 

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

 

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Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

 

   Group financial statements  Parent company financial statements
Materiality  $9.1m (2019: $17.1m)  $6.4m (2019: $11.9m)
Basis for determining materiality  0.8% of Revenue (2019: 1%)  Total assets, capped at 70% of group materiality (2019:70%)
Rationale for the benchmark applied  Revenue is considered to be the most appropriate and stable benchmark as the Group was loss making in the current and prior years.  As the parent company is a non-trading entity, we considered it appropriate to use total assets for determining materiality.

 

 

 

6.2.Performance materiality

 

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group performance materiality was set at $7.3m for the 2020 audit (2019: $11.9m) and parent company performance materiality was set at $5.1m (2019: $8.3m). In determining performance materiality, we considered the following factors:

 

a.the decline in trading performance of the Group in the current year and resulting impact on financial statement materiality compared to the scale of the Group’s financial operations and the number of components remaining the same;

b.the quality of the control environment and the control deficiencies identified;

c.the nature, volume and size of misstatements (corrected and/or uncorrected) identified in the previous audit; and

d.the complexity of financial reporting matters and one-off transactions.

 

6.3.Error reporting threshold

 

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of $0.45m (2019: $0.85m), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

 

7.An overview of the scope of our audit

 

7.1.Identification and scoping of components

 

The group comprises three reportable segments (North America, Europe and South Africa) and the corporate business unit, with geographical CGUs reported within each.

 

Our audit scope was consistent with the prior year, with component audit teams in the following countries:

 

·Spain;

·United States of America (‘USA’);

·France; and

·Canada.

 

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Full scope audits were performed on Grupo Ferroatlantica SAU by Deloitte Spain, FerroPem SAS by Deloitte France and by Deloitte UK for the parent company in the UK.

 

Specified audit procedures were performed on the Group’s businesses in USA by Deloitte US and Canada by Deloitte Canada.

 

Analytical review procedures were performed over the Group’s residual businesses and components by Deloitte Spain, with oversight performed by Deloitte UK.

 

The materialities applied to component audits ranged from $4.6 million to $1.5 million (2019: $10.2 million to $3.4 million).

 

7.2.Working with other auditors

 

The UK group audit team worked on an integrated basis with Deloitte Spain, directing and overseeing audit work performed by component teams and that performed directly by Deloitte Spain.

 

The integrated UK and Spanish audit team planned, supervised and reviewed work performed by component auditors in France, USA and Canada. The level of direct involvement varied by location and included attendance to key meetings with local engagement teams, including audit closing meetings, and a detailed review of their reporting deliverables and underlying audit work documentation.

 

The coverage of our audit work across the group is shown below:

 

   

 

 

8.Other information

 

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

 

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Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

 

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.

 

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in respect of these matters.

 

9.Responsibilities of directors

 

As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

 

10.Auditor’s responsibilities for the audit of the financial statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

 

11.Extent to which the audit was considered capable of detecting irregularities, including fraud

 

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

 

11.1.Identifying and assessing potential risks related to irregularities

 

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:

 

·the nature of the industry and sector, control environment and business performance including the design of the group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;

 

·results of our enquiries of management, internal audit, and the audit committee about their own identification and assessment of the risks of irregularities;

 

·any matters we identified having obtained and reviewed the group’s documentation of their policies and procedures relating to:

 

oidentifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;

 

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odetecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;

 

othe internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;

 

·the matters discussed among the audit engagement team including component audit teams and relevant internal specialists, including tax, valuations and IT regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.

 

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the revenue recognition process at the end of the year. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.

 

We also obtained an understanding of the legal and regulatory frameworks that the group operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act 2006 and and tax regulations applicable on the key jurisdictions where the group operates.

 

In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the group’s ability to operate or to avoid a material penalty. These included the group’s environmental regulations.

 

11.2.Audit response to risks identified

 

As a result of performing the above, we did not identify any key audit matters related to the potential risk of fraud or non-compliance with laws and regulations.

 

Our procedures to respond to risks identified included the following:

 

·reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;

 

·enquiring of management, the audit committee and in-house legal counsel concerning actual and potential litigation and claims;

 

·performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;

 

·reading minutes of meetings of those charged with governance and reviewing internal audit reports;

 

·in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business; and

 

·in addressing the risk of fraud in revenue recognition identified as a risk of cut-off, testing sales recorded in the last month of the year and in January 2021 by evaluating whether sales were recorded in the correct period in accordance with the agreed shipping terms.

 

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members, including internal specialists, and component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

 

Report on other legal and regulatory requirements

 

12.Opinions on other matters prescribed by the Companies Act 2006

 

In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

 

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In our opinion, based on the work undertaken in the course of the audit:

 

·the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

·the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

 

In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.

 

13.Matters on which we are required to report by exception

 

13.1.Adequacy of explanations received and accounting records

 

Under the Companies Act 2006 we are required to report to you if, in our opinion:

 

·we have not received all the information and explanations we require for our audit; or

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

·the parent company financial statements are not in agreement with the accounting records and returns.

 

We have nothing to report in respect of these matters.

 

13.2.Directors’ remuneration

 

Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not been made or the part of the directors’ remuneration report to be audited is not in agreement with the accounting records and returns.

 

We have nothing to report in respect of these matters.

 

14.Use of our report

 

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

 

Nicola Barker, ACA (Senior statutory auditor)

For and on behalf of Deloitte LLP

Statutory Auditor

London, UK

4 June 2021

 

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FERROGLOBE PLC

 

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Consolidated Financial Statements as of December 31, 2020 and 2019 and for each of the three years ended December 31, 2020, 2019 and 2018

 

Independent auditor’s report to the members of Ferroglobe plc    
Consolidated Statement of Financial Position as of December 31, 2020 and 2019   66  
Consolidated Income Statement for the years ended December 31, 2020, 2019 and 2018   67  
Consolidated Statement of Comprehensive Income (Loss) for the years ended December 31, 2020, 2019 and 2018   68  
Consolidated Statement of Changes in Equity for the years ended December 31, 2020, 2019 and 2018   69  
Consolidated Statement of Cash Flows for the years ended December 31, 2020, 2019 and 2018   70  
Notes to the Consolidated Financial Statements   71  

 

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FERROGLOBE PLC AND SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2020 AND 2019

Thousands of U.S. Dollars

 

      2020   2019 
   Notes  US$'000   US$'000 
ASSETS 
Non-current assets             
Goodwill  Note 7   29,702    29,702 
Other intangible assets  Note 8   20,756    51,267 
Property, plant and equipment  Note 9   620,034    740,906 
Other non-current financial assets  Note 10   5,057    2,618 
Deferred tax assets  Note 22       59,551 
Non-current receivables from related parties  Note 23   2,454    2,247 
Other non-current assets  Note 12   11,904    1,597 
Non-current restricted cash and cash equivalents  Note 10       28,323 
Total non-current assets      689,907    916,211 
Current assets             
Inventories  Note 11   246,549    354,121 
Trade and other receivables  Note 10   242,262    309,064 
Current receivables from related parties  Note 23   3,076    2,955 
Current income tax assets  Note 22   12,072    27,930 
Other current financial assets  Note 10   1,008    5,544 
Other current assets  Note 12   20,714    23,676 
Current restricted cash and cash equivalents  Note 10   28,843     
Cash and cash equivalents  Note 10   102,714    94,852 
Total current assets      657,238    818,142 
Total assets      1,347,145    1,734,353 
EQUITY AND LIABILITIES 
Equity             
Share capital      1,784    1,784 
Reserves      696,774    975,358 
Translation differences      (206,759)   (210,152)
Valuation adjustments      5,755    (2,169)
Result attributable to the Parent      (246,339)   (280,601)
Non-controlling interests      114,504    118,077 
Total equity  Note 13   365,719    602,297 
Non-current liabilities             
Deferred income      620    1,253 
Provisions  Note 15   108,487    84,852 
Bank borrowings  Note 16   5,277    144,388 
Lease liabilities  Note 17   13,994    16,972 
Debt instruments  Note 18   346,620    344,014 
Other financial liabilities  Note 19   29,094    43,157 
Other non-current liabilities  Note 21   16,767    25,906 
Deferred tax liabilities  Note 22   27,781    74,057 
Total non-current liabilities      548,640    734,599 
Current liabilities             
Provisions  Note 15   55,296    46,091 
Bank borrowings  Note 16   102,330    14,611 
Lease liabilities  Note 17   8,542    8,900 
Debt instruments  Note 18   10,888    10,937 
Other financial liabilities  Note 19   34,802    23,382 
Payables to related parties  Note 23   3,196    4,830 
Trade and other payables  Note 20   149,201    189,229 
Current income tax liabilities  Note 22   2,538    3,048 
Other current liabilities  Note 21   65,993    96,429 
Total current liabilities      432,786    397,457 
Total equity and liabilities      1,347,145    1,734,353 

 

Notes 1 to 30 are an integral part of the consolidated financial statements

 

The financial statements were approved by the board of directors and authorised for issue on June 4 2021.

 

Signed on its behalf by:

 

Dr. Marco Levi

Director

 

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FERROGLOBE PLC AND SUBSIDIARIES

 

CONSOLIDATED INCOME STATEMENT FOR 2020, 2019 AND 2018

Thousands of U.S. Dollars

 

      2020   2019   2018(*) 
   Notes  US$'000   US$'000   US$'000 
Sales  Note 25.1   1,144,434    1,615,222    2,242,002 
Cost of sales      (835,486)   (1,214,397)   (1,446,677)
Other operating income      33,627    54,213    45,844 
Staff costs  Note 25.2   (214,782)   (285,029)   (338,862)
Other operating expense      (132,059)   (225,705)   (277,560)
Depreciation and amortization charges, operating allowances and write-downs  Note 25.3   (108,189)   (120,194)   (113,837)
Impairment losses  Note 25.5   (73,344)   (175,899)   (58,919)
Net (loss) gain due to changes in the value of assets  Note 25.5   158    (1,574)   (7,623)
(Loss) gain on disposal of non-current assets  Note 25.6   1,292    (2,223)   14,564 
Bargain purchase gain  Note 5           40,142 
Other losses      (1)        
Operating (loss) profit      (184,350)   (355,586)   99,074 
Finance income  Note 25.4   177    1,380    4,858 
Finance costs  Note 25.4   (66,968)   (63,225)   (57,066)
Financial derivative gain (loss)  Note 19   3,168    2,729    2,838 
Exchange differences      25,553    2,884    (14,136)
(Loss) profit before tax      (222,420)   (411,818)   35,568 
Income tax benefit (expense)  Note 22   (21,939)   41,541    (20,459)
(Loss) profit  for the year from continuing operations      (244,359)   (370,277)   15,109 
(Loss) profit for the year from discontinued operations  Note 29   (5,399)   84,637    9,464 
(Loss) profit  for the year      (249,758)   (285,640)   24,573 
Loss attributable to non-controlling interests  Note 13   3,419    5,039    19,088 
(Loss) profit  attributable to the Parent      (246,339)   (280,601)   43,661 
                   
                   
Earnings per share                  
       2020    2019    2018(*)
(Loss) profit  attributable to the Parent (US$'000)      (246,339)   (280,601)   43,661 
Weighted average basic shares outstanding      169,269,281    169,152,905    171,406,272 
Basic (loss) earnings per ordinary share (US$)  Note 14   (1.46)   (1.66)   0.25 
Weighted average basic shares outstanding      169,269,281    169,152,905    171,406,272 
Effect of dilutive securities              123,340 
Weighted average dilutive shares outstanding      169,269,281    169,152,905    171,529,612 
Diluted (loss) earnings per ordinary share (US$)  Note 14   (1.46)   (1.66)   0.25 

 

 

(*) The amounts for prior periods have been restated to reclassify the results of the Company´s Spanish hydroelectric assets within profit (loss) from discontinued operations (see Note 29).

 

Notes 1 to 30 are an integral part of the consolidated financial statements

 

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FERROGLOBE PLC AND SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) FOR 2020, 2019 AND 2018
Thousands of U.S. Dollars

 

   2020   2019   2018(*) 
   US$'000   US$'000   US$'000 
Net (loss) profit   (249,758)   (285,640)   24,573 
                
Items that will not be reclassified subsequently to income or loss:               
Defined benefit obligation   3,630    (1,859)   3,568 
Tax effect   (45)       (296)
Total income and expense that will not be reclassified subsequently to income or los   3,585    (1,859)   3,272 
                
Items that may be reclassified subsequently to income or loss:               
Arising from cash flow hedges   (3,752)   9,663    10,006 
Translation differences   3,239    (8,698)   (45,435)
Tax effect            
Total income and expense that may be reclassified subsequently to income or loss   (513)   965    (35,429)
                
Items that have been reclassified to income or loss in the period:               
Arising from cash flow hedges   8,091    2,390    (7,228)
Tax effect       (805)   (190)
Total transfers to income or loss   8,091    1,585    (7,418)
                
Other comprehensive income (loss) for the year, net of income tax   11,163    691    (39,575)
                
Total comprehensive (loss) income for the year   (238,595)   (284,949)   (15,002)
                
Attributable to the Parent   (235,022)   (281,097)   4,976 
Attributable to non-controlling interests   (3,573)   (3,852)   (19,978)

 

(*) The amounts for prior periods have been restated to reclassify the results of the Company´s Spanish hydroelectric assets within profit (loss) from discontinued operations (see Note 29).

 

Notes 1 to 30 are an integral part of the consolidated financial statements

 

68

 

 

FERROGLOBE PLC AND SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR 2020, 2019 AND 2018
Thousands of U.S. Dollars

 

   Total Amounts Attributable to Owners 
   Issued   Share       Translation   Valuation   Result for   Non-controlling     
   Shares   Capital   Reserves   Differences   Adjustments   the Year   Interests   Total 
   (Thousands)   US$'000   US$'000   US$'000   US$'000   US$'000   US$'000   US$'000 
Balance at January 1, 2018   171,977    1,796    996,380    (164,675)   (16,799)   (678)   121,734    937,758 
Comprehensive income (loss) for 2018               (44,276)   5,591    43,661    (19,978)   (15,002)
Issue of share capital   40        240                    240 
Cash settlement of equity awards           (680)                   (680)
Share-based compensation           2,798                    2,798 
Distribution of 2017 loss           (678)           678         
Dividends paid to joint venture partner           (20,642)                   (20,642)
Own shares acquired   (1,153)   (12)   (20,088)                   (20,100)
Increase of Parent's ownership interest in FerroAtlántica de Venezuela S.A.           (15,623)   1,585    (351)       14,389     
Balance at December 31, 2018   170,864    1,784    941,707    (207,366)   (11,559)   43,661    116,145    884,372 
Comprehensive (loss) income for 2019               (9,886)   9,390    (280,601)   (3,852)   (284,949)
Share-based compensation           4,879                    4,879 
Distribution of 2018 income           43,661            (43,661)        
Dividends paid non-controlling interests                           (97)   (97)
Acquisition of non-controlling interests in Ferrosolar OPCO Group SL. and Rocas Arcillas and Minerales, S.A.           (14,889)   7,100            5,881    (1,908)
Balance at December 31, 2019   170,864    1,784    975,358    (210,152)   (2,169)   (280,601)   118,077    602,297 
Comprehensive (loss) income for 2020               3,393    7,924    (246,339)   (3,573)   (238,595)
Share-based compensation           2,017                    2,017 
Distribution of 2019 loss           (280,601)           280,601         
Balance at December 31, 2020   170,864    1,784    696,774    (206,759)   5,755    (246,339)   114,504    365,719 

 

Notes 1 to 30 are an integral part of the consolidated financial statements

 

69

 

 

FERROGLOBE PLC AND SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF CASH FLOWS FOR 2020, 2019 AND 2018
Thousands of U.S. Dollars

 

<
   2020   2019*   2018* 
   US$'000   US$'000   US$'000 
Cash flows from operating activities:               
(Loss) profit  for the year   (249,758)   (285,640)   24,573 
Adjustments to reconcile net profit (loss) to net cash provided by operating activities:               
Income tax expense (benefit)   21,939    (40,528)   24,235 
Depreciation and amortization charges, operating allowances and write-downs   108,189    123,024    119,137 
Finance income (loss)   (177)   2,140    (5,374)
Finance costs   66,968    66,139    62,022 
Financial derivative gain (loss)   (3,168)   (2,729)   (2,838)
Exchange differences   (25,553)   (2,884)   14,136 
Impairment losses   73,344    175,899    58,919 
Bargain purchase gain           (40,142)
Loss (gain) on disposal of discontinued operations   5,399    (85,101)    
Loss (gain) due to changes in the value of assets   (158)   1,574    7,623 
(Gain) loss on disposal of non-current assets   (1,292)   2,223    (14,564)
Share-based compensation   2,017    4,879    2,798 
Changes in operating assets and liabilities:               
(Increase) decrease in inventories   114,585    91,531    (101,024)
(Increase) decrease in trade and other receivables   71,034    30,933    (25,807)
Increase (decrease) in trade and other payables   (55,405)   (63,187)   55,410 
Other changes in operating assets and liabilities   14,473    (45,878)   (25,901)
Income tax paid   11,831    (3,589)   (36,408)
Net used cash provided by operating activities   154,268    (31,194)   116,795 
Cash flows from investing activities:               
Interest and finance income received   630    1,673    3,833 
Payments due to investments: