Figeac Aero : FGA - Financial annual report - FY22 - Auditors' report

KPMG S.A.	Mazars
224 rue Carmin	Green Park III
CS 17610	298, allée du Lac
31676 Labège Cedex	31670 Labège
France	France

Figeac Aéro S.A.

Statutory auditors' report on the consolidated

financial statements

Financial year ended March 31, 2022

Figeac Aéro S.A.

Zone Industrielle de l'Aiguille - 46100 Figeac

KPMG International Limited, une entité de droit anglais.

de Versailles.

FR 77 775 726 417

KPMG S.A.	Mazars
224 rue Carmin	Green Park III
CS 17610	298, allée du Lac
31676 Labège Cedex	31670 Labège
France	France

Figeac Aéro S.A.

Registered office: Zone Industrielle de l'Aiguille - 46100 Figeac

Capital: €4,967,165.28

Statutory auditors' report on the consolidated financial statements

Financial year ended March 31, 2022

For the attention of the General Meeting of Figeac Aéro S.A.,

Opinion

In performance of the engagement entrusted to us by your General Meeting, we have conducted our audit of the consolidated financial statements of Figeac Aéro S.A. for the financial year ended March 31, 2022, as appended to this report.

We certify that the consolidated financial statements give a true and fair view of the results of operations for the year ended, as well as the financial position and assets and liabilities at the end of said year, of the consolidated group of persons and entities in accordance with IFRS guidelines as adopted by the European Union.

The above opinion is consistent with the content of our report to the Audit Committee.

Basis of opinion

Auditing standards

We conducted our audit in accordance with the professional standards applicable in France. We believe that the evidence collected in our audit provides a reasonable basis for our opinion.

Our responsibilities pursuant to these standards are described in the section of this report entitled "Responsibilities of the statutory auditors regarding the audit of the consolidated financial statements".

Independence

We conducted our audit in accordance with the rules of independence set out in the French Commercial Code and in the Code of Ethics for Statutory Auditors for the period from April 1, 2021 to the date of issue of our report. In particular, we did not provide any services prohibited by Article 5(1) of Regulation (EU) consolidated financial statements 537/2014.

Observation

Without calling into question the opinion expressed above, we draw your attention to the following point set out in Note 1 paragraph U "Pension liabilities and other employee benefits" and Note 17 "Employee benefits" to the consolidated financial statements concerning the IFRIC interpretation of IAS 19 on the measurement of post-employment benefits, which came into force in April 2021.

KPMG International Limited, une entité de droit anglais.

de Versailles.

FR 77 775 726 417

Figeac Aéro S.A.

Rapport des commissaires aux comptes sur les comptes consolidés

August 12, 2022

Justification of assessments - Key audit matters

Due to the global crisis related to the Covid-19 pandemic, the financial statements of this period have been prepared and audited under specific conditions. Indeed, this crisis and the exceptional measures taken in the context of the state of health emergency have had numerous consequences for companies, particularly for their operations and financing, and have led to greater uncertainties regarding their future prospects. Some of these measures, such as travel restrictions and remote working, have also had an impact on companies' internal organization and the performance of audits.

It is in this complex and evolving context that, in accordance with the provisions of Articles L. 823-9 and R. 823-7 of the French Commercial Code on the justification of audit assessments, we draw your attention to the key audit matters in relation to risks of material misstatement which, in our professional judgment, were of most significance in the audit of the consolidated financial statements for the financial year, as well as our responses to those risks.

These assessments formed part of our audit of the consolidated financial statements, taken as a whole, and contributed to the formation of our opinion as expressed above. We do not express an opinion on items of these consolidated financial statements taken individually.

Going concern principle used in the preparation of the consolidated financial statements

Risk identified

The Covid-19 pandemic had a major impact on the aerospace industry during financial year 2020/21. The collapse of global air traffic caused by the health crisis prompted sector contractors to slash their delivery schedules, particularly for long-haul aerospace programs.

As a result of the sharp reduction in business in financial year 2020/21 and despite the recovery during the financial year ended, the Group incurred significant operating losses, which led Management to update cash flow forecasts in order to assess the Group's ability to meet its cash requirements over a rolling 12-month period. These forecasts, which are aligned with the Group's business forecasts for the coming year, are by their nature uncertain, as described in Note 27.1 "Liquidity risk" to the consolidated financial statements.

These forecasts, together with the redemption of the ORNANE bonds initially scheduled for October 2022, have led Management to take steps to restructure the Group's financial liabilities and strengthen its equity, as described in Note 31 "Post balance sheet events" to the consolidated financial statements.

In this regard, the assessment of the going concern principle by the Board of Directors entails a significant degree of judgment in view of the uncertainty surrounding the business outlook.

In view of the foregoing, we consider the use of the going concern assumption to be a key audit matter.

Our response

We obtained and assessed the appropriateness of the Board's assessment of the Group's ability to continue as a going concern over a period of 12 months from the end of the financial year and the assumptions and documentation on which this assessment is based. Our work involved:

• obtaining and reviewing the Group's cash flow forecast up to September 2023;
• assessing the consistency of the business assumptions underlying the cash flow forecasts with the latest version of the budget reviewed by the Board of Directors and corroborating,

- Exercice clos le 31 mars 2022

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Figeac Aéro S.A.

Rapport des commissaires aux comptes sur les comptes consolidés

August 12, 2022

as a whole, the reasonableness of these assumptions with regard to internal Group factors and the situation of the aerospace industry;

• assessing the consistency of assumptions regarding additional financing, the rescheduling of existing liabilities (in particular the modification of the ORNANE bond terms) and the strengthening of the capital base with the corresponding legal documentation;
• comparing the previous year's cash flow forecast with the actual data as of March 31, 2022 in order to assess the achievement of past targets;
• analyzing bank waivers regarding the triggering of early repayment clauses for loans subject to this mechanism;
• questioning Management regarding its knowledge of events or circumstances arising after the balance sheet date that might call these forecasts into question;
• assessing the appropriateness of the information provided in the note "Post balance sheet events" to the consolidated financial statements.

Revenue recognition in accordance with IFRS 15

Risk identified

Group revenue is generated through various types of contracts for the construction and delivery of aircraft sub-assemblies, which in some cases include development activities and have a duration of several financial years, or through service contracts.

In accordance with IFRS 15, the Group analyzes each new contract in its portfolio in order to determine the revenue recognition method to be adopted, as stated in Note 1 paragraph H to the consolidated financial statements.

Revenue recognition in accordance with IFRS 15 is a key audit matter insofar as the analysis of the different types of contracts that generate Group revenue entails a significant degree of judgment when:

• identifying the contract under IFRS 15, which defines the rights and obligations of the parties;
• identifying separate performance obligations, particularly for the part of the contracts relating to specific development activities;
• determining the timing of revenue recognition (progressively or at a specific moment);
• determining the accounting method for the contract performance costs, including amortization periods for capitalized expenses.

Our response

Our work involved:

• assessing the compliance of the accounting policies presented in Note 1 paragraph H to the consolidated financial statements with IFRS 15;
• reviewing the procedures and controls implemented by the Group in relation to the management and monitoring of contracts, the determination of contract revenue and costs, and testing the operational effectiveness of these controls, particularly in the context of the Covid-19 crisis;
• for a selection of individual transactions, testing the correct recognition of revenue and contract performance costs in accordance with IFRS 15;

- Exercice clos le 31 mars 2022

4

Figeac Aéro S.A.

Rapport des commissaires aux comptes sur les comptes consolidés

August 12, 2022

• assessing the appropriateness of the information provided in Note 1 paragraph H to the consolidated financial statements.

Capitalization and amortization of development costs

Risk identified

The development policy of the Figeac Aéro Group is focused on new machining systems. As of March 31, 2022, the net carrying amount of capitalized development costs was €57.3 million, excluding development costs relating to the implementation of the new ERP.

The criteria for capitalizing development costs, as well as the criteria relating to their start date and rate of amortization, are described in Note 1 paragraph I to the consolidated financial statements.

Assessing whether the various criteria for capitalization and amortization have been met entails numerous judgments and estimates, including an assessment of how the intangible asset will generate probable future economic benefits over its useful life.

In view of the materiality of the capitalized, amortized and non-amortized development costs as of March 31, 2022 and the assessment of the various capitalization and amortization criteria, we considered that the capitalization and amortization of development costs was a key audit matter.

Our response

Our work involved:

• reviewing the compliance of the methodology applied by the company with the prevailing accounting standards;
• reviewing the internal control procedures implemented to identify development costs that meet the criteria for capitalization, as well as their start date and rate of amortization;
• testing, on a sample basis, the existence and valuation of expenditure on various intangible assets during their development phase;
• assessing, on a sample basis, whether the various criteria for the capitalization and amortization of development costs are met;
• assessing the quality of the forecasting procedures used to analyze the probable future economic benefits generated by capitalized projects, including critical analyses of the revenue and profitability forecasts for capitalized development costs within the changing context of the Covid-19 crisis;
• assessing, on a sample basis, whether there are any indications of impairment for projects in the process of amortization.

We also assessed the appropriateness of the information provided in the notes to the consolidated financial statements.

EUR/USD currency hedging and derivative financial instruments

Risk identified

The Group generates a significant portion of its revenue and makes a significant portion of its supplier payments in US dollars. In order to hedge its currency risk, it implements a currency hedging policy based on the management of a portfolio of derivative financial instruments (forward sales, accumulators, etc.).

- Exercice clos le 31 mars 2022

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