03 > Financial Highlights
04 > Business Overview
06 > Chairman and Chief Executive’s Statement
10 > Business Review
16 > Board of Directors
17 > Directors’ Report
20 > Corporate Governance e2v technologies plc Report Annual Report and Financial Statements 2009
24 > Corporate Responsibility
30 > Directors’ Remuneration Report
36 > Directors’ Responsibilities
37 > Independent Auditor’s Report
39 > Financial Statements
< > 1 03 > Financial Highlights
04 > Business Overview
06 > Chairman and Chief Executive’s Statement Who we are 10 > Business Review e2v’s objective is to be a global leader in the 16 > design and supply of specialised components Board of and sub-systems that Directors enable the world’s leading systems
17 > companies to deliver innovative solutions Directors’ for medical & science, aerospace & defence, Report and commercial & industrial markets.
20 > Corporate e2v has four major product groups: Governance Report l Electron devices and sub-systems
24 > l Imaging devices Corporate Responsibility l Specialist semiconductors
30 > l Sensors Directors’ Remuneration Report We offer our customers and partners the ability to satisfy their exacting requirements, 36 > our employees the most exciting of careers, Directors’ Responsibilities our suppliers confidence in the strength of our business, and our shareholders a 37 > portfolio business of world beating products Independent Auditor’s Report and technologies.
39 > Financial Statements
< > 2 03 > Financial Highlights
04 > Business Overview
06 > Chairman and Chief Executive’s Statement Financial Highlights 10 > Business Review l Sales up 14%, due to the benefit of acquisition l Ongoing business improvement programme and exchange rate movements. delivered annual savings of £3.6m in the year. 16 > Adjusted* profit before tax down 13%. Acquisition of QP Semiconductor completed in Board of l l October 2008 for £41.1m, net of cash acquired. Directors l Adjusted* earnings per share flat at 30.20p. l Adverse exchange rates increased net borrowings l Cash generated from operations up 45% to £43m. by £20m. 17 > l Reported loss before taxation of £28.4m after Directors’ Order book at 31 March, £154m, up 26%. Up 9% – Impairment provisions - £28.6m. l Report at constant currency. – Business improvement programme costs and provision - £6.8m. 20 > – Fair value losses on financial instruments - £4.7m. Corporate Governance Report
24 > Corporate Responsibility
30 > Directors’ Remuneration Report Reported Sales £m adjusted* eps pence Adjusted* PBT £m Net Borrowings £m (as restated) (as restated) 36 > Directors’ Responsibilities Year ended Year ended 31 March 2009 31 March 2008 37 > £million £million Independent Revenue 233.2 204.6 Auditor’s Report Adjusted* profit before tax 20.4 23.4 Profit before tax (28.4) 13.7 > 39 Profit after taxation (21.3) 11.8 Financial Statements Total shareholders’ equity 53.7 74.5 Net debt 136.2 (93.2) Earnings per share – basic (34.42)p 19.36p Adjusted* earnings per share – basic 30.2p 30.08p
*Adjusted profit is before amortisation of acquired intangibles, impairment of acquired intangibles, plant and equipment, acquisition and integration costs, business improvement programme costs and fair value losses and gains on financial instruments. Adjusted earnings is adjusted profit less tax impacts where applicable. Previously adjusted profits were also before share based payments, comparative figures have been amended to reflect this change.
< > 3 03 > Financial Highlights
04 > Business Overview
06 > Chairman and Chief Executive’s Business Overview Statement Revenue by division
10 > Business Review
16 > Board of Directors
17 > Directors’ Report Electron Devices Imaging Devices Specialist Sensors 20 > and Sub-systems Semiconductors Corporate Governance Report £30.9m 24 > (£28.4m) Corporate Responsibility
30 > Directors’ Remuneration £53.3m Report (£39.8m)
36 > Directors’ Responsibilities
37 > £65.2m Independent Auditor’s Report (£60.6m)
39 > Financial Statements £83.7m (£75.8m)
Images courtesy of: Varian Medical Systems, NASA and Northrop Grumman
< > 4 03 > Financial Highlights
04 > Business Overview
06 > Chairman and Chief Executive’s Statement
10 > Business High Advanced CCD Specialist A wide range Review performance and CMOS semiconductors, of professional electron devices imaging sensors including logic, sensing products 16 > and sub-systems and cameras memory and for applications Board of Directors for applications for applications microprocessors, including: including: including: for applications 17 > including: Directors’ Report l Defence electronic l Space, science and life l High reliability l Environmental safety. countermeasures. science imaging. microprocessor > l X-ray spectroscopy. 20 requirements, in Corporate l Radiotherapy cancer l Industrial process partnership with l Automotive alarm Governance treatment machines. control. Freescale Semiconductor, and security systems. Report Radar systems. Intra-oral and panoramic l l and MRAMs in l Microwave radar and l Stellar satellite dental x-ray systems. partnership with safety and arming 24 > amplifiers. l Military surveillance. Everspin. devices. Corporate Responsibility l Digital television l Automotive imaging. l Mission-critical avionics l Fire, rescue and security transmitters. and defence programs thermal imaging. requiring high reliability l Industrial heating. 30 > integrated circuits with Directors’ continuity of supply over Remuneration programme lifetimes. Report l High speed data conversion. 36 > l Sensor data Directors’ Responsibilities acquisition utilising mixed signal application specific devices. 37 > Independent Auditor’s Report
39 > Financial Statements
Space and scientific imaging sensors
< > 5 03 > Financial Highlights
04 > Business Overview
06 > Chairman and Chief Executive’s Statement George Kennedy Keith Attwood Chairman Chief Executive 10 > Business Review Chairman’s and 16 > Board of Directors Chief Executive’s Statement
e2v’s objective is to be a global leader in the design and supply of > 17 specialised components and sub-systems that enable the world’s leading Directors’ systems companies to deliver innovative solutions for aerospace & defence, Report medical & science, and commercial & industrial markets. The Group specifically targets markets that exhibit long term growth, high 20 > barriers to entry, require a significant proportion of bespoke design and have a limited number of competitors. e2v does not seek to compete in Corporate commoditised markets. To achieve this, e2v’s business strategy has four Governance key elements: Report l To focus our resources on product opportunities with sustainable growth and margins in current 24 > and adjacent niche market sectors; Corporate Responsibility l To extend our scope of supply, where appropriate, thereby maximising revenues from established market positions as well as developing new market positions; > 30 l To continue our internal focus on productivity Directors’ improvements; and Remuneration Report l To acquire complementary businesses and technologies to accelerate growth. 36 > This has been a further year of expansion for the Group with the acquisition in The Group Directors’ October 2008 of QP Semiconductor Inc. (QP) for a consideration of £41.1m, net of cash acquired, substantially increasing our reach into the US defence market Responsibilities specifically and strengthening our portfolio of specialist semiconductor products. We have continued with the “Fit for the Future” programme during the year, targets markets 37 > incurring costs in the year of £2.2m and taking a further provision of £4.6m, that exhibit long Independent as we launched a further phase of the programme, principally in the UK and Auditor’s Report France, with the continued combined objectives of improving customer service term growth, whilst also improving productivity through greater efficiency and strengthened processes. This programme delivered savings of £3.6m in the year. high barriers to 39 > entry, require Financial Statements a significant proportion of bespoke design and have a limited number of competitors.
< > 6 03 > Financial Highlights
04 > Business Overview
06 > Chairman and Chief Executive’s Statement
10 > Business Review
16 > Board of Directors Market Overview Business Structure e2v serves three key market sectors, medical & science, The Group is organised into four divisions that are supported by aerospace & defence and commercial & industrial. Group functions: > 17 The largest of these market sectors is aerospace & defence, where l E lectron devices and sub-systems – high performance Directors’ the e2v addressed market is estimated to be £1.1bn, which is relatively electron devices and sub-systems for applications including Report stable but subject to programme timings. e2v has participated in this defence electronic countermeasures, radiotherapy cancer treatment market for more than 60 years establishing a strong, and in some niches, machines, radar systems, satellite communications amplifiers, digital a market leading position and further strengthened this position with the television transmitters. 20 > acquisition of QP. At this time, the defence market is deferring spend on l Imaging devices – advanced CCD and CMOS imaging sensors and many programmes and, although the programmes e2v will participate Corporate cameras for applications including space, science and life science in are known, contract awards are occurring more slowly. In the space Governance imaging, industrial process control, intra-oral and panoramic dental market, programme funding has been largely unaffected by the economic Report x-ray systems, military surveillance, automotive imaging. down turn to date and this sector remains robust. l Specialist semiconductors – including logic, memory and The next largest sector is commercial & industrial where the e2v 24 > microprocessors for high reliability microprocessor and MRAM addressed market is estimated to be £0.8bn. This sector has been requirements, in partnership with Freescale Semiconductor and Corporate seriously impacted by the economic downturn and remains the Everspin, mission-critical avionics and defence programs requiring high Responsibility most challenging. reliability integrated circuits, high speed data convertors and sensor Medical & science is the smallest sector, where the e2v addressed data acquisition utilising mixed signal application specific devices. market is estimated at £0.3bn and the main medical sub-sectors 30 > l Sensors – a range of professional sensing products for applications served by the Group, have also been impacted by the economic including environmental safety, x-ray spectroscopy, automotive alarm Directors’ downturn. The scientific sector is relatively robust and is benefiting and security systems, microwave radar and safety and arming devices, Remuneration from certain national government stimulus measures. fire rescue and security thermal imaging. Report Group functions cover: l Global operations with responsibility for all manufacturing and 36 > supply chain activity; Directors’ l Global sales that manage our customer relationships throughout the Responsibilities world through a combination of e2v’s own sales and support offices and a network of distribution partners and representatives; and 37 > l Support services including finance, legal, IT and HR. Independent Auditor’s Report
39 > Financial Statements
Military high-reliability integrated circuit
< > 7 03 > Financial Highlights Chairman’s and Chief Executive’s Statement
04 > Business Overview
06 > Chairman and Financial Performance Chief Executive’s Reported revenue for the Group increased by 14% to £233.2m, and by 3% Statement on a constant currency basis and adjusted* profit before taxation amounted to £20.4m (2008: £23.4m). The Board considers that the adjusted* profit before interest and taxation more accurately reflects the comparable 10 > performance of the underlying business. Business In light of the recent major changes in the Group’s markets, provisions Review for impairment of acquired intangible assets and plant and equipment of £28.6m (2008: £nil) and business improvement programme charges of £6.8m (2008: £2.0m) have been made. Along with amortisation of acquired > 16 intangibles of £8.6m (2008: £7.3m), fair value losses on foreign exchange Board of contracts and interest rate swaps of £4.7m (2008: £0.4m) these have Directors resulted in a Group loss before taxation of £28.4m (2008: £13.7m profit). Adjusted* earnings per share were 30.20p (2008: 30.08p) and earnings 17 > per share amounted to a loss of 34.42p (2008: 19.36p earnings). Directors’ Given the Group’s focus on cash conservation and debt reduction, the Board Report is not proposing a final dividend. An interim dividend of 2.7 pence per share was paid on 8 January 2009.
20 > The weakening of Sterling during the year against both the Euro and US dollar has significant ramifications for the Group. Whilst exports from Corporate Europe, and particularly the UK, are now more competitively priced against Governance US competitors’ products, the Group’s currency borrowings have, when Report translated into Sterling for reporting and covenant testing purposes, significantly increased, contributing some £20m to the increase in net borrowings to £137.3m, (2008: £94.4m). 24 > Corporate Cash flows generated from operations increased to £43.0m (2008: £29.7m). Responsibility The order book at 31 March 2009 was £154m (2008: £122m) an increase of 9% on a constant currency basis. £104m is for delivery in the financial year ending 31 March 2010 (FY 2008: £88m for delivery in FY2009). This 30 > is consistent with last year, on a constant currency basis, and is weighted Directors’ towards the second half. Remuneration Report Impairment Provisions The economic downturn in the last quarter of 2008/09 and the ongoing impact has resulted in write downs of the acquired intangible assets 36 > with respect to the imaging business in Grenoble, which serves primarily Directors’ the industrial and medical markets, of £17.4m. A strategic review of the Responsibilities markets, products and supply chain for the imaging business is underway. The specialist semiconductor business in Grenoble, acquired at the same time, services primarily the aerospace and defence market. This business 37 > continues to perform satisfactorily. The review, of the overall imaging Independent business identified plant and equipment, where the remaining useful life Auditor’s Report is considered to be reduced, resulting in an additional depreciation charge of £2.5m. Provisions have also been made against goodwill with regard to the QP 39 > business acquired in October 2008 of £7.0m. This provision arises due to Financial delays in programme awards impacting 2008/09 and 2009/10 and a prudent Statements view being taken with regard to future growth prospects. The net reduction in Sterling terms amounts to £2m. The business enjoys strong margins and the Board remain confident in its future performance.
£1.7m of goodwill, with regard to acquisitions made before the Group was *Adjusted profit is before amortisation of listed, have also been written off as the associated products are within acquired intangibles, impairment of acquired intangibles, impairment of plant and equipment, approximately five years of their commercially exploitable term. business improvement programme costs and fair value losses on financial instruments. Adjusted earnings is adjusted profit less tax impacts where applicable.
< > 8 03 > Financial Highlights
04 > Business Overview
06 > Chairman and The Board Chief Executive’s The Board consists of the Chairman, three independent Non-Executive Statement Directors and two Executive Directors. In May 2009, Charles Hindson joined the Board as Group Finance Director and Mike Hannant resigned from the Board after 17 years service with the Group. 10 > Business Our People Review Achieving last year’s performance in the face of a rapidly declining economic environment, required dedication and commitment from the e2v team, throughout the world. On behalf of the Board and our shareholders, 16 > we would like to register our thanks to the team for their efforts. Board of Directors Summary and Outlook The Group has experienced softer market conditions in many of its markets in the current calendar year. We are seeing general market
17 > softness with order deferments in the defence sector, although we have Directors’ an active opportunity pipeline. In the medical sector, new equipment Report sales are declining, whilst demand for spares is flat. The outlook for the industrial sectors remains weak. Consistent with the demand profile in the last quarter of the financial year ended 31 March 2009, this has led to 20 > a lower level of activity in the first half of the year ending 31 March 2010 Corporate and therefore the Board has implemented a range of actions. Governance The business improvement programme, ‘Fit for the Future’, was extended Report last financial year and a £4.6m provision made at the year end. To date in the current financial year, 40 people have left the Group and this programme is set to deliver savings of c£3m this year and annualised 24 > savings of c£5m. As a consequence of the tougher trading conditions, Corporate the Board has instigated further actions to contain costs including Responsibility discretionary spend and reduced working hours, which are targeting further cost reductions of c£6m in the current half year. The Board currently foresees that the trading performance in the second 30 > half of the financial year ending 31 March 2010 should benefit from the Directors’ stronger than normal order book for this period, opportunities for defence Remuneration projects in the order pipeline and strength in specific sectors, including Report space imaging and the scientific markets. The Board will be continuing with the existing initiatives to reduce costs and is developing other programmes to improve the scalability of operations. 36 > Directors’ The above actions should provide some headroom at 30 September 2009 and, together with the anticipated trading in the second half, provide Responsibilities additional headroom at 31 March 2010 for the Group’s borrowings. There remains foreign exchange translation risk on the Group’s borrowings as these are predominantly denominated in the Euro and the US dollar. 37 > Independent We consider the first half of the financial year ending 31 March 2010 to Auditor’s Report be challenging and, at the current level of exchange rates, we anticipate that the Group will remain within its banking arrangements. The Board is working with its financial advisers and is reviewing a > 39 range of options for the most appropriate long term capital structure Financial for the Group. Statements
George Kennedy Keith Attwood Chairman Chief Executive Officer Ordnance safety and arming unit
< > 9 03 > Financial Highlights
04 > Business Overview
06 > Chairman and Chief Executive’s Business Review Statement
10 > Overview Business The Group achieved revenue of £233.2m (2008: £204.6m) and Expenditure on research and development has increased to £17.1m Review adjusted* profits before taxation of £20.4m (2008: £23.4m). (2008: £14.0m). £1.5m of the impairment in acquired intangibles is included in the charge (2008: £0.1m) and excluding this amount the Whilst reported sales grew by 14% this increase was solely due to the increase of 12.2% overall is due to exchange rate movements in relation impact of acquisitions and exchange rates. Overall the underlying business 16 > to the research and development at the French operating site, as well was flat when compared with the previous year. Although there was Board of as the QP acquisition. There were significant reductions in research and growth in the Electron Device & Sub-systems (EDS) and sensor divisions Directors development within the electron devices and sub-systems division, but both the imaging and specialist semiconductor divisions’ performance this was more than offset by additional investment in CMOS technology declined. The Group experienced significant deterioration in demand within the imaging division. in the fourth quarter in industrial markets, particularly imaging within 17 > industrial processing and the automotive sector, but generally across the Selling and distribution costs increased by 28.8% to £18.0m Directors’ whole sector. This decline has continued into the current financial year. (2008: £14.0m). £1.7m of the increase is due to exchange rates when Report Fourth quarter performance was also held back by technical problems on converting the cost of overseas sales offices to Sterling. The remaining space programmes within imaging, that impacted sales levels but did not increase reflects the full year impact of the expansion in selling capability significantly increase costs, as well as destocking within radiotherapy and undertaken in the previous financial year. 20 > lower general demand within EDS for cargo screening. Corporate Administrative expenses increased to £63.4m (2008: £25.0m). Governance Gross profit increased by 9.1% to £79.0m (2008: £72.4m) and Administrative expenses include a number of the items added back to represented 33.9% of sales (2008: 35.4%). The exchange rate movement adjusted profits of £45.4m (2008: £9.6m) detailed below. The remaining Report has increased revenue but costs were adversely impacted and margins administration expenses of £18.0m (2008: £15.4m) increased by 17% and fell by 0.7% as a consequence. There has also been an increase in £0.9m of the increase is due to exchange rates and the remainder due to increased costs arising from the programme to strengthen the senior > depreciation, material and utility costs. The £3.6m of savings delivered 24 from the business improvement programme and the favourable impact management below Board level as well as additional resource to support Corporate of the QP acquisition only partly offset these adverse impacts. the enlarged Group. Responsibility
30 > Directors’ Adjusted* profit before taxation Remuneration The adjusted* profit before taxation more accurately reflects the Report underlying performance of the business and is calculated as follows: Year ended Year ended 31 March 2009 31 March 2008 > 36 £000 £000 Directors’ Responsibilities (Loss)/profit before taxation (28,405) 13,747 Included in administrative expenses: Amortisation of acquired intangible assets 8,628 7,310 37 > Independent Impairment of acquired intangible assets 24,579 - Auditor’s Report Impairment of plant and equipment 2,500 - Business improvement programme costs 6,826 1,996 39 > Fair value losses on foreign currency contracts 2,894 357 Financial Included in research and development costs: Statements Impairment of acquired intangible assets 1,548 - Fair value losses on interest rate swaps 1,819 - Adjusted* profit before taxation 20,389 23,410
< > 10 03 > Financial Highlights Reported sales grew by 14% 04 > and gross profit increased by 9.1%. Business Overview
06 > Chairman and Chief Executive’s Statement
10 > Business The increase in amortisation of acquired intangible assets in Review the Group income statement for the current year reflects both the exchange rate impact relating to amortisation incurred in Euros and the QP acquisition in the year. 16 > Board of In the review of the carrying value of intangibles and plant and equipment, total impairment of £28.6m has been provided Directors (2008: £nil). Further details are included in the Chairman’s and Chief Executive’s Statement. 17 > The Group continues its drive to improve efficiency and has invested Directors’ further in its business improvement programme incurring a charge in Report the year of £6.8m (2008: £2.0m). This year the US dollar forward exchange contracts do not qualify for hedge accounting and a mark to market adjustment was required in > 20 the income statement. This amounted to a loss of £2.9m (2008: £0.4m) Corporate and is described as ‘fair value losses on foreign exchange contracts’. Governance Report The sharp fall in LIBOR rates has resulted in a fair value loss on the interest rate swaps the Group contracted for in 2006 with regard to the term loans of £1.8m (2008: £nil). 24 > Corporate Responsibility Revenue and adjusted* profit before interest and tax by division was as follows:
30 > Revenue Adjusted* profit Directors’ £ million 2008/2009 2007/2008 2008/2009 2007/2008 Remuneration Electron Devices & Sub-systems 83.7 75.8 15.7 17.5 Report Imaging Devices 65.2 60.6 4.3 7.2 Specialist Semiconductors 53.3 39.8 13.1 6.4 > 36 Sensors 30.9 28.4 (1.6) (0.5) Directors’ Responsibilities 233.2 204.6 31.5 30.6 Group functions (11.1) (7.2) 20.4 23.4 37 > Independent Auditor’s Report * Adjusted profit is before amortisation of acquired intangibles, impairment of acquired intangibles, impairment of plant and equipment, business improvement programme costs and fair value losses on financial instruments. Adjusted earnings is adjusted profit less tax impacts where applicable.
39 > Financial Statements
< > 11 03 > Financial Highlights Business Review
04 > Business Overview
06 > Chairman and Finance charges Chief Executive’s Higher finance costs this year are as a result of using debt to finance Statement the QP acquisition and the exchange rate impact on Euro borrowings. The Group has an interest rate swap covering 37% of borrowings at 31 March 2009 which secures borrowing rates to a maximum of 5%. 10 > Business Taxation Review The effective tax rate on profits for the year ended 31 March 2009 (excluding adjustments to the tax charge in respect of prior years) amounts to 18.1% (2008: 26.5%) and 8.4% (2008: 21.5%) including adjustments relating to prior 16 > years. The tax charge in the current year has benefited from an increased Board of deduction in respect of tax credits for research and development in both the Directors UK and France. This has more than offset the impact of higher overseas tax rates on the increased levels of profits arising overseas. This has resulted in an actual tax for the year being a recovery of £7.1m (2008: £1.9m) charge. > 17 Currency Directors’ The Group’s primary exposure to foreign currency continues to be the US dollar Report which accounts for 35% (2008: 31%) of the Group’s sales revenue. In the year to 31 March 2009 US dollar were sold under foreign exchange contracts at
> an average rate of $1.93 = £1 (2008: $1.99 = £1). The net impact on profits 20 was a gain of £1.3m. Sales revenue denominated in Euros accounts for Corporate 28% (2008: 31%) of the total but the majority of this exposure is offset Governance by expenditure. Report In the year ended 31 March exchange rates applied were:
Average Year End 24 > Corporate 2009 2008 2009 2008 Responsibility US dollar 1.75 2.01 1.43 1.99 Euro 1.22 1.43 1.07 1.26 30 > 63% of the Groups borrowings are denominated in Euros and 31% are Directors’ denominated in US dollar. The movement in exchange rates in these currencies Remuneration has led to a translation loss in net debt of £20.8m (17%) in the year. Report Cash flow and net borrowings 36 > The net cash inflow generated from operations was £43.0m, an increase of £13.4m over the year ended 31 March 2008. This increase has been achieved Directors’ despite lower levels of profit, due to cash generation from working capital. Responsibilities Cash expended on tangible assets and software amounted to £10.8m in the year (2008: £12.6m). 37 > Net borrowings at 31 March 2009 amounted to £137.3m (2008: £94.4m), Independent equating to 3.19 times an EBITDA, as defined in the banking agreements. Auditor’s Report Borrowing facilities The Group’s multi currency borrowing facilities expire in July 2011 and currently > 39 consist of a term loan of €60.4m and general corporate purposes facilities of Financial €35.0m, £41.1m, and $65.0m. At 31 March 2009 a total of £143.7m had been Statements drawn on these facilities, consisting of £9.4m, €95.4m and $65.0m. The term loan is payable in six monthly instalments until 31 March 2011, of which €10.2m of the term loan is due for repayment during the year ended 31 March 2010. The balance is repayable on 11 July 2011. The general corporate purposes facilities are available to the Group in full until 11 July 2011. Interest is payable at between 60 and 125 basis points over interbank rates dependant upon the levels of borrowings to EBITDA. An interest rate hedging contract is in place for 100% of the term loan drawn at 31 March 2009. Automotive semiconductor air quality sensing
< > 12 03 > Financial Highlights
04 > Business Overview
06 > Chairman and Electron devices & sub-systems Chief Executive’s Sales in electron devices and sub-systems increased by 10% to Statement £83.7m (2008: £75.8m), and were up 5% at constant currency rates. The order book at 31 March 2009 was £76m (2008: £53m) driven by 10 > the renewal of multiyear contract orders in radiotherapy. The element Business of the order book on defence contracts was £17.5m (2008: £30.9m). Review £42.4m (2008: £35.9m), up 6% at constant currency, was due for delivery in FY2010. Sales into radiotherapy applications were flat overall, due to lower new > 16 equipment demand and destocking amongst our OEM customers, with Board of the underlying demand for spares unaffected. Since the year end a unique Directors support agreement was signed with Tomotherapy Inc., a US radiotherapy customer for a period of three years. This agreement is an incentive for both the customer and the Group to improve product life. 17 > Directors’ In defence, sales increased with the strong execution of order book including contracts for Eurofighter and deliveries on the first tranche of Report a 17 year supply agreement for towed decoys for the US navy fleet of Superhornets. Following completion of electronic sub-systems contracts for the US Department of Defence in the first half of the financial year, 20 > and development of a broader range of products for these applications, Corporate the division is now well placed to meet further potentially significant Governance requirements for the UK and US armed forces. The order book at the Report year end had fallen by £13m and a priority in the first half of 2009/10 is securing the contract opportunities for delivery within the financial year.
24 > Sales also grew in the division’s other markets with initial growth in cargo Corporate screening demand driven by legislation and completion of existing ship building contracts and spares for marine radar, together with new product Responsibility introductions in satellite communications. Cargo screening demand slowed in the fourth quarter from Asia and this continues into the current year. 30 > The division’s adjusted* profit before taxation was £15.7m (2008: £17.5m), Directors’ a reduction of 10%. This was due to utility price increases and increases in Remuneration selling and administration costs despite savings being achieved from the Report business improvement programme.
36 > Directors’ Responsibilities
37 > Independent Auditor’s Report
39 > Financial Statements
Thyratron for cancer radiotherapy
< > 13 03 > Financial Highlights Business Review
04 > Business Overview
06 > Chairman and Imaging devices Chief Executive’s Sales in imaging increased by 8% to £65.2m (2008: £60.6m), 2006, resulting in the reported impairment provisions of £17.4m, together Statement but fell 7% at constant currency rates. with an impairment provision of £2.5m against fixed assets in the UK. The order book at 31 March 2009 was £40.4m (2008: £39.5m). Sales for space programmes were down due to a combination of factors 10 > The element due for delivery in FY2010 amounted to £29.2m such as the delay of some major space programmes, both for earth Business (2008: £28.0m), down 15% at constant exchange rates. observation and space science as well as internal technical issues delaying Review contract completion. There was continued growth in scientific imaging The economic environment significantly impacted two areas of activity; utilising the division’s low light level technology. Funding levels within the industrial machine vision and x-ray dental imaging. space and science sectors have so far not been materially impacted by 16 > Machine vision cameras and sensors are used in a range of different the economic slow down. process control systems, from flat panel displays inspection to food Board of e2v remains well positioned to operate as a key supplier into this high- sorting or barcode reading. Sales in this segment, despite a strong Directors end imaging market, both with a respected position in Europe as well as first half, were impacted by a significant lack of end customer demand becoming a significant supplier to the emerging markets in Asia. restricting investment in manufacturing capacity by end customers. > The division’s adjusted* profit before taxation was £4.3m (2008: £7.2m), 17 Similarly sales were lower for x-ray dental imaging in the second half a reduction of £2.9m. This reflected major investment in the development Directors’ due to the gradual impact of industry consolidation, particularly the of CMOS technologies for new products, which will use an outsourced Report intra oral segments and the economic slowdown. manufacturing model, and operational gearing utilising the in house These changes in market demand have lead to the assessment of the manufacturing for CCD technologies as well as a result of lower volumes and higher warranty costs. 20 > impairment of the imaging divisions’ activities in Grenoble, acquired in Corporate Governance Report
24 > Specialist semiconductors Corporate Responsibility Sales in specialist semiconductors were £53.3m (2008: £39.8m), implement a similar business model for MRAM devices. There have up 34%. The growth came from the acquisition of QP and, at constant also been design wins for the development of new space grade data currency, sales were down 4%. converters and the development of a two core ASIC technology platforms > for sensor signal acquisition in commercial and industrial markets. 30 The order book at 31 March 2009 was £19.6m (2008: £15.6m). The In addition there has been a progression for e2v in the value chain Directors’ element due for delivery in FY2010 was £16.3m (2008: £13.3m) but with the development of assembly and test services for high reliability Remuneration down 5% at constant currency rates. Report application. First contracts have been obtained from space agencies for The acquisition of QP, completed in October 2008, contributed sales evaluation and qualification of the manufacturing line. of £7.2m and profit before taxation of £3.3m. In addition there was Whilst there has been significant progress on new products, the strengthened European demand with programmes for Airbus and 36 > commercial aerospace and industrial markets are now feeling the effects Eurofighter Typhoon which partly offset weaker demand in the US Directors’ of economic slowdown. In addition defence programmes are being aerospace & defence markets. Responsibilities deferred and securing contract awards is a priority. The division’s adjusted* The successful partnership with Freescale has been further enhanced profit before taxation was £13.1m (2008: £6.4m), an increase of £6.7m through the release of new generations of multi-core processors in reflecting the contribution of QP of £3.3m as well as maintaining the 37 > high-reliability versions. In addition, we are working with Everspin to beneficial impact of exchange rates. Independent Auditor’s Report
39 > Financial Statements
* Adjusted profit is before amortisation of acquired intangibles, impairment of acquired intangibles, impairment of plant and equipment, business improvement programme costs and fair value losses on financial instruments. Adjusted earnings is adjusted profit less tax impacts where applicable.
< > 14 03 > Financial Highlights
04 > Business Overview
06 > Chairman and Sensors Chief Executive’s Sales in sensors were up 9% to £30.9m (2008: £28.4m), and up order from the UK navy in the prior year. New variants of the product have Statement 3% at constant currency rates. been launched, targeting, amongst others, the law enforcement market. The order book as at 31 March 2009 was £18.2m, (2008: £14.5m) For gas sensors, initial demand from China delivered significant growth 10 > with £13.7m (2008: £10.7m) due for delivery in FY2010, up 23% in from a small base. Strong engagement with customers in the territory Business constant exchange rates. positions the division well for growth, driven by changes in legislation. Review The division comprises a number of small businesses across the spread Scientific Instruments continued on its growth profile driven by a of e2v’s addressed market sectors. high level of market acceptance of the SiriusSD product for x-ray fluorescence spectroscopy. 16 > The Lincoln facility covers activities in microwave and high speed Board of electronics. Programme phasing on defence activities resulted in lower During the year, the Group continued with the development of its Directors sales and profits although there was growth in commercial radar. biosensors programme at a cost of £1.0m. The technical objectives have The safety and arming products are seeing increasing interest from a not been reached and, following an independent review, the programme range of European OEMs. This business is currently for sale as part of has been closed. > the initiatives to reduce borrowings. 17 The division’s adjusted* operating loss was £1.6m (2008: £0.5m), an Directors’ The Group has two automotive product lines, representing 2% of Group increase of £1.1m, reflecting lower performance from the microwave and Report turnover. Performance in both areas was affected by the automotive high speed electronics business and slow growth in automotive activities. sector slowdown, although MiCS, which supplies air quality sensors, Since the year end the Group has agreed to explore the opportunity achieved growth by winning new customer platforms in the Asia Pacific to sell the microwave and high speed electronic business at Lincoln and 20 > region. A last time buy has been implemented on loss making automotive continues to focus on efficiencies to improve the overall profitability of Corporate products. New products are to be launched, aimed at non-automotive the Group. Governance applications, utilising the MiCS technology. Report Thermal imaging cameras delivered a significant order to the Australian navy but did not achieve growth overall, having won a similarly large 24 > Corporate Responsibility
30 > Group functions Directors’ Remuneration Unallocated group costs increased by £2.4m to £4.0m (2008: £1.6m) due to differences on exchange amounting to a loss of £1.7m, compared with Report a profit of £0.8m in the prior year.
36 > Directors’ Responsibilities
37 > Independent Auditor’s Report
39 > Financial Statements
The acquisition of QP, completed in October 2008, contributed sales of £7.2m and profit before taxation of £3.3m.
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04 > Board of Directors Business Overview
06 > Chairman and Chief Executive’s Statement
10 > Business Review George Kennedy CBE Keith Attwood Chairman Chief Executive Officer 16 > George has spent most of his career at the Smiths Group, which he joined Keith has 25 years of commercial management experience, gained in Board of in 1973, where he was an Executive Director holding various positions telecommunications, avionics and electronic components. He has held Directors culminating in the Chairmanship of the Medical Systems Division. a range of senior positions within UK industrial companies, including In addition to his position as Chairman of the Company, he is also Operations Director (GEC-Marconi Avionics Ltd) and Project Director (GPT currently deputy Chairman of Vernalis plc, and holds other Non-Executive Ltd), prior to joining the Group as Managing Director in 1998. Keith led > 17 positions. He has experience working with government organisations and the MBO of e2v from Marconi plc in 2002 and floated the Company on Directors’ is currently Chairman of the Healthcare Division of the Iraqi Reconstruction the London Stock Exchange in July 2004. He has subsequently led the Report Group. George has demonstrated a track record of leading high-tech business through a period of sustained growth. He is currently businesses working in a global market place. In 1997, he was awarded Vice Chairman of the CBI East of England Regional Council. a CBE for services to the healthcare industry and exports. 20 > Corporate Governance Report
24 > Corporate Responsibility Charles Hindson Anthony Reading MBE Group Finance Director Senior Independent Non-Executive Director
30 > Charles joined the e2v board in May 2009. Charles’s last role was Tony was appointed to the Board in 2004. He was an Executive Director Directors’ Chief Executive, and prior to that Group Finance Director, of Filtronic plc, of Tomkins plc and Chairman and Chief Executive of Tomkins Corporation, Remuneration a UK listed specialist electronics manufacturing group. Previously, he USA, for eleven years, until the end of 2003. He is currently a Report was Finance Director at Eutelstat S.A. and held various positions with Non-Executive Director of Spectris plc, Laird plc and Taylor Wimpey plc, the BT Group, British Gas plc, Price Waterhouse and 3i plc. and previously a Non-Executive Director of George Wimpey plc.
36 > Directors’ Responsibilities
37 > Independent Auditor’s Report Jonathan Brooks Ian Godden Independent Non-Executive Director Independent Non-Executive Director 39 > Financial Jonathan is a Non-Executive Director of Aveva Group plc, an LSE-listed Ian, after gaining managerial and technical experience in the worldwide oil Statements engineering IT software provider to the plant, power and marine industry, focussed on strategy consultancy in the United States and Europe. industries; Xyratex Limited, a NADAQ-listed provider of enterprise class During the 1990s he was UK Managing Partner and European Board Member data storage sub-systems and network technology and of of Booz Allen and Hamilton, and UK Managing Partner of Roland Berger Sophos plc, a privately held software security control company. Strategy Consultants. He started up a successful consultancy serving industrial He is also Chairman of Picochip Inc., a venture capital-backed and technology companies which he subsequently sold in the late 1990s. company developing wireless processors. Between 1995 and 2002, Ian is currently CEO of the Society of British Aerospace Companies (SBAC), he was Chief Financial Officer and a Director of ARM Holdings plc, President and CEO of Glenmore Energy (USA), Non-Executive Director of KBC where he was a key member of the team that developed Advanced Technologies and a senior adviser to The Parthenon Group. He has ARM Holdings to be a leader in its sector. been a Non-Executive Director of e2v since 2003.
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04 > Directors’ Report Business Overview
06 > Chairman and The Directors present their annual Chief Executive’s Statement report and the audited financial statements for the year ended 10 > 31 March 2009. The Group financial Business Review statements have been prepared in accordance with International 16 > Financial Reporting Standards (IFRS) Board of as adopted by the European Union. Directors The Company financial statements 17 > have been prepared in accordance Directors’ with UK generally accepted Report accounting practice (UK GAAP).
20 > Corporate Principal activity Governance The Group's principal activity is the design and supply of Report specialist components and sub-systems into niche sectors within the medical & science, aerospace & defence and the commercial & industrial markets. The Group was reorganised into four divisions namely, electronic > 24 devices and sub-systems, imaging devices, specialist semiconductors Corporate and sensors supported by Group functions. During the year, the Group Responsibility had manufacturing operations in the UK, France, USA and Switzerland, sales and distribution operations in the UK, USA, Germany, France and Hong Kong, as well as an established global network of agents and 30 > distributors covering the Americas, Europe, Middle East, Africa, Directors’ Asia Pacific and Australia. Remuneration Review of business and future developments Report A review of the year’s operations, including the Group’s key performance indicators covering revenue, adjusted* profit before taxation and order 36 > book along with the outlook for the coming year, is contained in the Chairman’s and Chief Executive’s statement on page 6, and the Directors’ Business review on pages 8 to 13. Responsibilities Since the end of the year Mike Hannant has resigned as a Director and Charles Hindson has been appointed as Group Finance Director. 37 > Futhermore following a review of business activities the Directors have, Independent since the year end, agreed to seek a buyer for the microwave and high Auditor’s Report speed electronics business in Lincoln and announced the closure of the Biosensors business activity. Acquisition 39 > On 10 October 2008, the Group acquired 100% of the equity of Financial QP, a leading designed and supplier of specialist semiconductor Statements components based in North America for £46.3m (£41.1m net of cash acquired). The acquisition was financed by bank borrowings.
< > 17 03 > Financial Highlights Directors’ Report
04 > Business Overview
06 > Chairman and Principal risks and uncertainties Property, plant and equipment Chief Executive’s As noted in the corporate governance report, the Board has adopted Land and buildings at the Group’s facility in Grenoble were acquired at Statement processes to identify, evaluate and manage the significant risks faced by fair value in July 2006 and have not subsequently been revalued. Although the Group. The more significant risks and uncertainties faced by the Group there have been no formal valuations carried out for the remainder of the are set out below. Group’s land and buildings, the Directors believe the market value to be > significantly in excess of book values. 10 l Foreign currency exchange risk Business During the year the Group had manufacturing operations in the UK, Research and development Review France, USA and Switzerland, but has a global distribution base, and is The Group continues to commit significant resources to existing product therefore subject to currency transaction, as well as translational risks, enhancement as well as the introduction of new products for established predominantly between Sterling and the US dollar and Euro. and emerging markets. Resource is also invested in a number of > 16 The Group’s borrowings are predominantly denominated in US dollar collaborative relationships with key universities to achieve leverage, Board of and Euro and are exposed to translational risks which impact the knowledge exchange and access to and training of talented young Directors Group’s banking covenant ratios. These amounts are not covered by scientists and engineers. This is achieved through various mechanisms any foreign exchange hedging arrangements. including a number of Knowledge Transfer partnerships. Customers fund Overall, the Group has no significant exposure to other currencies. directly a substantial proportion of expenditure on product enhancement > 17 The Group seeks to minimise its exposure to transactional currency and new product development but the amount funded by the Group Directors’ risks through the use of forward foreign exchange contracts. amounted to £17.1m (2008: £14.0m). Report l Competition Takeovers directive Whilst the market for the Group’s products is well established and we Pursuant to s992 of the Companies Act 2006, which implements the EU 20 > continue to invest in research and development activities to deliver Takeovers Directive, the Company is required to disclose certain additional continued advancement in technology, products will continually be at Corporate information. Such disclosures, which are not covered elsewhere in this risk of being superseded as a result of improvements in alternative Annual Report include the following: Governance technologies that provide the same or comparable functionality. Report In addition, the increasing costs of operating in Western Europe l The Company’s Articles of Association (‘Articles’) give power to the could be a threat to profitability for the foreseeable future. Board to appoint directors, but require directors to submit themselves for election at the first Annual General Meeting following their 24 > l Markets and customers appointment and for re-election where they have been a director at Corporate The Group can be subject to significant variations and costs each of the preceding two Annual General Meetings and were not Responsibility attributable to individual product lines and markets as a result of the appointed or re-appointed by the Company at, or since either such timing and quantum of orders, the impact of new product lines and the meeting. The Articles may be amended by special resolution of the applicable legislative and regulatory framework. shareholders and will be made available to view on the Company’s > website following this year’s Annual General Meeting. 30 l Legislation Directors’ The Group monitors changes in legislation to anticipate the effect on l The Board is responsible for the management of the business of the Remuneration its business and that of its customers and suppliers. A tightening of Company and may exercise all the powers of the Company subject to Report environmental legislation continues to add pressure to operating costs the provisions of the relevant statutes, the Company’s Memorandum of that the Group mitigates, where possible, through improved efficiencies. Association and the Articles. The Articles contain specific provisions and Unforeseen changes in legislation both in the United Kingdom and restrictions regarding the Company’s power to borrow money. Powers 36 > overseas, can have an adverse impact on operations. relating to the issuing and buying back of shares are also included in the Articles and such authorities are renewed by shareholders each year Directors’ l Acquisitions at the Annual General Meeting. Responsibilities The Group has made an acquisition in each of the past four years and will continue to seek suitable acquisitions as part of its strategy for l There are a number of agreements that take effect, alter or terminate growth. The Group carries out thorough due diligence in respect upon a change of control of the Group following a takeover, such as > 37 of each acquisition prior to completion. However there is a risk that the bank loan agreements and company share plans. Independent predicted benefits of acquisitions may not always be achieved Auditor’s Report in the anticipated timescales or that some benefits may not be l There are no restrictions on the transfer of securities, restrictions on achieved at all. voting rights and agreements between shareholders. The financial risk management objectives and policies are discussed Share capital 39 > in note 28. Details of the Company’s authorised and issued share capital are given in Financial Results and dividends note 23 to the financial statements. No shares have been issued between Statements 31 March 2009 and the date of this report as a result of the early exercise The loss before taxation amounted to £28.4m (2008: £13.7m profit). of share options by employees. The loss attributable to ordinary shareholders amounted to £21.3m (2008: £11.8m profit). Dividends paid during the year amounted to Directors £4.9m (2008: £4.4m) as disclosed in Note 11. Profiles of all Directors at the date of this report appear on page 14. The Directors do not recommend the payment of a final dividend The beneficial and non-beneficial interests, including family interests, in (2008: 5.25p). the share capital of the Company, for Directors in office at the end of the year are detailed on page 30.
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06 > Chairman and Directors’ indemnity insurance Provision of information to auditors Chief Executive’s The Company has indemnified the Directors of the Company and all its Having made enquiries of fellow Directors and of the Company’s auditors, Statement subsidiaries against liability in respect of proceedings brought by third each of the Directors at the date of approval of this report confirms that: parties, subject to the conditions set out in the Companies Act 1985. l To the best of his knowledge and belief, there is no information Such qualifying third party indemnity provision was in force during the (that is information needed by the Group’s auditors in connection > year and is still in place as at the date of this report. 10 with preparing their report) of which the Company’s auditors are Business Creditor payment policy unaware; and Review The Group seeks to abide by the payment terms agreed with suppliers l The Director has taken all the steps that he ought to have taken as a whenever it is satisfied that the supplier has provided the goods or Director to make himself aware of any relevant audit information and services in accordance with the agreed terms and conditions. The Group > to establish that the Company’s auditors are aware of that information. 16 does not have a standard or code of conduct which deals specifically Board of with the payment of suppliers. The Group’s average creditor payment Auditors Directors period at 31 March 2009 was 59 days (2008: 67 days). A resolution to reappoint Ernst & Young LLP as auditors will be put to the members at the next Annual General Meeting. The Company had trade creditors amounting to £474,000 at the end 17 > of the year (2008: £64,000). Directors’ Charitable and political donations By order of the Board Report Details of charitable donations are given on page 25 of the corporate responsibility section of the Annual Report. No donations were made to any political parties. 20 > Corporate Interest in voting shares Governance At 21 May 2009 the Company had been notified of the following Sally Weatherall Report interests of 3% or more in the Company’s ordinary shares. Secretary No. of 8 June 2009 24 > Percentage ordinary Corporate of ordinary shares share capital of 5p each Responsibility Aberforth Partners 19.62 12,273,358 AXA SA 13.27 8,301,610 30 > Legal and General Investment Management 7.82 4,889,831 Directors’ Remuneration Insight Investment Management 5.70 3,564,129 Report JP Morgan Asset Management 5.53 3,460,219 Aviva Investors 5.18 3,239,112 36 > Henderson Global Investors 3.65 2,286,721 Directors’ Schroder Investment Management 3.65 2,284,746 Responsibilities Standard Life Investments 3.48 2,177,148 Invesco Perpetual Asset Management 3.17 1,983,509 37 > Independent Auditor’s Report Disabled employees and employee involvement The Group endeavours to provide equality of opportunity in recruiting, 39 > training, promoting and career development to all, irrespective of sex, Financial race, religion or colour. The Group gives full consideration to applications Statements for employment from disabled persons where a handicapped or disabled person can adequately fulfil the requirements of the job. Where existing employees become disabled it is the Group’s policy, wherever practicable, to provide continuing employment under normal terms and conditions, and to provide training and career development and promotion to disabled employees, wherever appropriate. A review of employee involvement is given in the corporate responsibility review on page 24. Avionics broadband data converter
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04 > Business Overview
06 > Chairman and Chief Executive’s Corporate Statement Governance Report 10 > Business Statement by the Directors on compliance with Review e2v technologies plc recognises the combined code the importance of, and is committed The Group has complied with the provisions set out in Section 1 of the 16 > to, high standards of corporate combined code throughout the year. Board of governance and as such the Board The board of Directors Directors The Group is headed up by an effective Board which currently comprises acknowledges its contribution the Chairman, Chief Executive, the Group Finance Director and three Non-Executive Directors. Jonathan Brooks, the Chairman of the audit > 17 to achieving management committee is the member of that committee who is deemed to have Directors’ accountability, improving risk recent and relevant financial experience. All of the Non-Executive Directors Report are considered by the Board to be independent. Their biographies on management and ultimately page 14 demonstrate a range of experience and sufficient calibre to bring independent judgement on issues of strategy, performance, resources and 20 > creating shareholder value. standards of conduct which is vital to the success of the Group. Corporate The Articles of Association require that Directors retire in the third calendar Governance This statement explains how the year following the year in which they were elected. Any Director appointed Report Group has applied the main and by the Board is required to submit themselves for re-election at the next Annual General Meeting after appointment. George Kennedy and Anthony supporting principles of corporate Reading will retire by rotation at the Annual General Meeting and submit > 24 themselves for re-election. Corporate governance and describes the Responsibility Group’s compliance with the Role of the Board members provisions set out in Section 1 of The Non-Executives’ primary responsibilities are to: l E nsure the principles of corporate governance are applied; 30 > Directors’ the Combined Code on Corporate l Approve the strategy for the business; Remuneration Governance published by the l E nsure the strategy is being implemented; and Report Financial Reporting Council in l Provide independent advice on the implementation of the strategy June 2006. and other day to day matters where their experience is relevant. 36 > The Executives’ primary responsibilities, together with members of Directors’ the senior management team are to: Responsibilities l Formulate the strategy of the business and obtain Board approval; and l Implement the approved strategy subject to agreed levels of authority. 37 > Independent There exists a clear division of responsibilities between the Chairman Auditor’s Report and the Chief Executive Officer. The Chairman's primary role includes ensuring that the Board functions properly, that it meets its obligations and responsibilities and that its organisation and mechanisms are in place 39 > and are working effectively. The Chief Executive Officer's primary role is to Financial provide overall leadership and vision in developing, with the Board, the strategic direction of the Group. Additionally, the Chief Executive Officer Statements is responsible for the management of the overall business to ensure strategic and business plans are effectively implemented, the results are monitored and reported to the Board and financial and operational objectives are attained. The Board’s responsibilities are discharged by way of monthly Board reviews (except August and December), other Board meetings, as required to approve matters beyond the authority limits of the CEO. In addition there is attendance at meetings of the committees of the Board as well
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04 > Business Overview
06 > Chairman and Chief Executive’s Statement
10 > Business as attendance at quarterly reviews when senior members of executive Remuneration committee Review management, who are not Board members, attend. Matters beyond the The committee is chaired by Anthony Reading and has met four times authority limits of the CEO include, for example, the approval of customer during the year. Other members of the committee are Jonathan Brooks quotes over the approved financial limit set by the Board, certain and George Kennedy. The CEO and senior human resources manager 16 > activities relating to mergers and acquisitions as well as approval of the within the Group attend all meetings. The Group Finance Director attends Board of annual budget. when requested. The terms of reference of the committee include: Directors Principal board committees l Agreeing with the Board the framework or broad policy for the The Board has established the following committees whose individual remuneration of the Executive Directors and other members of 17 > terms of reference have been reviewed during the year. executive management, as well as review the appropriateness and relevance of the policy; Directors’ Audit committee Report The committee is chaired by Jonathan Brooks and has met four times l Determine targets for any performance related pay schemes and during the year. Other members of the committee are Anthony Reading approve total annual payments under the schemes; and Ian Godden. The Chairman, CEO and Group Finance Director attend 20 > l Review all share incentive plans, the related performance targets audit committee meetings by invitation and the audit partner attends at and all awards made under the schemes; Corporate least two of the meetings. At meetings reviewing the interim and full year Governance results the Non-Executive Directors exercise their right for discussions with l Determining the individual remuneration packages of senior Report the audit partner where no Executive Directors, or the Company Secretary, management within the agreed policy as well as contractual are present. The terms of reference of the audit committee include: arrangements, including pension provisions; 24 > l To keep under review the effectiveness of the financial reporting l Determining the procedure for vetting, authorising and re-imbursement of claims for expenses for all directors; and Corporate and internal control policies and procedures for the identification, Responsibility assessment and reporting of risks; l E stablishing selection criteria, terms of reference and selection and l Review the arrangements for what is commonly known as employment of remuneration consultants. ‘whistle blowing’; Full details of Directors’ remuneration and policies applied by the Board 30 > l Consider the requirements for establishing an Internal audit function; are set out in the Directors’ remuneration report on pages 28. Directors’ Remuneration l Make recommendations to the Board in relation to the appointment Nomination committee Report and re-appointment of the external auditors as well as oversee the The committee is chaired by George Kennedy. The other members of selection process of any new audit appointment; the committee are Keith Attwood and Anthony Reading. The committee l Keeping under review the relationship with the external auditors has met twice during the year. The terms of reference of the committee > 36 including assessments of independence and objectivity as well as include: Directors’ fee levels and terms of engagement; l Regular review of the structure, size and composition of the Board; Responsibilities l Reviewing the findings of the audit with the external auditors; and l Formal, rigorous and transparent procedures for new appointments l Reviewing the consistency of accounting policies on a year to year to the Board; > 37 basis and across the Group. l The formal selection and nominations for Board approval of any Independent new Board appointments; and Auditor’s Report The audit committee monitors fees paid to the auditors for non-audit work. During the year £534,893 of non audit work fees were paid, l Provision of recommendations to the Board regarding succession, of which £518,693 were in connection with the acquisition of QP and re-appointment and membership of the audit and remuneration 39 > £16,200 with regard to claims for government grants and rebates. The committees. Company engages other independent firms of accountants to perform tax Financial consulting and other consulting work. The committee has monitored the During the year specialist recruitment consultants were used to identify Statements level of non-audit services provided by the external auditor with a view to candidates for the role of Group Finance Director based on a profile and ensuring objectivity, independence and cost effectiveness. detailed job description provided by the Group. All short listed candidates were interviewed individually by the Directors before a final selection was The Board continues to review the key risks to the business through the made and a recommendation made to the Board. Group’s risk management process, managed by the Group Finance Director.
< > 21 03 > Financial Highlights Corporate Governance Report
04 > Business Overview
06 > Chairman and Induction and training Chief Executive’s Any new directors will receive induction on their appointment to the The Group’s key risk management processes and system of internal Statement Board covering the activities of the Group and its key business and control procedures include the following: financial risks, the terms of reference of the Board and its committees Management structure and the latest financial information about the Group. Ongoing training is The Group has adopted procedures for the delegation of authority and > provided as necessary. Directors may consult with the Company Secretary 10 authorisation levels, segregation of duties and other control procedures. at any time on matters related to their role on the Board. All Directors Business Appointments to the most senior management positions within the Group have access to independent professional advice at the Group’s expense Review require Board approval. where they judge it necessary to discharge their duties, with requests for such advice being authorised by the Chairman or the Company Secretary. Identification and evaluation of business risks 16 > Peformance evaluation of the Board The major financial, commercial, legal, regulatory and operating risks within the Group are identified through a range of review meetings at Board of The Chairman and Company Secretary undertook a performance the relevant management level. Senior management are also involved Directors evaluation of the Board which required an assessment, by each in the preparation of an annual risk assessment report which is reviewed individual director, of the performance of the Board and its Committees by the Board. by way of an anonymous questionnaire and ratings process. The results 17 > of this assessment were reviewed by the Board and there were no areas Information and financial reporting systems Directors’ of concern. The Senior Independent Non-Executive Director also led a The Group’s comprehensive planning and financial reporting procedures Report performance review of the Chairman, which required an assessment, include detailed operational budgets for the year ahead and a three by each Non-Executive Director, of the performance of the Chairman. year rolling business plan, both of which are approved by the Board. This assessment was reviewed by the Board and there were no areas Performance is monitored on a regular basis through monthly reporting 20 > of concern. and regular forecast updates. Corporate Communication with shareholders Investment appraisal Governance All capital expenditure and research and development projects require Report The Annual Report and Financial Statements and the Interim Report detailed written proposals and go through strict authorisation processes. provide investors with a half yearly balanced view of the Group’s activities All acquisitions are subject to Board approval and commercial, legal and and performance. The interim results were distributed to all shareholders financial due diligence is carried out if a business is to be acquired. 24 > in December 2008. Investors are also welcome to attend the Annual General Meeting. Apart from the Annual General Meeting, the principal Throughout the Group there are clear lines of delegated authority covering Corporate form of communication with private investors is the Company’s web site the full range of financial commitments. A schedule of delegated authority Responsibility which is updated regularly with Company information. for the Board to the CEO is agreed annually and items requiring Board approval are either agreed at monthly Board meetings, or at intervening The Chairman is available to Institutional Investors but the principal meetings specifically arranged for the purpose. 30 > contact points are the CEO and Group Finance Director. The Senior Directors’ Independent Non-Executive Director, Anthony Reading, is also available At the monthly Board meetings the Non-Executives review the reports presented to them by the CEO and Group Finance Director, which include Remuneration for any investors to address concerns they may have. Presentations are given to individual institutions, or on a Group basis if preferred, following a review of the financial results. This review compares current year to Report the announcement of interim and full year results. Site tours and ad-hoc previous year and the annual operating plan as well as a current year meetings are also arranged where requested. For example, in January forecast and order book levels. 2009 institutional investors were invited to a presentation on the Groups’ > At the current time the Board are of the opinion that a formal internal 36 overall market positions, strategy and on-going operational actions. Directors’ audit function is not considered necessary due to the structure and Responsibilities Control environment and internal controls size of the Group, widespread executive involvement in the day to day business and the levels of variance analysis undertaken by the executive The Directors acknowledge that they are responsible for the Group’s management and reported to the Board. However, the Board consider system of internal control and for reviewing its effectiveness. The system that it is appropriate to use a specialist organisation to undertake internal 37 > is designed to manage rather than eliminate the risk of failure to achieve control reviews in specific areas of risk. Such reviews are determined Independent the Group’s strategic objectives, and can only provide reasonable and not by the audit committee. In the year ended 31 March 2009, KPMG were Auditor’s Report absolute assurance against material misstatement of loss. contracted to fulfil this role. An ongoing process, in accordance with the guidance of the Turnbull A formal “whistle blowing” policy is operated and is included in the Committee on internal control, has been established for identifying, 39 > Group’s employee handbook. evaluating and managing the significant risks faced by the Group. Financial This process has been in place throughout the year under review and Statements up to the date of approval of the financial statements. The Board regularly reviews the process.
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06 > Chairman and Board meetings and attendance Chief Executive’s In addition to the Committee meetings noted above, there were 10 Statement main Board meetings during the year. There has been full attendance at all Committee and Board meetings. The Board also convened ad-hoc meetings during the year to deal with specific business requirements.
10 > Going concern Business The Group meets its day to day working capital requirements through Review loan facilities which are due for renewal on 11 July 2011. As highlighted in note 2 to the financial statements, in the six months 16 > to 31 March 2009 the weakening of Sterling increased the Sterling Board of value of the Group’s Euro and US dollar denominated loans, resulting in Directors consolidated net borrowings as at 31 March 2009 of £137.3m. As described on page 5 of The Chairman’s and Chief Executive’s report, the Group has experienced softer market conditions in many of the > 17 markets in which the Group operates in the current calendar year, leading Directors’ to a lower level of activity in the first half of the year ending 31 March Report 2010. Therefore the Board are implementing plans to reduce costs and production capacity primarily in this period, which are challenging.
20 > The Group’s borrowings are largely denominated in Euro and US dollar and there is significant uncertainty as to their translated value on 30 Corporate September 2009 and 31 March 2010 as this will depend on the Euro and Governance US dollar exchange rates at the time. Report The Directors of the Group have prepared detailed profit and cash flow forecasts through to 30 September 2010. In considering these profit and 24 > cash flow forecasts and the plans to reduce costs and limit production Corporate capacity, the Directors have carefully considered the assumptions and Responsibility sensitivities and have concluded that the Group can remain within its banking arrangements at both 30 September 2009 and 31 March 2010. However, the available headroom is limited for 30 September 2009, with the current expectation of increased headroom as at 31 March 2010. 30 > Directors’ The Directors of the Group have concluded that the combination of these Remuneration circumstances represents a material uncertainty that casts significant Report doubt upon the Group’s ability to continue to remain within its banking arrangements at 30 September 2009 and to a lesser extent at 31 March 2010. However, having considered these uncertainties, the Directors have 36 > a reasonable expectation the Group can remain within these arrangements Directors’ as at September 2009 and, with increased headroom, at 31 March 2010. Responsibilities On this basis the Directors believe that it is appropriate to prepare the financial statements on a going concern basis.
37 > On behalf of the Board Independent Auditor’s Report
39 > Financial Statements Jonathan Brooks Chairman of the audit committee 8 June 2009
Travelling wave tube for defence radar
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06 > Chairman and Chief Executive’s Corporate Responsibility Investors Statement e2v promotes two-way communication with current and potential investors. 10 > Business At e2v we strongly believe that we Review should consider the interests of the global community when conducting our 16 > business, ensuring that we function in an Board of Our policy is to: Directors ethical and responsible way at all times. l E nsure timely delivery of This involves considering the impact of our information in line with regulatory requirements. 17 > activities on society and the environment l Provide information in paper Directors’ format whilst promoting Report at large, as well acting responsibly towards the electronic provision of our customers, suppliers, employees, information via our “investor relations” website. > 20 shareholders and communities. l Make an additional annual Corporate presentation to investors Governance e2v is committed to adding value through and analysts. Report l Retain a financial PR bright ideas and has defined a corporate consultancy to ensure all communication is timely, 24 > responsibility framework which goes appropriate and in accordance Corporate with best practice. Responsibility further than just complying with statutory requirements and make steps to improve 30 > the quality of life for employees and their Directors’ families, as well as making a sustainable Remuneration Report contribution to the environment, local community and society at large. 36 > Directors’ Responsibilities
37 > Independent Auditor’s Report
39 > Financial Statements
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06 > Chairman and Chief Executive’s Employees Community Environment Supply Chain Statement e2v recognises the importance e2v operates in the heart of e2v continues to focus on e2v works to build long term of people to its ongoing success. local communities. The business minimising any adverse impact on relationships with its suppliers Its competiveness in the market is is also an integral part of those the environment stemming from and customers, encouraging dependent on employing the right communities across all e2v both the activities of the company ethical and environmental > 10 people with the right skills in locations. As a consequence e2v and its employees. considerations in all its dealings. Business the business. recognises the responsibility that Review comes with this position.
16 > Board of Our policy is to: Our policy is to: Our policy is to: Our policy is to: Directors l Comply with all legislation l M ake a positive contribution l Maintain operational and l Assess all potential suppliers relating to employee and show consideration to our management systems to against an ethical and relations in the countries neighbours and the community facilitate compliance with environmental questionnaire > 17 in which we operate. in which we operate. environmental legislation. prior to being added to our Directors’ l E qual opportunities l S upport local organisations l E ncourage all persons supplier lists. Report Maintain an equal through charitable giving. working on behalf of the l Communicate and treat our opportunities policy in l P romote an open two- Group, through training and suppliers/customers with line with, and going way dialogue with local communications to take fairness and courtesy as > 20 beyond, regulations. communities and stakeholders. personal responsibility to dictated by our internal values. Corporate l Health & safety (inc. minimise their adverse impact l Work with all of our customers l S upport local schools and on the environment and to Governance occupational health) learning institutions through and suppliers regarding Report Comply with, and where contribute towards meeting environmental initiatives, training and organisations group objectives and targets. possible exceed, health & such as STEM TEAM Essex encouraging them to help safety regulations. (formerly SETpoint). l E ncourage environmentally us to jointly reduce the 24 > l Learning and development sound design practices at all environment impact of Corporate (inc. performance review) stages of product life cycles. our work. Responsibility Maintain a learning l Seek all practical ways to l Work in partnership with and development reduce emissions to land, our suppliers to enhance the (inc. performance review) sea, air and water through quality and performance of programme for employees. responsible management of the items they supply. > 30 our business processes. Directors’ l Employee communications l Work in partnership with our (inc. upward communication) l Manage energy usage and customers to develop and Remuneration Facilitate and encourage greenhouse gas emissions improve both e2v’s products Report two-way communication at for efficiency and minimal and the systems in which our e2v, including a secure waste, through appropriate products are incorporated. ‘whistle-blowing’ process investment in process 36 > and annual employee survey. controls and continuous Directors’ l Remuneration policy improvement plans. Responsibilities Maintain and benchmark a l Use best available techniques policy ensuring e2v offers to minimise waste, by competitive work packages. preventing, reducing, re-using 37 > Our aspirations or recovering (inc. recycling) waste material. Independent l To create a great working Auditor’s Report environment at e2v where people want to work. l To encourage all employees to 39 > live the company’s 4 key values. Financial Statements
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06 > Chairman and Investors Chief Executive’s l e2v is a member company of the FTSE4Good Index, the responsible Statement investment index calculated by global index provider FTSE Group. l We held our annual investor and analyst presentation in London on 10 > 27 January 2009. The presentation was also posted onto our investor web site. Business Review Communication events include the AGM, where shareholders have an opportunity to question the Board, interim and full year results presentations, and an annual investor and analyst presentation. 16 > In addition, the Group responds to individual requests for information. Board of Communication channels to Investors include the delivery of paper Directors based documentation, face to face communication and on-line channels, including Regulatory News Statements and e2v’s investor relations site; where versions of the interim and annual report are posted to encourage
17 > shareholders and interested parties to view the documents electronically. Directors’ 2008 Report Employees l e2v conducted its annual employee survey in December 2008 and charitable 20 > has implemented a number of employee suggestions, including a Corporate Director’s blog posted on the Groups intranet to raise visibility of donations Governance the Executive Committee. In 2008, e2v’s employees Report l There were eight reportable accidents across the Group in 2008 and 136 non-reportable accidents. collectively raised £5,000 at 24 > l Attendance levels averaged 97% during 2009 across the Group company fundraising events Corporate (2008: 97%). (and many thousands more from Responsibility The Group recognises that attracting and retaining the right people their personal work), including is critical to the ongoing health and success of the business and we endeavour to deliver an environment where all our employees feel a football competition between 30 > proud to work for us and understand the importance of embracing the Company’s European sites, Directors’ our core values: Remuneration won by Chelmsford’s apprentice l Integrity. Report team, hamper raffles, a photo l Connectivity. competition and the monthly l Innovation. > 36 l Raising the bar. employee lottery. Directors’ Responsibilities We prioritise fostering a working environment where employees are This money was divided between engaged with the organisation, our vision and values. Consulting with them and listening to their feedback is important to us and one part of charitable organisations local to 37 > this is our annual employee survey, which we use to track the views of our sites. our people, get them involved and identify areas for improvement. Independent Auditor’s Report We also maintain a global Intranet with an employee forum to encourage Dawn Kelso, of e2v’s Charities communication and open discussion. In addition, in 2008 the Business TV Committee, is pictured here information system was extended to include more of our sites. 39 > presenting one of the cheques, A further traunch (the fifth) of the Company’s sharesave scheme was Financial issued in 2008. We believe this to be an excellent way of engaging our for £1,300, to Nezda Blythe of Statements people in the success of the Group. Essex Air Ambulance. Our reward strategy underpins our belief that people are at the very heart of our business and, as such, we offer a competitive benefits package and opportunities for people to be rewarded for going the extra mile in our ‘Smart Thinking Award’ & ‘Recognition Scheme’ (STARS). We are also committed to developing all of our people and have a comprehensive, innovative and high quality learning and development programme in
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06 > Chairman and Chief Executive’s place, including a ‘learning theatre’ programme to develop our future Statement leaders. All of these initiatives are underpinned by our commitment to creating a discrimination-free environment for our people, with a positive ‘whistle-blowing’ culture and where our policies meet, and often exceed, > 10 legal requirements. Business Review e2v also continues to support STEM TEAM Essex (Science, Technology, Engineering and Mathematics Network), formerly STEMNET and SETpoint. This is a UK wide organisation, sponsored by the Department of Business 16 > Enterprise and Regulatory Reform. e2v has around 20 ambassadors who Board of facilitate at Group events and go out into schools and colleges to work with young people, raising interest and awareness of careers in these Directors subjects and developing a pipeline of motivated and capable people into science, technology and maths-related careers. 17 > Occupational health Directors’ The business has in place an occupational health practice across the Bright Green Report Group. This consists of a network of third party specialist occupational health practitioners, including doctors, who proactively support the business to minimise occurrences of poor health amongst the work force. idea in Grenoble > 20 The service provided is broad and varied. In addition to the provision of Waste water from our clean rooms Corporate medical and health screening, all employees have access to professional Governance counselling services, advice on work place ergonomics, general well being in the Grenoble facility must be Report assessments, healthy eating and anti-smoking advice. In addition to the heated to more than 25 degrees above, all employees have unlimited confidential telephone and internet access to qualified professional counsellors and lawyers. We measure the prior to processing. Olivier Gonet 24 > effectiveness of the above by reference to our attendance levels. had the idea of using the clean Corporate Health & safety Responsibility room’s own air conditioning There were eight reportable accidents across the Group in the year to system to provide the heat, 31 March 2009 and 136 non-reportable accidents. Accidents are included in the statistics if they occurred during working time, including while rather than the current electrically 30 > travelling on company business or as a result of work (accidents on powered heating process. Directors’ private journeys between home and work are excluded). In the UK, Remuneration reportable accidents are based on the requirements of the Reporting of Report Injuries, Diseases and Dangerous Occurrences Regulations 1995 (RIDDOR), A heat exchanger has now been in other countries, local regulations are used. installed with the assistance of 36 > our service provider, Cofathec Directors’ Community Services, with a resulting Responsibilities l One of the contributions we make to our local community is our reduction in power requirements ‘whoosh!’ Learning Centre, based at our headquarters in Chelmsford and run in partnership with Essex County Council (ECC) and the of 900MWhr per year, equating to 37 > Learning and Skills Council. This unique centre offers a wide range a saving of 35,000 and 170,000 Independent of learning opportunities – from wine appreciation and languages to € Auditor’s Report yoga and storytelling for children – and is open to all members of the KgCO2 a year. local community. The centre opened in October 2008 and now has 610 members and runs 25 courses. Furthermore, we committed to offering 39 > all courses free of charge for the first year. Financial l The Charity Committee supported 9 (2008: 8) core global charitable Statements organisations and made forty separate donations in matched support of employee fundraising activities. l e2v employees raised more than £3,500 for the core charities through a company prize draw and various other fundraising events. In addition e2v donated £10,000 in matched funding, where employees had raised money for their chosen charities, and in support of the Group’s core charities. e2v also donated £10,000 to SOS Children’s villages charity, specifically supporting their vocational training centres.
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06 > l e2v continues to support the e2v foundation, an investment fund, Chairman and run by Essex Community Foundation (ECF). £30,000 was donated to Chief Executive’s the e2v foundation in the year. By taking advantage of a government Statement initiative called the Grassroots Endowment Match Challenge this amount was uplifted by 50%, making the total addition to the e2v foundation £45,000, bringing total donations to date to £104,000 > 10 (2008 £59,000). In accordance with ECF rules, £2,745 of the interest Business generated was released and donated by the Charities’ Committee to Review good causes in Essex. l e2v sponsored schools in both Lincolnshire and Essex taking part in the Greenpower project. 16 > Board of We firmly believe we should play an active part in the communities Directors where our people live and work. e2v has a tradition of encouraging charitable donations, and of supporting voluntary activity and fundraising by employees. We have a Charity Committee, with a 17 > global reach, which coordinates these activities. We also help our local Directors’ communities by encouraging young people’s interest in business, ‘whoosh!’ user, Report science and technology, working with national programmes such as Young Enterprise and STEM TEAM. Marie Adesola 20 > Corporate Environment and her children Governance l e2v has introduced ‘Bright Green’, a global initiative focussing on the Report continuous improvement of our systems and processes to minimise Sayo, 8, and any adverse impact on the environment. l e2v has become members of Business In The Community (BITC) and 24 > Tobi, 4 shadowed the environmental index section of the BITC CR Index as a Corporate precursor to full participation. Marie Adesola first heard about the Responsibility l To help in analysing the effect of environmental initiatives e2v ‘whoosh!’ centre when our launch calculated, for the first time, its combined footprint for all sites within event was advertised through her > the e2v group. Both Group and local targets have been established, 30 daughter Sayo’s school. Directors’ with the aim of reducing our carbon footprint by 3%. In addition, an Remuneration internal assurance process was introduced to provide rigour to both data collection and analysis. Since then Marie has attended Report e2v has, since 1997, incorporated the requirements of ISO14001 into its ‘whoosh!’ courses including Indian Environmental Management System at both Chelmsford and Lincoln sites. head massage and flower arranging. > 36 Environmental Management Systems are in place at all other e2v sites Marie also took her son Tobi, who is Directors’ and a programme is ongoing to prepare these sites for 14001 certification. severely disabled, to the storytelling Responsibilities Global warming and subsequent climate change, due substantially to human activity and the generation of greenhouse gas emissions, is now sessions for kids. “It was fantastic,” well understood by the scientific community. National and international > said Marie, “there’s not a lot out there 37 targets have been set by the UK and a global target is to be set in Independent Copenhagen in 2009/10. e2v has set itself challenging Group and local for children like Tobi, but he was really Auditor’s Report targets so that it fully contributes to meeting these initiatives. included in the session and loved There are a number of UK and International environmental indices. the noises and excitement going on 39 > e2v is using the Business in the Community (BITC) Environmental Index around him.” to benchmark our Environmental Management System against other Financial substantial UK organisations. Statements “What’s also been great is the A preparatory evaluation of e2v’s environmental systems was carried out opportunity ‘whoosh!’ has given me when a score of 52% was achieved. A full evaluation will be undertaken and a target of 70% has been set for the e2v Group. to have some time out – which I don’t A decision has been made not to use carbon offsetting within e2v. Any get very often. The floristry course changes will therefore be from the direct effect of the company’s activities. was wonderful and very rewarding!”
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06 > Chairman and Supply chain Chief Executive’s l We have introduced a global procurement function with Statement responsibility for all procurement processes across the Group. This new team has re-defined functions for commodity management and supply chain disciplines, ensuring we now > 10 have dedicated focus with appropriate skills. Business Review l 2008 saw e2v signing our longest ever duration contract, a 17 year project with a US defence contractor for a US DoD project; a demonstration of the partnership approach taken with 16 > all key customers. Board of At e2v we strive to build long term partnership based relationships with Directors our customers and suppliers, ensuring that every step of our supply chain contributes positively to the quality, safety, and availability of our products and services whilst supporting ethical and environmentally sensitive 17 > business practices. Directors’ This partnership approach is demonstrated by the fact that 15 of our STARS winner Report current top 25 customers had been with the Group for over 10 years. We have reviewed our customer satisfaction survey procedures. This Christine Harvey > resulted in a new approach which will be launched and target 80% 20 In January 2009, Christine Harvey, Corporate of customers by revenue. Governance The new global procurement team has already started the work required an operator who works in our Report to maximise the consolidation of spend through chosen strategic stores team, won a quarterly suppliers by the introduction of a supplier accreditation scheme, formal negotiation processes including global spend aggregation, savings STARS award for demonstrating 24 > roadmap, and commodity specific strategies. connectivity – one of our four key Corporate Responsibility organisational values. Christine won her award for the 30 > consideration she showed for her Directors’ colleagues when working as part Remuneration Report of a team to implement a new system in operations. 36 > Christine said: “I was lost for Directors’ Responsibilities words, which is rare for me, when I was told I’d won. I’m really pleased – it’s great to be 37 > Independent recognised for what you do.” Auditor’s Report
39 > Financial Statements
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06 > Chairman and Chief Executive’s Directors’ Remuneration Report Statement
10 > Remuneration committee Business The Remuneration Committee is responsible for recommending to the The individual components of the remuneration packages offered are: Review Board the framework and broad policy for the remuneration of the Chairman, Chief Executive Officer, the Group Finance Director, and such Basic salary and/or fees other members of the executive management as it is requested to Basic salary for each Executive Director is determined taking account 16 > consider. The remuneration of the Non-Executive Directors is a matter of the individual’s performance and responsibilities and comparable Board of reserved for the Executive Directors. market rates. More particularly, the Committee reviews benchmark data Directors provided by independent remuneration consultants sourced from two Members of the Committee are appointed by the Board and their terms groups of companies as follows (i) a group comprising broadly similar of reference are available on the Company’s website. Anthony Reading sized companies from the Electronic & Electrical Equipment, Aerospace & currently chairs the Committee, which meets at least twice a year, and 17 > Defence, Industrial Engineering and Technology Hardware & Equipment its other members are George Kennedy and Jonathan Brooks. The Board sectors and (ii) a group comprising companies from all sectors (excluding Directors’ considers that all members of the Committee are independent directors. Report financial companies) of a broadly similar size in terms of average market Mr Kennedy is a member of the Committee because the Board considers capitalisation, turnover and international scope. The most recently it essential that the Chairman be involved in setting remuneration policy conducted review showed that the base salaries payable to the Executive (although he is not party to any discussion directly relating to his own 20 > Directors in the year ended 31 March 2009 were well below the median. remuneration). The Chief Executive Officer is given notice of all meetings Basic salary is reviewed annually and is the only element of remuneration Corporate and has the right to attend them, and is consulted on the remuneration that is pensionable. Executive Director Salaries were reviewed on 1 July Governance of other executives. However, the Chief Executive Officer does not take 2008 and no increases were made. Report part in discussions that relate directly to his own remuneration. Fees for the Chairman and Non-Executive Directors are determined The Committee has no formally appointed advisers on remuneration taking account of the individual’s responsibilities, time required to policy. However during the year it has sought advice from Hewitt > devote to the role and comparable market rates. 24 New Bridge Street who provided services to the Company during the Corporate year in connection with the operation of the Company’s remuneration Charles Hindson was appointed as Group Financial Director on Responsibility arrangements. They provided no other services to the Company during 5 May 2009 with an annual base salary of £200,000. the year. Benefits 30 > Remuneration policy Benefits comprise the provision of a company car or car allowance and Directors’ The overall policy applied for the year ended 31 March 2009 and that health insurance. Non‑Executive Directors do not receive any benefits. will apply for the year ending 31 March 2010, is to ensure that Executive Remuneration Pensions Report Directors are fairly and competitively remunerated and incentivised in a manner consistent with the Group’s strategic objectives. The current The Group operates a defined contribution, HM Revenue and Customs remuneration packages combine basic salary, benefits and pension approved, pension scheme. The Company makes contributions of 15% 36 > contributions together with performance-related annual bonus and share of basic salary to the relevant pension scheme in respect of Executive Directors. Executive Directors are entitled to enhance this through salary Directors’ incentive awards. The Committee believes that the overall packages offered to Executive Directors should provide the right balance of fixed sacrifice arrangements and additional voluntary contributions subject to Responsibilities and performance-related pay and be appropriate for the size, scale and Inland Revenue limits. Non‑Executive Directors' fees are non-pensionable. geographic scope of the organisation as well as be competitive relative Performance related annual bonus to other companies within its sector. When setting the pay of Executive 37 > Directors, due account is taken of pay conditions elsewhere in the Group. An annual bonus is payable to Executive Directors subject to the Independent attainment of specific targets which are based on Group performance. Auditor’s Report Currently, based on the most recent benchmark information provided Non-Executive Directors are not entitled to a bonus. The Committee by independent remuneration consultants, the Committee believes that reserves the right in exceptional circumstances to amend the targets the remuneration of the Executive Directors is below the median of the during the year if it feels that changes, in such factors as the marketplace 39 > comparative data. or the Group's strategy, have resulted in the existing targets no longer Financial In line with the Association of British Insurers’ Guidelines on Responsible providing an appropriate incentive to the individual. The targets for the Statements Investment Disclosure the Remuneration Committee will ensure that the year ended 31 March 2009 were based on increasing earnings per share incentive structure for Executive Directors and senior management will and, for the year, bonuses could start to be earned if the earnings per not raise environmental, social or governance (ESG) risks. More generally, share increased by over 10%. For the year ended 31 March 2009, the with regard to the overall remuneration structure there is no restriction on maximum bonus opportunity was 100% of basic salary for the Chief the Committee which prevents it from taking into account ESG matters, Executive Officer and 80% of basic salary for the Group Finance Director. nor more general operational risks. As the threshold EPS growth target was not achieved for the year ended 31 March 2009, no bonus payments will be made to the Executive Directors.
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10 > Business The annual bonus for the forthcoming year will be structured in a similar Review manner, with the maximum bonus opportunity of the Chief Executive and the Group Finance Director will be 100%. This ensures that the packages of the Executive Directors remain competitive, but only through 16 > a significant focus on variable pay (as stated previously, basic salary levels Board of are below median). The Committee sets targets with a greater degree of Directors stretch than were employed when the bonus opportunity was lower, such that truly outstanding performance is required for a maximum bonus payout. > 17 Share incentives Directors’ Report The Group's policy is to align the interests of employees with those of shareholders. To achieve this, the Remuneration Committee has established the following schemes: 20 > l Long Term Incentive Plan (LTIP). Corporate l E xecutive Share Option Plan (ExSOP). Governance Report l Share Incentive Plan (SIP). l Sharesave Scheme (SAYE). 24 > The Committee regularly reviews the operation of the Group’s share Corporate incentive arrangements to ensure that they remain effective, fully Responsibility reflect the Group’s circumstances and take due account of market and best practice. Service contracts 30 > Directors’ In line with best practice it is the policy of the Committee to offer Executive Directors service agreements with notice periods not exceeding Remuneration twelve months. Current appointments are subject to rolling service Report agreements that can be terminated by twelve months’ notice as detailed below. Termination payments, based on basic salary and benefits only, are limited to contractual notice periods. George Kennedy, Anthony > 36 Reading and Jonathan Brooks do not have service contracts but have Directors’ letters of appointment with the Group. No notice is required to terminate Responsibilities their appointment. The services of Ian Godden are provided under a consultancy agreement with Godden Associates Ltd under the same terms as the letters of appointment for the Chairman and Non-Executive 37 > Directors. A summary of the Directors’ service contracts and letters of Independent appointment is listed below: Auditor’s Report Contract date Notice period Unexpired term K D Attwood 21 July 2004 12 Months 4 Months 39 > Financial M Hannant 21 July 2004 12 Months Resigned 28 May 2009 Statements G Kennedy 25 July 2004 None 3 Months A Reading 25 July 2004 None 3 Months J Brooks 18 August 2004 None 3 Months Consultancy Agreement date Notice period Unexpired term I Godden 23 January 2005 None 10 Months
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06 > Executive Directors are permitted, with the agreement of the Board, to Chairman and accept outside appointments provided that such appointments do not Mike Hannant Chief Executive’s conflict with their duties as Directors of the Company. Whether any fees resigned from his role Statement payable in respect of such outside appointments are retained by the Executive Director or remitted to the Company is determined on a case-by- as Group Finance Director case basis. No Executive Director held any such appointment in the year > 10 ending 31 March 2009. on 5th May 2009 Business Review Mike Hannant resigned from his role as Group Finance Director on 5 May when Charles Hindson 2009 and and is now an employee on 12 months notice. He has been replaced by Charles Hindson who commenced employment as the new was appointed. 16 > Group Finance Director on 5 May 2009. In addition, Sally Board of Shareholding guidelines Weatherall has been Directors The Company’s shareholding guidelines were reviewed and updated by the Remuneration Committee in January 2007. Under the guidelines, appointed Company Executive Directors will be expected to build up and retain shares equal > Secretary. 17 in value to at least twice their respective basic salaries. Directors’ Report Employee Benefit Trust (EBT) The Company established the EBT in 2004 as a discretionary employee benefit trust, in which all employees of the Group are potentially 20 > beneficiaries. The Trustee is Lloyds Offshore Trustee Limited, a professional Corporate offshore trustee. The main purpose of the EBT is to operate the LTIP and Governance share option schemes following recommendations from the Remuneration Report Committee or Board. Shareholder approval has been given to allow the Trustee to hold no more than 5 per cent of the issued ordinary share capital of the Company, and as at 31 March 2009 the percentage was 24 > 0.83% (2008: 1%). Corporate Directors’ interests Responsibility e2v technologies plc The beneficial interests of the Directors in the ordinary share capital of TSR performance since flotation the Company as at 31 March 2009 are set out in the table below, together with the beneficial interests at the end of the previous financial year. versus FTSE Electro. & Elecl. Equip. 30 > Directors’ Remuneration At 31 March 2009 At 31 March 2008 Report Ordinary 5p shares Ordinary 5p shares K D Attwood 1,375,643 1,346,732 36 > M Hannant 545,923 531,674 Directors’ G Kennedy 52,256 42,256 Responsibilities A Reading 24,352 19,352 I Godden 43,765 43,765 37 > J Brooks 14,500 8,500 Independent Auditor’s Report There were no changes to the above interests between the year end and the date of this report. e2v Performance graph 39 > FTSE Electro. & Elecl. Equip. (rebased) Financial The graph opposite shows the change in the Total Shareholder Return Statements (TSR) (with dividends re-invested) for the period since flotation to 31 March 2009 of a holding of a £100 investment in the Group’s shares against the corresponding change in a hypothetical holding of shares in the FTSE Electronics & Electrical Equipment sector. This sector was chosen as it represents the equity market index in which the Company is a constituent member.
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06 > Chairman and Information subject to audit Chief Executive’s Long Term Incentive Plan (LTIP) Statement Awards will vest on the third anniversary of the date of award to the As stated in last year’s annual report, the Committee reviewed the LTIP extent that the performance targets have been met. The maximum peer group and broadened the group. The peer group for the 2008 award annual award value under the Plan is one times basic annual salary. comprised the following companies: > 10 To encourage participants to deliver above market returns to l Bodycote International l Oxford Instruments Business shareholders, for awards made to date and, it is intended, for awards Review to be made in this forthcoming year, the targets relate to the Group’s l Castings l PV Crystalox Solar TSR relative to the TSR of a specified list of peer group companies. l Charter l Qinetiq Group 25% of an award will vest for median performance and an award will l Chemring Group l Raymarine 16 > only vest in full if the Group’s TSR performance would place it in the Board of top 20% compared to the peer group, with pro-rata vesting between l Chloride Group l Renishaw Directors 25% and full vesting. However, no award will vest (irrespective of the l Cookson Group l Rotork Group’s relative TSR performance) unless an adjusted EPS growth l Domino Printing Sciences l Senior “underpin” of RPI plus 2% over the three year performance period l Enodis l Severfield-Rowen 17 > has been satisfied (unless the Committee considers, in exceptional Directors’ circumstances, that it would be inappropriate to apply this underpin). l Fenner l Spectris Report There is also no provision for re-testing. TSR has been selected as the l Halma l Spirax-Sarco Engineering appropriate performance criteria as this measure aligns the interest l Hampson Industries l Tomkins of the senior executives with those of the Group’s shareholders. The l Hill & Smith Holdings l TT Electronics 20 > Group uses independent advisors to assess the extent to which the l IMI l Ultra Electronics Holdings Corporate TSR performance conditions are satisfied. Governance Mike Hannant remains an employee of the Company and remains l Invensys l UMECO Report eligible to participate in the LTIP. l Laird l Vitec Group On 3 September 2008 the 2005 LTIP award became capable of l Meggitt l VT Group vesting. The Company’s TSR performance over the relevant period l Melrose l Weir Group 24 > ranked between the median and the top 20% against the peer group l Morgan Crucible Company l Xaar Corporate companies, resulting in 44.65% of the shares subject to the award Responsibility vesting. The market price on the date of vesting was £2.59 resulting in a gain of £139,062, (2008: £442,260). 30 > All LTIP awards have been granted as nil exercise price options and Directors’ have no end date by which they must be exercised. The market price of the ordinary shares at 31 March 2009 was £0.41 (2008: £1.77) and Remuneration the range during the year was £0.41 to £2.01. Report
> 36 Awards held Granted in Excercised in Lapsed in Awards held at Date from which Directors’ Grant date 1 April 2008 the year the year the year 31 March 2009 excercisable Responsibilities K D Attwood LTIP 20.07.2005 64,750 - 28,911 35,839 - 20.07.2008 > 37 LTIP 31.07.2006 69,700 - - - 69,700 31.08.2009 Independent Auditor’s Report LTIP 16.07.2007 63,250 - - - 63,250 14.07.2010 LTIP 15.07.2008 - 99,850 - - 99,850 15.07.2011 M Hannant - 39 > Financial LTIP 20.07.2005 55,500 - 24,781 30,719 - 20.07.2008 Statements LTIP 31.07.2006 37,700 - - - 37,700 31.08.2009 LTIP 16.07.2007 39,875 - - - 39,875 14.07.2010 LTIP 15.07.2008 - 62,950 - - 62,950 15.07.2011
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06 > For awards granted prior to 2008, the peer group comprised Sharesave scheme (SAYE) Chairman and the following companies: Chief Executive’s The Group operates an HM Revenue and Customs approved sharesave Statement l Abacus Group scheme for all UK employees and Executive Directors can apply to join the scheme if they are UK employees. The Chief Executive Officer and Group l Amstrad plc (until 8 October 2007) Finance Director participate in the scheme to the fullest extent permissible l Chemring Group 10 > as detailed below: Business l Chloride Group Review l Domino Printing Services K D Attwood l First Technology (until 24 March 2006) l Halma SAYE At 1 April 2008 4,266 16 > l Laird Granted in year - Board of Directors l NXT Exercised in year - l Oxford Instruments At 31 March 2009 4,266 l Renishaw M Hannant 17 > l Dialight (formerly The Roxboro Group plc) Directors’ SAYE At 1 April 2008 4,266 l Spectris Report Granted in year - l TT Electronics Exercised in year - l Ultra Electronics Holdings 20 > At 31 March 2009 4,266 Corporate Executive Share Option Plan (ExSOP) First exercise date Governance The Group has an ExSOP for the granting of non-transferable market 01.03.2011 Report value options to certain employees over shares worth up to 100% of salary each year. The vesting period for the ExSOP is finite allowing Last exercise date eligible employees to exercise the option in a fixed period, once 31.08.2011 24 > conditions are met. The options may not be exercised unless, over the Exercise price Corporate vesting period, the Company’s earnings per share (EPS) has increased by 225.0p Responsibility a fixed percentage above the retail price index (RPI) as detailed in note 26 to the financial statements. No awards have been made to Executive Directors under this plan in the year ended 31 March 2009 (2008: nil). Mike Hannant remains an employee of the company and remains eligible 30 > The Committee has no intention of making grants under this plan to to participate in the SAYE scheme. Executive Directors in 2009/10. Directors’ Remuneration Share Incentive Plan (SIP) Report The Group has established a SIP which has been designed to qualify for approval by the HM Revenue and Customs. The plan contains three elements: 36 > Directors’ l Free shares, which are ordinary shares which may be allocated to Responsibilities an employee by the Company; l Partnership shares, which are ordinary shares which an employee may purchase out of their pre-tax earnings; and 37 > Independent l Matching shares, which are ordinary shares which may be allocated to an employee following the purchase of partnership shares. Auditor’s Report No awards have been made to any employees under this plan as at 31 March 2009. 39 > Financial Statements
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06 > Chairman and Directors’ remuneration Chief Executive’s The remuneration of Directors who served during the year was as follows: Statement Pension Pension Salary and/or Performance Car allowance/ contributions contributions 10 > fees related bonuses benefits in kind 2009 total 2008 total 2009 2008 Business £ £ £ £ £ £ £ Review K D Attwood 253,000 - 12,774 265,774 259,876 37,950 35,363 M Hannant 159,500 - 12,774 172,274 168,501 23,925 22,294 > 16 G Kennedy 95,000 - - 95,000 92,500 - - Board of Directors A Reading 36,000 - - 36,000 34,500 - - I Godden 33,000 - - 33,000 32,250 - - J Brooks 36,000 - - 36,000 34,500 - - 17 > Directors’ Total 612,500 - 25,548 638,048 622,127 61,875 57,657 Report
Approval 20 > This report was approved by the remuneration committee and has been Corporate approved subsequently by the Board of Directors. Governance Report On behalf of the Board
24 > Corporate Responsibility
30 > Directors’ Anthony Reading Remuneration Chairman of the Remuneration Committee Report 8 June 2009
36 > Directors’ Responsibilities
37 > Independent Auditor’s Report
39 > Financial Statements
The Group operates an HM Revenue and Customs approved sharesave scheme for all UK employees. Stellar satellite communications amplifier
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04 > Business Overview
06 > Chairman and Chief Executive’s Directors’ Responsibilities Statement
10 > Statement of Directors’ responsibilities in respect of the Directors’ responsibilities statement Business group financial statements We confirm that, to the best of our knowledge: Review The Directors are responsible for preparing the Annual Report and the l The financial statements, prepared in accordance with International Group financial statements in accordance with applicable United Kingdom Financial Reporting Standards, as adopted by the European Union, law and regulations. The Directors are required to prepare financial > give a true and fair view of the assets, liabilities, financial position 16 statements for the Group in accordance with International Financial and profit of the Group taken as a whole; and Board of Reporting Standards (IFRS) as adopted by the European Union. Directors l The Directors’ report, the Chairman’s and Chief Executive’s statement The Directors are required to prepare group financial statements for each and the business review include a fair review of the development of financial year which present fairly the financial position of the Group and the business and the position of the Group, together with a description the financial performance and cash flows of the Group for that period. 17 > of the principal risks and uncertainties that they face. In preparing those financial statements, the Directors are also required to: Directors’ Report l Properly select suitable accounting policies and then apply them consistently in accordance with IAS 8; On behalf of the board
> l Present information, including accounting policies, in a manner 20 that provides relevant, reliable, comparable and understandable Corporate information; Governance Report l Provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on Keith Attwood Charles Hindson Chief Executive Officer Group Finance Director 24 > the entity’s financial position and financial performance; and Corporate l State that the Group has complied with IFRSs, subject to any material 8 June 2009 8 June 2009 Responsibility departures disclosed and explained in the financial statements. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the 30 > Group, for safeguarding the assets, and for taking reasonable steps for the Directors’ prevention and detection of fraud and other irregularities to enable them Remuneration to ensure that the Group financial statements comply with the Companies Report Act 1985 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 36 > Directors’ The Annual Report for the year ended 31 March 2009 is published in hard-copy printed form and made available on the Group’s website. Responsibilities The Directors are responsible for the maintenance and integrity of the annual report on the website in accordance with UK legislation governing the preparation and dissemination of financial statements. Access to the 37 > website is available from outside the UK, where comparable legislation Independent may be different. Auditor’s Report
39 > Financial Statements
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< > 36 03 > Financial Highlights
04 > Business Overview
06 > Chairman and Chief Executive’s Independent Auditor’s Report Statement
10 > Independent auditor’s report to the shareholders of Business e2v technologies plc Review We have audited the Group financial statements of e2v technologies plc for the year ended 31 March 2009 which comprise the Group income statement, the Group statement of recognised income and expense, > 16 the Group balance sheet, the Group cash flow statement and the related Board of Notes 1 to 29. These Group financial statements have been prepared Directors under the accounting policies set out therein. We have reported separately on the parent company financial statements 17 > of e2v technologies plc for the year ended 31 March 2009 and on the information in the Directors’ remuneration report that is described as Directors’ having been audited. Report This report is made solely to the Company's members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work 20 > has been undertaken so that we might state to the Company's members Corporate those matters we are required to state to them in an auditor's report and Governance for no other purpose. To the fullest extent permitted by law, we do not Report 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. 24 > Respective responsibilities of Directors and Auditors Corporate The Directors’ responsibilities for preparing the annual report and Responsibility the Group financial statements in accordance with applicable United Kingdom law and International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the statement of > 30 Directors’ responsibilities. Directors’ Remuneration Our responsibility is to audit the Group financial statements in accordance Report with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the Group financial 36 > statements give a true and fair view and whether the Group financial Directors’ statements have been properly prepared in accordance with the Responsibilities Companies Act 1985 and Article 4 of the IAS Regulation. We also report to you whether in our opinion the information given in the Directors' report is consistent with the financial statements. The information given 37 > in the Directors' report includes that specific information presented in the Independent Chairman’s and Chief Executive’s statement and the Business review that Auditor’s Report is cross referred from the review of the business and future developments section of the Directors' report. In addition we report to you if, in our opinion, we have not received 39 > all the information and explanations we require for our audit, or if Financial information specified by law regarding Director’s remuneration and Statements other transactions is not disclosed. We review whether the corporate governance report reflects the Company’s compliance with the nine provisions of the 2006 Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and control procedures. ArgusSC security thermal imaging camera
< > 37 03 > Financial Highlights Independent Auditor’s Report
04 > Business Overview
06 > We read other information contained in the Annual Report and consider Chairman and whether it is consistent with the audited Group financial statements. Chief Executive’s The other information comprises only the Chairman’s and Chief Executive’s Statement statement and the Business review, the corporate governance report, the corporate responsibility report, the unaudited part of the Directors’ remuneration report and the five year record. We consider the implications > 10 for our report if we become aware of any apparent misstatements Business or material inconsistencies with the Group financial statements. Our Review responsibilities do not extend to any other information. Basis of audit opinion 16 > We conducted our audit in accordance with International Standards Board of on Auditing (UK and Ireland) issued by the Auditing Practices Board. Directors An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Group financial statements. It also includes an assessment of the significant estimates and judgments made 17 > by the Directors in the preparation of the Group financial statements, Directors’ and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed. Report We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide 20 > us with sufficient evidence to give reasonable assurance that the Group Corporate financial statements are free from material misstatement, whether caused Governance by fraud or other irregularity or error. In forming our opinion we also Report evaluated the overall adequacy of the presentation of information in the Group financial statements. Opinion 24 > Corporate In our opinion: Responsibility l The Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Group’s affairs as at 31 March 2009 and of its loss 30 > for the year then ended; Directors’ l The Group financial statements have been properly prepared in Remuneration accordance with the Companies Act 1985 and Article 4 of the IAS Report Regulation; and l The information given in the Directors’ report is consistent with 36 > the Group financial statements. Directors’ Emphasis of matter Responsibilities In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosures made in note 2 of the financial statements concerning the Group’s ability to continue to meet > 37 the banks’ consolidated net borrowings to adjusted consolidated EBITDA Independent covenant. These conditions indicate the existence of a material uncertainty Auditor’s Report which may cast significant doubt about the ability of the Group to continue as a going concern. The financial statements do not include any adjustment that would result if the Group was unable to continue 39 > as a going concern. Financial Statements
Ernst & Young LLP Registered Auditor, Cambridge 8 June 2009 X-ray detector for spectroscopy applications
< > 38 www.e2v.com 03 > Financial Highlights
04 > Business Overview
> 06 e2v technologies plc Annual Report and Financial Statements 2009 Chairman and Chief Executive’s Statement
10 > Business Review Financial 16 > Board of Directors
17 > Directors’ Statements Report
20 > Corporate Group Income Statement 38 Governance Group Balance Sheet 39 Report Group Cash Flow Statement 40 24 > Notes to the Financial Statements 41 Corporate Responsibility Financial Record 76
30 > Directors’ Remuneration Report
36 > Directors’ Responsibilities
37 > Independent Auditor’s Report
39 > Financial Statements
< > 39 03 > Financial Highlights
04 > Business Group income statement Overview for the year ended 31 March 2009
Year ended Year ended 06 > 31 March 2009 31 March 2008 Chairman and Notes £000 £000 Chief Executive’s Revenue 3 233,193 204,607 Statement Cost of sales (154,223) (132,213) Gross profit 78,970 72,394 10 > Business Research and development costs 5 (17,133) (13,988) Review Selling and distribution costs (17,973) (13,957) Administrative expenses (63,399) (25,020) 19,429 16 > Operating (loss)/profit (19,535) Board of Finance costs 8 (9,554) (6,183) Directors Finance revenue 8 684 501 Adjusted profit before taxation 20,389 23,410 17 > Amortisation of acquired intangible assets (8,628) (7,310) Directors’ Impairment of acquired intangible assets (26,127) - Report Impairment of plant and equipment (2,500) - Business improvement programme costs (6,826) (1,996) Fair value losses on foreign exchange contracts (2,894) (357) > 20 Fair value losses on interest rate swaps (1,819) - Corporate Governance (Loss)/profit before taxation (28,405) 13,747 Report Income tax credit/(expense) 9 7,106 (1,948) (Loss)/profit for the year attributable to equity holders of the parent (21,299) 11,799 (Loss)/earnings per share – basic 10 (34.42)p 19.36p 24 > (Loss)/earnings per share – diluted 10 (34.42)p 19.20p Corporate Adjusted earnings per share – basic 10 30.20p 30.08p Responsibility Adjusted earnings per share – diluted 10 30.16p 29.83p
30 > Directors’ Remuneration Report Group statement of recognised 36 > income and expense Directors’ Responsibilities Year ended Year ended 31 March 2009 31 March 2008 Notes £000 £000 37 > Losses on cash flow hedges taken directly to equity (80) (79) Independent Exchange differences on retranslation of foreign operations 4,425 1,296 Auditor’s Report Actuarial (loss)/gain on post employment employee benefits 26 (195) 210 Tax on items taken directly to or transferred from equity 9 (15) (697) 39 > Net income recognised directly in equity 4,135 730 Financial (Loss)/profit for the year (21,299) 11,799 Statements Total recognised income and expense for the year 24 (17,164) 12,529
< > 40 03 > Financial Highlights
04 > Business Group balance sheet Overview as at 31 March 2009
06 > 31 March 2009 31 March 2008 Chairman and Notes £000 £000 Chief Executive’s Assets Statement Non-current assets Property, plant and equipment 12 40,251 40,191 10 > Intangible assets 13 119,199 93,037 Business Deferred income tax asset 9 5,860 2,726 Review 165,310 135,954 Current assets Inventories 16 42,433 43,958 16 > Board of Trade and other receivables 17 61,109 54,547 Directors Other financial assets 18 - 188 Income tax recoverable 2,498 2,791 Cash 19 6,373 5,806 > 17 112,413 107,290 Directors’ Total assets 277,723 243,244 Report
Liabilities 20 > Current liabilities Corporate Trade and other payables 20 (52,567) (47,582) Governance Other financial liabilities 21 (13,950) (7,442) Report Income tax recoverable (139) (2,322) Provisions 22 (6,567) (4,804) (73,223) (62,150) > 24 Net current assets 39,190 45,140 Corporate Responsibility Non-current liabilities Other financial liabilities 21 (133,737) (92,073) 30 > Provisions 22 - (350) Directors’ Retirement benefit obligations 26 (3,355) (3,096) Remuneration Deferred income tax liabilities 9 (13,729) (11,125) Report (150,821) (106,644) Net assets 53,679 74,450 36 > Directors’ Shareholders’ equity Responsibilities Ordinary share capital 23 & 24 3,128 3,111 Share premium 24 41,780 41,116 Capital redemption reserve 24 274 274 37 > Treasury shares reserve 23 & 24 (5) (6) Independent Hedge reserve 24 - 58 Auditor’s Report Foreign currency translation reserve 24 5,408 983 Retained earnings 24 3,094 28,914 39 > Total shareholders’ equity attributable to equity holders of the parent company 53,679 74,450 Financial Statements Approved by the Board of Directors on 8 June 2009.
K Attwood C Hindson Chief Executive Officer Group Finance Director
< > 41 03 > Financial Highlights
04 > Business Group cash flow statement Overview for the year ended 31 March 2009
06 > Year ended Year ended Chairman and 31 March 2009 31 March 2008 Chief Executive’s Notes £000 £000 Statement Cash flows from operating activities (Loss)/profit before tax (28,405) 13,747 10 > Net finance costs 8,870 5,682 Business Operating (loss)/profit (19,535) 19,429 Review Adjustments to reconcile to net cash inflows from operating activities: Depreciation of property, plant and equipment 10,204 8,392 16 > Impairment of plant and equipment 2,500 - Board of Amortisation of intangible assets 12,674 10,749 Directors Impairment of intangible assets 26,127 - Fair value losses on foreign exchange contracts 2,894 357 Share based payment charges 625 821 17 > Decrease/(increase) in inventories 8,173 (753) Directors’ Decrease/(increase) in trade and other receivables 1,735 (6,474) Report Decrease in trade and other payables (3,224) (2,474) Increase/(decrease) in provisions 875 (378) 20 > Cash generated from operations 43,048 29,669 Corporate Income taxes paid (1,297) (3,582) Governance Net cash flows from operating activities 41,751 26,087 Report Cash flows from investing activities Proceeds from sale of property, plant and equipment 201 137 24 > Interest received 684 501 Corporate Purchase of property, plant and equipment (9,221) (10,910) Responsibility Purchase of software (1,531) (1,670) Expenditure on patents, trade marks and technology - (117) 30 > Expenditure on product development (2,612) (2,036) Directors’ Acquisition of subsidiary, net of cash acquired 15 (41,059) (5,037) Remuneration Net cash flows used in investing activities (53,538) (19,132) Report Cash flows from financing activities Interest paid (7,338) (5,858) Proceeds from issue of shares, net of expenses 681 1,252 36 > Dividends paid to equity shareholders of the parent (4,913) (4,380) Directors’ Payment of finance lease obligations (13) (16) Responsibilities Proceeds from borrowings 38,152 3,500 Transaction costs of new bank loans raised (184) - 37 > Repayment of borrowings (15,451) (4,576) Independent Net cash flows generated from/(used in) financing activities 10,934 (10,078) Auditor’s Report
Net decrease in cash and cash equivalents (853) (3,123) 39 > Net foreign exchange difference 1,420 433 Financial Cash and cash equivalents at 1 April 19 5,806 8,496 Statements Cash and cash equivalents at 31 March 19 6,373 5,806
< > 42 03 > Financial Highlights
04 > Business Notes to the financial statements Overview 1. Authorisation of financial statements 06 > Chairman and and statement of compliance with IFRS Chief Executive’s The Group’s financial statements for the year ended 31 March 2009 were debt covenant’ requirement at both 30 September 2009 and 31 March 2010. Statement authorised for issue in accordance with a resolution of the Directors on However the available headroom is limited and the Directors are cognisant 8 June 2009 and the balance sheet was signed on the Board’s behalf by of the fact that in the current economic climate there are inherent risks K Attwood and C Hindson. e2v technologies plc is a public limited company surrounding the achievability of the Group’s forecast sales, the success of the 10 > incorporated in England & Wales whose shares are publicly traded on the restructuring plan and steps to reduce production capacity along with the Business London Stock Exchange. The principal activities of the Group are described direction of the Euro and US dollar exchange rate movements. in the Directors’ report on page 15. Review The Directors of the Group have concluded that the combination of these The Group’s financial statements have been prepared in accordance with circumstances represents a material uncertainty that casts significant doubt International Financial Reporting Standards (IFRSs) as adopted for use by upon the Group’s ability to continue to meet ‘the net debt covenant’ at 16 > the European Union as they apply to the financial statements of the Group 30 September 2009 and, to a lesser extent, 31 March 2010. However, having Board of for the year ended 31 March 2009 applied in accordance with the provisions considered these uncertainties, the Directors have a reasonable expectation Directors of the Companies Act 1985. the Group can remain within ‘the net debt covenant’ at 30 September 2009 and 31 March 2010. On this basis the Directors believe that it is appropriate The principal accounting policies adopted by the Group are set out below. to prepare the financial statements on a going concern basis. The financial 17 > statements do not include any adjustments that would result if the going Directors’ 2. Summary of significant accounting policies concern basis of accounting were considered inappropriate. Report Basis of preparation Basis of consolidation The financial statements have been prepared on the historical cost The consolidated financial statements comprise the financial statements basis, except for the revaluation of financial instruments and retirement of e2v technologies plc and its subsidiaries as at 31 March each year. The 20 > benefit liabilities. financial statements of subsidiaries are prepared for the same reporting year Corporate as the parent company, using consistent accounting policies. Adjustments Governance The accounting policies set out below have been applied consistently to all periods presented in these financial statements. are made to bring into line any dissimilar accounting policies that may exist. Report The Group financial statements are presented in Sterling and all values are All intercompany balances and transactions, including unrealised profits rounded to the nearest thousand (£000) except when otherwise indicated. arising from intra-group transactions, have been eliminated in full. Any > unrealised losses arising from intra-group transactions are eliminated to the 24 Going concern Corporate extent that they are recoverable. The Group’s banking facilities expire on 11 July 2011. Under these facilities Responsibility Subsidiaries are consolidated from the date on which control is transferred the Group is required to confirm at 31 March and 30 September of each to the Group and cease to be consolidated from the date on which control year that consolidated net borrowings do not exceed a 3.5 times multiple is transferred out of the Group. Control comprises the power to govern the of adjusted consolidated EBITDA ‘the net debt covenant’ and that > financial and operating policies of the investee so as to obtain benefit from 30 adjusted consolidated EBITA is not less than a 3 times multiple of net its activities and is achieved through direct or indirect ownership of voting Directors’ interest payable. Remuneration rights. Where there is a loss of control of a subsidiary, the consolidated Report In the six months to 31 March 2009 the weakening of Sterling increased financial statements include the results for the part of the reporting year the Sterling value of the Group’s Euro and US dollar denominated loans, during which e2v technologies plc has control. resulting in consolidated net borrowings as at 31 March 2009 of £137.3m, Acquisitions, including QP Semiconductor Inc. in the current year and MiCS representing a multiple of 3.19 times the adjusted consolidated EBITDA for 36 > Microchemical Systems SA (MiCS) in the prior year, are included in the the year ended 31 March 2009. Directors’ consolidated financial statements using the purchase method of accounting Responsibilities The Group has experienced softer market conditions in many of the markets that measures the acquiree’s assets and liabilities at their fair value at in which the Group operates in the current calendar year, leading to a lower acquisition date. Accordingly, the consolidated financial statements include level of activity in the first half of the year ending 31 March 2010. Combined the results of QP Semiconductor Inc. for the period 10 October 2008 to 37 > with the uncertainty over the direction of the Euro and US dollar exchange 31 March 2009 in the current year and the results of MiCS for the period Independent rate movements, this represents a significant challenge to the Group’s ability 14 May 2007 to 31 March 2008 in the prior year. In both cases, the purchase Auditor’s Report to meet ‘the net debt covenant’ at 30 September 2009 and, to a lesser consideration has been allocated to the assets and liabilities on the basis of extent, 31 March 2010. fair value at the date of acquisition. The Board are implementing restructuring initiatives to reduce costs and Foreign currency translation > 39 production capacity primarily in the first half of the year ending 31 March The functional and presentation currency of e2v technologies plc is Financial 2010. With these steps, the Board has a reasonable expectation that the Sterling (£). Statements Group can remain within ‘the net debt covenant’. Transactions in currencies other than Sterling are recorded at the rate In addition the Board is working with finance providers and is reviewing a of exchange ruling at the date of the transaction. At each balance sheet range of options for a more long term capital structure for the business. date, monetary assets and liabilities denominated in foreign currencies are The Directors of the Group have prepared detailed profit and cash flow retranslated at the rate of exchange ruling at the balance sheet date. Non- forecasts through to 30 September 2010. In considering these profit and monetary assets and liabilities measured at historical cost are translated at cash flow forecasts and the plans to restructure costs and limit production the rate of exchange ruling at the date of the transaction. All differences are capacity, the Directors have carefully considered the assumptions and taken to the Group income statement, except when hedge accounting is sensitivities and have concluded that the Group can remain within ‘the net applied and for differences on monetary assets and liabilities that form part
< > 43 03 > Financial Notes to the financial statements Highlights
04 > Business 2. Summary of significant accounting policies (continued) Overview of the Group’s net investment in a foreign operation. These are taken directly Goodwill to equity until the disposal of the net investment, at which time they are Goodwill represents the excess of the cost of an acquisition over the Group’s recognised in the income statement. interest in the fair value of the identifiable assets, liabilities and contingent 06 > On consolidation, the assets and liabilities of overseas subsidiary liabilities of the subsidiary or business assets. Following initial recognition, Chairman and undertakings are translated at the rate of exchange ruling at the balance goodwill is measured at cost less any accumulated impairment losses. Chief Executive’s sheet date. Income and expense items are translated at the average rate for Goodwill is not amortised but is reviewed for impairment, annually or more Statement the year. The exchange difference arising on the retranslation of opening net frequently if events or changes in circumstances indicate that the carrying assets is taken directly to the Group’s foreign currency translation reserve, value may be impaired. as well as the difference between the average and closing rate effect on the Goodwill arising on acquisitions before the date of transition to IFRSs has 10 > income statement for the year. Such translation differences are recognised as been retained at the previous UK GAAP amounts subject to being tested for Business income or expense in the period in which the operation is disposed of. On impairment at that date. Goodwill written off to reserves under UK GAAP has Review disposal of a foreign entity, the deferred cumulative amount recognised in not been reinstated and will not be included in determining any subsequent equity relating to that particular foreign subsidiary shall be recognised in the profit or loss on disposal. income statement. 16 > For the purpose of impairment testing, as at the acquisition date, any Property, plant and equipment Board of goodwill acquired is allocated to the applicable cash-generating unit. Directors Freehold buildings, plant and equipment held for use in the production or Impairment is determined by assessing the recoverable amount of the supply of goods or services, or for administrative purposes are stated at cash-generating unit, to which the goodwill relates. Where the recoverable cost less accumulated depreciation and any impairment in value. Freehold amount of the cash-generating unit is less than the carrying amount, 17 > land is not depreciated and is held at historical cost. an impairment loss is recognised. Where goodwill forms part of a cash- generating unit and part of the operation within that unit is disposed of, Directors’ Depreciation is provided so as to write off the cost of assets on a straight the goodwill associated with the operation disposed of is included in the Report line basis over the estimated useful life, as follows: carrying amount of the operation when determining the gain or loss on Freehold buildings 25 to 50 years disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed 20 > Leasehold improvements over the remaining lease term of and the portion of the cash-generating unit retained. Corporate Plant and equipment 3 to 10 years Governance Office equipment, fixtures and fittings 3 to 10 years Intangible assets Report Intangible assets acquired separately are capitalised at cost and intangible Assets in the course of construction for production or administrative purposes assets acquired from a business acquisition are capitalised at fair value as are carried at cost, less any recognised impairment loss. Depreciation on at the date of acquisition. Following initial recognition, the cost model is these assets commences when the asset is brought into use. 24 > applied to the class of intangible assets. The useful lives of these intangible Corporate The carrying values are reviewed for impairment when events or changes assets are assessed to be either finite or indefinite. Where amortisation Responsibility in circumstances indicate the carrying value may not be recoverable. If any is charged on assets with finite lives, this expense is taken to the income such indication exists and where the carrying values exceed the estimated statement through the following line items: recoverable amount, the assets or cash-generating units are written down to Patents, trade-marks and technology administrative expenses 30 > their recoverable amount. The recoverable amount of plant and equipment Directors’ is the greater of net selling price and value in use. In assessing value in Development costs research and development costs use, the estimated future cash flows are discounted to their present value Remuneration Customer relationships using a pre-tax discount rate that reflects current market assessments of Report and agreements administrative expenses the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable Software cost of sales and 36 > amount is determined for the cash-generating unit to which the asset administrative expenses belongs. Impairment losses are recognised in the income statement in the Directors’ administrative expenses line item. Intangible assets, excluding development costs and software, created within Responsibilities the business are not capitalised and expenditure is charged against profits An item of property, plant and equipment is derecognised upon disposal or in the year in which the expenditure is incurred. Intangible assets are tested when no future economic benefits are expected to arise from the continued for impairment annually either individually or at the cash generating unit 37 > use of the asset. Any gain or loss arising on derecognition of the asset level. Useful lives are also examined on an annual basis and adjustments, Independent (calculated as the difference between the net disposal proceeds and the where applicable, are made on a prospective basis. Auditor’s Report carrying amount of the item) is included in the income statement in the year the item is derecognised. Computer software purchased (or internally generated) for use that is integral to the hardware (because without that software the equipment Government grants cannot operate) is treated as part of the hardware and capitalised as 39 > Government grants are recognised when it is reasonable to expect that the property, plant and equipment. Other software programs are treated as Financial grants will be received and that all related conditions will be met, usually intangible assets. Amortisation is provided so as to write off the cost of Statements on submission of a valid claim for payment. Grants of a revenue nature intangible assets on a straight-line basis over the estimated useful life, are credited to income so as to match them with the expenditure to which as follows: they relate. Grants in respect of capital expenditure are deducted from the Patents, trade-marks and technology 5 to 10 years carrying amount of the asset. The grant is recognised as income over the life of the asset by way of a reduced depreciation charge. Development costs 3 to 5 years Customer relationships and agreements 4 to 10 years Borrowing costs Software 2 to 7 years Borrowing costs, other than debt issue costs, are recognised as an expense in the period in which they are incurred.
< > 44 03 > Financial Highlights
04 > Business 2. Summary of significant accounting policies (continued) Overview Research and development costs Research costs are expensed as incurred. Development expenditure incurred are subsequently measured at amortised cost with any transaction costs on an individual project is carried forward when its future recoverability can amortised to the income statement over the period of the borrowings. > 06 reasonably be regarded as assured. For new products, this is deemed to Borrowings are classified as current liabilities unless, at the balance sheet Chairman and occur when the productisation review has been completed. At this stage the date, the Group has an unconditional right to defer settlement of the liability Chief Executive’s technical feasibility and commercial viability of the product has been proven. for at least 12 months after the balance sheet date. Statement Such expenditure is capitalised and amortised on a straight-line basis over the period of expected future sales from the related project. All expenditure Provisions on existing product development is capitalised unless there are specific Provisions are recognised when the Group has a present obligation (legal 10 > indicators that it does not meet the criteria. or constructive) as a result of a past event, it is probable that an outflow Business of resources embodying economic benefits will be required to settle the Following the initial recognition of the development expenditure the Review obligation and a reliable estimate can be made of the amount of the cost model is applied requiring the asset to be carried at cost less any obligation. Where the Group expects some or all of a provision to be accumulated amortisation and accumulated impairment losses. Any reimbursed, for example under an insurance contract, the reimbursement is expenditure carried forward is amortised over the period of expected future > recognised as a separate asset but only when the reimbursement is virtually 16 sales from the related project. Board of certain. The expense relating to any provision is presented in the income Directors The carrying value of development costs is reviewed for impairment annually statement net of any reimbursement. when the asset is not yet in use, or more frequently when an indicator of Pensions and other post-employment benefits impairment arises during the reporting year indicating that the carrying The Group operates defined contribution pension schemes which require 17 > value may not be recoverable. Where no internally generated asset can be contributions to be made to a separately administered fund. Payments to Directors’ recognised, development expenditure is recognised as an expense in the period in which it is incurred. defined contribution pension schemes are charged as an expense as they Report fall due. Payments made to a state-managed pension are dealt with as Gains or losses arising from derecognition of an intangible asset are payments to defined contribution schemes where the Group’s obligations measured as the difference between the net disposal proceeds and the under the schemes are equivalent to those arising in a defined contribution > 20 carrying amount of the asset and are recognised in the income statement retirement benefit scheme. Corporate when the asset is derecognised. The Group operates a defined benefit plan in France providing termination Governance Inventories Report payments to employees upon retirement. The cost of providing benefits Inventories are valued at the lower of cost and net realisable value. Costs under the plan is calculated based on the change in the present value of incurred in bringing each product to its present location and condition are benefits payable under the plan and is based on actuarial advice. When a settlement or curtailment occurs, the obligation is re-measured using 24 > accounted for in both the current year and previous year as follows: current actuarial assumptions and the resultant gain or loss is recognised Corporate Raw materials Purchase cost on a first-in, in the income statement during the period in which the settlement or Responsibility first-out basis curtailment occurs. Work in progress and finished goods Cost of direct materials and The interest element of the defined benefit cost represents the change in labour and a proportion of 30 > present value of scheme obligations resulting from the passage of time, and manufacturing overheads based is determined by applying the discount rate to the opening present value of Directors’ on a normal operating capacity Remuneration the benefit obligation, taking into account material changes to the obligation during the year. The interest cost is recognised in the income statement as Report Net realisable value is estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs an administrative expense. necessary to make the sale. The Group has applied the option in IAS 19 to recognise actuarial gains and > 36 Provision is made for obsolete, slow moving or defective items where losses in full in the statement of recognised income and expense in the Directors’ appropriate. Any net increase in provision for the period as a whole is period in which they occur. Responsibilities recognised as an expense in the period. Any net reversal of provision for the The defined benefit plan liability in the balance sheet comprises the present period as a whole is recognised as a reduction. value of the plan obligation, less any past service cost not yet recognised and less the fair value of plan assets out of which the obligations are to be > Trade and other receivables 37 settled directly. Independent Trade receivables, which generally have 30-60 day terms, are recognised and Auditor’s Report carried at original invoice amount less an allowance for any uncollectible Contributions to the plan are recognised in the income statement in the amounts. An estimate for doubtful debts is made when collection of the full period in which they become payable. amount is no longer probable. Bad debts are written off when identified. Share based payment transactions 39 > Cash and cash equivalents Employees (including directors) of the Group receive remuneration in Financial Cash in the balance sheet comprises cash at bank and in hand and short the form of share based payment transactions, whereby employees Statements term deposits with an original maturity of three months or less. render services in exchange for shares or rights over shares (‘equity-settled transactions’). For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash as defined above. The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair Interest-bearing loans and borrowings value is determined by an external valuer using a binomial model, further All loans and borrowings are initially recognised at cost, being the fair details of which are given in note 26. In valuing equity-settled transactions, value of the consideration received net of issue costs associated with the no account is taken of any vesting conditions, other than conditions linked borrowing. After initial recognition, interest-bearing loans and borrowings to the price of the shares of e2v technologies plc (‘market conditions’).
< > 45 03 > Financial Notes to the financial statements Highlights
04 > Business 2. Summary of significant accounting policies (continued) Overview The cost of equity-settled transactions is recognised, together with a Revenue from the supply of standard products is recognised when: corresponding increase in equity, over the period in which the performance A clear contractual arrangement can be evidenced; conditions are fulfilled, ending on the date on which the relevant employees l 06 > become fully entitled to the award (‘vesting date’). The cumulative expense l Delivery has been made in accordance with that contract; Chairman and recognised for equity-settled transactions at each reporting date until the l If required, contractual acceptance criteria have been met; and vesting date reflects the extent to which the vesting period has expired and Chief Executive’s l The contracted fee has been agreed and collectability is probable. Statement the number of awards that, in the opinion of the Directors of the Group at that date, based on the best available estimate of the number of equity For the supply of non-standard products, revenue is recognised by instruments that will ultimately vest. reference to the stage of completion of the project. The stage of completion is determined either by reference to the proportion that costs 10 > No expense is recognised for awards that do not ultimately vest, except for incurred for work performed to date bear to the estimated total project Business awards where vesting is conditional upon a market condition, which are costs, or by reference to the completion of a physical proportion of the treated as vesting irrespective of whether or not the market condition is Review work, dependent upon the nature of the underlying project. Revenues satisfied, provided that all other performance conditions are satisfied. derived from variations on projects are recognised only when they have Where the terms of an equity-settled award are modified, as a minimum an been accepted by the customer. Full provision is made for losses on all 16 > expense is recognised as if the terms had not been modified. In addition, an projects in the period in which they are first foreseen. Board of expense is recognised for any increase in the value of the transaction as a l Interest Directors result of the modification, as measured at the date of modification. Revenue is recognised as the interest accrues (using the effective interest Where an equity-settled award is cancelled, it is treated as if it had vested method that is the rate that exactly discounts estimated future cash 17 > on the date of cancellation, and any expense not yet recognised for the receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset. Directors’ award is recognised immediately. However, if a new award is substituted for Report the cancelled award, and designated as a replacement award on the date Income tax that it is granted, the cancelled and new awards are treated as if they were Current tax assets and liabilities are measured at the amount expected to be a modification of the original award, as described in the previous paragraph. paid (or recovered) to the taxation authorities, based on tax rates and laws 20 > The dilutive effect of outstanding options is reflected as additional share that have been enacted or substantively enacted by the balance sheet date. Corporate dilution in the computation of earnings per share (see note 10). Deferred income tax is recognised on all temporary differences arising Governance The Group has an employee share incentive plan and an employee between the tax base of assets and liabilities and their carrying amounts in Report benefit trust for the granting of non-transferable options to executives and the financial statements, with the following exceptions: senior employees. Shares in the Group held by the employee share trust l Where the temporary difference arises from the initial recognition of are treated as treasury shares and presented in the balance sheet as a > goodwill or of an asset or liability in a transaction that is not a business 24 deduction from equity. Corporate combination and, at the time of the transaction, affects neither the Responsibility Leases accounting profit nor taxable profit or loss; Finance leases, which transfer to the Group substantially all the risks and l In respect of taxable temporary differences associated with investments benefits incidental to ownership of the leased item, are capitalised at the in subsidiaries, associates and interests in joint ventures, except where 30 > inception of the lease at the fair value of the leased item or, if lower, at the timing of the reversal of the temporary differences can be controlled Directors’ the present value of the minimum lease payments. Lease payments are and it is probable that the temporary differences will not reverse in the Remuneration apportioned between the finance charges in the income statement and the foreseeable future; and Report reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Capitalised leased assets are l Deferred income tax assets are recognised only to the extent that it is depreciated over the shorter of the estimated useful life of the asset or the probable that taxable profit will be available against which the deductible temporary differences, the carry-forward of unused tax assets or unused > lease term. 36 tax losses, can be utilised. Directors’ Leases where the lessor retains substantially all the risks and benefits Responsibilities of ownership of the asset are classified as operating leases. Initial direct Deferred income tax assets and liabilities are measured on an undiscounted costs incurred in negotiating an operating lease are added to the carrying basis at the tax rates that are expected to apply when the related asset amount of the leased asset and recognised over the lease term on the same is realised or liability is settled, based on tax rates and laws enacted or 37 > basis as the lease income. Operating lease payments are recognised as an substantively enacted at the balance sheet date. Independent expense in the income statement on a straight-line basis over the Income tax is charged or credited directly to equity if it relates to items that Auditor’s Report lease term. are credited or charged to equity. Otherwise income tax is recognised in the Revenue income statement. 39 > Revenue is recognised to the extent that it is probable that economic Derivative financial instruments and hedging benefits will flow to the Group and the revenue can be reliably measured. Financial The Group uses derivative financial instruments such as foreign currency The following specific recognition criteria must also be met before revenue Statements contracts and interest rate swaps to hedge its risks associated with interest is recognised: rate and foreign currency fluctuations. Such derivative financial instruments l Sale of goods are initially recognised at fair value on the date on which a derivative Revenue is recognised when the significant risks and rewards of contract is entered into and are subsequently measured at fair value. ownership of the goods have passed to the buyer, which is usually on Changes in fair value are recognised in the income statement. the delivery of goods, but more specifically:
< > 46 03 > Financial Highlights
04 > Business 2. Summary of significant accounting policies (continued) Overview The fair value of forward exchange contracts is calculated by reference to The key assumptions concerning the future and other key sources of current forward exchange rates for contracts with similar maturity profiles. estimation uncertainty at the balance sheet date that have a significant The fair value of interest rate swap contracts is determined by reference to risk of causing a material adjustment to the carrying amounts of assets 06 > market values for similar instruments. and liabilities within the next financial year include the measurement and impairment of goodwill and other intangibles arising on acquisition, the Chairman and For the purpose of hedge accounting, hedges are classified as cash flow measurement of work in progress (stage of completion and total expected Chief Executive’s hedges where they hedge exposure to variability in cash flows that is either margin) and the measurement of product warranty provisions (estimation Statement attributable to a particular risk associated with a recognised asset or liability of level of returns). Details of the key judgements made and sensitivities or a forecast transaction. around goodwill are disclosed in note 14. The sensitivity of the discount 10 > In relation to cash flow hedges that hedge highly probable forecast rate used to calculate the retirement benefit obligation as detailed in note 26 would not have a significant impact on the income statement. Business transactions, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity and Review the ineffective portion is recognised in the income statement. The gains or losses that are recognised in equity are transferred to the 16 > income statement in the same year in which the hedged forecast transaction Board of affects profit or loss, for example when the forecast sale actually occurs. Directors Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument > 17 recognised in equity is kept in equity until the forecasted transaction occurs. Directors’ If the hedged transaction is no longer expected to occur, the net cumulative Report gain or loss recognised in equity is transferred to the income statement for the year.
20 > The derecognition of a financial instrument takes place when the Group no Corporate longer controls the contractual rights that comprise the financial instrument, which is normally the case when the instrument is sold, or all the cash Governance flows attributable to the instrument are passed through to an independent Report third party. The Group uses foreign currency borrowings to hedge its investment in 24 > currency investments and classifies the hedging relationship as a net Corporate investment hedge. To the extent that the hedge is effective, changes in the Responsibility fair value of the hedging instrument are recognised directly in equity. Classification of shares as debt or equity When shares are issued, any component that creates a financial liability of 30 > the Group is presented as a liability in the balance sheet, measured initially Directors’ at fair value net of transaction costs and thereafter at amortised cost until Remuneration extinguished on conversion or redemption. Report Treasury shares e2v technologies plc shares held by the employee benefit trust are classified 36 > in shareholders’ equity as treasury shares and are recognised at cost. Directors’ Consideration received for the sale of such shares is also recognised in Responsibilities equity, with any difference between the proceeds from sale and the original cost being taken to retained earnings. No gain or loss is recognised in the performance statements on the purchase, sale, issue or cancellation of 37 > equity shares. Independent Critical accounting judgements and key sources of Auditor’s Report estimation uncertainty When applying the Group’s accounting policies, management must make 39 > assumptions and estimates concerning the future that affect the carrying Financial amounts of assets and liabilities at the balance sheet date and the amounts of revenue and expenses recognised during the accounting period. Such Statements assumptions and estimates are based upon factors such as historical experience, information available from the Group’s customers and other outside sources.
< > 47 03 > Financial Notes to the financial statements Highlights
04 > Business 2. Summary of significant accounting policies (continued) Overview New standards and interpretations not applied The IASB and IFRIC have issued the following standards and interpretations 06 > with an effective date after the date of these financial statements: Chairman and Effective for periods Chief Executive’s International Accounting Standards commencing after Statement IFRS 2 Amendment to IFRS 2 Share based payment: Vesting conditions and cancellations 1 January 2009 IFRS 3 Revised IFRS 3 Business combinations 1 July 2009 10 > IFRS 7 Amendments to IFRS 7 – Improving disclosures about financial instruments 1 January 2009 Business Review IFRS 8 Operating segments 1 January 2009 IFRS 1 and IAS 27 Amendments – cost of investment in separate financial statements 1 January 2009 16 > IAS 1 Amendment – presentation of financial statements: A revised presentation 1 January 2009 Board of IAS 23 Amendment to IAS 23 Borrowing costs 1 January 2009 Directors IAS 27 Amendment to IAS 27 Consolidated and separate financial statements 1 July 2009 IAS 39 Amendment – eligible hedged items and embedded derivatives 1 July 2009 17 > Directors’ Report International Financial Reporting Interpretations Committee (IFRIC) IFRIC 9 Amendment – Embedded derivatives 1 July 2009
20 > IFRIC 16 Hedges of a net investment in a foreign operation 1 October 2008 Corporate IFRIC 17 Distribution of non-cash assets to owners 1 July 2009 Governance Report IFRIC 18 Transfer of assets from customers 1 July 2009
24 > The Group intends to adopt these standards in the first accounting period information based on the internal reports regularly reviewed by the Corporate after the effective date. The Directors do not anticipate that the adoption group’s chief operating decision maker in order to assess each segment’s Responsibility of these standards and interpretations will have a material impact on the performance and to allocate resources to them. The Directors do not Group’s financial statements in the period of initial application. anticipate that the adoption of this standard will have any impact on the analysis of operating segments. The amendment to IFRS 2 restricts the definition of vesting conditions and > 30 performance conditions. The group does not anticipate that the adoption New standards and interpretations applied during the year Directors’ of this amendment on the Group’s financial statements will have a IFRIC 14: The Limit on a Defined Benefit Asset, Minimum Funding Remuneration material impact. Requirements and their Interaction. The adoption of this standard did not Report IAS 23 requires borrowing costs attributable to the acquisition or have any impact on the Group’s position or performance. construction of certain assets to be capitalised. Accordingly, borrowing costs Adjusted profit measures will be capitalised on qualifying assets with a commencement date of 36 > 1 April 2009. In prior years, adjusted profit measures have been stated before share Directors’ based payments. Since the Groups share incentive plans have now been Responsibilities IFRS 3 will apply to business combinations arising from 1 April 2010. This in place long enough for data to be comparable from one year to the next, will require recognition of subsequent change in the fair value of contingent adjusted profit measures are now stated after share based payments. consideration in the income statement rather than against goodwill. In 37 > addition, transaction costs will be required to be recognised immediately in In addition, the layout of the Income statement has been amended to provide more meaningful information on adjusted profit measures at the Independent the income statement. profit before taxation level. Auditor’s Report IFRS 8, Operating Segments, introduces the management approach to segment reporting. IFRS 8 requires presentation and disclosure of segment
39 > Financial Statements 3. Revenue An analysis of the Group’s revenue is as follows: Year ended Year ended 31 March 2009 31 March 2008 £000 £000 Revenue – sale of goods 233,193 204,607 Finance revenue 684 501 Total revenue 233,877 205,108
< > 48 03 > Financial Highlights
04 > Business 4. Segment information Overview The Group’s primary reporting format is business segments and its secondary format is geographical segments. The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment 06 > representing a strategic business unit that offers different products. The segmental Chairman and reporting was reviewed during the year and is now reported as four divisions in line with Chief Executive’s the Group’s current divisional structure. The previous sensors and semiconductors segment Statement is now being managed as three divisions as detailed below. Comparative information has been restated to reflect the new segments. The four operating segments are: 10 > Business l E lectron devices and sub-systems, which includes applications including defence Review electronic countermeasures, radiotherapy cancer treatment, and radar systems. l Imaging devices, which includes sensors and cameras for applications including industrial process control, dental x-ray systems, space science and life sciences. 16 > Board of l Specialist semiconductors, which includes logic, memory and microprocessors for high Directors reliability mission-critical programs in avionics, defence and telecommunications, sensor data acquisition and high speed data conversion. l Sensors , which includes a range of professional sensing products for applications 17 > including fire, rescue and security thermal imaging, x-ray spectroscopy, and military Directors’ surveillance, targeting and guidance. Report Unallocated expenses includes head office costs and differences on exchange. Unallocated assets and liabilities include taxation balances, cash and cash equivalents, trade debtors and creditors and financial assets and liabilities. It is not currently possible to analyse > 20 trade receivable and payable balances between operating segments. Corporate Governance The Group’s geographical segments are determined by the location of the Group’s assets Report and operations.
24 > Corporate Business segments Responsibility The following tables present revenue and profit information and certain asset and liability and other information regarding the Group’s business segments for the years ended 31 March 2009 and 2008. 30 > Directors’ Remuneration Electron devices Specialist semi- Unallocated Report and sub-systems Imaging devices conductors Sensors expenses Total operations Year ended 31 March 2009 £000 £000 £000 £000 £000 £000 Revenue 83,739 65,224 53,323 30,907 - 233,193 36 > Directors’ Adjusted segment result 15,686 4,292 13,074 (1,596) (2,349) 29,107 Responsibilities Exchange differences - - - - (1,667) (1,667) Net finance costs - - - - (7,051) (7,051) 37 > Adjusted profit/(loss) before taxation 15,686 4,292 13,074 (1,596) (11,067) 20,389 Independent Amortisation of acquired intangible assets (58) (1,256) (6,512) (802) - (8,628) Auditor’s Report Impairment of acquired intangible assets (359) (17,430) (6,994) (1,344) - (26,127) Impairment of plant and equipment - (2,500) - - - (2,500) 39 > Business improvement programme costs (1,941) (2,495) (1,711) (679) - (6,826) Financial Statements Fair value losses on foreign exchange contracts - - - - (2,894) (2,894) Fair value losses on interest rate swaps - - - - (1,819) (1,819) Segment result and profit/(loss) before income tax 13,328 (19,389) (2,143) (4,421) (15,780) (28,405)
< > 49 03 > Financial Notes to the financial statements Highlights
04 > Business 4. Segment information (continued) Overview Electron devices Specialist semi- Unallocated and sub-systems Imaging devices conductors Sensors items Total operations Year ended 31 March 2009 £000 £000 £000 £000 £000 £000 06 > Chairman and Assets and liabilities Chief Executive’s Intangible assets 866 253 92,815 10,570 14,695 119,199 Statement Property, plant and equipment 6,312 15,574 8,275 3,392 6,698 40,251 Other assets 14,243 11,840 10,403 5,947 75,840 118,273 10 > Total assets 21,421 27,667 111,493 19,909 97,233 277,723 Business Review Total liabilities (4,025) (4,658) (2,118) (409) (212,834) (224,044) Net assets 17,396 23,009 109,375 19,500 (115,601) 53,679 16 > Other segment information Board of Capital expenditure: Directors Property, plant and equipment 1,305 3,508 1,361 653 2,394 9,221 Software - - - - 1,531 1,531 17 > Product development 482 1,295 379 456 - 2,612 Directors’ Report Depreciation 2,383 3,935 1,674 1,237 975 10,204 Amortisation and impairment 1,150 21,808 13,685 2,748 1,910 41,301 20 > Warranty provision arising in the year 3,242 2,491 445 280 - 6,458 Corporate Governance Report Electron devices Specialist semi- Unallocated and sub-systems Imaging devices conductors Sensors expenses Total operations 24 > Year ended 31 March 2008 £000 £000 £000 £000 £000 £000 Corporate Revenue 75,776 60,578 39,826 28,427 - 204,607 Responsibility Adjusted segment result 17,521 7,200 6,434 (481) (2,380) 28,294 Exchange differences - - - - 798 798 30 > Net finance costs - - - - (5,682) (5,682) Directors’ Remuneration Adjusted profit/(loss) before taxation 17,521 7,200 6,434 (481) (7,264) 23,410 Report Amortisation of acquired intangible assets - (1,390) (5,222) (698) - (7,310) Business improvement programme costs (1,215) (412) (369) - - (1,996) 36 > Fair value losses on foreign Directors’ exchange contracts - - - - (357) (357) Responsibilities Segment result and profit/(loss) before tax 16,306 5,398 843 (1,179) (7,621) 13,747
37 > Independent Auditor’s Report
39 > Financial Statements
< > 50 03 > Financial Highlights
04 > Business 4. Segment information (continued) Overview Electron devices Specialist semi- Unallocated and sub-systems Imaging devices conductors Sensors items Total operations Year ended 31 March 2008 £000 £000 £000 £000 £000 £000 06 > Chairman and Assets and liabilities Chief Executive’s Intangible assets 1,507 25,315 39,870 11,643 14,702 93,037 Statement Property, plant and equipment 7,384 15,729 5,725 3,237 8,116 40,191 Other assets 17,987 13,609 6,681 6,005 65,734 110,016 10 > Total assets 26,878 54,653 52,276 20,885 88,552 243,244 Business Review Total liabilities (4,559) (4,976) (1,898) (496) (156,865) (168,794) Net assets 22,319 49,677 50,378 20,389 (68,313) 74,450 16 > Other segment information Board of Capital expenditure: Directors Property, plant and equipment 2,431 3,146 1,143 934 2,989 10,643 Software - - - 322 1,348 1,670 > 17 Product development 862 498 254 422 - 2,036 Directors’ Report Other intangibles 117 - - - - 117 Depreciation 2,372 3,402 1,131 1,312 175 8,392 Amortisation and impairment 702 1,745 5,476 1,196 1,630 10,749 20 > Corporate Warranty provision arising in the year 2,798 776 162 150 - 3,886 Governance Report Geographical segments The following table presents revenue, capital expenditure and certain asset information Year ended Year ended regarding the Group’s geographical segments for the years ended 31 March 2009 and 2008. 31 March 2009 31 March 2008 24 > £000 £000 Corporate Responsibility Group turnover Revenue by destination United Kingdom 44,409 50,275 30 > Directors’ North America 79,953 56,194 Remuneration Europe 83,639 76,544 Report Asia Pacific 22,150 17,868 Rest ot the world 3,042 3,726 > 36 233,193 204,607 Directors’ Responsibilities Segment assets United Kingdom 92,410 102,191 37 > Independent North America 67,638 13,570 Auditor’s Report Europe 117,477 127,295 Asia Pacific 198 188 39 > 277,723 243,244 Financial Statements Capital expenditure including product development United Kingdom 7,386 9,575 North America 702 201 Europe 5,269 4,615 Asia Pacific 7 75 13,364 14,466
< > 51 03 > Financial Notes to the financial statements Highlights
04 > Business 5. Revenues and expenses Year ended Year ended Overview (Loss)/profit from continuing operations is stated after charging/(crediting): 31 March 2009 31 March 2008 £000 £000 Research and development expenditure expensed 13,414 12,056 06 > Chairman and Amortisation of deferred development expenditure 2,171 1,839 Chief Executive’s Impairment of deferred development expenditure 1,548 93 Statement Total research and development expense 17,133 13,988
> 10 Included in cost of sales: Business Review Depreciation of property, plant and equipment 9,666 7,992 Included in distribution and administrative expenses: Depreciation of property, plant and equipment 538 400 16 > Board of Amortisation of software 1,875 1,507 Directors Amortisation of acquired intangibles 8,628 7,310 Impairment of plant, equipment and acquired intangibles 27,079 - 17 > Total depreciation, amortisation and impairment expense 47,786 17,209 Directors’ Report Foreign currency losses arising from fair value adjustments 2,894 435 Net foreign currency losses/(gains) on settled foreign exchange contracts 3,526 (310) > 20 Total foreign exchange losses on items measured at fair value through the income statement 6,420 125 Corporate Governance Other net foreign currency gains (1,859) (923) Report Total net foreign currency losses/(gains) 4,561 (798)
24 > Government grants receivable (1,707) (1,228) Corporate Responsibility Increase in provision for impairment of trade receivables recognised in administrative expenses 722 395
30 > Costs of inventories recognised as an expense 137,974 120,449 Directors’ Including: Write-down of inventories to net realisable value 2,921 245 Remuneration Report Reversals of impairments in inventories* (251) (1,029)
36 > Minimum lease payments recognised as an operating lease expense 923 795 Directors’ Responsibilities * The reversal of impairments arose as a result of changes in demand for products.
37 > Independent Auditor’s Report 6. Auditor’s remuneration Year ended Year ended 31 March 2009 31 March 2008 £000 £000 39 > Financial Audit of the financial statements 315 200 Statements Statutory audit fees of subsidiary undertakings 233 136 Local non-statutory audit services in relation to subsidiary undertakings 46 5 Other services* 535 10 Total other fees paid to auditors 814 151
* Of the other services of £535,000, £519,000 relates to transaction advisory costs in connection with the acquisition of QP Semiconductor Inc. These fees have been included in the cost of acquisition of QP Semiconductor Inc.
< > 52 03 > Financial Highlights
04 > Business 7. Staff costs and directors’ remuneration Year ended Year ended Overview 31 March 2009 31 March 2008 Staff costs £000 £000 Wages and salaries 62,927 54,779 06 > Chairman and Social security costs 12,885 10,469 Chief Executive’s Defined contribution pension costs (see note 26) 1,575 1,721 Statement Termination payments upon retirement (see note 26) 399 330 Share based payment charges (see note 26) 625 821 > 10 78,411 68,120 Business Review Included in the above is an amount of £4,632,000 which has been provided for estimated termination payments in relation to the business improvement 16 > programme. Details of Directors’ remuneration for the year are provided in Board of the Directors’ remuneration report on pages 28 to 33. Directors Year ended Year ended 31 March 2009 31 March 2008 > 17 The average monthly number of employees during the year was made up as follows: No. No. Directors’ Report Manufacturing 1,215 1,339 Administration 499 489 1,714 1,828 20 > Corporate Governance Report 8. Finance costs and revenue Year ended Year ended 24 > 31 March 2009 31 March 2008 Corporate £000 £000 Responsibility Bank loan interest 7,323 5,802 Amortisation of debt issue costs 412 355 > 30 Total interest expense for financial liabilities not at fair value through the income statement 7,735 6,157 Directors’ Fair value adjustments to interest rate swaps 1,819 26 Remuneration Report Total finance costs 9,554 6,183
36 > Bank interest receivable 684 501 Directors’ Total finance revenue 684 501 Responsibilities
37 > Independent Auditor’s Report
39 > Financial Statements
< > 53 03 > Financial Notes to the financial statements Highlights
04 > Business 9. Income tax Major components of income tax expense for the years ended Overview Year ended Year ended 31 March 2009 and 2008 are: 31 March 2009 31 March 2008 £000 £000 06 > Chairman and Consolidated income statement Chief Executive’s Current income tax Statement Current income tax charge – UK corporation tax 2,603 4,656 Current income tax charge – foreign tax (571) 385 > 10 Current income tax charge 2,032 5,041 Business Adjustments in respect of current income tax of previous years (1,882) (794) Review Total current income tax 150 4,247
16 > Board of Deferred income tax Directors Relating to origination and reversal of temporary differences (8,143) (2,074) Adjustment in respect of the abolition of Industrial Buildings Allowances 983 - 17 > Adjustments in respect of deferred income tax of previous years (96) (225) Directors’ Total deferred income tax (7,256) (2,299) Report Income tax expense reported in the Group income statement (7,106) 1,948
> 20 Tax relating to items charged or credited to equity Corporate Net gain on revaluation of cash flow hedges (22) (26) Governance Report Charge in respect of share based payments 37 729 Net tax on retranslation of foreign operations - (6) 24 > Tax charge in the statement of recognised income and expense 15 697 Corporate Responsibility A reconciliation of income tax expense applicable to accounting (loss)/profit before income tax at the statutory income tax rate to income tax expense at 30 > the Group’s effective income tax rate for the years ended 31 March 2009 and Directors’ 2008 is as follows: Remuneration Year ended Year ended Report 31 March 2009 31 March 2008 £000 £000 36 > Accounting (loss)/profit before income tax (28,405) 13,747 Directors’ Responsibilities At UK statutory income tax rate of 28% (2008: 30%) (7,954) 4,124 Permanent differences 420 756 37 > Permanent difference in relation to goodwill impairment 5,003 - Independent Tax relief on research and development – current year (3,457) (2,047) Auditor’s Report Tax relief on research and development – prior year (866) (989) Impact of higher taxes on overseas earnings (123) 280 39 > Financial Impact of change in UK income tax rate - (146) Statements Impact of abolition of Industrial Buildings Allowances 983 - Adjustments in respect of current income tax of previous years (1,016) 195 Adjustments in respect of deferred income tax of previous years (96) (225) Total tax (credit)/charge reported in the income statement (7,106) 1,948
< > 54 03 > Financial Highlights
04 > Business 9. Income tax (continued) Overview Deferred income tax Consolidated balance sheet Consolidated income statement Deferred income tax at 31 March 2009 and 2008 relates to the following: 31 March 2009 31 March 2008 31 March 2009 31 March 2008 06 > £000 £000 £000 £000 Chairman and Chief Executive’s Deferred income tax liabilities Statement Accelerated depreciation for tax purposes 1,833 1,842 (163) 26 Fair value adjustments on acquisition 11,310 8,209 (5,294) (2,501) 10 > Revaluation of cash flow hedges - - - (75) Business Fair value of land and buildings 586 1,074 (205) (174) Review
Gross deferred income tax liabilities 13,729 11,125 16 > Board of Directors Deferred income tax assets Employment benefits 160 151 1 30 17 > Revaluation of foreign subsidiaries - - - 15 Directors’ Revaluation of cash flow hedges 1,433 91 (1,320) (56) Report Share based payment charges 50 256 169 154 Deferred tax allowances on provisions and accruals 4,217 2,228 (444) 282 20 > Corporate Gross deferred income tax assets 5,860 2,726 Governance Report Deferred income tax credit (7,256) (2,299) Net deferred income tax liability 7,869 8,399 24 > Corporate Responsibility At 31 March 2009, there was no recognised or unrecognised deferred income tax liability (2008: £nil) for taxes that would be payable on the 30 > unremitted earnings of certain of the Group’s subsidiaries as the Group has no liability to additional taxation should such amounts be remitted due to Directors’ the availability of double taxation relief. Remuneration Report There are no income tax consequences attaching to the payment of dividends by e2v technologies plc to the shareholders of the Company. The temporary differences associated with investments in subsidiaries for which a deferred tax liability has not been recognised aggregate to £8.6m 36 > (2008: £6.4m). The unprovided deferred tax amounts to £3.2m Directors’ (2008: £2.2m). Responsibilities
37 > Independent Auditor’s Report
39 > Financial Statements
< > 55 03 > Financial Notes to the financial statements Highlights
04 > Business 10. Earnings per share Overview Basic earnings per share amounts are calculated by dividing net (loss)/profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. 06 > Diluted earnings per share amounts are calculated by dividing the net Chairman and (loss)/profit attributable to ordinary shareholders by the weighted average Chief Executive’s number of ordinary shares outstanding during the year adjusted for the Statement effects of dilutive options. The following reflects the income and share data used in the basic and
> diluted earnings per share computations: 10 Year ended Year ended Business 31 March 2009 31 March 2008 Review £000 £000 (Loss)/profit attributable to ordinary shareholders (21,299) 11,799 16 > Board of Directors Adjusted earnings per share is arrived at using the following earnings: Year ended Year ended 31 March 2009 31 March 2008 17 > £000 £000 Directors’ Report (Loss)/profit for the year (21,299) 11,799 Amortisation of acquired intangible assets 8,628 7,310 20 > Impairment of acquired intangible assets 26,127 - Corporate Impairment of plant and equipment 2,500 - Governance Business improvement programme costs 6,826 1,996 Report Fair value losses on financial instruments 4,713 357 Impact of abolition of Industrial Buildings Allowances 983 - 24 > Tax impact of the above (9,793) (3,112) Corporate Responsibility (18,685) 18,350
The adjusted earnings per share is considered to more appropriately 30 > reflect the underlying performance of the business year on year. Directors’ Year ended Year ended Remuneration 31 March 2009 31 March 2008 Report Weighted average number of ordinary shares No.000 No.000 For basic earnings per share 61,871 60,951 > 36 Effect of dilution: Directors’ Responsibilities Share options 90 501 For diluted earnings per share 61,961 61,452
37 > Independent No further shares have been issued since the reporting date and before Auditor’s Report the completion of these financial statements as a result of exercises under share option schemes (2008: 54,626 shares issued). The weighted average number of ordinary shares excludes 518,856 (2008: 626,239) shares held by 39 > the Employee Benefit Trust. Financial Statements
< > 56 03 > Financial Highlights
04 > Business 11. Dividends paid and proposed Year ended Year ended Overview 31 March 2009 31 March 2008 £000 £000 Declared and paid during the year: 06 > Chairman and Chief Executive’s Equity dividends on ordinary shares: Statement Final dividend for 2008: 5.25p (2007: 4.75p) 3,234 2,878 First dividend for 2009: 2.70p (2008: 2.45p) 1,679 1,502 > 10 4,913 4,380 Business Proposed for approval at AGM (not recognised as a liability as at 31 March): Review
16 > Equity dividends on ordinary shares: Board of Final dividend for 2009: nil (2008: 5.25p) - 3,234 Directors
The number of shares owned by the Employee Benefit Trust is 518,856 > 17 (2008: 626,239). The Employee Benefit Trust has waived its right to Directors’ receive dividends. Report Following a detailed review of the Group’s cash requirements the Board is not proposing a final dividend. 20 > Corporate Governance Report
24 > Corporate Responsibility
30 > Directors’ Remuneration Report
36 > Directors’ Responsibilities
37 > Independent Auditor’s Report
39 > Financial Statements
< > 57 03 > Financial Notes to the financial statements Highlights
04 > Business 12. Property, plant and equipment Overview Land and Plant and Office equipment, Assets under buildings equipment fixtures and fittings construction Total Cost £000 £000 £000 £000 £000 06 > Chairman and At 1 April 2007 8,422 41,447 4,834 4,572 59,275 Chief Executive’s Additions 220 3,291 80 7,052 10,643 Statement Acquisition of subsidiary - 607 - - 607 Disposals (10) (1,309) (855) - (2,174) 10 > Reclassifications between categories 1,649 8,401 415 (10,465) - Business Exchange adjustment 1,249 1,327 154 - 2,730 Review At 1 April 2008 11,530 53,764 4,628 1,159 71,081 Additions 631 7,715 875 - 9,221 16 > Acquisition of subsidiary 428 524 36 - 988 Board of Directors Disposals (13) (294) (141) - (448) Reclassifications between categories - 283 7 (290) - 17 > Exchange adjustment 1,607 3,452 338 - 5,397 Directors’ At 31 March 2009 14,183 65,444 5,743 869 86,239 Report
Depreciation 20 > At 1 April 2007 1,025 20,004 3,054 - 24,083 Corporate Governance Provided during the year 999 6,613 780 - 8,392 Report Disposals (7) (1,166) (855) - (2,028) Exchange adjustment 57 338 48 - 443 24 > At 1 April 2008 2,074 25,789 3,027 - 30,890 Corporate Provided during the year 1,224 8,116 864 - 10,204 Responsibility Impairment during the year - 2,500 - - 2,500 Disposals - (122) (126) - (248) > 30 Exchange adjustment 527 1,965 150 - 2,642 Directors’ Remuneration At 31 March 2009 3,825 38,248 3,915 - 45,988 Report Carrying amount 36 > At 31 March 2007 7,397 21,443 1,780 4,572 35,192 Directors’ At 31 March 2008 9,456 27,975 1,601 1,159 40,191 Responsibilities At 31 March 2009 10,358 27,196 1,828 869 40,251
37 > Independent The carrying value of plant and equipment held under finance leases at Auditor’s Report 31 March 2009 was £nil (2008: £30,000). A review of the overall imaging business has identified plant and equipment, where the remaining useful life is considered to be reduced, resulting in an 39 > additional depreciation charge of £2.5m. Financial Statements
< > 58 03 > Financial Highlights
04 > Business 13. Intangible assets Overview Patents, Customer trademarks and Development relationships technology costs Software and agreements Goodwill Total 06 > Cost £000 £000 £000 Chairman and £000 £000 £000 Chief Executive’s At 1 April 2007 12,085 8,034 9,076 20,886 48,829 98,910 Statement Additions 117 2,036 1,670 - - 3,823 Acquisition of subsidiary 1,413 453 - 207 2,912 4,985 10 > Exchange adjustment 2,059 637 93 3,334 6,675 12,798 Business At 1 April 2008 15,674 11,160 10,839 24,427 58,416 120,516 Review Additions - 2,612 1,531 - - 4,143 Acquisition of subsidiary 2,238 - - 13,205 26,027 41,470 16 > Board of Exchange adjustment 2,837 976 62 6,413 12,804 23,092 Directors At 31 March 2009 20,749 14,748 12,432 44,045 97,247 189,221
17 > Amortisation Directors’ At 1 April 2007 1,493 4,258 4,011 4,873 - 14,635 Report Charge in year 1,943 2,034 1,507 5,172 - 10,656 Impairment loss - 93 - - - 93 20 > Corporate Exchange adjustment 400 214 36 1,445 - 2,095 Governance At 1 April 2008 3,836 6,599 5,554 11,490 - 27,479 Report Charge in year 2,478 2,399 1,875 5,922 - 12,674 Impairment loss 4,478 2,158 - 320 19,171 26,127 24 > Exchange adjustment 804 429 17 2,492 - 3,742 Corporate At 31 March 2009 11,596 11,585 7,446 20,224 19,171 70,022 Responsibility
Carrying amount 30 > At 31 March 2007 10,592 3,776 5,065 16,013 48,829 84,275 Directors’ Remuneration At 31 March 2008 11,838 4,561 5,285 12,937 58,416 93,037 Report At 31 March 2009 9,153 3,163 4,986 23,821 78,076 119,199
36 > Customer relationships and agreements includes £7,475,000 in The economic downturn in the last quarter of 2008/09 and the ongoing Directors’ respect of a relationship with an intermediary in North America, with a impact has resulted in write downs of the acquired intangible assets with Responsibilities remaining useful economic life of 9.5 years and, £3,855,000 in respect of respect to the imaging business in Grenoble, which served primarily the a partnership agreement in France with a remaining useful economic life of industrial and medical markets, of £17,430,000. Provisions have also been 2.5 years. Both agreements are in respect of the specialist semiconductors made against goodwill with regard to the QP Semiconductor Inc. business > 37 business segment. acquired in October 2008 of £6,994,000. £1,703,000 of goodwill, with regard Independent to acquisitions made before the Group was listed, have also been written Amortisation of £2,399,000 on development costs includes £2,171,000 Auditor’s Report off as the associated products are within approximately five years of their (2008: £1,839,000) in respect of capitalised development expenditure commercially exploitable term. and £228,000 (2008: £195,000) in respect of acquired in-process research 39 > and development. Goodwill is not amortised but is annually tested for impairment (see note 14). All other assets have finite lives. Financial The amortisation of acquired intangible assets presented on the face Statements of the income statement and excluded from the adjusted profit before Impairment losses on development costs are included within research taxation relates to amortisation of intangibles acquired through and development costs in the income statement. business combinations.
< > 59 03 > Financial Notes to the financial statements Highlights
04 > Business 14. Impairment testing of goodwill Overview Goodwill acquired through business combinations has been allocated to individual cash-generating units for impairment testing as follows: QP Semiconductor Inc. business, acquired in October 2008. 06 > l Chairman and l e2v semiconductors SAS semiconductor business, acquired in July 2006 Chief Executive’s (SAS Specialist Semiconductors). Statement l e2v Semiconductors SAS imaging business, acquired in July 2006 (SAS Imaging). 10 > l e2v scientific instruments, acquired in July 2005. Business l Dynex microwave alarms business, acquired in 2004. Review l e2v technologies, being entities in the Marconi Applied Technologies division, acquired in July 2002. > 16 l Siemens high power satcom product group, acquired in 1999. Board of Directors l MiCS business, acquired in May 2007. Following a review of the Group’s operating segments, the e2v semiconductors SAS unit has been reanalysed into two cash-generating > 17 units, e2v Semiconductors SAS Semiconductor business and e2v Directors’ Semiconductors SAS imaging business. Report The recoverable amount of the goodwill for all cash-generating units has been determined based on a value in use calculation. To calculate 20 > this, cash flow projections are based on financial budgets and forecasts approved by the Board covering a five year period. The discount rate Corporate applied to cash flow projections is 15% (2008: 15%). The carrying amount Governance of goodwill and impairment during the year for each cash-generating unit Report is set out in the table below:
24 > Corporate 1 April 2008 or Exchange Responsibility on acquisition adjustment Impairment 31 March 2009 31 March 2008 £000 £000 £000 £000 £000 QP Semiconductor Inc. unit 26,027 5,010 (6,994) 24,043 - 30 > e2v semiconductors SAS, specialist semiconductors unit 32,503 5,514 - 38,017 32,503 Directors’ Remuneration e2v semiconductors SAS, imaging business unit 8,955 1,519 (10,474) - 8,955 Report e2v Scientific Instruments unit 2,002 - - 2,002 2,002 Dynex microwave alarms 1,344 - (1,344) - 1,344 36 > e2v technologies unit 9,709 - - 9,709 9,709 Directors’ Siemens high power satcom 359 - (359) - 359 Responsibilities MiCS Microchemical Systems unit 3,544 761 - 4,305 3,544 84,443 12,804 (19,171) 78,076 58,416 37 > Independent Auditor’s Report
39 > Financial Statements
< > 60 03 > Financial Highlights
04 > Business 14. Impairment testing of goodwill (continued) Overview Key assumptions used in valuations for 31 March 2009 The following describes each key assumption on which management has The part of the SAS imaging business based in Grenoble, acquired as part based its cash flow projections to undertake impairment testing of goodwill: of the purchase from Atmel in 2006, is currently loss making and is expected > 06 to be loss making into the foreseeable future (a strategy and operational Chairman and Gross margins review is in process) and the total value of the goodwill and intangible Chief Executive’s The basis used to determine the value assigned to the budgeted gross assets (including capitalised research and development costs) of €18.8m Statement margins is the average gross margins achieved in the year immediately associated with this business is being written off. before the budgeted year, adjusted for any expected changes due to sales mix or efficiency improvements. The goodwill associated with the Dynex and Siemens products is being 10 > written off in full as these products, as originally acquired, are within Business Discount rates approximately five years of their commercially exploitable term. Review Discount rates reflect the management’s estimate of the return on capital The MiCS business, although heavily dependant on the automotive market, employed (ROCE) required in each cash generating unit. This is the has not been impaired. A detailed review of the current and future business benchmark used by management to assess operating performance and to has taken place and newly won contracts with two major automotive 16 > evaluate future capital investment proposals. Although interest rates have manufacturers with potential developments across other major automotive Board of reduced in recent months, a 15% discount rate is still considered manufacturers, together with the introduction of newly developed chemical Directors appropriate for the purposes of impairment reviews as it is consistent sensors indicate that an impairment is not required. These new contracts with the rates used in all investment appraisals. It is considered that the mainly support automotive sales in the Far East where the market is weighted average cost of capital (WACC) for the business concerned would currently growing. > not be materially different. 17 The headroom over goodwill from the impairment test is CHF4.7m. Directors’ Growth rates Sensitivity levels on the MiCS calculations show that impairment would have Report Growth rates have been considered separately for each cash generating unit needed to be considered if: and are based on financial budgets and forecasts for the next five years. After five years growth rates of between 1% and 3% have been used. l Revenue > 20 growth reduced by 15%; or Corporate QP Semiconductor Inc. has not performed in line with expectations at the Governance time of acquisition due to a decline in market conditions and reductions l Margin % in demand from major clients. An amount of $10m has been impaired – projected in medium term were reduced falls by 30%; or Report this reflects the consideration of a range of future revenue levels and is Discount Rate considered prudent. l of 18.5% or more had been selected; or 24 > Sensitivity levels on the base QP Semiconductor Inc. calculations show that Long Term Growth Corporate further impairment would need to be considered if: l there is no impairment if a zero rate long term growth Responsibility l Revenue rate is used (3% has been used). reduced by 5.5% initially or growth reduced to 3.5% (from 5%); or Both e2v scientific instruments unit and the e2v technologies unit have 30 > l Margin % sufficient headroom at £15.3m and £8.6m, respectively, not to be at risk Directors’ reduced by 5.3%; or of creating an impairment on the usual range of sensitivity tests. Remuneration l Discount Rate Report 16% or above had been selected; or
l Long Term Growth 36 > reduced to 1.5% (from 2.5%). Directors’ The SAS specialist semiconductors business based in Grenoble has a Responsibilities significant excess of cash flow over its intangible assets and is not impaired. Headroom for goodwill based on current forecast is in excess of €18.3m. Sensitivity levels on the SAS specialist semiconductors calculations show 37 > that impairment would have needed to be considered if: Independent Auditor’s Report l Revenue reduced by 20% ; or Margin Growth > l 39 reduced by 30%; or Financial Statements l Discount Rate of 18.25% or more had been selected; or
l Long Term Growth there is no impairment if a zero rate long term growth rate is used (1% has been used).
< > 61 03 > Financial Notes to the financial statements Highlights
04 > Business 15. Business combinations Overview Acquisition of QP Semiconductor Inc. On 10 October 2008, e2v Holdings Inc. acquired 100% of the voting shares of QP Semiconductor Inc., an unlisted company based in North America, specialising in the manufacture and distribution > 06 of specialist semiconductor components and sub-systems. Chairman and Chief Executive’s The fair value of the identifiable assets and liabilities of QP Semiconductor Inc. as at the date of acquisition was: Statement Provisional fair value recognised on acquisition Book value £000 £000 10 > Business Property, plant and equipment 988 988 Review Intangible assets 15,443 - Deferred income tax asset 782 782 16 > Income tax recoverable 245 245 Board of Inventories 3,261 3,261 Directors Trade debtors 1,127 1,127 Other debtors 163 163 17 > Cash and cash equivalents 5,265 5,265 Directors’ Report 27,274 11,831 Trade payables (135) (135) Other creditors (498) (498) 20 > Corporate Provisions (156) (156) Governance Deferred income tax liability (6,188) - Report (6,977) (789) Fair value of net assets 20,297 11,042 24 > Goodwill arising on acquisition 26,027 Corporate Responsibility Total consideration 46,324 Consideration: £000 Cash paid 43,421 30 > Directors’ Costs associated with the acquisition 2,903 Remuneration Total consideration 46,324 Report The cash outflow on acquisition is as follows: £000 Net cash acquired with the subsidiary 5,265 > 36 Cash paid (46,324) Directors’ Net cash outflow (41,059) Responsibilities
37 > Included in the £26.0m of goodwill recognised above are certain intangible continuing operations before tax and net finance costs of the Group would Independent assets that cannot be individually separated and reliably measured from the have been £15,619,000 and the revenue from continuing operations would Auditor’s Report acquiree due to their nature. These items include the anticipated growth in have been £240,451,000. market share, expected value of synergies and an assembled workforce. As detailed in note 25, there is a contingent liability of up to £1,000,000 in From the date of acquisition, QP Semiconductor Inc. has contributed £3.1m respect of the calculation of the earn-out and net worth on acquisition. This > 39 profit to the loss before tax and net finance costs of the Group. Had the amount is not included in the calculations above. The sale and purchase Financial acquisition occurred on the first day of the year, the consolidated loss from agreement also provides for earn-outs in respect of post acquisition profits. Statements The Directors do not anticipate any amounts becoming payable.
< > 62 03 > Financial Highlights
04 > Business 15. Business combinations (continued) Overview Acquisition of MiCS On 14 May 2007, e2v technologies plc acquired 100% of the voting shares of MiCS, an unlisted company based in Switzerland, specialising in the design > 06 and manufacture of specialised electronic components and sub-systems. Chairman and Chief Executive’s The fair value of the identifiable assets and liabilities of MiCS as at the date of acquisition was: Fair value Statement recognised on acquisition Book value £000 £000 10 > Business Property, plant and equipment 607 607 Review Intangible assets 2,073 453 Deferred income tax asset 266 - 16 > Inventories 225 225 Board of Trade debtors 85 85 Directors Other debtors 166 166 Cash and cash equivalents 103 103 17 > 3,525 1,639 Directors’ Report Trade payables (342) (342) Other creditors (603) (603) Financial liabilities (7) (7) 20 > Corporate Deferred income tax liability (345) - Governance (1,297) (952) Report Fair value of net assets 2,228 687 Goodwill arising on acquisition 2,912 > 24 Total consideration 5,140 Corporate Responsibility Consideration: £000 Cash paid 5,008 Costs associated with the acquisition 132 30 > Directors’ Total consideration 5,140 Remuneration The cash outflow on acquisition is as follows: £000 Report Net cash acquired with the subsidiary 103 Cash paid (5,140) 36 > Net cash outflow (5,037) Directors’ Responsibilities Included in the £2.9m of goodwill recognised above are certain intangible assets that cannot be individually separated and reliably measured from 37 > the acquiree due to their nature. These items include the expected value of Independent synergies and an assembled workforce. Auditor’s Report From the date of acquisition, MiCS contributed £0.7m loss to the profit before tax and net finance costs of the Group for the year ended 39 > 31 March 2008. Had the acquisition occurred on the first day of that year, Financial the consolidated profit from continuing operations before tax and net Statements finance costs of the Group would have been £19,129,000 and the revenue from continuing operations would have been £204,907,000.
< > 63 03 > Financial Notes to the financial statements Highlights
04 > Business 16. Inventories Overview 31 March 2009 31 March 2008 £000 £000 Raw materials and consumables 18,027 16,451 06 > Chairman and Work-in-progress 12,117 14,709 Chief Executive’s Finished goods 12,289 12,798 Statement Total inventories at lower of cost and net realisable value 42,433 43,958
10 > Business Review 17. Trade and other receivables (current) 31 March 2009 31 March 2008 16 > £000 £000 Board of Directors Trade receivables 51,163 45,535 Other debtors 7,531 6,007 Prepayments and accrued income 2,415 3,005 17 > Directors’ 61,109 54,547 Report
Trade receivables are non-interest bearing and are generally on 30 or 60 day 20 > terms and are shown net of provision for impairment. As at 31 March 2009 Corporate trade receivables with a value of £1,230k (2008: £692k) were impaired and Governance provided for due to poor payment history, insolvency of the debtor or their Report age profile. The movements on the provision for impairment of receivables were as follows: Year ended Year ended 31 March 2009 31 March 2008 24 > Corporate £000 £000 Responsibility Provision at 1 April 692 703 Amounts written off (172) (141) 30 > Unused amounts reversed (40) (306) Directors’ Provisions created in the year 722 395 Remuneration Foreign exchange on retranslation 28 41 Report Provision at 31 March 1,230 692
36 > Directors’ Responsibilities Trade receivables past due but not impaired Impaired trade receivables 31 March 2009 31 March 2008 31 March 2009 31 March 2008 37 > £000 £000 £000 £000 Independent 0-30 days overdue 1,954 1,616 5 - Auditor’s Report 31-60 days overdue 1,566 592 3 16 61-90 days overdue 459 24 67 87 39 > 91-120 days overdue 90 200 181 101 Financial 120+ days overdue 1,109 65 974 488 Statements Total 5,178 2,497 1,230 692
The credit quality of the receivables which are neither past due nor impaired is assessed on an ongoing basis and as at the balance sheet date, the risk of impairment was not considered significant.
< > 64 03 > Financial Highlights
04 > Business 18. Other financial assets Overview 31 March 2009 31 March 2008 £000 £000 Interest rate swap - 142 06 > Chairman and Forward currency contracts - 46 Chief Executive’s - 188 Statement
10 > Business 19. Cash Review 31 March 2009 31 March 2008 £000 £000 > 16 Cash at bank and in hand 6,373 5,806 Board of Directors Cash at bank earns interest at floating rates based on daily bank deposit rates. 17 > The fair value of cash is £6,373,000 (2008: £5,806,000). Directors’ For the purposes of the Group cash flow statement, cash and cash equivalents Report comprise the following at 31 March:
31 March 2009 31 March 2008 20 > Corporate £000 £000 Governance Cash at bank and in hand 6,373 5,806 Report
24 > Corporate 20. Trade and other payables Responsibility 31 March 2009 31 March 2008 £000 £000 30 > Trade payables 24,229 25,499 Directors’ Taxation and social security costs 2,908 2,712 Remuneration Report Payments received on account 2,061 3,919 Other payables 504 801 Retirement benefit obligations 172 110 36 > Directors’ Interest payable 17 31 Responsibilities Accruals and deferred income 22,676 14,510 52,567 47,582 37 > Independent Auditor’s Report Terms and conditions of the above financial liabilities: Trade payables are non-interest bearing and are normally settled on 60-day terms. Other payables are non-interest bearing and are normally settled within six months. 39 > Interest payable is settled monthly, quarterly or half yearly, throughout the financial year. Financial Statements
< > 65 03 > Financial Notes to the financial statements Highlights
04 > Business 21. Other financial liabilities Effective 31 March 2009 31 March 2008 Overview interest rate Maturity £000 £000 Current 06 > Obligations under finance leases 6.8 - 9.8% 2008-2009 - 13 Chairman and Bank loans: term credit 4.56 - 6.25%* 2009-2010 9,750 6,918 Chief Executive’s Interest rate swap 904 62 Statement Forward currency contracts 3,296 449 13,950 7,442 10 > Business Non-current Review Bank loans: term credit 4.56 - 6.25%* 2010-2011 46,000 47,678 Bank loans: revolving credit facility 1.76 - 2.40% 2011 86,822 44,395 16 > Interest rate swap 915 - Board of 133,737 92,073 Directors
* Includes the effects of related interest rate swap as discussed in note 29. interest rate is re-priced. Provided covenants continue to be met, the draw 17 > down is at the discretion of the Group with no requirement to reduce the Directors’ The bank loans are secured by a floating charge over the net assets of the Group. outstanding balance below that currently drawn before 2011. The loan is Report therefore treated as non-current. 50% of the original term credit bank loan of £50,000,000 is repayable by six monthly instalments until 31 March 2011. The balance of the loan is At 31 March 2009, the Group had available £31,714,000 (2008: £59,100,000) 20 > repayable on 11 July 2011. The revolving credit facility is repaid and re-drawn of un-drawn committed borrowing facilities in respect of which all conditions Corporate at periodic intervals ranging from one to six months, at which time the precedent had been met. Governance 31 March 2009 31 March 2008 Report £000 £000 Future minimum lease payments under finance leases are as follows: 24 > Not later than one year - 14 Corporate After one year but not more than five years - - Responsibility - 14 Less: finance charges allocated to future periods - (1) 30 > Present values of minimum lease payments - 13 Directors’ Remuneration Report
. Provisions Product 36 > 22 Contract losses Environmental warranty Total Directors’ £000 Responsibilities £000 £000 £000 At 1 April 2008 360 350 4,444 5,154 Arising on acquisition of QP Semiconductor Inc. - - 156 156 37 > Independent Arising during the year 209 - 7,403 7,612 Auditor’s Report Utilised during the year - (27) (6,458) (6,485) Released during the year - - (243) (243) 39 > Exchange adjustment 78 - 295 373 Financial At 31 March 2009 647 323 5,597 6,567 Statements Current 2009 647 323 5,597 6,567 Non-current 2009 - - - - 647 323 5,597 6,567 Current 2008 360 - 4,444 4,804 Non-current 2008 - 350 - 350 360 350 4,444 5,154
< > 66 03 > Financial Highlights
04 > Business 22. Provisions (continued) Overview The effect of the time value of money is not material and therefore the above provisions are not discounted. Contract losses 06 > Chairman and A provision is recognised for expected losses on contracts in progress at the balance sheet date. It is expected that most of the losses will be incurred in Chief Executive’s the next financial year. Statement Environmental A provision is recognised for expected environmental costs relating to UK > 10 manufacturing operations. It is expected that most of these costs will be Business incurred within one year of the balance sheet date. Review Product warranty A provision is recognised for expected warranty claims on products sold 16 > that are within their warranty period at the end of the year. The warranty Board of period can be date based or hours usage based. It is expected that most Directors of these costs will be incurred in the next financial year. Assumptions used to calculate the provision for warranties were based on relevant sales levels and current information available about warranty claims. 17 > Directors’ Report 23. Authorised and issued share capital 20 > 2009 2008 Corporate Authorisesd No. No. Governance Ordinary shares of 5p each 75,000,000 75,000,000 Report
Ordinary shares issued and fully paid No. £000 24 > At 1 April 2007 61,463,574 3,073 Corporate Responsibility Issued for cash on exercise of share options 753,842 38 At 31 March 2008 62,217,416 3,111 Issued for cash on exercise of share options 352,177 17 30 > Directors’ At 31 March 2009 62,569,593 3,128 Remuneration Report Treasury shares No. £000 At 1 April 2008 626,239 6 > 36 Issued during the year in respect of LTIP awards (107,383) (1) Directors’ Responsibilities At 31 March 2009 518,856 5
37 > The market value of the treasury shares at 31 March 2009 was £214,028 Independent (2008: £1,108,443). Auditor’s Report The Group has four share option schemes under which options to subscribe for the Company’s shares have been granted to employees (see note 26). 39 > The Company increased the issued share capital during the year due to the Financial exercise of options under share option schemes. Total proceeds from shares Statements issued under exercise of share options amounts to £681,558.
< > 67 03 > Financial Notes to the financial statements Highlights
04 > Business 24. Reconciliation of movements in equity Foreign currency Overview Share Other Hedge translation Retained Total equity Issued capital premium reserves reserve reserve earnings £000 06 > £000 £000 £000 £000 £000 £000 Chairman and At 1 April 2007 3,073 39,902 265 111 (50) 20,927 64,228 Chief Executive’s Total recognised (expense)/income for Statement the year - - - (53) 1,033 11,549 12,529 Share based payment charge - - - - - 821 821 10 > Issue of shares 38 1,214 - - - - 1,252 Business Review Issue of shares by EBT on exercise of options - - 3 - - (3) - Equity dividends - - - - - (4,380) (4,380) 16 > Board of At 31 March 2008 3,111 41,116 268 58 983 28,914 74,450 Directors Total recognised (expense)/income for the year - - - (58) 4,425 (21,531) (17,164) 17 > Share based payment charge - - - - - 625 625 Directors’ Issue of shares 17 664 - - - - 681 Report Issue of shares by EBT on exercise of options - - 1 - - (1) - 20 > Equity dividends - - - - - (4,913) (4,913) Corporate At 31 March 2009 3,128 41,780 269 - 5,408 3,094 53,679 Governance Report Nature and purpose of reserves > 24 Hedge reserve Other reserves Corporate This reserve records the portion of the gain or loss on a hedging instrument Other reserves consist of the Capital redemption reserve and Treasury shares Responsibility in a cash flow hedge that is determined to be an effective hedge. reserve. These reserves are used to record reserve transfers required on redemption of shares and also to record movements in shares held by the Foreign currency translation reserve Employee Benefit Trust. The balance on the Capital redemption reserve at > 30 The foreign currency translation reserve is used to record exchange 31 March 2009 was £274,000 (2008: £274,000). The balance on the Directors’ differences arising from the translation of the financial statements of Treasury shares reserve at 31 March 2009 was £5,000 (2008: £6,000). Remuneration foreign subsidiaries. It is also used to record the net investments hedged Report in these subsidiaries.
36 > Directors’ Responsibilities 25. Commitments and contingencies Operating lease commitments – Group as lessee The Group has entered into commercial leases on certain properties, motor 37 > vehicles and items of machinery where it is not in the best interest of the Independent Group to purchase these assets. Renewals are at the option of the specific Auditor’s Report entity that holds the lease. There are no restrictions placed upon the lessee by entering into these leases. Future minimum rentals payable under non-cancellable operating leases as 39 > at 31 March are as follows: Financial 31 March 2009 31 March 2008 Statements £000 £000 No later than one year 1,192 744 After one year but not more than five years 2,388 886 3,580 1,630
< > 68 03 > Financial Highlights
04 > Business 25. Commitments and contingencies (continued) Overview Capital commitments At 31 March 2009, the Group has commitments of £2,035,000 (2008: £4,056,000) principally relating to the acquisition > 06 of new plant and equipment. Chairman and Chief Executive’s Contingent liabilities Statement The Group is in discussion with the vendors of QP Semiconductor Inc. on the calculation of the earn-out and net worth on acquisition as assessed to date. The amount claimed by the vendors is less than £1.0m. No provision 10 > has been made for this amount. Business Review
16 > 26. Employment benefits – Equity settled share based payments Board of The Group operates four share based award schemes as follows: Directors Long Term Incentive Plan (LTIP) Awards under this scheme vest on the third anniversary of the date of the 17 > award subject to performance targets being met. Targets relate to Total Directors’ Shareholders’ Return (TSR) relative to the TSR of a specified list of peer Report group companies. In addition, no award will vest (irrespective of the Group’s relative TSR performance) unless an adjusted EPS growth “underpin” of RPI plus 2% over the three year performance period has been satisfied 20 > (unless the Remuneration Committee considers, in exceptional Corporate circumstances, that it would be inappropriate to apply this underpin). Governance All awards under this scheme have a £nil exercise price and have no end date by which they must be exercised. The following table provides details Report of awards made under this scheme: 2009 2008 No. No. 24 > Outstanding at the beginning of the year: Corporate Responsibility Awards granted 3 September 2004 - 258,000 Awards granted 20 July 2005 240,500 342,250 Awards granted 31 July 2006 210,400 254,500 30 > Directors’ Awards granted 10 January 2007 15,000 15,000 Remuneration Awards granted 16 July 2007 243,625 - Report 709,525 869,750 Granted in the year: > 36 Awards granted 16 July 2007 - 259,375 Directors’ Responsibilities Awards granted 15 July 2008 402,300 - Awards granted 1 October 2008 20,400 - 422,700 259,375 37 > Independent Awards exercised during the year (107,383) (258,000) Auditor’s Report Awards lapsed during the year (232,117) (161,600) Outstanding at the end of the year 792,725 709,525 39 > Weighted average share price on date of exercise of options 259.00p 270.77p Financial Statements Shares in relation to the LTIP will initially be issued from those currently held by the Employee Benefit Trust (EBT). The EBT owns 518,856 ordinary shares (2008: 626,239) in e2v technologies plc. These shares are recorded in the balance sheet as treasury shares at a cost of £5,000 (2008: £6,000). Dividends on the shares owned by the trust, the purchase of which was funded by an interest-free loan to the trust from e2v technologies plc, are waived. There were no options exercisable at the balance sheet date (2008: nil).
< > 69 03 > Financial Notes to the financial statements Highlights
04 > Business 26. Employment benefits – equity settled share based payments (continued) Overview Executive Share Option Plan (ExSOP) The Group has an ExSOP for the granting of non-transferable options to the adjusted earnings per share (EPS) has increased by a fixed percentage above the retail price index (RPI) as detailed below. > certain employees. Options granted under the plan vest on the first day on 06 which they become exercisable which is typically three years after grant date. For a period of three years, commencing with the financial year in which the Chairman and The overall life of the options is under four years. The vesting period for the option is granted, the increase in earnings per share (EPS) must be more Chief Executive’s ExSOP is finite allowing eligible employees to exercise the option in a fixed than the increase in the Retail Price Index (RPI) as follows: Statement period, once conditions are met. These options are settled in equity once exercised. The options may not be exercised unless, over the vesting period, 10 > Business Tier 1 Tier 2 Tier 3 Review EPS exceeds RPI by 15% 20% 40% 100% EPS exceeds RPI by 20% 50% 100% 16 > EPS exceeds RPI by 25% 100% Board of Directors The EPS is adjusted EPS, calculated on a consistent basis over the three year period, and excludes amortisation of acquired intangibles, business 17 > improvement programme costs and other items determined to be of a Directors’ non-recurring nature. The percentages in the above table are the Report percentages of the option that will vest should the performance criteria be achieved. The table below details the number of options granted under each tier of the plan. 20 > Corporate Date of Grant Governance First date for Last date for Report exercise exercise Exercise Price Total Tier 1 Tier 2 Tier 3 14 January 2005 1 February 2008 31 December 2008 196.5p 240,000 45,000 120,000 75,000 1 August 2005 3 August 2008 30 June 2009 215.5p 265,000 - - 265,000 24 > Corporate 12 January 2007 1 February 2010 31 December 2010 396.5p 72,000 - - 72,000 Responsibility 20 December 2007 1 January 2011 31 December 2011 254.0p 230,000 180,000 - 50,000 Total 807,000 225,000 120,000 462,000 30 > Directors’ Remuneration The following table illustrates the number (No.), weighted average remaining Report contractual life and the weighted average exercise prices (WAEP) of share options for the ExSOP.
36 > 2009 2009 2008 2008 Directors’ No. WAEP No. WAEP Responsibilities Outstanding at the beginning of the year 680,000 241.44p 497,000 234.27p Exercised during the year (165,000) 201.68p (16,000) 196.50p 37 > Lapsed during the year (111,500) 236.12p (31,000) 241.34p Independent Granted during the year – – 230,000 254.00p Auditor’s Report Outstanding at the end of the year 403,500 258.08p 680,000 241.44p Exercisable at the end of the year 140,000 215.50p 170,000 197.06p 39 > Financial Weighted average share price on date of exercise of options 260.30p 262.01p Statements Weighted average remaining contractual life 21 months 25 months
Share Incentive Plan (SIP) No awards have been made to date under this scheme.
< > 70 03 > Financial Highlights
04 > Business 26. Employment benefits – equity settled share based payments (continued) Overview Sharesave scheme (SAYE) The Group operates an HM Revenue and Customs approved Sharesave The following table illustrates the number (No.), weighted average remaining
> Scheme for all UK employees and Executive Directors and managers can contractual life and the weighted average exercise prices (WAEP) of share 06 apply to join the scheme. options for the SAYE. Chairman and Chief Executive’s Statement 2009 2009 2008 2008 No. WAEP No. WAEP 10 > Outstanding at the beginning of the year 935,277 234.51p 1,241,713 202.37p Business Exercised during the year (187,177) 186.34p (738,832) 165.44p Review Lapsed during the year (220,576) 238.07p (90,520) 302.55p Granted during the year 163,864 225.00p 522,916 225.00p 16 > Outstanding at the end of the year 691,388 244.16p 935,277 234.51p Board of Exercisable at the end of the year 2,925 194.30p 83,713 179.82p Directors Weighted average share price on date of exercise of options 260.70p 403.33p Weighted average remaining contractual life 29 months 30 months 17 > Directors’ Report The fair value of all share option plans is estimated as at the date of grant No subsequent amendments have been made to assumptions estimated at using the binomial model. The following table gives the assumptions made. the date of grant. 20 > Corporate Governance Dividend yield Expected Risk free Expected life Fair value of Report volatility interest rate of option option % % % Years Pence
24 > LTIP Corporate Awards granted 3 September 2004 2.6% 34.4% 4.8% 3 years 109.9p Responsibility Awards granted 20 July 2005 2.0% 29.6% 4.1% 3 years 135.4p Awards granted 31 July 2006 2.2% 27.0% 4.7% 3 years 188.8p 30 > Awards granted 10 January 2007 1.6% 26.0% 5.2% 3 years 237.2p Directors’ Awards granted 16 July 2007 1.7% 32.5% 5.8% 3 years 204.1p Remuneration Awards granted 15 July 2008 3.1% 38.0% 4.8% 3 years 143.2p Report Awards granted 1 October 2008 3.1% 39.8% 4.0% 3 years 158.6p ExSOP 36 > Directors’ Awards granted 14 January 2005 2.3% 33.1% 4.4% 3 years 5.5 months 48.2p Responsibilities Awards granted 3 August 2005 2.1% 30.3% 4.2% 3 years 5.5 months 51.7p Awards granted 12 January 2007 1.6% 26.6% 5.3% 3 years 5.5 months 92.4p 37 > Awards granted 20 December 2007 2.9% 34.7% 4.5% 3 years 5.5 months 62.4p Independent SAYE Auditor’s Report Awards granted 1 October 2004 2.6% 34.0% 4.7% 3 years 4 months 60.9p Awards granted 1 September 2005 2.1% 31.0% 4.0% 3 years 4 months 60.8p > 39 Awards granted 9 February 2007 1.5% 26.2% 5.4% 3 years 4 months 130.5p Financial Statements Awards granted 11 January 2008 2.8% 34.9% 4.3% 3 years 4 months 77.6p Awards granted 4 February 2009 10.4% 62.4% 2.2% 3 years 4 months 6.4p
The expected life of the options is based on historical data and is not No other features of options granted were incorporated into the necessarily indicative of exercise patterns that may occur. The expected measurement of fair value. volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.
< > 71 03 > Financial Notes to the financial statements Highlights
04 > Business 26. Employee benefits – post employment benefits Overview Pensions and other post-employment benefit plans Defined contribution plans 06 > The Group has defined contribution plans in the UK and North America, The main assumptions used in determining the liability of the defined Chairman and covering substantially all of its employees, which require contributions to benefit scheme include the discount rate for discounting scheme liabilities, Chief Executive’s be made to a separately administered fund. The Group contributes to state the expected rate of salary inflation, staff turnover rates and future mortality Statement schemes for European activities. Such schemes are defined contribution in service assumptions. For each of these assumptions, there is a range of schemes and there is no Group exposure to any scheme liabilities. possible values. Relatively small changes in some of these variables can have a significant impact on the level of the total obligation. > 10 Retirement benefit plan The amount recognised in the balance sheet in respect of the Group’s Business In addition to the state pension scheme, the French overseas subsidiary defined benefit scheme is given in the table below: Review based in Grenoble has a defined benefit retirement plan where there is an obligation to provide termination allowances and benefits called ‘Medailles du Travail’. This is an unfunded plan and the actuarial liability has been 16 > calculated at 31 March 2009 by a qualified actuary using the projected unit Board of credit method. The cost of providing these benefits is charged to the Income Directors statement in the period in which those benefits have been earned by the employees. Actuarial gains and losses are recognised in full in the period in which they arise and are recognised in the statement of recognised income 17 > and expense. Directors’ 31 March 2009 31 March 2008 Report £000 £000 Current liability 172 110 20 > Non-current liability 3,355 3,096 Corporate Total liability 3,527 3,206 Governance Report The current portion of the liability represents management’s best estimate 24 > of the contributions expected to be paid in the next financial year. Corporate The table below details the present value of the plan’s obligations and Responsibility experience adjustments recognised.
30 > 31 March 2009 31 March 2008 31 March 2007 On acquisition in 2006 £’000 £’000 £’000 £’000 Directors’ Remuneration Present value of plan’s obligations 3,527 3,206 2,792 3,019 Report Experience (losses)/gains recognised in the year/period (336) (108) 226
36 > Directors’ The total expense is recognised within administrative expenses in the Responsibilities income statement and is made up as follows: 31 March 2009 31 March 2008 £000 £000 37 > Service cost 199 184 Independent Auditor’s Report Interest on pension liabilities 200 146 Total expense 399 330 39 > Financial Statements
< > 72 03 > Financial Highlights
04 > Business 26. Employee benefits – post employment benefits (continued) Overview The actuarial loss/(gain) recognised in the statement of recognised income and expense, for the current and prior year is as follows: 31 March 2009 31 March 2008 06 > Chairman and £000 £000 Chief Executive’s Actuarial losses/(gains) due to changes in the following assumptions and experience adjustments: Statement - demographical changes (72) (114) - staff turnover 12 (2) 10 > - social taxes - 178 Business - salary increases 118 - Review - discount rate 66 (318) - beginning work life age (207) - 16 > - difference between the benefits paid 278 46 Board of Directors Total actuarial loss/(gain) 195 (210)
> 17 The cumulative amount of actuarial gains and losses recognised since Directors’ 1 August 2006 in the Group statement of recognised income and expense Report is £368,000 (2008: £563,000). Changes in the present value of the defined benefit obligation are given below: 20 > 31 March 2009 31 March 2008 Corporate £000 £000 Governance Report Defined benefit obligation at start of period 3,206 2,792 Exchange rate movement 506 475 Retirement benefit expense 399 330 24 > Corporate Benefits paid (365) (164) Responsibility Impact of business improvement programme (414) - Transfers - (17) 30 > Actuarial loss/(gain) 195 (210) Directors’ Closing defined benefit obligation 3,527 3,206 Remuneration Report The valuation assumptions used to estimate the defined benefit obligation are: 36 > Directors’ 31 March 2009 31 March 2008 Responsibilities Retirement age 64 years 65 years Discount rate 5.75% 5.95% 37 > Salary increases – administration 3.55% 3.0% Independent Salary increases – operators 3.12% 3.0% Auditor’s Report Salary increases – engineers 3.65% 3.4% Staff turnover rates – administration 1.65% 2.0% > 39 Staff turnover rates – operators 1.3% 2.0% Financial Staff turnover rates – engineers 3.5% 3.5% Statements
The actuarial valuation takes account of estimated mortality rates up to the date of retirement. The mortality rates are based on the French mortality tables TF 2000-2002 (women) and TH 2000-2002 (men). No account is taken of post retirement mortality rates as there is no liability after the date of retirement.
< > 73 03 > Financial Notes to the financial statements Highlights
04 > Business 27. Related party disclosures Overview Compensation of key management personnel of the Group Key management comprises the Board of Directors. Further details of their remuneration can be found in the Directors’ remuneration report on pages 28 to 33. 06 > 31 March 2009 31 March 2008 Chairman and £000 £000 Chief Executive’s Statement Short term employee benefits 638 622 Defined contribution pension costs 62 58 Share based payments 209 199 10 > Business Total compensation paid to key management personnel 909 879 Review
No Director had any material interest in any contract connected with 16 > the Group’s business during the year or at the end of the year. Board of Directors
17 > 28. Financial risk management objectives and policies Directors’ The Group’s principal financial instruments, other than derivatives, comprise rate swaps, approximately 37% (2008: 54%) of the Group’s borrowings were Report bank loans and cash. The main purpose of these financial instruments is at a fixed rate of interest. to raise finance for the Group’s operations. The Group has various other Based on the borrowings outstanding at the end of the year and assuming financial instruments such as trade debtors and trade creditors, which arise > constant exchange rates, it is estimated that an increase of 1% in interest 20 directly from its operations. Corporate rates on the Group’s borrowings would increase the interest payable by Governance The Group also enters into derivative transactions, principally interest rate £0.9m (2008: £0.5m). The impact of an increase in interest rates on bank Report swaps and forward currency contracts. The purpose is to manage the deposits is estimated to be less than £0.1m (2008: less than £0.1m). interest rate and currency risks arising from the Group’s operations and its sources of finance. Foreign currency risk The Group has operations in the United States, Europe, Canada and Hong 24 > It is, and has been throughout the year under review, the Group’s policy that Kong. As a result the Group’s balance sheet can be affected significantly Corporate no trading in financial instruments shall be undertaken. by movements in the US dollar and Euro exchange rates. The Group does Responsibility The main risks arising from the Group’s financial instruments are interest not currently hedge this exposure, other than by using foreign currency rate risk, liquidity risk, foreign currency risk and credit risk. The Board borrowings to finance overseas investments. reviews and agrees policies for managing each of these risks and they are 30 > The Group also has transactional currency exposures. Such exposure arises summarised below. The Group also monitors the market price risk arising when sales are made by an operating unit in currencies other than the unit’s Directors’ from all financial instruments. The magnitude of this risk that has arisen over Remuneration functional currency. Approximately 81% (2008: 75%) of the Group’s sales are the year is discussed in note 29. The Group’s accounting policies in relation outside of the UK and a significant proportion of these sales are not Sterling Report to derivatives are set out in note 2. and therefore subject to foreign exchange. The Group also incurs operational Interest rate risk costs in both US dollar and Euro. The Group manages its transactional currency exposures centrally by using forward currency contracts to minimise > The Group’s exposure to market risk for changes in interest rates relates 36 the net currency exposures. Directors’ primarily to the Group’s long term debt obligations. The following table demonstrates the Group’s sensitivity to a reasonably Responsibilities The Group’s policy is to manage its interest cost using a mix of fixed and possible weakening in the US dollar and Euro exchange rates in relation variable rate debt. To manage this mix in a cost-efficient manner, the Group to Sterling with all other variables held constant. The sensitivity analysis enters into interest rate swaps, in which the Group agrees to exchange, > includes only outstanding foreign currency denominated monetary items at 37 at specified intervals, the difference between fixed and variable interest the balance sheet date. The sensitivity excludes external loans as exchange Independent amounts calculated by reference to an agreed-upon notional principal gains and losses on retranslation do not impact profit before taxation. Auditor’s Report amount. At 31 March 2009, after taking into account the effect of interest
> 39 Change in US$/Euro rate Impact on profit before tax Financial £000 Statements 2008/09 – US$ 20% weakening in US$ 3,627 2008/09 – Euro 20% weakening in Euro (744) 2007/08 – US$ 5% weakening in US$ 786 2007/08 – Euro 5% weakening in Euro (315)
< > 74 03 > Financial Highlights
04 > Business 28. Financial risk management objectives and policies (continued) Overview The gain in profit before tax in respect of US dollar sensitivity includes The Group’s net borrowings are subject to currency risk due to cash and £2,954,000 (2008: £786,000) in relation to the estimated impact on the bank borrowings held in foreign currencies. The analysis of net borrowings valuation of forward foreign currency exchange contracts. by currency is shown in the table below: > 06 The impact of translating the net assets of foreign operations into Sterling Chairman and is excluded from the sensitivity analysis. The Group has no foreign currency Chief Executive’s exposure with regard to transactions accounted for directly within equity. Statement Year end 31 March 2009 exchange rate £million Denominated in Euro 92.7m 1.07 86.7 10 > € Business Denominated in US$ $61.2m 1.43 42.8 Review Denominated in Sterling or other currencies £7.8m 1.00 7.8 137.3 16 > Board of Year end 31 March 2008 Directors exchange rate £million Denominated in Euro €101.3m 1.26 80.4 17 > Denominated in US$ $(4.9)m 1.99 (2.5) Directors’ Denominated in Sterling or other currencies £16.5m 1.00 16.5 Report 94.4
20 > Corporate Credit risk Liquidity risk Governance The Group trades only with recognised, creditworthy third parties. It is the The Group’s objective is to maintain a balance between continuity of funding Report Group’s policy that all customers who wish to trade on credit terms are and flexibility through the use of bank loans and finance lease contracts. subject to credit verification procedures. In addition, receivable balances are The Group’s policy is to use funds in excess of the ongoing operating monitored on an ongoing basis with the result that the Group’s exposure to requirements to make early repayments against the bank borrowings on an 24 > bad debts is not significant. annual basis. Corporate With respect to credit risk arising from financial assets of the Group, The Group’s objective is to maintain a positive cash balance at a level Responsibility which comprise trade and other receivables, cash and certain derivative adequate for daily operations while retaining the option to use revolving instruments, the Group’s exposure to credit risk arises from default of the credit facilities for short term flexibility as necessary. counter party, with a maximum exposure equal to the carrying amount of The table below summarises the maturity profile of the Group’s non- > these instruments. There are no significant concentrations of credit risk 30 derivative financial liabilities at 31 March 2009 and 2008 based on within the Group. Directors’ contractual undiscounted payments. Remuneration Report 0-6 months 6-12 months 1-3 years £000 £000 £000 Total £000 31 March 2009 36 > Directors’ Interest bearing loans and borrowings 5,111 5,111 133,441 143,663 Responsibilities Interest payable on loans and borrowings* 1,918 2,005 4,869 8,792 Trade and other payables 45,542 4,350 443 50,335 37 > Total 52,571 11,466 138,753 202,790 Independent Auditor’s Report 0-6 months 6-12 months 1-4 years £000 £000 £000 Total £000 31 March 2008 39 > Financial Interest bearing loans and borrowings 2,913 4,370 92,921 100,204 Statements Interest payable on loans and borrowings* 2,365 2,285 9,126 13,776 Trade and other payables 39,501 4,162 - 43,663 Total 44,779 10,817 102,047 157,643
*Interest payable on loans and borrowings is calculated on an undiscounted basis at borrowing rates applicable at the end of the year and only takes into account scheduled repayments on the term loan. The maturity analysis of derivative financial liabilities is detailed in note 29.
< > 75 03 > Financial Notes to the financial statements Highlights
04 > Business 28. Financial risk management objectives and policies (continued) Overview Capital management The Group’s capital comprises shareholders’ funds as detailed in notes 23 06 > and 24 and net borrowings as detailed on page 73. The primary objective of the Group’s capital management is to ensure the sustainability of the Chairman and Group’s business and maximise shareholder value. The Board is currently Chief Executive’s working with finance providers and is reviewing a range of options for a Statement more appropriate capital structure for the business. Any adjustment to the Group’s capital structure is made in light of changes in economic conditions, and may be achieved by adjustment to the dividends paid to shareholders, > 10 a return of capital to shareholders, an issue of new shares or a change in Business the Group’s bank borrowings. Review The Board encourages employees to hold shares in the Company. This is achieved through a Save As You Earn option scheme in the UK, as well as 16 > through performance related share option plans. Board of Directors 29. Financial instruments 17 > Directors’ Fair values Report Set out below is a comparison by category of carrying amounts and fair values of the Group’s financial instruments that are carried in the financial statements. Carrying amount Fair Value 20 > Corporate 31 March 2009 31 March 2008 31 March 2009 31 March 2008 Governance £000 £000 £000 £000 Report Financial assets Loans and receivables 24 > Cash 6,373 5,806 6,373 5,806 Corporate Responsibility Held for trading at fair value through the income statement Forward currency contracts - 46 - 46
30 > Interest rate swap - 142 - 142 Directors’ Remuneration Financial liabilities Report Interest-bearing loans and borrowings: Obligations under finance leases - 13 - 13 > 36 Floating rate borrowings 142,572 98,991 137,639 98,991 Directors’ Responsibilities Held for trading at fair value through the income statement Forward currency contracts 3,296 449 3,296 449 Interest rate swap 1,819 62 1,819 62 37 > Independent Auditor’s Report The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. 39 > The fair value of interest rate swaps is calculated by reference to interest Financial rates at the period end and bank forecasts for changes in these rates over the remaining life of the instrument. The fair value of floating rate Statements borrowings is calculated by reference to market borrowing rates compared to existing borrowing facilities. The carrying amount of the other financial instruments of the Group, ie. short term trade receivables and payables that are not included in the above table, is a reasonable approximation of fair value. The Group is considering its options for the long term capital structure, which may involve re-financing the above facilities. If this arises, the Group is unlikely to continue to pay interest under the current margin arrangements.
< > 76 03 > Financial Highlights
04 > Business 29. Financial instruments (continued) Overview Currency – forward exchange contracts At 31 March 2009, the Group held several foreign exchange contracts designated 06 > to reduce the transactional exchange risk of US dollar denominated sales to Chairman and customers in the United States. The terms of these contracts are as follows: Chief Executive’s Statement Maturing in 0-6 months Maturing in 6-12 month Total currency value of contracts Average Exchange rate £’000 £’000 10 > 31 March 2009 Business US$ 31,646,549 US$ : £ 1.685 13,656 5,121 Review
31 March 2008 16 > US$ 41,010,000 US$ : £ 2.031 12,825 7,365 Board of Directors
17 > Interest rate swaps Directors’ The Group has interest rate swap agreements in place in relation to its Report term loan whereby it pays a fixed or secured rate of interest and receives a variable rate on the notional amount.
20 > Corporate Notional amount Maturity Secured rate Variable rate Governance 31 March 2009 Report €27,455,625 12 July 2011 3.88% 6 month EUR Euribor €30,201,188 12 July 2011 3.31% - 5.00%* 6 month EUR Euribor 24 > 31 March 2008 Corporate Responsibility €32,946,800 12 July 2011 3.88% 6 month EUR Euribor €34,777,125 12 July 2011 3.31% - 5.00%* 6 month EUR Euribor
30 > * Capped rate. Directors’ Remuneration Report Based on exchange rates and interest rates on the balance sheet date the Group’s liability under the interest rate swap arrangements on an undiscount- ed basis is a payment of £452,000 on a half yearly basis for the unexpired 36 > term of the loan (2008: £nil). Directors’ Responsibilities Hedging activities – net investment hedges Bank loans at the balance sheet date include a loan of €15,503,000 (2008: €15,503,000), which has been designated as a hedge of the net invest- 37 > ment in e2v technologies SAS. This loan is being used to hedge the Group’s Independent exposure to foreign exchange risk on this investment. Gains or losses on the Auditor’s Report retranslation of this borrowing are transferred to equity to offset any gains or losses on translation of the net investment in this subsidiary undertaking.
39 > Financial Statements
< > 77 03 > Financial Highlights
04 > Business Financial record Overview
2009 2008 2007 2006 2005 06 > £000 £000 £000 £000 £000 Chairman and Revenue Chief Executive’s Statement Electron devices and sub-systems 83,739 75,776 69,639 62,118 52,447 Imaging devices 65,224 60,578 53,096 27,326 24,281 10 > Specialist semiconductors 53,323 39,826 28,044 - - Business Sensors 30,907 28,427 23,146 22,832 23,819 Review Total revenue 233,193 204,607 173,925 112,276 100,547
16 > Adjusted profit before tax and net finance costs* 27,440 29,092 24,653 14,953 12,472 Board of Amortisation of acquired intangible assets (8,628) (7,310) (6,047) (369) (10) Directors Impairment of acquired intangible assets (26,127) - - - - Impairment of plant and equipment (2,500) - - - - 17 > Acquisition and integration costs - - (1,055) - - Directors’ Report Business improvement programme costs (6,826) (1,996) - (819) (61) Fair value losses on financial instruments (2,894) (357) - - - 20 > Initial public offering costs - - - - (1,901) Corporate (Loss)/profit before tax and net finance costs (19,535) 19,429 17,551 13,765 10,500 Governance Report Net finance charges (8,870) (5,682) (3,835) (1,849) (4,941) (Loss)/profit before tax (28,405) 13,747 13,716 11,916 5,559 24 > Income tax credit/(charge) 7,106 (1,948) (4,048) (3,768) (2,167) Corporate Responsibility (Loss)/profit for the year attributable to equity holders of the parent (21,299) 11,799 9,668 8,148 3,392
Basic (loss)/earnings per share (34.42)p 19.36p 16.46p 14.81p 6.93p 30 > Directors’ Adjusted* basic earnings per share 30.20p 30.08p 25.82p 16.89p 13.72p Remuneration Interim dividend paid 2.70p 2.45p 2.20p 2.00p 0.63p Report Final dividend proposed nil 5.25p 4.75p 4.25p 3.90p
> 36 Cash generated from operations 43,048 29,669 19,539 26,469 11,789 Directors’ Responsibilities Net debt 136,199 93,198 78,657 17,757 21,782
Average employee numbers 1,714 1,828 1,621 1,292 1,296 37 > Independent Auditor’s Report *Before amortisation of acquired intangibles, impairment of acquired intangibles, plant and equipment, acquisition and integration costs, business improvement programme costs, fair value adjustments on financial instruments, initial public offering costs, > 39 and their tax impact in the adjusted earnings per share calculation. Financial Statements
< > 78 www.e2v.com 03 > Financial Highlights
04 > Business Overview
> 06 e2v technologies plc Annual Report and Financial Statements 2009 Chairman and Chief Executive’s Statement
10 > Business Review Financial 16 > Board of Directors
17 > Directors’ Statements Report e2v technologies plc 20 > Corporate Governance Report Directors’ Responsibilities 78 24 > Independent Auditor’s Report 79 Corporate Responsibility Company Balance Sheet 80 Notes to the Financial Statements 81 30 > Directors’ Remuneration Report
36 > Directors’ Responsibilities
37 > Independent Auditor’s Report
39 > Financial Statements
< > 79 03 > Financial Highlights
04 > Business Directors’ Responsibilities Overview
06 > Chairman and Directors’ statement of responsibilities in relation to the parent Chief Executive’s company financial statements Statement The Directors are responsible for preparing the financial statements in accordance with applicable law and regulations.
10 > Company law requires the Directors to prepare financial statements in Business accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The financial Review statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing those financial statements, the Directors are required to: 16 > Board of l Select suitable accounting policies and then apply them consistently; Directors l Make judgments and estimates that are reasonable and prudent; l State whether applicable UK accounting standards have been followed, 17 > subject to any material departures disclosed and explained in the Directors’ financial statements; and Report l Prepare the parent company financial statements on the going concern basis unless it is inappropriate to presume that the parent company will continue in business. 20 > Corporate The Directors are responsible for ensuring that the Company keeps Governance accounting records which disclose with reasonable accuracy at any time the financial position of the Company and which enable them to ensure that Report the financial statements comply with the Companies Act 1985. The Directors have general responsibility for taking such steps, as are reasonably open to them, and which they deem are appropriate to safeguard the assets of the > 24 Company and to seek to prevent and detect fraud and other irregularities. Corporate Responsibility The Annual Report for the year ended 31 March 2009 is published in hard copy printed form and made available on the Company’s website. The Directors are responsible for the maintenance and integrity of the 30 > Annual Report on the website in accordance with UK legislation governing Directors’ the preparation and dissemination of financial statements. Access to the website is available from outside the UK, where comparable legislation Remuneration may be different. Report
36 > Directors’ Responsibilities
37 > Independent Auditor’s Report
39 > Financial Statements
< > 80 03 > Financial Highlights
04 > Business Independent Auditor’s Report Overview
06 > Chairman and Independent Auditor’s report to the members of Basis of audit opinion Chief Executive’s e2v technologies plc We conducted our audit in accordance with International Standards on Statement We have audited the parent company financial statements of e2v Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit technologies plc for the year ended 31 March 2009 which comprise company includes examination, on a test basis, of evidence relevant to the amounts Balance sheet and the related notes 1 to 12. These parent company financial and disclosures in the parent company financial statements and the 10 > statements have been prepared under the accounting policies set out part of the Directors’ remuneration report to be audited. It also includes Business therein. We have also audited the information in the Directors’ remuneration an assessment of the significant estimates and judgments made by the Directors in the preparation of the parent company financial statements, Review report that is described as having been audited. and of whether the accounting policies are appropriate to the company’s We have reported separately on the Group financial statements of circumstances, consistently applied and adequately disclosed. e2v technologies plc for the year ended 31 March 2009. 16 > We planned and performed our audit so as to obtain all the information Board of This report is made solely to the company's members, as a body, in and explanations which we considered necessary in order to provide us accordance with Section 235 of the Companies Act 1985. Our audit work has Directors with sufficient evidence to give reasonable assurance that the parent been undertaken so that we might state to the company's members those company financial statements and the part of the Directors’ remuneration matters we are required to state to them in an auditor’s report and for no report to be audited are free from material misstatement, whether caused other purpose. To the fullest extent permitted by law, we do not accept or 17 > by fraud or other irregularity or error. In forming our opinion we also assume responsibility to anyone other than the company and the company's evaluated the overall adequacy of the presentation of information in Directors’ members as a body, for our audit work, for this report, or for the opinions Report the parent company financial statements and the part of the Directors’ we have formed. remuneration report to be audited. Respective responsibilities of directors and auditors Opinion 20 > The Directors’ responsibilities for preparing the Annual Report, the Directors’ In our opinion: Corporate remuneration report and the parent company financial statements in Governance accordance with applicable United Kingdom law and Accounting Standards l The parent company financial statements give a true and fair view, in Report (United Kingdom Generally Accepted Accounting Practice) are set out in the accordance with United Kingdom Generally Accepted Accounting Practice, Statement of Directors’ responsibilities. of the state of the company's affairs as at 31 March 2009; Our responsibility is to audit the parent company financial statements and l The parent company financial statements and the part of the Directors’ > 24 the part of the Directors’ remuneration report to be audited in accordance remuneration report to be audited have been properly prepared in Corporate with relevant legal and regulatory requirements and International Standards accordance with the Companies Act 1985; and Responsibility on Auditing (UK and Ireland). l The information given in the Directors' report is consistent with the We report to you our opinion as to whether the parent company financial parent company financial statements. 30 > statements give a true and fair view and whether the parent company financial statements and the part of the Directors’ remuneration report to Emphasis of matter Directors’ be audited have been properly prepared in accordance with the Companies In forming our opinion on the parent company financial statements, which Remuneration Act 1985. We also report to you whether in our opinion the information is not qualified, we have considered the adequacy of the disclosures made Report given in the parent company Directors' report is consistent with the financial in note 2 of the parent company financial statements concerning the ability statements. The information given in the Directors' report includes that of e2v technologies plc and its’ subsidiary undertakings to continue to meet specific information presented in the Chairman’s and ChiefE xecutive’s the bank’s consolidated net borrowings to adjusted consolidated EBITDA > 36 statement and the business review that is cross referred from the review of covenant. These conditions indicate the existence of a material uncertainty Directors’ business and future developments section of the Directors' report. which may cast significant doubt about the ability of e2v technologies plc Responsibilities to continue as a going concern. The financial statements do not include any In addition we report to you if, in our opinion, the company has not kept adjustment that would result if e2v technologies plc was unable to continue proper accounting records, if we have not received all the information and as a going concern. 37 > explanations we require for our audit, or if information specified by law regarding directors’ remuneration and other transactions is not disclosed. Independent Auditor’s Report We read other information contained in the Annual Report and consider whether it is consistent with the audited parent company financial statements. The other information comprises only the Chairman’s and 39 > Chief Executive’s statement, the business review, the corporate governance Ernst & Young LLP Financial report and the unaudited part of the Directors’ remuneration report. We Registered Auditor, Cambridge Statements consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the parent company financial 8 June 2009 statements. Our responsibilities do not extend to any other information.
< > 81 03 > Financial Highlights
04 > Business Company balance sheet Overview as at 31 March 2009
06 > 31 March 2009 31 March 2008 Chairman and Notes £000 £000 Chief Executive’s Fixed assets Statement Tangible assets 4 2 6 Investments 5 53,758 65,372 10 > Business 53,760 65,378 Review Current assets Debtors 6 24,391 25,615 16 > Cash at bank and in hand 11 12 Board of 24,402 25,627 Directors Creditors: amounts falling due within one year Other creditors 7 1,137 530 > 17 1,137 530 Directors’ Report Net current assets 23,265 25,097 Total assets less current liabilities 77,025 90,475
20 > Corporate Creditors: amounts due after more than one year 8 (23,354) (28,683) Governance Net assets 53,671 61,792 Report
Capital and reserves > 24 Called up share capital 9 3,128 3,111 Corporate Share premium account 10 41,780 41,116 Responsibility Capital redemption reserve 10 274 274 Treasury shares reserve 10 (5) (6) 30 > Retained earnings 10 8,494 17,297 Directors’ Remuneration Equity shareholders’ funds 10 53,671 61,792 Report
Approved by the Board of Directors on 8 June 2009. 36 > Directors’ Responsibilities
37 > Independent Keith Attwood Charles Hindson Auditor’s Report Chief Executive Officer Group Finance Director
39 > Financial Statements
< > 82 03 > Financial Highlights
04 > Business Notes to the Financial Statements Overview 1. Accounting policies 06 > Chairman and Basis of preparation Chief Executive’s The Company financial statements are prepared in accordance with UK GAAP the Group can remain within ‘the net debt covenant’ at 30 September Statement and applicable accounting standards under the historical cost convention. 2009 and 31 March 2010. On this basis the Directors believe that it is appropriate to prepare the parent company financial statements on a going The Company has taken advantage of the exemption provided under section concern basis. The financial statements do not include any adjustments 230 of the Companies Act 1985 not to publish its individual profit and 10 > that would result if the going concern basis of accounting were considered loss account. The loss dealt with in the financial statements of the parent Business inappropriate. company is £4,514,000 (2008: profit of £7,479,000). Review Tangible assets The Company has taken advantage of the exemption in paragraph 2D of FRS 29 ‘Financial Instruments: Disclosures’ and has not disclosed information Motor vehicles are stated at cost less accumulated depreciation and any 16 > required by the Standard as the consolidated financial statements, in which impairment in value. Depreciation is provided so as to write off the cost Board of the Company is included, provide equivalent disclosures for the Group under of the asset on a straight line basis over the estimated useful life of three Directors IFRS 7 ‘Financial Instruments: Disclosures’. years. The carrying values of fixed assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may Going concern not be recoverable. 17 > The Group’s banking facilities, to which e2v technologies plc and certain Foreign currencies Directors’ subsidiary undertaking are borrowers, expire on 11 July 2011. Under these facilities e2v technologies plc, on behalf of the Group, is required to The presentation and functional currency of the Company is Sterling. Report confirm at 31 March and 30 September of each year that consolidated net Transactions denominated in foreign currencies are translated into the borrowings do not exceed a 3.5 times multiple of adjusted consolidated Company’s functional currency at the rate of exchange ruling on the date EBITDA (‘the Net debt covenant’) and that adjusted consolidated EBITA is of the transaction. Monetary assets and liabilities denominated in foreign > 20 not less than a 3 times multiple of net interest payable. currencies are retranslated at the rate of exchange ruling on the balance Corporate sheet. Currency translation differences are recognised in the profit and Governance In the six months to 31 March 2009 the weakening of Sterling increased loss account. Report the Sterling value of the Group’s Euro and US dollar denominated loans, resulting in consolidated net borrowings as at 31 March 2009 of £137.3m, Investments representing a multiple of 3.19 times the adjusted consolidated EBITDA for Investments in subsidiaries are held at historical cost less provision for 24 > the year ended 31 March 2009. impairment. The carrying values of investments are reviewed for impairment Corporate The Group has experienced softer market conditions in many of the markets when events or changes in circumstances indicate the carrying value may Responsibility in which the Group operates in the current calendar year, leading to a lower not be recoverable. level of activity in the first half of the year ending 31 March 2010. Combined Taxation with the uncertainty over the direction of the Euro and US dollar exchange Current tax, including UK corporation tax, is provided at amounts expected > rate movements, this represents a significant challenge to the Group’s ability 30 to be paid (or recovered) using the tax rate and laws that have been to meet ‘the net debt covenant’ at 30 September 2009 and to a lesser Directors’ enacted or substantively enacted by the balance sheet date. Remuneration extent at 31 March 2010. Report The Board are implementing restructuring initiatives to reduce costs and Deferred taxation production capacity primarily in the first half of the year ending 31 March Deferred tax is recognised in respect of all timing differences that have 2010. With these steps, the Board has a reasonable expectation that the originated but not reversed at the balance sheet date where transactions 36 > Group can remain within ‘the net debt covenant’. or events have occurred at that date that will result in an obligation to Directors’ pay more, or a right to pay less or to receive more, tax, with the In addition the Board is working with finance providers and is reviewing a Responsibilities following exceptions: range of options for a more long term capital structure for the business. l Provision is made for deferred tax that would arise on remittance of the The Directors of the Group have prepared detailed profit and cash flow retained earnings of overseas subsidiaries only to the extent that, at the > 37 forecasts through to 30 September 2010. In considering these profit and balance sheet date, dividends have been accrued as receivable. Independent cash flow forecasts and the plans to restructure costs and limit production Auditor’s Report capacity, the Directors have carefully considered the assumptions and l Deferred tax assets are recognised only to the extent that the Directors sensitivities and have concluded that the Group can remain within ‘the net consider that it is more likely than not that there will be suitable taxable debt covenant’ requirement at both 30 September 2009 and 31 March 2010. profits from which the future reversal of the underlying timing differences 39 > However the available headroom at 30 September 2009 is limited and the can be deducted. Directors are cognisant of the fact that, in the current economic climate, Financial Deferred tax is measured on an undiscounted basis at the tax rates that are there are inherent risks surrounding the achievability of the Group's forecast Statements expected to apply in the periods in which timing differences reverse, based sales, the success of the restructuring plan and steps to reduce production on tax rates and laws enacted or substantively enacted at the balance capacity along with the direction of the Euro and US dollar exchange sheet date. rate movements. The Directors of the Group have concluded that the combination of these Pensions circumstances represents a material uncertainty that casts significant doubt The Company contributes to personal pension arrangements for its upon the Group's ability to continue to meet ‘the net debt covenant’ at 30 employees. The pension cost is the amount of contributions payable in September 2009 and to a lesser extent at 31 March 2010. However, having the year. considered these uncertainties, the Directors have a reasonable expectation
< > 83 03 > Financial Notes to the financial statements Highlights
04 > Business 1. Accounting policies (continued) Overview Treasury shares Shares in the Company held by the Employee Benefit Trust are stated at No expense is recognised for awards that do not ultimately vest, except 06 > cost and are presented in the balance sheet as a deduction from equity. for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is Chairman and Share based payments satisfied, provided that all other performance conditions are satisfied. Chief Executive’s Employees (including Directors) of the Company receive remuneration in Where the terms of an equity-settled award are modified, as a minimum an Statement the form of share based payment transactions, whereby employees expense is recognised as if the terms had not been modified. In addition, render services in exchange for shares or rights over shares an expense is recognised for any increase in the value of the transaction as (‘equity-settled transactions’). 10 > a result of the modification, as measured at the date of modification. Equity-settled transactions Business Where an equity-settled award is cancelled, it is treated as if it had vested Review The cost of equity-settled transactions with employees is measured by on the date of cancellation, and any expense not yet recognised for the reference to the fair value at the date at which they are granted. award is recognised immediately. However, if a new award is substituted for The fair value is determined by an external valuer using a binomial model, the cancelled award, and designated as a replacement award on the date 16 > further details of which are given in note 26 to the consolidated financial that it is granted, the cancelled and new awards are treated as if they were Board of statements. In valuing equity-settled transactions, no account is taken of any a modification of the original award, as described in the previous paragraph. Directors vesting conditions, other than conditions linked to the price of the shares of e2v technologies plc (‘market conditions’). Financial assets and liabilities The Company uses interest rate swaps to adjust interest rate exposures. The cost of equity-settled transactions is recognised, together with a 17 > corresponding increase in equity, over the period in which the performance The Company’s criteria for interest rate swaps are: Directors’ conditions are fulfilled, ending on the date on which the relevant employees Report become fully entitled to the award (‘vesting date’). The cumulative expense l The instrument must be related to an asset or a liability; and recognised for equity-settled transactions at each reporting date until the l It must change the character of the interest rate by converting a vesting date reflects the extent to which the vesting period has expired and variable rate to a fixed rate or vice versa. 20 > the number of awards that, in the opinion of the Directors of the Company Corporate at that date, based on the best available estimate of the number of equity Derivative financial instruments have been recognised as assets and Governance instruments that will ultimately vest. liabilities measured at their fair values at the balance sheet date. Changes in Report the fair values have been recognised in the hedge reserve to the extent that The financial effect of awards by the Company of options over its equity they qualify for hedge accounting. Gains and losses arising from changes shares to employees of subsidiary undertakings are recognised by the in the fair value of derivatives that do not qualify for hedge accounting are Company in its individual financial statements. In particular, the Company > taken to the profit and loss account. 24 records an increase in its investment in subsidiaries with a credit to equity Corporate equivalent to the FRS 20 cost in subsidiary undertakings. Responsibility
30 > Directors’ 2. Dividends paid and proposed Year ended Year ended Remuneration 31 March 2009 31 March 2008 Report £000 £000 Declared and paid during the year: 36 > Equity dividends on ordinary shares: Directors’ Final dividend for 2008: 5.25p (2007: 4.75p) 3,234 2,878 Responsibilities First dividend for 2009: 2.70p (2008: 2.45p) 1,679 1,502 4,913 4,380 37 > Proposed for approval at AGM (not recognised as a liability as at 31 March): Independent Auditor’s Report Equity dividends on ordinary shares: Final dividend for 2009: nil (2008: 5.25p) - 3,234 39 > Financial Statements The number of shares owned by the Employee Benefit Trust is 518,856 (2008: 626,239). The Employee Benefit Trust has waived its right to receive dividends. Following a detailed review of the Group’s cash requirements the Board is not proposing a final dividend.
< > 84 03 > Financial Highlights
04 > Business 3. Remuneration Overview Directors’ remuneration Details of Directors’ remuneration, pension benefits and share option awards are included in the Directors’ remuneration report on pages 28 to 33. 06 > Chairman and Auditor’s remuneration Chief Executive’s The total fees payable by the Company to Ernst and Young LLP for work Statement performed in respect of the audit were £315,000 (2008: £200,000).
10 > Business Review 4. Tangible assets Motor vehicles £000 16 > Cost Board of Directors At 1 April 2008 12 Additions - At 31 March 2009 12 17 > Directors’ Depreciation Report At 1 April 2008 6 Provided during the year 4 20 > At 31 March 2009 10 Corporate Carrying amount Governance Report At 31 March 2008 6 At 31 March 2009 2 24 > Corporate Responsibility 5. Investments Equity interests in > 30 subsidiary undertakings Directors’ £000 Remuneration Report Cost At 1 April 2008 65,372 36 > Additions 284 Directors’ Write off in the year - e2v Biosensors Limited (1,285) Responsibilities Impairment in the year - e2v technologies SAS (10,613) At 31 March 2009 53,758 37 > Independent Auditor’s Report The decision to close the business conducted by e2v Biosensors Limited has been taken since the balance sheet date. The investment in this subsidiary undertaking has therefore been written off. 39 > Financial Following an impairment review of the e2v semiconductors business unit as detailed in note 14 to the Group financial statements, the Company’s Statements investment in e2v technologies SAS, the intermediate holding company, has been fully impaired. The additions to subsidiary investments relates to the awarding of share options to employees of subsidiary undertakings.
< > 85 03 > Financial Notes to the financial statements Highlights
04 > Business 5. Investments (continued) Overview Interests in Group undertakings
Name of undertaking Country of incorporation Principal activity 06 > e2v technologies (UK) Limited England & Wales Electrical component manufacturer Chairman and Chief Executive’s e2v semiconductors SAS *** France Electrical component manufacturer Statement e2v scientific instruments Limited England & Wales Electrical component manufacturer MiCS Microchemical Systems SA**** Switzerland Electrical component manufacturer 10 > e2v Microsensors SA**** Switzerland Electrical component manufacturer Business QP Semiconductor Inc.** USA Electrical component manufacturer Review e2v Biosensors Limited England & Wales Research and development e2v Asia Pacific Limited **** Hong Kong Sales & distribution 16 > e2v Limited England & Wales Sales & distribution Board of Directors e2v Inc.** USA Sales & distribution e2v technologies SAS France Holding company 17 > e2v SAS*** France Sales & distribution Directors’ e2v Technologies Canada Limited* Canada Sales & distribution Report e2v Technologies GmbH* Germany Sales & distribution e2v Holdings Inc. USA Holding company 20 > e2v overseas (holdings) Limited England & Wales Holding company Corporate EEV Limited England & Wales Dormant Governance Report Gresham Sensor Technology Limited England & Wales Dormant
24 > The Company has control over 100% of the ordinary share capital in respect Corporate of each of its subsidiary undertakings. Subsidiary undertakings are all held Responsibility by e2v technologies plc, with the following exceptions: * held through e2v technologies (UK) Limited ** held through e2v Holdings Inc. 30 > Directors’ *** held through e2v technologies SAS. Remuneration **** held through e2v overseas (holdings) Limited Report
36 > Directors’ 6. Debtors 31 March 2009 31 March 2008 Responsibilities £000 £000 Other debtors 33 24 37 > Prepayments and accrued income 38 44 Independent Auditor’s Report Amounts receivable from subsidiary undertakings 24,320 25,547 24,391 25,615 39 > Financial Statements
< > 86 03 > Financial Highlights
04 > 7. Other creditors Business 31 March 2009 31 March 2008 Overview £000 £000 Trade creditors 474 64 > 06 Amounts payable to subsidiary undertakings 50 35 Chairman and Chief Executive’s Other taxation and social security costs 127 117 Statement Accruals and deferred income 486 314 1,137 530 10 > Business Review 8. Creditors: Amounts falling due after more than one year > 16 31 March 2009 31 March 2008 Board of Loans £000 £000 Directors Amounts falling due: Bank loans: revolving credit facilities 23,354 28,683 17 > Directors’ 23,354 28,683 Report
31 March 2009 31 March 2008 20 > Corporate £000 £000 Governance Loan maturity analysis Report Amounts falling due: In more than one year but not more than two years - - 24 > In more than two years but not more than five years 23,354 28,683 Corporate 23,354 28,683 Responsibility
30 > The bank loans are secured by a floating charge over the net assets Directors’ of the Group. Remuneration The revolving credit facility is repaid and re-drawn at periodic intervals of one Report to six months, at which time the interest rate is re-priced. Provided covenants continue to be met, the draw down is at the discretion of the Company with no requirement to reduce the outstanding balance below that currently drawn 36 > before 2011. The loan is therefore treated as non-current. Directors’ Responsibilities
37 > Independent Auditor’s Report
39 > Financial Statements
< > 87 03 > Financial Notes to the financial statements Highlights
04 > Business 9. Authorised and issued share capital Overview 31 March 2009 31 March 2008 Authorised No. No. 06 > Ordinary shares of 5p each 75,000,000 75,000,000 Chairman and Chief Executive’s Statement 31 March 2009 31 March 2008 Ordinary shares issued and fully paid No. £000 10 > At 1 April 2008 62,217,416 3,111 Business Review Issued for cash on exercise of share options 352,177 17 At 31 March 2009 62,569,593 3,128 16 > Board of 31 March 2009 31 March 2008 Directors Treasury shares held by the Employee Benefit Trust No. £000 At 1 April 2008 626,239 6 17 > Issued during the year in respect of the LTIP awards (107,383) (1) Directors’ Report At 31 March 2009 518,856 5
> 20 Options have been granted under share option schemes, as detailed in the Directors’ remuneration Corporate report on pages 28 to 33, to subscribe for ordinary shares of the Company as follows: Governance Report Number of Share price at options date of grant Exercise price Exercise dates Expiry date > 24 LTIPS granted 3 September 2004 258,000 174.0p nil 03.09.07 N/A Corporate Responsibility LTIPS granted 20 July 2005 342,250 216.0p nil 20.07.08 N/A LTIPS granted 31 July 2006 254,500 291.0p nil 31.08.09 N/A LTIPS granted 10 January 2007 15,000 402.3p nil 31.08.09 N/A 30 > Directors’ LTIPS granted 16 July 2007 259,375 400.3p nil 14.07.10 N/A Remuneration LTIPS granted 15 July 2008 402,300 245.5p nil 15.07.11 N/A Report LTIPS granted 1 October 2008 20,400 250.0p nil 01.10.11 N/A ExSOP granted 14 January 2005 240,000 196.5p 196.5p 01.02.08 31.12.08 36 > ExSOP granted 1 August 2005 265,000 215.5p 215.5p 03.08.08 30.06.09 Directors’ ExSOP granted 12 January 2007 72,000 396.5p 396.5p 01.02.10 31.12.10 Responsibilities ExSOP granted 20 December 2007 230,000 254.0p 254.0p 01.01.11 31.12.11 SAYE granted 1 October 2004 928,621 174.0p 165.3p 01.11.07 30.04.08 37 > SAYE granted 1 September 2005 259,536 204.5p 194.3p 01.09.08 28.02.09 Independent Auditor’s Report SAYE granted 9 February 2007 214,357 419.8p 351.5p 01.04.10 01.10.10 SAYE granted 11 January 2008 522,916 259.0p 225.0p 01.03.11 31.08.11 39 > SAYE granted 4 February 2009 163,864 225.0p 225.0p 01.03.12 31.08.12 Financial Statements
< > 88 03 > Financial Highlights
04 > Business 9. Authorised and issued share capital (continued) Overview Options issued to employees of the Company are as follows:
06 > 2009 2008 Chairman and Long Term Incentive Plan (LTIP) No. No. Chief Executive’s Outstanding at the beginning of the year: Statement Awards granted 3 September 2004 - 258,000 Awards granted 20 July 2005 240,500 342,250 10 > Awards granted 31 July 2006 210,400 254,500 Business Review Awards granted 10 January 2007 15,000 15,000 Awards granted 16 July 2007 243,625 - 709,525 869,750 16 > Board of Granted in the year: Directors Awards granted 16 July 2007 - 259,375 Awards granted 15 July 2008 402,300 - 17 > Awards granted 1 October 2008 20,400 - Directors’ 422,700 259,375 Report Awards exercised during the year (107,383) (258,000) Awards lapsed during the year (232,117) (161,600) 20 > Outstanding at the end of the year 792,725 709,525 Corporate Governance Weighted average share price on date of exercise of options 259.00p 270.77p Report
Shares in relation to the LTIP will initially be issued from those currently held 24 > by the Employee Benefit Trust (EBT). The EBT owns 518,856 ordinary shares Corporate (2008: 626,239). These shares are recorded in the balance sheet as treasury Responsibility shares at a cost of £5,000 (2008: £6,000). Dividends on the shares owned by the trust, the purchase of which was funded by an interest free loan to the trust from e2v technologies plc, are waived. There were no options 30 > exercisable at the balance sheet date (2008: nil). Directors’ Sharesave scheme (SAYE) Remuneration Report 2009 2009 2008 2008 No. WAEP No. WAEP 36 > Directors’ Outstanding at the beginning of the year 29,750 224.93p 37,080 178.80p Responsibilities Exercised during the year (5,732) 165.30p (28,660) 165.30p Lapsed during the year (2,688) 351.50p - - 37 > Granted during the year 3,333 225.00p 21,330 225.00p Independent Outstanding at the end of the year 24,663 225.00p 29,750 224.93p Auditor’s Report Exercisable at the end of the year nil N/A 5,732 165.30p Weighted average share price at date of exercise of options 272.75p 251.90p 39 > Weighted average remaining contractual life 30 months 32 months Financial Statements Further details of employee share incentive plans, including an overview of each scheme and the valuation assumptions made in determining the share based payment charges, are given in note 26 to the Group financial statements.
< > 89 03 > Financial Notes to the financial statements Highlights
04 > Business 10. Reconciliation of movements in shareholders’ funds Overview
Capital Treasury Retained > 06 Issued capital Share premium redemption shares earnings Total equity Chairman and £000 £000 £000 £000 £000 £000 Chief Executive’s Statement At 1 April 2007 3,073 39,902 274 (9) 13,380 56,620 Issue of shares on exercise of options 38 1,214 - - - 1,252 10 > Profit for the year - - - - 7,479 7,479 Business Share based payment charges - - - - 467 467 Review Share options awarded to employees of subsidiary undertakings - - - - 354 354 16 > Issue of shares by EBT on exercise of options - - - 3 (3) - Board of Equity dividends - - - - (4,380) (4,380) Directors At 31 March 2008 3,111 41,116 274 (6) 17,297 61,792 Issue of shares on exercise of options 17 664 - - - 681 > 17 Loss for the year - - - - (4,514) (4,514) Directors’ Report Share based payment charges - - - - 341 341 Share options awarded to employees of subsidiary undertakings - - - - 284 284 20 > Corporate Issue of shares by EBT on exercise of options - - - 1 (1) - Governance Equity dividends - - - - (4,913) (4,913) Report At 31 March 2009 3,128 41,780 274 (5) 8,494 53,671
24 > Corporate Responsibility 11. Contingent liabilities
The Company acts as a guarantor on the Group’s borrowing facilities. 30 > Loans of £119,833,000 (2008: £70,867,000) were drawn by subsidiary Directors’ undertakings at the balance sheet date. Remuneration Report 12. Derivatives and other 36 > Directors’ financial instruments Responsibilities The Company’s principal financial instruments, other than derivatives, comprise investments in subsidiary undertakings, intercompany debtors 37 > and creditors, bank loans and cash. The main purpose of these financial instruments is to raise finance for the Company’s operations. The Company Independent has other financial instruments such as trade creditors that arise from its Auditor’s Report operations. The Company issued shares during the current and prior year in relation to the exercise of share options under share schemes. 39 > Financial Statements
< > 90 03 > Financial Highlights
04 > Business Overview
06 > Chairman and General information Chief Executive’s Statement
10 > Business Review
Directors Bankers 16 > Board of G Kennedy (Chairman) Barclays Bank plc 1 Churchill Place Directors K Attwood (Chief Executive) London E14 5HP C Hindson A Reading Lloyds TSB Corporate 17 > Black Horse House J Brooks Directors’ Castle Park Report I Godden Cambridge CB3 0AR HSBC Corporate Banking Company Secretary 8 Canada Square > 20 S Weatherall London E14 5HQ Corporate The Royal Bank of Scotland Governance Registered Office Report 250 Bishopsgate 106 Waterhouse Lane London EC2M 4AA Chelmsford 24 > Essex CM1 2QU Auditors Corporate Ernst & Young LLP Responsibility Solicitors Compass House Macfarlanes LLP 80 Newmarket Road 20 Cursitor Street Cambridge CB5 8DZ 30 > London EC4A 1LT Directors’ Birkett Long Registrars Remuneration Ocean House Equiniti Report Waterloo Lane The Causeway Chelmsford Worthing Essex CM1 1BD West Sussex BN99 6DA 36 > Directors’ Responsibilities
37 > Independent Auditor’s Report
39 > Financial Statements
< > 91 03 > Financial Highlights
04 > Business Overview
06 > Chairman and Chief Executive’s Statement
10 > Business Review
16 > Board of Directors
17 > Directors’ Report
e2v technologies plc 20 > Corporate 106 Waterhouse Lane Governance Chelmsford Report Essex CM1 2QU England 24 > T +44 (0)1245 493 493 Corporate Responsibility F +44 (0)1245 492 492 E [email protected] 30 > Directors’ Investor relations enquiries to: Remuneration [email protected] Report
36 > Directors’ Responsibilities
37 > Independent Auditor’s Report
39 > Financial Statements
www.e2v.com
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