e2v technologies plc: annual report and financial ...business review 06 > chairman and chief...

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Financial Highlights

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Financial Statements

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Independent Auditor’s Report

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Directors’ Responsibilities

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Directors’ Remuneration Report

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Corporate Responsibility

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Corporate Governance Report

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Directors’ Report

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Board of Directors

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Business Review

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Chairman and Chief Executive’s Statement

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Business Overview

e2v technologies plc Annual Report and Financial Statements 2009

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e2v’s objective is to be a global leader in the design and supply of specialised components and sub-systems that enable the world’s leading systems companies to deliver innovative solutions for medical & science, aerospace & defence, and commercial & industrial markets.

e2v has four major product groups:

l Electron devices and sub-systems

l Imaging devices

l Specialist semiconductors

l Sensors

We offer our customers and partners the ability to satisfy their exacting requirements, our employees the most exciting of careers, our suppliers confidence in the strength of our business, and our shareholders a portfolio business of world beating products and technologies.

Who we are

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Reported Sales £m Adjusted* PBT £m (as restated)

Net Borrowings £mAdjusted* ePS pence (as restated)

l Sales up 14%, due to the benefit of acquisition and exchange rate movements.

l Adjusted* profit before tax down 13%.

l Adjusted* earnings per share flat at 30.20p.

l Cash generated from operations up 45% to £43m.

l Reported loss before taxation of £28.4m after – Impairment provisions - £28.6m. – Business improvement programme costs and provision - £6.8m. – Fair value losses on financial instruments - £4.7m.

l Ongoing business improvement programme delivered annual savings of £3.6m in the year.

l Acquisition of QP Semiconductor completed in October 2008 for £41.1m, net of cash acquired.

l Adverse exchange rates increased net borrowings by £20m.

l Order book at 31 March, £154m, up 26%. Up 9% at constant currency.

* 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.

Year ended31 March 2009

£million

Year ended31 March 2008

£million

Revenue 233.2 204.6

Adjusted* profit before tax 20.4 23.4

Profit before tax (28.4) 13.7

Profit after taxation (21.3) 11.8

Total shareholders’ equity 53.7 74.5

Net debt 136.2 (93.2)

Earnings per share – basic (34.42) 19.36p

Adjusted* earnings per share – basic 30.2p 30.08p

p

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Electron Devices and Sub-systems

Imaging Devices Specialist Semiconductors

Sensors

Business OverviewRevenue by division

£83.7m (£75.8m)

£65.2m (£60.6m)

£53.3m (£39.8m)

£30.9m (£28.4m)

Images courtesy of: Varian Medical Systems, NASA and Northrop Grumman

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Space and scientific imaging sensors

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High performance electron devices and sub-systems for applications including:

l Defence electronic countermeasures.

l Radiotherapy cancer treatment machines.

l Radar systems.

l Stellar satellite amplifiers.

l Digital television transmitters.

l Industrial heating.

Advanced CCD and CMOS imaging sensors and cameras for applications including:

l Space, science and life science imaging.

l Industrial process control.

l Intra-oral and panoramic dental x-ray systems.

l Military surveillance.

l Automotive imaging.

Specialist semiconductors, including logic, memory and microprocessors, for applications including:

l High reliability microprocessor requirements, in partnership with Freescale Semiconductor, and MRAMs in partnership with Everspin.

l Mission-critical avionics and defence programs requiring high reliability integrated circuits with continuity of supply over programme lifetimes.

l High speed data conversion.

l Sensor data acquisition utilising mixed signal application specific devices.

A wide range of professional sensing products for applications including:

l Environmental safety.

l X-ray spectroscopy.

l Automotive alarm and security systems.

l Microwave radar and safety and arming devices.

l Fire, rescue and security thermal imaging.

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George KennedyChairman

Keith AttwoodChief Executive

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e2v’s objective is to be a global leader in the design and supply of specialised components and sub-systems that enable the world’s leading systems companies to deliver innovative solutions for aerospace & defence, medical & science, and commercial & industrial markets.

The Group specifically targets markets that exhibit long term growth, high barriers to entry, require a significant proportion of bespoke design and have a limited number of competitors. e2v does not seek to compete in commoditised markets. To achieve this, e2v’s business strategy has four key elements:

l To focus our resources on product opportunities with sustainable growth and margins in current and adjacent niche market sectors;

l To extend our scope of supply, where appropriate, thereby maximising revenues from established market positions as well as developing new market positions;

l To continue our internal focus on productivity improvements; and

l To acquire complementary businesses and technologies to accelerate growth.

This has been a further year of expansion for the Group with the acquisition in 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 and strengthening our portfolio of specialist semiconductor products.

We have continued with the “Fit for the Future” programme during the year, incurring costs in the year of £2.2m and taking a further provision of £4.6m, as we launched a further phase of the programme, principally in the UK and France, with the continued combined objectives of improving customer service whilst also improving productivity through greater efficiency and strengthened processes. This programme delivered savings of £3.6m in the year.

Chairman’s and Chief Executive’s Statement

The Group specifically targets markets that exhibit long term growth, high barriers to entry, require a significant proportion of bespoke design and have a limited number of competitors.

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Military high-reliability integrated circuit

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Market Overviewe2v serves three key market sectors, medical & science, aerospace & defence and commercial & industrial.

The largest of these market sectors is aerospace & defence, where the e2v addressed market is estimated to be £1.1bn, which is relatively stable but subject to programme timings. e2v has participated in this market for more than 60 years establishing a strong, and in some niches, a market leading position and further strengthened this position with the acquisition of QP. At this time, the defence market is deferring spend on many programmes and, although the programmes e2v will participate in are known, contract awards are occurring more slowly. In the space market, programme funding has been largely unaffected by the economic down turn to date and this sector remains robust.

The next largest sector is commercial & industrial where the e2v addressed market is estimated to be £0.8bn. This sector has been seriously impacted by the economic downturn and remains the most challenging.

Medical & science is the smallest sector, where the e2v addressed market is estimated at £0.3bn and the main medical sub-sectors served by the Group, have also been impacted by the economic downturn. The scientific sector is relatively robust and is benefiting from certain national government stimulus measures.

Business StructureThe Group is organised into four divisions that are supported by Group functions:

l electron devices and sub-systems – high performance electron devices and sub-systems for applications including defence electronic countermeasures, radiotherapy cancer treatment machines, radar systems, satellite communications amplifiers, digital television transmitters.

l Imaging devices – advanced CCD and CMOS imaging sensors and cameras for applications including space, science and life science imaging, industrial process control, intra-oral and panoramic dental x-ray systems, military surveillance, automotive imaging.

l Specialist semiconductors – including logic, memory and microprocessors for high reliability microprocessor and MRAM requirements, in partnership with Freescale Semiconductor and everspin, mission-critical avionics and defence programs requiring high reliability integrated circuits, high speed data convertors and sensor data acquisition utilising mixed signal application specific devices.

l Sensors – a range of professional sensing products for applications including environmental safety, x-ray spectroscopy, automotive alarm and security systems, microwave radar and safety and arming devices, fire rescue and security thermal imaging.

Group functions cover:

l Global operations with responsibility for all manufacturing and supply chain activity;

l Global sales that manage our customer relationships throughout the world through a combination of e2v’s own sales and support offices and a network of distribution partners and representatives; and

l Support services including finance, legal, IT and HR.

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Financial PerformanceReported revenue for the Group increased by 14% to £233.2m, and by 3% 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 performance of the underlying business.

In light of the recent major changes in the Group’s markets, provisions 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 intangibles of £8.6m (2008: £7.3m), fair value losses on foreign exchange contracts and interest rate swaps of £4.7m (2008: £0.4m) these have 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 per share amounted to a loss of 34.42p (2008: 19.36p earnings).

Given the Group’s focus on cash conservation and debt reduction, the Board is not proposing a final dividend. An interim dividend of 2.7 pence per share was paid on 8 January 2009.

The weakening of Sterling during the year against both the euro and US dollar has significant ramifications for the Group. Whilst exports from europe, and particularly the UK, are now more competitively priced against US competitors’ products, the Group’s currency borrowings have, when 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).

Cash flows generated from operations increased to £43.0m (2008: £29.7m).

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 is consistent with last year, on a constant currency basis, and is weighted towards the second half.

Impairment ProvisionsThe economic downturn in the last quarter of 2008/09 and the ongoing impact has resulted in write downs of the acquired intangible assets with respect to the imaging business in Grenoble, which serves primarily the industrial and medical markets, of £17.4m. A strategic review of the 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 continues to perform satisfactorily. The review, of the overall imaging business identified plant and equipment, where the remaining useful life 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 business acquired in October 2008 of £7.0m. This provision arises due to delays in programme awards impacting 2008/09 and 2009/10 and a prudent 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 listed, have also been written off as the associated products are within approximately five years of their commercially exploitable term.

Chairman’s and Chief Executive’s Statement

* 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.

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The BoardThe Board consists of the Chairman, three independent Non-executive 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.

Our PeopleAchieving 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, we would like to register our thanks to the team for their efforts.

Summary and OutlookThe Group has experienced softer market conditions in many of its markets in the current calendar year. We are seeing general market softness with order deferments in the defence sector, although we have an active opportunity pipeline. In the medical sector, new equipment 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 a lower level of activity in the first half of the year ending 31 March 2010 and therefore the Board has implemented a range of actions.

The business improvement programme, ‘Fit for the Future’, was extended 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 savings of c£5m. As a consequence of the tougher trading conditions, the Board has instigated further actions to contain costs including 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 half of the financial year ending 31 March 2010 should benefit from the stronger than normal order book for this period, opportunities for defence projects in the order pipeline and strength in specific sectors, including 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.

The above actions should provide some headroom at 30 September 2009 and, together with the anticipated trading in the second half, provide 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.

We consider the first half of the financial year ending 31 March 2010 to 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 range of options for the most appropriate long term capital structure for the Group.

Ordnance safety and arming unit

George Kennedy Chairman

Keith AttwoodChief Executive Officer

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Business Review

OverviewThe Group achieved revenue of £233.2m (2008: £204.6m) and adjusted* profits before taxation of £20.4m (2008: £23.4m).

Whilst reported sales grew by 14% this increase was solely due to the impact of acquisitions and exchange rates. Overall the underlying business was flat when compared with the previous year. Although there was growth in the electron Device & Sub-systems (eDS) and sensor divisions both the imaging and specialist semiconductor divisions’ performance declined. The Group experienced significant deterioration in demand in the fourth quarter in industrial markets, particularly imaging within industrial processing and the automotive sector, but generally across the whole sector. This decline has continued into the current financial year. Fourth quarter performance was also held back by technical problems on space programmes within imaging, that impacted sales levels but did not significantly increase costs, as well as destocking within radiotherapy and lower general demand within eDS for cargo screening.

Gross profit increased by 9.1% to £79.0m (2008: £72.4m) and represented 33.9% of sales (2008: 35.4%). The exchange rate movement has increased revenue but costs were adversely impacted and margins fell by 0.7% as a consequence. There has also been an increase in depreciation, material and utility costs. The £3.6m of savings delivered from the business improvement programme and the favourable impact of the QP acquisition only partly offset these adverse impacts.

Adjusted* profit before taxationThe adjusted* profit before taxation more accurately reflects the underlying performance of the business and is calculated as follows:

expenditure on research and development has increased to £17.1m (2008: £14.0m). £1.5m of the impairment in acquired intangibles is included in the charge (2008: £0.1m) and excluding this amount the increase of 12.2% overall is due to exchange rate movements in relation to the research and development at the French operating site, as well as the QP acquisition. There were significant reductions in research and development within the electron devices and sub-systems division, but this was more than offset by additional investment in CMOS technology within the imaging division.

Selling and distribution costs increased by 28.8% to £18.0m (2008: £14.0m). £1.7m of the increase is due to exchange rates when converting the cost of overseas sales offices to Sterling. The remaining increase reflects the full year impact of the expansion in selling capability undertaken in the previous financial year.

Administrative expenses increased to £63.4m (2008: £25.0m). Administrative expenses include a number of the items added back to adjusted profits of £45.4m (2008: £9.6m) detailed below. The remaining administration expenses of £18.0m (2008: £15.4m) increased by 17% and £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 management below Board level as well as additional resource to support the enlarged Group.

Year ended 31 March 2009

£000


£000

(Loss)/profit before taxation (28,405) 13,747

Included in administrative expenses:

Amortisation of acquired intangible assets 8,628 7,310

Impairment of acquired intangible assets 24,579 -

Impairment of plant and equipment 2,500 -

Business improvement programme costs 6,826 1,996

Fair value losses on foreign currency contracts 2,894 357

Included in research and development costs:


Fair value losses on interest rate swaps 1,819 -

Adjusted* profit before taxation 20,389 23,410

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The increase in amortisation of acquired intangible assets in 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.

In the review of the carrying value of intangibles and plant and equipment, total impairment of £28.6m has been provided (2008: £nil). Further details are included in the Chairman’s and Chief executive’s Statement.

The Group continues its drive to improve efficiency and has invested further in its business improvement programme incurring a charge in 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 the income statement. This amounted to a loss of £2.9m (2008: £0.4m) and is described as ‘fair value losses on foreign exchange contracts’.

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).

£ million 2008/2009 2007/2008 2008/2009 2007/2008

Electron Devices & Sub-systems 83.7 75.8 15.7 17.5

Imaging Devices 65.2 60.6 4.3 7.2

Specialist Semiconductors 53.3 39.8 13.1 6.4

Sensors 30.9 28.4 (1.6) (0.5)

233.2 204.6 31.5 30.6

Group functions (11.1) (7.2)

20.4 23.4

Revenue Adjusted* profit

Revenue and adjusted* profit before interest and tax by division was as follows:


Reported sales grew by 14% and gross profit increased by 9.1%.

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Business Review

Automotive semiconductor air quality sensing

Finance chargesHigher finance costs this year are as a result of using debt to finance 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%.

TaxationThe 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 years. The tax charge in the current year has benefited from an increased deduction in respect of tax credits for research and development in both the 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.

CurrencyThe Group’s primary exposure to foreign currency continues to be the US dollar 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 was a gain of £1.3m. Sales revenue denominated in euros accounts for 28% (2008: 31%) of the total but the majority of this exposure is offset by expenditure.

In the year ended 31 March exchange rates applied were:

63% of the Groups borrowings are denominated in euros and 31% are denominated in US dollar. The movement in exchange rates in these currencies has led to a translation loss in net debt of £20.8m (17%) in the year.

Cash flow and net borrowingsThe 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 despite lower levels of profit, due to cash generation from working capital.

Cash expended on tangible assets and software amounted to £10.8m in the year (2008: £12.6m).

Net borrowings at 31 March 2009 amounted to £137.3m (2008: £94.4m), equating to 3.19 times an eBITDA, as defined in the banking agreements.

Borrowing facilitiesThe Group’s multi currency borrowing facilities expire in July 2011 and currently consist of a term loan of €60.4m and general corporate purposes facilities of €35.0m, £41.1m, and $65.0m. At 31 March 2009 a total of £143.7m had been 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.

2009 2008 2009 2008

US dollar 1.75 2.01 1.43 1.99

Euro 1.22 1.43 1.07 1.26

Average Year End

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Thyratron for cancer radiotherapy

Sales in electron devices and sub-systems increased by 10% to £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 the renewal of multiyear contract orders in radiotherapy. The element of the order book on defence contracts was £17.5m (2008: £30.9m). £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 equipment demand and destocking amongst our OeM customers, with the underlying demand for spares unaffected. Since the year end a unique 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.

In defence, sales increased with the strong execution of order book including contracts for eurofighter and deliveries on the first tranche of 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, and development of a broader range of products for these applications, the division is now well placed to meet further potentially significant requirements for the UK and US armed forces. The order book at the 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.

Sales also grew in the division’s other markets with initial growth in cargo screening demand driven by legislation and completion of existing ship building contracts and spares for marine radar, together with new product introductions in satellite communications. Cargo screening demand slowed in the fourth quarter from Asia and this continues into the current year.

The division’s adjusted* profit before taxation was £15.7m (2008: £17.5m), a reduction of 10%. This was due to utility price increases and increases in selling and administration costs despite savings being achieved from the business improvement programme.

Electron devices & sub-systems

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Sales in specialist semiconductors were £53.3m (2008: £39.8m), up 34%. The growth came from the acquisition of QP and, at constant currency, sales were down 4%.

The order book at 31 March 2009 was £19.6m (2008: £15.6m). The element due for delivery in FY2010 was £16.3m (2008: £13.3m) but down 5% at constant currency rates.

The acquisition of QP, completed in October 2008, contributed sales of £7.2m and profit before taxation of £3.3m. In addition there was strengthened european demand with programmes for Airbus and eurofighter Typhoon which partly offset weaker demand in the US aerospace & defence markets.

The successful partnership with Freescale has been further enhanced through the release of new generations of multi-core processors in high-reliability versions. In addition, we are working with everspin to

implement a similar business model for MRAM devices. There have also been design wins for the development of new space grade data converters and the development of a two core ASIC technology platforms for sensor signal acquisition in commercial and industrial markets. In addition there has been a progression for e2v in the value chain with the development of assembly and test services for high reliability application. First contracts have been obtained from space agencies for evaluation and qualification of the manufacturing line.

Whilst there has been significant progress on new products, the commercial aerospace and industrial markets are now feeling the effects of economic slowdown. In addition defence programmes are being deferred and securing contract awards is a priority. The division’s adjusted* profit before taxation was £13.1m (2008: £6.4m), an increase of £6.7m reflecting the contribution of QP of £3.3m as well as maintaining the beneficial impact of exchange rates.

Specialist semiconductors


Sales in imaging increased by 8% to £65.2m (2008: £60.6m), but fell 7% at constant currency rates.

The order book at 31 March 2009 was £40.4m (2008: £39.5m). The element due for delivery in FY2010 amounted to £29.2m (2008: £28.0m), down 15% at constant exchange rates.

The economic environment significantly impacted two areas of activity; industrial machine vision and x-ray dental imaging.

Machine vision cameras and sensors are used in a range of different process control systems, from flat panel displays inspection to food sorting or barcode reading. Sales in this segment, despite a strong first half, were impacted by a significant lack of end customer demand restricting investment in manufacturing capacity by end customers.

Similarly sales were lower for x-ray dental imaging in the second half due to the gradual impact of industry consolidation, particularly the intra oral segments and the economic slowdown.

These changes in market demand have lead to the assessment of the impairment of the imaging divisions’ activities in Grenoble, acquired in

2006, resulting in the reported impairment provisions of £17.4m, together with an impairment provision of £2.5m against fixed assets in the UK.

Sales for space programmes were down due to a combination of factors such as the delay of some major space programmes, both for earth observation and space science as well as internal technical issues delaying contract completion. There was continued growth in scientific imaging utilising the division’s low light level technology. Funding levels within the space and science sectors have so far not been materially impacted by the economic slow down.

e2v remains well positioned to operate as a key supplier into this high-end imaging market, both with a respected position in europe as well as becoming a significant supplier to the emerging markets in Asia.

The division’s adjusted* profit before taxation was £4.3m (2008: £7.2m), a reduction of £2.9m. This reflected major investment in the development of CMOS technologies for new products, which will use an outsourced manufacturing model, and operational gearing utilising the in house manufacturing for CCD technologies as well as a result of lower volumes and higher warranty costs.

Imaging devices

Business Review

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Sales in sensors were up 9% to £30.9m (2008: £28.4m), and up 3% at constant currency rates.

The order book as at 31 March 2009 was £18.2m, (2008: £14.5m) with £13.7m (2008: £10.7m) due for delivery in FY2010, up 23% in constant exchange rates.

The division comprises a number of small businesses across the spread of e2v’s addressed market sectors.

The Lincoln facility covers activities in microwave and high speed electronics. Programme phasing on defence activities resulted in lower sales and profits although there was growth in commercial radar. The safety and arming products are seeing increasing interest from a range of european OeMs. This business is currently for sale as part of the initiatives to reduce borrowings.

The Group has two automotive product lines, representing 2% of Group turnover. Performance in both areas was affected by the automotive sector slowdown, although MiCS, which supplies air quality sensors, achieved growth by winning new customer platforms in the Asia Pacific region. A last time buy has been implemented on loss making automotive products. New products are to be launched, aimed at non-automotive applications, utilising the MiCS technology.

Thermal imaging cameras delivered a significant order to the Australian navy but did not achieve growth overall, having won a similarly large

order from the UK navy in the prior year. New variants of the product have been launched, targeting, amongst others, the law enforcement market.

For gas sensors, initial demand from China delivered significant growth from a small base. Strong engagement with customers in the territory positions the division well for growth, driven by changes in legislation.

Scientific Instruments continued on its growth profile driven by a high level of market acceptance of the SiriusSD product for x-ray fluorescence spectroscopy.

During the year, the Group continued with the development of its biosensors programme at a cost of £1.0m. The technical objectives have not been reached and, following an independent review, the programme has been closed.

The division’s adjusted* operating loss was £1.6m (2008: £0.5m), an increase of £1.1m, reflecting lower performance from the microwave and high speed electronics business and slow growth in automotive activities.

Since the year end the Group has agreed to explore the opportunity to sell the microwave and high speed electronic business at Lincoln and continues to focus on efficiencies to improve the overall profitability of the Group.

Sensors

Group functionsUnallocated 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 a profit of £0.8m in the prior year.

The acquisition of QP, completed in October 2008, contributed sales of £7.2m and profit before taxation of £3.3m.

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Jonathan Brooks Independent Non-Executive Director

Jonathan is a Non-executive Director of Aveva Group plc, an LSe-listed engineering IT software provider to the plant, power and marine industries; Xyratex Limited, a NADAQ-listed provider of enterprise class data storage sub-systems and network technology and of Sophos plc, a privately held software security control company. He is also Chairman of Picochip Inc., a venture capital-backed company developing wireless processors. Between 1995 and 2002, he was Chief Financial Officer and a Director of ARM Holdings plc, where he was a key member of the team that developed ARM Holdings to be a leader in its sector.

Ian Godden Independent Non-Executive Director

Ian, after gaining managerial and technical experience in the worldwide oil industry, focussed on strategy consultancy in the United States and europe. During the 1990s he was UK Managing Partner and european Board Member of Booz Allen and Hamilton, and UK Managing Partner of Roland Berger Strategy Consultants. He started up a successful consultancy serving industrial and technology companies which he subsequently sold in the late 1990s. Ian is currently CeO of the Society of British Aerospace Companies (SBAC), President and CeO of Glenmore energy (USA), Non-executive Director of KBC Advanced Technologies and a senior adviser to The Parthenon Group. He has been a Non-executive Director of e2v since 2003.

George Kennedy CBE Chairman

George has spent most of his career at the Smiths Group, which he joined in 1973, where he was an executive Director holding various positions culminating in the Chairmanship of the Medical Systems Division. In addition to his position as Chairman of the Company, he is also currently deputy Chairman of Vernalis plc, and holds other Non-executive positions. He has experience working with government organisations and is currently Chairman of the Healthcare Division of the Iraqi Reconstruction Group. George has demonstrated a track record of leading high-tech businesses working in a global market place. In 1997, he was awarded a CBe for services to the healthcare industry and exports.

Keith Attwood Chief Executive Officer

Keith has 25 years of commercial management experience, gained in telecommunications, avionics and electronic components. He has held a range of senior positions within UK industrial companies, including Operations Director (GeC-Marconi Avionics Ltd) and Project Director (GPT Ltd), prior to joining the Group as Managing Director in 1998. Keith led the MBO of e2v from Marconi plc in 2002 and floated the Company on the London Stock exchange in July 2004. He has subsequently led the business through a period of sustained growth. He is currently Vice Chairman of the CBI east of england Regional Council.

Anthony Reading MBE Senior Independent Non-Executive Director

Tony was appointed to the Board in 2004. He was an executive Director of Tomkins plc and Chairman and Chief executive of Tomkins Corporation, USA, for eleven years, until the end of 2003. He is currently a Non-executive Director of Spectris plc, Laird plc and Taylor Wimpey plc, and previously a Non-executive Director of George Wimpey plc.

Charles Hindson Group Finance Director

Charles joined the e2v board in May 2009. Charles’s last role was Chief executive, and prior to that Group Finance Director, of Filtronic plc, a UK listed specialist electronics manufacturing group. Previously, he was Finance Director at eutelstat S.A. and held various positions with the BT Group, British Gas plc, Price Waterhouse and 3i plc.

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Principal activityThe Group's principal activity is the design and supply of 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 devices and sub-systems, imaging devices, specialist semiconductors and sensors supported by Group functions. During the year, the Group 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 distributors covering the Americas, europe, Middle east, Africa, Asia Pacific and Australia.

Review of business and future developmentsA review of the year’s operations, including the Group’s key performance indicators covering revenue, adjusted* profit before taxation and order 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 Business review on pages 8 to 13.

Since the end of the year Mike Hannant has resigned as a Director and Charles Hindson has been appointed as Group Finance Director. Futhermore following a review of business activities the Directors have, since the year end, agreed to seek a buyer for the microwave and high speed electronics business in Lincoln and announced the closure of the Biosensors business activity.

Acquisition On 10 October 2008, the Group acquired 100% of the equity of QP, a leading designed and supplier of specialist semiconductor components based in North America for £46.3m (£41.1m net of cash acquired). The acquisition was financed by bank borrowings.

The Directors present their annual report and the audited financial statements for the year ended 31 March 2009. The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The Company financial statements have been prepared in accordance with UK generally accepted accounting practice (UK GAAP).

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Principal risks and uncertaintiesAs noted in the corporate governance report, the Board has adopted processes to identify, evaluate and manage the significant risks faced by the Group. The more significant risks and uncertainties faced by the Group are set out below.

l Foreign currency exchange risk During the year the Group had manufacturing operations in the UK, France, USA and Switzerland, but has a global distribution base, and is therefore subject to currency transaction, as well as translational risks, predominantly between Sterling and the US dollar and euro. The Group’s borrowings are predominantly denominated in US dollar and euro and are exposed to translational risks which impact the Group’s banking covenant ratios. These amounts are not covered by any foreign exchange hedging arrangements.

Overall, the Group has no significant exposure to other currencies. The Group seeks to minimise its exposure to transactional currency risks through the use of forward foreign exchange contracts.

l Competition Whilst the market for the Group’s products is well established and we continue to invest in research and development activities to deliver continued advancement in technology, products will continually be at risk of being superseded as a result of improvements in alternative technologies that provide the same or comparable functionality. In addition, the increasing costs of operating in Western europe could be a threat to profitability for the foreseeable future.

l Markets and customers The Group can be subject to significant variations and costs attributable to individual product lines and markets as a result of the timing and quantum of orders, the impact of new product lines and the applicable legislative and regulatory framework.

l Legislation The Group monitors changes in legislation to anticipate the effect on its business and that of its customers and suppliers. A tightening of environmental legislation continues to add pressure to operating costs that the Group mitigates, where possible, through improved efficiencies. Unforeseen changes in legislation both in the United Kingdom and overseas, can have an adverse impact on operations.

l Acquisitions 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 growth. The Group carries out thorough due diligence in respect of each acquisition prior to completion. However there is a risk that the predicted benefits of acquisitions may not always be achieved in the anticipated timescales or that some benefits may not be achieved at all.

The financial risk management objectives and policies are discussed in note 28.

Results and dividendsThe loss before taxation amounted to £28.4m (2008: £13.7m profit). The loss attributable to ordinary shareholders amounted to £21.3m (2008: £11.8m profit). Dividends paid during the year amounted to £4.9m (2008: £4.4m) as disclosed in Note 11.

The Directors do not recommend the payment of a final dividend (2008: 5.25p).

Property, plant and equipmentLand and buildings at the Group’s facility in Grenoble were acquired at fair value in July 2006 and have not subsequently been revalued. Although there have been no formal valuations carried out for the remainder of the Group’s land and buildings, the Directors believe the market value to be significantly in excess of book values.

Research and developmentThe Group continues to commit significant resources to existing product enhancement as well as the introduction of new products for established and emerging markets. Resource is also invested in a number of collaborative relationships with key universities to achieve leverage, knowledge exchange and access to and training of talented young scientists and engineers. This is achieved through various mechanisms including a number of Knowledge Transfer partnerships. Customers fund directly a substantial proportion of expenditure on product enhancement and new product development but the amount funded by the Group amounted to £17.1m (2008: £14.0m).

Takeovers directivePursuant to s992 of the Companies Act 2006, which implements the eU Takeovers Directive, the Company is required to disclose certain additional information. Such disclosures, which are not covered elsewhere in this Annual Report include the following:

l The Company’s Articles of Association (‘Articles’) give power to the Board to appoint directors, but require directors to submit themselves for election at the first Annual General Meeting following their appointment and for re-election where they have been a director at each of the preceding two Annual General Meetings and were not appointed or re-appointed by the Company at, or since either such meeting. The Articles may be amended by special resolution of the shareholders and will be made available to view on the Company’s website following this year’s Annual General Meeting.

l The Board is responsible for the management of the business of the Company and may exercise all the powers of the Company subject to the provisions of the relevant statutes, the Company’s Memorandum of Association and the Articles. The Articles contain specific provisions and restrictions regarding the Company’s power to borrow money. Powers relating to the issuing and buying back of shares are also included in the Articles and such authorities are renewed by shareholders each year at the Annual General Meeting.

l There are a number of agreements that take effect, alter or terminate upon a change of control of the Group following a takeover, such as bank loan agreements and company share plans.

l There are no restrictions on the transfer of securities, restrictions on voting rights and agreements between shareholders.

Share capitalDetails of the Company’s authorised and issued share capital are given in note 23 to the financial statements. No shares have been issued between 31 March 2009 and the date of this report as a result of the early exercise of share options by employees.

DirectorsProfiles of all Directors at the date of this report appear on page 14. The beneficial and non-beneficial interests, including family interests, in the share capital of the Company, for Directors in office at the end of the year are detailed on page 30.

Directors’ Report

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Avionics broadband data converter

Directors’ indemnity insuranceThe Company has indemnified the Directors of the Company and all its subsidiaries against liability in respect of proceedings brought by third parties, subject to the conditions set out in the Companies Act 1985. Such qualifying third party indemnity provision was in force during the year and is still in place as at the date of this report.

Creditor payment policyThe Group seeks to abide by the payment terms agreed with suppliers whenever it is satisfied that the supplier has provided the goods or services in accordance with the agreed terms and conditions. The Group does not have a standard or code of conduct which deals specifically with the payment of suppliers. The Group’s average creditor payment period at 31 March 2009 was 59 days (2008: 67 days).

The Company had trade creditors amounting to £474,000 at the end of the year (2008: £64,000).

Charitable and political donationsDetails 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.

Interest in voting shares At 21 May 2009 the Company had been notified of the following interests of 3% or more in the Company’s ordinary shares.

Disabled employees and employee involvementThe Group endeavours to provide equality of opportunity in recruiting, training, promoting and career development to all, irrespective of sex, race, religion or colour. The Group gives full consideration to applications 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.

Percentage of ordinary

share capital

No. of ordinary shares

of 5p each

Aberforth Partners 19.62 12,273,358

AXA SA 13.27 8,301,610

Legal and General Investment Management 7.82 4,889,831

Insight Investment Management 5.70 3,564,129

JP Morgan Asset Management 5.53 3,460,219

Aviva Investors 5.18 3,239,112

Henderson Global Investors 3.65 2,286,721

Schroder Investment Management 3.65 2,284,746

Standard Life Investments 3.48 2,177,148

Invesco Perpetual Asset Management 3.17 1,983,509

Provision of information to auditors Having made enquiries of fellow Directors and of the Company’s auditors, each of the Directors at the date of approval of this report confirms that:

l To the best of his knowledge and belief, there is no information (that is information needed by the Group’s auditors in connection with preparing their report) of which the Company’s auditors are unaware; and

l The Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

AuditorsA resolution to reappoint ernst & Young LLP as auditors will be put to the members at the next Annual General Meeting.

By order of the Board

Sally Weatherall Secretary

8 June 2009

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e2v technologies plc recognises the importance of, and is committed to, high standards of corporate governance and as such the Board acknowledges its contribution to achieving management accountability, improving risk management and ultimately creating shareholder value.

This statement explains how the Group has applied the main and supporting principles of corporate governance and describes the Group’s compliance with the provisions set out in Section 1 of the Combined Code on Corporate Governance published by the Financial Reporting Council in June 2006.

Statement by the Directors on compliance with the combined codeThe Group has complied with the provisions set out in Section 1 of the combined code throughout the year.

The board of DirectorsThe Group is headed up by an effective Board which currently comprises the Chairman, Chief executive, the Group Finance Director and three Non-executive Directors. Jonathan Brooks, the Chairman of the audit committee is the member of that committee who is deemed to have recent and relevant financial experience. All of the Non-executive Directors are considered by the Board to be independent. Their biographies on page 14 demonstrate a range of experience and sufficient calibre to bring independent judgement on issues of strategy, performance, resources and standards of conduct which is vital to the success of the Group.

The Articles of Association require that Directors retire in the third calendar year following the year in which they were elected. Any Director appointed by the Board is required to submit themselves for re-election at the next Annual General Meeting after appointment. George Kennedy and Anthony Reading will retire by rotation at the Annual General Meeting and submit themselves for re-election.

Role of the Board membersThe Non-executives’ primary responsibilities are to:

l ensure the principles of corporate governance are applied;

l Approve the strategy for the business;

l ensure the strategy is being implemented; and

l Provide independent advice on the implementation of the strategy and other day to day matters where their experience is relevant.

The executives’ primary responsibilities, together with members of the senior management team are to:

l Formulate the strategy of the business and obtain Board approval; and

l Implement the approved strategy subject to agreed levels of authority.

There exists a clear division of responsibilities between the Chairman 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 and are working effectively. The Chief executive Officer's primary role is to provide overall leadership and vision in developing, with the Board, the strategic direction of the Group. Additionally, the Chief executive Officer 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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as attendance at quarterly reviews when senior members of executive management, who are not Board members, attend. Matters beyond the authority limits of the CeO include, for example, the approval of customer quotes over the approved financial limit set by the Board, certain activities relating to mergers and acquisitions as well as approval of the annual budget.

Principal board committeesThe Board has established the following committees whose individual terms of reference have been reviewed during the year.

Audit committee The committee is chaired by Jonathan Brooks and has met four times during the year. Other members of the committee are Anthony Reading and Ian Godden. The Chairman, CeO and Group Finance Director attend audit committee meetings by invitation and the audit partner attends at least two of the meetings. At meetings reviewing the interim and full year results the Non-executive Directors exercise their right for discussions with the audit partner where no executive Directors, or the Company Secretary, are present. The terms of reference of the audit committee include:

l To keep under review the effectiveness of the financial reporting and internal control policies and procedures for the identification, assessment and reporting of risks;

l Review the arrangements for what is commonly known as ‘whistle blowing’;

l Consider the requirements for establishing an Internal audit function;

l Make recommendations to the Board in relation to the appointment and re-appointment of the external auditors as well as oversee the selection process of any new audit appointment;

l Keeping under review the relationship with the external auditors including assessments of independence and objectivity as well as fee levels and terms of engagement;

l Reviewing the findings of the audit with the external auditors; and

l Reviewing the consistency of accounting policies on a year to year basis and across the Group.

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, of which £518,693 were in connection with the acquisition of QP and £16,200 with regard to claims for government grants and rebates. The Company engages other independent firms of accountants to perform tax consulting and other consulting work. The committee has monitored the level of non-audit services provided by the external auditor with a view to ensuring objectivity, independence and cost effectiveness.

The Board continues to review the key risks to the business through the Group’s risk management process, managed by the Group Finance Director.

Remuneration committee The committee is chaired by Anthony Reading and has met four times during the year. Other members of the committee are Jonathan Brooks and George Kennedy. The CeO and senior human resources manager within the Group attend all meetings. The Group Finance Director attends when requested. The terms of reference of the committee include:

l Agreeing with the Board the framework or broad policy for the remuneration of the executive Directors and other members of executive management, as well as review the appropriateness and relevance of the policy;

l Determine targets for any performance related pay schemes and approve total annual payments under the schemes;

l Review all share incentive plans, the related performance targets and all awards made under the schemes;

l Determining the individual remuneration packages of senior management within the agreed policy as well as contractual arrangements, including pension provisions;

l Determining the procedure for vetting, authorising and re-imbursement of claims for expenses for all directors; and

l establishing selection criteria, terms of reference and selection and employment of remuneration consultants.

Full details of Directors’ remuneration and policies applied by the Board are set out in the Directors’ remuneration report on pages 28.

Nomination committee The committee is chaired by George Kennedy. The other members of the committee are Keith Attwood and Anthony Reading. The committee has met twice during the year. The terms of reference of the committee include:

l Regular review of the structure, size and composition of the Board;

l Formal, rigorous and transparent procedures for new appointments to the Board;

l The formal selection and nominations for Board approval of any new Board appointments; and

l Provision of recommendations to the Board regarding succession, re-appointment and membership of the audit and remuneration committees.

During the year specialist recruitment consultants were used to identify candidates for the role of Group Finance Director based on a profile and detailed job description provided by the Group. All short listed candidates were interviewed individually by the Directors before a final selection was made and a recommendation made to the Board.

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Induction and trainingAny new directors will receive induction on their appointment to the Board covering the activities of the Group and its key business and financial risks, the terms of reference of the Board and its committees and the latest financial information about the Group. Ongoing training is provided as necessary. Directors may consult with the Company Secretary at any time on matters related to their role on the Board. All Directors have access to independent professional advice at the Group’s expense where they judge it necessary to discharge their duties, with requests for such advice being authorised by the Chairman or the Company Secretary.

Peformance evaluation of the BoardThe Chairman and Company Secretary undertook a performance evaluation of the Board which required an assessment, by each individual director, of the performance of the Board and its Committees by way of an anonymous questionnaire and ratings process. The results of this assessment were reviewed by the Board and there were no areas of concern. The Senior Independent Non-executive Director also led a performance review of the Chairman, which required an assessment, by each Non-executive Director, of the performance of the Chairman. This assessment was reviewed by the Board and there were no areas of concern.

Communication with shareholdersThe Annual Report and Financial Statements and the Interim Report provide investors with a half yearly balanced view of the Group’s activities and performance. The interim results were distributed to all shareholders in December 2008. Investors are also welcome to attend the Annual General Meeting. Apart from the Annual General Meeting, the principal form of communication with private investors is the Company’s web site which is updated regularly with Company information.

The Chairman is available to Institutional Investors but the principal contact points are the CeO and Group Finance Director. The Senior Independent Non-executive Director, Anthony Reading, is also available for any investors to address concerns they may have. Presentations are given to individual institutions, or on a Group basis if preferred, following the announcement of interim and full year results. Site tours and ad-hoc meetings are also arranged where requested. For example, in January 2009 institutional investors were invited to a presentation on the Groups’ overall market positions, strategy and on-going operational actions.

Control environment and internal controlsThe Directors acknowledge that they are responsible for the Group’s system of internal control and for reviewing its effectiveness. The system is designed to manage rather than eliminate the risk of failure to achieve the Group’s strategic objectives, and can only provide reasonable and not absolute assurance against material misstatement of loss.

An ongoing process, in accordance with the guidance of the Turnbull Committee on internal control, has been established for identifying, evaluating and managing the significant risks faced by the Group. This process has been in place throughout the year under review and up to the date of approval of the financial statements. The Board regularly reviews the process.

The Group’s key risk management processes and system of internal control procedures include the following:

Management structureThe Group has adopted procedures for the delegation of authority and authorisation levels, segregation of duties and other control procedures. Appointments to the most senior management positions within the Group require Board approval.

Identification and evaluation of business risksThe major financial, commercial, legal, regulatory and operating risks within the Group are identified through a range of review meetings at the relevant management level. Senior management are also involved in the preparation of an annual risk assessment report which is reviewed by the Board.

Information and financial reporting systemsThe Group’s comprehensive planning and financial reporting procedures include detailed operational budgets for the year ahead and a three year rolling business plan, both of which are approved by the Board. Performance is monitored on a regular basis through monthly reporting and regular forecast updates.

Investment appraisalAll capital expenditure and research and development projects require detailed written proposals and go through strict authorisation processes. All acquisitions are subject to Board approval and commercial, legal and financial due diligence is carried out if a business is to be acquired.

Throughout the Group there are clear lines of delegated authority covering the full range of financial commitments. A schedule of delegated authority for the Board to the CeO is agreed annually and items requiring Board approval are either agreed at monthly Board meetings, or at intervening meetings specifically arranged for the purpose.

At the monthly Board meetings the Non-executives review the reports presented to them by the CeO and Group Finance Director, which include a review of the financial results. This review compares current year to previous year and the annual operating plan as well as a current year forecast and order book levels.

At the current time the Board are of the opinion that a formal internal audit function is not considered necessary due to the structure and size of the Group, widespread executive involvement in the day to day business and the levels of variance analysis undertaken by the executive management and reported to the Board. However, the Board consider that it is appropriate to use a specialist organisation to undertake internal control reviews in specific areas of risk. Such reviews are determined by the audit committee. In the year ended 31 March 2009, KPMG were contracted to fulfil this role.

A formal “whistle blowing” policy is operated and is included in the Group’s employee handbook.


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Board meetings and attendanceIn addition to the Committee meetings noted above, there were 10 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.

Going concern The Group meets its day to day working capital requirements through loan facilities which are due for renewal on 11 July 2011.

As highlighted in note 2 to the financial statements, in the six months to 31 March 2009 the weakening of Sterling increased 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.

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 markets in which the Group operates in the current calendar year, leading to a lower level of activity in the first half of the year ending 31 March 2010. Therefore the Board are implementing plans to reduce costs and production capacity primarily in this period, which are challenging.

The Group’s borrowings are largely denominated in euro and US dollar and there is significant uncertainty as to their translated value on 30 September 2009 and 31 March 2010 as this will depend on the euro and US dollar exchange rates at the time.

The Directors of the Group have prepared detailed profit and cash flow forecasts through to 30 September 2010. In considering these profit and cash flow forecasts and the plans to reduce costs and limit production capacity, the Directors have carefully considered the assumptions and 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.

The Directors of the Group have concluded that the combination of these circumstances represents a material uncertainty that casts significant 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 a reasonable expectation the Group can remain within these arrangements as at September 2009 and, with increased headroom, at 31 March 2010. On this basis the Directors believe that it is appropriate to prepare the financial statements on a going concern basis.

On behalf of the Board

Jonathan Brooks Chairman of the audit committee

8 June 2009

Travelling wave tube for defence radar

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At e2v we strongly believe that we should consider the interests of the global community when conducting our business, ensuring that we function in an ethical and responsible way at all times. This involves considering the impact of our activities on society and the environment at large, as well acting responsibly towards our customers, suppliers, employees, shareholders and communities.

e2v is committed to adding value through bright ideas and has defined a corporate responsibility framework which goes further than just complying with statutory requirements and make steps to improve the quality of life for employees and their families, as well as making a sustainable contribution to the environment, local community and society at large.

Investorse2v promotes two-way communication with current and potential investors.

Our policy is to:l ensure timely delivery of

information in line with regulatory requirements.

l Provide information in paper format whilst promoting the electronic provision of information via our “investor relations” website.

l Make an additional annual presentation to investors and analysts.

l Retain a financial PR consultancy to ensure all communication is timely, appropriate and in accordance with best practice.

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Supply Chaine2v works to build long term relationships with its suppliers and customers, encouraging ethical and environmental considerations in all its dealings.

Employeese2v recognises the importance of people to its ongoing success. Its competiveness in the market is dependent on employing the right people with the right skills in the business.

Communitye2v operates in the heart of local communities. The business is also an integral part of those communities across all e2v locations. As a consequence e2v recognises the responsibility that comes with this position.

Environmente2v continues to focus on minimising any adverse impact on the environment stemming from both the activities of the company and its employees.

Our policy is to:l Comply with all legislation

relating to employee relations in the countries in which we operate.

l equal opportunities Maintain an equal opportunities policy in line with, and going beyond, regulations.

l Health & safety (inc. occupational health) Comply with, and where possible exceed, health & safety regulations.

l Learning and development (inc. performance review) Maintain a learning and development (inc. performance review) programme for employees.

l employee communications (inc. upward communication) Facilitate and encourage two-way communication at e2v, including a secure ‘whistle-blowing’ process and annual employee survey.

l Remuneration policy Maintain and benchmark a policy ensuring e2v offers competitive work packages.

Our aspirations

l To create a great working environment at e2v where people want to work.

l To encourage all employees to live the company’s 4 key values.

Our policy is to:l Make a positive contribution

and show consideration to our neighbours and the community in which we operate.

l Support local organisations through charitable giving.

l Promote an open two-way dialogue with local communities and stakeholders.

l Support local schools and learning institutions through training and organisations such as STeM TeAM essex (formerly SeTpoint).

Our policy is to:l Maintain operational and

management systems to facilitate compliance with environmental legislation.

l encourage all persons working on behalf of the Group, through training and communications to take personal responsibility to minimise their adverse impact on the environment and to contribute towards meeting group objectives and targets.

l encourage environmentally sound design practices at all stages of product life cycles.

l Seek all practical ways to reduce emissions to land, sea, air and water through responsible management of our business processes.

l Manage energy usage and greenhouse gas emissions for efficiency and minimal waste, through appropriate investment in process controls and continuous improvement plans.

l Use best available techniques to minimise waste, by preventing, reducing, re-using or recovering (inc. recycling) waste material.

Our policy is to:l Assess all potential suppliers

against an ethical and environmental questionnaire prior to being added to our supplier lists.

l Communicate and treat our suppliers/customers with fairness and courtesy as dictated by our internal values.

l Work with all of our customers and suppliers regarding environmental initiatives, encouraging them to help us to jointly reduce the environment impact of our work.

l Work in partnership with our suppliers to enhance the quality and performance of the items they supply.

l Work in partnership with our customers to develop and improve both e2v’s products and the systems in which our products are incorporated.

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Investorsl e2v is a member company of the FTSe4Good Index, the responsible

investment index calculated by global index provider FTSe Group.

l We held our annual investor and analyst presentation in London on 27 January 2009. The presentation was also posted onto our investor web site.

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. In addition, the Group responds to individual requests for information.

Communication channels to Investors include the delivery of paper 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 shareholders and interested parties to view the documents electronically.

Employeesl e2v conducted its annual employee survey in December 2008 and

has implemented a number of employee suggestions, including a Director’s blog posted on the Groups intranet to raise visibility of the executive Committee.

l There were eight reportable accidents across the Group in 2008 and 136 non-reportable accidents.

l Attendance levels averaged 97% during 2009 across the Group (2008: 97%).

The Group recognises that attracting and retaining the right people is critical to the ongoing health and success of the business and we endeavour to deliver an environment where all our employees feel proud to work for us and understand the importance of embracing our core values:

l Integrity.

l Connectivity.

l Innovation.

l Raising the bar.

We prioritise fostering a working environment where employees are engaged with the organisation, our vision and values. Consulting with them and listening to their feedback is important to us and one part of this is our annual employee survey, which we use to track the views of our people, get them involved and identify areas for improvement.

We also maintain a global Intranet with an employee forum to encourage communication and open discussion. In addition, in 2008 the Business TV information system was extended to include more of our sites.

A further traunch (the fifth) of the Company’s sharesave scheme was issued in 2008. We believe this to be an excellent way of engaging our people in the success of the Group.

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

2008 charitable donationsIn 2008, e2v’s employees collectively raised £5,000 at company fundraising events (and many thousands more from their personal work), including a football competition between the Company’s European sites, won by Chelmsford’s apprentice team, hamper raffles, a photo competition and the monthly employee lottery.

This money was divided between charitable organisations local to our sites.

Dawn Kelso, of e2v’s Charities Committee, is pictured here presenting one of the cheques, for £1,300, to Nezda Blythe of Essex Air Ambulance.


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place, including a ‘learning theatre’ programme to develop our future 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, legal requirements.

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 enterprise and Regulatory Reform. e2v has around 20 ambassadors who facilitate at Group events and go out into schools and colleges to work with young people, raising interest and awareness of careers in these subjects and developing a pipeline of motivated and capable people into science, technology and maths-related careers.

Occupational healthThe business has in place an occupational health practice across the 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. The service provided is broad and varied. In addition to the provision of medical and health screening, all employees have access to professional counselling services, advice on work place ergonomics, general well being assessments, healthy eating and anti-smoking advice. In addition to the above, all employees have unlimited confidential telephone and internet access to qualified professional counsellors and lawyers. We measure the effectiveness of the above by reference to our attendance levels.

Health & safetyThere were eight reportable accidents across the Group in the year to 31 March 2009 and 136 non-reportable accidents. Accidents are included in the statistics if they occurred during working time, including while travelling on company business or as a result of work (accidents on private journeys between home and work are excluded). In the UK, reportable accidents are based on the requirements of the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995 (RIDDOR), in other countries, local regulations are used.

Communityl One of the contributions we make to our local community is our

‘whoosh!’ Learning Centre, based at our headquarters in Chelmsford and run in partnership with essex County Council (eCC) and the Learning and Skills Council. This unique centre offers a wide range of learning opportunities – from wine appreciation and languages to yoga and storytelling for children – and is open to all members of the local community. The centre opened in October 2008 and now has 610 members and runs 25 courses. Furthermore, we committed to offering all courses free of charge for the first year.

l The Charity Committee supported 9 (2008: 8) core global charitable 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.

Bright Green idea in GrenobleWaste water from our clean rooms in the Grenoble facility must be heated to more than 25 degrees prior to processing. Olivier Gonet had the idea of using the clean room’s own air conditioning system to provide the heat, rather than the current electrically powered heating process.

A heat exchanger has now been installed with the assistance of our service provider, Cofathec Services, with a resulting reduction in power requirements of 900MWhr per year, equating to a saving of €35,000 and 170,000 KgCO2 a year.

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‘whoosh!’ user, Marie Adesola and her children Sayo, 8, and Tobi, 4Marie Adesola first heard about the ‘whoosh!’ centre when our launch event was advertised through her daughter Sayo’s school.

Since then Marie has attended ‘whoosh!’ courses including Indian head massage and flower arranging. Marie also took her son Tobi, who is severely disabled, to the storytelling sessions for kids. “It was fantastic,” said Marie, “there’s not a lot out there for children like Tobi, but he was really included in the session and loved the noises and excitement going on around him.”

“What’s also been great is the opportunity ‘whoosh!’ has given me to have some time out – which I don’t get very often. The floristry course was wonderful and very rewarding!”

l e2v continues to support the e2v foundation, an investment fund, run by essex Community Foundation (eCF). £30,000 was donated to the e2v foundation in the year. By taking advantage of a government 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 (2008 £59,000). In accordance with eCF rules, £2,745 of the interest generated was released and donated by the Charities’ Committee to good causes in essex.

l e2v sponsored schools in both Lincolnshire and essex taking part in the Greenpower project.

We firmly believe we should play an active part in the communities 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 global reach, which coordinates these activities. We also help our local communities by encouraging young people’s interest in business, science and technology, working with national programmes such as Young enterprise and STeM TeAM.

Environmentl e2v has introduced ‘Bright Green’, a global initiative focussing on the

continuous improvement of our systems and processes to minimise any adverse impact on the environment.

l e2v has become members of Business In The Community (BITC) and shadowed the environmental index section of the BITC CR Index as a precursor to full participation.

l To help in analysing the effect of environmental initiatives e2v calculated, for the first time, its combined footprint for all sites within the e2v group. Both Group and local targets have been established, with the aim of reducing our carbon footprint by 3%. In addition, an internal assurance process was introduced to provide rigour to both data collection and analysis.

e2v has, since 1997, incorporated the requirements of ISO14001 into its environmental Management System at both Chelmsford and Lincoln sites. environmental Management Systems are in place at all other e2v sites and a programme is ongoing to prepare these sites for 14001 certification.

Global warming and subsequent climate change, due substantially to human activity and the generation of greenhouse gas emissions, is now well understood by the scientific community. National and international targets have been set by the UK and a global target is to be set in Copenhagen in 2009/10. e2v has set itself challenging Group and local targets so that it fully contributes to meeting these initiatives.

There are a number of UK and International environmental indices. e2v is using the Business in the Community (BITC) environmental Index to benchmark our environmental Management System against other substantial UK organisations.

A preparatory evaluation of e2v’s environmental systems was carried out 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.

A decision has been made not to use carbon offsetting within e2v. Any changes will therefore be from the direct effect of the company’s activities.


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Supply chainl We have introduced a global procurement function with

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 have dedicated focus with appropriate skills.

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 all key customers.

At e2v we strive to build long term partnership based relationships with 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 business practices.

This partnership approach is demonstrated by the fact that 15 of our current top 25 customers had been with the Group for over 10 years.

We have reviewed our customer satisfaction survey procedures. This resulted in a new approach which will be launched and target 80% of customers by revenue.

The new global procurement team has already started the work required to maximise the consolidation of spend through chosen strategic suppliers by the introduction of a supplier accreditation scheme, formal negotiation processes including global spend aggregation, savings roadmap, and commodity specific strategies.

STARS winner Christine HarveyIn January 2009, Christine Harvey, an operator who works in our stores team, won a quarterly STARS award for demonstrating connectivity – one of our four key organisational values.

Christine won her award for the consideration she showed for her colleagues when working as part of a team to implement a new system in operations.

Christine said: “I was lost for words, which is rare for me, when I was told I’d won. I’m really pleased – it’s great to be recognised for what you do.”

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Remuneration committee The Remuneration Committee is responsible for recommending to the Board the framework and broad policy for the remuneration of the Chairman, Chief executive Officer, the Group Finance Director, and such other members of the executive management as it is requested to consider. The remuneration of the Non-executive Directors is a matter reserved for the executive Directors.

Members of the Committee are appointed by the Board and their terms of reference are available on the Company’s website. Anthony Reading currently chairs the Committee, which meets at least twice a year, and its other members are George Kennedy and Jonathan Brooks. The Board considers that all members of the Committee are independent directors. Mr Kennedy is a member of the Committee because the Board considers it essential that the Chairman be involved in setting remuneration policy (although he is not party to any discussion directly relating to his own remuneration). The Chief executive Officer is given notice of all meetings and has the right to attend them, and is consulted on the remuneration of other executives. However, the Chief executive Officer does not take part in discussions that relate directly to his own remuneration.

The Committee has no formally appointed advisers on remuneration policy. However during the year it has sought advice from Hewitt New Bridge Street who provided services to the Company during the year in connection with the operation of the Company’s remuneration arrangements. They provided no other services to the Company during the year.

Remuneration policy The overall policy applied for the year ended 31 March 2009 and that will apply for the year ending 31 March 2010, is to ensure that executive Directors are fairly and competitively remunerated and incentivised in a manner consistent with the Group’s strategic objectives. The current remuneration packages combine basic salary, benefits and pension contributions together with performance-related annual bonus and share incentive awards. The Committee believes that the overall packages offered to executive Directors should provide the right balance of fixed and performance-related pay and be appropriate for the size, scale and geographic scope of the organisation as well as be competitive relative to other companies within its sector. When setting the pay of executive Directors, due account is taken of pay conditions elsewhere in the Group.

Currently, based on the most recent benchmark information provided by independent remuneration consultants, the Committee believes that the remuneration of the executive Directors is below the median of the comparative data.

In line with the Association of British Insurers’ Guidelines on Responsible Investment Disclosure the Remuneration Committee will ensure that the incentive structure for executive Directors and senior management will not raise environmental, social or governance (eSG) risks. More generally, with regard to the overall remuneration structure there is no restriction on the Committee which prevents it from taking into account eSG matters, nor more general operational risks.

The individual components of the remuneration packages offered are:

Basic salary and/or feesBasic salary for each executive Director is determined taking account of the individual’s performance and responsibilities and comparable market rates. More particularly, the Committee reviews benchmark data provided by independent remuneration consultants sourced from two groups of companies as follows (i) a group comprising broadly similar sized companies from the electronic & electrical equipment, Aerospace & Defence, Industrial engineering and Technology Hardware & equipment sectors and (ii) a group comprising companies from all sectors (excluding financial companies) of a broadly similar size in terms of average market capitalisation, turnover and international scope. The most recently conducted review showed that the base salaries payable to the executive Directors in the year ended 31 March 2009 were well below the median. Basic salary is reviewed annually and is the only element of remuneration that is pensionable. executive Director Salaries were reviewed on 1 July 2008 and no increases were made.

Fees for the Chairman and Non-executive Directors are determined taking account of the individual’s responsibilities, time required to devote to the role and comparable market rates.

Charles Hindson was appointed as Group Financial Director on 5 May 2009 with an annual base salary of £200,000.

Benefits

Benefits comprise the provision of a company car or car allowance and health insurance. Non-executive Directors do not receive any benefits.

Pensions The Group operates a defined contribution, HM Revenue and Customs approved, pension scheme. The Company makes contributions of 15% of basic salary to the relevant pension scheme in respect of executive Directors. executive Directors are entitled to enhance this through salary sacrifice arrangements and additional voluntary contributions subject to Inland Revenue limits. Non-executive Directors' fees are non-pensionable.

Performance related annual bonusAn annual bonus is payable to executive Directors subject to the attainment of specific targets which are based on Group performance. Non-executive Directors are not entitled to a bonus. The Committee reserves the right in exceptional circumstances to amend the targets during the year if it feels that changes, in such factors as the marketplace or the Group's strategy, have resulted in the existing targets no longer providing an appropriate incentive to the individual. The targets for the year ended 31 March 2009 were based on increasing earnings per share and, for the year, bonuses could start to be earned if the earnings per share increased by over 10%. For the year ended 31 March 2009, the maximum bonus opportunity was 100% of basic salary for the Chief executive Officer and 80% of basic salary for the Group Finance Director.

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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The annual bonus for the forthcoming year will be structured in a similar 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 a significant focus on variable pay (as stated previously, basic salary levels are below median). The Committee sets targets with a greater degree of stretch than were employed when the bonus opportunity was lower, such that truly outstanding performance is required for a maximum bonus payout.

Share incentives 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:

l Long Term Incentive Plan (LTIP).

l executive Share Option Plan (exSOP).

l Share Incentive Plan (SIP).

l Sharesave Scheme (SAYe).

The Committee regularly reviews the operation of the Group’s share incentive arrangements to ensure that they remain effective, fully reflect the Group’s circumstances and take due account of market and best practice.

Service contracts In line with best practice it is the policy of the Committee to offer executive Directors service agreements with notice periods not exceeding twelve months. Current appointments are subject to rolling service 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 Reading and Jonathan Brooks do not have service contracts but have letters of appointment with the Group. No notice is required to terminate 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 Directors. A summary of the Directors’ service contracts and letters of appointment is listed below:

Contract date Notice period Unexpired term

K D Attwood 21 July 2004 12 Months 4 Months

M Hannant 21 July 2004 12 Months Resigned 28 May 2009

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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executive Directors are permitted, with the agreement of the Board, to accept outside appointments provided that such appointments do not conflict with their duties as Directors of the Company. Whether any fees payable in respect of such outside appointments are retained by the executive Director or remitted to the Company is determined on a case-by-case basis. No executive Director held any such appointment in the year ending 31 March 2009.

Mike Hannant resigned from his role as Group Finance Director on 5 May 2009 and and is now an employee on 12 months notice. He has been replaced by Charles Hindson who commenced employment as the new Group Finance Director on 5 May 2009.

Shareholding guidelinesThe Company’s shareholding guidelines were reviewed and updated by the Remuneration Committee in January 2007. Under the guidelines, executive Directors will be expected to build up and retain shares equal in value to at least twice their respective basic salaries.

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 beneficiaries. The Trustee is Lloyds Offshore Trustee Limited, a professional offshore trustee. The main purpose of the eBT is to operate the LTIP and share option schemes following recommendations from the Remuneration 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 0.83% (2008: 1%).


Directors’ interests The beneficial interests of the Directors in the ordinary share capital of 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.

At 31 March 2009 At 31 March 2008

Ordinary 5p shares Ordinary 5p shares

K D Attwood 1,375,643 1,346,732

M Hannant 545,923 531,674

G Kennedy 52,256 42,256

A Reading 24,352 19,352

I Godden 43,765 43,765

J Brooks 14,500 8,500

There were no changes to the above interests between the year end and the date of this report.

Performance graphThe graph opposite shows the change in the Total Shareholder Return (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.

Mike Hannant resigned from his role as Group Finance Director on 5th May 2009 when Charles Hindson was appointed. In addition, Sally Weatherall has been appointed Company Secretary.

e2v

FTSe electro. & elecl. equip. (rebased)

e2v technologies plc TSR performance since flotation versus FTSE Electro. & Elecl. Equip.

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Information subject to auditLong Term Incentive Plan (LTIP)Awards will vest on the third anniversary of the date of award to the extent that the performance targets have been met. The maximum annual award value under the Plan is one times basic annual salary. To encourage participants to deliver above market returns to shareholders, for awards made to date and, it is intended, for awards to be made in this forthcoming year, the targets relate to the Group’s TSR relative to the TSR of a specified list of peer group companies. 25% of an award will vest for median performance and an award will only vest in full if the Group’s TSR performance would place it in the top 20% compared to the peer group, with pro-rata vesting between 25% and full vesting. However, 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 (unless the Committee considers, in exceptional circumstances, that it would be inappropriate to apply this underpin). There is also no provision for re-testing. TSR has been selected as the appropriate performance criteria as this measure aligns the interest of the senior executives with those of the Group’s shareholders. The Group uses independent advisors to assess the extent to which the TSR performance conditions are satisfied.

Mike Hannant remains an employee of the Company and remains eligible to participate in the LTIP.

On 3 September 2008 the 2005 LTIP award became capable of vesting. The Company’s TSR performance over the relevant period ranked between the median and the top 20% against the peer group companies, resulting in 44.65% of the shares subject to the award vesting. The market price on the date of vesting was £2.59 resulting in a gain of £139,062, (2008: £442,260).

All LTIP awards have been granted as nil exercise price options and 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 the range during the year was £0.41 to £2.01.

Grant dateAwards held 1 April 2008

Granted in the year

Excercised in the year

Lapsed in the year

Awards held at 31 March 2009

Date from which excercisable

K D Attwood

LTIP 20.07.2005 64,750 - 28,911 35,839 - 20.07.2008

LTIP 31.07.2006 69,700 - - - 69,700 31.08.2009

LTIP 16.07.2007 63,250 - - - 63,250 14.07.2010

LTIP 15.07.2008 - 99,850 - - 99,850 15.07.2011

M Hannant -

LTIP 20.07.2005 55,500 - 24,781 30,719 - 20.07.2008

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

l Bodycote International

l Castings

l Charter

l Chemring Group

l Chloride Group

l Cookson Group

l Domino Printing Sciences

l enodis

l Fenner

l Halma

l Hampson Industries

l Hill & Smith Holdings

l IMI

l Invensys

l Laird

l Meggitt

l Melrose

l Morgan Crucible Company

l Oxford Instruments

l PV Crystalox Solar

l Qinetiq Group

l Raymarine

l Renishaw

l Rotork

l Senior

l Severfield-Rowen

l Spectris

l Spirax-Sarco engineering

l Tomkins

l TT electronics

l Ultra electronics Holdings

l UMeCO

l Vitec Group

l VT Group

l Weir Group

l Xaar

As stated in last year’s annual report, the Committee reviewed the LTIP peer group and broadened the group. The peer group for the 2008 award comprised the following companies:

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For awards granted prior to 2008, the peer group comprised the following companies:

l Abacus Group

l Amstrad plc (until 8 October 2007)

l Chemring Group

l Chloride Group

l Domino Printing Services

l First Technology (until 24 March 2006)

l Halma

l Laird

l NXT

l Oxford Instruments

l Renishaw

l Dialight (formerly The Roxboro Group plc)

l Spectris

l TT electronics

l Ultra electronics Holdings

Executive Share Option Plan (ExSOP) The Group has an exSOP for the granting of non-transferable market value options to certain employees over shares worth up to 100% of salary each year. The vesting period for the exSOP is finite allowing eligible employees to exercise the option in a fixed period, once conditions are met. The options may not be exercised unless, over the vesting period, the Company’s earnings per share (ePS) has increased by 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). The Committee has no intention of making grants under this plan to executive Directors in 2009/10.

Share Incentive Plan (SIP)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:

l Free shares, which are ordinary shares which may be allocated to an employee by the Company;

l Partnership shares, which are ordinary shares which an employee may purchase out of their pre-tax earnings; and

l Matching shares, which are ordinary shares which may be allocated to an employee following the purchase of partnership shares.

No awards have been made to any employees under this plan as at 31 March 2009.

Sharesave scheme (SAYE) The Group operates an HM Revenue and Customs approved sharesave 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 Finance Director participate in the scheme to the fullest extent permissible as detailed below:

K D Attwood

SAYE At 1 April 2008 4,266

Granted in year -

Exercised in year -

At 31 March 2009 4,266

M Hannant

SAYE At 1 April 2008 4,266

Granted in year -

Exercised in year -

At 31 March 2009 4,266

First exercise date01.03.2011

Last exercise date31.08.2011

Exercise price

225.0p

Mike Hannant remains an employee of the company and remains eligible to participate in the SAYe scheme.

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Directors’ remuneration The remuneration of Directors who served during the year was as follows:

Approval This report was approved by the remuneration committee and has been approved subsequently by the Board of Directors.

On behalf of the Board

Anthony Reading Chairman of the Remuneration Committee

8 June 2009

Salary and/or

fees

Performance related bonuses

Car allowance/benefits in kind

2009 total

2008 total

Pension

contributions 2009

Pension

contributions 2008

£ £ £ £ £ £ £

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

G Kennedy 95,000 - - 95,000 92,500 - -

A Reading 36,000 - - 36,000 34,500 - -

I Godden 33,000 - - 33,000 32,250 - -

J Brooks 36,000 - - 36,000 34,500 - -

Total 612,500 - 25,548 638,048 622,127 61,875 57,657

The Group operates an HM Revenue and Customs approved sharesave scheme for all UK employees.

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Statement of Directors’ responsibilities in respect of the group financial statementsThe Directors are responsible for preparing the Annual Report and the Group financial statements in accordance with applicable United Kingdom law and regulations. The Directors are required to prepare financial statements for the Group in accordance with International Financial Reporting Standards (IFRS) as adopted by the european Union.

The Directors are required to prepare group financial statements for each financial year which present fairly the financial position of the Group and the financial performance and cash flows of the Group for that period. In preparing those financial statements, the Directors are also required to:

l Properly select suitable accounting policies and then apply them consistently in accordance with IAS 8;

l Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

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 the entity’s financial position and financial performance; and

l State that the Group has complied with IFRSs, subject to any material 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 Group, for safeguarding the assets, and for taking reasonable steps for the prevention and detection of fraud and other irregularities to enable them to ensure that the Group financial statements comply with the Companies 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.

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. 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 website is available from outside the UK, where comparable legislation may be different.

Directors’ responsibilities statementWe confirm that, to the best of our knowledge:

l The financial statements, prepared in accordance with International Financial Reporting Standards, as adopted by the european Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group taken as a whole; and

l The Directors’ report, the Chairman’s and Chief executive’s statement and the business review include a fair review of the development of the business and the position of the Group, together with a description of the principal risks and uncertainties that they face.

On behalf of the board

8 June 2009 8 June 2009



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Independent auditor’s report to the shareholders of e2v technologies plcWe 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, the Group balance sheet, the Group cash flow statement and the related Notes 1 to 29. These Group financial statements have been prepared under the accounting policies set out therein.

We have reported separately on the parent company financial statements of e2v technologies plc for the year ended 31 March 2009 and on the information in the Directors’ remuneration report that is described as having been audited.

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 has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and Auditors The Directors’ responsibilities for preparing the annual report and 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 Directors’ responsibilities.

Our responsibility is to audit the Group financial statements in accordance 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 statements give a true and fair view and whether the Group financial statements have been properly prepared in accordance with the 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 in the Directors' report includes that specific information presented in the Chairman’s and Chief executive’s statement and the Business review that 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 all the information and explanations we require for our audit, or if information specified by law regarding Director’s remuneration and 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.

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We read other information contained in the Annual Report and consider whether it is consistent with the audited Group financial statements. The other information comprises only the Chairman’s and Chief executive’s 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 for our report if we become aware of any apparent misstatements or material inconsistencies with the Group financial statements. Our responsibilities do not extend to any other information.

Basis of audit opinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. 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 by the Directors in the preparation of the Group financial statements, and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Group financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the Group financial statements.

OpinionIn our opinion:

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 for the year then ended;

l The Group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation; and

l The information given in the Directors’ report is consistent with the Group financial statements.

Emphasis of matter 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 the banks’ consolidated net borrowings to adjusted consolidated eBITDA covenant. These conditions indicate the existence of a material uncertainty 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 as a going concern.

Ernst & Young LLP Registered Auditor, Cambridge

8 June 2009


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Group Income Statement 38Group Balance Sheet 39Group Cash Flow Statement 40Notes to the Financial Statements 41Financial Record 76

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Group income statementfor the year ended 31 March 2009

Year ended Year ended 31 March 2009 31 March 2008

Notes £000 £000

Losses on cash flow hedges taken directly to equity (80) (79)

Exchange differences on retranslation of foreign operations 4,425 1,296

Actuarial (loss)/gain on post employment employee benefits 26 (195) 210

Tax on items taken directly to or transferred from equity 9 (15) (697)

Net income recognised directly in equity 4,135 730

(Loss)/profit for the year (21,299) 11,799

Total recognised income and expense for the year 24 (17,164) 12,529

Group statement of recognised income and expense


Notes £000 £000

Revenue 3 233,193 204,607

Cost of sales (154,223) (132,213)

Gross profit 78,970 72,394

Research and development costs 5 (17,133) (13,988)

Selling and distribution costs (17,973) (13,957)

Administrative expenses (63,399) (25,020)

Operating (loss)/profit (19,535) 19,429

Finance costs 8 (9,554) (6,183)

Finance revenue 8 684 501

Adjusted profit before taxation 20,389 23,410

Amortisation of acquired intangible assets (8,628) (7,310)

Impairment of acquired intangible assets (26,127) -

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)

Fair value losses on interest rate swaps (1,819) -

(Loss)/profit before taxation (28,405) 13,747

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

(Loss)/earnings per share – diluted 10 (34.42)p 19.20p

Adjusted earnings per share – basic 10 30.20p 30.08p

Adjusted earnings per share – diluted 10 30.16p 29.83p

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Group balance sheetas at 31 March 2009 31 March 2009 31 March 2008

Notes £000 £000

ASSETSNon-current assets Property, plant and equipment 12 40,251 40,191

Intangible assets 13 119,199 93,037

Deferred income tax asset 9 5,860 2,726

165,310 135,954

Current assets

Inventories 16 42,433 43,958

Trade and other receivables 17 61,109 54,547

Other financial assets 18 - 188

Income tax recoverable 2,498 2,791

Cash 19 6,373 5,806

112,413 107,290

TOTAL ASSETS 277,723 243,244

LiAbiLiTiESCurrent liabilitiesTrade and other payables 20 (52,567) (47,582)

Other financial liabilities 21 (13,950) (7,442)

Income tax recoverable (139) (2,322)

Provisions 22 (6,567) (4,804)

(73,223) (62,150)

Net current assets 39,190 45,140

Non-current liabilities

Other financial liabilities 21 (133,737) (92,073)

Provisions 22 - (350)

Retirement benefit obligations 26 (3,355) (3,096)

Deferred income tax liabilities 9 (13,729) (11,125)

(150,821) (106,644)

NET ASSETS 53,679 74,450

SHAREHOLDERS’ EqUiTYOrdinary share capital 23 & 24 3,128 3,111

Share premium 24 41,780 41,116

Capital redemption reserve 24 274 274

Treasury shares reserve 23 & 24 (5) (6)

Hedge reserve 24 - 58

Foreign currency translation reserve 24 5,408 983

Retained earnings 24 3,094 28,914

TOTAL SHAREHOLDERS’ EqUiTY ATTRibUTAbLE TO EqUiTY HOLDERS Of THE PARENT COMPANY 53,679 74,450

Approved by the Board of Directors on 8 June 2009.

C Hindson Group Finance Director

K Attwood Chief executive Officer

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Group cash flow statementfor the year ended 31 March 2009


Notes £000 £000

Cash flows from operating activities

(Loss)/profit before tax (28,405) 13,747

Net finance costs 8,870 5,682

Operating (loss)/profit (19,535) 19,429

Adjustments to reconcile to net cash inflows from operating activities:

Depreciation of property, plant and equipment 10,204 8,392


Amortisation of intangible assets 12,674 10,749

Impairment of intangible assets 26,127 -

Fair value losses on foreign exchange contracts 2,894 357

Share based payment charges 625 821

Decrease/(increase) in inventories 8,173 (753)

Decrease/(increase) in trade and other receivables 1,735 (6,474)

Decrease in trade and other payables (3,224) (2,474)

Increase/(decrease) in provisions 875 (378)

Cash generated from operations 43,048 29,669

Income taxes paid (1,297) (3,582)

Net cash flows from operating activities 41,751 26,087

Cash flows from investing activities

Proceeds from sale of property, plant and equipment 201 137

Interest received 684 501

Purchase of property, plant and equipment (9,221) (10,910)

Purchase of software (1,531) (1,670)

Expenditure on patents, trade marks and technology - (117)

Expenditure on product development (2,612) (2,036)

Acquisition of subsidiary, net of cash acquired 15 (41,059) (5,037)

Net cash flows used in investing activities (53,538) (19,132)

Cash flows from financing activities

Interest paid (7,338) (5,858)

Proceeds from issue of shares, net of expenses 681 1,252

Dividends paid to equity shareholders of the parent (4,913) (4,380)

Payment of finance lease obligations (13) (16)

Proceeds from borrowings 38,152 3,500

Transaction costs of new bank loans raised (184) -

Repayment of borrowings (15,451) (4,576)Net cash flows generated from/(used in) financing activities 10,934 (10,078)

Net decrease in cash and cash equivalents (853) (3,123)

Net foreign exchange difference 1,420 433

Cash and cash equivalents at 1 April 19 5,806 8,496

Cash and cash equivalents at 31 March 19 6,373 5,806

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Notes to the financial statements1. Authorisation of financial statements and statement of compliance with IFRSThe Group’s financial statements for the year ended 31 March 2009 were authorised for issue in accordance with a resolution of the Directors on 8 June 2009 and the balance sheet was signed on the Board’s behalf by K Attwood and C Hindson. e2v technologies plc is a public limited company incorporated in england & Wales whose shares are publicly traded on the London Stock exchange. The principal activities of the Group are described in the Directors’ report on page 15.

The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted for use by the european Union as they apply to the financial statements of the Group for the year ended 31 March 2009 applied in accordance with the provisions of the Companies Act 1985.

The principal accounting policies adopted by the Group are set out below.

2. Summary of significant accounting policiesBasis of preparationThe financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments and retirement benefit liabilities.

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

The Group financial statements are presented in Sterling and all values are rounded to the nearest thousand (£000) except when otherwise indicated.

Going concernThe Group’s banking facilities expire on 11 July 2011. Under these facilities the Group is required to confirm at 31 March and 30 September of each year that consolidated net borrowings do not exceed a 3.5 times multiple of adjusted consolidated eBITDA ‘the net debt covenant’ and that adjusted consolidated eBITA is not less than a 3 times multiple of net interest payable.

In the six months to 31 March 2009 the weakening of Sterling increased 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, representing a multiple of 3.19 times the adjusted consolidated eBITDA for the year ended 31 March 2009.

The Group has experienced softer market conditions in many of the markets in which the Group operates in the current calendar year, leading to a lower level of activity in the first half of the year ending 31 March 2010. Combined with the uncertainty over the direction of the euro and US dollar exchange rate movements, this represents a significant challenge to the Group’s ability to meet ‘the net debt covenant’ at 30 September 2009 and, to a lesser extent, 31 March 2010.

The Board are implementing restructuring initiatives to reduce costs and production capacity primarily in the first half of the year ending 31 March 2010. With these steps, the Board has a reasonable expectation that the Group can remain within ‘the net debt covenant’.

In addition the Board is working with finance providers and is reviewing a range of options for a more long term capital structure for the business.

The Directors of the Group have prepared detailed profit and cash flow forecasts through to 30 September 2010. In considering these profit and cash flow forecasts and the plans to restructure costs and limit production capacity, the Directors have carefully considered the assumptions and sensitivities and have concluded that the Group can remain within ‘the net

debt covenant’ requirement at both 30 September 2009 and 31 March 2010. However the available headroom is limited and the Directors are cognisant of the fact that in the current economic climate there are inherent risks surrounding the achievability of the Group’s forecast sales, the success of the restructuring plan and steps to reduce production capacity along with the direction of the euro and US dollar exchange rate movements.

The Directors of the Group have concluded that the combination of these circumstances represents a material uncertainty that casts significant doubt upon the Group’s ability to continue to meet ‘the net debt covenant’ at 30 September 2009 and, to a lesser extent, 31 March 2010. However, having considered these uncertainties, the Directors have a reasonable expectation 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 to prepare the financial statements on a going concern basis. The financial statements do not include any adjustments that would result if the going concern basis of accounting were considered inappropriate.

Basis of consolidationThe consolidated financial statements comprise the financial statements of e2v technologies plc and its subsidiaries as at 31 March each year. The financial statements of subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Any unrealised losses arising from intra-group transactions are eliminated to the extent that they are recoverable.

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights. Where there is a loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting year during which e2v technologies plc has control.

Acquisitions, including QP Semiconductor Inc. in the current year and MiCS Microchemical Systems SA (MiCS) in the prior year, are included in the consolidated financial statements using the purchase method of accounting that measures the acquiree’s assets and liabilities at their fair value at acquisition date. Accordingly, the consolidated financial statements include the results of QP Semiconductor Inc. for the period 10 October 2008 to 31 March 2009 in the current year and the results of MiCS for the period 14 May 2007 to 31 March 2008 in the prior year. In both cases, the purchase consideration has been allocated to the assets and liabilities on the basis of fair value at the date of acquisition.

Foreign currency translationThe functional and presentation currency of e2v technologies plc is Sterling (£).

Transactions in currencies other than Sterling are recorded at the rate of exchange ruling at the date of the transaction. At each balance sheet date, monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. Non-monetary assets and liabilities measured at historical cost are translated at the rate of exchange ruling at the date of the transaction. All differences are taken to the Group income statement, except when hedge accounting is applied and for differences on monetary assets and liabilities that form part

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to equity until the disposal of the net investment, at which time they are recognised in the income statement.

On consolidation, the assets and liabilities of overseas subsidiary undertakings are translated at the rate of exchange ruling at the balance sheet date. Income and expense items are translated at the average rate for the year. The exchange difference arising on the retranslation of opening net assets is taken directly to the Group’s foreign currency translation reserve, as well as the difference between the average and closing rate effect on the income statement for the year. Such translation differences are recognised as income or expense in the period in which the operation is disposed of. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign subsidiary shall be recognised in the income statement.

Property, plant and equipmentFreehold buildings, plant and equipment held for use in the production or supply of goods or services, or for administrative purposes are stated at cost less accumulated depreciation and any impairment in value. Freehold land is not depreciated and is held at historical cost.

Depreciation is provided so as to write off the cost of assets on a straight line basis over the estimated useful life, as follows:

freehold buildings 25 to 50 years

Leasehold improvements over the remaining lease term

Plant and equipment 3 to 10 years

Office equipment, fixtures and fittings 3 to 10 years

Assets in the course of construction for production or administrative purposes are carried at cost, less any recognised impairment loss. Depreciation on these assets commences when the asset is brought into use.

The carrying values are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. The recoverable amount of plant and equipment is the greater of net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognised in the income statement in the administrative expenses line item.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year the item is derecognised.

Government grantsGovernment grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions will be met, usually on submission of a valid claim for payment. Grants of a revenue nature are credited to income so as to match them with the expenditure to which they relate. Grants in respect of capital expenditure are deducted from the carrying amount of the asset. The grant is recognised as income over the life of the asset by way of a reduced depreciation charge.

Borrowing costsBorrowing costs, other than debt issue costs, are recognised as an expense in the period in which they are incurred.

GoodwillGoodwill represents the excess of the cost of an acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary or business assets. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

Goodwill arising on acquisitions before the date of transition to IFRSs has been retained at the previous UK GAAP amounts subject to being tested for impairment at that date. Goodwill written off to reserves under UK GAAP has not been reinstated and will not be included in determining any subsequent profit or loss on disposal.

For the purpose of impairment testing, as at the acquisition date, any goodwill acquired is allocated to the applicable cash-generating unit. Impairment is determined by assessing the recoverable amount of the cash-generating unit, to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, 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, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Intangible assetsIntangible assets acquired separately are capitalised at cost and intangible assets acquired from a business acquisition are capitalised at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to the class of intangible assets. The useful lives of these intangible assets are assessed to be either finite or indefinite. Where amortisation is charged on assets with finite lives, this expense is taken to the income statement through the following line items:

Patents, trade-marks and technology administrative expenses

Development costs research and development costs

Customer relationships and agreements administrative expenses

Software cost of sales and administrative expenses

Intangible assets, excluding development costs and software, created within the business are not capitalised and expenditure is charged against profits in the year in which the expenditure is incurred. Intangible assets are tested for impairment annually either individually or at the cash generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.

Computer software purchased (or internally generated) for use that is integral to the hardware (because without that software the equipment cannot operate) is treated as part of the hardware and capitalised as property, plant and equipment. Other software programs are treated as intangible assets. Amortisation is provided so as to write off the cost of intangible assets on a straight-line basis over the estimated useful life, as follows:

Patents, trade-marks and technology 5 to 10 years

Development costs 3 to 5 years

Customer relationships and agreements 4 to 10 years

Software 2 to 7 years

Notes to the financial statements

2. Summary of significant accounting policies (continued)

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Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured. For new products, this is deemed to occur when the productisation review has been completed. At this stage the technical feasibility and commercial viability of the product has been proven. Such expenditure is capitalised and amortised on a straight-line basis over the period of expected future sales from the related project. All expenditure on existing product development is capitalised unless there are specific indicators that it does not meet the criteria.

Following the initial recognition of the development expenditure the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure carried forward is amortised over the period of expected future sales from the related project.

The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use, or more frequently when an indicator of impairment arises during the reporting year indicating that the carrying value may not be recoverable. Where no internally generated asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

InventoriesInventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for in both the current year and previous year as follows:

Raw materials Purchase cost on a first-in, first-out basis

Work in progress and finished goods Cost of direct materials and labour and a proportion of manufacturing overheads based on a normal operating capacity

Net realisable value is estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Provision is made for obsolete, slow moving or defective items where appropriate. Any net increase in provision for the period as a whole is recognised as an expense in the period. Any net reversal of provision for the period as a whole is recognised as a reduction.

Trade and other receivablesTrade receivables, which generally have 30-60 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified.

Cash and cash equivalentsCash in the balance sheet comprises cash at bank and in hand and short term deposits with an original maturity of three months or less.

For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash as defined above.

Interest-bearing loans and borrowings All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings

are subsequently measured at amortised cost with any transaction costs amortised to the income statement over the period of the borrowings. Borrowings are classified as current liabilities unless, at the balance sheet date, the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

Pensions and other post-employment benefitsThe Group operates defined contribution pension schemes which require contributions to be made to a separately administered fund. Payments to defined contribution pension schemes are charged as an expense as they fall due. Payments made to a state-managed pension are dealt with as payments to defined contribution schemes where the Group’s obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.

The Group operates a defined benefit plan in France providing termination payments to employees upon retirement. The cost of providing benefits under the plan is calculated based on the change in the present value of benefits payable under the plan and is based on actuarial advice. When a settlement or curtailment occurs, the obligation is re-measured using current actuarial assumptions and the resultant gain or loss is recognised in the income statement during the period in which the settlement or curtailment occurs.

The interest element of the defined benefit cost represents the change in present value of scheme obligations resulting from the passage of time, and is determined by applying the discount rate to the opening present value of the benefit obligation, taking into account material changes to the obligation during the year. The interest cost is recognised in the income statement as an administrative expense.

The Group has applied the option in IAS 19 to recognise actuarial gains and losses in full in the statement of recognised income and expense in the period in which they occur.

The defined benefit plan liability in the balance sheet comprises the present 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 settled directly.

Contributions to the plan are recognised in the income statement in the period in which they become payable.

Share based payment transactions employees (including directors) of the Group receive remuneration in the form of share based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).

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 value is determined by an external valuer using a binomial model, further details of which are given in note 26. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of e2v technologies plc (‘market conditions’).


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corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and 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 instruments that will ultimately vest.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share (see note 10).

The Group has an employee share incentive plan and an employee benefit trust for the granting of non-transferable options to executives and senior employees. Shares in the Group held by the employee share trust are treated as treasury shares and presented in the balance sheet as a deduction from equity.

LeasesFinance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased item or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges in the income statement and the 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 depreciated over the shorter of the estimated useful life of the asset or the lease term.

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as the lease income. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.

RevenueRevenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

l Sale of goods Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, which is usually on the delivery of goods, but more specifically:

Revenue from the supply of standard products is recognised when:

l A clear contractual arrangement can be evidenced;

l Delivery has been made in accordance with that contract;

l If required, contractual acceptance criteria have been met; and

l The contracted fee has been agreed and collectability is probable.

For the supply of non-standard products, revenue is recognised by reference to the stage of completion of the project. The stage of completion is determined either by reference to the proportion that costs incurred for work performed to date bear to the estimated total project costs, or by reference to the completion of a physical proportion of the work, dependent upon the nature of the underlying project. Revenues derived from variations on projects are recognised only when they have been accepted by the customer. Full provision is made for losses on all projects in the period in which they are first foreseen.

l Interest Revenue is recognised as the interest accrues (using the effective interest method that is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset.

Income tax Current tax assets and liabilities are measured at the amount expected to be paid (or recovered) to the taxation authorities, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is recognised on all temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions:

l Where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

l In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

l Deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, the carry-forward of unused tax assets or unused tax losses, can be utilised.

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is recognised in the income statement.

Derivative financial instruments and hedgingThe Group uses derivative financial instruments such as foreign currency contracts and interest rate swaps to hedge its risks associated with interest rate and foreign currency fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently measured at fair value. Changes in fair value are recognised in the income statement.



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current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.

For the purpose of hedge accounting, hedges are classified as cash flow hedges where they hedge exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a forecast transaction.

In relation to cash flow hedges that hedge highly probable forecast 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 the ineffective portion is recognised in the income statement.

The gains or losses that are recognised in equity are transferred to the income statement in the same year in which the hedged forecast transaction affects profit or loss, for example when the forecast sale actually occurs.

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 recognised in equity is kept in equity until the forecasted transaction occurs. If the hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the income statement for the year.

The derecognition of a financial instrument takes place when the Group no longer controls the contractual rights that comprise the financial instrument, which is normally the case when the instrument is sold, or all the cash flows attributable to the instrument are passed through to an independent third party.

The Group uses foreign currency borrowings to hedge its investment in currency investments and classifies the hedging relationship as a net investment hedge. To the extent that the hedge is effective, changes in the fair value of the hedging instrument are recognised directly in equity.

Classification of shares as debt or equityWhen shares are issued, any component that creates a financial liability of the Group is presented as a liability in the balance sheet, measured initially at fair value net of transaction costs and thereafter at amortised cost until extinguished on conversion or redemption.

Treasury shares e2v technologies plc shares held by the employee benefit trust are classified in shareholders’ equity as treasury shares and are recognised at cost. Consideration received for the sale of such shares is also recognised in 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 equity shares.

Critical accounting judgements and key sources of estimation uncertaintyWhen applying the Group’s accounting policies, management must make assumptions and estimates concerning the future that affect the carrying amounts of assets and liabilities at the balance sheet date and the amounts of revenue and expenses recognised during the accounting period. Such assumptions and estimates are based upon factors such as historical experience, information available from the Group’s customers and other outside sources.

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year include the measurement and impairment of goodwill and other intangibles arising on acquisition, the measurement of work in progress (stage of completion and total expected margin) and the measurement of product warranty provisions (estimation of level of returns). Details of the key judgements made and sensitivities around goodwill are disclosed in note 14. The sensitivity of the discount rate used to calculate the retirement benefit obligation as detailed in note 26 would not have a significant impact on the income statement.


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3. RevenueAn 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

New standards and interpretations not appliedThe IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements:

The Group intends to adopt these standards in the first accounting period after the effective date. The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group’s financial statements in the period of initial application.

The amendment to IFRS 2 restricts the definition of vesting conditions and performance conditions. The group does not anticipate that the adoption of this amendment on the Group’s financial statements will have a material impact.

IAS 23 requires borrowing costs attributable to the acquisition or construction of certain assets to be capitalised. Accordingly, borrowing costs will be capitalised on qualifying assets with a commencement date of 1 April 2009.

IFRS 3 will apply to business combinations arising from 1 April 2010. This will require recognition of subsequent change in the fair value of contingent consideration in the income statement rather than against goodwill. In addition, transaction costs will be required to be recognised immediately in the income statement.

IFRS 8, Operating Segments, introduces the management approach to segment reporting. IFRS 8 requires presentation and disclosure of segment

information based on the internal reports regularly reviewed by the group’s chief operating decision maker in order to assess each segment’s performance and to allocate resources to them. The Directors do not anticipate that the adoption of this standard will have any impact on the analysis of operating segments.

New standards and interpretations applied during the yearIFRIC 14: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. The adoption of this standard did not have any impact on the Group’s position or performance.

Adjusted profit measuresIn prior years, adjusted profit measures have been stated before share based payments. Since the Groups share incentive plans have now been in place long enough for data to be comparable from one year to the next, adjusted profit measures are now stated after share based payments.

In addition, the layout of the Income statement has been amended to provide more meaningful information on adjusted profit measures at the profit before taxation level.

Effective for periods international Accounting Standards commencing after

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

ifRS 7 Amendments to IFRS 7 – Improving disclosures about financial instruments 1 January 2009

ifRS 8 Operating segments 1 January 2009

ifRS 1 and iAS 27 Amendments – cost of investment in separate financial statements 1 January 2009

iAS 1 Amendment – presentation of financial statements: A revised presentation 1 January 2009

iAS 23 Amendment to IAS 23 Borrowing costs 1 January 2009

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

international financial Reporting interpretations Committee (ifRiC)

ifRiC 9 Amendment – Embedded derivatives 1 July 2009

ifRiC 16 Hedges of a net investment in a foreign operation 1 October 2008

ifRiC 17 Distribution of non-cash assets to owners 1 July 2009

ifRiC 18 Transfer of assets from customers 1 July 2009



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4. Segment informationThe 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 representing a strategic business unit that offers different products. The segmental reporting was reviewed during the year and is now reported as four divisions in line with the Group’s current divisional structure. The previous sensors and semiconductors segment 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:

l electron devices and sub-systems, which includes applications including defence 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.

l Specialist semiconductors, which includes logic, memory and microprocessors for high 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 including fire, rescue and security thermal imaging, x-ray spectroscopy, and military surveillance, targeting and guidance.

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 trade receivable and payable balances between operating segments.

The Group’s geographical segments are determined by the location of the Group’s assets and operations.

Business segmentsThe 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.


Electron devices and sub-systems

£000

imaging devices

£000

Specialist semi-conductors

£000

Sensors

£000

Unallocatedexpenses

£000

Total operations

£000

Revenue 83,739 65,224 53,323 30,907 - 233,193

Adjusted segment result 15,686 4,292 13,074 (1,596) (2,349) 29,107

Exchange differences - - - - (1,667) (1,667)

Net finance costs - - - - (7,051) (7,051)

Adjusted profit/(loss) before taxation 15,686 4,292 13,074 (1,596) (11,067) 20,389

Amortisation of acquired intangible assets (58) (1,256) (6,512) (802) - (8,628)

Impairment of acquired intangible assets (359) (17,430) (6,994) (1,344) - (26,127)

Impairment of plant and equipment - (2,500) - - - (2,500)

Business improvement programme costs (1,941) (2,495) (1,711) (679) - (6,826)

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)

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£000

imaging devices

£000


£000

Sensors

£000

Unallocatedexpenses

£000

Total operations

£000

Revenue 75,776 60,578 39,826 28,427 - 204,607

Adjusted segment result 17,521 7,200 6,434 (481) (2,380) 28,294

Exchange differences - - - - 798 798

Net finance costs - - - - (5,682) (5,682)

Adjusted profit/(loss) before taxation 17,521 7,200 6,434 (481) (7,264) 23,410

Amortisation of acquired intangible assets - (1,390) (5,222) (698) - (7,310)

Business improvement programme costs (1,215) (412) (369) - - (1,996)

Fair value losses on foreign exchange contracts - - - - (357) (357)

Segment result and profit/(loss) before tax 16,306 5,398 843 (1,179) (7,621) 13,747



£000

imaging devices

£000


£000

Sensors

£000

Unallocateditems

£000

Total operations

£000

Assets and liabilities

Intangible assets 866 253 92,815 10,570 14,695 119,199

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

Total assets 21,421 27,667 111,493 19,909 97,233 277,723

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

Other segment information

Capital expenditure:

Property, plant and equipment 1,305 3,508 1,361 653 2,394 9,221

Software - - - - 1,531 1,531

Product development 482 1,295 379 456 - 2,612

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

Warranty provision arising in the year 3,242 2,491 445 280 - 6,458


4. Segment information (continued)

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£000

imaging devices

£000


£000

Sensors

£000

Unallocateditems

£000

Total operations

£000

Assets and liabilities

Intangible assets 1,507 25,315 39,870 11,643 14,702 93,037

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

Total assets 26,878 54,653 52,276 20,885 88,552 243,244

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

Other segment information

Capital expenditure:

Property, plant and equipment 2,431 3,146 1,143 934 2,989 10,643

Software - - - 322 1,348 1,670

Product development 862 498 254 422 - 2,036

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

Warranty provision arising in the year 2,798 776 162 150 - 3,886

Geographical segmentsThe following table presents revenue, capital expenditure and certain asset information regarding the Group’s geographical segments for the years ended 31 March 2009 and 2008.


£000


£000

Group turnover

Revenue by destination

United Kingdom 44,409 50,275

North America 79,953 56,194

Europe 83,639 76,544

Asia Pacific 22,150 17,868

Rest ot the world 3,042 3,726

233,193 204,607

Segment assets


North America 67,638 13,570

Europe 117,477 127,295

Asia Pacific 198 188

277,723 243,244

Capital expenditure including product development


North America 702 201

Europe 5,269 4,615

Asia Pacific 7 75

13,364 14,466

4. Segment information (continued)

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£000


£000

Research and development expenditure expensed 13,414 12,056

Amortisation of deferred development expenditure 2,171 1,839

Impairment of deferred development expenditure 1,548 93

Total research and development expense 17,133 13,988

Included in cost of sales:

Depreciation of property, plant and equipment 9,666 7,992

Included in distribution and administrative expenses:

Depreciation of property, plant and equipment 538 400

Amortisation of software 1,875 1,507

Amortisation of acquired intangibles 8,628 7,310

Impairment of plant, equipment and acquired intangibles 27,079 -

Total depreciation, amortisation and impairment expense 47,786 17,209

Foreign currency losses arising from fair value adjustments 2,894 435

Net foreign currency losses/(gains) on settled foreign exchange contracts 3,526 (310)

Total foreign exchange losses on items measured at fair value through the income statement 6,420 125

Other net foreign currency gains (1,859) (923)

Total net foreign currency losses/(gains) 4,561 (798)

Government grants receivable (1,707) (1,228)

increase in provision for impairment of trade receivables recognised in administrative expenses 722 395

Costs of inventories recognised as an expense 137,974 120,449

Including: Write-down of inventories to net realisable value 2,921 245

Reversals of impairments in inventories* (251) (1,029)

Minimum lease payments recognised as an operating lease expense 923 795

5. Revenues and expenses(Loss)/profit from continuing operations is stated after charging/(crediting):

* The reversal of impairments arose as a result of changes in demand for products.


6. Auditor’s remunerationYear ended

31 March 2009

£000


£000

Audit of the financial statements 315 200

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.

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Staff costs


£000


£000

Wages and salaries 62,927 54,779

Social security costs 12,885 10,469

Defined contribution pension costs (see note 26) 1,575 1,721

Termination payments upon retirement (see note 26) 399 330

Share based payment charges (see note 26) 625 821

78,411 68,120

The average monthly number of employees during the year was made up as follows:


No.


No.

Manufacturing 1,215 1,339

Administration 499 489

1,714 1,828

7. Staff costs and directors’ remuneration

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 programme. Details of Directors’ remuneration for the year are provided in the Directors’ remuneration report on pages 28 to 33.

8. Finance costs and revenueYear ended

31 March 2009

£000


£000

Bank loan interest 7,323 5,802

Amortisation of debt issue costs 412 355

Total interest expense for financial liabilities not at fair value through the income statement 7,735 6,157

Fair value adjustments to interest rate swaps 1,819 26

Total finance costs 9,554 6,183

Bank interest receivable 684 501

Total finance revenue 684 501

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£000


£000

Consolidated income statement

Current income tax

Current income tax charge – UK corporation tax 2,603 4,656

Current income tax charge – foreign tax (571) 385

Current income tax charge 2,032 5,041

Adjustments in respect of current income tax of previous years (1,882) (794)

Total current income tax 150 4,247

Deferred income tax

Relating to origination and reversal of temporary differences (8,143) (2,074)

Adjustment in respect of the abolition of Industrial Buildings Allowances 983 -

Adjustments in respect of deferred income tax of previous years (96) (225)

Total deferred income tax (7,256) (2,299)

income tax expense reported in the Group income statement (7,106) 1,948

Tax relating to items charged or credited to equity

Net gain on revaluation of cash flow hedges (22) (26)

Charge in respect of share based payments 37 729

Net tax on retranslation of foreign operations - (6)

Tax charge in the statement of recognised income and expense 15 697

9. Income taxMajor components of income tax expense for the years ended 31 March 2009 and 2008 are:


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 the Group’s effective income tax rate for the years ended 31 March 2009 and 2008 is as follows:


£000


£000

Accounting (loss)/profit before income tax (28,405) 13,747

At UK statutory income tax rate of 28% (2008: 30%) (7,954) 4,124

Permanent differences 420 756

Permanent difference in relation to goodwill impairment 5,003 -

Tax relief on research and development – current year (3,457) (2,047)

Tax relief on research and development – prior year (866) (989)

Impact of higher taxes on overseas earnings (123) 280

Impact of change in UK income tax rate - (146)

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

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Deferred income tax at 31 March 2009 and 2008 relates to the following:31 March 2009

£000

31 March 2008

£000

31 March 2009

£000

31 March 2008

£000

Deferred income tax liabilities

Accelerated depreciation for tax purposes 1,833 1,842 (163) 26

Fair value adjustments on acquisition 11,310 8,209 (5,294) (2,501)

Revaluation of cash flow hedges - - - (75)

Fair value of land and buildings 586 1,074 (205) (174)

Gross deferred income tax liabilities 13,729 11,125

Deferred income tax assets

Employment benefits 160 151 1 30

Revaluation of foreign subsidiaries - - - 15

Revaluation of cash flow hedges 1,433 91 (1,320) (56)

Share based payment charges 50 256 169 154

Deferred tax allowances on provisions and accruals 4,217 2,228 (444) 282

Gross deferred income tax assets 5,860 2,726

Deferred income tax credit (7,256) (2,299)

Net deferred income tax liability 7,869 8,399

Consolidated balance sheet Consolidated income statement

At 31 March 2009, there was no recognised or unrecognised deferred income tax liability (2008: £nil) for taxes that would be payable on the 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 the availability of double taxation relief.

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 (2008: £6.4m). The unprovided deferred tax amounts to £3.2m (2008: £2.2m).

9. Income tax (continued)

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10. Earnings per shareBasic 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.

Diluted earnings per share amounts are calculated by dividing the net (loss)/profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year adjusted for the effects of dilutive options.

The following reflects the income and share data used in the basic and diluted earnings per share computations:


£000


£000

(Loss)/profit attributable to ordinary shareholders (21,299) 11,799

Adjusted earnings per share is arrived at using the following earnings:


£000


£000

(Loss)/profit for the year (21,299) 11,799

Amortisation of acquired intangible assets 8,628 7,310



Business improvement programme costs 6,826 1,996

Fair value losses on financial instruments 4,713 357

Impact of abolition of Industrial Buildings Allowances 983 -

Tax impact of the above (9,793) (3,112)

(18,685) 18,350

Weighted average number of ordinary shares


No.000


No.000

For basic earnings per share 61,871 60,951

Effect of dilution:

Share options 90 501

For diluted earnings per share 61,961 61,452

The adjusted earnings per share is considered to more appropriately reflect the underlying performance of the business year on year.

No further shares have been issued since the reporting date and before 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 the employee Benefit Trust.


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11. Dividends paid and proposed Year ended 31 March 2009

£000


£000

Declared and paid during the year:

Equity dividends on ordinary shares:

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

4,913 4,380

Proposed for approval at AGM (not recognised as a liability as at 31 March):


Final dividend for 2009: nil (2008: 5.25p) - 3,234

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.

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12. Property, plant and equipment

COST

Land and buildings

£000

Plant and equipment

£000

Office equipment, fixtures and fittings

£000

Assets under construction

£000

Total

£000

At 1 April 2007 8,422 41,447 4,834 4,572 59,275

Additions 220 3,291 80 7,052 10,643

Acquisition of subsidiary - 607 - - 607

Disposals (10) (1,309) (855) - (2,174)

Reclassifications between categories 1,649 8,401 415 (10,465) -

Exchange adjustment 1,249 1,327 154 - 2,730

At 1 April 2008 11,530 53,764 4,628 1,159 71,081

Additions 631 7,715 875 - 9,221

Acquisition of subsidiary 428 524 36 - 988

Disposals (13) (294) (141) - (448)

Reclassifications between categories - 283 7 (290) -

Exchange adjustment 1,607 3,452 338 - 5,397

At 31 March 2009 14,183 65,444 5,743 869 86,239

DEPRECiATiON

At 1 April 2007 1,025 20,004 3,054 - 24,083

Provided during the year 999 6,613 780 - 8,392

Disposals (7) (1,166) (855) - (2,028)

Exchange adjustment 57 338 48 - 443

At 1 April 2008 2,074 25,789 3,027 - 30,890

Provided during the year 1,224 8,116 864 - 10,204

Impairment during the year - 2,500 - - 2,500

Disposals - (122) (126) - (248)

Exchange adjustment 527 1,965 150 - 2,642

At 31 March 2009 3,825 38,248 3,915 - 45,988

CARRYiNG AMOUNT

At 31 March 2007 7,397 21,443 1,780 4,572 35,192

At 31 March 2008 9,456 27,975 1,601 1,159 40,191

At 31 March 2009 10,358 27,196 1,828 869 40,251

The carrying value of plant and equipment held under finance leases at 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 additional depreciation charge of £2.5m.


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13. Intangible assets

COST

Patents, trademarks and

technology

£000

Development costs

£000

Software

£000

Customer relationships

and agreements

£000Goodwill

£000

Total

£000

At 1 April 2007 12,085 8,034 9,076 20,886 48,829 98,910

Additions 117 2,036 1,670 - - 3,823

Acquisition of subsidiary 1,413 453 - 207 2,912 4,985

Exchange adjustment 2,059 637 93 3,334 6,675 12,798

At 1 April 2008 15,674 11,160 10,839 24,427 58,416 120,516

Additions - 2,612 1,531 - - 4,143

Acquisition of subsidiary 2,238 - - 13,205 26,027 41,470

Exchange adjustment 2,837 976 62 6,413 12,804 23,092

At 31 March 2009 20,749 14,748 12,432 44,045 97,247 189,221

AMORTiSATiON

At 1 April 2007 1,493 4,258 4,011 4,873 - 14,635

Charge in year 1,943 2,034 1,507 5,172 - 10,656

Impairment loss - 93 - - - 93

Exchange adjustment 400 214 36 1,445 - 2,095

At 1 April 2008 3,836 6,599 5,554 11,490 - 27,479

Charge in year 2,478 2,399 1,875 5,922 - 12,674

Impairment loss 4,478 2,158 - 320 19,171 26,127

Exchange adjustment 804 429 17 2,492 - 3,742

At 31 March 2009 11,596 11,585 7,446 20,224 19,171 70,022

CARRYiNG AMOUNT

At 31 March 2007 10,592 3,776 5,065 16,013 48,829 84,275

At 31 March 2008 11,838 4,561 5,285 12,937 58,416 93,037

At 31 March 2009 9,153 3,163 4,986 23,821 78,076 119,199

Customer relationships and agreements includes £7,475,000 in respect of a relationship with an intermediary in North America, with a remaining useful economic life of 9.5 years and, £3,855,000 in respect of a partnership agreement in France with a remaining useful economic life of 2.5 years. Both agreements are in respect of the specialist semiconductors business segment.

Amortisation of £2,399,000 on development costs includes £2,171,000 (2008: £1,839,000) in respect of capitalised development expenditure and £228,000 (2008: £195,000) in respect of acquired in-process research and development.

The amortisation of acquired intangible assets presented on the face of the income statement and excluded from the adjusted profit before taxation relates to amortisation of intangibles acquired through business combinations.

The economic downturn in the last quarter of 2008/09 and the ongoing impact has resulted in write downs of the acquired intangible assets with respect to the imaging business in Grenoble, which served primarily the industrial and medical markets, of £17,430,000. Provisions have also been made against goodwill with regard to the QP Semiconductor Inc. business acquired in October 2008 of £6,994,000. £1,703,000 of goodwill, with regard to acquisitions made before the Group was listed, have also been written off as the associated products are within approximately five years of their commercially exploitable term.

Goodwill is not amortised but is annually tested for impairment (see note 14). All other assets have finite lives.

Impairment losses on development costs are included within research and development costs in the income statement.

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14. Impairment testing of goodwillGoodwill acquired through business combinations has been allocated to individual cash-generating units for impairment testing as follows:

l QP Semiconductor Inc. business, acquired in October 2008.

l e2v semiconductors SAS semiconductor business, acquired in July 2006 (SAS Specialist Semiconductors).

l e2v Semiconductors SAS imaging business, acquired in July 2006 (SAS Imaging).

l e2v scientific instruments, acquired in July 2005.

l Dynex microwave alarms business, acquired in 2004.

l e2v technologies, being entities in the Marconi Applied Technologies division, acquired in July 2002.

l Siemens high power satcom product group, acquired in 1999.

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 units, e2v Semiconductors SAS Semiconductor business and e2v Semiconductors SAS imaging business.

The recoverable amount of the goodwill for all cash-generating units has been determined based on a value in use calculation. To calculate this, cash flow projections are based on financial budgets and forecasts approved by the Board covering a five year period. The discount rate applied to cash flow projections is 15% (2008: 15%). The carrying amount of goodwill and impairment during the year for each cash-generating unit is set out in the table below:

1 April 2008 or on acquisition

£000

Exchange adjustment

£000

impairment

£000

31 March 2009

£000

31 March 2008

£000

QP Semiconductor Inc. unit 26,027 5,010 (6,994) 24,043 -

e2v semiconductors SAS, specialist semiconductors unit 32,503 5,514 - 38,017 32,503

e2v semiconductors SAS, imaging business unit 8,955 1,519 (10,474) - 8,955

e2v Scientific Instruments unit 2,002 - - 2,002 2,002

Dynex microwave alarms 1,344 - (1,344) - 1,344

e2v technologies unit 9,709 - - 9,709 9,709

Siemens high power satcom 359 - (359) - 359

MiCS Microchemical Systems unit 3,544 761 - 4,305 3,544

84,443 12,804 (19,171) 78,076 58,416


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The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill:

Gross marginsThe basis used to determine the value assigned to the budgeted gross margins is the average gross margins achieved in the year immediately before the budgeted year, adjusted for any expected changes due to sales mix or efficiency improvements.

Discount ratesDiscount rates reflect the management’s estimate of the return on capital employed (ROCe) required in each cash generating unit. This is the benchmark used by management to assess operating performance and to evaluate future capital investment proposals. Although interest rates have reduced in recent months, a 15% discount rate is still considered appropriate for the purposes of impairment reviews as it is consistent with the rates used in all investment appraisals. It is considered that the weighted average cost of capital (WACC) for the business concerned would not be materially different.

Growth ratesGrowth rates have been considered separately for each cash generating unit 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.

QP Semiconductor Inc. has not performed in line with expectations at the time of acquisition due to a decline in market conditions and reductions in demand from major clients. An amount of $10m has been impaired – this reflects the consideration of a range of future revenue levels and is considered prudent.

Sensitivity levels on the base QP Semiconductor Inc. calculations show that further impairment would need to be considered if:

l Revenue reduced by 5.5% initially or growth reduced to 3.5% (from 5%); or

l Margin % reduced by 5.3%; or

l Discount Rate 16% or above had been selected; or

l Long Term Growth reduced to 1.5% (from 2.5%).

The SAS specialist semiconductors business based in Grenoble has a 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 that impairment would have needed to be considered if:

l Revenue reduced by 20% ; or

l Margin Growth reduced by 30%; or

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).

The part of the SAS imaging business based in Grenoble, acquired as part of the purchase from Atmel in 2006, is currently loss making and is expected to be loss making into the foreseeable future (a strategy and operational review is in process) and the total value of the goodwill and intangible assets (including capitalised research and development costs) of €18.8m associated with this business is being written off.

The goodwill associated with the Dynex and Siemens products is being written off in full as these products, as originally acquired, are within approximately five years of their commercially exploitable term.

The MiCS business, although heavily dependant on the automotive market, has not been impaired. A detailed review of the current and future business has taken place and newly won contracts with two major automotive manufacturers with potential developments across other major automotive manufacturers, together with the introduction of newly developed chemical sensors indicate that an impairment is not required. These new contracts mainly support automotive sales in the Far east where the market is currently growing.

The headroom over goodwill from the impairment test is CHF4.7m.

Sensitivity levels on the MiCS calculations show that impairment would have needed to be considered if:

l Revenue growth reduced by 15%; or

l Margin % projected in medium term were reduced falls by 30%; or

l Discount Rate of 18.5% or more had been selected; or

l Long Term Growth there is no impairment if a zero rate long term growth rate is used (3% has been used).

Both e2v scientific instruments unit and the e2v technologies unit have sufficient headroom at £15.3m and £8.6m, respectively, not to be at risk of creating an impairment on the usual range of sensitivity tests.

14. Impairment testing of goodwill (continued)

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15. Business combinationsAcquisition 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 of specialist semiconductor components and sub-systems.

The fair value of the identifiable assets and liabilities of QP Semiconductor Inc. as at the date of acquisition was:

Provisional fair value recognised on acquisition

£000

book value

£000

Property, plant and equipment 988 988

Intangible assets 15,443 -

Deferred income tax asset 782 782

Income tax recoverable 245 245

Inventories 3,261 3,261

Trade debtors 1,127 1,127

Other debtors 163 163

Cash and cash equivalents 5,265 5,265

27,274 11,831

Trade payables (135) (135)

Other creditors (498) (498)

Provisions (156) (156)

Deferred income tax liability (6,188) -

(6,977) (789)

Fair value of net assets 20,297 11,042

Goodwill arising on acquisition 26,027

Total consideration 46,324

Consideration: £000

Cash paid 43,421

Costs associated with the acquisition 2,903


The cash outflow on acquisition is as follows: £000

Net cash acquired with the subsidiary 5,265

Cash paid (46,324)

Net cash outflow (41,059)

Included in the £26.0m of goodwill recognised above are certain intangible assets that cannot be individually separated and reliably measured from the acquiree due to their nature. These items include the anticipated growth in market share, expected value of synergies and an assembled workforce.

From the date of acquisition, QP Semiconductor Inc. has contributed £3.1m profit to the loss before tax and net finance costs of the Group. Had the acquisition occurred on the first day of the year, the consolidated loss from

continuing operations before tax and net finance costs of the Group would have been £15,619,000 and the revenue from continuing operations would have been £240,451,000.

As detailed in note 25, there is a contingent liability of up to £1,000,000 in respect of the calculation of the earn-out and net worth on acquisition. This amount is not included in the calculations above. The sale and purchase agreement also provides for earn-outs in respect of post acquisition profits. The Directors do not anticipate any amounts becoming payable.


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fair value recognised on

acquisition£000

book value£000

Property, plant and equipment 607 607

Intangible assets 2,073 453

Deferred income tax asset 266 -

Inventories 225 225

Trade debtors 85 85

Other debtors 166 166

Cash and cash equivalents 103 103

3,525 1,639

Trade payables (342) (342)

Other creditors (603) (603)

Financial liabilities (7) (7)

Deferred income tax liability (345) -

(1,297) (952)

Fair value of net assets 2,228 687

Goodwill arising on acquisition 2,912


Consideration: £000

Cash paid 5,008

Costs associated with the acquisition 132


The cash outflow on acquisition is as follows: £000

Net cash acquired with the subsidiary 103

Cash paid (5,140)

Net cash outflow (5,037)

Acquisition of MiCSOn 14 May 2007, e2v technologies plc acquired 100% of the voting shares of MiCS, an unlisted company based in Switzerland, specialising in the design and manufacture of specialised electronic components and sub-systems.

The fair value of the identifiable assets and liabilities of MiCS as at the date of acquisition was:

Included in the £2.9m of goodwill recognised above are certain intangible assets that cannot be individually separated and reliably measured from the acquiree due to their nature. These items include the expected value of synergies and an assembled workforce.

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 31 March 2008. Had the acquisition occurred on the first day of that year, the consolidated profit from continuing operations before tax and net finance costs of the Group would have been £19,129,000 and the revenue from continuing operations would have been £204,907,000.

15. Business combinations (continued)

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16. Inventories 31 March 2009

£000

31 March 2008

£000

Raw materials and consumables 18,027 16,451

Work-in-progress 12,117 14,709

Finished goods 12,289 12,798

Total inventories at lower of cost and net realisable value 42,433 43,958

17. Trade and other receivables (current) 31 March 2009

£000

31 March 2008

£000

Trade receivables 51,163 45,535

Other debtors 7,531 6,007

Prepayments and accrued income 2,415 3,005

61,109 54,547

Trade receivables are non-interest bearing and are generally on 30 or 60 day terms and are shown net of provision for impairment. As at 31 March 2009 trade receivables with a value of £1,230k (2008: £692k) were impaired and provided for due to poor payment history, insolvency of the debtor or their age profile. The movements on the provision for impairment of receivables were as follows:


£000


£000

Provision at 1 April 692 703

Amounts written off (172) (141)

Unused amounts reversed (40) (306)

Provisions created in the year 722 395

Foreign exchange on retranslation 28 41

Provision at 31 March 1,230 692


31 March 2009

£000

31 March 2008

£000

31 March 2009

£000

31 March 2008

£000

0-30 days overdue 1,954 1,616 5 -

31-60 days overdue 1,566 592 3 16

61-90 days overdue 459 24 67 87

91-120 days overdue 90 200 181 101

120+ days overdue 1,109 65 974 488

Total 5,178 2,497 1,230 692

Trade receivables past due but not impaired impaired trade receivables

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.

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18. Other financial assets 31 March 2009

£000

31 March 2008

£000

Interest rate swap - 142

Forward currency contracts - 46

- 188

19. Cash 31 March 2009

£000

31 March 2008

£000

Cash at bank and in hand 6,373 5,806

31 March 2009

£000

31 March 2008

£000

Cash at bank and in hand 6,373 5,806

Cash at bank earns interest at floating rates based on daily bank deposit rates. The fair value of cash is £6,373,000 (2008: £5,806,000).

For the purposes of the Group cash flow statement, cash and cash equivalents comprise the following at 31 March:

20. Trade and other payables 31 March 2009

£000

31 March 2008

£000

Trade payables 24,229 25,499

Taxation and social security costs 2,908 2,712

Payments received on account 2,061 3,919

Other payables 504 801

Retirement benefit obligations 172 110

Interest payable 17 31

Accruals and deferred income 22,676 14,510

52,567 47,582

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. Interest payable is settled monthly, quarterly or half yearly, throughout the financial year.

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21. Other financial liabilities Effectiveinterest rate Maturity

31 March 2009

£000

31 March 2008

£000

Current

Obligations under finance leases 6.8 - 9.8% 2008-2009 - 13

Bank loans: term credit 4.56 - 6.25%* 2009-2010 9,750 6,918

Interest rate swap 904 62

Forward currency contracts 3,296 449

13,950 7,442

Non-current

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

Interest rate swap 915 -

133,737 92,073

* Includes the effects of related interest rate swap as discussed in note 29.

The bank loans are secured by a floating charge over the net assets of the Group.

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 repayable on 11 July 2011. The revolving credit facility is repaid and re-drawn at periodic intervals ranging from one to six months, at which time the

31 March 2009

£000

31 March 2008

£000

Future minimum lease payments under finance leases are as follows:

Not later than one year - 14

After one year but not more than five years - -

- 14

Less: finance charges allocated to future periods - (1)

Present values of minimum lease payments - 13


interest rate is re-priced. Provided covenants continue to be met, the draw down is at the discretion of the Group with no requirement to reduce the outstanding balance below that currently drawn before 2011. The loan is therefore treated as non-current.

At 31 March 2009, the Group had available £31,714,000 (2008: £59,100,000) of un-drawn committed borrowing facilities in respect of which all conditions precedent had been met.

22. ProvisionsContract losses

£000

Environmental

£000

Product warranty

£000Total

£000

At 1 April 2008 360 350 4,444 5,154

Arising on acquisition of QP Semiconductor Inc. - - 156 156

Arising during the year 209 - 7,403 7,612

Utilised during the year - (27) (6,458) (6,485)

Released during the year - - (243) (243)

Exchange adjustment 78 - 295 373

At 31 March 2009 647 323 5,597 6,567

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

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above provisions are not discounted.

Contract lossesA 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 the next financial year.

EnvironmentalA provision is recognised for expected environmental costs relating to UK manufacturing operations. It is expected that most of these costs will be incurred within one year of the balance sheet date.

Product warrantyA provision is recognised for expected warranty claims on products sold that are within their warranty period at the end of the year. The warranty period can be date based or hours usage based. It is expected that most 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.

23. Authorised and issued share capital Authorisesd

2009

No.

2008

No.

Ordinary shares of 5p each 75,000,000 75,000,000

Ordinary shares issued and fully paid No. £000

At 1 April 2007 61,463,574 3,073

Issued for cash on exercise of share options 753,842 38

At 31 March 2008 62,217,416 3,111


At 31 March2009 62,569,593 3,128

Treasury shares No. £000

At 1 April 2008 626,239 6

Issued during the year in respect of LTIP awards (107,383) (1)

At 31 March 2009 518,856 5

The market value of the treasury shares at 31 March 2009 was £214,028 (2008: £1,108,443).

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).

The Company increased the issued share capital during the year due to the exercise of options under share option schemes. Total proceeds from shares issued under exercise of share options amounts to £681,558.

22. Provisions (continued)

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24. Reconciliation of movements in equity

issued capital

£000

Share premium

£000

Other reserves

£000

Hedgereserve

£000

foreign currencytranslation

reserve

£000

Retained earnings

£000

Total equity

£000

At 1 April 2007 3,073 39,902 265 111 (50) 20,927 64,228

Total recognised (expense)/income for

the year - - - (53) 1,033 11,549 12,529

Share based payment charge - - - - - 821 821

Issue of shares 38 1,214 - - - - 1,252

Issue of shares by EBT on

exercise of options - - 3 - - (3) -

Equity dividends - - - - - (4,380) (4,380)

At 31 March 2008 3,111 41,116 268 58 983 28,914 74,450

Total recognised (expense)/income for

the year - - - (58) 4,425 (21,531) (17,164)

Share based payment charge - - - - - 625 625

Issue of shares 17 664 - - - - 681

Issue of shares by EBT on

exercise of options - - 1 - -

(1) -

Equity dividends - - - - - (4,913) (4,913)

At 31 March 2009 3,128 41,780 269 - 5,408 3,094 53,679

Nature and purpose of reservesHedge reserveThis reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge.

Foreign currency translation reserveThe foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. It is also used to record the net investments hedged in these subsidiaries.


Other reservesOther reserves consist of the Capital redemption reserve and Treasury shares reserve. These reserves are used to record reserve transfers required on redemption of shares and also to record movements in shares held by the employee Benefit Trust. The balance on the Capital redemption reserve at 31 March 2009 was £274,000 (2008: £274,000). The balance on the Treasury shares reserve at 31 March 2009 was £5,000 (2008: £6,000).

25. Commitments and contingenciesOperating lease commitments – Group as lesseeThe Group has entered into commercial leases on certain properties, motor vehicles and items of machinery where it is not in the best interest of the Group to purchase these assets. Renewals are at the option of the specific 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 at 31 March are as follows:

31 March 2009

£000

31 March 2008

£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

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At 31 March 2009, the Group has commitments of £2,035,000 (2008: £4,056,000) principally relating to the acquisition of new plant and equipment.

Contingent liabilitiesThe 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 has been made for this amount.

The Group operates four share based award schemes as follows:

Long Term Incentive Plan (LTIP)Awards under this scheme vest on the third anniversary of the date of the award subject to performance targets being met. Targets relate to Total Shareholders’ Return (TSR) relative to the TSR of a specified list of peer 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 (unless the Remuneration Committee considers, in exceptional circumstances, that it would be inappropriate to apply this underpin). 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 of awards made under this scheme: 2009

No.

2008

No.

Outstanding at the beginning of the year:

Awards granted 3 September 2004 - 258,000

Awards granted 20 July 2005 240,500 342,250


Awards granted 10 January 2007 15,000 15,000

Awards granted 16 July 2007 243,625 -

709,525 869,750

Granted in the year:

Awards granted 16 July 2007 - 259,375


Awards granted 1 October 2008 20,400 -

422,700 259,375

Awards exercised during the year (107,383) (258,000)

Awards lapsed during the year (232,117) (161,600)

Outstanding at the end of the year 792,725 709,525

Weighted average share price on date of exercise of options 259.00p 270.77p

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).

26. Employment benefits – Equity settled share based payments

25. Commitments and contingencies (continued)

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The Group has an exSOP for the granting of non-transferable options to certain employees. Options granted under the plan vest on the first day on which they become exercisable which is typically three years after grant date. The overall life of the options is under four years. The vesting period for the exSOP is finite allowing eligible employees to exercise the option in a fixed period, once conditions are met. These options are settled in equity once exercised. The options may not be exercised unless, over the vesting period,

the adjusted earnings per share (ePS) has increased by a fixed percentage above the retail price index (RPI) as detailed below.

For a period of three years, commencing with the financial year in which the option is granted, the increase in earnings per share (ePS) must be more than the increase in the Retail Price Index (RPI) as follows:

Tier 1 Tier 2 Tier 3

EPS exceeds RPI by 15% 20% 40% 100%

EPS exceeds RPI by 20% 50% 100%

EPS exceeds RPI by 25% 100%

The ePS is adjusted ePS, calculated on a consistent basis over the three year period, and excludes amortisation of acquired intangibles, business improvement programme costs and other items determined to be of a non-recurring nature. The percentages in the above table are the 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.

Date of Grant first date for exercise

Last date for 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

12 January 2007 1 February 2010 31 December 2010 396.5p 72,000 - - 72,000

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

The following table illustrates the number (No.), weighted average remaining contractual life and the weighted average exercise prices (WAeP) of share options for the exSOP.

Share Incentive Plan (SIP)No awards have been made to date under this scheme.

2009No.

2009 WAEP

2008

No.

2008

WAEP

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

Lapsed during the year (111,500) 236.12p (31,000) 241.34p

Granted during the year – – 230,000 254.00p

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


Weighted average remaining contractual life 21 months 25 months


26. Employment benefits – equity settled share based payments (continued)

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2009

No.

2009

WAEP

2008

No.

2008

WAEP

Outstanding at the beginning of the year 935,277 234.51p 1,241,713 202.37p


Lapsed during the year (220,576) 238.07p (90,520) 302.55p

Granted during the year 163,864 225.00p 522,916 225.00p


Exercisable at the end of the year 2,925 194.30p 83,713 179.82p


Weighted average remaining contractual life 29 months 30 months

Dividend yield

%

Expected volatility

%

Risk free interest rate

%

Expected life of option

Years

fair value of option Pence

LTiP

Awards granted 3 September 2004 2.6% 34.4% 4.8% 3 years 109.9p

Awards granted 20 July 2005 2.0% 29.6% 4.1% 3 years 135.4p


Awards granted 10 January 2007 1.6% 26.0% 5.2% 3 years 237.2p



Awards granted 1 October 2008 3.1% 39.8% 4.0% 3 years 158.6p

ExSOP

Awards granted 14 January 2005 2.3% 33.1% 4.4% 3 years 5.5 months 48.2p

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

Awards granted 20 December 2007 2.9% 34.7% 4.5% 3 years 5.5 months 62.4p

SAYE

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

Awards granted 9 February 2007 1.5% 26.2% 5.4% 3 years 4 months 130.5p

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 necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

No other features of options granted were incorporated into the measurement of fair value.

Sharesave scheme (SAYE)The Group operates an HM Revenue and Customs approved Sharesave Scheme for all UK employees and executive Directors and managers can apply to join the scheme.

The following table illustrates the number (No.), weighted average remaining contractual life and the weighted average exercise prices (WAeP) of share options for the SAYe.

26. Employment benefits – equity settled share based payments (continued)

The fair value of all share option plans is estimated as at the date of grant using the binomial model. The following table gives the assumptions made.

No subsequent amendments have been made to assumptions estimated at the date of grant.

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Defined contribution plansThe Group has defined contribution plans in the UK and North America, covering substantially all of its employees, which require contributions to be made to a separately administered fund. The Group contributes to state schemes for european activities. Such schemes are defined contribution schemes and there is no Group exposure to any scheme liabilities.

Retirement benefit planIn addition to the state pension scheme, the French overseas subsidiary 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 calculated at 31 March 2009 by a qualified actuary using the projected unit credit method. The cost of providing these benefits is charged to the Income 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 and expense.

31 March 2009

£000

31 March 2008

£000

Current liability 172 110

Non-current liability 3,355 3,096

Total liability 3,527 3,206

The current portion of the liability represents management’s best estimate of the contributions expected to be paid in the next financial year.

The table below details the present value of the plan’s obligations and experience adjustments recognised.

31 March 2009£’000

31 March 2008£’000

31 March 2007£’000

On acquisition in 2006£’000

Present value of plan’s obligations 3,527 3,206 2,792 3,019

Experience (losses)/gains recognised in the year/period (336) (108) 226


The main assumptions used in determining the liability of the defined benefit scheme include the discount rate for discounting scheme liabilities, the expected rate of salary inflation, staff turnover rates and future mortality in service assumptions. For each of these assumptions, there is a range of possible values. Relatively small changes in some of these variables can have a significant impact on the level of the total obligation.

The amount recognised in the balance sheet in respect of the Group’s defined benefit scheme is given in the table below:

The total expense is recognised within administrative expenses in the income statement and is made up as follows:

31 March 2009

£000

31 March 2008

£000

Service cost 199 184

Interest on pension liabilities 200 146

Total expense 399 330

26. Employee benefits – post employment benefits

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and expense, for the current and prior year is as follows:

31 March 2009

£000

31 March 2008

£000

Actuarial losses/(gains) due to changes in the following assumptions and experience adjustments:

- demographical changes (72) (114)

- staff turnover 12 (2)

- social taxes - 178

- salary increases 118 -

- discount rate 66 (318)

- beginning work life age (207) -

- difference between the benefits paid 278 46

Total actuarial loss/(gain) 195 (210)

The cumulative amount of actuarial gains and losses recognised since 1 August 2006 in the Group statement of recognised income and expense is £368,000 (2008: £563,000).

Changes in the present value of the defined benefit obligation are given below:

31 March 2009

£000

31 March 2008

£000

Defined benefit obligation at start of period 3,206 2,792

Exchange rate movement 506 475

Retirement benefit expense 399 330

Benefits paid (365) (164)

Impact of business improvement programme (414) -

Transfers - (17)

Actuarial loss/(gain) 195 (210)

Closing defined benefit obligation 3,527 3,206

The valuation assumptions used to estimate the defined benefit obligation are:

31 March 2009 31 March 2008

Retirement age 64years 65 years

Discount rate 5.75% 5.95%

Salary increases – administration 3.55% 3.0%

Salary increases – operators 3.12% 3.0%

Salary increases – engineers 3.65% 3.4%

Staff turnover rates – administration 1.65% 2.0%

Staff turnover rates – operators 1.3% 2.0%

Staff turnover rates – engineers 3.5% 3.5%

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.

26. Employee benefits – post employment benefits (continued)

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The Group’s principal financial instruments, other than derivatives, comprise bank loans and cash. The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial instruments such as trade debtors and trade creditors, which arise directly from its operations.

The Group also enters into derivative transactions, principally interest rate swaps and forward currency contracts. The purpose is to manage the interest rate and currency risks arising from the Group’s operations and its sources of finance.

It is, and has been throughout the year under review, the Group’s policy that no trading in financial instruments shall be undertaken.

The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, foreign currency risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. The Group also monitors the market price risk arising from all financial instruments. The magnitude of this risk that has arisen over the year is discussed in note 29. The Group’s accounting policies in relation to derivatives are set out in note 2.

Interest rate risk

The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s long term debt obligations.

The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debt. To manage this mix in a cost-efficient manner, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. At 31 March 2009, after taking into account the effect of interest

Change in US$/Euro rate impact on profit before tax

£000

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)

27. Related party disclosuresCompensation 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.

31 March 2009

£000

31 March 2008

£000

Short term employee benefits 638 622

Defined contribution pension costs 62 58

Share based payments 209 199

Total compensation paid to key management personnel 909 879

No Director had any material interest in any contract connected with the Group’s business during the year or at the end of the year.


rate swaps, approximately 37% (2008: 54%) of the Group’s borrowings were at a fixed rate of interest.

Based on the borrowings outstanding at the end of the year and assuming constant exchange rates, it is estimated that an increase of 1% in interest rates on the Group’s borrowings would increase the interest payable by £0.9m (2008: £0.5m). The impact of an increase in interest rates on bank deposits is estimated to be less than £0.1m (2008: less than £0.1m).

Foreign currency risk The Group has operations in the United States, europe, Canada and Hong Kong. As a result the Group’s balance sheet can be affected significantly by movements in the US dollar and euro exchange rates. The Group does not currently hedge this exposure, other than by using foreign currency borrowings to finance overseas investments.

The Group also has transactional currency exposures. Such exposure arises when sales are made by an operating unit in currencies other than the unit’s functional currency. Approximately 81% (2008: 75%) of the Group’s sales are outside of the UK and a significant proportion of these sales are not Sterling and therefore subject to foreign exchange. The Group also incurs operational costs in both US dollar and euro. The Group manages its transactional currency exposures centrally by using forward currency contracts to minimise the net currency exposures.

The following table demonstrates the Group’s sensitivity to a reasonably possible weakening in the US dollar and euro exchange rates in relation to Sterling with all other variables held constant. The sensitivity analysis includes only outstanding foreign currency denominated monetary items at the balance sheet date. The sensitivity excludes external loans as exchange gains and losses on retranslation do not impact profit before taxation.

28. Financial risk management objectives and policies

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£2,954,000 (2008: £786,000) in relation to the estimated impact on the valuation of forward foreign currency exchange contracts.

The impact of translating the net assets of foreign operations into Sterling is excluded from the sensitivity analysis. The Group has no foreign currency exposure with regard to transactions accounted for directly within equity.

The Group’s net borrowings are subject to currency risk due to cash and bank borrowings held in foreign currencies. The analysis of net borrowings by currency is shown in the table below:

Year end exchange rate

31 March 2009£million

Denominated in Euro €92.7m 1.07 86.7

Denominated in US$ $61.2m 1.43 42.8

Denominated in Sterling or other currencies £7.8m 1.00 7.8

137.3

Year end exchange rate

31 March 2008£million

Denominated in Euro €101.3m 1.26 80.4

Denominated in US$ $(4.9)m 1.99 (2.5)

Denominated in Sterling or other currencies £16.5m 1.00 16.5

94.4

Credit risk The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.

With respect to credit risk arising from financial assets of the Group, which comprise trade and other receivables, cash and certain derivative instruments, the Group’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. There are no significant concentrations of credit risk within the Group.

Liquidity risk The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans and finance lease contracts. The Group’s policy is to use funds in excess of the ongoing operating requirements to make early repayments against the bank borrowings on an annual basis.

The Group’s objective is to maintain a positive cash balance at a level adequate for daily operations while retaining the option to use revolving credit facilities for short term flexibility as necessary.

The table below summarises the maturity profile of the Group’s non-derivative financial liabilities at 31 March 2009 and 2008 based on contractual undiscounted payments.

0-6 months

£000

6-12 months

£000

1-3 years

£000

Total £000

31 March 2009

Interest bearing loans and borrowings 5,111 5,111 133,441 143,663

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

Total 52,571 11,466 138,753 202,790

0-6 months

£000

6-12 months

£000

1-4 years

£000

Total £000

31 March 2008

Interest bearing loans and borrowings 2,913 4,370 92,921 100,204

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.

28. Financial risk management objectives and policies (continued)

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Capital management The Group’s capital comprises shareholders’ funds as detailed in notes 23 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 Group’s business and maximise shareholder value. The Board is currently working with finance providers and is reviewing a range of options for a 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, a return of capital to shareholders, an issue of new shares or a change in the Group’s bank borrowings.

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 through performance related share option plans.

29. Financial instruments Fair values 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.

31 March 2009

£000

31 March 2008

£000

31 March 2009

£000

31 March 2008

£000

financial assets

Loans and receivables

Cash 6,373 5,806 6,373 5,806

Held for trading at fair value through the income statement

Forward currency contracts - 46 - 46

Interest rate swap - 142 - 142

financial liabilities

Interest-bearing loans and borrowings:

Obligations under finance leases - 13 - 13

Floating rate borrowings 142,572 98,991 137,639 98,991

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

Carrying amount fair Value

The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swaps is calculated by reference to interest 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 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.

28. Financial risk management objectives and policies (continued)

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Interest rate swaps The Group has interest rate swap agreements in place in relation to its term loan whereby it pays a fixed or secured rate of interest and receives a variable rate on the notional amount.

Notional amount Maturity Secured rate Variable rate

31 March 2009

€27,455,625 12July2011 3.88% 6monthEUREuribor

€30,201,188 12July2011 3.31%-5.00%* 6monthEUREuribor

31 March 2008

€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

* Capped rate.

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 term of the loan (2008: £nil).

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-ment in e2v technologies SAS. This loan is being used to hedge the Group’s exposure to foreign exchange risk on this investment. Gains or losses on the retranslation of this borrowing are transferred to equity to offset any gains or losses on translation of the net investment in this subsidiary undertaking.

Currency – forward exchange contracts

At 31 March 2009, the Group held several foreign exchange contracts designated to reduce the transactional exchange risk of US dollar denominated sales to customers in the United States. The terms of these contracts are as follows:

Total currency value of contracts

Average Exchange rate

Maturing in 0-6 months

£’000

Maturing in 6-12 month

£’000

31 March 2009

US$ 31,646,549 US$:£1.685 13,656 5,121

31 March 2008

US$ 41,010,000 US$ : £ 2.031 12,825 7,365

29. Financial instruments (continued)

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2009

£000

2008

£000

2007

£000

2006

£000

2005

£000

Revenue

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

Specialist semiconductors 53,323 39,826 28,044 - -

Sensors 30,907 28,427 23,146 22,832 23,819

Total revenue 233,193 204,607 173,925 112,276 100,547

Adjusted profit before tax and net finance costs* 27,440 29,092 24,653 14,953 12,472

Amortisation of acquired intangible assets (8,628) (7,310) (6,047) (369) (10)

Impairment of acquired intangible assets (26,127) - - - -

Impairment of plant and equipment (2,500) - - - -

Acquisition and integration costs - - (1,055) - -

Business improvement programme costs (6,826) (1,996) - (819) (61)

Fair value losses on financial instruments (2,894) (357) - - -

Initial public offering costs - - - - (1,901)

(Loss)/profit before tax and net finance costs (19,535) 19,429 17,551 13,765 10,500

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

Income tax credit/(charge) 7,106 (1,948) (4,048) (3,768) (2,167)

(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

Adjusted* basic earnings per share 30.20p 30.08p 25.82p 16.89p 13.72p

interim dividend paid 2.70p 2.45p 2.20p 2.00p 0.63p

final dividend proposed nil 5.25p 4.75p 4.25p 3.90p

Cash generated from operations 43,048 29,669 19,539 26,469 11,789

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

* 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, and their tax impact in the adjusted earnings per share calculation.

Financial record

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Directors’ Responsibilities 78Independent Auditor’s Report 79Company Balance Sheet 80Notes to the Financial Statements 81

7979


www.e2v.com

e2v technologies plc

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Directors’ statement of responsibilities in relation to the parent company financial statements

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

Company law requires the Directors to prepare financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The financial 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:

l Select suitable accounting policies and then apply them consistently;

l Make judgments and estimates that are reasonable and prudent;

l State whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

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.

The Directors are responsible for ensuring that the Company keeps accounting records which disclose with reasonable accuracy at any time the financial position of the Company and which enable them to ensure that 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 Company and to seek to prevent and detect fraud and other irregularities.

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 Annual Report on the website in accordance with UK legislation governing the preparation and dissemination of financial statements. Access to the website is available from outside the UK, where comparable legislation may be different.

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Independent Auditor’s report to the members of e2v technologies plcWe have audited the parent company financial statements of e2v technologies plc for the year ended 31 March 2009 which comprise company Balance sheet and the related notes 1 to 12. These parent company financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the Directors’ remuneration report that is described as having been audited.

We have reported separately on the Group financial statements of e2v technologies plc for the year ended 31 March 2009.

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 has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorsThe Directors’ responsibilities for preparing the Annual Report, the Directors’ remuneration report and the parent company financial statements in accordance with applicable United Kingdom law and Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors’ responsibilities.

Our responsibility is to audit the parent company financial statements and the part of the Directors’ remuneration report to be audited in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the parent company financial statements give a true and fair view and whether the parent company financial statements and the part of the Directors’ remuneration report to be audited have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the parent company Directors' report is consistent with the financial statements. The information given in the Directors' report includes that specific information presented in the Chairman’s and Chief executive’s statement and the business review that is cross referred from the review of business and future developments section of the Directors' report.

In addition we report to you if, in our opinion, the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and other transactions is not disclosed.

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 Chief executive’s statement, the business review, the corporate governance report and the unaudited part of the Directors’ remuneration report. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the parent company financial statements. Our responsibilities do not extend to any other information.

Basis of audit opinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the parent company financial statements and the part of the Directors’ remuneration report to be audited. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the parent company financial statements, and of whether the accounting policies are appropriate to the company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the parent company financial statements and the part of the Directors’ remuneration report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the parent company financial statements and the part of the Directors’ remuneration report to be audited.

OpinionIn our opinion:

l The parent company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the company's affairs as at 31 March 2009;

l The parent company financial statements and the part of the Directors’ remuneration report to be audited have been properly prepared in accordance with the Companies Act 1985; and

l The information given in the Directors' report is consistent with the parent company financial statements.

Emphasis of matterIn forming our opinion on the parent company financial statements, which is not qualified, we have considered the adequacy of the disclosures made in note 2 of the parent company financial statements concerning the ability of e2v technologies plc and its’ subsidiary undertakings to continue to meet the bank’s consolidated net borrowings to adjusted consolidated eBITDA covenant. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the ability of e2v technologies plc to continue as a going concern. The financial statements do not include any adjustment that would result if e2v technologies plc was unable to continue as a going concern.

Ernst & Young LLP Registered Auditor, Cambridge

8 June 2009

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Company balance sheetas at 31 March 2009

Notes

31 March 2009

£000

31 March 2008

£000

fixed assets

Tangible assets 4 2 6

Investments 5 53,758 65,372

53,760 65,378

Current assets

Debtors 6 24,391 25,615

Cash at bank and in hand 11 12

24,402 25,627

Creditors: amounts falling due within one year

Other creditors 7 1,137 530

1,137 530

Net current assets 23,265 25,097

Total assets less current liabilities 77,025 90,475

Creditors: amounts due after more than one year 8 (23,354) (28,683)

Net assets 53,671 61,792

Capital and reserves

Called up share capital 9 3,128 3,111

Share premium account 10 41,780 41,116

Capital redemption reserve 10 274 274

Treasury shares reserve 10 (5) (6)

Retained earnings 10 8,494 17,297

Equity shareholders’ funds 10 53,671 61,792

Approved by the Board of Directors on 8 June 2009.



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Notes to the Financial Statements1. Accounting policiesBasis of preparationThe Company financial statements are prepared in accordance with UK GAAP and applicable accounting standards under the historical cost convention.

The Company has taken advantage of the exemption provided under section 230 of the Companies Act 1985 not to publish its individual profit and loss account. The loss dealt with in the financial statements of the parent company is £4,514,000 (2008: profit of £7,479,000).

The Company has taken advantage of the exemption in paragraph 2D of FRS 29 ‘Financial Instruments: Disclosures’ and has not disclosed information required by the Standard as the consolidated financial statements, in which the Company is included, provide equivalent disclosures for the Group under IFRS 7 ‘Financial Instruments: Disclosures’.

Going concernThe Group’s banking facilities, to which e2v technologies plc and certain subsidiary undertaking are borrowers, expire on 11 July 2011. Under these facilities e2v technologies plc, on behalf of the Group, is required to confirm at 31 March and 30 September of each year that consolidated net borrowings do not exceed a 3.5 times multiple of adjusted consolidated eBITDA (‘the Net debt covenant’) and that adjusted consolidated eBITA is not less than a 3 times multiple of net interest payable.

In the six months to 31 March 2009 the weakening of Sterling increased 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, representing a multiple of 3.19 times the adjusted consolidated eBITDA for the year ended 31 March 2009.

The Group has experienced softer market conditions in many of the markets in which the Group operates in the current calendar year, leading to a lower level of activity in the first half of the year ending 31 March 2010. Combined with the uncertainty over the direction of the euro and US dollar exchange rate movements, this represents a significant challenge to the Group’s ability to meet ‘the net debt covenant’ at 30 September 2009 and to a lesser extent at 31 March 2010.

The Board are implementing restructuring initiatives to reduce costs and production capacity primarily in the first half of the year ending 31 March 2010. With these steps, the Board has a reasonable expectation that the Group can remain within ‘the net debt covenant’.

In addition the Board is working with finance providers and is reviewing a range of options for a more long term capital structure for the business.

The Directors of the Group have prepared detailed profit and cash flow forecasts through to 30 September 2010. In considering these profit and cash flow forecasts and the plans to restructure costs and limit production capacity, the Directors have carefully considered the assumptions and sensitivities and have concluded that the Group can remain within ‘the net debt covenant’ requirement at both 30 September 2009 and 31 March 2010. However the available headroom at 30 September 2009 is limited and the Directors are cognisant of the fact that, in the current economic climate, there are inherent risks surrounding the achievability of the Group's forecast sales, the success of the restructuring plan and steps to reduce production capacity along with the direction of the euro and US dollar exchange rate movements.

The Directors of the Group have concluded that the combination of these circumstances represents a material uncertainty that casts significant doubt upon the Group's ability to continue to meet ‘the net debt covenant’ at 30 September 2009 and to a lesser extent at 31 March 2010. However, having considered these uncertainties, the Directors have a reasonable expectation

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 to prepare the parent company financial statements on a going concern basis. The financial statements do not include any adjustments that would result if the going concern basis of accounting were considered inappropriate.

Tangible assetsMotor vehicles are stated at cost less accumulated depreciation and any impairment in value. Depreciation is provided so as to write off the cost of the asset on a straight line basis over the estimated useful life of three years. The carrying values of fixed assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

Foreign currenciesThe presentation and functional currency of the Company is Sterling. Transactions denominated in foreign currencies are translated into the Company’s functional currency at the rate of exchange ruling on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling on the balance sheet. Currency translation differences are recognised in the profit and loss account.

InvestmentsInvestments in subsidiaries are held at historical cost less provision for impairment. The carrying values of investments are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

TaxationCurrent tax, including UK corporation tax, is provided at amounts expected to be paid (or recovered) using the tax rate and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred taxationDeferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the following exceptions:

l Provision is made for deferred tax that would arise on remittance of the retained earnings of overseas subsidiaries only to the extent that, at the balance sheet date, dividends have been accrued as receivable.

l Deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

PensionsThe Company contributes to personal pension arrangements for its employees. The pension cost is the amount of contributions payable in the year.

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Shares in the Company held by the employee Benefit Trust are stated at cost and are presented in the balance sheet as a deduction from equity.

Share based paymentsemployees (including Directors) of the Company receive remuneration in the form of share based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).

Equity-settled transactionsThe 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 value is determined by an external valuer using a binomial model, further details of which are given in note 26 to the consolidated financial statements. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of e2v technologies plc (‘market conditions’).

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the number of awards that, in the opinion of the Directors of the Company at that date, based on the best available estimate of the number of equity instruments that will ultimately vest.

The financial effect of awards by the Company of options over its equity shares to employees of subsidiary undertakings are recognised by the Company in its individual financial statements. In particular, the Company records an increase in its investment in subsidiaries with a credit to equity equivalent to the FRS 20 cost in subsidiary undertakings.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

Financial assets and liabilitiesThe Company uses interest rate swaps to adjust interest rate exposures.

The Company’s criteria for interest rate swaps are:

l The instrument must be related to an asset or a liability; and

l It must change the character of the interest rate by converting a variable rate to a fixed rate or vice versa.

Derivative financial instruments have been recognised as assets and liabilities measured at their fair values at the balance sheet date. Changes in the fair values have been recognised in the hedge reserve to the extent that they qualify for hedge accounting. Gains and losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting are taken to the profit and loss account.


2. Dividends paid and proposed

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.


£000


£000

Declared and paid during the year:


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

4,913 4,380

Proposed for approval at AGM (not recognised as a liability as at 31 March):


Final dividend for 2009: nil (2008: 5.25p) - 3,234

1. Accounting policies (continued)

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3. RemunerationDirectors’ remunerationDetails of Directors’ remuneration, pension benefits and share option awards are included in the Directors’ remuneration report on pages 28 to 33.

Auditor’s remunerationThe total fees payable by the Company to ernst and Young LLP for work performed in respect of the audit were £315,000 (2008: £200,000).

4. Tangible assetsMotor vehicles

£000

Cost

At 1 April 2008 12

Additions -

At 31 March 2009 12

Depreciation

At 1 April 2008 6

Provided during the year 4

At 31 March 2009 10

Carrying amount

At 31 March 2008 6

At 31 March 2009 2

5. InvestmentsEquity interests in

subsidiary undertakings

£000

Cost

At 1 April 2008 65,372

Additions 284

Write off in the year - e2v Biosensors Limited (1,285)

Impairment in the year - e2v technologies SAS (10,613)

At 31 March 2009 53,758

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.

Following an impairment review of the e2v semiconductors business unit as detailed in note 14 to the Group financial statements, the Company’s 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.

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Name of undertaking Country of incorporation Principal activity

e2v technologies (UK) Limited England & Wales Electrical component manufacturer

e2v semiconductors SAS *** France Electrical component manufacturer

e2v scientific instruments Limited England & Wales Electrical component manufacturer

MiCS Microchemical Systems SA**** Switzerland Electrical component manufacturer

e2v Microsensors SA**** Switzerland Electrical component manufacturer

QP Semiconductor Inc.** USA Electrical component manufacturer

e2v Biosensors Limited England & Wales Research and development

e2v Asia Pacific Limited **** Hong Kong Sales & distribution

e2v Limited England & Wales Sales & distribution

e2v Inc.** USA Sales & distribution

e2v technologies SAS France Holding company

e2v SAS*** France Sales & distribution

e2v Technologies Canada Limited* Canada Sales & distribution

e2v Technologies GmbH* Germany Sales & distribution

e2v Holdings Inc. USA Holding company

e2v overseas (holdings) Limited England & Wales Holding company

EEV Limited England & Wales Dormant

Gresham Sensor Technology Limited England & Wales Dormant

The Company has control over 100% of the ordinary share capital in respect of each of its subsidiary undertakings. Subsidiary undertakings are all held by e2v technologies plc, with the following exceptions:

* held through e2v technologies (UK) Limited

** held through e2v Holdings Inc.

*** held through e2v technologies SAS.

**** held through e2v overseas (holdings) Limited

Interests in Group undertakings


6. Debtors31 March 2009

£000

31 March 2008

£000

Other debtors 33 24

Prepayments and accrued income 38 44

Amounts receivable from subsidiary undertakings 24,320 25,547

24,391 25,615

5. Investments (continued)

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Loans31 March 2009

£000

31 March 2008

£000

Amounts falling due:

Bank loans: revolving credit facilities 23,354 28,683

23,354 28,683

31 March 2009

£000

31 March 2008

£000

Loan maturity analysis

Amounts falling due:

In more than one year but not more than two years - -

In more than two years but not more than five years 23,354 28,683

23,354 28,683

The bank loans are secured by a floating charge over the net assets of the Group.

The revolving credit facility is repaid and re-drawn at periodic intervals of one 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 before 2011. The loan is therefore treated as non-current.

8. Creditors: Amounts falling due after more than one year

31 March 2009

£000

31 March 2008

£000

Trade creditors 474 64

Amounts payable to subsidiary undertakings 50 35

Other taxation and social security costs 127 117

Accruals and deferred income 486 314

1,137 530

7. Other creditors

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Options have been granted under share option schemes, as detailed in the Directors’ remuneration report on pages 28 to 33, to subscribe for ordinary shares of the Company as follows:

Number of options

Share price at date of grant

Exercise price

Exercise dates

Expiry date

LTIPS granted 3 September 2004 258,000 174.0p nil 03.09.07 N/A

LTIPS granted 20 July 2005 342,250 216.0p nil 20.07.08 N/A


LTIPS granted 10 January 2007 15,000 402.3p nil 31.08.09 N/A



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

ExSOP granted 1 August 2005 265,000 215.5p 215.5p 03.08.08 30.06.09

ExSOP granted 12 January 2007 72,000 396.5p 396.5p 01.02.10 31.12.10

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

SAYE granted 1 September 2005 259,536 204.5p 194.3p 01.09.08 28.02.09

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

SAYE granted 4 February 2009 163,864 225.0p 225.0p 01.03.12 31.08.12


9. Authorised and issued share capital

Authorised

31 March 2009

No.

31 March 2008

No.

Ordinary shares of 5p each 75,000,000 75,000,000

Ordinary shares issued and fully paid

31 March 2009

No.

31 March 2008

£000

At 1 April 2008 62,217,416 3,111


At 31 March 2009 62,569,593 3,128

Treasury shares held by the Employee benefit Trust

31 March 2009

No.

31 March 2008

£000

At 1 April 2008 626,239 6

Issued during the year in respect of the LTIP awards (107,383) (1)

At 31 March 2009 518,856 5

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Long Term incentive Plan (LTiP)2009

No.

2008

No.

Outstanding at the beginning of the year:

Awards granted 3 September 2004 - 258,000



Awards granted 10 January 2007 15,000 15,000


709,525 869,750

Granted in the year:

Awards granted 16 July 2007 - 259,375


Awards granted 1 October 2008 20,400 -

422,700 259,375

Awards exercised during the year (107,383) (258,000)

Awards lapsed during the year (232,117) (161,600)

Outstanding at the end of the year 792,725 709,525


Options issued to employees of the Company are as follows:

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). 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).

Sharesave scheme (SAYE)

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.

2009No.

2009WAEP

2008No.

2008WAEP

Outstanding at the beginning of the year 29,750 224.93p 37,080 178.80p


Lapsed during the year (2,688) 351.50p - -

Granted during the year 3,333 225.00p 21,330 225.00p


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

Weighted average remaining contractual life 30months 32 months

9. Authorised and issued share capital (continued)

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10. Reconciliation of movements in shareholders’ funds

issued capital

£000

Share premium

£000

Capital redemption

£000

Treasury shares

£000

Retained earnings

£000

Total equity

£000

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

Profit for the year - - - - 7,479 7,479

Share based payment charges - - - - 467 467

Share options awarded to employees

of subsidiary undertakings - - - - 354 354

Issue of shares by EBT on exercise of options - - - 3 (3) -

Equity dividends - - - - (4,380) (4,380)

At 31 March 2008 3,111 41,116 274 (6) 17,297 61,792

Issue of shares on exercise of options 17 664 - - - 681

Loss for the year - - - - (4,514) (4,514)

Share based payment charges - - - - 341 341

Share options awarded to employees

of subsidiary undertakings - - - - 284 284

Issue of shares by EBT on exercise of options - - - 1 (1) -

Equity dividends - - - - (4,913) (4,913)

At 31 March 2009 3,128 41,780 274 (5) 8,494 53,671

11. Contingent liabilitiesThe Company acts as a guarantor on the Group’s borrowing facilities. Loans of £119,833,000 (2008: £70,867,000) were drawn by subsidiary undertakings at the balance sheet date.

12. Derivatives and other financial instrumentsThe Company’s principal financial instruments, other than derivatives, comprise investments in subsidiary undertakings, intercompany debtors and creditors, bank loans and cash. The main purpose of these financial instruments is to raise finance for the Company’s operations. The Company has other financial instruments such as trade creditors that arise from its operations. The Company issued shares during the current and prior year in relation to the exercise of share options under share schemes.


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General information

DirectorsG Kennedy (Chairman)

K Attwood (Chief executive)

C Hindson

A Reading

J Brooks

I Godden

Company SecretaryS Weatherall

Registered Office106 Waterhouse Lane Chelmsford essex CM1 2QU

SolicitorsMacfarlanes LLP 20 Cursitor Street London eC4A 1LT

Birkett Long Ocean House Waterloo Lane Chelmsford essex CM1 1BD

BankersBarclays Bank plc 1 Churchill Place London e14 5HP

Lloyds TSB Corporate Black Horse House Castle Park Cambridge CB3 0AR

HSBC Corporate Banking 8 Canada Square London e14 5HQ

The Royal Bank of Scotland 250 Bishopsgate London eC2M 4AA

AuditorsErnst & Young LLP Compass House 80 Newmarket Road Cambridge CB5 8DZ

RegistrarsEquiniti The Causeway Worthing West Sussex BN99 6DA

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e2v technologies plc 106 Waterhouse Lane Chelmsford Essex CM1 2QU England

T +44 (0)1245 493 493 F +44 (0)1245 492 492 E [email protected]

Investor relations enquiries to: [email protected]

www.e2v.com

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