E2V.L Regulatory News (E2V)

8 Jun 2009 07:00



8 June 2009

e2v technologies plc

Final results for the year ended 31 March 2009

e2v technologies plc, a leading developer and manufacturer of high-technology electronic components and sub-systems to the aerospace & defence, medical & science, and commercial & industrial sectors, announces its final results for the year ended 31 March 2009.

	Year ended 31 March 2009 £ million	Year ended  31 March 2008 £ million	change
Sales	233.2	204.6	+14%
Adjusted* profit before taxation	20.4	23.4	-13%
(Loss)/profit before taxation	(28.4)	13.7	-£42.1m
Adjusted* earnings per share	30.20p	30.11p	+0.09p
(Loss)/earnings per share	(34.42)p	19.36p	-53.78
Full year dividend	2.70p	7.70p	-5.00p
Cash generated from operations	43.0	29.7	+45%
Net borrowings	137.3	94.4	+£42.9m

Key points

Sales up 14%, due to the benefit of acquisition and FX movements

Adjusted* profit before tax down 13%

Adjusted* earnings per share flat at 30.20p

Cash generated from operations up 45% to £43m

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

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

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

Adverse exchange rates increased net borrowings by £20m

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

Appointment of Charles Hindson as Group Finance Director

*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.

Commenting on the results, Keith Attwood, Chief Executive said:

"e2v faced increasingly challenging markets in the final quarter of the year and the Group responded with a range of actions delivering a creditable trading performance.

The strong cash performance exemplifies our commitment to reducing the debt profile of the Group, despite the rapidly softening demand across a range of sectors.

 

Looking forward, conditions remain tough in the first half of the new financial year, though the stronger than normal order book, along with a good order pipeline, is encouraging for the second half. 

In light of increasing uncertainty in our markets, we are focused on further improving the scalability of our operations during the year."

Further enquiries:

e2v technologies plc
Keith Attwood, Chief Executive Charles Hindson, Group Finance Director		Today: 020 7269 7291 Thereafter: 01245 493 493
Website: www.e2v.com
Financial Dynamics
Jon Simmons / Susanne Yule		Tel: 020 7269 7291

CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT

INTRODUCTION

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:

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

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

To continue our internal focus on productivity improvements; and

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 Semiconductors Inc 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.

MARKET OVERVIEW

e2v serves three key market sectors, aerospace & defence, medical & science 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 Semiconductor Inc. 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 STRUCTURE

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

Electron Devices and Subsystems (EDS) - 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;

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;

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;

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:

Global operations with responsibility for all manufacturing and supply chain activity  

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

Support services including Finance, Legal, IT and HR

FINANCIAL PERFORMANCE

Reported 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 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: 30.11p) 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 of which £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 PROVISIONS

The economic downturn in the last quarter of 2008/09 and the ongoing impact has resulted in write downs of the acquired intangible assets 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 Semiconductor 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..

The Board

The 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 PEOPLE

Achieving last year's performance in the face of a rapidly declining economic environment, required dedication and commitment from the e2v team, throughout the world. On behalf of the Board and our shareholders, we would like to register our thanks to the team for their efforts.

SUMMARY AND OUTLOOK

The Group has experienced softer market conditions in many of its markets in the current calendar year. We are seeing general market 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 risks 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.

George Kennedy Keith Attwood

Chairman CEO

*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.

BUSINESS REVIEW

OVERVIEW 

The 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 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.

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 Semiconductor acquisition. There were significant reductions in research and development within the Electron Devices and Subsystems 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.

Adjusted* profit before taxation

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

	Year ended 31 March 2009	Year ended  31 March 2008
	£000	£000
(Loss)/profit before taxation	(28,405)	13,747
Included in administrative expenses
Amortisation of acquired intangible assets	7,080	7,217
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 currency contracts	2,894	357
Included in research and development costs
Amortisation of acquired intangible assets	1,548	93
Fair value losses on interest rate swaps	1,819	-
Adjusted* profit before taxation	20,389	23,410

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 Semiconductor 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$ 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). 

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

£ million	Revenue		Adjusted* profit
	2008/09	2007/08	2008/09	2007/08
Electron Devices & Subsystems	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

Finance charges

Higher finance costs this year are as a result of using debt to finance the QP Semiconductor acquisition and the exchange rate impact on Euro borrowings. 

The Group has an interest rate swap covering 37% of borrowings at 31 March which secures LIBOR rates to a maximum of 5%.

Taxation

The effective tax rate on profits for the year ended 31 March 2009 (excluding adjustments to the tax charge in respect of prior years) amounts to 18.1% (2008: 26.5%) and 8.4% (2008: 21.5%) including adjustments relating to prior 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: charge £1.9m).

Currency

The Group's primary exposure to foreign currency continues to be the US$ which accounts for 35% (2008: 31%) of the Group's sales revenue. In the year to 31 March 2009 US$ 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:

	Average		Year End
	2009	2008	2009	2008
US dollar	1.75	2.01	1.43	1.99
Euro	1.22	1.43	1.07	1.26

63% of the Groups borrowings are denominated in Euros and 31% are denominated in US$. 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 BORROWINGS

The net cash inflow generated from operations  was £43.0m, an increase of £13.3m 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 FACILITIES

The 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.

   

Electron Devices & Sub-Systems

Sales in Electron Devices and Subsystems increased by 10% to £83.7m (2007: £75.8m), and were up 5% at constant currency rates.

The order book at 31 March 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 was 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 subsystems contracts for the US DOD 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.

Imaging Division

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 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.

Specialist Semiconductors

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

The order book at 31 March 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 Semiconductors, 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 defence and aerospace 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 Semiconductors of £3.3m as well as maintaining the beneficial impact of exchange rates.

Sensors Division

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 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.

Group functions

Unallocated group costs increased by £2.4m to £4.0m (2008: £1.6m) due to differences on exchange amounting to a loss of £1.7m, compared with a profit of £0.8m in the prior year.

*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.

BOARD OF DIRECTORS

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.

Charles Hindson - Group Finance Director 

Charles joined the e2v board in May of 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.

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.

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; of 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.

  DIRECTORS' REPORT

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).

PRINCIPAL ACTIVITY

The Group's principal activity is the design and supply of specialist components and subsystems into niche sectors within the medical and science, aerospace and defence and the commercial and industrial markets. The Group was reorganised into four divisions namely, Electronic Devices and Subsystems, 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, Far East and Australia.

Review of business and future developments

A 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 and the Business review. 

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 Semiconductor Inc, 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.

Principal risks and uncertainties

As 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.

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. 

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.

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.

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.

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 DIVIDENDS

The 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 EQUIPMENT

Land 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 DEVELOPMENT

The 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: £14.1m). 

TAKEOVERS DIRECTIVE

Pursuant 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:

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.

The Board of directors 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.

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. 

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

SHARE CAPITAL

Details 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.

DIRECTORS

Profiles of all directors at the date of this report are set out above. 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 in the Directors' remuneration report in the annual report.

DIRECTORS' INDEMNITY INSURANCE

The 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 POLICY

The 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 DONATIONS

Details of charitable donations are given in the Corporate Social 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.

	Percentage of ordinary share capital	Number 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

DISABLED EMPLOYEES AND EMPLOYEE INVOLVEMENT

The 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 Social Responsibility Review . 

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:

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

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.

auditors

A 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

CORPORATE GOVERNANCE REPORT

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 Code

The Group has complied with the provisions set out in Section 1 of the Combined Code throughout the year.

The Board of Directors

The 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 abive 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. G. Kennedy and Anthony Reading will retire by rotation at the Annual General Meeting and submit themselves for re-election.

Role of the Board Members

The Non-Executives' primary responsibilities are to:

Ensure the principles of Corporate Governance are applied;

Approve the strategy for the business;

Ensure the strategy is being implemented; and

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:

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

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 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 Committees

The 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:

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

Review the arrangements for what is commonly known as "whistle blowing".

Consider the requirements for establishing an Internal Audit function.

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.

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

Reviewing the findings of the audit with the external auditors.

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 Semiconductor Inc 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:

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.

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

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

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

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

Establishing selection criteria, terms of reference and selection and employment of remuneration consultants.

 

Principal Board Committees (continued)

Full details of Directors' remuneration and policies applied by the Board are set out in the Directors' remuneration report in the annual report. 

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:

Regular review of the structure, size and composition of the Board.

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

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

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.

INDUCTION AND TRAINING

Any 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.

PERFORMANCE EVALUATION OF THE BOARD

The 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 Shareholders

The 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 Controls

The 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 structure: The 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. 

Control Environment and Internal Controls (continued)

Identification and evaluation of business risks: The 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 systems: The 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 appraisal:  All 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. 

Board Meetings and Attendance

In 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.

CORPORATE GOVERNANCE REPORT

As described in 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

DIRECTORS' RESPONSIBILITIES

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE group FINANCIAL STATEMENTS

The 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:

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

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

Provide additional disclosures when compliance with the specific requirements in IFRSs 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

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 statement

We confirm that, to the best of our knowledge:

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

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

Keith Attwood Charles Hindson 

Chief Executive Officer Group Finance Director

8 June 2009 8 June 2009

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF e2v technologies plc

We have audited the Group financial statements of e2v technologies plc for the year ended 31 March 2009 which comprise the Group income statement, the Group statement of recognised income and expense, 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.

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 social 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 opinion

We 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.

Opinion

In our opinion:

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;

 

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

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

Group income statement

for the year ended 31 March 2009

		Year ended 31 March 2009	Year ended  31 March 2008
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

Group statement of recognised income and expense

		Year ended 31 March 2009	Year ended  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 balance sheet

as at 31 March 2009

			31 March 2009	31 March 2008
		Notes	£000	£000
ASSETS
Non-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
LIABILITIES
Current liabilities
Trade and other payables		20	(52,567)	(47,582)
Other financial liabilities		21	(13,950)	(7,442)
Income tax payable			(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
			31 March 2009	31 March 2008
	Notes		£000	£000
SHAREHOLDERS' EQUITY
Ordinary 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.

K Attwood C Hindson

Chief Executive Officer Group Finance Director

Group cash flow statement

for the year ended 31 March 2009

		Year ended 31 March 2009	Year ended  31 March 2008
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
Impairment of plant and equipment		2,500	-
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

Notes to the financial statements

1. AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRS

The 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.

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 policies

Basis of preparation

The 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 concern

The 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 consolidation

The 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.

2. Summary of significant accounting policies (continued)

Foreign currency translation

The 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 of the Group's net investment in a foreign operation. These are taken directly 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 equipment

Freehold 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.

2. Summary of significant accounting policies (continued)

Government grants

Government 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 costs

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

Goodwill

Goodwill 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 assets

Intangible 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. 

2. Summary of significant accounting policies (continued)

Intangible assets (continued)

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

Research and development costs

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. 

Inventories

Inventories 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.

2. Summary of significant accounting policies (continued)

Trade and other receivables

Trade 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 equivalents

Cash 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.

Provisions

Provisions 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 benefits

The 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 plan requires contributions to be made to a separately administered fund. 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 and related plan assets are 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 expected return on plan assets is based on an assessment made at the beginning of the year of long term returns on plan assets, adjusted for the effect on the fair value of plan assets of contributions received and benefits paid during the year. The difference between the expected return on plan assets and the interest cost is recognised in the income statement as an administrative expense.

2. Summary of significant accounting policies (continued)

Pensions and other post-employment benefits (continued)

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').

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 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.

2. Summary of significant accounting policies (continued)

Leases

Finance 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. 

Revenue

Revenue 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:

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: 

A clear contractual arrangement can be evidenced;

Delivery has been made in accordance with that contract;

If required, contractual acceptance criteria have been met; and

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. 

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.

2. Summary of significant accounting policies (continued)

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:

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;

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

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 hedging

The 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 except for derivatives designated as hedges. Changes in fair value are recognised in the income statement.

The fair value of forward exchange contracts is calculated by reference to 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.

2. Summary of significant accounting policies (continued)

Derivative financial instruments and hedging (continued)

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 equity

When 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 uncertainty

When 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.

  

2. Summary of significant accounting policies (continued)

New standards and interpretations not applied

The IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements:

International Accounting Standards			Effective for periods 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

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 required 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. 

 

2. Summary of significant accounting policies (continued)

New standards and interpretations applied during the year

IFRIC 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 measures

In 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.

3. REVENUE

An analysis of the Group's revenue is as follows:

	Year ended	Year ended
	31 March  2009	31 March 2008
Revenue - sale of goods	233,193	204,607
Finance revenue	684	501
Total revenue	233,877	205,108

4. Segment information

The Group's primary reporting format is business segments and its secondary format is geographical segments. The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment 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: 

Electron devices and subsystems, which includes applications including defence electronic countermeasures, radiotherapy cancer treatment, and radar systems

Imaging devices, which includes sensors and cameras for applications including industrial process control, dental x-ray systems, space science and life sciences

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

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.

4. Segment information (continued)

Business segments

The following tables present revenue and profit information and certain asset and liability and other information regarding the Group's business segments for the years ended 31 March 2009 and 2008.

Year ended 31 March 2009	Electron devices and sub-systems	Imaging devices	Specialist semi-conductors	Sensors	Unallocated expenses	Total operations
	£000	£000	£000	£000	£000	£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)
Year ended 31 March 2009	Electron devices and sub-systems	Imaging devices	Specialist semi-conductors	Sensors	Unallocated items	Total operations
	£000	£000	£000	£000	£000	£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)

Business segments (continued)

		Electron devices and subsystems	Imaging devices	Specialist semi-conductors	Sensors	Unallocated expenses	Total operations
Year ended 31 March 2008		£000	£000	£000	£000	£000	£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

Year ended 31 March 2008	Electron devices and subsystems	Imaging devices	Specialist semi-conductors	Sensors	Unallocated items	Total operations
	£000	£000	£000	£000	£000	£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

4. Segment information (continued)

Geographical segments

The 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.

			Year ended	Year ended
			31 March  2009	31 March 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 of the world			3,042	3,726
			233,193	204,607
Segment assets
United Kingdom			92,410	102,191
North America			67,638	13,570
Europe			117,477	127,295
Asia Pacific			198	188
			277,723	243,244
Capital expenditure including product development
United Kingdom			7,386	9,575
North America			702	201
Europe			5,269	4,615
Asia Pacific			7	75
			13,364	14,466

5. REVENUES AND EXPENSES

(Loss)/profit from continuing operations is stated after charging/(crediting): 

	Year Ended	Year Ended
	31 March  2009	31 March 2008
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

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

6. AUDITOR'S REMUNERATION

	Year Ended	Year ended
	31 March  2009	31 March 2008
	£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.

 

7. STAFF COSTS AND DIRECTORS' REMUNERATION

	Year ended	Year ended
	31 March  2009	31 March 2008
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
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 in the annual report..
	Year ended	Year ended
	31 March  2009	31 March 2008
	No.	No.
The average monthly number of employees during the year was made up as follows:
Manufacturing	1,215	1,339
Administration	499	489
	1,714	1,828

 

8. FINANCE COSTS AND REVENUE

	Year ended	Year ended
	31 March  2009	31 March 2008
	£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

 

9. INCOME TAX

Major components of income tax expense for the years ended 31 March 2009 and 2008 are:

	Year ended	Year ended
	31 March  2009	31 March 2008
	£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

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:

	Year ended	Year ended
	31 March  2009	31 March 2008
	£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

9. INCOME TAX (continued)

Deferred income tax

Deferred income tax at 31 March relates to the following:

	Consolidated balance sheet		Consolidated income statement
	31 March  2009	31 March 2008	31 March  2009	31 March 2008
	£000	£000	£000	£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

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).

10. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing net (loss)/profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

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:

	Year ended	Year ended
	31 March  2009	31 March 2008
	£000	£000
(Loss)/profit attributable to ordinary shareholders	(21,299)	11,799

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

	Year ended	Year ended
	31 March  2009	31 March 2008
	£000	£000
(Loss)/profit for the year	(21,299)	11,799
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 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

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

	Year ended	Year ended
	31 March  2009	31 March 2008
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

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. 

  11. Dividends paid and proposed

	Year ended	Year ended
	31 March  2009	31 March 2008
	£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):
Equity dividends on ordinary shares:
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. 

12. PROPERTY, PLANT AND EQUIPMENT

	Land and buildings	Plant and equipment	Office equipment, fixtures and fittings	Assets under construction	Total
	£000	£000	£000	£000	£000
COST
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.

13. INTANGIBLE ASSETS

	Patents, trade marks and technology	Development costs	Software	Customer relationships and agreements	Goodwill	Total
	£000	£000	£000	£000	£000	£000
COST
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 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.

14. IMPAIRMENT TESTING OF GOODWILL

Goodwill acquired through business combinations has been allocated to individual cash-generating units for impairment testing as follows:

QP Semiconductor business, acquired in October 2008;

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

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

e2v scientific instruments, acquired in July 2005;

Dynex microwave alarms business, acquired in 2004;

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

Siemens high power satcom product group, acquired in 1999;

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 as, 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:

				Year ended	Year ended
	1 April 2008 or on acquisition	Exchange adjustment	Impairment	31 March  2009	31 March 2008
	£000	£000	£000	£000	£000
QP Semiconductor Inc unit	26,027	5,010	(6,994)	24,043	-
e2v semiconductors SAS, Specialist Semiconductors unit	32,503	5,514	-	38,017	32,503
e2v semiconductors SAS, Imaging business	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

Key assumptions used in valuations for 31 March 2009

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

Gross margins - the 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.

14. IMPAIRMENT TESTING OF GOODWILL (continued)

Discount rates - discount 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 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 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 calculations show that further impairment would need to be considered if:

Revenue Reduced by 5.5% initially or Growth reduced to 3.5% (from 5%)

OR Margin %  Reduced by 5.3%

OR Long term growth Reduced to 1.5% (from 2.5%)

OR Discount rate Of 16% or above had been selected

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:

Revenue Reduced by 20% 

OR Margin Growth Reduced by 30%

OR Long term growth A Zero rate does not impair (1% used)

OR Discount Rate Of 18.25% or more had been selected

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:

Revenue Growth reduced by 15%

OR Margin % Projected in medium term were reduced falls by 30%

OR Long term growth A Zero rate does not impair (used 3%)

OR Discount Rate Of 18.5% or more had been selected

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.

15. BUSINESS COMBINATIONS

Acquisition of QP Semiconductor Inc

On 10 October 2008, e2v Holdings inc. acquired 100% of the voting shares of QP Semiconductor Inc (QP), 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 as at the date of acquisition was:

	Provisional  fair value recognised on acquisition	Book value
	£000	£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
Total consideration		46,324
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 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.

15. BUSINESS COMBINATIONS (continued)

Acquisition of MiCS

On 14 May 2007, e2v technologies plc acquired 100% of the voting shares of MiCS, an unlisted company based in Switzerland, specialising in the design 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:

	Fair value recognised on acquisition	Book value
	£000	£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
Total consideration	5,140
Consideration:		£000
Cash paid		5,008
Costs associated with the acquisition		132
Total consideration		5,140
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)

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 has 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.

  16. INVENTORIES

	31 March  2009	31 March 2008
	£000	£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	31 March 2008
	£000	£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:

	31 March  2009	31 March 2008
	£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

	Trade receivables past due but not impaired		Impaired trade receivables
	31 March 2009	31 March 2008	31 March 2009	31 March 2008
	£000	£000	£000	£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

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.

18. other financial assets

	31 March  2009	31 March 2008
	£000	£000
Interest rate swap	-	142
Forward currency contracts	-	46
	-	188

19. cash

	31 March  2009	31 March 2008
	£000	£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:

	31 March  2009	31 March 2008
	£000	£000
Cash at bank and in hand	6,373	5,806

20. Trade and other payables 

 

	31 March  2009	31 March 2008
	£000	£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.

 

21. OTHER FINANCIAL LIABILITIES

	Effective		31 March  2009	31 March 2008
	interest rate	Maturity	£000	£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 term credit bank loan is repayable by six monthly instalments between 31 March 2009 and 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 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.

	31 March  2009	31 March 2008
	£000	£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

22. Provisions

	Contract losses	Environmental	Product warranty	Total
	£000	£000	£000	£000
At 1 April 2008	360	350	4,444	5,154
Arising on acquisition of QP	-	-	156	156
Arising during the year	209	-	7,403	7,612
Utilised	-	(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

The effect of the time value of money is not material and therefore the above provisions are not discounted.

Contract losses

A provision is recognised for expected losses on contracts in progress at the balance sheet date. It is expected that most of the losses will be incurred in the next financial year.

Environmental

A 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 warranty

A 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

	2009	2008
Authorised	No.	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
Issued for cash on exercise of share options	352,177	17
At 31 March 2009	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.

24. RECONCILIATION OF MOVEMENTS IN EQUITY

	Issued capital	Share premium	Other reserves	Hedge reserve	Foreign currency translation reserve	Retained earnings	Total equity
	£000	£000	£000	£000	£000	£000	£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 reserves

Hedge reserve

This 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 reserve

The 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 reserves

Other 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 contingencies

Operating lease commitments - Group as lessee

The 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.

25. Commitments and contingencies (continued)

Future minimum rentals payable under non-cancellable operating leases as at 31 March are as follows:

	31 March  2009	31 March 2008
	£000	£000
No later than one year	1,192	744
After one year but not more than five years	2,388	886
	3,580	1,630

Capital commitments

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 liabilities

The Group is in discussion with the vendors of QP Semiconductor Inc. on the calculation of the earn-out and net worth on acquisition as assessed to date. The amount claimed by the vendors is less than £1.0m. No provision has been made for this amount.

26. Employee benefits - equity settled share based payments

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	2008
	No.	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 31 July 2006	210,400	254,500
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 15 July 2008	402,300	-
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. Employee benefits - equity settled share based payments (continued)

Executive Share Option Plan (ExSOP)

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 detail options 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.

	2009	2009	2008	2008
	No.	WAEP	No.	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 share price on date of exercise of options		260.30p		262.01p
Weighted average remaining contractual life		21 months		25 months

Share Incentive Plan (SIP)

No awards have been made to date under this scheme.

26. Employee benefits - equity settled share based payments (continued)

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.

	2009	2009	2008	2008
	No.	WAEP	No.	WAEP
Outstanding at the beginning of the year	935,277	234.51p	1,241,713	202.37p
Exercised during the year	(187,177)	186.34p	(738,832)	165.44p
Lapsed during the year	(220,576)	238.07p	(90,520)	302.55p
Granted during the year	163,864	225.00p	522,916	225.00p
Outstanding at the end of the year	691,388	244.16p	935,277	234.51p
Exercisable at the end of the year	2,925	194.30p	83,713	179.82p
Weighted average share price on date of exercise of options		260.70p		403.33p
Weighted average remaining contractual life		29 months		30 months

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.

	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 31 July 2006	2.2%	27.0%	4.7%	3 years	188.8p
Awards granted 10 January 2007	1.6%	26.0%	5.2%	3 years	237.2p
Awards granted 16 July 2007	1.7%	32.5%	5.8%	3 years	204.1p
Awards granted 15 July 2008	3.1%	38.0%	4.8%	3 years	143.2p
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.

26. Employee benefits - POST EMPLOYMENT BENEFITS

Pensions and other post-employment benefit plans

Defined contribution plans

The 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 plan

In 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.

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:

	31 March  2009	31 March 2008
	£000	£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	31 March 2008	31 March 2007	On Acquisition in 2006
	£000	£000	£000	£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

26. Employee benefits - POST EMPLOYMENT BENEFITS (continued)

Retirement benefit plan (continued)

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

	31 March  2009	31 March 2008
	£000	£000
Service cost	199	184
Interest on pension liabilities	200	146
Total expense	399	330

The actuarial loss/(gain) recognised in the statement of recognised income and expense, for the current and prior year is as follows:

	31 March  2009	31 March 2008
	£000	£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 is given below:

	31 March  2009	31 March 2008
	£000	£000
Defined benefit obligation at start of period	3,206	2,792
Exchange rate movement	505	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	3,526	3,206

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

	31 March  2009	31 March 2008
Retirement age	64 years	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%

26. Employee benefits - POST EMPLOYMENT BENEFITS (continued)

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.

 

27. RELATED PARTY DISCLOSURES

Compensation of key management personnel of the Group 

Key management comprises the Board of Directors. Further details of their remuneration can be found in the Directors' remuneration report in the annual report. 

	31 March  2009	31 March 2008
	£000	£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.

28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

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 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).

28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

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$ 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 from sales 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$ 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$ 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.

	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)

The gain in profit before tax in respect of US$ sensitivity includes £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

28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

		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	£2.5m	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.

28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

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.

 

31 March 2009	0-6 months	6-12 months	1-3 years	Total
	£000	£000	£000	£000
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
31 March 2008	0-6 months	6-12 months	1-4 years	Total
	£000	£000	£000	£000
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.

Capital management 

The Group's capital comprises shareholders' funds as detailed in notes 23 and 24 and net borrowings as detailed above. 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. 

	Carrying amount		Fair value
	31 March  2009	31 March 2008	31 March  2009	31 March 2008
	£000	£000	£000	£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

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.

Currency - Forward exchange contracts

At 31 March 2009, the Group held several foreign exchange contracts designated to reduce the transactional exchange risk of US$ 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	Maturing in 6-12 month
		£'000	£'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)

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 equal to the notional amount. 

Notional amount	Maturity	Secured rate	Variable rate
31 March 2009
€27,455,625	12 July 2011	3.88%	6 month EUR Euribor
€30,201,188	12 July 2011	3.31% - 5.00%*	6 month EUR Euribor
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 undiscounted 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 investment 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.

Financial record

	2009	2008	2007	2006	2005
	£000	£000	£000	£000	£000
Revenue
Electronic tubes	83,739	75,776	69,639	62,118	52,447
Imaging	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.

ENDFR SSAEEWSUSEDM