E2V.L Regulatory News (E2V)

e2v technologies plc

Results for the year ended 31 March 2012

e2v technologies plc, the provider of specialist technology for high performance systems and equipment, announces its results for the year ended 31 March 2012:

Results

·; Solid full year trading performance.

·; Over 10% underlying(3) sales growth.

·; Positive progress in executing our key growth programmes in the US and Asia.

·; Similar progress in building our market positions in our 8 key application segments.

·; Net borrowings of £30m after site acquisition in US of £4m.

·; Final dividend of 2.8 pence per share, up 17%, up 14% on full year.

·; Cash generation before payment of dividends was £8.5m.

·; Non core businesses sold for £14.7m after year end.

(1) Adjusted operating profit is before amortisation of acquired intangible assets and operating exceptional items. Adjusted profit before tax is before amortisation of acquired intangible assets and all exceptional items.

(2) Adjusted earnings is profit before amortisation of acquired intangible assets and all exceptional items less tax where applicable.

(3) Underlying revenue excludes one-off revenue in the year arising mainly from the last time buys in the Grenoble front end fab, and non core product areas to our strategy mainly serving the automotive sector.

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

"We have delivered a solid performance for the year, and our underlying sales growth equates to c.10% for the second consecutive year. This has enabled us to increase the dividend for the year by 14%. We are making positive progress in executing our key growth programmes and are confident that these will convert to material future sales.

We have now completed the strategic realignment of the Group with the sale of the non core businesses last week. We have made good progress in building our US and Asia infrastructure and in establishing customer engagement in the new applications of SLiMTM and industrial processing systems, which we would expect to contribute more to revenue in the second half of 2012/13. The rest of the business remains robust and the Board anticipates continued positive progress during the current financial year."

Further enquiries:

CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S STATEMENT

We are pleased to report another year of solid performance in the Group as we deliver on our growth strategy.

Over the last two financial years we have achieved a compound annual growth rate in underlying revenue of 10% and in adjusted(1) operating profit, (excluding our estimate of contribution from non recurring activities), of 61%. We have delivered dividend growth of 14% for the financial year.

Our business is built on two core technologies of firstly Radio Frequency (RF) and microwave products, sub-systems and solutions and secondly semiconductor based products and solutions. Through these, we deliver technology for high performance systems at a component, sub-system and service level. These core technologies enable us to deliver technology solutions offering ground breaking innovation, transformational economics, life-enhancing capabilities, platform life extension and upgrade, and environmentally sensitive alternatives for our global customers.

Our growth strategy is to leverage our strong technology and market position to provide sub-systems and solutions through our focus on two key areas. These are the development of 8 application segments, 6 selected from our core longstanding businesses with the 2 newer applications of industrial processing systems and Semiconductor Lifecycle Management (SLiM™), and secondly, geographic expansion in the US and Asia. With this strategy we aim to achieve underlying turnover growth of over 10% a year and operating profit margins of at least 17%, supporting a progressive dividend policy.

In the financial year, we grew underlying turnover by 10% with most of the growth coming from the application segments of radiotherapy, space and scientific imaging, aerospace and defence semiconductors and SLiM™. Our sales in Asia and the US grew 10% resulting in over 51% of the Group's sales being outside of Western Europe. We achieved an adjusted(1) operating profit margin of 18% and, with this solid performance, propose a final dividend of 2.8p giving an annual increase in full year dividends of 14%.

In industrial processing systems, we announced a strategic partnership arrangement with Rio Tinto in February 2012 and commissioned our trial system for vermiculite processing in November 2011. The continued success of the programmes to manage End of Life (EOL) for the 68k series microprocessors, in conjunction with our strategic partner Freescale, demonstrates the true value of the SLiM™ approach to obsolescence management. We were pleased to announce during the year our strategic partnership with Maxim.

In support of our geographic expansion, we acquired a new facility in the US which we will move into this summer. We secured a contract with BAE Systems Inc for supply of towed decoy components to support the US Navy's F18 upgrade and continued developments for a F15 upgrade programme. In Asia, we have substantially increased our regional presence, opening new offices in Japan and Korea under the leadership of a new divisional director and we will be opening our facility in Beijing this summer.

We announced the disposal of our remaining non core businesses on 16 May 2012, for a total consideration of £14.7m. Whilst a post balance sheet event, this marks the final major step in our portfolio realignment programme.

Financial performance

The Group's revenue on a reported basis for last financial year increased 3% to £235m (2011: £229m), reflecting the steady growth in underlying revenue of 10%, and effectively reaching the end of our last time buy activities following completion of our reorganisation last summer.

Adjusted(1) operating profit also grew by 10% to £42m for the year (2011: £38m), reflecting the increased contribution from our strategic growth initiatives, and a much reduced contribution from last time buy activities estimated at £3m.

Adjusted(2) earnings per share grew faster than adjusted(1) operating profits by 22% to 13.71p (2011: 11.26p) reflecting reduced financing costs primarily through our new four year facility arranged in July 2011 and a modest reduction in our tax rate to 26.5%. Earnings per share were 11.12p (2011: 9.14p). The Board proposes dividends for the year of 4.1p a share (2011: 3.6p).

As part of the growth strategy, we increased our investment in research and development and infrastructure, including the freehold site acquired in the US. As a result, net borrowings increased modestly to £30.0m on 31 March 2012 (2011: £28.1m). Cash generation before payment of dividends was £8.5m.

Our order book at 31 March 2012 was £143m representing a decrease of £24m (2011: £167m), similarly our order book for delivery over the coming 12 months decreased by £19m (2011: £137m). This has reflected the anticipated changes in our order book profile with reductions arising from the fulfilment of last time buy orders, and first phase delivery of our first major SLiM™ programme for the 68k microprocessor. Short term arrangements for one of our radiotherapy customers were also a factor, whilst we conclude negotiations on a multi year contract. There was modest growth achieved in the remaining order book.

In addition to our order book, we also estimate future revenue of £20m over the coming ten years from established agreements with customers for our SLiM™ offering.

Board

In line with evolving practice, this year's Annual General Meeting (AGM) will consider a special resolution to move to the annual election of all Directors. We are implementing this early with all Directors offering themselves for re-election at this year's AGM.

Our people

This year we have welcomed 124 new joiners to our core staff and congratulate 75 members of our existing team who have taken on new or expanded roles. Our graduate and apprentice schemes have been active with 32 young people joining us under these development programmes. The Board also wishes to thank the staff for their commitment to our growth strategy and their contribution to the changes and opportunities it brings across our international operations.

Outlook

We have now completed the strategic realignment of the Group with the sale of the non core businesses last week. We have made good progress in building our US and Asia infrastructure and in establishing customer engagement in the new applications of SLiMTM and industrial processing systems. We anticipate continued progress in building our order book in these areas, though we remain, in many respects, still in the development phase. Consequently, we would expect to see meaningful revenue contribution arising from these areas in the second half of 2012/13. The rest of the business remains robust and the Board anticipates continued positive progress during the current financial year.

Chris Geoghegan Keith Attwood

Chairman Chief Executive Officer

BUSINESS REVIEW

This review will cover an overview of the growth strategy and the Group structure, our market drivers and our 8 application segments and the financial results achieved.

Strategy overview

Our business is built on two core technologies of firstly Radio Frequency (RF) and microwave products, sub-systems and solutions and secondly semiconductor based products and solutions. Through these, we deliver technology for high performance systems at a component, sub-system and service level. These core technologies enable us to deliver technology solutions offering ground breaking innovation, transformational economics, life-enhancing capabilities, platform life extension and upgrade, and environmentally sensitive alternatives to our global customers.

Our growth strategy leverages our strong technology and market position, now focused on 8 key application areas, reduced from 20 areas of focus three years ago. Within the 8 key applications are the 2 new sectors creating new markets for us with high growth potential, of SLiM™ and industrial processing systems.

The Group is organised into three product divisions supported by the two geographic regions in the US and Asia along with group functions. The divisions deliver solutions targeted at specialist global application segments. We are often a leader in these specific applications. The Group is focused on increasing our market share in both Asia and in the US aerospace and defence sector, from a well established European base. Within this strategy we are currently investing to build our market share.

Business structure

The Group has three product divisions:

RF power solutions (RFP) - high performance electron devices, sub-systems and solutions in three main application segments: radiotherapy, electronic countermeasures and industrial processing systems (IPS).

High performance imaging solutions (HPI) - advanced Charged Coupled Device (CCD) and Complementary Metal Oxide Semiconductor (CMOS) imaging sensors, cameras and solutions in three main application segments: machine vision, space imaging and scientific imaging.

Hi-rel semiconductor solutions (HRS) - high reliability semiconductors and services in two main application segments: aerospace and defence semiconductors and semiconductor lifecycle management under the Group's SLiM™ brand.

The three main product divisions have responsibility for product design and development, sales and customer service and work closely with the strengthened regional teams in the US and Asia.

Group functions cover:

·; Global operations with responsibility for all manufacturing and supply chain activity across the three main manufacturing sites based in Chelmsford (UK), Grenoble (France) and Santa Clara (California, US).

·; Support services including group marketing and technology, finance, commercial, IT and human resources.

Market and growth profile

Over the last two financial years the Group has delivered underlying sales growth that equates to c.10% per year. Our strategic plan increased our addressed markets from c.£2bn to over £3.5bn. We are making good progress in our geographic expansion plans. Our new facility in the US is currently undergoing fit out and we have substantially increased our presence in the Asia Pacific region with new sales offices in Japan, Korea and China.

In the two new sectors with high growth potential, SLiM™ and industrial processing systems, we expect these to convert into material future sales, building on the strong customer engagement and strategic partnerships announced over the past year. We remain confident that our strategy can deliver sustainable underlying revenue growth of c.10% and this remains the target for the Group.

In the medical and science market we address, the key drivers are: ongoing demand for spares reflecting growth in the installed base, Original Equipment Manufacturers (OEMs) expanding in Asia with increasing local competition and steady demand for scientific research, giving overall an estimated market growth rate of 3 to 5%.

The aerospace and space markets continue to benefit from demand for earth observation associated with climate change monitoring as well as increasing demand from emerging markets for space science. In aerospace we are seeing steady growth in commercial aircraft production, giving overall an estimated market growth rate of 3 to 5%.

In the defence markets we address, we are seeing a shift to platform life extension and upgrade programmes. Electronic warfare and communications is receiving funding in an overall decreasing envelope. There is a growing focus on semiconductor counterfeit and obsolescence management, giving overall an estimated market growth rate of 0 to 2%.

In commercial and industrial markets, capital investment remains subdued, although there are opportunities in Asia and the BRIC markets for new product lines. The after market sectors we address have remained steady, giving overall an estimated growth rate of 0 to 3%.

Our growth strategy provides opportunities for increased market presence and market share in the US and Asia, providing an estimated growth of 2.5 to 3%. We have opportunities for moving up the value chain to provide our customers with enhanced performance and more cost effective solutions, providing an estimated growth rate of 1.5 to 3%. We are developing new sectors, for example in mining, through applying more efficient technology to existing industrial processing chains, providing estimated growth of 1 to 3%.

The combination of the growth in our addressable markets, with the growth through our strategic positioning, provides targeted growth of c.8 to 12%.

RF power solutions

Financials

Revenue grew by 5% to £86.1m (2011: £82.1m) and underlying revenue growth (excluding the non core automotive alarms business) was 6%. Radiotherapy sales grew strongly, reflecting both new build and spares growth. Electronic countermeasures in the US benefited in the second half from a further order for the ALE-55 programme for the F18 Super Hornet, and is progressing development work for an upgrade programme for the F15. The other product lines in the division have shown good revenue growth.

The division's adjusted(1) operating profit was £12.5m (2011: £12.8m), a decrease of 2%. The contribution from the higher revenues and ongoing programmes to improve efficiency has been more than offset by increased research and development (R&D) and start up costs in industrial processing systems.

The order book at 31 March 2012 was £60m (2011: £73m). The reduction reflects short term arrangements with one of our radiotherapy customers whilst we conclude negotiations on a multi year contract, partially offset by increases in electronic countermeasures reflecting the US orders. The orders due for delivery in 12 months as at 31 March 2012 were £50m (2011: £54m), down 7% in line with the total order book and reflecting its changing mix.

Application segments

Radiotherapy

We deliver high performance, high reliability products and provide the continuity for long term spares that our radiotherapy customers require. We are established as the market leader for the supply of magnetrons, thyratrons, modulators and services. Our principal customers are the radiotherapy system OEMs including Accuray, Elekta and Varian. Key drivers for the market include new equipment demand which is dependant on healthcare spending, whereas the underlying demand for spares is primarily driven by the growing installed base and the spares replacement cycle which can be between five to ten years after a new system is commissioned.

Last year the division's radiotherapy revenue grew strongly, in part reflecting increased demand for both new build equipment and the growing spares requirement. For the coming years we continue to anticipate that spares revenue will grow in line with the past expansion of the installed base over the last five to ten years. Growth is anticipated to be driven by continued new build demand, which accounts for approximately one third of the growth, along with the growing installed base that underpins the other two thirds of the anticipated growth. We are continuing the development of our high power s-band magnetron which will provide an alternative to klystron based systems. We continue to engage with our customer base regarding moving up the value chain and developing new RF generating sub-systems.

Electronic countermeasures

We provide leading technology for platform life extension programmes and upgrades to enhance capability and provide electronic countermeasure protection of high value air, land and naval assets. We manufacture key components, such as magnetrons, coupled-cavity and helix Travelling Wave Tubes (TWTs), and, at a sub-system level, Microwave Power Modules (MPMs), as well as delivering design and development services. Our products are primarily of European origin, so are not restricted under the US's International Traffic in Arms Regulation (ITAR) which is a key advantage in our international markets. In the US, our operations are authorised for defence programmes and we anticipate expanding our US operational footprint, in support of US programmes during 2012/13. Key customers are the system level OEMs, including BAE Systems, Selex Galileo, Raytheon, Saab, EADS and Thales. For some novel applications we also contract directly with the end users or governmental laboratories through their technology groups.

Sales into electronic countermeasure applications reflected the anticipated lower demand in Europe. In the US the second half benefited from a further contract award within the ALE-55 programme. We are progressing our development contract for a module incorporating our ultra wideband TWT for an upgrade on a F15 programme. Growth is anticipated to come in Europe from contracts to supply MPMs and novel systems and in the US from the current contracts and future upgrade programmes. Our unique technology, including the new ultra wideband TWT and our MPM, is gaining traction in Europe, and there are opportunities in the US because of the product's size, weight and performance.

Industrial processing systems

Our application of RF/microwave technology to industrial processing delivers transformational economics in energy consumption and material yield in established sectors. Industrial processing systems can provide RF generators or complete systems, which include a RF generator, material handling system and process control. The current focus is in applications for mining, where we are providing RF generators and development support, and vermiculite processing, where we have designed and installed a fully integrated system in a commercial customer's premises. This system is the subject of an extended field trial, to help build our expertise in the industry and to resolve the inevitable teething problems with processing the full range of mined clays. We were pleased to announce in February 2012, that we have signed a strategic partnership with Rio Tinto to develop large-scale Prowave™ RF/microwave generators for use in copper recovery on an exclusive basis.

During the year we have secured orders of c.£2m for development work with our customers in the mining sector.

In March 2012 we received the first payment of £2m of our £6.2m grant from the Regional Growth Fund. The grant is being used to accelerate our R&D programme in conjunction with the University of Nottingham and investment in the infrastructure that supports this key opportunity for growth.

Other applications

The remaining businesses in the division are principally focused on applications in commercial and industrial markets including, radar for commercial shipping and industrial applications including, induction and dielectric welding, lasers and cargo screening along with satellite communication amplifiers.

Revenue for the remaining businesses has shown steady growth reflecting demand in industrial end user markets.

High performance imaging solutions

Financials

Reported revenue decreased by 6% to £66.2m (2011: £70.7m), reflecting a significant reduction in one-off revenue of £6.6m (2011: £17.5m) (one-off revenue include Last Time Buys (LTB) and recovery of the overdue orders related to the restructuring in Grenoble). Underlying revenue growth was 12%. Demand for machine vision cameras into process control applications in Asia is steadying after seeing demand soften earlier in the year. Scientific imaging continues to be steady with end user demand being maintained. Strong revenue growth in space imaging reflects progress on our technically challenging programmes. The remaining businesses, including dental products, have delivered good underlying growth.

The division's adjusted(1) operating profit before taxation was £10.3m (2011: £13.0m), a decrease of £2.7m. This was due to significantly lower volume of high margin LTB activity, some lower margin space programmes reflecting the technical challenges partially offset by cost savings from the closure of the Grenoble front end fab in June 2011. R&D expenditure was increased by £0.4m from the prior year, to support new product development.

The order book at 31 March 2012 was £56m (2011: £54m), which includes LTB orders of £3.1m (2011: £7.8m). The order book reflects good order intake in the space sector. The order book in the other application segments reflects underlying growth as one-off orders are being replaced by ongoing business. The orders due for delivery in 12 months as at 31 March 2012 were £44m (2011: £46m), down 4%.

Application segments

Machine vision

Our camera platforms provide sensitive, high speed performance for demanding inspection processes where quality and reliability are key customer requirements for applications such as semiconductor and electronics manufacturing inspection, food and beverage processing, ophthalmology and document imaging. Our products include line scan cameras for high end machine vision and optical coherence tomography ophthalmological applications based on CCD sensor technology. Each end user market has specialised inspection equipment suppliers that are e2v's customers, including for OCT/ophthalmology Carl Zeiss, Meditec, Canon and Optopol, and for semiconductor and electronics Orbotech and Basler. Additionally, there are a large number of integrators which we access via distributors and our agents.

Underlying sales in machine vision are down c.6%, reflecting some softening of demand earlier in the year, although demand is now steadying. The increased sales resources in Asia provide a platform to support these important markets with high growth potential. The new CMOS based line scan camera (the Eliixa+), which provides high speed sensitivity and high resolution for high end inspection applications, is getting traction and first orders have been received for design-ins for next generation inspection systems.

Space imaging

We are the world leading supplier for visible range high performance imaging sensors and sub-systems for space and ground based science applications.

We have a long established heritage of providing reliable, high performance, high quality space qualified imaging sensors and arrays for space science and astronomy applications and high speed, high resolution sensors for earth observation satellites. Countries wish to maintain independent observation capabilities and the increasing investment in monitoring climate change are driving a growing demand for new observation satellite programmes. We have a strong position in Europe for these CCD sensors and our product remains attractive for this application due to the long proven performance in flight. We are also developing a CMOS based technology platform. The main end users are worldwide space agencies including NASA, ESA and CNES as well as the prime satellite manufacturers including Astrium, Thales, Lockheed Martin, and Ball Aerospace.

Strong revenue growth in space reflects milestones achieved on programmes. Order intake in space has remained strong with two contracts received at the sub-system level for a focal plane array for a Korean land based telescope and to provide the complete camera for a space science telescope programme managed from Brazil. Current growth in space imaging is underpinned by major programmes in the order book.

Scientific imaging

We provide high performance sensors enabling high end scientific instruments. Our scientific imaging sensors are used in spectroscopy, microscopy, crystallography, fluoroscopy and broad scientific imaging applications. The market for high end scientific cameras is currently highly concentrated with three manufacturers Andor, Hamamatsu and Roper, all of whom we support. We have a significant market share, proprietary technology and have strong relationships with these major customers.

Scientific imaging has continued to be steady, delivering 10% volume growth. End user demand has been maintained throughout the year and end user funding appears to be maintained despite macro economic challenges. In March we received the first order for our new high performance sensors for life science applications.

Other applications

We support a range of other specialist applications for our technology including CMOS dental intra-oral sensors, CMOS area array sensors for use in automatic data collection systems including 2D barcode reading, andthermal imaging products.

Underlying growth has come from the continuing portfolio including the CMOS barcode and dental sensors. Thermal imaging cameras had a slower start to the year but saw stronger demand in the last quarter. Growth, particularly in Asia, is anticipated from new customers for our CMOS dental sensors, the hand held thermal imaging camera for the security market and from demand for 2D bar code reading that is replacing laser technology and facilitating new applications.

Hi-rel semiconductor solutions

Financials

Reported revenue increased by 8% to £67.5m (2011: £62.7m). Underlying revenue growth (excluding one-off revenue and non core products) was 14%. The SLiM™contract for the 68k microprocessor contributed £7m sales in the current year. Across all our SLiM™ programmes revenue estimated at £20m is expected to be delivered over the next ten years. The European test and assembly business has experienced strong demand for its services. The US based product lines demand has been flat.

The division's adjusted(1) operating profit was £21.1m (2011: £15.6m), an increase of 35%. This was due to the higher volumes and margins principally due to the 68K SLiM™ contract, as well as full year benefit of the anticipated cost savings from the restructuring in Grenoble.

The order book at 31 March 2012 was £20m (2011: £35m). The decrease primarily reflects delivery of £7m of orders related to the 68K SLiM™ programme. The orders for delivery within 12 months as at 31 March 2012 were £18m (2011: £33m).

Application segments

Aerospace and defence semiconductors

We provide high reliability semiconductors and packaging and test services that meet the demanding specifications of our aerospace and defence customers and have an established reputation for providing long term support. We partner with Freescale Semiconductor and Everspin, to provide a range of high reliability versions of their standard products. We provide market leading packaging and screening options, and redesigned EOL military specification integrated circuit s. The routes to market for semiconductor components are generally through distributors and we have strong relationships with two of the major worldwide component distributors, Arrow and Avnet. In January 2012 we announced that, in conjunction with Arrow Electronics, we would be providing EOL support for a range of hi-rel products previously manufactured by Lattice Inc. There are also some direct sales to major defence primes used on platforms such as the Eurofighter, the F15 and the Patriot Missile System.

Revenue from aerospace and defence semiconductors relating to the European test and assembly business grew. This offset lower assembly and test activity in the US operations, the result of lower demand principally from its European end users. We currently have market leading positions which should underpin future growth. The potential for further growth is anticipated to be achieved through the support provided into the SLiM™ programmes.

Semiconductor lifecycle management

SLiM™ is supporting platform life extension through a new professional approach to obsolescence and counterfeit management for our aerospace and defence customers. This provides a proactive approach for managing critical components in aerospace and defence systems, where the original components became obsolete during the lifetime of the system, and offers the potential for improved integrity, counterfeit avoidance, lower cost and reduced risk over the lifetime of the assets. The defence primes have long term support and maintenance commitments to ensure that the high value military assets they supply continue to perform throughout their lifecycle. Semiconductor obsolescence management is a particularly significant and costly issue that needs to be managed within these lifetime support programmes. Our capabilities in design of semiconductors, supply chain management and packaging and test services, can extend the availability of otherwise obsolete semiconductors, providing our customers with the security of supply of the components they require. The customers for SLiM™ are the large defence primes, including Raytheon Space and Airborne Systems and European OEMs on the Eurofighter Typhoon programme.

The continued success of the programme to manage the EOL for the 68K series microprocessors, in conjunction with our strategic partner Freescale, demonstrates the true value of the SLiM™ approach to obsolescence management. In addition to our partnership with Everspin, we were pleased to announce during the year a strategic partnership with Maxim Semiconductors Inc. We continue to explore additional strategic partnerships.

We have added a further four new significant OEM defence programmes in the year and we have extended our partnership with Raytheon Space and Airborne Systems to provide semiconductor lifecycle management services to support additional product lines for the F15. In China we were also pleased to announce our first contract win with the commercial airline prime COMAC to provide extended availability of certain semiconductor product lines for their C919 aircraft. Further growth is anticipated from existing OEM contracts and we are targeting an additional five contract wins per year as our SLiM™ value proposition takes hold.

Other applications

The other applications are in the smart sensor market for sensor signal conditioning Application Specific Integrated Circuits (ASICs) and Application Specific Standard Products (ASSPs) for applications in industrial automation, industrial detectors, automotive safety and security, engine management and climate control applications. These legacy product lines have performed strongly. These are not considered to be strategic products and we are continuing to manage our exit from these non core product lines.

Corporate centre

The corporate centre comprised a portfolio of businesses based in the UK and Switzerland covering x-ray detectors, gas sensors and air quality sensors. These non core businesses, representing 6% of the Group's turnover, have achieved reported growth of 13% and adjusted(1) operating profit of £0.9m (2011: loss £0.3m) in the year after the allocation of corporate costs. Post year end this portfolio of businesses were sold for £14.7m.

Financial overview

Revenue and adjusted(1) operating profit by division were as follows:

Review of trading performance

The Group's reported revenue increased by 3% compared with the last financial year, reflecting a significant reduction in last time buy revenues, with underlying revenue growth of 10%. By geographical spread, revenue grew in North America, Asia Pacific and the Rest of World with lower sales in Continental Europe and the UK. Geographic reach reflects the proportion of sales outside Western Europe (including UK) and increased to 51% in line with our strategy to grow in these markets. New business in the year, from new products or customers over three years, made up approximately 17% of revenue and business mix, which reflects the percentage of sales from sub-systems and solutions, was 31%. The change in new business proportion and business mix reflects the changes in the order book profile.

Adjusted(1) gross profit increased by 7% to £92.5m (2011: £86.7m) and represented 39% of revenue (2011: 38%). The contribution from one-off revenue is much reduced and estimated at £3m (2011: £10m), with the underlying growth at target margin more than compensating for the lower one-off revenue. The operating structure is improved reflecting the cost savings from the completed restructuring and increased resilience with c.18% of the labour cost now flexible.

Expenditure on R&D has increased to £15.7m (2011: £12.4m). The rate of spend reflects that investment in the key programmes is accelerating with the focus on the programmes supporting the growth opportunities, net of grant funding of which the Regional Growth Fund in the UK contributed £3.0m. These programmes include the continued MPM development, the next generation of the high power RF generator for use in industrial processing systems, the high performance sensors for life science applications, and the thermal imaging camera for the security market.

Selling and distribution costs increased by 8% to £17.6m (2011: £16.3m) reflecting the anticipated costs associated with the expansion of the sales and distribution activities in the US and Asia.

Administrative costs decreased to £21.5m (2011: £26.7m). Administrative costs include a number of the items added back to adjusted(1) operating profit of £4.1m (2011: £7.0m) detailed below.  The remaining administrative expenses of £17.4m (2011: £19.7m) decreased by 12% (£2.3m) with cost savings from the restructuring.

Adjusted(1) operating profit

Adjusted(1) operating profit is considered to reflect more accurately the underlying performance of the business and is calculated as follows:

Adjusted(1) operating profit increased to £41.9m (2011: £38.2m) and represented 18% of revenue (2011: 17%), above the 17% target set for the Group. Return on capital employed (adjusted(1) operating profit divided by net operating assets along with intangibles at 31 March 2009 and acquired thereafter) increased to 26% (2011: 24%) reflecting the improved level of profitability of the Group.

Amortisation of acquired intangible assets of £3.8m has reduced from the prior year (2011: £5.8m) and reflects a number of intangible assets recognised on the acquisition of Grenoble and e2v aerospace & defense Inc. which are now fully amortised.

The Group's restructuring programmes in Lincoln and Grenoble are now substantially completed within our previously published overall programme cost of £24m, with the main activity in the year on the business improvement and last time build programmes.

The business improvement programme expenses reported for the year were a net credit of £1.0m (2011: cost £2.5m). This comprises profit on sale of surplus fixed assets of £0.7m and release of receivable and termination provisions totalling £1.1m offset by costs of £0.8m, which principally relate to bonus payments to staff.

The last time build programme to support the machine vision and space imaging lines was completed in the year. A provision of £2.5m (2011: £0.8m) has been made for these product lines in accordance with the Group's accounting policy.

As part of the de-commissioning exercise in Grenoble in the second half of the year, certain of the equipment has been sold or re-deployed. The reversal of the previously recorded impairment charge of £0.4m, was recognised in the first half.

The outstanding provisions of £2.1m at 31 March 2012 for the business improvement programme are anticipated to be dispersed by December 2012.

The remaining property at the old Lincoln site was sold during the year resulting in a gain on sale of £0.2m.

The Group's overall foreign currency hedging policy is to put in place forward contracts to sell surplus currencies based on its trading forecasts, with the level of coverage decreasing over the next 12 months. The mark to market adjustment on this cover amounted to a loss of £0.4m (2011: gain £1.4m).

On 16 May 2012 the Group announced the disposal of its non core businesses. As at 31 March 2012, these were recognised as a disposal group held for sale, for which its carrying value was written down to the fair value less costs to sell and an impairment charge of £1.6m was recorded.

Finance charges

In the year, the Group hedged part of its interest rate exposure using interest rate swaps. The fair value gain of the interest rate swaps held by the Group was £0.1m (2011: £nil).

Net finance costs before exceptional items were £2.5m (2011: £4.7m), a reduction of 47% compared with the prior year reflecting the reduced margin payable on the bank facility entered into in July 2011.

Taxation

The tax charge for the year was £8.5m (2011: £6.3m). The effective tax rate on reported profit for the year ended 31 March 2012 amounted to 26.5% including beneficial adjustments relating to prior years for principally settlement of R&D tax credits of c.2%. The tax charge in the current year has benefited from tax credits for R&D in the UK and France of £2.4m (2011: £2.3m).

The Group generated profits in the UK, France and the US which were subject to tax at 26%, c.34% and c.40% (including state taxes) respectively.

The effective tax rate on adjusted(1) profit before tax was 26.3% including adjustments relating to prior years of c.2%.

Profit for the year

The profit for the year is £23.5m (2011: £19.5m). The increase in profitability underlines the continued progress made by the Group during the last year. We have maintained our progressive dividend policy with an interim dividend of 1.3p per share, paid December 2011, and a proposed final dividend of 2.8p per share, overall an increase of 14% on the prior year.

Currency

The manufacturing operations in the UK, France, US and Switzerland sell through the Group's global sales and distribution network, and are therefore subject to transactional and translational risks particularly in relation to the US dollar which accounts for 38% (2011: 39%) of the Group's sales. Where US dollars are forecast to exceed US dollar costs, the surplus US dollars are sold under foreign exchange contracts to cover costs incurred in the UK and France in accordance with the Group's hedging policy.

For the year ended 31 March exchange rates applied were:

At 31 March 2012, of the Group's borrowings £5.6m are in US dollars, the remainder is in sterling.

Cash flow and net borrowings

At 31 March 2012, net borrowings amounted to £30.0m, a modest increase of £1.9m over the year (2011: £28.1m). The increase in net borrowings is after non recurring cash flows including the restructuring payments (£7m), purchase of the US facility (£4m) and the payment of the interim divided for the financial year ended 31 March 2011 in May 2011 of (£2.5m). The net cash inflow generated from operations was £37.4m, an increase of £0.8m over the year ended 31 March 2011. Working capital utilised £5.1m of cash, reflecting increases in inventory and a reduction in payables in part reflecting payment for the 68k wafer bank, a reduction in advance payments on contracts reflecting progress on space programmes, offset by a reduction in trade receivables.

Borrowing facilities

In July 2011 we completed a new revolving credit facility. The committed multi currency revolving facilities are equivalent to c.£80m and were made available for 4 years from 27 July 2011. Based on the Group's performance and net borrowings as at 31 March 2012, the margin payable is 140bps and non utilisation fees of 40% of margin.

The facility is subject to the following key covenants as at 31 March 2012:

Central functions

The divisions are supported by group operations and central group functions including group marketing and technology, finance, commercial, IT and human resources.

Group marketing and technology

The central marketing and technology team help determine Group strategic direction and support the divisions with common processes and procedures. The divisions are responsible for their own sales teams, though core sale processes are developed within the group function.

Operations

The group operations function is responsible for the main manufacturing sites in Chelmsford (UK), Grenoble (France), Santa Clara (California, US), as well as the smaller sites in the UK and Switzerland. Group operations are also responsible for supply chain and procurement and have a dedicated purchasing office in Taipei. Group operations are responsible for maintaining the manufacturing facilities whilst controlling spend on tangible fixed assets. The facility that we have secured in China includes provision for modest assembly activities, where appropriate for market access, which will be opened in the summer.

Central functions

The costs of the central functions are allocated to the divisions. The central costs, excluding exchange differences, of £3.9m (2011: £1.5m) are the costs relating specifically to the management of e2v technologies plc and are not allocated.

Key performance indicators (KPIs)

Our KPIs to monitor financial performance have been covered in detail in this Business Review. The table below provides a summary of our KPIs. Non-financial KPIs are discussed in detail in the Corporate Responsibility Review and include customer satisfaction, number of reportable accidents in the year, percentage reduction in our carbon footprint and Business in the Community (BITC) Environmental Index.

Realignment

The sale of the non core businesses completes the strategic realignment of the Group. The continuing business excludes the businesses sold after the year end, last time buys and the discontinued automotive alarms business. The remaining last time buys and the discontinued automotive alarms business will contribute minimal revenue going forward. The continuing business will include the ongoing ASICs business. Whilst there will be no further product development in this business it is anticipated to generate revenue over the next few years.

The table below sets out the revenue for the continuing business over the past three years:

Board of Directors

Chris Geoghegan - Chairman

Chris joined the e2v Board as Chairman in October 2009. He has over 30 years of experience in the aerospace industry having spent most of his career in the commercial aircraft sector and was appointed one of three chief operating officers of BAE Systems plc. Chris was a key player in the growth and establishment of Airbus as managing director of the Airbus Company and a member of the executive board of Airbus Industrie. He also has substantial experience in the military aerospace sector, having been responsible for BAE Systems' European defence joint ventures and its defence electronics companies. He is currently senior independent director of Kier Group plc, Volex plc and SIG plc and a past president of the Society of British Aerospace Companies.

Keith Attwood - Chief Executive Officer

Keith joined the Group as Managing Director in 1998, having previously worked at a senior level within the telecommunications, defence and aerospace sectors. Keith led a management buy out of e2v from Marconi plc in 2002 and subsequently floated the company on the London Stock Exchange in 2004. He is former Chairman of the CBI East of England Regional Council and is currently chair of the CBI Education and Skills Committee.

Charles Hindson - Group Finance Director

Charles joined the e2v Board in May 2009. Charles' 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 Laird plc and Taylor Wimpey plc, and previously a non-executive director of George Wimpey plc and Spectris plc.

Dr Krishnamurthy Rajagopal - Independent Non-Executive Director

Krishnamurthy joined the Board in November 2010 and has considerable experience of senior engagement in global engineering operations and in the supply of materials, equipment and services to the global semiconductor and other high technology industries. He is currently Chairman of both UMIP Ltd and HHV Pumps Ltd and a non-executive director of Spirax-Sarco Engineering plc, Bodycote plc and WS Atkins plc. He was an executive director of the BOC Group plc and is a Fellow of the Royal Academy of Engineering. Dr Rajagopal is a past Commissioner with the Audit Commission, an appointment he held for three years.

Kevin Dangerfield - Independent Non-Executive Director

Kevin was appointed to the Board in January 2011. He is currently Chief Financial Officer of The Morgan Crucible Company plc. He has held a number of senior appointments including European Finance Manager for Virgin Retail Europe Group from 1996 to 1998, before becoming firstly Northern Europe Division Finance Manager in 1998, and then Group Finance Operations Manager for London International Group plc from 1998 to 2000. Kevin was then Group Financial Controller with The Morgan Crucible Company plc from 2000 to 2006 before being appointed to his current role.

DIRECTORS' REPORT

The Directors present their annual report and the audited financial statements for the year ended 31 March 2012. The Group's consolidated 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 sub-systems into niche sectors within the medical and science, the aerospace and defence and the commercial and industrial markets. As discussed in the Business Review, the Group is organised into business divisions which are supported by a number of group functions.

The Group has manufacturing operations in the United Kingdom (UK), France, United States of America (US) and Switzerland. The Group has distribution and representative operations in Korea, Japan, China, Hong Kong, UK, US, Germany and France. The Group also has 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, along with the outlook for the coming year, is contained in the Chairman's and Chief Executive Officer's Statement, Business Review and Corporate Responsibility Review.

Results and dividends

The consolidated profit before taxation amounted to £32,043,000 (2011: £25,832,000). The profit attributable to ordinary shareholders amounted to £23,540,000 (2011: £19,492,000).

As detailed in note 12, an interim dividend of £2,540,000 and a final dividend of £5,081,000 were paid respectively on 27 May 2011 and 3 August 2011 in respect of the previous financial year. An interim dividend of £2,752,000 was paid on 21 December 2011. The Directors recommend the payment of a final dividend of £5,929,000.

Event subsequent to the year end

On 16 May 2012, the Group sold e2v scientific instruments Ltd, MiCS Microchemical Systems SA and e2v microsensors SA. As part of this transaction the Group has also signed a contract with the same party to sell the industrial gas sensors business of e2v technologies UK Ltd by no later than May 2013. The estimated net proceeds on this combined transaction are £13 million.

Directors

The current members of the Board and the profiles of all Directors at the date of this report are set out above. They all served throughout the year and thereafter. Jonathan Brooks also served as a Non-Executive Director prior to his retirement on 27 July 2011.

The beneficial and non-beneficial interests, including family interests, of the Directors in the share capital of the Company and details of Directors' share options are detailed in the Directors' Remuneration 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 2006. Such qualifying third party indemnity provision was in force during the year and is still in place as at the date of this report.

Principal risks and uncertainties

As noted in the UK Corporate Governance Report, the Board has adopted processes to identify, evaluate and manage the significant risks faced by the Group. This is coupled with the significant risks and uncertainties faced by the Group that are set out below.

The financial risks associated with interest rates, foreign currency, credit and liquidity are discussed in note 31 to the consolidated financial statements. The financial instruments entered into by the Group are detailed in note 32 to the consolidated financial statements.

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. During the period e2v has purchased a further small area of freehold land and property at the current Grenoble site.

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 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 proportion of expenditure on product enhancement and new product development whilst the amount funded by the Group amounted to £15,674,000 (2011: £12,390,000).

Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008

Pursuant to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, the Company is required to disclose certain 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. New Articles will be proposed by special resolution of the shareholders at the next Annual General Meeting to replace the existing Articles with changes that will require every director to submit themselves for re-election on an annual basis. The Articles and the proposed new Articles showing such changes are available to view on the Company's website.

·; 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.

·; Certain agreements of the Group take effect, alter or terminate upon a change of control of the Group following a takeover, including: its bank loan agreements; company share plans; and certain commercial trading contracts.

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

Share capital

Details of the issued share capital, together with movements in the Company's issued share capital are given in note 25.

As at the latest practicable date prior to the publication of this report, being 17 May 2012, the Company's issued share capital is 214,954,236, with a nominal value of £10,747,712.

The Company has one class of ordinary share which carries no right to fixed income. Each share carries the right to one vote at general meetings of the Company.

There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles and prevailing legislation. The Directors are not aware of any agreement between the holders of the Company's shares that may result in restrictions on the transfer of securities or on voting rights.

Creditor payment policy

The Group does not have a standard or code of conduct which deals specifically with the payment of suppliers; however whenever the Group is satisfied that the supplier has provided the goods or services in accordance with the agreed terms and conditions it seeks to abide by the payment terms agreed with the individual supplier. The Group's average creditor payment period at 31 March 2012 was 56 days (2011: 59 days).

Charitable and political donations

Details of charitable donations are given in the Corporate Responsibility Review of the Annual Report. No donations were made to any political parties.

Interests in voting shares

At 10 May 2012 the Company had been notified of the following interests of 3% or more in the Company's ordinary shares.

Disabled employees and employee involvement

The Group endeavours to provide equality of opportunity in recruiting, training, promoting and career development to all, irrespective of race, ethnicity, religion, sexual orientation, gender or age. The Group gives full consideration to applications for employment from a person with a disability where a person with a disability can adequately fulfil the requirements of the role and workplace adjustments can be made to facilitate this appointment.

Where existing employees become disabled it is the Group's policy, wherever practicable, to provide workplace adjustments to ensure continuing employment under normal terms and conditions, and to provide training and career development and promotion opportunities, wherever appropriate.

A review of employee involvement is given in the Corporate Responsibility Review.

Going concern

The Group's business activities, together with the factors likely to affect its future development are discussed in the Chairman's and Chief Executive Officer's Statement and the Business Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Overview section of the Business Review. In addition, notes 31 and 32 to the consolidated financial statements include the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities, and its exposure to credit and liquidity risk. The Group meets its day to day working capital requirements through its revolving credit facility which is not due for renewal until July 2015. The current economic conditions create uncertainty over the level of demand for the Group's products and services, the exchange rates between Sterling, US dollars and Euros and the availability of bank finance in the foreseeable future.

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facility and remain within the covenant requirements.

The Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Directors' statement of responsibilities

The Directors are responsible for preparing the Annual Report and financial statements in accordance with law and regulations.

Company law requires the Directors to prepare financial statements for each year. Under the provisions of this law, the Directors have prepared the consolidated financial statements in accordance with IFRS as adopted by the European Union and the Company financial statements in accordance with United Kingdom (UK) Accounting Standards and applicable law.

In preparing those financial statements, the Directors are required to:

·; select suitable accounting policies and then apply them consistently;

·; make judgements and estimates that are reasonable and prudent;

·; state that the consolidated financial statements have complied with IFRS as adopted by the European Union, subject to any material departures being disclosed and explained; and

·; state for the Company financial statements whether the applicable UK Accounting Standards have been followed, subject to any material departures being disclosed and explained.

The Directors confirm that they have complied with the above requirements in preparing 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 and enable them to ensure that the consolidated financial statements comply with Companies Act 2006 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 2012 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.

Responsibility statements under the Disclosure and Transparency Rules

Each of the Directors, as at the date of this report, confirms to the best of his knowledge that:

·; the financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the Group; and

·; the Directors' Report includes a fair review of the development and performance of the business and the position of the Company and the Group together with a description of the principal risks and uncertainties that it faces.

Provision of information to the auditor

Having made enquiries of fellow Directors and of the Company's auditor, 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 auditor in connection with preparing their report) of which the Company's auditor 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.

Auditor

A resolution to reappoint Ernst & Young LLP as auditor will be put to the members at the Annual General Meeting.

By order of the Board

Charlotte Parmenter

Secretary

18 May 2012

e2v technologies plc

Company No: 4439718

Registered office: 106 Waterhouse Lane, Chelmsford CM1 2QU

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 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 the UK Corporate Governance Code published by the Financial Reporting Council in June 2010.

Statement by the Directors on compliance with the UK Corporate Governance Code

The Group has complied with the provisions set out in UK Corporate Governance Code throughout the year.

The Board of Directors

The Group is headed up by a Board which comprises the Chairman, Chief Executive Officer, Group Finance Director and the Non-Executive Directors. Anthony Reading is the Senior Independent Director and Chairman of the Remuneration Committee. Owing to the time that Anthony Reading has been engaged as a Non-Executive Director, his independence has been rigorously reviewed through the Company's internal annual assessment cycle and peer review by the other Non-Executive Directors including the Chairman. With the exception of Anthony Reading, the Non-Executive Directors have been fully refreshed within the last three years, with two of the Non-Executive Directors having been appointed in the last two years. Accordingly all of the Non-Executive Directors are considered by the Board to be independent. Their biographies above demonstrate sufficient experience to bring independent judgement to the Board and the success of the Group. The Board evaluates its own performance and considers itself effective and has not identified any areas of concern.

The Articles of Association require that Directors retire in the third calendar year following the year in which they were elected or re-elected. Any Director appointed by the Board is required to submit themselves for re-election at the next Annual General Meeting after appointment. Charles Hindson and Anthony Reading will be retiring by rotation at this Annual General Meeting and will be submitting themselves for re-election, in addition Chris Geoghegan, Keith Attwood, Kevin Dangerfield and Krishnamurthy Rajagopal will voluntarily retire and submit themselves for re-election. The Directors will be proposing a Special Resolution at the next Annual General Meeting of the Company to amend the Articles of the Company such that each Director will submit themselves for re-election on an annual basis.

Role of the Board members

The Non-Executive Directors' primary responsibilities are to:

·; ensure the effective and prudent management of the Company to deliver long-term success;

·; 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 Executive Directors' 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 in August and December) and other Board meetings, as required to approve matters beyond the authority limits of the Chief Executive Officer. In addition there are meetings of the Committees of the Board as well as regular business division and function reviews when senior members of executive management, who are not Board members, attend. Matters beyond the authority limits of the Chief Executive Officer include, for example, the approval of customer quotes over the approved financial limit set by the Board, the acquisition and disposal of property, certain activities relating to mergers and acquisitions as well as approval of the annual budget.

Conflicts of interest

In line with the Companies Act 2006, the Company has established a robust procedure requiring Directors to seek appropriate authorisation prior to entering into any outside business interests. Actual or potential conflicts of interest are reviewed by the Board.

Board meetings and attendance

In addition to the Committee meetings, there were 13 general Board meetings during the year. All Committee and Board meetings held in the year were quorate. The Board also convened ad-hoc meetings during the year to deal with specific business requirements. The full details of all Board and Committee meetings and attendances are shown in the following table:

(1) Retired on 27 July 2011

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 Kevin Dangerfield and has met three times during the year. Jonathan Brooks was the Chairman of the Committee prior to his retirement on 27 July 2011 as a Non-Executive Director. The other members of the Committee are Anthony Reading and Krishnamurthy Rajagopal, who was appointed to the Committee on 27 July 2011. Kevin Dangerfield is deemed to have recent and relevant financial experience. The Chairman, Chief Executive Officer and Group Finance Director attend Audit Committee meetings by invitation and the audit partner attended two meetings during the period. 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 are present. The terms of reference of the Audit Committee include:

·; keeping under review the effectiveness of the financial reporting and internal control policies and procedures for the identification, assessment and reporting of risks;

·; reviewing the arrangements for what is commonly known as "whistle blowing";

·; reviewing the Committee's terms of reference;

·; considering the requirements for establishing an internal audit function;

·; making recommendations to the Board in relation to the appointment and re-appointment of the external auditors as well as overseeing 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; and

·; 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 £27,000 of non-audit work fees were paid. 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 11 times during the year. Other members of the Committee are Chris Geoghegan, Krishnamurthy Rajagopal and Kevin Dangerfield, the latter two of which were appointed to the Committee on 27 July 2011. Jonathan Brooks was a member of the Committee prior to his retirement as a Non-Executive Director. The Chief Executive Officer and Group Human Resources Director attend all meetings (but the Chief Executive Officer is not involved in deciding his own remuneration). 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 reviewing the appropriateness and relevance of the policy;

·; determining targets for any performance related pay schemes and approving total annual payments under the schemes;

·; reviewing 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 reimbursement of claims for expenses for all Directors; and

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

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

Nomination Committee

The Committee is chaired by Chris Geoghegan. The other members of the Committee are Keith Attwood and Anthony Reading. The Committee has met once 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; and

·; provision of recommendations to the Board regarding succession, re-appointment and membership of the Audit and Remuneration Committees.

Induction and training

Any new directors will receive induction upon 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 of 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 Director, of the performance of the Chairman. This assessment was reviewed by the Board and there were no areas of concern. The Chairman also meets during the year with the Non-Executive Directors without the Executive Directors being present.

Communication with shareholders

The Annual Report and Financial Statements and the Half-Yearly Financial Report provide investors with a balanced view of the Group's activities and performance. The half-yearly results were distributed to all shareholders in November 2011. 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 and the principal contact points are the Chief Executive Officer and Group Finance Director. The Senior Independent Non-Executive Director, Anthony Reading, is also available to whom investors may address any concerns they may have. Presentations are given to individual institutions, or on a Group basis if preferred, following the announcement of half-yearly and full year results. Site tours and ad-hoc meetings are also arranged where requested.

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 and have accordingly reviewed the effectiveness of this during the year. 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.

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.

In addition the Board considers the significance of environmental, social and governance matters relevant to the business of the Group as part of its regular risk assessment procedures and Board constitution as detailed in the Corporate Responsibility Review and in this section.

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.

Share capital structure: Information about the share capital structure of the Company is discussed in the Directors' Report and in note 25.

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. Management and specialists within the Finance Department are responsible for ensuring the appropriate maintenance of financial records and processes that ensure all financial information is relevant, reliable, in accordance with the applicable laws and regulations, and distributed both internally and externally in a timely manner. A review of the consolidation and financial statements is completed by management to ensure that the financial position and results of the Group are appropriately reflected. All financial information published by the Group is subject to the approval of the Audit Committee.

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 Chief Executive Officer 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-Executive Directors review the reports presented to them by the Chief Executive Officer and Group Finance Director, which include a review of the financial results. This review compares the current year with the 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 review undertaken by the executive management and reported to the Board. However during the year the Company has introduced a programme whereby several internal audit reviews have been performed by multi-disciplinary peer review teams from across group functions and jurisdictions.

A formal "whistle blowing" policy is operated and is included in the Group's employee handbook.

On behalf of the Board

Kevin Dangerfield

Chairman of the Audit Committee

18 May 2012

DIRECTORS' REMUNERATION REPORT

Letter from Anthony Reading

Chairman of the remuneration committee

Dear Shareholder

I am pleased to be able to take this opportunity, in my capacity as Chairman of the Remuneration Committee, to update you on the work of the Committee during the year ended 31 March 2012.

Our remuneration philosophy remains focused on attracting, developing and retaining executives who are committed and incentivised to deliver the Company's business priorities and strategy, within a framework which is aligned with the interests of the Company's shareholders. In setting remuneration, the Committee gives full consideration to the best practice provisions set out in the UK Corporate Governance Code (Code) and other relevant best practice guidelines.

I would like to highlight the following matters that were considered by the Committee during the year:

·; The annual salary review for all employees, including Executive Directors takes place in October. Therefore, the Committee has not yet reviewed salary levels for Executive Directors for October 2012. However, it is anticipated that adjustments to salaries will be similar to those made in 2011, subject to consideration of continued performance and taking account of pay reviews for the wider employee population.

·; During the year the Committee reviewed the operation of the performance-related annual bonus. It was decided that for the year ending 31 March 2013 and future years, for the Executive Directors the focus should remain on the achievement of a stretching profit target.

·; Following the one-off Long Term Incentive Plan (LTIP) awards made to the Executive Directors in August 2010, no LTIP awards were made to the Executive Directors during the year. The Committee intends to make annual awards under the LTIP in the future and is currently consulting with major shareholders on the details of the awards to be made under the plan.

Further details on the developments described above can be found on the subsequent pages of the report.

The Committee believes that the remuneration structure continues to support and motivate our senior team whilst aligning them to the Company's strategic objectives and to achieving long term growth for our shareholders. I look forward to your support of the Committee's report at this year's Annual General Meeting.

Yours sincerely

Anthony ReadingChairman of the Remuneration Committee

DIRECTORS' REMUNERATION REPORT

Remuneration Committee 

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

Members of the Committee are appointed by the Board and their terms of reference are available on the Company's website. Anthony Reading currently chairs the Committee, which meets at least twice a year, and its other members are Chris Geoghegan, Kevin Dangerfield and Krishnamurthy Rajagopal. Jonathan Brooks was also a member of the Committee prior to his retirement as a Non-Executive Director in July 2011. The Board considers that all members of the Committee are independent directors. Chris Geoghegan is a member of the Committee because the Board considers it essential that the Chairman be involved in setting remuneration policy (although he is not party to any discussion directly relating to his own remuneration). The CEO is given notice of all meetings and has the right to attend them, and is consulted on the remuneration of other executives. However, the CEO does not take part in discussions that relate directly to his own remuneration.

When determining the pay of Executive Directors, the Committee takes into account the pay and employment conditions of employees throughout the Group. In this regard, the Committee ensures (via regular interaction with the Group's human resources (HR) teams) that it is kept fully informed of all relevant group-wide remuneration related issues and ensures that the same broad remuneration principles are used when designing the wider employee remuneration policies. The chairman of the Remuneration Committee regularly consults with the Group HR Director, who also attends all meetings.

Following their appointment in March 2011, Deloitte LLP have continued in the role of independent adviser to the Committee throughout the year ended 31 March 2012. Deloitte LLP is a member of the Remuneration Consultants Group and as such voluntarily operates under the code of conduct in relation to executive remuneration consulting in the UK. During the year a separate Deloitte department provided the Company with a limited level of resource to support the Group's finance function.

Remuneration policy 

The overall policy applied for the year ended 31 March 2012 and which will apply for the year ending 31 March 2013 is to ensure that Executive Directors are fairly and competitively remunerated and incentivised in a manner consistent with the Group's strategic objectives. The current remuneration packages combine basic salary, benefits and pension contributions together with a performance-related annual bonus and share incentive awards. The Committee believes that the overall packages offered to Executive Directors should provide the right balance of fixed and performance-related pay and be appropriate for the size, scale and geographic scope of the organisation as well as be competitive relative to other companies within its sector. In addition, the Committee considers general pay conditions of employees in the Group when determining remuneration levels for the Executive Directors.

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

As disclosed in last year's remuneration report, for the year ended 31 March 2012, after consultation with shareholders, the Executive Directors received moderate salary increases and adjustments were made to the annual bonus plan to ensure that the remuneration packages were sufficiently competitive whilst maintaining a strong link to Group performance.

Salaries remain positioned below the median (below the lower quartile for the CEO). Following a change to the Company's annual review date in October 2011, salaries will be reviewed again in October 2012 at the same time as all other employees. Any changes will be disclosed in next year's Directors' Remuneration Report.

Some changes to the structure of the annual bonus award were made for the year ended 31 March 2012, introducing an element of payment in shares that, if awarded, would be deferred for a three year period. Further details are given in the Performance-related annual bonus paragraph below. No further changes have been made to the quantum of the annual bonus for the year ending 31 March 2013.

No Long Term Incentive Plan (LTIP) awards were made to Executive Directors in the year ended 31 March 2012 following the one-off awards made in August 2010. It is the Committee's intention that awards will be made to Executive Directors under the LTIP in the year ending 31 March 2013. The Committee will be consulting with shareholders in relation to the details of these awards which will be disclosed in next year's report.

Summary of Remuneration

The following table summarises the various elements of executive remuneration:

Remuneration mix

In support of the remuneration philosophy, the mixture of fixed and variable reward is weighted towards the performance related elements.

The following chart illustrates the weighting of fixed and variable remuneration at target and maximum performance:

This can be viewed by clicking on the following link:-

http://www.rns-pdf.londonstockexchange.com/rns/7087D_-2012-5-18.pdf

Each Executive Director has a mixture of fixed and variable remuneration, broken down as follows:

·; at target performance - 55% is fixed and 45% is variable

·; at maximum performance - 32% is fixed and 68% is variable

For the purpose of the analysis above, fixed remuneration represents base salary and pension. Variable remuneration represents annual bonus and LTIP.

Basic salary and/or fees

Basic salary for each Executive Director is determined taking account of the individual's performance and responsibilities and comparable market rates. More particularly, the Committee reviews benchmark data provided by independent remuneration consultants sourced from two groups of companies as follows:

·; a group comprising broadly similar sized companies from the Electronic & Electrical Equipment, Aerospace & Defence and Technology Hardware & Equipment sectors; and

·; a group comprising companies from all sectors (excluding financial companies) of a broadly similar size in terms of market capitalisation, turnover and international scope. Basic salary is reviewed annually and is the only element of remuneration that is pensionable.

As disclosed in last year's report the Executive Directors received a salary increase of 6% effective from 1 October 2011. Following these increases, the current salaries are £268,000 for the CEO and £212,000 for the Group Finance Director.

The Committee has not yet considered salary levels for the Executive Directors for 2012/2013 as they will be reviewed at the September Remuneration Committee ahead of the 1 October 2012 review date in line with the salary review process for all employees. As disclosed last year, it is anticipated that similar adjustments to those applied in 2011 will be made, subject to continued performance and taking account of pay reviews for the wider employee population. Any changes will be disclosed in full in next year's remuneration report.

Fees for the Chairman and Non-Executive Directors are determined taking account of the individual's responsibilities including chairing Committees of the Board, time required to devote to the role and comparable market rates. Following a review of market rates, no changes were made to the fee level of the Chairman however the basic fee for Non-Executive Directors was increased from £33,000 to £35,000.

Benefits 

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

Pensions 

The Group operates a stakeholder pension arrangement and will also make contributions into individual personal pension arrangements where required. The Company makes contributions of 15% of basic salary to the relevant pension schemes in respect of Executive Directors. Executive Directors can also make additional employee contributions through salary sacrifice arrangements. Non‑Executive Directors' fees are non-pensionable.

Performance-related annual bonus

An annual bonus is payable to Executive Directors subject to the attainment of specific targets which are based on Group performance. Non-Executive Directors are not entitled to a bonus.

The maximum cash bonus opportunity that is immediately payable following the year end is 100% of 31 March salary for achieving stretching levels of performance, Executive Directors may earn up to a further 40% of 31 March salary in shares, deferred for a period of three years (and subject to continued employment) if maximum performance is achieved in the bonus year.

For the year ended 31 March 2012, 100% of the bonus was based on Adjusted Profit Before Interest and Tax (PBIT), also referred to as Adjusted Operating Profit. The Target Adjusted PBIT was £37.8m at which level 50% of the bonus available is payable (i.e. 70% of salary paid in cash). Maximum bonus (i.e. 100% of salary in cash and 40% of salary in shares) is payable for achieving Adjusted PBIT of £42.8m. As previously reported, the Remuneration Committee reserves the right, in exceptional circumstances, to amend the targets during the year if it feels that changes, of factors such as the marketplace or the Group's strategy, have resulted in the existing targets no longer being appropriate to provide the necessary incentive to the individual. No target amendments were made in the current financial year.

The Group reported Adjusted PBIT of £41.9m for the year ended 31 March 2012 and therefore Executive Directors will receive a bonus award of 127.4% of 31 March 2012 salary, of which 100% will be delivered in cash and 27.4% will be delivered in shares deferred for three years.

As disclosed last year, having considered the recommendation in the Code, in order to protect the Group and shareholders, a 'clawback' provision has been put in place in respect of awards under the deferred element of the annual bonus, to allow the Group to reclaim the deferred element in exceptional circumstances. Exceptional circumstances include any of the following: a participant, by act or omission, contributing to the restatement of financial results; a participant causing material loss to the Group; a participant causing reputational damage to the Group/participant, contravention of internal ethics standards/controls by a participant, gross misconduct of a participant.

Share incentives 

The Group's policy is to align the interests of employees with those of shareholders. To achieve this, the Remuneration Committee has established the following schemes:

·; Long Term Incentive Plan (LTIP);

·; Executive Share Option Plan (ExSOP);

·; Share Incentive Plan (SIP); and

·; Share Save Scheme (SAYE).

Non-Executive Directors are not entitled to any remuneration in the form of share options.

Service contracts

In line with best practice, it is the policy of the Committee to offer Executive Directors service contracts with notice periods not exceeding 12 months. Current appointments are subject to rolling service contracts that can be terminated by 12 months' notice as detailed below.  Termination payments, based on basic salary and benefits only, are limited to contractual notice periods. The Chairman and Non-Executive Directors do not have service contracts but have letters of appointment with the Company. No notice is required to terminate their appointment. A summary of the Executive Directors' and Non-Executive Directors' service contracts and letters of appointment is provided below and terms and conditions of employment are available for inspection at the Company's legal advisors:

(1) Term remaining until Director's retirement by rotation. Note: the Company will be proposing to move to annual retirement and re-election of all Directors at the next Annual General Meeting.

Executive Directors are permitted, with the agreement of the Board, to accept outside appointments provided that such appointments do not conflict with their duties as Directors of the Company. Whether any fees payable in respect of such outside appointments are retained by the Executive Director or remitted to the Company is determined on a case-by-case basis. No Executive Director held any such appointment in the year ended 31 March 2012.

Shareholding guidelines

Under the Company's shareholding guidelines, which are operated to further align the interests of the Executive Directors and shareholders, Executive Directors will be expected to build up and retain shares equal in value to at least twice their respective basic salaries. Where Executive Directors hold shares above these levels then, with the prior approval of the Chairman, they may undertake sales of these excess shares and this will not be viewed adversely. Both Executive Directors currently hold shares in excess of the shareholding guideline.

Employee Benefit Trust (EBT)

The Company established the EBT in 2004 as a discretionary employee benefit trust, in which all employees of the Group are potentially beneficiaries. The Trustee is EES Trustees International Limited, a professional offshore trustee. The main purpose of the EBT is to operate the LTIP and other share option schemes following recommendations from the Remuneration Committee or Board. Shareholder approval has been given to allow the Trustee to hold no more than 5 per cent of the issued ordinary share capital of the Company, and as at 31 March 2012 the percentage was 0.37% (2011: 0.37%). In addition to the shares held by the EBT, as at 31 March 2012, the Company held in treasury 2,400,000 (2011: 2,400,000) of its own shares. No shares (2011: 2,400,000) were purchased during the year. This holding represents 1.12% (2011: 1.12%) of the issued share capital of the company.

Directors' interests

The beneficial interests of the Directors in the ordinary share capital of the Company as at 31 March 2012 are set out in the table below, together with the beneficial interests at the end of the previous financial year, or date of appointment if later.

(1)  Includes 1,000,000 shares transferred to spouse during the year.

There were no changes to the above beneficial interests between the year end and the date of this report. The increase in Directors' holdings arose through Directors purchasing shares in the market.

Performance graph

The graph below shows the change in the Total Shareholder Return (TSR) (with dividends re-invested) for the five year period to 31 March 2012 of a holding of a £100 investment in the Group's shares against the corresponding change in a hypothetical holding of shares in the FTSE Electronics & Electrical Equipment sector. This sector was chosen as it represents the equity market index in which the Company is a constituent member.

http://www.rns-pdf.londonstockexchange.com/rns/7087D_1-2012-5-18.pdf

INFORMATION SUBJECT TO AUDIT

Long Term Incentive Plan (LTIP)

As the one-off awards made to Executive Directors and the executive committee in August 2010 were at double the normal award size, no LTIP awards were made to the Executive Directors in the year ended 31 March 2012.

The Committee intends to make normal LTIP awards to Executive Directors in the year ending 31 March 2013 and future years and is in the process of consulting with key shareholders in relation to the details of the proposed awards. Full disclosure of any awards made in the year ending 31 March 2013 will be made in next year's report.

The August 2010 awards vest according to a performance condition based on the Company's absolute TSR calculated as an average over the three month period ending on the last day of the performance period. Participants have been granted a nil price share option, 50% of which have a three year performance period and 50% of which have a four year performance period. The performance condition will be tested at the end of each performance period. The number of shares vesting shall be determined in accordance with the following:

Awards made prior to 2010 will vest on the third anniversary of the date of award to the extent that the performance targets have been met with performance conditions comparing Company's TSR relative to the TSR of a specified list of peer group companies, which are detailed below. 25% of an award will vest for median performance and an award will only vest in full if the Company's TSR performance would place it in the top 20% compared with the peer group, with pro-rata vesting between 25% and full vesting. No award will vest (irrespective of the Company's relative TSR performance) unless an adjusted earnings per share (EPS) growth underpin which is based on Retail Price Index (RPI) plus 2% over the three year performance period, has been satisfied (unless the Committee considers, in exceptional circumstances, that it would be inappropriate to apply this underpin). There is also no provision for re-testing.

The market price of the ordinary shares at 31 March 2012 was 122.25 pence (2011: 115.5 pence) and the range during the year was 86.75 pence to 146.5 pence.

The peer group for 2009 and 2008 awards comprises the following companies:

Outstanding awards under the LTIP relating to Directors are summarised below:

The LTIP awards granted in 2008 lapsed during the year as the minimum level of EPS growth underpin had not been achieved. Furthermore the Company was ranked below median of the TSR comparator group.

The LTIP awards granted in June 2009 will lapse as a result of the EPS growth underpin not being met at the year ended 31 March 2012. Following consultation with major shareholders, the Committee considered it was inappropriate to apply the EPS growth underpin in respect of the one-off award granted to C Hindson upon appointment in May 2009. This is due to the exceptional circumstances being faced by the Company at the time C Hindson joined, the one-off nature of the award and the strong underlying financial performance of the Company since his appointment. As a result of the strong TSR performance of the Company over the performance period, 66.7% of the award vested on 8 May 2012. These shares will be transferred to C Hindson upon completion of the share dealing close period on announcement of the results for the year ended 31 March 2012.

Executive Share Option Plan (ExSOP)

The Group has an ExSOP for the granting of non-transferable market value options to certain employees over shares worth up to 100% of basic salary each year. The vesting period for the ExSOP is finite allowing eligible employees to exercise the option in a fixed period, once conditions are met. The options may not be exercised unless, over the vesting period, the Company's EPS has increased by a fixed percentage above RPI as detailed in note 28 to the consolidated financial statements. No awards have been made to Executive Directors under this plan in the year ended 31 March 2012 (2011: nil) and all options previously issued under the ExSOP lapsed during the year. The Committee has no present intention of making grants under this plan to Executive Directors in the forthcoming year.

Share Save Scheme (SAYE)

The Group operates a HM Revenue and Customs approved Share Save Scheme for which all employees and Executive Directors can apply to join if they are UK employees. The CEO and Group Finance Director participate in the Scheme as detailed below:

Share Incentive Plan (SIP)

The Group has established a SIP which has been designed to qualify for approval by the HM Revenue and Customs. The plan contains three elements:

·; free shares, which are ordinary shares which may be allocated to an employee by the Company;

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

·; matching shares, which are ordinary shares which may be allocated to an employee following the purchase of partnership shares.

No awards have been made to any employees under this plan as at 31 March 2012.

Directors' remuneration and pension benefits

The remuneration and pension benefits of Directors who served during the year were as follows. The pension contributions were made by the Company to personal pension arrangements on behalf of the Executive Directors.

(1) Following the introduction of the deferred bonus plan during the year the following amounts will be deferred into shares: K Attwood £73,000 and C Hindson £58,000. No amounts were deferred in the year ended 31 March 2011.

(2) From date of appointment on 1 November 2010.

(3) From date of appointment on 28 January 2011.

(4) For period to 27 July 2011, date of retirement.

(5) For period to 28 January 2011, date of resignation.

Following a review by HM Revenue and Customs, the Company paid £48,000 during the year for income tax and national insurance in respect of the services of I Godden provided under a consultancy agreement during the period 6 April 2005 to 5 April 2010.

Approval 

This report was approved by the Remuneration Committee and has been approved subsequently by the Board of Directors.

On behalf of the Board

Anthony Reading

Chairman of the Remuneration Committee

18 May 2012

Independent Auditor's Report to the Members of e2v technologies plc

We have audited the consolidated financial statements of e2v technologies plc for the year ended 31 March 2012 which comprise the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated statement of financial position, the Consolidated statement of cash flows, the Consolidated statement of changes in equity and the related notes 1 to 32. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

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

Respective responsibilities of Directors and auditor

As explained more fully in the Directors' statement of responsibilities set out in the Directors' Report, the Directors are responsible for the preparation of the consolidated financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the consolidated financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the consolidated financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and Financial Statements to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion the consolidated financial statements:

·; give a true and fair view of the state of the Group's affairs as at 31 March 2012 and of its profit for the year then ended;

·; have been properly prepared in accordance with IFRSs as adopted by the European Union; and

·; have been prepared in accordance with the requirements of Companies Act 2006 and Article 4 of the IAS Regulation.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

·; the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

·; the information given in the Corporate Governance Report with respect to internal control and risk management systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

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

·; certain disclosures of Directors' remuneration specified by law are not made; or

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

·; a Corporate Governance Report has not been prepared by the Company.

Under the Listing Rules we are required to review:

·; the Directors' statement in relation to going concern;

·; the Corporate Governance Report relating to the Company's compliance with the nine provisions of the UK Corporate Governance Code specified for our review; and

·; certain elements of the report to shareholders by the Board on Directors' remuneration.

Other matter

We have reported separately on the parent company financial statements of e2v technologies plc for the year ended 31 March 2012 and on the information in Directors' Remuneration Report that is described as having been audited.

Robert Forsyth (Senior statutory auditor)

for and on behalf of Ernst & Young LLP, Statutory Auditor

Cambridge

18 May 2012

Notes:

1. The maintenance and integrity of the e2v website is the responsibility of the Directors; the work carried out by the auditor does not

involve consideration of these matters and, accordingly, the auditor accept no responsibility for any changes that may have occurred

to the financial statements since they were initially presented on the website.

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

other jurisdictions.

Consolidated income statement

Year ended 31 March 2012

Consolidated statement of comprehensive income

Year ended 31 March 2012

Consolidated statement of financial position

As at 31 March 2012

These financial statements were approved by the Board of Directors and authorised for issue on 18 May 2012. They were signed on its behalf by:

K Attwood C Hindson

Chief Executive Officer Group Finance Director

Consolidated statement of cash flows

Year ended 31 March 2012

Consolidated statement of changes in equity

Year ended 31 March 2012

Notes to the financial statements

1. Authorisation of financial statements and statement of compliance with IFRS

e2v technologies plc (the Company) is a public limited company incorporated and domiciled in the United Kingdom under the Companies Act 2006. The Company's shares are publicly traded on the London Stock Exchange. The address of the registered office is given in the Directors' Report. The nature of the Group's operation and its principal activities are set out in the Business Review.

The consolidated financial statements of the Company for the year ended 31 March 2012 comprise the results of the Company and its subsidiary undertakings (together referred to as the Group).

These financial statements are presented in Sterling as that is the currency of the primary economic environment in which the Group operates. Foreign operations are included in accordance with the policies set out in note 2. All values are rounded to the nearest thousand (£000) unless otherwise indicated.

The financial statements were approved for issue by the Board on 18 May 2012.

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

2. Summary of significant accounting policies

Basis of accounting

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) applied in accordance with the Companies Act 2006. The financial statements have also been prepared in accordance with IFRSs adopted by the European Union (EU) and therefore the consolidated financial statements comply with Article 4 of EU IAS Regulation.

The financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments. The principal accounting policies are set out below and have been applied consistently to all periods presented in these financial statements.

Going concern

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. Further detail is contained in the Directors' Report.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of e2v technologies plc and entities controlled by the Company (its subsidiaries) made up to 31 March each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights; currently exercisable or convertible potential voting rights; or by way of contractual agreement.

The financial statements of subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting period as the parent company. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group. The results of subsidiaries acquired or disposed during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. 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.

For acquisitions undertaken after 1 April 2010, the acquisition of subsidiaries is accounted for using the acquisition method of accounting. The cost of the acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling interest in the acquiree. The choice of measurement of non-controlling interest, either at fair value or at the proportionate share of the acquiree's identifiable net assets is determined on a transaction by transaction basis. Acquisition costs incurred are expensed and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of aggregate of the acquisition date fair value of the consideration transferred and the amount recognised for the non-controlling interest over the net identifiable amounts of the assets acquired and the liabilities assumed in exchange for business combination. Assets acquired and liabilities assumed in transactions separate to the business combinations, such as the settlement of pre-existing relationships or post-acquisition remuneration arrangements, are accounted for separately from the business combination in accordance with their nature and applicable IFRSs. Identifiable intangible assets meeting either the contractual, legal or separability criterion are recognised separately from goodwill. Contingent liabilities representing a present obligation are recognised if the acquisition date fair value can be measured reliably.

If the aggregate of the acquisition date fair value of the consideration transferred and the amounts recognised for the non-controlling interest is lower than the fair value of the assets, liabilities and contingent liabilities and the fair value of any pre-existing interest held in the business acquired, the difference is recognised in the income statement.

Acquisitions undertaken prior to 1 April 2010 were accounted for under the purchase method of accounting. However transaction costs directly attributable to the acquisition formed part of the acquisition costs. Furthermore, contingent consideration was recognised if, and only if, the Group had a present obligation, the economic outflow was more likely than not and a reliable estimate was determinable. Subsequent adjustments to the contingent consideration were recognised as part of goodwill.

Foreign currency translation

The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are retranslated into Sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rate of exchange ruling at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

All exchange differences are recognised in the income statement in the period in which they arise except for: exchange differences on transactions entered into that hedge certain foreign currency risks; and exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur in the foreseeable future (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the net investment.

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 exchange rate for the period, unless exchange rates fluctuate significantly during the period, in which case the exchange rates at the date of transactions are used. The exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity, within the foreign currency translation reserve. On disposal of a foreign operation, all of the accumulated exchange differences in respect of that operation attributable to the Group are reclassified to the income statement.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the rate of exchange ruling at the balance sheet date.

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.

Assets under construction for production or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group's accounting policy. Depreciation on these assets commences when the assets are available for use.

Freehold land is not depreciated and is held at historical cost.

Depreciation is recognised so as to write-off the cost of assets (other than land and assets under construction) less their residual values 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

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. Where an impairment loss subsequently reverses, the carrying value of the asset is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for this asset in prior years. A reversal of impairment loss is recognised immediately in the income statement.

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.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of an acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of the subsidiary. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Any impairment is recognised immediately in the income statement and is not subsequently reversed.

For the purpose of impairment testing, goodwill is allocated to each of the Group's cash generating units expected to benefit from the synergies of the combination. Impairment is determined by assessing the recoverable amount of the cash generating unit, to which goodwill relates. If the recoverable amount of the cash generating unit is less than the carrying amount, an impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

On disposal of a cash generating unit or part of the cash generating unit the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Goodwill arising on acquisitions before the date of transition to IFRSs has been retained at the previous amounts recorded under UK Generally Accepted Accounting Practice (UK GAAP) subject to being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has not been reinstated and will not be included in determining any subsequent profit or loss on disposal.

Intangible assets - research and development costs

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally generated intangible asset arising from the Group's development activities is capitalised only if all of the following conditions are met: an asset is created that can be identified (such as software and new processes); it is probable that the asset created will generate future economic benefits; and the development cost of the asset can be measured reliably.

Internally generated intangible assets are amortised on a straight-line basis over their useful lives, the period of expected future sales, estimated at between three and five years. The amortisation is recorded as part of research and development costs in the income statement. Where no internally generated intangible asset can be capitalised, development expenditure is recognised as an expense in the period in which it is incurred.

When the asset is not in use, the carrying value of development costs is reviewed for impairment annually or more frequently when an indicator of impairment arises during the reporting period indicating that the carrying value may not be recoverable.

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.

Other 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.

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 programmes are treated as intangible assets. Intangible assets, excluding development costs and software, created within the business are not capitalised and expenditure is charged to the income statement in the period 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.

The useful lives of these intangible assets are assessed to be either finite or indefinite. Where amortisation is charged on assets with finite lives, it 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, trademarks and technology 5 to 10 years

Customer relationships and agreements 4 to 10 years

Software 2 to 7 years

This expense is taken to the income statement through the following line items:

Patents, trademarks and technology administrative expenses

Customer relationships and agreements administrative expenses

Software cost of sales and administrative expenses