AXIS_ELECTRONICS_LIMITED - Accounts

The directors present the strategic report for the year ended 31 December 2022.

Fair Review of the Business

Axis Electronics Limited ("Axis") operates as a leading specialist supplier of high reliability solutions in low to medium volume electronic manufacturing services to customers who are market leaders in their field. The company was acquired by Cicor Technologies Ltd in November 2021 and now operates as part of the Cicor group of companies.

The company’s objective is to maintain its best-in-class position within the UK EMS market whilst growing share of our customers most valuable programmes.

This is achieved through reliable service levels that meet the demanding standards of our customers and the latest revision of AS9100, an accreditation that Axis maintains as part of a long-term strategic business plan.

Two key non-financial measures that ultimately affect the performance of the company due to the importance our customers place on them are quality and on-time-delivery. The directors ensure continuous improvement activities maintain and where possible improve these two measures with a culture of zero defect, one hundred percent on time.

Principal Risks and Uncertainties

Component Market

Component and semi-conductor market conditions remain challenging, despite reports of negative overall growth in this market for 2023 and excess inventories, supply in key areas such as Analog and Logic remain tight and is the principal constraint to our business for 2023.

Looking further ahead, governments around the world are recognising the strategic importance of re-shoring and increasing their capabilities in R&D and production of semi-conductors, the Chips Act is one example, but this is not a quick fix and increasing geo-political tensions make it difficult to predict future supply conditions.

Our mitigation to current and future material supply constraints is to secure material ahead, and we encourage our customers to place orders as early as possible to allow for longer lead-times. We remain in active dialogue with our supply chain to ensure that we support them with firm orders and visibility of future demand. Our supply chain continues to be part of our, and our customers success and we collaborate closely for the benefit of all.

During 2022, we have invested in developing our digital infrastructure to support our supply chain team with identifying and securing component availability, through digital integrations with our suppliers. This is an area that we believe is in its infancy, and we plan further investment for 2023.

COVID-19

The risks posed by COVID-19 have changed following the success of the vaccine rollout but remain a risk that the business continues to monitor. We continue to focus our efforts on promoting the health and wellbeing of our staff and their families by providing a COVID safe working environment.

Competitive risks

The level of demand from customers for the company’s services remains an area of uncertainty or risk. This demand depends in turn on the level of sales our customers achieve and the level of service and technical efficiency the company gives to customers. Axis has a spread of customers who are operating on several long-term programmes and platforms. The business supports many of its customers by offering a full suite of services and pays particular attention to technical and process development and innovation as well as providing excellent customer service.

Liquidity risks, cash flow and foreign exchange risks

The company actively monitors and manages its liquidity and cash flow position to ensure it has sufficient cash to fund its activities.

The business has seen increased input costs because of inflation, predominately in energy. We recognise that we have a part to play regarding bringing inflation back down and continue to monitor our cost base to limit the costs we pass onto our customers. Inflation is expected to subside in 2023, although we monitor this closely.

Non-financial KPIs

In the year to 31 December 2022 the business continued to exceed target levels of OTD and quality. These targets are set by customers and industry expectations and our achievements continue to enhance our reputation amongst our customers as a high quality and trusted partner whose services bring certainty and confidence in performance. Attainment of targets in non-financial KPIs is essential in enabling the company to meet its financial KPIs.

Financial KPIs

The company changed its financial reporting period to December in line with its parent company, Cicor Technologies Ltd.

Revenue for the 9 months to December 2022 was £20,787k, proportionately down on the previous year by £4,593k. This delta reflects constrained growth due to material availability and mainly reflects material only sales at a low margin. Operating profit was £4,837k, proportionately similar to the previous year of £4,901k. This like for like level of profit was achieved by maintaining the execution of the business plan to focus on highly technical and complex value adding services delivered for market leading customers on key programmes, particularly in the focused market areas of space, aerospace and defence, and high-performance automotive markets.

Aerospace and Defence continues to be the main market served by Axis. This market remains incredibly strong with the current geo-political situation seeing an increase in defence budget spends of NATO alliance countries with an expectation that this spend will be on programmes where Axis is an established element of the supply chain.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) was £5.4m (Prior Year: £7.2m) reflecting a proportionately similar level of performance in the year.

Axis employs several strategies to protect its cash reserves to fund capital investment, growth, and continuous improvement activities. One of these is to seek funding support from customers when there is a need to procure material ahead to protect our customers' programmes from allocation issues. This strategy strengthens our customers position to meet programme delivery timescales in the medium to long term and allows Axis to support our customers in these commitments.

The directors expect Axis to continue to grow in the mid to long term by developing its specialist processes and niche services to customers profitably which requires capital expenditure. The company had total capital expenditure of £0.2m during the year, this was lower than recent history due to significant spend in prior years to build capacity and a shift in our focus to developing our processes and skills which we believe are a key differentiator in the high reliability EMS market. Further investment on capex is expected throughout 2023 to support future growth in capabilities.

Operating Environment

We have a strong and committed workforce and they are the backbone of our continued success.

This success is built on trusted relationships, delivering on our promises, and building on the value our customers place on us. The reward for us is repeat orders, providing additional services over the life of programme but also orders to support our customers most prized new programmes, and this year our order book has grown significantly which is testament to this.

Recognising our staff as are biggest asset, we continue to focus on developing future leaders and providing pathways for everyone to build their career within Axis, this has worked for the last 25+ years and we believe integral to the next 25 years. The high levels of employment within the UK, and the shortage of technical skills make this route even more important.

The current geo-political environment and the increasing use of electronics in new technologies such as Electric Vehicles will likely protract current supply chain issues until new and local capacity comes on-line. Supply chain issues are not new, and Axis will continue to offer solutions to our customers, either through pre-funding arrangements to secure material ahead of production and operational solutions to be more reactive to changes in the supply chain.

On behalf of the board

The directors present their annual report and financial statements for the period ended 31 December 2022.

The principal activity of the company continued to be that of a leading specialist supplier in low-medium volume electronic manufacturing services.

The results for the period are set out on page 9.

Interim dividends were accounted for amounting to £10,000,000. The directors do not recommend payment of a final dividend.

The directors who held office during the period and up to the date of signature of the financial statements were as follows:

During the period the company continued to undertake the programme of research and development. The company expects to continue to expend resources on developing its products and processes to reduce technical uncertainty, improve efficiency and save waste in 2023 and beyond.

In March 2023, the company issued 3.3m shares and declared a dividend of £7.4m as part of a group reorganisation to rationalise the UK group structure.

The company’s auditor, Mercer & Hole, incorporated on 1 October 2022 to become Mercer & Hole LLP. The directors have consented to treating the incorporation of Mercer & Hole LLP as a continuation of the existing audit arrangement and in accordance with the company's articles, a resolution proposing that Mercer & Hole LLP be reappointed as auditor of the company will be put at a General Meeting.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

•     select suitable accounting policies and then apply them consistently;

•     make judgements and accounting estimates that are reasonable and prudent;

•     state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

•     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

We have audited the financial statements of Axis Electronics Limited (the 'company') for the period ended 31 December 2022 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 31 December 2022 and of its profit for the period then ended;

•     have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the strategic report and the directors' report for the financial period for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

•     adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

•     the financial statements are not in agreement with the accounting records and returns; or

•     certain disclosures of remuneration specified by law are not made; or

•     we have not received all the information and explanations we require for our audit.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

We gained an understanding of the legal and regulatory framework applicable to the company and the industry in which it operates and considered the risk of acts by the company that were contrary to applicable laws and regulations, including fraud. These included, but were not limited to, the Companies Act 2006 and tax legislation.

We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements and the financial report (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate entries including journals to overstate revenue or understate expenditure and management bias in accounting estimates.

Audit procedures performed by the engagement team included:

• discussions with management, including considerations of known or suspected instances of non- compliance with laws and regulations and fraud;

• gaining an understanding of management's controls designed to prevent and detect irregularities; and

• identifying and testing journal entries.

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non- compliance and cannot be expected to detect non-compliance with all laws and regulations.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's member 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 member those matters we are required to state to the member 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 member, for our audit work, for this report, or for the opinions we have formed.

The profit and loss account has been prepared on the basis that all operations are continuing operations.

Axis Electronics Limited is a private company limited by shares incorporated in England and Wales. The registered office is Silbury Court, 420 Silbury Boulevard, Central Milton Keynes, Buckinghamshire, MK9 2AF.

The company shortened its period end to 31 December 2022 to be in line with its ultimate holding company Cicor Technologies Limited.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared on the historical cost convention modified to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.

This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:

• Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;

• Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;

• Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;

• Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.

The financial statements of the company are consolidated in the financial statements of Cicor Technologies Limited. These consolidated financial statements are available from its registered office at Cicor Management AG, Gebenloostrasse 15, 9552 Bronschhofen, Switzerland.

The directors have reviewed whether the company is a going concern. The company’s management have produced forecasts, considering the current order book, projected order intake and company commitments. The potential for further disruption to operations from COVID-19 has also been considered although the potential impact to operations is less due to the success of the vaccine rollout and Government's focus on avoiding further lockdowns.true

The analysis provides a reasonable expectation that the company will remain profitable and cash generative for the foreseeable future, and as a result the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on dispatch of the goods, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

During the period ended 31 December 2022, the company changed its accounting policy in respect of income recognition on long term contracts. Previously, contracts for the supply of multiple components were accounted for using the percentage of completion method, recognising income and associated costs based on the contract stage of completion at the balance sheet date. Following a reassessment by the directors of the nature of recent contracts, it was deemed more appropriate to account for income on completion and delivery of the entire contract, with direct production costs incurred and attributable overheads being held in stock until such time. This change in policy also aligned the company’s accounting policy in this respect with that of its ultimate holding company, Cicor Technologies Limited. This change in accounting policy has been accounted for as a prior year adjustment in these financial statements, with changes made to reflect the impact on comparative figures (note 27).

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell 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 which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

Cash at bank and in hand are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including creditors and loans from fellow group companies, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value though profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

The company designates certain hedging instruments, including derivatives, embedded derivatives and non-derivatives, as either fair value hedges or cash flow hedges. At the inception of the hedge relationship, the company documents the relationship between the hedging instrument and the hedged item along with risk management objectives and strategy for undertaking various hedge transactions. At the inception of the hedge and on an ongoing basis, the company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item.

For derivatives that are designated and qualify as cash flow hedges, the effective portion of changes in the fair value of the hedge is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.

Any gain or loss previously recognised in other comprehensive income is reclassified to profit or loss when the hedge relationship ends. This occurs when the hedging instrument expires or no longer meets the hedging criteria, the forecast transaction is no longer highly probable, the hedged debt instrument is derecognised, or the hedging instrument is terminated.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences in the company's taxable profits and its results as stated in the financial statements.

Deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be suitable taxable profits from which the underlying timing differences can be deducted.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

The company operates a defined contribution scheme for eligible employees. Contributions payable to this scheme are charged to the profit & loss account in the period to which they relate. These contributions are invested separately from the company's assets. The assets of the scheme are held in an independently administered fund.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

Grants relating to an asset are recognised in income systematically over the asset's expected useful life. If part of such a grant is deferred it is recognised as deferred income rather than being deducted from the asset's carrying amount.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The company recognises stock provisions against raw materials and finished goods based on the age of the stock and the anticipated demand at the balance sheet date.

Management estimation is required in some events to determine the recoverability of trade debtors, where there is uncertainty a bad debt provision is made using the most reliable evidence available at the date the provisions were made.

An analysis of the company's turnover is as follows:

The average monthly number of persons (including directors) employed by the company during the period was:

Their aggregate remuneration comprised:

The number of directors for the 9 months to 31 December 2022 for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (12 months to 31 March 2022 - 6).

The actual charge for the period can be reconciled to the expected charge for the period based on the profit or loss and the standard rate of tax as follows:

The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.

Derivative liabilities with a value of £2,526,851 have been designated as hedging instruments in the period to 31 December 2022. For the year to 31 March 2022, these instruments were recorded at fair value through the profit and loss account. The derivative liabilities consist of foreign currency swaps connected with the company's future purchases of stock.

In addition to the above stock the company held customer and supplier owned stock with a value of £7,834,669 (31 March 2022 - £8,514,572) at the year end which is not recorded in the balance sheet. Customers also made prepayments related to stock which are included in accruals and deferred income.

Finance lease payments represent rentals payable by the company for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

The deferred tax asset set out above is expected to reverse within 12 months and relates to accruals for expenditure not deductible until paid. The deferred tax liability set out above is not expected to reverse within 12 months and relates to accelerated capital allowances.

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Amounts contracted for but not provided in the financial statements:

In March 2023, the company issued 3.3m shares and declared a dividend of £7.4m as part of a group reorganisation to rationalise the UK group structure.

The company has taken advantage of the exemption available in accordance with FRS 102, not to disclose transactions entered into between two or more members of the group, as the company is a wholly owned subsidiary undertaking of the group to which it is party to the transactions.

At the period end, the company's immediate parent company was Axis EMS Holdings Limited, by virtue of its 100% shareholding.

The largest group of undertakings for which group accounts are drawn up and of which the company is a member is the group headed by Cicor Technologies Limited. Copies of Cicor Technologies Limited's consolidated financial statements can be obtained from the company's registered office at Cicor Management AG, Gebenloostrasse 15, 9552 Bronschhofen, Switzerland.

The ultimate holding company is Cicor Technologies Limited.

There is no single ultimate controlling party.

As described in accounting policy note 1.4, during the period ended 31 December 2022 the company changed its accounting policy in respect of income recognition on long term contracts. This change in accounting policy has been accounted for as a prior year adjustment in these financial statements, with changes made to reflect the impact on comparative figures, including the impact on the corporation tax charge.