HARWIN PLC, German branchLiquidiert

HARWIN PLC, German branch

München

Konzernabschluss zum Geschäftsjahr vom 01.04.2011 bis zum 31.03.2012

Contents of the Consolidated Financial Statements for the Year Ended 31 March 2012

Company Information

Report of the Directors

Report of the Independent Auditors

Consolidated Profit and Loss Account

Consolidated Statement of Total Recognised Gains and Losses

Consolidated Balance Sheet

Company Balance Sheet

Consolidated Cash Flow Statement

Notes to the Consolidated Cash Flow Statement

Notes to the Consolidated Financial Statements

Consolidated Trading and Profit and Loss Account

Company Information for the Year Ended 31 March 2012

Report of the Directors for the Year Ended 31 March 2012

The directors present their report with the financial statements of the company and the group for the year ended 31 March 2012.

PRINCIPAL ACTIVITY

The principal activity of the group in the year under review was that of the manufacture and supply of connectors and other electronic components.

REVIEW OF BUSINESS

Group sales for the year ended 31 March 2012 were £13.5m. This, however, includes £1.4m of sales of Harwin Asia Pte, which was purchased from the company's parent with effect from 1 April 2011. There was a severe downturn in sales in the last three months of 2011 in the UK and Europe. While sales to some extent recovered in the first quarter of 2012, the picture for UK and Europe remains difficult.

The company has benefitted from a full year of its reorganisation of sales through distribution partners where on a global basis there has been overall growth, despite the tougher economic backdrop. Currently the company has a good order outlook with considerable potential from new product launches.

Group profit before taxation for the year was £507,000, down compared with the prior year reflecting the lower sales. The company, however, continues to invest heavily in research and development, both for new product and to improve production efficiency. Capital expenditure includes some £400,000 to expand the warehouse facilities, enabling Harwin to carry greater stocks, particularly of raw materials and piece parts, to give some protection against difficulties in the supply chain. Almost £200,000 of capital expenditure was made to invest in a closed loop water system, one of the first of its kind in the country, which is already producing significant annual savings in water usage.

Research and development expenditure, including capital costs amounted to more than £600,000, a large percentage of which was devoted to the development of a new range of 1mm pitch connectors - the Gecko range - to be launched in the autumn of 2012. The product has required a great deal of research into micro turning and micro moulding, as well as the development of packing technology to enable customers to automatically place the product on printed circuit boards.

Harwin was delighted to receive The Outstanding Export Award from the EEF, supported by UK Trade & Investment at the Future Manufacturing Awards dinner in 2011, a national event.

During the period, the company continued to support local apprentices in Hampshire, sponsoring Apprentice of the Year, Engineering Student of the Year and Most Innovative Engineering Project awards at Southdown College and the Portsmouth Engineering Training Association (PETA).

During the year payroll costs remained steady at £3.3million, paying over some £1m of PAYE and NIC to the Government, greatly increasing the cost of employment in the UK compared with USA and Asia.

The outlook for the next year or so in the UK and Europe is particularly worrying as the lack of stability and direction from Government makes industrial investment difficult. Making long term commitments to research, development and new plant and machinery is greatly hampered by the continuing financial crisis and the lack of strategic direction from Government.

PRINCIPAL RISKS AND UNCERTAINTIES

Commodity prices and exchange rates have remained volatile during the year. The company does contract non ferrous metals and plastics purchases for periods up to three months at a time if the Directors consider it is prudent to do so.

The company's Asian purchasing and logistics operation is based in Hong Kong and purchases Asian produced product in US Dollars. This has helped provide a natural hedge against US Dollar denominated sales through Harwin Inc, the company's US subsidiary. The company does have an exposure to the Euro through its European customers which principally buy in local currency. The Directors do hedge against the Euro for up to six months at a time when they consider it necessary to do so.

DIVIDENDS

No dividends will be distributed in respect of the year ended 31st March 2012.

RESEARCH AND DEVELOPMENT

The group is committed to a high level of research and development activities so as to ensure its cutting edge position in the manufacture of electrical connectors in its market sector.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 April 2011 to the date of this report.

GROUP'S POLICY ON PAYMENT OF CREDITORS

For all trade creditors it is the group's policy to

The group's creditor payment period at 31st March 2012 was 31 days (2011 - 35 Days) and that of the company was 35 days (2011 - 34 Days).

THE EURO

The group undertakes transactions in a number of currencies. The directors view the Euro as another currency in which it trades and as such will take the usual steps to minimise it's exposure to risk of currency fluctuations, including if considered appropriate, entering into a forward exchange contract.

POLITICAL AND CHARITABLE CONTRIBUTIONS

The group made charitable donations totalling £8,613 during the year and no political contributions.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Report of the Directors 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 the group and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's and the group's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group 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 the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the group's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the group's auditors are aware of that information.

The directors who were in office on the date of approval of these financial statements have confirmed that, as far as they are aware, there is no relevant audit information of which the auditors are unaware. Each of the directors have confirmed that they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that it has been communicated to the auditor.

AUDITORS

The auditors, Sheen Stickland LLP, will be proposed for re-appointment at the forthcoming Annual General Meeting.

Report of the Independent Auditors to the Members of Harwin plc

We have audited the financial statements of Harwin plc for the year ended 31 March 2012 on pages eight to thirty six. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

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 a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Statement of Directors' Responsibilities set out on page four, the directors are responsible for the preparation of the 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 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 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 and the parent company'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 Report of the Directors 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 financial statements:

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Report of the Directors for the financial year for which the financial statements are prepared 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 matters where the Companies Act 2006 requires us to report to you if, in our opinion:

Consolidated Profit and Loss Account for the Year Ended 31 March 2012

Consolidated Statement of Total Recognised Gains and Losses for the Year Ended 31 March 2012

Note of Historical Cost Profits and Losses for the Year Ended 31 March 2012

Consolidated Balance Sheet 31 March 2012

Consolidated Balance Sheet - continued 31 March 2012

The financial statements were approved by the Board of Directors on ................. and were signed on its behalf by:

Company Balance Sheet 31 March 2012

Company Balance Sheet - continued 31 March 2012

The financial statements were approved by the Board of Directors on ................. and were signed on its behalf by:

Consolidated Cash Flow Statement for the Year Ended 31 March 2012

Notes to the Consolidated Cash Flow Statement for the Year Ended 31 March 2012

1. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES

2. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT

3. ANALYSIS OF CHANGES IN NET DEBT

Notes to the Consolidated Financial Statements for the Year Ended 31 March 2012

1. ACCOUNTING POLICIES

Accounting convention

The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain assets and are in accordance with applicable accounting standards.

Basis of consolidation

The consolidated financial statements include the results of the company and its subsidiaries for the year ended 31 March 2012, prepared on a line by line basis.

The company has taken advantage of the exemption conferred by s408 of the Companies Act 2006 not to present its own profit and loss account.

Turnover

Turnover represents the value, excluding value added tax, of goods supplied to customers during the year.

Deferred tax

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 between the group's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements.

Deferred tax is recognised in the Statement of Total Recognised Gains and Losses on revaluations where at the balance sheet date there is an agreement to sell the asset.

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.

Research and development

It is the group's policy to capitalise research and development costs only when there is a reasonable expectation of commercial success. Any other costs incurred in relation to research and development are expensed as they occur.

Tangible fixed assets

Freehold land and buildings are shown at valuation. In accordance with Financial Reporting Standard 15, these assets will be subjected to a full valuation every five years and interim valuations the third year after every full valuation.

The freehold land and buildings were valued by Stiles Harold Williams, an independent firm of chartered surveyors, on 1 February 2011 on the basis of open market value with vacant possession. The directors consider that the market value of the property on an existing use basis is not materially difference to the open market value of the property with vacant possession.

The directors review the valuation annually for any significant changes in value. Other fixed assets are stated at historical cost.

Depreciation is provided at rates estimated to be sufficient to write off the assets concerned over their working lives. The rates used are as follows:

Freehold land and assets under construction are not depreciated.

Fixed assets manufactured by the group are capitalised at a cost which, in the directors' opinion, represents the efficient cost of producing the tool. Costs sustained in excess of this sum are written off to the profit and loss account as incurred.

As from 1 April 2010, Harwin Plc have adopted the policy of not capitalising any individual asset under the value of £500.

Stocks

Raw materials, work in progress and finished goods have been valued at the lower of cost and net realisable value. Cost is that incurred in bringing each product to its present location and condition. Net realisable value is based on the estimated normal selling price, less further costs expected to be incurred to completion and disposal. Provision is estimated for obsolete, slow moving or defective items where appropriate. This provision is based on stock usage during the previous twelve months.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.

In the group balance sheet assets and liabilities of the overseas subsidiary are translated at the year end rates and the consolidated profit and loss account includes the results of the overseas subsidiary translated at average rates of exchange. Gains or losses arising on these translations are taken directly to reserves.

Hire purchase and leasing commitments

Assets obtained under hire purchase contracts or finance leases are capitalised in the balance sheet. Those held under hire purchase contracts are depreciated over their estimated useful lives. Those held under finance leases are depreciated over their estimated useful lives or the lease term, whichever is the shorter.

The interest element of these obligations is charged to the profit and loss account over the relevant period. The capital element of the future payments is treated as a liability.

Rentals paid under operating leases are charged to the profit and loss account on a straight line basis over the period of the lease.

Pension costs and other post-retirement benefits

Harwin Plc operates a defined contribution pension scheme in the UK on behalf of the employees of the company. The amount charged to the profit and loss account represents the contributions payable in the year.

Financial instruments

The group uses forward currency contracts to reduce exposure to foreign exchange risks. Transactions in overseas currencies which are covered by the forward exchange contracts are converted at the contract rate.

2. TURNOVER

The group operates and sells in various geographical markets. Many of the group's customers are distribution companies with central warehousing facilities. The group sells and ships to these central locations and has limited knowledge of where the distributor will ultimately hold the stock. Consequently, the directors consider that any geographical analysis of turnover would be misleading to readers of the financial statements.

3. ANALYSIS OF OPERATIONS

4. STAFF COSTS

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

5. OPERATING PROFIT

The operating profit is stated after charging/(crediting):

The number of directors to whom retirement benefits were accruing was as follows:

Information regarding the highest paid director is as follows:

6. INTEREST RECEIVABLE AND SIMILAR INCOME

7. INTEREST PAYABLE AND SIMILAR CHARGES

8. TAXATION

Analysis of the tax charge

The tax charge on the profit on ordinary activities for the year was as follows:

Factors affecting the tax charge

The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The difference is explained below:

Included in the above are foreign taxes in respect of charges of £28,000 (2011 - £85,000) on the adjusted profit for the year, a credit of £1,000 (2011 - £8,000) in respect of prior periods and a transfer from a foreign tax asset of £13,000 (2011 - (£11,000)).

Deferred tax comprises a credit of £9,000 (2011 - £80,000 charge) for the origination and reversal of timing differences and a credit of £16,000 (2011 - £9,000 charge) for the effect of decreased tax rates on the opening liability.

9. PROFIT OF PARENT COMPANY

As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent company is not presented as part of these financial statements. The parent company's profit for the financial year was £422,544 (2011 - £728,726).

10. INTANGIBLE FIXED ASSETS

Group

On April 1 2011 Harwin plc acquired 100 % of the share capital in Harwin Asia Pte Ltd, a company incorporated in Singapore.

The acquisition method of accounting has been used and the goodwill shown above has arisen as a result of this acquisition.

The assets and liabilities resulting in this calculation are shown in the table below. The values given represent the fair values at acquisition as well as the book values from Harwin Asia Pte Ltd's accounts as at 31 March 2011 as follows:

Notes to the Consolidated Financial Statements - continued for the Year Ended 31 March 2012

11. TANGIBLE FIXED ASSETS

Group

Group and company

Freehold land and buildings were valued by Stiles Harold Williams, an independent firm of chartered surveyors, at an open market value with vacant possession of £1,750,000 on 1st February 2011.

The directors consider that the market value of the property on an existing use basis is not materially difference to the open market value of the property with vacant possession. The historical cost of these premises is £1,808,000 (2011 - £1,398,000).

Freehold land at a valuation of £1,050,000 and cost of £778,000 is not depreciated.

If the freehold land and buildings were sold at the revalued amount plus the current year cost it is estimated that tax of £105,000 would arise.

The lines 'transfer to ownership' shown in the note above represent assets held by the subsidiary Harwin Asia Pte Ltd prior to acquisition which were obtained by the group at acquisition on 1 April 2011.

Group

Cost or valuation at 31 March 2012 is represented by:

Assets held under finance lease and hire purchase agreements have a net book value of £1,818,000 (2011 - £1,870,000) with depreciation charged during the year of £298,000 (2011 - £262,000).

Company

Company

Cost or valuation at 31 March 2012 is represented by:

Assets held under finance leases and hire purchase agreements have a net book value of £1,818,000 (2011 - £1,870,000) with depreciation charges during the year of £298,000 (2011 - £262,000).

12. FIXED ASSET INVESTMENTS

Company

The group or the company's investments at the balance sheet date in the share capital of companies include the following:

Subsidiaries

Harwin (Portsmouth) Limited

Nature of business: Dormant

Harwin Asia Pte Ltd

Country of incorporation: Singapore

Nature of business: Retail of electronic components

13. STOCKS

14. DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

16. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

17. LOANS

An analysis of the maturity of loans is given below:

18. OBLIGATIONS UNDER HIRE PURCHASE CONTRACTS AND LEASES

Group

Company

The group and company liabilities held under hire purchase and finance lease agreements are secured against the assets to which they relate.

The following operating lease payments are committed to be paid within one year:

Group

Company

19. SECURED DEBTS

The following secured debts are included within creditors:

The bank overdraft is secured by way of a fixed and floating charge over the assets of the company.

The Barclays bank loan is secured over the land on the south side of Fitzherbert Road, Farlington, Portsmouth and the interest on the loan is fixed at 4.25 %.p.a.

The Standard Bank loan is secured by an unlimited guarantee from the company's ultimate parent supported by a first legal charge over a cash deposit held by the bank.

20. PROVISIONS FOR LIABILITIES

Group

Company

Provision for the group's and company's deferred tax liability of £291,000 (2011 - £335,000) comprises the excess of capital allowances over depreciation of £291,000 (2011 - £335,000) less revenue losses of £nil (2011 - £nil).

21. CALLED UP SHARE CAPITAL

Allotted, issued and fully paid:

68,500 Ordinary shares of £0.20 each were allotted as fully paid at a premium of £4.80 per share during the year.

22. RESERVES

Group

Company

During the year 68,500 ordinary shares of £0.20 each were allotted as fully paid at a premium of £4.80 per share. There was no movement on the revaluation reserve during the year.

23. ULTIMATE PARENT COMPANY

The directors consider the immediate and ultimate parent company and controlling party to be Harwin Engineers S.A., registered in Vaduz, Liechtenstein.

24. CONTINGENT LIABILITIES

The company has a bank guarantee in issue of £120,000 to facilitate the deferred payment of VAT. The facility was not drawn upon as at the 31 March 2012.

25. CAPITAL COMMITMENTS

26. OTHER FINANCIAL COMMITMENTS

The group (and the company) has entered into forward contracts in respect of the purchase of metals where the cost per kilogramme is predetermined as at 31 March 2012. The value of these outstanding contracts as at 31 March 2012 amounted to £303,000 (2011 - £63,000).

27. TRANSACTIONS WITH DIRECTORS

During the year £4,000 (2011 - £4,000) of expenses were met by the company and recharged to D P de Laszlo, the chairman of the company.

D P de Laszlo and W P de Laszlo are also directors of Finangle Limited. During the year consultancy fees of £nil (2011 - £55,000) were paid to Finangle Limited.

During the year consultancy fees of £nil (2011 - £6,000) were paid to H S Mighell, a director of the company.

H S Mighell is also a director of Quest Financial Associates Limited. During the year consultancy fees of £13,000 (2011 - £9,000) were paid to Quest Financial Associates Limited.

28. RELATED PARTY DISCLOSURES

Harwin plc owed Harwin Engineers S.A. (the ultimate parent company) £1,491,000 (2011 - £1,491,000) at the year end. The loan is interest free with no fixed repayment date, however the directors of Harwin Engineers S.A. have indicated that they do not intend to request repayment during the next year.

During the year Harwin plc paid a management charge of £10,000 (2011 - £10,000) to Harwin Engineers S.A.

Harwin plc acquired 100 % of the ordinary share capital of Harwin Asia Pte Ltd from Harwin Engineers S.A. on 1st April 2011 for £343,000.

Advantage has been taken under the provisions of FRS 8 not to disclose transactions and balances with 100 % owned subsidiary companies on the grounds that consolidated group accounts are prepared.

29. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

Group

Company

Consolidated Trading and Profit and Loss Account for the Year Ended 31 March 2012

Consolidated Trading and Profit and Loss Account for the Year Ended 31 March 2012