Manufacturing Company Limited

Transcription

1 Guidance notes reference Manufacturing Company Limited Company number Reports and Financial Statements For the Year Ended 31 December 2018

2 Manufacturing Company Limited Contents Page Directors' report 1-2 Strategic report 3-4 Independent auditor's report 5-6 Statement of comprehensive income 7 Statement of Financial Position 8 Statement of changes in equity 9 Statement of cash flows Significant accounting policies 2 Critical accounting judgements and key sources of estimation uncertainty 3 Turnover 4 Other operating income 5 Operating profit 6 Interest payable and similar charges 7 Taxation 8 Discontinued operations 9 Staff costs 10 Directors' remuneration 11 Intangible assets 12 Tangible assets 13 Stocks 14 Debtors 15 Loans to directors 16 Creditors: amounts falling due within one year 17 Creditors: amounts falling due after more than one year 18 Borrowings 19 Obligations under finance leases 20 Deferred taxation 21 Other provisions 22 Contingent liabilities 23 Pension scheme 24 Called up share capital 25 Other reserves 26 Financial instruments 27 Operating lease commitments 28 Capital commitments 29 Events after the end of the reporting period 30 Parent undertaking and related parties

3 Manufacturing Company Limited Page 1 Directors' report The directors present their annual report and the audited financial statements for the year ended 31 December Principal activity The principal activity of the company during the year has been the manufacture and supply of computer components. 9 Dividends The directors do not recommend the payment of a dividend. The profit for the financial year of 541,000 will therefore be taken to reserves. Directors 10 The directors of the company throughout the year were: Mr Raymond Chard Ms Adeline Long Mr Anthony Hope In accordance with Article 84(a) of the Company's Articles of Association, all directors shall retire and, being eligible, offer themselves for re-election. Directors indemnities 12 The Company has made qualifying third party indemnity provisions for the benefit of its directors which were made during the year and remain in force at the date of this report. Events after the end of the reporting period 13 As set out in note 28 to the financial statements, on 5 April 2019, the company acquired the goodwill and net assets of Italian Marketing Associates for 20,000 financed by a secured bank loan, repayable over 5 years. Strategic Report 14 The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Schedule 7 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 to be contained in the directors' report. It has done so in respect of future developments, research & development and financial instruments.

4 Manufacturing Company Limited Page 2 Directors' report (continued) Directors responsibilities statement 15 The directors are responsible for preparing the directors' report, the strategic report and the financial statements in accordance with applicable law and regulations and in accordance with United Kingdom Generally Accepted Accounting Practice. 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 (Financial Reporting Standard 102). 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 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; and 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 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. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom, governing the preparation and dissemination of financial statements, may differ from legislation in other jurisdictions. Statement of disclosure of information to the auditor 16 Each director who held office at the date of approval of this report confirms that: so far as the director is aware, there is no relevant audit information needed by the company s auditor in connection with preparing their report of which the company's auditor is unaware; and the director has taken all the steps that they ought to have taken as a director in order to be aware of any relevant audit information and to establish that the company's auditor is aware of that information. Auditor 17 Nickleby & Chuzzlewitt will be deemed to continue in office under the Companies Act 2006, s. 487(2). On behalf of the Board R.Chard Director 25 April

5 Manufacturing Company Limited Page 3 Strategic Report 19 Business review 20 The company has four product divisions and the directors consider that the key financial performance indicators are those that monitor the performance in respect of each of these divisions. The turnover of the company from the sale of products analysed by division is as follows: Sound & graphics 5,488 3,198 Network 2,395 2,217 WiFi and Bluetooth 1, USB Memory Sticks 1,877 2,011 11,087 7,579 The Sound & graphics divisions and the network divisions have shown growth of 72% and 8% respectively which were in line with the directors expectations. The directors are pleased to see the growth of products for the WiFi and Bluetooth market which was a new market in All product lines are sold in a competitive market and the directors believe that it is in the best interests of the company for it to operate predominantly in the UK. Due to a sustained downward turn in sales, the Board of Directors sold the Memory Sticks division in December The results of this division are shown separately in the accounts as discontinued activities. The loss on disposal of discontinued activities represents the loss on the sale of goodwill and plant in that division. The operating profit of the company has increased from 626,000 to 811,000, with those excluding the Memory Sticks division showing an increase from 749,000 to 1,287,000. The directors monitor gross profit margins as another key performance indicator, and note a disappointing decrease in the current year from 69% to 56%. However, steps have been implemented to introduce efficiencies with the intention of restoring gross margins to those achieved in earlier years. The company faces a number of risks and uncertainties and the directors believe that the key business risks are in respect of competition from both UK and international businesses and in ensuring product development and availability. In view of these risks and uncertainties, the directors are aware that the development of the company may be affected by factors outside their control. Principal risks and uncertainties The company faces a number of business risks and uncertainties due to worsening trading conditions and new competition. In view of this, the directors are looking carefully at both existing and potential new markets. In particular, this table sets out the key risks that have been identified, with the company s approach to mitigating those risks. Risk Impact on company Mitigation Exposure to foreign economies The company only has one overseas market at present, but even these limited sales give rise to foreign exchange risks. Changing legislation in other regulations can affect product specification, as will the effect of the UK leaving the European Union. More diversity in legislation can only increase manufacturing costs. Foreign exchange risk is mitigated by careful use of currency contracts. The directors are taking a cautious approach to expansion into overseas markets, preferring to concentrate on consolidating the domestic position. The French market is reviewed carefully and one of the company s professional team has a qualification in European law and a remit to monitor current and future legislative changes.

6 Manufacturing Company Limited Page 4 Strategic Report (continued) Principal risks and uncertainties (continued) Product obsolescence The technology industry is fast moving and there are risks associated with investing too heavily in a product that then becomes obsolete. In particular, this can lead to wasted development costs, written off stocks and opportunity cost of time that could have been invested in other areas. There is also a reputational risk in being associated with out of date products. The directors took responsive action to close the Memory Sticks division as consumer preferences for data storage continue to change. Continuous monitoring of the trade and popular press allows identification of trends and in future years funds will be set aside for speculative research to identify the best avenues for development (historically, efforts have been focused on development rather than identification of products). New entrants to the market The barriers to entry are fairly low, and new entrants who specialise in only one item and invest significant capital can make cost savings, particularly if their production is based overseas. New entrants can therefore potentially offer low selling prices to gain initial market share, which directly affects sales. The company has a sufficiently diverse product range to allow some absorption of problems from temporary loss of trade. Development of new products continues, with effort directed towards innovation so that the company s products can be clearly distinguished from those of competitors. Future developments The directors anticipate the business environment will remain competitive. They believe that the company is in a good financial position and that the risks that have been identified are being well managed. With careful focus on appropriate diversification and development of new products, as well as continuing review of the state of the market and the activities of competitors, the directors are confident in the company's ability to maintain and build on this position, albeit with cautious growth expectations. Financial instruments The company has a normal level of exposure to price, credit, liquidity and cash flow risks arising from trading activities which are largely conducted in sterling, with the only foreign currency transactions being covered by suitable currency contracts to minimise exposure to exchange rate volatility. The company does not enter into any formally designated hedging arrangements. Research and development The company is currently undertaking research and development to improve the performance of its network cards, Bluetooth dongles and WiFi extenders. On behalf of the Board R.Chard Director 25 April 2019

7 Page 5 Independent auditor s report to the members of Manufacturing Company Limited 21 Opinion We have audited the financial statements of Manufacturing Company Limited for the year ended 31 December 2018 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity, the statement of cash flows and the notes to the financial statements. 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), including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. In our opinion, the financial statements: Give a true and fair view of the state of the company s affairs as at 31 December 2018 and of its profit for the year then ended; Have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; Have been prepared in accordance with the requirements of the Companies Act Basis for opinion We conducted our audit in accordance with applicable law and International Standards on Auditing (UK) (ISAs (UK)). 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 We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: The directors use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or The directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. 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. 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. In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. 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. Opinion on other matter prescribed by the Companies Act In our opinion, based on the work undertaken in the course of the audit, 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 has been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception 23 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 directors report. 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: 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 or returns; or 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. Responsibilities of directors 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.

8 Auditor s responsibilities for the audit of financial statements 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. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council s website at: This description forms part of our auditor s report. Page 6 Use of this report 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 Our audit work has been undertaken so that we might state to the company s members those matters that 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, or the opinions we have formed. R Lee 25 Robert Lee Senior Statutory Auditor for and on behalf of Nickleby & Chuzzlewitt Chartered Accountants and Statutory Auditors Plymouth 25 April

9 Manufacturing Company Limited Page 7 Statement of Comprehensive Income Continuing Discontinued Total Continuing Discontinued Total operations operations operations operations Continuing operations Notes Turnover 3 9,210 1,877 11,087 5,568 2,011 7,579 Cost of sales (4,076) (1,919) (5,995) (1,728) (1,805) (3,533) Gross profit 5,134 (42) 5,092 3, ,046 Distribution costs and selling expenses Administrative expenses Other operating income Operating profit Loss on disposal of operation (778) (138) (916) (708) (130) (838) (3,115) (116) (3,231) (2,412) (199) (2,611) ,287 (296) (123) (180) (180) Interest payable and similar charges Profit before taxation 6 (74) - (74) (39) - (39) 1,213 (476) (123) 587 Taxation 7 (196) - (196) (170) - (170) Profit after taxation and profit for the financial year 9 1,017 (476) (123) 417 Other comprehensive income 29 Gain on revaluation of land and buildings Deferred taxation arising from revaluation of land and buildings (25) - Total comprehensive income for the year

10 Manufacturing Company Limited Page 8 Statement of Financial Position 30 At 31 December 2018 Notes Fixed assets Intangible assets Tangible assets 12 1,374 1,105 1,476 1,207 Current assets Stocks 13 1, Debtors 14 1,499 1,211 Cash at bank and in hand Total current assets 3,081 2,070 Creditors: amount falling due within one year 16 (1,314) (1,533) Net current assets 1, Total assets less current liabilities 3,243 1,744 Creditors: amount falling due more than one year 17 (770) (209) Provisions for liabilities Deferred taxation 20 (66) (49) Other provisions 21 (120) - (186) (49) TOTAL ASSETS 2,287 1,486 Capital and reserves Called up share capital Share premium account Other reserves Profit and loss account 1, TOTAL EQUITY 2,287 1,486 The financial statements were approved by the board of directors on 25 April 2019 and signed on its behalf by: 31 R. Chard Director Manufacturing Company Limited Company number

11 Manufacturing Company Limited Page 9 Statement of Changes in Equity Share Share Other Retained Notes capital premium reserves earnings Total At 1 January ,069 Profit for the year and total comprehensive income At 31 December 2017 and 1 January ,486 Profit for the year Gain on revaluation of land & buildings Deferred tax arising from revaluation of land & buildings Other comprehensive income for the year Total comprehensive income for the year (25) - (25) New shares issued in the year Capital contribution arising on loan from parent At 31 December ,171 2,287

12 Manufacturing Company Limited Page 10 Statement of Cash Flows 32 Notes Cash flows from operating activities Profit before tax: from continuing operations 1, from discontinued operations (476) (123) Adjustments for: Provisions Depreciation and amortisation Impairment loss on goodwill - 21 Finance costs Foreign exchange movements (20) (12) Loss on disposal of discontinued operation Profit on disposal of property, plant and equipment (26) (17) 1, Movements in working capital (Increase)/decrease in inventories (225) 59 Increase in trade and other receivables (268) (206) Decrease in trade and other payables (253) (463) Cash generated from operations Interest paid (34) (65) Income taxes paid (177) (124) Net cash generated from/(used in) operating activities 299 (52) Cash flows from investing activities Proceeds from sale of discontinued operations Proceeds from sale of property, plant and equipment Payments for property, plant and equipment (387) (186) Payments for other intangible assets (50) - Net cash used in investing activities (370) (157) Cash flows from financing activities Proceeds from issue of new share capital 52 - Repayments of bank borrowings (73) (10) Proceeds from bank and other borrowings Repayments of obligations under finance leases (41) (21) Net cash generated from/(used in) financing activities 602 (31) Net increase/(decrease) in cash and cash equivalents 531 (240) Cash and cash equivalents at the beginning of the year (106) 134 Cash and cash equivalents at the end of the year 425 (106) Cash and cash equivalents comprise: Cash and bank balances Bank overdrafts 19 (79) (110) Total cash and cash equivalents 423 (106)

13 Manufacturing Company Limited Page Significant accounting policies 33 (a) Statement of compliance 34 These financial statements have been prepared in compliance with FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and the Companies Act (b) Basis of preparation and general information 35 The financial statements have been prepared on the going concern basis and under the historical cost convention as modified by the revaluation of land and buildings and certain financial instruments measured at fair value in accordance with the accounting policies set out below. Manufacturing Company Limited, a company limited by shares, is a limited company incorporated in England and Wales and has its registered office and principal place of business at Sound House, Sea View, Plymouth, PL1 2CD. The financial statements are prepared in sterling which is the functional currency of the company. 55 (c) Going concern 35 As set out in the strategic report, the directors believe that the company is experiencing good levels of sales growth and profitability, and that it is well placed to manage its business risks successfully. Accordingly, they have a reasonable expectation that the company 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. (d) Revenue recognition Turnover is the amount derived from ordinary activities, and is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances, and is stated net of VAT. Revenue from the sale of computer components as specified in the strategic report is recognised when all the following conditions are satisfied: the Company has transferred to the buyer the significant risks and rewards of ownership of the goods; the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the Company; and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Specifically, revenue from the sale of components is recognised when the goods are delivered and legal title has passed. (e) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

14 Manufacturing Company Limited Page Significant accounting policies (continued) (f) Taxation Income 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 profit as reported in the statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and 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 end of the reporting period. Deferred tax is recognised on timing differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible timing differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Current or deferred tax for the year is recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax is also recognised in other comprehensive income or directly in equity respectively. (g) Intangible assets Development expenditure Development of products is capitalised where there is expected to be a benefit to future periods and the following conditions are met: (i) It is technically feasible to complete the research or development so that the product will be available for use or sale. (ii) It is intended to use or sell the product being developed. (iii) The Company is able to use or sell the product. (iv) It can be demonstrated that the product will generate probable future economic benefits. (v) Adequate technical, financial and other resources exist so that product development can be completed and subsequently used or sold. (vi) Expenditure attributable to the research and development work can be reliably measured. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses and amortised over its useful economic life. Assessments of useful economic life range from 5 to 15 years. All other research and development expenditure is recognised as an expense in the period in which it is incurred. Goodwill Goodwill arising on an acquisition of a business is carried at cost less accumulated amortisation and impairment losses, if any. Amortisation is calculated on a straight-line basis over the useful economic life of 10 years. (h) For the purposes of impairment testing, goodwill is allocated to each of the Company's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. Tangible assets Land and buildings held and used in the Company's own activities for production and supply of goods or for administrative purposes are stated in the statement of financial position at their revalued amounts. The revalued amounts equate to the fair value at the date of revaluation, less any depreciation or impairment losses subsequently accumulated. Revaluations are carried out regularly so that the carrying amounts do not materially differ from using the fair value at the date of the statement of financial position. Any revaluation increase or decrease on land and buildings is credited to the property revaluation reserve in other reserves.

15 Manufacturing Company Limited Page Significant accounting policies (continued) (h) Tangible assets (continued) Depreciation on revalued buildings is charged to profit or loss so as to write off their value, less residual value, over their estimated useful life of 50 years, using the straight-line method. Once a revalued property is sold or retired any attributable revaluation surplus that is remaining in the property revaluation reserve is transferred to retained earnings. No transfer is made from the revaluation reserve to retained earnings unless an asset is derecognised. Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation on plant and equipment is charged to profit or loss so as to write off their value, over their estimated useful lives of between 5 and 20 years using the straight-line method. Assets held under finance leases are depreciated in the same manner as owned assets. At each balance sheet date, the Company reviews the carrying amounts of its property, plant and equipment to determine whether there is any indication that any items of property, plant and equipment have suffered an impairment loss. If any such indication exists, the recoverable amount of an 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 the asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment loss is recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately. (i) Stocks Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Costs, which comprise direct production costs and an appropriate allocation of production overheads, are based on the method most appropriate to the type of inventory class, but usually on a first-in-first-out basis. Net realisable value is based on the estimated selling price less any estimated completion or selling costs. When stocks are sold, the carrying amount of those stocks is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of stocks to net realisable value and all losses of stocks are recognised as an expense in the period in which the write-down or loss occurs. The amount of any reversal of any write-down of stocks is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs. (j) Trade and other debtors Trade and other debtors that are receivable within one year and do not constitute a financing transaction are recorded at the undiscounted amount expected to be received, net of impairment. Those that are receivable after more than one year or that constitute a financing transaction are recorded initially at fair value less transaction costs and subsequently at amortised cost, net of impairment.

16 Manufacturing Company Limited Page Significant accounting policies (continued) (k) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand, demand deposits with banks and other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. In the statement of financial position, bank overdrafts are shown within borrowings or current liabilities. (l) Impairment of financial assets Financial assets, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when 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 of the investment have been affected. For all other financial assets, objective evidence of impairment could include: significant financial difficulty of the issuer or counterparty; or breach of contract, such as a default or delinquency in interest or principal payments; or it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or the disappearance of an active market for that financial asset because of financial difficulties. For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Company's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 50 days, as well as observable changes in national or local economic conditions that correlate with default on receivables. For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate. The impairment loss is recognised in profit or loss. For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. (m) Trade and other creditors Trade and other creditors are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

17 Manufacturing Company Limited Page Significant accounting policies (continued) (n) Interest bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in the statement of comprehensive income over the period of the borrowings, together with any interest and fees payable, using the effective interest method. (o) Derivative financial instruments The company uses forward foreign currency contracts to reduce exposure to foreign exchange rates. 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 and loss in finance costs or income as appropriate. The company does not currently apply hedge accounting for foreign exchange derivatives. (p) Related parties For the purposes of these financial statements, a party is considered to be related to the Company if: (i) the party has the ability, directly or indirectly, through one or more intermediaries, to control the Company or exercise significant influence over the company in making financial and operating policy decisions, or has joint control over the Company; (ii) the Company and the party are subject to common control; (iii) the party is an associate of the Company or a joint venture in which the Company is a venturer; (iv) the party is a member of key management personnel of the Company or the Company s parent, or a close family member of such an individual, or is an entity under the control, joint control or significant influence of such individuals; (v) the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or significant influence of such individuals; (vi) the party is a post-employment benefit plan which is for the benefit of employees of the Company or of any entity that is a related party of the Company; or (vii) the party, or any member of a group of which it is part, provides key management personnel services to the company or its parent. Close family members of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.

18 Manufacturing Company Limited Page Significant accounting policies (continued) (q) Leased assets Assets that are held by Company under leases which transfer to the Company substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Company are classified as operating leases. Assets held under finance leases are initially recognised as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Company's policy on borrowing costs (see the accounting policy above). Contingent rentals are recognised as expenses in the periods in which they are incurred. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. (r) Foreign currencies The financial statements are presented in Sterling, which is also the functional currency of the Company. Transactions in currencies, other than the functional currency of the Company, are recorded at the rate of exchange on the date the transaction occurred. Monetary items denominated in other currencies are translated at the rate prevailing at the end of the reporting period. All differences are taken to the statement of comprehensive income. Non-monetary items that are measured at historic cost in a foreign currency are not retranslated. (s) Employee benefits Short-term employee benefits are recognised as an expense in the period in which they are incurred. The obligations for contributions to defined contribution scheme are recognised as an expense in the period they are incurred. The assets of the scheme are held separately from those of the Company in an independently administered fund. (t) Discontinued operations A discontinued operation is a component of the Company's business, the operations and cash flows of which can be clearly distinguished from the rest of the Company and which represents a separate major line of business or geographical area of operations, or is part of a single coordinated disposal of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a review to resale.

19 Manufacturing Company Limited Page Significant accounting policies (continued) (u) Provisions Provisions are recognised when the Company has a present legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. 2. Critical accounting judgements and key sources of estimation uncertainty 36 In the application of the Company's accounting policies, which are described in note 1, management is required to make judgements, estimates and assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and underlying 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 if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The critical judgments made by management that have a significant effect on the amounts recognised in the financial statements are described below. Critical judgment Decision to recognise a provision for faulty Ethernet cards As described in note 21 to the financial statements, the directors have decided to recognise a provision amounting to 120,000 (2017: 0) in the financial statements in relation to faulty Ethernet cards. The decision to provide was taken on the basis that it is more likely than not that the company will be required to compensate customers for these products. Sources of estimation uncertainty Valuation of land and buildings As described in note 12 to the financial statements, land and buildings are stated at fair value based on the valuation performed by an independent professional valuer Turner & Co, Chartered Surveyors with recent experience in the location and category of property valued. The valuer used observable market prices adjusted as necessary for any difference in the future, location or condition of the specific asset. Valuation of provision for faulty Ethernet cards The provision for faulty Ethernet cards of 120,000 represents the directors' best estimate of the present value of the cost to the Company due to the recall and replacement of faulty Ethernet cards. The estimate takes into account the expected timing of payments and the number of customers and products affected. 3. Turnover 37 Turnover Continuing operations - Revenue from the sale of goods 9,210 5,568 Discontinued operations - Revenue from the sale of goods (note 8) 1,877 2,011 The analysis of turnover by class of business is as follows: 11,087 7,579 Sound & graphics 5,488 3,198 Network 2,395 2,217 WiFi and Bluetooth 1, USB memory sticks 1,877 2,011 11,087 7,579

20 Manufacturing Company Limited Page Other operating income 38 Gain on disposal of property, plant and equipment Foreign exchange gains Operating profit Operating profit has been arrived at after charging: 2017 (as 2018 restated) Auditor s remuneration Audit services Tax compliance services 5 6 Other services 7 6 Depreciation of property, plant and equipment owned assets assets held under finance lease Amortisation of intangible assets Impairment loss on goodwill - 21 Operating lease charges property plant and equipment Interest payable and similar charges (as 2018 restated) Continuing operations: Interest on bank overdrafts and loans: Wholly repayable within five years Not wholly repayable within five years 11 6 Interest on obligations under finance leases: Wholly repayable within five years 13 8 Losses on derivative financial instruments Taxation (a) Analysis of charge in period: Current tax UK corporation tax on profits of the period Under-provision in respect of prior year 7 - Total current tax Deferred tax (8) - Total income tax recognised in profit or loss (b) Factors affecting tax charge for the period The tax assessed for the period is higher than the standard rate of corporation tax in the UK. The differences are explained below. Profit before tax Profit multiplied by the standard rate of UK corporation tax 20% ( %) Effects of: Expenses not deductible for tax purposes Income not assessable for tax purposes (3) - Marginal tax rates (1) (7) Adjustments to charge in respect of previous periods 7 - Total tax charge for the period The applicable tax rate has changed following the substantive enactment of the Finance Act Deferred tax of 29,000 is expected to reverse in the next year as accelerated capital allowances reduce (see note 20). The company has used all brought forward tax losses which had reduced tax payments in recent years.

21 Manufacturing Company Limited Page Discontinued operations 40 Due to a sustained downward turn in sales, the Board of Directors sold the Memory Sticks division in December The disposal was completed on 31 December 2018 at which date control of the division passed to the acquirer. The comparative figures have been re-presented to show separately the results of the discontinued operation as included in that period. Sale of discontinued operations Goodwill 35 Property, plant and equipment 180 Net assets disposed of 215 Loss on sale of discontinued operations (180) Cash consideration received Staff costs The average number of persons employed by the company (including directors) during the year was: No. No. Production Selling and distribution 6 5 Administration Their remuneration was: Wages and salaries 1,779 1,364 Social security costs Pension costs ,249 1, Directors' remuneration 43 Aggregate remuneration (including benefits in kind) Aggregate of company contributions to defined contribution pension schemes Highest paid director remuneration money purchase pension contribution 74 5 Number of directors to whom retirement benefits are accruing: Defined contribution schemes 3 3