Prod Roxboro R&A 2004 - Back - Dialight

Chairman’s statementWe are pleased to report Roxboro’s continuing operations madeexcellent progress in 2004, demonstrated by a substantial improvement inoperating profit before goodwill that showed an 87% increase to £10.2m(2003: £5.4m). On a constant currency basis operating profit would havedoubled to £10.8m. This success was achieved despite turnover beingmarginally lower than in the previous year at £118.9m (2003: £122.2m)entirely due to currency movements having the effect of reducing sales byover £6m. On a constant currency basis turnover would have shown a2.5% increase.Profit before goodwill and tax was up 100% to £10.2m (2003: £5.1mcontinuing operations only) and adjusted EPS showed a 75% improvementto 22p per share (2003: 12.6p per share). Group operating cash flowswere strong at £13.2m, up 25% on the prior year (2003: £10.6m) whichrepresents 130% of operating profit. At the year end the Group had a cashbalance of £6.8m (2003: £2.0m).Group operating profit in the second half showed a 22% advance over thefirst half. In the main this was due to the significant advances made by theSignals business unit of Dialight, which made a good profit contribution inthe second half as a result of the benefits derived from relocating productionto Mexico in 2003. Our Mexico operation is now functioning efficiently withexcellent local management in place.DividendThe Board is recommending an increased final dividend of 7.6p (2003: 6.9p)to be paid on 13 May 2005 to shareholders on the register at 29 March2005. As a result total dividends per share for 2004 will be 11p, an increaseof 10% on the 2003 level.StaffThere has been a significant change in the distribution of our employees overthe past two years with over 460 now being employed in Mexico. We wishto welcome all our new colleagues and to thank them, together with all ofthe Group’s other employees for their hard work and commitment over thepast year.OutlookThe order book at the year-end was strong, particularly at Solartron, andtrading in the early part of the current year is ahead of the same period lastyear. Order intake rates at Dialight Opto-electronics picked up somewhatfrom the lower rates in the second half of last year, and increasing demandfor solid state obstruction lighting products has continued.Consequently the Board is confident that the Group will show furtherprogress in the current year.Sir Alan CockshawChairman

Chief Executive’s reviewFollowing the disposal of Weston, the aerospace sensors company partway through 2003, Roxboro has been able to focus its resources andenergies into its two remaining businesses, Dialight and Solartron.Three years ago we redefined our engineering and technology strategiesfor both business areas. We concluded that less engineering resourceshould be applied to sustaining existing or older products and particularlycontinually modifying them to meet specific customer requirements toachieve short-term sales and an increasing proportion should be appliedto completely new product developments at the top end of their markets.It could be argued that short-term growth has been sacrificed but theresults are now becoming evident as an increasing flow of new leadingedge products come to market. Although Roxboro does not operatewithin what has become known as the technology sector, the Groupcontinually applies and develops leading edge technology products intheir respective markets. Dialight, while maintaining its market positionin opto-electronic devices has also developed a leading position in theapplication of solid state lighting products, initially in signals but nowalso in illumination and colour mixing technology. Solartron, already thetechnology leader in density, viscosity and flow measurement is now alsoproducing world beating products in metrology gauging, ultrasonic andradar level measurement and frequency response analyzers.The flow of new product introductions, addressing wider marketsand new applications will continue with the objective of driving futuregrowth for Roxboro.

Chief Executive’s review continuedDialight Division2004 2003£m £mSales 55.3 57.9Operating profit 5.9 1.1Dialight made good operational progress in 2004. Operating profits increasedfive fold to £5.9m from £1.1m the prior year, with operating marginsreturning to double digits for the first time since the significant downturnin the technology sector in 2001. Had exchange rates remained constant,Dialight’s turnover would have shown an increase of 5% to £60.6m butwith the weakness of the US dollar in the year, the reported number showsa marginal reduction to £55.3m.SignalsThe major change at Dialight during 2004 was the performance of theSignals business unit. Following the relocation of production from theUnited States to Mexico in 2003, the cost benefits, including the eliminationof duplicated costs, showed through strongly in 2004. This business unit isagain making a positive contribution to profits.At a time when concerns continue to grow about the dangers of globalwarming through greenhouse gas emissions, it is interesting to note that20% of the world’s electricity production is used in illumination, but of thistotal lighting usage, over 30% is wasted in the generation of unwanted heat.Dialight’s solid state lighting solutions use typically 10% of the energyconsumed by conventional light sources for coloured applications and lessthan half the energy of an incandescent source for white light, substantiallyreducing the demand for electricity. 50% of traffic signals in the United Stateshave already been converted to solid state light, while in Europe the figure isless than 5%.Dialight continues to hold a market leadership position in solid state trafficsignals and has excellent relationships with both dealers and traffic systemsOEMs in the United States and increasingly in Europe. These OEMsincorporate Dialight’s solid state lighting modules into their signal heads fornew traffic installations or in the refurbishment of older systems, which islikely to continue to be a growing part of Dialight’s business. Pricing in thetraffic signals sector has stabilised somewhat and price-downs are anticipatedto be at manageable levels in the future.Opto-electronicsDialight’s unique surface mounted LED product, Prism, is becoming theaccepted industry standard, being designed into multiple applications by awide range of customers. The product line has a number of variants but arecently introduced bi-level version is also now being designed into a widerange of equipment particularly in the telecoms sector for channel indication.This product has the further advantage of being RoHS compliant meetingthe latest EU directive requirements including lead-free solder.Over the past five years Dialight has produced around 100 million Prismdevices and demand continues to grow, with 2004 sales increasing by over30% from the previous year. The fastest growing sector for Prism is mobiletelephony, although there is also growing demand across a wide range ofother electronic sectors.Dialight saw demand strengthen early in the year from the generalelectronics industry, particularly the telecoms sector, for its opto-electroniccomponents. Sales to US distributors, which account for 50% of theseproduct sales, were strong in the first half although this slowed somewhatin the third quarter as industry demand weakened. Nevertheless, secondhalf demand was ahead of the second half of the previous year.Dialight exports approximately 50% of its opto-electronic componentswith the majority of these being shipped to Asia where contractmanufacturers produce equipment for major OEM customers, such asCisco and Lucent. Most OEM customers design their equipment in theUnited States where Dialight is able to achieve specified status. In manycases production is then transferred to contract manufacturers in Asia,increasing Dialight’s export percentage.

Chief Executive’s review continuedTMSuccess in this business area is achieved through continuous design activity.To that end the company has enjoyed good success with both traditionalcustomers and in new areas such as networking and wireless but alsoin emerging technologies such as Storage Area Networks and Voice OverInternet. The company is also penetrating new areas such as gamingmachines, where opportunities for LED devices have been identifiedparticularly for panel mounted indicators.In Europe the launch of the new Eclipse range of solid state traffic moduleshas been well received and is expected to lead to increased volumes withOEMs such as Siemens Traffic Systems. European OEMs have until nowbeen reluctant to take higher volumes because of the relatively high unitcost of the European specified product, where sun phantom requirements(the reflection of sun on the lens) are much more rigorous than in theUnited States. This requirement eliminates the effect of sunlight causinga traffic signal to appear illuminated when it is switched off.The Eclipse range eliminates the sun phantom concern by applying thevery latest AllNGaP and InGaN LED technologies and lens design techniques,substantially reducing unit costs, while still achieving the tougher Europeanstandards. As Eclipse volumes increase the sub-assemblies that are highlylabour intensive to produce, will be built in Mexico and then shipped toEurope for final assembly.Continuing strong growth in demand for solid state obstruction lights is veryencouraging, both in the United States and Europe, with Dialight shipping15,000 lights to the Federal Aviation Authority for use at US airports duringthe year. These products are particularly attractive because of their long lifewhen located in such places as on the tops of buildings, towers or mastswhere access is difficult and expensive.Dialight has also introduced a range of specially designed solid state lightingproducts for use in hazardous environments such as oil refineries, wheresafety is critical. The low voltage and low heat of solid state lights makesthem ideal for these types of applications.In the rail sector Dialight has taken its first orders in Europe and China forwayside signals. In the US the introduction of Dialight’s unique “light-outdetection” feature is expected to lead to additional business in 2005.Dialight has opened up new opportunities for growth in the lighting industrywhere solid state lighting is increasingly being seen as a disruptive technologyreplacing traditional light sources. Dialight has developed a relationshipwith Rosco Laboratories Inc., the leading producer of colour gels for theatrelighting worldwide. Using SpectraMix TM , Dialight’s proprietary colour mixingtechnology, in association with its solid state lighting products, colours inthe Rosco palette of theatrical colour media can now be reproduced withrepeatable exact colour matching.Associated with SpectraMix TM , Dialight has also developed a range of solidstate lighting products including a long-throw spotlight module again fortheatrical use. Incorporating a patented optical system, Dialight has produceda product able to produce 1,214 lumens per square inch, considerably higherthan anything else on the market. When coupled with frontal secondaryoptics, Dialight’s spotlights or floodlights will be capable of providing6,000 lumens in a 500 watt solid state package with virtually infinitecolour variation. The unique optical solution also eliminates optical fringing,the separated coloured edges often seen around shadows.Dialight’s solid state lighting solutions generate virtually no heat and thereforeare considerably more efficient than conventional light sources. IncorporatingRGBA (red, green, blue and amber) multichannel LED arrays, the colourcontrol provided by SpectraMix TM allows complete control through morethan one billion colours or shades.These are the first of a range of high-end solid state lighting productsplanned to be introduced at Dialight into what is expected to be a verydynamic market over the next several years.BLPFollowing the cost reduction exercise in 2003, BLP made a positivecontribution in the year. The continued development of the X-Pulse TMpager network in the US led to even further interest in this remoteconnect/disconnect product, which bodes well for the growth in this market.

Chief Executive’s review continuedSolartron Division2004 2003£m £mSales 63.6 64.3Operating profit 6.7 6.6Solartron, the Group’s electronic measurement specialist, produced a steadyresult in an unfavourable environment caused by the weakness of the USdollar. This made it difficult for Solartron, whose manufacturing is in the UKand France, to compete with indigenous USA suppliers, even though in manycases Solartron’s products are superior. Both the North and South Americanmarkets were also affected by low investment in the domestic downstreamoil and gas sector. These conditions, however, were offset by strong growth inAsia, where demand for fluid analysis systems for oil installations was strongin China and in Japan good sales of analytical instruments was achieved.Order intake improved strongly, but too late in the year in some casesto benefit 2004. As a result, however, the order book at the year-endwas substantially higher than at the half year, placing us in a goodposition for 2005.Some encouraging advances were made, in particular the introduction ofthe new Pegasus 2-wire FMCW non-contacting Radar Level Transmitter.This advanced technology product, which can be used in the levelmeasurement of liquids or slurries, brings performance normally associatedwith more expensive measurement solutions, and addresses the fastestgrowing segment in the level measurement market.Solartron has also successfully continued its strategy of introducing andproducing “best-of-breed” products, and this has led to agreements withindustry-leading global instrumentation suppliers.The Analytical Instruments product line enjoyed strong demand in the secondhalf, particularly in Asia, primarily driven by greater investment in researchinto advanced materials, electrochemistry and energy storage devices. Late inthe year a new modular battery and fuel cell tester was launched providingvery cost-effective multichannel impedance and charge/discharge testing.The core of this product is a new modular Frequency Response Analyzer thatwill allow the company to broaden its market by addressing an increasingrange of measurement applications in materials research.

Chief Executive’s review continuedIn the oil and gas sector the business performed well, but again with a latepick-up in orders received and contracts awarded, much of this was carriedover and will benefit the current year. In particular good business with ChinaPetroleum for fluid analysis and measurement systems was maintained and isexpected to continue to grow for several years as China continues to invest inits oil distribution infrastructure. Solartron supplied three Dualstream 2 wetgas meters for use in the Atlantic and Cromarty North Sea gas andcondensate fields, for Amerada Hess and BG International respectively.The products will be used both for allocation gas metering and the detectionof water breakthrough from the reservoir. The meters are fully integratedinto Wellhead Production Trees and are located on the sea bed at a depthof over 100 metres making reliability a key factor.Solartron enjoyed a particularly good year in the metrology sector withincreasing demand for its unique range of analogue and digital gaugingtransducers, used for quality control throughout the world. The introductionof a range of new products, targeted to meet the specific needs ofthe industry for use in difficult applications, has injected new growthinto this area.The new “mini-probe” has been designed into the American Axle projectby Valenite to electronically measure internal bores in a difficult application.Solartron supplies mainly to OEMs such as Valenite, Renishaw, Air Gage andEtamic and commands a significant share of the world market for gaugingtransducers, but has been progressively expanding its market base with theintroduction of new products.Solartron’s Orbit Network is increasingly becoming accepted as an industrystandard for digital gauging, providing the company with a material leadover its competitors, as the gauging world increasingly moves to digitalrather than analogue measurement.SummaryThe 2004 performance of Roxboro was satisfactory and resulted fromthe endeavours of all of Roxboro’s excellent people throughout the world.With most US production now transferred to Mexico, where we nowemploy over 450 people, and some European based work progressivelybeing outsourced to Asia, the reduced cost structure of the Group createsa good platform for future growth. The introduction of new products willalso generate new growth opportunities as the Group’s R&D programmescome to fruition.Roxboro’s goal has been and will continue to be to manage the Group inthe long-term interests of shareholders, employees and customers, and thegeneration of sustainable profitable growth and shareholder value.Harry TeeGroup Chief Executive

Finance Director’s reviewSummary of financial resultsGroup sales for the continuing businesses fell by £3.3m to £118.9mhowever this decrease relates to exchange rate movements arising fromthe translation of sales reported from our overseas operations, principallyDollar and Euro denominated which amounted to £6.3m. If sales weretranslated on a constant currency basis sales for the continuing businesseswould have increased by 2.4% to £125.1m with both Dialight andSolartron reporting higher sales.Group profit before interest, tax, exceptional items and goodwillamortisation was £10.2m (2003: £8.3m) an increase of 22.9% over last year.2003 included a contribution from discontinued businesses of £2.8m andafter excluding this profit the continuing businesses achieved an 87%improvement in profitability. Profits on a constant currency basis wouldhave been increased by a further £0.7m.Summary of results by operating divisionGroup turnover and operating profit before goodwill amortisation fromcontinuing operations are set out below:TurnoverOperating2004 2003 2004 2003£’000 £’000 £’000 £’000Dialight 55,268 57,916 5,879 1,071Solartron 63,584 64,257 6,711 6,596Central – – (2,420) (2,230)118,852 122,173 10,170 5,437DialightDialight’s turnover in 2004 was £55.3m compared with £57.9m in 2003 –a reduction of 4.6%. Exchange rate movements principally in the dollardecreased turnover by £5.4m. Assuming a constant exchange rate turnoverfor the division would have increased by 4.7%.Dialight’s operating profit in 2004 at £5.9m was significantly improved over2003. Assuming constant exchange rates the operating profit would havebeen a further £0.7m higher than reported. The improvement in theoperating profit is attributable principally to the elimination of duplicatedcosts last year and the costs incurred in transferring a large proportionof production to lower cost operations in Mexico, together with the costsavings from a successful programme of supplier selection.BLP Components improved its performance with a positive contributionof profit to the group.In 2003 the division absorbed cash to facilitate the relocation of operationsto Mexico. This year with the strong operational improvements Dialight hasreduced the amount of working capital being carried and this, together withthe improved profits helped the division to generate cash.SolartronTurnover for 2004 was £63.6m which was slightly lower than reported lastyear (2003: £64.3m). The net effects of movement in the Dollar and Euro onthe translation of sales and operating profit reported by overseas subsidiarieswas a £0.9m decrease and £23,000 increase respectively. The divisionimproved its operating margin to 10.6% from 10.3% in 2003 despitethe impact of the weakening Dollar on sales revenue.The division has been consistently strong in cash generation and 2004was no exception.Central costsCosts have increased due to the Group executive bonus amounting to£337,000 together with redundancy costs incurred in the first halfamounting to £78,000.Goodwill amortisationAmortisation of intangible assets decreased to £1.1m (2003: £1.2m) followingthe elimination of the goodwill relating to Weston which was sold in 2003.DividendThe proposed final dividend of 7.6p (2003: 6.9p) will provide shareholderswith a total of 11.0p for the full year (2003: 10.0p). This dividend representsan increase of 10% over last year. Dividends are 1.7 times covered by profitsfor the year.Earnings per shareBasic earnings per share were 18.3p (2003: 45.4p). The earnings per sharefor 2003 included the earnings related to profit on the disposal of Weston.Adjusted earnings per share, which excludes the impact of the amortisationof intangible assets and the profit on sale of Weston in 2003, amountedto 22.0p (2003: 12.6p), an increase of 75%. Details of the calculations aregiven in note 8 to the accounts.TaxationThe tax rate, pre-exceptional profit and goodwill amortisation, for the yearwas 34.0% (2003: 30.8%). The Group’s tax rate is impacted by the higheroverseas rates particularly in the US, and by the losses incurred in Europefor which no tax relief is available. The other major impact is the chargefor goodwill for which there is no tax relief.The Group’s effective tax rate was 38.2% (2003: 11.7%) the table belowprovides an overall reconciliation between UK taxation rates and the Group’sactual tax rate.2004 2003% %UK taxation rate 30.0 30.0Overseas higher tax rate 2.1 1.9Unutilised overseas losses 3.7 4.4Goodwill amortisation 3.2 4.9Profit on sale of Weston (non-taxable element) – (24.6)Other Items including adjustments in respect of prior years (0.8) (4.9)38.2 11.7PensionsFRS17 “Retirement Benefits” was issued in November 2000 to replaceSSAP 24 by 2005. Although it is not required to be fully implemented until2005 there is a phased approach with regards to disclosures which theGroup has complied with. If the Group had fully adopted FRS17 in 2004then the profit and loss charge in respect of defined benefits schemes wouldhave reflected a charge of £0.9m, a reduction of £0.5m from the actual2004 SSAP 24 based charge. In addition, the net deficit arising on FRS17applied principals, which is effectively a snap shot of the assets at the yearend date, would have led to the Group’s Net Assets being reduced by£7.9m (2003: £7.5m).

The impact on the Company’s distributable reserves would have beena reduction of £0.6m (2003: £0.6m).Cash flowThe Group has generated net cash in flows from trading operations of£13.2m (2003: £10.6m), being 130% (2003: 128%) of operating profit(before interest and goodwill).Capital expenditure during the year was £1.3m (2003: £1.7m).An analysis of free cash flow (operating cash flow before acquisitionsand transactions with shareholders) is set out in the table below:2004 2003Cash flow Analysis £m £mCash inflow from operating activities 13.2 10.6Net Interest paid – (0.3)Capital expenditure (1.3) (1.6)Tax paid (3.6) (1.9)Free cash flow 8.3 6.8As at 31 December 2004 the Group had net cash in hand of £6.8m(2003: £2.0m).Treasury policyThe Group operates a central treasury function that provides a service to theoperating businesses within clearly defined guidelines approved by the Board.The treasury function is not a profit centre and no speculative transactions areundertaken. The Group’s treasury policy is to ensure that adequate financialresources are available for the business operations whilst managing itscurrency and interest rate risks.Currency translationThe results of the Group’s foreign subsidiaries are translated into sterlingat the average exchange rates for the relevant year. The balance sheetsof foreign subsidiaries are translated into sterling at the relevant closingexchange rates. Any gains or losses from translating these items from oneyear to the next are recorded in reserves.The principal translation currencies to which the Group is exposed are USdollars and the Euro. The average exchange rates and the closing year endrates for the year and the comparatives are as detailed in the following table:Currency translation rates used 2004 2003US dollar – average rate 1.833 1.634US dollar – year end rate 1.92 1.79Euro – average rate 1.474 1.446Euro – year end rate 1.413 1.419Currency transaction exposureAs with the majority of international companies, the Group’s UK andoverseas businesses purchase and sell products in their non-functionalcurrencies. Where possible, the Group nets such exposures and maintainshedging programmes utilising foreign exchange forward contracts andcurrency overdrafts to cover specific contracts and such proportion ofother anticipated exposures as can be estimated with reasonable certainty.The Group’s principal exposure is to US dollar and Euro currency fluctuation.Funding and depositsThe Group utilises short and medium term facilities to finance its operations.The Group has two principal bankers with a combined facility of £15m.At the year end the Group has unutilised facilities of £15m. The Group mayborrow in selected currencies at both fixed and floating rates of interest.Fixed rates of interest may be managed by interest rate swaps to limit theGroup’s exposure to interest rate fluctuations. Surplus funds are placedon short-term deposit utilising banks approved by the Board.Accounting policiesThe accounts have been prepared using the same accounting policiesas last year.Adoption of International Financial Reporting Standards (IFRS)All European Union listed groups are required to adopt IFRS for thepreparation of their financial statements from 2005. This means that theGroup will prepare its first financial statements under IFRS for the yearended 31 December 2005 and will restate the results for the 2004.The 2005 interim statements will show the impact of the adoption of IFRS.The Group has assessed the impact of the adoption of IFRS and summarieshave been presented to the audit committee on a regular basis.Based on the assessments we believe areas affecting the Group’s net profitand shareholder’s funds will be in the following areas:Post employment benefitsThe Group has reported the transitional arrangements under FRS17 innote 25 to the accounts. Under IAS 19 accounting for pension costs issimilar to FRS17 and the impact on the profit and loss account and themovement through the statement of total recognised gains and losseswill closely follow that set out under FRS17.Intangible fixed assetsUnder UK GAAP the Group amortises goodwill on a straight linebasis over 20 years. Under IFRS3 goodwill will no longer be amortisedbut will be subject to an annual review for permanent impairment.Any impairment will be charged through the profit and loss account.IAS 38 requires the mandatory capitalisation of development costsif certain criteria are met.Financial instrumentsIAS 39 requires that all financial instruments in place to manage theexposure to foreign exchange risk are recognised at fair value withchanges to the fair value recognised through the profit and loss account.Under IAS 39 there is the option to adopt hedge accounting if certaineffectiveness criteria are met. If adopted this has the effect of accountingfor the fair value movements through reserves until the related asset/liability is recognised.Proposed dividendsDividends are recorded in the period they are approved.Preference sharesThe preference shares outstanding as at 31 December 2004 will bereclassified as debt.Shares based paymentsIFRS 2 requires that a fair value is calculated for shares and share optionsgranted to employees and that this fair value is charged through the profitand loss account over the resting period. There is no adjustment for theshare options in issue as they were granted by November 2002.

AdvisersAdvisersFinancial advisersClose Brothers Corporate Finance10 Crown PlaceLondon EC2A 4FTStockbrokersJPMorgan Cazenove Limited20 MoorgateLondon EC2R 6DAAuditorsKPMG Audit Plc2 Cornwall StreetBirmingham B3 2DLLegal advisersClifford Chance LLP10 Upper Bank StreetLondon E14 5JJPiliero Goldstein Kogan & Miller, LLP10 East 53rd StreetNew YorkNew York 10022USARegistrarsLloyds TSB RegistrarsPO Box 28448Finance HouseOrchard BraeEdinburgh EH4 1WQPrincipal bankersHBOS plcCorporate Banking DivisionPO Box 399007th Floor Bishopsgate Exchange155 BishopsgateLondon EC2M 3YBNational Westminster BankFirst FloorConqueror HouseVision ParkChivers WayHistonCambridge CB4 9BYCompany secretaryCathryn BuckleyRegistered officeByron HouseCambridge Business ParkCambridge CB4 0WZRegistered number2486024

Directors’ reportThe directors present their report and the audited accounts of the Group for the year ended 31 December 2004.Principal activitiesThe principal activities of the Company and its subsidiary undertakings during the year were the manufacture and sale of electronic measurement products forthe energy and process markets, and electronic lighting and electromagnetic products for the communications and transportation markets.Review of the businesses and future developmentsA review of the businesses during the year, and the Group’s prospects can be found in the Chairman’s statement, the Chief Executive’s review and the FinanceDirector’s review on pages 2 to 13.Group profit and loss account and dividendsThe Group profit and loss account is set out on page 26.The directors recommend a final dividend of 7.6p per ordinary share, amounting to £2,288,000. This final dividend together with the interim dividend of3.4p per ordinary share paid on 14 October 2004, which amounted to £1,023,000, gives a total dividend for the year of 11p per ordinary share amountingto £3,311,000. The recommended final dividend, if approved at the Annual General Meeting, will be payable on 13 May 2005 to members on the registerat close of business on 29 March 2005.DirectorsThe members of the Board of directors throughout the year and at the date of this report are detailed on page 14, together with brief biographical details.In accordance with the Articles of Association, Mr W Whiteley and Mr A J Vaisey will retire at the forthcoming Annual General Meeting by rotation and beingeligible offer themselves for reappointment. Mr W Whiteley is a member of the remuneration, nominations and audit committees.Substantial shareholdingsThe following shareholders, other than Directors, had notified the company of a holding of 3% or more of the issued share capital of the Company:6 March 2005 Percentage of issuedordinary sharesordinary sharesof 1.89p eachof 1.89p eachAberforth Partners 8,166,922 27.1%Trustees of BT Pension Scheme (Hermes UK Small Companies Focus Fund) 3,083,286 10.2%Aviva (Morley Fund Management Limited) 2,453,602 8.2%Legal and General Investment Management 1,035,505 3.4%Political and charitable contributionsNo contributions were made for political purposes. A total of £3,000 (2003: £3,000) was donated to various charities.EmployeesIt is the aim of the Group to attract, retain and motivate the best people through the design of its employment policies. The Group considers itself to be anequal opportunities employer.The Group recognises the importance of good communications and relations with its employees. As the Group operates internationally its employmentpolicies are designed to meet local conditions and requirements, and enable any special needs to be accommodated within the particular environment.Staff appraisals and consultations take place between individuals and local management with training and development undertaken locally. All employees aregiven equal opportunities to develop their experience and their careers.It is Group policy to keep employees as fully informed as possible on matters which affect them, through communication procedures which include regularbriefings, consultative committees on each site.The Group gives full and fair consideration to applications for employment from disabled persons where the requirements of the job can be adequatelyfulfilled by a handicapped or disabled person.Employees who become disabled are provided, wherever practicable, with continuing employment under normal terms and conditions and are provided withtraining and career development wherever appropriate.Engineering technologyThe Group continues to invest resources engaged in technology and product development in both the UK and the USA, and to update and expand itsproduct range. Investment in this area is essential for the Group to retain and increase its market share in its competitive markets.Creditor payment policy and practiceTerms of payment are agreed with individual suppliers prior to supply. It is the Group’s policy to settle with its suppliers as payments fall due, provided thesupplier has delivered the goods and services in accordance with agreed terms and conditions. As the Company is a non-trading holding company it thereforehas no trade creditors. At 31 December 2004, the Group had an average of 50 days (2003: 45 days) purchases outstanding in trade creditors.Going concernThe directors are of the opinion that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason theycontinue to adopt the going concern basis in preparing the accounts.Special business at the Annual General MeetingThe resolutions that will be proposed at the Annual General Meeting on 10 May 2005 are set out in the Notice of Annual General Meeting enclosed with thisreport. Resolutions 1 to 5 are resolutions relating to ordinary business, whilst resolutions 6 to 10 will be special business. Details of the resolutions relating tospecial business are set out below:Special resolution 6 seeks to renew the authority from shareholders to enable the Company to purchase its own ordinary shares. This authority will applyfor up to 3,010,209 ordinary shares, representing 10% of the Company’s issued ordinary share capital. Purchases will only be made on the London StockExchange at a maximum price per share equal to 105% of the average middle market quotations for an ordinary share of the Company taken from theDaily Official List of the United Kingdom Listing Authority for the five business days immediately before the day on which the ordinary shares are purchased.If granted, the authority will expire at the conclusion of the Annual General Meeting in 2006 or on the date 15 months from the passing of this resolution,whichever is the earlier.

The directors are of the opinion that this authority, if renewed, will continue to give them greater flexibility to manage the issued share capital of theCompany, for the benefit of the shareholders and would only use this authority if it is for the benefit of the shareholders as a whole. The directors haveno present intention of exercising the authority conferred by this resolution.Ordinary resolution 7 gives authority to the directors to allot ordinary shares up to an aggregate nominal amount of £161,071 being the authorised ordinaryshare capital less the issued ordinary share capital, and representing approximately 28% of the ordinary share capital in issue at the date of the Notice of theAnnual General Meeting. If granted, the authority will expire at the earlier of the conclusion of the Annual General Meeting to be held in 2006 and the date15 months from the date of the passing of the resolution, and will replace a similar authority granted on 26 April 2004 and which expires at the conclusion ofthe forthcoming Annual General Meeting. Save for any ordinary shares issued pursuant to the exercise of options granted under the Share Option Schemes,the directors have no present intention of exercising the authority conferred by this resolution.Special resolution 8 seeks authority for the directors, until the earlier of the conclusion of the Annual General Meeting to be held in 2006 and the date15 months from the date of the passing of the resolution, to make issues of equity securities for cash otherwise than to existing shareholders in proportion totheir existing shareholdings up to an aggregate nominal amount of £28,446 being the equivalent of approximately 5% of the ordinary share capital in issueon the date of the notice of the Annual General Meeting. The power will, if granted, replace the similar power conferred on the directors on 26 April 2004.Resolution 9, which is an ordinary resolution, seeks shareholder approval of the Directors’ Remuneration Report, which is set out on pages 19 to 21 ofthis document.Resolution 10, which is a special resolution, proposes amendments to the Company’s Articles of Association. A copy of the Company’s existing Articles ofAssociation, together with a copy marked to show the amendments proposed pursuant to resolution 10 will be available for inspection up to the time of theAnnual General Meeting at the registered office of the Company during normal business hours and at the place of the meeting for at least 15 minutes beforeand during the meeting.The principal proposed amendments to the Articles of Association are summarised below:(a) The Treasury Shares Regulations – These regulations came into force on 1 December 2003 and they allow shares purchased out of distributable profitsto be held as treasury shares, which may then be cancelled, sold for cash or used to meet the Company’s obligations under its employee share schemesrather than, as would otherwise be the case, being immediately cancelled. The amount of shares which can be held as treasury shares is 10% of therelevant class of shares. Any sale of shares held in treasury would be subject to the rights of pre-emption granted by the Companies Act 1985 except tothe extent disapplied by the Company’s Articles of Association or by special resolution. In order for the Company to take advantage of the flexibility thatthis legislation offers, article 4 (Allotment) of the Company’s Articles of Association requires amendment to allow the power granted pursuant to thatarticle to be applicable to the sale of treasury shares, which is an allotment of equity securities by virtue of Section 94(3A) of the Companies Act 1985.Consequential amendments are also proposed to article 7 (Variation of rights), article 68 (Class meetings) and article 69 (Failure to disclose interests inshares) to reflect the coming into force of the Treasury Shares Regulations.(b) Uncertificated Securities Regulations – The Uncertificated Securities Regulations 2001 replaced earlier regulations and although they largely repeat theearlier provisions, amendments are proposed to the definition of “register” in article 1 (Interpretation) and to article 10 (Uncertificated shares), article 11(Right to certificate), article 27 (Power of sale), article 29 (Form of transfer), article 30 (Right to refuse registration) and article 102 (Overseas register) toupdate the Articles to accommodate the 2001 Regulations.(c) Electronic communications – An electronic communications regime was introduced by the Electronic Communications Order, which came into forceon 22 December 2000. The Order does not automatically amend a company’s articles of association and it does not compel a company to adopt the newelectronic regime. However, the best practice guide of the Institute of Chartered Secretaries and Administrators recommends that companies take steps toamend their articles of association. The Company’s Articles of Association already include some reference to the electronic regime however it is proposedthat the provisions be expanded to enable the Company to take full advantage of the flexibility that the electronic regime offers.It is proposed that new definitions of “address”, “communications” and “electronic communications” be inserted in article 1 (Interpretation) to reflectdefinitions under the Electronic Communications Order.The Order permits the electronic transmission of a notice of a general meeting either by email, CD-Rom, fax or by posting the notice on a nominatedweb site, although it provides that accidental failure to post the notice on a web site will not invalidate the proceedings at the meeting to which thenotice relates. This approach is reflected in the proposed amendments to article 43 (Length and form of notice), article 44 (Omission to send notice) andarticle 135 (Notices to be in writing or in electronic communication). The proposed amendments to article 136 (Service of notices and other documentson members), article 137 (Notice by advertisement) and article 138 (Evidence of service) relate to evidence of electronic service and when electronicservice is deemed effective. The proposed amendment to article 134 (Accounts to be sent to members etc) reflects the fact that under the electronicregime, accounts, annual reports, directors’ reports and directors’ remuneration reports may also be delivered electronically but that proceedings in ameeting will not be invalidated because of accidental failure to publish on a web site.Notice of board meeting may also be given by way of electronic communication to an address given by a director for that purpose, which is demonstratedin the consequential amendments to article 85 (Participation in board meetings) and article 107 (Notice of board meetings).Changes introduced by the Electronic Communications Order permit a proxy to be appointed electronically. An electronic proxy voting service, whichallows companies, agents and investors to liaise electronically regarding company meetings, was introduced by CRESTCo in January 2003. If a companypermits it, a registered holder of securities in CREST is able to appoint and instruct a proxy by electronic means using the CREST system. It is proposedthat the Company’s Articles of Association be amended to take advantage of the CREST automated proxy voting service. Accordingly, amendmentsare proposed to article 58 (Votes of members), article 61 (Voting by proxy), article 62 (Delivery of appointment) and article 63 (When votes by proxyvalid although authority revoked). It is also proposed that a new definition of “uncertified proxy instruction” be inserted in article 1 (Interpretation).The proposed amendment to article 62 (Delivery of appointment) inserts a new paragraph (B) which allows the Company to treat a CREST proxyappointment instruction as sufficient evidence of the authority of the voting service provider to send the instruction on behalf of the shareholder.(d) Interests in shares – Amendments are proposed to article 69 (Failure to disclose interests in shares), which relates to notices requiring disclosure ofinformation concerning interests in shares. To comply with the Listing Rules, an amendment to the definition of “prescribed period” is proposed sothat penalties for failure to provide information may not take effect until 14 days after service of the notice. Previously, the prescribed period dependedon the percentage of shares held in the Company.

Directors’ report continued(e) Appointment of directors – It is proposed that article 73 (Appointment of executive directors) be amended by inserting a provision that permits theBoard to enter into agreements and arrangements with executive directors for the provision of services outside the scope of the ordinary duties of adirector. An agreement entered into with a director for consultancy services is an example of the type of agreement that would be caught by thisproposed amendment.(f) Combined Code – The Combined Code requires annual re-election of non-executive directors who have served nine years or more. The proposedamendment to article 76 (Retirement by rotation) complies with this requirement. An amendment is proposed to article 82 (Vacation of the office ofdirector) to provide for automatic removal of a director after the expiration of a fixed term.(g) Directors’ remuneration – The effect of the proposed amendment to article 87 (Directors’ fees) is to enable the Board to set up a scheme for paymentof directors’ fees in shares. This amendment complies with the Combined Code and is in line with the Hampel Report which suggested that this is alegitimate way of aligning directors’ interests with those of the shareholders.(h) Powers of the Board – The proposed amendment to article 96 (Delegation to committees), clarifies the extent of the Board’s power to delegate powersin respect of remuneration and other benefits to a committee.(i) Directors’ Remuneration Report Regulations – The Directors’ Remuneration Report Regulations 2002 deal with disclosure and shareholder approval ofdirector’s remuneration and they require directors to prepare a directors’ remuneration report for each financial year. The proposed amendments toarticle 134 (Accounts to be sent to members etc) include the directors’ remuneration report in the list of items that must be sent to members.(j) Indemnity – The Companies (Audit, Investigations and Community Enterprise) Act 2004 provides, with effect from 6 April 2005, that companies mayprovide directors with funds to meet expenditure incurred in respect of defending civil and criminal proceedings and making certain applications to court.It is proposed to amend article 143 (Indemnity) to include a discretionary power to allow the Company to fund directors’ defence costs, as permittedunder the new law. It is proposed that a new paragraph (D) also be included in article 143 (Indemnity) to prevent directors who are interested in receivingfunding in a manner different to directors generally from voting on board resolutions in respect of funding the proceedings.(k) Miscellaneous – Amendments to update the Articles of Association are also proposed to article 38 (Reduction of capital), article 45 (Postponement ofgeneral meetings), article 83 (Appointment), article 84 (Revocation of appointment), article 98 (Power of Attorney), article 105 (Directors’ interests),article 130 (Scrip dividends) and article 142 (Winding up).AuditorsIn accordance with Section 384 of the Companies Act 1985, a resolution for the reappointment of KPMG Audit Plc as auditors will be proposed at theAnnual General Meeting.By order of the Board

Directors’ remuneration reportRemuneration reportThis Report has been prepared by the Remuneration Committee in accordance with the Directors Remuneration Report Regulations 2002 (“the Regulations”)contained in schedule 7A of the Companies Act 1985.The remuneration committeeThe remuneration committee (the Committee) of the Board is comprised of four non-executive directors, Sir Alan Cockshaw, Jeff Hewitt, Robert Jeens andBill Whiteley. During the year the Committee was chaired by Jeff Hewitt who is also the senior non-executive director.The remuneration committee confirms that it has been in compliance with the best practice governance provisions as set out in Section 1 of the Codethroughout the year.The Committee, which makes up the majority of the Board, is responsible for making recommendations to the Board on the framework for executiveremuneration and its costs, and determines on the Board’s behalf the individual salaries and other terms and conditions of employment for executivedirectors. The Committee also determines the terms of, and establishes the targets for, any discretionary incentive schemes in which the executive directorsmay participate.The Chairman of the Committee consults the Group Chief Executive on the remuneration of other senior executives and the Committee is consulted by theGroup Chief Executive on his recommendations for the remuneration of other senior managers.The Company Secretary keeps minutes of the Committee’s meetings and is available to advise on relevant matters.ConsultantsDuring the year the Committee appointed Kepler Associates as advisers on remuneration matters. Kepler has advised on the future annual incentive plans forexecutive directors and senior managers, stock option schemes being proposed to shareholders and other executive terms and conditions. The Committeeconfirms that Kepler Associates is a wholly independent adviser and does not have any other connection with the Company.Remuneration strategyThe Committee believe it is important that the Group is able to retain, motivate and when required, recruit high quality management. In recommending thelevel of remuneration the Committee takes into account the size and nature of the business including its international reach, using data from a number ofsources including Kepler and other third party surveys. The remuneration package is intended to motivate executives and senior management to achieveconsistent high performance, to recognise both individual and corporate achievement and to align the interests of executives with those of the shareholders.The Committee decided, advised by Kepler, to review the remuneration policy for senior executives to conform to current best practice but also to rectify andmotivate current and future management. As part of this review the Committee concluded that new Executive Share Option Schemes are required particularlyas the existing plans have no further headroom for option grants following the capital restructuring in 2003. Proposals are under due consideration and willbe put to shareholders in due course.Remuneration policyThe remuneration package for the executive directors and senior executives consists of an annual salary, short and long term incentive schemes, pensionarrangements, car or cash alternative and health care benefits.The incentive schemes consist of annual bonuses, executive share option schemes and employee sharesave schemes.Basic salary and benefitsThe basic salary is reviewed annually, and is determined by reference to relevant market data and the individuals experience, responsibilities and performance.Benefits principally comprise pension arrangements, a fully expensed company car or cash alternative and private healthcare.Performance related cash bonusesThe bonus for Group executive directors and certain senior executives is calculated on formulae which are determined each year by the remunerationcommittee. For each of the Group executive directors and certain senior executives, the formula measures the Group’s performance against pre-set stretchingbusiness targets relating to the operational performance of the Group or its subsidiaries. For 2004 the Committee determined that the bonus for the executivedirectors should be based on pre-set targets established for the Group’s operating profit before goodwill. The targets are not published externally for reasonsof commercial confidentiality.For the subsidiary senior executives, the targets are a combination of measures relating to their performance against specific objectives and business unitsoperational performance. In 2004 bonuses were earned at three subsidiary companies by the executive team responsible for those businesses. The maximumbonuses payable under the above schemes are limited to 50% of annual salary. The cost of any subsidiary bonuses are taken into account before Groupexecutive directors’ bonuses are calculated. The performance related bonuses are not pensionable.No. 1, No. 2 and No. 3 Executive Share Option SchemesThe No. 1, No. 2 and No. 3 Executive Share Option Schemes are available for certain executives in the Group’s businesses. It is the policy of the Committeethat annual awards should not exceed the annual basic salary of the recipient in any one year. The option price is based on the mid market price of thecompany’s shares on the last dealing date preceding the granting of the options and can be exercised between the third and tenth anniversary of thegrant date.The executive directors each have options outstanding only under the No. 3 Executive Scheme. The exercise of options under the No. 3 Executive ShareOption Scheme is dependent on certain performance criteria being achieved, namely that compound adjusted EPS growth over a three year period shouldexceed the movement in the retail price index by at least 3% for each year. The performance criteria has been achieved and the options under the No.3Executive Share Option Scheme have therefore vested.

Directors’ remuneration report continuedDirectors’ remuneration and pension entitlementsThe auditors have audited the information contained in this section of the report.The remuneration, excluding pensions, of the directors is set out below:Basic Salary Taxable Total Totalsalary (1) Bonuses (2) supplement (3, 4) benefits Fees 2004 2003£’000 £’000 £’000 £’000 £’000 £’000 £’000Sir Alan Cockshaw – – – – 50 50 50H L Tee 295 148 – 30 – 473 303A J Vaisey 220 110 43 1 – 374 288J Hewitt – – – – 20 20 20R Jeens – – – – 20 20 20W Whiteley – – – – 20 20 20P A M Curry – – – – – – 7515 258 43 31 110 957 708(1) The basic salary for Mr Tee includes a supplement of £60,000 per annum which is non-pensionable.(2) The executive directors were awarded bonuses equivalent to 50% of basic salary during 2004 under the performance related scheme described above.(3) Mr Vaisey has chosen the cash alternative to a company car and has received an additional payment of £14,000 classified as salary supplement.(4) Mr Vaisey received an additional payment amounting to £28,600 classified as a salary supplement, to compensate for the expected tax liability which arisesin respect of the Company’s contribution to the unapproved pension scheme.Fees for the provision of J Hewitt’s and W Whiteley’s services are payable to Electrocomponents PLC and Rotork PLC respectivelyThe non-executive directors receive a set fee for their services, which can be enhanced for taking on or providing additional responsibilities or services.No additional payments were made during the year.Pension benefits earned by directors (defined benefit schemes)Mr Tee is a contributory member of The Roxboro UK Executive Pension Fund. This fund is a defined benefit scheme and is approved by the Inland Revenue.The pension entitlements of Mr Tee are as follows:Increase in Increase Transfer Transfer Transfer Increaseaccrued in accrued value of value of value of in transferAccrued benefits benefits (A) less accrued accrued value lessbenefit at excluding including directors’ benefits at benefits at directors’31/12/04 inflation (A) inflation contributions 31/12/03 31/12/04 contributions£’000 £’000 £’000 £’000 £’000 £’000 £’000Mr H L Tee 136 4 8 53 1,962 2,281 305The accrued pension benefit shown is the amount that would be paid each year to the director in the form of a pension if he retired at the end of the year.This pension is calculated based on the total period of service with the Company, both before and after becoming a director. The transfer value has beencalculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11.Pension contributions paid on behalf of directors (money purchase schemes)Contributions£’000Mr A J Vaisey 88(2003: £84,000 (see note 1))Notes1. The contributions shown above of £88,000 in 2004 and £84,000 in 2003 are the total amounts paid by the Company in equal amounts to The RoxboroGroup UK Pension Scheme and to an unapproved pension scheme.As part of the pension arrangements, the directors are entitled to life assurance cover equal to four times basic salary.Directors’ beneficial interestsDirectors’ beneficial interests in the shares in the Company are set out below:B sharesOrdinary At Ordinaryshares 31 December sharesAt 2004 and At31 December 31 December 31 December2004 2003 2003Sir Alan Cockshaw 15,873 – 15,873H L Tee 1,370,857 2,590,922 1,370,857A J Vaisey 43,702 – 43,702J Hewitt 4,232 – 4,232R Jeens 10,000 – 10,000W Whiteley – – –There has been no change in directors’ holdings since 31 December 2004.None of the directors had or has an interest in any material contract relating to the business of the Company or any of its subsidiary undertakings.

Directors’ share optionsThe auditors have audited the information contained in this section of the report.Share options granted to directors are as follows:ExerciseDate Options priceNo 3 Executive Share Option Scheme granted granted per shareH L Tee 21 September 1999 80,000 246.5p14 March 2000 84,970 250.5p14 September 2001 125,000 194.0pA J Vaisey 21 September 1999 60,000 246.5p14 March 2000 71,202 250.5p14 September 2001 100,000 194.0pThere has been no change to the share options during the year.The options are exercisable after the third anniversary and before the tenth anniversary of the year of the grant.The performance criteria under the No.3 Executive Share Option Scheme have been achieved and the executive directors have the right to exercise the optionsgranted to them under this scheme.Share priceThe share price range for the ordinary shares during the period was a lowest market mid-point of 236.5p per share and highest market mid-point price of382p per share. On 31 December 2004 the market mid point price was 361.5p per share.Service contractsThe service contract of H L Tee dated 11 October 1993 was amended in January 2004 and now includes an ongoing notice period for termination of12 months to be given by either the Company or H L Tee.The service contract with A J Vaisey, dated 20 December 2003 includes an ongoing terminable period of 12 months if given by the Company and six monthsif given by A J Vaisey. In a letter dated 22 May 2004 Mr Vaisey agreed to extend the notice period he is required to give the Company to 12 months shouldhe give notice on or before 30 September 2005.There are no predetermined provisions for compensation on termination within the executive directors service contracts which exceed 12 months’ emolumentsfor Mr Tee and Mr Vaisey.Remuneration policy for non-executive directorsFees for the non-executive directors are determined by the Board as a whole. The non-executive directors do not take part in these discussions. Fees are paidon a per annum basis and are not varied for the number of days worked. The non-executive directors do not participate in the Company’s Bonus Schemes orShare Schemes, and they are not eligible for Pension Scheme membership.Non-executive directors’ letters of appointmentThe agreement with non-executive directors is that they have an initial term of three years. This may be extended by a further three year period bymutual consent of the director and the Board and thereafter for one-year periods upon agreement between the Company and the non-executive director.All agreements with the non-executive directors include notice periods of three months.The Articles of Association of the Company require that the non-executive directors stand for reappointment at the first Annual General Meetingfollowing appointment they are subject to triennial reappointment by shareholders and are required to retire at each Annual General Meeting followingtheir 70th birthday but are eligible for reappointment at that Annual General Meeting.Performance reviewThe following graphs show the five year total shareholder return performance of the Company, compared with the total shareholder return over the sameperiod for the FTSE Small Cap Index and the FTSE Electronics Index. These were selected as they were considered to be a broad representation of Roxboro’speer group in terms of its size and industry sector.Total shareholder return indices 2000-2004180 Roxboro GroupFTSE Small Cap1601401201008060Roxboro TSR v FTSE Electronic and Electrical Equipment TSR180Roxboro Group160FTSE Electronics14012010080604020402000 2001 2002 2003 200402000 2001 2002 2003 2004

Corporate governanceThe Company is committed to high standards of corporate governance. The Board is accountable to the company’s shareholders for good corporategovernance. This statement describes how the principles of corporate governance are applied to the Company and the Company’s compliance with theCode provisions set out in Section 1 of the Combined Code on Corporate Governance.Statement by the directors on compliance with the provisions of the Revised Combined CodeIn July 2003 the UK Financial Reporting Council published the Revised Combined Code (“the Revised Code”). This Revised Code was issued following therecommendations made in the Smith Report on Audit Committees and the Higgs report on non-executive directors. This is the first year that the Companyhas been required to report under the Revised Code.The Company has been in full compliance with the provisions set out in the Revised Code throughout the year, except in the following areas:The Board intends during the next few months to put in place a formal process for performance evaluation of the Board, its committees and directors.The arrangements whereby employees may in confidence raise matters of concern about possible improprieties in matters of financial reporting or othermatters will be formalised in line with the recommendations of the Code during the next year.The directors’ statement regarding compliance with requirements relating to internal control are dealt with below.The Board and Board committeesThe BoardThe Board currently comprises the independent non-executive Chairman, the Chief Executive, one other executive director and three other independentnon-executive directors. J Hewitt has acted as senior independent director throughout the year. The Board considers that all of the non-executive directorsare independent of management and are free from any relationship which could effect the exercise of their independent judgement and therefore meetthe criteria set out in the Revised Code. Their biographies appear on page 14. These demonstrate a range of experience and sufficient calibre to bringindependent judgement on issues of strategy, performance, resources and standards of conduct which is vital to the success of the Group. The Board isresponsible to shareholders for the proper management of the Group. A statement of the directors’ responsibilities in respect of the accounts is set out onpage 25 and a statement on going concern is given on page 16.The Board had nine meetings during the year, which were attended by the directors with the exception of one meeting which one director, Mr Whiteley,was unable to attend due to a prior commitment.There is a clear division of responsibilities between the Chairman and Chief Executive. The responsibilities broadly follow the guidance given in theRevised Code.The Board has a formal schedule of matters specifically reserved to it for decision including the approval of annual and interim results, annual budgets,and acquisitions and disposals. All directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuringthat Board procedures are followed and that applicable rules and regulations are complied with. Every director has access to appropriate training asrequired subsequent to appointment.The Board meets at least eight times each year, reviewing trading performance, ensuring adequate funding, setting and monitoring strategy, examining majoracquisition and disposal possibilities,and giving consideration to announcements to be made to shareholders. During the year the Board also reviews thosematters delegated to the Committees. The non-executive directors have a particular responsibility to ensure that the strategies proposed by the executivedirectors are fully considered.To enable the Board to discharge its duties, all directors receive appropriate and timely information. Comprehensive papers are distributed by the CompanySecretary to all directors in advance of Board meetings. The documentation normally includes a full report from the Chief Executive and Finance Directorand detailed papers on other matters that the Board are being asked to consider. In addition directors are briefed by presentations at the meetings includingthose given by senior management on key areas of the Group’s operations. Their understanding of the Group operations is further enhanced by visits to theoperations. The Chairman ensures that the directors take independent professional advice as required.The Chairman and other non-executive directors also meet during the year without the executive directors present.The Company has arranged for appropriate insurance cover for directors’ and officers of the Company.The following committees, all of which have terms of reference, deal with the specific aspects of the Group’s affairs.Nominations committeeThe nominations committee which comprises the non-executive directors meets as necessary. There were three meetings during 2004 attended by all themembers. The Chairman is Sir Alan Cockshaw and the Committee is responsible for proposing and recommending candidates for appointment to the Board,having regard to the balance and structure of the Board. In appropriate cases, recruitment consultants are used to assist the process. All directors are subjectto election by shareholders at the first Annual General Meeting following their appointment and to re-election thereafter at intervals of no more than threeyears. Non-executive directors are appointed for an initial three year term and are normally expected to serve up to six years. The Board continues to value theexperience and contribution offered by the Chairman who has served longer than six years.The Committee is also involved in the selection and recruitment of managing directors of the subsidiary businesses.Remuneration committeeThe Group’s remuneration committee was chaired by J Hewitt throughout the year with the other members being all the non-executive directors,Sir Alan Cockshaw, R Jeens and W Whiteley. It is responsible for making recommendations to the Board, within agreed terms of reference, on the Company’sframework of executive remuneration and its cost. The Committee determines the contract terms, remuneration and other benefits for each of the executivedirectors, including performance related bonus schemes, pension rights and compensation payments. The remuneration committee met seven times duringthe year and the meetings were attended by all members except for one meeting which Mr Whiteley was unable to attend.The Board itself determines the remuneration of the non-executive directors. The Committee calls for advice by leading firms of remuneration consultants asthey consider appropriate.Further details of the Company’s policies on remuneration and service contracts are given in the Board report on directors’ remuneration on pages 19 to 21.

Audit committeeThe audit committee, which is chaired by R Jeens, comprises all the non-executive directors and meets not less than twice annually. The Committee providesa forum for reporting by the Group’s external auditors. Meetings are also attended by invitation by the executive directors. The audit committee met twiceduring the year in March and September. Each meeting was attended by all of the members.The audit committee is responsible for reviewing a wide range of matters including the half-year and annual accounts before their submission to the Board,risk management,the application of appropriate accounting policies and procedures, and monitoring the controls which are in force to ensure the integrity ofthe information reported to the shareholders. The audit committee makes recommendations to the Board on the appointment and reappointment of externalauditors and on their remuneration both for audit and non-audit work, and discusses the nature, scope and results of the audit with external auditors.The audit committee is also responsible for overseeing the internal audit function for which an independent firm is used. The primary function of the internalaudit is to review the systems and controls for financial reporting. The audit committee receives copies of the reports prepared by the internal audit firm andgroup personnel for any internal control review visits they may perform. The internal audit firm will attend the audit committee as requested to report directlyon any significant findings.The Committee is also responsible for monitoring the cost effectiveness, independence and objectivity of KPMG Audit Plc, the external auditor, and agreeingthe level of remuneration and extent of non-audit services. The scope of the external audit for each business, together with the audit fees were presented byKPMG Audit Plc at the September 2004 Committee meeting. Both the audit scope and related fees were approved at the meeting. The executive directorsattended the meeting by invitation.Non-audit work is subject to approval by the audit committee if it is above a certain value, to ensure that the auditor’s independence is not compromised.All fees for non-audit work are subject to the agreement of the Group Finance Director. The approach of the Group over the past few years has been touse the Group’s auditors for tax work if they are considered to be best suited to do the work.The audit committee can meet with the auditors without management present.Relations with shareholdersCommunications with shareholders are given high priority. The review of the Chief Executive and Finance Director on pages 3 to 13 includes a detailedreview of the business and future developments. There is regular dialogue with institutional shareholders to foster mutual understandings of objectives.Such dialogue is controlled by written guidelines to ensure protection of share price sensitive information that has not already been made available generallyto the Company’s shareholders. Similar guidelines also apply to communications between the company and parties such as financial analysts, brokers andthe press.The Board uses the Annual General Meeting to communicate with private and institutional investors and welcomes their participation. The Chairman aimsto ensure that the chairman of the audit, remuneration and nomination committees are available at these meetings to answer questions. At the AGM theCompany conducts the formal business of the meeting by a poll on each separate resolution. Details of resolutions to be proposed at the Annual GeneralMeeting on 10 May 2005 can be found in the Notice of the Meeting. Notices covering each Annual General Meeting are sent out to shareholders at least20 working days before each meeting.Internal controlThe Board has overall responsibility for establishing and maintaining the Group’s system of internal control and for reviewing its effectiveness in accordancewith the guidance set out in “Internal Control: Guidance for Directors on the Combined Code” (the Turnbull Guidance). The directors have reviewed theeffectiveness of the system of internal controls in operation throughout the year. The role of the Group’s management is to implement Board policies on riskand control. Internal control systems are designed to meet the particular needs of the business concerned and the risks to which it is exposed and by theirnature can provide reasonable but not absolute assurance against material misstatement or loss.The Group’s management operates an ongoing risk management process for identifying, evaluating and managing the significant business, operational,compliance and financial risks faced by Roxboro. The process is reviewed by the Board during the year.The key procedures, which the directors have established to review and confirm the effectiveness of the system of internal control, include the following:Management structureThe Board has overall responsibility for the Group and there is a formal schedule of matters specifically reserved for decision by the Board. Each executivedirector has been given responsibility for specific aspects of the Group’s affairs. The executive directors together with key senior executives constitute theexecutive committee, which meets regularly, to discuss day-to-day operational matters. The executive directors also meet regularly with the managing directorsof the subsidiary businesses, together with their management teams.• Risk assessment Each business is required to maintain a Risk Register. The Risk Register identifies the key risks facing the business, the probability of thoserisks occurring, the impact should the risk occur, and the actions being taken to manage those risks to the approved level. Each business must submit theregister to the Board on an annual basis. The risk assessment is performed on a continual basis and reports are submitted to the Board on a periodic basis toupdate them on progress as appropriate.• Corporate accounting and procedures manual Responsibility levels are communicated throughout the Group as part of the corporate accounting andprocedures manual which sets out, inter-alia, the general ethos of the Group, delegation of authority and authorisation levels, segregation of duties andother control procedures together with accounting policies and procedures. The manual is updated regularly.• Quality and integrity of personnel The integrity and competence of personnel is ensured through high recruitment standards and subsequent trainingcourses. High quality personnel are seen as an essential part of the control environment and the ethical standards expected are communicated through thecorporate accounting and procedures manual.• Financial information Each year the Board approves the annual budget and updated business plan. Key risk areas are identified. Performance is monitoredand relevant action taken throughout the year through the monthly reporting to the Board of variances from the budget, updated forecasts for the yeartogether with information on the key risk areas.Each business also produces five year business plans which are updated regularly to reflect changing circumstances. The plans will include considerationof financial projections and the evaluation of business alternatives.The Board receives and reviews monthly management accounts together with the full year forecasts which are updated monthly. Performance againstforecast and budget is closely monitored.

• Investment appraisal Capital expenditure and research and development projects are regulated by budgetary process and authorisation levels.For expenditure beyond specified levels, detailed written proposals have to be submitted to the Board. Reviews are carried out after the acquisitionis complete, and for some projects, during the acquisition period, to monitor expenditure; major overruns are investigated.Due diligence work is carried out if a business is to be acquired.• Audit committee The audit committee monitors, through reports to it by the senior financial personnel and Internal Auditors, the controls which arein force and any perceived gaps in the control environment. The audit committee also considers and determines relevant action in respect of any controlissues raised by these reports or the external auditors.The Group does not have an in-house internal audit function, but engages a firm of independent auditors to perform internal audit reviews at each of themain businesses. The programme of visits to each of the main sites has continued throughout the year and reports issued to the audit committee. The firmof independent auditors does not provide any other services to the Group and their appointment is considered to enhance the monitoring process already inplace. In addition internal control visits are made at least once a year to a number of the subsidiaries by senior financial personnel from group companies toreview control procedures.Corporate Social ResponsibilityThe Board considers social and environmental matters and will review any items of significance where appropriate. The Risk Assessment processes in operationare designed to identify any major areas of concern in areas including Health and Safety and environmental issues.Social policyThe Group takes its responsibilities to its employees, customers and shareholders seriously but it also recognises its social responsibilities.Roxboro has a policy of not making donations to political groups, parties or individuals, but has a positive policy of supporting worthwhile institutions whichbenefit either the communities in which it operates or the industry in which it works.Environmental policyThe Group recognises its responsibility for the environment in which it operates. The business operations within the Group have a minimal environmentalimpact. Each business operates within a policy of reducing the environmental effects of its operations and to meet any statutory requirements placed upon it.Dialight – social, ethical and environmental mattersDialight’s industry leadership extends beyond technologically advanced products and solutions, as social, ethical and environmental stewardship help ensurethe businesses’ success. Dialight promotes a safe and equitable work environment, where equal opportunity abounds and employees are provided socialbenefits beyond insurance against illness and disability. For instance, the Employee Assistance Program, while not mandated by law, provides Dialightemployees access to confidential counselling services pertaining to a wide range of personal issues and dependencies. A written code of conduct to preventharassment and workplace violence is in place.Dialight’s manufacturing processes are designed to have minimal environmental impact; procedures are established to reduce, re-use and recycle all materials,including by-products of the manufacturing process. Emissions of gases, chemicals and water are well below governmental thresholds and, in most cases,undetectable. Dialight actively manages its supply chain and processes to eliminate or reduce the inclusion of hazardous substances in its end product andworks to meet and exceed internationally recognised regulations such as RoHS – 2002/95/EC, WEEE – 2002/96/EC, ELV – 200/53/EC dated 27 June 2002,JGPSSI dated 22 July 2003 and many regulations in discussion worldwide.Solartron – social, ethical and environmental mattersSolartron is a designer, manufacturer and supplier of measurement instrumentation; all of these products are used to improve industrial and process plant andequipment performance and safety. This includes reduction of energy used, elimination of emissions by ensuring efficient combustion processes, avoidance ofpollution risk with such applications as leak detection in pipelines and overfill protection on storage tanks.All Solartron products are designed in accordance with international standards and are independently certified for use globally in a wide range of industries,processes and applications.All Solartron business processes operate within national and international laws and directives. Solartron is an active member of trade bodies such as Gambica,PERA, EIC and API, contributing directly, where appropriate, to the development of standards, guidelines and directives on matters of product performance,design and safety.The division employs the services of external consultants to assist management and the total workforce to ensure full awareness and compliance with allappropriate guidelines and directives. It is the objective of the division to move towards the adoption of best practice throughout all aspects of the businessincluding HR, Health and Safety, AQ and Environmental matters.Solartron is a founding member of the B2B Compliance Producer Consortium, an organisation being established by members of Gambica, the UK trade bodyrepresenting the measurement and control industry. The B2B Compliance Producer Consortium is being established to help ensure participating memberscomply with the WEEE Directives and the resultant regulations soon to be issued by the DTI.

Directors’ responsibilities for the accountsCompany law requires the Directors to prepare accounts for each financial year which give a true and fair view of the state of affairs of the Group and theCompany and of the profit or loss for that period. In preparing those accounts, the directors are required to:• select suitable accounting policies and then apply them consistently;• make judgements and estimates that are reasonable and prudent;• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the accounts; and• prepare the accounts on the going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business.The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of theCompany and to enable them to ensure that the accounts comply with the Companies Act 1985. They are also responsible for safeguarding the assetsof the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.Independent auditors’ reportWe have audited the accounts on pages 26 to 46. We have also audited the information in the directors’ remuneration report that is described as havingbeen audited.This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has beenundertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s membersas a body, for our audit work, for this report, or for the opinions we have formed.Respective responsibilities of directors and auditorsThe directors are responsible for preparing the Annual Report and the directors’ remuneration report. As described above, this includes responsibilityfor preparing the accounts in accordance with applicable United Kingdom law and accounting standards. Our responsibilities, as independent auditors,are established in the United Kingdom by statute, the Auditing Practices Board, the Listing Rules of the Financial Services Authority and by our profession’sethical guidance.We report to you our opinion as to whether the accounts give a true and fair view and whether the accounts and the part of the directors’ remunerationreport to be audited have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the directors’ reportis not consistent with the accounts, if the Company has not kept proper accounting records, if we have not received all the information and explanationswe require for our audit, or if information specified by law regarding directors’ remuneration and transactions with the Group is not disclosed.We review whether the corporate governance statement on page 22 reflects the Company’s compliance with the nine provisions of the 2003 FRC Codespecified for our review by the Listing Rules, and we report if it does not. We are not required to consider whether the Board’s statements on internalcontrol cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and control procedures.We read the other information contained in the Annual Report, including the corporate governance statement and the unaudited part of the directors’remuneration report and consider whether it is consistent with the audited accounts. We consider the implications for our report if we become aware ofany apparent misstatements or material inconsistencies with the accounts.Basis of audit opinionWe conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis,of evidence relevant to the amounts and disclosures in the accounts and the part of the directors’ remuneration report to be audited. It also includes anassessment of the significant estimates and judgements made by the directors in the preparation of the accounts, and of whether the accounting policiesare appropriate to the Group’s circumstances, consistently applied and adequately disclosed.We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the accounts and the part of the directors’ remuneration report to be audited are free from materialmisstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentationof information in the accounts and the part of the directors’ remuneration report to be audited.OpinionIn our opinion:• The accounts give a true and fair view of the state of affairs of the Company and the Group as at 31 December 2004 and of the profit of the Group forthe year then ended; and• the accounts and the part of the directors’ remuneration report to be audited have been properly prepared in accordance with the Companies Act 1985.

Group profit and loss account2004 2003Notes £’000 £’000Turnover2(a)Continuing operations 118,852 122,173Discontinued operations – 14,606Cost of sales 118,852 136,779(80,521) (96,342)Gross profit 38,331 40,437Distribution costs (15,777) (18,062)Administrative expenses (after amortisation of intangible assets of £1,117,000 – (2003: £1,202,000)) (13,501) (15,304)Operating profit2(b)/3Continuing operations 9,053 4,235Discontinued operations – 2,8369,053 7,071Profit on disposal of discontinued operations – 15,585Profit on ordinary activities before interest and taxation 9,053 22,656Net interest 5 5 (326)Profit on ordinary activities before taxation 9,058 22,330Tax on profit on ordinary activities 6 (3,462) (2,612)Profit for the financial year 5,596 19,718Dividends 7 (3,391) (3,042)Retained profit for the financial year 22 2,205 16,676Earnings per share – basic 8 18.3 45.4– adjusted 8 22.0 12.6– diluted 8 18.2 45.4PencePenceGroup statement of total recognised gains and losses2004 2003£’000 £’000Profit for the financial year 5,596 19,718Currency translation differences on foreign currency net investments (1,195) (2,281)Total gains recognised in the year 4,401 17,437

Balance sheetsGroup Group Company Company2004 2003 2004 2003Notes £’000 £’000 £’000 £’000Fixed assetsIntangible assets 10 14,347 15,464 – –Tangible assets 11 11,463 13,100 63 112Investments 12 – – 51,899 51,89925,810 28,564 51,962 52,011Current assetsStocks 13 15,404 16,118 – –Debtors 14 26,314 25,879 24,606 26,751Cash at bank and in hand 6,819 4,332 6,946 5,68148,537 46,329 31,552 32,432Creditors:Amounts falling due within one yearBorrowings 15 (51) (2,364) – (2,337)Other creditors 15 (20,144) (19,354) (4,788) (3,779)(20,195) (21,718) (4,788) (6,116)Net current assets 28,342 24,611 26,764 26,316Total assets less current liabilities 54,152 53,175 78,726 78,327Provisions for liabilities and charges 18 (1,667) (1,507) – –52,485 51,668 78,726 78,327Capital and reservesCalled up share capital 21 2,849 3,115 2,849 3,115Share premium account 22 6,049 5,976 6,049 5,976Capital redemption reserve 22 40,372 40,104 40,372 40,104Other reserves 22 – – 23,018 23,018Profit and loss account 22 3,215 2,473 6,438 6,114Shareholders’ funds – equity and non-equity interests 23 52,485 51,668 78,726 78,327

Group statement of cash flows2004 2003Notes £’000 £’000Cash flow from operating activities 3(b) 13,201 10,562Returns on investments and servicing of financeInterest paid (90) (529)Interest received 95 216Net cash inflow/(outflow) from returns on investment and servicing of finance 5 (313)Taxation (3,583) (1,867)Capital expenditure and financial investmentPurchase of tangible fixed assets (1,299) (1,726)Sale of tangible fixed assets 13 101Net cash outflow from investing activities (1,286) (1,625)Acquisitions and disposalsDisposal of subsidiary undertakings – 52,654Purchase of intangible assets – (50)– 52,604Dividends paid (3,135) (4,883)Cash inflow before use of liquid resources and financing 5,202 54,478FinancingIssue of ordinary share capital 74 97Share issue expenses – (459)Redemption of ‘B’ shares (267) (40,053)Net loan repayments – (17,065)Capital element of finance lease rental payments (7) (20)(200) (57,500)Increase/(decrease) in cash in the year 17 5,002 (3,022)Reconciliation of net cash flow to movements in net fundsIncrease/(Decrease) in cash in the year 5,002 (3,022)Cash outflow from change in funds and lease financing 7 17,085Change in net funds resulting from cash flows 5,009 14,063Translation difference (209) (393)Movement in net funds in the year 4,800 13,670Net funds at beginning of year 1,968 (11,702)Net funds at end of year 17 6,768 1,968

Notes to the accounts1. Accounting policiesAccounting conventionThe accounts are prepared in accordance with the historical cost convention and in accordance with applicable accounting standards. A summary of theaccounting policies is set out below:The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group’s accounts.The Group has followed the transitional arrangements of FRS17 “Retirement Benefits” in these accounts.Basis of consolidationThe consolidated accounts include the accounts of the Company and those of each of its subsidiary undertakings made up to 31 December each year.The acquisition method of accounting has been adopted. Under this method, the results of subsidiary undertakings acquired or disposed of in the year areincluded in the consolidated profit and loss account from the date of acquisition or up to the date of disposal.Under Section 230(4) of the Companies Act 1985, the Company is exempt from the requirement to present its own profit and loss account.TurnoverGroup turnover represents the net amounts invoiced to customers for goods and services supplied in respect of ordinary activities, excluding intra-Grouptransactions and value added tax, except for long-term contracts where turnover is calculated as that proportion of total contract value which costs incurredto date bear to total expected costs for that contract.DepreciationDepreciation is calculated so as to write off the cost, less estimated net realisable value, of tangible fixed assets on a straight-line basis over the expecteduseful economic lives of the assets concerned. The principal annual rates used for this purpose are:Freehold land– not depreciatedFreehold buildings – between 2% and 6%Office equipment – between 10% and 20%Computer equipment – between 20% and 33.3%Plant, machinery, fixtures and fittings – between 10% and 20%Tooling and moulds – minimum 25%Motor vehicles – between 25% and 33.3%Leased assetsAssets acquired under finance leases and the related future rental obligations relating to capital repayments are included on the balance sheet. The interestelement of the rental obligation is charged against profit in proportion to the reducing capital elements outstanding. The assets are depreciated over theshorter of the lease term and their useful lives. The costs of operating leases are charged to the profit and loss account on a straight-line basis over the periodof the lease.Foreign currenciesTransactions in foreign currencies are recorded at the rate ruling at the date of the transaction or at the contracted rate if the transaction is covered by aforward exchange contract. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balancesheet date or if appropriate at the forward contract rate. All differences are taken to the profit and loss account with the exception of differences on foreigncurrency borrowings, to the extent that they are used to finance or provide a hedge against foreign equity investments, which are taken directly to reservestogether with the exchange difference on the carrying amount of the related investments.Profit and loss accounts denominated in foreign currencies are translated into sterling in the Group accounts at the average rates of exchange ruling for therelevant financial year. Assets and liabilities are translated at exchange rates ruling at the balance sheet date. Gains and losses arising on these translationsare taken to reserves. Exchange differences arising on the retranslation of the opening net investment in foreign enterprises are dealt with as adjustmentsto reserves.CashCash, for the purpose of the cash flow statement, comprises cash in hand, deposits repayable on demand, less overdrafts payable on demand.Stocks and work in progressStocks and work in progress are stated at the lower of cost and net realisable value. Cost includes material, direct labour and all overheads appropriate tothe relevant stage of production. Net realisable value represents the estimated amount at which stocks and work in progress will be realised after takinginto account all relevant marketing, selling and distribution costs and costs to complete.Long-term contractsProfit on long-term contracts is taken as the work is carried out if the final outcome can be assessed with reasonable certainty. The profit included is calculatedon a prudent basis to reflect the proportion of the work carried out at the year end, by recording turnover and related costs (as defined in Stocks above) ascontract activity progresses. Turnover is calculated as that proportion of total contract value which incurred to date bear to total expected costs for thatcontract. Full provision is made for losses on all contracts in the year for which they are first foreseen.

Notes to the accounts continued1. Accounting policies continuedTaxationDeferred taxation is recognised without discounting in respect of all timing differences between the treatment of certain items for taxation and accountingpurposes which have arisen but not reversed by the balance sheet date, except as otherwise required by FRS19.Intangible fixed assetsGoodwill prior to 31 December 1997, representing the difference between the purchase price and the fair value of net assets acquired has been immediatelyset off against reserves. On disposal of businesses, goodwill previously written off under this policy is written back through the profit and loss account.Goodwill previously eliminated against reserves has not been reinstated on implementation of FRS10.Positive goodwill arising on acquisitions since 1 January 1998 is capitalised and amortised on a straight-line basis over its anticipated useful economic lifeof 20 years. It is reviewed for impairment at the end of the first full financial year following the acquisition and in other periods if events or changes incircumstance indicate that the carrying value may not be recoverable.Intangible fixed assets purchased separately from a business are capitalised at their cost. Concessions, patents, licences and trademarks purchased by theGroup are amortised in full by equal annual instalments over their useful economic lives.Engineering technologyResearch and development expenditure incurred in the Group’s technology and product creation is written off to the profit and loss account as incurred.Investments in subsidiary undertakingsInvestments in subsidiary undertakings are stated at cost, less provisions for impairment in value.Pension contributionsThe Group operates defined benefit and defined contribution pension schemes in both the UK and USA. The defined benefit pension schemes costs areaccounted for on the basis of charging the consistent ongoing cost of providing pensions over the years during which the Group benefits from the employees’services, adjusted for any variations in cost arising from the experience of the schemes. The effects of variations from regular cost are spread over the averageexpected remaining working lifetime of members of the schemes. Contributions for the defined contribution pension schemes are charged to the profit andloss account as they become payable, in accordance with the rules of the schemes.2. Segmental informationTurnover, profit before interest and taxation and net assets are analysed below:2004 2003£’000 £’000a) TurnoverBy geographical destination:UK 23,007 28,562USA 45,961 56,005Other European countries 29,450 31,367Rest of the world 20,434 20,845118,852 136,779By geographical origin:UK 62,353 71,397USA 49,759 58,882Other European countries 15,626 15,698127,738 145,977Inter-segment sales (8,886) (9,198)118,852 136,779By business operation:Continuing operationsDialight 55,268 57,916Solartron 63,584 64,257118,852 122,173Discontinued operationsWeston – 14,606118,852 136,779

2. Segmental information continued2004 2003£’000 £’000b) Profit before interest and taxationBy geographical origin:UK 7,381 9,004USA 5,846 1,944Other European countries (637) (445)Operating profit before central costs and intangible assets amortisation 12,590 10,503Central costs (2,420) (2,230)Amortisation of intangible assets (1,117) (1,202)Operating profit on ordinary activities 9,053 7,071Profit on disposal of discontinued operations – 15,585Profit before interest and taxation 9,053 22,656By business operation:Continuing operationsDialight 5,879 1,071Solartron 6,711 6,59612,590 7,667Discontinued operationsWeston – 2,836Operating profit before central costs and intangible assets amortisation 12,590 10,503Central costs (2,420) (2,230)Amortisation of intangible assets (1,117) (1,202)Operating profit on ordinary activities 9,053 7,071Profit on disposal of discontinued operations – 15,585Profit before interest and taxation 9,053 22,656In 2004, £766,000 of the amortisation of intangible assets related to the Solartron business and £351,000 related to the Dialight business.In 2003, £766,000 of the amortisation of intangible assets related to the Solartron business, £352,000 related to the Dialight business and £84,000 related tothe discontinued Weston business.2004 2003£’000 £’000c) Net assetsBy geographical origin:UK 19,383 21,099USA 12,474 14,770Other European countries 1,823 1,69333,680 37,562Unallocated central net assets 18,805 14,10652,485 51,668By business operation:Continuing operationsDialight 17,705 20,406Solartron 15,975 17,15633,680 37,562Unallocated central net assets 18,805 14,10652,485 51,668Unallocated central net assets include intangible assets of £14,347,000 of which £11,399,000 relates to the Solartron business and £2,948,000 relates to theDialight business. In 2003 the unallocated central net assets included intangible assets of £15,464,000 of which £12,165,000 related to the Solartron businessand £3,299,000 related to the Dialight business.

Notes to the accounts continued3. Operating profit2004 2003£’000 £’000a) Operating profit is stated after chargingAuditors’ remuneration (including £26,000 for the parent company, (2003: £36,000)) 218 201Depreciation on owned fixed assets 2,603 3,380Depreciation on assets held under finance leases 3 102,606 3,390Amortisation of other intangible assets 191 191Amortisation of goodwill 926 1,0111,117 1,202Engineering and technology research costs 6,857 8,046Operating lease rentals – plant and machinery 1,144 1,226– land and buildings 2,259 2,4013,403 3,627An analysis of other fees paid to the auditors is as follows:Taxation 103 70Pension advisory 15 6Advisory re Weston disposal and capital reorganisation – 444Advisory re strategic and tax planning 269 –Advice given to pension schemes and not recharged to the schemes 79 69Other advisory – 34The Group has not sought any management consultancy services from its auditors.466 6232004 2003£’000 £’000b) Reconciliation of operating profit to cash flow from operating activitiesOperating profit 9,053 7,071Depreciation charge 2,606 3,390Amortisation of intangible assets 1,117 1,202Loss/(profit) sale of tangible fixed assets 54 (59)Decrease in stocks 238 2,462Increase in debtors (1,076) (1,988)Increase/(decrease) in creditors 1,009 (1,713)Increase in provisions 200 197Cash flow from operating activities 13,201 10,562Continuing Continuing Discontinuedoperations operations operations Total2004 2003 2003 2003£’000 £’000 £’000 £’000c)Turnover 118,852 122,173 14,606 136,779Cost of sales (80,521) (86,682) (9,660) (96,342)Gross profit 38,331 35,491 4,946 40,437Distribution costs (15,777) (16,999) (1,063) (18,062)Administrative expenses (13,501) (14,257) (1,047) (15,304)Operating profit 9,053 4,235 2,836 7,071Discontinued operations relate to the Weston division which was sold by the Group in June 2003.

4. Staff costs2004 2003£’000 £’000Staff costs during the year were:Wages and salaries 30,226 34,805Social security costs 3,226 3,951Pension costs 2,719 3,570Employee information36,171 42,3262004 2003Numbers NumbersThe average number of employees (including executive directors) by geographical location during the year, was:UK 656 834USA and Mexico 627 715Rest of the world 173 172Details for each director, of remuneration, pension entitlements and interests in share options are set out on pages 19 to 215. Net interest1,456 1,7212004 2003£’000 £’000Interest payable:Interest on bank loans and overdrafts (89) (540)Finance charges payable under finance leases (1) (2)(90) (542)Interest receivable:Bank deposit interest 95 216Net interest receivable/(payable) 5 (326)6. Tax on profit on ordinary activities2004 2003£’000 £’000UK corporation taxCurrent tax 1,597 2,102Adjustments to current tax in respect of prior years (75) (153)1,522 1,949Overseas taxCurrent tax 2,081 913Adjustments to current tax in respect of prior years (285) (221)1,796 692Total current tax 3,318 2,641Deferred taxCurrent year (63) (5)Adjustments in respect of prior years 207 (24)144 (29)Total tax charge 3,462 2,612

Notes to the accounts continued6. Tax on profit on ordinary activities continuedReconciliation of current tax chargeThe UK standard rate of corporation tax for the year is 30% (2003: 30%)2004 2003£’000 £’000The actual tax charge for the current year exceeds the standard rate for the reasons set out below:Profit on ordinary activities before taxation 9,058 22,330Notional charge at UK corporate tax rate at 30% 2,717 6,699Differences in effective overseas tax rates 189 128Goodwill amortisation for which no tax relief is due 287 332Items not deductible for tax purposes 88 63Profit on disposal of subsidiaries not taxable – (4,509)Unrecognised losses 334 297Adjustments in respect of prior years (360) (374)Current year deferred tax movements taken to profit and loss account 63 5Total current tax charge 3,318 2,641Factors that may affect future tax charges:No provision has been made for deferred tax on gains rolled over into replacement assets. Such tax would become payable only if the assets were soldwithout it being possible to claim rollover relief. The total amount unprovided is £0.2m and it is not envisaged that any tax will become payable in theforeseeable future.A deferred tax asset in respect of losses carried forward has only been recognised to the extent that the losses are deemed recoverable.7. Dividends on equity and non-equity shares2004 2003£’000 £’000Equity dividends on ordinary shares:Interim paid 3.4p (2003: 3.1p) 1,023 932Final proposed 7.6p (2003: 6.9p) 2,288 2,0753,311 3,007Non-equity dividends on B shares:31 December 2004 proposed 43 –31 December 2003 and 30 June 2004 paid 37 353,391 3,0428. Earnings per shareThe calculation of earnings per ordinary share is based on profit after tax of £5,596,000 (2003: £19,718,000) and after non-equity dividends of £80,000(2003: £35,000) and on 30,091,000 (2003: 43,324,000) ordinary shares, being the average number of ordinary shares in issue during the year.The diluted earnings per share is based on profit after tax for the year of £5,596,000 (2003: £19,718,000) and after non-equity dividends of £80,000(2003: £35,000) and on 30,339,000 (2003: 43,339,000) ordinary shares, calculated as follows:2004 2003Thousands ThousandsBasic weighted average number of shares 30,091 43,324Dilutive potential ordinary shares:Employee and Executive share options 248 1530,339 43,3392004 2003Pence PenceReconciliation to adjusted earnings per shareBasic earnings per share 18.3 45.4Amortisation of intangible assets of £1,117,000 (2003: £1,202,000) 3.7 2.8Profit on sale of discontinued operations – (35.6)Adjusted earnings per share 22.0 12.6

9. Profit attributable to members of the parent companyThe profit dealt with in the accounts of the parent company was £3,903,000 (2003: £16,467,000).10. Intangible assetsConcessions,patents,licences andtrademarks Goodwill Total£’000 £’000 £’000CostAt 1 January 2004 and 31 December 2004 573 18,537 19,110AmortisationAt 1 January 2004 (207) (3,439) (3,646)Provided during the year (191) (926) (1,117)At 31 December 2004 (398) (4,365) (4,763)Net book valueAt 31 December 2004 175 14,172 14,347At 31 December 2003 366 15,098 15,464Goodwill amounting to £46,955,000 (2003: £46,955,000) has been written off to the consolidated profit and loss account reserve.11. Tangible assetsGroupCompanyFreehold Plant,land and equipment Equipmentbuildings and vehicles Total and vehicles£’000 £’000 £’000 £’000CostAt 1 January 2004 6,768 35,149 41,917 514Exchange adjustments (113) (1,017) (1,130) –Additions 2 1,297 1,299 5Disposals – (2,336) (2,336) (35)At 31 December 2004 6,657 33,093 39,750 484DepreciationAt 1 January 2004 (2,358) (26,459) (28,817) (402)Exchange adjustments 88 798 886 –Charged to profit and loss account (181) (2,425) (2,606) (52)Disposals – 2,250 2,250 33At 31 December 2004 (2,451) (25,836) (28,287) 421Net book valueAt 31 December 2004 4,206 7,257 11,463 63At 31 December 2003 4,410 8,690 13,100 112The net book value of assets held under finance leases is as follows:2004 2003£’000 £’000Plant, equipment and vehicles – 53

Notes to the accounts continued12. InvestmentsCompany Company2004 2003£’000 £’000Investments comprise:Investments in subsidiary undertakings 51,899 51,899Investments in subsidiary undertakings:CostAt 1 January 2004 and 31 December 2004 54,421Provisions:At 1 January 2004 and 31 December 2004 (2,522)Net book value at 31 December 2004 51,899Net book value at 31 December 2003 51,899Details of the principal subsidiary companies are as follows:NameCountry of incorporation and operationDialight Corporation*United States of AmericaDialight Garufo GmbH*GermanyBLP Components LimitedEngland and WalesSolartron Mobrey Limited*England and WalesISA Controls Limited*England and WalesSolartron Metrology LimitedEngland and WalesThe Group owns all of the equity of the above companies. The investment is held directly by the Company except for those companies where indicated by*.13. Stocks2004 2003£’000 £’000Stocks comprise:Raw materials and consumables 9,271 9,440Work in progress 2,695 2,920Finished goods and goods for resale 3,438 3,75814. DebtorsGroup15,404 16,118Company2004 2003 2004 2003£’000 £’000 £’000 £’000Trade debtors 21,902 21,706 – –Bills receivable 240 308 – –Amounts due under long-term contracts – 1,039 – –Amounts owed by subsidiary undertakings – – 23,311 26,296Other debtors 1,988 1,096 1,100 68Corporation tax recoverable – – 168 350Deferred tax asset (note 18) 316 488 27 37Prepayments – pension 564 85 – –Prepayments – other 1,304 1,157 – –26,314 25,879 24,606 26,751Amounts falling due after more than one year included in debtors above are:Deferred tax asset (note 18) 213 437 – 37Prepayments – pension 564 – – –777 437 – 37

15. CreditorsGroupCompany2004 2003 2004 2003£’000 £’000 £’000 £’000Amounts falling due within one yearBank loans and overdrafts – 2,320 – 2,337Loan notes 51 37 – –Finance leases (note 19) – 7 – –Borrowings (note 16) 51 2,364 – 2,337Trade creditors 9,656 8,376 – –Other taxes and social security costs 1,142 1,212 40 40Amounts owed to subsidiary undertakings – – 1,686 844Corporation tax 1,212 1,486 – –Dividends payable 2,331 2,075 2,331 2,075Accruals and deferred income 5,803 6,205 731 820Other creditors 20,144 19,354 4,788 3,77916. Borrowings20,195 21,718 4,788 6,116GroupCompany2004 2003 2004 2003£’000 £’000 £’000 £’000Bank loans and overdrafts (unsecured) – 2,320 – 2,337Loan notes (unsecured) 51 37 – –Finance leases (note 19) – 7 – –51 2,364 – 2,337Less amounts falling due within one year (51) (2,364) – (2,337)Amounts falling due after one year – – – –Further details of the borrowings are set out in note 20.17. Analysis of net fundsAt Cash Other At1 Jan 2004 flow movement 31 Dec 2004£’000 £’000 £’000 £’000Cash in hand, at bank 4,332 5,002 (2,515) 6,819Debt due within one year (2,357) – 2,306 (51)Finance leases (7) 7 – –Total 1,968 5,009 (209) 6,768At 1 Jan Cash Other At 31 Dec2003 flow movement 2003£’000 £’000 £’000 £’000Cash in hand, at bank 7,747 (3,022) (393) 4,332Debt due within one year (19,422) 17,065 – (2,357)Finance leases (27) 20 – (7)Total (11,702) 14,063 (393) 1,968

Notes to the accounts continued18. Provisions for liabilities and chargesProvision fordilapidation costs Warranty provision Total2004 2003 2004 2003 2004 2003£’000 £’000 £’000 £’000 £’000 £’000GroupAt 1 January (600) (600) (907) (1,243) (1,507) (1,843)Exchange adjustments – – 39 49 39 49Profit and loss account – – (925) (1,060) (925) (1,060)Utilised – – 726 1,046 726 1,046Subsidiaries sold – – – 301 – 301At 31 December (600) (600) (1,067) (907) (1,667) (1,507)GroupCompany2004 2003 2004 2003£’000 £’000 £’000 £’000Deferred tax assetAt 1 January 488 228 37 50Profit and loss account (144) 29 (10) (13)Exchange adjustments (28) (47) – –Subsidiaries sold – 278 – –At 31 December (included in debtors – note 14) 316 488 27 37An analysis of deferred tax is as follows:GroupCompany2004 2003 2004 2003£’000 £’000 £’000 £’000Capital allowances (459) (432) 23 19Short-term timing differences 1,165 1,310 4 18Gain held over (390) (390) – –19. Obligations under leasesThe Group has the following obligations under finance leases:316 488 27 372004 2003£’000 £’000Amounts payableWithin one year – 7Analysis of changes in finance leasing during the year:At 1 January 7 27Capital element of finance lease repayments (7) (20)At 31 December – 7

19. Obligations under leases continuedThe Group is committed to the following annual payments under operating leases:2004 2003£’000 £’000Plant and machinery leases which expireWithin one year 190 275Between one and two years inclusive 298 375Between two and five years inclusive 403 303After five years – 10891 963Land and buildings leases which expireWithin one year 55 76Between one and two years inclusive 385 46Between two and five years inclusive 599 886After five years 1,049 1,059The parent company has no annual operating leases commitments in respect of land and buildings (2003: £55,000 within one year).2,088 2,06720. Financial instruments and related disclosuresDetails of the Group’s treasury policies and strategies are given in the Finance Director’s Review on pages 12 and 13The following table sets out the carrying amounts and the fair values of the Group’s financial instruments at 31 December 2004. Where available marketvalues have been used to determine fair values. Where market values are not available, fair values have been calculated by discounting cash flows at prevailinginterest and exchange rates. Short-term debtors and creditors have been excluded from these disclosures.Book value Fair value Book value Fair value2004 2004 2003 2003£’000 £’000 £’000 £’000Current assets:Cash at bank 6,819 6,819 4,332 4,332Liabilities:Short-term borrowings and overdrafts (51) (51) (2,364) (2,364)Forward exchange contracts – 272 – 362(51) 221 (2,364) (2,002)1. Cash at bank: The carrying amount reported in the balance sheet approximate to fair value.2. Short-term borrowings and overdrafts – the fair value approximates to the carrying amount reported in the balance sheet because of the short maturityof these instruments.3. Forward exchange contracts: The fair value of the Group’s forward exchange contracts is based on market prices and exchange rates at thebalance sheet date.

Notes to the accounts continued20. Financial instruments and related disclosures continuedInterest rate and currency profile of net fundsThe Group’s net funds and interest rate profile by currency is as follows:Fixed rateFloating rate Years Interest Total2004 £’000 £’000 fixed rate £’000CurrencySterling 2,617 – – – 2,617US dollars 3,788 – – – 3,788Euro (92) – – – (92)Other 455 – – – 4556,768 – – – 6,768Fixed rateFloating rate Years Interest Total2003 £’000 £’000 fixed rate £’000CurrencySterling (1,046) – – – (1,046)US dollars 1,860 – – – 1,860Euro 969 – – – 969Other 185 – – – 185The floating rate borrowings are linked to LIBOR in the UK and US Prime Rate and bank funding rates in the USA and Europe.1,968 – – – 1,968Currency riskAs detailed in the Financial Review, the Group’s policy is to utilise forward currency contracts to match exposures on financial assets and liabilities.As at 31 December 2004, after taking into account the effects of forward foreign exchange contracts, the Group had no material currency exposure.HedgesThe Group’s policy is to hedge against transactional currency exposures and currency exposures on future expected sales.Gains and losses on instruments used for hedging are not recognised until the exposure that is being hedged is itself recognised. Unrecognised gains andlosses and deferred gains and losses on financial instruments used for hedging are as follows:Gain/(loss)£’000Gains and losses unrecognised at 31 December 2003: 362Gains recognised in the profit and loss account in 2004 362Gains and losses unrecognised at 31 December 2004 272Gains and losses to be recognised in the profit and loss account in 2005 272Borrowing facilitiesAt 31 December 2004 the Group had the following undrawn committed borrowing facilities available.2004 2003£’000 £’000Expiring within one year 15,000 12,680

21. Called up share capital2004 2004 2003 2003Number £’000 Number £’000Authorised ordinary shares of 1.89p each 38,624,400 730 38,624,400 730Non-equity B shares of 75p each 3,395,829 2,547 57,054,186 42,791Issued and fully paidOrdinary shares of 1.89p each 30,102,090 569 30,072,090 568Non-equity B shares of 75p each 3,039,521 2,280 3,395,829 2,5472,849 3,115The holders of B shares are not entitled to receive notification of any general meeting of the Company or to attend, speak or vote at any such generalmeeting unless the business of the meeting includes the consideration of a resolution for the winding up of the Company, in which case the holders ofthe B shares shall have the right to attend the general meeting and shall be entitled to speak and vote only on any such resolution.B shares carry the right to a dividend paid at the rate of 70% of six month LIBOR, in arrears on a semi-annual basis.The B shares may be redeemed at six monthly intervals on every 30 June and 31 December. Unless redeemed earlier, the Company will redeem theoutstanding B shares on 31 December 2008.The Company has the option to compulsorily redeem the outstanding B shares at any time.Changes to authorised share capital On 26 April 2004, following shareholder approval at the Annual General Meeting, the authorised share capital ofthe B shares was reduced by 53,658,357 to 3,395,829 shares.Changes to issued share capital During the year 30,000 ordinary shares were issued under the terms of the Executive Share Option Schemes for a totalconsideration of £74,000.On 30 June 2004 and 31 December 2004 the Company redeemed 118,559 and 237,749 B shares respectively at par value at a cash cost of £267,000.Following each redemption the B shares were cancelled and the nominal value of the shares transferred from the profit and loss account to the CapitalRedemption Reserve (see note 22).The executive share option schemes in operation through the year were:Roxboro No. 1 Executive Roxboro No. 2 Executive Roxboro No. 3 ExecutiveShare Option Scheme Share Option Scheme Share Option SchemePence Pence PenceShares per share Shares per share Shares per shareOptions granted in previous years642,500 2465,000 233 5,000 233 241,760 251360,000 19425,000 269 5,000 250110,000 292 5,000 292Options granted at 1 January 2004 140,000 – 15,000 – 1,244,260 –Options lapsed during year – – (5,000) 292 (214,999) 246Options lapsed during year (110,000) 292 (5,000) 250 (35,000) 194Options lapsed during year (25,000) 269 – – (37,928) 251Options exercised during year – – (5,000) 233 (25,000) 246At 31 December 2004 5,000 – 931,333Exercise dates Between Between18 July 1998 and 21 September 2002 and17 July 2008 14 September 2011

Notes to the accounts continued22. ReservesShare Capital Profitpremium redemption Other and lossaccount reserve reserves account Total£’000 £’000 £’000 £’000 £’000GroupAt 1 January 2004 5,976 40,104 – 2,473 48,553Profit for the year – – – 2,205 2,205New share issue 73 – – – 73Transfer to capital redemption reserve – 268 – (268) –Exchange adjustments – – – (1,195) (1,195)At 31 December 2004 6,049 40,372 – 3,215 49,636CompanyAt 1 January 2004 5,976 40,104 23,018 6,114 75,212Profit for the year – – – 592 592Transfer to capital redemption reserve – 268 – (268) –New share issue 73 – – – 73At 31 December 2004 6,049 40,372 23,018 6,438 75,877Goodwill amounting to £46,955,000 (2003: £46,955,000) has been written off to the consolidated profit and loss account reserve.23. Reconciliation of movements in Group’s shareholders’ funds2004 2003£’000 £’000The movements in Group’s shareholders’ funds are:Total recognised gains and losses 4,401 17,437Dividends (3,391) (3,042)Goodwill previously taken to profit and loss account – 21,664New share capital subscribed 74 97Share issue expenses – (459)Redemption of B Shares (267) (40,053)Net change to shareholders’ funds 817 (4,356)Balance brought forward 51,668 56,024Balance carried forward 52,485 51,668GroupCompany2004 2003 2004 2003£’000 £’000 £’000 £’000Shareholders’ funds are analysed as follows:Shareholders’ fundsEquity 50,205 49,121 76,446 75,780Non-equity B Shares 2,280 2,547 2,280 2,54724. Commitments for capital expenditure52,485 51,668 78,726 78,3272004 2003£’000 £’000GroupCapital expenditure contracted 589 226The Company has no capital expenditure commitments.

25. PensionsUK Defined Benefit Pension Schemes There are three separately administered defined benefit pension schemes funded by the payment of contributions.The assets of the schemes are held separately from those of the Group. The total amount contributed by the Group during 2004 was £916,000 (2003:£1,028,000). The contributions to the schemes are determined with the advice of independent qualified actuaries on the basis of triennial valuations.The RoxboroSolartron MobreyUK Pension Fund Executive Scheme Pension SchemeMarket value of fund’s assets £8,763,000 £2,175,000 £5,904,000Level of funding on an ongoing basis 70% 79% 98%Valuation method Attained age Defined accrued Defined accruedmethod benefit method benefit methodDate of valuation 29 September 2004 5 April 2003 6 April 2004Main actuarial assumptions:The following assumptions apply for each scheme:Rate of return on investmentPre-retirement 6.5% pa 9.0% pa 7.5% paIn retirement 6.5% pa 8.0% pa 4.9-6.5% paAnnual rate of salary increases 4.0% pa 6.0% pa 3.5% paAnnual rate of pension increases 3.0% pa 3.5% pa 3.0% paUK Defined Contribution Schemes New employees are invited to join the schemes when they become eligible. The assets of the schemes are heldseparately from those of the Group in independently administered funds. The total amount contributed was £820,000 (2003: £1,002,000).There are no prepayments or accruals in the UK schemes as amounts contributed by the businesses are all paid to the funds in the month when thecontribution is due.US Defined Benefit Pension Schemes The Group operated two (2003: two) defined benefit schemes for employees of US subsidiaries. The assets ofthe schemes are held separately from those of the Group. These schemes are funded as required by the Employee Retirement Income Security Act of1974 (ERISA). The schemes were the subject of an actuarial valuation report updated as of July 2004 based on employee data and assets at that date.The valuation was carried out by an independent qualified actuary using reasonable actuarial assumptions and methods, which satisfied both SSAP 24accounting requirements and the requirements of ERISA. The expense for 2004 under the pension schemes was £438,000 (2003: £979,000). As of31 December 2004, the prepaid balance sheet asset value stands at £564,000 (2003: £85,000). During the year the plan was closed to new members.The schemes are funded according to the projected unit credit method, assuming an interest rate of 7.25%, expected salary increases of 4.0% and usingthe market value of assets. The total market value of assets under the pension scheme at 31 December 2004 was £8,870,000. (31 December 2003:£8,339,000). In 2003 the Group also operated a supplemental pension scheme for senior executives determined according to the Projected Unit Creditmethod. The total market value of assets in this scheme at 31 December 2003 was £91,000. The scheme was terminated during the year.US 401K Retirement Plans The Group operates 401K Retirement Plans for employees of US companies. The total amount contributed for the year was£226,000 (2003: £251,000).FRS17 Disclosure for the year ended 31 December 2004 The Group has continued to account for pensions in accordance with SSAP 24. FRS17“Retirement Benefits” was issued in November 2000, however, this will not be mandatory for the Group until the year ending 31 December 2005.The disclosures required by FRS17 are set out below. These disclosures set out the difference between the market value of the pension schemes assets,and the present value of the scheme’s liabilities.The Roxboro Group PLC operates a number of defined benefit schemes in the UK and US. The actuarial valuations of these schemes have been updated to31 December 2004 by the Schemes’ actuaries in accordance with FRS17 in order to value liabilities and assets.The principal financial assumptions used in the valuation of the liabilities of the Group’s schemes under FRS17 are:2004 2003 2002 2004 2003 2002UK UK UK US US USInflation 2.9% 2.75% 2.25% N/A 2.0% 2.5%Salary increases 3.5% 3.5% 3.0% N/A 3.25% 3.75%Increase to pensions in payment 2.9% 2.75% 2.25% 0% 0% 0%Discount rate 5.25% 5.3% 5.5% 5.75% 6.0% 6.5%There is no statutory obligation to increase pension payments in the US and no percentage increase has been assumed in the calculations.

Notes to the accounts continued25. Pensions continuedThe valuations of the defined benefit schemes at 31 December were:ExpectedExpectedlong-term 2004 long-term 2004 2004rate of return UK schemes rate of return US schemes Total% £’000 % £’000 £’000Equities 6.5 14,024 8.0 6,787 20,811Bonds 5.0 3,756 4.75 2,082 5,838Property 6.5 274 – – 274Cash 4.5 729 – – 729Total market value of assets 18,783 8,869 27,652Present value of scheme liabilities (27,331) (11,351) (38,682)Shortfall (8,548) (2,482) (11,030)Related deferred tax asset 2,564 943 3,507Net pension liability (5,984) (1,539) (7,523)ExpectedExpectedlong-term 2003 long-term 2003 2003rate of return UK schemes rate of return US schemes Total% £’000 % £’000 £’000Equities 6.5 12,722 8.0 6,529 19,251Bonds 5.3 3,263 6.5 1,901 5,164Property 6.5 263 – – 263Cash 4.0 396 – – 396Total market value of assets 16,644 8,430 25,074Present value of scheme liabilities (23,721) (12,463) (36,184)Shortfall (7,077) (4,033) (11,110)Related deferred tax asset 2,123 1,533 3,656Net pension liability (4,954) (2,500) (7,454)ExpectedExpectedlong-term 2002 long-term 2002 2002rate of return UK schemes rate of return US schemes Total% £’000 % £’000 £’000Equities 6.5 10,315 8.5 5,841 16,156Bonds 5.5 2,337 7.0 2,309 4,646Property 6.5 291 – – 291Cash 4.0 523 – – 523Total market value of assets 13,466 8,150 21,616Present value of scheme liabilities (20,126) (13,180) (33,306)Shortfall (6,660) (5,030) (11,690)Related deferred tax asset 1,998 1,911 3,909Net pension liability (4,662) (3,119) (7,781)

25. Pensions continuedOn full compliance with FRS17, on the basis of the above assumptions, the amounts that would have been charged to the consolidated profit and lossaccount and consolidated statement of total recognised gains and losses for the year ended 31 December 2004 and 31 December 2003 are set out below:2004 2003UK US Total UK US Total£’000 £’000 £’000 £’000 £’000 £’000Operating profitCurrent service cost 778 – 778 751 182 933Death in service cost 66 – 66 80 – 80Past service cost – – – – – –Settlements/Curtailments – (173) (173) – (121) (121)Total charge to operating profit 844 (173) 671 831 61 892Finance income/(cost)Expected return on pension scheme assets 1,049 692 1,741 862 615 1,477Interest on pension scheme liabilities (1,263) (672) (1,935) (1,113) (814) (1,927)(214) 20 (194) (251) (199) (450)Consolidated statement of total recognised gains and lossesActual return less expected return on scheme assets 567 293 860 1,589 1,149 2,738Experience gains and losses arising on scheme liabilities (86) 250 164 55 31 86Assumption changes regarding present value of liabilities (1,901) (317) (2,218) (2,095) (813) (2,908)Actuarial loss recognised in statement oftotal recognised gains and losses (1,420) 226 (1,194) (451) 367 (84)2004 2003UK US Total UK US Total£’000 £’000 £’000 £’000 £’000 £’000Movement in scheme deficits during the year:Deficit in schemes at beginning of year (7,077) (4,033) (11,110) (6,660) (5,030) (11,690)Movement in year:Current service cost (778) – (778) (751) (182) (933)Death in service cost (66) – (66) (80) – (80)Contributions 1,007 916 1,923 1,116 428 1,544Past service cost – – – – – –Other finance income (214) 20 (194) (251) (199) (450)Settlements and curtailments – 173 173 – 121 121Actuarial loss (1,420) 226 (1,194) (451) 367 (84)Exchange – 216 216 – 462 462Deficit in schemes at end of the year (8,548) (2,482) (11,030) (7,077) (4,033) (11,110)

Notes to the accounts continued25. Pensions continued2004 2003 2002UK US Total UK US Total UK US Total£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000A history of experiencegains and losses overthe period is as follows:Difference between theexpected and actualreturn on assets:Amount 567 293 860 1,589 1,149 2,738 (3,841) (2,318) (6,159)Percentage ofscheme assets 3% 3% 3% 10% 14% 11% (29)% (28)% (28)%Experience gainsand losses onscheme liabilities:Amount (86) 250 164 55 31 86 263 (36) 227Percentage ofscheme liabilities 0% 2% 0% 0% 0% 0% 1% 0% 1%Total amountrecognised instatement oftotal recognisedgains and losses:Amount (1,420) 226 (1,194) (451) 367 (84) (4,244) (3,441) (7,685)Percentage ofscheme liabilities (5)% 2% 3% (2)% 3% 0% (21)% (26)% (23)%If the above amounts had been recognised in the financial statements, the Group’s net assets and profit and loss reserve at 31 December 2004 would beas follows:2004 2004 2003 2003Net Profit Net Profitassets and loss assets and loss£’000 £’000 £’000 £’000As at 31 December 52,485 3,215 51,668 2,473Deficit in relation to pension schemes (net of deferred tax assets) (7,523) (7,523) (7,454) (7,454)Less: SSAP 24 pension prepayments (net of deferred tax) (400) (400) (53) (53)44,562 (4,708) 44,161 (5,034)If the above amounts had been recognised in the financial statements, the Company’s profit and loss reserve and net assets at 31 December 2004 wouldhave been reduced by £639,000 (2003: £609,000).26. Contingent liabilitiesGuarantees and performance bonds given by the bank to third parties on behalf of the Group amount to £900,000 (2003: £643,000).27. Shareholder informationThe market values of ordinary shares and B shares for Capital Gains Tax purposes are as follows:First day of trading market values30 June 2003Ordinary shares 218.5pB shares 75.5p

Five year summary2004 2003 2002 2001 2000£m £m £m £m £mTurnover 118.9 136.8 156.0 174.9 171.6Research and development expenditure 6.9 8.0 9.5 9.9 8.2Operating profit before goodwill and non-recurring costs 10.2 8.3 8.6 16.3 24.9Goodwill amortisation (1.1) (1.2) (1.1) (0.9) (0.9)Operating profit 9.1 7.1 7.5 15.4 24.0Exceptional items – 15.5 – – (0.1)Net interest – (0.3) (0.9) (1.0) (2.2)Profit before taxation 9.1 22.3 6.6 14.4 21.7Operating cash flow 13.2 10.6 13.0 19.8 27.3Net cash/(borrowings) 6.8 2.0 (11.7) (8.6) (10.6)Shareholders’ funds 52.5 51.7 56.0 60.6 56.6Pence Pence Pence Pence PenceStatistical informationEarnings per share – Adjusted 22.0 12.6 9.1 17.3 26.1Earnings per ordinary share – Basic 18.3 45.4 7.2 15.7 26.0Dividends per share 11.0 10.0 10.0 10.0 9.5Dividend cover (times) 1.7 6.5 0.7 1.6 2.7Operating margin before goodwill 8.6% 6.0% 5.5% 9.3% 14.5%Return on capital employed 17.2% 13.7% 13.3% 25.4% 42.4%Added value per employee (£’000) 31.1 29.4 31.0 36.4 38.5Turnover and operating profit are further analysed below to extractthe Weston division for the four years up to and including 2003the year of the disposalTurnover– Continuing operations 118.9 122.2 124.6 134.7 132.6– Discontinued operations – 14.6 31.4 40.2 39.0118.9 136.8 156.0 174.9 171.6Operating profit before goodwill and non-recurring costs– Continuing operations 10.2 5.5 5.2 10.0 17.4– Discontinued operations – 2.8 3.4 6.3 7.510.2 8.3 8.6 16.3 24.9

Directory of principal activitiesThe Roxboro Group PLCByron HouseCambridge Business ParkCambridge CB4 0WZTelephone: 01223 424626Facsimile: 01223 424656Email: roxboro@roxboro.comwww.roxboro.comDialightDialight Corporation1501 Route 34 SouthFarmingdaleNew Jersey 07727USATelephone: +1 732 919 3119Facsimile: +1 732 751 5778Email: info@dialight.comwww.dialight.comDialight de MexicoSdeRLdeCVColinas de Riverside 120Colinas del MarEl SauzalEnsenada B.C.MexicoC.P. 22760Telephone: +52 (646) 174 6412Facsimile: +52 (646) 175 8283Dialight-Garufo GmbHGewerbepark Spörerau 25D-86368 WangGermanyTelephone: +49 87 09 92 490Facsimile: +49 87 09 92 4910Email: sales@dialightgarufo.comwww.dialight.comBLPExning RoadNewmarketSuffolk CB8 0AXTelephone: 01638 665161Facsimile: 01638 660718Email: sales@blpcomp.comwww.blpcomp.comSolartronSolartron Mobrey158 Edinburgh AvenueSloughBerkshire SL1 4UETelephone: 01753 756600Facsimile: 01753 823589Email: sales@solartron.comwww.solartronmobrey.comSolartron ISAHackworth Industrial ParkShildonCo. Durham DL4 1LHTelephone: 01388 773065Facsimile: 01388 774888Email: sales@solartronisa.comwww.solartronisa.comSolartron AnalyticalUnit B1, Armstrong MallSouthwood Business ParkFarnboroughHampshire GU14 0NRTelephone: 01252 556800Facsimile: 01252 556899Email: info@solartronanalytical.comwww.solartronanalytical.comSolartron MetrologySteyning WayBognor RegisWest Sussex P022 9STTelephone: 01243 833300Facsimile: 01243 861244Email: sales@solartronmetrology.comwww.solartronmetrology.com