Sepura plc Annual Report & Accounts 2015 · TETRA (TErrestrial Trunked RAdio) ... Sepura plc Annual...

Sepura plcAnnual Report & Accounts 2015

Sepura is a global leader in the design, development and supply of digital radio solutions, complementary accessories, support tools and devices.

ApplicationsProductivity ApplicationsImage MessagingMessageQuery

Command & ControlSICS-NET DispatchSICS-NET VisualiseSICS-DTT

Resource ManagementLocate-ServerLocateRadio Manager 2STProtect

Radio ApplicationsShort Data ApplicationsVirtual ConsoleWAPStop & Search

Network ManagementNetwork Management System

SecurityCDTCMCSKMS

TerminalsHand-Portable RadiosSTP8X SeriesSTP9000 SeriesSRH Series

Mobile RadiosSRG3900HBCHBC2

Covert RadiosSRC3300

Fleet ManagementRadio Manager 2

ModemSRB

AccessoriesSTP AccessoriesSRH3900 AccessoriesSTP8X AccessoriesSRG Accessories

SystemsRadio AccessSoloFR400

Network CoreeXtras FTS100eXtras FTG64 GatewaysCentral RecorderSecurity Management

Command & ControlSICS-NET DispatchSICS-NET VisualiseSICS-DTT

Network ManagementNetwork Management System

The Complete Critical Communications Solution

Our Products

TETRA (TErrestrial Trunked RAdio)

TErrestrial Trunked RAdio (TETRA) is an open digital trunked mobile radio standard developed to meet the most demanding needs of Professional Mobile Radio (PMR) user organisations including:

• Public Safety • Transportation • Utilities • Government • Military • PAMR • Commercial & Industry • Oil & Gas

Sepura plc Annual Report & Accounts 2015

ApplicationsProductivity Applications

Image MessagingMessage

Query

DispatchEmergency 112

Resource ManagementLocate-Server

LocateSTProtect

ApplicationsDispatchSICS eXpress

TerminalsHand-portable RadiosSBP8000 SeriesSCP8000 SeriesSEP8000 Series

Mobile RadiosSBM8000SCM8000SEM8000

AccessoriesPortable AccessoriesMobile AccessoriesRepeater Accessories

SystemsControllerTier III Controller

RepeatersSBR8000SCR8000SER8000

DMR (Digital Mobile Radio)

Digital Mobile Radio (DMR) is an open digital standard that defines a direct digital replacement for analogue PMR. Designed for users who do not require the full range of public safety functionality of TETRA, DMR serves the widest range of users from trunked mission-critical applications through to single buildings.

Multi-Platform

market leader in over 30

countries resellers worldwide >100

>400staff in 20 countries

speaking 15

different languages

>1,300,000radios deployed

products operational in over 100 countries

Strategic ReportOur Products IFC

Operations 01

Chairman’s Statement 02

Highlights 03

Chief Executive’s Statement 04

Teltronic Acquisition 05

Sepura at a Glance 06

Marketplace 08

Creating Value 10

Key Performance Indicators 12

Risk Management 14

Our Achievements During the Year 16

Operational Review 18

Financial Review 22

Corporate Social Responsibility 26

Governance Corporate Governance Report 29

– Our Board and Senior Management 30

Report of the Audit Committee 35

Directors’ Remuneration Report

– Annual Statement 38

– Remuneration Policy Report 39

– Annual Report on Remuneration 44

Directors’ Report 50

Group Financial StatementsIndependent Auditors’ Report to the Members of Sepura Plc 55

Consolidated Income Statement 61

Consolidated Statement of Comprehensive Income 62

Consolidated Statement of Changes in Equity 62

Consolidated Balance Sheet 63

Consolidated Statement of Cash Flows 64

Notes to the Group Financial Statements 65

Company Financial StatementsIndependent Auditors’ Report to the Members of Sepura plc 96

Company Balance Sheet 98

Notes to the Parent Company Financial Statements 99

Shareholder Information 108

Contact Details and Advisers 109

Financial Calendar 2015/16 110

Strategic ReportSepura plc Annual Report & Accounts 2015 01

Facilitating the Analogue to Digital Migration

I am pleased to report another year of record revenues and a 20% increase in adjusted operating profit to €15.0 million, despite significant foreign exchange headwinds.

Chairman’s Statement

Revenues

+12%Record revenues of €131.2 million (2014: €116.6 million)

Addressable market

$3.3bAddressable market increased from $2.5 billion to $3.3 billion

At the same time we have continued to invest in expanding our addressable market, both organically and through acquisition, to ensure that we are positioned to benefit from the accelerating analogue to digital migration within the Professional Mobile Radio (“PMR”) market.

This acceleration reflects both government mandated migration to digital technologies, driven by a need for interoperability and increased spectrum efficiency, together with commercial users’ need for operational efficiencies that cannot be realised from obsolete analogue networks. We have responded to these trends by broadening our product portfolio and expanding our geographical reach, thereby significantly increasing our addressable market. Sepura now offers more solutions for a wider range of PMR users, as demonstrated by the increasing contribution from our recent investments in DMR and software applications.

Dr. John Hughes CBE

Hon DScChairman

The acquisition of Teltronic represents a material step in the transformation of Sepura into a geographically and technologically diverse critical communications solution supplier; it builds further on our successful earlier entry into the infrastructure market through the acquisition of 3T in FY13. Teltronic will enable us to accelerate the delivery of our strategic goals by providing additional scale, improved revenue visibility and increased exposure to commercial PMR users. The acquisition strengthens the Group’s position in a range of markets, with Teltronic’s customer base primarily in Latin America and North America. Combining Teltronic, the leading TETRA infrastructure supplier in North America, with Sepura, the market-leading TETRA terminals supplier, creates a compelling solution in the world’s largest PMR market. We are confident that we can build on the early success of both businesses and make North America a significant market for the Group.

Our record order book and the opportunities created by Teltronic give us confidence that our business is set to deliver further growth in earnings and cash generation over the coming years, reflected in a further increase in the annual dividend of 20% to 2.4p.

Our success was recognised in April 2015 with the award of the Queen’s Award for Enterprise: International Trade, which is a testament to the outstanding contribution of all of our employees to the profitable growth of our business. I would like once again to thank them for their commitment, and welcome our new colleagues from Teltronic who join us at an exciting time in Sepura’s development.

Subsequent to the acquisition of Teltronic and the significant expansion of the Group, I am pleased to announce that Richard Smith will be joining the Group as CFO not later than 2 January 2016. Our thanks to Steve Chamberlain for his contribution in this role, especially in the recent acquisition. Steve will be continuing with the Group after he steps down from the Board, initially focusing on supporting the integration of Teltronic. I am confident that the Company has a strong future ahead.

Dr. John Hughes CBE Hon DScChairman6 July 2015

02 Sepura plc Annual Report & Accounts 2015

Financial Highlights

• Revenues up 12% to €131.2 million (2014: €116.6 million)

• Adjusted operating profit1 up 20% to €15.0 million (2014: €12.5 million); adjusted diluted EPS1 up 15% to 9.7¢ (2014: 8.4¢)

• Operating cash conversion of 88% (2014: 101%) and closing net debt of €1.1 million (2014: net cash of €5.3 million)

• Full year dividend increased by 20% to 2.4p (2014: 2.0p)

• IFRS operating profit up 18% to €17.1 million (2014: €14.4 million)

Operational Highlights

• Strong demand across core markets– 217,000 radios delivered worldwide, up 15%

from 188,000 last year– Record order backlog at FY15 year end of €41

million for delivery in FY16 (2014: €13.1 million) following orders for 63,000 terminals for public safety network in Saudi Arabia

– Installed base grown to over 1.3 million radios providing a stable stream of repeat business

• Momentum building for DMR and Applications– DMR portfolio expanded and Fylde acquired

to facilitate DMR adoption– €2.3 million Applications contract for Finnish

National Police Board

Teltronic acquisition completed post year end

• Total consideration of €127.5 million financed by new debt facility and capital raise

• Immediately enhancing to adjusted diluted EPS and significantly enhancing in the first full financial year

• Cost synergies of €3 million per annum by the end of the first full financial year, with €1.5 million in the current year

• Addressable market increased by $820 million to over $3.3 billion

1 The calculation of adjusted operating profit and IFRS operating profit are set out in Notes 8 and 15 respectively to the consolidated financial statements.

Unless otherwise stated, all figures exclude the impact of the acquisition of Teltronic SAU that was completed after the end of the period.

Revenue +12%

€131.2m(2014: €116.6m)

IFRS operating profit1 +18%

€17.1m(2014: €14.4m)

Adjusted operating profit1 +20%

€15.0m(2014: €12.5m)

Highlights

See our Key Performance Indicators on pages 12 to 13


Chief Executive’s Statement

Delivering Growth

Successful execution against our strategic objectives will continue to create additional long-term shareholder value.

Radios delivered

>200,000We shipped a total of over 217,000 radios in 2015 (2014: 188,000)

Our record order book at the year-end of €41 million for delivery in FY16 included orders for a further 63,000 radios for delivery to the same network.

We believe this confirms TETRA as the digital PMR standard of choice for public safety users around the world, despite some uncertainty in the UK over the future role of TETRA for such users. This speculation did not have a material impact on our business in the UK, where we shipped 21,000 radios compared to 24,000 last year. We expect the UK market to continue to deliver strong repeat TETRA revenues during the medium term, together with an increasingly significant contribution from DMR as commercial users in the UK migrate to digital solutions.

PMR users increasingly demand more than voice communications from their investment in digital networks. Sepura’s investment in software applications enables us to support users as they adopt complementary technologies that supplement TETRA’s core voice and data capabilities. Our success in securing a significant role as part of a consortium delivering a multi-year, multi-agency and multi-standard Command & Control platform for the Finnish National Police Board confirms TETRA has a long-term role as an integral part of national PMR networks across Europe, and that Sepura is well positioned to address the increasingly complex needs of our customers.

The acquisition of Teltronic with its established infrastructure portfolio will enable us to accelerate our market penetration of new PMR networks around the world. Teltronic brings strong brands in Latin and North America, which together represented 83% of its revenues in the year ended 31 December 2014 compared to the current 5% for Sepura. In addition to this increased geographical diversity, Sepura will also have a more diverse customer base as 39% of Teltronic’s revenues are derived from commercial users, compared to 25% for Sepura in FY15. Teltronic also provides increased scale and longer-term revenue visibility through its contracted order backlog, together with an opportunity to promote Sepura’s existing products across Teltronic’s installed base of networks.

Gordon Watling

Chief Executive We have delivered a fourth consecutive

year of double-digit growth in adjusted operating profit, which increased by 20% to €15 million despite €1.9 million of foreign exchange headwinds. This has been achieved by our continuing focus on combining strong operational performance in our core markets with the strategic expansion of our addressable market, which has increased to approximately $3.3 billion following investments in DMR, software applications and, most recently, the acquisition of Teltronic.

Our core markets continue to show sustained, long-term demand despite the impact of macro-economic factors on specific segments such as the extractive industries. Terminal shipments increased by 15% to 217,000 radios, compared to 188,000 last year, and included 65,000 radios delivered in Germany and 31,000 radios delivered to a new national public safety network in Saudi Arabia.


Increased scale and visibilityCombining Teltronic and Sepura creates a group with pro-forma revenues1 for FY15 of €194 million and pro-forma adjusted operating profit of €23.4 million. The enlarged group is capable of targeting larger opportunities, with potential customers having increased confidence in sourcing products from a leading global supplier. Teltronic’s predominantly infrastructure business also offers a significant contracted backlog of €33.8 million at 31 December 2014, giving the enlarged group a pro-forma backlog of €74.8 million.

The acquisition adds significant scale to the financial profile of the Group. Teltronic generated revenue of €62.9 million and adjusted operating profit of €8.4 million for the year ended 31 December 2014. At the time of the acquisition, we announced that the transaction is expected to deliver €3 million of cost synergies per annum, to be achieved in full by the end of full year 2017 and with €1.5 million achieved in the current financial year. We also expect the acquisition to be immediately enhancing to adjusted diluted EPS and significantly enhancing in the first full financial year.

The robustness of our established markets and the exciting growth prospects provided by DMR, applications and the acquisition of Teltronic, which builds on our existing infrastructure capabilities, give us confidence in meeting our targets for the coming year. Successful execution against our strategic objectives will continue to create additional long-term shareholder value.

Gordon WatlingChief Executive6 July 2015

Case Study

Teltronic Acquisition

1

2

3

4

On 27 May 2015 Sepura completed the acquisition of Spanish PMR business Teltronic SAU. Teltronic provides complete wireless voice and data communications solutions, including infrastructure, terminals, and software, principally for customers in the public safety, transportation and utility sectors. Its vertically integrated business covers the entire PMR value chain, including network infrastructure, terminals and command and control centres.

Teltronic operates in over 50 countries serving customers based primarily in Latin America, the EMEA region and North America.

The acquisition helps Sepura accelerate the delivery of its strategic goals by providing additional scale and improved revenue visibility, geographical diversity, increased exposure to commercial PMR users, a broader product portfolio and attractive synergies.

NCE 33% Latin America 26% SEMEA 19% UK&I 10% APAC 8% North America 4%

Sepura Commercial 17%

Incremental Commercial 12%

Public Safety 71%

Pro-forma FY15 revenue1

Pro-forma FY15 revenue1

Product offering and technical breadthTeltronic has an extensive infrastructure portfolio, including an emerging LTE portfolio and P25 capability. It offers a comprehensive suite of transportation solutions, together with a broad command and control offering that complements Sepura’s applications products.

Global reachTeltronic generates its revenues in complementary territories to Sepura. In particular, it has established brands in Latin and North America, which in aggregate accounted for 83% of its revenues, compared to 5% for Sepura.

End market diversityWhile Teltronic has an established presence in public safety markets, it also derives a higher proportion of its revenues (39%) than Sepura (25%) from commercial PMR users, especially in the transportation sector. On a pro-forma basis, 29% of the enlarged group’s revenues are derived from commercial PMR users.

1 Pro-forma figures have been calculated by combining Sepura's actual results for the year ended 27 March 2015 with Teltronic's actual results for the year ended 31 December 2014.


Where We Operate

Applications

Term

inals

Systems

Products and Markets

Our deep expertise and experience enables us to combine terminals, systems and applications into solutions that address the operational challenges facing our customers.

Sepura is a global leader in the design, development and supply of digital radio solutions, complementary accessories, support tools and devices. Our compelling solutions bring together radio infrastructure, terminals and data applications to help our customers overcome the operational challenges they face every day.

Systems Terminals

Our network infrastructure delivers scaleable and seamless communications, covering a single-site campus right through to national networks.

We provide a comprehensive portfolio of hand-held and vehicle radios that address the operational requirements of the most demanding users and environments.

Sales staff based overseas

Head office

Offices

Countries investing over €1m in our solutions in FY15

Countries investing €1m or less in our solutions in FY15

Investment

Sepura at a Glance


Applications

Our applications capability offers enhanced productivity tools that drive improved performance across customers’ communications networks.

Sepura customers

>1,000Over 1,000 organisations using Sepura solutions in over 100 countries

Users

>1.3mOver 1.3 million users across the globe

Revenues

Revenue by customer location

49%Northern Europe

22%Southern Europe, Middle East and Africa

10%Asia-Pacific

3%Latin America

14%United Kingdom & Ireland

Northern America 2%

Further details on our KPIs on page 12 and 13


Enabling the Digital Revolution

Marketplace

Professional Mobile Radio (PMR) is the term used to describe the form of two-way radio communications used by many public safety and commercial organisations around the world. As at 31 December 2014 an estimated 43 million PMR users were communicating over PMR radio networks, generally through two-way radios that are either carried by individuals or installed in vehicles or control rooms. Organisations that utilise PMR networks generally operate over a wide geographical area with multiple users co-ordinated from a central control room and so require instant communication between individuals or pre-defined user groups.

Mission Critical

Sepura has a proud tradition of supplying radio equipment to Public Safety users that spans over 70 years. We now provide cutting edge solutions that deliver increased productivity and enhanced safety, maximising Public Safety organisations' return on their substantial investment in communication networks.

Why Professional Mobile Radio?

PMR radios offer a no-compromise, cost-effective solution to support business- critical communications. In addition, the functionality of next-generation digital radios extends well beyond voice communications and include value-adding location and text alert applications integrated into a rugged and reliable device. In comparision to consumer-friendly smartphones, PMR radios are often the only viable option to support today's frontline mobile workers' business-critical communications requirements.

Requirements for business-critical mobile communications devices:

• Reliable Communications are “mission critical“ and so users prefer their own network rather than relying on a shared or third-party network which may suffer degradation of service if too many users are accessing the network at the same time.

• Robust Users operate in extremely challenging environments, such as mines and factories, and so require rugged and robust devices that can withstand shock and dust or water ingress, with an operational life of between five to seven years. Users also typically wear protective clothing and so require devices that can be operated without removing, for example, gloves or helmets.

• Secure Private, encrypted networks reduce the risk that third parties eavesdrop on sensitive communications.

• Group communications Users need to communicate simultaneously with multiple individuals without the need to dial, or the delay associated with establishing a connection on a commercial mobile cellular system.

• Cost of ownership Without monthly services fees, PMR radios offer a significantly lower total cost of ownership when compared directly to smartphones and other cellular connected devices.

• Enhanced worker safety For scenarios where worker safety is critical, the always-on capabilities of PMR radios are invaluable.

• Battery life and management A major requirement for business-critical communication solutions is a strong all-shift battery.

• Audio quality The level of ambient noise can render many mobile communications devices ineffective. The voice quality on PMR digital radios is enhanced by sophisticated software algorithms and background noise suppression.

• Value adding features and functionality PMR radios offer additional integrated features such as GPS, text messaging and location tracking.

• Enterprise-class accessory ecosystem Providing a variety of accessories, PMR radios offer a broad accessory portfolio closely aligned with enterprise use cases and target applications.

The Case for PMR

Business Critical

Sepura supplies users across a wide spectrum of sectors that need the functionality of our secure and feature-rich product portfolio. These include transport networks, utilities and the extractive industries, which all demand secure, reliable and robust communications solutions.


The Professional Mobile Radio market is undergoing an “analogue to digital” migration as governments and commercial organisations replace ageing and obsolete analogue products with digital solutions. These enable the efficient use of radio spectrum, interoperability between government agencies and enhanced security and functionality that drive operational efficiencies.

The Analogue to Digital Migration

TETRA: 10+ years of future growth• The largest digital installed base

– New networks are being deployed– New users are continuing to join networks– Users will replace their radios multiple times

over the life of the infrastructure• TETRA is the public safety users’ preferred voice

solution outside North America

DMR: The commercial user's solution• A TDMA-based ETSI standard like TETRA• Targets users who do not need all of TETRA’s

public safety functionality• Results in significantly lower-cost infrastructure

Sepura has successfully expanded its total addressable market from $500 million in 2012 to over $3.3 billion for 2016, by investing in new products and solutions and expanding our geographical reach:

• $50m pa – TETRA ATEX Terminals• $600m pa – TETRA Infrastructure• $500m pa – Applications• $800m pa – DMR• $800m pa – North America• $100m pa – P25• $100m pa – LTE

Worldwide Installed Base of PMR Radios (M units)

40,000

10,000

0

20,000

30,000

50,000

Analogue DMR

TETRA Other Digital Standards

UK• Most mature TETRA market with c.275,000

users• Supply every police force in England,

Wales and Scotland• Supply every ambulance and paramedic• In 2015, the UK generated 14% of global

revenues at €18 million

Germany• Largest TETRA market in short-medium

term with c.750,000 forecast users• Deployment is still underway and over

200,000 more radios will be needed in the next 2-3 years

• Germany generated >€39 million of revenue in 2015

Global• In 2015, international revenues went

up by 16% to €113 million• 21 countries generated over €1 million

of revenue

Major Market Leaders

Source: IHS

2010 2011 2012 2013 2014 2015 2016 2017 2018

Total Addressable Market ($m)

TETRA Terminals (Excluding ATEX)

TETRA ATEX Terminals Systems Applications DMR North America P25 LTE

2012 2013 2014 2015

3,000

500

0

1,500

2,500

1,000

2,000

3,500


Creating Value

Our vision is to establish Sepura as a global leader in the supply of digital communication systems.

Our strategy is designed to deliver sustainable growth, reduced risk and long term financial performance.

Our business model is to exploit the Sepura brand and the core competencies it represents.

Market expertise

Routes to market

Supply chain

Developing a broad portfolio of

Expanding our addressable market Building long-te

rm cu

stom

er re

lati o

nshi

ps

Our employees have a deep understanding of the PMR market gained through many years of servicing the most demanding vertical within it: public safety. Our close relationship with our customers ensures that we understand their operational challenges, and our technical know-how enables us to develop a solution to address their specific needs.

Market expertise

Our close relationship with our customers ensures that we understand their operational challenges.

market-leading solutionsOur Strategy

Business Model


We are continually expanding our addressable market by identifying complementary high-growth opportunities within the PMR market which can be addressed by our core competencies by:

• growing our geographical footprint• broadening our product portfolio• entering new market verticals• offering a range of PMR standards.

We continuously enhance our product and service offering to ensure that we have a broad portfolio of market-leading solutions. We have invested over €150 million in research and development, enabling us to secure a competitive advantage by being first supplier in our markets to offer GPS and Gateway and Repeater functionality, together with a wide range of other innovative product features and functions.

A typical PMR network will be operational for at least 20 years. In addition to the initial capital sale of infrastructure, applications and radios, customers require regular supplies of batteries and other ancillaries which generate strong recurring revenues over the lifetime of the network. They also create new opportunities as the network expands, new applications are identified, new users join the network or existing users replace ageing radios with the latest technology. We have a demonstrable track record of customer retention and the repeat business that flows from establishing Sepura as our customers’ supplier of choice.

We have exclusive partnerships with a global network of dedicated PMR distributors, each of which is a specialist in their particular geography or market vertical. We work closely with them to target key opportunities, combining their local knowledge and relationships with our product expertise to create a compelling and cost-effective solution for end-users.

We outsource the manufacture of our products to world-class Contract Electronics Manufacturers, who offer a flexible and scaleable supply that meets our customers’ demand profile. We work closely with our supply chain to improve the design of our products, and to reduce costs and lead-times.

Routes to market Supply chain

We work closely with a global network of dedicated PMR distributors.

By outsourcing the manufacture of our products we can improve the design of our products whilst reducing costs.

Developing a broad portfolio of market-leading solutions

Building long-term customer relationships

Expanding our addressable market


A Strong Performance

Key Performance Indicators

Our strategic KPIs are leading indicators of future potential.

Installed Base (000s of radios)Strategic

Our growing installed base of radios in use will generate additional revenues from regular demand for replacement accessories and, ultimately, new radios, together with opportunities to upsell new applications to existing customers.

2012

930

2013

1,048

2014

1,186

2015

1,342

544

2009

677

2010

800

2011

Our operational KPIs are leading and lagging indicators demonstrating operational progress during the year.

Operational Closing Order Book (€m)

Our closing order book increased by c.€28 million as we secured significant orders for radios to be deployed on a new national network in the coming year, together with infrastructure and software contracts that will be delivered over several financial years, giving improved visibility for future revenues.

2013

9.8

2014

13.1

2015

41.0

Annual Shipments (000s of radios)

2014 20152013

154

188

217

Annual shipments increased by 15%, including 65,000 radios to Germany and 31,000 radios for a new national network in the Middle East.

Our financial KPIs are lagging indicators showing the financial result of our operational performance.

Financial Revenue (€m)

We delivered a third consecutive year of double-digit revenue growth as we broaden our product portfolio and penetrate new markets.

Adjusted Operating Margin1

We delivered a fourth consecutive year of double-digit growth in adjusted operating profits, driven by both increased revenues and improved operational leverage.

2013 2014 2015 2013 2014

10.7%

2015

11.4%

104.8116.6

131.2

10.0%

Other UK Germany


1 The calculations of adjusted operating margin and adjusted diluted EPS are set out in Notes 8 and 15 to the consolidated financial statements respectively.

2 Calculated as cash generated from operations divided by cash generated from operations before movements in working capital.

We have seen strong demand from new public-safety users that has more than mitigated the forecast softening demand from extractive industries.

Commercial vs Public Safety Revenues (€m)

20

0

100

80

60

40

2013 2014 2015

Total Addressable Market ($m)

The dividend declared by the Board of 2.4 pence represents a 20% increase over last year and reflects the Group’s strong balance sheet and confidence in the future.

We generated €25.2 million of operating cash during the period. This represented cash conversion of 88% as the significant growth in revenues, the increasing breadth of our product portfolio and delays in payment by customers in Greece and the Middle East increased working capital.

Cash Conversion2 Adjusted Diluted EPS (¢)1

Although adjusted operating profits increased 20%, adjusted EPS increased by 15% as the growth of the Group resulted in additional interest costs and proportionally less tax relief on its R&D expenditures.

2014

8.4

2013

7.8

2015

9.7

2013 2014

101%

119%

2015

88%

Dividends per Share (p)

2013

1.68

2014

2.00

2015

2.40

TETRA Terminals (Excluding ATEX)

TETRA ATEX Terminals Systems Applications DMR North America P25 LTE

Commercial Public Safety

2012 2013 2014 2015

3,000

500

0

1,500

2,500

1,000

2,000

3,500

29%30%

25%


Informing Decisions

Risk Management

The material strategic and operational risks and uncertainties facing the Group, their potential impact on our future performance, and how we manage them.

Technological changeOur revenue and profitability are affected by the extent to which there is increasing demand for, and development by our competitors of, additional products and product features. For example, the adoption of 4G / “LTE” for the delivery of broad-band data services to consumers has led some Public Safety agencies, including those in the UK, to explore the possibility of creating equivalent data networks, using either planned commercial networks or constructing their own 4G private networks. We make significant investments in new product development, and there can be no guarantee that we will be able to generate sufficient revenue to offset these development costs or to continue to make such investments. There are also associated risks relating to difficulties and delays in the development process of new products, and their acceptance by customers. If our competitors successfully launch new products or features which we are unable to match then we could lose market share with a corresponding impact on our future profitability and financial position.

Product innovationWhile the existing 4G standard does not contain the protocols necessary for voice traffic, or the call prioritisation and similar functions required by Public Safety agencies, we are investing in new product development to position the Group for the likely future deployment of LTE and our recently launched “Next Generation” SC2020 products incorporate a high speed data bearer making it the first TETRA hand-portable which can claim to be LTE data ready. This is part of our ongoing programme of identifying customer needs, and potential competitor advances, to ensure that we maintain a portfolio of market leading products. We focus our development efforts on features which meet a market requirement and are likely to generate sufficient revenue to fund their development. We have established internal processes for prioritising and reviewing our development projects.

Reliance on key markets or customersA significant percentage of our revenue in each financial year is currently derived from a small number of end-user organisations, the majority of which are governmental organisations, in several key geographies. The timing of orders from these customers is influenced by a number of factors, including governmental investment decisions which may be affected by changes in political and economic conditions. This makes accurate predictions of the timing of future revenues more difficult. In the event that there is a delay to either the tendering process or the placing of orders following a successful bid, then revenues may not be generated within the originally forecast timeframe, with a consequential impact on the profitability of the Group in any given period.

Growing our addressable marketThe Group’s focus on diversification will result in a reducing significance of individual contracts or customers relative to the Group’s total operations. Our addressable market is increasing as we launch new products and enter new markets. Furthermore, the increasing role of regular add-on and replacement business also helps to mitigate the impact of significant delays in securing new customers. However, the impact of significant contracts on half and full-year reported revenue remains a risk for the Group.

Credit riskReliance on key markets or customers may also result in credit risk being concentrated within a small group of customers and default by a material customer could have a material impact on the Group’s results. Following the global expansion of the Group’s activities it now operates in countries and with customers that may give rise to higher credit risk exposure than that to which it has previously been exposed.

Working with the right partnersThe Board has implemented policies that require appropriate credit checks on potential customers and customer orders are checked against pre-set requirements before acceptance. Formal credit control procedures are applied subsequent to invoicing customers, with letters of credit and payments in advance obtained where appropriate. Such rigorous procedures cannot completely mitigate credit risk, and the Group provides against significant overdue accounts where recoverability of the debt is considered sufficiently uncertain. The maximum exposure to credit risk is limited to the carrying value of trade and other receivables.

Risk and Impact Management Strategy

CompetitionThere is strong competition in the markets in which we operate, particularly in relation to government procurement tendering processes which rely on a combination of technical performance and price. A significant reduction in the prices we achieve for our products could have a material impact on the Group’s margins and profitability.

Investing in product leadershipThe Group’s ability to compete depends on its high-quality product range and its reputation for customer service as well as the ongoing programme of work to reduce product costs. The Board regularly reviews the level of investment in these areas in the light of changes in the competitive landscape, to ensure that the Group can continue to compete effectively.


Managing rapid growthThe rapid growth of our business may place a significant strain on our management, operational and financial resources, and those of our manufacturing and distribution partners. If we are unable to grow our business profitably, as a result of being unable to secure adequate resources or incurring excessive costs in doing so, then this could have a material adverse effect on our financial position.

Investing in operational excellenceThe Board is continually reviewing and enhancing our internal controls and processes and hiring additional employees in critical areas of the business. The Group is also implementing an integrated ERP system which will enhance internal controls and deliver operational efficiencies. We have two primary sub-contract manufacturers, ensuring continuity of supply and providing flexibility in meeting additional demand for our products.

Foreign currencyThe Group has an international customer base and purchases products and services in a range of currencies. The reported revenues, costs, assets and liabilities of the Group are therefore affected by fluctuations in prevailing rates of exchange between these currencies. This affects comparisons of current year results to previous periods, where equivalent underlying transactions are reported at differing rates, and may affect future results if assets and liabilities are subject to revaluation over time.

Effective hedging of exchange rate exposuresThe Company’s presentational and functional currency is the Euro, reflecting the relative contribution of Euro-denominated revenues. The Board has implemented policies that require regular reviews of the Group’s forecast currency requirements, in conjunction with a rolling programme of monthly forward contracts to hedge forecast net cash flows in major currencies. Where these hedges are deemed to be effective any unrealised gains or losses on the hedges are recognised in equity rather than in the consolidated income statement, again reducing possible volatility in reported earnings arising from changes in exchange rates.

Information securityThe Group regards information within the business as a key asset and recognises the risk and impact on the business of breaches to the integrity of information relating to the business.

Effective protection of information security and integrityThe Group has in place systems and processes for the classification and control of access to information within a number of elements of the business. The information security standard ISO27000 is a reference frame for all information security management systems and is the framework against which the Group manages information security.

Supply chain risk and product recallWe are dependent on outsourced electronic manufacturing companies for the manufacture of substantially all of our current products and on a small number of suppliers for key components. Any failure or inability of these companies to supply us could adversely affect our business. Our supply chain is complex, and the use of third-party suppliers and service providers could adversely affect our product quality, delivery schedules or customer satisfaction. Any of these could have an adverse effect on our financial results.

Monitor manufacturing and component supply chainThe Group mitigates supply chain risk by employing a number of supplier monitoring mechanisms and control measures which address business viability, production quality and component obsolescence. Automated and manual product testing is an integral part of all projects and manufacturing. In addition, all third party products undergo conformance testing and compliance checks.

Integration of acquired businessesOur future financial performance will reflect the results of acquired businesses, which will in turn be impacted by our ability to integrate such businesses into our current operations. If we are unable to retain key employees or exploit forecast synergies then we may be unable to deliver the forecast level of revenues, profitability and cash flows which could have an adverse effect on the financial results and position of the Group as a whole.

Protection from vendors, combined with detailed planning and execution Prior to any acquisition the Group undertakes detailed investigation and due diligence in conjunction with external advisors. Appropriate warranties and indemnities are obtained from the vendors against specific financial risks identified. Where appropriate, an element of consideration is deferred and will only be satisfied if the acquired business generates the forecast level of profitability on which the valuation of the business was based. Detailed integration plans are prepared, with specific risks identified and mitigation plans prepared, which set out detailed actions, responsibilities and timetables. We conduct regular reviews with the management of acquired entities to assess performance against these plans and take action accordingly.

Risk and Impact Management Strategy


We have grown our business

• Revenues up 12% to €131.2 million

• Adjusted operating profit up 20% to €15.0 million

We have invested for success

• Teltronic acquired in May 2015• €16.8 million invested in new

product development• Fylde Micro acquired in

May 2014

Key

Developing a broad portfolio of market-leading solutions

Building long-term customer relationships

Expanding our addressable market

Leading the Way

Our Achievements During the Year

Sepura announces office relocationOctober 2014

Sepura announced that it will relocate its head office to the city's Research Park. The company, currently based in the Chesterton area of the city, has signed a 15 year lease for the site's Building 9000.

Sepura announces partnership with Skyscape Cloud ServicesSeptember 2014

Sepura has launched its cloud-enabled applications portfolio, which is brought to the UK Public Safety market through a strategic alliance with assured cloud service provider Skyscape Cloud Services.

Major Bavarian Fire Services select Sepura radiosJune 2014

Sepura and our long-standing German partner Selectric GmbH were awarded two prestigious contracts for the supply of TETRA radios and accessories to the fire brigades in the cities of Ingolstadt and Augsburg in Central and Western Bavaria respectively.

Sepura announced acquisition of Fylde Micro LimitedMay 2014

Fylde Micro have been pioneers in the field of radio trunking for over thirty years, gaining a worldwide reputation for delivering reliable solutions within the Professional Mobile Radio (“PMR“) market.

Sepura expands into the 344-400MHz and 800MHz marketMay 2014

Sepura adds to its portfolio of products with the launch of its new 344-400MHz and 800MHz TETRA radios in order to serve customers in emerging markets, including China (344-400MHz) and North America (800MHz) as well as to increase the opportunity for market share growth in other 800MHz markets: Asia, Australia, South America and Brazil, specifically.

2014

Sepura is at the forefront of answering the communications needs of a broad spectrum of markets.

€113mInternational

Revenues up 16%


250,000Radios supplied to the German

Public Safety market

Sepura completes the acquisition of TeltronicMay 2015

Sepura announced the acquisition of Spanish PMR company Teltronic, with its complementary product offering and strong brands in Latin and North America. Further details are set out on page 5 and Note 34 to the consolidated financial statements.

Sepura awarded the Queen’s Award for Enterprise: International TradeApril 2015

In April 2015 Sepura was awarded the prestigious Queen’s Award for Enterprise: International Trade in recognition of Sepura’s consistent growth that has resulted from our focus on exciting high growth opportunities, product innovation and delivering quality and customer service.

Patria, Portalify and Codea deliver a Multi-Agency Field Commanding SystemJanuary 2015

The Finnish National Police Board and a consortium comprising Patria, Portalify Oy and Codea Oy signed an agreement for the development and delivery of a Multi-Agency Field Commanding System (KEJO) for all Finnish Public Protection and Disaster Relief (PPDR) authorities. The total value of the consortium's contract is €23 million.

Sepura delivers a quarter of a million radios to the German Public Safety marketNovember 2014

Sepura delivered its 250,000th TETRA radio terminal to German public safety organisations. We celebrated this significant milestone with our established German partner Selectric after a very successful financial year. FY15 saw shipments of 65,000 Sepura TETRA radio terminals to Germany alone.

Sepura launches DMR Tier III portfolioOctober 2014

Sepura announced the availability of its DMR Tier III solution to the global market. This latest significant addition to Sepura's product portfolio and to its DMR offering was accelerated by the acquisition of Fylde Micro, world leading experts in DMR trunked radio solutions.

Sepura launches a new revolutionary accessoryNovember 2014

Sepura launched the Sepura Dynamic Controller (SDC) at PMR Expo. The SDC connects GSM and TETRA devices to Sepura's proven range of covert accessories.

2015

€15.0mAdjusted Operating

Profit up 20%


The Critical Communications Solutions Provider

Sepura has been transformed from a UK-centric TETRA terminals business into a global geographically diverse critical communications solutions provider, with an estimated addressable market of $3.3 billion. The Group’s record revenues of €131.2 million, up 12% from €116.6 million last year, reflect an increasingly diverse global customer base that is expected to deliver long-term growth from the analogue to digital migration.

Sustained demand from our core TETRA devices marketsThe Group delivered a record 217,000 devices last year, up from 188,000 in the previous year. This included 65,000 radios into Germany, the world’s largest TETRA market with approximately 600,000 registered users and one in which Sepura is market leader. The current backlog of contracted orders for future delivery to new users in Germany is approximately 53,000 radios. In line with experience in mature markets, the Group has seen increasing demand from German customers for replacement batteries and ancillaries, and for specialist accessories such as covert solutions as network coverage extends across the country.

With an installed base now over 1.3 million radios across 114 countries, the Group has a growing stream of recurring revenues as users refresh existing fleets and acquire accessories and applications to maximise the return on their investments in our technology. This is also the case in Germany where, in addition to demand from new users, early adopters have confirmed their intention to begin refreshing their existing radio fleets as they near the end of their operational lives.

Growing demand from emerging marketsNorth America is the world’s largest PMR market and is forecast to generate 25% of the growth in digital PMR users as 1.5 million commercial PMR users in North America convert to digital. The acquisition of Teltronic and its North America Powertrunk brand, since the end of the period brings together the leading suppliers of TETRA terminals and infrastructure in North America. Sepura and Teltronic have supplied 11 of the first 14 TETRA networks in North America, and Sepura terminals are now in use on all of these networks.

Operational Review

The Group delivered a record 217,000 devices last year, up from 188,000 in the previous year. This included 65,000 radios into Germany, the world’s largest TETRA market with approximately 600,000 registered users and one in which Sepura is market leader.


Growing demand from commercial usersThe total PMR market is continuing to expand, with an estimated value of $16.5 billion per annum in 2017 when 45 million PMR radios are forecast to be in use globally according to independent research from IHS. An increasing proportion of these will be digital radios. Approximately 15 million PMR users, representing one third of all PMR users, currently use digital PMR technology and a further 10 million PMR users are forecast to migrate to digital by 2018. The majority of this growth is expected to come from smaller, frequently single site, digital networks primarily for use by individual commercial organisations that prefer a single supplier that can offer a simple migration path to a solution that suits their operational needs.

Installed base

1.3mAn installed base of over 1.3 million radios across 114 countries

Addressable market

$3.3bAddressable market increased to $3.3 billion (2014: $2.5 billion)


Operational Reviewcontinued

Forecast number of global PMR users in 2017

45mThe total PMR market has an estimated value of $16.5 billion per annum in 2017 when 45 million PMR radios are forecast to be in use globally


Increasing contribution from DMRDMR products address the needs of smaller commercial users. DMR is independently forecast to be the fastest growing segment within PMR over the next four years, with the installed base of DMR radios forecast to grow by 4.2 million radios by 2017. The Group’s DMR portfolio has expanded since its launch last year, and has been enhanced by the acquisition of Fylde with its enabling technology that offers a lower risk and more cost-effective migration strategy for trunked analogue users. The Group has also expanded its DMR reseller channel and routes to market, and Sepura DMR radios are already operational in 37 countries. The acquisition of Teltronic will further increase routes to market for DMR products, particularly within Latin America, where Teltronic has well established distribution channels to commercial users.

The range of potential DMR customers is demonstrated by the largest deployment to date being a fleet of 2,600 radios in Brazil, while other prestigious early adopters include leading sporting venues requiring significantly smaller fleets such as Goodwood racecourse, and the Group’s local football team Cambridge United. Management believe the Group will be able to establish a similar presence and reputation in the DMR market over time to that enjoyed by its TETRA products, which will enable DMR to become a significant revenue stream for the Group over the medium term.

Developing a broad portfolio of market-leading solutionsIn addition to the ongoing investment in DMR and software applications, Sepura has continued to invest in product innovation. The Group’s new generation of TETRA radios which was launched earlier this month at Critical Communications World, maintains its product-leadership position by offering enhanced robustness and additional features and functionality that support PMR users’ increasing demand for real-time data in the field.

Building global relationships

37The Group has also expanded its DMR reseller channel and routes to market, and Sepura DMR radios are already operational in 37 countries


Delivering Record Revenues

The Group delivered record revenues of €131.2 million, up 12% from last year’s €116.6 million.

Financial Review

Research and development costsGross expenditure on R&D was €16.8 million (2014: €16.7 million), or 13% of revenues (2014: 14%). A significant proportion of these costs relate to the fixed Sterling costs of the Group’s UK-based development teams. These are hedged 12 months in advance and so reflect last year’s GBP/Euro rates, and on a constant currency basis gross expenditure on R&D increased by 4% to €17.4 million.

Investment in research and development continued to focus on maintaining product leadership, with significant investment in the Group’s next generation platform of both terminals and infrastructure, broadening its DMR portfolio and expanding its Applications offering.

Capitalised development expenditure represented 78% (2014: 75%) of related gross development spend. The related amortisation charge for the period decreased to €6.7 million (2014: €8.1 million) as the development expenditure on several older products is now fully amortised, while an increasing proportion of research and development expenditure is on long-term projects, such as the Group’s next generation platform, on which amortisation has yet to commence.

RevenueThe Group delivered record revenues of €131.2 million, up 12% from last year’s €116.6 million. Fylde, whose results have been consolidated for the first time following its acquisition on 20 May 2014, accounted for €1.5 million of the increase. The total number of terminals shipped increased by 15% from 188,000 to 217,000, including 31,000 to new public safety customers in Saudi Arabia. The Group also received orders for a further 63,000 radios to Saudi Arabia for delivery in FY16.

Gross marginGross margin strengthened as forecast in the second half of the year, with a gross margin for H2 of 47.1% compared to 45.1% in H1. The gross margin for the full year of 46.2% was affected by product and customer mix, including the first full year of the Group’s DMR portfolio and entry into new strategic markets. Gross margin was also impacted by foreign exchange and on a constant currency basis the gross margin was 46.7%, compared to the 47.4% reported for the same period last year. The gross margin percentage for the first half of the current year will reflect pricing for recent high volume contracts in strategic new markets, which will deliver incremental business over the operational life of those radios.

Steve Chamberlain

Chief Financial Officer


Selling, marketing, distribution and administrative expensesSelling, marketing and distribution costs increased by 10% to €18.2 million (2014: €16.6 million), reflecting investments made over the last year to expand the Group’s routes to market, especially in North America. Current year costs include a full year contribution from Portalify, together with the incremental costs associated with Fylde and the launch of the Group’s DMR portfolio.

Administrative expenses, excluding the IFRS 2 share option cost, non-recurring items and the amortisation of acquired intangibles, increased by 12% compared with the same period last year to €10.7 million from €9.5 million. Foreign exchange accounted for 10% of this increase and the remainder related to the incremental costs of Portalify and Fylde following acquisition.

The total cash operating costs, being the gross R&D expenditure, sales and marketing costs and administrative expenses (excluding the IFRS 2 share option cost, associated National Insurance, the amortisation of acquired intangibles and non-recurring items), increased by 7% to €45.6 million (2014: €42.8 million), reflecting the investment in research and development and routes to market described above, and the impact of foreign exchange.

Foreign exchangeThe Group continues to be impacted by the volatility of both Euro/GBP and Euro/USD exchange rates. Adjusted operating profit on a constant currency basis, excluding the forecast impact of foreign exchange hedges, was €16.9 million, €1.9 million higher than that reported, after adjusting for the following items:

• Revenues would have been €1.3 million lower at last year’s exchange rates;

• Product costs would have been €1.3 million lower at last year’s exchange rates;

• The Group’s unhedged Sterling operating costs would have been €0.6 million lower at last year’s exchange rates; and

• The Group incurred €1.3 million more of transactional net foreign exchange losses during the period compared to last year.

The Group continues to use forward contracts to sell Euros and buy Sterling to meet Sterling expenses that can be forecast with sufficient certainty as to timing and value to qualify for hedge accounting. This provides certainty as to the future Euro reporting value of these costs to the Group for the next 12 months.

The average hedge rate for the period was €1.190 / £1, based on prevailing rates during the prior year, compared to €1.24 / £1 for the same period last year which were in turn based on prevailing rates 12 months previously. As a result the Group’s hedged Euro operating costs decreased by 4% compared to the prior year.

The hedges outstanding at the end of the period covered £27.4 million (2014: £19.2 million) of forecast Sterling cash flows at rates ranging from €1.233 – €1.354 / £1 (2014: €1.169 – €1.219 / £1), and with a weighted average rate of €1.274 / £1 (2014: €1.190 / £1) compared to the spot rate at the end of the period of €1.367 / £1 (2014: €1.205 / £1). The translation of the Group’s hedged Sterling cost base into Euros in the coming year will therefore result in higher reported Euro costs than those reported for the current period.

Operating profitThe Group presents adjusted operating profit as a key performance measure in addition to the operating profit reported under IFRS, as the exclusion of certain non-operational or non-cash items better reflects the underlying trading performance of the Group. Adjusted operating profit for the period increased by 20% to €15.0 million, (2014: €12.5 million), while the operating profit reported under IFRS was €17.1 million (2014: €14.4 million), representing growth of 18%.

Non-recurring itemsThe Group incurred €532,000 of costs, primarily professional fees, in connection with the acquisition of Fylde, together with €350,000 of subsequent restructuring costs, and initial costs of €864,000 in connection with the acquisition of Teltronic SAU, which completed subsequent to the end of the period. Following amendments to the terms of the Fylde earn-out, and reflecting the first year's post acquisition performance, €2,320,000 of deferred consideration that had been recognised on acquisition will now be treated as future management remuneration and accordingly this amount has been released to the income statement.

While the Board will continue to pursue full settlement of the amounts outstanding under a Greek public safety contract, given the current economic situation in Greece, which makes the timing and value of any payments uncertain, the Group has provided €1,770,000, being the total financial exposure.

Revenue (€m)

2013

104.8

2014

116.6

2015

131.2

€131.2mRecord revenues of €131.2 million (2014: €116.6 million)

Closing Order Book (€m)

€41.0mAn increase of 212% to €41.0 million (2014: €13.1 million)

9.813.1

41.0

2013 2014 2015


8.4

Financial Reviewcontinued

Closing cash balances at 27 March 2015 stood at €2.4 million (2014: €8.0 million) and net debt, including borrowings acquired with Sepura Systems and Portalify, was €1.1 million (2014: net cash of €5.3 million).

The balance sheetThe Group’s intangible assets increased during the period from €52.9 million to €66.6 million primarily due to the acquisition of €8.0 million of intangibles with Fylde, and net capitalised R&D of €6.4 million.

Inventory levels, excluding the impact of the acquisition of Fylde, increased by €1.4 million (2014: decrease of €1.3 million) as the Group’s product portfolio broadened while trade receivables increased by a net €8.7 million (2014: €4.8 million) compared to the prior period due to the growth in second half revenues over the same period last year and the delayed customer receipt referred to above. Trade payables increased by €9.4 million (2014: €3.9 million), in line with increased levels of activity across the Group while provisions were reduced by €2.7 million, including a €2.3 million release of part of the contingent consideration relating to Fylde. These movements equate to the working capital outflow of €3.4 million during the period referred to above.

Share capitalThe Company has continued to purchase shares for Treasury in anticipation of future share option awards vesting, with a further 2.9 million shares (2014: 0.9 million) acquired during the period for total consideration of €5.4 million (2014: €1.3 million). 2.2 million (2014: 0.5 million) Treasury shares were utilised to settle options that vested and were exercised during the period, leaving 1.2 million (2014: 0.5 million) shares in Treasury at the end of the period.

A further invitation for eligible employees to participate in the Company’s SAYE scheme was issued in September, with options over 0.8 million shares subsequently granted at an exercise price of 1.19p. Options were also granted to senior executives under the Company’s Long-Term Incentive Plan totalling 1.8 million shares (2014: 2.0 million). These will vest if targets relating to the period to 31 March 2017 and 31 March 2018 are achieved.

TaxationThe Group has continued to benefit from enhanced tax relief on qualifying research and development expenditure and its brought forward tax losses, with €9.5 million (net) of losses available for offset against future taxable profits (2014: €9.9 million) in the UK. These are not available to the Group’s overseas subsidiaries, which paid an aggregate of €631,000 of corporate taxes during the period. The Group also has deferred tax liabilities of €8.0 million (2014: €6.8 million) in relation to the development costs capitalised under IFRS, together with €0.9 million (2014: €0.8 million) in relation to acquired intangibles, which do not represent future tax cash payments and will be released to income as the related costs are amortised.

EPSAdjusted diluted earnings per share, based on expensing development costs as they are incurred and excluding non-recurring items, the IFRS 2 share option charge, associated National Insurance and the amortisation of acquired intangibles, was 9.7 € cents (2014: 8.4 € cents). IFRS fully diluted earnings per share was 10.8 € cents (2014: 9.4 € cents).

Cash flows and financingThe Group continues to generate strong operating cash flows, with net cash generated from operations of €24.6 million (2014: €26.4 million). Cash conversion for the year was 88% (2014: 101%) with net working capital increasing by €3.4 million (2014: decrease of €0.3m). This is broadly in line with target cash conversion despite the delay in receipt from the Greek public safety contract referred to above.

Significant non-operating cash flows during the period related to:

• €3.4 million (2014: €5.0 million) paid for acquisitions;

• €13.1 million (2014: €12.5 million) spent on capitalised development costs;

• €5.2 million (2014: €4.6 million) of other capital expenditure due to investment in test equipment and tooling for the Group’s new DMR portfolio and next generation TETRA terminal, and investment in a new integrated business system;

• €3.7 million (2014: €3.0 million) paid in relation to last year’s final dividend and this year’s interim dividend;

• €5.4 million (2014: €1.3 million) purchasing shares for Treasury; and

• €0.2 million (2014: €0.2 million) received from employees exercising share options.

Adjusted diluted earnings per share (¢)

2013

7.8

2014 2015

9.7

9.7¢An increase of 15% to 9.7¢ (2014: 8.4¢)

Dividend

2.4pA total dividend of 2.4p per Ordinary share (2014: 2.00p)

2013

1.68

2014

2.00

2015

2.4


DividendsThe Board has proposed a final dividend of 1.71p per Ordinary share in respect of the year (2014: 1.41p), payable on 18 August 2015 to shareholders on the register at the close of business on 17 July 2015, giving a total dividend of 2.4p per Ordinary share (2014: 2.0p). This represents a 20% increase on last year’s total dividend.

Post period eventsOn 27 May 2015 the Company announced that it had completed the acquisition of Teltronic for €127.5 million. The acquisition was financed through a combination of new banking facilities of €120 million from a broadened group of banks (which replaced all previous facilities) and a £60.5 million equity raise, gross of fees and expenses, which has significantly broadened the Group’s institutional investor base.

Teltronic is highly complementary, both in terms of product set and geographical penetration, with an extensive infrastructure portfolio, an emerging LTE portfolio and P25 capabilities. The acquisition strengthens the Group's presence in both Latin America and North America, in addition to extending the existing strong EMEA customer base.

Teltronic generated revenues of €62.9 million and an adjusted operating profit of €8.4 million for the year ended 31 December 2014. At the time of the acquisition, the Group announced that the transaction is expected to be immediately enhancing to adjusted diluted EPS and significantly enhancing in the first full year of ownership to March 2017.

There is expected to be significant overlap in R&D spend, as well as savings across the operating cost base, that are expected to generate €3 million of cost synergies per annum by the end of the first full year after completion.

Approximately €1.5 million of these are expected to be achieved this year, and the cost of implementation to realise them is expected to be c. €1.9 million. The improved product offering, cross selling and geographical expansion is expected to provide other incremental benefits.

The Relationship Agreement (as defined on page 58 of the Company’s Annual Report for the year ended 28 March 2014) between the Company and its Principal Shareholders that has been in effect since the Company’s IPO in August 2007 has been terminated following the completion of the acquisition and associated equity raise.

Steve ChamberlainChief Financial Officer6 July 2015

Adjusted operating profit for the period increased by 20% to €15.0 million, (2014: €12.5 million), while the operating profit reported under IFRS was €17.1 million (2014: €14.4 million), representing growth of 18%.


Maintaining Long-Term Value

Corporate Social Responsibility

Sepura recognises that a positive approach to Corporate Social Responsibility (“CSR”) can have a positive contribution to its reputation and the ability to create and maintain long-term value for shareholders.

This is why the Board, led by the Chief Executive Officer, takes CSR seriously and is committed to advancing our related policies, systems and initiatives across all areas of the business as we continue to grow and mature. These areas primarily include ethical behaviour, concern for employee welfare, health and safety, care for the environment and community involvement.

We make considerable efforts to communicate effectively with all stakeholders who may have an interest in our CSR activities, including our shareholders, customers, suppliers, partners and employees. The Company’s website is one of the main routes for providing information to interested parties and providing us with constructive feedback.

Ethical behaviourIn support of our core values of integrity, excellence, care, teamwork and commitment, Sepura expects that its business around the world is always conducted to high ethical standards of practice and legal principles. To that end, all our employees and business partners are also expected to demonstrate high standards of professionalism and integrity at all times when conducting business on the Company’s behalf. This is indeed how we behave in practice.

A Code of Business Conduct and Ethics (including a whistle-blowing policy) covering the whole of the business and our various stakeholder interests is in place and is regularly reviewed and reiterated to staff and business partners.

Human rightsThe Group respects all human rights and conducts its business in adherence to all relevant government guidelines, and takes all practical steps to ensure that its products are not supplied to organisations that may use them to advance terrorism, internal repression or otherwise abuse human rights.

EmployeesAs a business driven largely by technical development and innovation, our main assets lie in the talents and skills of the people we employ. Consequently, we aim to attract, retain and motivate the highest calibre of employees, both technical and non-technical, by encouraging and rewarding high performance through competitive remuneration and incentive arrangements. Sepura continues to be an “Investor in People” accredited employer.

Discounted shares for employees

20%The UK's ShareSave Scheme enables employees to purchase shares in Sepura through regular savings made over a three or five year period but at a discount of up to 20% on the share price as determined at the outset


Acknowledging that an environment that fosters innovation and collaboration is critical to our success, efforts are made to identify and provide further learning, training and development opportunities for our employees. These are structured so as to align our organisational objectives with personal career aspirations. Formal performance reviews, including 360° appraisals, are conducted annually.

Similarly, the importance of two-way communication is recognised, particularly as it relates to the business and its performance. We actively encourage employee involvement through a Staff Council and keep employees regularly informed of the Group’s activities and performance through team briefings, direct access to managers and Directors at all levels and by interim and year-end presentations to all staff.

During the period, and with a view to encouraging share ownership amongst its employees, the Company issued another invitation to employees to join an all-employee ShareSave Scheme in the UK. This Scheme, which is HMRC approved, enables employees to purchase shares in Sepura through regular savings made over a three or five year period but at a discount of up to 20% on the share price as determined at the outset. The Company intends to make an annual invitation under this Scheme and will from time to time consider its extension to other countries in which it has established a major operating presence.

Equality and diversityThe split of staff by gender at the end of the period was as shown opposite.Sepura is committed to providing equality of opportunity to all existing and prospective employees without unlawful or unfair discrimination. In addition, we are supportive of the employment and advancement of disabled persons. The Group gives full and fair consideration to the applications for employment from disabled persons, having regard to their particular aptitudes and abilities. Appropriate arrangements are made for the continued employment and training, career development and promotion of disabled persons employed by the Group. If members of staff become disabled the Group aims to continue their employment, either in the same, or an alternative, position, with appropriate retraining being given if necessary.

Health and safetyDuring the period there were no accidents reportable under the Reportable Injuries, Diseases and Dangerous Occurrences Regulations 2013; there were 3 non-reportable accidents in the UK (2014: 3). The Group operates a Health & Safety Management System based on the ISO18001 framework. The Health and Safety Committee meets regularly, with responsibility for controlling, directing and delegating responsibility to line management and functional heads for the practical day-to-day compliance with the Group’s Health and Safety Policy Statement, other operating procedures and relevant legislation. Appropriate training is also coordinated by this Committee, together with an ongoing awareness programme for all employees to help create and maintain a safe and healthy working environment. Health & Safety is included as part of the Group’s internal audit cycle with periodic audits also undertaken by an external consultant.

It continues to be the Company’s policy to offer staff free influenza injections and additional policy and contingency plans are in place in the event of any pandemic virus impacting staff health and business continuity. Notable health and safety risks to the business continue to be fire, electrical faults, soldering, manual handling, work station use, driving and stress. Employee travel to high risk geographies, due to the expanding diversity of the Group’s customer base, is also of particular concern. The statutory testing of all equipment and appliances is up to date for all UK offices. Manual handling training is mandatory for those where risk assessment has identified training as necessary, and regular work station risk assessments are carried out together with any remedial action necessary. All staff have free access to a stress counselling service and our Occupational Road Risk Policy has been re-written to reflect current industry best practice.

Sepura welcomes new apprentices

Our apprenticeship programme has gone from strength to strength; the appointment of our latest apprentices is testament to, and builds on, the success of the scheme. Our first apprentices are making excellent progress. They are learning, growing professionally and have started to add real value to the organisation

Gender diversity

Female Male

Directors Other Employees

332

54

7

Senior Managers

46

2


Corporate Social Responsibilitycontinued

Environmental careWe are committed to minimising the environmental impact of our business operations and complying with all relevant legislation, with pro-active and effective environmental management throughout our business operations wherever practicable. The Company is ISO 14001 accredited and our business complies with relevant legislation and regulations.

We set targets against which we measure and report, driving forward continuous improvement in resource conservation and the prevention of pollution throughout the life-cycle of our products with a particular focus on:

• Conserving resources through better energy efficiency, reduction of travel emissions and recycling;

• Promoting sustainable design principles in the development of new products and packaging;

• Fostering a positive culture amongst our employees, customers and supply chain by the development and communication of clear policies, and the promotion of good practice;

• Minimising our impact on the communities in which we operate through engagement with local organisations and raising employee awareness; and

• Using our Environmental Management System to provide a framework for setting, evaluating and reporting environmental performance.

Specific initiatives undertaken during the last year included:

• Packaging We have applied eco-design principles

to a review of all of the packaging we use, decreasing the size of packaging and delivered a lower carbon footprint for the packaging itself and reduced emissions from shipping.

• Recycling We encourage recycling wherever

possible, and during the period achieved an overall recovery rate of 54% at our Cambridge headquarters, up from 47% last year.

• Batteries and radios We record sales by weight and

chemistry to comply with the Waste Batteries and Accumulators Regulations, and offer a “take-back” scheme for batteries and radio units that have reached their end- of-life. We employ a specialist contractor to recycle returns and currently achieve a recycle rate of at least 96% per unit.

• Transport We participate in the Government’s

“Bikes for Work Scheme” for employees, and offer staff the opportunity to have their bikes serviced free of charge. The number of employees based at our Cambridge office who, during our travel survey week in October 2014, arrived at work by bicycle, on foot or using public transport now stands at 52%.

By way of supplement to our existing Environmental Management System, a regular Environmental Update is issued to help highlight and explain to staff and other interested stakeholders exactly what we are doing in this important area.

Greenhouse gas emissionsSepura is committed to reporting its total carbon emissions based on the Scope 1 and 2 Greenhouse gas emissions from across the Group. A “financial control” approach has been adopted in conjunction with the “GHG Protocol Corporate Accounting and Reporting Standard (revised edition)” and emission factors from UK Government’s “GHG Conversion Factors for Company Reporting 2014” to determine the Group’s total greenhouse gas emissions, based on detailed metrics from each of the Group’s locations where they are available. Data from several smaller offices, based in serviced premises, has been excluded on the grounds of materiality as the data is not available.

The total emissions and intensity ratios for the last financial year, together with the prior year that formed the baseline year from which progress will be tracked, are show above.

Community involvementSepura aims to be a responsible corporate citizen and active employer in the communities in which we operate, particularly at our main operating site in Cambridge. Sepura is the headline sponsor of the Cambridge United Community Trust, which was established in 2011 with the aim of positively influencing 10,000 children per year through a series of programmes for young offenders, children at risk of exclusion, ethnic minority groups, disability groups, the homeless and people living in areas of deprivation.

Gordon WatlingChief Executive Officer6 July 2015

Greenhouse Gas Emissions 2015 2014

Tonnes of Tonnes of Co2 per Tonnes of Co2 per Tonnes Tonnes €1m of Co2 per Tonnes of €1m of of Co2 of Co2 revenue employee of Co2 revenue employee

Scope 1: Direct emissions 52 0.4 0.1 72 0.6 0.2Scope 2: Indirect emissions 676 5.2 1.7 1,045 9.0 3.0

Total Scope 1 and Scope 2 emissions 728 5.6 1.8 1,117 9.6 3.2


Corporate Governance Report

Introduction from the Chairman

We believe that solid governance principles for the Group to operate within are the foundations that underpin the creation of value for shareholders on a sustainable long term basis. My Board colleagues and I are therefore committed to setting the ‘tone from the top’ in terms of instilling high standards of corporate governance and business integrity.

Sound corporate governance is considered by the Board to be at the core of the setting and implementation of the strategy for the Group by way of both informing decisions and monitoring their implementation. The Board has established the structure and procedures described in this report for these purposes.

Set out in the following pages are:

• Biographical details of the members of our Board

• A summary of the operation of our Board and its Committees

• A report from our Audit Committee• The Directors’ Remuneration Report• The Directors' Report

I hope that readers will find them informative.

This Corporate Governance Report also sets out how the Company has applied the main principles of good governance contained in the UK Corporate Governance Code 2012 (the “Code”, which can be found on the FRC’s website at www.frc.org.uk), for the period ended 27 March 2015. The Board considers that the Company is compliant with the Code with just one exception.

The Board does not currently have a nominated Senior Independent Non-Executive Director, as it continues to have this appointment under review, although it intends to appoint one in the coming year. On his appointment as a new independent Non-Executive Director during the year, Russell King was appointed to the Nominations Committee, bringing that Committee into full compliance with the Code.

We look forward to reporting to you on these and other developments in our Annual Report next year.

Dr. John Hughes CBE Hon DScChairman6 July 2015

As an integral part of Sepura’s participation in an established investment market your Board continues to be mindful of the responsibility for the Company to be managed transparently and in an optimal manner to maximise success in its business.

Dr. John Hughes CBE

Hon DScChairman

Sepura plc Annual Report & Accounts 2015 29G

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Corporate Governance Reportcontinued

Our Board and Senior Management

The Board is responsible for providing leadership for the Group. Its prime objectives include ensuring that the right strategy and controls, together with appropriate financial and human resources, are in place to deliver value to shareholders and other stakeholders.

Dr. John Hughes CBE Hon DSc (63) N, INon-Executive Chairman (Chairman of the Nominations Committee)

John Hughes joined the Group as non-executive Chairman in July 2010. John has more than 30 years' experience in the management and strategic positioning of complex, high technology businesses. John has previously held senior positions within a number of leading technology companies, including Thales Group, Lucent Technologies and Hewlett-Packard. He is currently Chairman of JUST EAT plc, Spectris plc and Telecity Group plc and Non-executive director of CSG Systems International, Inc., a Nasdaq-listed company. John is also an Alzheimer's Society Ambassador. John was awarded the CBE for services to international telecommunications in the Queen’s 2011 New Year Honours List, and an honorary Doctor of Science in 2014 by The University of Hertfordshire in recognition of his contribution to the communications and technology sector and to the wider business community.

Gordon Watling (47) Chief Executive Officer

Gordon Watling was appointed to the Board as Chief Executive Officer on 1 October 2008, having served as Chief Operating Officer since joining the Group in November 2006. He was previously Global Engineering Director of Honeywell's Electronic Sensing business from 2003 to 2006 and Operations Director of Invensys Energy Systems from 1998 to 2000, until he became Development Manager at HP/Agilent Technologies in 2000. Prior to that, Gordon had operations, development and manufacturing roles at Schlumberger Industries between 1985 and 1997.

Sion Kearsey (49) NNon-Executive Director

Sion Kearsey is a founding member of Sepura and joined the Group in 2002. He was a co-founder and is now Managing Partner of Kelso Place Asset Management LLP, a private equity firm specialising in acquiring controlling interests in UK based companies. Sion was previously a Managing Director of Goldman Sachs International in its Fixed Income, Currencies and Commodities Division.

Russell King (57) A, N, R, INon-Executive Director

Russell King was appointed to the Board in July 2014. He is a highly experienced board-level executive and has deployed his strong strategic and human capital skills across a number of sectors including technology, industrials, chemicals and mining. He is currently Senior Independent Non-Executive Director and Chairman of the Remuneration Committee of Aggreko plc, Non-executive Director and Chairman of the Remuneration Committee of Spectris plc, Chairman of Humming Bird Resources plc and Senior Independent Non-Executive Director of Interserve plc. He is also a senior adviser to Heidrick & Struggles. During his career Mr King has been Chief Strategy Officer of Anglo American plc and spent over 20 years at ICI, working within its fertiliser, petrochemical and paint businesses.


Senior Management Team

Paul WatsonChief Operating Officer

Juan FerroCEO, Teltronic

Kasper BarfoedSenior Vice President, Sales

Jonathan HamillVice President, Government and Public Safety

Chris D’AguiarVice President, Commercial

Steve BarberHead of Product Strategy

James GriffithsGroup HR Director

A: Audit CommitteeN: Nominations CommitteeR: Remuneration CommitteeI: Independent Non-Executive Director

Steve Chamberlain (43)Chief Financial Officer

Steve Chamberlain was appointed Chief Financial Officer in March 2012. He joined the Group from Autonomy where he spent 7 years as VP Finance with worldwide responsibility for finance. During that time Steve played a pivotal role in the successful integration of key acquisitions with a combined value of $2 billion. He has over 15 years of experience in the technology sector which includes time in practice at Arthur Andersen and Deloitte. Steve is a Chartered Accountant and has a Masters Degree in Mechanical Engineering, Manufacture and Management from the University of Birmingham.

Nigel Smith (61) A, N, R, INon-Executive Director(Chairman of the Remuneration Committee)

Nigel Smith joined the Group in July 2013. He is a highly experienced executive with deep technology sector expertise. He is currently Chairman of Spikes Cavell, a business focused on the public sector in the UK and USA. Prior to that, he was in HM Treasury as Permanent Secretary, Board Member and Chief Executive of the Office of Government Commerce, and is still actively involved with government as an adviser. His previous experience includes senior board roles at major industrial and engineering businesses, including Invensys plc, Charter Group plc and TI Group plc. He is also a Non-Executive Director of Sellafield Ltd.

Gordon Stuart (51) A, N, R, INon-Executive Director (Chairman of the Audit Committee)

Gordon Stuart joined the Group in July 2013, bringing his detailed understanding of quoted technology businesses. He is currently Chief Financial Officer of TMF Group, a leading global provider of high value outsourced business services. Previously, following six years at McKinsey & Co, he held senior positions with a number of highly successful UK listed businesses, serving as Group Finance Director of London Bridge Software plc and thereafter Xansa plc. He then became Chief Financial Officer of recruitment process outsourcing firm, Alexander Mann Solutions. He also served as a Non-Executive Director of Intec Telecom Systems PLC.


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Summary of the operation of our BoardThe Board directs the Company, and provides leadership, support and challenge to the rest of the Group. The Group operates within a framework of appropriate and effective controls that enables risks and uncertainties to be identified, assessed and managed.

The Board:

• sets the Group’s strategic aims;• ensures that the Company has the

necessary financial and human resources in place;

• reviews management performance;• defines the Group’s values and standards;• ensures that its obligations to shareholders

are understood and met; and• works closely with the operating

management to achieve the Group’s objectives.

All members of the Board take collective responsibility for the Group’s performance.The Board has seven members, all of whom served throughout the financial period, save for Russell King who was appointed during the period. Its composition is as follows:

• a Non-Executive Chairman, John Hughes, who was independent on appointment, who chairs the Nominations Committee, and who stepped down from the Remuneration Committee during the year bringing this into compliance with leading best practice;

• two Executive Directors, Gordon Watling, Chief Executive Officer, and Steve Chamberlain, Chief Financial Officer;

• three independent Non-Executive Directors, Russell King, Nigel Smith, and Gordon Stuart, all of whom serve on each of the Audit, Nominations and Remuneration Committees; and

• A further Non-executive Director, Sion Kearsey, who serves on the Nominations Committee.

All Directors are able to, and do, devote sufficient time and attention to their Board duties and responsibilities.

This schedule of matters reserved for the Board’s decision is reviewed annually, and updated as considered appropriate, as it was during the year. In addition, certain matters have been delegated to three principal Committees within clearly defined terms of reference. Their remits, together with the composition of each Committee, are reviewed annually. The current terms of reference for the Audit, Remuneration and Nominations Committees are available on the Company’s website at www.sepura.com/investors. Resumés of the roles of each of these Committees appear later in this Report.

The Directors have access to the advice and services of the Company Secretary, whose appointment and removal may only be effected by the Board. The Company Secretary, who also acts as Secretary to each Committee, is responsible for information flow to the Board and Committees, facilitating the induction and professional development of the Directors, and advising through the Chairman on compliance with Board procedures and applicable laws and regulations on governance matters.

Board decisions are taken through consensus following debate as appropriate. Though no Director so requested during the period, Directors have the right to request that any concerns they may have are recorded in the appropriate Board or Committee minutes. Minutes are circulated for comment before being formally approved at the next relevant meeting. There is also an agreed procedure by which Directors may take independent professional advice relating to their duties at the Company’s expense, if required. No such advice was taken by any Director during the period.

The Board has adopted a formal schedule of matters specifically reserved for its or its Committees’ decision which include:

• the Group’s strategy, which is reviewed with relevant members of the management team when appropriate during the year;

• the business plan and annual operating budget, which are prepared and considered in the context of the outcome of the strategy discussions;

• internal controls and risk management, which are reviewed regularly by the Audit Committee;

• major investments, acquisition opportunities and capital projects, and monitoring their subsequent performance;

• accounting policies, which are reviewed in detail by the Audit Committee;

• dividend policy and payments commented on further in the Directors’ Report on page 50;

• shareholder communications, such as announcements of results and this Annual Report and accompanying notice of the AGM;

• the Board structure, composition and succession planning, which are handled in more detail by the Nominations Committee;

• Executive remuneration policy and the remuneration of the Chairman, which are handled by the Remuneration Committee; and

• the remuneration of the Non-Executive Directors, in relation to which they do not participate in decisions.


The Board meets regularly at scheduled meetings, approximately eight times per year. At these meetings, it reviews the development, trading performance and plans of the Group. If and when required, additional meetings are held, usually by telephone conference.

A Contract Bid Committee has also been established with a remit to help facilitate the review and determination of contractual bid proposals which exceed pre-determined approval limits delegated to management.

Irrespective of their membership, all Non-Executive Directors may attend Committee meetings and the Executive Directors (and members of management) may attend and present on relevant matters at the invitation of the Committee Chairman.

Board balance and independenceThe Board believes that its current structure and membership of the Chairman, two Executive Directors and four Non-Executive Directors is appropriate and represents a good balance of skills and experience necessary to manage the business and the Company in an effective and successful manner. This composition ensures that a proper balance of influence is maintained without one person or separate group having undue powers of decision making. All the Non-Executive Directors bring strong independent judgement to bear on the Board’s deliberations and decision making process.

As recommended by the Code, the Board has considered the independence of its Non-Executive Directors and determined that three of its four Non-Executive Directors are independent for this purpose. In addition, the Chairman was independent at the time of his appointment to that position. Sion Kearsey is not deemed to be independent under the Code due to his shareholding in the Company. Mr Kearsey is, though, considered fully independent of management and makes a valuable contribution to the Board as a whole in his role as a Non-Executive Director.

The attendance of current Board and Committee members at meetings and calls, as compared with the number of meetings held during the period they were a member of the Board or on the relevant Committee, is shown below:

Directors absent from meetings were unavoidably prevented from being present. Where a Director is unable to attend a particular meeting, full documentation for the meeting is issued to them, their views are sought in advance and briefings are provided subsequent to the meeting, as appropriate.

1 John Hughes stepped down from the Remuneration Committee with effect from 16 March 2015.

2 Denotes Chairman status.3 Directors do not attend meetings of the

Remuneration Committee when the Committee is deciding matters in relation to such Directors’ remuneration.

4 Appointed to the Board and Audit, Nominations and Remuneration Committees in July 2014.

All Directors on the Board at that time attended the AGM.

Attendance at Board meetings

John Hughes1

Gordon Watling

Steve Chamberlain

Sion Kearsey

Russell King4

Nigel Smith

Gordon Stuart

Board (12 meetings)

Audit Committee (3 meetings)

Remuneration Committee (3 meetings)3

Nominations Committee (1 meeting)

Board or Committee member not present

Non-committee member invited to attend some or all of a meeting (although not any part of a Remuneration Committee meeting at which their own remuneration was decided)

2 2

2

2

The role of the Chairman and Chief ExecutiveThe roles of the Chairman and Chief Executive are separated, with a clear division of responsibility at the head of the Company having been established, agreed and set out in writing. This division of responsibilities has recently been reviewed and no changes found necessary.

The Chairman is primarily responsible for managing the Board, facilitating the effective contribution of all Directors, for ensuring effective communication with shareholders and that all Board members are aware of the views of major investors.

The Chief Executive, together with the Chief Financial Officer, has been delegated appropriate responsibilities and authorities for the effective leadership of the senior management team in the day-to-day running of the business, for carrying out the agreed strategy and for implementing specific Board decisions relating to the Group’s operations. During the period the Chairman held both formal and informal discussions with the Non-Executive Directors without the Executive Directors being present.


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Audit Committee:Gordon Stuart, ChairmanThis Committee comprises solely the Company’s three independent Non-Executive Directors and reviews matters in relation to the Company’s financial reporting, internal control and risk management on behalf of the Board. Its membership and activities are commented upon further in its report which commences on page 35.

Performance reviews and Directors’ developmentAn internally facilitated evaluation of the Board’s performance, individual Directors and its Committees, and of the performance of the Chairman, was completed during the period. The appraisal questionnaires used were wide-ranging covering the membership, activities and performance of the Board and its Committees. The appraisal outputs were used to highlight strengths and weaknesses and indicated that the overall performance was effective. A number of areas for improved effectiveness and opportunities to develop processes were identified for further consideration. The Board has agreed specific actions to address these. They included matters in relation to further ongoing reviews in relation to the Group’s industry and its markets generally; ongoing strengthening of the management team in line with the development of the Group; and matters specifically in relation the Group’s Committees.

Directors have free access to the Company’s officers, management and advisers and to visit the Company’s operations. Every Director has access to appropriate training, as required, subsequent to appointment and it is the responsibility of the Chairman and the Company Secretary to ensure that the Directors are able to update their skills and are provided with the necessary resources to do so.

Re-election of DirectorsAll Directors retire, and where appropriate, are proposed for reappointment at the Company’s annual general meetings. The Board considers that each of the Non-Executive Directors makes a valuable contribution to the Group both at and outside Board meetings. Following the results of the Board evaluation, the Chairman confirms that each of the Non-Executive Directors continues to be effective. Accordingly they are all to be proposed for reappointment

Takeover DirectiveDisclosures relating to the Takeover Directive are included in the Directors’ Report on page 54.

Shareholder relationsThe Board is committed to maintaining good communications with existing and potential shareholders based on the mutual understanding of objectives. A comprehensive investor relations programme underpins this commitment. The Chairman, Chief Executive, Chief Financial Officer and Chairman of the Remuneration Committee have regular dialogue with institutional shareholders in order to develop an understanding of their views which is fed back to, and discussed with, the Board and Remuneration Committee. Presentations are generally given to analysts and investors covering the annual and interim results and other major corporate events.

The results announcements and results presentations, together with all information reported to the market via a regulatory information service, press releases and other shareholder information, are published on the Company’s website at www.sepura.com/investors. Additional Shareholder Information is set out on page 108.

All shareholders are encouraged to attend, and have the opportunity to ask questions at, the Company’s Annual General Meetings and at any other times by contacting the Company. The Chairmen of the Audit, Nominations and Remuneration Committees will be available at the Annual General Meeting to answer questions relating to the responsibilities of those Committees.

The Notice convening the 2015 AGM will be issued at least 20 working days in advance of the meeting and separate resolutions will be proposed on each substantially separate matter. The results of the proxy votes on each resolution will be published on the Company’s website after the meeting.

Nominations Committee:John Hughes, ChairmanThe Nominations Committee now comprises the Chairman, who was considered independent on appointment, and four other Non-Executive Directors, three of whom are considered independent. It is responsible for evaluating the balance of skills, knowledge and experience of the Directors. It also reviews the composition and structure of the Board and makes recommendations to the Board on retirements and appointments of additional and replacement Directors, including succession planning.

The Nominations Committee selected and recommended the appointment of Russell King before he joined the Board at the time of last year’s AGM. This followed a formal, rigorous and transparent recruitment process. The Nominations Committee was able to select Mr King from a range of suitable candidates without any need to appoint an external search firm or engage in open advertising and considered him to be ideally suited for the role. This included all existing Directors meeting Mr King prior to the recommendation for his appointment.

The Board recognises the benefits of diversity in its membership as in the Group more generally and has a policy that recruitments to the Board should enhance this. The Directors currently on the Board are from a diverse range of backgrounds and provide a wide range of knowledge, skills and experience enriching Board discussions and informing its decision making. Gender diversity in the Group is commented upon under Corporate Social Responsibility on page 27 and the Board supports this approach as part of its own policy.

Remuneration Committee:Nigel Smith, ChairmanThe Remuneration Committee comprises three independent Non-Executive Directors and meets at least three times per year, as it did in the period, and otherwise as necessary. It sets the Company’s remuneration strategy and determines, on behalf of the Board and within its agreed remuneration framework, the individual remuneration package and conditions of employment of each of the Executive Directors and the Chairman.

No Director is involved in deciding his own remuneration whether determined by the Committee, or in the case of other Non-Executive Directors, by the Board.

The Directors’ Remuneration Report on pages 38 to 49 includes a more detailed description of the role and activities of the Remuneration Committee.

Board Committees


The AuditCommittee

Report of the Audit Committee

The Committee:

• is Chaired by Gordon Stuart who has recent, significant and relevant financial experience from his current Chief Financial Officer role external to the Group as well as his past roles in public and private companies;

• is responsible for recommending the appointment, review and remuneration of the external auditors and has authority to approve their engagement for both audit and permitted non-audit services within an agreed framework;

• assesses the independence, objectivity and effectiveness of the external auditors against specific criteria;

• reviews the external audit process and post-audit findings;

• reviews the annual and half-year financial statements, the Group’s accounting policies and procedures and its financial control environment;

• monitors the Group’s system of internal controls, including financial, operational and compliance risk management;

• reviews updates to the Group’s key policies including, during the period, its anti-bribery and related policies and its whistleblowing arrangements, which now include an externally managed hotline; and

• considers whether, in its view, the Annual Report taken as a whole provides a fair, balanced and understandable assessment of the Group’s position and prospects, the ultimate judgement on which is decided by the Board.

The Committee met three times during the year and addressed the following:

Topic What was considered

Financial reporting The Annual Report, Interim Results and related announcements, together with reports from the external auditor. Further details on specific financial reporting risks identified, and their mitigation, are given below.

Internal controls The effectiveness of the Group’s internal control systems and risk management processes in place during the period, as set out on pages 36 and 37.

Risk register The Group’s risk register, which forms an integral part of the Group’s risk management process, as set out on page 37.

The external auditor The proposed audit plan of the external auditor, together with the results of their review of the Interim Results, the audit of the Annual Report, their proposed fees and the policies in place to ensure the external auditor’s independence.

Going concern The basis of the statement on Going Concern on page 52.

Audit Committee:Gordon Stuart, Chairman The Audit Committee comprises three independent Non-Executive Directors, in accordance with the provisions of the Code.

The Committee meets at least three times a year, together with representatives of the executive and finance management teams and the external auditors as appropriate. It also meets privately with the external auditors on a regular basis.


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The Audit Committee has set a policy which is intended to maintain the independence and integrity of the Company’s auditors when acting as auditor of the Group’s accounts. The policy governs the provision of audit and non-audit services provided by the auditor and, in summary, requires significant non-audit services other than other assurance services and routine tax compliance services to be subject to a competitive tendering process. The fees paid to the auditor for audit services, audit related services and other non-audit services are set out in Note 9 to the consolidated financial statements.

Non-audit services over £5,000 are subject to approval by the Audit Committee.

The Company recognises the new requirements for the tendering of audits and will comply with these. The Audit Committee in any case keeps this possibility under review, taking into account the outcome of its annual review of the effectiveness of the external audit process. PricewaterhouseCoopers LLP has served as the Company’s auditor for the last 13 years, during the last 8 of which the Company’s Ordinary shares have been traded on the Official List of the London Stock Exchange. There has not been an audit tender during that time. Rotation of the audit engagement partner in line with the relevant guidelines will take place in the coming year.

The Audit Committee is authorised to engage the services of external advisers, as it deems necessary, at the Company’s expense in order to carry out its functions.

Internal controls and risk management environmentThe Board is ultimately responsible for the operation of an effective system of internal control and risk management appropriate to the business. Of course, any control system can provide only reasonable and not absolute assurance against material misstatement or loss. The Company has complied with the FRC’s Internal Control Guidance for Directors on the Code throughout the period and up to the date on which these financial statements were approved.

Day-to-day operating and financial responsibility rests with senior management and performance is closely monitored through the Operations Management Committee, which meets on a weekly basis.

Report of the Audit Committeecontinued

As part of its consideration of the Annual Report the Committee identified the following significant financial reporting issues:

Significant financial reporting issues for 2015

How the committee addressed these issues

Revenue recognition The Committee assessed the Group’s policy in relation to revenue recognition, including long-term contracts, together with associated risk management and approval processes.

Overdue accounts receivable The Committee reviewed the methodology used to assess overdue accounts for potential indicators of impairment, together with management’s judgement as to the level of provision required against specific receivables.

Capitalisation of development costs The Committee reviewed the methodology used to determine whether specific projects qualified for capitalisation, and when amortisation should commence, together with the basis for subsequent reviews of capitalised development costs for potential impairment and useful economic lives.

Acquisition accounting The Committee reviewed the methodology used to assess the fair value of the assets and liabilities acquired with Fylde Micro Limited, together with the likely level of contingent consideration payable.


The following key elements comprise the present internal control environment which has been designed to identify, evaluate and manage, rather than eliminate, the risks faced by the Group in seeking to achieve its business objectives and ensure accurate and timely reporting of financial data for the Company and the Group.

The process is embedded in the Group through various operational and financial control and procedure statements:

• an appropriate organisational structure with clear lines of responsibility;

• a comprehensive annual strategic and business planning process;

• systems of control procedures and delegated authorities, which operate within defined guidelines, and approval limits for capital and operating expenditure and other key business transactions and decisions;

• a robust financial control, budgeting and rolling forecast system, which includes regular monitoring, variance analysis, key performance indicator reviews and risk and opportunity assessments at Board level;

• procedures by which the Company's consolidated financial statements are prepared, which are monitored and maintained through the use of internal control frameworks addressing key financial reporting risks arising from changes in the business or accounting standards;

• an experienced and commercially focused legal function that supports the Group’s bid and contracts’ management process;

• established policies and procedures setting out expected standards of integrity and ethical standards which reinforce the need for all employees to adhere to all legal and regulatory requirements;

• an experienced and qualified finance function which regularly assesses the possible financial impact of the risks facing the Group; and

• an ongoing risk management programme, including a comprehensive disaster recovery and business interruption plan.

The Audit Committee considers annually whether there is any need for a separate internal audit activity and has again concluded in the period that in its opinion, given the scale and nature of the Group’s operations, this is not required.

A Risk Committee, comprising the senior management team, meets on a regular basis. The Company has a robust risk management process that follows a sequence of risk identification, assessment of probability and impact, and assigns an owner to manage mitigation activities. A register is kept of all corporate risks and is monitored by the Risk Committee. The Risk Committee, the Audit Committee and the Board together ensure that the risk management process is operating effectively.

This approach to risk management helps to facilitate top-down and bottom-up perspectives across key business risks within the organisation. The corporate risk register is presented to, and reviewed by, the Audit Committee regularly.

The internal control process described above has been in place throughout the period and up to the date of approval of this Annual Report.

The Company’s Code of Business Conduct and Ethics, which was reviewed and refreshed during the year has been re-communicated across the Company together with the Whistleblowing Policy which provides a mechanism through which employees can raise public interest issues on a confidential basis. These policies form an integral part of the Company’s internal control policy. All employees received specific training on anti-bribery measures during the year.

Review of effectivenessThe Audit Committee, on behalf of the Board, has reviewed the effectiveness of the internal control systems and risk management processes in place during the period, taking account of any material developments since the financial period end, and can confirm that no failings or weaknesses were found which the Committee considered significant. This judgement was reached after reviews of reports received from management and the results of external audits.

Gordon StuartChairman of the Audit Committee6 July 2015


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Directors' Remuneration Report

Annual Statement

Our remuneration policy is appropriately aligned with the strategic goals of the Group.

Dear ShareholderThis report, which has been prepared by the Remuneration Committee (the “Committee“) and approved by the Board for the financial year ended 27 March 2015, sets out the remuneration policy for the Directors of the Company. As a result of the shareholder voting and disclosure requirements published by the Department for Business, Innovation and Skills, this report has been divided into three sections:• This Annual Statement, which

demonstrates how performance has linked to reward and summarises the decisions made by the Committee in the year;

• The Remuneration Policy Report, which sets out the Group's policy on the remuneration of Executive and Non-Executive Directors which, following shareholder approval, became effective from the 2014 AGM; and

• The Annual Report on Remuneration, which discloses details of the Remuneration Committee, how the remuneration policy will operate for the period ending 1 April 2016 (“FY16”) and how the policy was implemented in the period ended 27 March 2015 (“FY15”).

The Remuneration Policy Report which was approved at the Company’s AGM in 2014 has been included for information only given that no changes are proposed. This Annual Statement and the Annual Report on Remuneration will be subject to an advisory vote at the 2015 AGM.

Remuneration policy and reward for FY15The Company performance during FY15 has been strong with revenues up 12%, adjusted operating profit up 20% and adjusted diluted earnings per share up 15%. However as a result of the challenging performance targets set this level of performance only resulted in a 17% payout under the terms of the FY15 STIP.

The FY15 results also form the basis for one third of the FY13 LTIP granted in July 2012 and while performance has been strong the Group only met the minimum adjusted EBITDA target of €15.3 million and hence vesting for this component will be 10% of the maximum for this part of the award. The remaining components of the LTIP are based on share price performance and as such, full vesting under these parts are expected July 2015 when the scheme performance period for these awards ends.

Remuneration policy for FY16The Company is not proposing any changes to the Remuneration Policy for FY16. The key points to note in relation to the coming year are:

• The base salary levels for the Chief Executive Officer and Chief Financial Officer will be reviewed and become effective from 1 July 2015 following a review of both individual and Company performance which will be carried out during July 2015. Major investors will be consulted to the extent this is considered appropriate.

• Benefit and pension provision will remain unchanged, with the Company pension contribution (or salary supplement in lieu) limited to no more than 10% of base salary.

• The STIP will remain capped at 120% of salary for the Chief Executive Officer and 100% of salary for the Chief Financial Officer. Targets will continue to be challenging and primarily based around financial performance, requiring growth in adjusted operating profit of over 20% for the maximum payout to be achieved.

• The level of bonus received to be awarded in deferred shares will be increased from 40% to 50% with a normal deferral period of two years.

• LTIP awards will continue to be granted at 150% of salary for Executive Directors with performance targets again based on challenging Total Shareholder Return (TSR); adjusted EBITDA and Absolute Share Price targets measured over a three year period.

• Share ownership guidelines will continue to operate at 100% of salary and, consistent with best practice, clawback provisions will apply.

Shareholder engagementThe Committee continues to take an active interest in shareholder views on our executive remuneration policy and is mindful of the views of shareholders and other stakeholders. This is reflected in our voting result at the 2014 AGM, which was over 99% in favour of the Directors' Remuneration Report resolution. In conclusion, we intend that implementation of our remuneration policy for FY16 onwards will continue to be appropriately aligned with the strategic goals of the Group in supporting long terms success and delivering sustained shareholder value.

Nigel SmithChairman of the Remuneration Committee6 July 2015


Remuneration Policy Report

This part of the Directors' Remuneration Report sets out the remuneration policy for the Group which has operated and became formally effective from the Company’s 2014 AGM. No changes are being proposed to this policy framework for FY16 although certain disclosures in this section of the report that do not affect the policy itself have been updated to reflect the latest available information.

Policy overviewThe Committee’s policy for the remuneration of the Executive Directors and senior management team members is based on the following three key principles:

1. To provide remuneration in a form and amount that is sufficient to attract, retain and motivate a senior management team of the calibre and experience required to run the Company successfully;

2. To ensure that there is a strong link between reward and corporate and individual performance. To this end, it has been the Committee’s policy to set fixed pay levels broadly around market levels, but to provide the opportunity to earn upper quartile rewards for achieving and exceeding the Group’s business plan through variable performance-linked remuneration; and

3. To provide alignment with shareholders’ interests by ensuring that a significant proportion of the remuneration package is delivered in the form of shares (via the compulsory deferral of a portion of any bonus earned and participation in the Long-Term Incentive Plan) and by encouraging the Executive Directors to build up a meaningful holding of the Company’s shares over time through the operation of a formal shareholding guideline.

Consequently, the Committee structures executive remuneration in two distinct parts:

(i) fixed remuneration comprising base salary, benefits and pension to recognise day to day responsibilities and support the internal control and risk management elements of the Group strategy; and

(ii) variable performance-related remuneration provided through participation in the annual bonus and long-term incentive plan to provide motivation for achieving the Group's shorter and longer-term aims.

The Committee aims to ensure that the incentive structure for Executive Directors and senior management does not raise environmental, social or governance risks by inadvertently motivating irresponsible behaviour. More generally, with regard to the overall remuneration structure, the Committee also ensures that the remuneration policy does not encourage inappropriate operational risk-taking and is aligned with the Company's risk policies and systems. The Group’s remuneration policy is reviewed regularly to ensure that it remains appropriate and recognises any key developments in remuneration practice and corporate governance.

Remuneration scenarios for Executive Directors for FY16The charts above, which are the same as those presented last year, show how the composition of the Executive Directors' remuneration packages varies at three performance levels, namely, at minimum (i.e. fixed pay), target and maximum levels, under the policy set out in the table above.

The charts above are based on:

• salary levels effective 1 July 2014• an approximated annual value of benefits

for FY16• an annualised pension contribution

(as a % of salary)• a 120% of salary maximum annual bonus

for the Chief Executive Officer and 100% of salary maximum annual bonus for the Chief Financial Officer (with target assumed to be 50% of the max)

• a 150% of salary award under the Long Term Incentive Plan (with target assumed to be 50% of the maximum). The additional award proposed for the Chief Executive Officer for FY15 has been excluded from the analysis given that it is not part of the ongoing policy

• No share price appreciation in respect of the share awards has been assumed in line with the legislation.

Value of remuneration packages at different levels of performance

Chief Financial OfficerChief Executive Officer

Minimum MaximumOn-target

45% 250

0

1,500

£‘000

1,250

1,000

750

50024%

31%

40%

31%

100%

LTIP award Bonus Basic salary, benefits

and pension

29%

Minimum

100%

On-target

47%

Maximum

31%21%

28%32%

41%


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Directors' Remuneration Reportcontinued

Summary Director policy tableThe table below summarises the remuneration policy for Directors which, following shareholder approval, became effective from the 2014 AGM:

Purpose and Link to Strategy

Operation Maximum Performance Targets

Salary Reflects the role, responsibilities and experience of the individual.

Provides an appropriate level of basic fixed income avoiding excessive risk arising from over reliance on variable income.

Normally reviewed annually, effective 1 July.

Normally paid in cash on a monthly basis.

Comparisons against companies with similar characteristics and in similar sectors are taken into account.

There is no prescribed maximum or maximum annual base salary increase.

The Committee is guided by the general increase for the broader employee population but may decide to award a lower increase or a higher increase for Executive Directors to recognise, for example, an increase in the scale, scope or responsibility of the role and/or to take account relevant market movements.

N/A

Benefits Provides market consistent benefits.

Supports the individual and their family during periods of ill health or death.

Benefits currently comprised of life assurance and private medical cover.

Other benefits may be provided where appropriate.

N/A N/A

Pension Provides competitive retirement benefits.

Defined contribution and/or cash supplement.

Up to 10% of basic salary p.a.

N/A

Bonus Incentivises delivery of Group and personal/strategic annual goals.

Maximum bonus only payable for achieving demanding targets.

Non-pensionable.

Part of the bonus may be payable in deferred shares which normally vest after 3 years, subject to continued employment.

Dividend equivalents may be payable (in cash or shares) on any deferred bonus shares.

Up to 120% of salary p.a. Group profit-related target will apply for the majority (if not all).

Personal and/or strategic targets may be applied for a minority.

One year performance period.

Clawback provisions apply.

Remuneration Policy Reportcontinued


Purpose and Link to Strategy

Operation Maximum Performance Targets

Long Term Incentive Plan

Aligned to main strategic objectives of delivering long-term value creation.

Encourages co-investment.

Aligns Executive Directors' interests with those of shareholders.

Retention.

Grant policy normally based on the annual grant of share awards which normally vest subject to continued service and performance targets.

The Committee reviews the quantum of awards annually and monitors the continuing suitability of the performance measures.

150% of salary p.a. maximum limit.

300% of salary exceptional limit for 2014/15, 200% of salary exceptional limit thereafter.

Participants may benefit from the value of dividends paid over the vesting period to the extent that awards vest. This benefit is delivered in the form of cash or additional shares at the time that awards vest.

Performance normally measured over three years although longer performance periods may apply.

Financial measures (e.g. EBIDTA) and / or relative share price related targets (e.g. TSR).

No more than 25% may vest at threshold performance increasing to 100% vesting at maximum.

Clawback provisions apply.

All employee share plans

Encourages employee/shareholder alignment and long-term shareholdings in the Company.

Invitations made by the Committee under the Sharesave (or any other all employee share plan introduced in the future).

As per prevailing HMRC limits.

N/A

Share ownership guidelines

Provides alignment of interests between Executive Directors and shareholders.

Executive Directors are required to build (over time) and maintain a shareholding equivalent to at least one year's base salary.

At least 100% of salary. N/A

Non-Executive Directors

Provides fees reflecting time commitments and responsibilities, in line with those provided by similarly sized companies.

Normally based on a cash fee.

Normally paid on a monthly basis.

Fees are reviewed periodically.

There is no prescribed maximum fee increase The Board, excluding Non-Executive Directors, is guided by market rates, time commitments and responsibility levels.

N/A

Notes:(1) The choice of the performance metrics applicable to the annual bonus scheme reflect the Committee’s belief that any incentive compensation should be appropriately

challenging and tied to both the delivery of profit growth and personal and/or strategic objectives. The Remuneration Committee may in its sole discretion at any time make adjustments to the targets for factors not taken into account at the time they were set, such as subsequent acquisitions or other exceptional items.

(2) The performance conditions applicable to the FY15 LTIP were selected by the Remuneration Committee on the basis that they reward the delivery of long-term returns to shareholders and the Group's financial performance and are consistent with the Company's objective of delivering superior levels of long-term value to shareholders. Performance conditions in future years may differ from those in 2015 if considered appropriate by the Committee.

(3) The Committee operates the LTIP and its all-employee share plan in accordance with the plan rules, the Listing Rules and HMRC legislation and the Committee, consistent with market practice, retains discretion over a number of areas relating to the operation and administration of the plan.

(4) Consistent with HMRC legislation, the all-employee Sharesave scheme does not have performance conditions.

(5) For the avoidance of doubt, in approving this Directors' Remuneration Policy, authority was given to the Company to honour any commitments entered into with current or former Directors (such as the payment of the prior year's annual bonus or the vesting/exercise of share awards granted in the past). Details of any payments to former Directors will be set out in the Annual Report on Remuneration as they arise.


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Remuneration Policy Report continued

How employees' pay is taken into accountPay and conditions elsewhere in the Group were considered when finalising the current policy for Executive Directors and continue to be considered in relation to implementation of this policy. In order to do so, the Committee regularly interacts with the CEO and other senior executives.

How the Executive Directors' remuneration policy relates to the wider GroupThe remuneration policy described above provides an overview of the structure that operates for the most senior executives in the Group. Employees below executive level have a lower proportion of their total remuneration made up of incentive-based remuneration, with remuneration driven by market comparators and the impact of the role of the employee in question. Long-term incentives are reserved for those judged as having the greatest potential to influence the Group's earnings growth and share price performance.

How shareholders’ views are taken into accountThe Committee continues to take an active interest in shareholder views on our executive remuneration policy and is mindful of the concerns of shareholders and other stakeholders. This is reflected in our voting result at the 2014 AGM, at which over 99% of the votes cast were in favour of the Directors' Remuneration Report resolution. The Committee consulted with institutional and other substantial investors in the Company representing approximately 75% of the Company’s share capital on the current policy and proposals for FY15. The policy presented in this report reflects the results of that consultation. To the extent that there are any changes to the Remuneration Policy or any major changes to the way the policy is implemented, our major shareholders will be consulted where appropriate.

Service contracts

Effective date of Notice period from Company service agreement (from employee) Gordon Watling 1 October 2008 12 months (2014: 12 months)Steve Chamberlain 26 March 2012 6 months (2014: 6 months)

Service contracts

Effective date of Commencement of Unexpired term (months) letter of appointment current three year term from 27 March 2015 John Hughes 21 July 2010 21 July 2013 16Sion Kearsey 01 July 2007 01 July 2013 15Russell King 30 July 2014 30 July 2014 28Nigel Smith 22 July 2013 22 July 2013 16Gordon Stuart 22 July 2013 22 July 2013 16

Non-Executive Directors' letters of appointmentEach of the Chairman and Non-Executive Directors has a letter of appointment from the Company (rather than a contract of service) setting out the terms on which the appointment is made. The letter of appointment of the Chairman may be terminated on three months’ notice by the Chairman or six months’ notice by the Company. The letters of appointment of the independent Non-Executive Directors may be terminated by either party on one-months’ notice. The letter of appointment of the non-independent Non-Executive Director terminates automatically in line with the Company’s articles or on three months’ notice from the Director. The Company may elect to make a payment in lieu of any unexpired portion of notice period for earlier termination. The letters of appointment are available for inspection at the Company’s registered office during normal business hours. Relevant appointment letter and term dates are set out in the table below.

Directors' Remuneration Report Resolution

99%Over 99% of votes at the 2014 AGM were in favour of the Directors' Remuneration Report Resolution


Approach to recruitment and promotionsThe remuneration package for a new Executive Director would be set in accordance with the terms of the Company’s prevailing approved remuneration policy at the time of appointment and take into account the skills and experience of the individual, the market rate for a candidate of that experience and the importance of securing the relevant individual.

Salary would be provided at such a level as required to attract the most appropriate candidate and may be set initially at a below mid-market level on the basis that it may progress towards the mid-market level once expertise and performance has been proven and sustained.

The annual bonus potential would be limited to 120% of salary and grants under the LTIP would be limited to 150% of salary (300% of salary in exceptional circumstances). In addition, the Committee may offer additional cash and/or share-based elements to replace deferred or incentive pay forfeited by an executive leaving a previous employer. It would seek to ensure, where possible, that these awards would be consistent with awards forfeited in terms of vesting periods, expected value and performance conditions.

For an internal Executive Director appointment, any variable pay element awarded in respect of the prior role may be allowed to pay out according to its original terms.

For external and internal appointments, the Committee may agree that the Company will meet certain relocation and/or incidental expenses as appropriate.

Fee structure and quantum for Non-Executive Director appointments will be based on the prevailing Non-Executive Director fee policy.

Approach to leaversNo Executive Director has the benefit of provisions in his or her service contract for the payment of pre-determined compensation in the event of termination of employment or a change of control. It has been the Committee’s general policy that the service contracts of Executive Directors (none of which are for a fixed term) should provide for termination of employment by giving notice or by making a payment of an amount in lieu of notice (equal to base salary, pension and bonus for any completed year in respect of Gordon Watling’s contract and base salary in respect of Steve Chamberlain’s contract). In determining amounts payable on termination, the Committee also will also consider the Executive Director’s duty to mitigate his loss and amounts may be payable in instalments.

In respect of Gordon Watling, if the Company terminates without cause on or after the end of the third quarter of the financial year, the executive is entitled to a pro-rata proportion of the bonus paid in cash at the normal payment date. In respect of Steve Chamberlain, an annual bonus may be payable with respect to the period of the financial year served, although it will be pro-rated for time and normally paid in cash at the normal payment date.

Any share-based entitlements granted to an Executive Director under the Company’s share plans will be determined based on the relevant plan rules. However, in certain prescribed circumstances such as ill-health, injury, disability, retirement, redundancy, sale of employing company or business or other circumstances at the discretion of the Committee, “good leaver” status may be applied. For good leavers:

• Deferred share bonus awards will normally vest at cessation; and

• LTIP awards will normally vest at the date of cessation, subject to the satisfaction of the relevant performance conditions at that time and reduced pro-rata to reflect the proportion of the vesting period actually served. However, other than in the case of death where LTIP awards vest on the date of death subject to performance and time pro-rating, the Remuneration Committee has discretion to determine that awards vest at some other date (e.g. the normal vesting date) and/or disapply time pro-rating.

Outside interests Executive Directors may accept external Non-Executive Director appointments with prior approval of the Board and provided that such appointments do not prejudice their ability to fulfil their executive duties with the Company. Whether an Executive Director is entitled to retain any fees relating to such an appointment will be considered on a case-by-case basis. No Non-Executive Directorships were held by the Executive Directors during the year.


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Annual Report on Remuneration

Implementation of the Remuneration Policy for FY16

Base salaryThe base salary for each Executive Director is determined by the Remuneration Committee taking into account the role, responsibilities, performance and experience of the individual. When setting base salary levels, the Remuneration Committee takes into account the performance of the individual, the Company’s particular circumstances and market data on salary levels for similar positions in comparable companies (although the latter is used with caution given the risk of creating an upwards ratchet in pay levels). The current annual salaries for the Chief Executive Officer and Chief Financial Officer, effective from 1 July of each year, are shown in the table above.

The base salary levels for the Chief Executive Officer and Chief Financial Officer were reviewed last year and the increases (10% and 5% respectively, as detailed and explained in last year’s Annual Report on Remuneration) became effective on 1 July 2014. No changes to base salary levels have since been made although salary levels will be reviewed during July 2015 (becoming effective 1 July 2015) once the Committee has considered both individual and Company performance. Major investors will be consulted to the extent this is considered appropriate.

Benefits in kind and pensionNon-pension benefits will continue to comprise life assurance and private medical insurance cover. The current range of benefits and their value are considered to be broadly in line with those provided to Executive Directors in other similarly sized listed companies and they will continue to be reviewed and monitored annually.

Executive Directors will continue to be eligible to participate in a defined contribution group personal pension plan into which the Company contributes on behalf of participating individuals. Alternatively, an equivalent salary supplement may be provided. The pension contributions for Executive Directors for the coming year are currently anticipated to remain at 10% of salary.

2015/2016 2014/2015 £’000 £’000 % Increase Gordon Watling Chief Executive Officer £330,000 £330,000 –Steve Chamberlain Chief Financial Officer £190,000 £190,000 –

Performance-related annual bonus

The annual bonus plan is designed to drive and reward the short-term operating performance of the Group which should, in turn, lead to the generation of sustained long-term returns to shareholders


Non-Executive Directors

2015/2016 2014/2015 £’000 £’000

Chairman 145 145Non-ExecutiveDirector fee 40 40Committee Chair fee 5 5

Performance-related annual bonus The annual bonus plan is designed to drive and reward the short-term operating performance of the Group which should, in turn, lead to the generation of sustained long-term returns to shareholders. Bonuses are not pensionable. For FY16, the performance targets for the Executive Directors under the annual bonus will be linked to the Group’s financial performance. Financial performance will be measured by reference to demanding profit targets while personal performance targets will be linked to specific business and personal objectives. The maximum bonus potential for the Executive Directors for FY16 will continue to be 120% of base salary for the Chief Executive Officer and 100% of base salary for the Chief Financial Officer.

To ensure a further alignment of interest between Executive Directors and shareholders, any bonus paid will, at the discretion of the Committee, be settled by a combination of cash (50%) and deferred Sepura plc shares (50%). The deferred shares (together with any dividends received thereon) will normally vest after two years subject to continued employment.

Long-term incentives The Sepura Long-Term Incentive Plan continues to be the Group’s primary long-term incentive arrangement. It is envisaged that the FY16 awards granted to Executive Directors will be not more than 150% of salary and will be subject to the following performance conditions measured over three years from grant or, in the case of adjusted EBITDA, three financial years ending 31 March 2018:

(a) One third absolute share price growth measured over the three years from grant (with testing based on the 90 day average share price prior to grant and the 90 day average ending prior to the third anniversary of grant). 10% of this part of an award vests for an average share price growth of 5% compound p.a. increasing pro-rata to 55% of this part of an award vesting for a share price growth of 10% compound p.a. increasing pro-rata to 100% of this part of an award vesting for a share price of 15% compound p.a. or more. No vesting will take place for this part of an award for a share price growth less than 5% compound p.a.

(b) One third relative TSR as measured over the 3 years from grant – 10% of this part of an award vests for median TSR increasing pro-rata to 100% of this part of an award vesting for upper quartile TSR of the FTSE SmallCap (excluding investment trusts) at grant. No vesting will take place for this part of an award for a TSR below median; and

(c) One third adjusted EBITDA growth as measured from FY15 to FY18. 10% of this part of an award vests for an adjusted EBITDA growth of 10% compound p.a., 25% of this part of an award vests for adjusted EBITDA growth of 14% compound p.a. increasing pro rata to full vesting for this part of an award for an adjusted EBITDA growth of 18% compound p.a.. No vesting will take place for this part of an award for an adjusted EBITDA growth less than 10% compound p.a.

Consideration by the Directors of matters relating to Directors’ remunerationAll decisions with regard to the remuneration of the Executive Directors are taken by the remuneration Committee. This committee comprises Nigel Smith (Chairman), Russell King and Gordon Stuart. The Committee is advised by its own remuneration advisor, New Bridge Street, which has no other relationship with the Company or its Executive Directors.

New Bridge Street's fees for the year totalled €20,000 (2014: €24,000) for services principally relating to advice on the Company's share schemes, executive remuneration and the Directors' Remuneration Report.


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Annual Report on Remuneration continued

Tables for Annual Report on RemunerationAudited informationTotal remuneration received by Directors The individual remuneration of the Directors serving during the period ended 27 March 2015, together with equivalent sums received in the prior year, is set out below. Salary Taxable Annual Long-term£’000 and fees benefits Pension cash bonus incentives Total

Executive Directors Gordon Watling 2015 323 – 32 40 833 1,228 2014 298 – 30 205 – 533

Steve Chamberlain 2015 188 – 19 19 – 226 2014 179 – 18 101 – 298

Non-Executive Directors John Hughes 2015 145 – – – – 145 2014 145 7 – – – 152

Sion Kearsey 2015 40 – – – – 40 2014 45 – – – – 45

Gordon Stuart1 2015 45 – – – – 45 2014 31 – – – – 31

Nigel Smith1 2015 45 – – – – 45 2014 31 – – – – 31

Russell King2 2015 27 – – – – 27 2014 – – – – – –

Former Directors3

2015 – – – – – –2014 36 – – – – 36

Total 2015 813 – 51 59 833 1,7562014 765 7 48 306 – 1,126

1 Appointed on 22 July 2013.2 Appointed on 30 July 2014.3 David Tilston and Tony Illsley retired on 22 July 2013.

Annual bonus for FY15The annual bonuses awarded to Executive Directors in respect of FY15 are set out below: Total Awarded Award payable Maximum (% of salary) Actual (% of salary) In cash (% of salary) In shares (% of salary)

Gordon Watling 120% 20% 12% 8%Steve Chamberlain 100% 17% 10% 7%

The element of the bonus payable in shares will be awarded following the approval of this Annual Report with the deferred bonus shares vesting over a two year period.


LTIP performanceThe LTIP value for Mr Watling in respect of FY15 is based on the LTIP award granted in August 2011 which vested during the year under review following the completion of the performance period to which it related as follows:

Year Target Actual Number of of grant Metric Threshold Stretch outturn Vested shares vested Value1

FY12 Absolute share price growth 75p 100p > 100p 100% 286,788 £416,560FY12 TSR Median Upper Upper 100% 286,788 £416,560 performance quartile quartile performance performance

FY12 Adjusted EBITDA for the year £14.4m £17.7m €14.4m Nil – – ended 28 March 2014

573,576 £833,120

1 The share price on the day of vesting was £1.4525.

The expected outturns for the LTIP awards granted in July 2012, where the performance period expires shortly after the period under review, are as follows:

Year of Target Expected Expectedgrant Metric Threshold Stretch outturn vesting

FY13 Absolute share price growth 90p 125p > 125p 100% FY13 TSR Median Upper Upper 100% performance quartile quartile performance performance

FY13 Adjusted EBITDA for the year €15.3m €19.4m €17.0m 10% ended 27 March 2015

Share awards granted in the yearThe following share awards were granted to Directors during FY15:

Share price % of face value used to Number Face value that would vest Vesting Basis of determine of shares of award at threshold determined by Type of award award granted awards granted (£’000) performance performance over

Gordon Watling LTIP 150% of salary £1.44 312,391 £450,000 10% 3 years LTIP 150% of salary £1.44 312,391 £450,000 10% 4 years Deferred 25% of the £1.44 35,633 £51,330 N/A 3 years bonus shares annual bonus

Steve Chamberlain LTIP 150% of salary £1.44 188,476 £271,500 10% 3 years Deferred 25% of the £1.44 17,509 £25,223 N/A 3 years bonus shares annual bonus

The performance targets attached to the FY15 LTIP awards were as follows:

(a) One third absolute share price growth measured over the three years from grant (with testing based on the 90 day average share price prior to grant and the 90 day average ending prior to the third anniversary of grant). 10% of this part of an award vests for an average share price growth of 5% compound p.a. increasing pro-rata to 55% of this part of an award vesting for a share price growth of 10% compound p.a. increasing pro-rata to 100% of this part of an award vesting for a share price of 15% compound p.a. or more. No vesting will take place for this part of an award for a share price growth less than 5% compound p.a.

(b) One third relative TSR as measured over the 3 years from grant – 10% of this part of an award vests for median TSR increasing pro-rata to 100% of this part of an award vesting for upper quartile TSR of the FTSE SmallCap (excluding investment trusts) at grant. No vesting will take place for this part of an award for a TSR below median; and

(c) One third adjusted EBITDA growth as measured from FY14 to FY17. 10% of this part of an award vests for an adjusted EBITDA growth of 10% compound p.a., 25% of this part of an award vests for adjusted EBITDA growth of 15% compound p.a. increasing pro rata to full vesting for this part of an award for an adjusted EBITDA growth of 20% compound p.a.. No vesting will take place for this part of an award for an adjusted EBITDA growth less than 10% compound p.a.


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Annual Report on Remuneration continued

Outstanding LTIP awardsDetails of outstanding LTIP awards granted to Directors are set out below:

Granted Vested Lapsed No. of shares End of Exercise No. of shares at during during during shares at performance Exercise Director Scheme Grant date price 29 March 2014 the year the year the year 27 March 2015 period period

Gordon FY12 19 August 2011 – 860,364 – (573,576) (286,788) – – –Watling FY13 24 July 2012 – 614,103 – – – 614,103 23 July 2015 – FY14 10 June 2013 – 383,260 – – – 383,260 9 June 2016 – 50% - FY15 17 June 2014 – – 624,782 – – 624,782 16 June 2017 – 50% - 16 June 2018

Steve FY13 24 July 2012 – 362,109 – – – 362,109 23 July 2015 –Chamberlain FY14 10 June 2013 – 225,991 – – – 225,991 9 June 2016 – FY15 17 June 2014 – – 188,476 – – 188,476 16 June 2017 –

Performance targets are disclosed above or, in respect of earlier awards, in prior Remuneration Reports.

Directors’ interestsDirectors’ interests in the shares of the Company at the beginning and end of the period were as follows:

Beneficially Beneficially Outstanding Outstanding share Shareholding owned at owned at Outstanding deferred awards under all as a % of salaryDirector 29 March 2014 27 March 2015 LTIP awards share awards employee share plans at year end1

Gordon Watling 135,994 302,539 1,622,145 86,216 40,382 126%Steve Chamberlain 68,125 69,098 776,576 42,364 24,229 50%2

John Hughes 40,000 40,000 – – – N/ASion Kearsey 8,000,000 8,000,000 – – – N/AGordon Stuart 15,000 15,000 – – – N/ANigel Smith – 20,000 – – – N/ARussell King – – – – – N/A

1 Based on the share price and base salary levels as at 27 March 2015.2 The Executive Directors are increasing their shareholdings in accordance with the Company’s shareholding criteria.

Performance Graph and CEO RemunerationThe following chart presents the Company’s TSR over the past 6 years compared to the FTSE SmallCap index excluding investment trusts.

400

350

250

100

50

0

150

200

300

450

500

31/03/2009 31/03/2010 01/04/2011 29/03/201301/04/2012 28/03/2014 27/03/2015

Sepura FTSE Small Cap


The CEO’s total remuneration over the same six year period has been as follows:

FY10 FY11 FY12 FY13 FY14 FY15

Total remuneration (£000s) 257 245 320 559 533 1,242Annual bonus (%) 5% 0% 0% 67% 71% 20%

LTIP vesting (%) 0% 0% 0% 0% 0% 66.6%

Changes in CEO remunerationThe CEO received an increase in salary and benefits as described on page 44 above. This compares to other employees as follows:

% change

Chief Executive Salary 8%1

Benefits 7% Bonus -80%

All employees Salary 8% Benefits 12% Bonus -88%

1 Based on actual remuneration received for the financial year; salary rises are effective part-way through each financial year.

Relative importance of spend on payOverall staff costs increased by 9% during FY15, through a combination of pay reviews, additional headcount through both recruitment and the acquisition of Portalify and Fylde, and the impacts of foreign exchange. This increase in overall staff costs can be seen in the context of the change in other key metrics as shown below:

FY14 FY15 €M €M % change

Staff costs 30.4 32.8 8%Revenue 116.6 131.2 12%Gross profit 55.3 60.3 9%R&D expenditures 16.7 16.8 1%Adjusted operating profit 12.5 15.0 20%Dividends and share repurchases 4.3 9.1 112%

Shareholder votingShareholders voted overwhelmingly at the 2014 AGM in favour of adopting both the Company’s Remuneration Policy and the Annual Statement and Annual Report on Remuneration:

Annual Statement and Remuneration Policy Annual Report on Remuneration

Percentage Percentage Votes of votes Votes of votes

Votes cast in favour 110,528,646 99.97% 101,446,788 92.10%Votes cast against 38,299 0.03% 8,707,618 7.90%Total votes cast 110,566,945 100% 110,154,406 100%Votes Withheld 2,000 – 414,469 –


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Directors' Report

Directors’ Report

The Directors have pleasure in presenting their report and the audited financial statements for the period ended 27 March 2015, being the nearest Friday to the end of the period.

Strategic ReportThe Strategic Report on pages 01 to 28 sets out a fair review of the Group’s performance during the period and of its position at the period end, including commentary on its likely future development and prospects, while information on principal risks and uncertainties and key performance indicators is given on pages 12 to 15. Such information should be read in conjunction with this Report. The Corporate Governance Report and Directors’ Remuneration Report detail the Company’s Governance and Directors’ remuneration arrangements. The Group’s approach to business ethics, employee welfare and practice, health and safety, environmental and community matters is summarised in the Corporate Social Responsibility Statement on pages 26 to 28. All these sections form part of this Directors’ Report into which they are incorporated by reference.

Results and dividendsThe audited financial statements of the Group and of the Company for the period under review are set out on pages 61 to 95 and pages 98 to 107 respectively.

The Board’s chosen dividend policy takes account of the profitability and underlying growth of the Group in addition to capital requirements, cash flows and distributable reserves, while also recognising the appropriateness of maintaining an appropriate level of dividend cover.

Pursuant to that policy, the Directors have recommended an increased final dividend for the period of 1.71 pence per Ordinary share which, subject to approval by shareholders at the Annual General Meeting to be held on Wednesday 12 September 2015 (“2015 AGM”), will be paid on 9 October 2015 to shareholders registered at the close of business on 28 August 2015. Together with the interim dividend paid of 0.69 pence per Ordinary share, this makes a total dividend for the period of 2.4 pence per Ordinary share. A Dividend Reinvestment Plan will be offered in conjunction with the final dividend.

Going forward, and subject to any unforeseen circumstances, the Directors intend to continue their recommendation of both an interim and final dividend in respect of each financial period in the approximate proportions of approximately one-third and two-thirds respectively of the total annual dividend.

Research and developmentProduct development and innovation, principally, but not solely, related to TETRA technology and products, remain key strategies for maintaining and improving the Group’s competitive position and therefore they continue to be strong priorities. The key objectives are new product development, improved functionality and extended application, all designed to enhance benefits for the end-user.

Our commitment to this vital area is highlighted by the €16.8 million of development spend during the period, representing 13% of sales (2014: €16.7 million and 14% of sales). Under IAS 38 “Intangible Assets”, €13.1 million of this period’s spend was capitalised (2014: €12.5 million). The Group will continue to commit a significant amount of resource and expenditure, as appropriate, to research and development.

Financial instrumentsDetails of the Group’s objectives and policies on financial risk management, and of the financial instruments currently in use, can be found in Note 31 to the consolidated financial statements.

EmploymentThe Group’s policy regarding the hiring, continuing employment and training, career development and promotion of disabled persons is set out on page 27.


Share capitalThe Company has a single class of share which is divided into Ordinary shares of £0.0005 each with all of the Ordinary shares ranking pari passu. On a show of hands at a general meeting, every holder of Ordinary shares present in person or by proxy, and entitled to vote, has one vote, and on a poll every holder of Ordinary shares present in person or by proxy, and entitled to vote, has one vote for every Ordinary share held.

The rights (including full details relating to voting), obligations and any restrictions on transfer relating to the Company’s Ordinary shares, as well as the powers of the Directors, are set out in the Company’s Articles of Association. These can only be amended by special resolution at a general meeting of shareholders.

The Company is not aware of any agreements or control rights between shareholders that may result in restrictions on the transfer of securities or on voting rights. Further information regarding the Company’s share capital are set out in Note 26 to the consolidated financial statements.

Share buy backAt the Annual General Meeting held on 30 July 2014 (“2014 AGM”), shareholders granted the Company limited authority to purchase its own shares, subject to certain specified conditions.

During the year, the Company purchased 2,880,867 shares (representing 2.08% of the called up share capital) into treasury and issued 2,164,200 shares from treasury in satisfaction of the Company share option schemes.

Pursuant to resolutions passed at the 2014 AGM, the Company had authority exercisable by the Directors:

(a) to allot shares in the Company and to grant rights to subscribe for or to convert any security into shares in the Company up to a maximum of £23,024;

(b) to make market purchases (as defined in section 693 (4) of that Act) of Ordinary shares of £0.0005 each in the capital of the Company. As at the date of this report, there is authority remaining to make such market purchases in relation to 10,983,676 Ordinary shares.

The Company will seek to renew these authorities at the 2015 AGM.

Major shareholdersAt 30 June 2015 the Company had been notified (or was aware) of the following material interests of 3% or more in the Ordinary share capital of the Company:

Number of % of Ordinary shares voting rights1

Schroders Plc 24,493,432 13.33%Henderson Global Investors 23,719,518 12.90%Jonathan Green 20,368,068 11.08%Michael Sherwood 18,145,958 9.87%Sion Kearsey (Director) 8,000,000 4.35%Danske Capital Management 7,317,667 3.98%Liontrust Asset Management 6,572,254 3.58%

1 Total voting rights attaching to the issued share capital of the Company comprising 183,777,335 Ordinary shares each of £0.0005 nominal value, being the 185,183,892 Ordinary shares in issue less 1,406,557 Ordinary shares currently held in Treasury.

2 No changes to such interests have been notified to the Company between 30 June 2015 and 6 July 2015, being the date on which this Report has been signed.

Board of DirectorsThe Directors of the Company who served throughout the period and up to the date of signing of this Annual Report (except where noted) were:

Dr. John Hughes (Chairman)CBE Hon DScGordon Watling (Chief Executive Officer)Steve Chamberlain (Chief Financial Officer)Russell King (Appointed 30 July 2014)Sion KearseyNigel SmithGordon Stuart

The names and brief biographical details of the current Directors, and identification of the Board Committees on which they sit, are shown on pages 30 and 31 and details of their beneficial holdings in the shares of the Company are shown on page 48.

Election and re-election of DirectorsThe Company’s Articles of Association contain provisions relating to the appointment and replacement of Directors. They require that all Directors stand for re-election at intervals of not more than three years. The UK Corporate Governance Code 2012 recommends all directors retire are and, if appropriate, be proposed for election every year and in accordance with best practice the Company is following this guideline.

The service agreements of the Executive Directors and the letters of appointment of the Non-Executive Directors are available for inspection by shareholders at the Company’s registered office during normal business hours and at the Company’s AGM from 15 minutes before the meeting.

There have been no changes in the Directors’ beneficial or non-beneficial interests between the period-end and 6 July 2015, being the date on which this Report has been signed. Save as disclosed, none of the Directors nor any person connected with a Director has any interest in the shares or loan capital of the Company or any subsidiary undertakings.

Details of the Directors’ employment agreements and appointment letters, and emoluments and interests in the Ordinary share capital of the Company which derive from their employment are set out in the Directors’ Remuneration Report which commences on page 38.

Save as disclosed in this Annual Report, at no time during the period did any Director hold a material interest, directly or indirectly, in any contract of significance with the Company or any undertaking other than service agreements between Executive Directors and the Company.


overnance

Directors' Reportcontinued

Directors’ indemnity arrangementsThe Company has purchased and maintained throughout the period to the date of this Report, and intends to do so going forward, Directors’ and Officers’ qualifying third-party liability insurance in respect of itself and its Directors.

Corporate governanceThe Company is committed to high standards of corporate governance. Its application of the principles of good governance in respect of the UK Corporate Governance Code 2012 for the period under review is described in the Corporate Governance Report on pages 29 to 34, which forms part of this Directors’ Report.The Statement of Directors’ Responsibilities in respect of this Annual Report and the financial statements appears on pages 53 and 54.

Political donationsAt the 2014 AGM, shareholders gave authority (covering the period up to the conclusion of the 2015 AGM or 28 September 2015, whichever is earlier) for the Company to make political donations and incur political expenditure up to a maximum aggregate sum of £100,000 as a precautionary measure in light of the wide definitions contained in the Political Parties Elections and Referendums Act 2000. No payments were made during the period or the prior period and it is proposed to maintain the Group’s policy in this area and renew this authority at the forthcoming AGM.

Greenhouse gas emissionsDisclosures in respect of greenhouse gas emissions are given on page 28.

Employee share incentive plansThe Company has in place for its Executive Directors and employees the Sepura 2008 Long-Term Incentive Plan (“LTIP”) under which awards were granted during the period. Details of this share plan can be found in the Directors’ Remuneration Report commencing on page 38 and Note 27 to the consolidated financial statements.

The Company also has in place a Savings-Related Share Option Scheme (based on HMRC Guidelines) (“Sharesave Scheme”). This incentive plan, which encourages share ownership amongst Sepura employees, was successfully launched in September 2008 and experienced a high level of take-up, and has subsequently been refreshed annually. The Board expects this to continue for the foreseeable future.

The table opposite outlines any impact of a change of control prescribed in the rules of each of the Company’s share incentive plans

Related party transactionsThere were no related party transactions with Directors, other than their remuneration, during either the current or previous period.

Going concernAfter making due enquiry, and having considered the Group’s budget for the coming year together with outline projections through to 2018, the Directors confirm they have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. Consequently, the going concern basis has been applied in preparing the financial statements for the period ended 27 March 2015.

2015 AGMThe Annual General Meeting of the Company will be held at 9am on Wednesday 12 September 2015 at the offices of Hogan Lovells International LLP, Atlantic House, Holborn Viaduct, London, EC1A 2FG. A separate Circular, comprising a Letter from the Chairman, Notice of Meeting, Explanatory Notes and a Form of Proxy, accompanies this Annual Report to shareholders.

The Notice of the 2015 AGM specifies deadlines for the exercise of voting rights and the appointment of a proxy or proxies to vote in relation to the resolutions to be proposed at the meeting. All proxy votes will be counted and the numbers For, Against or Withheld (the latter of which is not a vote at law) in relation to each resolution will be announced at the meeting and via a regulatory information service, and published on the Company’s website at www.sepura.com/investors.

Independent auditorsSeparate resolutions to re-appoint PricewaterhouseCoopers LLP as auditors of the Company and to authorise the Directors to determine their remuneration will be proposed at the 2015 AGM. The re-appointment of PricewaterhouseCoopers LLP has been recommended to the Board by its Audit Committee and PricewaterhouseCoopers LLP have indicated their willingness to remain in office.


Change of control provisions contained within the share PerformanceShare incentive plan incentive plan rules Effect on vesting condition

LTIP Yes Acceleration pro rata to time and voting level1 Pro rata testing1

Deferred bonus shares Yes Acceleration N/A Sharesave Scheme Yes Acceleration pro rata to accumulated savings1 Not applicable

1 At the discretion of the Remuneration Committee.

Disclosure of information to auditorsEach of the Directors of the Company at the time when this Report was approved confirmed that:

• so far as the Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and

• he has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

This confirmation is given in accordance with section 418(2) of the Act.

Statement of Directors’ ResponsibilitiesThe Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union, and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period.

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

• select suitable accounting policies and then apply them consistently;

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

• state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and parent company financial statements respectively; and

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

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors consider that this Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy.


overnance

Directors' Reportcontinued

• save as otherwise disclosed above, there are no other significant agreements to which the Company is a party that take effect, alter or terminate upon a change of control following a takeover bid.

Information required under the Listing RulesOn 1 May 2015 the Company published a prospectus in relation to the proposed acquisition of Teltronic SAU, a proposed firm placing and proposed placing and open offer that included a profit forecast and estimate.

Post balance sheet eventOn 1 May 2015 the Company announced the proposed acquisition of Teltronic SAU for aggregate consideration of €127.5 million, to be funded through a firm placing and offer of 46,538,461 Ordinary shares in the Company at 130p per share and a new debt facility of €120 million. The acquisition was approved by shareholders on 21 May 2015 and completed on 27 May 2015, and further information is given in Note 34 to the consolidated financial statements.

Relationship AgreementEffective from Listing in August 2007, John Drinkwater, Jonathan Green, Sion Kearsey, Michael Sherwood and Kelso Place Asset Management LLP (“Principal Shareholders”), entered into an agreement to regulate the ongoing relationship between the Company and the Principal Shareholders, details of which are set out on page 58 of the Company’s Annual Report for the year ended 28 March 2014. The Relationship Agreement has been terminated following the completion of the Teltronic acquisition and associated equity raise.

On behalf of the Board

Tony Hunter, Company SecretaryRadio HouseSt Andrew’s RoadCambridge, CB4 1GRRegistered in England No. 043538016 Juy 2015

Each of the Directors, whose names and functions are listed on pages 30 and 31, confirms that, to the best of their knowledge:

• the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

• the Strategic Report and Governance Review, along with the Directors’ Report, together include a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces on pages 14 and 15.

Overseas branchesThe Company conducts some of its overseas operations through branches in Malaysia and Argentina.

Takeover Directive disclosuresWhere not provided previously in this Report, the following provides the additional information required for shareholders as a result of the implementation of the Takeover Directive into English law and Section 922 of the Companies Act 2006:

• the Company has not entered into any contractual commitments to its Directors or employees providing for compensation on loss of office or employment (whether through resignation, purported redundancy or otherwise) that would occur because of a takeover bid;

• the Company has entered into various agreements in the ordinary course of business, many with local governments and government organisations around the world. Some of these, either by their nature or value, may represent significant agreements and generally (as with the Company’s standard terms and conditions of business) do provide for a right of termination upon a change in control of the Company. National security and commercial sensitivity prevent disclosure of the details of any individual agreements; and


Group Financial Statem

entsSepura plc Annual Report & Accounts 2015 55

Independent Auditors’ Report to the Members of Sepura plcReport on the group financial statements

Our opinionIn our opinion, Sepura plc’s group financial statements (the “financial statements”):

• give a true and fair view of the state of the group’s affairs as at 27 March 2015 and of its profit and cash flows for the year then ended;

• have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union; and

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

What we have auditedSepura plc’s financial statements comprise:

• the Consolidated Balance Sheet as at 27 March 2015;

• the Consolidated Income Statement and the Consolidated Statement of Comprehensive Income for the year then ended;

• the Consolidated Statement of Cash Flows for the year then ended;

• the Consolidated Statement of Changes in Equity for the year then ended; and

• the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

Certain required disclosures have been presented elsewhere in the Annual Report & Accounts 2015 (the “Annual Report”), rather than in the notes to the financial statements. These are cross-referenced from the financial statements and are identified as audited.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs as adopted by the European Union.

Our audit approachOverviewMateriality• Overall group materiality: €760,000 which

represents approximately 5% of profit before tax.

Audit scope• Of the Group's four reporting units,

we identified Sepura plc (based in the United Kingdom) and Sepura Systems GmbH (based in Austria), which, in our view, required an audit of their complete financial information due to their size.

• Specific procedures were performed on certain balances of Portalify OY (based in Finland) and Fylde Micro Limited (based in the United Kingdom). This, together with additional procedures at Group level, gave us the evidence we needed for our opinion on the Group financial statements as a whole.

Areas of focus• Risk of fraud in revenue recognition.• Accounting for long term contracts.• Recoverability of accounts receivable.• Capitalisation of product development

costs.• Acquisition accounting for Fylde Micro

Limited.

The scope of our audit and our areas of focusWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identified as “areas of focus” in the table below. We have also set out how we tailored our audit to address these specific areas in order to provide an opinion on the financial statements as a whole, and any comments we make on the results of our procedures should be read in this context. This is not a complete list of all risks identified by our audit.


Independent Auditors’ Report to the Members of Sepura plc continued

Area of focus How our audit addressed the area of focus

Revenue recognition(Refer to page 36 (Report of the Audit Committee) and Note 4 (Summary of significant accounting policies)

Historically, Sepura makes a significant amount of sales in the last month of the financial year. These sales included both the sale of hardware and software.

We focussed on this area as, with a significant amount of sales being generated in the final month of the year, there is a risk that cut-off procedures may have been incorrectly applied and, as a result, the revenue for the year could be overstated.

The Group has bill and hold arrangements in place with certain customers. This involves handsets that are sold to the customer and then held by Sepura on their behalf until the customer is ready for delivery. The nature of such bill and hold arrangements means there is a risk that the conditions set out in IAS 18, 'Revenue’ have not been met allowing for such revenue to be recognised. The key conditions in IAS 18 that we focussed on were that the goods need to be on hand, identified and ready for collection at the time the sale is recognised and that the buyer has specifically acknowledged the deferred delivery instructions.

The Group has sold software during the period. Revenue is recognised on a software sale when there is appropriate evidence of a commercial arrangement and provided the software is available for use by the customer. When there is maintenance and support associated with the sale a proportion of revenue is recognised on a straight line basis over the period of the maintenance contract. The focus of our work was therefore to check that appropriate commercial arrangements were in place, the software was available to the customer and whether there were appropriate deferrals of revenue for maintenance and support.

We performed detailed cut-off procedures for March sales, agreeing to supporting invoice and third party despatch documentation. We also checked the Incoterms; sales are typically made on an “Ex-works” basis, which means revenue is recognised when the goods are despatched and ready for delivery or collection by the customer. No significant issues were identified as a result of our work.

As an additional cut-off procedure, we also tested credit notes covering all sales (hardware and software) that were raised during the financial year and also subsequent to the year end (up to the date of signing the financial statements) on a sample basis. This test was performed in order to establish whether or not there was a need for a credit note provision at the year end. No significant issues were identified as a result of our work.

We tested material sales made on bill and hold terms, obtaining customer confirmations. We also attended a specific inventory count on 30 March 2015 (the first working day immediately after the year end) to confirm that the goods were on hand, separately identified and ready for delivery to the buyer. No significant issues were identified as a result of our work.

We tested the treatment of software sales to check for appropriate contractual arrangements, availability of the software with customers and that appropriate amounts were deferred. This involved examining contracts and correspondence between the Group and the customer, including to look for any maintenance / support clauses or for any rights of return. No significant issues were identified as a result of our work.

Accounting for long term contracts (Refer to page 36 (Report of the Audit Committee), Note 4 (Summary of significant accounting policies) and Note 5 (Critical accounting estimates and assumptions)

The company’s subsidiary undertakings (Sepura Systems GmbH and Portalify OY) have a number of projects that straddle the year end that are accounted for as long term contracts. These contracts are to provide systems solutions and will generally take a number of months to complete. As a result, revenue and cost of sales from these long-term contracts are recognised on the percentage of completion basis based on costs incurred to date when the outcome of the contract can be estimated reliably. The criteria for this are that total contract revenue and the costs to complete the contract can be estimated reliably, it is probable that the economic benefits associated with the contract will flow to the Group and that the stage of contract completion can be measured.

We focussed on this area as there is judgement involved with respect to estimating the costs to complete individual projects (versus the costs incurred to date) and with regard to management’s forecasts. An increase in costs to complete would impact the stage of completion and result in less revenue recognised. There is also a risk that customers have not been invoiced on a timely basis in line with the contract terms.

We tested the calculations of revenue recognised, based on supporting documentation, including timesheet data and contracts. We also reconciled the amounts outstanding to invoices raised and cash received. No significant issues were identified as a result of our work.

We agreed forecast costs to complete to project plans prepared by management. We also tested historical estimating accuracy relating to projects that had completed during the year, comparing the estimated costs to complete on these projects as at the prior year end with the actual costs that were incurred to complete the project. No significant variances were identified as a result of this work.




Recoverability of accounts receivable(Refer to page 36 (Report of the Audit Committee) and Note 4 (Summary of significant accounting policies), Note 5 (Critical accounting estimates and assumptions) and Note 21 (Trade and other receivables)

The Group continues to grow internationally, generating sales of its products and services in both established markets (such as the UK and Germany) and new markets (such as the Middle East and Greece). As a result of increased sales in new markets, where receiving payment is an inherently slower process, the Group has a significant number of accounts receivable balances that are overdue (€9.4 million as per Note 21 of the consolidated financial statements). There was therefore a risk that the Group’s provision for doubtful debts was insufficient if amounts were not recoverable. The Group’s accounting policy is that trade receivables are assessed individually for impairment.

We focused in particular on the overdue elements relating to two specific material receivable balances; one in the Middle East and one in Greece where amounts are overdue and any past payments have been slower than agreed.

We performed the following procedures when testing the recoverability of accounts receivable balances:

• We sent specific confirmations on a sample basis to confirm year end balances. We also requested that these customers confirm their acknowledgement of the transfer of risks and rewards at the invoice date, as appropriate. No significant issues were identified as a result of our work.

• We vouched cash received post year end to bank records. No significant issues were identified as a result of our work.

• We read relevant credit terms and considered whether any payments received during the period that provided evidence of future payment of any overdue amounts. No significant issues were identified as a result of our work.

• On overdue balances, we obtained sufficient supporting evidence where no provision was made. This evidence was in the form of subsequent payment and / or correspondence obtained to support the recoverability of the balance.

• In respect of the material receivable from the Middle East customer, we considered recoverability in light of established local business practices and consulted with PwC legal counsel with experience of such matters in these markets. Based on our work, we considered that management had made sufficient provision against that balance.

• In respect of the material receivable from Greece, management have made a provision for the exposure on this receivable as described in Note 21. Based on our work, we considered that management had made sufficient provision against this balance.



Capitalisation of product development costs(Refer to page 36 (Report of the Audit Committee) and Note 4 (Summary of significant accounting policies), Note 5 (Critical accounting estimates and assumptions) and Note 17 (Intangible assets)

Sepura spends a significant amount in developing new products and product functionality. As set out in Note 17, during the current period the Group has capitalised €13.1 million of internal development costs within Intangible assets and had a Net book value balance of €40.2 million of capitalised development costs at 27 March 2015.

We focussed on this area due to the size of the costs capitalised, and the fact that judgement is involved in assessing whether the criteria set out in the accounting standards required for capitalisation of such costs have been met, particularly:

• The appropriateness and support for the costs capitalised;• The technical feasibility of the project; and • The likelihood of the project delivering sufficient future economic

benefits.

We had particular regard to the fact that the Group is developing its next generation platform of both terminals and infrastructure. To the extent that these projects have not yet been completed, no amortisation has been charged. We therefore also focussed on whether the carrying value of the capitalised development costs was impaired.

As part of our work we also focussed on management’s judgements regarding whether capitalised costs were of a developmental rather than research nature (which would result in the costs being expensed rather than capitalised); and whether costs, including employment (payroll) costs, were directly attributable to relevant projects.

We obtained a breakdown, by value, of all individual development projects (new products and product functionality) capitalised in the period and reconciled this to the amounts recorded in the general ledger. Subsequently, management posted an adjustment of €1.5 million and we agreed with this adjustment.

We tested all projects where capitalised costs were in excess of €495,000, together with a sample of smaller projects from the remaining population, as follows:

• We obtained explanations from management of why the project was considered capital in nature, in terms of how the specific requirements of the relevant accounting standards (IAS 38 “Intangible assets”) were met. We also conducted interviews with individual project managers responsible for the projects selected to corroborate these explanations and to obtain an understanding of the specific projects to enable us to independently assess whether the projects met all the criteria for capitalisation set out in the accounting standards. From these discussions, we challenged management further on why one particular project had been capitalised but we were ultimately satisfied that these costs satisfied the criteria in the accounting standards.

• To determine whether costs were directly attributable to projects, we obtained listings of hours worked on individual projects and selected a sample of the individual hours recorded. We then reconciled the hours worked to the payroll records and then reconciled the payroll amounts with the amounts capitalised. We also tested which cost centres were directly related to capitalised costs and that the individual employees were included in the appropriate cost centre. No significant issues were identified as a result of this work.

• In respect of impairment of capitalised development costs, we evaluated and challenged management’s future cash flow forecasts, and the process by which they were drawn up, and tested the underlying calculation. We compared managements’ forecast to the latest Board approved forecasts as this would indicate the quality of the forecasting process. The key assumptions related to the level of forecast cash flows and the assumed rate that the new technology would replace the existing technology. We also obtained other evidence such as prototypes or production invoices to support the progress on the projects and their expected completion and release timetables. We performed sensitivity analysis around these key assumptions to ascertain the extent of change in those assumptions that either individually or collectively would be required for the development costs to be impaired. We determined that there was sufficient headroom in the calculations such that no impairment was required.

Acquisition accounting for Fylde Micro Limited(Refer to page 36 (Report of the Audit Committee) and Note 4 (Summary of significant accounting policies), Note 5 (Critical accounting estimates and assumptions) and Note 6 (Acquisition of Fylde Micro Limited)

On 20 May 2014, the Group announced the acquisition of Fylde Micro Limited.

The consideration for the acquisition consisted of €4 million payable on completion and €4.4 million payable dependent on EBITDA targets being met for each of the two years ending 31 May 2016. This contingent consideration must be valued at each period end.

There is judgement in determining the fair value of contingent consideration, as this is based on management’s forecasts to determine the level of EBITDA that will be generated and, hence, the amount of the payments that will be made.

On acquisition, management recognised the maximum amount of contingent consideration as a financial liability in accordance with IAS 39, “Financial Instruments: Recognition and Measurement”. However, as described in Note 6, reflecting the first year’s post acquisition performance, an adjustment was posted by management to reduce the financial liability to its fair value of €2,093,000 with the corresponding credit of €2,320,000 recognised in the consolidated income statement (see Note 9 to the consolidated financial statements) in accordance with IFRS 3 “Business combinations” (para 58).

We compared business performance post acquisition with the original expectation and challenged management’s future forecasts. We read correspondence between the company and the selling shareholders around the proposed changes to the arrangements and were satisfied that the accounting appropriately reflected the nature of the arrangements.




MaterialityThe scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole. Based on our professional judgement, and consistent with the prior year, we determined materiality for the financial statements as a whole as follows:

Overall group materiality €760,000 (2014: €685,000).

How we determined it Approximately 5% of profit before tax.

Rationale for benchmark applied We have applied this benchmark, a generally accepted auditing practice, in the absence of indicators that an alternative benchmark would be appropriate.

How we tailored the audit scopeWe tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the geographic structure of the group, the accounting processes and controls, and the industry in which the group operates.

The Group is structured as one core operating business focussed on the design, development and supply of secure digital radio products and systems. The core operating business consists of four reporting units and the Group financial statements are a consolidation of those four reporting units and centralised functions.

In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed at the reporting units by us, as the Group engagement team, or component auditors from other PwC network firms operating under our instruction. Where the work was performed by component auditors, we determined the level of involvement we needed to have in the audit work at those reporting units to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the Group financial statements as a whole.

Of the Group's four reporting units, we identified Sepura plc (based in the United Kingdom) and Sepura Systems GmbH (based in Austria), which, in our view, required an audit of their complete financial information due to their size. Specific procedures were performed on certain balances of Portalify OY (based in Finland) and Fylde Micro Limited (based in the United Kingdom). This, together with additional procedures at Group level, gave us the evidence we needed for our opinion on the Group financial statements as a whole.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above €37,500 (2014: €30,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Going concernUnder the Listing Rules we are required to review the directors’ statement, set out on page 52, in relation to going concern. We have nothing to report having performed our review.

As noted in the directors’ statement, the directors have concluded that it is appropriate to prepare the financial statements using the going concern basis of accounting. The going concern basis presumes that the group has adequate resources to remain in operation, and that the directors intend it to do so, for at least one year from the date the financial statements were signed. As part of our audit we have concluded that the directors’ use of the going concern basis is appropriate.

However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the group’s ability to continue as a going concern.


Other required reporting

Consistency of other informationCompanies Act 2006 opinionIn our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

ISAs (UK & Ireland) reportingUnder ISAs (UK & Ireland) we are required to report to you if, in our opinion:

• information in the Annual Report is: – materially inconsistent with the

information in the audited financial statements; or

– apparently materially incorrect based on, or materially inconsistent with, our knowledge of the group acquired in the course of performing our audit; or

– otherwise misleading.• the statement given by the directors on

page 53, in accordance with provision C.1.1 of the UK Corporate Governance Code (“the Code”), that they consider the Annual Report taken as a whole to be fair, balanced and understandable and provides the information necessary for members to assess the group’s performance, business model and strategy is materially inconsistent with our knowledge of the group acquired in the course of performing our audit.

• the section of the Annual Report on page 35, as required by provision C.3.8 of the Code, describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee.

We have no exceptions to report arising from these responsibilities.

Adequacy of information and explanations receivedUnder the Companies Act 2006 we are required to report to you if, in our opinion, we have not received all the information and explanations we require for our audit. We have no exceptions to report arising from this responsibility.

Directors’ remunerationUnder the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

Corporate governance statementUnder the Listing Rules we are required to review the part of the Corporate Governance Statement relating to the parent company’s compliance with ten provisions of the UK Corporate Governance Code. We have nothing to report having performed our review.

Responsibilities for the financial statements and the audit

Our responsibilities and those of the directorsAs explained more fully in the Statement of Directors’ Responsibilities set out on page 53, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.


What an audit of financial statements involvesAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:

• whether the accounting policies are appropriate to the group’s circumstances and have been consistently applied and adequately disclosed;

• the reasonableness of significant accounting estimates made by the directors; and

• the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Other matter

We have reported separately on the Parent Company financial statements of Sepura plc for the year ended 27 March 2015 and on the information in the Directors’ Remuneration Report that is described as having been audited.

Stuart Newman (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsCambridge6 July 2015



Consolidated Income Statement

2015 2014

Before non- Non- After non- Before non- Non- After non- recurring recurring recurring recurring recurring recurring items items1 items items items1 items Note €’000 €’000 €’000 €’000 €’000 €’000

Revenue 7 131,160 – 131,160 116,645 – 116,645Cost of sales (70,508) – (70,508) (61,326) – (61,326)

Gross profit 60,652 – 60,652 55,319 – 55,319Selling, marketing and distribution costs (18,225) (1,770) (19,995) (16,625) – (16,625)Research and development costs (10,394) – (10,394) (12,228) – (12,228)Administrative expenses (13,750) 574 (13,176) (11,449) (590) (12,039)

Operating profit 9 18,283 (1,196) 17,087 15,017 (590) 14,427Financial income 12 55 – 55 6 – 6Financial expense 13 (484) – (484) (250) – (250)

Net financial expense (429) – (429) (244) – (244)

Profit before income tax 17,854 (1,196) 16,658 14,773 (590) 14,183Income tax (expense) credit 14 (1,838) 256 (1,582) (1,189) 136 (1,053)

Profit for the period attributable to owners of the parent 16,016 (940) 15,076 13,584 (454) 13,130

Earnings per share (¢)Basic 15 11.6 (0.7) 10.9 9.8 (0.3) 9.5Diluted 15 11.5 (0.7) 10.8 9.8 (0.4) 9.4

1 Non-recurring items relate to the acquisition of Fylde Micro Limited in the current period, as described in Note 6, and subsequent restructuring costs, together with initial costs incurred in connection with the acquisition of Teltronic SAU which completed subsequent to the end of the period as described in Note 34. They also include a provision against outstanding receivables due from a customer in Greece. Non-recurring items in the prior period related to the acquisition of Portalify OY and subsequent restructuring costs.

The accompanying notes are an integral part of these consolidated financial statements.


Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

2015 2014 €’000 €’000

Profit for the period 15,076 13,130Other comprehensive income (expense):Exchange translation (164) (42)Cash flow hedges, net of taxation 1,695 1,125

Other comprehensive income that may be reclassified into income 1,531 1,083

Total comprehensive income for the period attributable to owners of the parent 16,607 14,213

Share Share Other Retained Total capital premium reserves earnings equity Note €’000 €’000 €’000 €’000 €’000

At 30 March 2013 78 – – 63,103 63,181Profit for the period – – – 13,130 13,130Other comprehensive (expense) income for the period – – (42) 1,125 1,083

Total comprehensive (expense) income – – (42) 14,255 14,213

Transactions with ownersTax on share option schemes 19 – – – 517 517Employee share option schemes: value of employee services 27 – – – 664 664Equity dividends paid 16 – – – (3,020) (3,020)Issue of shares 26 1 999 – – 1,000Treasury shares – purchase of own shares 26 – – – (1,323) (1,323)

– issue of shares to settle employee share options 26 – – – 163 163

Total transactions with owners 1 999 – (2,999) (1,999)

At 28 March 2014 79 999 (42) 74,359 75,395Profit for the period – – – 15,076 15,076Other comprehensive (expense) income for the period – – (164) 1,695 1,531

Total comprehensive (expense) income – – (164) 16,771 16,607

Transactions with ownersTax on share option schemes 19 – – – 248 248Employee share option schemes: value of employee services 27 – – – 1,262 1,262Equity dividends paid 16 – – – (3,686) (3,686)Treasury shares – purchase of own shares 26 – – – (5,397) (5,397)

– issue of shares to settle employee share options 26 – – – 193 193

Total transactions with owners – – – (7,380) (7,380)

At 27 March 2015 79 999 (206) 83,750 84,622




Consolidated Balance SheetOf Sepura plc, Company number 04353801, as at 27 March 2015

2015 2014 Note €’000 €’000

AssetsNon-current assetsIntangible assets 17 66,552 52,864Property, plant and equipment 18 10,329 7,706Deferred tax asset 19 4,294 6,069

Total non-current assets 81,175 66,639

Current assetsInventories 20 12,133 11,983Trade and other receivables 21 47,632 37,407Derivative financial instruments 31 2,516 403Cash and cash equivalents 22 2,401 8,017

Total current assets 64,682 57,810

Total assets 145,857 124,449

LiabilitiesCurrent liabilitiesBorrowings 23 (2,983) (2,182)Trade and other payables 24 (45,269) (34,039)Income tax payable (1,195) (1,225)Provisions 25 (2,578) (1,316)

Total current liabilities (52,025) (38,762)

Non-current liabilitiesBorrowings 23 (546) (650)Trade and other payables 24 (3,348) (4,826)Provisions 25 (5,316) (4,816)

Total non-current liabilities (9,210) (10,292)

Total liabilities (61,235) (49,054)

Net assets 84,622 75,395

Shareholders’ equityOrdinary share capital 26 79 79Share premium 26 999 999Other reserves (206) (42)Retained earnings 83,750 74,359

Total equity 84,622 75,395

The financial statements on pages 61 to 95 were approved by the Board and authorised for issue on 6 July 2015 and are signed on its behalf by:

Gordon Watling Steve Chamberlain Chief Executive Officer Chief Financial Officer



Consolidated Statement of Cash Flows

2015 2014 Note €’000 €’000

Cash generated from operations 28 25,205 26,446Income taxes paid (631) (60)

Net cash generated from operating activities 24,574 26,386

Cash flow from investing activitiesInterest received 55 6Purchase of property, plant and equipment (4,419) (3,711)Capitalised development costs (13,108) (12,536)Purchase of subsidiary undertakings, net of cash acquired (3,403) (4,997)Purchase of other intangible assets (834) (896)Proceeds on disposal of property, plant and equipment 78 18

Net cash used in investing activities (21,631) (22,116)

Cash flow from financing activitiesNew borrowings 15,200 –Repayment of borrowings (14,281) (463)Interest paid (436) (202)Arrangement fee (150) –Dividends paid to shareholders (3,686) (3,020)Purchase of own shares for Treasury (5,397) (1,323)Issue of share capital from Treasury 193 163

Net cash used in financing activities (8,557) (4,845)

Net decrease in cash and cash equivalents 29 (5,614) (575)Cash and cash equivalents at the beginning of the period 8,017 8,634Foreign exchange (2) (42)

Cash and cash equivalents at the end of the period 22 2,401 8,017




Notes to the Group Financial StatementsFor the period ended 27 March 2015

1. IncorporationSepura plc (“the Company”) is a public limited company incorporated and domiciled in England and Wales with registered number 04353801, whose Ordinary shares of £0.0005 each are traded on the Official List of the London Stock Exchange. The Company’s registered office is Radio House, St Andrew’s Road, Cambridge, CB4 1GR, England.

Details of the Company’s subsidiary undertakings are set out in Note 6 to the Company’s financial statements. The Company and its subsidiary undertakings are collectively referred to below as “the Group”.

2. The business of the GroupThe principal activity of the Group is the design, development and distribution of secure digital radio products and systems.

3. Basis of preparationThese consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union, the IFRS Interpretations Committee (formerly the International Financial Reporting Interpretations Committee (“IFRIC”)) interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements of the parent company, which have been prepared in accordance with UK GAAP, are presented separately following these consolidated financial statements.

The consolidated financial statements have been prepared on a going concern basis and under the historical cost basis, except for certain financial instruments that have been measured at fair value.

The Company has prepared these consolidated financial statements for the period to 27 March 2015, being the nearest Friday to the end of the period.

These consolidated financial statements include the results of all of the Company’s subsidiary undertakings, which are listed in Note 6 to the Company’s financial statements. One of the Company’s subsidiaries, Fylde Micro Limited, has taken advantage of the exemption from an audit for the period ended 27 March 2015 available under s479A of the Companies Act 2006 as the Company has given a statutory guarantee of all of the outstanding liabilities of Fylde Micro Limited as at 27 March 2015.

4. Summary of significant accounting policiesThe principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

New standards, interpretations and amendments to published standards effective in the financial statementsFor the purposes of the preparation of these consolidated financial statements, the Group has applied all standards and interpretations that are effective for accounting periods beginning on or after 29 March 2014.

The following new standards and amendments to published standards have been adopted during the current period:

• IFRS 10 “Consolidated Financial Statements”• IFRS 11 “Joint arrangements”• IFRS 12 “Disclosure of Interests in Other Entities”• IAS 27 (Revised) “Separate Financial Statements”• IAS 28 (Revised) “Investments in Associates and Joint Ventures”• IAS 36 (Amended) “Recoverable Amount Disclosures for Non-Financial Assets”• IAS 39 (Amended) “Novation of Derivatives and Continuation of Hedge Accounting”• Amendments to IFRS 10, IFRS 11 and IFRS 12 on transition guidance• Amendments to IFRS 10, IFRS 12 and IAS 27 in relation to “Investment Entities”• Amendments to IAS 32 on financial instrument asset and liability offsetting

None of these have had an impact on the reported results of the Group.

Standards, interpretations and amendments to published standards that are not yet effectiveCertain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group’s accounting periods beginning on or after 28 March 2015 or later periods, and which the Group has not adopted early:

• IFRS 9 “Financial Instruments”• IFRS 14 “Regulatory Deferral Accounts”• IFRS 15 “Revenue from Contracts with Customers”• IFRIC 21 “Levies”• Amendment to IAS 19 “Employee Benefits” on defined benefit plans• Amendment to IAS 1 “Presentation of Financial Statements” on the disclosure initiative• Amendments to IFRS 10 and IAS 28 on investment entities applying the consolidation exemption• Amendments to IFRS 10 and IAS 28 on the sale or contribution of assets• Amendments to IAS 27 “Separate Financial Statements” on the equity method• Amendments to IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets” on depreciation and amortisation• Amendments to IFRS 11 “Joint Arrangements” on acquisition of an interest in a joint operation

The Directors are reviewing the implications of IFRS15 on the Group’s financial statements. The Directors do not anticipate that the adoption of the other Standards, Amendments and Interpretations, where relevant, in future periods will have a material impact on the Group’s financial statements.


4. Summary of significant accounting policies (continued)Basis of consolidationThe Group financial statements incorporate the financial statements of the Company and its subsidiary undertakings. Subsidiary undertakings are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiary undertakings are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated but are considered an impairment indicator of the asset transferred. Accounting policies of subsidiary undertakings have been changed where necessary to ensure consistency with the policies adopted by the Group.

Segment reportingAn operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Operating segments are aggregated into reporting segments where they share similar economic characteristics as a result of the nature of the products sold or the services provided, the production processes used to manufacture the products, the type of customer for the products and services and the methods used to distribute the products or provide the services.

RevenueRevenue, which relates to both the shipment of products and supplying solutions as part of long-term contracts, is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

i. Sale of productsRevenue from the sale of products, such as the Group’s terminals, accessories and standard software products, is recognised when the significant risks and rewards of ownership of the products have passed to the buyer and revenue can be reliably measured. Depending on the Incoterms applicable, the Group typically recognises such revenue from the sale of products on despatch, on receipt of products by the customer, or upon formal acknowledgement from the customer that title has passed but they wish the products to be stored at the Group’s premises, in which case revenue is only recognised when the products are on hand, separately identified and available for collection, usual payment terms apply, and it is probable that delivery will take place.

In a multiple element arrangement some of the elements, either hardware or software, may remain undelivered or incomplete. Revenue may be recognised on the fair value of the elements delivered providing the following conditions are fulfilled:

• The element of the product delivered has value to the customer on a stand-alone basis and is thus a separately identifiable component within the arrangement;

• The fair value can be reliably attributed to the undelivered element (in the event of bundling where undelivered components may not have a separate invoiced sales price the fair value of the revenue deferred is calculated by comparing the underlying product list price of each element of the bundle compared to the overall bundle price); and

• Delivery of the undelivered element is probable and under the control of the Group i.e. the technical risk attached to the delivery of the component is acceptable.

If any of these conditions are not met then all revenue under the arrangement is deferred until either the contract is complete or uncertainty over any of these conditions is removed.

ii. Long-term contractsThe supply of solutions by the Group, such as network infrastructure or command and control software applications, where the implementation takes place over a period of months or years, are accounted for as long-term contracts. Revenue and cost of sales from long-term contracts are recognised on the percentage of completion basis based on costs incurred to date when the outcome of the contract can be estimated reliably. The criteria for this are that total contract revenue and the costs to complete the contract can be estimated reliably, it is probable that the economic benefits associated with the contract will flow to the Group and that the stage of contract completion can be measured. When the Group is not able to meet those conditions, the policy is to recognise revenue equal to costs incurred to date, to the extent that such costs are expected to be recovered. Expected losses are recognised in full at the point at which they are anticipated. If the amount of the revenue recognised exceeds the amounts invoiced to customers, the excess amount is recorded in amounts recoverable on contracts within trade and other receivables. If the amounts invoiced exceed the revenue recognised, the excess amount is recorded as deferred revenue or payments in advance.

Notes to the Group Financial Statements continuedFor the period ended 27 March 2015



4. Summary of significant accounting policies (continued)iii. WarrantiesAs noted above, the Group assesses whether any of its contracts contain elements which operate independently of other contractual elements and which should, therefore, be ‘unbundled’ and accounted for separately. The Group offers as standard to all customers a product warranty package, which is typically for a period of three to five years depending on the product and territory concerned. Generally, product warranty packages which are offered as standard with all products are not separately priced, are offered for periods in line with the Group’s standard terms of supply at the time of sale and are not considered to be an element capable of ‘unbundling’. In such cases, provision is made at the time of sale for the estimated cost of providing the warranty cover based on historical information on the cost and frequency of repairs required to the Group’s products. The Group also has back-to-back warranties of between twelve and fifteen months with the majority of its sub-contract manufacturers to limit risk on product warranties. Amounts due from manufacturers under back-to-back warranties are not recognised until the manufacturer has confirmed a reimbursement will be made.

In certain cases “enhanced” warranty packages, of a longer than standard period, are sold to customers as separate products. In such cases the fair value of the revenue associated with the warranty cover is amortised over the underlying period of the warranty cover. The fair value of the revenue is determined by the Directors based on market information, including the sales price when enhanced warranties are sold on a stand-alone basis.

PensionsThe Group provides access to a Stakeholder Pension Scheme, a defined contribution plan into which employees may elect to contribute via salary deduction. The Group makes contributions to the scheme in proportion to the amount contributed by the employees. Costs are recognised in the consolidated income statement in the period to which they relate.

Employee share schemesThe Group issues equity-settled share-based payments to its eligible employees. Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed in the consolidated income statement on a straight-line basis over the vesting period, based on the Group’s estimate of the number of shares that will eventually vest. The corresponding entry is recorded in retained earnings. Fair value is measured using the trinomial model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

Financial incomeFinancial income comprises interest receivable on cash balances and deposits and is recognised using the effective interest rate method.

Financial expenseFinancial expense comprises interest payable on credit facilities and is calculated using the effective interest rate method in accordance with IAS 39 “Financial Instruments: Recognition and Measurement”.

Income taxIncome tax on the result for the period comprises current and deferred tax. Income tax is recognised in the consolidated income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date, in the countries in which the Group operates, and any adjustment to tax payable in respect of previous periods.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. DividendsDividends declared on the Company’s equity share capital are recognised as a liability when an irrevocable obligation to pay the dividends is established. In the case of interim dividends this arises when the dividend is paid, while for final dividends this is the date at which the dividends are approved at a shareholders’ general meeting.


4. Summary of significant accounting policies (continued)Property, plant and equipmentProperty, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items including, where relevant, the cost of subcontractors, direct labour and a proportion of attributable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the consolidated income statement during the financial period in which they are incurred.

Depreciation is provided to write off the cost less the estimated residual value of property, plant and equipment. Depreciation for certain manufacturing plant and machinery is calculated by reference to the number of units produced, and for all other assets by equal annual instalments over their estimated useful economic lives as follows:

• Plant and machinery 3 – 7 years• IT equipment 3 – 5 years

No depreciation is charged on assets in the course of construction as their useful economic life has yet to commence. On completion, the assets are transferred to the appropriate class of property, plant and equipment and depreciation is charged at the above rates.

Intangible assetsThe Group undertakes research and development activities with a view to developing new products and product functionality. Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, is recognised in the consolidated income statement when incurred.

Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when it is demonstrable that:

• It is technically feasible that the project can be completed and will result in a product that is available for use or sale;• It is intended that the project will be completed and the asset will be used or sold;• The resultant asset can be used or sold;• The resultant asset will generate future economic benefits;• There are sufficient resources to complete the development and use or sell the asset; and• The expenditure attributable to the project can be measured reliably.

Development expenditures that do not meet these criteria are recognised as an expense in the consolidated income statement as they are incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. The expenditure capitalised includes cost of materials, subcontractors, direct labour and a proportion of attributable overheads. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Amortisation is provided to write off the cost of the development expenditure by equal annual instalments over the products’ estimated useful life, which is usually three years, commencing from the time the asset is available for use. The amortisation of capitalised development expenditure is included in research and development costs in the consolidated income statement.

Software and similar licencesExternally purchased software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. The Group also purchases licences to exploit third-party intellectual property rights. Licences are recorded at the historical cost to acquire the licence less accumulated amortisation and impairment losses, and are amortised on a straight-line basis over the life of the licence or, where the licence is indefinite, their estimated useful life which is generally three years. The amortisation of software and similar licences is included in the consolidated income statement within cost of sales or research and development costs as appropriate.

Acquired intangible assetsAt the date of acquisition of a subsidiary, intangible assets that are deemed separable and that arise from contractual or other legal rights are capitalised and included within the net identifiable assets acquired. These intangible assets are initially measured at fair value, which reflects market expectations of the probability that the future economic benefits embodied in the asset will flow to the entity, and are amortised on a straight-line basis over their expected useful lives. They are subsequently measured at cost less accumulated amortisation and impairment. At each balance sheet date, these assets are assessed for indicators of impairment and, in the event that an asset’s carrying amount is determined to be greater than its recoverable amount, the asset is written down immediately through the consolidated income statement.




4. Summary of significant accounting policies (continued)GoodwillGoodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of the value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.

Acquisition costsCosts relating to an acquisition, other than those associated with the issue of debt or equity securities, are expensed to the consolidated income statement as incurred.

ImpairmentThe carrying value of non-current assets is reviewed whenever events or changes in circumstances indicate that the carrying value may not be recoverable to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. Intangible assets initially recognised during the current annual period which are not yet available for use are also tested for impairment by reference to the asset’s recoverable amount at the balance sheet date.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount of property, plant and equipment and capitalised software and other licences is the greater of their fair value less costs to sell and value in use. The recoverable amount of capitalised development costs is its value in use. In assessing value in use, the estimated future cash flows over the remaining useful economic life of the asset in question are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

InventoriesInventories including work in progress are stated at the lower of cost and net realisable value, being estimated selling price in the ordinary course of business less applicable variable selling costs. Cost is determined on a first in first out basis and includes transport and handling costs. Where necessary, provision is made for obsolete, slow moving and defective inventories.

Cash and cash equivalentsCash and cash equivalents comprise cash in hand and call deposits with maturity of less than three months.

LeasesFinance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term, unless there is reasonable certainty that ownership will be retained at the end of the lease term in which case they are depreciated over their useful economic life.

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the consolidated income statement on a straight-line basis over the lease term.

Where the Group enters into a finance sale and leaseback, the transaction is essentially a financing operation and therefore no profit or loss is recognised on the sale. Instead, any gain or loss arising on the sale, reflecting the difference between the sale price and the previous carrying value, is deferred and amortised over the lease term.

Restructuring provisionsProvisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that the Group will be required to settle that obligation and the amount can be estimated reliably. Provisions are measured at the best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

Warranty provisionsProvision is made at the time of sale for the estimated cost of providing warranty cover which cannot be separated from the sale of the underlying goods. The provision is calculated based on historical information on the cost and frequency of repairs required to the Group’s products. The Group also has back-to-back warranties of between twelve and fifteen months with the majority of its sub-contract manufacturers to limit risk on liabilities arising from manufacturing defects. This back-to-back warranty has not been netted from the provision. The warranty provision has not been discounted as the impact would not be material.


4. Summary of significant accounting policies (continued)Contingent considerationAny contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in the consolidated income statement.

Share capitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Non-recurring itemsItems of income and expense that are considered material, either by their size and/or nature, are classified as exceptional / non-recurring. Such items are shown separately on the face of the consolidated income statement. The categorisation of exceptional items depends on the nature of the items arising.

Financial instrumentsi. Treasury policies and managementThe Group’s treasury policies are designed to ensure that adequate financial resources are available for the development of the Group’s businesses.

ii. Trade receivablesTrade receivables are recognised initially at fair value and subsequently held at amortised cost using the effective interest rate method, less provision for impairment. Trade receivables are first assessed individually for impairment, or collectively where the receivables are not individually significant. Where there is no objective evidence of impairment for an individual receivable, it is included in a group of receivables with similar credit risk characteristics and these are collectively assessed for impairment and movements in the provision for doubtful debts are recorded in the consolidated income statement.

iii. Trade payablesTrade payables are recognised initially at fair value and subsequently held at amortised cost using the effective interest rate method. Trade payables are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

iv. BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated income statement over the period of the borrowings using the effective interest rate method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

v. Derivative financial instrumentsDerivatives are initially recognised at fair value on the date the derivative contract is entered into, and are subsequently remeasured at their fair value at each reporting date. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either:

(a) hedges of the fair value of recognised assets or liabilities or a firm commitment (“fair value hedges”);(b) hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (“cash flow hedge”); or(c) hedges of a net investment in a foreign operation (“net investment hedge”).

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The fair values of various derivative instruments used for hedging purposes are disclosed in Note 31.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement within “losses on forward currency contracts”. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when the forecast sale that is hedged takes place). When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within “losses on forward currency contracts”. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the consolidated income statement as they arise.




4. Summary of significant accounting policies (continued)Foreign currenciesi. Functional and presentational currencyThe presentational currency of the Group and the Company is the Euro (€). The functional currency of each Group entity is that of the primary economic environment in which it operates.

ii. Transactions and balancesTransactions denominated in foreign currencies have been translated into the functional currency at the actual rates of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies have been retranslated at rates ruling at the balance sheet date. All exchange gains and losses are taken to the consolidated income statement in the period in which they arise.

iii. Group companiesThe results and financial position of the Group’s overseas subsidiary undertakings are translated, where appropriate, into Euros as follows:

• Assets and liabilities at each balance sheet date presented are translated at the closing rate at the date of that balance sheet;• Income and expenses are translated at average exchange rates; and• All resulting exchange differences are recognised as a separate component of equity.

5. Critical accounting estimates and assumptionsJudgements and estimatesThe preparation of financial information in conformity with IFRS requires the Directors to make critical accounting estimates and judgements that affect the application of policies and reported amounts of assets and liabilities, income and expenses. An assessment of the impact of these estimates and judgements on the financial statements is set out below.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

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

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets or liabilities within the next financial period are discussed below.

Bad debt provisionThe Group has some concentration of credit risk due to the influence of large contracts on its business, albeit these contracts are directly, or indirectly (via the Group’s distribution partners) predominantly with Government agencies both in the UK and internationally. To offset this risk the Group has implemented policies that require appropriate credit checks on potential customers before sales are made. The Group does not hold any security or other collateral in respect of its trade receivables and so was exposed to credit risk in respect of the net trade receivables balance of €40.5 million (2014: €34.8 million) including overdue receivable balances relating to projects in the Middle East. An impairment provision is maintained in respect of amounts owed by specific customers where recoverability of the debt is considered sufficiently uncertain. This includes a provision in relation to a Greek public safety contract as described in Note 21.

Assessment of fair value of undelivered elements in multiple element arrangementsRevenue is recognised when the significant risks and rewards of ownership of the products or services have passed to the buyer and revenue can be reliably measured. Depending on the Incoterms applicable, there can be judgement regarding the point at which these risks and rewards have been transferred. The Group enters into a number of multiple element arrangements where typically an element of software (which is not fundamental to the effective operation of the product) is delivered after the date of delivery of the initial hardware and software. In such circumstances, where the fair value of the undelivered elements can be estimated by management, revenue equal to this fair value is separately carved out and deferred until such items have been delivered. The remainder of the revenue is recognised on initial delivery. If management’s estimation of the fair value of deferred income (as at the date of invoicing) were increased by 10% then profit for the period ended 27 March 2015 would be increased by €0.1 million (2014: reduction of €21,000) while net assets would be reduced by €0.5 million (2014: €0.6 million).

Estimating the costs required to complete long-term contractsRevenue recognised under long-term contracts is determined by reference to the stage of completion of the relevant contract. Assessing the stage of completion requires an estimation of the future costs that will be incurred to complete the contract. If management’s assessment of these future costs were amended by 10% then the impact on revenue and gross margin would be €0.2 million (2014: €0.3 million).


5. Critical accounting estimates and assumptions (continued)Assessing whether development costs meet the criteria for capitalisationThe point at which development costs meet the criteria for capitalisation is critically dependent on management’s judgement of the point at which technical feasibility is demonstrable.

The carrying amount of development costs on projects which are not yet available for sale or use was:

2015 2014 €’000 €’000

Development costs not available for sale or use 27,169 25,600

Assessing the useful economic lives of capitalised development costsManagement have estimated the useful economic lives of capitalised development costs as three years based on historical knowledge of the life cycle of the Group’s products and technology.

If this estimate was reduced from three to two years, net assets would be reduced by €1.1 million at 27 March 2015 and €2.7 million at 28 March 2014, with a corresponding increase in the Group’s reported profit of €1.5 million and €0.4 million respectively.

Impairment of goodwill, capitalised development costs and acquired intangiblesDetermining whether goodwill is impaired requires an estimation of the value in use of the cash generating unit (“CGU”) to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows of the CGU, and a suitable discount rate, in order to calculate the present value. Similar calculations are required in respect of capitalised development costs and other acquired intangibles. Changing the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the cash flow projections, could significantly affect the Group’s impairment evaluation.

Acquired intangiblesIFRS 3 (revised) “Business Combinations” requires that goodwill arising on the acquisition of subsidiaries is capitalised and included in intangible assets. IFRS 3 (revised) also requires the identification of other intangible assets at acquisition. The assumptions involved in valuing these intangible assets, as set out in Note 17, requires the use of estimates and judgements, that may differ from the actual outcome. These estimates and judgements cover future growth rates, expected inflation rates and the discount rate used. Changing the assumptions selected by management could significantly affect the allocation of the purchase price paid between goodwill and other acquired intangibles.

Contingent considerationContingent consideration of up to €4.9 million and €2.1 million is payable to the previous owners of Portalify OY and Fylde Micro Limited respectively in the event that revenue and operating profit targets are met over a certain period. Management have considered that, based on current projections, all of this consideration will be payable and accordingly a provision for €7.0 million is recorded in the consolidated financial statements. In the event that either Portalify OY or Fylde Micro Limited fail to meet these targets then the amount of consideration payable will be reduced accordingly.

Tax estimatesThe calculation of the Group’s total tax charge for the period necessarily involves a degree of estimation and judgement in respect of certain items whose tax treatment cannot be finally determined at the reporting date. To the extent that the final outcome differs from the tax that has been provided, adjustments will be made to income tax and deferred tax provisions. Furthermore, the recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits, based on the latest available profit forecasts, will be available in the future against which the reversal of temporary differences can be deducted.




6. Acquisition of Fylde Micro LimitedOn 20 May 2014 the Group announced the acquisition of the entire share capital of Fylde Micro Limited, (“Fylde”), which designs and manufactures trunking controllers that enable a simple, low-risk and cost-effective migration from analogue to digital networks. The acquisition of Fylde expands the Group’s addressable market by broadening the Group’s product portfolio. The initial cash consideration was £2.75 million, with a subsequent additional payment of £450,000 based on the net assets at the date of acquisition. Further contingent consideration of up to £3.5 million was payable in cash if Fylde achieved EBIT targets over an earn-out period, none of which was linked to future employment. Subsequent to the acquisition, the terms of the earn-out were amended to include technical milestones as well as EBIT. As a result, in accordance with IFRS 3 “Business Combinations”, part of the contingent consideration now represents future management remuneration that will be charged to the income statement as it is incurred. Reflecting this and the first year's post-acquisition performance, the related liability that had been recognised on acquisition has been released through the income statement and included within non-recurring items.

The provisional book and fair values of the assets and liabilities acquired are as follows:

Fair value Provisional Book value adjustments fair value €’000 €’000 €’000

Intangible assets – 2,402 2,402Property, plant and equipment 33 – 33Deferred tax – (480) (480)Inventories 253 – 253Trade and other receivables 263 – 263Cash at bank and in hand 548 – 548Income tax payable (144) – (144)Trade and other payables (135) – (135)

Net assets acquired 818 1,922 2,740Goodwill 5,624

Purchase consideration, including contingent consideration 8,364

The purchase consideration comprises:Cash consideration paid on completion 3,951Deferred consideration payable in cash 4,413

Purchase consideration, including contingent consideration 8,364

Intangible assets acquired relate to existing customer contracts, intellectual property and relationships together with the business’ brand name. These are being amortised over the expected useful economic lives, which have been assessed as five years. The goodwill arising on the acquisition is attributable to the value of synergies arising from the acquisition, Fylde’s assembled workforce and future profits arising from access to new markets. None of the goodwill on this acquisition is expected to be deductible for tax. The Group incurred €882,000 of costs in connection with acquisition and subsequent restructuring that have been charged to the consolidated income statement as non-recurring items.

Fylde reported a profit after tax for the year ended 31 December 2013 of £1,000. Fylde contributed €1.5 million of revenues and a loss of €0.4 million, after deducting amortisation of acquired intangibles, to the Group’s results for the period, while the Group’s revenue and earnings would have been €131.6 million and €15.2 million respectively if Fylde had been a member of the Group for the whole period.

During the period the preliminary fair values attributable to the assets and liabilities of Portalify OY, acquired on 25 July 2013, were re-assessed and the related goodwill increased by €148,000.


7. Segment reportingThe Board has concluded that the Group has a single reportable segment, being the design, development and supply of secure digital radio products and systems as:

• The Chief Operating Decision Maker is the Board, which reviews regular financial information on the performance of the Group, assesses the performance of the Group’s executives and is responsible for resource allocation;

• Since acquiring Fylde Micro Limited on 20 May 2014 its operations have been integrated into Sepura’s core business and a combined sales team now go to market selling Fylde Micro’s products as part of Sepura’s total product portfolio; and

• Responsibility for world-wide sales falls under a single individual, reflecting the shared economic characteristics of the Group’s geographical markets and customers in terms of the products sold into these markets, the sourcing of those products from the Group’s sub-contract manufacturers and the distribution channels used by end-customers.

Revenues attributable to customers based in the Company’s country of domicile, the United Kingdom, were €18,320,000 (2014: €19,346,000). Revenues from all other countries totalled €112,840,000 (2014: €97,299,000), of which €39,016,000 (2014: €32,309,000) related to customers in Germany which in aggregate represented more than 10% of the Group’s revenues for the period. A significant percentage of the Group’s revenue in each financial period is derived from orders from a small number of end-user organisations; the Group is not reliant on any individual end-user organisations.

The Group’s intangible assets and property, plant and equipment are located as follows: 2015 2014 €’000 €’000

United Kingdom 56,280 39,520Rest of world 20,601 21,050

76,881 60,570

8. Adjusted performance measuresThe Group presents adjusted figures as key performance measures in addition to those reported under IFRS. These adjusted figures, comprising EBITDA, adjusted EBITDA, adjusted operating profit and adjusted operating margin, exclude certain non-operational or non-cash items and so, in management's view, better reflect the underlying trading performance of the Group. They may not be comparable to measures with a similar description used by other entities.

Earnings before interest, tax, depreciation and amortisation has been calculated as follows: 2015 2014 €’000 €’000 Increase

Operating profit 17,087 14,427 18%Depreciation (see Note 18) 1,801 1,445Amortisation (see Note 17) 8,428 9,588

EBITDA 27,316 25,460 7%Non-recurring items 1,196 590Reversal of capitalised development costs (see Note 17) (13,108) (12,536)Reversal of the IFRS 2 share-option charge (see Note 10) 1,262 664Reversal of the NI payable on the shares subject to the IFRS 2 share-option charge 301 238

Adjusted EBITDA 16,967 14,416 18%

Adjusted operating profit has been calculated as follows: 2015 2014 €’000 €’000 Increase

Operating profit 17,087 14,427 18%AdjustmentsNon-recurring items 1,196 590Reversal of capitalised development costs (see Note 17) (13,108) (12,536)Reversal of associated amortisation (see Note 17) 6,747 8,080Reversal of amortisation of acquired intangibles (see Note 17) 1,518 1,010Reversal of the IFRS 2 share-option charge (see Note 10) 1,262 664Reversal of the NI payable on the shares subject to the IFRS 2 share-option charge 301 238

Adjusted operating profit 15,003 12,473 20%

Adjusted operating margin, being adjusted operating profit divided by revenue 11.4% 10.7%




8. Adjusted performance measures (continued)Adjusted operating costs have been calculated as follows:

For the period ended 27 March 2015 Selling, marketing Research and Administrative and distribution costs development costs expenses Total €’000 €’000 €’000 €’000

Per consolidated income statement 19,995 10,394 13,176 43,565AdjustmentsNon-recurring items (1,770) – 574 (1,196)Reversal of capitalised development costs (see Note 17) – 13,108 – 13,108Reversal of associated amortisation (see Note 17) – (6,747) – (6,747)Reversal of amortisation of acquired intangibles (see Note 17) – – (1,518) (1,518)Reversal of the IFRS 2 share-option charge (see Note 10) – – (1,262) (1,262)Reversal of the NI payable on the shares subject to the IFRS 2 share-option charges – – (301) (301)

Adjusted operating costs 18,225 16,755 10,669 45,649

For the period ended 28 March 2014 Selling, marketing Research and Administrative and distribution costs development costs expenses Total €’000 €’000 €’000 €’000

Per consolidated income statement 16,625 12,228 12,039 40,892AdjustmentsNon-recurring items – – (590) (590)Reversal of capitalised development costs (see Note 17) – 12,536 – 12,536Reversal of associated amortisation (see Note 17) – (8,080) – (8,080)Reversal of amortisation of acquired intangibles (see Note 17) – – (1,010) (1,010)Reversal of the IFRS 2 share-option charge (see Note 10) – – (664) (664)Reversal of the NI payable on the shares subject to the IFRS 2 share-option charges – – (238) (238)

Adjusted operating costs 16,625 16,684 9,537 42,846

9. Operating profit 2015 2014 €’000 €’000

Operating profit is stated after charging (crediting):Cost of inventories recognised as an expense (included in cost of sales) 66,665 53,530Depreciation on property, plant and equipment:– Owned assets 1,801 1,445– Amounts included in capitalised development costs 365 183Amortisation of intangible assets– Development costs 6,747 8,080– Software and similar licences 163 498– Acquired intangibles 1,518 1,010Research and non-capitalised development costs (excluding amortisation) 3,647 4,148Operating lease rentals:– Land and buildings 1,499 1,451– Plant and machinery 19 19Trade receivables impairment (included in sales, marketing and distribution costs and excluding the non-recurring item described below) (37) 346Foreign exchange losses 1,414 144Non-recurring items:– Acquisition costs relating to Fylde Micro Limited (See Note 6) 532 329– Acquisition costs relating to the acquisition of Teltronic SAU 864 –– Restructuring costs 350 261– Release of Fylde contingent consideration (2,320) –– Provision against Greek public safety contract (See Note 21) 1,770 –


9. Operating profit (continued)Non-recurring items in the current period relate to the acquisition of Fylde Micro Limited and subsequent restructuring, together with initial costs incurred in connection with the acquisition of Teltronic SAU which completed subsequent to the end of the period, as described in Note 34. They also include a provision against outstanding receivables due from a customer in Greece as described in Note 21. Non-recurring items in the prior period related to the acquisition of Portalify OY and subsequent restructuring.

2015 2014 €’000 €’000

Auditors’ remuneration:– Fees payable to the Company’s Auditors for the audit of the Company and consolidated financial statements 114 99– Fees payable to the Company’s Auditors for other services:– Audit related assurance services (interim review) 25 25– Tax compliance services 16 12– Tax advisory services 10 11– Corporate finance and Reporting Accountant services 262 16– All other non-audit services 6 3

433 166

10. Employee numbers and costsThe average monthly number of persons employed by the Group (including executive Directors) during the period, analysed by category, was as follows:

2015 2014 Number Number

Research and development 205 200Sales, marketing and distribution 95 78General and administration 20 17Production support 69 50

389 345

The aggregate costs of these employees were as follows:

2015 2014 €’000 €’000

Wages and salaries 27,214 25,303Social security costs 3,031 3,238Other pension costs 1,322 1,176Expense relating to share based payments 1,262 664

32,829 30,381

11. Key management compensation and remuneration of DirectorsTotal Directors’ remuneration, excluding gains from the exercise of share options, comprised:

2015 2014

£’000 €’000 £’000 €’000

Directors’ emoluments 872 1,104 1,078 1,305Company contributions to money purchase pension plans 51 65 48 58

923 1,169 1,126 1,363

Information on the remuneration of individual Directors is given in those sections of the Directors’ Remuneration Report described as having been audited, and those elements required by the Companies Act 2006 and the Financial Conduct Authority form part of these financial statements. One of the Directors exercised share options during the period giving rise to a taxable gain of £833,000 (2014: £211,000); the total expense in the income statement relating to Directors’ share based payments was €383,000 (2014: €190,000).




11. Key management compensation and remuneration of Directors (continued)The compensation of the Directors and the seven (2014: seven) other “key management personnel” (as defined within IAS 24) was as follows:

2015 2014 €’000 €’000

Salaries and other short-term employee benefits 2,487 2,687Aggregate gains made on the exercise of share options 1,055 255Expense relating to share based payments 568 300

4,110 3,242

12. Financial income 2015 2014 €’000 €’000

Interest receivable and similar income on short-term bank deposits 55 6

13. Financial expense 2015 2014 €’000 €’000

Interest payable on borrowings and credit facilities 436 202Amortisation of loan arrangement fees 48 48

484 250

14. Income tax expense 2015 2014 €’000 €’000

Current tax:Overseas income tax for the period 457 769Deferred tax:Origination and reversal of temporary differences 1,125 1,200Adjustment in respect of prior periods – (1,428)Impact of change in UK tax rate – 512

Total tax in consolidated income statement 1,582 1,053

Factors affecting the tax expense for the periodThe tax expense for the period is different from the standard rate of corporation tax in the UK, which was 21% (2014: 23%). The differences are explained below:

2015 2014 €’000 €’000

Tax reconciliationProfit before income tax 16,658 14,183

At standard rate of corporation tax in the UK 3,498 3,262Effects of:Research and development enhanced expenditure (828) (735)Patent box (447) (498)Expenses not deductible for tax purposes 132 65Accelerated capital allowances – 23Employee share options (773) (148)Impact of change in UK tax rate – 512Adjustment in respect of prior periods – (1,428)

Total tax expense (see above) 1,582 1,053

Effective tax rate 9% 7%

The Finance Act 2013, which provides for reductions in the main rate of corporation tax from 23% to 21% effective from 1 April 2014 and to 20% effective from 1 April 2015, was substantively enacted on 2 July 2013. These rate reductions have been reflected in the calculation of deferred tax at the balance sheet date.


15. Earnings per shareBasic earnings per share has been calculated by dividing earnings attributable to owners of the parent by the weighted average number of shares of the Company for each period. For diluted earnings per share, the weighted average number of shares is adjusted to allow for the conversion of all dilutive equity instruments.

2015 2014

Before non- Non- After non- Before non- Non- After non- recurring recurring recurring recurring recurring recurring items items items items items items

Earnings attributable to owners of the parent (€’000) 16,016 (940) 15,076 13,584 (454) 13,130

Number of sharesBasic weighted average number of shares (‘000) 138,056 138,056 138,056 138,057 138,057 138,057

Effect of dilutive securities:Employee incentive plans (‘000) 1,041 1,041 1,041 1,160 1,160 1,160

Diluted weighted average number of shares (‘000) 139,097 139,097 139,097 139,217 139,217 139,217

Basic EPS (¢) 11.6 (0.7) 10.9 9.8 (0.3) 9.5

Diluted EPS (¢) 11.5 (0.7) 10.8 9.8 (0.4) 9.4

The Group presents an adjusted earnings per share figure which excludes non-recurring items, the capitalisation of development costs (together with associated amortisation), the amortisation of acquired intangibles and the IFRS 2 share-option charge, all net of UK Corporation Tax at the standard rate. This adjusted earnings per share figure has been based on adjusted basic earnings for each financial period and on the same number of diluted weighted average shares in issue as the GAAP earnings per share calculation above.

2015 2014 €’000 €’000

Earnings attributable to owners of the parent 15,076 13,130

AdjustmentsNon-recurring items 1,196 590Reversal of capitalised development costs (13,108) (12,536)Reversal of associated amortisation 6,747 8,080Reversal of amortisation of acquired intangibles 1,518 1,010Reversal of the IFRS 2 share-option charge 1,262 664Reversal of the NI payable on the shares subject to the IFRS 2 share-option charge 301 238

(2,084) (1,954)Effect of UK Corporation Tax at 21% (2014: 23%) 438 449

Net of UK Corporation Tax at 21% (2014: 23%) (1,646) (1,505)

Adjusted earnings attributable to owners of the parent 13,430 11,625

Adjusted diluted EPS (¢) 9.7 8.4




16. DividendsThe Directors have proposed a final dividend in respect of the financial period ended 27 March 2015 of 1.71p per Ordinary share, totalling approximately €4.3 million based on the Ordinary shares in issue at the date of this report. The proposed dividend is subject to approval by shareholders and has not been included as a liability in these financial statements.

During the current and prior periods the Company paid the following dividends:

2015 2014 €’000 €’000

FY15 Interim dividend of 0.69p per Ordinary share 1,255 –FY14 Final dividend of 1.41p per Ordinary share 2,431 –FY14 Interim dividend of 0.59p per Ordinary share – 966FY13 Final dividend of 1.17p per Ordinary share – 2,054

3,686 3,020

17. Intangible assets Acquired software, Capitalisation of Software customer development and similar relationships costs licences and brand Goodwill Total €’000 €’000 €’000 €’000 €’000

CostAt 30 March 2013 93,346 3,705 4,468 8,513 110,032Additions 12,536 896 – – 13,432Acquisitions 730 504 1,031 5,440 7,705

At 28 March 2014 106,612 5,105 5,499 13,953 131,169Transfer – (504) 504 – –Additions 13,108 834 – – 13,942Acquisitions – – 2,402 5,772 8,174

At 27 March 2015 119,720 5,435 8,405 19,725 153,285

Amortisation and impairmentAt 30 March 2013 64,748 2,914 1,055 – 68,717Charge for the period 8,080 498 1,010 – 9,588

At 28 March 2014 72,828 3,412 2,065 – 78,305Charge for the period 6,747 163 1,518 – 8,428Transfer – (88) 88 – –

At 27 March 2015 79,575 3,487 3,671 – 86,733

Net book valueAt 27 March 2015 40,145 1,948 4,734 19,725 66,552

At 28 March 2014 33,784 1,693 3,434 13,953 52,864

At 29 March 2013 28,598 791 3,413 8,513 41,315

The amortisation charge for each period has been included within the following captions of the consolidated income statement:

2015 2014 €'000 €'000

Cost of sales – 315Research and development costs 6,845 8,175Administrative expenses 1,583 1,098

8,428 9,588


17. Intangible assets (continued)The Group tests annually for impairment, or more frequently if there are indications that goodwill may have been impaired. Goodwill relates to the acquisition during the period of Fylde Micro Limited, and the acquisitions of Portalify OY and 3T Communications AG in prior periods, all of which are considered part of a single “cash generating unit”. The Directors have prepared “value in use” calculations in accordance with IAS 36 “Impairment of assets”, using the following key assumptions:

Assumption How determined

Revenues Management have used detailed forecasts for the next three years as this time period provides sufficient headroom to support the carrying value of goodwill.

Gross margin Gross margin has been calculated based on the specific customer and product mix included in the revenue forecasts for the three year period.

Operating costs Operating costs are based on detailed forecasts reflecting expected future head-count, investment in R&D and routes to market and contracted hedge rates for Sterling-denominated costs.

Capital expenditure Forecast capital expenditure is based on specific planned investment together with historical levels of capital expenditure.

Discount rate The pre-tax discount rate of 15% applied to the cash flows reflects the weighted average cost of capital of the Group using the industry standard formula.

Based on the above, the Directors have concluded that no impairment is required to be recorded.

18. Property, plant and equipment Assets under Plant and construction machinery IT equipment Total €’000 €’000 €’000 €’000

CostAt 30 March 2013 468 12,432 2,318 15,218Transfers (247) 229 18 –Additions 1,746 1,655 310 3,711Acquisitions – – 6 6Disposals – (13) (5) (18)

At 28 March 2014 1,967 14,303 2,647 18,917Foreign exchange – 63 – 63Transfers (572) 570 2 –Additions 1,901 2,043 475 4,419Acquisitions – 33 – 33Disposals – – (78) (78)

At 27 March 2015 3,296 17,012 3,046 23,354

Accumulated depreciationAt 30 March 2013 – 7,933 1,833 9,766Charge for the period – 1,228 217 1,445

At 28 March 2014 – 9,161 2,050 11,211Foreign exchange – 13 – 13Charge for the period – 1,472 329 1,801

At 27 March 2015 – 10,646 2,379 13,025

Net book valueAt 27 March 2015 3,296 6,366 667 10,329

At 28 March 2014 1,967 5,142 597 7,706

At 29 March 2013 468 4,499 485 5,452

There was no capital expenditure at the end of either period which had been contracted for prior to the end of the period but not provided for in the financial statements.




19. Deferred taxThe Group’s deferred tax assets and (liabilities) totalled €13,773,000 (2014: €13,883,000) and €9,479,000 (2014: €7,612,000) respectively and relate to temporary differences in respect of:

Equity- Capitalised Cash- Acquired settled Other Property, development flow intangible share temporary plant and costs hedges assets Losses options differences equipment Net €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000

At 30 March 2013 (6,578) 248 (785) 9,886 1,607 188 2,120 6,686Acquired (179) – (338) – – – – (517)Recognised in income – – 353 41 153 (11) (820) (284)Recognised in equity:– Arising on cash flow hedges – (333) – – – – – (333)– Arising on equity settled share options – – – – 289 – – 289– Effect of change in tax rate – – – – 228 – – 228

At 28 March 2014 (6,757) (85) (770) 9,927 2,277 177 1,300 6,069Acquired – – (480) – – – – (480)Recognised in income (1,272) – 303 (412) 265 (9) – (1,125)Recognised in equity:– Arising on cash flow hedges – (418) – – – – – (418)– Arising on equity settled share options – – – – 248 – – 248

At 27 March 2015 (8,029) (503) (947) 9,515 2,790 168 1,300 4,294

Deferred tax liabilities have been offset against deferred tax assets at 27 March 2015 as there is a legally enforceable right to offset current tax assets and current tax liabilities within the same fiscal jurisdiction.

The Group’s deferred tax assets have been recognised in accordance with IAS 12 as, based on historical performance and future budgets, the Directors believe that it is probable that there will be sufficient taxable profits against which the assets will reverse.

Deferred tax assets and liabilities may be classified as long-term or current as follows:

2015 2014 €’000 €’000

Non-current assets 11,971 12,421Non-current liabilities (8,657) (7,378)

3,314 5,043

Current assets 1,802 1,260Current liabilities (822) (234)

980 1,026


20. Inventories 2015 2014 €’000 €’000

Raw materials 2,196 1,800Work in progress 2,182 1,526Finished goods and goods for resale 7,755 8,657

12,133 11,983

An obsolescence provision is maintained in respect of inventories, the movements on which are set out below:

2015 2014 €’000 €’000

At the beginning of the period 906 907(Released) charged to cost of sales in the consolidated income statement (310) 11Utilised in period (12) (12)

At the end of the period 584 906

21. Trade and other receivables 2015 2014 €’000 €’000

Trade receivables 42,581 35,844Less: provision for impairment of receivables (2,070) (1,004)

Trade receivables (net) 40,511 34,840Other receivables 862 416Prepayments and accrued income 6,259 2,151

47,632 37,407

Other receivables at 27 March 2015 included €Nil (2014: €120,000) of unamortised fees incurred in connection with the Group’s revolving credit facility described in Note 23. The equivalent balance at 27 March 2015 has been offset against borrowings as described in Note 23.

Credit risk in relation to trade and other receivablesThe Group has some concentration of credit risk due to the influence of large contracts on its business, albeit these contracts are directly, or indirectly (via the Group’s distribution partners) predominantly with Government agencies both in the UK and internationally. To offset this risk the Group has implemented policies that require appropriate credit checks on potential customers before sales are made. Customer orders are checked against pre-set requirements before acceptance and formal credit control procedures are applied subsequent to invoicing the customer. Letters of credit and payments in advance are also obtained from customers as appropriate.

The Group does not hold any security or other collateral in respect of its trade receivables and so was exposed to credit risk in respect of the net trade receivables balance of €40,511,000 (2014: €34,840,000). Management believe that the credit quality of trade receivables which are within the Group’s typical payment terms of between 30 and 90 days is good, with €9,438,000 (2014: €5,126,000) being overdue but not impaired at the period end, of which €1,081,000 was less than 30 days overdue (2014: €2,059,000) and €4,542,000 (2014: €3,128,000) was more than 120 days overdue.




21. Trade and other receivables (continued)An impairment provision is maintained in respect of amounts owed by specific customers which were more than 120 days overdue and where recoverability of the debt was considered sufficiently uncertain. While the Board will continue to pursue full settlement of the amounts outstanding under a Greek public safety contract, given the current economic situation in Greece, which makes the timing and value of any payments uncertain, the Group has provided €1,770,000, being the total financial exposure.

The movement in the impairment provision during the period and the prior period is shown below:

2015 2014 €’000 €’000

At the beginning of the period 1,004 780(Released) charged to the consolidated income statement (37) 346Provision against Greek public safety contract included in non-recurring items 1,770 –Utilised in period (667) (122)

At the end of the period 2,070 1,004

Foreign exchange risk in relation to trade receivablesThe carrying amounts of the Group’s trade receivables are denominated in the following currencies:

2015 2014 €’000 €’000

Euro 33,877 32,392Sterling 4,671 2,125US dollar 1,678 134Other 285 189

Total 40,511 34,840

The Group’s overall foreign exchange risk is explained in Note 31 “Financial instruments”.

22. Cash and cash equivalentsThe denomination and interest rate risk profile of the Group’s cash and cash equivalents is as follows:

2015 2014

Cash at Cash at bank and Short-term bank and Short-term in hand deposits Total in hand deposits Total €’000 €’000 €’000 €’000 €’000 €’000

Sterling 9 – 9 728 121 849US dollar 723 – 723 2,219 168 2,387Euro 1,235 9 1,244 2,625 2,018 4,643Other currencies 425 – 425 138 – 138

Total 2,392 9 2,401 5,710 2,307 8,017

Variable rate 0.4% 0.25% 0.4% 0.13%

The credit risk associated with cash and cash equivalents is mitigated by holding funds with counterparties with high credit ratings assigned by international credit rating agencies. Deposit accounts represent amounts placed on short-term deposit on the money markets through accounts held at AA2 to AA3-rated banks (2014: AA2 to AA3-rated). The effective interest rate on deposit accounts was 2.2% (2014: 0.1%). The Group’s overall interest rate risk is explained in Note 31 “Financial instruments”.


23. Borrowings and facilitiesBorrowings outstanding at the end of the period 2015 2014 €’000 €’000

Bank borrowings, all of which are denominated in Euros, are repayable as follows:Within one year 2,983 2,182In the second year 170 311In the third to fifth year inclusive 376 339

3,529 2,832Less: amounts due for settlement within 12 months (shown under current liabilities) (2,983) (2,182)

Amount due for settlement after 12 months 546 650

Bank borrowings comprise drawdowns under the Group’s Revolving Credit Facility, net of fees, of €1,131,000 (that bear interest at LIBOR plus 1.35%), and loans acquired with Sepura Systems GmbH and Portalify OY. Bank borrowings at Sepura Systems GmbH comprise an export loan of €1,500,000, which bears interest at 1.85% and a term loan of which €321,000 is outstanding, is repayable in monthly instalments of €11,000 and bears interest at 4.56%. Bank borrowings at Portalify OY comprise development funding loans of €539,000, which are repayable in annual instalments through to 2017 and bear interest at the Bank of Finland base rate less 3% (subject to a minimum of 1%), and €38,000 of other loans repayable monthly or quarterly that bear interest at rates ranging from 1% to 6%.

FacilitiesOn 2 October 2014 the Group increased its revolving credit facility to €35 million, with an extended life of five years from that date. The total costs associated with extending the facility were €150,000, which, together with the unamortised fees for the original facility of €96,000, were being amortised over the life of the facility. The facility was secured by a fixed and floating charge over the Group’s assets, and included covenants which were tested quarterly. The facility was refinanced after the end of the period as part of the acquisition of Teltronic described in Note 34.

24. Trade and other payables 2015 2014 €’000 €’000

Trade payables 30,721 21,039Other taxation and social security 1,747 896Accruals and deferred income 12,632 11,650Payments in advance 169 454

45,269 34,039

Non-currentDeferred income 3,348 4,826

Non-current deferred income relates to non-standard warranty package revenues, which are amortised over the underlying period of the warranty cover.

At the end of the period the Group had entered into supply agreements under which the Group has minimum contractual purchase commitments of €9,606,000 (2014: €9,899,000) during the three month period subsequent to the period end. No loss is expected to be incurred in respect of these contracts.

Foreign exchange risk in relation to trade payablesThe carrying amounts of the Group’s trade payables are denominated in the following currencies:

2015 2014 €’000 €’000

Euro 15,241 14,894Sterling 6,058 4,220US dollar 9,316 1,872Other currencies 106 53

Total 30,721 21,039

The Group’s overall foreign exchange risk is explained in Note 31 “Financial instruments”.




25. Provisions 2015 2014

Warranty Contingent Warranty Contingent provision consideration Total provision consideration Total €’000 €’000 €’000 €’000 €’000 €’000

At the beginning of the period 1,227 4,905 6,132 1,388 5,000 6,388Settled during the period – – – – (5,000) (5,000)Arising on acquisition of Fylde Micro Limitedas described in Note 6 – 4,413 4,413 – – –Subsequent release of part of the contingent consideration in respect of Fylde Micro Limited as described in Note 6 – (2,320) (2,320) – – –Arising on acquisition of Portalify OY – – – – 4,905 4,905Charged to the consolidated income statement 258 – 258 441 – 441Utilised in period (589) – (589) (602) – (602)

At the end of the period 896 6,998 7,894 1,227 4,905 6,132Less: amounts due for settlement within 12 months(shown under current liabilities) (483) (2,095) (2,578) (411) (905) (1,316)

Amount due for settlement after 12 months 413 4,903 5,316 816 4,000 4,816

Warranty provisionA warranty provision is made at the time of sale for the estimated cost of providing standard warranty cover which cannot be separated from the sale of the underlying goods. The provision is calculated based on historical information regarding the cost and frequency of repairs required to the Group’s products. Warranty cover is typically provided over a period of three to five years, depending on the product and territory concerned. The Group also has back-to-back warranties of between twelve and fifteen months with the majority of its sub-contract manufacturers to limit risk on liabilities arising on manufacturing defects.

Contingent considerationContingent consideration of up to €4.9 million and €2.1 million is payable to the previous owners of Portalify OY and Fylde Micro Limited respectively in the event that revenue and operating profit targets are met over a certain period. Management have considered that, based on current projections, all of this consideration will be payable and accordingly a provision for €7.0 million is recorded in the consolidated financial statements. In the event that either Portalify OY or Fylde Micro Limited fail to meet these targets then the amount of consideration payable will be reduced accordingly. 26. Share capitalAuthorised share capital 2015 2014

Number £ €’000 Number £ €’000

AuthorisedOrdinary shares of £0.0005 each 400,000,000 200,000 227 400,000,000 200,000 227

Issued share capitalDuring the period and the prior period the following changes occurred in the Company’s issued, allotted and fully paid share capital of Ordinary shares of £0.0005 each:

Share Share capital premium Number £ €’000 €’000

At 30 March 2013 137,318,580 68,659 78 –Exercise of options under employee share option schemes 25,517 13 – –Issue of shares to settle contingent consideration relating to the acquisition of 3T Communications AG 1,301,334 651 1 999

At 28 March 2014 and 27 March 2015 138,645,431 69,323 79 999


26. Share capital (continued)Treasury sharesDuring the period and the prior period the following changes occurred in the number of Ordinary shares held in Treasury:

Aggregate Employee consideration consideration Number €‘000 €‘000

At 30 March 2013 131,983Purchase of Ordinary Shares for Treasury 850,000 1,323 –Exercise of options under employee share option schemes (478,551) – 163

At 28 March 2014 503,432Purchase of Ordinary Shares for Treasury 2,880,867 5,397 –Exercise of options under employee share option schemes (2,164,200) – 193

At 27 March 2015 1,220,099

27. Share based paymentsShare options have been granted to Directors and employees under the following equity-settled schemes:

i. Sepura Limited 2002 Employees’ Share Option PlanIn July 2002 the Company established the Sepura Limited EMI share option plan that entitled employees to purchase shares in the entity under the Government’s Enterprise Management Initiative (“EMI”) scheme. The scheme was closed to new employees joining the Group after 1 October 2005 (save for one individual award made in July 2007).

ii. Long Term Incentive PlanThe Group launched its Long Term Incentive Plan for senior executives and management in July 2008. Annual awards have been made under the Long Term Incentive Plan which will vest in the event that certain performance targets are met. Further details are set out in the Directors’ Remuneration Report on pages 38 to 49.

iii. Employee SAYE schemesFollowing shareholder approval at the 2008 AGM the Company launched an all-employee SAYE scheme in September 2008. The fourth scheme matured during the period, and a further invitation to employees to join the scheme was issued in August 2014.

vi. Deferred bonus sharesDeferred shares are issued as part of the bonus arrangements for senior management. Further details are set out in the Directors’ Remuneration Report on pages 38 to 49.

The Group recognised an expense of €1,262,000 (2014: €664,000) in relation to equity-settled share based payments during the period.

Movements in the total number of share options outstanding and their relative weighted average exercise prices are as follows:

2015 2014

Weighted Weighted average average exercise exercise price in £ Number price in £ Number per share of options per share of options

At the beginning of the period 0.13 9,408,782 0.11 7,797,623Granted 0.35 2,621,769 0.19 2,700,029Forfeited and lapsed 0.03 (1,020,836) 0.12 (584,802)Exercised 0.07 (2,164,200) 0.27 (504,068)

At the end of the period 0.22 8,845,515 0.13 9,408,782

The weighted average share price at the date of exercise of the options exercised during the period was £1.45 (2014: £1.43).




27. Share based payments (continued)The outstanding options may be analysed as follows:

2015 2014

Weighted Weighted average average exercise exercise price in £ Number price in £ Number per share of options per share of options

Vested and exercisable 0.43 2,518 0.0000007 9,940Unvested 0.22 8,842,997 0.13 9,398,842

8,845,515 9,408,782

Share options outstanding at each reporting date have the following expiry date and exercise prices.

Exercise price 2015 2014Expiry date Scheme in £ per share Number Number

31 May 2014 2012 LTIP –1 – 2,537,1321 October 2014 2002 Employees’ Share Option Plan 0.0000007 – 9,2401 March 2015 2010 SAYE 5 year scheme 0.31 – 328,25030 April 2015 2012 SAYE 3 year scheme 0.43 2,518 135,15623 July 2015 2013 LTIP –1 2,699,666 2,782,7751 October 2015 2002 Employees’ Share Option Plan 0.0000007 – 7001 March 2016 2011 SAYE 5 year scheme 0.34 56,345 56,3451 March 2016 2013 SAYE 3 year scheme 0.54 811,159 811,15931 July 2016 2013 Deferred shares –1 118,779 118,77931 July 2016 2014 LTIP –1 1,905,885 1,957,7551 March 2017 2014 SAYE 3 year scheme 0.96 359,322 387,82230 April 2017 2012 SAYE 5 year scheme 0.43 14,348 21,52216 June 2017 2015 LTIP –1 1,440,867 –31 July 2017 2014 Deferred shares –1 82,510 –28 February 2018 2015 SAYE 3 year scheme 1.19 527,228 –1 March 2018 2013 SAYE 5 year scheme 0.54 127,773 127,77316 June 2018 2015 Additional LTIP –1 312,391 –1 March 2019 2014 SAYE 5 year scheme 0.96 134,374 134,37428 February 2020 2015 SAYE 5 year scheme 1.19 252,350 –

8,845,515 9,408,782

1 Not applicable for awards under the LTIP scheme or deferred shares forming part of the short-term bonus arrangements for senior management.

The weighted average remaining contractual life of the outstanding options was 1 year and 5 months (2014: 1 year and 4 months).


27. Share based payments (continued)The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on the trinomial model. The significant inputs into the model for each grant during the period and the prior period were:

2014 deferred 2015 Additional bonus LTIP 2015 LTIP 2015 SAYE 2015 SAYE 18 June 18 June 18 June 1 September 1 SeptemberDate of grant 2014 2013 2014 2014 2014

Share price at grant date £1.14 £1.45 £1.45 £1.42 £1.42Exercise price – – – £1.19 £1.19Number of employees 7 1 40 30 108Shares under option 88,933 312,391 1,440,867 252,350 527,228Vesting period 36 months 48 months 36 months 60 months 36 monthsExpected volatility (expressed as standard deviation of expected share price returns) 11% 11% 11% 11% 11%

Expected option life 36 months 48 months 36 months 63 months 39 monthsRisk free interest rate(based on national Government bonds) 3.0% 3.0% 3.0% 3.0% 3.0%Dividend yield 2.0% 2.0% 2.0% 2.0% 2.0%Fair value per option £1.14 £1.34 £1.36 £0.55 £0.52

2013 deferred bonus 2014 LTIP 2014 SAYE 2014 SAYE 10 June 24 July 29 July 29 JulyDate of grant 2013 2013 2013 2013

Share price at grant date £1.14 £1.35 £1.42 £1.42Exercise price – – £0.96 £0.96Number of employees 6 46 21 95Shares under option 118,779 2,040,304 134,374 406,572Vesting period 36 months 36 months 60 months 36 monthsExpected volatility (expressed as standard deviation of expected share price returns) 21% 21% 21% 21%

Expected option life 39 months 39 months 63 months 39 monthsRisk free interest rate(based on national Government bonds) 3.0% 3.0% 3.0% 3.0%Dividend yield 1.2% 1.2% 1.2% 1.2%Fair value per option £1.14 £1.34 £0.55 £0.52

The expected volatility for options granted during the period and prior period was determined by reference to the Company’s share price since Listing in August 2007. Share options are granted under a service condition. Such conditions are not taken into account in the fair value measurement of the services received.




28. Cash generated from operations 2015 2014 €’000 €’000

Profit before income tax 16,658 14,183Adjustments for:Depreciation charges 1,801 1,445Amortisation charges 8,428 9,588Equity settled share based payment charge 1,262 664Financial income (55) (6)Financial expense 484 250

Cash generated from operations before movements in working capital 28,578 26,124(Increase) decrease in inventories (1,397) 1,330(Increase) in trade and other receivables (8,730) (4,766)Increase in trade and other payables 9,405 3,919Decrease in provisions (2,651) (161)

Movements in working capital (3,373) 322

Cash generated from operations 25,205 26,446

Cash conversion 88% 101%

Cash conversion is calculated as cash generated from operations divided by cash generated from operations before movements in working capital.

29. Reconciliation of cash flows to movements in net funds (debt) 2015 2014 €’000 €’000

Net (decrease) in cash and cash equivalents (5,614) (575)Net (drawdown) repayment of borrowings (919) 463Arrangement fee 150 –

Changes in net funds (debt) resulting from cash flows (6,383) (112)Amortisation of debt issue costs (48) (48)Borrowings acquired with subsidiary undertaking – (1,098)

Net movements in net funds (debt) (6,431) (1,258)Net funds at the beginning of the period 5,305 6,605Foreign exchange (2) (42)

Net (debt) funds at the end of the period (1,128) 5,305

Net (debt) funds comprises:Cash and cash equivalents 2,401 8,017Gross borrowings – Amounts due within one year (3,031) (2,182)

– Amounts due after one year (720) (650)Unamortised loan arrangement fees 222 120

(1,128) 5,305


30. Operating lease commitmentsThe future aggregate minimum lease payments under non-cancellable operating leases are as follows:

2015 2014

Plant and Plant and machinery Property Total machinery Property Total €’000 €’000 €’000 €’000 €’000 €’000

No later than one year 6 1,093 1,099 6 970 976Later than one year and no later than five years – 6,589 6,589 – 1,546 1,546More than five years – 15,428 15,428 – – –

6 23,110 23,116 6 2,516 2,522

The Group rents its principal location at Radio House, St Andrew’s Road, Cambridge, under a lease which expires during the year ending 31 March 2017. The Group has exercised a break clause under the lease, terminating the lease with effect from 1 April 2016, and has signed a 15 year lease, expiring in July 2030, on new premises with an initial annual rental of £1,020,000 per annum, subject to a two year ‘‘rent-free’’ period. The Group has contracted to lease additional space at its new premises for ten years from July 2020, for a further £133,000 per annum. 31. Financial instrumentsDerivative financial instruments Current assets

2015 2014 €’000 €’000

Derivatives that are designated and effective as hedging instruments carried at fair value – cash flow hedgesForeign exchange derivative financial instruments (through equity) 2,516 403

The above foreign exchange derivative financial instruments, which mature at various dates during the coming year, represent aggregate sales of €34,932,000 and purchases of £27,412,000 (2014: €22,877,000 and £19,288,000 respectively).

€367,000 (2014: €5,000) was credited to the consolidated income statement in relation to ineffective hedges.

Financial assets and liabilitiesThe Group’s accounting policies for financial instruments have been applied to the items below:

2015 2014

Derivatives Derivatives Loans and used for Loans and used for receivables hedging receivables hedgingAssets as per balance sheet €’000 €’000 €’000 €’000

Trade and other receivables, excluding prepayments 43,443 – 35,256 –Derivative financial instruments – 2,516 – 403Cash and cash equivalents 2,401 – 8,017 –

45,844 2,516 43,273 403

2015 2014

Liabilities Liabilities at fair value Other at fair value Other through profit financial through profit financial and loss liabilities and loss liabilities Liabilities as per balance sheet €’000 €’000 €’000 €’000

Borrowings – (3,529) – (2,832)Trade and other payables, excluding non-financial instruments – (43,522) – (33,143)Contingent consideration (6,998) – – (33,143)

(6,998) (47,051) – (35,975)




31. Financial instruments (continued)Trade receivablesTrade receivables are recognised initially at fair value and subsequently re-measured at amortised cost using the effective interest rate method, less provision for impairment. A provision for impairment of trade receivables is established where there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, or default or delinquency in payments are considered to be indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of loss is recognised in the consolidated income statement within administrative expenses. When a trade receivable is irrecoverable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against the trade receivable impairment provision in the consolidated income statement. Details concerning the credit risk associated with trade receivables are set out in Note 21 above.

Derivative financial instruments and hedging activitiesDerivatives are initially recognised at fair value on the date that a derivative contract is entered into and are subsequently re-measured at their fair value. Details concerning derivative financial instruments are set out above.

Cash and cash equivalentsCash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Further details are set out in Note 22 above.

Fair value estimationThe fair value of foreign exchange contracts is determined by comparing contracted forward exchange rates with the prevailing exchange rates at the balance sheet date. As a result they fall into “Level 2” of the fair value hierarchy as defined in Paragraph 27A of IFRS 7 “Financial Instruments: Disclosures”. The nominal value less impairment provision of trade receivables and payables approximates to their fair value. The book value of all other financial assets and liabilities approximate to fair value.

Financial risk managementThe Group’s operations expose it to financial risks that include the effects of changes in certain currency rates, credit risk and interest rate cash flow and fair value risk. The Group has in place risk management procedures that seek to limit the adverse effects on the financial performance of the Group by monitoring the movements in relevant currency and interest rates and a credit control procedure to minimise the risk of customer debt default.

The Board of Directors sets the policies for liquidity, credit and interest rate cash flow and fair value risk, and these are implemented by the Group’s finance department which has a procedures manual that sets out specific guidelines for managing currency, interest and credit risk. In circumstances where it is appropriate financial instruments are used to manage those risks.

Market risk managementThe Group is not exposed to market risks other than currency and interest rate risks.


31. Financial instruments (continued)Foreign exchange riskCurrency denominated bank accounts are maintained to provide some cover for timing differences, and a currency exchange hedging policy has been agreed by the Board of Directors. The Group invoices its customers in Sterling pounds (GBP), US dollars (US$) or Euros (€), and the majority of the Group’s suppliers also trade in these currencies. The exposure to other currencies is not material to the Group’s operations.

i. SterlingThe Group has a partial natural hedge as operating expenses are primarily denominated in Sterling and this exposure is partly offset by Sterling receivables from the Group’s UK business. However, there remains a net exposure and the Board has agreed a policy of taking out forward contracts on a rolling twelve month basis to hedge the forecast monthly Sterling operating costs.

The Group had the following current assets and liabilities denominated in Sterling: 2015 2014 £’000 £’000

Outstanding forward contracts (27,413) (19,228)

Trade receivables denominated in GBP 3,419 1,756

Sundry receivables denominated in GBP 68 64

Cash balances denominated in GBP 7 702

Trade payables denominated in GBP (4,435) (3,488)

Other payables denominated in GBP (5,735) (6,950)

Percentage of net current assets not matched by forward contracts – –

The period-end rate and the average rate for the period were as follows:

2015 2014

Period-end rate €1.37/£1 €1.21/£1

Average rate for the period €1.27/£1 €1.18/£1

If Sterling had weakened or strengthened by 10% against the Euro then the following additional foreign exchange gains (losses) would have been reported in the consolidated income statement or consolidated statement of comprehensive income:

2015 2014 £’000 £’000

GBP weakens (1,380) (850)

GBP strengthens 1,518 935




31. Financial instruments (continued)ii. US DollarPurchases and receipts in US dollars are dealt with through the Group’s US dollar current account, with further purchases of currency to meet US dollar denominated liabilities being made as necessary on a spot basis. Any significant US dollar revenues or purchases are hedged on order confirmation.

The Group had the following current assets and liabilities denominated in US dollars:

2015 2014 $’000 $’000

Outstanding forward contracts – –

Trade receivables denominated in US dollars 1,787 184

Cash balances denominated in US dollars 820 4,434

Trade payables denominated in US dollars (10,417) (2,740)

Percentage of net current assets not matched by forward contracts 100% 100%

The period-end rate and the average rate for the period were as follows:

2015 2014

Period-end rate $1.07/€1 $1.38/€1

Average rate for the period $1.27/€1 $1.34/€1

If the US dollar had weakened or strengthened by 10% against the Euro then the following additional foreign exchange gains (losses) would have been reported in the consolidated income statement or consolidated statement of comprehensive income:

2015 2014 €’000 €’000

US dollar weakens 730 (235)

US dollar strengthens (803) 259

Liquidity riskPrudent liquidity risk management implies maintaining sufficient cash and short-term deposits and the availability of funding through an adequate amount of committed credit facilities. Accordingly on 2 October 2014 the Group increased its revolving credit facility to €35 million, with an extended life of five years from that date. The table below analyses the Group’s financial liabilities, which will be settled on a net basis, into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Less than Between Between one year 1 & 2 years 2 & 5 years €’000 €’000 €’000

At 27 March 2015Borrowings 3,068 220 507Trade and other payables 45,269 – –

At 28 March 2014Borrowings 2,241 332 337Trade and other payables 34,039 – –

Borrowings are Euro-denominated.


31. Financial instruments (continued)Cash flow and fair value interest rate riskThe Group had interest bearing cash deposits of €9,000 (2014: €2,307,000).

The Group’s outstanding borrowings comprise €1,821,000 (2014: €1,966,000) which bears interest at fixed rates and €1,930,000 (2014: €866,000) which bears interest at floating rates as set out in Note 23 above, exposing the Group to cash flow interest rate risk. A change of 1% in interest rates at the balance sheet date, applied to borrowings outstanding at that point in time, would have had a €20,000 impact on the Group’s reported results (2014: €20,000).

Off-settingCash balances of €6,706,000 (2014: €Nil) have been off-set against bank overdrafts where there is a legal right of set-off.

Capital risk managementThe Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The capital structure of the Group comprises borrowings (as disclosed in Note 23), cash and cash equivalents (as disclosed in Note 22) and the equity attributable to equity holders in the parent company (comprising the issued share capital, share premium, other reserves and retained earnings disclosed in the Consolidated Statement of Changes in Equity). At 27 March 2015 the Group had net assets of €84,622,000 (2014: €75,395,000) which included net debt of €1,128,000 (2014: Net funds of €5,305,000). In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, borrow additional funds or sell assets to reduce debt.

The Group is not subject to externally imposed capital requirements. The Group is subject to certain covenant restrictions under its revolving credit facility. The Group did not breach any of these covenants during the period. 32. Contingent liabilitiesThe Group has entered into guarantee and performance bond arrangements with its customers totalling approximately €2.4 million (2014: €2.1 million). The Group is also subject to disputes with suppliers during the ordinary course of business. Provision is made for any amounts that the Directors consider will probably become payable under such arrangements.

33. Ultimate controlling partyThe Directors do not consider that Sepura plc has an ultimate controlling party, as no individual shareholder is able to exercise control over the Company.




34. Post balance sheet eventOn 1 May 2015 the Company announced the proposed acquisition of Teltronic SAU for aggregate consideration of €127.5 million, to be funded through a firm placing and offer of 46,538,461 Ordinary shares in the Company at 130p per share and a new debt facility of €120 million. The acquisition was approved by shareholders on 21 May 2015 and completed on 27 May 2015.

The preliminary provisional book and fair values of the assets and liabilities acquired are as follows:

€’000

Intangible assets 7,394Property, plant and equipment 4,540Non-current financial assets 3,055Deferred tax asset 7,067Inventories 7,889Trade and other receivables 37,702Taxes and government grants receivable 2,589Other current assets 1,201Cash and cash equivalents 2,776Borrowings (15,786)Derivative financial instruments (614)Trade and other payables (22,155)Provisions (4,643)Tax liabilities (2,142)

Net assets acquired 28,873Goodwill and purchased intangibles arising on acquisition 98,627

Purchase consideration 127,500

The purchase price allocation has not yet been finalised given that the acquisition was completed on 27 May 2015. This exercise is expected to be completed during the first half of the current financial year and the appropriate amount will be recorded as purchased intangibles, with the balance being attributable to goodwill.

The goodwill arising on the acquisition is attributable to the value of synergies arising from the acquisition, Teltronic’s assembled workforce and future profits arising from access to new markets. None of the goodwill on this acquisition is expected to be deductible for tax. Acquisition costs are expected to be approximately €2,500,000, of which €864,000 have been charged to administrative expenses in the consolidated income statement for the year ended 27 March 2015 and the remainder will be charged to administrative expenses in the consolidated income statement for the year ending 1 April 2016.


Independent Auditors’ Report to the Members of Sepura plc

Report on the parent company financial statements

Our opinionIn our opinion, Sepura plc’s parent company financial statements (the “financial statements”):

• give a true and fair view of the state of the parent company’s affairs as at 27 March 2015;

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

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

What we have auditedSepura plc’s financial statements comprise:

• the Company Balance Sheet as at 27 March 2015; and

• the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

Certain required disclosures have been presented elsewhere in the Annual Report & Accounts 2015 (the “Annual Report”), rather than in the notes to the financial statements. These are cross-referenced from the financial statements and are identified as audited.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Other required reporting

Consistency of other informationCompanies Act 2006 opinionIn our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

ISAs (UK & Ireland) reportingUnder International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”) we are required to report to you if, in our opinion, information in the Annual Report is:

• materially inconsistent with the information in the audited financial statements; or

• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the company acquired in the course of performing our audit; or

• otherwise misleading.

We have no exceptions to report arising from this responsibility.

Adequacy of accounting records and information and explanations receivedUnder the Companies Act 2006 we are required to report to you if, in our opinion:

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

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

• the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Directors’ remunerationDirectors’ remuneration report - Companies Act 2006 opinionIn our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

Other Companies Act 2006 reportingUnder the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

Company Financial Statem


Responsibilities for the financial statements and the audit

Our responsibilities and those of the directorsAs explained more fully in the Statement of Directors' Responsibilities set out on page 53, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What an audit of financial statements involvesWe conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:

• whether the accounting policies are appropriate to the company’s circumstances and have been consistently applied and adequately disclosed;

• the reasonableness of significant accounting estimates made by the directors; and

• the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Other matter

We have reported separately on the group financial statements of Sepura plc for the year ended 27 March 2015.

Stuart Newman (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsCambridge6 July 2015


2015 2014 Note €’000 €’000

Fixed assetsTangible assets 4 11,072 7,761Intangible assets 5 – –Investments 6 25,013 18,967

36,085 26,728Current assetsStock 7 10,604 8,337Current asset investments 8 – 2,306Debtors (including €8,355,000 (2014: €10,361,000)due after more than one year) 9 51,212 46,329Derivative financial instruments 11 2,516 403Cash at bank and in hand 806 1,801

65,138 59,176Creditors: amounts falling due within one year 12 (41,867) (30,019)

Net current assets 23,271 29,157

Total assets less current liabilities 59,356 55,885Creditors: amounts falling due after more than one year 13 (3,348) (4,826)Provision for liabilities 14 (7,894) (6,132)

Net assets 48,114 44,927

Capital and reservesCalled up share capital 15 79 79Share premium 15 999 999Cumulative translation reserve (275) (46)Profit and loss account 17 47,311 43,895

Total shareholders’ funds 18 48,114 44,927

The parent company financial statements on pages 98 to 107 were approved by the Board and authorised for issue on 6 July 2015 and are signed on its behalf by:

Gordon Watling Steve Chamberlain Chief Executive Officer Chief Financial Officer

The accompanying notes are an integral part of these financial statements.

Company Balance SheetOf Sepura plc, Company number 04353801, at 27 March 2015



1. Principal accounting policiesBasis of accountingThe financial statements have been prepared on the going concern basis, in accordance with the Companies Act 2006 and in accordance with applicable Accounting Standards in the United Kingdom. A summary of the more important accounting policies, which have been reviewed by the Board of Directors in accordance with Financial Reporting Standard (“FRS”) 18, “Accounting policies”, and have been applied consistently, is set out below.

The Company has prepared these financial statements for the period to 27 March 2015, being the nearest Friday to the end of the period.

The financial statements are prepared in accordance with the historical cost convention, except for certain financial instruments that have been measured at fair value.

Turnover and warranty costsTurnover represents the invoiced amount of goods sold excluding value added tax. For contracts which do not involve complex long-term software and hardware development, revenue is recognised on despatch or upon formal acknowledgement from the customer that title has passed but they wish the goods to be stored at the Group’s premises. Turnover also includes warranty income, as appropriate.

Revenue and cost of sales from contracts which do involve complex long-term software and hardware development are recognised on the percentage of completion basis, based on costs incurred to date when the outcome of the contract can be estimated reliably. The criteria for this are that total contract revenue and the costs to complete the contract can be estimated reliably, it is probable that the economic benefits associated with the contract will flow to the Company, and that the stage of contract completion can be measured. When the Company is not able to meet those conditions, the policy is to recognise revenue equal to costs incurred to date, to the extent that such costs are expected to be recovered. Expected losses are recognised in full at the point at which they are anticipated. If the amount of revenue recognised exceeds the amounts invoiced to customers, the excess amount is recorded in amounts recoverable on contracts within debtors. If the amounts invoiced exceed the revenue recognised, the excess amount is recorded as deferred revenue or payments in advance.

In a multi-element arrangement some of the elements, either hardware or software may remain undelivered or incomplete. Revenue may be recognised on the fair value of the elements delivered providing the following conditions are fulfilled:

• If the element of the product delivered has value to the customer on a stand-alone basis and is thus a separable element from the undelivered element;

• If the fair value can be reliably attributed to the undelivered element. (In the event of bundling where undelivered components may not have a separate invoiced sales price then the fair value of the revenue deferred can be calculated by comparing the underlying product list price of each element of the bundle to the overall bundle price); and

• If the delivery of the undelivered element is probable and under the control of the company i.e. the technical risk attached to the delivery of the component is acceptable.

If any of these conditions are not met then all revenue under the arrangement is deferred until the contract is complete or uncertainty over any of these conditions is removed.

In accordance with the requirements of FRS 5 Application Note G “Reporting the substance of transactions: Revenue recognition”, the Company assesses whether any of its contracts contain elements which operate independently of other contractual elements and which should, therefore, be ‘unbundled’ and accounted for separately. The Company offers as standard to all customers a product warranty package, which is typically for a period of three to five years depending on the product and territory concerned. Generally, in the case of product warranty packages which are offered as standard with all products, are not separately priced, and are offered for periods in line with the Company’s standard terms of supply at the time of sale, such standard warranty packages are not considered to be an element capable of ‘unbundling’. In such cases, provision is made at the time of sale for the estimated cost of providing the warranty cover based on historical information on the cost and frequency of repairs required to the Company’s products. The Company also has back-to-back warranties of between twelve and fifteen months with the majority of its sub-contract manufacturers to limit risk on product warranties. Amounts due from manufacturers under back-to-back warranties are not recognised until the manufacturer has confirmed a reimbursement will be made.

In certain cases “enhanced” warranty packages, of a longer than standard period, are sold to customers as separate products. In such cases the fair value of the revenue associated with the warranty cover is amortised over the underlying period of the warranty cover. The fair value of the revenue is determined by the Directors based on market information, including the sales price when enhanced warranties are sold on a stand-alone basis.

Notes to the Parent Company Financial StatementsFor the period ended 27 March 2015


1. Principal accounting policies (continued)Research and development expenditureAll ongoing research and development expenditure is written off in the period in which it is incurred.

Investments in subsidiary undertakingsInvestments in subsidiary undertakings are stated at cost less provision for impairment, if any.

Tangible fixed assetsThe cost of tangible fixed assets is their purchase cost, together with any incidental costs of acquisition including, where relevant, the cost of subcontractors, direct labour and a proportion of attributable overheads. Tangible fixed assets are carried at cost less accumulated depreciation and are depreciated from the date they come into use. Depreciation is provided to write off the cost less the estimated residual value of tangible fixed assets. Depreciation for certain manufacturing plant and machinery is calculated by reference to the number of units produced, and for all other assets by equal annual instalments over their estimated useful economic lives as follows:

• Plant and machinery 3-7 years• IT equipment 3-5 years

Provision is made against the carrying value of tangible fixed assets where impairment is deemed to have occurred.

No depreciation is charged on assets in the course of construction as their useful economic life has yet to commence. On completion, the assets are transferred to the appropriate class of tangible fixed assets and depreciation is charged at the above rates.

Intangible assetsThe Company purchases licences to exploit third-party intellectual property rights. Licences are recorded at the historical cost to acquire the licence less accumulated amortisation and impairment losses, and are amortised on a straight-line basis over the life of the licence.

LeasesFinance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term.

Stocks and work in progressStocks and work in progress are stated at the lower of cost and net realisable value. Cost is determined on a first in first out basis and includes transport and handling costs. Where necessary, provision is made for obsolete, slow moving and defective stocks.

Current asset investmentsShort-term bank deposits are stated at cost less provision for impairment, if any.

Cash flowThe Company has taken advantage of the exemption in FRS 1 (Revised 1996) “Cash Flow Statements” which provides that where a company is a member of a group and a consolidated cash flow statement is published, the company does not have to prepare a cash flow statement.

Deferred taxationProvision is made for deferred taxation, using full provision accounting when an event has taken place by the balance sheet date which gives rise to an increased or reduced tax liability in the future in accordance with FRS 19, “Deferred taxation”. Deferred tax assets and liabilities are not discounted.

Pension scheme arrangementsThe Company contributes to defined contribution plans for employees. The Company contributes to these schemes based upon various fixed percentages of employee compensation and such contributions are expensed as incurred.

The Company provides no other post-retirement benefits to its employees.

Notes to the Parent Company Financial Statements continuedFor the period ended 27 March 2015



1. Principal accounting policies (continued)Derivative financial instruments and hedging activitiesThe Company has taken advantage of the exemption under FRS 29 “Financial Instruments: Disclosures” for parent company financial statements as the disclosures in respect of the Company are included in the consolidated financial statements.

Derivatives are initially accounted for at fair value on the date a derivative contract is entered into, and are subsequently remeasured at their fair value at each reporting date. The gain or loss on remeasurement is taken to the profit and loss account except where the derivative is a designated cash flow hedging instrument. The accounting treatment of derivatives classified as hedges depends on their designation, which occurs on the date that the derivative contract is committed to. The Company designates derivatives as either:

(a) hedges of the fair value of an asset or liability (“fair value hedges”);(b) hedges of the income or cost of a highly probable forecast transaction or commitment (“cash flow hedges”); or(c) hedges of a net investment in a foreign operation (“net investment hedges”).

In order to qualify for hedge accounting, the Company is required to document in advance the relationship between the item being hedged and the hedging instrument. The Company is also required to document and demonstrate an assessment of the relationship between the hedged item and the hedging instrument, which shows that the hedge will be highly effective on an ongoing basis. This effectiveness testing is performed at each period end to ensure that the hedge remains highly effective.

Gains or losses on fair value hedges that are regarded as highly effective are recorded in the profit and loss account with the gain or loss on the hedged item attributable to the hedged risk.

Gains or losses on cash flow hedges that are regarded as highly effective are recognised in equity. Where the forecast transaction results in a financial asset or liability, only gains or losses previously recognised in equity are reclassified to profit or loss in the same period as the asset or liability affects profit or loss. Where the forecasted transaction or commitment results in a non-financial asset or non-financial liability, any gains or losses previously deferred in equity are included in the cost of the related asset or liability. If the forecasted transaction or commitment results in future income or expenditure, gains or losses deferred in equity are transferred to the profit and loss account in the same period as the underlying income or expenditure. The ineffective portions of the gain or loss on the hedging instrument are recognised in the profit and loss account.

For the portion of hedges deemed ineffective or transactions that do not qualify for hedge accounting under FRS 26, any change in assets or liabilities is recognised immediately in the profit and loss account. Where a hedge no longer meets the effectiveness criteria, any gains or losses deferred in equity are only transferred to the profit and loss account when the committed or forecasted transaction is recognised in the profit and loss account. However, where an entity applied cash flow hedge accounting for a forecasted or committed transaction that is no longer expected to occur, the cumulative gain or loss that has been recorded in equity is transferred to the profit and loss account. When a hedging instrument expires or is sold, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the profit and loss account.

Foreign currenciesTransactions denominated in foreign currencies have been translated into Euros at actual rates of exchange ruling at the date of the transactions, except to the extent that these transactions were covered by forward foreign exchange contracts. Monetary assets and liabilities denominated in foreign currencies have been translated at rates ruling at the balance sheet date, except to the extent that the assets and liabilities are covered by forward foreign exchange contracts. All exchange gains and losses are taken to the profit and loss account in the period in which they arise. Transactions, assets and liabilities covered by forward foreign currency contracts are translated at the forward foreign currency contract rate.

Share optionsThe Company issues equity-settled share-based payments to employees and Directors of the Company. In accordance with FRS 20 “Share-based payment”, equity-settled share-based payments are measured at fair value at the date of grant. Fair value is measured by use of the trinomial pricing model. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of the number of shares that will eventually vest. The corresponding credit is recognised in reserves.


2. Profit for the financial periodAs permitted by Section 408 of the Companies Act 2006, the parent company’s profit and loss account has not been included in these financial statements. The parent company’s profit after taxation was €9,349,000 (2014: €7,101,000). The audit fee for the Company was €90,000 (2014: €72,000).

The average number of employees of the Company during the period was 301 (2014: 289) and total staff costs, excluding charges for share options, were €24.5 million (2014: €23.8 million). Information on the remuneration of Directors is given in those sections of the Directors’ Remuneration Report described as having been audited and Note 11 to the Company’s consolidated financial statements, and those elements required by the Companies Act 2006 and the Financial Conduct Authority form part of these financial statements.

3. DividendsThe Directors have proposed a final dividend in respect of the financial period ended 27 March 2015 of 1.71p per Ordinary share, totalling approximately €4.3 million based on the Ordinary shares in issue at the date of this document. The proposed dividend is subject to approval by shareholders and has not been included as a liability in these financial statements.

During the current and prior periods the Company paid the following dividends:

2015 2014 €'000 €'000

FY15 Interim dividend of 0.69p per Ordinary share 1,255 –FY14 Final dividend of 1.41p per Ordinary share 2,431 –FY14 Interim dividend of 0.59p per Ordinary share – 966FY13 Final dividend of 1.17p per Ordinary share – 2,054

3,686 3,020

4. Tangible assets Assets under Plant and IT construction machinery equipment Total €’000 €’000 €’000 €’000

Cost At 29 March 2014 1,967 12,633 5,012 19,612Foreign exchange – 63 – 63Transfers (526) 524 2 –Additions 1,855 1,799 1,295 4,949

At 27 March 2015 3,296 15,019 6,309 24,624

Accumulated depreciation At 29 March 2014 – 8,518 3,333 11,851Foreign exchange – 11 – 11Charge for the period – 1,269 421 1,690

At 27 March 2015 – 9,798 3,754 13,552

Net book value at 27 March 2015 3,296 5,221 2,555 11,072

Net book value at 28 March 2014 1,967 4,115 1,679 7,761

There was no capital expenditure at the end of either period which had been contracted for prior to the end of the period but not provided for in the financial statements.




5. Intangible assets Licences €’000

Cost At 29 March 2014 1,985Additions –

At 27 March 2015 1,985

Accumulated amortisationAt 29 March 2014 1,985Charge for the period –

At 27 March 2015 1,985

Net book value at 27 March 2015 –

Net book value at 28 March 2014 –

6. Fixed asset investments 2015 2014 €’000 €’000

Shares in Group undertakingsAt the beginning of the period 18,967 13,052Acquisition of Fylde Micro Limited(see Note 6 to the Company’s consolidated financial statements) 6,044 –Acquisition of Portalify OY – 5,905Investment in newly-incorporated subsidiaries 2 10


The Company owns the entire issued share capital of the following subsidiary undertakings, whose results are included within the consolidated financial statements of Sepura plc for the period ended 27 March 2015:

Proportion of nominal Country of value of shares held PrincipalName of undertaking incorporation Description of shares held by the Group activity

Sepura Systems GmbH Austria 8,400 ordinary shares of €10 each 100% Trading

Fylde Micro Limited England & Wales 1,331 A ordinary shares of £0.1 each 100% Trading

Portalify OY Finland 17,991,795 ordinary shares of €0.01 each 100% Trading

Smashlet OY1 Finland 8,000 ordinary shares of €1 each 100% Dormant

Sepura Deutschland GmbH Germany One ordinary share of €250 and one ordinary share of €24,750 100% Sales support

Sepura Seviços de Brazil Six thousand ordinary shares Intermediação e Marketing em of R$1,000 each 100% Sales support Equipamentos de Radio Ltda1

Sepura LLC The State of Delaware, United States of America One ordinary share of $1 100% Sales support

Sepura Mexico, S.A. de C.V. Mexico 50,000 shares of 1 Peso each 100% Sales support

Sepura Overseas Limited England & Wales One hundred ordinary shares Holding of £1 each 100% company

1 Held indirectly.

The Directors believe that the carrying value of the investments is supported by their underlying net assets.


7. Stock 2015 2014 €’000 €’000

Raw materials 2,196 1,800Work in progress 2,182 1,526Finished goods and goods for resale 6,226 5,011

10,604 8,337

There is no material difference between the balance sheet value of stock and its replacement cost.

8. Current asset investmentsCurrent asset investments of €Nil (2014: €2,306,000) comprised short-term bank deposits, which are classified as cash in the Group’s financial statements which are prepared under IFRS.

9. Debtors 2015 2014 €’000 €’000

Amounts falling due within one year: Trade debtors 35,788 32,574Amounts owed by Group undertakings 686 788Other debtors 2,460 259Deferred tax asset, including €8,355,000 (2014: €10,361,000) due after one year (see Note 10) 10,638 11,387Prepayments and accrued income 1,640 1,321

51,212 46,329

10. Deferred taxThe Company’s deferred tax assets relate to timing differences in respect of: Cash-flow Tangible Equity-settled hedges fixed assets Losses share options Net €’000 €’000 €’000 €’000 €’000

At 29 March 2014 (85) 1,300 9,767 405 11,387Charged (credited) to the profit and loss account – – (596) 265 (331)Recognised in equity (418) – – – (418)

At 27 March 2015 (503) 1,300 9,171 670 10,638

Deferred tax liabilities have been offset against deferred tax assets as there is a legally enforceable right to offset current tax assets and current tax liabilities within the same fiscal jurisdiction. There was no unprovided deferred taxation at the end of either period.

The Company’s deferred tax asset has been recognised as, based on historical performance and future budgets, the Directors believe that it is probable that there will be sufficient taxable profits against which the assets will reverse. The net deferred tax asset has been classified within debtors in Note 9 above.

The Finance Act 2013, which provides for reductions in the main rate of corporation tax from 23% to 21% effective from 1 April 2014 and to 20% effective from 1 April 2015, was substantively enacted on 2 July 2013. These rate reductions have been reflected in the calculation of deferred tax at the balance sheet date.




11. Derivative financial instrumentsDerivative financial instruments comprise foreign exchange forward contracts. Further details are given in Note 31 to the Company’s consolidated financial statements.

12. Creditors: amounts falling due within one year 2015 2014 €’000 €’000

Bank loans and overdrafts 914 –Trade creditors 29,346 18,658Corporation tax payable 204 181Other taxation and social security 1,962 1,007Accruals and deferred income 9,441 10,173

41,867 30,019

13. Creditors: amounts falling due after more than one year 2015 2014 €’000 €’000

Accruals and deferred income 3,348 4,826

14. Provision for liabilities 2015 2014

Warranty Contingent Warranty Contingent provision consideration Total provision consideration Total €’000 €’000 €’000 €’000 €’000 €’000

At the beginning of the period 1,227 4,905 6,132 1,388 5,000 6,388Settled during the period – – – – (5,000) (5,000)Arising on acquisition of Fylde Micro Limitedas described in Note 6 to the Company’s consolidated financial statements – 4,413 4,413 – – –Subsequent release of part of the contingent consideration in respect of Fylde Micro Limited as described in Note 6 to the Company’s consolidated financial statements – (2,320) (2,320) – – –Arising on acquisition of Portalify OY – – – – 4,905 4,905Charged to the profit and loss account 258 – 258 441 – 441Utilised in period (589) – (589) (602) – (602)

At the end of the period 896 6,998 7,894 1,227 4,905 6,132

Warranty provisionThe warranty provision is an estimate of the future costs of rectifying potential defects in products shipped to customers whilst they are under warranty cover. Warranty cover is typically provided over a period of three to five years, depending on the product and territory concerned. The Company also has back-to-back warranties of between twelve and fifteen months with the majority of its sub-contract manufacturers to limit risk on liabilities arising on manufacturing defects.

Contingent considerationContingent consideration of up to €4.9 million and €2.1 million is payable to the previous owners of Portalify OY and Fylde Micro Limited respectively in the event that revenue and operating profit targets are met over a certain period. Management have considered that, based on current projections, all of this consideration will be payable and accordingly a provision for €7.0 million is recorded in the consolidated financial statements. In the event that either Portalify OY or Fylde Micro Limited fail to meet these targets then the amount of consideration payable will be reduced accordingly.


15. Called up share capitalAuthorised share capital 2015 2014

Number £ €’000 Number £ €’000

Authorised Ordinary shares of £0.0005 each 400,000,000 200,000 227 400,000,000 200,000 227

Issued share capitalDuring the period and the prior period the following changes occurred in the Company’s issued, allotted and fully paid share capital of Ordinary shares of £0.0005 each:

Share Share capital premium Number £ €’000 €’000

At 30 March 2013 137,318,580 68,659 78 –Exercise of options under employee share option schemes 25,517 13 – –Issue of shares to settle contingent consideration relating to the acquisition of 3T Communications AG 1,301,334 651 1 999

At 28 March 2014 and 27 March 2015 138,645,431 69,323 79 999

Treasury sharesDuring the period and the prior period the following changes occurred in the number of Ordinary shares held in Treasury:

Aggregate Employee consideration consideration Number €’000 €’000

At 30 March 2013 131,983 Purchase of Ordinary Shares for Treasury 850,000 1,323 –Exercise of options under employee share option schemes (478,551) – 163

At 28 March 2014 503,432 Purchase of Ordinary Shares for Treasury 2,880,867 5,397 –Exercise of options under employee share option schemes (2,164,200) – 193

At 27 March 2015 1,220,099

16. Share optionsInformation on share options which have been granted to Directors and employees is given in Note 27 to the Company’s consolidated financial statements.

17. Profit and loss account 2015 2014 €’000 €’000

At the beginning of the period 43,895 39,185Profit for the financial period 9,349 7,101Dividends paid (3,686) (3,020)Employee share option schemes: value of employee services 1,262 664Cash flow hedges, net of taxation 1,695 1,125Treasury shares – purchase of own shares (5,397) (1,323)

– issue of shares to settle employee share options 193 163





18. Reconciliation of movements in shareholders’ funds 2015 2014 €’000 €’000

Profit for the financial period 9,349 7,101Dividends paid (3,686) (3,020)Employee share option schemes: value of employee services 1,262 664Cash flow hedges, net of taxation 1,695 1,125Issue of shares – 1,000Treasury shares – purchase of own shares (5,397) (1,323)

– issue of shares to settle employee share options 193 163Foreign exchange (229) (46)

Net additions to shareholders’ funds 3,187 5,664Opening shareholders’ funds 44,927 39,263

Closing shareholders’ funds 48,114 44,927

19. Operating lease commitmentsAt 27 March 2015 the Company had annual commitments under non-cancellable operating leases as follows:

2015 2014

Other Other Land and operating Land and operating buildings leases buildings leases €’000 €’000 €’000 €’000

Expiring within one year 1,078 6 20 6Expiring between two to five years inclusive – – 912 –

1,078 6 932 6

20. Bank facilitiesOn 2 October 2014 the Group increased its revolving credit facility to €35 million, with an extended life of five years from that date. The total costs associated with extending the facility were €150,000, which, together with the unamortised fees for the original facility of €96,000, were being amortised over the life of the facility. The facility was secured by a fixed and floating charge over the Group’s assets, and included covenants which were tested quarterly. The facility was refinanced after the end of the period as part of the acquisition of Teltronic described in Note 34 to the Company’s consolidated financial statements.

21. Contingent liabilitiesThe Company has entered into guarantee and performance bond arrangements with its customers totalling approximately €1.0 million (2014: €3.0 million). The Company is also subject to disputes with suppliers during the ordinary course of business. Provision is made for any amounts that the Directors consider will probably become payable under such arrangements.

Under sections 394A and 479A of the Companies Act 2006, the Company has guaranteed all of the outstanding liabilities of Fylde Micro Limited as at 27 March 2015, which totalled €292,000, until they are satisfied in full. The guarantee is enforceable against the Company by any person to whom any such liability is due.

22. Related party transactionsThe Company has taken advantage of the exemption available to parent companies under FRS 8, “Related party disclosures” not to disclose transactions and balances with wholly owned subsidiary undertakings.

23. Ultimate controlling partyThe Directors do not consider that Sepura plc has an ultimate controlling party, as no individual shareholder is able to exercise control over the Company.

24. Post balance sheet eventOn 27 May 2015 the Company announced that it had completed the acquisition of Teltronic SAU. Further details are given in Note 34 to the Company’s consolidated financial statements.


Shareholder Information

Share services and informationEquiniti, the Company’s Registrars, provide a range of shareholder information on-line. You can check your holding and find practical help on transferring shares and updating your personal details at www.shareview.co.uk. Equiniti may also be contacted on 0871 384 2030 (calls to this number are charged at 8p per minute plus network extras), or by writing to Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA. Lines are open 8.30am to 5.30pm, Monday to Friday. Callers from outside the UK should dial +44 (0) 121 415 7047.

Share dealing serviceAn internet and telephone share dealing service is operated by Equiniti, enabling shareholders to buy and sell Sepura plc Ordinary shares on the London Stock Exchange. Shareholders who are interested in using these services should visit www.shareview.co.uk or telephone 0845 603 7037.

ShareGiftShareholders, who hold only a small number of shares, where dealing costs make it uneconomic to sell them, may wish to consider donating them to charity though ShareGift, a registered charity administered by The Orr Mackintosh Foundation. The relevant share transfer form can be obtained from their website www.sharegift.org or by writing to ShareGift, 5 Lower Grosvenor Place, London SW1W 0EJ, or by telephoning +44 (0) 20 7828 1151.

Dividends/payments to mandated accounts/Dividend Reinvestment PlanWe recommend to you that you have all your future dividends paid direct into your nominated bank or building society account via the Bankers’ Automated Clearing System (BACS). This service provides you with cleared funds on the dividend payment date, is more secure than sending a cheque by post and avoids the inconvenience of paying each dividend by cheque. A tax voucher will still be sent to your registered address.

You can take advantage of this convenient and popular method of payment by visiting www.shareview.co.uk, or by completing the dividend mandate form that will be sent to you with your dividend cheque on 9 October 2015. Alternatively, you can contact the Company’s Registrar, Equiniti, by telephone 0871 384 2030 or by writing to them at Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA. Lines are open 8.30am to 5.30pm, Monday to Friday. Callers from outside the UK should dial +44 (0) 121 415 7047. Please quote your Shareholder Reference Number as detailed on your dividend tax voucher or share certificate.

Shareholders have the opportunity of using their cash dividend payments to increase their shareholding in Sepura plc through the Dividend Reinvestment Plan (“DRIP”). Participation in the DRIP will mean that in future all your dividends will be reinvested in Sepura plc shares, which will be purchased on your behalf in the market on or as soon as practicable after the relevant dividend payment. An explanatory booklet, which also contains the terms and conditions of the DRIP, and an application form will be sent to you on request. If you wish to join the DRIP, please read the terms and conditions carefully and return the completed application form in the reply paid envelope provided. (Alternatively, you can access the details and download the application form from the investor section of the Company’s website.)

Sepura plc Annual Report & Accounts 2015 109

Company SecretaryTony Hunter

Registered OfficeRadio HouseSt Andrews RoadCambridgeCB4 1GRTel: +44 (0) 1223 876000Fax: +44 (0) 1223 879000Email: [email protected]

Websitewww.sepura.com

Registered number4353801

RegistrarsEquinitiAspect HouseSpencer RoadLancingWest Sussex BN99 6DAService helpline:Tel: 0871 384 2030 (UK)+44 (0) 121 415 7047 (Overseas)www.shareview.co.uk

Corporate brokersLiberum CapitalRopemaker Place Level 1225 Ropemaker StreetLondonEC2Y 9LY

BankersBarclays Bank PlcAshton House497 Silbury BoulevardMilton KeynesMK9 2LD

Independent AuditorsPricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsAbacus HouseCastle ParkCambridge CB3 0ANTel: +44 (0) 1223 460055www.pwc.com

Legal AdvisorsHogan Lovells International LLPAtlantic HouseHolborn ViaductLondon EC1A 2FG

Eversheds LLPOne Wood Street, London EC2V 7WS

Financial PR ConsultantsBell Potinger6th Floor, Holborn Gate330 High HolbornLondonWC1V 7QD

Contact Details and Advisers


Financial Calendar 2015/16

Annual General Meeting September 2015

FY15 Final Dividend: Key DatesEx-dividend 27 August 2015Record 28 August 2015Payment 9 October 2015

FY16 Interim Results AnnouncementProvisional November 2015

FY16 Financial Period End 1 April 2016

FY16 Final Results AnnouncementProvisional June 2016

Sepura plc is a public limited company registered in England No. 04353801 and its Ordinary shares are traded on the Official List of the London Stock Exchange (ticker: SEPU).

Sepura plc is the parent company of the Sepura Group of companies. Unless otherwise stated, the text in this Annual Report does not distinguish between the activities and operations of the parent company and those of its subsidiary undertakings.

This is the Annual Report of Sepura plc for the 12 month period ended 27 March 2015 and complies with UK legislation and regulations. It is also available on the Company’s website at www.sepura.com/investors.

© Sepura 2015. The name ‘Sepura’ and its logo device, and all other brand or product names referred to in this Annual Report, are registered trademarks or trademarks pending registration (in accordance with the relevant national laws worldwide) of the Sepura Group of companies. All rights reserved.

Cautionary statementThe purpose of this Annual Report is to provide information to the members of the Company. The Annual Report contains certain forward-looking statements with respect to the operations, performance and financial condition of the Group. By their nature, future events and circumstances can cause results and developments to differ materially from those anticipated. No undertaking is given to update the forward-looking statements whether as a result of new information, future events or otherwise. Nothing in this Annual Report should be construed as a profit forecast or an invitation to deal in the Ordinary shares of Sepura plc.

Directors’ liability and indemnity arrangementsUnder the Companies Act 2006, a new safe harbour limits the liability of Directors in respect of certain statements in, and omissions from, this Annual Report. Under English law, the Directors would be liable to the Company (but not any third party) if any errors were made as a result of reckless or knowing misstatement or dishonest concealment of a material fact, but they would not otherwise be liable. This Annual Report has been drawn up and presented in accordance with and in reliance upon English law and the liabilities of the Directors shall be limited and restricted accordingly.

Sepura plc Annual Report & Accounts 2015 111

Notes


Notes

Sepura plcRadio HouseSt Andrews RoadCambridgeCB4 1GR

T: +44 (0) 1223 876000F: +44 (0) 1223 879000

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