Exova Group Limited Report and Accounts For the year ended 31 December 2013

Testing, calibrating, advising

www.exova.com

Exova Group Limited Report and Accounts Contents

Page

Strategic Report  Chairman’s Report  Group and Market Overview  Business Review  Key Performance Indicators  Financial Review  Principal Risks and Uncertainties  Corporate Social Responsibility Directors’ Report  Other statutory information  Board of Directors and Shareholder Statement of Directors’ Responsibilities Independent Auditor’s Report Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Notes to the Consolidated Financial Statements Parent Company Balance Sheet Notes to the Parent Company Financial Statements

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STRATEGIC REPORT CHAIRMAN’S REPORT Exova was established by funds managed by the private equity firm Clayton, Dubilier & Rice (CD&R) in October 2008 when the business was acquired from Bodycote plc. In the period following the acquisition, the business faced the most difficult global trading conditions for many decades and demonstrated its resilience by maintaining its EBITDA performance. During 2009 and 2010, we focused our attention on strengthening our management structure and exiting some loss-making and underperforming businesses. As economic conditions started to recover in 2011, we refreshed our growth strategy and commenced the development of what we call the ‘Exova Model’. This model describes our strategic priorities together with the key systems and processes which we believe help to differentiate our offering and enable growth. Our results in 2011 and 2012 started to show the benefits of the changes we had made and we also made good progress in putting in place the key components of the Exova Model. We began to refresh our Heath, Safety and Quality procedures, launched a new Technical Career Development Programme and steadily introduced new systems including our Group-wide Lab Performance Dashboard and a new Group-wide Customer Relationship Management System called Exova Hub. We also continued to renew our laboratory infrastructure, increasing our levels of capital expenditure to support new growth opportunities. Our results in 2013 reflect another year of good progress for the Group. Despite challenges in some areas, the Group has continued to demonstrate its resilience by delivering increased levels of organic revenue growth and margin development. We have achieved this by continuing to invest in our people, our laboratories and the systems which constitute the Exova Model. With regard to our people, we continued the rollout of our Technical Career Development Programme, extended the use of elearning for training and trialed a new management development course. In our laboratories, in addition to numerous smaller projects, we opened a new state of the art corrosion testing facility in Dudley (UK), installed a new fire testing furnace in Dandenong (Australia) and significantly enhanced our facilities at our Warrington (UK) fire testing centre of excellence. With regard to systems, we completed the rollout of Exova Hub and implemented the first trial of a new Laboratory Information Management System in our Aerospace testing laboratory in Mississauga (Canada). In terms of growth, our focus since 2008 has been on organic sales however we had always envisaged complementing this with a small number of acquisitions when the time was right. Having been successful in developing the Group’s performance and putting in place the key components of the Exova Model, the Board deemed that 2013 was the appropriate time so start pursuing acquisitions in line with our plans. It was with great pleasure, therefore, that we welcomed both the Defiance Testing and Engineering Services Inc. (US) and GSMobile (Czech Republic) businesses to our Group in the final quarter of the year. Defiance strengthens our position in the US Automotive testing market whilst GSMobile brings new capabilities and a foot-hold in Eastern Europe for our calibration business, Metech. We also completed the outsourcing of labs in Denmark and the US from Vestas who is a long-standing customer in the renewable energy sector. In early 2014 we completed the acquisition of Catalyst, a specialist provider of industrial stack testing services in the UK. Having now established a strategy and pipeline of potential future acquisitions and a central team with the skills to support our businesses in completing transactions, we plan to continue to extend the range of testing services we offer and our Group’s global reach through further acquisitions in the years ahead. In terms of governance, the Group continues to be overseen by a highly experienced Board consisting of Executive and NonExecutive Directors who bring a significant breadth of industry and functional experience to our discussions about the performance and future development of the business. The maturity of our governance processes is further evidenced through our active Board Committees and the comprehensive reporting and monitoring processes that we have put in place since 2008. With an impressive set of results behind us, a proven and robust team and operating model in place and exciting plans ahead of us, the Board has determined that the time is right to approach another important milestone for the Group. Accordingly, we intend to complete an initial public offering of shares in a new group holding company on the main market of the London Stock Exchange in 2014. As always, none of our successes or future plans could be realised without the skills, professionalism and hard work of our teams across the world. Exova has a strong reputation amongst some of the world’s leading companies for delivering testing services which are often complex and ground-breaking. This reputation and the trust our customers place in us is the ultimate manifestation of our success and is what drives all of us in Exova. I would like to thank all of my colleagues for their commitment to our business and to all of its stakeholders.

Fred Kindle Chairman 20 March 2014

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GROUP AND MARKET OVERVIEW Background Exova is a leading provider of laboratory based testing and related advisory services, operating from 117 laboratories in 22 countries. We focus on providing our clients with technically demanding, value added testing and related advisory services across a broad range of products and processes to ensure compliance with safety and quality standards imposed by customers, accreditation bodies and regulatory authorities. We are also a leader in the provision of calibration services in Northern Europe. Our global network serves both our multinational clients and local markets and allows us to transfer knowledge and deliver global best practice locally. We serve over 25,000 customers, none of which accounted for more than 4% of our revenue in 2013. The Group employs around 3,600 people. The Exova Group was formed in October 2008 from the acquisition of the Testing Division of Bodycote plc by Clayton, Dubilier & Rice, a private equity firm. The business is one of the most respected testing and related services companies in the world, with over 40 years of industry experience. Our laboratories are accredited by national agencies such as UKAS, industry specific agencies such as Nadcap in the aerospace sector and, in many cases, receive client specific approvals from major blue chip companies. We manage our business through three divisions: Europe, the Americas and Rest of World (formerly known as Middle East / Asia Pacific). Across these divisions, we provide services across five business clusters which are Aerospace, Oil & Gas and Industrials, Products, Health Sciences and Middle East. Our people include highly qualified scientists, engineers, chemists and materials specialists from a range of technical disciplines which include Metal Technology, Polymers & Composites, Corrosion & Protection, Fire Technology, Structures & Systems, Calibration and Chemistry & Microbiology. Our Group Technical Director continues to oversee the development of our technical expertise via a network of technical leaders across our Group.

Market overview We operate primarily within the testing, inspection and certification (“TIC”) market, with a focus on testing services, supplemented to a limited degree by inspection and certification services in particular niche sectors and geographic regions. Based on industry reports and our own analysis, the TIC market had an estimated global value of approximately £110 billion in 2013, of which approximately 45% is estimated to be outsourced to third party providers. We estimate, based on industry reports and our own analysis, that the testing segment of the TIC market represents approximately 48% of the total TIC market, or about £53 billion, and that the TIC market has grown at an average of approximately 5-6% per year between 2010 and 2013. Testing services are required to assess compliance with standards set out by accreditation bodies, regulatory authorities, our customers themselves or the parties to whom our customers supply their products. The relevant standards define the testing methods and equipment to be used. Accordingly, testing laboratories generally require teams of highly skilled people that may be in limited supply, accreditations by relevant authorities that may be difficult or time-consuming to obtain and extensive capital investment in laboratories and equipment. These requirements represent significant barriers to entry for new competitors and our focus on the provision of technically demanding services raises this bar even higher in some sectors. Growth trends Based on experience across the market sectors in which we operate, we believe that the Group benefits from the following long term growth drivers: End user growth Our performance is directly affected by the level of demand for our customers’ products and services. Increased production levels can directly influence the demand for our services. In addition, some of our customers may conduct testing themselves but their laboratories can sometimes become capacity constrained thereby leading them to use testing providers such as Exova to provide overflow capacity. We also believe that the long-term trend towards globalisation of trade and markets, as well as the migration of manufacturing to low-cost regions, is likely to continue to create increased future demand for testing services in order to ensure supply chain integrity and maintain the standards of quality control required by European and North American end markets in particular. Regulation and self-regulation We believe that increases in the number and complexity of the standards with which materials, components and products must comply have resulted, and are likely to continue to result, in an increasing number of required tests. In addition, companies require up-to-date regulatory expertise and advisory services to keep their testing programmes in line with evolving standards, especially in light of the global trend towards harmonising regulatory requirements. Examples of regulatory regimes that we believe are driving growth in the testing segment of the TIC market include tightening environmental standards governing the disposal of oil field drilling waste in Canada and increasing fire safety standards, particularly in the European Union. In addition, we believe that increasing consumer awareness regarding product quality, safety and environmental issues is driving companies to use third-party testing as a means of differentiating their products based on quality.

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Innovation The development of new products and services directly impacts the demand for testing services. Competitive pressure, consumer demand for an increasing number of product varieties and technological improvements are shortening product lifecycles, which leads to an increase in the number of new products being developed. Environmental concerns and high fuel costs have driven customers in sectors such as Aerospace and Transportation to seek to use lighter weight materials in their products, which has led to increased demand for certain types of tests. As businesses diversify into new geographical markets, this can often require that products be adapted to meet local tastes and requirements. In addition, given that new test types often evolve from product development or increasingly complex componentry, their propensity to be outsourced is greater given the need for investment in new equipment and/or technical expertise. Outsourcing We estimate that overall levels of outsourcing in the TIC market are still low at approximately 45% and that many customers still operate in-house laboratories. Certain customers have demonstrated a willingness to outsource such in-house laboratories and these situations can provide growth opportunities for testing providers. Outsourcing allows companies to focus on their core competencies and to reduce costs by eliminating the fixed costs associated with maintaining in-house laboratories, the capacity of which they may not be able to fully utilise, and reducing the costs of keeping up-to-date with new technologies and regulatory requirements. Pricing As testing processes become more efficient, we are sometimes able to obtain price increases (e.g. where we are able to provide accelerated turnaround times for our customers). Price growth is driven by segmental pricing and can vary depending on the sector. Market position The TIC market is highly fragmented, and we believe that Exova is one of the largest service providers that focuses primarily on the testing segment, in terms of the number of business sectors we serve and geographic locations in which we are present. A few larger, global service providers have activities across the TIC market but these companies also focus on the certification and inspection segments of the market, as well as specific end market niches within the testing market. A number of medium-sized specialists or regional firms also focus on the testing segment of the TIC market and are our direct competitors, although they compete with us only in specific business sectors in a particular region. In addition, we face competition from local independent laboratories, numbering in the thousands, but only in specific business sectors in the locations where they are present.

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BUSINESS REVIEW Our vision Our vision is to be recognised globally as the supplier of choice in our chosen fields of Testing, Calibration and Advisory Services.

Our mission We aspire to be the best. We believe that being at the forefront of our industry requires expertise, exceptional people and excellent processes, which we seek to improve continuously. We balance the demands of our stakeholders to create sustainable growth and profitability.

Our strategy Our strategy is to deliver sustainable growth and profitability by developing our business as a provider of testing, calibration and related advisory services. We achieve this using the Exova Model which consists of five elements as follows: Provision of technically demanding services We provide technically demanding services through our network of 117 laboratories. Our policies for managing health, safety and quality facilitate risk management in the laboratories and the retention of external accreditations and client approvals. The business is underpinned by the strength of our technical leadership team, led by our Group Technical Director. We continue to develop technical leaders for the future through our Technical Career Development Programme and we invest continuously in our laboratory network to maintain our technical abilities. Building long term client relationships We aim to provide the highest standards of service to our clients by utilising our deep knowledge of our customers’ requirements. Over recent years, we have introduced a dedicated sales team of over 100 people, which allows us to respond directly to our customers’ needs and thereby generate sales. In addition, we employ a number of group-wide processes and technical solutions. Our CRM platform allows active management of client relationships, including monitoring laboratory-level activity and sales forecasting. The CRM platform also assists us in preparing for account review meetings with key clients. Our Net Promoter Score Programme helps us to measure customer loyalty and identify opportunities to make service improvements. Organic growth and increasing market share We are focused on attracting new customers in existing markets, growing volumes from existing customers and, where appropriate, expanding organically into adjacent markets. We use a standardised sales framework across our laboratories which are run on a sector and regional basis to increase our sales efficiency. Sector based growth plans are underpinned by a five year top to bottom and bottom-up approach and enable an effective budgeting process that can be refined based on the most up to date information. This increases our ability to adapt to the changing business environment and to increase the precision of our budgeting. Efficient laboratory management We are focused on running our laboratories efficiently and use our Laboratory Performance Dashboard (‘LPD’) to monitor performance and to share best practices. Each laboratory is expected to implement one best practice project every year based on findings from the LPD data across our network. Through our LPD system, we seek to improve efficiency, improve utilisation and achieve operational consistency across the laboratory network. Extending business reach We are focused on enhancing our capabilities and accelerating growth through targeted M&A opportunities. Our dedicated Corporate Development team has developed a methodology for screening potential targets and an approach to integrating businesses which we acquire. We also target outsourcing opportunities in a similar way to M&A. We expects to use both M&A and outsourcing to expand our footprint in both existing and adjacent testing markets, and we view inorganic growth of this nature as a good way to expand the Group’s geographic footprint over time.

Business development In 2013, we made significant progress with all of the key components of our strategy. Notable highlights include:

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We continued to focus on further improving our Health & Safety framework. Health & Safety remains the first item on all formal meeting agendas (including at Board level) and in 2013 we made good progress in developing our culture of safe working practices by increasing the level of ‘near miss’ reporting across the Group.

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We appointed new Managing Directors for our European and Rest of World regions and continued to strengthen our technical, functional and laboratory management teams in a number of areas. We completed the group-wide implementation of Exova Hub, our new Customer Relationship Management system. The system now provides us with an invaluable tool to support sales planning, account management and sales forecasting. We developed new Sales Operating Procedures and commenced a training programme to ensure that all of our sales teams are familiar with them. We remain focused on best practice sharing and continued to encourage all of our laboratories to deliver at least one business improvement project every year. To support this we now have a database of current and past projects to assist our General Managers in sourcing improvement ideas for their laboratories. We delivered important capital projects to enhance our fire testing facilities in Warrington (UK) and Dandenong (Australia). We also opened our new flagship corrosion testing facility in Dudley (UK) and relocated our aerospace laboratory in Toulouse to a new facility. As in previous years, many other smaller investment projects were completed to maintain our laboratories and enhance the testing services we provide to our clients. We continued to upgrade our finance systems and, as planned, our European Shared Services centre expanded its coverage to include more laboratories in Continental Europe. We expanded the reach of our business with the acquisitions of Defiance Testing and Engineering Services, an automotive testing provider in Troy (Michigan, USA) and GSMobile, a calibration services provider in Prague (Czech Republic) and signed a long term global partnership agreement with Vestas Wind which included the acquisition of the in-house calibration capacity in Denmark and USA. We implemented a new Quality Management System in a number of our oil & gas and pharmaceutical laboratories. We also had a successful trial of a new Laboratory Information Management System in our aerospace laboratory in Mississauga (Canada). We aim to develop these new systems further in 2014.

Outlook In 2013, we updated the company’s 5 year plan and, as part of this, we completed a thorough review of the growth prospects in the sectors and geographic regions in which we operate. As a result of this review, we continue to remain optimistic about the future growth prospects for the company. Whilst we will always see some variation from year-to-year, the underlying medium term growth drivers in the key sectors in which we operate remain positive. For example, we continue to see demand for technically demanding testing services in support of offshore oil & gas projects and, in aerospace, the order books for new commercial aircraft remain strong. In the Middle East, a recovering economic situation in the UAE coupled with anticipated infrastructure investments in a number of other countries is expected to continue to provide growth opportunities. Our review has also identified a number of areas where we can continue to make capital investments in our business to support growth. Accordingly, we have an exciting list of new projects to complete over coming years. We will also continue to develop our people, processes and systems to ensure that our range of testing services continues to support the innovation which is so crucial to many of our clients.

Operating review The Group operates across three geographical regions; Europe, the Americas and Rest of World. Europe In Europe, Exova operates from 62 permanent laboratories in 12 countries. The business services the following sectors; Aerospace, Oil & Gas and Industrials, Products and Health Sciences. Key developments in 2013 included: 

Aerospace – The market for production of commercial aircraft remained positive in 2013 and we made a significant investment to expand capacity in Toulouse in France by moving to a larger laboratory. We also continued investment in our labs in Lancaster in the UK and Plzen in the Czech Republic which both saw strong market demand.

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Oil & Gas and Industrials - The demand for subsea corrosion expertise to test for metal fatigue in deeper and more hostile operating environments continued to grow and we built and opened our new corrosion testing laboratory in Dudley in the UK. This facility will continue to service our global customer base and will also be the centre of excellence to support our corrosion testing activities in the USA, Middle East and Singapore.

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Product – Our expanded fire testing facility in Warrington in the UK, which almost doubled the footprint of the laboratory, was officially opened and enabled us to attract new clients in the field of testing innovative fire protection coatings. Our calibration business saw good growth in the life sciences sector as a result of the extension of our capabilities for this market. In Q4 we completed the acquisition of GSMobile in the Czech Republic and signed a long-term global partnership agreement with Vestas Wind which included the acquisition of their labs in Denmark and the USA.

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Americas The Americas business operates laboratories on 37 sites in the USA, Canada and Mexico, including managing client based laboratories through outsourcing agreements. The laboratories provide specialist testing services to the Aerospace, Oil & Gas and Industrials, Transportation and Health Sciences markets. The key developments in 2013 were: 

Product – The automotive industry in North America continued to grow with a large number of new models introduced in the year. The increase in automobile production generated record demand for our on-site custom gasoline engine testing services at client assembly plants in the USA and Mexico. Our Warren facility capitalised on the development of the new models delivering solid returns on the growth investments made in the prior year. In September we acquired Defiance Testing & Engineering Services Inc. whose facilities in the Detroit area are complementary to our Warren business. The acquisition positions us very well in the structural durability testing segment in North America.

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Aerospace – A new customer relationship with an emerging markets aerospace manufacturer helped our composites business deliver strong growth and profit. The capacity and capability investments made in our Anaheim lab in 2012 were a critical enabler to delivering this service. At the same time, our key long-term foundry and casting accounts continued to grow at attractive rates enabling the sector to perform solidly versus the previous year.

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Oil & Gas and Industrials – The Gulf of Mexico enjoyed robust investment in exploration and development activity. Many of the new fields in development present a ‘hostile environment’ to the production hardware that will be installed. This drives the need for sophisticated testing to ensure the materials will be able to withstand the service they will be exposed to. Our investments in corrosion and coatings capabilities allowed us to offer our customers these services in a timely fashion, resulting in strong profitable growth for our business in the sector. In Western Canada, our newly expanded facility in Fort St. John in the Pacific North West benefited from its proximity to onshore drilling activity remote from the major production hubs.

Rest of World Our businesses in Rest of World operate from 18 permanent laboratories, 10 in the Middle East and 8 in Asia Pacific. Additionally, we have numerous site based project laboratories, particularly on large construction projects where considerable volumes of routine tests are performed on site. Within the Middle East, our businesses generally comprise large multidisciplinary laboratories in key geographical centres. The major end markets are Infrastructure, Oil & Gas and Industrials, Fire and Health Sciences. In Asia Pacific we have an Oil & Gas focused lab in Singapore and Fire businesses in Singapore, Hong Kong and Australia. The key developments in 2013 were: 

Dubai – During the year a purpose built rig was developed at our Façade Testing Division to test a system for the Haramain Rail Project in Saudi Arabia. This system is considered to be the largest sample of its type to be tested anywhere in the world. The ongoing recovery in the Dubai real estate market has been further underpinned by the recent award of the Expo 2020 event which is expected to generate infrastructure investment which will present opportunity for our Dubai business moving forwards.

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Abu Dhabi – The major project worked on during the year was the Midfield Air Terminal and we established our first site-based lab for a customer in Iraq.

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Saudi Arabia - We successfully completed the Jeddah Environmental Monitoring Project which required us to deploy, manage and maintain 10 air quality monitoring stations throughout the city and provide analytical support services for marine, groundwater, wastewater and drinking water. Additionally, we gained further traction in the Western Region through the provision of on-site testing facilities for the Jeddah Storm Water Project.

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Qatar – We made a significant investment in a new asphalt testing facility to support the Government’s planned QR80 billion investment programme in advance of the World Cup in 2022.

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Australia – Our new fire resistance furnace in Dandenong, Australia which was officially opened in early 2013 generated substantial growth from new and existing clients during the year. Our fire consultants continued to work on many iconic and technically demanding projects including Sydney Harbour Bridge upgrade and Melbourne Airport’s new terminal.

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KEY PERFORMANCE INDICATORS (KPIs) The Group utilises the following indicators of performance to assess its development against its strategic, financial and operational objectives.

Adjusted EBITA margin (%) 2013 2012 2011

17.2% 16.5% 12.8%

Adjusted EBITDA margin (%)

Net debt to Adjusted EBITDA ratio

2013 2012 2011

2013 2012 2011

21.9% 21.1% 19.3%

3.60 3.79 4.59

Strategic rationale

Strategic rationale

Adjusted EBITA and EBITDA margin are the most significant indicators of operating performance for the Group. They measure elements of cost efficiency and cash generation in relation to overall activity levels. Comparisons are measured to establish optimum performance and targets for underperforming sites.

As a private equity backed business with a relatively high level of net debt, this ratio provides a measure of the Group’s ability to de-lever through operational cash flow generation.

Definition and calculation

Definition and calculation

Adjusted EBITA is defined as operating profit from continuing operations before restructuring costs, loss on disposal of subsidiary, acquisition and integration costs, management fees to private equity investor, IPO related costs, intangibles amortisation and impairment of assets.

The ratio is calculated as net debt divided by Adjusted EBITDA.

Adjusted EBITDA is defined as adjusted EBITA before depreciation.

Net debt represents the carrying value of all financing including senior loan notes, bank financing, other external loans and finance leases, net of cash and short-term deposits. Net debt does not include loans from parent undertakings, preference shares, accrued dividends or capitalised debt issue costs.

Adjusted EBITA margin is adjusted EBITA expressed as a percentage of revenue and adjusted EBITDA margin is adjusted EBITDA expressed as a percentage of revenue.

Days sales outstanding (days)

Lost time incident frequency rate (accidents/200,000 hours)

2013 2012 2011

2013 2012 2011

62 days 61 days 65 days

0.63 0.72 0.65

Strategic rationale

Strategic rationale

Trade receivables are the most significant element of working capital and the main focus of working capital management in the Group. Days sales outstanding (“DSO”) is measured for each entity in the Group and benchmarked against internal targets. The movement in DSOs is discussed in page 12 of the Financial Review

As a people intensive business, with a very rigorous focus on Health and Safety issues, we measure lost time incidents for each site and benchmark against the rest of the Group. The lost time incident performance is discussed in page 18 of the Corporate Social Responsibility Review.

Definition and calculation

Definition and calculation

DSO is calculated on the countback method where receivables at the balance sheet date are mapped to daily sales. Daily sales are calculated as an average of the total sales for each month divided by the number of days in the month.

Lost time incidents are incidents that cause employees to be unavailable for normal duties for more than one day. The rate is expressed as the number of incidents per 200,000 hours worked.

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FINANCIAL REVIEW Operating performance The consolidated financial statements for the Group have been prepared in accordance with International Financial Reporting Standards, as adopted by the EU and are included on pages 30 to 61. The key accounting policies of the Group are detailed in Note 1 to the financial statements. Income statement Year ended 31 December 2013 2012 £m £m Revenue

279.0

253.6

Cost of sales

(176.0)

(159.4)

Gross profit

103.0

94.2

Selling and administrative expenses

(58.8)

(57.1)

3.2

4.0

Operating profit before separately disclosed items

47.4

41.1

Amortisation of intangible assets

(9.0)

(8.7)

Acquisition and integration costs

(1.1)

-

Impairment of propertty, plant and equipment

(0.9)

-

Restructuring costs

(4.5)

(6.4)

Other income

IPO related costs

(4.2)

-

Operating profit

27.7

26.0

Net finance costs

(53.3)

(50.2)

Loss before tax

(25.6)

(24.2)

Income tax Loss for the year

(6.5)

(0.4)

(32.1)

(24.6)

61.0

53.6

21.9%

21.1%

48.1

41.8

17.2%

16.5%

Other financial data: Adjusted EBITDA (1) Adjusted EBITDA Margin Adjusted EBITA (1) Adjusted EBITA Margin

(1) Adjusted EBITDA and adjusted EBITA are defined on page 8

Year ended 31 December 2013 compared to year ended 31 December 2012 Revenue Revenue increased by 10% to £279.0 million in 2013 from £253.6 million in 2012. Organic growth on a constant currency basis was 7.5%. 

Europe (49% of revenue in 2013). Revenue on a reported currency basis increased by 8.4% to £136.0 million from £125.5 million in 2012. Organic growth on a constant currency basis was 5.7%. This increase was due to strong performance in the Aerospace business cluster and at the end of 2013 the Toulouse laboratory was relocated to a new facility with an additional 25% capacity. Oil & Gas and Industrials also continued to perform well in the more technically demanding testing applications and we opened a new flagship corrosion centre in Dudley, UK during the year. Our fire safety facility in Warrington, UK continued to perform well in 2013, following its capacity expansion in 2012. Our calibration business also continued to grow and we completed small acquisitions in the Czech Republic and Denmark towards the end of the year. These increases were partially offset by reduced demand for certain routine Oil & Gas and Industrial applications in 2013 compared to 2012. Health Sciences continued to underperform and we made the decision to exit food advisory services, although with a new management team and renewed focus on our core testing activities we saw some improvement in performance and new business wins in both food and pharmaceutical testing towards the end of 2013.

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Americas (39% of revenue in 2013). Revenue increased by 15.6% on a reported currency basis to £109.6 million in 2013 from £94.8 million in 2012. Organic growth on a constant currency basis was 12.8%. In Aerospace, we

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benefited from investment in new testing equipment to support the development of composite materials in airframes, as demand for commercial aircraft continued to be strong in 2013. In addition, we continued to expand our specialist corrosion testing in Houston as Oil & Gas activity in the Gulf of Mexico remained very strong. Our operations in the US Industrials sector also performed well, but activity in this area in Canada was generally less buoyant. The Product sector performed very strongly largely due to an £8.0 million increase compared to the previous year from a new product launch at one of our automotive customers. Our Health Sciences business remained flat compared to 2012 largely due to a moratorium on contract awards affecting a number of our customers in the Canadian environmental sector. 

Rest of World (12% of revenue in 2013). Revenue increased 0.3% to £33.4 million in 2013 from £33.3 million in 2012 on a reported basis. On a constant currency basis, revenues reduced by 0.6% in 2013 as compared to 2012. Revenues in the Middle East region reduced from 2012 to 2013, as a number of projects were delayed and we experienced increasing pricing pressure for routine work. In addition, revenues in 2012 benefited from a large contract to supply testing equipment as well as testing services and there were no similar equipment sales in 2013. Oil & Gas activities in South East Asia grew more slowly, with fewer major projects in 2013 than the previous year. Our fire safety operations in Australia grew strongly following the installation of a new furnace in early 2013.

Adjusted EBITDA and Adjusted EBITA Adjusted EBITDA increased by £7.4 million, or 13.8% to £61.0 million in 2013 from £53.6 million in 2012. Adjusted EBITDA margin increased to 21.9% from 21.1%. Adjusted EBITA increased by £6.3 million, or 15.1% to £48.1 million in 2013 from £41.8 million in 2012. Adjusted EBITA margin increased to 17.2% from 16.5%. Adjusted EBITA margin for Europe decreased from 15.8% in 2012 to 15.1% in 2013. There was margin improvement in Aerospace and some of the more technically demanding Oil & Gas applications. However, this was offset by margin decline in specific Health Sciences and Industrials labs. These labs were restructured during 2013 to provide a lower cost base going into 2014. Adjusted EBITA margin for the Americas increased from 19.8% in 2012 to 24.1% in 2013 as a result of general improvement across most sectors due to sales growth and good cost control. In addition, the testing relating to the customer product launch in the automotive sector was at higher than average margins. Adjusted EBITA margin for the Rest of World decreased from 9.6% in 2012 to 3.6% in 2013 as a result of pricing pressure in Abu Dhabi, cost overruns in Saudi Arabia and investment in management and processes. In addition, the margin earned on the sale of testing equipment for a large project in 2012 was not repeated in 2013. Operating profit before separately disclosed items Operating profit before separately disclosed items increased by 15.3% to £47.4 million in 2013 compared to £41.1 million in 2012.

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Cost of sales for 2013 was £176.0 million, an increase of £16.6 million from £159.4 million in 2012. This increase was primarily due to increased costs of direct labour and consumable materials to support the sales growth in the business and the inclusion of Defiance costs for three months. As a percentage of revenue, cost of sales was similar at 62.9% in 2012 and 63.1% in 2013.

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Selling and administrative expenses for 2013 was £58.8 million, an increase of £1.7 million from £57.1 million in 2012. This increase was primarily due to the continued strengthening of the senior management team and the inclusion of Defiance costs for three months. As a percentage of revenue, selling and administrative costs reduced from 22.5% in 2012 to 21.1% in 2013.

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Other income for 2013 was £3.2 million, a decrease of £0.8 million, or 20.0%, from £4.0 million in 2012. £0.5 million of this decrease was due to a lower gain on sale of fixed assets compared to 2012 and the remainder was primarily due to lower SRED credits and rental income.

Separately disclosed items Amortisation of intangible assets Amortisation of intangible assets for 2013 was £9.0 million, an increase of £0.3 million from £8.7 million in 2012. This increase was primarily due to the addition of amortisation of customer relationships in Defiance for three months after its acquisition in September 2013. Restructuring costs We incurred £4.5 million of restructuring costs in 2013, compared to £6.4 million in 2012, shown within separately disclosed items. This decrease was due to a reduction of £1.3 million in redundancy and recruitment costs and £0.6 million in site closure costs. Restructuring costs in 2013 were primarily related to the strengthening of the regional management teams, particularly in Rest of World, and restructuring of parts of the Health Sciences and Industrials businesses in the UK, including the cost of exiting food advisory services. £0.6 million related to provisions for onerous lease contracts, most of which will be cash costs in future years. There were no non-cash costs in 2013. Acquisition and integration costs We incurred £1.1 million of acquisition and integration costs in 2013 (2012: nil). These costs primarily relate to the Defiance Testing and Engineering Services Inc, GSMobile and Vestas transactions.

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Impairment of property, plant and equipment In 2013 there was a £0.9 million exceptional cost related to the impairment of fixed assets in the Americas region associated with specialised equipment used in a contact which has now ended. No further use for the equipment could be identified in the Group. IPO related costs In 2013 we incurred £4.2 million of costs associated with a potential IPO (2012: nil). These costs primarily relate to legal and other professional advisor fees. Income tax effect on separately disclosed items A £1.9 million credit related to the amortisation of the customer list is offset by a £0.6 million charge as a result of redundancies in Europe and Americas (2012: £2.0 million relating to the amortisation of customer lists). Net finance costs Year ended 31 December 2013 2012 £m £m Net cash interest payable: Bank loans Senior loan notes Other loans and charges Interest receivable Non cash costs: Loan owed to parent undertaking Preference share dividend Amortisation of debt issue costs

3.9 16.3 1.5 (0.1) 21.6

4.1 16.3 1.1 (0.1) 21.4

26.8 3.2 1.7 31.7

24.3 3.0 1.5 28.8

53.3

50.2

Net finance costs increased to £53.3 million in 2013 from £50.2 million in 2012. Cash interest and charges payable in 2013 were £21.6 million, consisting of interest on bank and other borrowings and the senior loan notes (2012: £21.4 million). Non cash interest included £26.8 million in non-cash interest on shareholder loans (2012: £24.3 million), and £1.7 million amortisation of debt issue costs (2012: £1.5 million). Income tax The total tax charge for corporate income tax and deferred tax is £6.5 million (2012: £0.4 million). Year ended 31 December 2013

2012

£m

£m

Current tax

7.0

3.9

Deferred tax

(0.5)

(3.5)

6.5

0.4

The Group is in a tax paying position in a number of overseas jurisdictions in which it operates, with a current year overseas income tax charge of £7.0 million. UK taxable profits were wholly offset by UK losses arising from debt financing. The net deferred tax credit of £0.5 million includes the amortisation of £1.9 million of the deferred tax liability relating to customer relationships. Across the Group there are tax losses of £81.2 million most of which are available to carry forward indefinitely to offset future taxable profits in the jurisdictions in which they arose. Deferred tax assets have been recognised in respect of certain losses where it is sufficiently certain that they will be utilised against taxable profits in the foreseeable future. The majority of the losses are not recognised as deferred tax assets.

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Cash Flow Year ended 31 December 2013 2012 £m £m 50.1 47.0 (26.2) (23.0) 23.9 24.0

Cash generated from operations Interest and tax paid Net cash flows from operating activities Investing activities Purchase of property, plant and equipment Purchase of intangible assets Sale of property plant and equipment Acquisition of subsidiary undertakings Interest received Net cash used in investing activities Net cash flows from financing activities Net increase in cash and cash equivalents

(17.2) (0.5) (19.9) 0.1 (37.5) 15.5 1.9

(16.3) (0.5) 0.5 (16.3) (2.9) 4.8

Net cash generated from operating activities Net cash flows from operating activities were £23.9 million for 2013, a reduction of £0.1 million compared to £24.0 million for 2012. Operating cash flows before movements in working capital increased by £3.5 million due to improved trading. In addition, working capital reduced by £1.2 million in 2013 compared with a reduction of £1.6 million in 2012. An increase of one day of DSO plus the effect of sales growth contributed to the £3.6 million increase in receivables for 2013 compared with an increase of £3.3 million in 2012. This was offset by an increase of £4.8 million in provisions and other payables in 2013 compared to an increase of £4.9 million in 2012. Cash interest costs increased to £21.6 million for 2013 from £21.2 million for 2012 and tax paid increased to £4.6 million for 2013 from £1.8 million for 2012. Net cash used in investing activities Net cash used in investing activities was £37.5 million in 2013, which comprised net additions to tangible and intangible assets of £17.7 million and investment in new subsidiaries totalled £19.9 million. This was offset by interest received of £0.1 million. Net cash flows from financing activities Net cash inflow from financing activities was £15.5 million in 2013. New borrowings to fund acquisitions net of related debt issue costs contributed £18.6 million. This was offset by repayment of loans and lease liabilities of £1.8 million, an investment in a subsidiary undertaking of £0.3 million and dividends paid to non-controlling interests in subsidiaries of £1.0 million. Credit facilities In October 2010 we issued £155 million senior loan notes and used the net proceeds to repay all of the amounts outstanding under our mezzanine facility agreement and certain amounts outstanding under our senior facilities agreement, including all of the amortising term loans. During the year we entered into a £50 million committed acquisition facility within our senior banks and on 30 September 2013 drew down £20.1 million to fund the purchase of Defiance Testing and Engineering Services Inc. At 31 December 2013, our remaining senior bank facilities comprised £95.7 million of non-amortising term loan borrowings. In addition, a £35 million revolving credit facility (£4.7 million of which has been allocated to an overdraft facility) and a £29.9 million acquisition facility were undrawn at 31 December 2013. The senior loan notes are denominated in sterling and the remaining term loans are denominated in euros and US dollars. The following table summarises the contractual maturity of the principal amounts under our financing arrangements as at 31 December 2013. The revolving credit facility is due for renewal in 2015. There are no repayments scheduled on our senior bank debt until 2016 and beyond. The senior loan notes are repayable in 2018.

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As at 31 December 2013

Maturity

Senior loan notes Senior bank loans Revolving credit facility Credit card facility Bank overdrafts Loan due to parent undertaking Preference shares Preference share dividend payable Finance leases Other short term borrowings Loan due to non-controlling interests Total

less than one year £m

between one and two years £m

0.2 0.3 0.3 0.8

between two and five years £m

0.2 0.2

after five years £m

155.0 95.7 270.1 0.2 521.0

34.2 8.9 43.1

Total drawn amounts £m

Undrawn amounts £m

155.0 95.7 270.1 34.2 8.9 0.6 0.3 0.3 565.1

29.9 30.1 0.2 4.7 64.9

Total 2013 £m 155.0 125.6 30.1 0.2 4.7 270.1 34.2 8.9 0.6 0.3 0.3 630.0

The loan due to parent undertaking carries the right to roll up interest at a rate of 15% per annum plus a margin of 0.125% per annum. Any rights to payment of cash interest or principal are subordinated to repayment of liabilities under the senior loan notes. Net external debt (excluding debt issue costs)

As at 31 December 2013 2012 £m £m Senior loan notes

155.0

155.0

Senior bank loans

95.7

78.3

Finance leases

0.6

-

Other

0.6

0.5

External debt

251.9

233.8

Cash and cash equivalents Net external debt

(32.0) 219.9

(30.5) 203.3

Net external debt has increased from £203.3 million to £219.9 million predominantly as a result of an additional bank loan of £20.1 million to fund the acquisition of Defiance Testing and Engineering Services Inc. This was partially offset by a higher cash balance at the year end. Capitalised debt issue costs of £7.5 million (2012: £7.5 million) have been excluded from this analysis. Interest rates The senior loan notes carry a fixed interest rate of 10.5%. All other external borrowing facilities are charged at variable rates of interest. Contractual obligations and off-balance sheet arrangements The total amount of future minimum lease payments in respect of non-cancellable operating leases are as follows: As at 31 December Operating leases

2013 Land and buildings 2013 £m

Within one year Between two and five years After five years

7.8 17.0 8.2 33.0

2012

Other 2013 £m

Total 2013 £m

0.8 0.5 1.3

8.6 17.5 8.2 34.3

Land and buildings 2012 £m

7.3 17.7 8.9 33.9

Other 2012 £m

Total 2012 £m

0.9 0.8 1.7

8.2 18.5 8.9 35.6

The majority of these commitments relate to building rentals on our global network of laboratories.

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Capital commitments Contracted for but not provided

As at 31 December 2013 2012 £m £m 1.7

4.2

We are not a party to any other off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

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PRINCIPAL RISKS AND UNCERTAINTIES The principal risks and uncertainties that affect the Group are outlined below.

Operational Health and safety The Group’s work environment presents various potential risks which are mitigated by providing clear guidance on appropriate procedures and maintenance of equipment, supported by regular training and supervision, Health and safety is always the first item on the agenda at all levels within the Group. Quality and compliance people are embedded in the organisation and risk is managed continuously and assessed for maximum mitigation. Markets The strength of our end markets is key to our success and on-going monitoring of our strategic plan has confirmed our overall view that the business is likely to continue to see a range of attractive growth opportunities for the foreseeable future. During 2013 we implemented a Group wide CRM system which provides greater visibility of future revenues and allows us to plan our capacity much more efficiently. Client relationships Across the Group no client accounts for more than 4% of revenues and, with a highly diverse client base across our regions, there is no key dependence globally on any one relationship. We seek to limit exposure to client and third party liabilities, wherever possible, through the reliance on good internal processes and by focusing on the agreement of fair contractual terms with our clients. Dependence on accreditation The Group relies on being awarded and retaining appropriate accreditations and affiliations around the world in order to provide its testing and advisory services. Failure to obtain or retain a particular accreditation could lead to a loss of business in the relevant industry and could damage the Group’s reputation. The Group has extensive quality assurance procedures and controls are embedded in its operations to ensure that it holds and maintains the necessary accreditations and that the required operational standards are applied. Operations are regularly subjected to audit and review by external parties including accreditation bodies, governments, trade affiliations and clients. Litigation From time-to-time, the Group is involved in claims and lawsuits, incidental to its normal business, including claims for damages, negligence and commercial disputes and disputes with current and former employees. There is a risk that a legal dispute could adversely affect the reputation of the Group and result in significant financial loss. To reduce the likelihood of claims arising, the Group has extensive quality assurance procedures and controls in place. The Group mitigates the risk of financial loss arising from litigation by maintaining appropriate insurance cover for potential claims, although there is no certainty that this will be sufficient to cover any ultimate losses. Competitors The testing market is highly fragmented and there is no single direct competitor operating across all of our defined testing markets. In most sectors competition is local rather than global and we use our high standards of service to maintain our competitive advantage. Human resources People are our greatest asset and loyalty is engendered through good working conditions, career progression opportunities and focused training programmes. Turnover rates amongst our people are monitored regularly and we use this information to adapt our human resources plans where necessary. Labour is the most significant cost item for the Group and we remain aware that we must react to market conditions to maintain performance of the business and close control is kept over people costs across all regions. Reputation As a service business our reputation is key to our success, and stringent attention to compliance with all applicable laws and regulations is essential. The business is regularly audited both internally and externally and an open door policy is in place through which all employees are encouraged to report any legitimate concerns to senior executives. All employees have access to dedicated whistleblowing telephone numbers and e-mail addresses which are operated by a third party. Environment The Group is aware of its corporate responsibility to minimise its effect on the environment and makes efforts to reduce its carbon footprint wherever possible. We have an Environmental Policy in accordance with the requirements of EN ISO 14001.

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Scottish Independence Although the Group has 117 establishments in 22 countries, of which only its head office, a shared services centre and four laboratories are located in Scotland, the Group faces potential risks associated with the outcome of the planned referendum on Scottish independence and the future of Scotland in the EU. Risks associated with the referendum include: the currency that an independent Scotland would use; whether agreement and ratification of an independent Scotland’s membership to the European Union would be achieved by the target date (currently 24 March 2016); the shape and role of the monetary system; and the approach to individual taxation. Any political instability prior to, or resulting from, the referendum or changes in legislation (including tax legislation), policy or currency as a result of independence could increase uncertainty around the Group’s tax liabilities, future sources of revenue or costs of complying with new legislation or regulation.

Financial Foreign exchange risk The Group operates globally with the majority of its profit being earned outside the UK. As a result, the Group is exposed to two types of currency risk; transactional and translational. Transactional currency exposure arises when operating subsidiaries enter into contracts denominated in a currency other than their functional currency. Although around 75% of the Group’s sales are generated outside the UK, the overwhelming majority of those sales are supplied locally to clients buying in the same currency as input costs. Consequently, foreign exchange transaction risk is low. Any significant exposures are hedged, usually by means of forward foreign exchange contracts. Translational currency exposure can impact reported earnings through the translation of the profits of overseas subsidiaries into sterling for consolidated reporting purposes and can impact net assets through the translation of the Group’s net investments in overseas subsidiaries. The Group partially reduces its net asset translational currency exposures by means of foreign currency borrowings. The Group does not hedge the translational exposure arising from profit and loss items. Liquidity risk Liquidity risk is the risk that the Group will be unable to meet its liabilities as they fall due. This is managed by monitoring actual and forecast cash flows and ensuring sufficient cash and committed borrowing facilities are in place at all times and, also, that additional headroom is available to meet possible downside scenarios. Shareholder loans are non-current liabilities with interest rolled up into final amounts payable and all payments of interest or capital are subordinated to other external borrowings. Details of the Group’s cash and committed borrowing facilities can be found in note 16 to the Group financial statements. Credit risk Credit risk is the risk of financial loss if a client or counterparty fails to meet an obligation under a contract. The risk that clients fail to settle outstanding debts is mitigated by the large number of clients and countries over which this risk is spread. In addition, credit quality of the Group’s significant clients is monitored through an assessment of financial position, previous payment history and with reference to external credit rating agencies. Further information regarding the Group’s credit risk can be found in note 17 to the Group financial statements. Financial irregularities The Group could suffer financial loss either through misappropriation of assets or the misrepresentation of financial results. The Group has established financial and management controls to ensure that the Group’s assets are protected from major financial risks. A detailed system of financial reporting is in place to ensure that monthly financial results are reviewed thoroughly. The Group has an outsourced internal audit function and independent external auditors audit the Group’s annual financial statements. Acquisition and integration The acquisition and integration of any new business into an existing organisation presents a number of key risk areas, not least the failure to deliver the expected returns, distraction of senior management during the process and integration challenges that present themselves with each deal. Specifically this can lead to the possible loss of clients, incompatibilities between systems and procedures, corporate policies and cultures, a reduction in management attention paid to daily operations and the loss of personnel, particularly senior management. As such we have developed a structured evaluation, due diligence and integration process where the core focus is to identify, secure and risk assess bolt-on businesses that provide future growth opportunities for the group. Key activities in the process include early stage business evaluation against our key strategic principles, market and competitive appraisal, and comprehensive due diligence. The integration process includes a dedicated integration manager, assessment and approval gates that guide the process through each stage, and the completion of a prescriptive 90 day integration programme.

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CORPORATE SOCIAL RESPONSIBILITY (CSR) At Exova Corporate Social Responsibility (CSR) is at the heart of what we do. CSR is critical to the sustainability of our business strategy, and to us this means: 

Ensuring the health and safety of our people, as they are often faced with a wide variety of risks, and managing our environmental impact.



Developing our people so that they have the right skills to continue delivering high quality technically demanding services and furthering advancements in our industry.



Maintaining the highest ethical practices across all of our business activities.



Partnering with our customers to achieve their CSR objectives and develop even greater CSR outcomes for our communities.

As our business grows we realise that there are other areas where we need to more proactively manage our approach to CSR and play our part. There will be greater expectations for us to report on how we manage environmental impacts across the group. This is currently managed at an operational level to facilitate compliance with local legislation and regulations; however, going forward we intend to centralise the monitoring and oversight of our environmental management activities at a group-level. In addition, as the groups of stakeholders interested in our business expand, we will need to be more strategic in responding to all of their interests, including how we interact with and contribute to the communities in which we are a part. This report details our approach to the four key areas outlined above. In addition, we have covered those areas where we are committed to developing a more strategic response, including Environment and Community. Throughout, we have highlighted our commitments and focus areas for 2014, and next year will report our progress against these. CSR Governance Exova’s Board has ultimate responsibility for our CSR activities and performance, while the day-to-day management and accountability for CSR is actioned through the executive management team. Each month, the Board and our executive teams receive reports covering key CSR issues, which are also discussed at our weekly Executive Team meetings. Operational oversight and reporting to the Board across the various CSR elements is the responsibility of Exova’s Group Technical and HSE Director and the Group Human Resource Director. CSR is also embedded through Exova’s Values: 

Innovation is key to staying ahead of the competition by delivering great service to our clients. We invest in the technical development of our people and the equipment in our laboratories to ensure that we are able to offer the most up-to-date and efficient testing methods to our clients.



Teamwork allows us to achieve our goals and attract great people. We aim to share best practice across our Group with teamwork providing the foundation for global delivery. Our people’s combined knowledge and experience power our vision and their passion constantly raises the bar on what we can achieve. Performance is a core part of our culture as a business. We keep our promises to each other and our clients. We operate a structured performance management framework across our Group which is underpinned by our Laboratory Performance Dashboards (LPDs). The LPDs allow us to monitor the performance of all our laboratories and enable us to identify our strengths and share learnings across our Group.



Integrity is at the heart of everything we do and is embodied in our commitment to running a transparent, safe and high quality operation.

Going forward we will look to implement additional processes to further embed CSR into the way we do business and support our longer term sustainable business strategy.

Health, Safety and Environment (HSE) HSE Strategy To support our business strategy, we developed a focused HSE strategy that sets out the main objectives and targets for the business up to 2016. Developed in consultation with our HSE network and key stakeholders, it was endorsed by Exova’s Executive Team, and communicated throughout the business. Our HSE strategy is based on seven key themes: leadership, compliance, people, resourcing, equipment/assets, culture and HSE Management Systems. Aligned to each, is a set of key initiatives, which will help us achieve our objectives. We will review and challenge this strategy to ensure it continues to support the future needs of our business. HSE Policy and processes Our Group HSE Policy, which is reviewed and updated annually, defines the framework governing our HSE approach and outlines our key objectives. To support this policy, we have group-wide HSE standards and procedures.

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We proactively monitor the management of HSE risks through our internal audit programme, which was enhanced by piloting a new risk-based system in our European business. Key benefits of the system include: 

A standardised scoring system providing a consistent approach to assessing site performance over time, and against Exova expectations and other sites.



External auditing of laboratories to provide compliance reports and



Total risk scores that set the frequency of re-audits and ensure higher risk sites receive appropriate support.



Links to the HSE Operations Manual checklist, serving as a ‘self-audit’ tool for site management to assess their progress.



A Red-Amber-Green rating for management to assess and monitor areas requiring focus.

Given the success of the system, we intend to roll it out across the Group later in 2014. HSE requirements have been introduced into the laboratory business plans this year. This means that key HSE elements are now considered as part of our core business programmes, and has resulted in a number of capital expenditure plans that have also had significant HSE benefits, such as utilities conservation programmes. Safety Our safety-first approach is embedded within our philosophy: ‘the standard you walk by is the standard you accept’. It is more than just policies and procedures; it is a way of working, a way of thinking and a way of looking out for each other. As we work towards sustainability across our business we monitor and report our performance. Since 2010 we have improved the collection of data relating to leading and trailing indicators. Incident reporting has been improved and now represents an accurate reflection of our performance. Our safety performance is highlighted in the charts following.

Note: The Lost time frequency rate is based on the number of lost work day incidents per 200,000 hours worked. 

2013 saw an improvement in the Lost Work Day Incidents (LWDI) as well as the number of associated lost work days.



Lost Time Frequency Rates show an improvement in performance (0.72 to 0.63 in 2013).

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

The period saw an increase in Medical Aid incidents (673 in 2013 from 471 in 2012) and an 11% increase in First Aid (FA) incidents.



Performance in relation to injury numbers between 2010 and 2013 is attributable to a number of influences, including:     



Increased awareness of the Group incident reporting requirements. The promotion and encouragement of Near Miss (NM) reporting. Improved reporting especially of FA incidents that now include very minor injuries. The impacts of local regulatory requirements and cultural attitudes on the classification of injuries. Increased referral of less serious injuries for medical attention.

Leadership focus throughout the year was on encouraging incident reporting, especially NM reporting. We have observed a correlation between sites with good leadership, increased reporting of NM incidents and low levels of injuries. In developing our data capture especially for ‘leading’ indicators we can better determine ‘early warning’ signs and address these ahead of potential incidents. Our focus for next year is to continue to drive up NM reporting to reduce the risks that lead to injuries within the business.

Managing our safety performance At Exova all incidents are subject to an appropriate level of investigation, root cause analysis and follow up action to prevent reoccurrence. We believe we can learn from each one. We also further enhanced our incident analysis through the roll out of a root cause training pack. Our major cause of injuries is related to lacerations associated with handling glassware and metal samples. By consulting with, and learning from, a number of organisations including customers, we have reduced these from 52% of our injuries to 32% over the past 3 years. We continue to use the HSE Bulletin system for communicating learning points arising from incidents and have issued eight bulletins in the year. We have continued to promote and support the concept of ‘the standard you walk by is the standard you accept’. In 2013 we developed and piloted a behavioural safety process (SEA - See, Engage, Act) for cascading behavioural safety awareness and engagement to all employees based on: 

See – observing unsafe acts, conditions and equipment



Engage – establishing a dialogue with people affected by the act, condition or behavior



Act – taking action to correct any safety issues.

Following our pilot, we will begin to roll out this process across the group in 2014.

Environment Operating in a way that minimises our impact on the environment is an important consideration for building a sustainable business. We believe that the nature of the business we perform does not have an inherently high environmental impact. The impact of our operations varies by site, being heavily dependent on the services performed at that site. Even though we don’t consume high volumes of energy, use significant amounts of non-renewable resources or generate large amounts of waste; it is still important for us to assess these impacts. While we have not performed a formal group-wide review of our environmental impacts, we consider the primary environmental impacts of our operations to include energy consumption, associated greenhouse gas emissions, use of non-renewable resources, water use and discharges, and waste. A top level review of the Group’s environmental aspects and impacts will be completed in 2014 using a tool developed in-house to help confirm our understanding of our environmental footprint and improve our understanding of areas for focus. This will be followed by a more detailed review in 2015. Environmental management across Exova is focused at a site and/or regional level where site managers are ultimately responsible for identifying environmental compliance requirements and meeting these. As a global business operating in 22 countries we believe it is critical that our sites focus first and foremost on meeting their compliance requirements; however as we grow, we recognise there will be an increasing demand for us to report on our environmental performance across the group. This includes demands for businesses to publicly report on greenhouse emissions and other environmental impacts. Going forward our focus will be to develop group guidance on environmental reporting requirements, and to support our sites in meeting these by developing a standard framework to assess environmental performance and set targets. We have already started making some developments in this respect. For a number of years we have tracked environmental incidents through our incident management system, and are pleased to report no serious environmental incidents throughout 2013. Further, the introduction of our risk-based auditing system this year has led to greater awareness of environmental issues throughout the business as it incorporates environmental compliance requirements as well as other areas critical to our business, such as HSE training and waste management. A number of our laboratories have ISO14001 accreditation for their environmental management systems (EMS), including Linkoping and Goteborg in Sweden. These sites maintain their ISO14001 accreditation because of the specific work they carry out and the clients they serve. Whilst it is not a group requirement to obtain ISO14001 accreditation or implement a formal EMS, most of our sites have implemented the core elements of an EMS, including undertaking regular risk assessments,

19

monitoring and measuring environmental performance and allocating specific resources responsible for environmental management. As we move forward we would like to exhibit best practice in how we manage our environmental impacts. One example of this has been the implementation of a new Active Tracker System within our UK vehicles throughout the year. The system optimises the routes to be driven, creating significant reductions in fuel consumption, as well as reducing driving hours and improving driver safety. Our 2014 targets:       

Continue to focus on reporting lead indicators, including near misses. Continue to share best practices across our laboratories to maximise the safety of our people, our visitors and our customers. Roll out the risk-based HSE auditing system across the group. Continue to mature the existing safety-first culture using behaviour based safety processes. Undertake a top level review of the Group’s environmental aspects and impacts. Develop group-wide environmental data capture systems and reporting guidance, which will include processes for gathering our greenhouse gas emissions data. Roll out further environmental best practice initiatives, such as the Active Tracker System.

Our People Exova aims to recruit, develop and retain the best talent. We are an equal opportunities employer and aim to promote an environment in which all employees (including potential employees) enjoy equal opportunities and treatment, free of any form of discrimination, bias or harassment. In the course of 2013 there was a significant focus on enhancing the Group Ethics Policy framework, including developing and expanding our policies and procedures in relation to Anti-Bribery and Corruption, Competition and Whistleblowing. Further detail on this is provided in the Ethical Business Practices section. We also continued to develop and expand our Group-wide Technical Career Development Programme. Attracting the best people We have more than 3,600 Exova people worldwide who together are focused on the achievement of our operational and growth strategy objectives. Exova is proud to have some of the leading specialists in their fields working with us, helping us to further advance technology in support of our customers. For example Exova’s internationally renowned corrosion control scientist, Dr Chris Fowler is a Fellow and ex-President of NACE International, the world’s largest organisation dedicated to the study of corrosion, and is currently the President of the NACE Institute, the organisation’s training group. As we grow, attracting, retaining and developing the right people is of paramount importance to the continued success of our business. In 2013 we introduced a Global Recruitment Policy which outlines a framework for recruiting and selecting people based on the principles of fair and appropriate consideration. The policy supports Exova’s regional and business-specific recruitment processes and practices, which must meet local requirements and laws. Together with our resourcing processes, the policy ensures we have the right people for the right roles. Engaging our people Throughout the year we have also continued to build on the strong communication platforms we have now established across the Group, ensuring that our people are engaged and informed. In particular, engaging our people to further their technical skills and knowledge through networking is critical to enabling us to build a sustainable business. In October last year we held our first European Technical Conference in Birmingham. The conference brought together over 80 of our technical specialists from across Europe, and helped them to share knowledge, experience and establish networks across our Group. At the beginning of the year we again brought our global leadership team together in a series of world-wide events to communicate and discuss our growth strategy ambitions. We also had direct involvement from a broad range of valued customers who provided an external perspective on Exova, our service, key strengths and also areas for improvement. We supported this throughout the year with regular web conference calls to update our global leadership team on progress and to share best practice and key learnings from across our business. Through our ExovaLive e-newsletter, we share and celebrate many successes with all of our people across the globe. Going forward we will further formalise our approach by piloting an employee engagement survey in 2014 to gauge the opinions of our people. Developing our people It is through our people that we have achieved a world class reputation for the provision of technically demanding services. Our people are trusted by the world’s leading organisations to advise on the safety, quality and performance of their products. It is through them that we consistently achieve the levels of quality demanded by customers and accreditation bodies alike, and will build a sustainable business into the future. We are committed to investing in the technical development of our teams, not only to support our current and future growth plans but to ensure our people see a rewarding and valuable technical career path with Exova. In 2013, we continued to develop and expand our Group-wide Technical Career Development Programme which now supports the development needs of over 250 people from across our global technical community. The Programme has contributed directly to career progression and skills development for a number of those individuals, and in early 2014 we will further expand participation and involvement in this important strategic initiative.

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We also piloted a ‘Leading the How’ Leadership Development Programme aimed at General Managers and key functional leaders across our global operations. As a growing business, it is important that we have strong leadership capabilities both now and in the future. The Programme is aimed at developing leaders by focusing on enhancing their team leadership and management skills and capabilities. Feedback from attendees has been very positive and we will look to further develop this approach in 2014. Recognising our peoples’ contribution To retain the best talent we know it’s important to recognise their efforts through a mixture of benefits. Exova’s bonus scheme provides the opportunity for our executives and the extended leadership team across the world to benefit from meeting the group’s financial and operational objectives. However, we believe it is also important to recognise our people’s contribution and efforts by other means. The Exova Values Awards are a formal recognition programme which recognises our people who have lived our Values. Awards can be presented to our people from their peers, management and our customers in acknowledgement of their achievements. Our 2014 targets:   

Pilot an employee survey to gauge the opinions of our people. Continue to develop and expand our Technical Career Development Programme. Further develop our leaders through our ‘Leading the How’ Leadership Development Programme.

Ethical business practices Our reputation is built on our values and our collective commitment to acting with integrity in everything we do, from the way we treat our people, to our relationships with customers, third parties and the communities in which we operate. Ensuring we comply with relevant regulatory requirements will always be our priority; however, operating an ethical business is more than this, and we strive to implement policies and processes which allow our people to act with integrity and be committed to the highest ethical standards. To ensure we stay true to these standards, in 2013 we enhanced our Group Ethics Policy framework by developing and expanding our policies and procedures in relation to Anti-Bribery and Corruption, Competition and Whistleblowing. The policies outline our commitments as a business, provide guidance on application and adherence, including “do’s” and “don’ts”, as well as detailing key responsibilities and contact points for further information. They cover key issues such as confidentiality, maintaining the integrity of test results, working with governments and relationships with competitors, as well as the receiving of gifts and hospitality. They also include monitoring, investigation and auditing requirements, which are part of our internal compliance and reporting processes. This year we also launched an externally managed whistleblowing ‘hotline’ across our global operations, with multi-lingual communication materials and call handlers. We are pleased that there were no serious incidents reported throughout the year, however we did receive some minor reports, all of which were followed up, investigated and reported to the Audit Committee. To support the introduction of these policies, we also implemented a focused training programme on our ethics policies and procedures for senior managers. The training sessions were tested to ensure they were well understood and our senior management team then cascaded this framework across the group. Human rights We support freedom of expression, and through the introduction of our whistleblowing ‘hotline’, we now formally encourage all of our people to raise any concerns they may have. We recognise the growing need to manage potential human rights issues across our business, and as a team we are committed to determining what this means for our business going forward. Working with our suppliers Our commitment to conducting business in an ethical way extends throughout our supply chain to our suppliers. For Exova to deliver a quality service to our customers, it is critical that we expect only the highest quality and standards from our suppliers, and in the goods and services they provide. This year in our European business we reviewed and redefined our supplier selection process to ensure we only use suppliers with acceptable business practices, quality standards and HSE performance. In 2014 this business will implement a centralised system to integrate our supplier selection and accreditation processes. Following the pilot of this system, we will assess its effectiveness in monitoring the accreditation and performance of our suppliers, and consider expanding it across the group. Community At Exova we believe we are part of the communities in which we operate. Our people are community focused, and it is important that they have the opportunity and support to engage with their communities in ways that matter most to them. For example, our Middle Eastern businesses participated in fundraising efforts throughout 2013 to provide donations for the Philippines disaster relief efforts following Typhoon Haiyan. The business has a number of people originating from the Philippines and therefore felt it to be a significant cause, which was supported by Exova through matching the contributions of our people. As a business providing technically demanding services, we believe that supporting further education, particularly in the technical fields of science and engineering is critical. Throughout the year we continued to engage with local schools and

21

universities and encourage students to consider their career options. For example, Mark Benger, Operations Manager of our Edinburgh Pharmaceutical laboratory, visited a local school to talk to senior students about options for a career in Chemistry. Being part of our community is however more than providing charitable donations and volunteering. The services we provide are often critical to supporting our communities, such as in providing testing of drinking water supplies and air quality, so that our communities are safe. Exova was recognised for their contribution to fire safety at the opening of the extension to our fire testing facility in Warrington. UK Fire Minister, Brandon Lewis MP stressed the important role that Exova Warringtonfire plays in advancing life safety around the world, and welcomed our continued investment and commitment to Warrington through our 25 year relationship. We also invest in our communities by hiring local skilled labour and engaging local suppliers to support employment and economic development within our communities. In 2013 Exova invested over £3 million in our facilities in Dudley, UK and Toulouse, France. Dudley is now at the heart of the world’s fight against corrosion, and the new facility further strengthens our long-term relationship with the Midlands community. We recognise however the changing nature of community engagement, where as our business grows; so will the expectations for us to be a more visible part of the community. Going forward, we will assess what this means for us as a business and whether developing a group-wide response to our community engagement is appropriate. We believe that it will remain important for our sites and regions to undertake activities in areas they feel to be most important and will continue to facilitate their freedom in doing so. Our 2014 targets:   

Continue to demonstrate compliance with regulatory requirements. Formalise our response to managing the risks of human rights issues throughout our business. Assess the effectiveness of an integrated system for monitoring the accreditation and performance of our suppliers, to be piloted in our European business.

Partnering with our customers We believe our customers should always be at the forefront of our plans so that we can develop a position where we are not just a ‘supplier’ but a strategic partner. We believe that by creating strong customer relationships, we can build a much more sustainable business. At Exova, we partner with our customers to help them achieve their own CSR objectives and targets. Our services are founded on providing our customers with assurance on the safety, quality and performance of their products, services and operations. Our support has helped some of the world’s leading organisations to minimise the health, safety and environmental impacts of their activities, but also help bring critical products and services to the market. For example: 

Health and Environmental Sciences – we provide assurance that food products meet stringent safety requirements and can be on the market, we work with our customers to reduce food waste and ensure critical drugs and medications are available through optimising shelf-life labelling, we help our customers to ensure that microbiological hazards such as Legionella are not present in HVAC systems and we help ensure buildings containing asbestos are safe for occupation.



Oil and Gas – we provide improved safety of oil pipelines through advanced coatings and corrosion management, and we test to ensure the integrity of domestic and industrial water supply infrastructure to prolong the life of installed pipelines and reduce water leakage.



Aerospace – we support flight safety through the validation of materials used in aircraft structures, systems and engines, and help advance aircraft efficiency through the testing of new light-weight materials.

Engaging with our customers By forging strong relationships with our customers, we can better understand how we can add value to their business. However, we believe that it is important that we interact with our customers not only through our commercial relationships but through membership and participation in industry bodies and professional institutions. A number of our senior technical staff have leadership roles in these organisations, with the objective of improving safety and quality standards within the industries we serve as a whole. For example: 

Phil Dent, one of our corrosion experts was appointed as a Member of the ISO15156 Maintenance Panel, which is one of the most important production standards for the Oil & Gas industry.



Iltaf Hussain, one of our metallurgical specialists, was appointed as a Fellow of the Institute of Materials.

We encourage our staff to take these leadership positions, providing them with the time and resources needed to do so. Responding to our customers’ expectations to operate in a responsible manner Increasingly, our customers not only expect us to deliver a quality service, but to also incorporate CSR principles into the way we carry out our activities. Most tenders now request certain HSE information as standard practice, for example regarding our ISO accreditation, HSE management systems and related performance data. However, increasingly we see requests for information expanding out to broader CSR areas, such as diversity, human rights, ethical investment as well as our policies and approach to CSR more generally.

22

As these requests are specific to our customers’ needs; we respond to each individually on an as-needs basis, using the information within our management systems. We then work together with our customers so that we can best meet their needs. For example, with new customers we assess our respective safety management systems and undertake risk assessments so that we can implement the highest safety standards throughout our work. Through these partnerships we believe we obtain even greater CSR outcomes as we have the opportunity to share learnings and best practice. Our 2014 targets:  

Continue to partner with our customers and deliver positive CSR outcomes through our respective operations. Continue to engage with our customers and seek their feedback, so that we know how to best help them achieve their own CSR objectives.

23

DIRECTORS’ REPORT Exova Group Limited Registered number: 06720350 OTHER STATUTORY INFORMATION Treasury management The general policy is to finance the Group through a mixture of equity and debt with a variety of maturity dates. The objective is to provide sufficient capital to develop the business while safeguarding the Group’s ability to continue as a going concern. The capital structure is managed centrally through the Group treasury function which has responsibility for monitoring funding and liquidity, foreign exchange and interest rate risks. Further information on financial risk management can be found in Note 17 to the Group financial statements.

Going concern The Group’s business activities, together with the factors likely to affect its future development, performance and position are described in the Strategic Report on pages 5 to 7. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review and Other Statutory Information. In addition, notes 16 and 17 to the financial statements include the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. The Directors have reviewed the Group’s budget for 2014 and its financial trading projections and cash flows to 31 December 2015, taking account of possible sensitivities to the risks outlined on pages 15 and 16. This review considered the projected financial performance in relation to the Group’s existing banking facilities described above. As a result of this review, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Significant contractual and other relationships The Group does not have any clients that account for more than 4% of Group turnover. As a service company, our main operating resource is our people and there are no individually significant external suppliers. Finance is arranged through the holders of senior loan notes and a syndicate of banks to access the level of funding required for its leveraged structure and the continuation of strong relationships with these parties is critical for the Group.

Political donations The Group made no political donations during the period.

Events since the balance sheet date On the 6 of January 2014, Exova acquired 100% of the share capital of Catalyst Environmental Limited, a leading provider of UKAS and MCERTS accredited stack emission testing in the UK and Ireland for an initial cash consideration of £5.2 million (£4.9 million net of cash acquired) with a further payment of £1.3 million contingent upon future profitability in the year following acquisition. The company, which will become Exova Catalyst, will add six facilities and 58 colleagues to our existing portfolio and will allow us to develop further the specialist stack testing capabilities we provide in Europe, Americas and Middle East. Catalyst provides a range of specialist stack sampling services, including continuous emissions monitoring, landfill gas, emissions to atmosphere, and laboratory-based testing of physical and chemical elements. On 11 March 2014 our European Oil & Gas and Industrials sector announced the intention to restructure the North Sea Oil and Gas activities by ceasing to offer testing services from the Sandnes facility and focusing on servicing this market from alternative facilities within the European network. An estimate of the financial effect of this restructuring cannot be made at this time.

Auditors Ernst & Young LLP shall remain in office as auditors until the Company or Ernst & Young LLP otherwise determine.

Statement as to disclosure of information to auditors The Directors who held office at the date of approval of this report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditors are unaware; and each Director has taken all the steps that he/she ought to have taken as a Director to make himself/herself aware of any audit information and to establish that the Company’s auditors are aware of that information.

24

BOARD OF DIRECTORS AND SHAREHOLDER Board members Fred Kindle Chairman – Appointed 27 November 2008 Fred became Chairman of Exova in 2008, having joined CD&R as a partner in 2008. He is the former President and Chief Executive Officer of ABB Limited, a leading supplier of electrical and automation equipment, services and systems. Prior to joining ABB, Fred served from 1999 to 2004 as President and Chief Executive Officer of Sulzer Ltd, global industrial engineering and management company. Previously Fred worked for McKinsey and Company in New York and Zurich. He is Chairman of BCA Osprey Ltd, Senior Independent Director (and from 4 April 2014, Chairman) of VZ Holding AG and a member of the boards of Zurich Insurance Company Ltd and Stadler Rail Ltd. Fred graduated the Swiss Federal Institute of Technology in Zurich with a masters degree in engineering. He also holds a MBA from Northwestern University. Ian El-Mokadem Chief Executive Officer – Appointed 18 April 2011 Ian joined Exova in early 2011 from Compass Group plc, where he was Group Managing Director, UK & Ireland and a member of the Group’s Executive Committee. Whilst at Compass, Ian led the UK and Ireland business through a period of successful transformation and was responsible for operations with a combined turnover of £1.8 billion and circa 60,000 people. Prior to Compass Group, Ian’s career includes positions with Centrica plc and the global management consultancy Accenture. At Centrica he held several senior roles in British Gas before leading the successful launch, growth and subsequent sale of the Group’s telecommunications division which traded principally under the Onetel brand name. Ian has a BSc in Economics and Statistics from University College London and an MBA from INSEAD. Anne Thorburn Chief Financial Officer – Appointed 24 June 2010 Anne joined Exova as Chief Financial Officer in August 2009. She has many years of experience at PLC board level in international groups, having served as Group Finance Director at British Polythene Industries PLC. Before that she held the same position at Clyde Blowers PLC. Anne has extensive expertise in corporate funding, mergers & acquisitions, strategic planning and restructuring of complex geographically diverse organisations. Anne trained as a Chartered Accountant with KPMG where she progressed to Senior Manager in Corporate Finance, specialising in providing structuring and funding advice on MBOs and acquisitions. She has a BSc (Hons) in Zoology from the University of Glasgow and post-graduate diploma in business and finance from Strathclyde University Business School. Christian Rochat CD&R – Appointed 13 August 2008 Christian became a Non-Executive Director of Exova in 2008. He joined CD&R in 2004, where he led the sale of Brakes and the acquisition of the Group and Spie. Prior to joining CD&R, Christian was Managing Director at Morgan Stanley Capital Partners, having previously been a Director at Schroeder Ventures (now Permira). He also worked in the London and New York offices of Morgan Stanley’s mergers and acquisitions department. He holds a BA and PhD in law from the Université de Lausanne, as well as an MBA from the Stanford Graduate School of Business. Eric Rouzier CD&R – Appointed 23 March 2010 Eric joined CD&R in 2005 and played a key role in the acquisition of Exova. Previously, Eric worked in the investment banking division of JP Morgan and as a management consultant. He graduated from the ENSAM Graduate School of Engineering and ESSEC Graduate School of Management in Paris. Andrew Simon Non-Executive Director – Appointed 27 November 2008 Andrew became a Non-Executive Director of Exova in October 2008. He spent the first 23 years of his career at the Evode Group variously as Chief Executive and Chairman and building it from a £23 million adhesives and sealants business into a £300 million international materials and speciality chemicals group. Since 1993 he has built a varied career of Non-Executive directorships in the UK and overseas in both private equity and public companies. He is currently on the board of Travis Perkins plc, SGG Carbon SE (Germany) and Finning International Inc. (Canada). He has a BSc in social science from the University of Southampton and has an MBA from the Wharton Business School at the University of Pennsylvania. Helmut Eschwey Non-Executive Director – Appointed 27 November 2008 Helmut became an Independent Non-Executive Director of Exova in October 2008. He served until 2008 as Chairman of the management board and Chief Executive Officer of Heraeus Holding GmbH. Before joining Heraeus, he held senior positions at Henkel, Pirelli, Freudenberg and the SMS group. He is a Non-Executive Chairman and Board Member in a number of private companies. He holds a PhD in chemistry from the University of Freiburg im Breisgau. William Spencer Non-executive Director – Appointed 19 July 2011 Bill became a Non-Executive Director of Exova in July 2011. He has been involved in the testing, inspection and certification business for nearly twenty years, including fifteen years as the Chief Financial Officer of Intertek Group plc. Before joining Intertek, he held senior financial positions with Inchcape, Olivetti and Rexam. Bill is also a Non-Executive Director of UK Mail Group plc, an Independent Non-Executive Director of the Finance Committee of the Royal Institution of Chartered Surveyors and a Director and Consultant for Lopensa & Co Limited. He is a Chartered Management Accountant and Corporate Treasurer and has a BSc in Management Sciences from the University of Manchester.

25

Shareholder Clayton, Dubilier & Rice LLC, the manager of Clayton Dubilier & Rice Fund VII LP, is considered to be the ultimate controlling party. Fred Kindle, an operating partner at Clayton Dubilier & Rice, has oversight of the Company on behalf of the fund. Christian Rochat and Eric Rouzier also represent Clayton, Dubilier & Rice.

Corporate governance The Board is responsible for the strategic direction, development and control of the Company and there is a clear division of responsibility between the Chairman and the Chief Executive. Fred Kindle of CD&R is the Chairman while Ian El-Mokadem as Chief Executive has responsibility for implementing the plans and policies established by the Board. Board meetings are held quarterly and the Directors are supplied in a timely manner with information necessary to discharge their duties. Directors may, from time to time in the furtherance of their duties, take independent professional advice at the Company’s expense. The Group has in place appropriate insurance cover for the Board members, in respect of any legal action taken against them. The Board has responsibility for consideration of matters including determination of overall Group strategy, approval of business plans, major capital investments, acquisitions and disposals, risk management strategy, review of corporate governance policy and approval of the Annual Report & Accounts. The Board’s strategy is implemented by the Executive Team comprising senior executives of the business who assist the Chief Executive in the management of the operations and development of the Group as a whole. The Executive Team has monthly meetings and weekly calls, chaired by the Chief Executive and, additionally hold regular strategy sessions. Detailed operational activity is the focus of divisional operational teams.

26

STATEMENT OF DIRECTORS’ RESPONSIBILITIES The Directors are responsible for preparing the annual report and Group and Parent Company financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. Under that law the Directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and applicable law and have elected to prepare the Parent Company financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice). Under company law the Directors must not approve the Group financial statements unless they are satisfied that they present fairly the financial position, performance and cash flows of the Group for that period. Under company law the Directors must not approve the Parent Company financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Parent Company and of the profit or loss of the Company for that period. In preparing each of the Group and Parent Company financial statements the Directors are required to: 

select suitable accounting policies and then apply them consistently;



make judgements and estimates that are reasonable;



for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU, subject to any material departures disclosed and explained in the financial statements;



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



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

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that its financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report and Directors’ Report that complies with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Strategic Report, covering pages 2 to 23, and the Directors' Report, covering pages 24 to 27, have been approved by the Board of Directors in accordance with the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.

By order of the board

Ian El-Mokadem Chief Executive Officer

Anne Thorburn Chief Financial Officer

20 March 2014 6 Coronet Way Centenary Park Eccles Manchester M50 1RE

27

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF EXOVA GROUP LIMITED We have audited the financial statements of Exova Group Limited for the year ended 31 December 2013 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity, the Parent Company Balance Sheet and the related notes 1 to 27 to the Group financial statements and the related notes 1 to 7 of the Parent Company financial statements The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As explained more fully in the Directors’ Responsibilities Statement set out on page 27, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Report and Accounts 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. Opinion on financial statements In our opinion: 

the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2013 and of the Group’s loss for the year then ended;



the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;



the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and



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

Opinion on other matters prescribed by the Companies Act 2006 In 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.

28

Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: 

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



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



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



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

Mark Harvey (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Edinburgh 20 March 2014

29

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended 31 December 2013

Continuing Operations

Notes

Year ended 31 December 2013 Before Separately separately disclosed disclosed items items (note 3) £m £m

Revenue

2

279.0

Operating profit

2

47.4

Finance costs

6

(53.4)

Finance income

6

0.1

Loss before taxation Income tax

7

Loss for the year

-

Total £m

Year ended 31 December 2012 Before Separately separately disclosed disclosed items items (note 3) £m £m

279.0

253.6

27.7

41.1

-

(53.4)

(50.3)

-

(50.3)

-

0.1

0.1

-

0.1

(19.7)

-

Total £m

(15.1)

253.6 26.0

(5.9)

(19.7)

(25.6)

(9.1)

(15.1)

(24.2)

(7.8)

1.3

(6.5)

(2.4)

2.0

(0.4)

(13.7)

(18.4)

(32.1)

(11.5)

(13.1)

(24.6)

Other comprehensive income Other comprehensive income to be reclassified to profit or loss in subsequent periods: Exchange differences on translation of foreign operations and related borrowings

(13.2)

(5.6)

Net other comprehensive income to be reclassified to profit or loss in subsequent periods

(13.2)

(5.6)

Other comprehensive income not to be reclassified to profit or loss in subsequent periods: Re-measurement gains on defined benefit plans

0.6

-

Net other comprehensive income not to be reclassified to profit or loss in subsequent periods

0.6

-

Other comprehensive income for the year

(12.6)

(5.6)

Total comprehensive income for the year

(44.7)

(30.2)

Loss attributable to: Equity holders of the parent Non-controlling interests

(31.6) (0.5)

(25.1) 0.5

(32.1)

(24.6)

(44.1) (0.6)

(30.6) 0.4

(44.7)

(30.2)

Total comprehensive income for the year attributable to: Equity holders of the parent Non-controlling interests

30

CONSOLIDATED BALANCE SHEET At 31 December 2013 2013 £m

Notes Assets Non-current assets Property, plant and equipment Goodwill Intangible assets Government grants Deferred tax asset

61.5 322.6 18.8 7.9 7.0

54.0 320.9 24.8 9.7 6.4

417.8

415.8

60.2 1.8 32.0

54.6 1.8 30.5

94.0

86.9

511.8

502.7

4.4 114.9 2.9 (244.1)

4.4 114.9 16.0 (212.9)

Equity attributable to equity holders of the parent Non-controlling interests

(121.9) 2.9

(77.6) 3.6

Total Equity

(119.0)

(74.0)

93.5 149.7 270.1 34.2 8.9 0.4 1.9 7.6 11.0 4.6

77.6 148.6 243.2 34.2 5.7 2.3 6.8 10.9 4.0

581.9

533.3

0.6 0.2 43.4 1.7 3.0

0.1 39.2 1.4 2.7

48.9

43.4

Total liabilities

630.8

576.7

Total equity and liabilities

511.8

502.7

Current assets Trade and other receivables Government grants Cash at bank

8 9 11 12 20

Restated 2012 £m

14 12 16

Total assets

Equity and Liabilities Equity Issued share capital Share premium Capital contribution reserve Foreign currency translation reserve Retained earnings

Non-current liabilities Financial liabilities - bank and other borrowings Financial liabilities - senior loan notes Financial liabilities - loan due to parent undertaking Financial liabilities - preference shares Financial liabilities - preference share dividends payable Financial liabilities - finance leases Retirement benefit obligations Provisions Deferred tax liability Other liabilities

Current liabilities Financial liabilities - bank and other borrowings Financial liabilities - finance leases Trade and other payables Current tax liabilities Provisions

21

16 16 16 16 16 22 19 20

16 22 15 19

The financial statements were approved by the Board of Directors on 20 March 2014 and signed on its behalf by:

Ian El-Mokadem Chief Executive Officer

Anne Thorburn Chief Financial Officer

31

CONSOLIDATED STATEMENT OF CASH FLOWS Year ended 31 December 2013

Notes Loss before tax Net finance costs Depreciation of property, plant and equipment Amortisation of intangibles Impairment loss on plant, property & equipment Gain on sale of property plant and equipment Net government grants

Year ended 31 December 2013 £m £m

Year ended 31 December 2012 £m £m

(25.6) 53.3 12.9 9.0 0.9 (1.6)

(24.2) 50.2 11.8 8.7 0.5 (1.6)

48.9

45.4

6 8 11 8 12

Operating cash flows before movements in working capital Increase in trade and other receivables and prepayments (Decrease)/Increase in provisions Increase in trade and other payables

(3.6) (0.9) 5.7

Movements in working capital Cash generated from operations Interest paid Tax paid Net cash flows from operating activities Investing activities Purchase of property, plant and equipment Intangible asset additions Sale of property, plant and equipment Acquisition of subsidiary undertakings (net of cash acquired) Interest received

(3.3) 2.5 2.4 1.2

1.6

50.1

47.0

(21.6) (4.6)

(21.2) (1.8)

23.9

24.0

(17.2) (0.5) (19.9) 0.1

10

(16.3) (0.5) 0.5 -

Net cash used in investing activities

(37.5)

(16.3)

Net cash flows before financing

(13.6)

7.7

Financing activities Proceeds from borrowings Repayment of bank borrowings Loans repaid to minority shareholders Payment of finance lease liabilities Dividends paid to non-controlling interests Acquisition of non-controlling interests Debt issue costs paid

20.1 (1.5) (0.2) (0.1) (1.0) (0.3) (1.5)

Net cash flows from financing activities

(2.8) (0.1) 15.5

(2.9)

1.9

4.8

Cash and cash equivalents at 1 January

30.5

26.4

Effects of exchange rate changes

(0.4)

(0.7)

32.0

30.5

Net increase in cash and cash equivalents

Cash and cash equivalents at 31 December

16

32

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year ended 31 December 2013

Attributable to equity holders of the parent Foreign Capital currency Share capital and Contribution translation Retained share premium reserve reserve earnings Note £m £m £m £m Comprehensive income for the year As at 1 January 2012 Restatement As at 1 January 2012 (restated)

Total shareholders' equity £m

Non-controlling interests £m

Total equity £m

4.4 4.4

114.9 114.9

21.5 21.5

(186.9) (0.9) (187.8)

(46.1) (0.9) (47.0)

4.2 4.2

(41.9) (0.9) (42.8)

(Loss) / profit for the year

-

-

-

(25.1)

(25.1)

0.5

(24.6)

Other comprehensive income

-

-

(5.5)

(5.5)

(0.1)

(5.6)

Total comprehensive income for the year

-

-

(5.5)

(30.6)

0.4

(30.2)

Dividends to non-controlling interests

-

-

-

(1.0)

(1.0)

4.4

114.9

16.0

(212.9)

(77.6)

3.6

(74.0)

(Loss)/profit for the year

-

-

-

(31.6)

(31.6)

(0.5)

(32.1)

Other comprehensive income

-

-

(13.1)

0.6

(12.5)

(0.1)

(12.6)

Total comprehensive income for the year

-

-

(13.1)

(31.0)

(44.1)

(0.6)

(44.7)

Acquisition of non-controlling interests

-

-

-

(0.2)

(0.2)

(0.1)

(0.3)

4.4

114.9

2.9

(244.1)

(121.9)

At 31 December 2012

1

-

(25.1)

-

-

Comprehensive income for the year

At 31 December 2013

33

2.9

(119.0)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013 1. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES Exova Group Limited ("the Company") is a company domiciled and incorporated in the United Kingdom. The consolidated financial statements (the ''financial statements'') of the Company for the year ending 31 December 2013 incorporate the financial statements of the Company and its subsidiaries (together referred to as the ''Group'').

Authorisation of financial statements and statement of compliance with IFRSs The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (''adopted IFRSs''). The Company has elected to prepare its parent company financial statements in accordance with UK GAAP. These are presented on pages 62 to 65. The consolidated financial statements were authorised for issue by the Board of Directors on 20 March 2014.

Basis of preparation The financial statements have been prepared on the historical cost basis except for derivative financial instruments which are stated at their fair value. The financial statements have been prepared on a going concern basis. The reasons for this are outlined in the Directors' Report on page 24. The financial statements are presented in Pounds Sterling (£) and all values are rounded to the nearest hundred thousand (£0.1m) except where otherwise indicated.

Basis of consolidation Subsidiaries are entities controlled by the Company. Control exists when the Company has the power to, directly or indirectly, govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries acquired to bring the accounting policies used into line with those used by the Group. All intra Group transactions, balances, income and expenses are eliminated on consolidation. Non-controlling interests are stated at their proportion of the fair values of the assets and liabilities recognised. Total comprehensive income is attributed to the owners of the parent and to the noncontrolling interests even if this results in the non-controlling interests having a deficit balance. The Company has a number of joint venture investments where more than half of the voting power is not owned. As the company exercises management control over these joint venture investments, these are accounted for as subsidiaries.

Foreign currency Items included in the financial statements of the Group’s subsidiary companies are measured using the currency of the primary economic environment in which the subsidiary operates (‘the functional currency’). The consolidated financial statements are presented in sterling, which is the Company’s functional and presentational currency.

Foreign currency transactions Foreign currency transactions are translated into the functional currency of the Group using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Differences arising on translation are charged or credited to the income statement except when deferred in equity as qualifying cash flow hedges or qualifying net investment hedges.

Foreign operations The income statements of foreign subsidiary companies are translated into sterling at monthly average exchange rates and the balance sheets are translated at the exchange rates ruling at the balance sheet date. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Hedge of net investment in foreign operation On consolidation, exchange differences arising from the translation of the net investment in foreign subsidiaries and of borrowings designated as hedges of such investments are taken to shareholders’ equity. These exchange differences are disclosed as separate components of shareholders’ equity.

Adoption of new accounting standards, amendments and interpretations IFRS 13 Fair value measurement IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS. IFRS defines fair value as an exit price. As a result of the guidance in IFRS 13, the Group reassessed its policies for measuring fair values. IFRS 13 also requires additional disclosures. Level one fair value measurements are those derived from the quoted price in active markets. Level two fair value measurements are those derived from inputs other than quoted prices that are observable for the asset and liability, either directly or indirectly. Level three fair value measurements are those derived from unobservable inputs for the asset or liability. For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. Application of IFRS 13 has not materially impacted the fair value measurements of the Group. Additional disclosures where required, are provided in note 17.

IAS 1 Presentation of Items of Other Comprehensive Income The amendments to IAS 1 introduce a grouping of items presented in other comprehensive income (OCI). Items that will be reclassified to profit or loss at a future point in time have to be presented separately from items that will not be reclassified. The amendments affect presentation only and have no impact on the Group's financial position or performance.

34

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013

IAS 19 Employee Benefits (Revised 2011) This revision has eliminated the use of the "corridor approach" method which was previously applied by the Group. Under the previous "corridor approach" the pension liability proved immaterial in prior years. Following the amendment which applies this year, the remeasurement of the pension liability has become material and according to the revised standard it is now recognised in full and has therefore been presented with comparatives for the first time. IAS 19R includes a number of amendments to the accounting for defined benefit plans, including actuarial gains and losses that are now recognised in OCI and permanently excluded from profit and loss; expected returns on plan assets that are no longer recognised in profit and loss, instead, there is a requirement to recognise interest on the net defined benefit liability (asset) in profit or loss, calculated using the discount rate used to measure the defined benefit obligation, and; unvested past service costs are now recognised in profit or loss at the earlier of when the amendment occurs or when the related restructuring or termination costs are recognised. Other amendments include new disclosures, such as, quantitative sensitivity disclosures. In case of the Group, the transition to IAS 19R had an impact on the net defined benefit plan obligations due to the difference in accounting for interest on plan assets and unvested past service costs. The Group applied IAS 19 (Revised 2011) retrospectively in the current period in accordance with the transitional provisions set out in the revised standard. The opening statement of financial position of the earliest comparative period presented (01 January 2012) and the comparative figures have been restated accordingly. As at 31 December 2013 £m 1.1 (0.2)

Increase in the defined benefit plan obligation (non-current) Increase in deferred tax asset (non-current)

As at 31 December 2012 £m 1.1 (0.2)

Net impact on equity

0.9

0.9

Attributable to: Equity holders of the parent Non-controlling interest

0.9 -

0.9 -

0.9

0.9

Impact on consolidated statement of comprehensive income: There was no material impact on the Group's consolidated statement of comprehensive income and statement of cash flows.

International Accounting Standards (IAS/IFRS) The International Accounting Standards Board and International Financial Reporting Interpretations Committee have issued the following standards and interpretations, which are considered relevant to the Group, with an effective date after the date of these financial statements. Effective date for periods commencing IFRS 9 Financial Instruments postponed IFRS 10, IFRS 11 and IFRS 12 Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12) 1 January 2014 IFRS 10 Consolidated Financial Statements 1 January 2014 IFRS 11 Joint Arrangements 1 January 2014 IFRS 12 Disclosure of Interests in Other Entities 1 January 2014 IAS 19 Employee Benefits (Amendments to IAS 19) 1 January 2014 IAS 27 Consolidated and Separate Financial Statements (Amendments to IAS 27) 1 January 2014 IAS 28 Associates and Joint Ventures (Amendments to IAS 28) 1 January 2014 IAS 32 Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) 1 January 2014 IAS 36 Impairment of Assets (Amendments to IAS 36) 1 January 2014 IAS 39 Financial Instruments: Recognition and Measurement (Amendments to IAS 39) 1 January 2014 1 January 2014 Annual Improvements to IFRSs 2010-2012 Cycle 1 January 2014 Annual Improvements to IFRSs 2011-2013 Cycle The above standards and interpretations will be adopted in accordance with their effective dates and have not been adopted in these financial statements. The directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group’s financial statements in the period of initial application besides IFRS 9. IFRS 9 : Financial Instruments has been issued as the IASB completes each phase of its project to replace IAS 39. The first elements of IFRS 9 were issued in November 2009 and October 2010 to replace the parts of IAS 39 that relate to the classification and measurement of financial instruments. In November 2013 an amendment was issued to address hedge accounting and to remove the previously determined effective date of 1 January 2015. Instead, the IASB proposes to set the effective date of IFRS 9 when it completes the impairment phase of the project. The Group will assess IFRS 9’s full impact and will determine the date to adopt IFRS 9 once it is endorsed for use in the EU.

Summary of significant accounting policies Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Short term projects are recognised in revenue once the service is completed, this is usually when the report of findings is issued. In some instances, where the project is classed as long term, the Group accounts for the transaction on the basis of the value of the work done if this can be measured reliably. In the case that it can not be measured reliably the revenue is limited to the recoverable value of the cost so far incurred.

Research and development Research costs are expensed as incurred. Development expenditure on an individual project is recognised as an intangible asset when the Group can demonstrate: - the technical feasibility of completing the intangible asset so that it will be available for use; - its intention to complete and its ability to use the asset; - how the asset will generate future economic benefit; - the availability of resources to complete the asset; and - the ability to measure reliably the expenditure during development. Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use.

35

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013

Separately disclosed items The Group presents, as separately disclosed items on the face of the consolidated statement of comprehensive income, those items of income and expense which, because of their nature, merit separate presentation to allow users to understand better the elements of financial performance in the period. The Group believes this presentation facilitates a comparison with prior periods and a better assessment of trends in financial performance. Where applicable, these items include amortisation of intangible assets, impairment of property, plant & equipment, acquisition & integration costs, profit or loss on disposal of a business, IPO related costs and restructuring costs.

Retirement benefit obligations Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group's obligation under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme. The Group operates defines benefit plans in Sweden and Germany which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plans are determined using the projected unit credit method in accordance with the advice of qualified actuaries. The liability recognised in the balance sheet in respect of defined benefit plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of the plan assets. Remeasurements arising from adjustments and changes in actuarial assumptions when estimating the present value of the obligation are recognised in equity in the consolidated statement of comprehensive income in the period in which they arise.

Finance income and finance costs Finance income and finance costs which comprise interest expense on borrowings are recognised on a time proportion basis using the effective interest method.

Income tax The tax expense represents the sum of the current taxes payable and deferred tax. The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. The tax charge is included in the income statement except if it relates to an item recognised directly in equity or other comprehensive income. Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which the temporary differences can be utilised. Deferred tax liabilities are recognised for all taxable temporary differences, except: - where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and - in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures where the timing of the reversal of the temporary differences can be controlled and it is probable, that the temporary differences will not reverse in the foreseeable future.

Property plant and equipment Property, plant and equipment is shown at historical cost less subsequent depreciation and impairment. Cost represents invoiced cost plus any other costs that are directly attributable to the acquisition of the item. No depreciation is provided on freehold land. Depreciation is provided on all other property, plant and equipment to write down their cost or, where their useful economic lives have been revised, their carrying amount at the date of revision to their estimated residual values on a straight line basis over the periods of their estimated, or revised, remaining useful economic lives respectively. These lives are considered to be:

Freehold buildings Leasehold buildings Plant and equipment

50 years Over the period of the lease Between 3 and 15 years

The residual value and useful economic life are reviewed, and adjusted if appropriate at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

36

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013

Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition fair value and the amount of any minority interest in the acquiree. For each business combination, the acquirer measures the minority interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed. Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is not subject to annual amortisation but is instead tested annually for impairment and carried at cost less accumulated impairment losses. Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

Business combinations prior to 31 December 2009 In comparison to the above mentioned requirements, the following differences applied: - Business combinations were accounted for using the purchase method; - Transaction costs directly attributable to the acquisition formed part of the acquisition costs; and - The minority interests were measured at the proportionate share of the acquiree’s identifiable net assets.

Other intangible assets Other intangible assets are stated at cost less accumulated amortisation and any recognised impairment losses. Intangible assets acquired separately are measured on initial recognition at cost. An intangible asset acquired in a business combination is recognised as an intangible asset if it is separable from the acquired business or arises from contractual or legal rights, is expected to generate future economic benefits and its fair value can be measured reliably. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in the income statement in the year in which the expenditure is incurred. The expected useful lives of intangible assets are as follows: Customer relationships Capitalised development costs Computer software

Between 5 and 15 years 4 years Between 3 and 5 years

The residual value and useful economic life are reviewed, and adjusted if appropriate at each balance sheet date.

Government grants Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate.

Impairment At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Intangible assets with indefinite useful lives, including goodwill, are tested for impairment annually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount. The increase applied brings the revised carrying value to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. Goodwill impairments are never reversed.

Trade receivables Trade receivables do not carry interest and are stated at the lower of their original invoiced value and recoverable amount. Balances are written off when the probability of recovery is assessed as being remote.

Cash and short term deposits Cash and short term deposits comprise cash at bank and in hand, short-term deposits and other short-term highly liquid investments with original maturities of three months or less held for the purpose of meeting short-term cash commitments. Bank overdrafts are presented in current liabilities to the extent that there is no right of offset with cash balances.

Borrowings Borrowings are recognised initially at fair value, being the issue proceeds net of any transaction costs incurred. Borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is adjusted for the amortisation of any transaction costs. The amortisation is recognised in finance costs. All borrowings denominated in currencies other than sterling are translated at the rate ruling at the balance sheet date. 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.

37

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013

Preference shares Redeemable preference shares are classified as a financial liability measured at amortised cost until it is extinguished on redemption.

Leases Finance leases that transfer substantially all the risks and benefits incidental to ownership of the leased item to the Group, are capitalised at the commencement of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between 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 recognised in finance costs in the income statement. A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Rentals paid under operating leases (those leases where a significant portion of the risks and rewards of ownership are retained by the lessor) are charged to the income statement over the term of the lease on a straight line basis.

Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the future expected cash flows at a pre-tax rate that reflects the current market assessment of the time value of money and, where appropriate, the risks specific to the liability.

Trade and other payables Trade payables are non interest-bearing and are stated at amortised cost.

Financial instruments Financial assets The Group's financial assets comprise 'trade and other receivables' and 'cash and short term deposits' in the balance sheet. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date, which are classifies as non current assets. These assets are carried at amortised cost using the effective interest method.

Derivative financial instruments The Group uses derivative financial instruments to hedge exposure to changes in the value of specific assets, liabilities or cash flows. It does not use derivative financial instruments for speculative purposes. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and subsequently re-measured at fair value. 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: - hedges of a particular risk associated with a recognised asset or liability or a highly probable forecasted transaction (cash flow hedge); or - 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 cash flows of hedged items. The effective portion of changes in the fair value of cash flow and net investment derivatives that are designated and qualify as hedges are recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in 'net finance costs' in the income statement. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than one year, and as a current asset or liability when the remaining maturity of the hedged item is less than one year. Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedge instrument expires or is sold, terminated, exercised or no longer qualifies for hedge accounting. Any cumulative gain or loss previously recognised in other comprehensive income remains in other comprehensive income until the forecast transaction or firm commitment affects profit or loss.

Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Financial liabilities and equity instruments are classified according to the substance of the contractual arrangement entered into.

Significant accounting judgments, estimates and assumptions The preparation of the consolidated financial statements requires the Directors to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. 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 judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Areas requiring the Directors to make judgments, estimates and assumptions are highlighted in these accounting policies and throughout the notes to the consolidated financial statements. Key estimation and judgment areas are as follows: (i) Tangible and intangible assets Depreciation and amortisation rates are reviewed regularly to ensure they reflect accurately useful lives and residual values are reviewed on an annual basis in line with market conditions.

(ii) Impairment of goodwill The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated above. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates as detailed in the financial statements. (iii) Taxation The Group is subject to income taxes in the various jurisdictions in which it operates. Judgments are required in determining the consolidated provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Group recognises tax liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The amount of such liabilities is based on an assessment of various factors, such as experience of previous tax audits and differing interpretations of tax law. This assessment relies on estimates and assumptions and involves a series of complex judgments about future events. To the extent that the final tax outcome of these matters is different from the amount recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

38

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013 2. OPERATING PROFIT Year ended 31 December 2013

Revenue

Before separately disclosed items

Separately disclosed items (note 3)

£m

£m

Year ended 31 December 2012

Total

Before separately disclosed items

Separately disclosed items (note 3)

Total

£m

£m

£m

£m

279.0

-

279.0

Cost of sales

(176.0)

-

Gross profit

103.0

-

Selling and administrative expenses Other income Acquisition and integration costs Impairment of property, plant and equipment Restructuring costs IPO related costs

(58.8) 3.2 -

47.4

Operating profit

253.6

-

253.6

(176.0)

(159.4)

-

(159.4)

103.0

94.2

-

94.2

(9.0) (1.1) (0.9) (4.5) (4.2)

(67.8) 3.2 (1.1) (0.9) (4.5) (4.2)

(57.1) 4.0 -

(8.7) (6.4) -

(65.8) 4.0 (6.4) -

(19.7)

27.7

41.1

(15.1)

26.0

2013 £m

2012 £m

12.9

11.8

0.4 9.3 4.8

0.3 9.2 4.4

(1.8) (0.7) -

(1.9) (0.9) (0.5)

Year ended 31 December 2013 £m

Year ended 31 December 2012 £m

Group operating profit is arrived at after charging / (crediting): Cost of sales: Depreciation of property, plant and equipment Other operating lease rentals payable - plant and machinery - property Repairs and maintenance expenditure on property, plant and equipment Other income Government grants Rental income Gain on disposal of property, plant and equipment

Audit services: The Group paid the following amounts to its auditors in respect of the audit of the financial statements and for other services provided to the Group:

Audit Audit of the financial statements * Local statutory audits of subsidiaries

0.3

0.2

0.1 0.1 1.4

0.1 0.1 -

1.6

0.2

Other fees: Taxation compliance services Taxation advisory services IPO related corporate finance services

* £14,000 (2012: £13,000) relating to audit of the Group financial statements and £5,500 (2012: £5,000) for the audit of the Company financial statements.

3. SEPARATELY DISCLOSED ITEMS

Year ended 31 December 2013 £m

Year ended 31 December 2012 £m

Amortisation of intangible assets Impairment of property, plant & equipment Acquisition & integration costs Restructuring costs IPO related costs

9.0 0.9 1.1 4.5 4.2 19.7

8.7 6.4 15.1

Income tax

(1.3)

(2.0)

18.4

13.1

The Group presents, as separately disclosed items on the face of the consolidated statement of comprehensive income, those items of income and expense which, because of their nature, merit separate presentation to allow users to understand better the elements of financial performance in the period to facilitate a comparison with prior periods and a better assessment of trends in financial performance. A more detailed description of these costs has been included in the Strategic Report on page 10.

39

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013

4. SEGMENTAL REPORTING For management purposes, the Group is organised into three operating divisions: Europe, Americas and Rest of World. These three divisions are organised and managed separately based on the geographies served and each is treated as an operating segment and a reportable segment in accordance with IFRS 8. The operating and reportable segments were determined based on reports reviewed by the Directors which are used to make operational decisions. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on Adjusted EBITA and Adjusted EBITDA and are measured consistently in the consolidated financial statements. However, Group financing (including finance costs and finance income), IPO related costs and income taxes are managed centrally and are not allocated to operating segments. Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties and inter-segment revenues are eliminated on consolidation.

For the year ended 31 December 2013

Europe 2013 £m

Americas 2013 £m

Rest of World 2013 £m

Eliminations 2013 £m

Unallocated 2013 £m

Total 2013 £m

Operations Revenue - external customers Revenue - inter business segments

136.0 0.3

109.6 0.5

33.4 1.0

(1.8)

-

279.0 -

Total revenue

136.3

110.1

34.4

(1.8)

-

279.0

26.0

31.9

3.1

-

-

61.0

Adjusted EBITDA Depreciation

(5.5)

(5.5)

(1.9)

-

-

(12.9)

Adjusted EBITA

20.5

26.4

1.2

-

-

48.1

Management fee to private equity investor Amortisation of intangible assets Acquisition & integration costs Impairment of property, plant and equipment Restructuring costs IPO related costs

(0.3) (4.3) (0.2) (2.0) -

(0.3) (2.9) (0.9) (0.9) (1.2) -

(0.1) (1.8) (1.3) -

-

(4.2)

(0.7) (9.0) (1.1) (0.9) (4.5) (4.2)

Segmental operating profit

13.7

20.2

(2.0)

-

(4.2)

27.7

-

-

-

-

(53.3)

(53.3)

13.7

20.2

(2.0)

-

(57.5)

(25.6)

Net finance costs Profit/(loss) before tax Income tax

-

-

-

-

(6.5)

(6.5)

13.7

20.2

(2.0)

-

(64.0)

(32.1)

Segment assets Unallocated assets - deferred tax asset - cash and cash equivalents

217.4

172.0

83.4

-

-

472.8

-

-

-

-

7.0 32.0

7.0 32.0

Total assets

217.4

172.0

83.4

-

39.0

511.8

Segment liabilities Unallocated liabilities - financial liabilities - bank and other borrowings - financial liabilities - senior loan notes - financial liabilities - loan due to parent undertaking - financial liabilities - preference shares - financial liabilities - preference share dividends payable - financial liabilities - financial leases - IPO related costs creditors - deferred tax liability - current tax

(31.5)

(15.5)

(10.4)

-

-

(57.4)

-

-

-

-

(94.1) (149.7) (270.1) (34.2) (8.9) (0.6) (3.1) (11.0) (1.7)

(94.1) (149.7) (270.1) (34.2) (8.9) (0.6) (3.1) (11.0) (1.7)

Total liabilities

(31.5)

(15.5)

(10.4)

-

(573.4)

(630.8)

(9.4) (0.3)

(5.5) (0.2)

(2.3) (0.8)

-

-

(17.2) (1.3)

Profit/(loss) for the year

Other segment items Capital expenditure (property, plant and equipment) Provision for impairment of trade receivables

Allocated segment assets comprise goodwill of £322.6m, intangible assets of £18.8m, property, plant and equipment of £61.5m, government grants of £9.7m and trade and other receivables of £60.2m. Allocated segment liabilities comprise trade and other payables of £40.3m, provisions of £10.6m, retirement benefit obligations of £1.9m and other liabilities of £4.6m. The revenue analysis in the tables above is based on the location of the customer which is not materially different from the location where the order is received and where the assets are located.

Revenues 2013 £m

Geographical analysis 2013 UK Canada USA Sweden Other countries individually less than 10% of total revenue / non-current assets

Non-current assets 2013 £m

62.0 54.2 52.4 31.1 79.3

110.2 90.1 60.0 22.4 128.1

279.0

410.8

Deferred tax asset

7.0 417.8

The revenue above is based on the location of the customer. Non-current assets analysed by geography comprise property, plant and equipment, goodwill, intangible assets and non-current government grants.

40

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013

For the year ended 31 December 2012

Europe 2012 £m

Americas 2012 £m

Rest of World 2012 £m

Eliminations 2012 £m

Unallocated 2012 £m

Total 2012 £m

Operations Revenue - external customers Revenue - inter business segments

125.5 1.1

94.8 0.2

33.3 0.4

(1.7)

-

253.6 -

Total revenue

126.6

95.0

33.7

(1.7)

-

253.6

24.6

23.8

5.2

-

-

53.6

Adjusted EBITDA Depreciation

(4.8)

(5.0)

(2.0)

-

-

(11.8)

Adjusted EBITA

19.8

18.8

3.2

-

-

41.8

Management fee to private equity investor Amortisation of intangible assets Restructuring costs

(0.3) (4.1) (5.1)

(0.3) (2.7) (1.0)

(0.1) (1.9) (0.3)

-

-

(0.7) (8.7) (6.4)

Segmental operating profit

10.3

14.8

0.9

-

-

26.0

-

-

-

-

(50.2)

(50.2)

10.3

14.8

0.9

-

(50.2)

(24.2)

-

-

-

-

(0.4)

(0.4)

10.3

14.8

0.9

-

(50.6)

(24.6)

Segment assets Unallocated assets - deferred tax asset (restated) - cash and cash equivalents

212.2

165.5

88.1

-

-

465.8

-

-

-

-

6.4 30.5

6.4 30.5

Total assets

212.2

165.5

88.1

-

36.9

502.7

Segment liabilities (restated) Unallocated liabilities - financial liabilities - bank and other borrowings - financial liabilities - senior loan notes - financial liabilities - loan due to parent undertaking - financial liabilities - preference shares - financial liabilities - preference share dividends payable - deferred tax liability - current tax

(32.1)

(11.7)

(11.2)

-

-

(55.0)

-

-

-

-

(77.7) (148.6) (243.2) (34.2) (5.7) (10.9) (1.4)

(77.7) (148.6) (243.2) (34.2) (5.7) (10.9) (1.4)

Total liabilities

(32.1)

(11.7)

(11.2)

-

(521.7)

(576.7)

(8.3) (0.3)

(6.0) (0.3)

(2.0) (0.4)

-

-

(16.3) (1.0)

Net finance costs Profit/(loss) before tax Income tax Profit/(loss) for the year

Other segment items Capital expenditure (property, plant and equipment) Provision for impairment of trade receivables

Allocated segment assets comprise goodwill of £320.9m, intangible assets of £24.8m, property, plant and equipment of £54.0m, government grants of £11.5m and trade and other receivables of £54.6m. Allocated segment liabilities comprise trade and other payables of £39.2m, provisions of £9.5m, retirement benefit obligations of £2.3m and other liabilities of £4.0m. Trade and other payables and other liabilities have been restated by £0.1m and £1.1m respectively in relation to the retirement benefit obligation balance sheet disclosure. The revenue analysis in the tables above is based on the location of the customer which is not materially different from the location where the order is received and where the assets are located.

Revenues 2012 £m

Geographical analysis 2012 UK Canada USA Sweden Other countries individually less than 10% of total revenue / non-current assets

Non-current assets 2012 £m

59.0 50.4 42.7 27.1 74.4

109.5 102.8 45.8 22.3 129.0

253.6

409.4

Deferred tax asset (restated)

6.4 415.8

The revenue above is based on the location of the customer. Non-current assets analysed by geography comprise property, plant and equipment, goodwill, intangible assets and non-current government grants.

41

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013

5. STAFF COSTS Average monthly number of people (including executive directors) employed by the Group during the year: Production Selling and administration

2013 Number

2012 Number

2,988

2,735

736

756

3,724

3,491

Year ended 31 December 2013 £m

Year ended 31 December 2012 £m

The costs incurred in respect of these employees were: Wages and salaries

122.1

113.6

Social security costs

12.3

11.4

3.8

3.5

138.2

128.5

Defined contribution pension costs

Directors' remuneration Remuneration

2013 £m

2012 £m

1.4

1.6

The emoluments of the highest paid director were £0.9m (2012: £1.1m). No company contributions were made to a pension scheme on behalf of directors' qualifying services. Defined contribution pension schemes The Group operates a defined contribution schemes in the UK and other territories across the Group. The assets of these schemes are held separately from those of the Group, being invested in funds under the control of a number of insurance companies. The pension charge includes contributions payable by the Group to the various insurance companies.

6. NET FINANCE COSTS

Year ended 31 December 2013 £m

Year ended 31 December 2012 £m

Finance costs: Bank loans Senior loan notes Loan owed to parent undertaking Preference share dividend Other loans and charges Amortisation of debt issue costs

3.9 16.3 26.8 3.2 1.5 1.7

4.1 16.3 24.3 3.0 1.1 1.5

Total finance costs

53.4

50.3

Finance income: Interest income on short term deposits

(0.1)

(0.1)

Total finance income

(0.1)

(0.1)

Net finance costs

53.3

50.2

42

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013 7. INCOME TAX

Current year tax charge

Year ended 31 December 2013

Restated Year ended 31 December 2012

The taxation charge for the year comprises: Current tax Income tax: - UK - overseas

£m

£m

7.0

0.1 4.7

Adjustments in respect of previous year Income tax: - UK - overseas

(0.6) 0.6

(0.9)

7.0

3.9

Deferred taxation Origination and reversal of temporary differences - UK - overseas

(1.9) 1.7

(2.0) 1.8

Adjustments in respect of previous year - UK - overseas Total deferred tax

(0.3) (0.5)

(3.3) (3.5)

6.5

0.4

Total current tax

Total income tax expense There is no tax recorded in other comprehensive income. A reconciliation of the total tax charge for the year compared to the effective rate of corporation tax is summarised below:

(Loss) on ordinary activities before tax Tax at 23.25% (2012: 24.5%) Effects of: Permanent differences arising from UK and overseas operations Withholding tax written off Rate and translation differences Current year losses unrelieved Adjustments in respect of previous periods Movement in previously unrecognised temporary differences Other adjustments to deferred tax in respect of previous periods Total charge for the year

Year ended 31 December 2013 £m

Year ended 31 December 2012 £m

(25.6)

(24.2)

(6.0)

(5.9)

7.3 1.3 3.6 0.6 (0.3)

6.9 0.1 0.1 3.4 (0.9) (2.6) (0.7)

6.5

0.4

The Group has tax losses of £81.2m (2012: £61.4m) which arose in various jurisdictions and that are available for offset against future taxable profits of the companies in which the losses arose. The majority of the losses are available for carry forward indefinitely. The major jurisdictions affected are UK £57.8m (2012: £45.2m), USA £3.8m (2012: £1.1m), Sweden £16.7m (2012: £12.9m), Saudi Arabia £1.7m (2012: £1.8m) and Singapore £0.5m (2012: £0.6m). Deferred tax assets of £3.3m (2012: £2.6m) have been recognised for some of the losses carried forward on the basis that it is sufficiently certain that those losses will be utilised against future profits. Permanent differences arising from UK and overseas operations primarily consist of disallowed interest on shareholder loans.

43

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013

8. PROPERTY, PLANT AND EQUIPMENT Land and buildings £m

Plant and equipment £m

Total £m

Cost As at 1 January 2012 Exchange adjustments Additions Disposals

22.4 (0.4) 1.8 (0.7)

73.2 (1.3) 14.5 (0.7)

95.6 (1.7) 16.3 (1.4)

At 31 December 2012

23.1

85.7

Exchange adjustments Acquisition of subsidiaries (note 10) Additions Disposals

(0.7) 0.9 2.7 -

(3.1) 3.9 15.8 (0.1)

At 31 December 2013

26.0

Accumulated depreciation As at 1 January 2012 Exchange adjustments Charge for the year Disposals

5.6 (0.1) 1.6 (0.2)

38.7 (0.7) 10.2 (0.3)

44.3 (0.8) 11.8 (0.5)

At 31 December 2012

6.9

47.9

54.8

Exchange adjustments Impairment Charge for the year Disposals

(0.2) 1.8 -

(1.6) 0.9 11.1 (0.1)

(1.8) 0.9 12.9 (0.1)

At 31 December 2013

8.5

58.2

66.7

Net book value at 31 December 2013

17.5

44.0

61.5

Net book value at 31 December 2012

16.2

37.8

54.0

Land and buildings comprise:

2013 £m

2012 £m

Cost Freehold Long leasehold Short leasehold

9.0 5.2 11.8

9.3 4.3 9.5

26.0

23.1

2.0 2.0 4.5

1.7 1.6 3.6

8.5

6.9

Accumulated depreciation Freehold Long leasehold Short leasehold

102.2

Finance leases The carrying value of property, plant and equipment held under finance leases at 31 December 2013 was £0.6m. Additions during the year include £0.6m of property, plant and equipment under finance leases. Leased assets are pledged as security for the related finance lease. Security Borrowings have been provided by a banking syndicate who have security over the assets of the material entities of the Group. In 2013, the carrying amount of these assets was £49.4m (2012: £42.9m)

44

108.8 (3.8) 4.8 18.5 (0.1) 128.2

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013

9. GOODWILL £m Cost and net book value As at 1 January 2012 Exchange adjustment

327.2 (6.3)

At 31 December 2012 Exchange adjustment Acquisition of subsidiaries (note 10)

320.9 (9.7) 11.4

At 31 December 2013

322.6

Goodwill is allocated to the group's cash-generating units (CGUs) identified according to operating segment. A summary of the carrying amounts of goodwill by operating segments (representing groups of cash generating units) is presented below:

2013 £m

2012 £m

Europe Americas Defiance Testing & Engineering Services Inc. Rest of World

145.3 103.1 11.1 63.1

145.4 110.3 65.2

At 31 December

322.6

320.9

Impairment reviews Goodwill has been tested for impairment by comparing the carrying amount of each cash-generating unit (''CGU''), including goodwill, with the recoverable amount. The recoverable amounts are determined from value-in-use calculations. The key assumptions for the value-in-use calculations are those regarding operating margin, discount rates and growth rates. The operating margin is based on past performance and expectations as set out in the latest forecasts for the next five years for the CGUs as approved by management and the discount rate reflects current market assessment of the time value of money and the risks specific to the CGUs. The Group prepares cash flow forecasts derived from the most recent five year financial forecasts approved by management plus a terminal value at the end of the 5 year period, based on an appropriate industry multiple of EBITDA. The Group's long-term growth rates reflect industry experience by geographic area creating an average estimated Group growth rate of 2.5% (2012: 2.5%). The pre-tax rate used to discount the cash flows is the Group's weighted average cost of capital of 9.7% (2012: 9.7%). The characteristics of the CGUs are largely similar to each other and therefore the same pre-tax weighted average cost of capital and long term growth rates have been applied to each CGU. Impairment reviews were carried out at the year end by comparing the carrying value of goodwill with the recoverable amount of the CGUs to which goodwill has been allocated. Management determined that there has been no impairment. Base case forecasts show significant headroom above carrying value for each CGU with the exception of Rest of World. Sensitivity analysis has been undertaken for each CGU to assess the impact of any reasonably possible change in key assumptions. With the exception of the Rest of World there is no reasonably possible change that would cause the carrying values to exceed recoverable amounts of goodwill. In respect of Rest of World operations, management has concluded that a reasonably possible change in a key assumption could cause the carrying values to exceed recoverable amounts. Under the current assumptions, the recoverable amount exceeds carrying amount by £43.8m. A decrease in forecast cash flows of 25% will result in the carrying value being equal to recoverable amounts.

45

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013 10. BUSINESS COMBINATIONS Acquisitions in 2013 During the year, the Group acquired a number of companies. (a) Defiance Testing & Engineering Services Inc. (Defiance) On 30 September 2013 the Group acquired 100% of the share capital of Defiance Testing & Engineering Services Inc., a company based in the USA, for a cash consideration of £19.2m (£18.4m net of cash acquired). Defiance provides testing and engineering services to manufacturers and leading suppliers in the passenger car, light truck, bus and military vehicle sectors. Its range of capabilities include component and systems testing, system simulation, engine performance and full vehicle structural testing. Its addition to the Exova Group, combined with our existing capability, will make us one of the leading providers of transportation testing services in North America.

(b) GSMobile On 17 November 2013 the Group acquired 100% of the share capital of GSMobile, a company based in the Czech Republic, for a cash consideration of £0.8m (£0.6m net of cash acquired). GSMobile is an ISO 17025 accredited calibration service provider specialising in RF and Microwave, supporting the telecoms and electronics sectors within the Czech Republic, Slovakia, Hungary, Ukraine, Romania and Poland. The business brings expertise which will strengthen and broaden the capabilities of Exova Metech within these markets and creates a platform for the company’s ambitious expansion plans.

(c) Vestas On 30 November 2013 the Group acquired Vestas' in-house calibration capacity in Denmark and USA for a cash consideration of £0.9m. This resulted in the transfer of technology, assets and 18 skilled personnel as part of a long-term agreement to be the sole provider of calibration services across the globe. The move comes about as a result of a long-term relationship between the two companies and the ability of Exova Metech to apply its flexible operating model to meet directly the needs of Vestas. A further site in China is likely to be acquired in 2014.

The provisional fair values are set out in the following table:

Property, plant & equipment Intangible assets Deferred tax assets Trade and other receivables Cash and cash equivalents Trade and other payables Current tax liabilities Long term provisions Deferred tax liabilities Net assets acquired Goodwill Total purchase price Acquired cash and cash equivalents Net cash outflow on acquisition

Defiance £m

Other £m

Total £m

3.3 3.2 1.9 2.8 0.8 (0.9) (0.1) (1.2) (2.0) 7.8 11.4 19.2 (0.8)

1.5 0.2 1.7 1.7 (0.2)

4.8 3.2 1.9 2.8 1.0 (0.9) (0.1) (1.2) (2.0) 9.5 11.4 20.9 (1.0)

18.4

1.5

19.9

As at 31 December 2013, the initial accounting is not yet complete and the fair value amounts disclosed may be subject to further adjustments following completion of the fair value assessment exercise. Goodwill The goodwill of £11.4m comprises the fair value of the expected synergies arising from the acquisition and the value of the human capital that does not meet the criteria for recognition as a separable intangible asset. Consideration paid The total cash consideration paid for the acquisitions in the year was £20.9m (2012: nil). Contribution of acquisitions to revenue and profits The Group revenue and operating profit (before amortisation) for the year ended 31 December 2013 would have been £289.3m (compared to actual of £279.0m) and £39.7m (compared to actual of £36.7m) respectively if the acquisitions were assumed to have been made on 1 January 2013. From the dates of acquisition the newly acquired subsidiaries contributed £2.5m to revenue and £0.6m to operating profit (before amortisation) in the year ended 31 December 2013.

46

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013

11. INTANGIBLE ASSETS Customer relationships £m

Capitalised development costs £m

Cost As at 1 January 2012 Exchange movement Additions Disposals

61.7 (1.1) -

0.4 (0.4)

1.9 0.5 -

64.0 (1.1) 0.5 (0.4)

At 31 December 2012

60.6

-

2.4

63.0

Exchange movement Acquisition of subsidiaries (note 10) Additions

(1.7) 3.2 0.2

-

(0.1) 0.3

(1.8) 3.2 0.5

At 31 December 2013

62.3

-

2.6

64.9

Accumulated amortisation As at 1 January 2012 Exchange movement Charge for the year Disposals

28.8 (0.5) 8.5 -

0.2 (0.2)

1.3 (0.1) 0.2 -

30.3 (0.6) 8.7 (0.2)

At 31 December 2012

36.8

-

1.4

38.2

Exchange movement Charge for the year

(1.1) 8.7

-

0.3

(1.1) 9.0

At 31 December 2013

44.4

-

1.7

46.1

Net book value at 31 December 2013

17.9

-

0.9

18.8

Net book value at 31 December 2012

23.8

-

1.0

24.8

2013 £m

2012 £m

11.5 (1.1) 1.8 (0.2) (2.3)

12.5 (0.2) 1.9 (0.3) (2.4)

At 31 December

9.7

11.5

Current Non-current

1.8 7.9

1.8 9.7

At 31 December

9.7

11.5

Computer software £m

Total £m

12. GOVERNMENT GRANTS

Opening balance Exchange adjustment Amount earned in the year Cash received in the year Utilised during the year

Government grants are receivable in relation to research and development expenditure. Accumulated tax credits ("SRED - Scientific Research and Experimental Development") from R&D expenditure in Canada can be used to settle future cash tax liabilities and can be carried forward for up to 20 years.

47

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013 13. INVESTMENT IN SUBSIDIARIES A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest is given below.

Country of Incorporation

Principal Activity

Percentage holding

Subsidiary Undertakings Exova Topco Limited Exova Holdings Limited Exova PLC Exova Group (UK) Limited MTS Pendar Limited Warrington Fire Research Group Ltd Exova (UK) Limited Exova Warrington Fire Consulting (Guernsey) Ltd Warrington Fire Research Gent NV Exova S.r.o. Exova Metech S.r.o. Exova Metech AS Exova Metech Oy Exova SA Exova (Holdings) GmbH Exova Metech GmbH Exova GmbH Exova (Ireland) Limited Exova Srl Centro Triveneto Richerche Srl Exova BV Exova (Holdings) B.V. Exova (Rotterdam) BV Exova A/S Exova (Sweden) Holdings AB Exova AB CSM NDT Certification AB Exova Metech AB Exova (US) Holdings Inc Exova Inc. Defiance Testing & Engineering Services Inc. Exova (Canada) Inc. Exova Property Holdings Inc. Exova (Mexico) Testing Inc. Exova Warringtonfire Middle East LLC * Al Futtaim Exova LLC * Exova Limited & Co. LLC Exova (Qatar) LLC * Exova (Saudi Arabia) Limited * Exova Warrington Aus Pty Limited Exova (Cayman) Limited Exova Warringtonfire (Hong Kong) Limited Exova (Singapore) Pte Limited

UK Holding UK Holding UK Holding UK Holding UK Holding UK Holding UK Testing Channel Islands Testing Belgium Testing Czech Republic Testing Czech Republic Testing Denmark Testing Finland Testing France Testing Germany Holding Germany Testing Germany Testing Ireland Testing Italy Testing Italy Testing Netherlands Testing Netherlands Holding Netherlands Testing Norway Testing Sweden Holding Sweden Testing Sweden Testing Sweden Testing US Holding US Testing US Testing Canada Testing Canada Property Holding Mexico Testing Dubai Testing Dubai Testing Oman Testing Qatar Testing Saudi Arabia Testing Australia Testing Cayman Islands Testing Hong Kong Testing Singapore Testing

100% 100% 100% 100% 100% 100% 100% 100% 65% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 80% 100% 100% 100% 100% 100% 100% 100% 49% 49% 70% 49% 50% 100% 100% 100% 100%

* These companies are treated as subsidiaries in the results of the Group as effective control over their operations exists, as described in the shareholder and management services agreements with the relative parties. The Company is taking the exemption available under Section 410 of the Companies Act 2006 to only disclose principal subsidiaries. Exova Topco shareholding is held directly whilst all others are held through wholly owned subsidiaries.

48

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013

14. TRADE AND OTHER RECEIVABLES 2013 £m

2012 £m

Trade receivables Less: provision for impairment of receivables

46.8 (1.3)

43.4 (1.0)

Net trade receivables Other receivables Prepayments and accrued income

45.5 4.4 10.3

42.4 3.7 8.5

60.2

54.6

The average credit period on sales was 63 days (2012: 61 days).

£m

Analysis of trade receivables Neither impaired nor past due Past due but not impaired Impaired

34.3 11.2 1.3

30.1 12.3 1.0

46.8

43.4

£m

The ageing of past due but not impaired trade receivables Up to 3 months Over 3 months

£m

£m

11.1 0.1

12.0 0.3

11.2

12.3

Ageing of impaired trade receivables

£m

£m

Up to 3 months Over 3 months

0.1 1.2

1.0

1.3

1.0

£m

£m

1.0 (0.1) 1.2 (0.3) (0.5)

1.5 0.4 (0.5) (0.4)

1.3

1.0

Movements on the provision for impairment of trade receivables Opening balance Exchange adjustment Provision for receivables impairment Amounts recovered during the year Receivables written off during the year as uncollectible At 31 December As at 31 December 2013 £1.3m trade receivables (2012: £1.0m) were determined to be impaired based on age and recoverability of the debt and fully provided for.

15. TRADE AND OTHER PAYABLES 2013 £m Trade payables Other taxes and social security Other payables Accruals and deferred income

49

Restated 2012 £m

8.7 3.6 21.8 9.3

7.2 4.1 18.5 9.4

43.4

39.2

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013 16. BANK AND OTHER BORROWINGS Amounts falling due in: less than one more than one year year £m £m

Total 2013 £m

Amounts falling due in: less than more than one year one year £m £m

Total 2012 £m

Senior bank loans Senior loan notes Other short term borrowings Loan due to non-controlling interests Finance leases Debt issue costs - senior bank loans Debt issue costs - senior loan notes

0.3 0.3 0.2 -

95.7 155.0 0.4 (2.2) (5.3)

95.7 155.0 0.3 0.3 0.6 (2.2) (5.3)

0.1 -

78.3 155.0 0.4 (1.1) (6.4)

78.3 155.0 0.5 (1.1) (6.4)

Financial liabilities - bank and other borrowings

0.8

243.6

244.4

0.1

226.2

226.3

Financial liabilities - loan due to parent undertaking Financial liabilities - preference shares Financial liabilities - preference share dividends payable

-

270.1 34.2 8.9

270.1 34.2 8.9

-

243.2 34.2 5.7

243.2 34.2 5.7

0.8

556.8

557.6

0.1

509.3

509.4

The following analysis details outstanding borrowings, the facilities available to the Group and the undrawn amounts at the balance sheet date.

less than one year £m

Maturity

Amounts falling due in: between one between two and two years and five years £m £m

Cash at bank

(32.0)

-

Cash and cash equivalents in the cash flow statement Senior bank loans Senior loan notes Loan due to parent undertaking Preference shares Preference share dividends payable Other short term borrowings Loan due to non-controlling interests Finance leases Debt issue costs - senior bank loans Debt issue costs - senior loan notes

(32.0) 0.3 0.3 0.2 (31.2)

-

(32.0)

0.2 -

95.7 155.0 270.1 0.2 (2.2) (5.3)

34.2 8.9 -

(32.0) 95.7 155.0 270.1 34.2 8.9 0.3 0.3 0.6 (2.2) (5.3)

0.2

513.5

43.1

525.6

-

-

29.9 4.7 30.1 0.2

513.5

43.1

622.5

29.9 4.7 30.1 0.2

-

Total facilities

65.7

0.2

£m

Total 2013 £m

-

Undrawn facilities Senior bank loan Bank overdrafts Revolving credit facility Credit card facility

less than one year

after five years £m

Amounts falling due in: between one between two and two years and five years

after five years

Total 2012

£m

£m

£m

Cash at bank

(30.5)

-

-

-

(30.5)

Cash and cash equivalents in the cash flow statement Senior bank loans Senior loan notes Loan due to parent undertaking Preference shares Preference share dividends payable Loan due to non-controlling interests Debt issue costs - senior bank loans Debt issue costs - senior loan notes

(30.5) 0.1 -

0.1 -

78.3 0.2 (1.1) -

155.0 243.2 34.2 5.7 0.1 (6.4)

(30.5) 78.3 155.0 243.2 34.2 5.7 0.5 (1.1) (6.4)

(30.4)

0.1

77.4

431.8

478.9

-

-

4.7 30.1 0.2

77.4

431.8

544.4

Maturity

Undrawn facilities Bank overdrafts Revolving credit facility Credit card facility

4.7 30.1 0.2

-

Total facilities

35.1

0.1

50

£m

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013

Preference Shares Authorised: 50,000,000 preference shares of £1 each Allotted, issued and fully paid: 34,216,549 preference shares of £1 each

Total 2013 £m

Total 2012 £m

50.0

50.0

34.2

34.2

At 31 December 2013 there were 34,216,459 redeemable preference shares in issue. Each share has a par value of £1 and has no fixed redemption date. The preference shares carry a dividend of 8% per annum, capitalised annually in arrears on 31 December for dividend calculation purposes. The dividend rights are cumulative. The preference shares rank ahead of the ordinary shares in the event of liquidation.

17. FINANCIAL INSTRUMENTS Financial risk management objectives & policies The Group Board has the responsibility for setting the financial risk management policies applied by the Group. The policies are implemented by the central treasury department which receives regular reports from the operating companies to enable prompt identification of financial risks so that the appropriate actions may be taken. (i) Foreign exchange risk policy The Group has operations in 22 countries and is therefore exposed to foreign exchange translation risk when the profits and net assets of these entities are consolidated into the Group Accounts. Assets are partially hedged, where appropriate, by matching the currency of borrowings to the net assets of the subsidiaries. It is Group policy not to hedge the translational exposure arising from profit and loss items. Transaction related foreign exchange exposures arise when entities within the Group enter into contracts to pay or receive funds in a currency different from the functional currency of the entity concerned. It is Group policy that all operating units eliminate exposures on material committed transactions usually by undertaking forward foreign currency contracts through the Group's treasury function. (ii) Net Investment in foreign operations EUR variable loans included in interest-bearing loans and borrowings, amounting to EUR 23.6m (2012: EUR 24.1m) and USD variable loans included in interest-bearing loans and borrowings, amounting to USD 125.3m (2012: USD 94.8m) have been designated as a hedge of the Group's exposure to translational foreign exchange risk on its net investments in foreign operations. Gains or losses on the retranslation of the borrowings are transferred to equity to offset any gains or losses on translation of the net investments in these subsidiaries. (iii) Interest rate risk policy The Group's borrowings are at a fixed rate of interest for the senior loan notes and at variable rates of interest for the senior bank facilities. Interest rate risk is regularly monitored to ensure that the mix of variable and fixed rate borrowing is appropriate for the Group in the short to medium-term. (iv) Credit risk policy Concentrations of credit risk with respect to trade receivables are limited due to the Group's customer base being large and unrelated. Consequently, management believe there is no further credit risk provision required in excess of a normal provision for doubtful receivables. Therefore, the maximum exposure to credit risk at the reporting date is the fair value of each class of receivable. The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer and before accepting any significant new customer, the Group uses an external credit scoring system to assess the potential customer's credit quality and defines a credit limit for the customer. The geographic profile of credit risk over the period of these financial statements is broadly in line with that of revenue in note 4. (v) Liquidity risk policy The Group actively maintains a mixture of committed facilities that are designed to ensure the Group has sufficient available funds for existing operations and planned expansions. Management monitors rolling forecasts of the Group's liquidity reserve (comprising undrawn borrowing facility and cash and cash equivalents (note 16)) on the basis of expected cash flow. The Group's liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these; monitoring balance sheet liquidity ratios against internal and external requirements and maintaining debt financing plans. The Group has no derivative financial instruments which will be settled on a gross basis.

51

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013 Carrying amounts & fair values Set out below is a comparison by category of carrying amounts and fair values of all the Group's financial instruments that are carried in the financial statements.

Fair value measurement Level

Carrying amount 2013 £m

Fair value 2013 £m

Carrying amount 2012 £m

Fair value 2012 £m

Amortised costs Non-derivative financial assets Trade receivables Cash and short term deposits

1 1

(45.5) (32.0)

(45.5) (32.0)

(42.4) (30.5)

(42.4) (30.5)

Non-derivative financial liabilities Trade payables Senior bank loans Senior loan notes Loan due to parent undertaking Preference shares Preference share dividends payable Finance leases Other short term borrowings Loan due to non-controlling interests

1 2 2 2 2 2 2 2 2

8.7 93.5 149.7 270.1 34.2 8.9 0.6 0.3 0.3

8.7 93.5 160.7 270.1 34.2 8.9 0.6 0.3 0.3

7.2 77.2 148.6 243.2 34.2 5.7 0.5

7.2 77.2 156.0 243.2 34.2 5.7 0.5

488.8

499.8

443.7

451.1

At 31 December 2012 and 31 December 2013, the Group held all financial instruments at level 2 fair value measurement. Between 31 December 2012 and 31 December 2013, there were no transfers between level 1 and level 2 fair value measurements and no transfers into or out of level 3 fair value measurements. For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. The fair value of cash and short-term deposits, trade and other receivables and trade and other payables approximates to their carrying amounts due to the short-term maturities of these instruments. The fair value of borrowings and obligations under finance leases have been estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risks and remaining maturities. The carrying amount of financial instruments of the Group, i.e. trade receivables and payables that are included in the above table, is a reasonable approximation of fair value. The fair value of the senior loan notes have been calculated on the basis of a quoted price at the year end in an inactive market. The fair value of all other items have been calculated by discounting the expected future cash flows at prevailing interest rates.

Liquidity and credit risk The Group manages liquidity risk by maintaining adequate banking facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The Group has at its disposal additional undrawn facilities which further reduce the liquidity risk and are disclosed above. The following analysis details the contractual maturities of financial liabilities at the balance sheet date including interest and principal cash flows, using undiscounted cash flows. For floating rate financial liabilities, the interest applied in the analysis below has been calculated using the prevailing rate at the year end.

in less than one year £m

At 31 December 2013 Amortised cost: Non-derivative financial liabilities Trade payables Senior bank loans Senior loan notes Loan owed to parent undertaking Preference shares Finance leases Other short term borrowings Loans due to non-controlling interests

8.7 4.3 16.3 0.2 0.3 0.3

30.1

in less than one year £m

At 31 December 2012 Amortised cost: Non-derivative financial liabilities Trade payables Senior bank loans Senior loan notes Loan owed to parent undertaking Preference shares Loans due to non-controlling interests

7.2 3.6 16.3 0.1

27.2

52

Amounts falling due: between one between two and two years and five years £m £m

4.3 16.3 0.2 -

20.8

101.4 203.8 446.6 0.2 -

after five years £m

62.4 -

Total 2013 £m

8.7 110.0 236.4 446.6 62.4 0.6 0.3 0.3

752.0

62.4

865.3

Amounts falling due: between one between two and two years and five years £m £m

after five years £m

Total 2012 £m

3.6 16.3 0.1

20.0

85.8 48.8 0.4

135.0

171.3 446.6 62.4 -

680.3

7.2 93.0 252.7 446.6 62.4 0.6

862.5

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013 Interest rate risk The following table analyses the carrying amount of the Group's financial instruments between fixed and floating rate:

Fixed rate Net Debt 2013 £m Currency and interest rate profile Currency Sterling Euro US dollar Canadian dollar Swedish krona UAE dirham Qatar rial Other

463.3 0.1 0.1 0.3 0.3

Floating rate Net Debt 2013 £m

19.5 74.0 -

Cash at bank 2013 £m

Total 2013 £m

(10.0) (2.9) (2.5) (2.9) (2.1) (5.7) (2.5) (3.4)

453.3 16.6 71.6 (2.8) (2.1) (5.4) (2.5) (3.1)

464.1

93.5

(32.0)

525.6

Fixed rate Net Debt 2012 £m

Floating rate Net Debt 2012 £m

Cash at bank 2012 £m

Total 2012 £m

Currency and interest rate profile Currency Sterling Euro US dollar Canadian dollar Swedish krona UAE dirham Qatar rial Other

431.7 0.5 -

19.4 57.8 -

(11.1) (4.1) (0.7) (1.1) (2.2) (4.3) (3.9) (3.1)

420.6 15.3 57.1 (1.1) (2.2) (3.8) (3.9) (3.1)

432.2

77.2

(30.5)

478.9

Increase in basis points

Effect on profit before tax gain/(loss) £m

Effect on equity gain/(loss) £m

+100 +100

(0.2) (0.7)

Increase in basis points

Effect on profit before tax gain/(loss) £m

+100 +100

(0.2) (0.6)

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant.

2013 Euro US dollar

2012 Euro US dollar

53

-

Effect on equity gain/(loss) £m -

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013 Foreign exchange risk The following table demonstrates the sensitivity to sterling strengthening by 25% in these respective foreign currency exchange rates with all other variables held constant, of the Group's profit / (loss) before tax (due to foreign exchange translation of monetary assets and liabilities) and the Group's equity (due to changes in net investment hedges). The impact of translating the net assets of foreign operations into sterling is excluded from the sensitivity analysis.

Increase in currency rate

Effect on profit before tax gain/(loss) £m

Effect on equity gain/(loss) £m

+25% +25% +25% +25% +25% +25%

(3.4) (0.5) (0.4) (4.9) (0.2) (0.2)

(18.9) (5.5) (4.9) (8.4) (0.7)

Increase in currency rate

Effect on profit before tax gain/(loss) £m

Effect on equity gain/(loss) £m

+25% +25% +25% +25% +25% +25%

(1.6) (0.6) (0.3) (1.6) (0.4) (0.2)

(21.3) (5.1) (5.0) (8.6) (2.5)

Average rate 2013

Closing rate 2013

Average rate 2012

Closing rate 2012

1.1765 1.5645 1.6106 10.1576 5.7477 5.7005

1.1979 1.6491 1.7640 10.6906 6.0580 6.0092

1.2313 1.5859 1.5882 10.7179 5.8263 5.7852

1.2234 1.6168 1.6118 10.5249 5.9386 5.8877

2013 Canadian dollar Euro Swedish krona US dollar UAE dirham Qatar rial

2012 Canadian dollar Euro Swedish krona US dollar UAE dirham Qatar rial

The following significant exchange rates applied during the year:

Euro US dollar Canadian dollar Swedish krona UAE dirham Qatar riyal

54

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013 18. CAPITAL MANAGEMENT The primary objective of the Group's capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions. As the company is a private equity backed business, the loan due to parent undertaking is considered to represent equity rather than debt in the consideration of capital management. The Group monitors capital using the following indicators. Gearing ratio Gearing is calculated as net debt divided by total equity, including loan due to parent undertaking, preference shares and preference share dividends. Net debt represents the carrying value of all financing including senior loan notes, bank financing, other external loans and finance leases, net of cash and short term deposits. Net debt does not include loans from parent undertakings, preference shares, accrued dividends or capitalised debt issue costs. Restated

2013 Net debt (£m) Total equity including loan to parent undertaking, preference shares and preference share dividends (£m) Gearing ratio (%)

219.9 194.2 113

2012 203.3 209.1 97

Net debt to adjusted EBITDA cover Net debt to Adjusted EBITDA ratio is calculated as Adjusted EBITDA divided by net debt. Adjusted EBITDA is defined as operating profit from continuing operations before restructuring costs, loss on disposal of subsidiary, IPO related costs, acquisition and integration costs, management fee to private equity investor, depreciation, intangibles amortisation and impairment of assets.

2013 Net debt (£m) Operating profit (£m) Impairment of property, plant and equipment (£m) Acquisition and Integration costs (£m) Restructuring costs (£m) IPO related costs (£m) Management fee to private equity investor (£m) Depreciation and intangibles amortisation (£m) Adjusted EBITDA (£m) Net debt to adjusted EBITDA cover (ratio)

219.9 27.7 0.9 1.1 4.2 4.5 0.7 21.9 61.0 3.60

2012 203.3 26.0 6.4 0.7 20.5 53.6 3.79

Interest cover Interest cover comprises operating profit from continuing operations before separately disclosed items divided by the net finance costs excluding interest on loan to parent undertaking, preference share dividends and amortisation of debt issue costs ('net interest costs'), for the 12 months to 31 December.

Operating profit before separately disclosed items (£m) Net interest costs (£m) Interest cover (ratio)

2013

2012

47.4 21.6 2.2

41.1 21.4 1.9

19. PROVISIONS

Opening balance Exchange adjustment Additions in year Utilised Released during the year At 31 December

Current Restructuring 2013 £m

Non current Restructuring 2013 £m

Non current Dilapidations 2013 £m

Total 2013 £m

Current Restructuring 2012 £m

2.7 (0.1) 3.7 (3.3) -

1.8 0.2 (0.2) (0.3)

5.0 (0.1) 2.1 (0.2) (0.7)

9.5 (0.2) 6.0 (3.7) (1.0)

1.3 2.5 (0.9) (0.2)

3.0

1.5

6.1

10.6

2.7

Restructuring provisions relate to termination payments payable within 2 years and onerous lease costs payable within 9 years. Provisions have been recognised for the dilapidation costs associated with exiting operating leases which have an average life of 5 to 7 years.

55

Non current Restructuring 2012 £m

Non current Dilapidations 2012 £m

Total 2012 £m

0.6 1.2 -

5.1 (0.1) 0.1 (0.1)

7.0 (0.1) 3.8 (0.9) (0.3)

1.8

5.0

9.5

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013 20. DEFERRED TAX The government has announced that it intends to reduce the rate of UK corporation tax rate to 20% by 1 April 2015. The rate of corporation tax reduced from 24% to 23%, effective from 1 April 2013, and was enacted in July 2012. Further reductions in the corporation tax rate to 21%, effective from 1 April 2014 and to 20% effective from 1 April 2015, were enacted on 2 July 2013. The reduction in the rate to 20% was enacted as at the balance sheet date, and reduces the tax rate expected to apply when timing differences reverse.

Losses £m

Tangible fixed assets timing differences £m

Intangible assets timing differences £m

Deferred tax assets Deferred tax liabilities

(3.3) -

(0.9) 1.7

6.1

2.9

(2.0) -

(0.6) -

(0.2) 0.3

(7.0) 11.0

Net deferred tax liability

(3.3)

0.8

6.1

2.9

(2.0)

(0.6)

0.1

4.0

Accrued interest disallowed until paid £m

Provisions/ accruals £m

Intangible assets timing differences £m

Research & Development £m

Accrued interest disallowed until paid £m

Provisions/ accruals £m

Other £m

2013 Total £m

Losses £m

Tangible fixed assets timing differences £m

Deferred tax assets Deferred tax liabilities

(0.5) -

(1.2) 0.8

6.7

2.9

(3.8) -

Net deferred tax liability

(0.5)

(0.4)

6.7

2.9

(3.8)

Research & Development £m

Other £m

Restated 2012 Total £m

-

(0.9) 0.5

(6.4) 10.9

-

(0.4)

4.5

Deferred tax assets have been recognised in respect of certain losses where it is sufficiently certain that they will be utilised against taxable profits in the foreseeable future. The deferred tax liability includes £3.7m (2012: £5.6m) in respect of customer relationships and is being amortised over 7 years. These balances are mainly made up of losses, fixed asset timing differences, intangible assets timing differences, research and development and accrued interest disallowed until paid. The amount recognised as a deferred tax liability relates to tax payable on the use of research credits in Canada. The benefit of the research credits is reflected separately in the balance sheet outwith deferred tax. Other comprises small balances across a number of entities in the group operating in different jurisdictions and in 2012 it includes the restated values (note 1).

56

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013 21. ISSUED SHARE CAPITAL AND RESERVES Ordinary shares of £1 each

2013 £m

2012 £m

Authorised 10,000,000 ordinary shares of £1 10,000,000 A ordinary shares of £1 10,000,000 B ordinary shares of £1

10.0 10.0

10.0 -

Allotted, issued and fully paid: 3,927,961 ordinary shares of £1 each 3,695,311 A ordinary shares of £1 each 232,650 B ordinary shares of £1 each

3.7 0.2

3.9 -

At 31 December

3.9

3.9

2013 £m

2012 £m

Authorised 5,000,000 ordinary shares of £1

5.0

5.0

Allotted, issued and fully paid: 500,000 ordinary shares of £1 each

0.5

0.5

At 31 December

0.5

0.5

2013 £m

2012 £m

5.0

5.0

Nil

-

-

At 31 December

-

-

Preferred Ordinary shares of £1 each

Deferred Ordinary shares of £1 each Authorised 5,000,000 ordinary shares of £1 Allotted, issued and fully paid:

On 6 November 2013, a special resolution was passed whereby the ordinary shares were divided into A ordinary shares and B ordinary shares The Company has two classes of ordinary shares and one class of preferred ordinary shares which carry no right to fixed income. No deferred shares were issues during the year. All other reserves are included in the statement of changes in equity. Foreign currency translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations, as well as from the translation of the liabilities that hedge the Group's net investment in a foreign subsidiary. Capital contribution reserve The capital contribution reserve was created on 3 October 2011 following the execution of a deed of release whereby Exova Group B.V. agreed to unconditionally and irrevocably release Exova Topco Limited from its obligation to repay the sum of £102.5m from the current sum outstanding under the group undertaking loan agreement. On 16 November 2011, following a resolution by Exova Group Limited, the existing holders of the preference shares of Exova Group Limited waived their right to receive any of the accrued preference dividends at the rate of 15% to the 31 December 2010 totalling £12.4m. Furthermore, the preference rate dividend has been reset from 15% to 8% per annum with effect from 1 January 2011. The capital contribution reserve is distributable in future periods, subject to the provisions of the Companies Act 2006.

57

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013

22. COMMITMENTS (a) Capital commitments At 31 December Contracted for but not provided

2013 £m

2012 £m

1.7

4.2

(b) Operating lease commitments The total of future minimum lease payments in respect of non-cancellable operating leases are as follows:

Land and buildings 2013 £m At 31 December Within one year Between two and five years After five years

Other 2013 £m

Total 2013 £m

Land and buildings 2012 £m

Other 2012 £m

Total 2012 £m

7.8 17.0 8.2

0.8 0.5 -

8.6 17.5 8.2

7.3 17.7 8.9

0.9 0.8 -

8.2 18.5 8.9

33.0

1.3

34.3

33.9

1.7

35.6

The Group leases various properties and plant and equipment under non-cancellable operating lease agreements. The leases have various terms and renewal rights. The Group has also sub-let certain properties under non-cancellable sublease agreements and the total of future minimum lease payments expected to be received amounts to £1.4m (2012: £1.0m).

(c) Finance lease and hire purchase commitments The Group has finance leases and hire purchase contracts for various items of plant and equipment. These leases have terms of renewal, but no purchase options and escalation clauses. Renewals are at the option of the specific entity that holds the lease. Future minimum lease payments under finance leases and hire purchase contracts together with the present value of the net minimum lease payments are, are follows:

Minimum payments 2013 £m

Present value of payments 2013 £m

Minimum payments 2012 £m

Present value of payments 2012 £m

Within one year

0.2

0.2

-

-

After one year but not more than five years

0.4

0.4

-

-

More than five years

-

-

-

-

Total minimum lease payments

0.6

0.6

-

-

Less amounts representing finance charges

-

-

Present value of minimum lease payments

0.6

0.6

-

-

23. CONTINGENT LIABILITIES

The Group had provided a total of £0.7m in guarantees and performance bonds at 31 December 2013 (2012: £0.6m). The equivalent amount of cash has been deposited to facilitate the issuance of the individual guarantees and is recognised under other receivables.

58

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013 24. EMPLOYEE BENEFITS

The Group operates a number of pension schemes throughout the world. In most locations, these are defined contribution arrangements. However, there are defined benefit pension plans in Sweden and Germany, which require contributions to be made to separately administered funds. Defined contribution pension schemes A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in the consolidated statement of comprehensive income as incurred. Defined benefit plans pension schemes A defined benefit plan is a post employment benefit plan other than a defined contribution plan. The Group's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior years; that benefit is discounted to determine its present value. Any unrecognised past service costs and the fair value of any plan assets are deducted.

Total pension cost The total pension cost included in operating profit for the Group was: Defined contribution schemes Defined benefit scheme- current service cost

2013 £m 3.8 0.2

2012 £m 3.5 0.2

Pension cost included in operating profit

4.0

3.7

2013 £m 0.2 0.1

2012 £m 0.2 0.2

0.3

0.4

Defined benefit schemes The amounts recognised in the consolidated statement of comprehensive income were as follows: Current service cost Pension interest cost Total charge

The current service cost is included in operating costs in the statement of consolidated income and pension interest cost and expected return on scheme assets are included in net financing costs.

Actuarial gains and losses recognised directly in the consolidated statement of comprehensive income: Cumulative losses at 1 January Recognised gains in the year Cumulative loss at 31 December

Pension liability for defined benefit schemes The amounts recognised in the balance sheet for defined benefit schemes were as follows:

2013 £m 1.1 (0.6)

2012 £m 1.1 -

0.5

1.1

Total schemes 2013 £m 3.0 (4.9)

Fair value of scheme assets Present value of funded defined benefit obligations

(1.9)

(2.3)

Defined benefit obligation

Total

Net liability in the balance sheet

Fair value of plan assets The fair value changes in the schemes are shown below:

Defined benefit obligation

Total

Fair value of plan assets

2013

2012 £m 3.0 (5.3)

2012

At 1 January Current service cost Interest cost

£m 3.0 0.1

£m (5.3) (0.2) (0.2)

£m (2.3) (0.2) (0.1)

£m 2.6 0.1

£m (4.9) (0.2) (0.3)

£m (2.3) (0.2) (0.2)

Sub-total included in profit or loss Actuarial gains/(losses)

0.1 -

(0.4) 0.6

(0.3) 0.6

0.1 -

(0.5) (0.1)

(0.4) (0.1)

(0.1)

0.6 0.2

0.6 0.1

0.3 -

(0.1) 0.2

(0.1) 0.3 0.2

3.0

(4.9)

(1.9)

3.0

(5.3)

(2.3)

Sub-total included in OCI Normal contributions by the employer Effect of exchange rate changes on overseas schemes 31 December

59

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013 Composition of scheme assets in each category: Bonds Structured products

Sweden scheme 2013 3.0 -

2012 2.8 0.2

Germany scheme 2013 -

2012 -

Sweden scheme 2013

2012

Germany scheme 2013

2012

The bonds held within the Swedish scheme are quoted in active markets. The German scheme has no assets.

The actuarial return on scheme assets was as follows: Actual return

-

The pension deficit of each scheme at 31 December 2013 was as follows:

-

Sweden scheme 2013 3.0 (4.7)

Fair value of scheme assets Present value of funded defined benefit obligations Deficit in schemes

(1.7)

Principal actuarial assumptions:

-

Germany scheme 2013 (0.2)

2012 3.0 (5.1)

(0.2)

(2.1)

Sweden scheme 2013 3.2% 1.5% 3.0%

Discount rate Inflation rate Rate of salary increases

-

(0.2)

Germany scheme 2013 3.6% 2.0%

2012 3.6% 3.0% 3.0%

2012 (0.2)

2012 3.2% 2.5%

A quantitative sensitivity analysis for significant assumptions at 31 December 2013 is shown below: Assumptions Sensitivity level Impact on defined benefit obligation

Inflation rate 1% increase £m 0.6

1% decrease £m (0.6)

Discount rate 1% increase £m (0.8)

1% decrease £m 0.9

Rate of salary increase 1% increase £m 0.5

1% decrease £m (0.3)

The sensitivity analyses above have been determined based on a method that extrapolates the impact on the defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period.

The following payments are expected contributions to the defined benefit plan obligations in future years: 2013 £m 0.2 0.7 1.0 3.0

Less than one year between 2 and 5 years Between 5 and 10 years Beyond 10 years Total expected payments

4.9

The average duration of the defined benefit plan obligation at the end of the reporting period is 29.1 years (2012: 29.5 years)

60

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2013 25. RELATED PARTY TRANSACTIONS During the year the Company has entered into certain transactions with related parties. Details of these transactions are as follows: (a) Income statement

2013 £m

2012 £m

Management fee to private equity investor Finance costs on loan from parent undertaking (note 6) Preference share dividend (note 6)

0.7 26.8 3.2

0.7 24.3 3.0

270.1 34.2 8.9

243.2 34.2 5.7

3.8 0.2 0.3

3.5 0.1 0.3

4.3

3.9

(b) Year-end balances at 31 December Loans owed to parent undertaking (note 16) Preference shares (note 16) Preference share dividends payable (note 16) (c) Key management compensation Salaries and short-term benefits Post employment benefits Termination benefits

Key management comprises members of the executive team. The executive team is responsible for the day to day running of the Group, comprising the CEO, CFO, Managing Directors and Group Functional Directors. d) Transactions with equity interests of less than 50% The Group holds equity interests of less than 51% in the following companies:Exova (Qatar) LLC - 49% Al Futtaim Exova LLC - 49% Exova Warringtonfire Middle East LLC - 49% Exova (Saudi Arabia) Limited - 50% Exova (Qatar) LLC did not approve a dividend for 2013 to its equity JV partner (2012: the dividend of QAR 6.0m was approved and unpaid at year-end). The Group has the power to govern the operating and financial policies of the JVs. Based on these facts and circumstances, management has determined that in substance the Group controls these entities and therefore consolidates the entities in its financial statements.

26. POST BALANCE SHEET EVENTS On 6 January 2014, Exova acquired 100% of the share capital of Catalyst Environmental Limited, a leading provider of UKAS and MCERTS accredited stack emission testing in the UK and Ireland for an initial cash consideration of £5.2m (£4.9m net of cash acquired) with a further payment of £1.3m contingent upon future profitability in the year following acquisition. The company, which will become Exova Catalyst, will add six facilities and 58 colleagues to our existing portfolio and will allow us to develop further the specialist stack testing capabilities we provide in Europe, Americas and Middle East. Catalyst provides a range of specialist stack sampling services, including continuous emissions monitoring, landfill gas, emissions to atmosphere, and laboratory-based testing of physical and chemical elements. No further disclosures have been provided under IFRS3 in respect of business combinations after the balance sheet date on the basis that the initial accounting is not yet complete. On 11 March 2014 our European Oil & Gas and Industrials sector announced the intention to restructure the North Sea Oil and Gas activities by ceasing to offer testing services from the Sandnes facility and focusing on servicing this market from alternative facilities within the European network. An estimate of the financial effect of this restructuring cannot be made at this time.

27. ULTIMATE PARENT COMPANY AND CONTROLLING PARTIES The immediate parent undertaking and controlling party is Exova Group BV Limited. Clayton, Dubilier & Rice LLC, the manager of Clayton, Dubilier & Rice Fund VII LP, is considered to be the ultimate controlling party. The parent company of the smallest group of which the company is a member, and for which group financial statements are prepared, is Exova Group Limited.

61

PARENT COMPANY BALANCE SHEET

Company Registration No. 06720350

At 31 December 2013

2013 £m

2012 £m

19.1 44.6 63.7

19.1 40.5 59.6

0.3 0.3

0.8 1.0 1.8

Total assets

64.0

61.4

Creditors falling due within one year Trade and other payables

(3.2)

-

Net current assets

(2.9)

1.8

Total assets less current liabilities

60.8

61.4

(34.2) (8.9) (43.1)

(0.7) (34.2) (5.7) (40.6)

17.7

20.8

4.4 12.4 0.9

4.4 12.4 4.0

17.7

20.8

Notes Assets Fixed assets Investments in subsidiaries Loan due from subsidiary undertaking

3

Current assets Amounts due from parent undertaking Cash at bank

Creditors falling due after more than one year Amounts due to parent undertaking Financial liabilities - preference shares Financial liabilities - preference share dividend payable

Net assets

Shareholders' equity Called up share capital Capital contribution reserve Retained earnings

4 6 6

Total shareholders' equity The financial statements were approved by the Board of Directors on 20 March 2014 and signed on its behalf by:

Ian El-Mokadem Chief Executive Officer

Anne Thorburn Chief Financial Officer

62

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS At 31 December 2013

1. Significant accounting policies Basis of preparation The Company's financial statements have been prepared under the historical cost convention and in accordance with applicable UK accounting standards. The financial statements have been prepared on a going concern basis. Profit and loss account Under section 308 of the Companies Act 2006, the Company is exempt from the requirement to present its own profit and loss account. Related party transactions There are no transactions or balances with entities which form part of the Group that are not wholly owned. Investments in subsidiaries Investments are stated at cost less provisions for any impairment. Dividends Dividends payable to the Company's shareholders are recorded as a liability in the period in which the dividends are approved. Audit fees Audit fees for the Company of £5,500 (2012: £5,000) were borne by a subsidiary undertaking.

2. Staff costs Employees and Directors' emoluments Exova Group Limited has no employees other than the directors of the Company, disclosures regarding Director's remuneration are included in note 5 of the group financial statements. Key management comprises members of the executive team. No emoluments were payable to the Executive Directors in respect of services to the Company (2012: nil). In 2013, £0.1m was paid in fees to the Non-Executive Directors (2012: £0.1m).

63

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS At 31 December 2013

Subsidiary undertakings equity

Subsidiary undertakings equity

2013

2012

Opening balance Additions in the year

£m 19.1 -

£m 19.1 -

As at 31 December

19.1

19.1

3. Investments Shares at cost less provisions

A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest is given below.

Country of Incorporation

Principal Activity

Percentage holding

Subsidiary Undertakings Exova Topco Limited Exova Holdings Limited Exova PLC Exova Group (UK) Limited MTS Pendar Limited Warrington Fire Research Group Ltd Exova (UK) Limited Exova Warrington Fire Consulting (Guernsey) Ltd Warrington Fire Research Gent NV Exova S.r.o. Exova Metech S.r.o. Exova Metech AS Exova Metech Oy Exova SA Exova (Holdings) GmbH Exova Metech GmbH Exova GmbH Exova (Ireland) Limited Exova Srl Centro Triveneto Richerche Srl Exova BV Exova (Holdings) B.V. Exova Rotterdam BV Exova A/S Exova (Sweden) Holdings AB Exova AB CSM NDT Certification AB Exova Metech AB Exova (US) Holdings Inc Exova Inc Defiance Testing & Engineering Services Inc. Exova (Canada) Inc Exova Property Holdings Inc Exova (Mexico) Testing Inc Exova Warringtonfire Middle East LLC * Al Futtaim Exova LLC * Exova Limited & Co. LLC Exova (Qatar) LLC * Exova (Saudi Arabia) Limited * Exova Warrington Aus Pty Limited Exova (Cayman) Limited Exova (Singapore) Pte Limited

UK UK UK UK UK UK UK Channel Islands Belgium Czech Republic Czech Republic Denmark Finland France Germany Germany Germany Ireland Italy Italy Netherlands Netherlands Netherlands Norway Sweden Sweden Sweden Sweden US US US Canada Canada Mexico Dubai Dubai Oman Qatar Saudi Arabia Australia Cayman Islands Singapore

Holding Holding Holding Holding Holding Holding Testing Testing Testing Testing Testing Testing Testing Testing Holding Testing Testing Testing Testing Testing Testing Holding Testing Testing Holding Testing Testing Testing Holding Testing Testing Testing Property Holding Testing Testing Testing Testing Testing Testing Testing Testing Testing

100% 100% 100% 100% 100% 100% 100% 100% 55% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 80% 100% 100% 100% 100% 100% 100% 100% 49% 49% 70% 49% 50% 100% 100% 100%

* These companies are treated as subsidiaries in the results of the Group as effective control over their operations exists as described in the shareholder and management services agreements with the relative parties. The Company is taking the exemption available under Section 410 of the Companies Act 2006 to only disclose principal subsidiaries. Exova Topco shareholding are held directly whilst all others are held through wholly owned subsidiaries.

64

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS At 31 December 2013

4. Called Up Share Capital Ordinary shares of £1 each

2013 £m

2012 £m

Authorised 10,000,000 ordinary shares of £1 10,000,000 A ordinary shares of £1 10,000,000 B ordinary shares of £1

10.0 10.0

10.0 -

Allotted, issued and fully paid: 3,927,961 ordinary shares of £1 each 3,695,311 A ordinary shares of £1 each 232,650 B ordinary shares of £1 each

3.7 0.2

3.9 -

At 31 December

3.9

3.9

2013 £m

2012 £m

Authorised 5,000,000 ordinary shares of £1

5.0

5.0

Allotted, issued and fully paid: 500,000 ordinary shares of £1 each Opening balance Allotted during the year

0.5 -

0.5 -

At 31 December

0.5

0.5

2013 £m

2012 £m

Authorised 5,000,000 ordinary shares of £1

5.0

5.0

Allotted, issued and fully paid: Nil

-

-

At 31 December

-

-

Preferred Ordinary shares of £1 each

Deferred Ordinary shares of £1 each

On 6 November 2013, a special resolution was passed whereby the ordinary shares were divided into A ordinary shares and B ordinary shares The Company has two classes of ordinary shares and one class of preferred ordinary shares which carry no right to fixed income. No deferred shares were issues during the year.

5. Profit and loss account

Profit/(loss) in the year

6. Reconciliation of movement in shareholders' funds. Share capital and share premium £m Opening shareholders' funds

4.4

Profit/(loss) in the year

-

Closing shareholders' funds

4.4

Capital contribution reserve £m 12.4 12.4

2013 £m

2012 £m

(3.1)

1.0

Profit & Loss reserve £m

Total £m

4.0

20.8

(3.1)

(3.1)

0.9

17.7

Capital contribution reserve On 16 November 2011, the capital contribution reserve was created following a resolution by Exova Group Limited, the existing holders of the preference shares of Exova Group Limited waived their right to receive any of the accrued preference dividends at the rate of 15% to the 31st December 2010 totalling £12.4m. Furthermore, the preference rate dividend has been reset from 15% to 8% per annum with effect from 1 January 2011.

7. Ultimate parent company and controlling parties The immediate parent undertaking and controlling party is Exova Group BV Limited. Clayton, Dubilier & Rice LLC, the manager of Clayton, Dubilier & Rice Fund VII LP, is considered to be the ultimate controlling party. The parent company of the smallest group of which the company is a member, and for which group financial statements are prepared is Exova Group Limited.

65