Company Registration No. SC622646 (Scotland)
BROADEX TECHNOLOGIES UK LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
BROADEX TECHNOLOGIES UK LIMITED
COMPANY INFORMATION
Directors
Dr Y Ding
Dr W Zhu
Company number
SC622646
Registered office
Starlaw Business Park
Starlaw Road
Livingston
United Kingdom
EH54 8SF
Auditor
Armstrong Watson Audit Limited
24 Blythswood Square
Glasgow
G2 4BG
BROADEX TECHNOLOGIES UK LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3
Directors' responsibilities statement
4
Independent auditor's report
5 - 7
Statement of comprehensive income
8
Balance sheet
9
Statement of changes in equity
10
Statement of cash flows
11
Notes to the financial statements
12 - 23
BROADEX TECHNOLOGIES UK LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -
The directors present the strategic report for the year ended 31 December 2023.
Fair review of the business
Broadex Technologies UK Limited stands at the forefront of the Opto-Electronics sector, having been founded in February 2019. The company is dedicated to addressing the needs of the worldwide telecoms industry by creating and supplying groundbreaking devices. It boasts a state-of-the-art 2000 square meter cleanroom facility for Wafer Fabrication, where it pursues the development and production of its premium offerings. Leveraging silica-on-silicon technology, Broadex Technologies focuses on the design and production of Planar Light Circuit (PLC) devices. As an integral part of Broadex Technologies Co. Ltd., based in China and listed on the Shenzhen Stock Exchange (300548.SZ), the UK subsidiary is well-equipped to deliver superior technology, sales, and customer service on a global scale.
In 2023, the telecommunications industry, a key market for Broadex Technologies UK Ltd's offerings, faced significant challenges. Delays in infrastructure deployment were a major issue, stemming from financial strains linked to geopolitical tensions, resulting in the consumption pace of telecommunications components slowing significantly. Broadex Technologies UK Ltd also observed a trend where customers had accumulated excess inventory in prior years, which led to a decrease in demand for their products during 2023.
In what can only be described as a challenging year for Broadex Technologies UK Ltd, in 2023, revenues witnessed a 67% change compared with the previous year, with an adjustment in losses of 54%. However, despite this backdrop of reduced production demand, Broadex Technologies UK Ltd. has used the opportunity to focus on enhancing operational efficiency; yield optimisation improvements; continued advancement of its investment in state-of-the-art laser trimming technology and sustained commitment to research and development, positioning itself for future growth and innovation.
At the forefront of Research and Development has been the successful deployment of Broadex Technologies UK Ltd.’s Cascade AWG product lines. These products have commenced qualification processes for use in both data communications and telecommunications applications by top-tier customers. This achievement validates Broadex Technologies UK Ltd.'s strategic decision to develop these product lines, which have garnered substantial interest for their ultra-wide-band and ultra-low-loss filter features across various customers and sectors. Looking ahead to 2024, expanding the reach and capabilities of this product remains a primary goal for the company, leveraging the momentum gained in 2023.
In parallel, Broadex Technologies UK Ltd. has made commendable advancements in its other significant technological development, the Silicon Nitride – Glass waveguide, throughout 2023. This technology has shown exceptional performance, achieving almost lossless light transmission between materials. This breakthrough paves the way for numerous potential applications, including the reduction of die sizes and the direct coupling of active components with small mode field diameters to our planar light circuit chip. Customer engagement has been robust, with several collaborative projects initiated in 2023 and set to continue into 2024.
Future outlook
Moving forward, Broadex Technologies UK Ltd. is set to not only continue but also broaden its research and development efforts to enhance its presence in existing markets and cultivate relationships with current customers by advancing the products and technologies developed over 2023. Working collaboratively with the company’s customers, a main goal of 2024 is to bring those Cascade AWG and Silicon Nitride – Glass hybrid products to volume production.
Furthermore, as the telecommunications sector evolves and begins its recovery in 2024, Broadex Technologies UK Ltd. aims to reestablish its supply connections within this market to its customers. A critical strategy for achieving this will involve participating in a global trade conference in the first quarter, where the company will showcase competitive and attractive products to secure a larger market share.
One relevant sector that has demonstrated major growth in 2023 has been Artificial Intelligence. Fueled by the rapid increase in consumer and industry demand for AI in 2023, which is only set to continue and grow in the future, comes the need for increased bandwidth in the data network and solutions for vast interconnects across computational nodes. Therein exists opportunities for Broadex Technologies UK Ltd. as a supplier of optical devices for network and interconnective devices. In 2023, the company started a project with a customer to supply planar-light-circuit waveguided routers for multi-node connections in an AI network.
BROADEX TECHNOLOGIES UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
Future outlook (continued)
As we move into 2024, this project continues after successful testing of development samples in the customer’s network. Further interest in this product type has been shown from a further tier 1 customer, and it is an area that the company will pursue opportunities in during 2024, offering solutions in this burgeoning field.
While facing challenges and uncertainties common to many businesses, the company has demonstrated remarkable resilience and remains strategically positioned for future prosperity. The management team is confident in its understanding and handling of business risks related to market competition, product performance, development, sales penetration, and cost management, implementing effective strategies to mitigate these risks. Additionally, the firm enjoys the ongoing support of its parent company, Broadex Technologies Co. Ltd., bolstering its prospects for sustained success.
Principal risks and uncertanties
Broadex Technologies UK Ltd. has adeptly managed supply chain risks amid the ongoing conflict in Ukraine, maintaining operational continuity without disruption. Similarly, potential supply chain disruptions due to unrest in the Middle East have not impacted the company's operations. At the outset of 2023, the company faced record-high energy costs, driven by restricted natural gas supplies linked to the Ukraine conflict. However, as the year progressed and gas supply constraints diminished, along with the onset of summer, the company secured more favorable energy prices and continued to effectively manage its energy use. Consequently, by the year's end, energy expenses were reduced by 40% compared to the beginning of the year. With energy market prices declining as we move into 2024, Broadex Technologies UK Ltd. anticipates leveraging further savings upon renewing its energy contracts at the end of the first quarter of 2024. The financial statements are presented on a going concern basis, reflecting the directors' confidence in their ability to address the operational challenges mentioned earlier, supported by the ongoing backing of the parent company.
Dr W Zhu
Director
25 March 2024
BROADEX TECHNOLOGIES UK LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
The directors present their annual report and financial statements for the year ended 31 December 2023.
Principal activities
The principal activity of the company was the manufacture of optical precision instruments.
Results and dividends
The results for the year are set out on page 8.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Dr Y Ding
Dr W Zhu
Future developments
The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of future developments.
Auditor
The auditor, Armstrong Watson Audit Limited, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
Going concern
At the time of approving the financial statements, the directors have a reasonable expectation that the company has access to adequate resources to continue in operational existence for the foreseeable future notwithstanding the loss of approximately £5.7m generated in the financial year. In forming this assessment, the directors have considered forecast trading performance as well as confirmations received from its parent company that it will continue to provide the support necessary to allow the company to meet its obligations as they fall due for at least twelve months from the date of approval of the financial statements.
The directors are confident that they can continue to manage any short term operational challenges combined with the continued support of its parent company and have therefore prepared the financial statements on a going concern basis.
On behalf of the board
Dr W Zhu
Director
25 March 2024
BROADEX TECHNOLOGIES UK LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -
The directors are responsible for preparing the strategic report, directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
BROADEX TECHNOLOGIES UK LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF BROADEX TECHNOLOGIES UK LIMITED
- 5 -
Opinion
We have audited the financial statements of Broadex Technologies UK Limited (the 'company') for the year ended 31 December 2023 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 31 December 2023 and of its loss for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
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; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
BROADEX TECHNOLOGIES UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF BROADEX TECHNOLOGIES UK LIMITED
- 6 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Directors' report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records 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.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and knowledge of the Company to identify or recognise non-compliance with applicable laws and regulations.
we identified the laws and regulations applicable to the company through discussions with directors and other management and review of appropriate industry knowledge. Key laws and regulations we identified during the audit were the UK Companies Act 2006 and tax legislation, UK employment legislation and UK health and safety legislation;
we assessed the extent of compliance with the laws and regulations identified above by making enquiries of management and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the Company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
BROADEX TECHNOLOGIES UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF BROADEX TECHNOLOGIES UK LIMITED
- 7 -
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures as a risk assessment tool to identify any unusual or unexpected relationships;
tested journal entries recorded on the Company’s finance system to identify unusual transactions that may indicate override of controls;
reviewed key judgements and estimates for any evidence of management bias.
reviewed the application of accounting policies with focus on those with heightened estimation uncertainty.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
Due to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, as with any audit, there remains a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing fraud or non-compliance with laws and regulations and cannot be expected to detect all fraud and non-compliance with laws and regulations.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' report.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 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 Auditors' 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.
Martin Johnston CA (Senior Statutory Auditor)
For and on behalf of Armstrong Watson Audit Limited
25 March 2024
Chartered Accountants
Statutory Auditor
24 Blythswood Square
Glasgow
G2 4BG
BROADEX TECHNOLOGIES UK LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
2023
2022
Notes
£
£
Turnover
3
1,411,462
5,459,652
Cost of sales
(5,537,415)
(7,309,948)
Gross loss
(4,125,953)
(1,850,296)
Administrative expenses
(1,445,490)
(1,775,132)
Other operating income
95,894
116,330
Operating loss
4
(5,475,549)
(3,509,098)
Interest receivable and similar income
7
22
Interest payable and similar expenses
8
(194,530)
(184,277)
Loss before taxation
(5,670,057)
(3,693,375)
Tax on loss
9
Loss for the financial year
(5,670,057)
(3,693,375)
The profit and loss account has been prepared on the basis that all operations are continuing operations.
BROADEX TECHNOLOGIES UK LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 9 -
2023
2022
Notes
£
£
£
£
Fixed assets
Intangible assets
10
32,742
39,762
Tangible assets
11
3,422,163
4,489,164
3,454,905
4,528,926
Current assets
Stocks
12
1,075,631
1,134,982
Debtors
13
750,441
538,439
Cash at bank and in hand
436,200
458,789
2,262,272
2,132,210
Creditors: amounts falling due within one year
14
(599,079)
(1,797,381)
Net current assets
1,663,193
334,829
Total assets less current liabilities
5,118,098
4,863,755
Creditors: amounts falling due after more than one year
15
(3,023,091)
(2,985,394)
Net assets
2,095,007
1,878,361
Capital and reserves
Called up share capital
17
15,539,528
9,652,825
Share premium account
1,396
1,396
Other reserves
237,500
624,910
Profit and loss reserves
18
(13,683,417)
(8,400,770)
Total equity
2,095,007
1,878,361
The financial statements were approved by the board of directors and authorised for issue on 25 March 2024 and are signed on its behalf by:
Dr W Zhu
Director
Company Registration No. SC622646
BROADEX TECHNOLOGIES UK LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 10 -
Share capital
Share premium account
Other reserves
Profit and loss reserves
Total
Notes
£
£
£
£
£
Balance at 1 January 2022
8,497,315
1,396
12,334
(4,719,729)
3,791,316
Year ended 31 December 2022:
Loss and total comprehensive income for the year
-
-
-
(3,693,375)
(3,693,375)
Issue of share capital
17
1,155,510
-
-
1,155,510
Other movements
-
612,576
12,334
624,910
Balance at 31 December 2022
9,652,825
1,396
624,910
(8,400,770)
1,878,361
Year ended 31 December 2023:
Loss and total comprehensive income for the year
-
-
-
(5,670,057)
(5,670,057)
Issue of share capital
17
5,886,703
-
-
5,886,703
Other movements
-
(387,410)
387,410
-
Balance at 31 December 2023
15,539,528
1,396
237,500
(13,683,417)
2,095,007
BROADEX TECHNOLOGIES UK LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 11 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash absorbed by operations
22
(5,998,993)
(454,883)
Interest paid
-
(184,277)
Net cash outflow from operating activities
(5,998,993)
(639,160)
Investing activities
Purchase of tangible fixed assets
(10,570)
(425,611)
Proceeds on disposal of tangible fixed assets
100,249
Interest received
22
Net cash generated from/(used in) investing activities
89,701
(425,611)
Financing activities
Proceeds from issue of shares
5,886,703
1,155,510
Net cash generated from financing activities
5,886,703
1,155,510
Net (decrease)/increase in cash and cash equivalents
(22,589)
90,739
Cash and cash equivalents at beginning of year
458,789
368,050
Cash and cash equivalents at end of year
436,200
458,789
BROADEX TECHNOLOGIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 12 -
1
Accounting policies
Company information
Broadex Technologies UK Limited is a private company limited by shares incorporated in Scotland. The registered office is Starlaw Business Park, Starlaw Road, Livingston, United Kingdom, EH54 8SF.
1.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
1.2
Going concern
At the time of approving the financial statements, the directors have a reasonable expectation that the company has access to adequate resources to continue in operational existence for the foreseeable future notwithstanding the loss of approximately £5.7m generated in the financial year. In forming this assessment, the directors have considered forecast trading performance as well as confirmations received from its parent company that it will continue to provide the support necessary to allow the company to meet its obligations as they fall due for at least twelve months from the date of approval of the financial statements. true
The directors are confident that they can continue to manage any short term operational challenges combined with the continued support of its parent company and have therefore prepared the financial statements on a going concern basis.
1.3
Turnover
Turnover is recognised at the fair value of the consideration received or receivable for goods provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
1.4
Intangible fixed assets other than goodwill
Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.
Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.
Amortisation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases:
Patents
20 years straight line
BROADEX TECHNOLOGIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 13 -
1.5
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases:
Freehold land and buildings
30 years straight line
Plant and equipment
2.5 to 5 years straight line
Fixtures and fittings
7 years stright line
Office and computer equipment
3 years straight line
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to the profit and loss account.
1.6
Impairment of fixed assets
At each reporting period end date, the company 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 it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
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 (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the profit and loss account.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the profit and loss account.
1.7
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
Stocks are calculated on a standard cost basis.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in the profit and loss account. Reversals of impairment losses are also recognised in the profit and loss account.
1.8
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and include cash in hand and deposits held at call with banks.
BROADEX TECHNOLOGIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 14 -
1.9
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include certain debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Impairment of financial assets
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
BROADEX TECHNOLOGIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 15 -
Basic financial liabilities
Basic financial liabilities, including certain creditors and loans from fellow group companies, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Other financial liabilities
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.10
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.11
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
1.12
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.13
Leases
Rentals payable under operating leases, including any lease incentives received, are charged to the profit and loss account on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.
BROADEX TECHNOLOGIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 16 -
1.14
Government grants
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
R&D tax credits are also recognised at the fair value of the asset received or receivable when there is reasonable assurance that claims will be successful. R&D tax credits are recognised in other operating income.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
1.15
Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the profit and loss account for the period.
1.16
Insurance proceeds are recognised at the point the claim is accepted by the insurer and a reasonable estimate of the proceeds can be made. Proceeds are recognised in other income.
2
Judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Stock valuation - 2023 £1.08m (2022: £1.13m)
Stock is valued using standard costs applied at an estimation of actual costs incurred incorporating certain direct and indirect costs which could be absorbed into the cost of stock produced.
Valuation of fixed assets - 2023 £3.42m (2022: £4.49m)
Depreciation is provided based on management’s assessment of an assets useful life and its residual value at the end of that life. Both of these are assessed as key sources of estimation uncertainty.
BROADEX TECHNOLOGIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 17 -
3
Turnover and other revenue
2023
2022
£
£
Turnover analysed by class of business
Manufacturing of optical precision instruments
1,384,474
5,459,652
Sundry sales
26,988
-
1,411,462
5,459,652
2023
2022
£
£
Turnover analysed by geographical market
Europe
146,871
243,140
Americas
183,735
445,722
Asia
1,080,856
4,770,790
1,411,462
5,459,652
2023
2022
£
£
Other significant revenue
Interest income
22
-
Other operating income
95,894
116,330
4
Operating loss
2023
2022
Operating loss for the year is stated after charging/(crediting):
£
£
Exchange differences apart from those arising on financial instruments measured at fair value through profit or loss
(115,090)
205,954
Fees payable to the company's auditor for the audit of the company's financial statements
17,000
17,000
Depreciation of owned tangible fixed assets
1,004,478
965,927
Profit on disposal of tangible fixed assets
(24,065)
-
Amortisation of intangible assets
3,929
6,186
Operating lease charges
16,284
18,935
BROADEX TECHNOLOGIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 18 -
5
Employees
The average monthly number of persons employed by the company during the year was:
2023
2022
Number
Number
Production
43
46
Administration
16
16
Total
59
62
Their aggregate remuneration comprised:
2023
2022
£
£
Wages and salaries
2,224,554
2,447,478
Social security costs
210,761
245,947
Pension costs
103,737
115,402
2,539,052
2,808,827
6
Directors' remuneration
No remuneration was paid to the directors by Broadex Technologies UK Limited, directors are remunerated by the immediate parent undertaking.
7
Interest receivable and similar income
2023
2022
£
£
Interest income
Interest on bank deposits
22
Investment income includes the following:
Interest on financial assets not measured at fair value through profit or loss
22
8
Interest payable and similar expenses
2023
2022
£
£
Other finance costs:
Other interest
194,530
184,277
Loans from group undertakings are discounted in line with market interest rates. As the discounted element unwinds the effective interest costs are taken through profit and loss.
BROADEX TECHNOLOGIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 19 -
9
Taxation
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
2023
2022
£
£
Loss before taxation
(5,670,057)
(3,693,375)
Expected tax credit based on the standard rate of corporation tax in the UK of 23.52% (2022: 19.00%)
(1,333,597)
(701,741)
Tax effect of expenses that are not deductible in determining taxable profit
(262)
Research and development tax credit
(22,555)
Movement in deferred tax not recognised
1,424,598
627,890
Fixed asset differences
14,189
(16,486)
Remeasurement of deferred tax for changes in tax rates
(84,554)
90,599
Chargable gains/(losses)
1,919
Taxation charge for the year
-
-
The gross value of unrecognised deferred tax assets on trading losses carried forward at 31 December 2023 was £3,554,284.
10
Intangible fixed assets
Patents
£
Cost
At 1 January 2023
133,589
Disposals
(4,136)
At 31 December 2023
129,453
Amortisation and impairment
At 1 January 2023
93,827
Amortisation charged for the year
3,929
Disposals
(1,045)
At 31 December 2023
96,711
Carrying amount
At 31 December 2023
32,742
At 31 December 2022
39,762
BROADEX TECHNOLOGIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 20 -
11
Tangible fixed assets
Freehold land and buildings
Plant and equipment
Fixtures and fittings
Office and computer equipment
Total
£
£
£
£
£
Cost
At 1 January 2023
2,277,232
4,855,690
15,229
6,690
7,154,841
Additions
10,570
10,570
Disposals
(91,955)
(91,955)
At 31 December 2023
2,277,232
4,774,305
15,229
6,690
7,073,456
Depreciation and impairment
At 1 January 2023
239,102
2,407,859
12,208
6,508
2,665,677
Depreciation charged in the year
62,374
939,730
2,192
182
1,004,478
Eliminated in respect of disposals
(18,862)
(18,862)
At 31 December 2023
301,476
3,328,727
14,400
6,690
3,651,293
Carrying amount
At 31 December 2023
1,975,756
1,445,578
829
3,422,163
At 31 December 2022
2,038,130
2,447,831
3,021
182
4,489,164
12
Stocks
2023
2022
£
£
Raw materials and consumables
507,184
512,347
Work in progress
386,085
361,087
Finished goods and goods for resale
182,362
261,548
1,075,631
1,134,982
13
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
306,584
181,917
Amounts owed by group undertakings
18,516
77,967
Other debtors
269,814
77,337
Prepayments and accrued income
155,527
201,218
750,441
538,439
BROADEX TECHNOLOGIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 21 -
14
Creditors: amounts falling due within one year
2023
2022
£
£
Trade creditors
221,897
1,375,972
Amounts owed to group undertakings
119,361
Taxation and social security
54,679
55,830
Other creditors
35,697
44,253
Accruals and deferred income
167,445
321,326
599,079
1,797,381
15
Creditors: amounts falling due after more than one year
2023
2022
£
£
Amounts owed to group undertakings
3,023,091
2,985,394
A loan of £3,023,091 from the parent company is repayable in full in 2025. It is unsecured and bears interest at 0.5%. The difference between its initial fair value and the cash received has been recorded as a capital contribution.
16
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
103,737
115,402
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
17
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
15,539,528
9,652,825
15,539,528
9,652,825
On 31 December 2023, the company issued 5,886,703 Ordinary shares of £1 each for a total consideration of £5,886,703.
BROADEX TECHNOLOGIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 22 -
18
Profit and loss reserves
The profit and loss account represents cumulative profits and losses net of dividends and other adjustments.
Other reserves
Other reserves relates to the discounting of loans provided to the company or group at a rate of interest below the prevailing market rate. A balance is created in other reserves on initial discounting of the loans to their present value and is subsequently unwound through to maturity in applying a notional effective interest charge.
Share premium
Share premium represents the amount by which the amount received for a stock issue exceeds its face value.
19
Charges
The Royal Bank of Scotland PLC holds a charge over the company's cash Deposit of £10,000. The bank may retain the Deposit and, without prior notice, apply or set off the Deposit to reduce the Owner's Obligations.
20
Operating lease commitments
Lessee
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
2023
2022
£
£
Within one year
3,116
4,779
Between two and five years
779
4,155
3,895
8,934
21
Ultimate controlling party
The parent company of Broadex Technologies UK Limited is Broadex Technologies Co. Ltd, a company registered in China, whose registered address is 306 Yatai Road, Nanhu District, Jiaxing, Zhejiang Province, China, 314006.
Broadex Technologies Co., Ltd is the largest and smallest company which prepares consolidated financial statements.
BROADEX TECHNOLOGIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 23 -
22
Cash absorbed by operations
2023
2022
£
£
Loss for the year after tax
(5,670,057)
(3,693,375)
Adjustments for:
Finance costs
194,530
184,277
Investment income
(22)
Gain on disposal of tangible/intangible fixed assets
(24,065)
-
Amortisation and impairment of intangible assets
3,929
6,186
Depreciation and impairment of tangible fixed assets
1,004,478
965,927
Movements in working capital:
Decrease/(increase) in stocks
59,351
(240,878)
(Increase)/decrease in debtors
(212,002)
1,105,468
(Decrease)/increase in creditors
(1,355,135)
1,217,512
Cash absorbed by operations
(5,998,993)
(454,883)
23
Analysis of changes in net funds
1 January 2023
Cash flows
Non-cash changes
31 December 2023
£
£
£
£
Cash at bank and in hand
458,789
(22,589)
-
436,200
Intra-group debt
2,985,394
-
37,697
3,023,091
3,444,183
(22,589)
37,697
3,459,291
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