Final Results
Associated British Engineering PLC
20 July 2007
A • B • E
ASSOCIATED BRITISH ENGINEERING PLC•
PRELIMINARY ANNOUNCEMENT
ASSOCIATED BRITISH ENGINEERING PLC
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31 MARCH 2007
The Group made a pre-tax profit of £302,000 from continuing operations compared
with a pre-tax loss of £78,000 last year. There is an additional charge in
respect of the interest on the pension fund liability, with the pension fund
deficit increasing from £4,395,000 to £5,078,000.
This was in contrast to an improvement in the underlying performance from the
only operating subsidiary, British Polar Engines Limited ('BPE').
We have been in continual negotiations with the Trustees of the ABE Pension
Fund, and the satisfactory conclusion of these, which is anticipated by the
Board in the near future, would result in the division of the fund and only the
obligations for the BPE section of the ABE Pension Fund would need to be
accounted for by ABE going forward.
BPE has not been able to meet its statutory obligations concerning its
contributions to the Pension Fund, which is in respect of the whole deficit of
the fund including companies that ceased to be part of ABE as far back as 1996.
This has resulted in the need to conclude a settlement with the Trustees of the
Pension Fund which is likely to require the blessing of the Pension Regulator
and possibly the Pensions Protection Fund ('PPF'). The full financial
implications of a settlement cannot be quantified at this stage.
All sections of the Pension Fund show an actuarial deficit of £5,078,000 at 31
March 2007 (£4,395,000 at 31 March 2006), and all sections of the Pension Fund,
with the exception of the BPE section, are in wind up. Further details of the
Pension Fund are set out in note 9 to the preliminary announcement.
BPE again improved its performance significantly and made an operating profit of
£592,000 against a profit of £337,000 last year. The Board of BPE should be
congratulated on its endeavours in continuing to develop its business from a
stable platform.
At long last the Board feels that a final resolution of the Pension Fund issues
is in sight and will be announcing at the appropriate time any completion of
contractual arrangements with the relevant parties. Thereafter the Board will be
able to devote more time to the future development of the Group, with the
pension matters resolved and the operating subsidiary BPE performing well.
The Board has continued to keep the central costs of the Company at as low a
level as is reasonably possible and recognises that its priority will be to find
a suitable corporate transaction to take the Group forward.
The Board and I are very grateful for the patience of the shareholders in what
has been a long and hard road to the resolution of the Pension issues.
D A H Brown
Chairman
Date: 19 July 2007
ASSOCIATED BRITISH ENGINEERING PLC
GROUP INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2007
________________________________________________________________________________
2007 2006
£'000 £'000
REVENUE 3,861 3,278
Operating costs (3,304) (3,050)
________ ________
OPERATING PROFIT 557 228
Finance expense (305) (340)
Finance income 50 34
________ ________
PROFIT/(LOSS) BEFORE TAXATION 302 (78)
Taxation - -
________ ________
PROFIT/(LOSS) FOR THE YEAR 302 (78)
======== ========
PROFIT/(LOSS) PER SHARE
BASIC AND DILUTED 23p (6)p
======== ========
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE YEAR ENDED 31 MARCH 2007
________________________________________________________________________________
2007 2006
£'000 £'000
Actuarial losses on retirement benefit (410) (933)
obligation
Profit/(loss) for the year 302 (78)
________ ________
TOTAL RECOGNISED INCOME AND EXPENSE FOR THE
YEAR (108) (1,011)
======== ========
ASSOCIATED BRITISH ENGINEERING PLC
GROUP BALANCE SHEET
31 MARCH 2007
________________________________________________________________________________
2007 2006
£'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 274 299
________ ________
Current assets
Inventories 1,266 1,328
Trade and other receivables 1,179 670
Held for trading investments 74 60
Cash and cash equivalents 1,642 1,205
________ ________
4,161 3,263
________ ________
Total assets 4,435 3,562
======== ========
EQUITY AND LIABILITIES
Called up share capital 2,627 2,627
Share premium account 5,038 5,038
Other reserve 11 11
Retained earnings (9,347) (9,239)
________ ________
Equity attributable to the Company's Equity
shareholders (1,671) (1,563)
________ ________
LIABILITIES
Non-current liabilities
Retirement benefit obligation 5,078 4,395
Cumulative preference shares - -
Obligations under finance leases 4 1
________ ________
5,082 4,396
________ ________
Current liabilities
Trade and other payables 1,023 728
Obligations under finance leases 1 1
________ ________
1,024 729
________ ________
Total liabilities 6,106 5,125
________ ________
Total equity and liabilities 4,435 3,562
======== ========
ASSOCIATED BRITISH ENGINEERING PLC
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2007
________________________________________________________________________________
2007 2006
£'000 £'000
Cash flows from operating activities
Cash generated from operations 446 69
Interest received 50 34
Interest paid (3) (4)
________ ________
Net cash from operating activities 493 99
________ ________
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment - 5
Purchase of property, plant and equipment (38) (39)
Purchase of trading investments (14) (30)
________ ________
Net cash used in investing activities (52) (64)
________ ________
Cash flows from financing activities
Repayments of obligations under finance
leases (4) (3)
________ ________
Net cash used in financing activities (4) (3)
________ ________
Net increase in cash and cash equivalents 437 32
Cash and cash equivalents at beginning of
year 1,205 1,173
________ ________
Cash and cash equivalents at end of year 1,642 1,205
======== ========
CASH FLOW FROM OPERATING ACTIVITIES
2007 2006
£'000 £'000
Net profit/(loss) 302 (78)
Adjustments for:
Depreciation 67 72
Loss on disposal of fixed assets 3 -
Interest income (50) (34)
Interest expense 3 4
Pension scheme interest expense 302 336
Current service cost (29) (37)
Changes in working capital:
Increase in inventories 62 (55)
Increase in trade and other receivables (509) (263)
Increase in payables 295 135
Decrease in provisions - (11)
________ ________
Cash generated from operations 446 69
======== ========
ASSOCIATED BRITISH ENGINEERING PLC
GROUP ACCOUNTING POLICIES
FOR THE YEAR ENDED 31 MARCH 2007
________________________________________________________________________________
BASIS OF PREPARATION
The preliminary announcement has been prepared in accordance with applicable
accounting standards as stated in the interim financial statements for the six
months ended 30 September 2006, and have remained unchanged from the prior year.
A number of new International Financial Reporting Standards, amendments to
standards and interpretation are not yet effective for the year ended 31 March
2007, and have not been applied.
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE PRELIMINARY STATEMENT
FOR THE YEAR ENDED 31 MARCH 2007
________________________________________________________________________________
1. SEGMENTAL REPORTING
Based on risks and returns the directors consider that the primary reporting
format is by business segment. The directors consider that there is only one
business segment being diesel and related engineering activities.
The secondary reporting format is by geographical analysis by destination as
shown below.
The following table shows an analysis of the Group's sales by
geographical market:
2007 2006
£'000 £'000
United Kingdom 1,974 1,347
Europe 798 769
Middle East 110 256
Far East and Australasia 684 312
Africa 31 57
North and South America 264 522
Russia - 15
________ ________
3,861 3,278
======== ========
All of the above revenue arises from diesel and related engineering activities
and originates in the United Kingdom.
In the year ended 31 March 2007 and 31 March 2006 all of the assets held by the
group were located in the United Kingdom and all capital expenditure was
incurred within the United Kingdom.
2. OPERATING COSTS 2007 2006
£'000 £'000
Changes in inventories (69) 55
Raw materials used 1,835 1,580
Staff costs 1,164 1,120
Depreciation and amortisation 67 72
Other expenses 307 223
________ ________
3,304 3,050
======== ========
3. OPERATING PROFIT 2007 2006
£'000 £'000
Operating profit is stated after charging
Depreciation on owned assets 65 70
Depreciation on assets held under finance
leases 2 2
Auditor's remuneration:
Audit of the company pursuant to legislation 9 9
Audit of subsidiaries 26 21
Taxation 8 8
Operating lease rental on plant and machinery 24 25
Operating lease rental on land and buildings 54 54
Pension provision reversal - (11)
Foreign exchange loss 2 3
======== ========
4. NET FINANCE EXPENSE 2007 2006
£'000 £'000
Interest on obligations under finance
leases 3 4
7% Cumulative preference dividend - -
8% Cumulative redeemable preference
dividend - -
Pension interest cost less expected
return on scheme assets 302 336
________ ________
305 340
Interest receivable (50) (34)
________ ________
255 (306)
======== ========
The Company is required to pay cumulative dividends on the non-equity shares.
However, the Company has insufficient distributable reserves to pay this
dividend which has been provided in accordance with the Company's Articles of
Association. Further information is disclosed within note 7 of the notes to this
preliminary announcement.
5. PROFIT/(LOSS) PER SHARE
The calculation of profit/(loss) per ordinary share is based on the profit/
(loss) attributable to ordinary shareholders divided by the weighted average
number of shares in issue during the year.
2007 2006
Weighted Per Weighted
Average shares Average Per shares
Profit number of amount Loss Number of amount
£'000 Shares pence £'000 Shares Pence
Basic and
diluted profit/
(loss) per share 302 1,313,427 23p (78) 1,313,427 (6)
====== ========= ====== ====== ========= ======
6. PROPERTY, PLANT AND EQUIPMENT Freehold
land and Plant and
buildings machinery Total
£'000 £'000 £'000
COST
At 1 April 2005 689 1,434 2,123
Additions - 39 39
Disposals - (97) (97)
_________ _________ _________
At 31 March 2006 689 1,376 2,065
Additions - 44 44
Disposals - (62) (62)
_________ _________ _________
At 31 March 2007 689 1,358 2,047
_________ _________ _________
ACCUMMULATED DEPRECIATION
At 1 April 2005 489 1,297 1,786
Charge for year 32 40 72
Eliminated on disposals - (92) (92)
_________ _________ _________
At 31 March 2006 521 1,245 1,766
Charge for year 32 35 67
Eliminated on disposals - (60) (60)
_________ _________ _________
At 31 March 2007 553 1,220 1,773
_________ _________ _________
6. PROPERTY, PLANT AND EQUIPMENT (continued) Freehold
land and Plant and
buildings machinery Total
£'000 £'000 £'000
CARRYING AMOUNTS
At 31 March 2007 136 138 274
========= ========= =========
At 31 March 2006 168 131 299
========= ========= =========
Plant and machinery assets with a carrying amount of £14,000 (2006: £10,000) are
held under finance leases. The amount of depreciation in respect of such assets
amounted to £2,000 (2006: £2,000) for the year.
7. CALLED UP SHARE CAPITAL 2007 2006
£'000 £'000
Authorised:
1,699,078 ordinary shares of £2 each 3,398 3,398
750,000 7% cumulative preference shares
of £1 each 750 750
1,681,443 8% cumulative redeemable
preference shares of £1 each 1,681 1,681
________ ________
5,829 5,829
======== ========
Nominal value:
Allotted and fully paid:
1,313,427 ordinary shares of £2 each 2,627 2,627
555,000 7% cumulative preference shares
of £1 each 555 555
157,395 8% cumulative redeemable
preference shares of £1 each 157 157
________ ________
3,339 3,339
======== ========
Carrying value:
Equity shares:
1,313,427 ordinary shares of £2 each 2,627 2,627
======== ========
Shares classed as financial liabilities
555,000 7% Cumulative preference shares
of £1 each - -
157,395 8% Cumulative redeemable
preference shares of £1 each - -
________ ________
- -
======== ========
There were no shares allotted during the course of the years ended 31 March 2007
or 31 March 2006.
The Company has one class of ordinary share which carries no right to fixed
income. The Company also has two classes of cumulative preference shares, which
carry the right to fixed returns of 7% and 8% per annum respectively.
The 7% cumulative preference shares and 8% cumulative redeemable preference
shares, classified as debt under IAS 32, are non voting unless the dividends are
six months in arrears or the resolution relates to the winding up of the Company
or affects the rights attaching to them. The Company has the power to redeem the
8% Cumulative preference shares at par (together with arrears of dividends) at
any time. Since the dividends are more than six months in arrears, the 8%
Cumulative redeemable preference shares of £1 each have 50 votes per share and
the 7% Cumulative preference shares of £1 each have 4 votes per share.
7. CALLED UP SHARE CAPITAL (continued)
In accordance with IAS 39 the 7% cumulative preference shares and the 8%
cumulative redeemable preference shares are required to be carried at fair value
within the financial statements. As there is no expectation of being able to
redeem the preference shares in the foreseeable future the fair value is deemed
to be zero. The 7% cumulative preference shares are accruing a dividend of
£39,000 per annum and the 8% cumulative redeemable preference shares are
accruing a dividend of £13,000 per annum. At 31 March 2007 total dividend
arrears of £360,000 (2006: £308,000) had accrued, representing arrears to date
of 49 pence per share relating to the 7% cumulative preference shares and 56
pence per share relating to the 8% cumulative redeemable preference shares.
Under IAS 32 the preference dividends should be disclosed as finance charges and
any arrears of dividends included with accruals. IAS 39 also permits the total
of accumulated arrears of dividends to be discounted. As the company has no
distributable reserves and there is no expectation of being able to pay the
dividend arrears in the foreseeable future as a result of anticipated future
cash flows, the accrued dividends are deemed to have a carrying value of zero
and therefore have been discounted to zero.
8. STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
Share Share Other Retained
Capital Premium reserve Earnings Total
£'000 £'000 £'000 £'000 £'000
Balance at 1 April 2005 2,627 5,038 11 (9,178) (1,502)
Loss for the year - - - (78) (78)
Actuarial losses in defined benefit
plan - - - (933) (933)
Defined benefit plan adjustment - - - 950 950
_______ _______ _______ _______ _______
Balance at 31 March 2006 2,627 5,038 11 (9,239) (1,563)
Profit for the year - - - 302 302
Actuarial losses in defined benefit
plan - - - (410) (410)
_______ _______ _______ _______ _______
Balance at 31 March 2007 2,627 5,038 11 (9,347) (1,671)
======= ======= ======= ======= =======
9. RETIREMENT BENEFIT SCHEMES
The Group operates a defined benefit pension scheme, holding the assets in a
separate trustee administered fund ('the ABE Pension Fund'). The required
contributions are assessed with the advice of an independent qualified actuary
using the projected unit credit method. The Group also has a designated Group
personal pension plan which meets stakeholder requirements.
The Company is in the process of leaving the ABE Pension Scheme and has
negotiated 'in principle' Heads of Terms with the Trustees of the scheme.
2007 2006
£'000 £'000
(a) Pension cost (recognised in Income Statement)
Operating charge
Current service cost 121 109
________ ________
Total operating charge 121 109
________ ________
Other finance charges
Interest on pension scheme liabilities 697 663
Expected return on pension scheme assets (395) (327)
________ ________
Net finance charge 302 336
________ ________
Total pension cost recognised in the
Income Statement 423 445
======== ========
(b) Benefit liability
Present value of funded obligations 14,496 14,088
Fair value of plan assets (9,418) (9,693)
________ ________
Net liability 5,078 4,395
======== ========
The major categories of plan assets are
as follows:
Equities 1,438 4,103
Bonds 7,956 4,673
Cash 24 (33)
Other - 950
________ ________
9,418 9,693
======== ========
(c) Change in benefit obligation
Benefit obligation at beginning of
the year 14,088 12,186
Current service cost 121 109
Interest cost 697 663
Actuarial losses 17 1,519
Contributions by plan participants 25 24
Benefits paid (452) (413)
________ ________
Benefit obligation at end of the year 14,496 14,088
======== ========
(d) Change in plan assets
Fair value of plan assets at beginning
of the year 9,693 8,062
Expected return on plan assets 395 327
Actuarial (losses)/gains on plan assets (394) 586
Contributions made by employer 151 157
Contributions by plan participants 25 24
Benefits paid (452) (413)
Defined benefit plan adjustment - 950
________ ________
Fair value of plan assets at end of the
year 9,418 9,693
======== ========
The cumulative amount of actuarial loss recognised in the statement of
recognised income and expense is £103,000 (2006: £405,000).
The expected long term return on cash is equal to bank base rates at the balance
sheet date. The expected return on bonds is determined by reference to United
Kingdom long dated gilt and bond yields at the balance sheet date. The expected
rate of return on equities and property have been determined by setting an
appropriate risk premium above gilt/bond yields having regard to market
conditions at the balance sheet date. The expected rates have then all been
reduced to reflect the level of anticipated future expenses.
The expected long term rates of return (net of expenses) are as follows:
2007 2006
% per annum % per annum
Equities 5.4 5.4
Bonds 3.0 3.0
Cash 1.5 1.5
________ ________
Overall rate of return for the plan 3.3 4.1
======== ========
The actual return on the plan assets over the year ended 31 March 2007 was
1.93%.
(e) Principal actuarial assumptions
Inflation 3.2% 3.0%
Rate of increase in pensionable
salaries 4.2% 4.0%
Discount rate 5.4% 5.0%
Pension in payment increases 3.0% 2.8%
Revaluation rate for deferred
pensioners 3.2% 3.0%
Estimate of contributions to be
paid in the next accounting period £135,000 £161,000
Pre retirement mortality AM92,-5 (males) AM92,-5 (males)
AF92,-5 (females) AF 92,-5 (females)
Post retirement mortality PMA92 (males) PMA92 (males)
PFA92 (females) PFA92(females)
9. RETIREMENT BENEFIT SCHEMES (continued) 2007 2006 2005
(f) History of experience gains and losses
(i) Difference between the expected and actual
return on scheme (liabilities)/assets:
(a) Amount (£'000) (395) 586 569
(b) Percentage of scheme assets (4)% 7% 7%
(ii) Experience (gains) and losses on scheme
liabilities
(a) Amount (£'000) 324 (424) 444
(b) Percentage of present values of scheme
liabilities (2)% (3)% 4%
10. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information set out in the preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985 but is derived from the 2007 financial statements. Statutory accounts for
2006, which were prepared under International Financial Reporting Standards and
contained an unqualified auditor's report, have been delivered to the Registrar
of Companies, and those for 2007 will be delivered in due course. The auditors
have reported on the accounts for the year ended 31 March 2007 and their report
was unqualified and did not contain statements under section 237(2) or (3) of
the Companies Act 1985.
The auditors have included an emphasis of matter statement with regard to going
concern. They have drawn attention to the Directors statement that 'BPE has not
been able to meet its statutory obligations concerning the Pension Fund, which
has resulted in the need to conclude a settlement with the Trustees of the ABE
Pension Fund, the Pension Regulator and the PPF.
All sections of the ABE Pension Fund show an actuarial deficit of £5,078,000 at
31 March 2007 (£4,395,000 at 31 March 2006), but all sections of the Pension
Fund, with the exception of the BPE section, are in wind up. The financial
statements have been prepared on the going concern basis as the Board expects a
successful outcome to negotiations with the Trustees of the ABE Pension Fund,
the Pension Regulator and the PPF, as explained in the Chairman's Statement. It
therefore considers that the Group has sufficient resources to continue in
operational existence for the foreseeable future.'
D A H Brown
Date: 19 July 2007
Enquiries:
Mr D.A.H. Brown (Chairman)
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