Interim Results

Associated British Engineering PLC 22 December 2006 ASSOCIATED BRITISH ENGINEERING PLC INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 ASSOCIATED BRITISH ENGINEERING PLC INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 CONTENTS Page Chairman's statement 1 Consolidated income statement 2 Consolidated interim balance sheet 3 Consolidated interim statement of changes in shareholders' equity 4 Consolidated interim cash flow statement 5 Notes to the interim report 6 - 10 ASSOCIATED BRITISH ENGINEERING PLC CHAIRMAN'S STATEMENT INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 SUMMARY OF RESULTS Six months to Six Months to Year to 30 September 2006 30 September 2005 31 March 2006 £'000 £'000 £'000 (restated) Revenue 1,839 1,345 3,278 Profit/(Loss) before Tax 197 (36) (78) Earnings per Share Basic 15p (3)p (6)p Diluted 15p (3)p (6)p The six month period to 30th September 2006 shows an improvement in the underlying performance of the Company generated from the results at our subsidiary British Polar Engineering Limited. The profit before tax is £197,000 (2005: (£36,000)) and the earnings per share 15p (2005: 3p loss per share). This is satisfactory but if we take account of the outstanding dividends on the two classes of Preference Share in issue, being £26,000 for the period, this would reduce the earnings per share to 13p; the cumulative outstanding Preference Share dividends now stand at £332,000. The Company is now reaching the final stages of negotiation with the Pensions Protection Fund and with the Pensions Regulator, with a view to finally resolving the outstanding Group pension issues. I am confident that in my next Chairman's Statement I will be in a position to report upon the conclusion of these negotiations following which the Board will be able to more actively consider the Company's next steps. ASSOCIATED BRITISH ENGINEERING PLC CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 Six months to Six months to Year to 30 September 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 REVENUE 1,839 1,345 3,278 Cost of sales and overheads (1,663) (1,401) (3,050) ------------- ------------- ------------- OPERATING PROFIT/(LOSS) 176 (56) 228 Finance expense - - (340) Finance income 21 20 34 ------------- ------------- ------------- PROFIT/(LOSS) BEFORE TAXATION 197 (36) (78) Taxation - - - ------------- ------------- ------------- PROFIT/(LOSS) FOR PERIOD 197 (36) (78) ============= ============= ============= PROFIT/(LOSS) PER SHARE BASIC AND DILUTED 15p (3)p (6)p ==== ====== ====== GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE Six months to Six months to Year to 30 September 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 Actuarial losses on retirement benefit obligation - - (933) Profit/(loss) for the period 197 (36) (78) ------------ ------------ ---------- TOTAL RECOGNISED INCOME AND EXPENSE FOR THE YEAR 197 (36) (1,011) ============ ============ ========== ASSOCIATED BRITISH ENGINEERING PLC CONSOLIDATED INTERIM BALANCE SHEET 30 SEPTEMBER 2006 At 30 September At 30 September At 31 March 2006 2005 2006 £'000 £'000 £'000 ASSETS Non-current assets Property, plant and equipment 282 299 299 ------------- ------------- ------------- Current assets Inventories 1,160 1,386 1,328 Trade and other receivables 586 497 670 Held for trading investments 65 52 60 Cash and cash equivalents 1,588 986 1,205 ------------- ------------- ------------- 3,399 2,921 3,263 ------------- ------------- ------------- Total assets 3,681 3,220 3,562 ============= ============= ============= EQUITY AND LIABILITIES Called up share capital 2,627 2,627 2,627 Share premium account 5,038 5,038 5,038 Other reserve 11 11 11 Retained earnings (9,042) (9,214) (9,239) ------------- ------------- ------------- Equity attributable to the Company's Equity shareholders (1,366) (1,538) (1,563) ------------- ------------- ------------- LIABILITIES Non-current liabilities Retirement benefit obligation 4,395 4,113 4,395 Obligations under finance leases - - 1 ------------- ------------- ------------- 4,395 4,113 4,396 ------------- ------------- ------------- Current liabilities Trade and other payables 646 641 728 Obligations under finance leases 6 4 1 ------------- ------------- ------------- 652 645 729 ------------- ------------- ------------- Total liabilities 5,047 4,758 5,125 ------------- ------------- ------------- Total equity and liabilities 3,681 3,220 3,562 ============= ============= ============= ASSOCIATED BRITISH ENGINEERING PLC CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Share Share Other Retained Total Capital Premium reserve Earnings £'000 £'000 £'000 £'000 £'000 Balance at 1 April 2005 2,627 5,038 11 (9,178) (1,502) Loss for the period - - - (36) (36) --------- --------- --------- --------- --------- Balance at 30 September 2005 2,627 5,038 11 (9,214) (1,538) Loss for the period - - - (42) (42) Actuarial losses in defined benefit plan - - - (933) (933) Defined benefit plan adjustment - - - 950 950 --------- --------- --------- --------- --------- Balance at 1 April 2006 2,627 5,038 11 (9,239) (1,563) Profit for the period - - - 197 217 --------- --------- --------- --------- --------- Balance at 30 September 2006 2,627 5,038 11 (9,042) (1,346) ========= ========= ========= ========= ========= ASSOCIATED BRITISH ENGINEERING PLC CONSOLIDATED INTERIM CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 Six months to Six months to Year to 30 September 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 Cash flows from operating activities Cash generated from/ (used in) operations 383 (181) 69 Interest received 21 20 34 Interest paid - - (4) ------------ ------------ ---------- Net cash from/(used in) operating activities 404 (161) 99 ------------ ------------ ---------- Cash flows from investing activities Proceeds from sale of property, plant and equipment - 6 5 Purchase of property, plant and equipment (25) (9) (39) Purchase of held for trading investments (5) (22) (30) ------------ ------------ ---------- Net cash used in investing activities (30) (25) (64) ------------ ------------ ---------- Cash flows from financing activities Net change in obligations under finance leases 4 (1) (3) ------------ ------------ ---------- Net cash generated from/(used in) financing activities 4 (1) (3) ------------ ------------ ---------- Net increase/(decrease) in cash and cash equivalents 378 (187) 32 Cash and cash equivalents at beginning of year 1,205 1,173 1,173 ------------ ------------ ---------- Cash and cash equivalents at end of year 1,583 986 1,205 ============ ============ ========== CASH FLOW FROM OPERATING Six months to Six months to Year to ACTIVITIES 30 September 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 Net profit/(loss) 197 (36) (78) Adjustments for: Depreciation 42 41 72 Interest income (21) (20) (34) Interest expense - - 4 Pension scheme interest expense - - 336 Current service cost - - (37) Changes in working capital: Decrease/(increase) in inventories 168 (113) (55) Decrease/(increase) in trade and other receivables 84 (90) (263) (Decrease)/increase in payables (87) 48 135 Decrease in provisions - (11) (11) ------------- ------------- ------------ Cash generated from/ (used in) operations 383 (181) 69 ============= ============= ============ ASSOCIATED BRITISH ENGINEERING PLC NOTES TO THE INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PREPARATION This Group interim report has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. The policies set out below have been consistently applied to all periods presented. GOING CONCERN 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 Pension Regulator and the PPF. All sections of the ABE Pension Fund show an actuarial deficit of £4,395,000 at 31 March 2006 (£4,124,000 at 31 March 2005), but all sections of the Pension Fund, with the exception of the BPE section, are in wind up. The interim report has been prepared on the going concern basis as the Board expect a successful outcome to negotiations with 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. BASIS OF CONSOLIDATION The Group interim report incorporates the financial statements of Associated British Engineering plc and its subsidiary undertakings to 30 September each year. All inter-company balances and transactions have been eliminated in full. The Group interim report includes the results of subsidiaries acquired or disposed of during the year from or to the effective date of acquisition or disposal. REVENUE RECOGNITION Revenue is measured at the fair value of the consideration receivable by the Group for goods supplied and services provided, excluding value added tax and trade discounts. Revenue from the sale of spare parts is recognised when the goods are dispatched or, if under a bill and hold arrangement, when they are available for dispatch to a specific customer. Revenue from the sale of engines is recognised in accordance with the performance of contractual terms and specifically when the engines have been satisfactorily tested in accordance with contractual terms. INVENTORIES AND IMPAIRMENT OF INVENTORIES Inventories of raw materials, work in progress and finished goods are valued at the lower of cost and net realisable value. Work in progress and finished goods include an appropriate allocation of overheads. Cost is on a first in, first out basis. Net realisable value is the estimated selling price in the normal course of business, less estimated costs of completion and provision is made for obsolete, slow moving and defective inventories. ASSOCIATED BRITISH ENGINEERING PLC NOTES TO THE INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) LEASED ASSETS Leases of property, plant and equipment, where the Group has substantially all the risks and rewards of ownership, are classified as finance leases. Assets held under finance leases are capitalised at lease inception at the lower of the asset's fair value and the present value of the minimum lease payments. Obligations related to finance leases, net of finance charges in respect of future periods, are included as appropriate within borrowings. The interest element of the finance cost is charged to the income statement over the life of the lease so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant or equipment is depreciated on the same basis as owned plant and equipment or over the life of the lease, if shorter. Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Operating lease rentals (net of any related lease incentives) are charged against profit on a straight line basis over the period of the lease. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost less depreciation and any impairment in value. Freehold land is not depreciated. Depreciation is calculated to write down the cost of all property, plant and equipment less its residual value by annual instalments over their expected useful lives on the following bases: Freehold buildings 5 per cent Plant and machinery 7 1/2- 33 1/3 per cent Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or where shorter, over the term of the relevant lease. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised as income. The carrying values of plant and machinery are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists, and where the carrying values exceed the estimated recoverable amount, the assets or cash generating units are written down to their recoverable amounts. TAXATION The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. The deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred 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 tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. ASSOCIATED BRITISH ENGINEERING PLC NOTES TO THE INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (CONTINUED) FOREIGN CURRENCIES Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the exchange rates ruling at the balance sheet date. All exchange differences are dealt with through the income statement. RETIREMENT BENEFIT COSTS Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group's obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme. For defined benefit retirement schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised outside profit or loss and presented in the statement of recognised income and expense. Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the plan. The Group has recognised the actuarial losses and gains immediately within the Statement of Recognised Income and Expenditure in accordance with the provisions stated within IAS 19 'Employee benefits'. CASH AND CASH EQUIVALENTS Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short term deposits with a maturity of three months or less which are subject to an insignificant risk of changes in value. FINANCIAL INSTRUMENTS Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the profit and loss account. Finance costs are calculated so as to produce a constant rate of charge on the outstanding liability. Where none of the contractual terms of share capital meet the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity. Trade receivables Trade receivables are originally recognised at fair value less any allowance for any uncollectible amounts. An estimate for doubtful debts is made when the collection of the full amount is no longer probable. Bad debts are written off when identified. ASSOCIATED BRITISH ENGINEERING PLC NOTES TO THE INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (CONTINUED) Trade payables Trade payables are originally recognised at fair value less any adjustment for any unpayable amounts. Investments in securities Investments are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, with all transaction costs being written off to the income statement as incurred. Investments are classified as either held for trading or available-for-sale, and are measured at subsequent reporting dates at fair value. Gains and losses arising from changes in fair value of held for trading financial assets are included in the net profit or loss for the period. For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the net profit or loss for the period. SHARE BASED PAYMENTS AND SHARE OPTIONS Former employees of the Group have received remuneration in the form of share based payment transactions, whereby employees render services in exchange for rights over shares ('equity settled transactions'). The cost of these transactions is measured by reference to their fair value at the date at which the options are granted. The fair value is determined by using the Black-Scholes Option pricing model. In preparing this interim report in accordance with IFRS 1, the Group has elected to apply the share-based payment exemption. It applied IFRS 2 'Share Based Payment' from 1 April 2004 to those options which were issued after 7 November 2002 but had not vested by 1 April 2005. IMPAIRMENT OF TANGIBLE ASSETS At each balance sheet date, the Group reviews the carrying amounts of its tangible 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. Recoverable amount is the higher of fair value less costs to sell and value to 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, 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 (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. ASSOCIATED BRITISH ENGINEERING PLC NOTES TO THE INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 2. GEOGRAPHICAL SEGMENT ANALYSIS Based on risks and returns the directors consider the primary reporting format is by business segment. The directors consider that there is only one business segment being diesel and related engineering activities. Therefore the disclosures for the primary segment have been given in the consolidated income statement and consolidated interim balance sheet. 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: Six months to Six months to Year to 30 September 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 United Kingdom 1,054 713 1,347 Europe 483 199 769 Middle East 6 4 256 Far East and Australasia 196 217 312 Africa 21 12 57 North and South America 79 185 522 Russia - 15 15 ---------- ---------- ---------- Total 1,839 1,345 3,278 ========== ========== ========== All of the above turnover arises from diesel and related engineering activities and originates in the United Kingdom. All of the assets held by the Group were located in the United Kingdom and all capital expenditure was incurred within the United Kingdom. This information is provided by RNS The company news service from the London Stock Exchange

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