Final Results
Associated British Engineering PLC
29 July 2004
A • B • E
•ASSOCIATED BRITISH ENGINEERING PLC•
PRELIMINARY STATEMENT
A • B • E
CHAIRMANS' STATEMENT
The Group made a pre-tax loss of £246,000 on the continuing operations compared
with a pre-tax loss of £297,000 last year. As with last year, the losses reflect
a number of issues, with the Group managing to reduce its central costs. In view
of the size of the Group, it was decided to negotiate the termination of the
contract of employment with the Company's Finance Director, Kirsten Good, which
resulted in a one off expense of £96,000. In addition, there have been further
costs relating to the negotiation of the settlement with the Trustees of the
pension fund amounting to £55,000. On the assumption that the Company completes
those negotiations, then the Company can proceed with the sale of the assets of
British Polar Engines Limited. For a number of fundamental reasons, it has not
been possible to do this until the pension issues are settled.
British Polar Engines Limited improved its performance and made an operating
profit of £45,000 against a loss of £28,000 last year. The company has had the
opportunity to operate in a relatively stable way in the last year, following
the re-organisations of previous years. The Board have had detailed discussions
regarding a potential Management Buy Out of British Polar Engines Limited and
should be able to proceed once the pension scheme issues are settled and binding
documentation has been signed.
The Board of Directors has spent a considerable amount of time and attention in
resolving the situation surrounding the ABE Pension Scheme ('Scheme') and its
potential financial impact on the Company. As a result of this work, the Company
has negotiated 'in principle' Heads of Terms with the Trustees of the Scheme,
and the negotiations for a formal Compromise Deed and resultant changes to the
Trust Deed are underway. The key features of the compromise are that the
specific liabilities of the Company are set out and agreed and all future
liabilities of the Company under the Scheme are terminated. The non-binding
Heads of Terms were signed by the Company, British Polar Engines Limited and the
Trustees of the Scheme on 20 July 2004. The principal terms of the Heads of
Terms are:
1 The Scheme has five different employers. As it relates to the following
four companies, the Scheme is currently in wind up:
• The Company (no active members)
• Dawson Keith Limited (a previous subsidiary)
• Associated British Catering Limited (in liquidation)
• Peter Nesbit & Company Limited ( in liquidation)
British Polar Engines Limited will be the only company in the Scheme, and
will therefore take over from the Company as the Principal Employer.
2 On the basis that a sale of the assets of British Polar Engines Limited now
proceeds, then all of the net proceeds of that sale (save for an
outstanding loan owed to the Company by British Polar Engines Limited of
£50,000) will be given to the Scheme.
3 The parties to the Heads of Terms will negotiate a Compromise Agreement and
any resultant changes to the Trust Deed.
4 The Company will pay a fixed sum of £40,000 towards the Trustees' costs in
connection with the settlement of the documents referred to at 3 above.
5 The Company will pay its Minimum Funding Requirement sum under the wind up
of the Company's part of the Scheme. This is required at law in any case.
The Company section only had one member, and the sum payable is not
expected to be material to the Company.
6 The Company will have no further liabilities in connection with the Scheme.
A • B • E
CHAIRMANS' STATEMENT
Qualified audit opinion arising from limitation in audit scope
In November 2000, the Accounting Standards Board issued FRS 17 'Retirement
Benefits', replacing SSAP 24 'Accounting for Pension Costs'. Certain disclosures
are required in the transition period, for periods which end on or after 22 June
2001. Following a dispute with the scheme's actuary the Trustees of the Group's
defined benefit pension scheme decided to appoint a new actuary during the year.
As a result of the ongoing dispute the previous actuary has not yet provided the
new actuary with all of the schemes' details and it has, therefore, not been
possible to obtain the FRS 17 disclosures for the year ended 31 March 2004 which
relate to the part of the scheme not currently in wind up. This has resulted in
the auditors having to issue a qualified opinion in this respect.
Following the settlement relating to the pension scheme, and the anticipated
sale of British Polar Engines Limited, the Board will be in a good position to
look at transactions for the Company, and will be seeking the appropriate
approvals from the Shareholders.
I would like to thank the former Finance Director, Kirsten Good, for her years
of work for the Group, and the helpful way in which she assisted the Group in
the handover of her responsibilities. We wish her every success in the future.
The Finance role has been assumed by our new non-Executive Director, Colin
Weinberg. The management accounts of the Group are being prepared by a firm of
Chartered Accountants, haysmacintyre.
D A H Brown
Chairman
29 July 2004
A • B • E
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MARCH 2004
________________________________________________________________________________
2004 2003
£'000 £'000
Turnover 2,695 2,692
Operating loss (271) (323)
Loss on ordinary activities before finance costs (271) (323)
Net finance income 25 26
Loss on ordinary activities before taxation (246) (297)
Taxation - 5
Loss on ordinary activities after taxation (246) (292)
Appropriation in respect of non-equity shares (51) (51)
Retained loss (297) (343)
Loss per ordinary share
Basic (23)p (26)p
A • B • E
RECONCILIATION OF MOVEMENTS
IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 31 MARCH 2004
________________________________________________________________________________
2004 2003
£'000 £'000
Retained loss (297) (343)
Appropriation in respect of non equity shares 51 51
Shareholders' funds at 1 April 2003 2,883 3,175
Shareholders' funds at 31 March 2004 2,637 2,883
There were no recognised gains or losses other than the result for the financial
year
A • B • E
GROUP BALANCE SHEET
AS AT 31 MARCH 2004
________________________________________________________________________________
2004 2003
£'000 £'000
FIXED ASSETS
Tangible assets 413 473
CURRENT ASSETS
Stock 1,260 1,279
Property held for sale - 138
Investments 39 -
Debtors - amounts falling due within one year 516 621
Cash at bank and in hand 1,210 1,138
3,025 3,176
Creditors - amounts falling due within one year 736 734
Net current assets 2,289 2,442
Total assets less current liabilities 2,702 2,915
Creditors- amounts falling due after one year 5 10
Provisions for liabilities and charges 60 22
Net assets 2,637 2,883
CAPITAL AND RESERVES
Called up share capital 3,339 3,339
Share premium account 5,038 5,038
Other reserves 11 11
Profit and loss account (5,751) (5,505)
Equity shareholders' funds 1,721 2,018
Non-equity shareholders' funds 916 865
Total shareholders' funds 2,637 2,883
A • B • E
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2004
________________________________________________________________________________
2004 2003
£'000 £'000
OPERATING ACTIVITIES
Cash outflow from operating (194) (313)
activities
RETURNS ON INVESTMENT AND
SERVICING OF FINANCE
Finance income received 32 34
Bank interest paid (6) (3)
Finance cost element of finance lease (1) (5)
rental payments
Net cash inflow from returns on
investments and
servicing of finance 25 26
TAXATION
UK taxation paid - 5
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT
Sale/(purchase) of property 316 (22)
Purchase of tangible fixed assets (31) (27)
Net proceeds on sale of tangible fixed - 17
assets
Purchase of current asset investments (27) -
Net cash inflow/(outflow) from capital
expenditure
and financial investment 258 (32)
MANAGEMENT OF LIQUID RESOURCES
Cash held at Investment Managers (12) -
Net cash outflow from the management of liquid
resources (12) -
Cash inflow/(outflow) before financing 77 (314)
FINANCING
Decrease in debt - (12)
Capital element of finance lease repayments (5) (5)
Net cash outflow from (5) (17)
financing
Increase/(decrease) in cash in the year 72 (331)
A • B • E
NOTES
________________________________________________________________________________
1. BASIS OF PREPARATION
The preliminary announcement has been prepared in accordance with
applicable accounting standards, with the exception of FRS 17 Retirement
Benefits (see note 7), and under the historical cost convention.
The principal accounting policies of the group have remained unchanged
from those set out in the group's 2003 annual report and financial
statements.
2. ANALYSIS OF TURNOVER BY GEOGRAPHICAL 2004 2003
DESTINATION £'000 £'000
United Kingdom 1,274 1,201
Europe 426 424
Middle East 124 114
Far East and Australasia 560 836
Africa 97 33
North and South America 194 84
Russia 20 -
2,695 2,692
All of the above turnover arises from diesel and related engineering
activities and originates in the United Kingdom.
3. OPERATING LOSS 2004 2003
£'000 £'000
Turnover 2,695 2,692
Change in stocks of finished goods and work in 19 121
progress
Raw materials and services 1,701 1,499
Staff costs 1,200 1,069
Auditors' remuneration for audit 38 34
Depreciation
Tangible fixed assets 90 93
Exceptional items (note 4) (123) 148
Operating lease rentals on plant and machinery 41 51
Net operating expenses 2,966 3,015
Operating loss (271) (323)
A • B • E
NOTES
________________________________________________________________________________
4. EXCEPTIONAL ITEMS
2004
The group made an exceptional profit on the sale of the property held for
resale of £178,000. In addition the group incurred further exceptional
costs in relation to the ABE pension scheme of £55,000.
2003
The group incurred exceptional professional costs relating to the potential
sale of British Polar Engines business of £58,000 and professional costs of
£90,000 in respect of advice regarding the ABE pension scheme.
5. LOSS PER ORDINARY SHARE
The calculation of loss per ordinary share is based on the loss
attributable to ordinary shareholders divided by the weighted average
number of shares in issue during the year.
Potential ordinary shares are anti-dilutive.
2004 2003
Weighted Weighted
average Per average Per
number shares number shares
Loss of amount Loss of amount
£'000 shares pence £'000 shares pence
Basic loss per (297) 1,313,427 (23) (343) 1,313,427 (26)
share
6. NOTES OF THE CASH FLOW STATEMENT 2004 2003
£'000 £'000
Reconciliation of operating loss to net cash outflow
from
operating activities:
Operating loss (271) (323)
Depreciation charges 90 93
Profit on sale of property held for resale (178) -
Loss on sale of fixed assets 1 -
Decrease in stocks 19 121
Decrease in debtors 105 -
Increase/(decrease) in creditors 2 (199)
Increase/(decrease) in pension provision 38 (5)
Net cash outflow from operating activities (194) (313)
Reconciliation of net cash flow to movement in net cash:
Increase/(decrease) in cash in the year 72 (331)
Change in net debt - 12
Capital element of finance lease payments 5 5
New finance leases - (3)
77 (317)
Net funds at the beginning of the year 1,124 1,441
Net funds at the end of the year 1,201 1,124
A • B • E
NOTES
________________________________________________________________________________
6. NOTES OF THE CASH FLOW STATEMENT - continued
Analysis of changes in net funds
2003 Cash flow 2004
£'000 £'000 £'000
Cash at bank and in hand 1,138 72 1,210
Finance leases (14) 5 (9)
Total 1,124 77 1,201
7. PENSIONS
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 method and charged to the profit and loss
account so as to spread the cost of pensions over employees' working lives
with the Group. 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,
the details of which are summarised in the Chairman's Statement.
SSAP 24 'Accounting for pension costs'
The most recent actuarial valuation of the whole scheme was at 1 April
2002. The principal assumptions used in the most recent actuarial valuation
as at 1 April 2002 are based upon price inflation of 2.8% per annum, an
investment return of 6.3% per annum prior to retirement and 5.3% per annum
in retirement, pay growth of 4.5% per annum (including allowance for
promotions) and increases in present and future pensions in payment (where
subject to increases in line with RPI capped at 5% per annum) at 2.6% per
annum. At that date, the market value of the assets of the fund was
£8,102,000 (including the value of insured pensions) and was sufficient to
cover 76% of the benefits which had accrued to members after allowing for
expected future increases in earnings. Ionian Investment Management, a
division of Fiske plc, of which Mr S J Cockburn is Deputy Chairman and a
shareholder, manages the pension fund investments.
Employer contributions of £202,000 were paid or provided for over the year
(2003: £93,000). This is stated after a reduction of £5,000 (2003: £5,000)
representing the amortization, over the expected average remaining service
lives of the employees, of a provision made in previous years as a result
of a preceding actuarial valuation. This provision was £17,000 at 31 March
2004 (2003: £22,000). In addition this figure also includes provision made
in the year by the company of £43,000 in respect of its estimated
liability. Following the results of the formal actuarial valuation carried
out as at 1 April 2002, the level of employer contributions being paid into
the Scheme increased from 13% per annum of pensionable salaries of 16.5%
per annum of pensionable salaries from 1 March 2003.
FRS 17 'Retirement benefits'
In November 2000, the Accounting Standards Board issued FRS 17 'Retirement
Benefits', replacing SSAP 24 'Accounting for Pension Costs'. Certain
disclosures are required in the transition period, for periods which end on
or after 22 June 2001. Following a dispute with the scheme's actuary the
Trustees of the Group's defined benefit pension scheme decided to appoint a
new actuary during the year. As a result of the ongoing dispute the
previous actuary has not yet provided the new actuary with all of the
schemes' details and it has, therefore, not been possible to obtain the FRS
17 disclosures for the year ended 31 March 2004. This has resulted in the
auditors having to issue a qualified opinion in this respect.
Included below are the FRS 17 disclosures included in the 2003 financial
statements. The directors have not been able to update to 31 March 2004 the
assumptions, and therefore the disclosures, due to the complexities
involved with the scheme.
A • B • E
NOTES
________________________________________________________________________________
A full actuarial valuation was carried out at 1 April 2002 and updated to
31 March 2003 by a qualified independent actuary. The major assumptions
used by the actuary were:
2003 2002
Rate of increase in salaries 2.60% 2.80%
Rate of increase of pensions in payment increasing at 2.40% 2.55%
RPI
Discount rate 5.40% 6.00%
Inflation assumption 2.60% 2.80%
The assets in the scheme and the expected rates of return (net of expenses)
were:
2003 2002
% £'000 % £'000
Equities 5.10 2,949 6.90 4,787
Bonds 2.60 2,558 4.40 2,449
Cash 1.50 818 2.60 557
Insured pensions 5.40 321 6.00 -
Total market value of assets 6,646 7,793
Actuarial value of liability (11,073) (9,556)
Deficit in the scheme (4,427) (1,763)
Related deferred tax asset 1,328 529
Net pension liability (3,099) (1,234)
2003
£'000
Movement in deficit during the year
Deficit in scheme at beginning of year (1,763)
Movement in year:
Current service cost (88)
Contributions 85
Finance cost (120)
Actuarial loss (2,541)
Deficit in scheme at end of year (4,427)
2003
£'000
Analysis of finance cost on pension scheme
Expected return on pension scheme assets 444
Interest on pension liabilities (564)
Net return (120)
A • B • E
NOTES
________________________________________________________________________________
2003
£'000
Analysis of the amount that would have been charged to operating
profit
Service cost 88
Past service cost -
Total operating charge 88
2003
£'000
Analysis of amount that would have been recognised in statement of
total recognised gains and losses
Actual return less expected return on assets (1,603)
Experience gains and losses on liabilities (93)
Changes in assumptions (845)
Actuarial loss recognised (2,541)
Had the Group fully adopted FRS 17 in the 2003 financial statements the group
profit and loss account would have stated as follows:
2003 2002
£'000
£'000
Profit and loss account at 31 March (5,505) (5,213)
Deficit relating to the pension fund (4,427) (1,763)
Profit and loss account at 31 March as adjusted (9,932) (6,976)
The deferred taxation asset relating to the pension liability has not been
included above because it is not expected to crystallise.
History of experience gains and losses 2003 % of scheme
£'000 assets/
liabilities
The following disclosure will be built up over time as a
five year history:
Difference between expected and actual return on
scheme assets (1,603) (24)
Experience gains and losses on scheme
liabilities (93) 1
Total amount recognised in statement of total
recognised gains and losses (2,541) 23
A • B • E
NOTES
________________________________________________________________________________
8. The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in section 240 of the Companies
Act 1985.
The summarised balance sheet at 31 March 2004 and the summarised profit and
loss account, summarised cash flow statement and associated notes for the
year then ended have been extracted from the Group's 2004 statutory
financial statements upon which the Auditors' opinion is qualified as
detailed in both the Chairman's Statement and note 7 but does not include
any statement under Section 237 of the Companies Act 1985. Those financial
statements have not been delivered to the Registrar of Companies.
9. The comparative figures for the year ended 31 March 2003 are abridged from
the accounts for that year and do not constitute full accounts within the
meaning of Section 240 of the Companies Act 1985 (as amended). Statutory
accounts for that period, on which the Auditors gave an unqualified
opinion, have been delivered to the Registrar of Companies.
10. The board does not recommend a dividend on ordinary shares for the year
(2003: Nil).
D A H Brown
29 July 2004
Enquiries:
Mr D A H Brown (Chairman)
Mr C Weinberg
Tel: 0207 553 9637
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