Final Results
Associated British Engineering PLC
28 July 2005
A • B • E
•ASSOCIATED BRITISH ENGINEERING PLC•
PRELIMINARY STATEMENT
A • B • E
CHAIRMANS' STATEMENT
The Group made a pre-tax loss of £26,000 from continuing operations compared
with a pre-tax loss of £246,000 last year. As with last year, the losses reflect
a number of issues with the Group managing to reduce its central costs. However,
there have been further ongoing costs relating to the negotiation of the
settlement with the Trustees of the pension fund amounting to £28,000. On the
assumption that the Company completes these negotiations, the Company can then
proceed with the sale of the assets of British Polar Engines Limited ('BPE').
For a number of fundamental reasons, it has not been possible to do this until
the pension issues are settled and this is outlined in greater detail below.
BPE improved its performance and made an operating profit of £65,000 against a
profit of £45,000 last year. The company has again benefited from the
re-organisations of previous years. The Board of BPE should be congratulated for
its endeavours.
This year as in the recent past the Board of Directors has spent most of its
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 in 2004, the Company had 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 being undertaken. 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 Company, BPE and the Trustees of the Scheme signed the
non-binding Heads of Terms on 20 July 2004. BPE is now the only company in the
Scheme, and will therefore take over from the Company as the Principal Employer.
I reported last year that we were still committing a lot of time to resolving
the pension issues. This has still been the case in the last financial year,
although we have managed to spend much less money, £28,000, on the process.
Shareholders will be aware that the law relating to pensions has changed over
the course of the year, and this, coupled with the need for the actuaries
calculating all of the new values for the different parts of the scheme, has
meant that we have still not fully resolved the position. The BPE section of the
fund is still substantially underfunded, and additional payments will have to be
made by BPE to reduce that deficit over time.
However, I can report that all of the parts of the scheme are now in wind up
with the exception of the BPE section. ABE has now made its final payment into
the pension scheme. We are now in the final stages of negotiating the Compromise
Agreement with the Trustees based on the heads of terms agreed last year, which
if agreed as we are intending, would mean that the bulk of the proceeds of sale
from any disposal of BPE would be given to the pension fund in order to relieve
some of the deficit that exists.
To achieve this settlement, the Company and the Trustees will have to have the
Compromise Agreement approved by the new pensions regulator. It is regrettable
that this will prolong what has already become a tedious and painful exercise. I
can only ask that shareholders be patient while the Board continues in its
efforts to overcome this final hurdle. In theory, the regulator could order ABE
to contribute further to the deficit on the scheme, over and above what is
proposed in the Compromise Agreement. The Directors, based on professional
advice, feel that this is unlikely, but it is possible, and this would have an
effect on the value of ABE commensurate with the amount of any such award.
Further details regarding the pension scheme are set out in note 8.
The Board and I are urgently seeking to resolve all the outstanding issues and
we will naturally announce to shareholders the final position as soon as this is
known.
D A H Brown
Chairman
27 July 2005
A • B • E
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MARCH 2005
Note 2005 2004
£'000 £'000
Turnover 2 2,700 2,695
Other operating costs 3 (2,748) (2,966)
Operating loss 4 (48) (271)
Loss on ordinary activities before finance costs (48) (271)
Net finance income 22 25
Loss on ordinary activities before taxation (26) (246)
Taxation - -
Loss on ordinary activities after taxation (26) (246)
Appropriation in respect of non-equity shares (51) (51)
Retained loss (77) (297)
Loss per ordinary share
Basic and diluted 6 (6)p (23)p
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 2005
2005 2004
£'000 £'000
FIXED ASSETS
Tangible assets 337 413
CURRENT ASSETS
Stock 1,273 1,260
Investments 48 39
Debtors 407 516
Cash at bank and in hand 1,155 1,210
2,883 3,025
Creditors - amounts falling due within one year (597) (736)
Net current assets 2,286 2,289
Total assets less current liabilities 2,623 2,702
Creditors - amounts falling due after one year (1) (5)
Provisions for liabilities and charges (11) (60)
Net assets 2,611 2,637
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 (5,777) (5,751)
Equity shareholders' funds 1,644 1,721
Non-equity shareholders' funds 967 916
Total shareholders' funds 2,611 2,637
A • B • E
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2005
Note 2005 2004
£'000 £'000
OPERATING ACTIVITIES
Cash outflow from operating 7 (57) (194)
activities
RETURNS ON INVESTMENT AND
SERVICING OF FINANCE
Finance income received 31 32
Bank interest paid - (6)
Finance cost element of finance lease (9) (1)
rental payments
Net cash inflow from returns on
investments and
servicing of finance 22 25
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT
Sale of property - 316
Purchase of tangible fixed assets (7) (31)
Net sales/(purchases) of current asset 9 (27)
investments
Net cash inflow from capital expenditure
and financial investment 2 258
MANAGEMENT OF LIQUID RESOURCES
Cash held at stockbrokers (18) (12)
Net cash outflow from the management of liquid (18) (12)
resources
Cash (outflow)/inflow before financing (51) 77
FINANCING
Capital element of finance lease repayments (4) (5)
Net cash outflow from (4) (5)
financing
(Decrease)/increase in cash in the year (55) 72
A • B • E
NOTES
1. BASIS OF PREPARATION
The preliminary announcement has been prepared in accordance with applicable UK
accounting standards and under the historical cost convention.
The principal accounting policies of the group have remained unchanged from
those set out in the group's 2004 annual report and financial statements.
2. ANALYSIS OF TURNOVER BY GEOGRAPHICAL 2005 2004
DESTINATION £'000 £'000
United Kingdom 1,120 1,274
Europe 667 426
Middle East 92 124
Far East and Australasia 354 560
Africa 209 97
North and South America 233 194
Russia 25 20
2,700 2,695
All of the above turnover arises from diesel and related engineering activities
and originates in the United Kingdom.
3. OTHER OPERATING COSTS 2005 2004
£'000 £'000
(as
restated)
Change in stocks of finished goods and work in (13) 19
progress
Raw materials and consumables 1,362 1,381
Staff costs 1,033 1,200
Depreciation: Tangible fixed assets 83 90
Other operating charges 283 454
Other operating income - (178)
Total other operating costs 2,748 2,966
The 2004 figures have been reanalysed to improve
presentation.
4. OPERATING LOSS 2005 2004
£'000 £'000
Operating loss is stated after charging:
Depreciation on owned assets 82 88
Depreciation on assets held under finance lease 1 2
Audit 31 30
Operating lease rental on plant and machinery 32 41
Exceptional items (note 5) (49) (123)
An amount of £18,000 (2004: £37,000) was payable to the auditors in respect of
the provision of non audit services during the year. Of this amount in 2005
£1,300 relates to advice regarding the potential sale of British Polar Engines
Limited with the balance of £16,700 relating to corporation tax compliance and
advisory work.
A • B • E
NOTES
5. EXCEPTIONAL ITEMS
2005
The provision for pension costs was settled after the balance sheet date for
£11,000 resulting in a release to the profit and loss account of £49,000 in the
year.
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.
6. 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. The share options in issue are not dilutive in accordance with
FRS 14.
2005 2004
Weighted Weighted
average Per average Per
shares shares
Loss number of amount Loss number of amount
£'000 shares pence £'000 shares pence
Basic and (77) 1,313,427 (6) (297) 1,313,427 (23)
diluted loss
per share
7. NOTES OF THE CASH FLOW STATEMENT 2005 2004
£'000 £'000
Reconciliation of operating loss to net cash outflow
from
Operating activities:
Operating loss (48) (271)
Depreciation charges 83 90
Profit on sale of property held for resale - (178)
Loss on sale of fixed assets - 1
(Increase)/decrease in stocks (13) 19
Decrease in debtors 109 105
(Decrease)/increase in creditors (139) 2
(Decrease)/increase in pension provision (49) 38
Net cash outflow from operating activities (57) (194)
Reconciliation of net cash flow to movement in net cash/
(debt):
(Decrease)/increase in cash in the year (55) 72
Capital element of finance lease payments 4 5
(51) 77
Net funds at the beginning of the year 1,201 1,124
Net funds at the end of the year 1,150 1,201
A • B • E
NOTES
7. NOTES OF THE CASH FLOW STATEMENT - continued
2004 Cash flow 2005
Analysis of changes in net £'000 £'000 £'000
funds
Cash at bank and in hand 1,210 (55) 1,155
Finance leases (9) 4 (5)
Total 1,201 (51) 1,150
8. 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 Scheme was at 1 April 2004. The
principal assumptions used in the most recent actuarial valuation as at 1 April
2004 are based upon price inflation of 3.0% per annum, an investment return of
6.0% per annum prior to retirement and 4.8% per annum in retirement, pay growth
of 4.0% 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 2.75% per annum. At that date, the market value of
the assets of the fund was £7,315,000 (including the value of insured pensions)
and was sufficient to cover 57% of the benefits which had accrued to members
after allowing for expected future increases in earnings.
The pension charge of £106,000 (2004:£202,000) is stated after the release of
£49,000 of pension provisions (2004 increase of £38,000).
These amounts are based upon the equivalent to 16.5% of pensionable pay plus
additional contributions to correct the Minimum Funding Requirement (MFR)
deficit of £6,000 per month which have been accrued by British Polar Engines
Limited since 26 February 2003. These additional payments have been made by
British Polar Engines Limited during the period.
With effect from 1 July 2005 the MFR contributions to the scheme due by British
Polar Engines Limited have increased to 17.1% of pensionable pay plus £19,700
per month for 10 years. This and any other future funding of the pension scheme
is dependent upon the successful finalisation of the compromise agreement or
such other mutually satisfactory arrangement with the pension trustees and
approval by the pensions regulator.
FRS 17 'Retirement benefits'
The transitional arrangements of the new accounting standard FRS 17 require
disclosure of assets and liabilities as at 31 March 2005 calculated in
accordance with the requirements of FRS 17. They also require disclosure of the
items which would appear in the profit and loss account and in the statement of
total recognised gains and losses were the full requirements of FRS 17 in place.
For the purpose of these financial statements, all of these figures are
illustrative only and do not impact on the actual 31 March 2005 balance sheet or
on this year's performance statements.
A • B • E
NOTES
8. PENSIONS - continued
Assumptions
The assets of the scheme have been taken at market value and the liabilities
have been calculated using the following principal actuarial assumptions:
31 March 2005 31 March 2004 31 March 2003
% per annum % per annum % per annum
Inflation 3.0 3.0 2.6
Salary
increases 4.0 4.0 2.6
Rate of
discount 5.5 5.5 5.4
Pension in
payment
increases 2.8 2.8 2.4
Revaluation
rate for
deferred
pensioners 3.0 3.0 2.6
The deferred taxation asset relating to the pension liability has not been
included below because it is not expected to crystalise.
Illustrative balance sheet figures
31 March 2005 31 March 2004 31 March 2003
£'000 £'000 £'000
Assets 8,062 7,315 6,325
Liabilities (12,186) (12,200) (10,752)
Deficit (4,124) (4,885) (4,427)
If the amounts above had been recognised in the financial statements, the
company's net assets and profit and loss reserve at 31 March 2005 and 31 March
2004 would be as follows:
31 March 2005 31 March 2004
£'000 £'000
Net assets excluding pension
liability 2,611 2,637
Pension liability (4,124) (4,885)
Net assets including pension
liability (1,513) (2,248)
Profit and loss reserve excluding
pension liability (5,777) (5,751)
Pension liability (4,124) (4,885)
Profit and loss reserve (9,901) (10,636)
A • B • E
NOTES
8. PENSIONS - continued
Assets
31 March 2005 31 March 2004 31 March 2003
£'000 £'000 £'000
Equities 4,404 3,644 2,949
Bonds 2,574 2,469 2,558
Cash 1,084 1,202 818
Expected long term rate of return (net of expenses)
31 March 2005 31 March 2004 31 March 2003
% per annum % per annum % per annum
Equities 5.4 5.4 5.1
Bonds 3.0 3.0 2.6
Cash 1.5 1.5 1.5
Illustrative charge to the profit and loss account over the financial year
Year Ended Year Ended
31 March 2005 31 March 2004
£'000 £'000
Operating charge
Current service
cost 103 68
Total operating
charge 103 68
Other finance charges
Interest on
pension scheme
liabilities 665 568
Expected return
on pension
scheme assets (287) (221)
Net finance
charge 378 347
Total charge to
profit and loss
account 481 415
A • B • E
NOTES
8. PENSIONS - continued
Illustrative amounts which would be included within the Statement of Total
Recognised Gains and Losses (STRGL)
Year Year
Ended Ended
31 March 31 March
2005 2004
Difference between expected and actual return on scheme
assets:
Amount (£'000) 569 1,239
Percentage of scheme
assets 7% 17%
Experience gains and losses arising on the scheme liabilities:
Amount (£'000) 444 102
Percentage of present
value of scheme
liabilities 4% 1%
Effects of changes in the demographic and financial
assumptions underlying the present value of the scheme
liabilities:
Amount (£'000) - (1,460)
Percentage of present
value of scheme
liabilities 0% (12%)
Total amount recognised in STRGL:
Amount (£'000) 1,013 (119)
Percentage of scheme
liabilities 8% (1%)
Movement in deficit during the year: Year Ended Year Ended
31 March 2005 31 March 2004
£'000 £'000
Deficit in
scheme at
beginning of
year 4,885 4,427
Movement in year:
Current service
cost 103 68
Net finance
charge 378 347
Contributions (229) (76)
Past service costs - -
Actuarial
loss/(gain) (1,013) 119
Deficit in
scheme at end of
year 4,124 4,885
A • B • E
NOTES
8. PENSIONS - continued
History of Experience Gains and Losses
A history of the amounts recognised, which would have been in the statement of
total recognised gains and losses for the previous 3 accounting years are as
follows:
31 31 March 31 March
March 2004 2003
2005 £'000 £'000
£'000
Difference between expected and actual return on
scheme assets:
Amount (£'000) 569 1,239 (1,603)
Percentage of
scheme assets 7% 17% (25%)
Experience gains and losses on scheme liabilities:
Amount (£'000) 444 102 (93)
Percentage of
the present
value of the
scheme
liabilities 4% 1% (1%)
Effects of changes in the demographic and financial
assumptions underlying the present value of the scheme
liabilities:
Amount (£'000) - (1,460) (845)
Percentage of
the present
value of the
scheme
liabilities 0% (12%) (8%)
Total actuarial gain or loss:
Amount (£'000) 1,013 (119) (2,541)
Percentage of
the present
value of the
scheme
liabilities 8% (1%) (24%)
9. INTERNATIONAL ACCOUNTING STANDARDS
The Council of the European Union (EU) announced in June 2002 that all European
listed companies will be required to adopt the International Financial Reporting
Standards ('IFRS') and International Accounting Standards ('IAS') in the
preparation of financial statements for 2005 onwards. This means the Group will
have to prepare its first financial statements in accordance with IFRSs and IASs
for the year ending 31 March 2006.
The Board is in the process of preparing for the transition to IFRS. The first
published report will be the interim statements for the 6 month period ended 30
September 2005. The key IFRS which at the present time the Board believes may
impact Group's results are as follows:
- Adoption of IAS 19 (Retirement and other employee benefits) - effects of the
Group's accounts both retrospectively and prospectively of the pension scheme
- Adoption of IAS 32 (Financial Instruments: Disclosure and presentation) - the
potential requirement to disclose in certain circumstances preference shares as
a liability
- Adoption of IAS 5 (Non current assets held for sale and discontinued
operations) - potential impact as a result of British Polar Engines Limited
being marketed for sale
- Adoption of IAS 14 (Segmental reporting) - ability to obtain sufficient
information to comply with these requirements in respect of British Polar
Engines Limited's geographical segments.
A • B • E
NOTES
10. 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 2005 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 2005 statutory financial statements
upon which the Auditors' opinion is unqualified and 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.
11. The comparative figures for the year ended 31 March 2004 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 a qualified
opinion, have been delivered to the Registrar of Companies.
12 The board does not recommend a dividend on ordinary shares for the year
(2004: Nil).
D A H Brown
27 July 2005
Enquiries:
Mr D.A.H. Brown (Chairman)
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