A.b.engineering Regulatory News (ASBE)

Company Number: 00110663

ASSOCIATED BRITISH ENGINEERING PLC

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED

31 MARCH 2014

ASSOCIATED BRITISH ENGINEERING PLC

REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2014

The Directors' Report on pages 3 to 5 and the Directors' Remuneration Report on pages 51 and 53 have each been drawn up in accordance with the requirements of English law and liability in respect thereof is also governed by English law. In particular, the responsibility of the directors for these reports is owed solely to Associated British Engineering plc.

The directors submit to the members their Report and Accounts for the Group for the year ended 31 March 2014. Pages 1 to 8 and 46 to 54, including the Financial Highlights, Chairman's Statement, Directors' Report, Strategic Report, Corporate Governance Report, Directors' Remuneration Report and the Directors, Registered Office and Advisers page form part of the Report of the Directors.

ASSOCIATED BRITISH ENGINEERING PLC

FINANCIAL HIGHLIGHTS

ASSOCIATED BRITISH ENGINEERING PLC

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31 MARCH 2014

The Chairman's Statement forms part of the Strategic Report.

The Group's operating loss increased from £31,000 in the previous year to a loss of £308,000 in the year to 31 March 2014. The increased loss was largely due to losses at British Polar Engines Limited's ("BPE") subsidiary Akoris Trading Limited ("Akoris"). BPE is our main operating subsidiary and its turnover increased from £2.5 million (2013) to £2.7 million on improved gross margins.

The market in which BPE operates remains unpredictable and subject to sensitivity arising from the wider world economy and political events; but there are encouraging indications that some stability will return in the near future.

Akoris has started to generate revenue in the post balance sheet period, albeit at modest levels, and we are closely monitoring progress in our attempts to create value in the company.

The IAS 19 Pension Valuation has resulted in the pension deficit for BPE increasing from £931,000 to £1,414,000 at 31 March 2014. Shareholders will appreciate that the calculations surrounding these figures result from a combination of facts and assumptions which are set out more fully in the Notes to these accounts.

The Board continues carefully to monitor central costs and is seeking to identify a suitable corporate transaction to take the Group forward.

D A H Brown

Chairman

7 July 2014

ASSOCIATED BRITISH ENGINEERING PLC

DIRECTORS' REPORT

FOR THE YEAR ENDED 31 MARCH 2014

The directors submit their report and audited accounts for the year ended 31 March 2014.

PRINCIPAL ACTIVITY

During the year the Company acted as a parent undertaking for a subsidiary engaged in diesel and related engineering activities, for a subsidiary engaged in commodity and natural resource trading, finance and investment and also a dormant subsidiary. Details of the subsidiaries are set out in note 23.

RESULTS AND DIVIDENDS

The Group's loss after tax amounted to £316,000. The directors are unable to recommend a dividend on the ordinary shares for the year (2013: nil per ordinary share).

DIRECTORS

The names of the directors who served during the period from 1 April 2013 to 31 March 2014 are:

Biographical details of the directors are set out on page 53.

In accordance with the Articles of Association Mr S Cockburn retires by rotation and, being eligible, offers himself for re-election.

SUBSTANTIAL HOLDINGS

As at 12 June 2014 the Company had been notified of the following substantial interests, in excess of 3%, in the issued ordinary share capital of the Company:

BENEFICIAL INTERESTS IN SIGNIFICANT CONTRACTS

None of the directors had a material interest in any contract of significance to which the Company or any of its subsidiaries was party during the year.

ASSOCIATED BRITISH ENGINEERING PLC

DIRECTORS' REPORT (continued)

FOR THE YEAR ENDED 31 MARCH 2014

BENEFICIAL INTERESTS IN THE SHARE CAPITAL OF THE COMPANY

The beneficial interests of the directors, their spouses and children in the share capital of the Company according to the register kept by the Company as at 1 April 2013 and 31 March 2014 were as follows:

At the relevant dates Mr S J Cockburn had a non-beneficial interest in 80,859 (2013: 80,859) ordinary shares.

At 31 March 2014 David Brown had a 12.4% (2013: 12.4%) interest in the shares of Akoris Trading Limited.

No share options were held by any of the directors at 31 March 2014 or 31 March 2013.

Since 31 March 2014 and up to and including 31 May 2014 there have been no changes in the directors' interests in the share capital of the Company.

The Group uses various financial instruments and these include cash, equity investments, loan stock and various others, such as trade receivables and trade payables which arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group's operations. Details of the group's exposure to price risk, liquidity risk and credit risk are given in note 19.

The structure of the Group's and Company's capital, at nominal value, is as follows:

Further details of the policies adopted by the Group in respect of the financial risk management are included within note 19 to the Group financial statements.

DISABLED PERSONS

It is the Group's policy to give sympathetic consideration to the recruitment, continuing employment, training, career development and promotion of disabled persons.

GLOBAL GHG EMISSIONS DATA FOR THE YEAR ENDED 31 MARCH 2014

In compliance with the Climate Change Act (2008) each business division in the group has reported scope 1 and 2 emissions to provide a consolidated total of each source of greenhouse gas emissions for the year ended and these were as follows:

ASSOCIATED BRITISH ENGINEERING PLC

DIRECTORS' REPORT (continued)

FOR THE YEAR ENDED 31 MARCH 2014

GLOBAL GHG EMISSIONS DATA FOR THE YEAR ENDED 31 MARCH 2014 (continued)

Combustion of fuel and operation of facilities: 155 tonnes of CO2 e

Electricity, heat, steam and cooling purchased for own use: 89 tonnes of CO2 e

The Group's chosen intensity measurement

Emissions reported above (244 tonnes of CO2 e) normalised to per £'000 of revenue (£2,667k): 0.09

Methodology

We have reported on all of the emission sources required under the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013. These sources fall within our consolidated financial statements. We do not have responsibility for any emission sources that are not included in our consolidated financial statements. We have used the GHG Protocol Corporate Accounting and Reporting Standard (revised edition), to gather data to fulfil our requirements, and emission factors from the UK Government's GHG Conversion Factors for Company Reporting 2014.

AUDITOR

Grant Thornton UK LLP have expressed willingness to continue in office. In accordance with section 489 (4) of the Companies Act 2006, a resolution to reappoint Grant Thornton UK LLP will be proposed at the Annual General Meeting.

By order of the Board

For and on behalf of haysmacintyre Company Secretaries Limited

Company Secretary

7 July 2014

ASSOCIATED BRITISH ENGINEERING PLC

STRATEGIC REPORT

FOR THE YEAR ENDED 31 MARCH 2014

BUSINESS REVIEW

A review of the business and of events during the year is contained in the Chairman's Statement which forms part of the Strategic Report.

BUSINESS MODEL AND STRATEGY

The Associated British Engineering Group consists of the following two trading subsidiaries:

1. British Polar Engines Limited ("BPE"), a wholly owned subsidiary, carries out Associated British Engineering's core operating activity of manufacturing and supplying diesel engines and spare parts for diesel engines together with associated repair work.

2. Akoris Limited ("Akoris"), a subsidiary of BPE, which continued to develop its business in natural resource and commodities trading though did not generate any revenue during the year.

BPE's business model and strategy (by division):

Sales

Our sales team deal with the distribution of spare parts worldwide, the team are well versed on our wide range of products and maintain a high level of technical knowledge. We sell and provide replacement parts for Diesel Engines principally in two key ranges and for generator sets. All our major items are certified by Lloyds Register.

Repair and maintenance

We provide a twenty four hour service worldwide to our customers. Repair and maintenance work is carried out on site and in house. We carry out Major Engine Overhauls, upgrade and retrofits, as well as routine engine maintenance and service work for generator sets. Our engineers are highly experienced and able to provide technical support/assistance on site.

 Our business model to achieve our strategic objectives is:

1. To meet the highest standards of customer service in some of the most demanding industrial sectors.

2. To continue the training and development of our workforce. We are currently looking at succession planning.

3. To unify standards and procedures. With the high levels of quality, safety and efficiency procedures adhered to within the company, we continue to adjust and raise our operating standards investing in new production equipment when justified.

4. To maintain a strong governance framework. The Senior Management team operate within a tight framework of controls, monitored and directed by our two executive directors under direction of the Board.

Akoris business model and strategy

During the year the strategy of Akoris changed as implied in the interim statement. In the latter half of the year Akoris looked to acquire a Dutch aluminium trader but after extensive negotiations and due diligence the management of Akoris failed to conclude a satisfactory deal and the acquisition was abandoned. It is regrettable that a considerable amount of management time and expense was expended to no avail. Today Akoris is concentrating on developing an aluminium trading business in the Far East. We hope to start generating revenue streams in the forthcoming trading period. Our business model shows potential for attractive returns for our shareholders using our in-house expertise and knowhow. While Akoris had not entered into any trades in this financial period it is the intention to test this model vigorously prior to entering a full operation. Akoris strategy is to grow organically and generate revenues through the identification of market opportunities, enabling us to buy and sell commodities and natural resources with a focus on a number of key areas of our expertise whilst ensuring that our liquidity position is strengthened by generating positive cash flow and maintaining a flexible capital base in order to support future growth and shareholder returns, whilst keeping a tight rein on expenditure.

ASSOCIATED BRITISH ENGINEERING PLC

STRATEGIC REPORT (continued)

FOR THE YEAR ENDED 31 MARCH 2014

PRINCIPAL RISKS FACING THE BUSINESS

The Group's main operating businesses are its subsidiaries BPE and Akoris.

Business activity in the sector in which BPE primarily operates has in recent years been buoyed by sales to the oil services business. The past year has demonstrated that this business remains sensitive to economic downturn as orders have been delayed and deferred. 2014 has seen an increase in revenue compared to the previous year but margins have been adversely affected by pricing pressure from competitors within the EU while the EU economy remains depressed. We are actively seeking new areas of operations and we anticipate new trading opportunities overseas which should improve turnover in 2015.

Akoris is dependent on the volume of supply and demand for aluminium which it trades in, which can fluctuate depending on a number of external factors beyond its control such as changes in global production capacity, government policies, global and regional economic conditions and natural disasters. The price of this commodity is dependent on the activities of the competitors, speculators, exchange rate movements and production costs. All of these factors could have a significant impact on the Group's revenues and cost base.

The trading outlook for the Group remains unpredictable due to exposure to both volatile pricing and periodic cyclical swings. A review of the record of the trading results over the last decade amply demonstrates this with both revenue and operating profit increasing and declining with the oil sector. The Group's income stream fluctuates throughout the year as a result of the nature and size of the orders and order flows. It is therefore difficult to forecast trading and profitability to any great degree.

The economic climate generally, and in our area of operation specifically, will continue to impact on the income and performance of the Group. The directors aim to keep abreast of the economic climate and business strategy will be continually reviewed and updated to deal with changes.

Further consideration of risks and uncertainties in respect of financial instruments that face the Group and Company is contained in note 19 to the Group financial statements.

KEY PERFORMANCE INDICATORS

The Group uses various indicators to monitor its progress. Sales, service and production are continually monitored against set monthly budgets to compare and improve upon gross profit and operating profit margins. Budgets are set on a monthly and annual basis but the directors have not enhanced the disclosures in this regard as one key transaction stalling could have a significant impact on the feasibility of the budget meaning that such disclosures are not considered useful to users of the accounts.

The Group reviews the Pension Fund liability, the key assumptions underpinning the actuarial valuation and the minimum funding requirement on a continual basis. The key assumptions underpinning the actuarial valuation are reviewed and compared with industry norms; there were no notable variances from the prior year.

CORPORATE GOVERNANCE

Details of corporate governance, which is part of this report for the year to 31 March 2014, are disclosed in the corporate governance report on page 47.

CORPORATE SOCIAL RESPONSIBILITY

Environment

The Group is committed to the protection of the environment and the development of processes which ensure that any adverse impact on the environment arising from their trading activities is minimised by encouraging reduction in waste, awareness of recycling, and encouraging employees to pay regard to environmental issues.

ASSOCIATED BRITISH ENGINEERING PLC

STRATEGIC REPORT (continued)

FOR THE YEAR ENDED 31 MARCH 2014

CORPORATE SOCIAL RESPONSIBILITY (continued)

Employees

The Group currently employs thirty people, including four male non-executive directors and nine senior managers, eight male and one female. We have a dedicated and loyal workforce, many of whom are long serving employees. Over the next few years it is our intention to introduce new members of staff to ensure continuity and the passing on of knowledge for the future.

By order of the Board

For and on behalf of haysmacintyre Company Secretaries Limited

Company Secretary

7 July 2014

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF

ASSOCIATED BRITISH ENGINEERING PLC

We have audited the financial statements of Associated British Engineering plc for the year ended 31 March 2014 which comprise the group income statement, the group statement of comprehensive income, the group balance sheet, and the group cash flow statement, the group statement of changes in equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

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 auditor's 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.

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement set out on page 46, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/apb/scope/private.cfm.

Auditor commentary

The group consists of the parent company, Associated British Engineering plc, and its two trading subsidiary undertakings, British Polar Engines Limited and Akoris Limited. In establishing the overall approach to the group audit, we determined the work that needed to be performed on the operating businesses by us, as the group engagement team. Our audit scope included a full audit of the group financial statements of the parent company, Associated British Engineering plc, and the financial information of the two subsidiary undertakings.

We undertook planned site visits to evaluate controls over key financial systems identified as part of our risk assessment, reviewed the accounts production and consolidation processes and addressed critical accounting matters. We attended the year end stock count of British Polar Engines, the main operating location of the group, in order to evaluate and test the controls over inventories. We undertook substantive testing on significant transactions, balances and disclosures, the extent of which was based on various factors such as our overall assessment of the control environment, the effectiveness of controls over individual systems and the management of specific risks.

Our audit approach included the use of the work of management's and auditor's experts to assist with the audit. We reviewed the actuarial report obtained from the group's actuary on the valuation of the defined benefit pension scheme in order to ascertain the net liabilities of the scheme at the year end. Our actuarial specialists undertook a review of the assumptions and conclusions formed in this report. We have evaluated the adequacy of the work of these experts in respect of our audit.

Our application of materiality

We apply the concept of materiality in planning and performing our audit, in evaluating the effect of any identified misstatements and in forming our opinion. For the purpose of determining whether the financial statements are free from material misstatement we define materiality as the magnitude of a misstatement or an omission from the financial statements or related disclosures that would make it probable that the judgement of a reasonable person relying on the information would have been changed or influenced by the misstatement or omission. For the group audit, we established materiality for the group financial statements as a whole to be £30,000. For the financial information of the individual subsidiary undertakings, we set our materiality based on a proportion of group materiality appropriate to the relative scales of each of the operating businesses.

We determined the threshold at which we communicate misstatements to the Audit Committee to be £1,500. In addition, we communicate misstatements below that threshold that, in our view, warrant reporting on qualitative grounds.

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF

ASSOCIATED BRITISH ENGINEERING PLC

CONTINUED

Measurement of the defined benefit pension liability

The Company has a significant defined benefit pension scheme, which has a deficit of £1,414,000 at the year end. The pension scheme is accounted for in accordance with IAS 19 'Employee Benefits'. The process to measure the pension liability, including the determination of the appropriate timing of recognition, involves significant judgement as the valuation is subject to complex actuarial assumptions. We therefore identified the defined benefit pension scheme as an area requiring particular audit attention.

Our audit work included, but was not restricted to, reviewing the appropriateness of the IAS 19 valuation methodology; agreeing underlying data sent to actuaries and agreeing asset values to underlying investment manager statements. We also involved our actuarial specialists to independently challenge management's assumptions and hold discussions with the company's actuary.

The group's pension assumptions are set out in detail, together with related IAS 19 disclosures, in the group accounting policies and note 17 to the group financial statements.

Recognition of revenue

Revenue for British Polar Engines Limited represents 100% of total group revenue. Revenue is a significant material item in the group income statement. Accordingly the recognition of revenue is therefore identified as a significant risk requiring special audit consideration.

Our audit work included, but was not restricted to, a review of the group's revenue recognition policy; obtaining an understanding of the controls over the process, including challenging management's judgement regarding timing and recoverability of revenue; and for a sample of transactions ensuring that revenue has been recognised in accordance with the stated policy.

The group's accounting policy on the recognition of revenue are included in the group accounting policies and the components of that revenue are included in note 1 to the group financial statements.

Inventory valuation and existence

British Polar Engines Limited holds significant amount of inventory which is used for the manufacture and sales of diesel engines and spare parts as well as associated repair works. Inventory items may be held for long period of time before utilisation making them vulnerable to obsolescence or theft. This could result in an overstatement of the value of inventory if the historical cost is higher than the net realisable value through sales. Furthermore, the assessment and application of inventory provisions are subject to significant management judgement. We have therefore identified inventory existence and valuation as a reasonably possible risk requiring special audit consideration.

Our audit work included, but was not restricted to, the attendance of the stock count at the year end and the assessment of the adequacy and quality of controls during the stock take. We also reviewed a sample of stock items to ensure they were held at the lower of cost and net realisable value, and evaluated the management judgement with regards to the application of provisions to inventory lines.

The group's accounting policies are included in the group accounting policies and disclosures are included in note 12 to the group financial statements.

Management override of financial control

Under ISAs (UK & Ireland), for all of our audits we are required to consider the risk of management override of financial controls. Due to the unpredictable nature of this risk we are required to assess it as a significant risk requiring special audit consideration.

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF

ASSOCIATED BRITISH ENGINEERING PLC

CONTINUED

Management override of financial control (continued)

Our audit work included, but was not restricted to, specific procedures relating to this risk that are required by ISA 240 ' The Auditors Responsibilities relating to Fraud in an Audit of Financial Statements'. This included tests of journal entries, the evaluation of judgements and assumptions in management's estimates and tests of significant transactions outside the normal course of business.

In particular, our work on the defined benefit pension scheme and stock provisions addressed key aspects of ISA 240.

Opinion on financial statements

In our opinion the financial statements:

§ give a true and fair view of the state of the group's affairs as at 31 March 2014 and of the group's loss for the year then ended;

§ have been properly prepared in accordance with IFRSs as adopted by the European Union; and

§ have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.

Other reporting responsibilities

Opinion on other matters prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and the Directors' Report for the financial year for which the group financial statements are prepared is consistent with the group financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

· materially inconsistent with the information in the audited financial statements; or

· apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course of performing our audit; or

· is otherwise misleading.

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the directors' statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that were communicated to the audit committee which we consider should have been disclosed.

§ certain disclosures of directors' remuneration specified by law are not made;

§ we have not received all the information and explanations we require for our audit.

§ the directors' statement, set out on page 50, in relation to going concern; and

§ the part of the Corporate Governance Statement relating to the company's compliance with the nine provisions of the UK Corporate Governance Code specified for our review.

Other matter

We have reported separately on the parent company financial statements of Associated British Engineering plc for the year ended 31 March 2014, and on the information in the Directors' Remuneration Report that is described as having been audited.

Nicholas Watson

Senior Statutory Auditor

for and on behalf of Grant Thornton UK LLP

Statutory Auditor, Chartered Accountants,

Oxford

7 July 2014

ASSOCIATED BRITISH ENGINEERING PLC

GROUP ACCOUNTING POLICIES

FOR THE YEAR ENDED 31 MARCH 2014

BASIS OF PREPARATION

The Company is incorporated in the United Kingdom under the Companies Act 2006.

These Group financial statements have 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 the years presented.

The consolidated financial statements have been prepared using accounting policies specified by those IFRSs that are in effect at the end of the reporting period (31 March 2014) or which have been adopted early.

NEWLY ISSUED ACCOUNTING STANDARDS

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

· IAS 27 Separate Financial Statements (amendment effective 1 January 2014)

· IAS 28 Investments in Associates and Joint Ventures (effective from 1 January 2014)

· IAS 32 Financial Instruments Presentation (amendment effective 1 January 2014)

· IAS 36 Recoverable Amount Disclosures for Non-Financial Assets (amendment effective 1 January 2014)

· IFRS 9 Financial Instruments (effective from 1 January 2018)

· IFRS 10 Consolidated Financial Statements (amendment effective 1 January 2014)

· IFRS 11 Joint Arrangements (effective from 1 January 2014)

· IFRS 12 Disclosure of Interests in Other Entities (amendment effective 1 January 2014)

The directors anticipate that the adoption of the above Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.

STANDARDS AND INTERPRETATIONS EFFECTIVE FOR THE FIRST TIME

(Effective for annual periods beginning on or after 1 July 2013)

Amendments to IAS 1: Presentation of Financial Statements

The amendments revise the way other comprehensive income is presented (OCI). They require entities to group items presented in OCI based on whether they are potentially re-classifiable to profit or loss subsequently.

For the purpose of these financial statements, the directors do not believe the amendments have any impact on the financial statements as the profit or loss and OCI have been presented together as in prior years.

(Effective for annual periods beginning on or after 1 January 2013)

ASSOCIATED BRITISH ENGINEERING PLC

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2014

Amendments to IAS 19: Employee Benefits

The amendments provide revised requirements for pensions and other post-retirement benefits, termination benefits and other changes.

In the current year, the Group has applied IAS 19 Employee Benefits (as revised in 2011) and the related consequential amendments for the first time.

IAS 19 (as revised in 2011) changes the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in the fair value of plan assets when they occur, and hence eliminate the 'corridor approach' permitted under the previous version of IAS 19 and accelerate the recognition of past service costs. All actuarial gains and losses are recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus. Furthermore, the interest cost and expected return on plan assets used in the previous version of IAS 19 are replaced with a 'net interest' amount under IAS 19 (as revised in 2011), which is calculated by applying the discount rate to the net defined benefit liability or asset. These changes have had an impact on the amounts recognised in profit or loss and other comprehensive income in prior years (see the tables below for details). In addition, IAS 19 (as revised in 2011) introduces certain changes in the presentation of the defined benefit cost including more extensive disclosure. Specific transitional provisions are applicable to first time application of IAS 19 (as revised in 2011). The Group has applied the relevant transitional provisions and restated the comparative amounts on a retrospective basis (see the table below for details).

ASSOCIATED BRITISH ENGINEERING PLC

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2014

Amendments to IAS 32: Financial Instruments: Presentation

The amendments clarify that income tax on distributions to holders of an equity instrument and transaction costs of an equity transaction should be accounted for in accordance with IAS 12 Income Taxes.

For the purpose of these financial statements, the directors do not believe the amendments have any impact on the financial statements as there have been no distributions made to holders of an equity instrument and no equity transactions in the year ended 31 March 2014.

Amendments to IFRS 1: First-time Adoption of International Financial Reporting Standards

The amendments address how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRSs. The amendments mirror the requirements for existing IFRS preparers in relation to the application of amendments made to IAS 20 Accounting for Government Grants and Disclosure of Government Assistance in relation to accounting for government loans.

For the purpose of these financial statements, the directors do not believe the amendments have any impact on the financial statements as they are not first time adopters of the International Financial Reporting Standards.

Amendments to IFRS 7: Financial Instruments

Amends the disclosure requirements in IFRS 7 Financial Instruments: Disclosures to require information about all recognised financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation. The amendments also require disclosure of information about recognised financial instruments subject to enforceable master netting arrangements and similar agreements even if they are not set off under IAS 32.

For the purpose of these financial statements, the directors do not believe the amendments have any impact on the financial statements as no financial instruments are held which are set off in accordance with IAS 32 and no financial instruments are subject to enforceable master netting and similar arrangements.

Amendments to IFRS 13: Fair Value Measurement

The amendment replaces the guidance on fair value measurement in existing IFRS accounting literature with a single standard. IFRS 13 applies when another IFRS requires or permits fair value measurements or disclosures about fair value measurements (and measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements). With some exceptions, the standard requires entities to classify these measurements into a 'fair value hierarchy' based on the nature of the inputs.

For the purpose of these financial statements the directors do not believe the amendments have any impact on the financial statements as the fair value of the investment assets held by the Company is calculated by reference to the quoted market price at the year end.

ASSOCIATED BRITISH ENGINEERING PLC

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2014

GOING CONCERN

The financial statements have been prepared on the going concern basis. There have been no changes to accounting policies in the year. The most notable accounting event has been the recent restructuring of the Company's capital base and the increase in the pension scheme deficit based on this year's actuarial forecast and referred to in the Chairman's Statement. The directors have agreed a revised schedule of contributions to eliminate the deficit on the ABE Pension Fund over thirteen years starting from the year ended 31 March 2010. Based on the Group's budgets and cash forecasts, the Board considers that the Group has sufficient resources to meet all necessary outgoings and to enable it to continue in operational existence for the foreseeable future.

BASIS OF CONSOLIDATION

The Group financial statements incorporate the financial statements of Associated British Engineering plc and its subsidiary undertakings to 31 March each year. All inter-company balances and transactions have been eliminated in full. The Group financial statements include the results of subsidiaries acquired or disposed of during the year from or to the effective date of acquisition or disposal.

BUSINESS COMBINATIONS

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

· deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 and IAS 19 respectively;

· liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and

· assets that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with the Standard.

Goodwill is measured in the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis.

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 despatch 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. Revenue from servicing and repair work is recognised when the work is completed.

ASSOCIATED BRITISH ENGINEERING PLC

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2014

ACCOUNTING ESTIMATES AND JUDGEMENTS

Management are required, in accordance with IFRS, to exercise judgement and to make estimates and assumptions regarding the application of accounting policies and the resulting effect on reported amounts of assets, liabilities, income and expenses. These estimates and assumptions are based on historical experience and a review of current conditions prevailing at the time but actual results may differ from these estimates. Any such revision is recognised in the financial statements in the period in which the change in circumstance is detected.

Accounting Judgements

The key areas where management have exercised judgement in the year, and the thought processes undertaken, are as follows:

Deferred tax

Please refer to Taxation Policy below and note 20.

Pension Scheme

The directors are in regular contact with the Trustees of the pension scheme in connection with three keys areas where judgement is exercised; the assumptions underpinning the actuarial valuation, continued negotiations regarding the pension scheme and in relation to the payment plan. The directors then assess the relevant estimates and assumptions made to ensure that where possible, all statutory obligations are met.

In evaluating the assumptions underpinning the actuarial valuation the directors have sought the professional advice of a firm of actuaries who prepare the valuation according to industry standards and norms. During the year under review an actuarial loss of £580,000 (2013: £40,000 loss (restated)) was recognised in the Group accounts.

The assumptions underpinning the actuarial valuation are disclosed further in note 17 to the Group financial statements.

Accounting Estimates

The accounting estimate having an impact on carrying amounts of assets and liabilities in the reporting period is as follows:

Inventories

Inventories held by the Group consist of raw material (mainly components), work in progress (manufactured engine parts) and finished goods (both purchased and manufactured engine parts). A specific provision is made, on a 100% basis, for all stock lines that are obsolete or slow moving for periods in excess of four years. A general provision is made of 5%, 12.5%, 25% and 50% over all stock lines that have not moved for one, two, three and four years respectively. The reasoning/basis for the general provision is based on past experience of management.

The inventory provision at the year end amounted to £2,219,000 (2013: £2,145,000). The gross value of inventories at the year end is £3,271,000 (2013: £3,174,000).

The directors review their assumptions and accounting estimates, along with the accounting policies adopted in preparing these financial statements, on a regular basis and recognise any change in the period in which circumstances vary.

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

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2014

LEASED ASSETS

Leases of property and 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.

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.

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 7½- 33⅓ per cent

These useful lives and residual values are reviewed in each financial period.

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 property, 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 nor 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.

ASSOCIATED BRITISH ENGINEERING PLC

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2014

TAXATION (continued)

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.

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 Group statement of comprehensive income.

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 cumulative unrecognised 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 Comprehensive Income 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 when originally entered into 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 income statement. 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.

Further analysis of the Group's financial instruments, and the relevant exposure to risks and uncertainties, is stated in note 19 below and the various classifications of financial assets and liabilities are identified and explained.

ASSOCIATED BRITISH ENGINEERING PLC

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2014

Trade and other receivables

Trade and other receivables are originally recognised at fair value. Subsequent measurement is at amortised cost using the effective interest rate method. A provision against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The total of bad and doubtful debts at the year end was £71,000 (2013: £32,000). Trade receivables and cash and cash equivalents are classified as loans and receivables.

Trade and other payables

Trade and other payables are originally recognised at fair value, net of transaction costs. Subsequent measurement is at amortised cost using the effective interest rate method.

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 held for trading 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. At the year end an adjustment of £37,500 (increase) was made to align the investments in securities with their fair value.

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. There has been no charge recognised with respect to the share options as all those in issue fall outside the scope of IFRS 2, having been granted before November 2002.

IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT

At each balance sheet date the Group reviews the carrying amounts of its property, plant and equipment 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 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 (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.

SEGMENTAL REPORTING

The standard requires financial information to be disclosed in the financial statements in the same format in which it is disclosed to the chief operating decision-maker. The chief decision-maker has been identified as the Board, at which level strategic decisions are made.

ASSOCIATED BRITISH ENGINEERING PLC

GROUP ACCOUNTING POLICIES (continued)

FOR THE YEAR ENDED 31 MARCH 2014

EQUITY AND RESERVES

Share capital represents the nominal value of shares that have been issued except for the preference shares classified as debt.

Deferred shares represents shares arising from the sub-division of ordinary shares of £2.

Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

Retained earnings include all current and prior period retained profits and losses.

Other reserves relate to movements not classified in any of the reserves detailed above.

All transactions with owners of the parent are recorded separately within equity.

ASSOCIATED BRITISH ENGINEERING PLC

GROUP INCOME STATEMENT

FOR THE YEAR ENDED 31 MARCH 2014

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2014

All activities are classified as continuing.

The accounting policies on pages 12 to 20 and the notes on pages 25 to 37 form part of these accounts.

(*) items which will not subsequently be reclassified to the income statement

ASSOCIATED BRITISH ENGINEERING PLC Company Number: 00110663

GROUP BALANCE SHEET

31 MARCH 2014

The financial statements were approved and authorised for issue by the Board of Directors on

and were signed below on its behalf by:

C Weinberg

Director

7 July 2014

The accounting policies on pages 12 to 20 and the notes on pages 25 to 37 form part of these accounts.

ASSOCIATED BRITISH ENGINEERING PLC

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2014

Note:

Adjustments relating to the restatement of balances relate to transitional provisions arising as a result of amendments to IAS 19: Employee Benefits which has resulted in the restatement of comparative amounts on a retrospective basis. The adjustments are explained further within the Group Accounting Policies.

(*) - Items which will not be subsequently reclassified to the income statement

 The accounting policies on pages 12 to 20 and the notes on pages 25 to 37 form part of these accounts.

ASSOCIATED BRITISH ENGINEERING PLC

GROUP CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 MARCH 2014

The accounting policies on pages 12 to 20 and the notes on pages 25 to 37 form part of these accounts.

ASSOCIATED BRITISH ENGINEERING PLC

NOTES TO THE ACCOUNTS - GROUP

FOR THE YEAR ENDED 31 MARCH 2014

1. SEGMENTAL REPORTING

All of the above revenue arises from diesel and related engineering activities and originates in the United Kingdom.

In the years ended 31 March 2014 and 31 March 2013 all of the assets held by the Group were located in the United Kingdom and all capital expenditure was incurred within the United Kingdom.

Operating segments

The following segment information has been prepared in accordance with IFRS 8, "Operating Segments", which defines requirements for the disclosure of financial information of an entity's operating segments.

The Board consider the Group on an individual company basis. Reports by individual companies are used by the chief decision-maker in the Group. Significant operating segments are Associated British Engineering Plc, British Polar Engines Limited and Akoris Trading Limited.

The Group's operations are located in the United Kingdom. Any transactions between business units are on normal commercial terms and conditions.

British Polar Engines Limited's activities consist of the manufacture and supply of diesel engines and spare parts for diesel engines together with associated repair work.

Akoris Trading Limited's activities consist of commodity and natural resource trading, finance and investment. The company only incurred set up expenditure in the period to 31 March 2014.

Associated British Engineering Plc is the Group holding company.

ASSOCIATED BRITISH ENGINEERING PLC

NOTES TO THE ACCOUNTS - GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2014

1. SEGMENTAL REPORTING (continued)

Included in the total Group revenue was £585,000 (2013: £286,735) of sales which arose from two customers who contributed to 10% or more of the total Group revenue for the year ended 31 March 2014 (2013: one customer).

ASSOCIATED BRITISH ENGINEERING PLC

NOTES TO THE ACCOUNTS - GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2014

Directors received emoluments of £45,000 (2013: £47,000). Further details can be found on page 52.

The Group made no pension contributions in respect of Group directors during the year ended 31 March 2014 or 31 March 2013.

ASSOCIATED BRITISH ENGINEERING PLC

NOTES TO THE ACCOUNTS - GROUP (continued)

FOR THE YEAR ENDED 31 MARCH 2014