A.b.engineering Regulatory News (ASBE)

28 Jul 2005 15:07

Associated British Engineering PLC28 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 comparedwith a pre-tax loss of £246,000 last year. As with last year, the losses reflecta number of issues with the Group managing to reduce its central costs. However,there have been further ongoing costs relating to the negotiation of thesettlement with the Trustees of the pension fund amounting to £28,000. On theassumption that the Company completes these negotiations, the Company can thenproceed 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 untilthe 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 aprofit of £45,000 last year. The company has again benefited from there-organisations of previous years. The Board of BPE should be congratulated forits endeavours. This year as in the recent past the Board of Directors has spent most of itstime and attention in resolving the situation surrounding the ABE Pension Scheme('Scheme') and its potential financial impact on the Company. As a result ofthis work in 2004, the Company had negotiated 'in principle' Heads of Terms withthe Trustees of the Scheme, and the negotiations for a formal Compromise Deedand resultant changes to the Trust Deed are being undertaken. The key featuresof the compromise are that the specific liabilities of the Company are set outand agreed and all future liabilities of the Company under the Scheme areterminated. The Company, BPE and the Trustees of the Scheme signed thenon-binding Heads of Terms on 20 July 2004. BPE is now the only company in theScheme, 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 resolvingthe 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 overthe course of the year, and this, coupled with the need for the actuariescalculating all of the new values for the different parts of the scheme, hasmeant that we have still not fully resolved the position. The BPE section of thefund is still substantially underfunded, and additional payments will have to bemade by BPE to reduce that deficit over time. However, I can report that all of the parts of the scheme are now in wind upwith the exception of the BPE section. ABE has now made its final payment intothe pension scheme. We are now in the final stages of negotiating the CompromiseAgreement with the Trustees based on the heads of terms agreed last year, whichif agreed as we are intending, would mean that the bulk of the proceeds of salefrom any disposal of BPE would be given to the pension fund in order to relievesome of the deficit that exists. To achieve this settlement, the Company and the Trustees will have to have theCompromise Agreement approved by the new pensions regulator. It is regrettablethat this will prolong what has already become a tedious and painful exercise. Ican only ask that shareholders be patient while the Board continues in itsefforts to overcome this final hurdle. In theory, the regulator could order ABEto contribute further to the deficit on the scheme, over and above what isproposed in the Compromise Agreement. The Directors, based on professionaladvice, feel that this is unlikely, but it is possible, and this would have aneffect 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 andwe will naturally announce to shareholders the final position as soon as this isknown. 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 2,695Other 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 financialyear 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 oninvestments 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 UKaccounting standards and under the historical cost convention. The principal accounting policies of the group have remained unchanged fromthose 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 activitiesand 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 ofthe 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 EnginesLimited with the balance of £16,700 relating to corporation tax compliance andadvisory work. A • B • E NOTES 5. EXCEPTIONAL ITEMS 2005The 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 theyear. 2004The Group made an exceptional profit on the sale of the property held for resaleof £178,000. In addition the Group incurred further exceptional costs inrelation 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 toordinary shareholders divided by the weighted average number of shares in issueduring the year. The share options in issue are not dilutive in accordance withFRS 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 aseparate trustee administered fund ("the ABE Pension Fund"). The requiredcontributions are assessed with the advice of an independent qualified actuaryusing the projected unit method and charged to the profit and loss account so asto spread the cost of pensions over employees' working lives with the Group. TheGroup also has a designated Group personal pension plan which meets stakeholderrequirements. The Company is in the process of leaving the ABE Pension Scheme and hasnegotiated 'in principle' Heads of Terms with the Trustees of the scheme, thedetails 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. Theprincipal assumptions used in the most recent actuarial valuation as at 1 April2004 are based upon price inflation of 3.0% per annum, an investment return of6.0% per annum prior to retirement and 4.8% per annum in retirement, pay growthof 4.0% per annum (including allowance for promotions) and increases in presentand future pensions in payment (where subject to increases in line with RPIcapped at 5% per annum) at 2.75% per annum. At that date, the market value ofthe 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 membersafter 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 plusadditional contributions to correct the Minimum Funding Requirement (MFR)deficit of £6,000 per month which have been accrued by British Polar EnginesLimited since 26 February 2003. These additional payments have been made byBritish Polar Engines Limited during the period. With effect from 1 July 2005 the MFR contributions to the scheme due by BritishPolar Engines Limited have increased to 17.1% of pensionable pay plus £19,700per month for 10 years. This and any other future funding of the pension schemeis dependent upon the successful finalisation of the compromise agreement orsuch other mutually satisfactory arrangement with the pension trustees andapproval by the pensions regulator. FRS 17 "Retirement benefits" The transitional arrangements of the new accounting standard FRS 17 requiredisclosure of assets and liabilities as at 31 March 2005 calculated inaccordance with the requirements of FRS 17. They also require disclosure of theitems which would appear in the profit and loss account and in the statement oftotal recognised gains and losses were the full requirements of FRS 17 in place.For the purpose of these financial statements, all of these figures areillustrative only and do not impact on the actual 31 March 2005 balance sheet oron 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 liabilitieshave been calculated using the following principal actuarial assumptions: 31 March 2005 31 March 2004 31 March 2003 % per annum % per annum % per annumInflation 3.0 3.0 2.6Salaryincreases 4.0 4.0 2.6Rate ofdiscount 5.5 5.5 5.4Pension inpaymentincreases 2.8 2.8 2.4Revaluationrate fordeferredpensioners 3.0 3.0 2.6 The deferred taxation asset relating to the pension liability has not beenincluded 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 6,325Liabilities (12,186) (12,200) (10,752)Deficit (4,124) (4,885) (4,427) If the amounts above had been recognised in the financial statements, thecompany's net assets and profit and loss reserve at 31 March 2005 and 31 March2004 would be as follows: 31 March 2005 31 March 2004 £'000 £'000 Net assets excluding pensionliability 2,611 2,637Pension liability (4,124) (4,885)Net assets including pensionliability (1,513) (2,248)Profit and loss reserve excludingpension 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 2,949Bonds 2,574 2,469 2,558Cash 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 5.1Bonds 3.0 3.0 2.6Cash 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 £'000Operating chargeCurrent servicecost 103 68Total operatingcharge 103 68Other finance chargesInterest onpension schemeliabilities 665 568Expected returnon pensionscheme assets (287) (221)Net financecharge 378 347Total charge toprofit and lossaccount 481 415 A • B • E NOTES 8. PENSIONS - continued Illustrative amounts which would be included within the Statement of TotalRecognised Gains and Losses (STRGL) Year Year Ended Ended 31 March 31 March 2005 2004Difference between expected and actual return on schemeassets:Amount (£'000) 569 1,239Percentage of schemeassets 7% 17%Experience gains and losses arising on the scheme liabilities: Amount (£'000) 444 102Percentage of presentvalue of schemeliabilities 4% 1%Effects of changes in the demographic and financialassumptions underlying the present value of the schemeliabilities:Amount (£'000) - (1,460)Percentage of presentvalue of schemeliabilities 0% (12%)Total amount recognised in STRGL:Amount (£'000) 1,013 (119)Percentage of schemeliabilities 8% (1%) Movement in deficit during the year: Year Ended Year Ended 31 March 2005 31 March 2004 £'000 £'000 Deficit inscheme atbeginning ofyear 4,885 4,427Movement in year:Current servicecost 103 68Net financecharge 378 347Contributions (229) (76)Past service costs - -Actuarialloss/(gain) (1,013) 119Deficit inscheme at end ofyear 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 oftotal recognised gains and losses for the previous 3 accounting years are asfollows: 31 31 March 31 March March 2004 2003 2005 £'000 £'000 £'000Difference between expected and actual return onscheme assets:Amount (£'000) 569 1,239 (1,603)Percentage ofscheme assets 7% 17% (25%)Experience gains and losses on scheme liabilities:Amount (£'000) 444 102 (93)Percentage ofthe presentvalue of theschemeliabilities 4% 1% (1%)Effects of changes in the demographic and financialassumptions underlying the present value of the schemeliabilities:Amount (£'000) - (1,460) (845)Percentage ofthe presentvalue of theschemeliabilities 0% (12%) (8%)Total actuarial gain or loss:Amount (£'000) 1,013 (119) (2,541)Percentage ofthe presentvalue of theschemeliabilities 8% (1%) (24%) 9. INTERNATIONAL ACCOUNTING STANDARDS The Council of the European Union (EU) announced in June 2002 that all Europeanlisted companies will be required to adopt the International Financial ReportingStandards ("IFRS") and International Accounting Standards ("IAS") in thepreparation of financial statements for 2005 onwards. This means the Group willhave to prepare its first financial statements in accordance with IFRSs and IASsfor the year ending 31 March 2006. The Board is in the process of preparing for the transition to IFRS. The firstpublished report will be the interim statements for the 6 month period ended 30September 2005. The key IFRS which at the present time the Board believes mayimpact Group's results are as follows: - Adoption of IAS 19 (Retirement and other employee benefits) - effects of theGroup's accounts both retrospectively and prospectively of the pension scheme - Adoption of IAS 32 (Financial Instruments: Disclosure and presentation) - thepotential requirement to disclose in certain circumstances preference shares asa liability - Adoption of IAS 5 (Non current assets held for sale and discontinuedoperations) - potential impact as a result of British Polar Engines Limitedbeing marketed for sale - Adoption of IAS 14 (Segmental reporting) - ability to obtain sufficientinformation to comply with these requirements in respect of British PolarEngines Limited's geographical segments. A • B • E NOTES 10. The financial information set out in this preliminaryannouncement does not constitute statutory accounts as defined in section 240 ofthe Companies Act 1985. The summarised balance sheet at 31 March 2005 and the summarised profit and lossaccount, summarised cash flow statement and associated notes for the year thenended have been extracted from the Group's 2005 statutory financial statementsupon which the Auditors' opinion is unqualified and does not include anystatement under Section 237 of the Companies Act 1985. Those financialstatements have not been delivered to the Registrar of Companies. 11. The comparative figures for the year ended 31 March 2004 areabridged from the accounts for that year and do not constitute full accountswithin the meaning of Section 240 of the Companies Act 1985 (as amended).Statutory accounts for that period, on which the Auditors gave a qualifiedopinion, 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) This information is provided by RNS The company news service from the London Stock Exchange