ACER Acertec

RNS Number:2185I
Acertec PLC
21 November 2007



For Immediate Release                                           21 November 2007

                                  Acertec plc
                  ("Acertec" or the "Group" or the "Company")

             Accounting issue, trading update and management change


Accounting discrepancy in BRC

On 5 September 2007, Acertec plc announced that it had discovered a discrepancy
in the accounting for stock at one of the divisions of BRC in the UK.

Since then, an investigation into the discrepancy, which is now largely
completed, has been undertaken by independent lawyers (Peters and Peters) and
accountants (KPMG LLP). This shows that there has been a breakdown in control
within the BRC division and that the accounts have been manipulated and
misstated over a period of more than two years. The Board is naturally concerned
that this was not detected over such a long period and is taking appropriate
steps to improve the control environment.

The underlying accounting and control issues started to come to light following
the appointment of a new divisional finance director to the BRC division
concerned, in March 2007. He has been heavily engaged in the investigation, with
the independent accountants and lawyers. In addition, all the key divisional
accounting staff, except one, have now changed.

The investigation has focused on the relevant division's balance sheets at 30
September 2007, 31 December 2006 and 31 December 2005. Its results show a total
discrepancy of #5.0m arising from an overstatement of stock accounts and an
understatement of accruals. Of the total discrepancy, it is estimated that #1.4m
relates to the current year, #1.8m to the year ended 31 December 2006, and #1.8m
to the year ended 31 December 2005 and possibly to prior years.

No evidence of theft has so far been found. The preliminary conclusion is
therefore that the trading profits of the division and therefore of the Group
have been overstated during the periods concerned. The full results for the year
ended 31 December 2006 and the balance sheets at 31 December 2006 and December
2005 will be restated when the accounts for the year ending 31 December 2007 are
published.

Segmental operating profit (before goodwill amortisation and exceptional items),
as published and as adjusted for these discrepancies, for the year ended 31
December 2006 and the six months ended 30 June 2007 are as follows:


                                                  Six months ended                     Year ended
                                                    30 June 2007                    31 December 2006
                                                      unaudited                         unaudited
                                              -------------------------         -------------------------

                                              Published        Adjusted         Published        Adjusted
                                                GBP'm            GBP'm            GBP'm            GBP'm
Operating profit/(loss) before
goodwill amortisation and exceptional
items:
Group and share of joint ventures

BRC                                               5.0              3.6              9.2              7.4
Stadco                                            5.5              5.5             11.0             11.0
Central                                          (1.5)            (1.5)            (3.5)            (3.5)

Total Acertec                                     9.0              7.6             16.7             14.9

Shareholders' funds                              31.0             26.0             24.9             21.3

Earnings per share for profit 
attributable to the equity      
holders of the Company from 
continuing operations during 
the period:                                     Pence             Pence           Pence            Pence
Basic & diluted                                   9.7               7.0            12.7              7.1


It has not been practicable to allocate precisely the discrepancy arising in the
nine months to 30 September 2007 between the half year to 30 June 2007 and the
three months to September 2007. As a result, the directors have allocated the
whole of the discrepancy to the six months ended 30 June 2007.

Profit and loss reserves in the balance sheet at 31 December 2005 will be
reduced by #1.8m being the impact for the year ended 31 December 2005 and prior
years.

These adjustments have no impact on the reported tax charges in the relevant
periods.

The Company has informed its banks about the outcome of the investigation and
the banks remain supportive.

Outlook for 2007

In the second half of 2007, construction markets in the UK have generally
remained buoyant and BRC's turnover has continued to grow. However, since
Acertec's interim results were announced on 20 September 2007, pricing has
tightened and demand has slowed in certain areas, with customer call-offs on
some projects being delayed. Although BRC as a whole is not highly exposed to
the housing and commercial sectors these are important for certain of BRC's
specialty products and demand has softened in some of these areas.

The planned changes to BRC's manufacturing structure and its expansion of
capacity have now been successfully completed. However, a number of one-off
costs have been incurred during the implementation due to the disruption caused
by the changes.

In Stadco, trading is in line with expectations; however, an increase in the
reserve for bad debts has been required in respect of a one-off project with one
non-UK customer.

The overall impact of the foregoing factors means that Acertec's operating
results for 2007 will now be below market expectations. In addition, it is
estimated that there will be a non-recurring exceptional charge of #0.6m
relating to the costs of the BRC investigation.

Russia

Stadco is making good progress with its expansion project in Russia. In order to
enhance the total sales prospects in Russia, whilst at the same time reducing
the financial risk, Stadco has agreed to develop its Russian business as a 50/50
joint venture with Gestamp Automocion SL (Gestamp). Gestamp is a major global
supplier of body-in-white components to many of the world's leading vehicle
manufacturers, including General Motors which is investing heavily in new
vehicle assembly operations in St. Petersburg. Ford, which is Stadco's prime
customer in Russia, is the leading international vehicle manufacturer in the St.
Petersburg region, where other manufacturers, including Toyota, Nissan and
Suzuki, are also developing substantial new vehicle assembly facilities.

Gestamp is providing the initial funding to start the required investment in the
project.

Management

It is also announced today that David Roache will be standing down as Finance
Director of Acertec from 31 December 2007 rather than at the next AGM as he had
planned. An announcement will be made regarding his replacement in the near
future. The Board extends to David its thanks for the work he has done for
Acertec over the years, and its best wishes for the future.

                                    - Ends -

Enquiries:

Acertec plc                                                         01789 403070
James Kerr-Muir, Chairman
John Sword, Chief Executive

Hawkpoint Partners Limited (Nominated Adviser)                     020 7665 4500
David Renton

Weber Shandwick Financial                                          020 7067 0700
Nick Oborne, Rachel Martin, Charlie Hooper




                      This information is provided by RNS
            The company news service from the London Stock Exchange

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