TIDMASBE
RNS Number : 6657L
Associated British Engineering PLC
07 July 2014
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
CONTENTS Page
Financial highlights 1
Chairman's statement 2
Directors' report 3
Strategic report 6
Report of the independent auditor - Group 9
Group accounting policies 12
Group income statement 21
Group statement of comprehensive income 21
Group balance sheet 22
Group statement of changes in equity 23
Group cash flow statement 24
Notes to the Group financial statements 25
Report of the independent auditor - Company 38
Principal accounting policies - Company 39
Company balance sheet 41
Notes to the company financial statements 42
Statement of directors' responsibilities 46
Corporate governance report 47
Directors' remuneration report 51
Directors, registered office and advisers 54
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
2014 2013
GBP'000 GBP'000
(restated)
REVENUE 2,667 2,488
OPERATING (LOSS) (308) (31)
LOSS BEFORE TAXATION (328) (71)
NET ASSETS 2,858 3,754
BASIC LOSS PER 2.5p ORDINARY SHARE (4p) (2p)
EQUITY SHAREHOLDERS' FUNDS PER 2.5p ORDINARY GBP1.39 GBP1.83
SHARE
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 GBP31,000 in the
previous year to a loss of GBP308,000 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 GBP2.5 million (2013) to GBP2.7 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 GBP931,000 to GBP1,414,000 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 GBP316,000. 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:
Mr D A H Brown Chairman
Mr S J Cockburn Non-Executive Director
Mr C Weinberg Non-Executive Director
Mr A R Beaumont Non-Executive Director
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:
W B Nominees Limited 22.6%
R A Pearce Gould
(Part of Mr Pearce Gould's holding for his pension fund is
held in Rulegale Nominees Limited - see below) 12.4%
Fiske Nominees Limited (FISKPOOL)
(Of which I A W Tyler has 3.2% of issued ordinary shares) 8.9%
Rulegale Nominees Limited
(Of which R A Pearce Gould's pension fund has 4.7% of issued
ordinary shares; this holding is included above under Mr
Pearce Gould's overall beneficial holding) 8.1%
Fitel Nominees Limited (DMOD) 7.3%
BNY (OCS) Nominees Limited
(Of which all is The Investment Company PLC) 4.9%
Hargreaves Lansdown (Nominees) Limited
(Of which D Newlands has 4.1% of issued ordinary shares) 4.6%
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:
Ordinary shares
of
2.5p 2.5p
2014 2013
No. No.
Mr D A H Brown 93,312 93,312
Mr S J Cockburn 72,237 72,237
Mr C Weinberg 161,416 115,916
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:
No. in issue Nominal Total % of
Value Value Capital
GBP GBP %
Ordinary shares 2,048,990 0.025 51,225 1.9
Deferred shares 1,313,427 1.975 2,594,018 98.1
========= ====== ========== ======
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
CO(2) e
Electricity, heat, steam and cooling purchased for own use: 89
tonnes of CO(2) e
The Group's chosen intensity measurement
Emissions reported above (244 tonnes of CO(2) e) normalised to
per GBP'000 of revenue (GBP2,667k): 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.
Total no. of officers/employees Number of males Number of females
% %
------------------- -------------------------------- ---------------- ------------------
Senior Management 9 89 11
------------------- -------------------------------- ---------------- ------------------
Whole Workforce 30 90 10
------------------- -------------------------------- ---------------- ------------------
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
GBP30,000. 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 GBP1,500. 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
Our assessment of risk
Without modifying our opinion, we highlight the following
matters that are, in our judgement, likely to be most important to
users' understanding of our audit. Our audit procedures relating to
these matters were designed in the context of our audit of the
group financial statements as a whole, and not to express an
opinion on individual transactions, account balances or
disclosures.
Measurement of the defined benefit pension liability
The Company has a significant defined benefit pension scheme,
which has a deficit of GBP1,414,000 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:
Under the ISAs (UK and Ireland), we are required to report to
you if, in our opinion, information in the annual report is:
-- 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.
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
-- 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.
Under the Listing Rules, we are required to review:
-- 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).
Impact on total comprehensive
income for the year of
application of IAS 19 (as 2014 2013
revised in 2011) GBP'000 GBP'000
---------- ----------
Impact on profit (loss)
for the year
Decrease in finance expenses 41 41
Increase in profit for
the year 41 41
---------- ----------
Impact on other comprehensive
income for the year
Increase in defined benefit
obligation (41) (41)
Increase in profit for
the year attributable to:
Owners of the company 41 41
----------
Non-controlling interests - -
---------- ----------
41 41
----------
Increase in total comprehensive
income for the year attributable
to:
---------- ----------
Owners of the company - -
---------- ----------
Non-controlling interests - -
---------- ----------
- -
---------- ----------
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 GBP580,000 (2013: GBP40,000 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 GBP2,219,000
(2013: GBP2,145,000). The gross value of inventories at the year
end is GBP3,271,000 (2013: GBP3,174,000).
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 7 1/2 - 331/3 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 GBP71,000 (2013: GBP32,000).
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 GBP37,500 (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 GBP2.
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
Note 2014 2013
GBP'000 GBP'000
(restated)
REVENUE 1 2,667 2,488
Operating costs 2 (2,975) (2,519)
------------- -------------
OPERATING LOSS (308) (31)
Finance expense 7 (45) (78)
Finance income 7 25 38
------------- -------------
LOSS BEFORE TAXATION (328) (71)
Taxation 8 12 (15)
------------- -------------
LOSS FOR THE YEAR (316) (86)
====== ======
EARNINGS PER SHARE ON LOSS FOR THE YEAR
ATTRIBUTABLE TO EQUITY HOLDERS OF THE
PARENT COMPANY
BASIC AND DILUTED 9 (4p) (2p)
====== ======
Loss for the year attributable to:
Owners of the Company (99) (49)
Non-controlling interests (217) (37)
------------ ------------
(316) (86)
------------ ------------
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2014
2014 2013
GBP'000 GBP'000
(restated)
Loss for the year (316) (86)
------------ ------------
Other comprehensive income (*)
Actuarial loss on retirement benefit obligation 17 (580) (40)
----------- -----------
Other comprehensive income for the year (580) (40)
------------ ------------
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (896) (126)
====== ======
Total comprehensive loss attributable to:
Owners of the Company (679) (89)
Non-controlling interests (217) (37)
------------ ------------
(896) (126)
====== ======
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
2014 2013
Note GBP'000 GBP'000
ASSETS (restated)
Non-current assets
Property, plant and equipment 10 364 380
------------- -------------
Current assets
Inventories 12 1,052 1,029
Trade and other receivables 13 527 497
Held for trading investments 14 129 84
Cash and cash equivalents 2,992 3,532
------------- -------------
4,700 5,142
------------- -------------
Total assets 5,064 5,522
====== ======
EQUITY AND LIABILITIES
Called up share capital 15 51 51
Deferred shares 15 2,594 2,594
Share premium account 5,370 5,370
Other components of equity 11 11
Retained earnings (5,227) (4,548)
-------------- --------------
Equity attributable to the Company's Equity
shareholders 2,799 3,478
Non-controlling interests 59 276
-------------- --------------
Total equity 2,858 3,754
------------- -------------
LIABILITIES
Non-current liabilities
Retirement benefit obligation 17b 1,414 931
Obligation under finance leases 18 172 237
Deferred tax liabilities 20 2 15
------------- -------------
1,588 1,183
------------- -------------
Current liabilities
Trade and other payables 18 553 520
Obligations under finance leases 18 65 65
------------- -------------
618 585
------------- -------------
Total liabilities 2,206 1,768
------------- -------------
Total equity and liabilities 5,064 5,522
====== ======
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
Share Share Deferred Other Retained Attributable Non-controlling
capital premium shares reserve earnings to owners interests Total
of the parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April
2012 51 5,370 2,594 11 (4,459) 3,567 - 3,567
Loss for the year - - - - (49) (49) (37) (86)
Other
comprehensive
income (*)
Actuarial loss
in defined
benefit
plan - - - - (40) (40) - (40)
-------------- -------------- ---------------- -------------- --------------- --------------- --------------- ---------------
Total
comprehensive
income for the
year - - - - (89) (89) (37) (126)
-------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Additional
non-controlling
interest arising
on the
acquisition of
Akoris Trading
Limited - - - - - - 313 313
-------------- -------------- -------------- -------------- --------------- --------------- --------------- ---------------
Balance at 31
March 2013 51 5,370 2,594 11 (4,548) 3,478 276 3,754
(restated - refer -------------- -------------- --------------- -------------- --------------- --------------- --------------- ---------------
to Note below)
Loss for the year - - - - (99) (99) (217) (316)
Other
comprehensive
income (*)
Actuarial loss
in defined
benefit
plan - - - - (580) (580) - (580)
-------------- -------------- --------------- -------------- --------------- --------------- --------------- ---------------
Total
comprehensive
income for the
year - - - - (679) (679) (217) (896)
-------------- -------------- --------------- -------------- --------------- --------------- --------------- ---------------
Balance at 31
March 2014 51 5,370 2,594 11 (5,227) 2,799 59 2,858
====== ====== ====== ====== ======= ======= ======= ======
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
2014 2013
GBP'000 GBP'000
Cash flows from operating activities
Cash used in operations (445) (245)
Interest received 20 38
Interest paid (5) (32)
----------------- -----------------
Net cash used in operating activities (430) (239)
----------------- -----------------
Cash flows from investing activities
Proceeds from sale of equipment - 1
Purchase of equipment (37) (349)
Purchase of investments (13) -
Sale proceeds from trading investments 5 28
----------------- -----------------
Net cash used in investing activities (45) (320)
----------------- -----------------
Cash flows from financing activities
Cash raised from non-controlling interests - 313
(Settlement of)/proceeds from finance
leases (65) 302
Redemption of loan notes - (555)
----------------- -----------------
Net cash generated from financing activities (65) 60
----------------- -----------------
Net decrease in cash and cash equivalents (540) (499)
Cash and cash equivalents at beginning
of year 3,532 4,031
----------------- ----------------
Cash and cash equivalents
at end of year 2,992 3,532
========= ========
CASH FLOW FROM OPERATING ACTIVITIES
2014 2013
GBP'000 GBP'000
(restated)
Loss before taxation (328) (71)
Adjustments for:
Depreciation 53 37
Interest income (20) (38)
Finance expense 5 32
Pension scheme interest expense 40 46
Cash paid in excess of current service cost (137) (130)
Profit on disposal of equipment - (1)
Profit on disposal of Held for Trading investments (1) (33)
Changes in working capital:
(Increase) / Decrease in inventories (23) 60
(Increase) / Decrease in trade and other receivables (30) 13
Increase / (Decrease) in payables 35 (122)
Decrease in investments (39) (10)
------------ ------------
(445) (217)
Taxes paid - (28)
------------ ------------
Cash used in operations (445) (245)
===== ======
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
The following table shows an analysis of the Group's external
sales by geographical market:
2014 2013
GBP'000 GBP'000
United Kingdom 1,081 947
Europe 813 811
Far East and Australasia 98 345
Africa 314 206
North and South America 331 70
Middle East 30 82
Russia - 27
------------- -------------
2,667 2,488
====== ======
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.
Year to 31 March Associated British British Polar Akoris Trading Consolidated
2014 Engineering Engines Limited Limited
Plc
GBP'000 GBP'000 GBP'000 GBP'000
External sales - 2,667 - 2,667
------------ ------------ ----------- -----------
Segment result
(PBIT) (182) 308 (434) (308)
------------- ------------ ------------ ------------
Net finance expenses (20)
Taxation 12
-----------
Profit after
tax (316)
=====
Other information
Capital additions - 37 - 37
Balance sheet
Segment assets 288 4,443 333 5,064
====== ====== ====== ======
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - GROUP (continued)
FOR THE YEAR ENDED 31 MARCH 2014
1. SEGMENTAL REPORTING (continued)
Year to 31 March Associated British Polar Akoris Trading Consolidated
2013 (restated) British Engineering Engines Limited Limited
Plc
GBP'000 GBP'000 GBP'000 GBP'000
External sales - 2,488 - 2,488
------------ ------------ ------------ ------------
Segment result
(PBIT) 253 (211) (73) (31)
------------ ------------ ------------ ------------
Net finance expenses (40)
Taxation (15)
------------
Profit after tax (86)
======
Other information
Capital additions - 349 - 349
Balance sheet
Segment assets 244 4,650 628 5,522
====== ====== ====== ======
Included in the total Group revenue was GBP585,000 (2013:
GBP286,735) 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).
2. OPERATING COSTS 2014 2013
GBP'000 GBP'000
Changes in inventories (23) 60
Raw materials used 1,109 1,133
Staff costs 1,156 1,031
Depreciation and amortisation 52 37
Other expenses 681 258
------------- -------------
2,975 2,519
====== ======
3. OPERATING PROFIT 2014 2013
GBP'000 GBP'000
Operating profit is stated after charging/(crediting)
Depreciation on owned assets 20 18
Depreciation on assets held under finance
leases 33 19
Fees payable to the Company's auditor
for the audit of the Company's annual
accounts:
PLC audit costs 22 22
The audit of the Company's subsidiaries
pursuant to legislation 18 17
Operating lease rental on plant and
machinery 35 25
Profit on disposal of property, plant
& equipment - (1)
====== ======
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - GROUP (continued)
FOR THE YEAR ENDED 31 MARCH 2014
4. STAFF COSTS AND EMPLOYEES 2014 2013
GBP'000 GBP'000
Wages and salaries 1000 851
Social security costs 107 86
Other pension costs 107 94
------------- -------------
1,214 1,031
====== ======
The average monthly number of persons employed by
the Group during the year was:
2014 2013
Number Number
By activity
Production 11 11
Administration 19 19
------------- -------------
30 30
====== =====
5. DIRECTORS' REMUNERATION
Directors received emoluments of GBP45,000 (2013: GBP47,000).
Further details can be found on page 52.
6. KEY MANAGEMENT COMPENSATION 2014 2013
GBP'000 GBP'000
Remuneration of Group directors 45 47
====== ======
The Group made no pension contributions in respect of Group
directors during the year ended 31 March 2014 or 31 March 2013.
7. NET FINANCE EXPENSE 2014 2013
GBP'000 GBP'000
(restated)
Interest on obligations under finance
leases 5 3
Loan stock interest - 29
---------- ----------
Interest expenses for borrowings
at amortised cost 5 32
Pension interest cost less expected
return on scheme assets 40 46
------------ ------------
45 78
Interest receivable on cash
and cash equivalents (25) (38)
------------- -------------
20 40
====== ======
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - GROUP (continued)
FOR THE YEAR ENDED 31 MARCH 2014
8. TAXATION 2014 2013
GBP'000 GBP'000
The tax charge is set out below:
Current tax:
United Kingdom corporation tax at - -
23% (2013: 24%)
Deferred tax:
In respect of current year 12 15
-------- ---------
Total current tax and tax on profit on ordinary
activities 12 15
==== =====
The tax assessed for the period is different from the standard
rate of corporation tax in the UK of 23% (2013: 24%). The
differences are explained as follows:
2014 2013
GBP'000 GBP'000
(restated)
Loss on ordinary activities before
tax (328) (71)
---------------- ----------------
Loss on ordinary activities multiplied by
standard rate of
Corporation tax in the UK of 23% (2013:
24%) (75) (17)
Effects of:
Expenses not deductible for tax purposes 7 63
Income not taxable (33)
Tax losses and advance corporation
tax relief (ACT) (3) (35)
Other differences - 4
Depreciation for the period in excess
of capital allowances 7 (15)
Unrelieved tax losses 97 -
---------------- ----------------
Current tax for period - -
======= ========
The Group has trading losses of approximately GBP1.5 million
(2013: GBP1.4 million), surplus advance corporation tax relief of
approximately GBP865,000 (2013: GBP865,000) and capital losses of
GBP8.5 million (2013: GBP9.2 million). These are available to set
against future taxable profits, taxation liabilities and capital
gains respectively. The trading losses are available to be used
against future profits arising from the same trade within
Associated British Engineering plc. These amounts are subject to
agreement with Her Majesty's Revenue and Customs.
9. LOSS PER 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.
2014 2013
Weighted Weighted Per shares
Average Per shares Loss Average amount
Loss number amount GBP'000 Number Pence
of of
GBP'000 Shares pence (re stated) Shares (re stated)
Basic and
diluted earnings
per share (99) 2,048,990 (4) (49) 2,048,990 (2)
========= ========= ========= ========= ========= =========
.
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - GROUP (continued)
FOR THE YEAR ENDED 31 MARCH 2014
10. PROPERTY, PLANT AND EQUIPMENT Freehold
land and Plant and
buildings machinery Total
GBP'000 GBP'000 GBP'000
COST
At 1 April 2013 689 1,552 2,241
Additions - 37 37
Disposals - (180) (180)
---------------- ------------------- -------------------
At 31 March 2014 689 1,409 2,098
---------------- ------------------- -------------------
ACCUMULATED DEPRECIATION
At 1 April 2013 689 1,172 1,861
Charge for year - 53 53
Eliminated on disposals - (180) (180)
---------------- ------------------- -------------------
At 31 March 2014 689 1,045 1,734
---------------- ------------------- -------------------
CARRYING AMOUNTS
At 31 March 2014 - 364 364
======== ======== ==========
At 31 March 2013 - 380 380
======== ======== ==========
11. CAPITAL COMMITMENTS
At 31 March 2014 the Group had capital commitments of GBPNil
(2013: GBPNil).
12. INVENTORIES 2014 2013
GBP'000 GBP'000
Raw materials 107 146
Work in progress 117 93
Finished goods 828 790
------------- -------------
1,052 1,029
====== ======
The closing inventory balance of GBP3,371,000 (2013:
GBP3,174,000) is stated net of provisions of GBP2,219,000 (2013:
GBP2,145,000). There was an increase in provision of GBP74,000 in
relation to write downs to net realisable value.
13. TRADE AND OTHER RECEIVABLES 2014 2013
GBP'000 GBP'000
Trade receivables 390 332
Prepayments and accrued income 137 165
----------- -----------
527 497
===== =====
The Group has no significant concentration of credit risk, with
exposure spread over a large number of customers. At the year end a
provision against the trade receivables balance amounts to
GBP79,000 (2013: GBP32,000). Movement during the year related to an
increase in the provision. There were no reversals.
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - GROUP (continued)
FOR THE YEAR ENDED 31 MARCH 2014
14. HELD FOR TRADING INVESTMENTS 2014 2013
GBP'000 GBP'000
Listed Securities (held
for trading non-derivative
financial assets) 129 84
==== ===
Financial assets at
fair value through profit
or loss
GBP
Opening balance 84
Additions 13
Net profit recognised 39
Disposals (5)
----------
Closing balance 129
=====
Gains or losses on held for trading investments are presented
within the operating costs heading.
IFRS 13 requires that the fair value reflects "exit price" and
is valued in line with the relevant "unit of account" and the fair
value of the equity investments held is calculated by reference to
the quoted market price at the year end.
15. CALLED UP SHARE CAPITAL 2014 2013
GBP'000 GBP'000
Nominal value:
Allotted and fully paid:
2,048,990 ordinary shares of GBP0.025 each 51 51
1,313,427 deferred shares of GBP1.975 each 2,594 2,594
------------- -------------
2,645 2,645
====== ======
Carrying value:
Equity shares:
2,048,990 ordinary shares of GBP0.025
each 51 51
====== ======
The structure of the Group and Company's capital is as
follows:
Number Number
Ordinary Deferred
of ordinary shares of deferred shares Share premium
shares GBP'000 shares GBP'000 GBP'000
Balance at 1 April 2013
(GBP0.025/GBP1.9752
shares) 2,048,990 51 1,313,427 2,594 5,370
============ ========= ============ ========= ==============
Further to the Extraordinary General Meeting held on 1 September
1999 the ordinary shares have 200 votes per share.
The deferred shares do not have voting rights and do not carry
any entitlement to attend general meetings of the Company; they are
not admitted to any Stock Exchange and carry a right to participate
in any return of capital once an amount of GBP100 has been paid in
respect of each new ordinary share.
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - GROUP (continued)
FOR THE YEAR ENDED 31 MARCH 2014
16. SHARE BASED PAYMENTS
The Company operates an Executive Share Option Scheme (ESOP)
under which options are granted with the guidance of the remuneration
committee. Options are granted with a fixed exercise price equal
to the market price of the shares under option at the date of
the grant. The contractual life of an option is 10 years. Options
granted under the ESOP will become exercisable on the third
anniversary of the date of the grant. There were no unexercised
share options at the end of the year as all share options have
lapsed.
17. RETIREMENT BENEFIT SCHEMES
Previously the Group operated a defined benefit pension scheme,
holding the assets in a separate trustee administered fund ("the
ABE Pension Fund"). The required contributions were assessed with
the advice of an independent qualified actuary using the projected
unit credit method. The Group also has a designated Group personal
pension plan which meets stakeholder requirements.
The scheme exposes the group to actuarial risks such as:
Salary risk:
The present value of the plan liability is calculated by
reference to the future salaries of participating members. Any
increase in members' salaries will increase the schemes'
liability
Interest rate risk:
Any decrease in bond rates will increase the scheme's liability
though this may be partly offset by an increase in return on the
scheme's debt investments.
Investment risk:
If the return on scheme assets is below the discount rate used
to calculate the present value of the scheme liability it may lead
to a scheme deficit.
Longevity risk:
Any increase in life expectancy of the scheme's members will
increase the scheme's liability as the present value of the schemes
liability is calculated by reference to the best estimate of the
mortality of the scheme's members.
The scheme consists of three active members, thirty four
deferred members and fifty six pensioner members. The expected
contribution to the scheme for the forthcoming year is expected to
be GBP230,000.
The value placed on the benefit obligation is particularly
sensitive to changes in some of the key assumptions. Two of the
most critical are:
-- The real (i.e. net of inflation) and nominal rates of interest used: and
-- Changes in future mortality rates
Set out below a table highlighting the impact on the results of
changing these assumptions.
There would be a similar, but opposite effect if the discount
rate was to be increased, the inflation rate was decreased and
members assumed to live one year or less.
% change to Defined Benefit Obligation
0.25% p.a. reduction to discount rate 4.0
0.25% p.a. increase to inflation 1.6
Members assumed to live one year longer 3.4
In the year ended 31 March 2009 the Company came to agreement
with the Trustees of the scheme and a resolution was approved
whereby the Group is no longer liable for its previously recognised
retirement obligations for the ABE section of the fund. The
elimination of the ABE section resulted in an elimination of
GBP3,047,000 of the opening obligation which was reflected through
the Statement of Comprehensive Income. The remaining obligation
relates to the BPE section of the scheme and is summarised on the
following page:
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - GROUP (continued)
FOR THE YEAR ENDED 31 MARCH 2014
17. RETIREMENT BENEFIT SCHEMES (continued)
Contributions by employer in respect of future accrual of
benefits, death in service benefits and expenses:
28.6% of Pensionable Salaries less member contributions, payable
monthly by the 19(th) of the calendar month after that to which
they relate. In addition, the employer will pay amounts into the
scheme equal to the levy payments made by the scheme to the Pension
Protection Fund. Such amounts will be paid by the employer within a
year of them being paid by the scheme. Insurance premiums for death
in service benefits, management and administration expenses are
payable in addition as and when they are due.
Contributions by employer in respect of the shortfall in
funding:
With reference to the recovery plan agreed in conjunction with
the valuation as at 1 April 2010, the employer will make the
following contributions over the period from 1 April 2010 to 31
December 2021:
-- An additional lump sum of GBP64,000 in respect of the period
from 1 April 2010 to 31 March 2011 is payable by 31 July 2011.
-- GBP196,000 is payable by 31 July 2011 in respect of the
period from 1 April 2011 to 31 March 2014.
-- From 1 April 2011 to 31 March 2014, contributions of
GBP11,666 per month are payable by the 19(th) of the calendar month
after that to which they relate.
-- From 1 April 2014 until 31 December 2021, contributions of
GBP17,000 per month are payable by the 19(th) of the calendar month
after that to which they relate.
2014 2013
GBP'000 GBP'000
(a) Pension cost (recognised in Income Statement) (restated)
Operating charge
Current service cost 28 41
-------------- --------------
Other finance charges
Interest on net defined benefit obligation 40 46
--------------- ---------------
Total pension cost recognised in the Income
Statement 68 87
======= =======
(b) Benefit liability 2014 2013 2012 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Present value of funded
obligations 7,101 6,748 6,451 6,577 6,663
Fair value of plan assets (5,687) (5,817) (5,476) (4,725) (4,436)
--------------- --------------- --------------- --------------- ---------------
Net liability 1,414 931 975 1,852 2,227
======= ======= ======= ======= =======
The major categories of plan assets are as follows: 2014 2013
GBP'000 GBP'000
Equities 847 866
Bonds 4,767 4,929
Cash 73 22
-------------- --------------
5,687 5,817
======= =======
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - GROUP (continued)
FOR THE YEAR ENDED 31 MARCH 2014
17. RETIREMENT BENEFIT SCHEMES (continued) 2014 2013
GBP'000 GBP'000
(restated)
(c) Change in benefit obligation
Benefit obligation at beginning of
the year 6,748 6,451
Current service cost 28 41
Interest cost 303 307
Actuarial losses 393 402
Contributions by plan participants 5 7
Benefits paid (376) (460)
----------------- ------------------
Benefit obligation at end of the year 7,101 6,748
======== ========
(d) Change in plan assets
Fair value of plan assets at beginning of the
year 5,817 5,476
Expected return on plan assets 263 261
Actuarial (loss)/gains on plan assets (187) 362
Contributions made by employer 165 171
Contributions by plan participants 5 7
Benefits paid (376) (460)
--------------- ---------------
Fair value of plan assets at end of the year 5,687 5,817
======= =======
The cumulative amount of actuarial gain recognised in the Group
statement of comprehensive income is GBP2,907,000 (2013:
GBP3,528,000). The actuarial loss for the year recognised in the
Group statement of comprehensive income is GBP580,000 (2013:
GBP40,000 loss (restated)).
The expected long term return on cash is determined by reference
to current and expected long-term bank base rates. The expected
return on bonds is determined by reference to United Kingdom long
dated gilt and bond yields at the balance sheet date. The expected
rate of return on equities have been determined by setting an
appropriate risk premium above gilt/bond yields having regard to
market conditions at the balance sheet date. The expected rates
have then all been reduced to reflect the level of anticipated
future expenses.
The expected long term rate of return under IAS 19 (revised in
2011) is the same as the discount rate of 4.7% pa (2013: 4.6%
p.a.).
(e) Principal actuarial assumptions 2014 2013
(restated)
Inflation 2.1% 2.3%
Rate of increase in pensionable
salaries 2.5% 2.5%
Discount rate 4.7% 4.6%
Pension in payment increases 2.1% 2.3%
Revaluation rate for deferred
pensioners 2.1% 2.3%
Pre-retirement mortality PNMAOO, MC PNMAOO, MC 1%
1% PNFAOO, MC 1%
PNFAOO, MC
1%
Post retirement mortality PNMAOO, MC PNMAOO, MC 1%
1%
PNFAOO, MC PNFAOO, MC 1%
1%
Life expectancy from age 65 (years):
Male currently aged 65 22.8 22.7
Female currently aged 65 25.3 25.2
Male currently aged 45 24.7 24.7
Female currently aged 45 27.1 27.0
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - GROUP (continued)
FOR THE YEAR ENDED 31 MARCH 2014
18. PAYABLES 2014 2013
GBP'000 GBP'000
Current
Obligations under finance leases 65 65
Trade payables 174 170
Other taxation and social security 39 35
Other payables 24 63
Accruals and deferred income 316 252
----------------- -----------------
618 585
======== ========
The net finance lease obligations
are due:
In one year or less 65 65
Between two and three years 172 237
---------------- ----------------
237 302
======== ========
All current payables apart from obligations under finance leases
are expected to mature within a period of 6 months.
19. FINANCIAL INSTRUMENTS
The Group's financial instruments comprise cash and various
items, such as trade and other receivables, held for trading
investments and trade and other payables that arise directly from
its operations. The main purpose of these financial instruments is
to finance the Group's operations. At 31 March 2014 the Group has
cash balances of GBP2,992,000 (2013: GBP3,532,000) and no bank
overdraft (2013: GBPNil). No sensitivity analysis to movements in
interest rates or foreign currency exchange rates has been included
as the Board do not consider such information to be material.
RISKS
The main risks arising from the Group's financial instruments
are market risk, liquidity risk and credit risk. Market risk
includes price commodity risk, foreign exchange risk and interest
rate risk. The Group has limited exposure to foreign exchange risk
and also has no loans.
A significant risk that is also not considered below is that of
the Group's pension funds. This is discussed in depth throughout
the financial statements, and more specifically in Note 17, and has
therefore not been further analysed below but is a key risk to the
future of the Group. The Board meets on a regular basis to discuss
the various funds and investment opportunities with each other and
the Trustees.
The Board reviews and agrees policies for managing each of the
above risks and they are summarised below and in the accounting
policies to the Group financial statements. These policies have
been consistently applied throughout the period.
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - GROUP (continued)
FOR THE YEAR ENDED 31 MARCH 2014
19. FINANCIAL INSTRUMENTS (continued)
COMMODITY PRICE RISK
The Group is dependent upon its suppliers to effectively operate
a 'just in time' stock management system, which is utilised to
mitigate high warehousing costs. There is the potential to leave
the Group exposed to 'stock out' or shortages but the Group has not
experienced stock difficulties of this nature in the current or
prior year and does not envisage this going forward, due to its
strong supplier relations.
When prices are advantageous a strategic decision may be taken
to increase a stock level which mitigates the issue of price
commodity risk. There are a number of suppliers used, each with
various contractual terms, and therefore the Board do not consider
this a significant risk.
The price of aluminium which the Group trades in is dependent on
the activities of the competitors, speculators, exchange rate
movements and production costs. This could have a significant
impact on the Group's revenues and cost base.
LIQUIDITY RISK
The Group's liquidity is dependent on the cash balances
available and it is the Group's policy to place surplus cash on
deposit to ensure as high a rate of return as possible. The
maturity profile of the Group's finance lease liabilities is set
out in note 18.
CREDIT RISK
The Group's principal financial assets are cash deposits and
trade and other receivables. The credit risk associated with the
cash is limited as the counterparties have high credit ratings
assigned by international credit-rating agencies. The principal
credit risk arises therefore from its trade and other receivables.
In order to manage credit risk the directors of the subsidiary
company set limits for customers based on a combination of payment
history and third party credit references. Credit limits are
reviewed by the subsidiary's directors on a regular basis in
conjunction with debt ageing and collection history. In 2014 and
2013 there were no concentrations of credit risk, with exposure
being spread over a large number of customers, with over 200
customers at the year end.
At the year end the Group's top five customers comprised 43%
(2013: 40%) of the year end trade receivables. The Board consider
their strong customer relations to be strength rather than a risk
as they are the preferred suppliers to these customers.
Where appropriate, the subsidiary company requests payment or
part-payment in advance of shipment which generally covers the cost
of the goods. In connection with the trade receivables, there is a
risk of warranty claims, which the subsidiary company tries to
minimise. The carrying value of the trade receivables represents
the maximum credit risk exposure and therefore sensitivity analysis
has not been performed.
Collection procedures in relation to receivables are initiated
once the credit terms are exceeded and trade receivables both due
and not yet due are reviewed on a line by line basis, with adequate
provision being made against period end balances where appropriate.
During the year an additional provision of GBP48,000 has been
included in the financial statements.
At the year end 40% of current financial assets are aged greater
than 90 days. These amounted to GBP179,000 and GBP79,000 have been
provided for.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The directors consider that the fair values of the Group's
financial instruments at 31 March 2014 and 31 March 2013 were not
materially different from their book values.
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - GROUP (continued)
FOR THE YEAR ENDED 31 MARCH 2014
20. DEFERRED TAXATION
The deferred taxation liability at 31 March 2014 was GBP2,000
(31 March 2013: GBP15,000).
No provision has been made for the potential deferred tax assets
on the trading losses carried forward as they are not sufficiently
certain to crystallise in the foreseeable future, with future
pension obligations deemed to exceed the potential future cash
inflows. This assumption will be revisited on an annual basis or as
and when circumstances change. The amounts not recognised (all of
which have been calculated at 20% (2013: 20%)) are set out
below:
Group 2014 2013
GBP'000 GBP'000
Arising from trading losses 273 272
Arising from capital losses 1,700 1,831
Arising from pension deficit 283 173
------------- -------------
2,256 2,276
====== ======
21. CONTINGENT LIABILITIES
2014 2013
GBP'000 GBP'000
a) Banker's indemnities 30 30
==== ====
The indemnities relate to provision of services such as letters
of credit or international guarantees by the bank.
b) There were no other contingent liabilities at 31 March 2014 or 31 March 2013.
22. COMMITMENTS UNDER OPERATING LEASES
At 31 March the Group had the following commitments under non-cancellable
operating leases:
Other
2014 2013
GBP'000 GBP'000
Within one year 13 23
Between two and five years
inclusive 17 17
------------- -------------
30 40
====== ======
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - GROUP (continued)
FOR THE YEAR ENDED 31 MARCH 2014
23. SUBSIDIARIES
At 31 March 2014 and 31 March 2013 the Company held 100% of the
share capital of the following subsidiaries:
Proportion Country of
held by the incorporation
Share Capital parent Nature of Business
British Polar Engines Ordinary 100% Great Britain Manufacture and
Limited supply of diesel
engines, associated
servicing and
sale of spare
parts
Akoris Trading Limited Ordinary 50% Great Britain Commodity and
natural resource
trading, finance
and investment.
The group controls 100% of the voting power of the subscribed
shares and has control over the financial and operational policies
of Akoris Trading Limited. Therefore, Akoris Trading Limited is
controlled by the group and consolidated in these financial
statements.
24. RELATED PARTY TRANSACTIONS
At 31 March 2014 David Brown, a company director, had a 12.4%
(2013: 12.4%) interest in the shares of Akoris Trading Limited.
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF ASSOCIATED
BRITISH ENGINEERING PLC
We have audited the parent company financial statements of
Associated British Engineering PLC for the year ended 31 March 2014
which comprise the principal accounting policies, the parent
company balance sheet, and the related notes. The financial
reporting framework that has been applied in their preparation is
applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).
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 parent company 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 parent
company 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.
Opinion on financial statements
In our opinion the parent company financial statements:
-- give a true and fair view of the state of the company's affairs as at 31 March 2014;
-- have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act
2006
In our opinion:
-- the part of the Directors' Remuneration Report to be audited
has been properly prepared in accordance with the Companies Act
2006; and
-- the information given in the Strategic Report and Directors'
Report for the financial year for which the financial statements
are prepared is consistent with the parent company financial
statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements and the part of the
Directors' Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the group financial statements of
Associated British Engineering PLC for the year ended 31 March
2014. That report includes audit commentary.
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
PRINCIPAL ACCOUNTING POLICIES - COMPANY
FOR THE YEAR ENDED 31 MARCH 2014
BASIS OF PREPARATION
The Company accounts have been prepared in accordance with
applicable UK accounting standards (United Kingdom Generally
Accepted Accounting Practice). The summary of the principal
accounting policies, which have been applied consistently, is set
out below. The policies have remained unchanged from the previous
year.
BASIS OF ACCOUNTING
The accounts are prepared on the historical cost basis, modified
to include the revaluation of current asset investments.
GOING CONCERN
The financial statements have been prepared on the going concern
basis. The most notable accounting event has been the increase in
the pension scheme deficit based on this year's actuarial forecast
and mentioned in the Chairman's Statement. The directors have
agreed a revised schedule of the 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.
TANGIBLE FIXED ASSETS
Freehold land is not depreciated. Other fixed assets are
depreciated over their estimated useful lives at the following
annual rates to cost:
Freehold buildings 5 per cent
Computer equipment 20 per cent
DEFERRED TAXATION
Deferred tax is recognised on an undiscounted basis on all
timing differences where the transactions or events that give the
Company an obligation to pay more tax in the future, or a right to
pay less tax in the future, have occurred by the balance sheet
date. Deferred tax assets are recognised when it is more likely
than not that they will be recovered. Deferred tax is measured
using rates of tax that have been enacted or substantively enacted
by the balance sheet date.
FOREIGN CURRENCIES
Assets and liabilities denominated in foreign currencies are
translated at the rate of exchange ruling at the year end date.
Transactions in foreign currencies are recorded at the rate ruling
at the date of the transaction. Any exchange gains or losses are
credited or charged to the profit and loss account in the year in
which they arise.
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 profit and loss account.
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.
ASSOCIATED BRITISH ENGINEERING PLC
PRINCIPAL ACCOUNTING POLICIES - COMPANY
FOR THE YEAR ENDED 31 MARCH 2014
FINANCIAL INSTRUMENTS (continued)
Trade and other debtors
Trade and other debtors are originally recognised at fair value.
A provision against trade debtors is made when there is objective
evidence that the Company will not be able to collect all amounts
due to it in accordance the original terms of those receivables.
There is no general or specific provision for bad and doubtful
debts at year end. Trade debtors and cash and cash equivalents are
classified as loans and receivables.
Trade and other creditors
Trade and other creditors are initially recognised at fair
value, net of transaction costs and are subsequently held at
amortised cost.
Loan notes
The company was also funded by GBP555,000 of loan notes with a
6% per annum coupon rate. The loan notes were redeemed at their
book value in the financial year to 31 March 2013.
INVESTMENTS
Fixed asset investments in subsidiaries are included at cost
less amounts written off.
Current asset investments are held for trading and 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 measured at market value, with all
transaction costs being written off to the profit & loss
account as incurred.
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 FRS 20, having been granted before November 2002.
ASSOCIATED BRITISH ENGINEERING PLC Company Number: 00110663
COMPANY BALANCE SHEET
AS AT 31 MARCH 2014
2014 2013
Note GBP'000 GBP'000
FIXED ASSETS
Tangible assets 3 - 1
Investments 5 - 2,484
------------- -------------
- 2,485
------------ ------------
CURRENT ASSETS
Investments 6 171 132
Debtors 7 18 11
Cash at bank and in hand 98 110
------------- -------------
287 253
Creditors - amounts falling due within
one year 8 (54) (884)
------------- -------------
Net current assets / (liabilities) 233 (631)
------------ ------------
Total assets less current liabilities 233 1,854
Creditors - amounts falling due after
more than one year 8 - (2,292)
------------- -------------
233 (438)
====== ======
CAPITAL AND RESERVES
Called up share capital 10 51 51
Deferred shares 10 2,594 2,594
Share premium account 12 5,370 5,370
Other reserve 212 212
Profit and loss account 12 (7,994) (8,665)
------------- -------------
SHAREHOLDERS' FUNDS 233 (438)
====== ======
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 39 and 40 and the notes on
pages 42 to 45 form part of these accounts.
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - COMPANY
FOR THE YEAR ENDED 31 MARCH 2014
1. ADMINISTRATIVE EXPENSES 2014 2013
GBP'000 GBP'000
Directors (note 2) and employees 64 63
Depreciation of tangible fixed assets:
owned 1 23
====== ======
2. DIRECTORS
2014 2013
GBP'000 GBP'000
Remuneration in respect of directors was
as follows:
Remuneration 45 47
====== ======
The average number of employees, including directors, during the
year was 5 (2013: 5). More detailed information concerning directors'
remuneration is shown in the Directors' Remuneration Report.
3. TANGIBLE FIXED ASSETS Computer Freehold
land
equipment and buildings Total
GBP'000 GBP'000 GBP'000
COST
At 1 April 2013 2 - 2
Additions - - -
Disposals - - -
--------- -------------- -------------
At 31 March 2014 2 - 2
--------- -------------- -------------
DEPRECIATION
At 1 April 2013 1 - 1
Charge for the year 1 - 1
Disposals - - -
--------- -------------- -------------
At 31 March 2014 2 - 2
--------- -------------- -------------
NET BOOK VALUE
At 31 March 2014 - - -
===== ====== ======
At 31 March 2013 1 - 1
===== ====== ======
4. CAPITAL COMMITMENTS
At 31 March 2014 the Company had no capital commitments (2013:
GBPNil).
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - COMPANY
FOR THE YEAR ENDED 31 MARCH 2014
5. FIXED ASSET INVESTMENTS Subsidiary
Undertakings
COST GBP'000
At 1 April 2013 3,406
Disposals (3,406)
-------------
At 31 March 2014 -
-------------
AMOUNTS WRITTEN OFF
At 1 April 2013 922
Disposals (922)
-------------
At 31 March 2014 -
-------------
NET BOOK AMOUNT
At 31 March 2014 -
======
At 31 March 2013 2,484
======
The wholly owned subsidiary is:
Company Activity Country of incorporation
British Polar Engines Limited Engineering Great Britain
The investment in British Polar Engines Limited was fully
provided at 31 March 2014 and 31 March 2013. Danway Limited, a
Cayman Islands based dormant subsidiary, was struck off from the
Cayman Islands Register of Companies on 28 June 2013.
6 CURRENT ASSET INVESTMENTS 2014 2013
GBP'000 GBP'000
Equities 129 84
Cash on deposit 42 48
------------- -------------
171 132
====== ======
7. DEBTORS 2014 2013
GBP'000 GBP'000
Prepayments and accrued income 18 11
------------- -------------
18 11
====== ======
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - COMPANY
FOR THE YEAR ENDED 31 MARCH 2014
8. CREDITORS 2014 2013
GBP'000 GBP'000
Amounts falling due within one
year
Amounts due to group undertakings - 815
Other creditors 21 19
Accruals and deferred income 33 50
------------- -------------
54 884
====== ======
Amounts falling due after one year 2014 2014
GBP'000 GBP'000
Amounts due to group undertakings - 2,292
------------- -------------
- 2,292
====== ======
9. DEFERRED TAXATION
There is no unprovided deferred taxation liability
at 31 March 2014 or 31 March 2013.
No provision has been made for the potential deferred tax assets
on the trading losses carried forward as they are not sufficiently
certain to crystallise in the foreseeable future. The amounts
not recognised (all of which have been calculated at 20% (2013:
20%) are set out below:
2014 2013
GBP'000 GBP'000
Arising from trading losses 273 272
Arising from capital losses 1,655 1,831
------------- -------------
1,928 2,103
====== ======
ASSOCIATED BRITISH ENGINEERING PLC
NOTES TO THE ACCOUNTS - COMPANY (Continued)
FOR THE YEAR ENDED 31 MARCH 2014
10. CALLED UP SHARE CAPITAL 2014 2013
GBP'000 GBP'000
Nominal value:
Allotted and fully paid:
2,048,990 ordinary shares of GBP0.025
each 51 51
1,313,427 deferred shares of GBP1.975
each share premium 2,594 2,594
------------- -------------
2,645 2,645
====== ======
Carrying value:
Equity shares:
2,040,000 ordinary shares of GBP0.025
each 51 51
====== ======
Further to the Extraordinary General Meeting held on 1 September
1999 the ordinary shares have 200 votes per share.
The deferred shares do not have voting rights and do not carry
any entitlement to attend general meetings of the Company; they are
not admitted to any Stock Exchange and carry a right to participate
in any return of capital once an amount of GBP100 has been paid in
respect of each new ordinary share.
11. SHARE BASED PAYMENTS
The Company operates an Executive Share Option Scheme (ESOP) under
which options are granted with the guidance of the remuneration
committee. Options are granted with a fixed exercise price equal
to the market price of the shares under option at the date of
the grant. The contractual life of an option is 10 years. Options
granted under the ESOP will become exercisable on the third anniversary
of the date of the grant. There were no unexercised share options
at the end of the year as all share options have lapsed.
12. RESERVES GBP'000 GBP'000
Profit and Share premium
loss
At 1 April 2013 (8,665) 5,370
Profit for the year 671 -
------------- -------------
At 31 March 2014 7,994 5,370
====== ======
There were no movements in other reserves during the year. As
permitted by the Companies Act 2006, the Company's profit and loss
account has not been included in these accounts. The Company's
profit for the financial year was GBP671,000 (2013:
GBP173,000).
13. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 March 2014 or 31
March 2013.
14. RELATED PARTY TRANSACTIONS
The Company has taken advantage of the exemption conferred by
FRS 8 with regard to disclosing transactions with wholly-owned
subsidiaries on the grounds that the results of the subsidiaries
are included in the publicly available consolidated financial
statements of Associated British Engineering plc. There were no
transactions with any other group entities.
ASSOCIATED BRITISH ENGINEERING PLC
STATEMENT OF DIRECTORS' RESPONSIBILITIES
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Strategic
Report, the Directors' Report, the Remuneration Report and the
financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and have elected to prepare the
parent company financial statements under United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards
and applicable laws). Under company law the directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs and profit
or loss of the company and group for that period. In preparing
these financial statements, the directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements and the Remuneration report comply with
the Companies Act 2006 and Article 4 of the IAS Regulation. They
are also responsible for safeguarding the assets of the company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The directors confirm that:
-- so far as each director is aware, there is no relevant audit
information of which the company's auditor is unaware; and
-- the directors have taken all the steps that they ought to
have taken as directors in order to make themselves aware of any
relevant audit information and to establish that the auditors are
aware of that information.
The directors are responsible for preparing the annual report in
accordance with applicable law and regulations. Having taken advice
from the Audit Committee, the directors consider the annual report
and the financial statements, taken as a whole, provides the
information necessary to assess the company's performance, business
model and strategy and is fair, balanced and understandable.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
To the best of my knowledge:
-- the financial statements, prepared in accordance with
applicable accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
company and the undertakings included in the consolidation taken as
a whole; and
-- the annual report, including the strategic report, includes a
fair review of the development and performance of the business and
the position of the company and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
C Weinberg
Director
7 July 2014
ASSOCIATED BRITISH ENGINEERING PLC
CORPORATE GOVERNANCE REPORT
(AS REFERRED TO IN THE DIRECTORS' REPORT)
In accordance with the requirements of the Listing Rules of the
Financial Services Authority, set out below are details of the
Company's corporate governance arrangements, including a statement
as to how the Company applies the principles of Section 1 of the UK
Corporate Governance Code, together with a statement regarding its
compliance with specific provisions. Whilst welcoming the
principles contained within the Code, the Board considers that it
should be recognised that what may be appropriate for a large
Company may not necessarily be so appropriate for a smaller company
and the Company's current circumstances. As a result, the Company
has been in compliance throughout the year with the provisions set
out in the UK Corporate Governance Code with the following
exceptions:-
-- The division of responsibilities between the roles of
chairman and chief executive have not been clearly established, set
out in writing and agreed by the Board. This is contrary to
provision A.2.1. This has not been put in place because there is no
chief executive on the Board;
-- The Company does not have a Nomination Committee, this is
contrary to provisions B2.1-B2.2. This has not been considered
necessary due to the size and nature of the Board which consists of
four non-executive directors;
-- The non-executive directors of the Company have not been
appointed for specific terms as required by provision B2.3. This
has not been considered necessary to date but is being actively
considered by the Board;
-- There is no formal training programme for new directors on
joining the Board. This is contrary to provision B4.2. This has not
been considered necessary to date but is being actively considered
by the Board;
-- The Board has not undertaken a formal and rigorous annual
evaluation of its own performance and the
individual directors. This is contrary to provision B.6.1. This
has not been considered necessary to date but is being actively
considered by the Board.
Board of Directors
The Board comprises four non-executive directors, as detailed in
the Directors' Report.
In common with other organisations of a similar size, the
directors review all the transactions and activities of the
business. The Board of Directors is responsible for formulating
strategy and monitoring financial performance. The directors are in
frequent contact throughout the year in connection with the Group's
business, meet as required and also attend one formal Board
meeting. The strategies proposed by management of the subsidiary
are fully discussed, critically examined against the best and long
term interests of not only the shareholders, but also employees,
customers, suppliers and various communities within which the Group
operates. During the year, all four serving directors were in
attendance at the Board meeting. The Board retains full
responsibility for the direction and control of the Group and has a
formal schedule of matters in respect of which decisions are
reserved to it, covering key areas including strategy formulation,
acquisitions or disposals, approval of the budget for the
subsidiary, financial results, board appointments and proposals for
dividend payments.
The Board has full and timely access to relevant information
throughout the Group.
All directors have access to the advice and services of the
Company Secretary, who is responsible to the Board for ensuring
that Board procedures are compiled with. There is also formal
agreed procedure for directors in the furtherance of their duties
to take independent professional advice as necessary at the
Company's expense.
The business address of each of the directors is 9 High Street,
Little Eversden, Cambridge CB23 1HE.
The Board is supported by a senior management team which
includes the following individuals:
Stewart Davis (66), managing director of BPE. Stewart has worked
for BPE for 51 years, and is qualified as a mechanical engineer. As
Sales Director from 1985 he was responsible for negotiating major
naval contracts with international governments for the supply of
spare parts and technical support for vessels supplied by the
Ministry of Defence. He was appointed Managing Director in
2007.
Rupert Pearce Gould (62), chairman of BPE. Rupert is a chartered
accountant and has served as an executive director and chairman in
both the public and private sector. He has been chairman of BPE
since 2000.
ASSOCIATED BRITISH ENGINEERING PLC
CORPORATE GOVERNANCE REPORT (continued)
Non-Executive Directors
The biographies of the directors appear on page 54 and show
considerable and varied experience in the business world and the
City. The Board has appointed Andrew Beaumont as a senior
independent non-executive director. There have been no changes in
the other significant commitments of the Chairman.
All directors have access to the advice and services of the
Company Secretary, who is responsible to the Board for ensuring
that Board procedures are complied with. There is also a formal
agreed procedure for directors in the furtherance of their duties
to take independent professional advice as necessary at the
Company's expense.
Under the Company's Articles of Association, at least one third
of the directors retire from office each year. The retiring
director is eligible for re-election.
The role of non-executive directors is a vital element of
corporate accountability. Due to the small size of the Board and
because there are no full time executive directors, the
non-executive directors do carry out certain limited specific
executive responsibilities.
Nomination
Appointment to executive director would be fully discussed by
the Chairman and the two non-executive directors. Potential new
non-executive directors are proposed by all the members of the
Board in the light of the Company's business requirements and the
need to have a balanced Board. Possible candidates are discussed
amongst all directors before any approach is made to them.
Audit Committee
The Company's audit committee comprises of Mr Andrew Beaumont
(Chairman) and Mr Colin Weinberg. The audit committee is to meet at
least twice a year to monitor the financial reporting process,
including its annual and interim accounts; the effectiveness of the
Company's internal controls and risk management systems; statutory
audit of the annual and consolidated accounts; and to review and
monitor the independence of the statutory auditor and provision of
additional services to the Group.
The audit committee reviews final drafts of the Group's Report
and Accounts for both the half and full year. As part of this
process, the performance of the Group's major divisions is
considered, with key judgements, estimates and accounting policies
being approved by the committee ahead of recommendation to the
board.
The primary areas of financial reporting judgement considered by
the Committee in relation to the 2013 financial statements and how
they were addressed are outlined below:
Revenue Recognition and Management Override
The Committee have reviewed the systems and control processes in
place during the financial year to 31 March 2014 and concluded
that, given the resources available, appropriate procedures are in
place. There is sufficient level of supervisory oversight in place
to ensure that revenue is not materially misstated and the risk of
management override has been reduced.
GHG Emissions/Carbon Reporting
It was brought to the attention of the Committee that the
requirement for the disclosures concerning greenhouse gas emission
was effective for the first time. It was decided that the intensity
measurement to be used for emissions reporting would be normalised
using GBP'000 of turnover.
ASSOCIATED BRITISH ENGINEERING PLC
CORPORATE GOVERNANCE REPORT (continued)
Audit Committee (continued)
Assessing external audit effectiveness
The Audit Committee reviews audit quality every year using
feedback from the Board and the Senior Management Team. The
effectiveness and quality of the audit process is considered by
focusing on the scope of the audit and auditor independence in
order to ensure that the quality of the audit process is not
compromised and remains effective.
Appointing the auditor and safeguards on non-audit services
The current auditors have acted for more than ten years and do
not provide any non-audit services. The Audit Committee will
consider the practicalities of putting the audit out to tender.
Remuneration
The Company's remuneration committee comprises Mr Andrew
Beaumont (Chairman) and Mr Stephen Cockburn. The remuneration
committee is to meet at least twice a year and has as its remit the
determination and review of, amongst others, the remuneration of
executive directors (as and when appointed) and any share incentive
plans adopted, or be adopted, by the Company.
Communication with Shareholders
The Board believes it is important to respond adequately to the
queries of both private and institutional shareholders. The Group
responds throughout the year to correspondence from shareholders on
a wide variety of issues.
The Chairman's Statement in the Annual Report contains a
business review. An interim business review is also provided with
the half yearly announcement. The Chairman is available to
shareholders at any time to discuss strategy and governance
matters.
The Board seeks to ensure that its report and accounts and other
financial statements provide a clear assessment of the Group's
business. All shareholders have the opportunity to ask questions
and express their views at the Company's Annual General Meeting, at
which all directors are available to take questions.
ASSOCIATED BRITISH ENGINEERING PLC
CORPORATE GOVERNANCE REPORT (continued)
AUDIT AND INTERNAL CONTROL
The directors are responsible for the Group's system of internal
control and reviewing its effectiveness. These controls can only
ever provide reasonable but not absolute assurance that assets are
safeguarded against material misstatement or loss, that proper
accounting records are maintained, and that the information used
internally, or for publication, is accurate and reliable. The key
procedures, which exist to provide external control, are as follows
-
- clearly defined organisation structures with segregation of
duties wherever practicable. Operating and financial
responsibilities for the subsidiary Company are delegated to the
subsidiary's Board and there are limits which apply to capital
expenditure and significant contracts
- a regular review is undertaken to assess the risks facing the
trading subsidiary and to enhance the systems which manage the risk
identified. Local management establishes control procedures for
each of the risks identified and reports whether the key controls
have operated effectively
- agreement of Group short term financial objectives and business plans
- review by the Board of monthly Group Financial Statements and
monitoring of results against budget. The Board attends regular
Board meetings of the subsidiary
- Board control over treasury, taxation, legal, insurance and personnel issues
- the acquisition or disposal of a business may not be completed
without the approval of the Board.
- the operational responsibility for preparing the consolidated
accounts is delegated to a third party service provider with the
Board retaining responsibility for overall content, presentation
and final review of the consolidated accounts.
Through these mechanisms, Group performance is continually
monitored, risks identified in a timely manner, their financial
implication assessed, control procedure re-evaluated and corrective
actions agreed and implemented.
The Board believes that it is not currently appropriate for the
Company to maintain an internal audit function due to the size of
the Group and the manner in which the Board are involved in payment
and financial commitment execution.
The Board consider the independence and objectivity of the
external auditor on an annual basis, with particular regard to
non-audit services. The split between audit and non-audit fees for
the year and information on the nature of the non-audit fees appear
in note 3 to the financial statements. There were no non-audit fees
incurred from the auditor during the year. The Board also receive
an annual confirmation of independence from the auditors.
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 increase in
the pension scheme deficit based on this year's actuarial forecast
and mentioned in the Chairman's Statement. The directors have
agreed a revised schedule of the 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.
C Weinberg
Director
7 July 2014
ASSOCIATED BRITISH ENGINEERING PLC
DIRECTORS' REMUNERATION REPORT
Introduction
This Report is submitted in accordance with Schedule 8 to the
Large and Medium sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 in respect of the year ended 31 March
2014. The new reporting requirements entail two sections to be
included, a Policy Report and an Annual Remuneration Report which
are presented below.
The Company's auditor, Grant Thornton UK LLP, is required to
give its opinion on certain information included in this report,
this comprises of the Directors' remuneration - single figure table
on page 52 and the information on directors shareholdings which is
contained in the directors report on page 4 and also forms part of
this directors remuneration report. Their report on these and other
matters is set out on pages 9 to 11.
Consideration by the Directors of Matters Relating to Directors'
Remuneration
The Company's Remuneration Committee considers Directors'
remuneration and has not sought advice or services from any person
in respect of its consideration of Directors' remuneration during
the period although the Directors expect from time to time to
review the fees against those paid to the boards of directors of
comparable organisations and appointments. The Company does not
have a Chief Executive Officer, Senior Management or any full time
employees.
DIRECTORS' REMUNATION POLICY REPORT
The Board consists entirely of Non-Executive Directors, who meet
at least four times a year and on other occasions as necessary to
deal with important aspects of the Company's affairs.
The Company's policy is for the Directors to be remunerated in
the form of fees, payable monthly in arrears. The non-executive
directors each receive a fee for their services, which is agreed by
the Remuneration Committee after reviewing comparable organisations
and appointments. None of the non-executive directors receive a
pension or other benefit from the Company, nor do they participate
in any bonus or incentive schemes or share option schemes.
The fees are not specifically related to the Directors'
performance, either individually or collectively. The Board is also
entitled to be repaid all reasonable travelling subsistence and
other expenses incurred by them respectively whilst conducting
their duties as Directors, however no other remuneration or
compensation was paid or payable by the Company during the period
to any of the current Directors. There will be no payment for loss
of office unless approved by a separate shareholder resolution.
The Company's policy is that the fees payable to each Director
should reflect the time spent by the director on the Company's
affairs and the responsibilities borne by each Director. They
should be sufficient to attract candidates of high calibre to be
recruited. The policy is for the Chairman of the Board to be paid
higher fees than the other Directors in recognition of the more
onerous role. The Remuneration policy is to review the Director's
fee rates from time to time, benchmarking the fees against
comparable organisations and appointments, although such review
will not necessarily result in any change. Due to the nature of the
Company, there are no full time employees other than the Directors
and therefore the requirement to consider the percentage change in
remuneration of all employees when determining the Directors'
remuneration is not considered to be relevant.
The non-executive directors do not have service contracts with
the Company. In accordance with the Articles of Association each
director retires from office at the third annual general meeting
after the annual general meeting at which he was last elected. A
retiring director is eligible for re-election.
A Director may resign by notice in writing to the Board at any
time giving one months' notice. None of the Directors are entitled
to compensation payable upon early termination of their contract
other than in respect of any unexpired notice period.
ASSOCIATED BRITISH ENGINEERING PLC
DIRECTORS' REMUNERATION REPORT (continued)
In accordance with the new reporting requirements of Large and
Medium sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013, an Ordinary resolution for the
approval of the remuneration policy of the Company to remain in
force for a three year period, will also be put to the members of
the Annual General Meeting and effective from that date.
ANNUAL REMUNERATION REPORT
DIRECTORS' REMUNERATION - SINGLE FIGURE TABLE 2014 2013
(AUDITED)
Total Total
GBP'000 GBP'000
Mr D A H Brown 15 15
Mr S J Cockburn 10 10
Mr C Weinberg 10 10
Mr A Beaumont 10 12
-------- --------
45 47
==== ====
The amounts above all relate to directors fees and represent the
total remuneration of the company's directors.
The remuneration policy described above will be implemented with
effect from 1 October 2014 subject to approval at the AGM and
remain unchanged for a three year period. The Board will review the
remuneration of the Directors if thought after reviewing comparable
organisations and appointments on an annual basis. Only a change in
role is likely to incur a change in the remuneration of any one
director otherwise.
This section of the report is subject to approval by a simple
majority of shareholders at the AGM in September 2014, as in
previous years.
Statement of Voting at the Annual General Meeting (AGM)
The 2012 Remuneration Report was presented to the AGM in
September 2013 and received shareholder approval following a vote
on a show of hands. 0.47% of the votes cast on the proxy forms were
against the Report and no votes were withheld. The proxy forms
returned contained no explanation for the votes against the
resolution. At the AGM the Chairman advised the shareholders
attending that an increase of director's fees at present would be
inappropriate.
Shareholders' views are always considered by the Board.
Shareholders can contact the Board in writing or by phone using the
Registered Office contact details as set out on the following
page.
Total Shareholder Return (TSR)
ASSOCIATED BRITISH ENGINEERING PLC
DIRECTORS' REMUNERATION REPORT (continued)
Source: Yahoo UK finance
The graph above shows ABE's TSR performance compared to the FTSE
All Share index over the past five years. TSR is defined as share
price growth plus reinvested dividends. This provides a basis for
comparison with a relevant equity index.
Company Performance
The Board is responsible for the Company's business strategy and
performance.
The Statement of Directors' responsibilities, Corporate
Governance report and the Directors' Remuneration report on pages
46 to 53 form part of the Directors' report to the parent Company
only financial statements,
On behalf of the Board
C Weinberg
Director
7 July 2014
ASSOCIATED BRITISH ENGINEERING PLC
DIRECTORS AND ADVISERS
The Board comprises four directors:
DAVID BROWN (61) became a non-executive director on 22 March
2000 and became Chairman on 11 November 2002. He is a consultant to
a major industrial Group in Ukraine, working on mergers and
acquisition and financing transactions. He has previously been a
company secretary and director of two fully listed companies and
general counsel on the Canary Wharf Development. He is a
non-practising qualified solicitor.
STEPHEN COCKBURN (74) has been a non-executive director since
1979. He has been a non-executive director of AIM-listed Fiske plc
since September 1999 and is a non-executive director of The
Investment Company plc.
COLIN WEINBERG (65) became a non-executive director on 10
November 2003. He was a member of the London Stock Exchange from
1980 to 1987 and was admitted to fellowship of the Securities
Institute in 1995. He was previously a non-executive director of
Peckham Building Society and was also during the year appointed as
a non-executive director of Kennedy Ventures PLC.
ANDREW BEAUMONT (54) was appointed a non-executive director on
21 December 2011. He is a director of Aldbury Associates Limited, a
business which provides company secretarial services. His past
experience includes having been a director of Independent
Registrars Group Limited (IRG), and working in Russia for part of
the Overseas Aid Development Agency as a British consultant to the
governing body for regulating Registrars (PARTAD).
SECRETARY & REGISTERED OFFICE BANKERS
haysmacintyre Company Secretaries Limited The Royal Bank of Scotland
plc
26 Red Lion Square 5th Floor
London Tay House
WC1R 4AG 300 Bath Street
Registered No. 110663 Glasgow
Tel No: 020 7969 5500 G2 4RS
AUDITOR CORPORATE ADVISERS
Grant Thornton UK LLP Beaumont Cornish Limited
3140 Rowan Place 2nd Floor
John Smith Drive Bowman House
Oxford 29 Wilson Street
OX4 2WB London
EC2M 2SJ
REGISTRARS
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
SOLICITORS
Fladgate LLP
12 Great Queen Street
London
WC2B 5DG
This information is provided by RNS
The company news service from the London Stock Exchange
END
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