TIDMAAT
RNS Number : 9902I
AEA Technology Group PLC
01 August 2012
AEA TECHNOLOGY GROUP PLC
ANNUAL FINANCIAL RESULTS STATEMENT FOR THE YEAR ENDED 31 MARCH
2012
AEA Technology Group plc, a leading technical, energy and
sustainability consultancy, today announces its annual financial
results for the year ended 31 March 2012.
Highlights
Financial Position
-- On 18 July, the Board announced it would consider all
strategic options to realise value and can report that this process
is now underway, including ongoing discussions with a number of
interested parties. However, as previously announced, the Board
does not envisage there will be offers for the share capital of the
Company and the Board expects that such options will result in
little or no value for shareholders.
-- Lloyds TSB Bank plc (the "Bank") will continue to provide
short-term support while the Group executes its financial
restructuring plan.
-- The Bank has given an agreement in principle on the terms for
a new money facility to provide additional short term funding of
GBP5.0 million on a secured basis through to end of October
2012.
-- The Trustee of the Group's pension scheme has agreed to defer
all pension payments otherwise due to assist in the Group
maintaining appropriate liquidity whilst the strategic review is
undertaken.
Financial summary
-- Order intake GBP134.1 million (2011: GBP80.9 million)
-- Revenue GBP110.3 million (2011: GBP113.7 million)
-- Adjusted operating profit GBP4.1 million (2011: GBP8.8 million) (1)
-- Operating loss GBP35.4 million (2011: GBP5.9 million)
-- Net debt of GBP36.4 million (2011: GBP28.3 million)
-- Net liabilities in respect of retirement benefits of GBP168.5
million (2011: GBP121.8 million)
Operational summary
-- Despite challenging economic backdrop, the energy and
environmental consulting businesses in both the UK and US delivered
results in line with expectations.
-- PPC has suffered from failure to secure expected new
contracts together with some existing contract losses.
-- New business plan with stronger commercial focus is being implemented by John Lowry.
-- Plan supported by a strengthening and change of management in the US businesses.
(1) Adjusted operating profit is defined as operating profit
before amortisation of acquired intangibles, impairment of goodwill
and other significant items
Dr Paul Golby CBE, Chairman of AEA Technology Group plc,
said:
"The difficult trading conditions have made this a challenging
year for all of our employees. Nevertheless, I am extremely
grateful to them for their hard work, resilience and
encouragement.
Despite a robust business plan and the underlying strength and
expertise of the Group's employees, the business has been
overwhelmed by the growing pension liability.
Going forward, the Board remains cautious in light of the
challenging international trading conditions and material
uncertainty over the future funding requirements of the Group."
For further information:
Investors
IR Focus
Neville Harris nharris@irfocus.co.uk
Chairman's statement
It has been a very challenging year for AEA. Having acquired ERG
in November 2010 the Group was seeking to grow in the US markets
and further shift the focus of the Group away from what had been
very difficult markets in the UK. However, despite a broadly on
track performance from the UK and US energy and environmental
consulting businesses, our failure to secure certain contracts,
combined with the loss of others in the IT consulting business
based in Washington has, despite an improved order intake, resulted
in a significant, previously announced, reduction in the expected
level of adjusted operating profit.
Capital structure and funding
Since the date of the profit warning in January, Lloyds TSB Bank
plc (the "Bank") has remained supportive of the Group's activities
while the Board, together with its advisers, prepared a new
strategy and business plan. During this period, the Company sought
to reach agreement with the Bank as to revised facilities,
including amended covenants for 2013. At the same time the Company
held detailed discussions with the trustee of the Group's defined
benefit pension scheme (the "Trustee") with a view to addressing
the significant deficit of the scheme and the Group's on-going
funding of these retirement benefit obligations.
The impact of the significantly reduced profit level and its
effect on our bank facilities and covenants, combined with the
increase in the level of the pension deficit, has meant that the
Board has, with the Bank and Trustee, been exploring ways to match
the level of Group debt and pension obligations to the level of
profit and cash flow being generated by the Group's businesses.
The new strategy and business plan has now been completed and
discussed with both the Bank and Trustee. The new strategy and
expected operating performance sets out a positive way forward for
the Group and its employees, and the actions already taken by the
Board to improve operational efficiency have started to deliver
results. However, as announced on 18 July 2012, despite
constructive discussions with the Bank and Trustee, the Board has
been unable to achieve a long term solution to the existing levels
of net debt and the significant on-going funding costs of the
Group's retirement benefit obligations.
As a result, with the support of the Trustee and the Bank,
including short term financial support, the Board decided to
consider all strategic options to realise value and can report that
this process is now underway, including ongoing discussions with a
number of interested parties. However, as previously announced, the
Board does not envisage there will be offers for the share capital
of the Company and the Board expects that such options will result
in little or no value for shareholders.
In order to support the Group whilst these options are pursued,
the Bank has given an agreement in principle on the terms for a new
money facility to provide additional short term funding of GBP5.0
million on a secured basis through to the end of October 2012.
Entering into a formal facility agreement in respect of the
additional GBP5.0 million will be conditional upon the Group
providing security and an ongoing liquidity covenant.
Going Concern
Additional short term funding is expected to be provided to
allow the Group to realise value through a sale of all or part of
the Group's businesses and assets which it is hoped will enable the
Group to agree a financial restructuring plan which will discharge
its liabilities to the Bank and the pension scheme in a solvent
manner.
The Board believes that preparing the Financial Statements on
the going concern basis remains appropriate as it is actively
pursuing a sale of all or part of the Group's businesses and
assets, and believe this will return sufficient value to enable a
financial restructuring plan which will discharge its liabilities
to the Bank and the pension scheme in a solvent manner. In
addition, the Board believes it will be able to finalise the
agreement of the GBP5.0 million short term facility, to meet short
term cash forecasts and operate within the facilities expected to
be provided by the Bank and comply with any related covenants and
that it will be able to execute a sale of all or part of the
Group's businesses and assets during the period in which facilities
are provided by the Bank.
However there can be no certainty that a sale process can be
completed in the short term that will enable the discharge of
liabilities to the Bank and the pension scheme. Should the Group
not maintain the ongoing support of the Bank and pension scheme and
execute a financial restructuring plan that provides an appropriate
solution for the Bank and pension scheme, and meet its forecast
cash requirements it may not have sufficient funds to remain in
operational existence. These circumstances indicate the existence
of material uncertainties that may cast significant doubt over the
Group's ability to continue as a going concern. The Financial
Statements do not include any adjustment to the value of balance
sheet assets or provision for further liabilities, which would
result should the going concern basis not be appropriate.
Results highlights
Revenue from continuing operations was GBP110.3 million (2011:
GBP113.7 million). Order intake was improved at GBP134.1 million
compared to GBP80.9 million in 2011, although this includes the
full year impact of order intake in ERG of GBP43.3 million.
Adjusted operating profit fell to GBP4.1 million from GBP8.8
million in the previous year as the significant impact of the
decline in the IT business was felt. Europe was ahead at the
adjusted operating profit level year on year. The statutory
operating loss was GBP35.4 million compared to a loss of GBP5.9
million the year before reflecting an impairment to goodwill on
previously acquired businesses of GBP28.8 million, costs of GBP4.4
million to restructure the business and a GBP4.6 million provision
to cover the costs of onerous property leases.
Dividend
The Directors are not proposing that a dividend is paid.
Board
Following Andrew McCree's resignation in November 2011, John
Lowry was appointed to the Board as Interim CEO in November
2011.
On 16 July 2012, Tim Robinson resigned as Non-Executive
Director. Tim Robinson is CEO of Talaris which has recently been
the subject of a take-over and he has left AEA to devote his time
to the integration of Talaris with the new parent company.
People
The difficult trading conditions have made this a challenging
year for all of our employees. Nevertheless, I am extremely
grateful to them for their hard work, resilience and
encouragement.
Outlook
The operational strategy for an improved future is now in place
and execution is in line with plan.
Despite a robust business plan and the underlying strength and
expertise of the Group's employees, the business has been
overwhelmed by the growing pension liability.
Going forward, the Board remains cautious in light of the
challenging international trading conditions and material
uncertainty over the future funding requirements of the Group.
Dr Paul Golby CBE, Chairman
Business & performance review
Review of the business
The last twelve months has been a difficult period for AEA and
its shareholders.
Following the acquisition of ERG in November 2010 the Group
became a leading technical advisor to the US and UK Governments in
energy, sustainability, emissions and waste.
However, continued spending cuts and tightened fiscal policy
from both our principal customers has meant that the strategic
vision has been more difficult to execute than previously
expected.
Despite the challenging backdrop, the energy and environmental
consulting businesses on both sides of the Atlantic were able to
achieve results in line with expectations, through a combination of
new project wins and a firm control of costs. However, the
Washington based IT business suffered from a failure to win a
number of contracts that had been expected to be won and some
contract losses. The impact of these on the Group as a whole has
been significant, leading to profit warnings in both November 2011
and January 2012.
Future development of the business
Following these trading difficulties, John Lowry, who was
appointed Interim CEO last November, has led the Senior Executive
Management Team in a root and branch review of the business to
determine the best way forward for the Group.
The fundamental strategy of the business based upon consulting
in areas of deep domain knowledge, experience and reputation
remains unchanged.
However to achieve the best results from these strengths will
require a very different method of execution. The new strategy and
business plan has been developed by the newly formed AEA Group
Executive which is comprised of the CEOs and CFOs of the operating
companies and the CEO and CFO of the Group, with the following
objectives:
-- Revenue growth will be maximized by the recruitment of senior
personnel around whom a more assertive business development culture
will be developed.
-- Business will be developed in new market areas adjacent to
our existing areas of expertise which have characteristics that
demand our existing skills and experience.
-- Target market sectors will be expanded to include new
geographic territories where we can leverage our reputation with US
and UK development agencies.
-- Work in commercial sectors will be expanded where there is no
conflict of interest with government sector work.
-- Cost reduction opportunities continue to be pursued across
all aspects of the Group's operations and there have been some
notable successes already.
Operational developments
-- Management at PPC, our Washington based business, has been
improved and, under the leadership of a new CEO and CFO, this
business is steadily improving.
-- At ERG, our Boston based business, the former owner has now
left the business after a period of handover and we are seeking a
new CEO and CFO.
-- Overall, despite the necessary operational change that is
taking place, the commitment of our employees remains strong.
Business wins
Despite the challenges in the market, order intake grew to
GBP134.1 million from GBP80.9 million in the previous year,
although this includes the full year impact of ERG of GBP43.3
million.
Notable project wins include a framework agreement to support
the US Environmental Protection Agency ("EPA") with its development
of greenhouse gas emissions legislation (which was won with
considerable support from the European operations) and a framework
agreement to support the EPA and other members of a high-level Task
Force in the development of the restoration strategy for the Gulf
of Mexico. The Task Force delivered the final strategy to President
Barack Obama in December 2011.
ERG, supported by PPC, was awarded a contract for the US
Department of Energy ("DOE") Building Technologies Program Support
which will utilise a broad range of the Group's capabilities:
programme design and implementation; data management, web design
and technology services; market research; partnership development;
regulatory support and acquisition and life cycle management for
the DOE's Better Buildings Neighborhood Program.
AEA Europe won a rebid to produce the annual UK Inventory of Air
Pollutant Emissions, including greenhouse gases, which is used for
reporting under international treaties and led a consortium with
ICLEI to win an 18 month project to determine how European cities
can and should adapt to climate change.
These high profile wins clearly demonstrate the underlying
strength and expertise of the Group's technical consulting
skills.
Financial performance
The Group has two reportable segments being Europe and the US.
The US constitutes two operating segments being PPC and ERG which
both provide a similar consulting service, operate in a similar
market and both have the US Government as the primary customer. Due
to these similar economic characteristics they are amalgamated into
one reportable segment. ERG was acquired in November 2010 and
contributed to the performance of the Group in the prior year only
for a period of 5 months. For that reason, the analysis that
follows will include where relevant identification of the impact of
ERG to assist in understanding the financial performance of the
reportable segments.
Total order intake was GBP134.1 million (2011: GBP80.9
million).
US operations order intake was GBP86.7 million (2011: GBP49.7
million), with a full year of ERG contributing orders of GBP43.3
million. PPC order intake increased by 30%, which reflects a
greater degree of budget certainty within the US Government sector
in the second half of the financial year. In Europe order intake
was GBP47.4 million (2011: GBP31.2 million), an increase that
reflected Europe's strong competitive edge that secured major wins
within the UK public sector and a 28% increase in order intake from
the international public sector.
Total Group revenue for the year was GBP110.3 million (2011:
GBP113.7 million). In Europe the revenue was GBP39.0 million (2011:
GBP54.7 million), which reflected the anticipated UK Government
budget cuts and also reductions in Government programmes that led
to a drop in subcontractor through costs within revenue. In the US
revenue in the year was GBP71.3 million (2011: GBP59.0 million), an
increase of 21%, with ERG contributing revenue of GBP37.6 million,
compared to GBP15.4 million in the five months post acquisition in
2010/11. PPC revenue was GBP33.7 million (2011: GBP43.6 million)
due to the reduced spending by the US Government, which resulted in
lower revenue in the second half of the year following lower than
expected orders.
Amortisation of acquired intangibles, impairment of goodwill and
certain other significant items are included within operating
profit. In order to give a clearer analysis of the underlying
operating performance of the Group these items have been excluded
to derive the adjusted operating profit figures. The significant
items relate mainly to the impairment of goodwill (GBP28.8
million), costs of restructuring and redundancy during the year
(GBP4.4 million) and, having reviewed the properties across the
Group in light of the Group's revised forecasts, the provision for
onerous property lease costs (GBP4.6 million).
The costs of restructuring and redundancy include:
-- redundancy programmes and restructuring and redundancy of
Group senior management teams in the UK and US, including
recruitment fees associated with Executive Board members and Senior
Management in the US (GBP1.9 million).
-- professional advice in respect of restructuring debt and pension liabilities (GBP1.8 million),
-- restructuring US IT operational activities (GBP0.4 million), and
-- other minor restructuring costs.
The adjusting significant items are shown below the Consolidated
income statement.
The adjusted operating profit in the year was GBP4.1 million
(2011: GBP8.8 million). The result reflects the lower organic
revenue within the US, which reduced US adjusted operating profit
from GBP7.2 million to GBP1.7 million, a drop in organic adjusted
operating profit of GBP7.0 million, offset partially by non-organic
growth in adjusted operating profit related to the acquisition of
ERG in 2010 of GBP1.7 million. This has resulted in the appointment
of new management and a programme of cost reductions that will
align the cost base with the anticipated future revenue activity
and make the business more competitive in the current business
environment. Europe mitigated the expected fall in revenue with
targeted and pre emptive cost savings in the previous financial
year, which continued into the current financial year.
Net finance costs were GBP4.7 million (2011: GBP3.9 million)
including interest on debt facilities of GBP2.5 million (2011:
GBP1.7 million), which was up from 2010/11 due to higher levels of
debt resulting from the lower revenues generated by PPC in the year
and a higher margin following the renegotiation of the banking
facility in September 2011. Net pension finance costs were GBP2.0
million (2011: GBP2.0 million).
The overall impact of tax on the Group was a charge of GBP0.3
million (2011: GBP4.3 million). Taxable profits of AEA Technology
plc are largely offset by brought forward losses in the UK. The tax
charge arises from deferred income tax movements of GBP0.3 million
(2011: GBP3.4 million), overseas income tax of GBPnil (2011: GBP1.0
million) and a current tax charge of GBPnil (2011: credit GBP0.1
million). As at 31 March 2012 the recognised net deferred income
tax asset was GBP0.8 million (2011: asset GBP1.1 million). The
Group has an unrecognised deferred income tax asset of GBP68.8
million (2011: GBP56.5 million). The three operating companies of
the Group operate in the UK and the US, where the statutory tax
rates are 26% and 34% respectively.
The loss for the year attributable to owners of the Company was
GBP40.4 million (2011: GBP14.0 million). This loss was driven
largely by the increase in significant items of GBP24.8 million,
which includes impairment losses on goodwill of GBP28.8 million
offset partially by reductions year on year of GBP4.5 million in
restructuring, acquisition and onerous property lease costs. The
adjusted loss attributable to the owners of the Company excludes
the impact of the significant items described above and,
additionally, the net finance costs of GBP2.0 million (2011: GBP2.0
million) on the defined benefit pension scheme. Adjusted loss
attributable to the owners of the Company, per note 7 was GBP0.7
million (2011: profit GBP0.4 million). This movement is a result of
the fall in adjusted operating profit partially offset by a
reduction in the tax charge to GBP0.3 million (2011: GBP4.3
million).
The adjusted earnings per share, calculated using the adjusted
loss attributable to the owners of the Company, was 0.0p (2011:
0.0p). Basic earnings per share was a loss of 2.8p (2011: loss
1.2p) as a result of both the increase in the weighted average
number of Ordinary shares in issue and the loss attributable to
owners of the Company. The Group has dilutive Ordinary shares from
share options, although due to the loss in the year to 31 March
2012 there remains no dilution resulting from the share
options.
Cash flows in the year
The net cash flow generated from business operations of GBP3.6
million (2011: GBP10.3 million) has been used to fund various
significant items, principally the costs of restructuring and
redundancy discussed above and as shown in the 'Statement of
movement in net debt - alternative performance measures', resulting
in cash used in operations of GBP4.3 million (2011: GBP3.9
million). In Europe management have continued to focus on active
management of working capital, which resulted in cash generated
from business operations of GBP4.4 million (2011: GBP4.4 million).
Lower profits in the US resulted in cash generated from business
operations of GBP3.3 million (2011: GBP8.6 million). Within the
Corporate centre the impact of cash expenditure on restructuring
increased outflows to GBP4.1 million in the financial year (2011:
GBP2.7 million).
Overall net debt increased from GBP28.3 million to GBP36.4
million.
Financial position
Banking facilities and net debt
AEA has a three year bank facility expiring in September 2014,
which includes a GBP43.0 million (2011: GBP39.0 million) revolving
credit facility (including an overdraft facility of GBP7.0 million)
to manage periods of working capital fluctuation and a GBP4.0
million bonding facility to support the obligations of members of
the Group arising in the ordinary course of business. Following the
year end, the Group has obtained the Bank's agreement in principle
on the terms for a new money facility to provide an additional
short term facility of GBP5.0 million on a secured basis through to
the end of October 2012. Entering into a formal agreement will be
conditional upon the Group providing security and an ongoing
liquidity covenant.
The balance of net debt is at a low point at the end of March
each year, due to the seasonality of cash flows, but historically
it is at a peak at the end of December, January and February.
As disclosed in note 2 these banking facilities are not
considered sufficient to cover the Group's anticipated funding
requirements for the foreseeable future. The short term funding has
been provided to allow the Group to consider all strategic options
to realise value, including through a sale of all or part of its
businesses and assets, which it is hoped will enable the Group to
agree a financial restructuring plan which will discharge its
liabilities to the Bank and the pension scheme.
Net debt at 31 March 2012 was GBP36.4 million (2011: GBP28.3
million). The detailed analysis of the Group's borrowings is shown
in note 11.
Capital structure
The Company's authorised and issued share capital as at 31 March
2012, together with details of shares issued during the year, are
set out in note 9. Each Ordinary share carries one vote.
At 31 March 2012 the Group's deficit on net shareholder funds
amounted to GBP157.3 million (2011: GBP70.1 million).
Dividends and dividend policy
The Board is not recommending the payment of a dividend in
respect of the year ended 31 March 2012 (2011: GBPnil).
Share price and market capitalisation
The closing share price of the Group on 31 March 2012 was 0.27p
(2011: 4.34p) and market capitalisation of the Group was GBP3.9
million (2011: GBP63.1 million). The high and low prices during the
year were 5.00p and 0.18p respectively.
Pensions
The Group assesses pension scheme funding with reference to
actuarial valuations and for reporting purposes uses IAS 19. Under
IAS 19 the Group's post retirement benefit net liability was
GBP168.5 million at 31 March 2012 (2011: GBP121.8 million). The
increase in the net liability primarily resulted from a reduction
in the discount rate, which dropped to 4.8% (31 March 2011 at
5.6%). AEA Technology plc agreed a schedule of contributions with
the Trustee of the AEA Technology Pension Scheme (the "Scheme") in
June 2009, which are agreed payments of GBP2.4 million per year
commencing July 2010, increasing to GBP6.0 million per year from
July 2012 through to April 2029. This has been confirmed by the
Pensions Regulator. The Company has been in ongoing discussions to
agree a revised schedule of contributions with the Trustee. These
discussions have not yet produced an agreed outcome and the
discussions continue. As outlined in note 2 the Trustee have agreed
a short term deferment of pension contributions.
Accounting policies
A description of the principal accounting policies appears in
note 17. The policies followed are in accordance with IFRS as
adopted by the EU. The preparation of the Financial Statements
conforming with generally accepted accounting principles requires
the use of estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the Financial
Statements and the reported amounts of revenues and expenses during
the reporting period. Although these estimates are based on
management's best knowledge of the amount, event or actions, actual
results ultimately may differ from those estimates. Any revisions
to estimates are recognised prospectively.
The accounting policies and areas that require the most
significant estimates and judgments to be used in the preparation
of the Financial Statements are in relation to assessment of
provisions, contract accounting and defined benefit pension
schemes.
Treasury policies and objectives
The Group's finance team manages and monitors external funding
and financial risks in support of the CFO who operates within
written policies approved by the Board and within the internal
control framework.
The Group uses various financial instruments in order to manage
the exposures that arise in its business operations as a result of
movements in financial markets. A natural hedge is maintained
against investment in US activities through maintaining a US dollar
denominated portion of the Group's borrowings. Swap contracts are
maintained to minimise risk of interest rate variability and such
derivatives are valued appropriately in the balance sheet. The
Group does not undertake speculative foreign exchange or interest
rate dealings for which there is no underlying exposure. Treasury
dealings such as investments, borrowings and foreign exchange are
conducted only to support underlying business transactions. All
treasury activities are focused on the management of risk. The main
risks arising from the Group's financial instruments are market
risk (including foreign exchange risk and cash flow and interest
rate risk), credit risk and liquidity risk.
Entities within the Group are required by the Group's treasury
function to maintain and regularly update detailed cash forecasting
models. The treasury function supports the cash flow needs of the
underlying businesses and maintains financial flexibility through
utilising the available funds under the Group's revolving credit
facility (note 11). As at 31 March 2012 GBP2.9 million (2011:
GBP6.7 million) of this revolving credit facility remains
unutilised. However, as noted in the Chairman's statement and
further disclosed in note 2, there exist material uncertainties
around the sufficiency of headroom under the existing facility and
the nature and availability of future facilities. The Group's
banking facilities are described in detail in note 11.
There have been no significant changes in the Group's policies
in the last year.
Net finance costs
Changing finance costs have a significant impact on AEA's
profits. There are two main elements to finance costs: interest
expense in respect of bank borrowings (impacting the Group's cash
flow) and net interest expense on AEA Technology plc's defined
benefit pension liability (not directly impacting the Group's cash
flow).
The interest expense on bank borrowings will fluctuate in line
with the level of borrowings and with changes in interest rates.
The interest rate risk is reduced through the use of interest rate
swaps.
The net interest expense in respect of the defined benefit
pension liability will fluctuate in line with market conditions and
changing yields on corporate bonds. Note 12 details the assumptions
used in calculating the pension liability and the sensitivity
analysis on changes to the key assumptions.
Outstanding legacy issues
The Group has residual issues relating to divested and closed
businesses. Settlement of such issues at amounts differing to the
estimates provided for will have an impact on the Group's future
cash flows and net borrowings requirement. The risks and
uncertainties associated with these issues are discussed in the
section entitled Risks and uncertainties.
Significant progress continues to be made in reducing the
exposure on residual issues during the year and this will continue
to be key area of focus in the new financial year.
Key supplier relationships
The top ten suppliers accounted for 20% of total Group
procurement in the year and no single supplier accounted for more
than 4% of total Group procurement. The Group is therefore not
dependent on any single key supplier for its procurement
requirement.
Key customer relationships
The key customers for the Group are the UK and US Governments,
which combined account for 67% of Group revenue (2011: 65%).
Risks & uncertainties
To achieve AEA's strategic objectives the Group must respond
effectively to the associated risks.
AEA has a well established risk management process that complies
with the FSA's UK Governance Code and addresses strategic risks and
risks specific to individual businesses and contracts, including
operational risks, financial risks, strategic risks, environmental
and safety risks.
The Board has reviewed the material risks identified as well as
the mitigating action plan. The principal risks for the Group are
as follows:
Liquidity risk
The Group is exposed to a risk of adequate bank funding being
available. AEA has a three year bank facility expiring in September
2014, which includes a GBP43.0 million revolving credit facility to
manage periods of working capital fluctuation arising in the
ordinary course of business. Recent bank covenant tests have been
postponed but the longer term borrowing facility in place at 31
March 2012 can now be removed by the Bank at short notice. As
disclosed in note 2 an additional short term facility of GBP5.0
million has been agreed in principle to fund the Group whilst it
considers all strategic options to realise value, including through
a sale of all or part of the Group's businesses and assets which it
is hoped will enable the Group to agree a financial restructuring
plan which will discharge its liabilities to the Bank and the
pension scheme. Entering into a formal facility agreement in
respect of the additional GBP5.0 million will be conditional upon
the Group providing security and an ongoing liquidity covenant.
The Board believes that a sale of all or part of the Group's
businesses and assets will return sufficient value to enable a
financial restructuring plan which will discharge its liabilities
to the Bank and the pension scheme. In addition, the Board believe
it will be able to meet short term cash forecasts and operate
within the short term facilities expected to be provided by the
Bank and that they will be able to execute a sale of all or part of
the Group's businesses and assets during the period in which
facilities are provided by the Bank. However there can be no
certainty that such a sale process can be completed in the short
term or that it will enable the discharge of liabilities to the
Bank and the pension scheme.
Changes in the competitive environment resulting from Government
policy
Future risks are likely to be dominated by a hiatus in placing
contracts by both UK and US governments, and future changes in both
UK and US government policies, priorities and expenditure levels or
delays in implementation of legislation which could affect the
Group's business. At the very least, internal government
reorganisation could mean AEA finds itself working with new
customers who have different priorities. AEA must therefore
maintain ongoing links with senior officials in key UK and US
government departments and anticipate and be able to react swiftly
to future changes.
Investment is being made in making more complete use of the
breadth of energy and environmental knowledge within and between
the business units, increasingly underpinned by sales propositions,
relationship skills and senior management connections with relevant
parts of the customer organisations. Risk mitigation plans have
focused on the development of more integrated propositions,
leveraging extensive capabilities within the Group in data and
information management and economics analysis. Actions to manage
and mitigate risks to sales pipelines will be focused largely on
maintaining and expanding sales to public sector bodies and
international agencies and development of operating models to
support this agenda.
Recruitment and retention of sufficient high calibre people
The risk for the business is that the sourcing of suitably
qualified technical experts has become more challenging,
particularly in the UK market where demand for high calibre experts
has increased. However, through a combination of challenging and
rewarding assignment opportunities, enhanced by the opportunities
of working both in the US and the UK, and through investment in
development in both technical and business skills, the Group has
successfully executed its retention strategy and expects to
continue this strategy into the future.
Retirement benefits
The Group is exposed to financial risks in relation to the AEA
Technology plc Pension Scheme (the "Scheme"), which currently has a
large deficit. The amount of the deficit can vary significantly due
to changes in the assumptions used to value the longevity of Scheme
members, the discount rate, and the inflation rate assumptions.
Consequently the Group is exposed to the risk of increases in the
cash contributions payable under the recovery plan, volatility in
the deficit reported in the Group's Balance sheet and gains/losses
recorded in the Group's Consolidated statement of comprehensive
income. The Board has also taken steps to improve the governance of
the Scheme. This includes the appointment of an independent trustee
as chairman of the board of directors of the Trustee and the
adoption of a trigger based de risking strategy.
Legacy provisions
The Group has provided for various liabilities inter alia
onerous leases, warranties and indemnities in respect of disposals
of companies and businesses. Uncertainty exists around the
potential for claims under warranties and indemnities in respect of
these disposals, with a number of indemnities continuing for five
or more years post divestment, and there is uncertainty in
estimating the future costs of decommissioning nuclear facilities.
The total liability is predominantly represented by provisions, as
detailed in note 13.
All residual issues relating to the divested and closed
businesses are under the control of the CFO and the Company
Secretary. The Group has not become aware of any significant
additional liabilities in respect of disposals. We continue
actively to address and reduce the legacy risks and have reduced
them considerably during 2011/12.
Exchange risk
The Group has operations denominated in US dollars and also
maintains a US dollar loan. As a result, the Group's profit and net
debt is impacted by exchange rate fluctuations which could have a
negative or positive impact on the Group results.
Consolidated income statement
2012 2011
For the year ended 31 March Note GBPm GBPm
---------------------------------------------- ---------- -------- --------
Revenue 3 110.3 113.7
Cost of sales (64.2) (69.1)
---------------------------------------------- ---------- -------- --------
Gross profit 46.1 44.6
Other operating income 1.6 3.2
Selling and marketing costs (7.1) (7.6)
Administrative expenses (76.0) (46.1)
---------------------------------------------- ---------- -------- --------
Operating loss (35.4) (5.9)
Investment income - 0.1
Finance income 4 20.6 21.2
Finance costs 5 (25.3) (25.1)
---------------------------------------------- ---------- -------- --------
Loss before tax (40.1) (9.7)
Income tax 6 (0.3) (4.3)
---------------------------------------------- ---------- -------- --------
Loss for the year attributable to the owners
of the Company (40.4) (14.0)
---------------------------------------------- ---------- -------- --------
Loss per share attributable to the owners of the
Company during the year
Basic (pence) 7 (2.8)p (1.2)p
Diluted (pence) 7 (2.8)p (1.2)p
------------------------------------------------------ -------- --------
All results relate to continuing operations.
Consolidated income statement - alternative performance
measures (note 16)
2012 2011
Adjusted operating profit Note GBPm GBPm
--------------------------------------------------- ------ ------- ------
Operating loss (35.4) (5.9)
Amortisation of acquired intangibles 1.7 1.3
Impairment of goodwill 28.8 -
Restructuring costs including redundancy 4.4 7.7
Acquisition costs - 4.3
Property onerous lease costs 4.6 1.5
Pension credit from curtailment 12 - (0.1)
Adjusted operating profit 3 4.1 8.8
--------------------------------------------------- ------ ------- ------
2012 2011
Adjusted profit before tax Note GBPm GBPm
------------------------------------------ ----- ------- ------
Loss before tax (40.1) (9.7)
Amortisation of acquired intangibles 1.7 1.3
Impairment of goodwill 28.8 -
Restructuring costs including redundancy 4.4 7.7
Acquisition costs - 4.3
Property onerous lease costs 4.6 1.5
Pension credit from curtailment 12 - (0.1)
Net pension finance costs 12 2.0 2.0
------------------------------------------ ----- ------- ------
Adjusted profit before tax 1.4 7.0
------------------------------------------ ----- ------- ------
Consolidated statement of comprehensive income
2012 2011
For the year ended 31 March Note GBPm GBPm
----------------------------------------------------- ----- ------- -------
Loss for the year attributable to the owners of
the Company (40.4) (14.0)
Other comprehensive (expense)/income:
currency translation gains/(losses) - net of tax(1) 10 0.1 (1.1)
actuarial (losses)/gains on defined benefit pension
schemes - net of tax(1) 12 (46.7) 17.4
----------------------------------------------------- ----- ------- -------
Other comprehensive (expense)/income recognised
for the year - net of tax (46.6) 16.3
Total comprehensive (expense)/income for the year
attributable to the owners of the Company (87.0) 2.3
----------------------------------------------------- ----- ------- -------
(1) The tax charge/(credit) on items taken directly to equity is
GBPnil in the current and prior year.
Balance sheets
Group Company
2012 2011 2012 2011
As at 31 March Note GBPm GBPm GBPm GBPm
----------------------------------- ----- -------- -------- ------ ------
ASSETS
Non-current assets
Goodwill 8 41.5 69.9 - -
Other intangible assets 10.3 11.7 - -
Property, plant and equipment 3.1 4.4 - -
Investment in subsidiaries - - 37.5 69.0
Trade and other receivables 0.1 1.3 - 3.7
Deferred income tax assets 1.6 2.3 - -
----------------------------------- ----- -------- -------- ------ ------
56.6 89.6 37.5 72.7
----------------------------------- ----- -------- -------- ------ ------
Current assets
Contract work in progress - 0.1 - -
Trade and other receivables 28.6 31.7 1.3 -
Current income tax assets 0.2 0.2 - -
Cash and cash equivalents 3.4 4.0 - -
----------------------------------- ----- -------- -------- ------ ------
32.2 36.0 1.3 -
----------------------------------- ----- -------- -------- ------ ------
Total assets 88.8 125.6 38.8 72.7
----------------------------------- ----- -------- -------- ------ ------
EQUITY
Capital and reserves attributable
to owners of the Company
Share capital 9 14.5 14.5 14.5 14.5
Share premium 9 - - - -
Merger reserve 10 82.0 82.0 - -
Other (deficit)/reserves 10 (77.0) (28.1) 0.2 0.1
Retained (deficit)/reserves (176.8) (138.5) 16.7 52.4
----------------------------------- ----- -------- -------- ------ ------
Total equity (157.3) (70.1) 31.4 67.0
----------------------------------- ----- -------- -------- ------ ------
LIABILITIES
Non-current liabilities
Trade and other payables 1.8 1.7 - 1.2
Borrowings 11 35.2 30.2 1.0 3.0
Retirement benefit obligations 12 168.5 121.8 - -
Provisions for liabilities and
charges 13 5.9 4.7 - -
Deferred income tax liabilities 0.8 1.2 - -
----------------------------------- ----- -------- -------- ------ ------
212.2 159.6 1.0 4.2
----------------------------------- ----- -------- -------- ------ ------
Current liabilities
Trade and other payables 25.2 32.0 0.7 0.9
Borrowings 11 4.6 2.1 5.7 0.6
Derivative financial instruments 0.5 0.3 - -
Provisions for liabilities and
charges 13 3.5 1.3 - -
Current income tax liabilities 0.1 0.4 - -
----------------------------------- ----- -------- -------- ------ ------
33.9 36.1 6.4 1.5
----------------------------------- ----- -------- -------- ------ ------
Total liabilities 246.1 195.7 7.4 5.7
----------------------------------- ----- -------- -------- ------ ------
Total equity and liabilities 88.8 125.6 38.8 72.7
----------------------------------- ----- -------- -------- ------ ------
Approved by the Board on 31 July 2012.
Statement of changes in equity
Share Share Merger Other
capital premium reserve reserves
(note (note (note (note Retained Total
9) 9) 10) 10) deficit equity
Group GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- --------- --------- --------- ---------- --------- --------
Balance as at 1 April
2010 2.3 11.7 82.0 (44.8) (181.4) (130.2)
Comprehensive expense:
Loss for the year - - - - (14.0) (14.0)
--------------------------- --------- --------- --------- ---------- --------- --------
Total comprehensive
expense - - - - (14.0) (14.0)
--------------------------- --------- --------- --------- ---------- --------- --------
Other comprehensive
income/(expense):
Currency translation
losses - - - (1.1) - (1.1)
Actuarial gains on
defined benefit pension
schemes - - - 17.4 - 17.4
--------------------------- --------- --------- --------- ---------- --------- --------
Total other comprehensive
income - - - 16.3 - 16.3
--------------------------- --------- --------- --------- ---------- --------- --------
Total comprehensive
income/(expense)
for the year - - - 16.3 (14.0) 2.3
--------------------------- --------- --------- --------- ---------- --------- --------
Transactions with
owners:
Shares issued under
Firm Placing, Placing
and Open Offer (note
9) 11.1 41.5 - - - 52.6
Consideration shares
issued 1.1 4.6 - - - 5.7
Additional costs of
Firm Placing, Placing
and Open Offer - - - - (0.9) (0.9)
Capital reduction
(note 9) - (57.8) - - 57.8 -
Fair value of share
option schemes (note
10) - - - 0.4 - 0.4
--------------------------- --------- --------- --------- ---------- --------- --------
Total transactions
with owners 12.2 (11.7) - 0.4 56.9 57.8
--------------------------- --------- --------- --------- ---------- --------- --------
Balance as at 31 March
2011 14.5 - 82.0 (28.1) (138.5) (70.1)
--------------------------- --------- --------- --------- ---------- --------- --------
Comprehensive expense:
Loss for the year - - - - (40.4) (40.4)
--------------------------- --------- --------- --------- ---------- --------- --------
Total comprehensive
expense - - - - (40.4) (40.4)
--------------------------- --------- --------- --------- ---------- --------- --------
Other comprehensive
(expense)/income:
Currency translation
gains - - - 0.1 - 0.1
Actuarial losses on
defined benefit pension
schemes - - - (46.7) - (46.7)
--------------------------- --------- --------- --------- ---------- --------- --------
Total other comprehensive
expense - - - (46.6) - (46.6)
--------------------------- --------- --------- --------- ---------- --------- --------
Total comprehensive
expense for the year - - - (46.6) (40.4) (87.0)
--------------------------- --------- --------- --------- ---------- --------- --------
Transactions with
owners:
Fair value of share
option schemes (note
10) - - - (0.2) - (0.2)
Transfer of balance
related to expired
share options - - - (2.1) 2.1 -
--------------------------- --------- --------- --------- ---------- --------- --------
Total transactions
with owners - - - (2.3) 2.1 (0.2)
--------------------------- --------- --------- --------- ---------- --------- --------
Balance as at 31 March
2012 14.5 - 82.0 (77.0) (176.8) (157.3)
--------------------------- --------- --------- --------- ---------- --------- --------
All changes in equity are attributable to the equity holders of
the Company.
Share Other
Share premium reserves
capital (note (note Retained Total
(note 9) 9) 10) reserves equity
Company GBPm GBPm GBPm GBPm GBPm
----------------------------- ---------- --------- ---------- ---------- --------
Comprehensive expense:
Loss for the year - - - (4.5) (4.5)
----------------------------- ---------- --------- ---------- ---------- --------
Total comprehensive expense - - - (4.5) (4.5)
----------------------------- ---------- --------- ---------- ---------- --------
Transactions with owners:
Issue of shares in AEA
Technology Group plc 2.3 11.7 - - 14.0
Shares issued under Firm
Placing, Placing and
Open Offer (note 9) 11.1 41.5 - - 52.6
Consideration shares
issued 1.1 4.6 - - 5.7
Additional costs of Firm
Placing, Placing and
Open Offer costs - - - (0.9) (0.9)
Capital reduction (note
9) (57.8) - 57.8 -
Fair value of share option
schemes - - 0.1 - 0.1
----------------------------- ---------- --------- ---------- ---------- --------
Total transactions with
owners 14.5 - 0.1 56.9 71.5
----------------------------- ---------- --------- ---------- ---------- --------
Balance as at 31 March
2011 14.5 - 0.1 52.4 67.0
----------------------------- ---------- --------- ---------- ---------- --------
Comprehensive expense:
Loss for the year - - - (35.7) (35.7)
----------------------------- ---------- --------- ---------- ---------- --------
Total comprehensive expense - - - (35.7) (35.7)
----------------------------- ---------- --------- ---------- ---------- --------
Transactions with owners:
Fair value of share option
schemes - - 0.1 - 0.1
----------------------------- ---------- --------- ---------- ---------- --------
Balance as at 31 March
2012 14.5 - 0.2 16.7 31.4
----------------------------- ---------- --------- ---------- ---------- --------
Statement of cash flows
Group Company
2012 2011 2012 2011
For the year ended 31 March Note GBPm GBPm GBPm GBPm
------------------------------------------- ------ ------------ ------------ ------ -------
Cash flows used in operating activities
Cash used in operations 14 (4.3) (3.9) (3.5) (3.7)
Interest paid (2.4) (1.6) (0.1) -
Taxes paid (0.3) (0.8) - -
------------------------------------------- ------ ------------ ------------ ------ -------
Net cash used in operating activities (7.0) (6.3) (3.6) (3.7)
------------------------------------------- ------ ------------ ------------ ------ -------
Cash flows (used in)/generated from
investing activities
Acquisition of subsidiary, including
loan from/(to) subsidiary's previous
shareholders - (48.2) 1.2 (49.1)
Dividends received - - 2.4 -
Purchases of other intangibles (0.6) (0.2) - -
Purchases of property, plant and
equipment (0.3) (1.5) - -
------------------------------------------- ------ ------------ ------------ ------ -------
Net cash (used in)/generated from
investing activities (0.9) (49.9) 3.6 (49.1)
------------------------------------------- ------ ------------ ------------ ------ -------
Cash flows (used in)/generated from
financing activities
Repayment of borrowings (2.0) (17.1) (2.0) -
Draw-down of borrowings 9.7 20.3 5.1 3.6
Capital element of finance lease
repayments (0.5) (0.5) - -
Issue of intra-group loans - - (4.3) (2.4)
Proceeds from intra-group loans - - 1.2 1.3
Capital contribution to AEA Technology
plc - - - (1.4)
Proceeds from new equity issues 9 - 51.7 - 51.7
Net cash generated from financing
activities 7.2 54.4 - 52.8
------------------------------------------- ------ ------------ ------------ ------ -------
Net decrease in cash and cash equivalents (0.7) (1.8) - -
Cash and cash equivalents at beginning
of year 4.0 6.0 - -
Exchange gains/(losses) on cash
and cash equivalents 0.1 (0.2) - -
------------------------------------------- ------ ------------ ------------ ------ -------
Cash and cash equivalents at end
of year 3.4 4.0 - -
------------------------------------------- ------ ------------ ------------ ------ -------
Statement of movement in net debt - alternative performance
measures (note 2)
Group Company
Movement in net debt for the year 2012 2011 2012 2011
ended 31 March Note GBPm GBPm GBPm GBPm
---------------------------------------- ----- ------- ------- ------ -------
Net cash flow generated from/(used
in) business operations 3 3.6 10.3 (1.3) (0.2)
Restructuring including redundancy
costs (5.0) (4.7) (2.2) -
Acquisition costs - (3.6) - (3.5)
Legacy cash flows (1.3) (4.1) - -
Funding of pension deficit (1.6) (1.8) - -
---------------------------------------- ----- ------- ------- ------ -------
Cash used in operations 14 (4.3) (3.9) (3.5) (3.7)
Net interest and tax paid (2.0) (2.4) (0.1) -
Net cash (used in)/generated from
investing activities (0.9) (49.9) 3.6 (49.1)
Cancellation of debt - 2.0 - -
Proceeds from new equity issues - 51.7 - 51.7
Non-cash financing - facility fees (0.6) - - -
Non-cash financing - finance leases (0.3) (0.4) - -
Exchange gains on net debt - 0.8 - -
Capital contribution to AEA Technology
plc - - - (1.4)
Net movement in intra-group loans - - (3.1) (1.1)
---------------------------------------- ----- ------- ------- ------ -------
Net increase in net debt (8.1) (2.1) (3.1) (3.6)
Net debt at beginning of year (28.3) (26.2) (3.6) -
---------------------------------------- ----- ------- ------- ------ -------
Net debt at end of year (36.4) (28.3) (6.7) (3.6)
---------------------------------------- ----- ------- ------- ------ -------
Closing net debt comprises: Group Company
2012 2011 2012 2011
Note GBPm GBPm GBPm GBPm
----------------------------- ----- ------------ ------------ ------ ------
Cash at bank and in hand 3.4 4.0 - -
Current borrowings 11 (4.6) (2.1) (5.7) (0.6)
Non-current borrowings 11 (35.2) (30.2) (1.0) (3.0)
----------------------------- ----- ------------ ------------ ------ ------
Net debt at end of year (36.4) (28.3) (6.7) (3.6)
----------------------------- ----- ------------ ------------ ------ ------
These supplementary disclosures do not form part of the
Statement of cash flows and these tables are not included in the
notes.
Notes to the financial statements
1 GENERAL INFORMATION
The financial information set out above and below for the year
ended 31 March 2012 does not constitute the statutory accounts for
the year but is derived from those accounts. The statutory
Financial Statements for the year, on which the auditors issued an
unqualified report which included an emphasis of matter on going
concern, will be delivered to the Registrar of Companies following
the Company's Annual General Meeting.
The comparative financial information for the Group is based on
the Group's accounts for the year ended 31 March 2011, which were
delivered to the Registrar of Companies and on which the auditors
issued an unqualified report.
The Annual Financial Results Statement has been prepared on the
basis of the accounting policies set out in the Annual Report and
Accounts for the year ended 31 March 2012.
2 GOING CONCERN
The Group has a banking facility, which is provided by its sole
bank, Lloyds TSB Bank Plc (the "Bank"), to meet its liquidity
needs. In addition the Group has a significant pension deficit and
is required to agree a suitable funding programme to alleviate
this. The Group currently forecasts that it will be unable to
generate cash from its core operations to discharge its obligations
to both the Bank and the pension scheme.
Recent bank covenant tests have been postponed but the longer
term borrowing facility in place at 31 March 2012 can now be
removed by the Bank at short notice. However, the Bank continues to
be supportive and the Group has obtained the Bank's agreement in
principle on the terms for a new money facility to provide an
additional secured, short term facility of GBP5.0 million to fund
the Group through to the end of October 2012. Entering into a
formal facility agreement will be conditional upon the Group
providing security and an ongoing liquidity covenant. The headroom
available under these facilities is limited and requires the Group
to meet its trading forecasts through this period. The Trustee of
the Group's defined benefit pension scheme has agreed to defer all
pension payments otherwise due to assist in the Group maintaining
appropriate liquidity during this period.
Additional short term funding is expected to be provided to
allow the Group to realise value through a sale of all or part of
the Group's businesses and assets which it is hoped will enable the
Group to agree a financial restructuring plan which will discharge
its liabilities to the Bank and the pension scheme in a solvent
manner.
The Board believes that preparing the Financial Statements on
the going concern basis remains appropriate as it is actively
pursuing a sale of all or part of the Group's businesses and
assets, and believe this will return sufficient value to enable a
financial restructuring plan which will discharge its liabilities
to the Bank and the pension scheme in a solvent manner. In
addition, the Board believes it will be able to finalise the
agreement of the GBP5.0 million short term facility, to meet short
term cash forecasts and operate within the facilities expected to
be provided by the Bank and comply with any related covenants and
that it will be able to execute a sale of all or part of the
Group's businesses and assets during the period in which facilities
are provided by the Bank.
However there can be no certainty that a sale process can be
completed in the short term that will enable the discharge of
liabilities to the Bank and the pension scheme. Should the Group
not maintain the ongoing support of the Bank and pension scheme and
execute a financial restructuring plan that provides an appropriate
solution for the Bank and pension scheme, and meet its forecast
cash requirements it may not have sufficient funds to remain in
operational existence. These circumstances indicate the existence
of material uncertainties that may cast significant doubt over the
Group's ability to continue as a going concern. The Financial
Statements do not include any adjustment to the value of balance
sheet assets or provision for further liabilities, which would
result should the going concern basis not be appropriate.
3 SEGMENTAL INFORMATION
The Chief Operating Decision Maker (CODM) is the combination of
the Interim CEO and the CFO. The reports reviewed by them, and upon
which they allocate resources, are based upon the reportable
segments of Europe and the US. The US constitutes two operating
segments, being PPC and ERG, which both provide a similar
consulting service, operate in a similar market and both have the
US Federal Government as the primary customer. Due to these similar
economic characteristics they have been amalgamated into one
reportable segment. Europe is a reportable segment and an operating
segment.
The measure of reported segmental profit or loss used by the
CODM to assess the performance of the segments is adjusted
operating profit. This measure excludes the effect of amortisation
of acquired intangibles, impairment of goodwill and other
significant items, as defined in note 17 'Alternative performance
measures'.
The Group has only one service, being that of consultancy,
policy support, programme and data management.
All amounts provided to the CODM are measured in accordance with
the Group's accounting policies as stated in note 17 and are
therefore consistent with the amounts presented in the Financial
Statements. Any sales between segments are carried out at arm's
length.
The revenue and adjusted operating profit generated by each of
the Group's segments, together with the depreciation and
amortisation charge and impairment losses for each segment, are
summarised as follows:
2012 2011
GBPm GBPm
--------------- ------ ------
Europe 39.0 54.7
US 71.3 59.0
--------------- ------ ------
Total revenue 110.3 113.7
--------------- ------ ------
2012 2011
GBPm GBPm
------------------------------------------- ------ ------
Europe 4.7 4.4
US 1.7 7.2
------------------------------------------- ------ ------
Total segmental adjusted operating profit 6.4 11.6
------------------------------------------- ------ ------
Corporate centre (2.3) (2.8)
------------------------------------------- ------ ------
Total adjusted operating profit 4.1 8.8
------------------------------------------- ------ ------
2012 2011
GBPm GBPm
--------------------------------------------------------- ------ ------
Europe 0.8 1.2
US 0.9 0.6
--------------------------------------------------------- ------ ------
Total depreciation and amortisation charged in adjusted
operating profit 1.7 1.8
--------------------------------------------------------- ------ ------
2012 2011
GBPm GBPm
------------------------------------------------------ ------ ------
Europe - -
US 29.0 -
------------------------------------------------------ ------ ------
Total impairment losses charged in adjusted operating
profit 29.0 -
------------------------------------------------------ ------ ------
Impairment losses are made up of goodwill impairment of GBP28.8
million (2011: nil) and GBP0.2 million (2011: nil) impairment of
plant and equipment.
Net cash flow generated from business operations by segment is
as follows:
2012 2011
GBPm GBPm
-------------------------------------------------------- ------ ------
Europe 4.4 4.4
US 3.3 8.6
-------------------------------------------------------- ------ ------
Net cash flow generated from business operations 7.7 13.0
-------------------------------------------------------- ------ ------
Corporate centre (4.1) (2.7)
-------------------------------------------------------- ------ ------
Total net cash flow generated from business operations 3.6 10.3
-------------------------------------------------------- ------ ------
A reconciliation from segmental net cash flow generated from
business operations to cash used in operations is given within the
alternative performance measures, movement in net debt shown
beneath the Statement of cash flows.
Reportable segment assets and liabilities represent the
operational working capital balances of each of the reportable
segments.
Total reportable segment assets are as follows:
2012 2011
GBPm GBPm
--------------------------------- ------ ------
Europe 8.4 9.1
US 18.8 20.7
--------------------------------- ------ ------
Total reportable segment assets 27.2 29.8
--------------------------------- ------ ------
Total reportable segment liabilities are as follows:
2012 2011
GBPm GBPm
-------------------------------------- ------ ------
Europe 9.6 14.0
US 9.0 7.8
-------------------------------------- ------ ------
Total reportable segment liabilities 18.6 21.8
-------------------------------------- ------ ------
A reconciliation of Total segmental adjusted operating profit to
loss before tax is as follows:
2012 2011
GBPm GBPm
------------------------------------------- ------- ------
Total segmental adjusted operating profit 6.4 11.5
Corporate centre (2.3) (2.7)
Amortisation of acquired intangibles (1.7) (1.3)
Impairment of goodwill (28.8) -
Restructuring costs including redundancy (4.4) (7.7)
Property onerous lease costs (4.6) (1.5)
Acquisition costs - (4.3)
Investment income - 0.1
Pension credit from curtailment - 0.1
Net finance costs (4.7) (3.9)
------------------------------------------- ------- ------
Loss before tax (40.1) (9.7)
------------------------------------------- ------- ------
Reportable segment assets are reconciled to total assets as
follows:
2012 2011
GBPm GBPm
-------------------------------- ------ ------
Reportable segment assets 27.2 29.8
Non-current assets 56.6 89.6
Current assets:
contract work in progress - 0.1
other receivables 1.4 1.9
current income tax assets 0.2 0.2
cash and cash equivalents 3.4 4.0
-------------------------------- ------ ------
Total assets per Balance sheet 88.8 125.6
-------------------------------- ------ ------
Reportable segment liabilities are reconciled to total
liabilities as follows:
2012 2011
GBPm GBPm
---------------------------------------- ------ ------
Reportable segment liabilities 18.6 21.8
Non-current liabilities 212.2 159.6
Current liabilities:
other payables 6.6 10.2
borrowings 4.6 2.1
derivative financial instruments 0.5 0.3
provisions for liabilities and charges 3.5 1.3
current income tax liabilities 0.1 0.4
Total liabilities per Balance sheet 246.1 195.7
---------------------------------------- ------ ------
Entity-wide disclosures
The following table shows external revenue by country based on
the destination of service. Revenues are disclosed for the UK, the
US and other countries in total.
2012 2011
GBPm GBPm
--------------- ------ ------
UK 33.5 49.0
US 71.2 58.5
Other 5.6 6.2
Total revenue 110.3 113.7
--------------- ------ ------
The locations of non-current assets, other than deferred income
tax assets, are as follows:
2012 2011
GBPm GBPm
-------------------- ------ ------
UK 2.2 3.9
US 52.8 83.4
Non-current assets 55.0 87.3
-------------------- ------ ------
Revenues of GBP17.9 million (2011: GBP24.5 million) are derived
from a single external customer attributable to the Europe segment.
Revenues of GBP55.7 million (2011: GBP49.6 million) are derived
from a single external customer attributable to the US segment.
These revenues are considered to be from single customers as they
are from numerous departments and agencies under the control of the
UK or US national governments.
4 FINANCE INCOME
2012 2011
GBPm GBPm
---------------------------------------------------------- ------ ------
Expected return on defined benefit pension scheme assets
(note 12) 20.6 21.2
---------------------------------------------------------- ------ ------
20.6 21.2
---------------------------------------------------------- ------ ------
5 FINANCE COSTS
2012 2011
GBPm GBPm
--------------------------------------------------------- ------ ------
Interest on bank overdrafts and loans 2.5 1.7
Interest on finance leases - 0.1
Fair value losses on financial instruments at fair
value through profit or loss:
interest rate swaps 0.2 0.1
Accretion of discount on defined benefit pension scheme
obligations (note 12) 22.6 23.2
--------------------------------------------------------- ------ ------
25.3 25.1
--------------------------------------------------------- ------ ------
6 INCOME TAX
2012 2011
GBPm GBPm
------------------------------------------------------------- ------ ------
UK corporation tax at 26% (2011: 28%) - (0.1)
Overseas tax charge - 1.0
Deferred income tax - origination and reversal of temporary
differences 0.3 3.4
------------------------------------------------------------- ------ ------
Income tax expense 0.3 4.3
------------------------------------------------------------- ------ ------
The tax on the Group's loss before tax differs from the
theoretical amount that would arise using the weighted average tax
rate applicable to the loss of the Group as follows:
2012 2011
GBPm GBPm
-------------------------------------------------------- ------- ------
Loss before tax (40.1) (9.7)
-------------------------------------------------------- ------- ------
Tax calculated at domestic tax rates applicable to
(loss)/profits in respective countries (14.8) (2.3)
Income not subject to tax (0.9) -
Deferred tax asset not recognised on impairment losses 11.0 -
Derecognition of deferred tax liability on impairment
losses (1.2) -
Expenses not deductible for tax purposes 0.3 3.0
Current tax losses for which no deferred tax asset
was recognised 3.5 1.9
Overseas tax 0.3 0.1
Derecognition of previously recognised tax losses 2.1 1.6
Income tax expense 0.3 4.3
-------------------------------------------------------- ------- ------
7 EARNINGS PER SHARE
Details of basic, diluted and adjusted earnings per share are
set out below.
Basic
Basic earnings per share is calculated by dividing the loss
attributable to the owners of the Company by the weighted average
number of Ordinary shares in issue during the year.
2012 2011
---------------------------------------------------------- -------- --------
Loss attributable to owners of the Company (GBP million) (40.4) (14.0)
---------------------------------------------------------- -------- --------
Weighted average number of Ordinary shares in issue
(million) 1,453.6 1,173.6
---------------------------------------------------------- -------- --------
Basic loss per share (pence per share) (2.8)p (1.2)p
---------------------------------------------------------- -------- --------
Diluted
Diluted earnings per share is calculated by adjusting the
weighted average number of Ordinary shares in issue to assume
conversion of all potential dilutive Ordinary shares. The
calculation is performed to determine the number of shares that
could have been acquired at fair value determined as the average
annual market share price of the Company's shares based on the
monetary value of the subscription rights attached to outstanding
share options. The number of shares calculated as above is compared
with the number of shares that would have been issued assuming the
exercise of share options to give the number of shares deemed to be
issued at nil consideration. These dilutive shares are added to the
weighted average number of Ordinary shares in issue.
2012 2011
---------------------------------------------------------- -------- --------
Loss attributable to owners of the Company (GBP million) (40.4) (14.0)
---------------------------------------------------------- -------- --------
Weighted average number of Ordinary shares in issue
(million) 1,453.6 1,173.6
Adjustment for share options (million) - -
---------------------------------------------------------- -------- --------
Weighted average number of Ordinary shares for diluted
earnings per share (million) 1,453.6 1,173.6
---------------------------------------------------------- -------- --------
Diluted loss per share (pence per share) (2.8)p (1.2)p
---------------------------------------------------------- -------- --------
Adjusted - alternative performance measures (note 17)
The basic and adjusted earnings per share for adjusted earnings
are calculated as follows:
2012 2011
---------------------------------------------------------- -------- --------
Loss attributable to owners of the Company (GBP million) (40.4) (14.0)
Amortisation of acquired intangibles (GBP million) 1.7 1.3
Tax benefit of amortisation of acquired intangibles
(GBP million) (0.4) (0.6)
Impairment of goodwill (GBP million) 28.8 -
Tax cost related to impairment of goodwill (GBP million) (1.2) -
Restructuring costs including redundancy (GBP million) 4.4 7.7
Tax cost related to restructuring costs (GBP million) (0.2) (1.7)
Property onerous lease costs (GBP million) 4.6 1.5
Acquisition costs (GBP million) - 4.3
Pension credit from curtailment (GBP million) - (0.1)
Net pension finance costs (GBP million) 2.0 2.0
Adjusted (loss)/profit attributable to owners of the
Company (GBP million) (0.7) 0.4
---------------------------------------------------------- -------- --------
Weighted average number of Ordinary shares in issue
(million) 1,453.6 1,173.6
---------------------------------------------------------- -------- --------
Basic adjusted earnings per share (pence per share) 0.0p 0.0p
---------------------------------------------------------- -------- --------
2012 2011
---------------------------------------------------------- -------- --------
Loss attributable to owners of the Company (GBP million) (40.4) (14.0)
Amortisation of acquired intangibles (GBP million) 1.7 1.3
Tax benefit of amortisation of acquired intangibles
(GBP million) (0.4) (0.6)
Impairment of goodwill (GBP million) 28.8 -
Tax cost related to impairment of goodwill (GBP million) (1.2) -
Restructuring costs including redundancy (GBP million) 4.4 7.7
Tax cost related to restructuring costs (GBP million) (0.2) (1.7)
Property onerous lease costs (GBP million) 4.6 1.5
Acquisition costs (GBP million) - 4.3
Pension credit from curtailment (GBP million) - (0.1)
Net pension finance costs (GBP million) 2.0 2.0
Adjusted (loss)/profit attributable to owners of the
Company (GBP million) (0.7) 0.4
---------------------------------------------------------- -------- --------
Weighted average number of Ordinary shares in issue
(million) 1,453.6 1,173.6
Adjustment for share options (million) - 1.1
---------------------------------------------------------- -------- --------
Weighted average number of Ordinary shares for diluted
adjusted earnings per share (million) 1,453.6 1,174.7
---------------------------------------------------------- -------- --------
Diluted adjusted earnings per share (pence per share) 0.0p 0.0p
---------------------------------------------------------- -------- --------
8 GOODWILL
2012 2011
Group GBPm GBPm
------------------ ------ ------
Cost
At 1 April 69.9 32.7
Additions - 39.3
Foreign exchange 0.4 (2.1)
------------------ ------ ------
At 31 March 70.3 69.9
------------------ ------ ------
Accumulated impairment
At 1 April - -
Impairment losses 28.8 -
At 31 March 28.8 -
---------------------------- ----- -----
Net book value at 31 March 41.5 69.9
---------------------------- ----- -----
Impairment tests for goodwill
For the purpose of performing impairment reviews, goodwill has
been allocated to the Group's Cash Generating Units ("CGU")
identified according to segment as presented as follows:
2012 2011
GBPm GBPm
-------- ------ ------
Europe - 16.4
PPC 31.0 14.5
ERG 39.3 39.0
-------- ------ ------
70.3 69.9
-------- ------ ------
The goodwill previously allocated to the European CGU has been
reallocated in full to the PPC CGU during the period.
No intangible assets other than goodwill have indefinite useful
lives. The impairment reviews compare the carrying value of each
CGU, including allocated goodwill, with the present value of future
cash flows arising from the use of assets in the unit (value in
use). The key assumptions for the value in use calculations are
those regarding discount rates and growth rates. As described in
the Business and Performance Review, continued spending cuts and
tightened fiscal policy in the US has meant that the strategic
vision for the Group has been more difficult to execute than
previously expected which led to a profit warning being issued in
January 2012. This has led the group to revise its assumptions
around cash flow forecasts and growth rates in the near term, and
created an impairment in the second half of the year ended 31 March
2012. There is inherently an element of judgement applied in
arriving at these assumptions. Sensitivities to a movement in the
key assumptions are provided in note 3 to these financial
statements.
The value in use calculations use cash flow projections based on
financial budgets approved by management covering a three-year
period. The revenue growth rates over this period are assumed to
average 7.0% and 5.5% per annum for PPC and ERG, respectively,
underpinning growth in profitability. This assumes success is made
towards implementing the Group's new business plan. Subsequent cash
flows are extrapolated into perpetuity (as appropriate for such
long-term businesses) based on an estimated long-term growth rate
of 3.0% (2011: 2.3%). This rate reflects inflation rates and is in
line with long-term growth rates for the industry.
The discount rates are derived from the Group Weighted Average
Cost of Capital, calculated as 9.7% (2011: 9.9%) for the PPC and
ERG CGUs and 9.9% for the European CGU in 2011, which are then
adjusted based upon a long-term assessment of the average cost of
equity and debt of comparable companies within the market and
territories that the Group operates.
This gives a post-tax discount rate that is then applied to the
cash flow projections, which include tax cash flows at the
statutory rate for the relevant country. The discount rates used
are equivalent to pre-tax discount rates as follows:
2012 2011
% %
------------- ----- -----
Europe N/A 12.2
PPC and ERG 13.6 14.9
------------- ----- -----
For the PPC CGU poor trading in the current period resulting
from the failure to secure certain contracts, combined with the
loss of the other contracts in the IT consulting business based in
Washington, has led the Board to revise projections used to assess
impairment in previous periods. The result of the impairment review
is that an impairment loss of GBP17.5 million has been recognised
against the goodwill in the PPC CGU during the year to reduce the
carrying value to the value in use leaving a net book value of
GBP13.5 million of goodwill in the PPC CGU at 31 March 2012. The
net book value of goodwill in the ERG CGU at 31 March 2012 is
GBP28.0 million (2011: Europe GBP16.4 million, PPC GBP14.5 million
and ERG GBP39.0 million) following an impairment loss of GBP11.3
million having been recognised against the goodwill to reduce the
carrying value to the value in use. This impairment loss in ERG
arises from more modest growth rates forecast for the US markets
than previously assumed. The total impairment loss of GBP28.8
million has been charged to administrative expenses in the
Consolidated income statement.
The Board has assessed the carrying value of the CGUs on the
value in use basis and do not believe this is materially different
to the fair value less cost to sell assessment.
9 SHARE CAPITAL AND SHARE PREMIUM
Number Ordinary Share
of shares shares premium Total
Group millions GBPm GBPm GBPm
---------------------------------------------------------- ----------- --------- --------- -------
At 1 April 2010 228.8 2.3 11.7 14.0
Firm Placing, Placing and Open Offer 1,111.6 11.1 41.5 52.6
Consideration shares issued on acquisition of subsidiary 113.2 1.1 4.6 5.7
Capital reduction - - (57.8) (57.8)
At 1 April 2011 and 31 March 2012 1,453.6 14.5 - 14.5
---------------------------------------------------------- ----------- --------- --------- -------
Number Ordinary Share
of shares shares premium Total
Company millions GBPm GBPm GBPm
---------------------------------------------------------- ----------- --------- --------- -------
On incorporation - - - -
Issue of shares on Scheme of Arrangement effective date 228.8 2.3 11.7 14.0
Firm Placing, Placing and Open Offer 1,111.6 11.1 41.5 52.6
Consideration shares issued on acquisition of subsidiary 113.2 1.1 4.6 5.7
Capital reduction - - (57.8) (57.8)
At 1 April 2011 and 31 March 2012 1,453.6 14.5 - 14.5
---------------------------------------------------------- ----------- --------- --------- -------
The total authorised number of Ordinary shares is 5,000,000,000
shares with a par value of 1.0 pence per share. All issued shares
are fully paid.
10 OTHER RESERVES
Share Actuarial Currency Other
option pension translation (deficit)/ Merger Total
reserve reserve reserve reserves reserve reserves*
Group GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- --------- ---------- ------------- ------------ --------- -----------
At 1 April 2010 2.3 (48.9) 1.8 (44.8) 82.0 37.2
Currency translation
differences - - (1.1) (1.1) - (1.1)
Actuarial gains on
defined benefit pension
schemes - 17.4 - 17.4 - 17.4
Fair value of share
option schemes 0.4 - - 0.4 - 0.4
At 31 March 2011 2.7 (31.5) 0.7 (28.1) 82.0 53.9
Currency translation
differences - - 0.1 0.1 - 0.1
Actuarial losses on
defined benefit pension
schemes - (46.7) - (46.7) - (46.7)
Fair value of share
option schemes (0.2) - - (0.2) - (0.2)
Transfer of balance
related to expired
share options (2.1) - - (2.1) - (2.1)
-------------------------- --------- ---------- ------------- ------------ --------- -----------
At 31 March 2012 0.4 (78.2) 0.8 (77.0) 82.0 5.0
-------------------------- --------- ---------- ------------- ------------ --------- -----------
Share
option Total
reserve reserves*
Company GBPm GBPm
------------------------------------ --------- -----------
On incorporation - -
Fair value of share option schemes 0.1 0.1
------------------------------------ --------- -----------
At 31 March 2011 0.1 0.1
------------------------------------ --------- -----------
Fair value of share option schemes 0.1 0.1
------------------------------------ --------- -----------
At 31 March 2012 0.2 0.2
------------------------------------ --------- -----------
*Excluding retained (deficit)/reserves
Distributable reserves
The Company currently has GBP16.9 million (2011: GBP52.5
million) of distributable reserves. Distributable reserves comprise
retained earnings and the share option reserve.
11 BORROWINGS
Group Company
--------------------------------
2012 2011 2012 2011
GBPm GBPm GBPm GBPm
-------------------------------- ------ ------ ------ ------
Non-current borrowings
Unsecured bank and other loans 35.0 30.0 1.0 3.0
Finance lease liabilities 0.2 0.2 - -
-------------------------------- ------ ------ ------ ------
Non-current borrowings 35.2 30.2 1.0 3.0
-------------------------------- ------ ------ ------ ------
Current borrowings
Unsecured bank and other loans 4.3 1.7 5.7 0.6
Finance lease liabilities 0.3 0.4 - -
-------------------------------- ------ ------ ------ ------
Current borrowings 4.6 2.1 5.7 0.6
-------------------------------- ------ ------ ------ ------
Total borrowings 39.8 32.3 6.7 3.6
-------------------------------- ------ ------ ------ ------
Maturity of total borrowings is as follows:
Group Company
---------------------------
2012 2011 2012 2011
GBPm GBPm GBPm GBPm
--------------------------- ------ ------ ------ ------
Within one year 4.6 2.1 5.7 0.6
Between one and two years 35.2 30.2 1.0 3.0
Total borrowings 39.8 32.3 6.7 3.6
--------------------------- ------ ------ ------ ------
The fair values of current and non-current borrowings are not
materially different from the carrying values stated above.
Unsecured bank and other loans excluding finance leases
Group Company
2012 2011 2012 2011
GBPm GBPm GBPm GBPm
--------------------------------- ------ ------ ------ ------
Bank debt - revolving credit
facility 40.1 32.3 6.7 3.6
Capitalised loan arrangement
fees (0.7) (0.6) - -
Revaluation of bank debt (0.1) - - -
Total non-current and current
unsecured bank and other loans 39.3 31.7 6.7 3.6
--------------------------------- ------ ------ ------ ------
Bank debt
At 31 March 2012 the Company had a GBP43.0 million loan facility
agreement (the 'facility') with Lloyds TSB Bank plc (2011: GBP39.0
million). This facility was entered into in September 2011 for a
period of three years (including an overdraft facility of GBP7.0
million) to manage periods of working capital fluctuation. Recent
bank covenant tests have been postponed but the longer term
borrowing facility in place at 31 March 2012 can now be removed by
the Bank at short notice. The facility will mature in September
2014, save for the overdraft facility, which is renewable annually.
Annual extensions are expected as the overdraft facility forms part
of the revolving credit facility. Following the year end, the Group
has obtained the Bank's agreement in principle on the terms for a
new money facility to provide an additional facility of GBP5.0
million on a secured basis through to the end of October 2012.
Entering into a formal facility agreement in respect of the
additional GBP5.0 million short term facility will be conditional
upon the Group providing security and an ongoing liquidity
covenant.
The facility is denominated in Sterling, although borrowings
under the facility are in Sterling and US Dollars. The utilised
amounts bear interest at LIBOR plus 3.5% or US Dollar-LIBOR plus
3.5%. The agreement contains financial covenants in relation to the
ratio of net borrowings to PBITDA and the ratio of PBITDA to net
interest payable.
The same bank also provides a GBP4.0 million bonding
facility.
At 31 March the following amounts were outstanding under the
facility:
2012 2011
Available Utilised Unutilised Available Utilised Unutilised
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ---------- --------- ----------- ---------- --------- -----------
Bank debt - revolving credit
facility 43.0 40.1 2.9 39.0 32.3 6.7
------------------------------ ---------- --------- ----------- ---------- --------- -----------
12 Retirement benefit obligations
Defined contribution plans
In Europe, AEA Technology plc and AEA Technology Group plc
jointly operate a defined contribution stakeholder plan (the "UK
Plan") for all qualifying employees. Participants may make
voluntary contributions to the UK Plan up to the maximum amount
allowable by UK law. The assets of the UK Plan are held separately
from those of both AEA Technology plc and AEA Technology Group plc
in individual accounts under the control of the pension provider.
The only obligation of AEA Technology plc and AEA Technology Group
plc with respect to the UK Plan is to make the specified
contributions.
The US subsidiaries, Project Performance Corporation and ERG
Inc, operate defined contribution 401(K) profit sharing plans (the
"US Plans") for all eligible employees. Participants may make
voluntary contributions to the US Plans up to the maximum amount
allowable by US law. Employer contributions to the US Plans are at
the discretion of management and vest to the participants over a
five-year period. The assets of the US Plan are held separately
from those of both Project Performance Corporation and ERG Inc in
funds under the control of trustees and insurance companies. The
only obligation of Project Performance Corporation and ERG Inc with
respect to the US Plans is to make the specified contributions.
Neither Project Performance Corporation nor ERG Inc have further
payment obligations once the contributions have been paid. The
contributions are recognised as an employee benefit expense when
they are due. Prepaid contributions are recognised as assets to the
extent that a cash refund or reduction of future payment is
available.
The total cost charged to the income statement of GBP3.4 million
(2011: GBP3.2 million) represents contributions payable to these
plans by the Group at rates specified in the rules of the
plans.
Defined benefit schemes - funded obligations
The AEA Technology plc Pension Scheme (the "Scheme"), a defined
benefit pension scheme, was closed to future accrual on 31 July
2009 and no further benefits will be built up with effect from that
date.
The funding of the Scheme is based on long-term trends and
assumptions relating to market growth, as advised by the Scheme
actuary. The calculations for the Scheme are based on the
liabilities determined at the funding valuation as at 31 March 2008
in accordance with the requirements of the Pensions Act 2004. Based
on the schedule of contributions agreed by AEA Technology plc and
Trustee in June 2009 the Scheme's past service funding deficit was
expected to be cleared over approximately 20 years. The Company is
in discussions with the Trustee to agree a revised schedule of
contributions. These discussions have not yet produced an agreed
outcome and the discussions continue. The tri-annual funding
valuation of the Scheme as at 31 March 2011 is currently being
undertaken in accordance with the requirements of the Pensions Act
2004.
International Accounting Standard 19 'Employee Benefits' (IAS
19) requires the Group to include in the Balance sheet the surplus
or deficit on the Scheme calculated as at the balance sheet date.
The method used for the calculation is as prescribed by IAS 19. It
is a snapshot view that can be significantly influenced by
short-term market factors. The calculation of the surplus or
deficit is, therefore, dependent on factors which are beyond the
control of the Group - principally the value at the balance sheet
date of the assets in which the Scheme has invested and long-term
interest rates, which are used to discount future liabilities.
AEA Technology plc's actuaries (the "Actuaries"), Aon Hewitt
Associates Limited, carried out the valuation. The results are then
adjusted by the Actuaries each year, allowing for the IAS 19
financial and demographic assumptions and rolling forward the
liabilities to the balance sheet date.
AEA Technology plc employs a building block approach in
determining the long-term rate of return on pension scheme assets.
Historical markets are studied and assets with higher volatility
are assumed to generate higher returns consistent with widely
accepted capital market principles. The assumed long-term rate of
return on each asset class is set out within this note. The overall
long-term expected rate of return on assets at 31 March 2012 and 31
March 2011 is derived by modelling the expected returns on the
agreed strategic asset allocation at the start of the accounting
year, taking into account the interactions between asset classes to
derive an expected return for the portfolio as a whole.
The estimated amount of contributions expected to be paid to the
Scheme during the financial year to 31 March 2013 was GBP5.9
million. In addition AEA Technology plc pays a contribution equal
to the Pension Protection Fund levy, which for the year to 31 March
2012 amounted to GBP0.2 million (2011: GBP0.6 million). As noted
above, the Company is in discussions with the Trustee to agree a
revised schedule of contributions. These discussions have not yet
produced an agreed outcome and the discussions continue. As
disclosed in note 2, the Trustee has agreed to defer all pension
payments from July 2012 onwards while these discussions
continue.
As at 31 March 2012 contributions of GBPnil (2011: GBPnil) due
in respect of the year to 31 March have not been paid over to the
Scheme.
Defined benefit schemes - unfunded obligations
In Europe AEA Technology plc operates a formal, employer
financed retirement benefit scheme to provide benefits in excess of
the HMRC earnings cap for a former director and also has unfunded
top-up arrangements in place to provide benefits to certain former
directors and employees (the Unfunded Company Scheme).
The value of the pensions reserve required to be recognised
under IAS 19 is calculated by the Actuaries using the same
assumptions as used for the Scheme, with the exception of
post-retirement mortality. The post-retirement mortality
assumption, given within this note, adopted for the unapproved
reserves is less pessimistic than that adopted for the mixed
population of the Scheme. This reflects the lower mortality rates
typically experienced by individuals with above average levels of
personal wealth.
Pension benefits
The amounts recognised in the Consolidated income statement and
the Group balance sheet in respect of the defined benefit scheme
are summarised as follows:
2012 2011
GBPm GBPm
-------------------------------------- ------ ------
Balance sheet obligation for pension
benefits 168.5 121.8
-------------------------------------- ------ ------
Income statement charge for pension
benefits 2.0 1.9
-------------------------------------- ------ ------
The amounts recognised in the balance sheet are determined as
follows:
2012 2011
GBPm GBPm
----------------------------------------------------- -------- --------
Present value of funded obligations 450.9 406.0
Fair value of defined benefit pension scheme assets (286.4) (287.8)
----------------------------------------------------- -------- --------
Retirement benefit obligations of the Scheme 164.5 118.2
Present value of unfunded obligations 4.0 3.6
----------------------------------------------------- -------- --------
Retirement benefit obligations 168.5 121.8
----------------------------------------------------- -------- --------
The amounts recognised in the Consolidated income statement are
as follows:
2012 2011
GBPm GBPm
---------------------------------------------------------- ------- -------
Curtailment gains - (0.1)
---------------------------------------------------------- ------- -------
Net pension credit - (0.1)
Accretion of discount on defined benefit pension scheme
obligations 22.6 23.2
Expected return on defined benefit pension scheme assets (20.6) (21.2)
---------------------------------------------------------- ------- -------
Amount included in employee benefit costs 2.0 1.9
---------------------------------------------------------- ------- -------
The net pension credit in 2010/11 results from a curtailment
credit arising on the cessation of benefits payable to one
individual in the unfunded scheme.
The accretion of discount on defined benefit pension scheme
obligations of GBP22.6 million (2011: GBP23.2 million) and the
expected return on defined benefit pension scheme assets of GBP20.6
million (2011: GBP21.2 million) are included in 'finance costs' and
'finance income' respectively. The total of the expected return on
defined benefit pension scheme assets (GBP20.6 million) and the
actuarial loss on defined benefit pension scheme assets (GBP11.8
million that is debited to the pension reserve) equates to an
actual gain on defined benefit pension scheme assets of GBP8.8
million (2011: GBP15.4 million).
The movement in the pension obligation recognised in the Group
balance sheet is as follows:
Funded Unfunded Funded Unfunded
Company Company Company Company
Scheme Scheme 2012 Scheme Scheme 2011
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- --------- ------- --------- --------- -------
At 1 April 406.0 3.6 409.6 416.4 3.9 420.3
Accretion of discount on
defined benefit obligations 22.4 0.2 22.6 23.0 0.2 23.2
Curtailment gains - - - - (0.1) (0.1)
Actuarial losses/(gains) 34.5 0.4 34.9 (23.1) (0.1) (23.2)
Benefits paid (12.0) (0.2) (12.2) (10.3) (0.3) (10.6)
------------------------------ --------- --------- ------- --------- --------- -------
At 31 March 450.9 4.0 454.9 406.0 3.6 409.6
------------------------------ --------- --------- ------- --------- --------- -------
The movement in the pension asset recognised in the Group
balance sheet is as follows:
Funded Unfunded Funded Unfunded
Company Company Company Company
Scheme Scheme 2012 Scheme Scheme 2011
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- --------- --------- ------- --------- --------- -------
At 1 April 287.8 - 287.8 280.5 - 280.5
Expected return on defined
benefit pension scheme assets 20.6 - 20.6 21.2 - 21.2
Actuarial losses (11.8) - (11.8) (5.8) - (5.8)
Contributions paid by employer 1.8 - 1.8 2.2 - 2.2
Benefits paid (12.0) - (12.0) (10.3) - (10.3)
-------------------------------- --------- --------- ------- --------- --------- -------
At 31 March 286.4 - 286.4 287.8 - 287.8
-------------------------------- --------- --------- ------- --------- --------- -------
The net pension obligation is as follows:
Total
GBPm
------------------ ------
At 31 March 2012 168.5
------------------ ------
At 31 March 2011 121.8
------------------ ------
A GBP46.7 million loss (2011: GBP17.4 million gain) in respect
of actuarial gains and losses is reported in the Consolidated
statement of comprehensive income (SOCI) and the cumulative total
of actuarial losses and gains reported through the SOCI is a net
GBP78.2 million loss (2011: GBP31.5 million).
The principal actuarial assumptions used are as follows:
2012 2011
% %
--------------------------------- ----- -----
Discount rate 4.8 5.6
RPI inflation 3.3 3.4
CPI inflation 2.3 2.5
Expected return on plan assets:
equities 8.0 8.3
corporate bonds 4.8 5.6
infrastructure 8.0 8.3
property 7.7 8.0
other 1.0 0.8
Future salary increases n/a n/a
Future pension increases n/a n/a
--------------------------------- ----- -----
The discount rate is based on future projected cash flows and
the AA-corporate bond yield curve as at 31 March 2012, with an
adjustment so that the yield relates to bonds that were AA-rated as
at 31 March 2012. The assumed rate of inflation has been calculated
based on future projected cash flows and the inflation curve as at
31 March 2012, with an allowance for an inflation risk premium.
The expected rates of return on categories of the Scheme assets
are determined using a building block approach. Historical markets
are studied and assets with higher volatility are assumed to
generate higher returns consistent with widely accepted market
principles.
Post-retirement mortality assumptions are as follows:
2012 2011
---------------------- ---------------------------------- ---------------------------------
Funded Company Scheme "S1PxA" Year of Use tables.
"S1PxA" Year of Use tables. Improvements in line with
Improvements in line with 80% of the Long Cohort for
the 'CMI_2010' Core Projections, males and 60% of the Long
with a long term rate of Cohort for females, subject
improvements of 1.0% per to a minimum annual improvement
annum. of 1.0%.
Scaling factor of 100%. Scaling factor of 95%.
---------------------- ---------------------------------- ---------------------------------
Unfunded Company "S1PxA Light" Year of Use
Scheme tables.
"S1PxA Light" Year of Use Improvements in line with
tables. Improvements in line 80% of the Long Cohort for
with the 'CMI_2010' Core males and 60% of the Long
Projections, with a long Cohort for females, subject
term rate of improvements to a minimum annual improvement
of 1.0% per annum. of 1.0%.
Scaling factor of 100%. No scaling factor.
---------------------- ---------------------------------- ---------------------------------
Demographic assumptions (post-retirement mortality)
Based on the mortality assumptions adopted, the following table
shows the expected future lifetime of a Scheme member on retirement
at age 60:
2012 2011
Years Years
------------------------------ ------ ------
Males retiring today 26.7 27.1
Females retiring today 29.0 29.1
Males retiring in 20 years 28.3 29.2
Females retiring in 20 years 30.7 31.0
------------------------------ ------ ------
Sensitivity analysis of the principal assumptions used to
measure Scheme liabilities
Assumption Change in assumption Impact on Scheme liabilities
------------------ -------------------------- -----------------------------
Discount rate Increase/decrease by 0.5% Decrease/increase by 9%
Rate of inflation Increase/decrease by 0.5% Increase/decrease by 8%
Rate of mortality Increase by 1 year Increase/decrease by 3%
------------------ -------------------------- -----------------------------
The analysis of the Scheme assets and expected rate of return at
31 March is as follows:
Expected return Fair value of
assets
--------------------
2012 2011 2012 2011
% % GBPm GBPm
-------------------- -------- -------- ------- -------
Equity instruments 7.0 8.3 145.2 147.1
Corporate bonds 4.8 5.6 80.1 67.6
Infrastructure 7.0 8.3 29.6 27.2
Property 6.7 8.0 22.2 16.8
Other assets 1.0 0.8 9.3 29.1
-------------------- -------- -------- ------- -------
286.4 287.8
-------------------- -------- -------- ------- -------
The five-year history of defined benefit pension scheme
obligations and defined benefit pension scheme assets is as
follows:
2012 2011 2010 2009 2008
GBPm GBPm GBPm GBPm GBPm
--------------------------------------- -------- -------- -------- -------- --------
Present value of defined benefit
obligations 454.9 409.6 420.3 313.7 318.4
Fair value of defined benefit pension
scheme assets (286.4) (287.8) (280.5) (205.5) (258.4)
--------------------------------------- -------- -------- -------- -------- --------
Retirement benefit obligation 168.5 121.8 139.8 108.2 60.0
--------------------------------------- -------- -------- -------- -------- --------
The five-year history of experience adjustments is as
follows:
2012 2011 2010 2009 2008
-------------------------------------- ------- ------ ------- ------- -------
Experience (losses)/gains on defined
benefit scheme obligations
Amount (GBP million) (34.9) 23.2 (95.9) 15.0 57.6
Percentage of Scheme liabilities 8.5% 5.6% 22.8% 4.8% 18.1%
-------------------------------------- ------- ------ ------- ------- -------
Experience (losses)/gains on defined
benefit pension scheme assets
Amount (GBP million) (11.8) (5.8) 67.3 (68.4) (27.3)
Percentage of Scheme assets 4.1% 2.0% 24.0% 33.3% 10.6%
-------------------------------------- ------- ------ ------- ------- -------
Development of net retirement benefit obligation over the year
to 31 March 2012
The pension cost recognised in the Consolidated income statement
is calculated based on assumptions made at the beginning of the
year. If experience over the year is in line with the assumptions
made at the start of the year, the retirement benefit obligation
would reduce by the excess of the cash contributions made over the
income statement charge. Actuarial gains and losses due to
differences between actual experience and the assumptions made at
the start of the year are recognised in full in the SOCI.
13 PROVISIONS FOR LIABILITIES AND CHARGES
Decommissioning
and waste
management Restructuring Contracts Other Total
Group GBPm GBPm GBPm GBPm GBPm
-------------------------------- ---------------- -------------- ---------- ------ ------
At 1 April 2010 4.1 2.9 1.2 1.6 9.8
Utilised (3.9) (1.1) (0.6) (0.5) (6.1)
Balance sheet reclassification - (0.6) 0.6 - -
Increase in provision - - 1.0 0.3 1.3
Money received in respect
of leasehold obligation - - 0.8 - 0.8
Acquisition of subsidiary - - 0.2 - 0.2
-------------------------------- ---------------- -------------- ---------- ------ ------
At 31 March 2011 0.2 1.2 3.2 1.4 6.0
Utilised - (0.3) (0.7) - (1.0)
Release of provision - (0.1) (0.1) - (0.2)
Increase in provision - - 4.6 - 4.6
At 31 March 2012 0.2 0.8 7.0 1.4 9.4
-------------------------------- ---------------- -------------- ---------- ------ ------
Group Company
----------------------------------------
2012 2011 2012 2011
Provisions for liabilities and charges GBPm GBPm GBPm GBPm
---------------------------------------- -------- ---------- -------- ---------
Current 3.5 1.3 - -
Non-current 5.9 4.7 - -
---------------------------------------- -------- ---------- -------- ---------
9.4 6.0 - -
---------------------------------------- -------- ---------- -------- ---------
Provisions for liabilities and charges comprise both legacy and
continuing provisions. Legacy provisions relate to potential costs
that result from businesses that have either been discontinued or
sold by the Group.
Decommissioning and waste management
On 31 March 1996 certain properties, rights and liabilities of
UKAEA were vested in AEA Technology plc in accordance with the
Transfer Scheme made pursuant to section 1 of the Atomic Energy
Authority Act 1995.
A supplemental agreement entered into pursuant to the Transfer
Scheme provides that liabilities for decommissioning any nuclear
facility in existence as at 31 March 1996 and for any waste
transferred to UKAEA ("the Authority") for disposal prior to 31
March 1996 are to remain with the Authority. All new or incremental
decommissioning, waste management and clean up liabilities arising
after 1 April 1996 were assumed by the Group except for certain
liabilities, which have been transferred to, or assumed by, third
parties.
Provisions for these costs were made in full once facilities
became contaminated and were calculated on the latest technical
assessments of the processes and methods likely to be used in the
future and represent estimates derived from a combination of the
technical knowledge available, existing legislation and regulations
and commercial agreements. The principal liabilities are now
settled.
These provisions are expected to be utilised within the next one
to two years.
Restructuring
In the two years to 31 March 2007 the Group completed the
transformation of its business from a diverse Group to a single
mission Group focused on climate change and energy consultancy.
Provisions related to this restructuring are held for associated
warranties and indemnities given under business sale agreements.
These provisions are expected to be utilised within the next one to
two years.
Contracts
Contract provisions are in respect of projected losses or
commitments on long-term contracts, notably onerous property lease
contracts. These provisions will be utilised when the costs are
incurred on the long-term contracts. Where future cash flows can be
predicted with reasonable certainty a discount factor has been
applied to the calculation of the carrying value of the provision.
Where cash flows cannot be predicted with reasonable certainty then
a discount rate has not been applied. The increase in the provision
during the year relates to providing for onerous leases in both the
UK and the US following a review of property requirements across
the Group. These provisions are expected to be utilised within the
remaining terms of the leases to which the provisions relate.
Other
The remainder of the provisions are primarily dilapidations and
wear and tear provisions on the Group's property assets. These
provisions will be utilised as dilapidation repairs are carried
out. These provisions are expected to be utilised within the
remaining terms of the leases to which the provisions relate.
14 CASH (USED IN)/GENERATED FROM OPERATIONS
Group Company
-------------------------------------------
2012 2011 2012 2011
GBPm GBPm GBPm GBPm
------------------------------------------- ------- ------- ------- ------
Loss for the year (40.4) (14.0) (35.7) (4.5)
Adjustments for:
tax 0.3 4.3 - -
depreciation of property, plant
and equipment 1.5 1.6 - -
amortisation 1.9 1.5 - -
impairment losses 29.0 0.8 35.0 -
share option (credit)/charge (0.2) 0.4 - -
finance costs 25.3 25.1 0.2 -
finance income (20.6) (21.2) (0.2) -
dividend income - - (2.4) -
other 0.2 0.6 - -
Changes in working capital:
work in progress - 0.3 - -
trade and other receivables 3.1 4.5 - -
trade and other payables (5.8) (1.0) 0.1 0.4
inter-company balances - - (0.5) 0.4
Changes in retirement benefit obligations (2.0) (2.8) - -
Changes in provisions for liabilities
and charges 3.4 (4.0) - -
------------------------------------------- ------- ------- ------- ------
Cash used in operations (4.3) (3.9) (3.5) (3.7)
------------------------------------------- ------- ------- ------- ------
15 POST BALANCE SHEET EVENTS
There were no post Balance sheet events.
16 ANNUAL ACCOUNTS AND ANNUAL GENERAL MEETING
Copies of the Annual Report and Accounts will be available in
electronic format on www.aeat.com and will be sent to shareholders
in August 2012. Copies will also be available from the Company
Secretary.
The Annual General Meeting will be held during September
2012.
17 SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
these consolidated Financial Statements are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated.
Basis of preparation
The consolidated Financial Statements have been prepared in
accordance with IFRS and IFRIC interpretations, as adopted for use
within the European Union and Jersey Law 1991 applicable to
companies reporting under IFRS. These consolidated Financial
Statements have been prepared under the historical cost convention,
as modified by the revaluation of financial instruments at fair
value through profit or loss.
The preparation of Financial Statements in compliance with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise itsjudgmentin the process of
applying the Group's accounting policies.
As disclosed more fully in note 2 the Board believes that
preparing the financial statements on the going concern basis
remains appropriate as it is actively pursuing a sale of all or
part of the Group's businesses and assets, and believe this will
return sufficient value to enable a financial restructuring plan
which will discharge its liabilities to the Bank and the pension
scheme in a solvent manner. In addition, the Board believes it will
be able to finalise the agreement of the GBP5.0 million short term
facility, to meet short term cash forecasts and operate within the
facilities expected to be provided by the Bank and that it will be
able to execute a sale of all or part of the Group's businesses and
assets during the period in which facilities are provided by the
Bank.
Application of new standards and interpretations
The following new standards, amendments to existing standards or
interpretations are mandatory for the first time for the financial
year ending 31 March 2012, but either have no significant impact or
are not currently relevant for the Group:
-- IAS 24 (revised), 'Related party disclosures', effective for
annual periods beginning on or after 1 January 2011;
-- IFRIC 14 amendment, 'Prepayments of a minimum funding
requirement', effective for annual periods beginning on or after 1
January 2011;
-- IFRIC 19, 'Extinguishing financial liabilities with equity
instruments', effective for annual periods beginning on or after 1
July 2010; and
-- Annual improvements to IFRSs (2010), effective for annual
periods beginning on or after 1 January 2011.
The following new standards, amendments to existing standards or
interpretations have been issued, but are not effective for the
financial year ending 31 March 2012 and have not been adopted
early:
-- IFRS 7 amendment, 'Financial instruments: Disclosures on de
recognition', effective for annual periods beginning on or after 1
July 2011, subject to EU endorsement;
-- IFRS 7 amendment, 'Disclosures - offsetting financial assets
and liabilities', effective for annual periods beginning on or
after 1 January 2013, subject to EU endorsement;
-- IFRS 9, 'Financial instruments', effective for annual periods
beginning on or after 1 January 2015, subject to EU
endorsement;
-- IFRS 10, 'Consolidated financial statements', effective for
annual periods beginning on or after 1 January 2013, subject to EU
endorsement;
-- IFRS 11, 'Joint arrangements', effective for annual periods
beginning on or after 1 January 2013, subject to EU
endorsement;
-- IFRS 12, 'Disclosure of interests in other entities',
effective for annual periods beginning on or after 1 January 2013,
subject to EU endorsement;
-- IFRS 13, 'Fair value measurements', effective for annual
periods beginning on or after 1 January 2013, subject to EU
endorsement;
-- IAS 1 amendment, 'Financial statement presentation',
effective for annual periods beginning on or after 1 July 2012
subject to EU endorsement;
-- IAS 12 amendment, 'Income taxes on deferred tax', effective
for annual periods beginning on or after 1 January 2012, subject to
EU endorsement;
-- IAS 19 amendment, 'Employee benefits', effective for annual
periods beginning on or after 1 January 2013 subject to EU
endorsement;
-- IAS 27, 'Separate financial statements', effective for annual
periods beginning on or after 1 January 2013, subject to EU
endorsement;
-- IAS 28, 'Investments in associates and joint ventures',
effective for annual periods beginning on or after 1 January 2013,
subject to EU endorsement;
-- IAS 32 amendment, 'Offsetting financial assets and financial
liabilities', effective for annual periods beginning on or after 1
January 2014, subject to EU endorsement.
These standards will require additional disclosures but
otherwise will not have a material impact on the Group Financial
Statements when they are adopted.
Alternative performance measures
The Group uses a number of alternative (non-Generally Accepted
Accounting Practice (non-GAAP)) financial measures, which are not
defined by IFRS. The Board use these measures in order to assess
the underlying operational performance of the Group and as such
these measures are important and should be considered alongside the
IFRS measures. The following non-GAAP measures are referred to in
this Annual Report and Accounts:
a) Adjusted operating profit and adjusted profit before tax
Beneath the Consolidated income statement adjusted operating
profit is separately disclosed. This is defined as operating profit
before amortisation of acquired intangibles, impairment of goodwill
and other significant items, which includes acquisition, group
restructuring and redundancy costs (which include Board and Senior
Management recruitment fees) and property onerous lease costs.
Profit before tax is also adjusted in the same way, with the
additional adjustment to exclude net pension finance costs. A
reconciliation of profit before tax to adjusted profit before tax
is shown beneath the Consolidated income statement.
b) Movement in net debt
Beneath the Statement of cash flows a Statement of movement in
net debt is shown being the movement between opening and closing
net debt. An analysis of net debt by Balance sheet heading is also
shown.
c) Adjusted earnings per share
Adjusted earnings per share as shown in note 6 is calculated by
dividing the adjusted (loss)/profit attributable to owners of the
Company by the weighted average number of Ordinary shares in issue
during the year.
d) Net cash flow generated from business operations
Beneath the Statement of cash flows in the Statement of movement
in net debt the 'Cash used in operations' is split into its
component parts, representing net cash flow generated from business
operations; restructuring including redundancy costs, acquisition
costs, legacy cash flows (note 12) and the funding of the pension
deficit.
18 RESPONSIBILITY STATEMENT OF THE DIRECTORS
To the best of the knowledge of the Directors (whose names and
functions are set out below), the Annual Financial Results
Statement which has been prepared using accounting policies and
methods of computation consistent with those used in the Group's
annual report for the year ended 31 March 2011 and to be adopted
for the financial year ended 31 March 2012, gives a true and fair
view of the assets, liabilities, financial position and profit for
the Company and the undertakings included in the consolidation
taken as a whole; and Pursuant to Disclosure and Transparency
Rules, Chapter 4, the Directors' Report of the Company's annual
report will include 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 faced by the business.
Paul Golby Chairman
John Lowry Interim Chief Executive Officer
Kevin Higginson Group Chief Financial Officer
Rodney Westhead Non Executive Director
Bernard Lord Non Executive Director
This information is provided by RNS
The company news service from the London Stock Exchange
END
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