19 Jul 06. ABRO today announced its fourth year Trading Fund results with profits before interest of £4.9m and a return on capital employed of 6.8% against an agreed target of 3.5%.
In the year to 31st March the organisation maintained a strong order book. Sales were £137m, the majority in support of MoD customers. Over £17.2m came from either military original equipment manufacturers in support of defence contracts or non-military customers. Profit after interest was £4.5M and a dividend of £12m was paid to the owner, the Ministry of Defence (MoD).
Equipment output finished the year very strongly after a slow first half and against a background of reducing customer budgets. All major programmes were delivered and a significant number of urgent operational requirements were undertaken in support of Forces for combat and deployment both to Iraq and Afghanistan. The challenge to deliver all planned programmes whilst being able to support these requirements helped underpin ABRO’s market position and establish the value and capability of the organisation to its major shareholders.
The balance sheet was considerably strengthened from improvements in materials management. These released excessive accruals for goods received of £3.7m and released value from stock disposals. The revaluation of fixed assets and the disposal of the Warminster site as part of a sale and lease back arrangement contributed to the loss on asset disposals of £1.2m. The net effect of these ‘one off’ adjustments was a £2.9m enhancement to profits.
In July, ABRO announced the intention to proceed with a two phase rationalisation programme. Under phase one and during the period, 283.5 staff were released. Phase two proposals for rationalisation of the Land and wheeled vehicle business were confirmed, with implementation beginning in 2006/07. However, the decision by the MoD customer to upgrade its armoured vehicles meant that the original proposals for rationalisation of ABRO’s armoured vehicle and related business units had to be re-examined. As a consequence the armoured vehicle work, currently undertaken at ABRO Donnington remains for the foreseeable future.
Further progress has been made in restructuring the business to improve efficiency and provide greater strategic focus. The executive management board has slimmed, the procurement function strengthened and a significant investment in a new business system made to aid stock and control materials management and workshop planning.
The year saw key partnerships develop and a significant number of contracts placed with a variety of original equipment manufactures for the provision of engineering support and fleet management services. These were predominantly for the defence industry but did include fleet services contracts for BAA Plc’s Edinburgh Airport and the City of York; delivered under the ABRO Fleet Services brand.
Peter Moore, ABRO’s Chief Executive said “The demands on our business created by the need to respond to the modernisation of logistic support to the front line, created a difficult and volatile trading environment. Our first priority was to deliver the required ouptut for the UK Armed Forces and this we have done. However, traditional MoD repair programme activity continues to come under pressure with a planned reduction in overall levels. In response to this and to reflect the downturn in workload, steps have been taken to increase the efficiency of our business, protect our competitive position and modernise our service delivery footprint”.
He added “Against this background of uncertainty, the financial year ended well with us achieving a profit before interest of £4.5.m and a ROCE of 6.8%. The challenges ahead of us remain demanding and include; supporting the MoD’s aim of modernising support to our Armed Forces, balancing demands for better value and performance, meeting the obligations placed upon us in the Defence Industrial Strategy and continuing to acquire b