TIDMAUK
RNS Number : 8367K
Aukett Swanke Group PLC
30 June 2014
Aukett Swanke Group Plc
Interim Results
For the Six Months ended 31 March 2014
Aukett Swanke Group Plc, the international practice of
architects and interior design specialists, is pleased to announce
its interim results for the six month period ended 31 March
2014.
Highlights
-- Much improved trading performance and outlook, particularly in the UK
-- Successful acquisition of Swanke Hayden Connell Europe
-- Group revenues rise to GBP7.58m with pre-tax profit of GBP750,000
-- Revenue from pre-acquisition operations up 58% to GBP5.39m
-- First time revenue contribution for three months from Swanke
Hayden Connell of GBP2.19m
-- GBP749,000 of pre-tax profit from pre-acquisition operations
(2013: loss of GBP79,000)
-- UK pre-tax profit GBP945,000 (2013: GBP127,000)
-- GBP82,000 of pre-tax profit from newly acquired Swanke Hayden
Connell Turkey operation
-- Middle East delivers returns to profit with activity levels picking up
-- All three jointly owned Continental Europe operations in
profit, producing a total of GBP176,000 (2013: GBP134,000)
-- Earnings per share of 0.31p (2013: loss of 0.02p)
-- Group net funds GBP1.33m at 31 March 2014 (30 September 2013: GBP1.08m)
-- Interim dividend of 0.1p per share to be paid in July
Commenting on today's interim results announcement, CEO Nicholas
Thompson said;
"We are extremely pleased by a very strong performance in the UK
coupled with improving performances in Continental Europe and the
new Turkish operation, all of which offer good signs of progress
from previous turnover levels. The UK will continue to grow in
profitability for the foreseeable future and the associated cash
generation should provide the group with funding to invest in new
opportunities. As a result of this performance we are pleased to
confirm the continuation of an interim dividend payment to
shareholders."
Enquiries
Aukett Swanke Group Plc - 020 7843 3000
Nicholas Thompson, Chief Executive Officer
Duncan Harper, Group Finance Director
FinnCap - 020 7220 0500
Corporate Finance: Julian Blunt/James Thompson
Corporate Broking: Stephen Norcross
Hermes Financial PR
Trevor Phillips - 07889 153628
Chris Steele - 07979 604687
Interim statement
Overview
The first half of this year has produced a group profit before
tax of GBP750,000 which is an extremely pleasing outcome when
compared with the last year's loss for the same period of GBP79,000
and the full year's profit of GBP550,000. The overall result is
well above our original expectations and in line with the most
recent trading update, and includes a breakeven result from Swanke
Hayden Connell for a three month period.
The driving force has been the on-going recovery in the UK
market which began some eighteen months ago and which we see
continuing well into 2015 and beyond.
Against this strong UK market other areas have found life more
difficult, but we remain committed to our operations in both
Russia, and the Middle East where we believe operational
readjustments and an improving economic background will bear fruit.
Indeed our operation in the Middle East has returned a small
profit. Turkey is a strategically placed operation which offers
much promise and similarly our jointly owned operations in Germany
and Czech Republic are also doing well given local economic
circumstances.
Operations
First half pre-tax profits in the UK rose significantly to
GBP945,000 (2013: GBP127,000) on revenues of GBP6.08m. The first
half saw some extra costs as the UK reinstated salaries and other
benefits across the board and paid a Christmas bonus for the first
time in five years. The first half also saw the first integration
costs relating to SHC being absorbed which in the main will be
self-financing over the next three years, or recovered against
second half property savings. Within these figures SHC's UK
operations made a loss in the period of GBP105,000 as a result of a
delay in the instruction of a major project, which commenced at the
end of the second quarter, and holding excess property space, which
has subsequently been sub-let.
A clear change in the UK property market could be seen in the
first half with the return of the speculative office market
development outside of London - a phenomenon that has been absent
since 2009. We now have schemes underway in Cambridge (150,000 sq
ft), Reading (470,000 sq ft), Oxford (campus 1,000,000 sq ft) and
Birmingham (195,000 sq ft) with three other schemes awaiting
further instructions: Norwich (140,000 sq ft), Bristol (170,000 sq
ft) and Sheffield (70,000 sq ft). That they total over 2m sq ft is
news in itself but that some phases are being instructed to
construction gives a far more positive view of the economic upturn
in our sector and in developer confidence. Our client base behind
these projects is at the premium end of the market.
Despite this regional upturn, the main stay of the first half's
income relates to London centric projects - as earlier instructions
than regional UK - they are feeding through to revenues sooner and
with values that are a multiple of the new build cost in the
regions. Interestingly Veretec, our executive architect business,
is seeing its best growth in many years and is the fastest growing
part of the London business which reflects the intent of developers
to build as the office leasing market and residential accommodation
stock build-up gathers momentum and the UK service industry emerges
rapidly from the recession.
Against this the performance of our pre-acquisition Russian
operation was disappointing although largely due to outside
factors. First half losses widened to GBP323,000 (2013: loss of
GBP245,000) which includes a goodwill impairment write down of
GBP125,000. Whilst losses continue, we remain hopeful of a move
into profit in this important and large market. The losses were due
principally to variability in workload along with project
deferrals, delays in decisions and the need to maintain staffing
levels at client required levels rather than a lack of actual work
opportunities. We are implementing a plan to correct this position
by the end of the year which includes the co-location of our
pre-acquisition team with that of SHC's Moscow operation. This
newly acquired operation made a modest profit in the period of
GBP24,000. It should be noted that the troubles in Ukraine have had
no visible impact on enquiries or our day to day activities in
Russia.
Turkey is a new, wholly-owned operation arising from the
acquisition of SHC and has been established for 16 years in
Istanbul. Its profit contribution is welcome at GBP110,000 (before
intangible amortisation of GBP28,000) on revenues of GBP441,000.
This profit was well ahead of original expectations when the SHC
acquisition was being negotiated. We see Turkey as strategically
important in our network linking Moscow and the Middle East. The
office is in the process of completing the forty four storey
Palladium tower in the financial district of Istanbul.
The Middle East remains under-resourced, mainly due to
registration issues as we have moved to Dubai from our existing
licenced location of Abu Dhabi. Dubai has the far more active
market of the two for our breadth of services. At present we have
relied on third parties to manage the registration issue and we are
actively looking to resolve this situation. We have a single
project at present with Majid Al Futtaim, but there are numerous
bids in progress and the small profit of GBP4,000 (2013: loss of
GBP54,000) is a credible achievement by local management given the
high operating cost exposure. Once the licensing issue is resolved
we can embark upon an expansion of our resourcing which should then
lead to a regular contribution to profit.
Continental Europe is the group's second best performer at
present with all three of the jointly owned operations in profit.
The overall result at GBP176,000 (2013: GBP135,000) reflects a
slightly lower performance by Berlin (25% owned) but a considerable
uplift in Frankfurt (50% owned) and a return to profit in Prague
(50% owned) - a pleasing result given the low market activity
levels in the Czech Republic.
In South America we have embarked upon a process of identifying
a collaboration partner in Brazil on the basis of a limited amount
of direct investment by the group.
Board
We have seen a number of new joiners to the board during the
period. Andrew Murdoch, David Hughes and Nick Pell all joined as
executive directors in December last year, David and Nick as part
of the acquisition of SHC. We welcome them all to the board and
feel sure that they will add much to the group. Since the period
end John Bullough has joined the board in a non-executive capacity
and we welcome him similarly.
John Vincent retired in March after a long career with the group
and Duncan Harper, the Group Finance Director, has announced his
decision to resign after six and a half years' service, though he
will remain with the group during his notice period to ensure an
orderly handover to his successor. The board has begun a process of
finding a replacement and further announcements will be made in due
course.
Prospects
Undoubtedly the UK is and will remain the greatest source of the
group's future profit, based on the growth in the pipeline of
opportunities and improving rate of conversions. The London market
has provided much of the pick-up in activity to date, though we
expect the regional UK market to begin to contribute meaningfully
in the second half and into 2015. Coupled with a full contribution
to second half revenues by SHC and with the start of property
savings which should more than offset the integration costs of the
2013 transaction, we expect that total UK profits will continue to
perform well despite some cost inflation in the second half which
will marginally lower returns until volumes lift further.
Outside the UK the drive to revive revenue generation in Russia
and resolve our Middle East organisational issues should further
assist the group to build on current performance.
Overall therefore we take an optimistic view of the profit
potential of the group for the foreseeable future in our
traditional areas of expertise and, as we have said before, we will
continue to review and evaluate opportunities to expand the
business.
Meanwhile, as our underlying business returns to full strength,
the board is also actively considering alternative strategies to
both counter the cyclical nature of our revenue streams and find
ways to diversify away from our single revenue discipline. This
will have the twin-fold benefit of providing greater revenue
visibility and broader growth opportunities in order to preserve
longer term profitability.
In recognition of trading year to date and our much improved
outlook we are delighted to be paying an interim dividend of 0.1p
per share on Monday 28 July 2014 to shareholders on the register at
close of business on Friday 11 July 2014.
Nicholas Thompson
Chief Executive Officer
29 June 2014
Consolidated income statement
For the six months ended 31 March 2014
Note Unaudited Unaudited Audited
six months six months year to
to 31 March to 31 March 30 September
2014 2013 2013
GBP'000 GBP'000 GBP'000
Revenue 2 7,575 3,403 8,406
Sub consultant costs (1,015) (580) (1,290)
------------- ------------- --------------
Revenue less sub consultant
costs 6,560 2,823 7,116
Personnel related costs (4,270) (2,064) (4,751)
Property related costs (997) (630) (1,256)
Other operating expenses (842) (455) (1,027)
Other operating income 132 121 217
------------- ------------- --------------
Operating profit / (loss) 583 (205) 299
Finance income - - 1
Finance costs (9) (8) (14)
------------- ------------- --------------
Profit / (loss) after finance
costs 574 (213) 286
Share of results of associate
& joint ventures 176 134 264
------------- ------------- --------------
Profit / (loss) before tax 2 750 (79) 550
Taxation (255) 52 (176)
------------- ------------- --------------
Profit / (loss) for the period
attributable
to equity holders of the company 495 (27) 374
------------- ------------- --------------
Earnings / (losses) per share
Basic 3 0.31p (0.02)p 0.26p
Diluted 3 0.31p (0.02)p 0.26p
------------- ------------- --------------
Consolidated statement of comprehensive income
For the six months ended 31 March 2014
Unaudited Unaudited Audited
six months six months year to
to 31 March to 31 March 30 September
2014 2013 2013
GBP'000 GBP'000 GBP'000
Profit / (loss) for the period 495 (27) 374
Other comprehensive income:
Currency translation differences (42) 37 (2)
Currency translation differences
recycled
on discontinued operation - - 1
------------- ------------- --------------
Other comprehensive income
for the period (42) 37 (1)
Total comprehensive income
for the period
attributable to equity holders
of the company 453 10 373
------------- ------------- --------------
Consolidated statement of financial position
At 31 March 2014
Note Unaudited Unaudited Audited
at 31 at 31 at 30
March March September
2014 2013 2013
GBP'000 GBP'000 GBP'000
Non current assets
Goodwill 1,890 1,494 1,369
Other intangibles 599 - -
Property, plant & equipment 355 287 326
Investment in associate and
joint ventures 297 231 229
Deferred tax 411 685 454
---------- ---------- -----------
Total non current assets 3,552 2,697 2,378
Current assets
Trade and other receivables 5,620 2,399 3,515
Current tax 15 193 117
Cash and cash equivalents 5 1,522 724 1,343
---------- ---------- -----------
Total current assets 7,157 3,316 4,975
Total assets 10,709 6,013 7,353
Current liabilities
Trade and other payables (5,320) (2,904) (4,005)
Short term borrowings 5 (150) (150) (150)
Provisions (260) (100) (50)
Current tax (25) - -
Total current liabilities (5,755) (3,154) (4,205)
Non current liabilities
Investment in joint ventures - (1) -
Long term borrowings 5 (38) (188) (113)
Provisions (136) - -
Deferred tax (72) (5) (6)
Total non current liabilities (246) (194) (119)
Total liabilities (6,001) (3,348) (4,324)
Net assets 4,708 2,665 3,029
---------- ---------- -----------
Capital and reserves
Share capital 1,652 1,456 1,456
Merger reserve 1,176 - -
Foreign currency translation
reserve (13) 67 29
Retained earnings (403) (1,300) (898)
Other distributable reserve 2,296 2,442 2,442
---------- ---------- -----------
Total equity attributable
to
equity holders of the company 4,708 2,665 3,029
---------- ---------- -----------
Consolidated statement of cash flows
For the six months ended 31 March 2014
Note Unaudited Unaudited Audited
six months six months year to
to 31 March to 31 March 30 September
2014 2013 2013
GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Cash from / (used in) operations 4 367 (6) 646
Interest paid (9) (8) (14)
Taxation received 94 - 61
------------- ------------- --------------
Net cash from / (used in)
operating activities 452 (14) 693
Cash flows from investing
activities
Purchase of property, plant
& equipment (70) (30) (157)
Sale of property, plant &
equipment - 4 4
Acquisition of subsidiary, (57) - -
net of cash acquired
Interest received - - 1
Dividends received from associate 104 83 210
------------- ------------- --------------
Net cash (used in) / from
investing activities (23) 57 58
Net cash flow before financing
activities 429 43 751
Cash flows from financing
activities
Repayment of bank loan (75) (75) (150)
Payment of asset finance liabilities (2) - -
Dividends paid (146) - -
Net cash used in financing
activities (223) (75) (150)
Net change in cash, cash equivalents
and bank overdraft 206 (32) 601
Cash, cash equivalents and
bank
overdraft at start of period 1,343 739 739
Currency translation differences (27) 17 3
------------- ------------- --------------
Cash, cash equivalents and
bank
overdraft at end of period 5 1,522 724 1,343
------------- ------------- --------------
Consolidated statement of changes in equity
For the six months ended 31 March 2014
Foreign
currency Other
Share Merger translation Retained distributable Unaudited
capital reserve reserve earnings reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October
2013 1,456 - 29 (898) 2,442 3,029
Profit for the
period - - - 495 - 495
Other comprehensive
income - - (42) - - (42)
Dividends - - - - (146) (146)
Share issue 196 1,176 - - - 1,372
---------- ---------- ------------- ----------- ---------------- ------------
At 31 March
2014 1,652 1,176 (13) (403) 2,296 4,708
---------- ---------- ------------- ----------- ---------------- ------------
For the six months ended 31 March 2013
Foreign
currency Other
Share Merger translation Retained distributable Unaudited
capital reserve reserve earnings reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October
2012 1,456 - 30 (1,276) 2,442 2,652
Profit for the
period - - - (27) - (27)
Other comprehensive
income - - 37 - - 37
Share based
payment value
of employee
services - - - 3 - 3
---------- ---------- ------------- ----------- ---------------- ------------
At 31 March
2013 1,456 - 67 (1,300) 2,442 2,665
---------- ---------- ------------- ----------- ---------------- ------------
For the year ended 30 September 2013
Foreign
currency Other
Share Merger translation Retained distributable Unaudited
capital reserve reserve earnings reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October
2012 1,456 - 30 (1,276) 2,442 2,652
Profit for the
period - - - 374 - 374
Other comprehensive
income - - (1) - - (1)
Share based
payment value
of employee
services - - - 4 - 4
---------- ---------- ------------- ----------- ---------------- ------------
At 30 September
2013 1,456 - 29 (898) 2,442 3,029
---------- ---------- ------------- ----------- ---------------- ------------
Notes to the interim report
1 Basis of preparation
The financial information presented in this interim report has
been prepared in accordance with the recognition and measurement
principles of International Financial Reporting Standards ('IFRS')
as adopted by the EU that are expected to be applicable to the
financial statements for the year ending 30 September 2014 and on
the basis of the accounting policies expected to be used in those
financial statements.
2 Business combination
On 18 December 2013 the group acquired 100% of the issued share
capital of Swanke Hayden Connell Europe Ltd, a major firm of
architects and interior designers with offices in London, Moscow,
Istanbul and Sheffield.
The total consideration for the acquisition was GBP1.58m
comprising a cash payment of GBP209,053 with the balance satisfied
by the issue of 19,594,959 new shares at a price of 7.00 pence per
share.
The fair values of the identifiable assets and liabilities
acquired have only been provisionally determined and are subject to
adjustment during the measurement period.
2 Operating segments
The Group comprises a single business segment and five
separately reportable geographical segments (together with a group
costs segment). Geographical segments are based on the location of
the operation undertaking each project.
Segment revenue Pre-acquisition Acquired
operations operations Total
GBP'000 GBP'000 GBP'000
Unaudited six months to 31 March
2014
United Kingdom 4,817 1,260 6,077
Russia 154 484 638
Turkey - 441 441
Middle East 419 - 419
Continental Europe - - -
Total 5,390 2,185 7,575
---------------- ------------ ----------
Unaudited six months to 31 March
2013
United Kingdom 2,287 - 2,287
Russia 942 - 942
Turkey - - -
Middle East 174 - 174
Continental Europe - - -
Total 3,403 - 3,403
---------------- ------------ ----------
Audited year to 30 September
2013
United Kingdom 6,160 - 6,160
Russia 1,875 - 1,875
Turkey - - -
Middle East 371 - 371
Continental Europe - - -
Total 8,406 - 8,406
---------------- ------------ ----------
Segment result before tax Pre-acquisition Acquired
operations operations Total
GBP'000 GBP'000 GBP'000
Unaudited six months to 31 March
2014
United Kingdom 1,050 (105) 945
Russia (323) 24 (299)
Turkey - 82 82
Middle East 4 - 4
Continental Europe 176 - 176
Group costs (158) - (158)
---------------- ------------ ----------
Total 749 1 750
---------------- ------------ ----------
Unaudited six months to 31 March
2013
United Kingdom 127 - 127
Russia (245) - (245)
Turkey - - -
Middle East (54) - (54)
Continental Europe 135 - 135
Group costs (42) - (42)
---------------- ------------ ----------
Total (79) - (79)
---------------- ------------ ----------
Audited year to 30 September
2013
United Kingdom 961 - 961
Russia (395) - (395)
Turkey - - -
Middle East (132) - (132)
Continental Europe 260 - 260
Group costs (144) - (144)
---------------- ------------ ----------
Total 550 - 550
---------------- ------------ ----------
3 Earnings / (losses) per share
The calculations of basic and diluted earnings / (losses) per
share are based on the following data:
Earnings / (Losses) Unaudited Unaudited Audited
six months six months year to
to 31 March to 31 March 30 September
2014 2013 2013
GBP'000 GBP'000 GBP'000
Profit / (Loss) for the period 495 (27) 374
------------- ------------- --------------
Number of shares Unaudited Unaudited Audited
six months six months year to
to 31 March to 31 March 30 September
2014 2013 2013
'000 '000 '000
Weighted average number of shares 157,616 145,619 145,619
Effect of dilutive options 394 - -
------------- ------------- --------------
Diluted weighted average number
of shares 158,010 145,619 145,619
------------- ------------- --------------
4 Reconciliation of profit / (loss) before tax to net cash from / (used in) operations
Unaudited Unaudited Audited
six months six months year to
to 31 March to 31 March 30 September
2014 2013 2013
GBP'000 GBP'000 GBP'000
Profit / (Loss) before tax 750 (79) 550
Currency translation differences
recycled - - 1
Share based payment value of
employee services - 3 4
Finance income - - (1)
Finance costs 9 8 14
Share of results of associate
& joint ventures (176) (134) (264)
Goodwill written off 125 - 125
Depreciation 106 62 149
Amortisation 36 - -
Loss on disposal of property,
plant & equipment - (4) (4)
Change in trade & other receivables 70 161 (1,022)
Change in trade & other payables (506) 198 1,365
Change in provisions (47) (221) (271)
------------- ------------- --------------
Net cash from / (used in) operations 367 (6) 646
------------- ------------- --------------
5 Analysis of net funds
Unaudited Unaudited Audited
at 31 at 31 at 30
March March September
2014 2013 2013
GBP'000 GBP'000 GBP'000
Cash and cash equivalents 1,522 724 1,343
Secured bank overdraft - - -
---------- ---------- -----------
Cash, cash equivalents and bank
overdraft 1,522 724 1,343
Secured bank loan (188) (338) (263)
Net funds 1,334 386 1,080
---------- ---------- -----------
Cash and cash equivalents 1,522 724 1,343
Short term borrowings (150) (150) (150)
Long term borrowings (38) (188) (113)
---------- ---------- -----------
Net funds 1,334 386 1,080
---------- ---------- -----------
6 Status of interim report
The interim report covers the six months ended 31 March 2014 and
was approved by the board of directors on 29 June 2014. The interim
report is unaudited.
The interim condensed set of consolidated financial statements
in the interim report are not statutory accounts as defined by
Section 434 of the Companies Act 2006.
Comparative figures for the year ended 30 September 2013 have
been extracted from the statutory accounts of the group for that
period.
The statutory accounts for the year ended 30 September 2013 have
been reported on by the group's auditors and delivered to the
Registrar of Companies. The audit report thereon was unqualified,
did not include references to matters which the auditors drew
attention by way of emphasis without qualifying the report, and did
not contain a statement under Section 498 of the Companies Act
2006.
7 Further information
Copies of the interim report will be dispatched by post to
holders of 10,000 or more shares in due course. An electronic
version will be available on the Group's website
(www.aukettswanke.com).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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