TIDMAUK
RNS Number : 5236I
Aukett Swanke Group PLC
20 June 2017
Embargoed until 7:00am on 20 June 2017
Aukett Swanke Group Plc
Interim results
For the six months ended 31 March 2017
Aukett Swanke Group Plc, the international practice of
architects and interior design specialists and engineers, is
pleased to announce its interim results for the six month period
ended 31 March 2017.
Highlights
Revenues down 9% at GBP9.1m
Net cash at GBP1.56m with net funds of GBP594,000
Loss before tax of GBP358,000
Commenting on today's interim results announcement, CEO Nicholas
Thompson said;
"All Group operations have worked hard to maintain revenues
during the period although some markets have continued to weaken,
resulting in decreased earnings. This coupled with some specific
write downs offset by claim recoveries, has resulted in losses
which has hampered the development of our three hub structure. We
are, however, pleased to report that we have maintained our
liquidity strength."
Enquiries
Aukett Swanke Group Plc - 020 7843 3000
Nicholas Thompson, Chief Executive Officer
Beverley Wright, Chief Financial Officer
finnCap - 020 7220 0500
Corporate Finance: Julian Blunt/ Corporate Broking: Alice
Lane
Investor/Media enquiries
Ben Alexander - 07926 054111
Interim statement
Overview
As previously announced, the results for the six months to 31
March show a decline in revenues and a loss for the period.
Revenues are 9% lower at GBP9.1m (2016: GBP10.0m) and the loss
after tax is GBP345,000 (2016: profit GBP466,000) which has been
offset by a settlement claim in respect of a recent acquisition in
the sum of GBP572,000.
The United Arab Emirates ("UAE") saw an increase in revenues of
44% but this was offset by the decline in United Kingdom ("UK")
revenues of 32%, with our wholly owned Continental Europe offices'
revenues continuing to fall. Whilst the results are well below
recent performances the Group has continued to reshape the
structure of its operations and has expanded its Middle East
business, so that, as intended, our operations are now more evenly
balanced as we move forward. This balance is a key strategic
priority in order to provide the Group with some resilience to the
cyclical markets in which we operate.
We are pleased to report that cash has held up well since the
year end and stands at GBP1.56m (30 September 2016: GBP1.84m). The
Group has conserved its cash position during the period to assist
in mitigating the impact of the losses; to cover licensing
requirements in the UAE and to maintain liquidity strength for the
future. Net funds remain positive at GBP594,000 (30 September 2016:
GBP790,000) and we have continued to reduce our long term debt
(drawn down on the acquisition of Shankland Cox Limited ('SCL')),
which is denominated in US dollars.
United Kingdom
Revenues at GBP4.6m (2016: GBP6.7m) are disappointing and
reflect a lack of new market instructions as historic projects came
to a conclusion in the period.
During the first six month period and over the remainder of the
year we have some 20 major project completions in London and the UK
regions. These include: three offices in Cambridge with the
Bradfield Centre, Biomed Realty at Granta Park and Radio House; two
major refurbishments in the West End - Verde for Tishman Speyer and
the Adelphi Building phase 3 on The Strand for Blackstone; and a
number of Veretec (our specialist executive delivery operation)
projects including a retail store in Durham, head office buildings
on Bishopsgate and Liverpool Street, monitoring at Derwent's White
Collar Factory at Old Street and a residential scheme at Earls
Court. Around half that number of projects will continue onto site
into 2018, reflecting the decline in UK construction output
statistics, before new instructions begin to contribute.
Given the comparatively high fixed operating costs and the need
to retain core staff, cost reductions could not exactly match falls
in revenue, although some GBP1.4m of savings was achieved. The
result was a loss of GBP211,000 (2016: profit GBP498,000). Cost
reduction remains a focus and following the half year the operation
has surrendered part of its London leased property portfolio
providing a future net cost saving of GBP230,000 per annum.
With the construction market having previously peaked we do not
expect to see higher volumes in the immediate future. However
recent enquiries both in London and the UK regions provide some
confidence that that the general development market has adapted to
a post Brexit future.
Middle East - United Arab Emirates
The UAE market is relatively subdued at present but is expected
to grow in 2018 as it adapts to reduced oil prices and a more
mature market model. Our current scale of operation remains
competitive in this restricted environment and work is still
buoyant in sectors where a large proportion of commissions reflect
midsized projects in the post contract phase. Our revenues
continued to climb following the benefit of a full half year
contribution from SCL and now stand at GBP4.2m (2016: GBP2.9m) for
the six months. However only a small profit of GBP121,000 (2016:
GBP243,000) was generated. John R Harris & Partners ('JRHP')
performed satisfactorily and contributed to the result as did our
original Aukett Fitzroy International ('AFRI') operation.
Following its acquisition SCL had been the subject of a
downsizing and restructuring exercise across two of its offices
which resulted in additional costs and some additional bad debt
provisions. This is an ongoing process which will be concluded
principally during the fourth quarter. We then expect growth and
anticipate that JRHP will also better its performance in the second
half additionally supported in part by project income initially
generated by AFRI. With SCL now emerging from post acquisition
issues, we will be integrating all 3 businesses under the Aukett
Swanke brand in order to gain the full benefit of the enlarged
platform that we now have.
Continental Europe
Our business in this geography comprises a mixture of wholly
owned subsidiaries, joint ventures and an associate. The geography
has endured a wide range of economic and geopolitical conditions
ranging from the continued strength of the mature market in
Germany, relative stability in Russia to considerable uncertainty
in Turkey following the attempted coup, the ongoing State of
Emergency and the recent referendum.
As previously reported the half year result has fallen due to
losses in Russia and Turkey along with a lower contribution from
Germany.
Wholly owned operations
Russia and Turkey reported losses. Russia has been downsized to
a minimal level and Turkey suffered from a reversal of project
income following the sale of a site in the pre referendum period.
As such revenues fell to GBP331,000 (2016: GBP436,000)
Project highlights for the period include:
-- The first phase of our three residential apartment towers
totalling 42,000 sqm for Comstrin in Perm, Siberia and the 38,000
sqm luxury Monet apartment tower in Moscow are nearly complete. --
Our Japan Tobacco International fit out at the Moscow City
development won the Best Office Awards for 2016 at both the Office
Next and MCFO awards. -- The Istanbul office completed over 150,000
sqm of space as a part of the Nidakule Atasehir Kuzey and Guney
Office Campus development. -- The Cengiz Konya office headquarters'
project also completed during this year together with over 24
floors of accommodation for Allianz in their Allianz Tower in
Izmir.
Joint ventures and associates
-- Completed projects include the interior design of the new
Microsoft digital workplace offices in Zurich and Geneva, and
nearing completion in August 2017 the 130 room luxury Fontenay
Hotel in Hamburg.
-- Projects in progress include the 100,000 sqm Mercedes Platz
commercial office, retail and leisure centre for Anschutz through
Hochtief in Berlin; two interior design projects of 65,000 sqm and
17,000 sqm for a major insurance company on a campus in Cologne and
a high rise building in Frankfurt am Main; a further 20,000 sqm
laboratory and R&D centre for Agilent Technologies in Waldbronn
for Hochtief; and ongoing tenant fit out projects for Blackstone at
the Messe Turm in Frankfurt.
-- Our Prague office saw the completion of a significant phase
of the production facility and HQ building for the SAB Miller
brewery and a 3,000 sqm fit out for Rockwell Automation.
All three of Berlin, Frankfurt and Prague were profitable.
Berlin was less so than in 2016 due to a major project not being
formally signed by the half year end. Frankfurt has benefitted from
a number of larger and continuing instructions from Deutsche Bank
and Hochtief. Prague has assisted other offices in the Group to
augment its more limited local market opportunities.
Due to a combination of reduced management time and mitigation
of economic and / or geopolitical factors which cannot be avoided,
a joint venture is our preferred model in Continental Europe. As
such we are progressing a strategy of implementing this for the
geography as a whole.
Group costs
These were held during the period at GBP95,000 (2016:
GBP70,000).
Prospects
With many of our operations in a loss situation we will continue
to focus on cost savings in the second half whilst ensuring that we
retain the core skills required to deliver our services to clients
in order to return the Group to profitability.
Whilst we believe we have reached the bottom of the cycle in the
UK, there is no immediate sign of a strong sustainable recovery in
this market. We feel more confident about the Brexit impact having
been weathered. However, with the recent UK general election result
creating a hung parliament it is more likely that this business may
now face a longer period of uncertainty than was hitherto expected.
The UAE still represents our best opportunity for profitable growth
in the second half and we will focus on that. Continental Europe
should return a positive result in the second half. Overall we
currently foresee a loss situation for the year pending a return to
positive results for our Group.
We recognise that our business is sensitive to market changes
and that minor setbacks can have a disproportionate impact on
performance in the short term. However that is the norm for
operations such as ours in cyclical industries. With that in mind
we have pursued our strategy of balancing the Group's businesses
economically as well as politically. Evidencing this, our total
revenues (including 100% of the joint ventures) which are now
predominantly non sterling denominated, demonstrate our platform of
three broadly equal sized operations. The balance that this brings
is key to our medium term outlook.
Although cash remains strong the Board has decided it will
continue to review the decision to recommend a dividend until there
is a return to profitability.
Finally, may I add a comment on a post period event that, at the
Architect's Journal Annual Awards 2017 held only last week, Aukett
Swanke's "Veretec" were again named as 'Executive Architect of the
Year'. The accolade of our peer group is a demonstration of the
excellent work and dedication of our staff and underpins our
confidence in the future. It reinforces our commitment to keeping
our teams together and maintaining our levels of service.
Nicholas Thompson
Chief Executive Officer
19 June 2017
Consolidated income statement
For the six months ended 31 March 2017
Note Unaudited Unaudited Audited
six months six months year to
to 31 to 31 30 September
March March 2016
2017 2016 GBP'000
GBP'000 GBP'000
(restated)
Revenue 3 9,070 10,007 20,841
Sub consultant costs (998) (869) (2,431)
------------ ------------ --------------
Revenue less sub consultant
costs 8,072 9,138 18,410
Personnel related costs (6,795) (6,725) (13,929)
Property related costs (1,343) (1,286) (2,632)
Other operating expenses (1,323) (1,062) (1,901)
Other operating income 4 934 450 732
------------ ------------ --------------
Operating (loss) / profit (455) 515 680
Finance income - 8 8
Finance costs (18) (11) (28)
------------ ------------ --------------
(Loss) / profit after
finance costs (473) 512 660
Share of results of
associate and joint
ventures 115 65 267
------------ ------------ --------------
(Loss) / profit before
tax 3 (358) 577 927
Taxation 13 (111) (106)
------------ ------------ --------------
(Loss) / profit for
the period (345) 466 821
------------ ------------ --------------
(Loss) / profit attributable
to:
Owners of Aukett Swanke
Group Plc (342) 443 772
Non controlling interests (3) 23 49
------------ ------------ --------------
(345) 466 821
------------ ------------ --------------
Earnings per share
Basic 5 (0.21)p 0.27p 0.47p
Diluted 5 (0.21)p 0.27p 0.47p
------------ ------------ --------------
Consolidated statement of comprehensive income
For the six months ended 31 March 2017
Unaudited Unaudited Audited
six months six months year to
to 31 to 31 30 September
March March 2016
2017 2016 GBP'000
GBP'000 GBP'000
(restated)
(Loss) / profit for the
period (345) 466 821
Other comprehensive income:
Currency translation
differences 37 113 424
Other comprehensive income
for the period 37 113 424
Total comprehensive (loss)
/ income for the period (308) 579 1,245
------------ ------------ --------------
Total comprehensive (loss)
/ income is attributable
to:
Owners of Aukett Swanke
Group Plc (296) 545 1,158
Non controlling interests (12) 34 87
------------ ------------ --------------
(308) 579 1,245
------------ ------------ --------------
Consolidated statement of financial position
At 31 March 2017
Note Unaudited Unaudited Audited
at 31 at 31 year to
March March 30 September
2017 2016 2016
GBP'000 GBP'000 GBP'000
(restated)
Non current assets
Goodwill 2,422 2,347 2,409
Other intangibles 1,001 1,100 1,056
Property, plant and
equipment 346 568 506
Investment in associate
and joint ventures 667 446 710
Deferred tax 219 243 219
---------- ------------ --------------
Total non current assets 4,655 4,704 4,900
Current assets
Trade and other receivables 8,477 9,534 9,227
Cash and cash equivalents 7 1,555 2,567 1,839
---------- ------------ --------------
Total current assets 10,032 12,101 11,066
Total assets 14,687 16,805 15,966
Current liabilities
Trade and other payables (5,626) (7,853) (6,553)
Short term borrowings 7 (256) (223) (247)
Provisions (98) - (90)
Current tax (8) (125) (12)
Total current liabilities (5,988) (8,201) (6,902)
Non current liabilities
Long term borrowings 7 (705) (891) (802)
Provisions (1,029) (1,025) (973)
Deferred tax (84) (50) (100)
Total non current liabilities (1,818) (1,966) (1,875)
Total liabilities (7,806) (10,167) (8,777)
Net assets 6,881 6,638 7,189
---------- ------------ --------------
Capital and reserves
Share capital 1,652 1,652 1,652
Merger reserve 1,176 1,176 1,176
Foreign currency translation
reserve 156 (174) 110
Retained earnings 2,231 2,244 2,573
Other distributable
reserve 1,494 1,610 1,494
---------- ------------ --------------
Total equity attributable
to
equity holders of the
Company 6,709 6,508 7,005
---------- ------------ --------------
Non controlling interests 172 130 184
Total equity 6,881 6,638 7,189
---------- ------------ --------------
Consolidated statement of cash flows
For the six months ended 31 March 2017
Note Unaudited Unaudited Audited
six months six months year to
to 31 to 31 30 September
March March 2016
2017 2016 GBP'000
GBP'000 GBP'000
(restated)
Cash flows from operating
activities
Cash (outflow) / inflow
from operations 6 (276) 122 104
Interest paid (18) (11) (29)
Taxation paid (2) (63) (99)
------------ ------------ --------------
Net cash (outflow) /
inflow from operating
activities (296) 48 (24)
Cash flows from investing
activities
Purchase of property,
plant and equipment (11) (31) (147)
Sale of property, plant
and equipment 2 - 4
Acquisition of subsidiary,
net of cash acquired - (484) (761)
Interest received - 8 8
Dividends received from 151 - -
associate
------------ ------------ --------------
Net cash inflow / (outflow)
from investing activities 142 (507) (896)
Net cash outflow before
financing activities (154) (459) (920)
Cash flows from financing
activities
Proceeds from bank loan - 1,114 1,123
Repayment of bank loan (128) - (175)
Dividends paid - - (181)
Net cash (outflow) /
inflow from financing
activities (128) 1,114 767
Net change in cash,
cash equivalents
and bank overdraft (282) 655 (153)
Cash, cash equivalents
and bank
overdraft at start of
period 1,839 1,873 1,873
Currency translation
differences (2) 39 119
------------ ------------ --------------
Cash, cash equivalents
and bank
overdraft at end of
period 7 1,555 2,567 1,839
------------ ------------ --------------
Consolidated statement of changes in equity
For the six months ended 31 March 2017
Share Foreign Retained Other Merger Total Non Total
capital currency earnings distributable reserve controlling Equity
translation reserve interests
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- ------------- ---------- -------------- --------- --------- -------------- ---------
At 1 October
2016 1,652 110 2,573 1,494 1,176 7,005 184 7,189
Loss for the
period - - (342) - - (342) (3) (345)
Other
comprehensive
income - 46 - - - 46 (9) 37
At 31 March
2017 1,652 156 2,231 1,494 1,176 6,709 172 6,881
--------------- --------- ------------- ---------- -------------- --------- --------- -------------- ---------
For the six months ended 31 March 2016 (restated)
Share Foreign Retained Other Merger Total Non Total
capital currency earnings distributable reserve controlling Equity
translation reserve interests
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- ------------ ---------- ----------------- --------- --------- ------------ ---------
At 1 October
2015 1,652 (276) 1,801 1,791 1,176 6,144 107 6,251
Profit for
the period - - 443 - - 443 23 466
Other
comprehensive
income - 102 - - - 102 11 113
Other
adjustments - - - - - - (11) (11)
Dividends
paid - - - (181) - (181) - (181)
--------------- --------- ------------ ---------- ----------------- --------- --------- ------------ ---------
At 31 March
2016 1,652 (174) 2,244 1,610 1,176 6,508 130 6,638
--------------- --------- ------------ ---------- ----------------- --------- --------- ------------ ---------
For the year ended 30 September 2016
Share Foreign Retained Other Merger Total Non Total
capital currency earnings distributable reserve controlling Equity
translation reserve interests
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- ------------- ---------- -------------- --------- --------- -------------- ---------
At 1 October
2015 1,652 (276) 1,801 1,791 1,176 6,144 107 6,251
Profit for
the year - - 772 - - 772 49 821
Other
comprehensive
income - 386 - - - 386 38 424
Other
adjustments - - - - - - (10) (10)
Dividends
paid - - - (297) - (297) - (297)
--------------- --------- ------------- ---------- -------------- --------- --------- -------------- ---------
At 30
September
2016 1,652 110 2,573 1,494 1,176 7,005 184 7,189
--------------- --------- ------------- ---------- -------------- --------- --------- -------------- ---------
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 2017 and on
the basis of the accounting policies expected to be used in those
financial statements.
2 Restatement of prior period
On 10 February 2016 the Group acquired 100% of the issued share
capital of Shankland Cox Limited, a company incorporated in England
and Wales but operating through four branches in the United Arab
Emirates.
At the time of publishing the interim financial statements for
the six month period ended 31 March 2016, the accounting of this
business combination was incomplete and provisional amounts were
reported. During the 12 month post acquisition measurement period,
the Group obtained additional facts and circumstances that existed
at the acquisition date which, if known, would have affected the
measurement of the amounts recognised at acquisition. These facts
and circumstances included the fair value of trade receivables at
acquisition as well as the identification and recognition of
intangible assets. As prescribed by IFRS 3, these changes have been
applied retrospectively and therefore the amounts previously
reported for the 6 month period ended 31 March 2016 have been
restated.
As a result of the restatement, provisional goodwill of
GBP194,000 was removed, intangible assets of GBP313,000 were
recognised and GBP160,000 of resulting negative goodwill was
released to the income statement. The fair value of trade
receivables at acquisition was also reduced by GBP621,000 which,
under the payment mechanism, also reduced the fair value of
contingent consideration at acquisition by GBP621,000.
In addition to the retrospective application of acquisition
accounting noted above, amounts reported in the statement of cash
flows and the reconciliation of profit before tax to net cash from
operations have been corrected in accordance with IAS 8.
3 Operating segments
The Group comprises a single business segment and three
separately reportable geographical segments (together with a Group
costs segment). Geographical segments are based on the location of
the operation undertaking each project. Turkey and Russia are
included within Continental Europe together with Germany and the
Czech Republic.
Segment revenue Unaudited Unaudited Audited
six months six months year to
to 31 to 31 30 September
March March 2016
2017 2016 GBP'000
GBP'000 GBP'000
United Kingdom 4,573 6,686 12,142
Middle East 4,166 2,885 7,383
Continental Europe 331 436 1,316
Total 9,070 10,007 20,841
------------ ------------ --------------
Segment result before Unaudited Unaudited Audited
tax six months six months year to
to 31 to 31 30 September
March March 2016
2017 2016 GBP'000
GBP'000 GBP'000
(restated)
United Kingdom (211) 498 1,052
Middle East 121 243 41
Continental Europe (173) (94) 95
Group costs (95) (70) (261)
------------ ------------ --------------
Total (358) 577 927
------------ ------------ --------------
4 Other operating income
Unaudited Unaudited Audited
six months six months year to
to 31 to 31 30 September
March March 2016
2017 2016 GBP'000
GBP'000 GBP'000
(restated)
Property rental income 212 213 432
Management charges to
joint ventures and associates 54 54 104
Licence fee income 1 3 5
Other sundry income 18 20 31
Release of negative goodwill
on acquisition - 160 160
Fair value gain on the 77 - -
reduction of deferred
consideration
Gain recognised on acquisition 572 - -
settlement
------------ ------------ --------------
Total other operating
income 934 450 732
------------ ------------ --------------
5 Earnings per share
The calculations of basic and diluted earnings per share are
based on the following data:
Earnings Unaudited Unaudited Audited
six months six months year to
to 31 to 31 30 September
March March 2016
2017 2016 GBP'000
GBP'000 GBP'000
(restated)
(Loss) / profit for the
period (342) 443 772
------------ ------------ --------------
Number of shares Unaudited Unaudited Audited
six months six months year to
to 31 to 31 30 September
March March 2016
2017 2017 '000
'000 '000
Weighted average number
of shares 165,214 165,214 165,214
Effect of dilutive options - 256 154
------------ ------------ --------------
Diluted weighted average
number of shares 165,214 165,470 165,368
------------ ------------ --------------
6 Reconciliation of profit before tax to net cash from operations
Unaudited Unaudited Audited
six months six months year to
to 31 to 31 30 September
March March 2016
2017 2016 GBP'000
GBP'000 GBP'000
(restated)
(Loss) / profit before
tax (358) 577 927
Finance income - (8) (8)
Finance costs 18 11 28
Share of results of associate
and joint ventures (115) (65) (267)
Goodwill impairment - 17 17
Depreciation 173 172 359
Amortisation 60 73 177
(Profit) / loss on disposal
of property, plant and
equipment (2) - 10
Change in trade and other
receivables 749 (76) 628
Change in trade and other
payables (887) (481) (1,583)
Change in provisions 36 62 16
Negative goodwill - (160) (160)
Unrealised foreign exchange
differences 50 - (40)
------------ ------------ --------------
Net cash (outflow) /
inflow from operations (276) 122 104
------------ ------------ --------------
7 Analysis of net funds
Unaudited Unaudited Audited
at 31 at at
March 31 March 30 September
2017 2016 2016
GBP'000 GBP'000 GBP'000
Cash and cash equivalents 1,555 2,567 1,839
Secured bank loan (961) (1,114) (1,049)
Net funds 594 1,453 790
---------- ---------- --------------
Cash and cash equivalents 1,555 2,567 1,839
Short term borrowings (256) (223) (247)
Long term borrowings (705) (891) (802)
---------- ---------- --------------
Net funds 594 1,453 790
---------- ---------- --------------
8 Status of interim report
The interim report covers the six months ended 31 March 2017 and
was approved by the Board of Directors on 19 June 2017. 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 2016 have
been extracted from the statutory accounts of the group for that
period.
The statutory accounts for the year ended 30 September 2016 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 to 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.
9 Further information
Copies of the interim report will be dispatched by post to
holders of 100,000 or more shares in due course. An electronic
version will be available on the Group's website
(www.aukettswanke.com).
The company news service from the London Stock Exchange
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