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My concern primarily is Aukett’s cash position.
Coutt's are reviewing the facility in May: and this is what they will be looking at........
What we know is that the Current Assets plunged last year from 9.1m to 6.7m, whilst their Total Liabilities stayed flat at 6.8m, and now exceed Current Assets. That is a huge 'red flag'!
Net Cash has collapsed from close to $2m to 150k in recent years, and still falling. That is a massive worry.
Provisions against bad debts have been running at close to 1m pa. primarily from their poorly conceived Middle East acquisitions, which deleted their cash pile of 2m. 1m bad debts year on year is horrendous.
Net Assets are propped up by 3.2m of goodwill and intangibles, making the only worthy asset being, oddly enough, their stated value of their shareholding in the private architectural companies in Germany.
The very experience Wright [CFO] is leaving this week, and replaced by Barkwith. He appears to have no experience with a listed company, nor a professional practice. He comes from a small, 2.4m turnover company, with 7 people. The difference between the skill set is vast! The highly experienced Simmons [Chair], with a lifetime of experience in running professional practices, is also departing this week too. Stating this, running a small architectural practice is not 'rocket science' from an accountancy point of view. Accountants cannot win architectural work.
With a collapsing Net Cash position, collapsing Revenue, collapsing Current Assets, Bad Debts running at 1m pa, a dearth of new work, and with delays and cancellations occurring across their two main revenue bases: it looks as bad as you can get.
The Balance Sheet is shot to bits, with the only asset left being the valuation of their long term German investments. Germany Manufacturing PMI plunged this month to 44.7, which has sent a shiver to all markets.
Last year Aukett seriously under forecast their loss position on their 28.6.18 statement, stating, “a Group loss for the full year despite a better second half". Aukett’s ‘better second half’ ended with another 1.2m loss. How the CEO could get it so wrong 3 months from a year end, is a considerable worry.
If Coutt's pulls the plug in May, or if Aukett run out of overdraft facility, then Aukett will need to start selling shares at 1p if they find buyers, diluting the valuation.
'Value Realisation' only happens when you have something to sell. If the cash runs out they have nothing to sell.
I have been presenting the 'bear case' for many years on this stock: I have been proven unfortunately correct. They may hang on, but they will be in a fragile state for years to come.
hey Vodka,
Unless of course Aukett run out of cash?
Record 2.5m loss in 2018 ain't pretty.
157k Net Cash, 6 months ago, so that is the major concern when you are spending 1.3m per month.
Aukett have had to write off nearly 2m of bad debts in the past 2 years.
60% of the Debtor Pile now lives in the UAE, 'home' of the bad debts.
Extracting 1.3m per month from the Debtor Pile will be a huge struggle.
Bank reviews the facility in May, so if there is no cash left, Aukett will be selling shares at 1p, I guess. They will not have any other option.
Current Assets now have crashed to equal Total Liabilities, so you now have to run to Non Current Assets [got to love Goodwill & Intangibles] to prop up Net Assets.
Todays press sums up the current position for their UK business:
"Brexit uncertainty ‘hits home hard’ for architects
Architects have reported a dearth of new enquiries, a reduction in job applications from Europe and pressure on fees as the UK’s laboured withdrawal from the EU continues to exasperate the profession..."
Last year Aukett spent nearly 1m on fee bids, and they failed to win anything.
Chairman & CFO heading out the door this week.
Big 9 shareholders selling stock.
Just commenting on the obvious problems....and high probability of dilution.
Is AUK planning a secondary offering to raise additional capital?
AUK's 1 March Notice stated: Section 551 of 826k .
Perhaps an additional 50% share issue of 82.6m shares @ 1p?
AUK might be looking for new capital to service existing debt or simply cash to keep going, and may be issuing additional shares to raise the funds according to 1 March Notice.
Dilution will drastically impact the share value.
Warning Alarms......
1 March Notice of Meeting noted the following:
826k of additional shares under section 551 of the Companies Act 2006 authorized and 165k under section 570.
As the net assets are principally the poor debtor pile, old computers and old furniture, Net Assets plummeting, and the share price +/- 1p, one can only imagine that if Aukett exercise this additional share offering, it will dilute the value of shares already issued.
55m shares @ say 1.5p = 825k represents 33% of the number of shares issued @ 165.2m.
That is a very large Section 551 placement!
I guess it is the fall back position if the bank withdraws their 1m support, but it would kill the share price?
New London Architecture’s 2019 London Tall Buildings survey has revealed that while the number of planning applications for tall buildings in 2018 fell slightly the number of approvals grew.
The number of applications decreased from 78 in 2017 to 75 in 2018, but the number of tall towers granted planning increased to 72 from 63.
AUK has not been appointed Architect on any of them!
"This year a record number of skyscrapers will be built in London - transforming the iconic skyline of the capital.
A total of 76 buildings with 20 storeys or more are set to be finished in 2019, three times more than last year's total. 121 are under construction"
Aukett Swanke are not appointed on any of these buildings in London.
Aukett Swanke UK income plummeting.
Aukett are now down to Net Cash representing a 3 day supply @ 157k.
AUK cost base is c.1.3m per month, including a c.1.0m per month salary bill.
AUK Debtor Pile is now heavily focused on UAE [60%], where AUK are facing massive bad debt problems from Clients that were inherited through the poorly conceived acquisition process. They are not traditional AUK clients.
AUK Debtor Pile has plummeted 30% in the last year, and the significant problem is cash.
Aukett start out each month without sufficient funds to pay the end of months wages.
Revenue from UK & UAE is plummeting, and redundancy costs will further erode cash.
Former Directors still selling their shares it would appear. Chair & CFO heading out the door.
If AUK have a bad collection month, they are gone.
AUK's only real assets: old computers, old desks, and a very uncertain Debtor Pile.
Bullish?.......pump & dump at best!
'bbr391' you are the only one flying, AUK are hanging on by their fingernails: I'll stick with the former Directors who are selling....
With 9.24m of shares I would well imagine Curiel has his own interests in mind.
A 73 year old returning to a part time role, after 5 years with his feet up, will do nothing. Wheeling him in on his 'zimmer' won't do anything, but appear desperate.
Curiel's client base would have long retired, so it all makes zero difference.
The current Chairman Simmons at least ran a successful accounting firm!
Both Simmons and the CFO are both bailing out in a few weeks: tells you something!
It is unfortunate that the CEO & Chairman positions cannot be held by the next generation of younger Architects, putting the old Dad's Army out to pasture. These old guys seem to have ridden the ship onto the rocks, by very poor decisions in the past.
2m of cash has been eroded and the balance sheet smashed in recent years: and it has all been self inflicted.
The Bank is reviewing their debt & overdraft facility in May '19, so if Aukett do not have their act together by then, by reducing their cost base significantly below earnings, then this LSE Share Discussion might come to an abrupt end!
6m of shares from the Top 9 Shareholders have been sold in recent weeks. These shares were held by former directors: they are starting to liquidate. Gives you a clue!
Chairman going, CFO going, past Directors selling millions of shares....Aukett living off the overdraft.
Check Please!
Architects Journal
22 Feb 2019
"Big practices braced for Brexit job cuts"
"A large number of big architecture practices are preparing to slash staff numbers as the prospect of a no-deal Brexit looms, new research has revealed."
Forget profit, this is more about basic survival.
UK revenue needs to grow from 2018 to break even, so the Annual Report stated: that looks more and more unlikely. If a further loss develops, there will be a potentially big cash drain, with added cash demands paying out redundancies. In 2018 Aukett failed to win work so the Annual Report stated, leaving them with little to do in 2019!
UAE revenue fell in 2018, with big losses. 2019 outlook not promising either so the Annual Report stated, so a potentially larger cash drain, coupled with a very uncertain debtor book. Middle East clients love not to pay consultants.
Europe revenue barely covering the salaries.
The big issue is, will the cash run out, with the bank demanding their [1m] loan and overdraft back?.......delisting, or worse?
Two big 3m sell orders in the recent weeks, that must have come from Top 9 Shareholders: very brave to buy at this point.
5 Year Chart look Reckt!
Aukett should be updating the market more regularly, and not taking 3 months to inform the market of substantial losses, as occurred recently. Aukett would know now what the half year will look like, but by past performance the CEO will inform us in about 4 months time.
The RIBA’s latest Workload Trends survey found that firms with more than 51 members of staff were far more pessimistic at the start of the year than they had been December, recording a balance figure of -40, a sharp contrast with the previous month’s +60.
RIBA executive director Adrian Dobson said the slump in workload confidence among large practices was “a cause for concern”, noting that the lack of clarity about the Brexit process – and the potential for a no deal exit from the EU – was being cited by many firms as the biggest cause of concern.
First Half Year 2018: 1.2m loss
Second Half Year 2018: 1.2m loss
Living off the Overdraft and an uncertain Debtor Pile
Things have got worse according to the RIBA.
I am invested in other well run businesses, so I do not post, as there is little need.
I have learnt to be very careful investing in professional practices that list on stock exchanges, as the Directors motives are always focused on maximising their own exit strategy, rather than on the future success of the business, and investing in the next generation of people.
The story always ends the same way.
Hopefully my posts have allowed others to exit, rather than take the 85% loss that has followed.
If Aukett can survive the inevitable collapse of the UAE revenue, and somehow survive the ongoing collapse of the UK revenue, then they may drift along with a balance sheet that looks shot to bits.
They will live off an overdraft, and rely upon an uncertain Debtor Pile to pay their costs. Their real assets are desks and old computers.
It is amazing that the CEO Thompson continues to take his significant pay packet, whilst slashing the fee earners pay, when it was his own poor decisions that led to this almighty implosion.
Researching who this individual is, led me to a 7 July 2009 High Court Case, Fitzroy Robinson v Mentmore Towers, where the High Court judge summed up the case by stating that CEO Nicholas Thompson had made representations to the High Court that were 'made knowingly and deliberately, without belief in its truth, and therefore fraudulent." The press reported: "Fraudulent Misrepresentation"
Anyone investing needs to know what they are dealing with.
Hopefully I have allowed others to miss taking a sizeable loss: that has been my focus.
hi Tobriand,
I invested in Aukett previously, but got out before the big correction south.
I have tried to give as many people the 'heads up' that this company was heading down three years ago.
It was clear to me that the 'growth by acquisition' model would never work, and revenues would return to the base position.
It was clear to me that buying second grade assets in UK & UAE, Aukett would waste their cash when they could at least afford to. Unfortunately a 1.5m loss in the first year in UAE was even worse than I had thought!
Aukett are now living now off bank debt, with a 2.5m loss, the financial situation is a mess, living off a Debtor pile which is heavily focused towards slow/no paying UAE clients, that are not previously Aukett clients.
With Aukett's core UK architectural workload collapsing 70% in 3 years, coupled with existing projects intermittently suspended, going slower than programme or put on permanent hold, and more troublesomely, a failure to win work in the past year, things look very bleak.
The Chairman & CFO are both leaving shortly, and up to 11 other Directors have left.
7 other senior Aukett staff have left the London office in the past few years.
Offices in Bristol & Southampton have both closed with a loss of 4 directors.
However, despite all this, Aukett are still woefully overstaffed.
All Aukett can do [it seems] is roll out a 72 year old former director to sit now as Chair in the UK [todays press], and Aukett have sent another 70 yo old to the UAE to try to right the ship.
Dad's Army to the rescue!
Sad really.....
Aukett Swanke’s UK architectural revenue has collapsed 70% in three years
The historical base of Aukett Swanke's revenue has been the UK architectural business.
It is alarming to read in the Annual Report just posted on the companies website [ye.September 2018], that Aukett Swanke’s UK architectural revenue has collapsed 70% in three years from 11.0m in 2015 to 3.3m in 2018.
AS Veretec UK revenue in 2015 was 3.3m, and it would appear that in 2018 the AS Veretec revenue was much the same. It has been the Aukett Swanke’s UK architectural revenue which has totally collapsed, year on year since 2015.
The annual report has tried its best to disguise this fundamental problem.
If Aukett Swanke’s core UK business is unable to win work, over an extended period, then the future looks particularly dim.
The 3m share sale must have come from one of the nine major shareholders listed on page 19 of the Annual Report: either one of the 7 Former Directors or 2 Asset Funds?
They must have the same opinion as I.
The concerns I have for AUK is cash.
As stated in the Accounts:
“The decrease in the size of the UK business and delayed receipts in the UAE mean that there is less free cash available”
AUK has a cost base that requires 1.4m per month to survive, yet the ability to extract that from Debtors is becoming potentially not sustainable: “there is less free cash available”.
AUK has a 500k overdraft that the Bank will review in May 2019. AUK has a Loan of 553k with the same bank. Without Bank support AUK are toast.
KPI of 70k to 91k in their key markets of UK & UAE is appalling. Competitors are running at 160k. AUK has twice the staff they should have: that is the problem. AUK should have 40 FTE maximum in UK & UAE based on earnings. The hard decisions have not been made by the CEO.
Key extracts from Report:
Financing
Net Funds 157k
Loan 553k
Overdraft 500k assigned to UK business [bank will review in May 19]
The decrease in the size of the UK business and delayed receipts in the UAE mean that there is less free cash available
UK
45% fall in revenue
1505k loss
numerous delays or short term suspensions on contracts
design-led projects were awarded to other bidders at up to 50% of AUK pricing
750k of bidding costs for work which we were not successful in winning
ASL shrinking [Design Led Architectural Services]
Veretec increasing [Delivery of other Architects projects]
91k revenue/technical staff [72 FTE]
Middle East
decrease in market liquidity
Existing Projects intermittently suspended, going slower than programme or put on permanent hold
debtor and work in progress provisions 700k
three separate operations not under a common brand or centralised to achieve economies
70k revenue/technical staff [83 FTE]
Continental Europe
42k revenue/technical staff [15 FTE]....hopeless! ....hardly pays the wages!
Excellent summary by Graham Neary today:
“The numbers now look very frightening to me.
Balance sheet equity reduces from £6.6 million to £4.2 million. Tangible equity reduces from £3.3 million to £1.2 million.
Receivables turnover is only 2x, implying that it took Aukett about six months to get paid on average. This figure has deteriorated since last year. Massive receivables book of £6 million.
As has been pointed out by a bear over on the LSE board, the company's cash balance for September 2018 adds up to 3 days' worth of last year's expenses.”
The significant concern now for AUK is cash.
AUK are living off an overdraft, and the Debtor pile of 6m.
Unfortunately the Debtor Pile is more than likely filled with a huge total of Middle East Clients who love not paying consultants.
For AUK, Step 1 should be to get their UK cost base below their current income levels, say 5m. Unfortunately the Report gives the clear impression that to break back into profit a higher revenue level to current levels would be required. It is amazing that the CEO cannot make the correct call, and slash the cost base?!
Step 2 would be to do the same in the UAE
Current Assets @ 6.7 [Debtors + Cash] now just exceed Current Liabilities @ 5.8 [Trade 5.2 + Borrowing 0.6] .
If the ‘Debtors’ are full of future ‘bad debts’, then AUK is on a downward slope greater than Graham Neary may believe!
Check please!
AUK: Aukett Swanke Group Plc
Today: Aukett Swanke results for the year ended 30 September 2018 released
The Perfect Storm
Growth through Merger and Acquisitions
Promise and reality
2+2 = 5? ….it did not work out that way for Aukett Swanke
Record Loss 2.54m
Record Loss in UK 1.5m
Record Loss in UAE 1.2m
Revenue Collapses 30% in 2 years
3 days worth of Net Cash
Total equity down 2.4m, 35% loss
Future: Bleak?
In 2013 Aukett Swanke bought Swanke Hayden Connell with the express hope that the purchase would boost Aukett Swanke’s UK revenue. By 2015 UK revenue had risen to 14m, well short of the target at 20m+ that CEO Thompson was crowing about at the time.
Since then Aukett Swanke UK’s revenue has seen an almighty collapse, now back to 6.6m falling 45% in 2 years, and 55% over 3 years, and delivering an enormous 1.5m loss in 2018. Massive loss of staff over the past 3 years, leaves Aukett Swanke working out of ‘cheap digs’ with half the crew it had: not a happy outcome. But is there worse to come?
In 2015 & 2016 Aukett Swanke bought low margin John R Harris & Shankland Cox businesses in the UAE, with the hope of 10m+ combined revenue. In 2017 the UAE business slumped to 6.8m, and in 2018 declined 20% once again, with a substantial loss of 1.2m. The cash piled into these UAE purchases has drained Aukett Swanke treasury, when it could least afford it. Will UAE revenue collapse further as it has done in the UK following the similar acquisition model?
Little wonder then that a majority of acquisition deals intended specifically to enable growth fail to achieve their expressed growth objective.
In mainland Europe, revenue has fallen 50% in 3 years, now worth 0.6m. Break even over 2 years. You must ask: Why bother?
The failed acquisition process has eroded 2m of Aukett Swanke group cash over three years, caused by ill-timed acquisitions of low margin companies that are now producing massive losses, a UK acquisition strategy that has imploded on itself with record massive losses, and ongoing very poor KPI on staff/revenue.
Today, Aukett Swanke has posted an all-time record loss of 2.54m.
Earning per technical staff member is half that of the top architectural companies like Fosters. Woeful.
Looking forward, Aukett Swanke’s UK business continues to be caught in a declining market for architectural services: ‘signature architects’ continue to get the major work, leaving the likes of Aukett Swanke with the crumbs…and Brexit woes will continue for years.
Aukett Swanke’s UAE business prospects may be equally troubling as the main fee earner from Shankland Cox has left the UAE business, and the Expo 2020 workload dries up. ‘Signature architects’ continue to get the major UAE work, and Aukett Swanke is not on that list.
Aukett Swanke has little net cash left to protect any further mis-steps. Net Cash is now 150k, representing a wafer thin 1% of turnover. There are ongoing concerns with bad debtors in both
5 October Company Update
Revenues collapses to c.15m, down 30% in two years.
Net Funds just above zero
No mention of profit: +/- 1.2m Loss
Revenue
2016: 20.8m
2017: 18.4m
2018: c.15.0m
Net Funds
2016: 790k
2017: 184k
2018: 132k
Profit
2016: Profit, 927k
2017: Loss, 325k
2018: Loss, 1220k half year
Revenue Collapses
Massive Losses
Net Funds close to zero
Chairman Resigns
Board Members Resign
Chief Financial Officer Resigns
Exceedingly poor KPI Earnings per Employee: 50% of Top 10 UK Architects
AUK has had the largest fall from Top 30 Architects, 23rd to 30th in a year.
AUK now have only 42 Architects, representing 1.3% of all architects employed in Top 30 practices.
AUK are now a shadow of what they once were.
Foster & Partners have 362 architects, whilst BDP have 315 architects employed
AUK are now very exposed with net funds reaching near zero. AUK need to reduce their cost base well below revenue in order to survive. In 3 years AUK have eroded a 2m net cash pile to near zero.
Chairman, CFO, & Board Members have all resigned in recent months: they may want out in case the situation deteriorates further.
Revenue Collapses
Massive Losses
No Cash
Chairman Resigns
Board Members Resign
…..and now…..
Chief Financial Officer Resigns! [always a worry when the 'money person' resigns...!]
….and to make matters worse, AUK have had to find ‘rent free digs’ to survive, in a grubby back street location!
AUK Half-Year Horror! 2017-18
Net Funds GONE! Living off Bank Debt….Massive Losses!
• Revenues down 18% at 7.41m (2017: 9.07m)
• Loss before tax: 1.22m (2017: 358k loss)
• Net Debt: -311k (2017: +594k)
UK Revenue Collapses, massive loss
UAE Revenue Collapses, massive loss
European Revenue Collapses
Board upheavals
Chairman resigns
Two Architectural Directors resign from the Board.
Accountants running a Design Business; a very bad idea!
Earnings pa FTE: Horrendous. Fosters & Partners 160k pa FTE v AUK <80k pa FTE: incredibly poor!
AUK group revenue, excl sub consultant component, of 13m pa should support a maximum of 90 FTE, however AUK has well over 180 FTE!
Losses will no doubt continue until staffing levels are slashed.
Outlook: Further Losses? Delisting? Delinquency?