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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.....

hey Tobriand,

If you have a query, post it here and I will get back to you

bear17

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?

It looks to me that on the trajectory of rapidly declining NET FUNDS, AUK will exhaust their current bank facilities by Xmas 2018. AUK Half Year Results still to be posted, but AUK had predicted a sizeable loss, which undoubtedly will place Net Funds into a negative position. Will Bank Debt now prop up AUK? How long can it last? Here are the figures: 300915 1900k 310316 1500k 300916 790k 310317 594k 300917 184k 310318 ?? Xmas 2018 [1000k]...Bank Debt Exhausted?

An architectural competitor to AUK, Make Architects latest annual report shows income from UK work has almost halved in two years. Make Architects blames Brexit uncertainty for the substantial revenue slide. AUK has warned of a larger half year loss, and so it will be concerning to read the full half year report when AUK releases it shortly. AUK's UK revenue might be falling very quickly too!!

AUK Share Price finally hit 1p today as Board Changes announced, and confirmation of a larger half year loss than last. �We expect a larger loss in the first half compared to last year�� CEO The loss in the first half last year was 358k, so a larger loss than this [400k - 500k?], will put great strains on the Net Cash position. Group Revenue must have slipped once again? Debt & Overdraft was at 1.0m at the end of the full year,. This loss will potentially grow to c. 1.4m at the half year. Board upheavals: Simmonds, Chairman, resigns Murdoch, beyond retirement age, resigns as Board Director heads to Dubai with no prior Middle East experience? Pell resigns as Board Director focuses on Russia [!] and China [!] with no prior experience in either location? Fry [former MD Europe] joins board in London, as European workload implodes after poor results and very poor income. Really? AUK have had far too many staff for their income, with the KPI of Earnings/Staff in UK & UAE woefully poor. Cash & Borrowings will be an ongoing concern. Can the share price go below 1p? 'Confidence' within large UK commercial practices continues to decline [todays press].....so perhaps it can.

AUK Chairman sounded a stark warning of things to come, saying: Considering all of the exogenous economic and political issues facing the group, and particularly in the UK, the board feels that the overall group outcome is unlikely to be profitable in the 2018 financial year. We believe it will take the UK more than one year to recover its previous profitability at reduced revenue levels. It would appear that projects are continuing to be postponed or cancelled on a regular basis according to the CEO in today's press. UK staff will need to drastically be cut, to bring the cost base 20% below the forecast UK revenue, at a 120k/staff level. The concern is that it appears AUK have a low level of secured UK income in 2018, so the situation could become very serious, very quickly. Losses in the Middle East grew from 199k in 2016, to 687k in 2017. With 115 staff in the Middle East and only 6.8m earnings in 2017, one can only deduce that without a massive cull of staff to under 60, further losses will continue to grow. The acquistions in the UAE have been a disaster for AUK, robbing the Group of cash at a time when the core UK business needed protection. Losses in Europe continues to mount in 2017, due to inaction by the Board to complete the JV arrangements promised at the half year. With over 1m in Debt & Overdraft, presenting an aggressive risk profile to revenue of 1:16 and rising, it is difficult to see how the position will not become more difficult for AUK as the cost reduction process mount in UK, UAE & Europe. The 2018 costs of a London office relocation will only add to the burden. All this set against a current near zero net cash position. The Board and Directors will need to slash their rewards, and staff put onto 3 day weeks to have any chance of survival. The CEO has bought a few additional shares as the full year figures were announced, however I suggest this was more in hope than in judgement. My opinion is that the shares will crash back to the penny dreadful level: I am amazed it has not already happened!

Aukett S****e Annual Financial Report ye 30.9.17 2017 Results: �a sorry story� With a rapidly declining turnover, down to 16.07m, 325k loss, 184k net cash, this is perhaps the worse position Aukett S****e [AUK] has been in for decades. CEO states: �AUK unlikely to be profitable in the 2018 financial year�. So another year of losses�.and net cash constantly under pressure! � Losses 325k � Net Cash 184k � Group Revenue down 11.7% � UK Revenue down 27%: no profit in sight! 8.7m and falling, a very uncertain and loss making year ahead! � Middle East 6.8m, 115 staff @ <60k/Employee: Extremely Poor KPI, 38% of Fosters!! Very low profitability potential at this KPI. � Europe 0.4m, hardly worth the effort! � 1m Debt & Overdraft [� Aggressive Risk� ratio revenue:debt @ 16] � Very Poor KPI: �Turnover/Employee� � �unlikely to be profitable in the 2018 financial year�. Without a one-off non-reoccurring income charge to the revenue stream in 2016/17, the loss would have been significantly larger! As I predicted earlier in the year, the AUK share price has already collapsed to multi year lows to 1.65p over the past few months, and it would appear that any upside is a long way off. Dividends cannot be paid until the net cash position significantly improves: that appears to be a long way away! The bank must be concerned on how their loan is going to be repaid! The ongoing concern is that the two major markets [UK & UAE] have serious ongoing issues: Brexit [UK] & prolonged slump in Oil Prices [UAE] weighing on the economic growth outlook in both markets. In December 2017, confidence in future architectural workloads for UK Architects had fallen to its lowest level according to the latest RIBA survey. Clients in both locations will be reluctant to instruct projects to proceed past the planning stage. There is every chance that turnover will slide further in both markets. The competition in both markets is extreme, as �signature architects� remain the �go-to� appointment for the major projects. AUK is not on that list of �signature architects�! Foster + Partners, the leading architectural �signature� competitor, are rolling along at 20% profit, with the 10 directors receiving 1m pa each! The key KPI �Turnover/Employee� is 160k pa, twice that of AUK. 7m has been distributed this year to key F+P staff as bonuses! Aukett Architectural Fee Earning Directors are on minimal reward: less than 10% of Foster+Partners. The key KPI �Turnover/Employee� is a mere 60k pa, less than 40% of the leading competitor. AUK continues to suffer from poor management, poor decisions, low fees, inefficient staffing levels, poorly run and unprofitable projects, multiple small und

Aukett S****e [AUK] has announced a project gain in Dubai. It is basically a big shed for Lesso! Be careful guys: AUK half year results showed an underlying $1m loss position for 2016/17, with cash draining very quickly. Lesso is a Chinese industrial group of home building materials, selling poor quality, poorly designed, Chinese interior building products. They buy low cost Chinese home building materials and are trying to sell them internationally through large shed buildings. AUK continues to �buy� low grade work. It is clear that Lesso buys the cheapest that is offered to them. AUK has most probably offered the Chinese a fee deal that even they could not resist! Hard to see how this cannot be AUK desperately buying �zero profit� workload to prop up their poor, low grade Middle East acquisition. AUK�s �1m Debt to prop up these low grade UAE acquistions, might be considered an aggressive risk position with �revenue : debt� ratio @ 16, so be careful! The key KPI �Turnover/Employee� is a mere �80k pa at AUK, less than 50% of the leading competitor. Dividends cannot be paid until the net cash position significantly improves: that appears to be a long way away! AUK continues to suffer from poor management, poor decisions, low fees, inefficient staffing levels, poorly run and unprofitable projects, multiple small under performing offices, high non-architectural staff wages [too many accountants!], and retention of high quality senior architectural staff not being rewarded resulting in low moral and departures. Shares traded at 1.65p at their lowest: shares continue to drag along at 30 year lows...... Expect 2016/17 results in January 18.....may not be pretty!

As AUK Year End approaches, shares have traded down to the 2p level as anticipated. Considering the half year results issued earlier, it would appear that without the ‘Windfall Gain’ listed within page 13 of the half year statement relating to ‘Non Recurring Income’ of 0.65m [Fair value gain on the reduction of deferred consideration + Gain recognised on acquisition settlement], the true loss for the half year would have blown out to c.1.0m. Without a significant turn around in income in the second half, a sizeable loss might be the outcome for the second half, with the knock effect of wiping out all ‘net funds’. AUK will then be relying on bank borrowings. More troubling is the fact that AUK are reporting to be holding 400 employees, with an annualised net fee income [excl.consultants] of only c.16m pa, representing a KPI of 40k/staff. The two highest paid employees appear to be accountants, and they are at c.200k/year! Fosters + Partners, the main UK competitor, are delivering 225m revenue with 1265 staff, representing a KPI of 178k/staff, 4.4x better than AUK!! Fosters have their 10 architectural directors earning on average 600k/year, before the distribution of EBITBA of 35.5m to shareholders. Most other UK Architectural practices are in constant profit with Chapman Taylor at 8% and Grimshaw at 6%. These companies are run by architects! Directors salaries are also much, much higher! Dividends will not emerge from AUK until they start clearing the debt and start delivering regular 10-15% profit margins. Currently they are in a potential substantial loss position, unless revenue increases fast. Cutting the cost base does not seem to be on the agenda, as they are constantly stating they are ‘protecting the core’? Sounds like the ‘core’ needs to be drastically reduced to 90 FTE to match the declining revenue stream and Fosters KPI of 178k/staff. If this full year loss outcome emerges, and 'net funds' exhausted, I expect the share price to be below 2p, and threaten multi year lows. If AUK does not reduce their headcount below the revenue base, an even worse outcome might follow…..

Aukett S****e (LON:AUK) Bear: Target 2.0p or lower. Multi Year Low “Interim results For the six months ended 31 March 2017 Aukett S****e 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 £9.1m • Net cash at £1.56m with net funds of £594k • Loss before tax of £358k 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." Overall we currently foresee a loss situation for the year pending a return to positive results for our Group.” As FTSE sets multi year highs, AUK approaching multi year lows UK Revenue Collapses Significant Losses in UK & Europe £473k Loss, only lessened by a share of JV profit Net Cash dropping fast: £594k [was £1.9m 18 months ago, losing c.£450k every 6 months] £1.0m of Bank Debt to support cash flow deleted from UAE purchases. UK GDP set to drop to 1.5% over the next two years. Service Sector is in sharp decline in last 3 months. 50% of AUK Group Income from UK, dropping from 65% in 2016: now heavily constrained by Brexit, UK Political Uncertainty, and UK Terrorist Attacks. Volatile National UK Mood. International operations spread across volatile, challenging geographies, with low fees, and bad debt provisions, incl. Middle East, Russia & Turkey. 45% of AUK Group Income from UAE, now constrained in UAE by over supply of office accommodation, and major retail and hospitality schemes coming on stream. Signature Architects taking the quality projects. Fosters + Partners [F+P] opened Dubai Office in 2017: a substantial high quality signature competitor. F+P £57m Middle East Fees in 2016. AUK has chased typically low margin design work with low fees and small margins Results continue to be very poor Poor Earnings per FTE @ £83k in 2016 [£18.4/220 FTE]; 2017 looks even worse! Ongoing Poor/No Profitability compared with other Architects, eg. Foster+Partners at 27- 30% profit in 2016. AUK had one client who delivered 20% of UK workload in 2016 [£2.25m] – this may not be repeatable in the years ahead, requiring more projects to fill this gap. 30% decline year on year decline in UK. Serial history of disappointing, lackluster, and lumpy trading CEO gifting shares to family as presents Micro-cap: very, very low share trading Risk of delisting: why do AUK bother? Chance of Delin

……….Just as I forecast on 12 January 2017 Net Funds @ 600k, sinking fast. Cash is king, and it is sinking… Losses everywhere: UK, UAE, Germany, Turkey 350k outgoings per week, leaves AUK with Net Funds of less than 2 weeks outgoings. No mention of projected full year numbers, but with Brexit in full swing, AUK’s main source of revenue from the UK [65% of group income] will be under considerable strain. UAE High End Office rentals forecast to fall as current office projects are being completed in 2017. Hard to see where the normal commercial AUK work will come from in the UAE. Business Bay just completed, and the other large projects in Abu Dhabi already have signature architects appointed. In retail, Mall of the World and Yas Island Development architects already in position. Large hotel projects Al Habtoor City, Jewel of the Creek, Paramount and Viceroy also already have architects engaged. AUK up against world class signature architects…..will they be able to attract clients? Predictions of a Loss for Full Year, Net Cash back to zero, More Staff Reduction costs to come? AUK = Overstaffed, Poor Fee Levels, Unproductive, Poor Earnings/Head. Far too uncertain to invest in this one…..