Last checked at 20 Jan 2014 07:00
Embargoed until 7:00am on Monday 20 January 2014
Aukett Fitzroy Robinson Group Plc
Announcement of final audited results
for the year ended 30 September 2013
Aukett Fitzroy Robinson Group Plc, the international practice of architects and interior design specialists, announces its final audited results for the year ended 30 September 2013.
Highlights
· Profit before tax from continuing operations up 162% to £550,000 (2012: £210,000)
· Earnings per share from continuing operations of 0.26p (2012: 0.08p)
· Significant second half recovery in UK performance continuing into 2014 with a strong order book
· Profit contribution from all joint ventures and associates
· Net funds of over £1m at 30 September 2013
· RIBA Award for flagship sustainable retail store in North West England
· Resumption of dividend payments in December 2013
· Acquisition of Swanke Hayden Connell Europe in December 2013
Nicholas Thompson, Chief Executive Officer of Aukett Fitzroy Robinson commented:
"Our performance in 2013 reflects a continuation of our recovery plans which have enabled us to move to a more strategic platform going forward as evidenced by our recent acquisition and creation of "Aukett Swanke" for 2014"
Enquiries
Aukett Fitzroy Robinson - 020 7843 3000
Nicholas Thompson, Chief Executive Officer
Duncan Harper, Group Finance Director
FinnCap - 020 7220 0500
Julian Blunt - Corporate Finance
Stephen Norcross or Simon Starr - Corporate Broking
Hermes Financial PR
Chris Steele - 07979 604687
Trevor Phillips - 07889 153628
Chairman's statement
I am delighted to report the continuation of our successful return to profitability with our result for the year ended 30 September 2013 being ahead of expectations. The group's profit before tax was £550,000 (2012: £210,000) on revenues that dipped slightly to £8.41m (2012: £9.15m). Earnings per share continue to improve at 0.26 pence per share (2012: 0.08 pence per share). With our cash balances rising we were able to return to the payment of a dividend for the first time in five years, an objective we have aspired to for some time. All of this is encouraging news and reflects the considerable achievements within the business.
This year brings a change to our annual report with the mandatory introduction of a strategic report. This report comprises five sections of which two, on strategy and business model, whilst not obligatory for AIM companies, have been included as the board believes that it better enables the reader to understand the background to our performance.
Our strategic report identifies M&A activity as a mechanism by which we can achieve our operating objectives and I am therefore extremely pleased to be able to report that we acquired the entire issued share capital of Swanke Hayden Connell Europe Limited on 18 December 2013. By doing this we have considerably enhanced the group's future prospects and its ability to meet its key objective of increasing shareholder value. Swanke Hayden Connell Europe is a well-regarded brand in the architectural and interior design market place and the merger of our two companies will provide a new and exciting creative design offer under our new brand "Aukett Swanke".
In that regard I would like to thank the management teams of both Aukett Fitzroy Robinson and Swanke Hayden Connell Europe in diligently completing what proved to be a lengthy process that had a successful outcome.
With this move we have taken steps to broaden board membership and I am delighted to welcome Andrew Murdoch, a senior director within the UK operation of Aukett Fitzroy Robinson, along with David Hughes and Nick Pell both of Swanke Hayden Connell Europe, to the board. I look forward to working with the new team.
As is customary I would also convey my thanks to all staff throughout our network for their hard work during the year in making these results possible and which provides a positive foundation for the year ahead.
The economies in our major client markets of the UK, Russia, Germany and the Middle East are all steadily improving, and with an increasingly favourable construction sector I remain confident about the group's future.
Anthony Simmonds
Non-Executive Chairman
17 January 2014
Extracts from strategic and directors' reports
Overview
AFR has performed well in the current financial year in comparison to the past four financial years. However, there remains some way to go in realising the group's potential despite the 162% rise in pre-tax profits during 2013.
Whilst revenue fell 8% during the year to £8.41m (2012: £9.15m), revenues less sub consultant costs increased by 6% to £7.12m (2012: £6.74m). With historic cost reduction programmes continuing to be effective, pre-tax profits rose to £550,000 (2012: £210,000). Underlying profit before a goodwill impairment provision of £125,000 was over three times higher at £675,000. This very good result has enabled the group to recommence dividend payments.
The majority of this year's trading improvement came about from a substantial second half uplift in UK revenue, but this in turn was tempered by poor performances in both Russia and the Middle East. We have, however, continued to see a significant and growing contribution from our partly owned European operations.
In terms of architectural success, the group has won a number of awards this year, led very much by a major new flagship retail store at Cheshire Oaks in Northern England. The design has won numerous awards, and in particular a RIBA North West Award, which then included the building in the long list for RIBA's prestigious Stirling Prize. More recently it has also been acclaimed for its efficiency by beating its use of energy targets by a staggering 33%. Additionally we won awards for 123 Victoria Street in London for Land Securities and best office building in the Moscow Awards for our design of 1,000,000 sq ft of recently completed new offices on Leningradsky Prospekt.
On the staff front we have increased the number of employees in the group including recruiting a large number of post graduate architectural assistants with a view to them qualifying as fully registered architects with us in due course. This will reinvigorate the business as local markets return to pre-recession levels of activity.
As a result of considerable cash being generated, net funds rose to £1.08m (2012: £0.33m) and, with a more confident outlook, the board recommenced dividend payments with a 0.01p per share dividend being paid in December 2013.
United Kingdom
As stated above the UK is at the core of our group. This year the UK has outperformed its targets for the year in terms of revenue, profitability and recruitment. Year on year revenues less sub consultant costs have increased by 21% to £6.08m (2012: £5.03m). Profits by comparison increased substantially from £127,000 in the first half to £961,000 for the full year (2012: £38,000) and allowed the operation to start the slow re-instatement of remuneration waivers in the second half and for bonuses to be paid, the first for some considerable time. Staff recruitment was high on the agenda during the second half, with the monthly number of FTE technical staff rising from 44 in February 2013 to 78 in September 2013.
Fourteen clients provided nearly 75% of the UK revenue reflecting the spread of project workload. Five projects reached the site phase including The Adelphi Building refurbishment for Blackstone, 125 Wood Street in the City for Orchard Street with Veretec (our executive delivery subsidiary) having three projects including an on-going instruction for Sir Robert McAlpine on De Vere Gardens in Kensington, The Turnmill in Farringdon for McLaren and 1A Page Street in Westminster for BAM.
Four projects are currently at the pre-tender stage including phase 1 of Forbury Place Reading for M&G Real Estate and our second building for Imperial College at Imperial West on their new West of London campus. There were a further six major schemes in the planning process by the year end including two schemes each for Development Securities and Goodman, all four of which were outside of London. There were also a number of projects in both the hotel / hotel interior sector, including projects for Tonstate and Morgans Hotels, and in the high end retail sector.
Russia
Russia had a very poor start to the year, losing £245,000 in the first half of the year, with two expected major projects not commencing leading to a loss of the team built up for our 3,600 key hotel project in Sochi for the 2014 Winter Olympics which completed satisfactorily by the year end.
Whilst some new projects and studies were won in the second half, including work on a new Jewish Cultural Centre just outside of Moscow and a concept office in Skolkovo, these were insufficient in both number and revenue to return the operation to profitability, and the operation lost a further £25,000 in second half bringing the full year loss before impairment to £270,000 (2012: profit of 58,000) on a dramatically reduced revenue less sub consultant costs of £0.78m (2012: £1.31m).
With the first quarter of the new financial year expected to be loss making, and as a result of the required impairment review, a decision was taken to make an impairment provision in 2013 against half of the goodwill attributed to the operation.
Careful cash management ensured that the operation continued to be self-funding and since the year end it has now won a major hotel instruction in Stavropol along with other smaller projects. This should reduce the group's exposure in 2014 and it is hoped restore modest profitability by the second half.
Middle East
Having lifted expectations in 2012 by achieving £396,000 of revenue less sub consultant costs, it was disappointing to finish the year with a drop of 36% to £252,000. The resulting loss of £132,000 (2012: profit of £44,000) was therefore not un-expected.
However, the final quarter saw our appointment to a major commission from Majid Al Futtaim, a significant Dubai developer, so we now have a more reliable revenue stream for 2014. Additionally we are now part of a preferred developer team for a number of retail led schemes in Abu Dhabi.
We remain committed to the region as a strategic location in our longer term international plans for growth. However, in the short term we are hampered by our local size and ability to manage only a small number of commissions in comparison to the rest of the group. Our strategy is to resolve this encumbrance of size in order to realise the potential of this operation.
Berlin
The continuing success of our 25% owned Berlin associate has seen another uplift in its revenue less sub consultant costs to £4.10m (2012: £3.43m). Coupled with tight cost control this has resulted in its profits before tax increasing to £1.34m (2012: £1.06m).
The operation is now seen as the preferred partner on many local projects, which includes commissions from Siemens, KFW Bank, and the Bundesdruckerei (the German state security printers). With an active construction market in Berlin we see a steady performance over the coming years with staff numbers remaining high to undertake the continuing workload.
At present the operation is at an optimum size for the local market and produces a twice yearly dividend. The strategy remains to focus on repeat business and investment return.
Frankfurt
Our 50% owned Frankfurt operation has had a fluctuating profit history in recent years, but now appears to be more stable at a higher revenue level. It returned to profit in 2013 helped by a strong fourth quarter. Its revenue less sub consultant costs rose to £496,000 from £348,000 generating a profit before tax of £58,000 (2012: loss of £28,000).
This performance came from a series of fit-out instructions from JP Morgan, Jaguar Land Rover and Microsoft showing both the high quality client base of the operation and the scaling up of project size. The Frankfurt area has little in the way of new architectural projects and we have adapted to be one of a number of specialist practices in the office fit-out arena.
Having relocated the studio to more modern premises, and with a strong client base, we see growth being achieved over the next two years.
Prague
The operation in Prague, which became a 50% joint venture with local management in September 2012, has suffered from a market with falling GDP, political distress with no political leadership, and consequent lack of market activity. Not surprisingly there has been a decline in property construction starts.
Against this background local management has reduced labour costs including those of the directors and this has enabled it to achieve a small but worthwhile profit of £12,000 (2012: loss of £8,000) on revenues less sub consultant costs of £308,000 (2012: £313,000).
The studio has excellent design capability, and the group is actively pursuing new ways of working to retain this skill set, and aid a return to longer term profitability in Prague.
Group costs
Group costs, which comprise those costs attributed to the corporate activities of the parent rather than the individual operations, rose to £145,000 (2012: £98,000) reflecting costs incurred in relation to the acquisition of Swanke Hayden Connell Europe, which were written off as incurred.
Swanke Hayden Connell Europe acquisition
With non-organic growth opportunities being an elusive element in our strategy it was a welcome and positive step to find a merger partner in Swanke Hayden Connell Europe with whom a deal was completed shortly after the year end.
This European firm has its roots on the East Coast of the United States and pedigree going back over a hundred years. It is one of the most highly regarded design firms for both architecture and interior design having completed numerous projects from its studios in UK, Russia and Turkey.
Management sees a very strong cultural fit and common design ethos between the practices with the internal integration process expected to be both seamless and project generative enabling the enlarged group to build upon its current staff base. Job losses are not expected although there should be property savings in due course, which will be partly offset by integration costs in relation to enhancing onto common IT operating systems.
The enlarged group now comprises sixteen studios in eight countries with:
· Eight wholly owned studios in the UK, Russia, Turkey and the UAE;
· Three partly owned operations in Germany and the Czech Republic; and
· Five licensees in the UK, Brazil and Colombia.
The pro forma combined revenues of all these operations is approximately £26m with a staff of over 340. Of these, 95 staff come from the former Swanke Hayden Connell Europe business.
Dividends
Having recommenced dividend payments, it is the intention of the directors to return to pursuing a policy of regular progressive dividend distributions.
Summary
Taking account of the market environment in which we operate, the executive directors are satisfied that the progress made in the year reflects a positive step forward in recovering our pre-recession performance levels.
Nicholas Thompson Chief Executive Officer | Duncan Harper Group Finance Director |
17 January 2014
Consolidated income statement
For the year ended 30 September 2013
2013 £'000 | 2012 £'000 | ||
Revenue | 8,406 | 9,150 | |
Sub consultant costs | (1,290) | (2,406) | |
Revenue less sub consultant costs | 7,116 | 6,744 | |
Personnel related costs | (4,751) | (4,596) | |
Property related costs | (1,256) | (1,342) | |
Other operating expenses | (1,027) | (842) | |
Other operating income | 217 | 95 | |
Operating profit | 299 | 59 | |
Finance income | 1 | - | |
Finance costs | (14) | (22) | |
Profit after finance costs | 286 | 37 | |
Share of results of associate and joint ventures | 264 | 173 | |
Profit before tax | 550 | 210 | |
Tax charge | (176) | (103) | |
Profit from continuing operations | 374 | 107 | |
Profit from discontinued operation | - | 48 | |
Profit for the year attributable to equity holders of the company |
374 |
155 | |
Basic and diluted earnings per share | |||
From continuing operations | 0.26p | 0.08p | |
From discontinued operation | - | 0.03p | |
Total earnings per share | 0.26p | 0.11p |
Consolidated statement of comprehensive income
For the year ended 30 September 2013
2013 £'000 | 2012 £'000 | ||
Profit for the year | 374 | 155 | |
Other comprehensive income: | |||
Currency translation differences | (2) | (27) | |
Currency translation differences recycled on discontinued operations |
1 |
(172) | |
Other comprehensive income for the year | (1) | (199) | |
Total comprehensive income for the year attributable to equity holders of the company |
373 |
(44) |
Consolidated statement of financial position
At 30 September 2013
2013 £'000 | 2012 £'000 | ||
Non current assets | |||
Goodwill | 1,369 | 1,494 | |
Property, plant and equipment | 326 | 319 | |
Investment in associate | 190 | 157 | |
Investments in joint ventures | 39 | 9 | |
Deferred tax | 454 | 674 | |
Total non current assets | 2,378 | 2,653 | |
Current assets | |||
Trade and other receivables | 3,515 | 2,502 | |
Current tax | 117 | 152 | |
Cash and cash equivalents | 1,343 | 739 | |
Total current assets | 4,975 | 3,393 | |
Total assets | 7,353 | 6,046 | |
Current liabilities | |||
Trade and other payables | (4,005) | (2,641) | |
Short term borrowings | (150) | (150) | |
Provisions | (50) | (321) | |
Total current liabilities | (4,205) | (3,112) | |
Non current liabilities | |||
Long term borrowings | (113) | (263) | |
Deferred tax | (6) | (19) | |
Total non current liabilities | (119) | (282) | |
Total liabilities | (4,324) | (3,394) | |
Net assets | 3,029 | 2,652 | |
Capital and reserves | |||
Share capital | 1,456 | 1,456 | |
Foreign currency translation reserve | 29 | 30 | |
Retained earnings | (898) | (1,276) | |
Other distributable reserve | 2,442 | 2,442 | |
Total equity attributable to equity holders of the company |
3,029 |
2,652 |
Consolidated statement of cash flows
For the year ended 30 September 2013
2013 £'000 | 2012 £'000 | ||
Cash flows from operating activities | |||
Cash generated from operations | 646 | 378 | |
Interest paid | (14) | (22) | |
Income taxes paid | 61 | (223) | |
Net cash inflow from operating activities | 693 | 133 | |
Cash flows from investing activities | |||
Purchase of property, plant and equipment | (157) | (153) | |
Sale of property, plant and equipment | 4 | 1 | |
Disposal of subsidiary, net of cash disposed | - | (95) | |
Interest received | 1 | - | |
Dividends received | 210 | 134 | |
Net cash generated from / (used in) investing activities |
58 |
(113) | |
Net cash inflow before financing activities | 751 | 20 | |
Cash flows from financing activities | |||
Repayment of bank loans | (150) | (150) | |
Payment of asset finance liabilities | - | (31) | |
Dividends paid | - | - | |
Net cash used in financing activities | (150) | (181) | |
Net change in cash, cash equivalents and bank overdraft |
601 |
(161) | |
Cash and cash equivalents and bank overdraft at start of year |
739 |
912 | |
Currency translation differences | 3 | (12) | |
Cash, cash equivalents and bank overdraft at end of year |
1,343 |
739 |
Consolidated statement of changes in equity
For the year ended 30 September 2013
Share capital £'000 | Foreign currency translation reserve £'000 | Retained earnings £'000 | Other distributable reserve £'000 | Total £'000 | |
At 30 September 2011 | 1,456 | 229 | (1,438) | 2,442 | 2,689 |
Profit for the year | - | - | 155 | - | 155 |
Other comprehensive income |
- |
(199) |
- |
- |
(199) |
Share based payment value of employee services |
- |
- |
7 |
- |
7 |
At 30 September 2012 | 1,456 | 30 | (1,276) | 2,442 | 2,652 |
Profit for the year | - | - | 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 audited final results
1 Basis of preparation
The financial information presented in this announcement has been prepared in accordance with the recognition and measurement principals of International Financial Reporting Standards as adopted by the European Union ('IFRS').
2 Operating segments
The group comprises a single business segment and four separately reportable geographical segments (together with a group costs segment). Geographical segments are based on the location of the operation undertaking each project.
The group's associate and joint ventures are all based in Continental Europe.
Segment revenue
2013 Segment revenue | Total £'000 | ||
United Kingdom | 6,160 | ||
Russia | 1,875 | ||
Middle East | 371 | ||
Continental Europe | - | ||
Revenue | 8,406 |
2012 Segment revenue | Continuing operations £'000 | Discontinued operation £'000 | Total £'000 |
United Kingdom | 5,157 | - | 5,157 |
Russia | 3,547 | - | 3,547 |
Middle East | 446 | - | 446 |
Continental Europe | - | 545 | 545 |
Revenue | 9,150 | 545 | 9,695 |
The geographical split of revenue based on the location of project sites was:
2013 £'000 | 2012 £'000 | ||
United Kingdom | 6,114 | 4,979 | |
Russia | 1,875 | 3,537 | |
Middle East | 408 | 587 | |
Continental Europe | 9 | 559 | |
Rest of the World | - | 33 | |
Revenue | 8,406 | 9,695 |
Segment revenue less sub consultant costs From continuing operations | 2013 £'000 | 2012 £'000 | |
United Kingdom | 6,083 | 5,034 | |
Russia | 781 | 1,314 | |
Middle East | 252 | 396 | |
Continental Europe | - | - | |
Revenue less sub consultant costs | 7,116 | 6,744 |
Segment result
2013 Segment result | Before goodwill impairment £'000 | Goodwill impairment £'000 | Total £'000 |
United Kingdom | 961 | - | 961 |
Russia | (270) | (125) | (395) |
Middle East | (132) | - | (132) |
Continental Europe | 260 | - | 260 |
Group costs | (144) | - | (144) |
Profit before tax | 675 | (125) | 550 |
2012 Segment result | Continuing operations £'000 | Discontinued operation £'000 | Total £'000 |
United Kingdom | 38 | - | 38 |
Russia | 58 | - | 58 |
Middle East | 44 | - | 44 |
Continental Europe | 168 | 60 | 228 |
Group costs | (98) | - | (98) |
Profit before tax | 210 | 60 | 270 |
3 Earnings / (Losses) per share
The calculations of basic and diluted earnings per share are based on the following data:
Earnings | 2013 £'000 | 2012 £'000 |
Continuing operations | 374 | 107 |
Discontinued operations | - | 48 |
Profit for the year | 374 | 155 |
Number of shares | 2013 Number | 2012 Number |
Weighted average of ordinary shares in issue | 145,618,693 | 145,618,693 |
Effect of dilutive options | - | - |
Diluted weighted average of ordinary shares in issue | 145,618,693 | 145,618,693 |
4 Cash generated from operations
2013 £'000 | 2012 £'000 | ||
Profit before tax - continuing operations | 550 | 210 | |
Profit before tax - discontinued operation | - | 60 | |
Currency translation differences recycled | 1 | (172) | |
Share based payment value of employee services | 4 | 7 | |
Finance income | (1) | - | |
Finance costs | 14 | 22 | |
Share of results of associate and joint ventures | (264) | (173) | |
Goodwill impairment provision / write off | 125 | 102 | |
Depreciation | 149 | 144 | |
Profit on disposal of property, plant and equipment | (4) | (1) | |
Change in trade and other receivables | (1,022) | 591 | |
Change in trade and other payables | 1,365 | (568) | |
Change in provisions | (271) | 156 | |
Net cash generated from operations | 646 | 378 |
5 Analysis of net funds
2013 £'000 | 2012 £'000 | ||
Cash and cash equivalents | 1,343 | 739 | |
Secured bank overdraft | - | - | |
Cash, cash equivalents and bank overdraft | 1,343 | 739 | |
Secured bank loan | (263) | (413) | |
Net funds | 1,080 | 326 |
| 2013 £'000 | 2012 £'000 | |
Cash and cash equivalents | 1,343 | 739 | |
Short term borrowings | (150) | (150) | |
Long term borrowings | (113) | (263) | |
Net funds | 1,080 | 326 |
6 Post balance sheet event
On 18 December 2013 the group acquired the entire issued share capital of Swanke Hayden Connell Europe Ltd, a major group of architects and interior designers with studios in the UK, Russia and Turkey.
The total consideration for the acquisition is £1.58m comprising a cash payment of £209,053 with the balance satisfied by the issue of 19,594,959 new ordinary shares at a price of 7.00 pence per share.
The enlarged group will trade as Aukett Swanke and a resolution will be proposed at the annual general meeting to change the name of the company to Aukett Swanke Group Plc.
7 Status of final audited results
This announcement of final audited results was approved by the board of directors on 17 January 2014.
The financial information presented in this announcement has been extracted from the group's audited statutory accounts for the year ended 30 September 2013 which will be delivered to the Registrar of Companies following the company's annual general meeting. The auditor's report on these accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain a statement under section 498 of the Companies Act 2006.
Statutory accounts for the year ended 30 September 2012 have been delivered to the registrar of companies and the auditors' report on these accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain a statement under section 498 of the Companies Act 2006.
The financial information presented in this announcement of final audited results does not constitute the group's statutory accounts for the year ended 30 September 2013.
8 Annual general meeting
The annual general meeting of the company will be held at 9:30am on Tuesday 25 March 2014 at 36-40 York Way, London, N1 9AB.
9 Annual report and accounts
A copy of the annual report and accounts will be dispatched by post in due course to those shareholders who have elected to continue receiving a printed version. Other shareholders will receive notification by post that an electronic copy will be available for download from the company's website (www.aukettfitzroyrobinson.com).