Aukett Swanke Regulatory News (AUK)

27 Jan 2006 11:46

Aukett Group PLC27 January 2006 For Release 27 January 2006 Aukett Group PLC 2005 PRELIMINARY RESULTS ANNOUNCEMENT Repositioning and Long Term Growth Strategy in Place Aukett Group Plc ("Aukett"), the international group of architects, designersand engineers announces its Preliminary Results for the 12 months ended 30September 2005. Aukett provides creative design consultancy in a diverse rangeof sectors including: commercial property, hotels, retail, interior design,urban regeneration, residential, healthcare, leisure, transportation andtechnical support facilities. The Group's network has been rationalised and offices with delivery capabilityare now situated in Berlin, Bratislava, Frankfurt, London, Moscow, Prague andWarsaw. Glasgow has been closed, Holland sold, London consolidated into the WestEnd, and a new joint venture in Romania. Financial HighlightsYear ended 30 September 2005 2005 2004 (as restated) Turnover £12.28m £11.69mGroup work done £12.61m £11.90m Operating profit/(loss) £236,000 (£1,223,000)Profit/(loss) before tax £159,000 (£1,327,000) Basic and diluted earnings/(loss) per share 0.02p (1.63p) Dividends per share £nil £nil Net assets £2.33m £0.28mNet borrowings (£1.38m) (£1.46m)Gearing 59% 521% Key Points of Statement. • Five month contribution from Fitzroy Robinson. • New long term strategy in place. • Financial position strengthened. • Merger with Fitzroy Robinson contributed significantly to improved balance sheet position, better trading performance. • Stand alone Aukett operation loss-making during period, improvement in latter months. • IT infrastructure upgraded. • Mixed set of results in Europe. • Greatest potential markets in Russia, Poland and Spain. • Proposed move to AIM from Official List. CEO, Nicholas Thompson, said: "Most of the shortcomings have now been addressed in the UK and throughout thewider European network. Under performing operations have been eitherrationalised or sold, with internal control systems strengthened. A newmanagement team is in place to ensure that the enlarged group operates and growsfrom a stable base in what is a competitive market place. Our intention is toimplement a growth strategy which aims to double the size of the business withinthe next five years. This strategy will combine organic growth underpinned bygreater volumes through existing business streams alongside a general increasein the scale of projects, as demonstrated by recent project wins." Enquiries to: Nicholas Thompson, Chief Executive Nicholas.thompson@aukettfitzroyrobinson.com Gerry Deighton, Chairman Aukett Group Plc Tel: 020 7636 8033 Peter Binns peter.binns@binnspr.co.uk Binns & Co PR Tel: 020 7786 9600 AUKETT GROUP PLC Results for the twelve months ended 30 September 2005 Introduction I became the CEO role of the newly merged group in April 2005. My immediatetask was to ensure the successful integration of the two businesses followingthe merger and at the same time ensuring that a new long-term strategy for thebusiness was developed. This involved rationalising the operations whilsteffecting a continued strengthening of our financial position. I am pleased toreport that progress has been made on both fronts, details of which are coveredin the report below. The repositioning of the Group has involved many difficult decisions. As apeople based business, our principal fixed cost is premises and these have beensuccessfully reduced through relocation, substantially lowering the cost base.Our variable costs are almost entirely staff related and reducing these has beena painful but necessary operation. Overall, we have achieved theserestructurings whilst continuing to provide a first class product to our clientsand I am immensely grateful to our staff for their dedication and effort. Financial overview The Group achieved a net profit before tax for the year of £0.16m (2004: Loss£1.33m as restated) on work done of £12.6m (2004: £11.9m as restated). We haveamended our accounting policy in line with UITF 40; the financial impact ofwhich is detailed in note 6 below. The merger with Fitzroy Robinson contributedsignificantly to the improved balance sheet position as well as contributing toa better trading performance, albeit for only the last 5 months of the year.The stand alone Aukett operation continued to make losses during the period nowreported but an improvement was achieved in the latter months. Our cashposition also started to improve with inroads made into our debtor collectionrate on the basis of improved appointment and invoicing methodology along with amore focused recovery programme. There are a small number of significantproject claims, totalling approximately £2.8m gross, where the Company is innegotiations with clients for additional fees which are not included in thereported result; some of which may be resolved during 2006. Of this sum,approximately 50% relates to a Planning Consent success fee and the remainderrelates to time related costs for the extended scope of services on variousprojects. Review of Operations During the financial year, the original London based Aukett operation has beenrationalised to reflect the needs of the on-going business. This process wasmanaged to ensure that each Sector in which we operate retained the level ofskill and critical mass for it to be able to contribute under our futurestrategy. As part of this review, the Board took the decision to close ourGlasgow office. Existing contracts are therefore being run out and no newcommissions taken on. In order to ensure that our business is fully able to operate in a competitiveenvironment, a significant upgrade programme has been undertaken to renew our ITinfrastructure including the rolling out of the latest AutoCad software systemthroughout our UK and European operations. This enabled us to maximise ourbuying power and achieve significant volume discounts. In December 2005 we completed our move from Battersea to new premises in theWest End at a one-off cost of £390,000 for penalties and dilapidations, thusrelocating all of our staff within walking distance of each other. Goingforwards, this move will result in a rental saving of in excess of £300,000 perannum plus associated office running costs. Additionally, we are nowoutsourcing administrative tasks wherever possible, including IT management,archiving and payroll to ensure that we only retain necessary and strategicallyappropriate administrative backup. In Europe we have had a mixed set of results. Our Russian operation continuesto gain new, significant enquiries but is hampered by a skills shortage. Polandhas returned to profitability but remains dependent on projects in Russia. TheCzech office has continued to expand its operations in central Europe with ajoint venture being formed in Romania on the back of projects secured there. TheGerman operations are maintaining income in what continues to be a verydifficult market. Despite a number of initiatives including a local alliance,our Dutch operation has continued to under perform and the operation wastherefore sold in December 2005 to our alliance partners who have assumed allliabilities. Corporate strategy Having returned the UK operations to profit, my principal aim for theforthcoming year is to continue to improve commercial performance by increasingthe number of high quality, high value projects which the practice undertakescoupled with sound financial management. It is pleasing to note that in theimmediate post merger period we have been invited to bid or have been shortlisted on a number of significant projects, of which a small number are inexcess of £100m construction value. This reflects our status as one of the fewsignificant UK based architectural practices with a track record of deliveringlarge scale projects from conceptual design to practical completion. Our intention is to implement a growth strategy which aims to double the size ofthe business within the next five years. This strategy will combine organicgrowth underpinned by greater volumes through existing business streamsalongside a general increase in the scale of projects, as demonstrated by recentproject wins. To deliver this strategy and to ensure that ultimate successioncan be properly managed, the Board has adopted an active strategy of givinggreater responsibility to key staff below director level. We believe that looking beyond the UK our greatest potential markets aresituated in Russia, Poland and Spain and consider our operations in thesecountries complementary to those in London in terms of likely commercial growthover the ensuing period. In Spain, we are looking to forge a strategic alliancewith an appropriate partner so long as it is on the right commercial terms. A factor within this growth strategy is the greater potential to enhanceearnings by better utilisation of the expertise and the lower cost base that ourEuropean network can deliver whilst maintaining overall quality. We arecommencing a programme of investment into our Central and East European officesto ensure that they have state-of-the-art technology providing all offices withthe capability to work with each other on significant projects. We have reviewed our current positioning on the stockmarket as a "small cap"company on the Official list. With the evolution and greater acceptability ofAIM and its attractions to investors as well as its growing reputation, theBoard has decided that the future of the Company would be better served if itwere to be quoted on an exchange with companies of a similar size and outlook.As such, a resolution will be put to shareholders to approve the Company'sproposed move to AIM under the fast track procedures of the London StockExchange. Gerry Deighton has assumed the role of Chairman and Jose Luis Ripoll has steppeddown from the Board with immediate effect having fulfilled the objectives setout by him last year. On behalf of the Board I would like to thank him for hiscontribution over the last 18 months. Summary It was clear upon concluding the Merger that a number of significantshortcomings still existed in the previous operations, both in the UK andthroughout the wider European network. Most have now been addressed andunderperforming operations have either been rationalised or sold and a strategyput in place to better position the business longer term. Having strengthenedthe internal control systems, the new management team will continue to exercisediligent control over operations to ensure that we can operate and grow from astable base in what is a competitive marketplace. Finally, I would like to thank the Directors and staff for their commitment anddedication to making the merged entity a success, both in the few months we havebeen together and in the many years of future success to which we can lookforward. J N E ThompsonChief Executive Officer 27 January 2006 Consolidated profit and loss accountFor the year ended 30 September 2005 Notes 2005 2004 £000 (as restated) £000 Group turnover 1 12,284 11,690 Movement in amounts Recoverable on contracts 1 327 214 Group work done 1 12,611 11,904 Existing Operations 10,158 11,904 Acquisitions 2,453 - Group Work Done 12,611 11,904 Group operating profit/(loss) 2 236 (1,223) Existing Operations (114) (1,223) Acquisitions 350 - Operating profit/(loss) 236 (1,223) Share of operating profit/(loss) in joint 25 31ventures and associate Exceptional items: Profit on disposal of joint 3 23 - ventures Profit/(loss) on ordinary activities before 284 (1,192)interest and tax Net interest payable (125) (135) Profit/(loss) on ordinary activities before 4 159 (1,327)tax Tax (charge)/credit on profit/(loss) on (136) 143ordinary activities Profit/(loss) on ordinary activities after 23 (1,184)tax Dividends - - Retained profit/(loss) for the year 23 (1,184) Basic and diluted earnings/(loss) per share 5 0.02p (1.63p) There is no difference between the profit/(loss) on ordinary activities beforetaxation and the retained profit/(loss) for the Group stated above and theirhistorical cost equivalents. The operating profit for the year arises from the Group's continuing operations Consolidated Balance Sheet At 30 September 2005 2005 2004 (as restated) £000 £000 £000 £000Fixed assetsIntangible assets 1,647 204Tangible assets 350 363Investments in joint ventures: Share of gross assets - 357 Share of gross liabilities - (308) - 49Investment in associate 31 29 2,028 645Current assetsDebtors 6,064 5,271Cash at bank and in hand 1,158 404 7,222 5,675Creditors falling due within one year (5,400) (5,989)Net current assets/(liabilities) 1,822 (314)Total assets less current liabilities 3,850 331Creditors falling due after one year (1,520) (53)Net assets 2,330 278 Capital and reservesCalled up share capital 1,448 724Share premium account 1,385 1,794Merger reserve 1,542 -Profit and loss account (2,045) (2,240)Equity shareholders' funds 2,330 278 Statement of total recognised gains and lossesFor the year ended 30 September 2005 2005 2004 (as restated) £000 £000Profit/(loss) for the financial year 23 (1,184) Foreign exchange differences (28) 41 Total gains and losses recognised in the year (5) (1,143) Prior period adjustment (note 6) (243) Total gains and losses recognised since the last annual report (248) Reconciliation of movements in equity shareholders' fundsFor the year ended 30 September 2005 2005 2004 £000 £000 Opening shareholders' funds as originally presented 521 1,493 Prior Period Adjustments (note 6) (243) (72) Opening shareholders' funds as restated 278 1,421 Exchange movement (28) 41 New shares issued 2,266 - Share issue costs offset against share premium account (209) - Profit/(loss) attributable to shareholders 23 (1,184) Shareholders' funds at 30 September 2,330 278 Consolidated Cash Flow StatementFor the year ended 30 September 2005 2005 2004 (as restated) £000 £000 £000 £000 Net cash inflow from operating activities 426 523 Returns on investments and servicing of (125) (135)finance Tax paid (46) 73Capital expenditure Purchase of tangible fixed assets (117) (14)Acquisitions and disposals Disposal of joint venture 44 - Cash acquired with subsidiary 508 - Costs of acquisition of subsidiary (409) - Net cash inflow before financing 281 447Financing Repayment of loans - (40) Principal repayments under hire purchasecontracts and finance leases (92) (147) Net cash outflow from financing (92) (187) Increase in cash 189 260 Reconciliation of net cash flow to movement in netdebt Increase in cash for the year 189 260 New loans forming part of consideration foracquisition of subsidiary (200) - Cash outflow from decrease in debt 92 187 New finance leases - - Movement in net debt during the year 81 447 Net debt at 1 October 2004 (1,464) (1,911) Net debt at 30 September 2005 (note 9) (1,383) (1,464) NOTES 1 Turnover and work done An analysis of turnover and work done by geographical area of destination is asfollows: 2005 2004 (as restated) United Rest of United Rest of Kingdom Europe Total Kingdom Europe Total £000 £000 £000 £000 £000 £000Turnover Gross turnover 9,969 2,728 12,697 9,790 2,655 12,445 Less: Share of joint - (210) (210) - (498) (498)ventures Share of associate - (203) (203) - (257) (257) Group turnover 9,969 2,315 12,284 9,790 1,900 11,690 Movement in amountsrecoverable on contracts Gross movement 311 76 387 282 (138) 144 Less: Share of joint - 3 3 - 63 63ventures Share of associate - (63) (63) - 7 7 Group movement in amountsrecoverable on contracts 311 16 327 282 (68) 214 Work doneGross work done 10,280 2,804 13,084 10,072 2,517 12,589 Less: Share of joint - (207) (207) - (435) (435)ventures Share of associate - (266) (266) - (250) (250) Group work done 10,280 2,331 12,611 10,072 1,832 11,904 2 Group operating profit/(loss) 2005 2004 Existing Acquisition Total (as restated) £'000 £'000 £'000 £'000 Turnover 9,586 2,698 12,284 11,690 Movement in work in progress 572 (245) 327 214 Group work done 10,158 2,453 12,611 11,904 Other operating income 49 - 49 172 Staff costs (5,446) (978) (6,424) (6,927) Amortisation of goodwill (52) - (52) (63) Depreciation (233) (65) (298) (336) Other operating charges (4,200) (1,060) (5,260) (5,327) Exceptional operating charges (390) - (390) (646) Group operating profit/(loss) (114) 350 236 (1,223) The exceptional operating charge of £390,000 comprises provisions for the£230,000 exit penalty on early termination of the lease of the Group's Batterseaoffices and £160,000 for associated dilapidation costs. The 2004 exceptional operating charges related to an impairment provision of£236,000 to fully amortise goodwill carried on the balance sheet in respect toAukett BV, costs relating to 2004 EGM of £210,000 mainly comprise professionaladviser fees in respect to issuing the circulars to shareholders and holding thesubsequent EGM in March 2004, and adviser costs relating to the Acquisition (seenote 7). 3 Exceptional item The exceptional item relates to the profit on disposal of the Group'snon-strategic interest in Aukett & Garretti Srl in December 2004. 4 Profit/(loss) on ordinary activities before taxation An analysis of profit/(loss) on ordinary activities before taxation bygeographical area is as follows: 2005 2004 (as restated) United Rest of United Rest of Kingdom Kingdom Europe Total Europe Total £000 £000 £000 £000 £000 £000 Company and subsidiaries 519 5 524 (318) (392) (710) Share of joint ventures - 23 23 - 28 28 Share of associate - 2 2 - 1 1 519 30 549 (318) (363) (681) Impairment of goodwill - (236) Costs relating to 2004 EGM - (210) Costs relating to the - (200)Acquisition Lease penalty & dilapidations (390) - Group total 159 (1,327) 5 Earnings/(loss) per share The earnings per share is calculated on the profit attributable to shareholdersof £23,000 for the year ended 30 September 2005 (2004: loss £1,184,000 asrestated) and on 105,940,081 (2004: 72,421,394) ordinary shares, being theweighted average number of shares in issue during the year. There is noadditional dilution to the report in either year in accordance with FRS 14,Earnings per Share. 6 Summary of effects of change in accounting policy The change in accounting policy has been introduced in response to theaccounting Abstract relating to revenue recognition and service contracts whichwas issued in March 2005 and is applicable to all accounting periods endingafter 22 June 2005. The abstract, inter alia, restricts the recognition ofincome when the consideration is conditional on a specified future event theoccurrence of which is outside the control of the seller. As a result the workin progress valuation at 31 March 2005 was £302,000 lower than it would havebeen under the previous policy. Of this, £59,000 relates to the current year,reducing both work done and profit accordingly and £243,000 relates to prioryears and has therefore been taken as an adjustment to reserves. 7 Movement in Reserves Following the completion of the Acquisition, a total of £409,000 of costsrelating to the issue of shares has been written off against the share premiumaccount in accordance with s130(2) of the Companies Act 1985. Consequently,there is a transfer of £200,000 between the profit & loss and share premiumaccounts representing share issue costs expensed through the 2004 accounts. 8 Acquisition of a subsidiary undertaking On 15 April 2005, the Company acquired 100% of the issued share capital ofFitzroy Robinson Limited for consideration comprising the issue of 72,392,431new ordinary shares of £0.01 each in the Company and a £200,000 loan note. Thefair value of the consideration was £2,465,883. In accordance with sections 131and 133 of the Companies Act 1985, the Company has taken no account of anypremium on the shares issued and has recorded the cost of the investment at thenominal value of the shares issued plus the fair value of the otherconsideration. The resulting difference arising on consolidation has beencredited to other reserves. The following table sets out the book value of the identifiable assets andliabilities acquired and their fair value to the Group: Book and Fair value £'000 Fixed assets 169 Current assetsDebtors 1,561Cash 508 Total assets 2,069 CreditorsFees in Advance 514Trade creditors 277Accruals 217Other creditors 258 Total liabilities 1,266 Net assets 972 Goodwill 1,494 2,466 Satisfied by:Shares issued 2,266Loan note 200 2,466 Net cash inflows in respect of the acquisition comprised: £'000 Cash consideration -Cash at bank and in hand acquired 508Bank overdrafts acquired - 508 9 Analysis of net debt At 1 October Cash flow Non-cash At 30 September 2004 movements 2005 £'000 £'000 £'000 £'000 Cash at bank and in hand 404 754 - 1,158 Overdrafts repayable on (1,729) (565) 1,350 (944)demand (1,325) 189 1,350 214 Bank and other loansrepayable in: Less than one year - - (38) (38) More than one year - - (1,512) (1,512) Finance leases and HirePurchase contracts (139) 92 - (47) (139) 92 (1,550) (1,597) Net Debt (1,464) 281 (200) (1,383) 10 Post Balance Sheet Events On 16 December 2005 the Company entered into an agreement to sell for €1 100% ofits shares of Aukett BV, a subsidiary based in the Netherlands, to Group A BV -a team of designers based in Rotterdam with whom the Group had been working. Atthe date of disposal, the net liabilities included in the books of the Groupamounted to £20,000. 11 Statutory accounts The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 30 September 2005 or 2004 but is derivedfrom those accounts. Statutory accounts for 2004 have been delivered to theRegistrar of Companies and those for 2005 will be delivered following theCompany's annual general meeting. The auditors have reported on the 2004accounts; their reports was unqualified and did not contain statements undersection 237(2) or (3) of the Companies Act 1985. 12 Annual Report The Annual Report and Accounts is expected to be mailed toshareholders on or before 28 February 2006. Further copies will be availablefrom the registered office of the Company, 14 Devonshire Street, London W1G 7AE,or will be accessible via the Company's website atwww.aukettfitzroyrobinson.com. This information is provided by RNS The company news service from the London Stock Exchange