Aukett Swanke Regulatory News (AUK)

Aukett Swanke Group Plc

("Aukett Swanke", the "Company", or, together with its subsidiaries, the "Group")

Final audited results

for the year ended 30 September 2022

Aukett Swanke Group plc, the international group of architects, interior designers and engineers announces its final audited results for the year ended 30 September 2022.

Highlights

Period under review

· Revenue less sub consultant costs (from continuing operations) up 13% to £7.127m (2021: £6.305m) due to increases from the UK operations.

· Trading loss before tax (from continuing operations) reduced to £72k (2021: £595k).

· Continued strong performance from its German associate and joint venture, recording profit of £327k (2021: £186k).

· Disposal of John R Harris & Partners for £1.1m (AED 5.0m), and discontinuation of remaining loss making UAE businesses.

· One-off impairment of £1.75m goodwill from historic mergers to better reflect the tangible position of the current operations. 

Since the financial year end

Acquisition of Torpedo Factory Group Limited which:

· expands the Group technology offering relating to building systems;

· increases access to recurring revenue opportunities;

· strengthens the financial position of the enlarged Group; and

· strengthens the executive management team.

Clive Carver, Chairman said:

"Our focus is on growing both the core architecture businesses and our building systems capabilities."

Robert Fry, CEO said:

"During the period under review, market conditions across the Group's continuing business segments improved, reflected in higher revenues and stronger trading results in the second half of the year.

This momentum has continued after the year end. We continue to receive repeat instructions from longstanding clients and win new business, resulting in an improved confirmed order book for the architecture and interior design businesses, which is approximately 23% higher than the same time last year.

Having invested in retaining our existing key staff and capabilities during the challenging times of the COVID-19 pandemic, we are now in a sustained period of growth, with the UK architecture and interior design operations recruiting to increase technical staff numbers continually over the past nine months to service this growing workload.

Significant investments have also been made in business resilience measures to facilitate effective remote working, improving Revit 3D modelling and rendering capability whilst simultaneously increasing resilience to cybersecurity threats."

Copies of the 2022 audited accounts will be available today on the Company's website (www.aukettswankeplc.com) for the purposes of AIM rule 26 and will be posted to shareholders who have elected to receive a printed version in due course.

Annual General Meeting ("AGM") and proposed Board Changes

Notice of the AGM, which is expected to be held on 21 April 2023, will be posted to shareholders in due course.

Robert Fry's appointment as interim CEO is scheduled to end at the conclusion of the AGM, when it is proposed that Nick Clark become the Group's permanent Chief Executive, with Robert becoming a part time executive director and Deputy Chairman, with principal responsibility for the Group's architecture businesses.

Raul Curiel has informed the Board that he does not propose to offer himself for re-election at the forthcoming AGM. The Company is in advanced stages on the appointment of a new independent Non-Executive Director and looks forward to updating on this in due course.

For further information please contact:

Aukett Swanke Group Plc +44 (0) 20 7843 3000 

Clive Carver (Chairman)

Robert Fry (Chief Executive)

Antony Barkwith (Group Financial Director)

Strand Hanson Limited (Financial and Nominated Adviser) +44 (0) 20 7409 3494

Richard Johnson, James Bellman

Zeus Capital Limited (Broker) +44 (0) 20 3829 5000

Simon Johnson, Louisa Waddell

Investor/Media +44 (0) 7979 604 687

Chris Steele

Chairman's statement

I am pleased to present the financial statements for the year ended 30 September 2022.

Leadership changes

Nicholas Thompson

After 28 years with the Group, of which the last 17 years were as Chief Executive, Nicholas Thompson retired at the end of December 2022.

Nicholas masterminded the 2005 merger between Aukett and Fitzroy Robinson and the 2013 merger between Aukett Fitzroy Robinson and Swanke Hayden Connell to form the current Aukett Swanke Group. He then led the integration of these businesses and was instrumental in the Group's international expansion.

In recent years he led the Group through difficult times, succeeding in preserving for shareholders what might otherwise have been a casualty to either the Global Financial Crisis or the Covid inspired downturn.

Nicholas will act as a consultant to the Group and continue to play a leading role at the WREN, the industry's leading professional indemnity insurer.

Raul Curiel

Raul joined the Group in 1978 retiring in 2015. He returned as Non-Executive Chairman in early 2019 until 8 December 2022, when he relinquished the Chairman role but continued as a Non-Executive Director.

Raul was one of the Group's most prominent and award winning architects and responsible for numerous notable buildings. More recently as Non-Executive Chairman he led the board in helping set and oversee the Group's strategic plans.

Raul has informed the board that he does not propose to seek re-election at the AGM scheduled for 21 April 2023 and will therefore leave the board at that time.

The acquisition of Torpedo Factory Group ("TFG") and the expansion of the Group's activities into Smart Buildings was conceived under the leadership of Nicholas and Raul and will be actively pursued by the current board.

The Investment Case

Background

The past few years have been difficult, and the board's focus was principally to preserve the Group as intact as possible to form the base for future growth.

As is set out more fully in the Chief Executive's Report, this now has largely been achieved, with the continuing businesses trading better than for some time and those businesses and offices not deemed to be long term either sold, closed, or being moved onto a licence basis where the responsibility for profit rests with the local office concerned rather than the Group.

UK Businesses

Aukett Swanke Limited ("ASL") (design and architecture) and Veretec Limited ("Veretec") (executive architecture) are core and key to the Group's future.

These businesses can trace their roots back to 1906 and currently employs over 80 FTE technical staff of which 54 are qualified architects or architects in training.

The Group has enjoyed notable success across a range of building types, including some of the most iconic in the UK. In recent years this success has continued for buildings in the commercial office, research and education, mixed use hybrid and hospitality sectors. A feature of these businesses is the number of repeat instructions from leading developers.

German investments

We also have meaningful investments in two successful German architecture businesses. These are a 25% interest in the Berlin based Aukett + Heese GmbH and a 50% interest in the Frankfurt based Aukett + Heese Frankfurt GmbH.

As we account for these investments under IFRS rules, which do not separately show revenues, shareholders may not fully realise the strength of these investments.

The Berlin business employed an average of 90 FTE technical staff with revenue of £12.20m in the year to 30 September 2022. The Frankfurt business employed an average of 11 FTE technical staff with revenue of £1.65m in the year to 30 September 2022. In aggregate, the dividends received in the past two financial years were £656,000.

These businesses are well positioned for further success.

Discontinued Businesses

In recent years we have exited by sale or closure from the international offices in which trading was difficult.

Public Company Status

We are the UK's only listed architecture business and with the costs involved in maintaining the listing this could be seen as an unnecessary burden. Alternatively, it could be seen as a differentiating feature that can help fuel further growth. We believe the latter is the case and are working hard to make use of the listing.

That said there is little benefit in operating as a public company with a market capitalisation below £4 million, as has been the case recently. We also have infrastructure in place that could handle operations significantly greater than at present. We therefore need to grow.

Growth

To increase the Group's share price, and hence market capitalisation, we need to be profitable and to grow that profit. Some improvement can be expected from actions already taken. In part from growth in the existing core businesses, which have the capacity to do better as markets improve, and in part from the savings related to no longer being involved in the discontinued businesses.

Growth in the architecture businesses is expected to come from further investment in the core business through additional staffing and from targeted mergers.

We recognise that growth from the core architecture businesses solely through additional staffing will take time. The UK businesses have been actively recruiting for the past 9 months which represents a significant upfront investment, the benefits of which will take time to be seen.

A characteristic of our industry is the changing nature of ownership. In previous decades successful architects in their thirties and forties would typically transition to ownership via the partnership structures in place at most firms, which was good for renewal and motivation but also provided an exit to older architects looking to sell.

The younger generation of architects seem now less inclined or less able to take on the large financial commitments required to become owners, leaving a growing number of firms without viable ownership succession plans. As the UK's only listed architecture business, we are able to offer our shares to the owners of such practices and will be looking to use this competitive advantage to our benefit.

We are also looking to broaden the Group's exposure to the property market by moving into closely allied fields but where the business model is more favourable than with a traditional architecture business and in particular with recurring revenues and where growth is not solely a function of staff numbers.

A traditional architecture business has high fixed costs (principally staff, office space, technology and insurance) and where each project has to be won in competition with others who may not be bidding at economic rates and where once the project is completed there is no further income until the next project is won.

This provides a high barrier to entry, which deters new entrants. However, as we already have these fixed costs, we propose to make the most of them by spreading them over a wider pool of architecture staff and in particular staff at the director / project leader level, which effectively determines how many projects can be worked on.

A different business model, but one still focused on the property sector, is one where revenues are generated monthly throughout the lifetime of a building; where technology is used to its utmost; where rapid growth is achievable without the often time consuming and expensive recruitment of additional staff; and where short-term fluctuations in economic activity do not dictate customer buying decisions.

We have therefore identified extending our property related activities via the deployment of new technologies. The first venture relates to developing a market presence in the provision of technical systems in buildings.

Torpedo Factory Group

The acquisition of TFG in March 2023 is the first step in broadening the Group's activities. Further details of the acquisition are detailed in the Post balance sheet event note 35.

In comparison with the traditional architecture business model, which has high fixed costs and where almost all of the income from a building is at the start of its life with little or no recurring income, smart buildings can generate predictable income over the lifetime of the building and is a business that is scalable without adding proportionately to staff numbers.

TFG has a foothold in the provision of smart buildings with further acquisition opportunities identified to extend the enlarged Group's smart buildings offering. As such we believe it to be an ideal complement to the traditional architecture business.

Additionally, having a significant portion of the Group revenues from recurring payments on longer term contracts is also expected to result in a re-rating of the enlarged Group's shares.

New board

While the extent of the senior management changes are greater in number than typical, these have been a combination of inter alia, long-term succession planning, making the current transition easier to manage, and the recent TFG acquisition.

The changes allow the board to be refreshed to not only assist in the direction of the Group but also to acknowledge prevailing corporate governance, as is appropriate for the Group, at its current stage.

Chairman

My first contact with the Group was in 2006 as the Group's nominated adviser and broker, since when I followed the Group's progress with great interest, becoming a Non-Executive Director in 2019.

Executive management team

Robert Fry, who is another of the Group's leading and longstanding architects, and who became Interim Chief Executive following the retirement of Nicholas Thompson, leads the management team.

Nick Clark, the founder and CEO of TFG joined the board on 20 March 2023 on completion of the TFG acquisition and will take the lead in developing the Group's presence in the smart building sector.

Nick founded the TFG business in 1997. Prior to that he studied physics at Imperial College followed by an MPhil in Microelectronic Engineering and Semiconductor Physics at the University of Cambridge.

Robert's appointment as interim CEO is scheduled to end at the conclusion of the annual general meeting, when it is proposed that Nick become permanent Group Chief Executive, with Robert becoming a part time Executive Director and Deputy Chairman with principal responsibility for the Group's architecture businesses.

Antony Barkwith, who has been Group Finance Director since 2019, continues in that role for the enlarged Group. 

Non-Executive directors

As noted above Raul Curiel has informed the board that he does not propose to offer himself for re-election at the forthcoming Annual General Meeting.

We are in advanced stages on the appointment of a new independent Non-Executive Director and look forward to updating on this in due course.

Further biographical details of the board are set out on pages 7-8.

Outlook

The Group's UK architecture businesses and its German investments are high quality operations with strong brands and a history of delivering outstanding buildings.

The effective stewardship of the Group in recent years has provided the firm base for meaningful and scalable growth in the coming years. The acquisition of TFG is the first step on this path.

We will now look for further growth in the UK architecture business and work towards becoming a master systems integrator in the Smart Buildings arena, where scalability is not dependent solely on headcount.

Clive Carver

Chairman

27 March 2023

Board of Directors

Clive Carver (Non-Executive Chairman) *+ #

FCA FCT Aged 62

Clive became Chairman in December 2022 having joined the board in May 2019 as a Non-Executive Director. 

He has been the Chairman of AIM listed Caspian Sunrise PLC since 2006, and over the past decade has been on the boards of 8 companies listed on the London Stock Exchange, often in the role of Chairman.

He spent 15 years as a Qualified Executive with a number of City broking firms and was until 2011 Head of Corporate Finance at finnCap. He qualified as a Chartered Accountant with Coopers & Lybrand and has worked in the corporate finance departments of Kleinwort Benson, Price Waterhouse, Williams de Broe and Seymour Pierce. He is also a qualified Corporate Treasurer.

Raúl Curiel (Non-Executive Director and former Non-Executive Chairman) *+ #

BA(Hons) MArch Aged 76

Raúl's extensive career as a professional architect spanned some 40 years before his retirement from Aukett Fitzroy Robinson in 2015. During this period, he delivered over 300,000sqm of space in Central London, throughout the rest of the UK and internationally, specialising in the design of large-scale corporate offices, business parks and master planning.

As well as a practising architect, he has been Chairman of Fitzroy Robinson, European Managing Director of its successor Aukett Fitzroy Robinson, and subsequently a Non-Executive Director of the Group until 2010. He was appointed Non-Executive Group Chairman in 2019.

In December 2022 Raúl passed the Group Chairman role to Clive Carver, and has since continued as a Non-Executive Director.

Robert Fry (Chief Executive Officer) #

BA(Hons) DipArch MA RIBA Int'l AIA Aged 66

Robert was appointed CEO of the Aukett Swanke Group Plc Board in January 2023 having joined the Board in March 2018 as Executive Director and Managing Director - International. Following his graduation from Sheffield University he spent his formative years at Milton Keynes Development Corporation. In 1987 Robert became a founding member of Swanke Hayden Connell's London office joining its Board in 2002, becoming Managing Director of the UK and Europe group in 2005.

Robert works closely with the Chairman and Group Finance Director in the setting and development of the Group's overall strategy.  His considerable property and construction experience has been used to allow the development of ASG's businesses.

Robert's appointment as interim CEO is scheduled to end when a permanent Group Chief Executive is appointed, at which point Robert will become a part time Executive Director and Deputy Chairman with principal responsibility for the Group's architecture businesses.

Antony Barkwith (Group Finance Director & Company Secretary)

FCA MPhys (Hons) Aged 43

Tony is the Group Finance Director of Aukett Swanke Group Plc. He joined the Group in November 2018 as Group Financial Controller, was promoted to Group Finance Director (non-Board) in April 2019 and was subsequently appointed to the Board in July 2019.

Tony is a Chartered Accountant, having qualified with BDO LLP, and has a master's degree from the University of Warwick. He was previously Group Financial Controller for Advanced Power, an international power generation developer, owner and asset manager, working there from 2010 until 2018.

Nick Clark (Executive Director)

BSc(Hons), MPhil Aged 48

Nick was appointed as an executive director of the Group in March 2023 following the acquisition of TFG.

Nick is chief executive of TFG. He founded the business in 1997 and has grown it through a combination of acquisitions and organic growth. In June 2022, Nick was appointed a non-executive director at Drumz plc, the AIM-listed investing company focused on investing in and acquiring established technology businesses. Prior to starting TFG Nick studied physics at Imperial College graduating with a BSc Hons 2(i) followed by an MPhil in Microelectronic Engineering and Semiconductor Physics at the University of Cambridge.

Board committees

The board has the following committees

· Audit Committee

· Remuneration Committee

· Nomination Committee

However, in recent times given the relatively small size of the board it has been the board as a whole that has taken the lead in the work otherwise delegated to the committees.

Following the appointment of additional Non-Executive Directors, the composition of the committees will be reviewed.

* Member of the Audit Committee

+ Member of the Remuneration Committee

# Member of the Nomination Committee

Chief Executive's Report

I am pleased to present my first report as Chief Executive.

Business Review

Overview

During the period under review and subsequently, market conditions improved across the full range of the Group's continuing businesses, although the improvements were generally seen towards the end of that period.

We continue to receive repeat and new business instructions that have resulted in an improved confirmed order book, which is approximately 23% higher than the same time last year.

In addition, we have taken action to deal with those parts of the Group that your board did not consider to be in shareholders' interests to continue with over the longer term.

United Kingdom

Notable Projects

Our architectural design business, Aukett Swanke Limited, saw the completion of the STEAMhouse development for Birmingham City University which has been shortlisted for a BCO award. Both the EQ Office Headquarters building in Bristol for CEG and an office building extension in Westminster for Asticus have started on site.

Planning consents were granted for a mixed use office and residential development in Maidenhead, and 7 Princes Street in the City of London, the latter being a significant office strip back-to-frame refurbishment of a Fitzroy Robinson designed 1970s office building.

Interior design projects under way for prestigious clients include a new workplace strategy for a major international bank and a 196 key luxury hotel in London.

Veretec, our executive architecture business, completed the 21,300 sqm Featherstone building for Derwent working with Skanska and Morris + Company. Projects in progress include Holloway Park, the site of the former women's prison, a residential development for Peabody with AHMM and two prominent buildings on Moorgate for Osborne with Ben Adams. Heritage projects under way include the Grade ll Listed 41 Lothbury for Pembroke RE with Stiff + Trevellion and Greycoat Place in Westminster for Victoria Spaces with SPPARC.

Investing in the future

We have also continued to focus upon retaining our existing staff and recruiting new staff to service this workload.

Significant investments have also been made in business resilience measures to facilitate effective remote working, improving Revit 3D modelling and rendering capability whilst simultaneously mitigating cybersecurity threats.

German Investments

The Continental group of operations were once again the best performing of the group's geographic operations this year with profits (excluding Group management charges) of £0.42m (2021: £0.33m).

The main contributor was our associate office Aukett + Heese in Berlin, which with its sister joint venture company in Frankfurt, continued to navigate around the now post-pandemic era for the third year running.

Berlin celebrated two major topping-out ceremonies on the 140m tall, 34 storey Edge East Side Tower, let to Amazon and the tallest building in Berlin and the residential complex of BUWOG Bauträger GmbH, consisting of three new high-quality buildings and a renovated old building of 109 apartments. The 57,000 m² Forum Stieglitz refurbishment of Berlin's oldest shopping centre was completed, and the newly renovated 40,000 m² shopping centre formerly known as the "Potsdamer Platz Arkaden", has re-opened as "The Playce".

In Frankfurt, completions included further landlord upgrades and fit-outs for corporate and financial sector tenants in the iconic Messeturm building. A first project in the Main Tower, another well-known landmark, has cemented the office's status as a significant architect of record for tall buildings. New BIM/Revit projects have begun with a 14,000m² tenant fit-out in Berlin and a major new refurbishment project has begun for an international bank in Frankfurt together with a new building for a Tata Group subsidiary company in Bonn in collaboration with the Berlin office.

Other International activities

Istanbul

Our operation in Istanbul, a wholly owned subsidiary, recorded a small loss this year of £0.05m (2021: loss £0.02m) in another turbulent year of political and economic instability in Turkey.

The Istanbul office completed the first of two major fit-out projects for Vakifbank at Tower A in Istanbul and three concept design stage completions for Bayer Insaat on a 63,000 sqm mixed-use urban regeneration project in the Beşiktaş district of Istanbul, a prototype concept design for four separately located reception areas for Eczacibasi, a prominent Turkish industrial products group and a 7,000 sqm. concept design for Beycelik Gestamp A.S, an international automotive industry supplier for their HQ building in Bursa.

Middle East

Mid-way through the trading year (29 April 2022) the Group concluded the disposal of its interest in John R Harris & Partners Limited ("JRHP") to its local management team operating out of the Middle East.

The disposal provided an initial inflow of cash consideration along with a deferred consideration sum payable over 5 years, for a total £1.1m (AED 5.0m). The Group entered into a Marketing Agreement as a part of this transaction, covering the use of the Group's project portfolio and associated materials, over the deferred consideration period for an additional sum.

Torpedo Factory Group

The acquisition of TFG completed after the period under review. Nevertheless, it underpins our strategy of broadening the services offered by the Group by looking to become a master systems integrator in the smart buildings arena.

TFG comprises three separate businesses:

· Intelligent Environments

· Intelligent Venues

· Live Events

It will be through an extension of the operations of the Intelligent Environments and the Intelligent Venues business and by focused acquisition that we will build out our smart building capabilities.

The acquisition adds approximately 60 new staff, and also provides additional financial resources.

Robert Fry

Chief Executive Officer

27 March 2023

Financial review

The headline financial results of the Group were:

1Alternative performance measures, refer to page 18 for definition

The result for the year is split between continuing operations and the discontinued Middle East operations.

The trading loss was just £72k (2021: £595k) with significant improvements in the results of both the United Kingdom and Continental European operations.

The result of the discontinued Middle East operations was a loss before tax of £0.50m (2021: £0.94m). JRHP was sold in in April 2022 and the remaining subsidiaries underwent a process to cease trade and recover outstanding balances, incurring significant one off closure costs, and provisions on outstanding trade debtors and guarantees. The Middle East operations are shown in the financial statements as a discontinued operation.

The £1.75m goodwill impairment relates almost entirely to the acquisitions of Fitzroy Robinson Limited in 2005 and Swanke Hayden Connell Europe Limited in 2013. Further details are provided in note 12.

Revenues for the year from continuing operations were £8.65m, a decrease of 6.0% on the previous year (2021: 9.19m). However, and more importantly, revenues less sub consultants increased by 13.0% to £7.13m (2021: £6.31m), with subconsultant costs falling by 47.4% to £1.52m (2012: £2.89m).

Both the Group's key hubs experienced better performance and results. In the UK, revenue less sub consultant costs increased 15.0% to £6.98m (2021 £6.06m) as the UK operations continued to rebuild following the reductions experienced during the COVID-19 pandemic.

In Continental Europe, stronger performance from the Berlin associate and Frankfurt joint venture producing a combined share of profits of £0.33m (2021: £0.18m), resulted in a significant increase in the year-on-year profit for the segment.

Performance in Turkey was below expectations.

Operating expenses in the year increased by £0.43m, within which personnel related costs increased by £0.64m, as the group recruited to meet staffing commitments from projects won, partially offset by a £0.21m reduction in other operating expenses.

Other operating income reduced by £32k, primarily due to the end of government grants from the UK government furlough scheme £nil (2021: £59k).

During the year under review, deferrals from previous periods, UK VAT and rent holidays taken during the Covid-19 pandemic and amounting in aggregate to £172k were repaid according to their terms.

The Group managed technical staff numbers (UK net revenue per FTE technical staff was maintained at £104k, whilst the UK average FTE technical staff increased by 9 to 67), with the UK still in a transition period of growth following the COVID-19 slow down and not yet up to an optimum size for the fixed costs of the operation.

The loss after tax at £2,282k gives an EPS loss of 1.38 pence per share (2021: 0.69 pence per share), split as 1.08 pence from continuing operations (of which 1.06 pence is due to the Goodwill impairment) and 0.30 pence from discontinued operations.

United Kingdom

1Alternative performance measures, refer to page 18 for definition

The UK's revenue less sub consultant costs increased 15.0% year on year as the hub started to rebound from the COVID-19 slowdown. Revenue decreased 4.6% as the projects that Veretec executive architecture acted on as the lead consultant progressed into later stages, requiring lower volumes of sub consultant expertise.

The first half of the year saw the UK business unable to grow beyond the prior year second half with revenue less subconsultant costs of £3.31m (2021: H2: £3.47m), however significant improvements came in H2 with the award of a number of projects most noticeably in the hotels sector in Aukett Swanke Limited with projects with total fees in excess of £3.5m awarded, and in Veretec a mixture of residential and commercial projects with total fees in excess of £4.2m awarded. This enabled both companies to begin to grow through the second half of the year with revenue less subconsultant costs totalling £3.67m, and a stronger order book leading into the year commencing 1 October 2022.

Staff numbers (FTE technical staff) started the year at 70 in October 2021, but with lower workloads during the 2nd quarter of the year numbers were reduced to a low point of 60. With the successes of project wins in the second half of the year the necessary recruitment enabled the UK to regrow to 77 FTE's by 30 September 2022.

This pro-active management of staffing resources enabled the UK to report net revenue per FTE at £104k for the full year, comparable with the prior year result.

The improvement in revenue particularly in H2, translated into a reduction in the current year loss by £0.52m compared to the prior year, and enabled the hub to record a profit before tax (excluding Group management charges).

Continental Europe

The principal components of the Continental Europe hub are the two German investments, for which under the prevailing accounting rules we do not show revenue and costs but only report our share of profits.

1Alternative performance measures, refer to page 18 for definition

The hub result before tax (including Group management charges), including the joint venture and associate in Germany and the joint venture in the Czech Republic (in the prior year, now liquidated), was a profit of £275k (2021: £149k).

Continental Europe's result is materially dominated by the associate Berlin and joint venture in Frankfurt. Having remained profitable in the prior year but with lower levels of profit than has been historically the case due to the effects of the COVID pandemic, the year to September 2022 saw trading return back closer to the expected pre pandemic levels of profitability. They together contributed £328k (2021: £182k) profit (including Group management charges) to the Continental Europe result.

Reported revenues, comprise the Turkish subsidiary. Turkey reported revenues for the year of £180k (2021: £321k), with revenue less subconsultant costs decreasing to £152k (2021: £242k). The reduction in earnings was principally due to a further devaluation of the Turkish Lira across the period, with the average TRY to GBP rate in the year at 18.44 (2021: 11.07). However, whilst the year on year revenue was comparable in local currency, clients pausing projects led to sub optimal efficiency of staff time and the very high levels of inflation in Turkey increased operating costs of the company whilst the existing projects were priced at rates which were not able to fully absorb the increased costs that followed. As a result, Turkey recorded a local loss (including Group management charges) of £52k and loss (excluding Group management charges) of £36k.

The liquidation of the Czech Republic joint venture was completed early in the year under review with nominal residual costs of £1k (2021: loss for the year of £16k).

Total revenues under management decreased 4.8%, whilst revenue less sub consultant costs increased 1.2%. Staff numbers decreased to 108 (2021: 127), partially due to the closure of the Czech Republic office, but also with a reduction in average staff numbers in Germany. However, more efficient working post COVID-19 and more profitable projects in Germany led to a significant increase in net revenue per FTE technical staff to £98k (2021: £82k) and with it improved profitability.

Middle East - discontinued operation

1Alternative performance measures, refer to page 18 for definition

Revenues decreased 45.3% from £2.82m to £1.54m in the year (revenues less subconsultant costs similarly reduced by 50.1%), due to the continued effect of the slowdown in construction investment in the region during the COVID-19 pandemic combined with the disposal of JRHP in April 2022.

Average technical staff FTE numbers reduced to 18 (2021: 36) and net revenue per FTE technical staff was relatively similar at £68k (2021: £69k).

Whilst the loss was significantly lower than in the prior year, the loss for the year included costs in the process of terminating Shankland Cox Limited ("SCL") licenses and commencing the process to reclaim associated guarantees.

The hub had no remaining Middle East based employees as at 30 September 2022.

With no further material revenue forecast post year end, the Middle East hub has been treated as a discontinued operation.

Financing

The net deficit (see note 22) at the year end was significantly down on the prior year as a result of the loss in the year combined with the timing of UK debtor receipts. This gave a deficit of £621k (2021: net funds £15k), comprising cash of £28k (2021: £515k), a net overdraft of £232k (2021: nil), and a CBILS loan of £417k (2021: £500k) drawn in May 2021.

The CBILS loan set out in note 21 was arranged with Coutts & Co in response to the challenges impacting trade incurring losses during the COVID pandemic. The loan is repayable over 3 years with the first instalment made in June 2022, to be paid back in 24 monthly instalments through to May 2024. As at 30 September 2022, the first 4 instalments had been made on time as planned.

The Group's overdraft facility from its bankers Coutts & Co started the year at £500k and was renewed in November 2021. In February 2022 the Group requested and Coutts & Co granted a temporary waiver of the net gearing covenant from February to the end of April 2022. The Group similarly agreed to temporarily reduce the overdraft to £250k from February to May 2022. In May 2022, the Group and Coutts & Co agreed to remove the covenants from the facility agreement, and to maintain the overdraft at £250k up to renewal in November 2022. This is discussed further in note 1.

In November 2022, Coutts & Co confirmed the renewal of the £250k overdraft facility for another year, continuing to provide working capital flexibility and to support the UK business. This is renewable annually and will remain in place until November 2023.

The Group has four leases taken out by ASL to fund the purchase of fit-out costs of the London office in June & November 2018 on 5 year terms, which are capitalised as right of use assets and lease liabilities. The lease liability (see note 15) as at 30 September 2022 was down to £55k (2021: £133k).

The Group recognises a right of use asset and lease liability on the London office which was taken out on a 10 year lease to May 2028. The lease liability as at 30 September 2022 was £2,364k (2021: £2,756k). There are no office leases remaining in the UAE and the office lease in Turkey is short term. Other leases in the Group are low value, therefore no IFRS16 capitalisation of these leases has been made.

Throughout the year there has continued to be a very strong focus on cash management, liquidity forecasts and covenant compliance. Whilst covenants may have been removed from the Coutts & Co facility during the year, management continue to review monthly management account measurements indicating whether the former covenants would be adhered to if they had been in force.

The overdraft was utilised throughout the year. Following the acquisition of TFG on 20 March 2023 which significantly improves short term available cash, utilisation of the facility is expected to be very occasional and backed by other available cash within the Group through the going concern period.

The Plc continues to act as the Group's central banker, and it continued to seek to optimise the Group's position by maximising cash flows and flexibility across geographies. The overdraft is effectively assigned to the UK businesses. All other businesses are required to be cash generative or as a minimum cash neutral. Subject to formal approval, short term working capital advances or small funding loans may be made.

Going Concern

We expect the coming year to present significantly more opportunities to the Group than has been the case over the past few years.

The losses incurred during the pandemic and sustained by the Middle East during the period of discontinuing the remaining offices, and the cost of administering the listed company structure, has meant the main challenge post year end continued to be maintaining working capital which has reduced over the period along with Group net assets.

During the second half of the financial year, we saw our revenues in the United Kingdom grow and both UK trading entities began a period of recruitment to meet the needs of new client instructions which has continued post year end. Management of cash flow therefore continues to be key with the associated costs of increasing staff numbers not perfectly aligned with initial payments from clients.

In December 2022 the Group renewed its £250k overdraft facility with Coutts & Co and continues to repay the CBILS loan drawn during the pandemic.

The recently announced acquisition of TFG immediately adds a significant available cash balance, as well as a significant boost to the net assets of the Group, which will provide the Directors a more stable platform to grow the existing combined business and undertake future opportunities for acquisition and growth.

The TFG acquisition brings into the Group a freehold property independently valued at £3.02m in July 2021 with a mortgage balance of £1.48m as at December 2022, giving a loan to value percentage of just 48%.

However, as the mortgage renewal date is less than 12 months from the signing date of these accounts, the Board must consider the remote possibility that if the mortgage could not be renewed, then the Group may need to raise cash to repay the full balance of the mortgage through alternative borrowing facilities, asset sales or fund raising which are not wholly within the Group's control.

Based on forecasts prepared and reviewed for the period to 31 March 2024 the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future.

However, while the Board is confident of either being able to re-mortgage the building or selling it should the need arise, the requirement to refinance the building within the going concern period indicates the possible existence of a material uncertainty which may cause significant doubt on the Group's and the Parent Company's ability to continue as a going concern.

The financial statements therefore do not include the adjustments that would result if the Group or the Parent Company was unable to continue as a going concern.

The going concern statement in the Directors report and corresponding section in note 1 provide a summary of the assessments made by the directors to establish the financial risk to the Group over the next 12 months. This is further supplemented by the principal risks and uncertainties section in the Strategic Report.

Future work

Tracking and keeping an accurate record of the pipeline of future work is key to understanding the business and managing its future shape and portfolio. It is also essential in order to afford the directors time to react to any changes.

With the distribution of the business across the hubs, there are differing profiles:

· The UK trades as two businesses: Veretec Limited and Aukett Swanke Limited. Following the significant slowdown and rationalisation of staff numbers during the COVID-19 pandemic, Veretec has been re-growing its technical staff base. From a low of 26 FTE equivalent technical staff in March 2021, Veretec grew to average 36 FTE technical staff in the year, finishing September 2022 with over 43 FTE technical staff. Aukett Swanke Limited maintained a more steady core staff number starting October 2021 at 32 FTE technical staff, averaging 30 FTE technical staff across the year, and ending September 2022 at 33 FTE technical staff. With both companies experiencing increasing bid activity and improved conversion of new projects in the second half of the year and in the first quarter after the year end, both companies target further growth in staff numbers and revenue in the coming year to achieve a closer to optimum capacity to cover the fixed cost base of the London studio.

· The Middle East: Following the sale of JRHP in April 2022, Management took the decision to allow the remaining trade licences in SCL to expire and then undertake an orderly wind down of the Middle East operations. As at September 2022 the remaining Group Middle East subsidiaries no longer employed any UAE staff, and future expectations are limited to clearing the balance sheets of the companies by collecting the remaining debtor balances and paying off associated creditors.

· Continental Europe remains mixed across the portfolio. Having made profits through the COVID-19 pandemic, the German businesses continued to be strongest. Berlin in particular recorded profits back to pre-covid levels in the year to September 2022 and has an even stronger order book commencing the year to September 2023. Turkey starts the coming year with a stronger order book than the prior year but the ongoing very high levels of inflation and uncertainty in the local economy will make returning to consistent profitability challenging in the short term.

Key Performance Indicators ("KPIs")

The key performance indicators used within the Group for assessing financial performance are:

· Total revenues under management. This includes 100% of the revenues generated by our joint venture in Frankfurt and associate in Berlin. This is used as a measurement of the overall size and reach of the Group and is disclosed on pages 12 and 14. As total revenues under management includes revenue derived from subconsultants, this figure can vary significantly year on year depending on the nature of external expertise required on individual projects as described on page 14. Consolidated Group revenue can be reconciled to total revenues under management by adding i) the revenue of the associate disclosed in note 17; and ii) double the share of revenue in joint ventures disclosed in note 18;

· Revenue less sub consultant costs which reflects the revenue generated by our own technical staff but excludes the revenue attributable to sub consultants, which are mainly passed through at cost. This is the key driver of profitability for our business, and is discussed by segment on pages 12 to 15;

· Revenue less sub consultant costs being generated per full time equivalent (FTE) technical member of staff ('net revenue per FTE technical staff'). For our larger operations this provides a barometer of near term efficiency and financial health. This figure when compared to the movement in total costs provides an insight into the likely direction of profitability and is a key measure of productivity. This KPI is only analysed on a segmental basis and calculations for each segment can be found on pages 13 to 15; 

· Result before taxation (excluding Group management charges), and result before taxation (including Group management charges), which are further assessed on pages 13 to 15;

· Cash at bank and in hand and net funds / (debt), which is assessed further on page 2.

The numbers of full time equivalent technical members of staff differ from the employee numbers disclosed in note 7 as, at times, the Group uses some non-employed workers through agencies and freelance contracts. Staff working on a part time basis, or on long term leave, are also pro-rated in the number of full time equivalent staff numbers, which differs from the method of calculating the average number of employees for the year under the Companies Act 2006 as disclosed in note 7. Full time equivalent technical members of staff are given for each hub on pages 13 to 15.

Antony Barkwith

Group Finance Director

27 March 2023

Strategic report

The Directors present their Strategic Report on the Group for the year ended 30 September 2022.

Strategy

We are a professional services group that principally provides architectural design services along with specialisms in master planning, interior design, executive architecture and some engineering services. With the acquisition of TFG we are also looking to become a Smart Buildings master systems integrator.

Our strategic objective is to provide a range of high-quality design orientated solutions to our clients that allow us to create shareholder value over the longer term and at the same time provides an attractive and rewarding working environment for our staff. In addition, we undertake to deliver projects throughout the technical drawing stages onto site, and up to practical completion and handover.

Our markets are subject to cyclical and other economic and political influences in the geographies in which we operate, which gives rise to peaks and troughs in our financial performance.

The pandemic, which affected all our operations, is an event that has required specific responses. Similarly, the current conflict in Ukraine creates an uncertain outlook in terms of both continuity of project instructions and new business activity.

Business Model

Our architecture and interior design businesses operate in the UK, Germany and Turkey with other locations operating through licence based arrangements where the responsibility for profit rests with local management and owners. 

The presentation of the results of our operations is at local, underlying, trading level and before the allocation of central costs in order to provide a level playing field in terms of comparable performance across the hubs as many only incur a small management charge.

The United Kingdom hub comprises three principal service offers: comprehensive architectural design including master planning, interior design and fit-out capability and an executive architectural delivery service operating under the 'Veretec' brand.

Our Continental European operations provide services offered that are consistent with those in the UK.

The Group entered into a marketing agreement with JRHP following the sale of the Dubai based operation in April 2022 maintaining the Group's interest in this market. without the financial risk of ownership.

As a Group, we now have a total average full time equivalent ("FTE") staff contingent of 223 (2021: 256) throughout our organisation which includes both wholly owned and joint venture operations. We are ranked by professional staff in the 2023 World Architecture 100 at number 61 (2022 WA100 number 63).

Principal Risks and Uncertainties

The directors consider the principal risks and uncertainties facing the business are as follows:

Levels of property development activity

Changes in development activity levels have a direct impact on the number of projects that are available. These changes can be identified by rises and falls in overall GDP, construction output, planning application submissions, construction tenders and starts, investment in the property sector and numbers of new clients. Due to lack of information in the relevant market places, we have to adapt to the information flow that is available.

In addressing this risk, the Group considers which markets and which clients to focus upon based on the strength of their financial covenant so that there is clear ability to provide both project seed capital and geared funding to complete the delivery process. This avoids the dual risk of delays between stages and deferrals of projects.

Geo-political factors

Political events and decisions, or the lack thereof, can seriously affect the markets and economies in which the Group operates, leading to a lack of decisions by government bodies and also by clients. In turn this directly impacts workload and can even delay committed projects.

We believe the main shocks of Brexit and Covid-19 are behind us, although there are likely to be continued consequences for the foreseeable future. We are conscious that the Ukraine conflict has affected business sentiment and is likely to continue to do so until the conflict ends.

Share price volatility

A strong share price and higher market capitalisation attract new investors and provide the Group with greater flexibility when considering M&A activity. Conversely a weaker share price affords the Group less flexibility.

Operational gearing and funding

In common with other professional services businesses, the Group has a relatively high level of operational gearing, through staffing, IT and property costs, which makes it difficult to reduce costs sufficiently quickly to immediately avoid losses and associated cash outflows when faced with sharp and unpredicted falls in revenue.

The UK continues to maintain a balance in the mix of permanent vs. contract and agency staff to give flexibility to respond to fluctuation in revenue as has been experienced in recent years.

The project payment arrangements under which the Group operates vary significantly by geographical location. Payment terms by jurisdiction are typically:

· in the United Kingdom it is usual to agree in advance with the client at the start of a project a monthly billing schedule which generally leads to relatively low levels of contracts assets (and consequentially higher levels of contract liabilities);

· in Turkey it is usual to either agree in advance with the client a monthly billing schedule or to agree a billing schedule based on deliverable work stages; and

· in the Middle East it is usual to bill clients monthly, but the value of the monthly invoices raised is dependent upon demonstrating specific progress from the work performed, which generally leads to higher levels of contract assets. Payment also tends to take longer in the Middle East.

The losses sustained in the prior two years, the decline in revenue in the Middle East, the final repayments of residual UK deferred rent and VAT agreed during the COVID-19 pandemic and the commencement of monthly repayments of the CBILS loans, tightened the free cash available to be remitted to the Plc during the year but was largely offset by the proceeds of the disposal of JRHP. Furthermore, the month end timing of UK debtor receipts in September 2022 meant that the Group was in a position of utilising part of its overdraft facility at the year end. Dividends were received from the Berlin associate during the year, but at lower levels than in prior years, as the Berlin associate only remits dividends on the basis of local GAAP accounting, which restricts the recognition of profits until the final completion of individual projects, and as such there is a lag between recognising distributable reserves vs IFRS profits.

The Directors seek to ensure that the Group retains appropriate funding arrangements and regularly and stringently monitor expected future requirements through the Group's annual budgeting, monthly forecasting and cash flow, and weekly and daily cash reporting processes in order to react immediately to a required change with maximum flexibility.

The Group's principal bankers remain supportive and in December 2022 renewed the Group's overdraft facility until November 2023, at the existing £250k level. In May 2021 a £500k CBILS loan was also offered and drawn down. Repayments on this loan commenced monthly from June 2022, with the last instalment scheduled for May 2024.

The acquisition of TFG on 20 March 2023 provides a significant boost to the net assets and cash balance of the Group, reducing immediate cash pressures on the business, but adding a mortgage liability to be renewed in February 2024.

Staff skills and retention

Our business model relies upon a certain standard and number of skilled individuals based on qualifications and project track record. Failure to retain such skills makes the strategies of the Group difficult to achieve.

The Group aims to ensure that knowledge is shared and that particular skills are not unique to just one individual.

The Group conducts external surveys to ensure that salaries and benefits are appropriate and comparable to market levels and endeavours to provide an attractive working environment for staff.

Staff training programmes, career appraisals and education assistance are provided, including helping our professionally qualified staff comply with their continuing professional development obligations. Training programmes take various forms including external courses and external speakers.

Quality of technical delivery

In common with other firms providing professional services, the Group is subject to the risk of claims of professional negligence from clients.

The Group seeks to minimise these risks by retaining skilled professionals at all levels and operating quality assurance systems which have many facets. These systems include identifying specific individuals whose roles include focusing on maintaining quality assurance standards and spreading best practice.

The Group's UK operation is registered under ISO 9001 which reflects the quality of the internal systems under which we work. As part of these registrations an external assessor undertakes regular compliance reviews. In addition, as part of its service to members, the Mutual, which provides professional indemnity insurance to the UK and until recently parts of the Middle East operations, undertakes annual quality control assessments.

The Group maintains professional indemnity insurance in respect of professional negligence claims but is exposed to the cost of excess deductibles on any successful claims.

Contract pricing

All mature markets are subject to downward pricing pressures as a result of the wide spectrum of available suppliers to each project. This pressure is increased if activity levels are low such as in the economic downturns and global recession. Additionally, architects may be under pressure to work without fees (for a time) in order to win a project or retain sufficient qualified staff to complete the project if won. The Group mitigates this risk by focusing on markets where it has clear skills that are well above average, or avoids it by not lowering prices, thus risking the loss of such work.

All fee proposals to clients are prepared by experienced practice directors who will be responsible for the delivery of the projects. Fee proposals are based on appropriate due diligence regarding the scope and nature of the project, knowledge of similar projects previously undertaken by the Group and estimates of the resources necessary to deliver the project. Fee proposals for larger projects are subject to review and approval by senior Group management and caveats are included where appropriate.

When acting as general designer for projects located outside the UK, the Group is usually exposed to the risk of actual sub consultant costs varying from those anticipated when the overall fee was agreed with the client. To mitigate this risk, fee proposals are usually sought from sub consultants covering the major design disciplines as part of the process of preparing the overall fee proposal.

Under performing acquisitions

The acquisition of businesses for too high a price or which do not trade as expected can have a material negative impact on the Group, affecting results and cash, as well as absorbing excessive management time.

The Group invests senior management time and Group resources into both pre- and post-acquisition work. Pre-acquisition there is a due diligence process and price modelling based on several criteria. Agreements entered into are subject to commercial and legal review. Post-acquisition there is structured implementation planning and ongoing monitoring and review.

Overseas diversification

The Group derives a proportion of its revenues from projects located outside the UK. This offers some protection for the Group by providing diversification but in turn exposes the Group to the economic environments and currencies of those locations. Building regulations, working practices and contractual arrangements often differ in these overseas businesses when compared to the UK and these may significantly increase the risks to the Group. To mitigate these risks:

· the overseas operations are managed by nationals or highly experienced expatriates, with oversight from senior Group management. All offices are regularly visited by senior Group management to monitor and review the businesses. There is regular, comprehensive reporting and KPIs are used extensively;

· the Group seeks to work for multinational or the larger and more established domestic clients who themselves often have significant international experience;

· when acting as general designer for projects located outside the UK, the Group typically seeks to appoint sub consultants with an established and successful track record on similar projects;

· within the boundaries imposed by local laws and commercial constraints, the Group seeks to structure contractual arrangements with clients and sub consultants to minimise the significant contractual risks which can arise; and

· as far as possible foreign currency flows are matched to minimise any impact of exchange rate movements and significant exposures are hedged.

The Strategic Report was approved by the Board on 27 March 2023 and signed on its behalf by

Antony Barkwith

Group Finance Director

Directors' report

The Directors present their report for the year ended 30 September 2022.

Corporate governance

In accordance with AIM Rule 26 the Company is required to apply a recognised corporate code. The Board continues to adopt the QCA Corporate Governance Code (2018) published by the Quoted Companies Alliance.

The QCA Corporate Governance Code (2018) comprises 10 Principles.

We set out our compliance with these Principles in a matrix ('the QCA Matrix'). This lists the Principles, as well as related considerations and requirements, all of which have been assigned a sub-number within each Principle.

PRINCIPLE 1

Strategy and business model

The current strategy and business model for the Group is set out in the Strategic Report on page 19.

Our strategic objective is to provide a range of high-quality design orientated solutions to our clients that allow us to create shareholder value over the longer term and at the same time provides a pleasant and rewarding working environment for our staff. The cyclical nature of the markets in which we operate gives rise to peaks and troughs in our financial performance. Management is cognisant that our business model needs to reflect this variable factor in both our decision making and expectation of future performance.

We operate a structure covering: the United Kingdom with our office in London; Continental Europe with three offices in Berlin, Frankfurt and Istanbul; along with a marketing agreement with an operation in the Middle East with an office in Dubai.

The United Kingdom hub comprises three principal service offerings: comprehensive architectural design including master planning, interior design and fit-out capability and an executive architectural delivery service operating under the 'Veretec' brand.

Our Continental European operations provide services offered that are consistent with those of the UK operation.

PRINCIPLE 2

Share capital and shareholders

Information about the Company's shares, listing information, significant shareholders; Directors' shareholdings and share donations are set out within the Investor relations section of the Company's website and in the annual report.

The Executive Directors understand the importance of shareholder dialogue and regularly seek to engage with shareholders at the time of results' announcements, at the AGM or as requested. In addition, there is a separate mailbox  cosec@aukettswanke.com

The Directors also appreciate the value of a dividend policy and they endeavour to ensure that the Company's policy is clear.

The primary contact for investors is Robert Fry, Chief Executive Officer.

PRINCIPLE 3

Corporate Social Responsibility & Stakeholder Engagement

The About section of the Company's website sets out how we engage with our clientele and related stakeholders in the practice of architecture, master planning, urban and interior design. This also provides the contact and separate website details of each entity within the Group.

Our employees recognise that the professional services we offer have a significant impact on not just our direct clientele but also on the public realm, society and the environment as a whole, and this is recognised in the websites for each subsidiary entity in the Awards sections of each entity's website.

Client and stakeholder engagement and feedback are an integral and iterative part of the design process undertaken on projects, as expressed in the Awards sections of the websites.

Alongside the contribution made to our clientele and others through the execution of our services we actively participate as thought and practice leaders in initiatives and events in the property and construction industry. We also undertake on occasion voluntary and charitable endeavours that are featured in the News sections of the Company and subsidiaries websites, internal Intranet sites and social media platforms.

PRINCIPLE 4

Risk Management

The Group's risk management objective is to identify, document and monitor those factors that represent risks to the Group in fulfilling its strategic objectives and to manage those risks consistent with agreed risk tolerances. 

The Business Risk Review (BRR) is the principal tool by which the Group carries out this process and allows the Board to assess the business risks in the context of best practice consistent with any codes of corporate governance. This tool sets out the level of risk incurred and its probability of occurrence to establish a level of tolerance applicable to the business.

The BBR is structured to allow monthly reporting from all local businesses and elevated monthly to the Plc Board with any significant risks given a 'Red Flag'. These Red Flag items reflect the key Risks and Uncertainties as set out in the Report and Accounts.

PRINCIPLE 5

Board structure and composition

The Board comprises two Non-Executive Directors (NED's) and three Executive directors. The Board believes that the optimal structure is balanced between NED's and Executives such that equal weighting is given to oversight and governance, and strategic development and operational performance in order to promote the company.

Committees

These are set out in the Directors' Report on pages 29 to 30.

Additionally, each year the relevant Sub Committee produces its own Business Plan for inclusion in the Group Business Plan setting out any changes to its Terms of Reference and the principal activities it is to undertake in the forthcoming financial period. External surveys and internal analysis of implementation is provided to the relevant committee.

PRINCIPLE 6

Directors experience and capabilities

The biographies of each current board member can be found on pages 7-8.

Other roles

Board members are encouraged to take on other roles that do not conflict with their membership of the Board or are seen as supportive of their current role.

Robert Fry (Chief Executive Officer) is a member of the RIBA and is a regular contributor and awards judge for World Architecture News (WAN), Antony Barkwith (Group Finance Director) is a member of the Architect's Financial Management Group (AFMG), Clive Carver (Chairman and NED) holds various NED roles in the oil & gas and other industries, and Nick Clark (Executive Director) is a NED in a technology investment company which is AIM-listed.

Group management structure

The ultimate management of the Group is by the Board and its committees. The role, remits and reports of the committees are set out in the Directors report. Implicit within all remits is the obligation of the Board under The Companies Act to promote the company at all times.

Day to day and operational management is delegated to the CEO, GFD and the Managing Directors. Each business in the group has its own team under the Managing Director and its own board. The CEO and GFD are represented on all boards.

Delegated responsibility is defined at each level and there are authority matrices which set out limits of responsibility at specific levels and for specific actions and activities. Each individual board meets every month. The Directors and senior members of staff review, mentor and develop colleagues on an ongoing basis in a coaching and advisory capacity.

All members of the Board endeavour to keep up-to-date and attend seminars and training courses as appropriate. Each Director is required to complete CPD in accordance with his/her professional qualification.

PRINCIPLE 7

Evaluation of the Board

The Nomination Sub Committee of the Board reviews the skills of each board member on an annual basis using a matrix grid of core requirements and level of each attribute achieved by the board membership.

The Skills matrix covers 14 key skills identified as relevant to the operations of the listed company and its key activities. Each skill is given a weighting factor of 1 to 3 and graded by level of knowledge and experience on a scale of 1 to 4. This then provides a weighted ranking of the skills provided by the current board and each member in relation to that ranking.

Following completion of the annual review the Nomination Committee makes recommendations to the Board on further training or mentoring requirements as necessary.

Appraisals are carried out by the Chairman of each board member on an annual basis. The NED's appraise the Chairman. As a result of these meetings, any mentoring and training needs are established.

Board attendance & Effectiveness

Members are encouraged to personally attend all meetings and where this is not possible the Board makes alternative provision through changing of dates or allowing attendance via video conferencing (VC) facilities. The VC facilities are used consistently to permit Board members to reduce travel in the Post-Covid 19 era. This has resulted in the high attendance record.

The attendance record for the year is included in the Directors' Report on page 31.

Board remit

The Board is a balanced team of Executives and Non-Executives with the remit to ensure good, appropriate. safe governance and compliance of the Group and to manage the staff and assets, monitoring performance and developing and implementing strategy to deliver the best possible results for the shareholders.

The principal matters reserved for the Board are set out within the Investor Relations section of the Company's website.

Succession planning

The Nomination Committee is responsible for managing the succession plan of the Board. This is carried out by maintaining a succession planning matrix. This matrix contains information on: the Role, Job Holder, Sub Committee membership, term and notice period, AGM re-election dates, and alternatives for either temporary or permanent replacement.

NED's hold office for no more than three successive terms of three years - in line with industry norms.

Executives are on contracts of six months' notice duration.

PRINCIPLE 8

Corporate Governance - External

Key corporate governance statements relating to the company and its operations are set out within the Investor Relations section of the Company's website.

Our strategic health & safety statement acknowledging our duties and responsibilities is signed by the CEO. Two Plc Board members form a part of the H&S Steering Committee which meets quarterly and reports into the Plc Board meetings.

Data Privacy (GDPR)

A data privacy notice outlines our policy and procedures covering how information is collected and used whether via our website or by visiting our studios, an individual's rights and the measures to be adopted for reporting any breaches. 

Corporate Governance - Internal

Our external statements are supported by other policy and procedural documents located on our intranet site and in a Studio Handbook (UK) for the benefit of our employees.

The company's intranet site provides details of our Group and internal management structure, design culture, employment, sustainability, health & safety, data privacy, anti-corruption & bribery, social media, whistle blowing, equality & diversity and modern slavery policies.

The Studio Handbook is a separate printable document available on the intranet site which contains more detailed operational information and requirements pertaining to the activities of employees. It includes various sections covering Practice Profile, Studio wellbeing, health & safety, fire evacuation, IT protocols, CPD, mentoring, training and office administration.

The Project Handbook is a separate section of the intranet site that covers the range of policy, procedures, guidelines and templates for the application of our professional skills on the projects we design and deliver for our clients. It includes project execution, drawing and Revit/BIM protocols, guides and templates, a design review methodology and data management tools.

Our business operation in the practice of architecture, master planning and interior design in the UK is underpinned by accreditation and certification by the British Standards Institute for our Environmental Management System ISO 14001:2015 and our Quality Management System ISO 9001:2016. These standards are emulated in our overseas operations where relevant and in relation to local standards and license requirements.

In addition, we have an extensive track record of peer recognition and reward through award winning projects meeting exacting design, delivery and environmental performance requirements such as the RIBA, British Council for Offices, BREEAM, LEED, SKA, Estidama and DGNB.

Performance and rewards

The Remuneration Committee is responsible for assessing the Board on a performance and rewards basis. The Committee uses industry available material to assess remuneration levels and has undertaken external reviews of the level of reward for both executive and non-executive directors. The most recent external review was undertaken in 2017 by UHY Hacker Young and, the most recent AIM survey information was provided by BDO in 2018.

PRINCIPLE 9

Roles

Chairman - the Chair leads the Board at its regular meetings, sets the Agenda, oversees the governance aspects of the internal control process and, monitors and challenges the strategic direction of the company.

Chief Executive - the CEO provides guidance and information to inform on the strategic direction of the company and its operations. Along with the senior management team the CEO leads the delivery of the strategy.

Non-Executive Directors - act as independent voices on the Board and attend a maximum of 24 to 48 days per annum under their contracts.

PRINCIPLE 10 

Corporate information

The following documents are posted and held on the Company's website:

· Annual Report and Accounts

· Interim Announcements

· AGM notices (where separately issued and not contained in the Report and Accounts).

· Trading updates

· Memorandum and Articles of Association

Non-Compliance with Rule 26

The following requirements of the QCA code are not covered by our website or Report and Accounts

8.3 Rewards reflecting company values

8.5 Rewarding ethical behaviour

Board of Directors

The Group is headed by a Board of Directors which leads and controls the Group, and which is accountable to shareholders for good corporate governance of the Group.

The Board currently comprises three Executive Directors and two independent Non-Executive Directors who bring a wide range of experience and skills to the Company.

The Board considers Clive Carver and Raúl Curiel to be independent Non-Executive Directors.

The Board meets regularly to determine the policy and business strategy of the Group and has adopted a schedule of matters that are reserved as responsibilities of the Board. The Board has delegated certain authorities to Board committees, each with formal terms of reference.

Audit Committee

The main role and responsibility of the Audit Committee is to monitor the integrity of the information published by the Group about its financial performance and position. It does this by keeping under review the adequacy and effectiveness of the internal financial controls and by reviewing and challenging the selection and application of important accounting policies, the key judgements and estimates made in the preparation of the financial information and the adequacy of the accompanying narrative reporting.

The Audit Committee is also responsible for overseeing the relationship with the external auditor, which includes considering its selection, independence, terms of engagement, remuneration and performance. A formal statement of independence is received from the external auditor each year.

It meets at least twice a year with the external auditor to discuss audit planning and the audit findings, with certain executive directors attending by invitation. If appropriate, the external auditor attends part of each committee meeting without the presence of any executive directors.

The Audit Committee currently comprises Clive Carver, as Chairman and Raúl Curiel, and they report to the Board on matters discussed at the Committee meetings.

During the year the Committee met on three occasions to review, in addition to the above, budgets, monthly management accounts and working capital requirements by reference to the Company's financial strategy. It is also reviewed through a sub-committee the management of risk inherent in the business.

Remuneration Committee

The Remuneration Committee convenes not less than twice a year, ordinarily on a six monthly basis, and during the year it met on three occasions. The Committee currently comprises Clive Carver and Raúl Curiel, with Raul Curiel as Chairman until 8 December 2022. It is responsible for determining remuneration policy and all aspects of the Executive Directors' remuneration and incentive packages including pension arrangements, bonus provisions, discretionary share options, relevant performance targets and the broader terms and conditions of their service contracts.

In fulfilling its duties, the Committee initiates research as appropriate into comparable market remuneration, appointing third party advisors as required. In liaison with the Nomination Committee, it has regard to succession planning and makes recommendations to the Board in relation to proposed remuneration packages for any proposed new executive and non-executive appointments.

Where appropriate the Committee consults the Chief Executive Officer regarding its proposals. No Director plays a part in any discussion regarding his or her own remuneration.

Nomination Committee

The Nomination Committee is responsible for keeping under regular review the size, structure and composition (including the skills, knowledge, experience and diversity) of the Board. This includes considering succession planning for the senior management of the Group, taking into account the skills and expertise expected to be needed in the future.

It is responsible for nominating new candidates for the Board, for which selection criteria are agreed in advance of any new appointment.

The Nomination Committee was chaired by Raúl Curiel until 8 December 2022 with the other current members being Robert Fry and Clive Carver.

Directors

Antony Barkwith, Clive Carver, Raúl Curiel, Robert Fry and Nicholas Thompson all served as Directors of the Company throughout the year ended 30 September 2022.

Biographical details of the current Directors are set out on pages 7 and 8.

The Company maintains directors' and officers' liability insurance.

Attendance at board meetings by members of the Board were as follows:

Directors' interests

Directors' interests in the shares of the Company were as follows:

Directors' service contracts

The Company's policy is to offer service agreements to Executive Directors with notice periods of not more than twelve months. Nicholas Thompson had a rolling service contract with the Company which was subject to twelve months' notice of termination by either party, however since serving notice this expired on 31 December 2022. Antony Barkwith and Robert Fry have rolling service contracts with the Company which are subject to six months' notice of termination by either party.

The remuneration packages of Executive Directors comprise basic salary, contributions to defined contribution pension arrangements, discretionary annual bonus, discretionary share options and benefits in kind such as medical expenses insurance.

Non-Executive Directors do not have service contracts with the Company, but the appointment of each is recorded in writing. Their remuneration is determined by the Board. Non-Executive Directors do not receive any benefits in kind and are not eligible for bonuses or participation in either the share option schemes or pension arrangements.

Substantial shareholdings

At 27 March 2023 the Company had been informed of the following notifiable interests of three per cent or more in its share capital:

* Keith McCullagh and Nick Clark's shares are included within a Concert Party holding a total of 89,159,484 shares representing 32.38% of the number of ordinary shares.

Share price

The mid-market closing price of the shares of the Company at 30 September 2022 was 2.40 pence and the range of mid-market closing prices of the shares during the year was between 1.45 pence and 2.40 pence.

Streamlined energy and carbon reporting ("SECR")

Under the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 ('the 2013 Regulations') and the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 ('the 2018 Regulations'), quoted companies and large unquoted companies are required under part 13 of the companies Act 2006 to disclose information relating to their energy usage and Greenhouse Gas ("GHG") emissions.

For these purposes, quoted companies defined as those whose equity share capital is officially listed on the main market of the London Stock Exchange ("LSE"); or is officially listed in an European Economic Area State; or is admitted to dealing on either the New York Stock Exchange or NASDAQ.

The Company is not large, and whilst the Company's shares are traded on AIM, the Company is not listed on traded on the main market of the LSE. The company is therefore not required to disclose energy and carbon information.

Statement by the Directors in performance of their statutory duties in accordance with s172 (1) Companies Act 2006

The Board is mindful of the duties of directors under S.172 of the Companies Act 2006 to have regard to the following six factors:

a) the likely consequences of any decisions in the long-term;

b) the interests of the Group's employees;

c) the need to foster the Group's business relationships with suppliers, customers and others;

d) the impact of the Group's operations on the community and environment;

e) the desirability of the Group maintaining a reputation for high standards of business conduct; and

f) the need to act fairly as between shareholders of the Group.

Directors act in a way they consider, in good faith, to be most likely to promote the success of the Group for the benefit of its shareholders. In doing so, they each have regard to a range of matters when making decisions for the long term success of the Group.

Our culture is that of treating everyone fairly and with respect and this extends to all our principal stakeholders. Through engaging formally and informally with our key stakeholders, we have been able to develop an understanding of their needs, assess their perspectives and monitor their impact on our strategic ambition.

As part of the Board's decision-making process, the Board and its Committees consider the potential impact of decisions on relevant stakeholders whilst also having regard to a number of broader factors, including the impact of the Group's operations on the community and environment, responsible business practices and the likely consequences of decisions on the long term.

Our objective is to act in a way that meets the long term needs of all our main stakeholder groups. However, in so doing we pay particular regard to the longer term needs of shareholders.

We engage with investors on our financial performance, strategy and business model. Our Annual General Meeting provided an opportunity for investors to meet and engage with members of the Board.

The Board continues to encourage senior management to engage with staff, suppliers, customers and the community in order to assist the Board in discharging its obligations.

Further details of how the Directors have had regard to the issues, factors and stakeholders considered relevant in complying with s172 (1) (a)-(f), the methods used to engage with stakeholders and the effect on the Group's decisions during the year can be found throughout this report and in particular in the Investment Case section of the Chairmans statement on pages 3-5 (in relation to decision-making), in the Strategic report on pages 19-23 (where the Group's strategy, objectives and business model are addressed), the following Employees statement (in relation to employees), and the following Environmental Policy (in relation to social and environmental matters).

We seek to attract and retain staff by acting as a responsible employer. The health and safety of our employees is important to the Company and is a standing item at all Group board meetings.

We continue to provide support to communities and governments through the provision of employment, and high quality sustainable design.

We have established long-term partnerships that complement our in-house expertise and have built a network of specialised partners within the industry and beyond.

Environmental policy

The Group promotes wherever possible a 'green' and ecologically sound policy in all its work, but always takes into account the considerable pressures of budget, commercial constraints and client preferences. Sustainability is essential to our design philosophy and studio ethos. It is an attitude of mind that is embedded within our thinking from the start of any project. We design innovative solutions and focus on:

· incorporating passive design principles that mitigate solar gain and heat loss from the outset;

· reducing energy demand through active and passive renewable energy sources;

· the use of energy and resource efficient materials, methods and forms;

· the re-use of existing buildings and materials and flexibility for future change;

· and importantly the careful consideration of the experience and wellbeing of the end user in our buildings.

We believe ourselves to be at the forefront of sustainability amongst our peers which is demonstrated by our track record in achieving 79 'Excellent' or 'Very Good' BREEAM (Building Research Establishment Environmental Assessment Method) ratings awarded to buildings designed by the Group. We have also achieved 1 Ska 'Gold' and 2 Ska 'Silver' environmental assessment ratings and 9 LEED (Leadership in Energy and Environmental Design) 'Gold' award and 5 'Silver' awards.

Employees

As a professional services business, the Group's ability to achieve its commercial objectives and to service the needs of its clients in a profitable and effective manner depends upon the contribution of its employees. The Group seeks to keep its employees informed on all material aspects of the business affecting them through the operation of a structured management system, staff presentations and an intranet site.

The Group's employment policies do not discriminate between employees, or potential employees, on the grounds of age, gender, sexual orientation, ethnic origin or religious belief. The sole criterion for selection or promotion is the suitability of any applicant for the job.

It is the policy of the Group to encourage and facilitate the continuing professional development of our employees to ensure that they are equipped to undertake the tasks for which they are employed, and to provide the opportunity for career development equally and without discrimination. Training and development is provided and is available to all levels and categories of staff.

It is the Group's policy to give fair consideration to application for employment for disabled persons wherever practicable and, where existing employees become disabled, efforts are made to find suitable positions for them.

Health and safety

The Group seeks to promote all aspects of health and safety at work throughout its operations in the interests of employees and visitors.

The Group has a Health and Safety Steering Committee, chaired by Robert Fry, to guide the Group's health and safety policies and activities. Health and safety is included on the agenda of each board meeting. Antony Barkwith is also a member of the Committee.

Group policies on health and safety are regularly reviewed and revised and are made available on the intranet site. Appropriate training for employees is provided on a periodic basis.

Disclosure of information to auditor

Each of the Directors who were in office at the date of approval of these financial statements has confirmed that:

· so far as they are aware, there is no relevant audit information of which the auditor is unaware; and

· they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Independent Auditors

On the 12 October 2022, BDO LLP confirmed their resignation as auditors of Aukett Swanke Group Plc.

The Directors appointed Moore Kingston Smith LLP as auditors of the Group on 19 October 2022 for the year ended 30 September 2022.

The auditors, Moore Kingston Smith LLP have indicated their willingness to continue in office and a resolution concerning their reappointment will be proposed at the Annual General Meeting.

Future developments

An indication of likely future developments in the business of the Group is contained in the Strategic Report.

Financial instruments

Information concerning the use of financial instruments by the Group is given in notes 28 to 32 of the financial statements.

Dividends

The Board does not intend to pay a dividend in the forthcoming year.

Going Concern

Measures taken around the world to restrict the spread of the COVID-19 virus, followed by the macro-economic implications of rising energy prices and inflation globally have had a significant impact on the Company and the Group for the past 2 & 1/2 years of trading.

Despite action taken in this time, management were only able to partially mitigate the financial impact of the above on the Group which resulted in a loss for the year, largely attributable to the discontinued Middle East operation, and reduction in net assets of the Group.

The Group has continued to operate within its banking limits, a CBILS loan was agreed in May 2021, and subsequently the Gearing Covenant and Debt Servicing covenant were removed from the facility agreements.

On 20 March 2023, the Group acquired 100% of TFG with consideration paid on a share for share basis. This provided a significant boost to Group with approximately £1.7m of net tangible assets including almost £1m of cash.

More details of the actions taken, and the results of forecasting performed by the Group (upon which the going concern assessment of the Company is dependent) in response to the global macro-economic environment are summarised in the Going Concern section of note 1.

In addressing any going concern issues the Directors are required to consider likely cashflows over at least a 12 month period following the date of the approval of the Financial Statements.

The TFG acquisition brings into the Group a freehold property independently valued at £3.02m in July 2021 with a mortgage balance of £1.48m as at December 2022 giving a loan to value percentage of just 48%.

However, as the mortgage renewal date is less than 12 months from the signing date of these accounts, the Board must consider the remote possibility that if the mortgage could not be renewed, then the Group may need to raise cash to repay the full balance of the mortgage through alternative borrowing facilities, asset sales or fund raising which are not wholly within the Group's control.

Based on forecasts prepared and reviewed for the period to 31 March 2024, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future.

However, while the Board is confident of either being able to re-mortgage the building or selling it should the need arise, the requirement to refinance the building within the going concern period indicates the possible existence of a material uncertainty which may cause significant doubt on the Group's and the Parent Company's ability to continue as a going concern.

The financial statements do not include the adjustments that would result if the Group or the Parent Company was unable to continue as a going concern.

Annual General Meeting

Notice of the annual general meeting, which is expected to be held on 21 April 2023, will be posted to shareholders in due course.

The Directors' report was approved by the Board on 27 March 2023 and signed on its behalf by

Antony Barkwith

Company Secretary

Aukett Swanke Group Plc

Registered number 02155571

Statement of directors' responsibilities

Directors' responsibilities

The Directors are responsible for preparing the annual report and financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group and Company financial statements in accordance with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006. Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on AIM. 

In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgments and accounting estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006, subject to any material departures disclosed and explained in the financial statements;

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and Group and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website publication

The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

Independent auditor's report to the members of Aukett Swanke Group Plc

Opinion

We have audited the financial statements of Aukett Swanke Group Plc (the 'parent Company') and its subsidiaries (the 'Group') for the year ended 30 September 2022 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Financial Position, the Consolidated and Company Statements of Changes in Cash Flows, the Consolidated and Company Statements of Changes in Equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in the preparation of the Group and parent Company financial statements is applicable law and UK adopted International Accounting Standards and, as regards the parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

In our opinion:

· the financial statements give a true and fair view of the Group's and of the parent Company's affairs as of 30 September 2022 and of the Group's loss for the year then ended;

· the Group financial statements have been properly prepared in accordance with UK adopted International Accounting Standards;

· the parent Company financial statements have been properly prepared in accordance with UK adopted International Accounting Standards and as applied in accordance with the provisions of the Companies Act 2006; and

· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

We draw attention to Note 1 to the financial statements which indicates that the Directors have assumed that the overdraft facility of £250,000 will be renewed in November 2023 whilst making their assessment of the Group's and parent Company's going concern status. Whilst there are no indications that the overdraft facility will not be renewed, it is not guaranteed.

The renewal of the £1.46m mortgage will only be reviewed later in 2023, and as such there is a possibility that if the mortgage is not renewed then the Group would need to repay the full balance of the mortgage within 12 months of the signing date of these accounts. In this case the Group may need to raise cash through alternative borrowing facilities, asset sales or fund raising which are not wholly within the Group's control.

As stated in Note 1, these conditions and the economic uncertainty which exists, along with other matters as set out in Note 1, indicate that a material uncertainty exists that may cause significant doubt on the Group's and parent Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors' assessment of the Group and the parent Company's ability to continue to adopt the going concern basis of accounting has been highlighted as a key audit matter based on our assessment of the significance of the risk and the effect on our audit strategy.

Our evaluation of the Directors' assessment of the Group and the parent Company's ability to adopt the going concern basis of accounting and our response to the key audit matters include:

· A critical assessment of the detailed cash flow projections prepared by the Directors, which are based on future revenue pipelines and newly won contracts, we also evaluated the sensitivities that the Directors performed against this forecast.

· We evaluated the key assumptions in the forecast, which were consistent with our knowledge of the business and considered whether these were supported by the evidence we obtained. We obtained an understanding of all relevant uncertainties, including those arising because of the impact of the COVID-19 pandemic over the past years. We have factored the ongoing impact of COVID-19 into our analysis of the risks affecting the ability of the Group and parent Company to continue to trade and meet its liabilities as they fall due for at least twelve months from the date of approval of the Group and parent Company financial statements.

· We have inquired about revenue pipeline, and status of outstanding bids. We have agreed submitted proposal documents and newly won contracts where appropriate.

· We have examined current year actual results against the budget for the year to determine the accuracy of the budgeting and forecasting by management.

· We examined the disclosures relating to the going concern basis of preparation and found that these provided an explanation of the Directors' assessment that was consistent with the evidence we obtained.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

Overview

An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group's system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.

The components of the Group were evaluated by the Group audit team based on a measure of materiality, considering each component as a percentage of the Group's net assets, gross revenue and results before tax, which allowed the Group audit team to assess the significance of each component and determine the planned audit response. We determined there to be four significant components to the Group, which were Aukett Swanke Group Plc, Aukett Swanke Limited, Veretec Limited, and Aukett Swanke Architectural Design Limited. They were all subjected to full scope audits.

Also, we have performed a full scope audit on John R Harris & Partners Limited, Swanke Hayden Connell International Limited, Aukett Fitzroy Robinson International Limited and Shankland Cox Limited for the purpose of coverage and to cover specific identified risk. All full-scope audits, excluding John R Harris & Partners Limited were conducted by the group audit engagement team. The audit of John R Harris & Partners Limited was performed by a component audit firm in Dubai, UAE.

For significant components requiring a full scope approach, we evaluated controls by performing walkthroughs over the financial reporting systems identified as part of our risk assessment, reviewed the accounts production process, and addressed critical accounting matters. We then undertook substantive testing on significant transactions and material account balances.

We have overall coverage of 100% of group profit before tax, 100% of Group revenue and 100% of Group total assets.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.

In addition to the matter described in the material uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our audit report.

Our application of materiality

The scope and focus of our audit were influenced by our assessment and application of materiality. We define materiality as the magnitude of misstatement that could reasonably be expected to influence the readers and the economic decisions of the users of the financial statements. We use materiality to determine the scope of our audit and the nature, timing, and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole. We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements.

Based on our professional judgement we determined materiality for the 2022 financial statements as a whole and performance materiality as follows:

Performance materiality:

The performance materiality benchmark has been selected based of the following considerations:

· cumulative identification of errors noted in the previous years that has been posted by management as per previous auditor file review

· our risk assessment, together with our assessment of the overall control environment

Component materiality:

We set materiality for each component of the Group based on a percentage of Group materiality dependent on the size and our assessment of risk of material misstatements of that component. Component materiality, other than the parent Company's, ranged from £91,000 to £3,000. In the audit of each component, we further applied performance materiality levels of 50% of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.

Trivial:

We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £7,800 for the Group and £7,600 for the parent Company. We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. We also reported to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The Directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

· the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

· the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Group and the parent Company and their environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

· adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

· the parent Company financial statements are not in agreement with the accounting records and returns; or

· certain disclosures of directors' remuneration specified by law are not made; or

· we have not received all the information and explanations we require for our audit.

Responsibilities of Directors

As explained more fully in the Directors' responsibilities statement set out on page 37, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities is available on the FRC's website at https://wwww.frc.org.uk/auditors/auditor-assurance/auditor-s-responsibilities-for-the-audit-of-the-fi/description-of-the-auditor's-responsibilities-for

This description forms part of our auditor's report.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the company.

Our approach was as follows:

· We obtained an understanding of the legal and regulatory requirements applicable to the company and considered that the most significant are the Companies Act 2006, UK adopted international accounting standards, the rules of the Alternative Investment Market, and UK taxation legislation.

· We obtained an understanding of how the Group and parent Company complies with these requirements by discussions with management and those charged with governance.

· We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance.

· We inquired of management and those charged with governance as to any known instances of non-compliance or suspected non-compliance with laws and regulations.

· Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken for no purpose other than to draw to the attention of the company's members those matters which we are required to include in an auditor's report addressed to them. To the fullest extent permitted by law, we do not accept or assume responsibility to any party other than the company and the company's members as a body, for our work, for this report, or for the opinions we have formed.

Mital Shah (Senior Statutory Auditor)

for and on behalf of Moore Kingston Smith LLP

Chartered Accountants

Statutory Auditor

6th Floor

9 Appold Street

London

EC2A 2AP

27 March 2023

Consolidated income statement

For the year ended 30 September 2022

Consolidated statement of comprehensive income

For the year ended 30 September 2022

Consolidated statement of financial position

At 30 September 2022

The financial statements on pages 47 to 109 were approved and authorised for issue by the Board of Directors on 27 March 2023 and were signed on its behalf by:

Company statement of financial position

At 30 September 2022

The result for the year contained within the parent company's income statement is a loss of £783k (2021: loss £1,179k).

The financial statements on pages 47 to 109 were approved and authorised for issue by the Board of Directors on 27 March 2023 and were signed on its behalf by:

Consolidated statement of cash flows

For the year ended 30 September 2022

Company statement of cash flows

For the year ended 30 September 2022

Consolidated statement of changes in equity

For the year ended 30 September 2022

The other distributable reserve was created in September 2007 during a court and shareholder approved process to reduce the capital of the Company.

The merger reserve was created through a business combination in December 2013 representing the issue of 19,594,959 new ordinary shares at a price of 7.00 pence per share.

Company statement of changes in equity

For the year ended 30 September 2022