AukettFitzroyRobinson – Press Release

 

For Release 27 January 2006

 

Aukett Group PLC

2005 PRELIMINARY RESULTS ANNOUNCEMENT

 

Repositioning and Long Term Growth Strategy in Place

 

Aukett Group Plc (“Aukett”), the international group of architects, designers and engineers announces its Preliminary Results for the 12 months ended 30 September 2005. Aukett provides creative design consultancy in a diverse range of sectors including: commercial property, HOTELS, retail, interior design, urban regeneration, residential, healthcare, leisure, transportation and technical support facilities.

 

The Group’s network has been rationalised and offices with delivery capability are now situated in Berlin, Bratislava, Frankfurt, London, Moscow, Prague and Warsaw. Glasgow has been closed, Holland sold, London consolidated into the West End, and a new joint venture in Romania.

 

Financial Highlights
Year ended 30 September 2005	2005	2004 (as restated)
Turnover	£12.28m	£11.69m
Group work done	£12.61m	£11.90m
Operating profit/(loss)	£236,000	(£1,223,000)
Profit/(loss) before tax	£159,000	(£1,327,000)
Basic and diluted earnings/(loss) per share	0.02p	(1.63p)
Dividends per share	£nil	£nil
Net assets	£2.33m	£0.28m
Net borrowings	(£1.38m)	(£1.46m)
Gearing	59%	521%

 

 

Key Points of Statement.

 

• Five month contribution from Fitzroy Robinson.
• New long term strategy in place.
• Financial position strengthened.
• Merger with Fitzroy Robinson contributed significantly to improved balance sheet position, better trading performance.
• Stand alone Aukett operation loss-making during period, improvement in latter months.
• IT infrastructure upgraded.
• Mixed set of results in Europe.
• Greatest potential markets in Russia, Poland and Spain.
• Proposed move to AIM from Official List.

 

 

CEO, Nicholas Thompson, said:

 

“Most of the shortcomings have now been addressed in the UK and throughout the wider European network. Under performing operations have been either rationalised or sold, with internal control systems strengthened. A new management team is in place to ensure that the enlarged group operates and grows from a stable base in what is a competitive market place. Our intention is to implement a growth strategy which aims to double the size of the business within the next five years. This strategy will combine organic growth underpinned by greater volumes through existing business streams alongside a general increase in the scale of projects, as demonstrated by recent project wins.”

 

Enquiries to:

 

Nicholas Thompson, Chief Executive	Nicholas.thompson@aukettfitzroyrobinson.com
Gerry Deighton, Chairman
Aukett Group Plc	Tel: 020 7636 8033
Peter Binns	peter.binns@binnspr.co.uk
Binns & Co PR	Tel: 020 7786 9600

 

AUKETT GROUP PLC

Results for the twelve months ended 30 September 2005

 

Introduction

I became the CEO role of the newly merged group in April 2005. My immediate task was to ensure the successful integration of the two businesses following the merger and at the same time ensuring that a new long-term strategy for the business was developed. This involved rationalising the operations whilst effecting a continued strengthening of our financial position. I am pleased to report that progress has been made on both fronts, details of which are covered in the report below.

 

The repositioning of the Group has involved many difficult decisions. As a people based business, our principal fixed cost is premises and these have been successfully reduced through relocation, substantially lowering the cost base. Our variable costs are almost entirely staff related and reducing these has been a painful but necessary operation. Overall, we have achieved these restructurings whilst continuing to provide a first class product to our clients and I am immensely grateful to our staff for their dedication and effort.

 

Financial overview

 

The Group achieved a net profit before tax for the year of £0.16m (2004: Loss £1.33m as restated) on work done of £12.6m (2004: £11.9m as restated). We have amended our accounting policy in line with UITF 40; the financial impact of which is detailed in note 6 below. The merger with Fitzroy Robinson contributed significantly to the improved balance sheet position as well as contributing to a better trading performance, albeit for only the last 5 months of the year. The stand alone Aukett operation continued to make losses during the period now reported but an improvement was achieved in the latter months. Our cash position also started to improve with inroads made into our debtor collection rate on the basis of improved appointment and invoicing methodology along with a more focused recovery programme. There are a small number of significant project claims, totalling approximately £2.8m gross, where the Company is in negotiations with clients for additional fees which are not included in the reported result; some of which may be resolved during 2006. Of this sum, approximately 50% relates to a Planning Consent success fee and the remainder relates to time related costs for the extended scope of services on various projects.

 

Review of Operations

 

During the financial year, the original London based Aukett operation has been rationalised to reflect the needs of the on-going business. This process was managed to ensure that each Sector in which we operate retained the level of skill and critical mass for it to be able to contribute under our future strategy. As part of this review, the Board took the decision to close our Glasgow office. Existing contracts are therefore being run out and no new commissions taken on.

 

In order to ensure that our business is fully able to operate in a competitive environment, a significant upgrade programme has been undertaken to renew our IT infrastructure including the rolling out of the latest AutoCad software system throughout our UK and European operations. This enabled us to maximise our buying power and achieve significant volume discounts.

 

In December 2005 we completed our move from Battersea to new premises in the West End at a one-off cost of £390,000 for penalties and dilapidations, thus relocating all of our staff within walking distance of each other. Going forwards, this move will result in a rental saving of in excess of £300,000 per annum plus associated office running costs. Additionally, we are now outsourcing administrative tasks wherever possible, including IT management, archiving and payroll to ensure that we only retain necessary and strategically appropriate administrative backup.

 

In Europe we have had a mixed set of results. Our Russian operation continues to gain new, significant enquiries but is hampered by a skills shortage. Poland has returned to profitability but remains dependent on projects in Russia. The Czech office has continued to expand its operations in central Europe with a joint venture being formed in Romania on the back of projects secured there. The German operations are maintaining income in what continues to be a very difficult market. Despite a number of initiatives including a local alliance, our Dutch operation has continued to under perform and the operation was therefore sold in December 2005 to our alliance partners who have assumed all liabilities.

 

 

Corporate strategy

 

Having returned the UK operations to profit, my principal aim for the forthcoming year is to continue to improve commercial performance by increasing the number of high quality, high value projects which the practice undertakes coupled with sound financial management. It is pleasing to note that in the immediate post merger period we have been invited to bid or have been short listed on a number of significant projects, of which a small number are in excess of £100m construction value. This reflects our status as one of the few significant UK based architectural practices with a track record of delivering large scale projects from conceptual design to practical completion.

 

Our intention is to implement a growth strategy which aims to double the size of the business within the next five years. This strategy will combine organic growth underpinned by greater volumes through existing business streams alongside a general increase in the scale of projects, as demonstrated by recent project wins. To deliver this strategy and to ensure that ultimate succession can be properly managed, the Board has adopted an active strategy of giving greater responsibility to key staff below director level.

 

We believe that looking beyond the UK our greatest potential markets are situated in Russia, Poland and Spain and consider our operations in these countries complementary to those in London in terms of likely commercial growth over the ensuing period. In Spain, we are looking to forge a strategic alliance with an appropriate partner so long as it is on the right commercial terms.

 

A factor within this growth strategy is the greater potential to enhance earnings by better utilisation of the expertise and the lower cost base that our European network can deliver whilst maintaining overall quality.   We are commencing a programme of investment into our Central and East European offices to ensure that they have state–of-the-art technology providing all offices with the capability to work with each other on significant projects.

 

We have reviewed our current positioning on the stockmarket as a “small cap” company on the Official list. With the evolution and greater acceptability of AIM and its attractions to investors as well as its growing reputation, the Board has decided that the future of the Company would be better served if it were to be quoted on an exchange with companies of a similar size and outlook. As such, a resolution will be put to shareholders to approve the Company’s proposed move to AIM under the fast track procedures of the London Stock Exchange.

 

Gerry Deighton has assumed the role of Chairman and Jose Luis Ripoll has stepped down from the Board with immediate effect having fulfilled the objectives set out by him last year. On behalf of the Board I would like to thank him for his contribution over the last 18 months.

 

Summary

 

It was clear upon concluding the Merger that a number of significant shortcomings still existed in the previous operations, both in the UK and throughout the wider European network. Most have now been addressed and underperforming operations have either been rationalised or sold and a strategy put in place to better position the business longer term. Having strengthened the internal control systems, the new management team will continue to exercise diligent control over operations to ensure that we can operate and grow from a stable base in what is a competitive marketplace.

 

Finally, I would like to thank the Directors and staff for their commitment and dedication to making the merged entity a success, both in the few months we have been together and in the many years of future success to which we can look forward.

 

 

 

J N E Thompson

Chief Executive Officer

 

27 January 2006

 

		Notes		2005 £000		2004 (as restated) £000
Group turnover		1		12,284		11,690
Movement in amounts Recoverable on contracts		1		327		214
Group work done		1		12,611		11,904
	Existing Operations			10,158		11,904
	Acquisitions			2,453		–
	Group Work Done			12,611		11,904
Group operating profit/(loss)		2		236		(1,223)
	Existing Operations			(114)		(1,223)
	Acquisitions			350		–
	Operating profit/(loss)			236		(1,223)
Share of operating profit/(loss) in joint ventures and associate				25		31
Exceptional items: Profit on disposal of joint ventures		3		23		–
Profit/(loss) on ordinary activities before interest and tax				284		(1,192)
Net interest payable				(125)		(135)
Profit/(loss) on ordinary activities before tax		4		159		(1,327)
Tax (charge)/credit on profit/(loss) on ordinary activities				(136)		143
Profit/(loss) on ordinary activities after tax				23		(1,184)
Dividends				–		–
Retained profit/(loss) for the year				23		(1,184)
Basic and diluted earnings/(loss) per share		5		0.02p		(1.63p)

 

There is no difference between the profit/(loss) on ordinary activities before taxation and the retained profit/(loss) for the Group stated above and their historical cost equivalents.

 

The operating profit for the year arises from the Group’s continuing operations

 

Consolidated Balance Sheet

At 30 September 2005

 

		2005		2004 (as restated)
		£000	£000	£000	£000
Fixed assets
Intangible assets			1,647		204
Tangible assets			350		363
Investments in joint ventures:
Share of gross assets		–		357
Share of gross liabilities		–		(308)
			–		49
Investment in associate			31		29
			2,028		645
Current assets
Debtors		6,064		5,271
Cash at bank and in hand		1,158		404
		7,222		5,675
Creditors falling due within one year		(5,400)		(5,989)
Net current assets/(liabilities)			1,822		(314)
Total assets less current liabilities			3,850		331
Creditors falling due after one year			(1,520)		(53)
Net assets			2,330		278
Capital and reserves
Called up share capital			1,448		724
Share premium account			1,385		1,794
Merger reserve			1,542		–
Profit and loss account			(2,045)		(2,240)
Equity shareholders’ funds			2,330		278

 

 

Statement of total recognised gains and losses

For the year ended 30 September 2005

 

 

	2005   £000		2004 (as restated) £000
Profit/(loss) for the financial year	23		(1,184)
Foreign exchange differences	(28)		41
Total gains and losses recognised in the year	(5)		(1,143)
Prior period adjustment (note 6)	(243)
Total gains and losses recognised since the last annual report	(248)

 

 

 

 

 

 

Reconciliation of movements in equity shareholders’ funds

For the year ended 30 September 2005

 

 

		2005 £000		2004 £000
Opening shareholders’ funds as originally presented		521		1,493
Prior Period Adjustments (note 6)		(243)		(72)
Opening shareholders’ funds as restated		278		1,421
Exchange movement		(28)		41
New shares issued		2,266		–
Share issue costs offset against share premium account		(209)		–
Profit/(loss) attributable to shareholders		23		(1,184)
Shareholders’ funds at 30 September		2,330		278

 

 

 

 

 

 

 

Consolidated Cash Flow Statement

For the year ended 30 September 2005

 

				2005			2004 (as restated)
				£000		£000	£000	£000
Net cash inflow from operating activities						426		523
Returns on investments and servicing of finance						(125)		(135)
Tax paid						(46)		73
Capital expenditure
Purchase of tangible fixed assets						(117)		(14)
Acquisitions and disposals
Disposal of joint venture						44		–
Cash acquired with subsidiary						508		–
Costs of acquisition of subsidiary						(409)		–
Net cash inflow before financing						281		447
Financing
Repayment of loans				–			(40)
Principal repayments under hire purchase contracts and finance leases				(92)			(147)
Net cash outflow from financing						(92)		(187)
Increase in cash						189		260
Reconciliation of net cash flow to movement in net debt
Increase in cash for the year						189		260
New loans forming part of consideration for acquisition of subsidiary						(200)		–
Cash outflow from decrease in debt						92		187
New finance leases						–		–
Movement in net debt during the year						81		447
Net debt at 1 October 2004						(1,464)		(1,911)
Net debt at 30 September 2005 (note 9)						(1,383)		(1,464)

 

 

 

NOTES

 

• Turnover and work done

 

An analysis of turnover and work done by geographical area of destination is as follows:

 

 

	2005				2004 (as restated)
	United Kingdom £000	Rest of Europe £000	Total £000		United Kingdom £000	Rest of Europe £000	Total £000
Turnover
Gross turnover	9,969	2,728	12,697		9,790	2,655	12,445
Less: Share of joint ventures	–	(210)	(210)		–	(498)	(498)
Share of associate	–	(203)	(203)		–	(257)	(257)
Group turnover	9,969	2,315	12,284		9,790	1,900	11,690
Movement in amounts recoverable on contracts
Gross movement	311	76	387		282	(138)	144
Less: Share of joint ventures	–	3	3		–	63	63
Share of associate	–	(63)	(63)		–	7	7
Group movement in amounts recoverable on contracts	311	16	327		282	(68)	214
Work done
Gross work done	10,280	2,804	13,084		10,072	2,517	12,589
Less: Share of joint ventures	–	(207)	(207)		–	(435)	(435)
Share of associate	–	(266)	(266)		–	(250)	(250)
Group work done	10,280	2,331	12,611		10,072	1,832	11,904

2          Group operating profit/(loss)

 

	Existing		Acquisition		2005 Total		2004 (as restated)
	£’000		£’000		£’000		£’000
Turnover	9,586		2,698		12,284		11,690
Movement in work in progress	572		(245)		327		214
Group work done	10,158		2,453		12,611		11,904
Other operating income	49		–		49		172
Staff costs	(5,446)		(978)		(6,424)		(6,927)
Amortisation of goodwill	(52)		–		(52)		(63)
Depreciation	(233)		(65)		(298)		(336)
Other operating charges	(4,200)		(1,060)		(5,260)		(5,327)
Exceptional operating charges	(390)		–		(390)		(646)
Group operating profit/(loss)	(114)		350		236		(1,223)

 

 

The exceptional operating charge of £390,000 comprises provisions for the £230,000 exit penalty on early termination of the lease of the Group’s Battersea offices and £160,000 for associated dilapidation costs.

The 2004 exceptional operating charges related to an impairment provision of £236,000 to fully amortise goodwill carried on the balance sheet in respect to Aukett BV, costs relating to 2004 EGM of £210,000 mainly comprise professional adviser fees in respect to issuing the circulars to shareholders and holding the subsequent EGM in March 2004, and adviser costs relating to the Acquisition (see note 7).

 

3          Exceptional item

 

The exceptional item relates to the profit on disposal of the Group’s non-strategic interest in Aukett & Garretti Srl in December 2004.

 

• Profit/(loss) on ordinary activities before taxation

 

An analysis of profit/(loss) on ordinary activities before taxation by geographical area is as follows:

 

	2005				2004 (as restated)
	United Kingdom £000	Rest of Europe £000	Total £000			United Kingdom £000	Rest of Europe £000	Total £000
Company and subsidiaries	519	5	524			(318)	(392)	(710)
Share of joint ventures	–	23	23			–	28	28
Share of associate	–	2	2			–	1	1
	519	30	549			(318)	(363)	(681)
Impairment of goodwill			–					(236)
Costs relating to 2004 EGM			–					(210)
Costs relating to the Acquisition			–					(200)
Lease penalty & dilapidations			(390)					–
Group total			159					(1,327)

 

5          Earnings/(loss) per share

 

The earnings per share is calculated on the profit attributable to shareholders of £23,000 for the year ended 30 September 2005 (2004: loss £1,184,000 as restated) and on 105,940,081 (2004: 72,421,394) ordinary shares, being the weighted average number of shares in issue during the year. There is no additional dilution to the report in either year in accordance with FRS 14, Earnings per Share.

 

 

6          Summary of effects of change in accounting policy

 

The change in accounting policy has been introduced in response to the accounting Abstract relating to revenue recognition and service contracts which was issued in March 2005 and is applicable to all accounting periods ending after 22 June 2005. The abstract, inter alia, restricts the recognition of income when the consideration is conditional on a specified future event the occurrence of which is outside the control of the seller. As a result the work in progress valuation at 31 March 2005 was £302,000 lower than it would have been under the previous policy. Of this, £59,000 relates to the current year, reducing both work done and profit accordingly and £243,000 relates to prior years and has therefore been taken as an adjustment to reserves.

 

7          Movement in Reserves

 

Following the completion of the Acquisition, a total of £409,000 of costs relating to the issue of shares has been written off against the share premium account in accordance with s130(2) of the Companies Act 1985. Consequently, there is a transfer of £200,000 between the profit & loss and share premium accounts representing share issue costs expensed through the 2004 accounts.

 

• Acquisition of a subsidiary undertaking

 

On 15 April 2005, the Company acquired 100% of the issued share capital of Fitzroy Robinson Limited for consideration comprising the issue of 72,392,431 new ordinary shares of £0.01 each in the Company and a £200,000 loan note. The fair value of the consideration was £2,465,883. In accordance with sections 131 and 133 of the Companies Act 1985, the Company has taken no account of any premium on the shares issued and has recorded the cost of the investment at the nominal value of the shares issued plus the fair value of the other consideration. The resulting difference arising on consolidation has been credited to other reserves.

 

The following table sets out the book value of the identifiable assets and liabilities acquired and their fair value to the Group:

 

		Book and Fair value
		£’000
Fixed assets		169
Current assets
Debtors		1,561
Cash		508
Total assets		2,069
Creditors
Fees in Advance		514
Trade creditors		277
Accruals		217
Other creditors		258
Total liabilities		1,266
Net assets		972
Goodwill		1,494
		2,466
Satisfied by:
Shares issued		2,266
Loan note		200
		2,466

 

Net cash inflows in respect of the acquisition comprised:

 

	£’000
Cash consideration	–
Cash at bank and in hand acquired	508
Bank overdrafts acquired	–
	508

 

 

 

9          Analysis of net debt

• At 1 October
• 2004
• Cash flow
• Non-cash
• movements
• At 30 September 2005
• £’000
• £’000
• £’000
• £’000
• Cash at bank and in hand
• 404
• 754
• –
• 1,158
• Overdrafts repayable on demand
• (1,729)
• (565)
• 1,350
• (944)
• (1,325)
• 189
• 1,350
• 214
• Bank and other loans repayable in:
• Less than one year
• –
• –
• (38)
• (38)
• More than one year
• –
• –
• (1,512)
• (1,512)
• Finance leases and Hire Purchase contracts
• (139)
• 92
• –
• (47)
• (139)
• 92
• (1,550)
• (1,597)
• Net Debt
• (1,464)
• 281
• (200)
• (1,383)

 

 

10         Post Balance Sheet Events

 

On 16 December 2005 the Company entered into an agreement to sell for €1 100% of its shares of Aukett BV, a subsidiary based in the Netherlands, to Group A BV – a team of designers based in Rotterdam with whom the Group had been working. At the date of disposal, the net liabilities included in the books of the Group amounted to £20,000.

 

 

11        Statutory accounts

 

The financial information set out above does not constitute the Company’s statutory accounts for the years ended 30 September 2005 or 2004 but is derived from those accounts. Statutory accounts for 2004 have been delivered to the Registrar of Companies and those for 2005 will be delivered following the Company’s annual general meeting. The auditors have reported on the 2004 accounts; their reports was unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985.

 

 

12        Annual Report

 

The Annual Report and Accounts is expected to be mailed to shareholders on or before 28 February 2006. Further copies will be available from the registered office of the Company, 14 Devonshire Street, London W1G 7AE, or will be accessible via the Company’s website at www.aukettfitzroyrobinson.com.

 

END