Preliminary Results 2007

Preliminary announcement of results for the year ended 30 September 2007

Aukett Fitzroy Robinson Group Plc, the international practice of architects and interior design specialists, announces its preliminary results for the year ended 30 September 2007.

 

Key highlights

• Group turnover up 21% to £19.7m with strong growth in the UK hotel and retails sectors, and Russian operation.

• Profit before tax up £1.6m to £2.4m as a result of turnover and margin growth.

• 136% growth in earnings to 1.06 pence per share.

• Strong cash flow with £1.8m of net cash inflow before financing leading to the elimination of net debt.

• Shareholders’ funds up 45% including net cash of £1.7m.

• Recommencement of dividend payments with 0.2 pence per share paid in September 2007.

 

Nicholas Thompson, Chief Executive Officer of Aukett Fitzroy Robinson commented:

“Having now achieved two years of improving profitability, we are cautiously optimistic as we embark upon a period where we need to maintain our current financial performance and improve both the transparency and quality of our income in the longer term.”

 

Enquiries

Aukett Fitzroy Robinson – 020 7636 8033
Nicholas Thompson, Chief Executive Officer
Duncan Harper, Group Finance Director

JM Finn – 020 7600 1658
Sam Smith
Clive Carver

Adventis Financial PR – 020 7034 4759
Chris Steel
Tarquin Edwards

 

Chairman’s statement

I am delighted to report a further year of real financial progress.

At the half year we said that we expected to meet the then market expectation for financial performance which we have done with profit before tax rising to £2.37m (2006: £0.79m).

This improvement in our financial performance allowed us to reorganise our capital structure thereby enabling a return to dividend payment with an initial sum of 0.2p per share, which is reflected in these results.

The business now focuses upon those areas of the commercial property markets both in the UK and throughout our international operation where we believe there are proven long-term project opportunities to access better levels of fee income and where the group has a clear competitive advantage.

Finally, after my return to the company in March 2004 and seeing it prosper, I have decided to retire as Chairman at the next annual general meeting. It has been a pleasure to be a part of the revival of Aukett Fitzroy Robinson in its merged form and I am also delighted to have accepted the position of Honorary President of the company for the next two years.

I leave an experienced and capable management team, whose commitment and loyalty should maintain the group’s return to growth and prosperity.

Gerry Deighton
Chairman
15 January 2008

Chief Executive Officer’s report

Introduction

2007 has been another positive year for the group. Our actual financial performance is underpinned by the significant efforts that were made to improve both the quality of our income stream in previous periods and the size of projects generated throughout our operations: the result of which is self-evident in these financial statements.

Financial overview

The group achieved a profit before tax of £2.37m (2006: £0.79m) on turnover of £19.75m (2006: £16.28m).

This result is all the more encouraging as it was achieved after paying staff bonuses of some £0.91m (2006: £0.04m) which produces an underlying gross profit of £3.28m (2006: £0.83m).

During the year group net borrowings were eliminated and the year ended with a net cash surplus of £1.69m (2006: net debt £0.18m) which fully reflects the impact of our consistent contract and invoicing regime which was implemented following the merger in 2005.

Review of operations

Our operations in both the UK and countries where we have international offices performed well during the year. Additionally, we have international projects in other locations including the United Arab Emirates, France, Ukraine, Kazakhstan and the Islands of Cape Verde.

As with many other professional consultants engaged in the construction based industries, we have suffered from the lack of suitably qualified staff to support both existing commissions and market opportunities to their full extent. This phenomenon is not limited to the UK and has been noticeable in all our office locations where we have sought to increase our workload, with the exception of Germany. To an extent, the impact of this skill shortage has been mitigated by the increasing number of larger projects that we have won, where the gestation period up to the requirement for production information (the project stage with the highest concentration of staff) is spread over a longer period than has hitherto been the case on a historically smaller project portfolio. In recent months we have seen a softening of the resource market which should alleviate this situation.

For the second year running, our commercial office and hotel sector groups have performed well. Our commercial office group is currently working on a number of significant projects for its retained client base which includes: Goodman, Development Securities, Jarrold, Land Securities and Great Portland Estates.

The hotel team has five major projects that are underway both in the UK and internationally.  These cover both Grade I & II listed conversions for high net worth private clients and new build opportunities within the branded hotel market – an area we see for future expansion.

Our specialist interiors team support the main architectural sectors and have a number of commissions with Radisson Edwardian, Radisson SAS and Hilton.

Both our transport team and Veretec, our executive architecture arm, performed at a similar level to the prior year with work on the upgrading of Farringdon Station in London and for major contractors including Taylor Woodrow, Wates and Kier.

The retail group had one of its best years for some time, having concentrated on the ‘green’ agenda and captured ten new commissions from one of the UK’s premier retailers under this heading, whilst at the same time maintaining exposure in the bespoke retail market with a commission for Dunhill in London’s West End.

Outside of London, our two regional offices in Bristol and Southampton continued to win significant projects in their local markets. The Bristol office currently has six projects at the planning application stage of which three were won during the current year. Due to its recent success, the Bristol office is planning to relocate to larger premises within the city during the new financial year.

The newly opened Southampton office had a variable year with a number of the initial opportunities not proceeding. However, the office achieved a planning consent for the new headquarters of Linden Homes and has currently secured a new commission for a 200 unit residential apartment block and is negotiating on a £60m mixed-use scheme both of which will enable the team to expand over the forthcoming period.

Internationally, Russia continues to perform well with a further four contracts being signed during the current year which have a combined contract value of $240m. In addition, the Moscow office is now converting residential opportunities in Sochi, a Black Sea resort, in the Krasnodar region and in the Ukraine for Conrad Hilton.

Our offices in Prague and Bratislava further improved on last year’s excellent results, and continue to enjoy a range of new enquiries from a broad spectrum of commercial clients.

Poland, as reported at the interim stage has yet to achieve a better balance in its business model and continued to be loss-making in the second half. However, local management is working with group executives on a number of alternative income generating options in order to maintain our position in this strategic market.

Both of our German joint ventures were profitable during the year, arising out of a resurgence in the economic activity in this country. Berlin, particularly, has seen an increase in the number and size of project opportunities.

In both Romania, where we have a joint venture, and in the adjacent market of Bulgaria, commissions are based upon individual project opportunities.

People

As part of our succession programme, we have appointed six new operational directors within the UK business. The group provides a formal career path for talented individuals which is underpinned by further training and coaching to improve their skills and maintain both the design quality and management requirements of the business. Internationally, we have appointed six staff to the position of associate director in the UK, Moscow, Prague and Warsaw.

Duncan Harper joined us as Group Finance Director in August. Duncan is a chartered accountant and comes with senior finance experience at Avesco and at Connect Mortgages where he was Finance Director. Duncan trained with Coopers & Lybrand.

I would also like to pay a special tribute to our Chairman, Gerry Deighton, who has presided over the merger process and the restoration of Aukett Fitzroy Robinson’s market reputation to the point where we have a robust and sustainable business model in terms of both architectural skill and financial management. His good counsel has been much appreciated by his board colleagues.

Corporate strategy

Our corporate strategy established in 2005 remains to double turnover to £25m by 2010, whilst improving margins. These results show that we are on-track to achieve that objective.  Much of our attention has now been focused on ensuring that our design and delivery systems, and the skills that are necessary to underpin our work, are both maintained and improved as we strive to achieve our financial objectives.

There has been much speculation and commentary on the prospects of a downturn in the UK commercial property market – which we consider well founded – but we believe our diversified business model allows us to realign our resource focus into those areas of the market which provide greater opportunities based upon our wide skill base and track record.  We have identified international branded hotels, green retail in the UK, and Russian orientated projects, to provide the most promising opportunities to maintain our business model. Management focus has therefore shifted into these areas to compensate for any potential reductions in revenue from traditional income flows.

During the current year we entered talks with a competitor which, if consummated, would have created Europe’s largest architectural practice. Whilst this merger process did not proceed, we continue to seek opportunities that will improve our market position based on strengthening our core sector skills or entering markets where there are premium income opportunities. Management will focus on those opportunities which improve the business model whilst at the same time enhancing earnings.

Summary

Having now achieved two years of improving profitability, we are cautiously optimistic as we embark upon a period where we need to maintain our current financial performance and improve both the transparency and quality of our income in the longer term.

 

Nicholas Thompson
Chief Executive Officer
15 January 2008

 

Consolidated profit and loss account

For the year ended 30 September 2007

		2007 £’000	2006 £’000
Turnover (including share of joint ventures)		20,302	16,677
Less share of joint ventures turnover		(554)	(393)
Group turnover		19,748	16,284
Group operating profit		2,349	840
Share of operating profit of joint ventures		62	105
Share of operating profit / (loss) of associate		11	(22)
Total operating profit		2,422	923
Loss on disposal of subsidiary		–	(15)
Profit on ordinary activities before interest & taxation		2,422	908
Interest receivable and similar income		55	44
Interest payable and similar charges		(109)	(166)
Profit on ordinary activities before taxation		2,368	786
Tax on profit on ordinary activities		(831)	(137)
Profit for the financial year		1,537	649
Basic earnings per share		1.06p	0.45p
Diluted earnings per share		1.06p	0.45p
Dividends per share		0.20p	–

All turnover and operating profit arises from continuing operations.

Consolidated balance sheet

At 30 September 2007

		2007 £’000	2006 £’000
Fixed assets
Intangible assets		1,545	1,596
Tangible assets		275	322
Interests in joint ventures		46	19
Investment in associate		14	6
Fixed assets		1,880	1,943
Current assets
Debtors		8,226	6,432
Cash at bank and in hand		2,819	1,341
Current assets		11,045	7,773
Creditors: Amounts falling due within one year		(7,664)	(5,588)
Net current assets		3,381	2,185
Total assets less current liabilities		5,261	4,128
Creditors: Amounts falling due after more than one year		(975)	(1,162)
Net assets		4,286	2,966
Capital and reserves
Called up share capital		1,456	1,448
Share premium account		–	1,385
Merger reserve		–	1,542
Profit and loss account		2,830	(1,409)
Shareholders’ funds		4,286	2,966

Consolidated statement of total recognised gains and losses

For the year ended 30 September 2007

		2007 £’000	2006 £’000
Profit for the financial year		1,537	649
Currency translation differences		40	(13)
Total gains and losses recognised in year		1,577	636

Reconciliation of movements in consolidated shareholders’ funds

For the year ended 30 September 2007

		2007 £’000	2006 £’000
Profit for the financial year		1,537	649
Dividends paid		(291)	–
Retained profit		1,246	649
Currency translation differences		40	(13)
Issue of new shares		34	–
Net addition to shareholders’ funds		1,320	636
Opening shareholders’ funds		2,966	2,330
Closing shareholders’ funds		4,286	2,966

 

Consolidated cash flow statement

For the year ended 30 September 2007

		2007 £’000	2006 £’000
Net cash inflow from operations		2,637	1,716
Returns on investments and servicing of finance
Interest received		26	44
Interest paid		(112)	(166)
Net cash outflow from returns on investments and servicing of finance		(86)	(122)
Taxation paid		(192)	(65)
Capital expenditure
Purchase of tangible fixed assets		(228)	(326)
Net cash outflow from capital expenditure		(228)	(326)
Equity dividends paid		(291)	–
Net cash inflow before financing		1,840	1,203
Financing
Issue of new shares		34	–
Repayment of bank loans		(187)	(38)
Repayment of loan notes		(200)	–
Capital element of finance leases		(9)	(38)
Net cash outflow from financing		(362)	(76)
Increase in cash		1,478	1,127

Notes to the preliminary announcement

1          Basis of preparation

The preliminary results for the year ended 30 September 2007 have been prepared in accordance with the accounting policies set out in the annual report and accounts for the year ended 30 September 2006.

2          Segmental analysis

The directors consider that the group’s activities fall within a single business segment and therefore only geographical segmental analysis is shown below.

Turnover by origin

	2007			2006
	United Kingdom £’000	Rest of World £’000	Total £’000	United Kingdom £’000	Rest of World £’000	Total £’000
Turnover (including share of joint ventures)	15,975	4,327	20,302	13,035	3,642	16,677
Less share of joint ventures turnover	–	(554)	(554)	–	(393)	(393)
Group turnover	15,975	3,773	19,748	13,035	3,249	16,284

Turnover by destination

	2007			2006
	United Kingdom £’000	Rest of World £’000	Total £’000	United Kingdom £’000	Rest of World £’000	Total £’000
Turnover (including share of joint ventures)	14,321	5,981	20,302	11,766	4,911	16,677
Less share of joint ventures turnover	–	(554)	(554)	–	(393)	(393)
Group turnover	14,321	5,427	19,748	11,766	4,518	16,284

Profit before taxation

	2007			2006
	United Kingdom £’000	Rest of World £’000	Total £’000	United Kingdom £’000	Rest of World £’000	Total £’000
Group	1,713	582	2,295	428	275	703
Share of joint ventures	–	62	62	–	105	105
Share of associate	–	11	11	–	(22)	(22)
Profit before taxation	1,713	655	2,368	428	358	786

 

Net assets

	2007			2006
	United Kingdom £’000	Rest of World £’000	Total £’000	United Kingdom £’000	Rest of World £’000	Total £’000
Group	3,410	820	4,230	2,541	418	2,959
Share of joint ventures	–	42	42	–	1	1
Share of associate	–	14	14	–	6	6
Net assets	3,410	876	4,286	2,541	425	2,966

 

3          Tax on profit on ordinary activities

		2007 £’000	2006 £’000
Gross UK corporation tax		634	–
Less double tax relief		(58)	–
Net UK corporation tax		576	–
Overseas tax		170	126
Adjustment in respect of previous years		61	36
Share of associate and joint ventures		24	1
Total current tax charge		831	163
Group deferred tax		–	(26)
Total tax charge		831	137

The differences from the standard rate of corporation tax in the UK are explained below:

		2007 £’000	2006 £’000
Profit on ordinary activities before tax		2,368	786
Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30% (2006: 30%)		710	236
Effects of:
Non tax deductible expenses		109	109
Depreciation in excess of capital allowances		8	23
Other timing differences		6	–
Tax losses utilised		(9)	(239)
Differences in overseas tax rates		(28)	(2)
Tax relief on exercise of share options		(26)	–
Adjustment in respect of previous years		61	36
Total		831	163

 

4          Earnings per share

The calculations of basic and diluted earnings per share are based on the following data:

Earnings	2007 £’000	2006 £’000
Profit for the financial year	1,537	649

Number of shares	2007 Number	2006 Number
Weighted average of ordinary shares in issue	145,363,844	144,813,825
Effect of dilutive options	179,239	68,665
Diluted weighted average of ordinary shares in issue	145,543,083	144,882,490

5          Dividends

	2007 £’000	2006 £’000
Interim dividend paid of 0.2p per share	291	–
Total	291	–

 

6          Reconciliation of group operating profit to net cash flow from operating activities

		2007 £’000	2006 £’000
Group operating profit		2,349	840
Depreciation of tangible fixed assets		275	286
Amortisation of intangible fixed assets		51	51
Loss on disposal of fixed assets		–	61
Increase in debtors		(1,781)	(634)
Increase in creditors		1,743	1,112
Net cash flow from operating activities		2,637	1,716

7          Analysis of net funds / (debt)

	At 1 October 2006 £’000	Cash flow £’000	At 30 September 2007 £’000
Cash	1,341	1,478	2,819
Bank loans	(1,312)	187	(1,125)
Loan notes	(200)	200	–
Finance lease obligations	(9)	9	–
Net (debt) / funds	(180)	1,874	1,694

8          Reconciliation of net cash flow to movement in net funds / (debt)

		2007 £’000	2006 £’000
Increase in cash		1,478	1,127
Cash outflow from repayment of bank loans		187	38
Cash outflow from repayment of loan notes		200	–
Cash outflow from finance lease obligations		9	38
Change in net (debt) / funds		1,874	1,203
Opening net debt		(180)	(1,383)
Closing net funds / (debt)		1,694	(180)

 

9          Status of preliminary announcement

This preliminary announcement was approved by the board of directors on 15 January 2008.

The preliminary results for the year ended 30 September 2007 have been extracted from the group’s audited statutory accounts for the year ended 30 September 2007 which will be delivered to the Registrar of Companies following the company’s annual general meeting.  The auditor’s report on these accounts was unqualified and did not contain a statement under either Section 237 (2) or (3) of the Companies Act 1985.

Statutory accounts for the year ended 30 September 2006 have been delivered to the registrar of companies and the auditors’ report on these accounts was unqualified and did not contain a statement under either Section 237(2) or (3) of the Companies Act 1985.

The financial information set out in this preliminary announcement does not constitute the group’s or the company’s statutory accounts for the year ended 30 September 2007.

10        Annual general meeting

The annual general meeting of the Company will be held at 14 Devonshire Street, London, W1G 7AE on 10:30am at Thursday 3 April 2008.

 

11        Annual report and accounts

Copies of the annual report and accounts will be dispatched to shareholders in due course. Copies will also be available on the company’s website (www.aukettfitzroyrobinson.com) and from the registered office of the company (14 Devonshire Street, London, W1G 7AE).