Announcement PDF RNS Number : 3888D Aukett Swanke Group PLC 29 June 2021 Aukett Swanke Group Plc Interim results For the six months ended 31 March 2021 Aukett Swanke Group Plc (the "Group"), the international practice of architects, interior designers and engineers, is pleased to announce its interim results for the six-month period ended 31 March 2021. Highlights The Group's most recent 12 months of trading has occurred during the COVID19 pandemic. Extract H1/2021 £000 H2/2020 £000 Revenue less sub consultant costs 4,139 4,476 fall of 7.5% Operating costs 5,178 4,959 rise of 4.4% Operating loss (1,039) (483) Loss before tax (1,017) (182) 201 837 Net Funds Before management charges the UK & UAE made reported losses while Continental Europe maintained its profitability. UK wrote £6.0m of new orders and Berlin €4.0m in H1/2021 (fees net of subconsultant costs). Banking facilities increased from £500k to £1m in May 2021. Commenting on the interim results, CEO Nicholas Thompson said: "These results show the full impact of the uncertainties created by COVID-19 in the form of project delays and deferments. Action taken during the period under review, and subsequently, has provided additional support to our business model and should improve our financial performance. However, this is unlikely to come soon enough to avoid reporting a loss for the year as a whole." Enquiries Aukett Swanke Group Plc - 020 7843 3000 Nicholas Thompson, Chief Executive Officer Antony Barkwith, Group Finance Director Arden Partners Plc - 020 7614 5900 Corporate Finance: John Llewellyn-Lloyd; Akhil Shah Investor/Media enquiries - Chris Steele - 07979 604687 Interim statement Overview Any meaningful analysis of these results needs to look behind the figures and at the impact of COVID-19. The building process takes several years from inspiration to occupation with the result standing for decades. During the formative stage any economic or political uncertainty, and now, pandemic uncertainty, leads to decision makers waiting for such uncertainty to play itself out. This is an industry wide phenomenon and has both the inevitability of the process taking longer but also the consequential pressure on margins as fewer contracts are available to the consultant market, which remains undiminished. It is against this backdrop that the results for the first six months need to be judged. Having said this, we continue to win work and two of our operations have successfully written a significant amount of new business that is spread over the next three years. Our focus continues to be on maintaining a resilient and viable commercial operation at minimal cost and within our financing capability. Group Results Group revenues fell to £5.28m, some £2.1m lower than in the same period in 2020. However, revenue less sub consultant costs at £4.14m was only 7.5% (£337k) lower than in H2/2020. It is this reduced level that allowed us to control staff costs in anticipation of project conversions or further instructions. Although such new work did not happen in the volumes hoped in the period under review and therefore resulted in a deeper loss, the capacity of the group businesses has been preserved. To have a value going forward it was key to preserve a critical mass in each business. United Kingdom Revenues were down 16% at £3.44m (2020: £4.09m) but higher than H2/2020 due to the inclusion of a larger amount of pass through income which is offset by matching sub consultant costs. Revenue net of sub consultant costs at £2.59m was some £313k lower than in H2/2020. This, along with fewer staff being put on furlough so as to support bid opportunities, and a one-off cost in respect of R&D tax credits of £72k, resulted in losses before tax (and before management charges) increasing from £97k in H2/2020 to £567k in H1/2021. We had a reasonable expectation of some growth in H1/2021 but that did not materialise in full and, therefore, much time was spent on bidding for new projects - some successfully - but insufficient in number. The resulting loss of £567k (2020: profit £311k) before management charges reflects a significant reduction in revenue of £1.5m (£2.59m vs £4.09m in the prior year), of which just under half was mitigated by cost reductions. The main beneficiary in H1 from the rebound in activity levels was our executive architecture arm, Veretec, which won a small number of large projects and secured its financial position with two major wins and one continuing instruction. Firstly, a new 470 residential apartment block at Vulcan Wharf for London Square and the second for a major pharmaceutical refurbishment project in Surrey for UCB with Heatherwick Studio as design lead. In addition, a large West End project that had stalled, re-commenced earlier than expected in H1. The Veretec business is expected to perform better in H2 this year and into next year based on its strong order book. The design business has seen an increase in market opportunities but has also seen an even greater incidence of price competition. There have also been continuing delays in passing through project gateways. This situation could all turn on a very small number of positive decisions in our favour, but until then we continue to hold our staffing structure and hence our cost base. This has been alleviated, to a reducing extent, through some marginal use of the government furlough scheme. The main contract wins in the half year included De Beers and an instruction to move our £60m EQ building in Bristol to the site phase. We also commenced a number of hybrid building feasibilities and pre applications. The combination of these new project wins generates £6m in fees of which £4.8m will be recognised in future periods. As with many companies we have not fully returned to the office since March 2020, and we are now considering how we can more economically utilise this space and the available occupancy options with a view to lowering this high fixed cost. Middle East The impact of lockdown and consequently restrictions and a general reduction in market activity impacted revenues levels with H1 falling 50% from last year to £1.58m (2020: £3.14m). Fortunately, the ongoing re-structuring exercise, involving fewer Licenses and consequent reduced overhead costs contributed to a 45% fall in costs, which did, almost, but not quite, offset the revenue decline. The net result before management charges is a loss of £79k (2020: Profit £103k). During the first half we saw the closing out of five major projects, and these being replaced by two school instructions (one new client) and three luxury residential villas at Jumeriah Park, three delivery projects in Saudi Arabia and a project in Cairo for a Dubai Developer, as well as a number of Dubai Expo projects. Currently the largest new project is on hold and this may impact the full year result this year. Under framework contracts we continue to roll out a programme for Etisalat which comprises 28 projects this year and a framework for Du telecom. Continental Europe The performance of our businesses in Continental Europe was positive in the 6 months to 31 March 2021. Our single wholly owned subsidiary increased revenues to £258k (2020: £147k). However, profit before central costs fell slightly to £227k (2020: £247k) - with all joint ventures and associates producing positive results. The Turkish operation has continued the success of the previous year completing interior fit-out projects for significant corporate clients, several being repeat commissions to provide new COVID-19 compliant workplaces including Google, Allianz and VM Ware. New projects include interior fitouts for LC Waikiki, the HQ for Vakifbank and architectural projects for a private villa, a hotel and an office extension in Istanbul. The associate and joint venture operations in Berlin and Frankfurt have enjoyed relatively stable market conditions. Completions by the Berlin studio include the Haus an der Dahme apartment building, the design for the refurbishment of the Bahn Tower at the Sony Centre. The Edge Tower, set to become the tallest building in Berlin and pre-let to Amazon, has started on site. The Frankfurt studio continues to complete phased refurbishments of the iconic MesseTurm building including interior fitouts for incoming and existing tenants including D&G, Tata and an American bank. Following a significant market downturn in the Czech Republic during the latter part of 2020, and with no new opportunities forthcoming our Prague office permanently ceased trading having completed work on the Churchill Residences and projects for WPP and Exxon Mobil. The Moscow operation completed several concept designs for mixed use projects in Moscow and the regions, including collaborations with the London studio on a significant education centre and a private residence project in Moscow. The Moscow operation is continuing to make a positive contribution to the Group results. Group costs Our central costs increased by £73k to £598k (2020: £525k) due primarily to £71k of foreign exchange losses occasioned by the strengthening of sterling. Goodwill and other intangible assets Management have reviewed and considered performance of all aspects of the business. Materially, the loss in the period has been caused by short-term trading volatility and slow development of the pipeline for the FY21 due to COVID-19 uncertainty. Management have considered the long-term cash flows and prospects of the Group, and as a result of this have concluded that the value in use models prepared as at 30 September 2020 in support of goodwill and intangible asset valuation remain viable and therefore that no impairment is considered to be required as a result. Funding and Going Concern At times of uncertainty cash management is key. Cash balances at the period end were £76k greater than the corresponding period in 2020 despite repaying more than £100k of the term loan taken out to fund the purchase of our UAE businesses in 2016, which will be paid in full in July 2021. Net funds of £201k were therefore £212k higher than in March 2020. Since the period end, we have secured additional funding by way of £500k from the Coronavirus Business Interruption Loan Scheme ("CBILS"), which is in addition to the current bank overdraft facility of £500,000. This CBILS facility provides additional headroom whilst we navigate our way through the payments that were deferred from 2020 (VAT, rent and some other overheads costs). The arrangement fees for this loan and the first year of interest is paid for by the UK Government and the funds will mainly be used instead of the current bank overdraft facility as and when it is necessary. The loan has a duration of three years with interest at 4.05% over the Coutts base rate (currently 0.1%) in years two and three. We expect to repay the CBILS loan before the expiry of the term. The cash management actions taken to date, plus the extended facilities, allow the Board to continue to use the going concern basis of accounting for these interim results. Prospects Not all of the group's issues can be attributed to COVID-19, however it is our number one concern. While we cannot predict with any confidence when things will improve, we firmly believe that they will, and we now have the funding in place to help us bridge the time frame between today's market activity levels and the levels that we expect to return in the period ahead. Nicholas Thompson Chief Executive Officer 28 June 2021 Consolidated income statement For the six months ended 31 March 2021 Note Unaudited six months Unaudited six months Audited year to Revenue 3 to 31 March 2021 £'000 to 31 March 2020 £'000 30 September 2020 £'000 5,280 7,375 12,166 Sub consultant costs (1,141) (515) (830) Revenue less sub consultant costs 4,139 6,860 11,336 Personnel related costs Property related costs Other operating expenses Other operating income Operating (loss) / profit (3,997) (639) (732) 190 (1,039) (5,430) (650) (867) 142 55 (9,600) (1,295) (1,324) 455 (428) 4 Finance costs (49) (78) (112) (1,088) (23) (540) 71 53 106 52 442 (1,017) 136 (46) Tax credit / (charge) 409 (34) 26 (Loss) / profit for the period (608) 102 (20) (Loss) / profit attributable to: Owners of Aukett Swanke Group Plc Non-controlling interests (603) (5) 96 6 5 (25) (Loss) / profit for the period (608) 102 (20) (0.36p) 0.06p 0.00p (0.36p) 0.06p 0.00p Unaudited six months to 31 March 2021 £'000 Unaudited six months to 31 March 2020 £'000 Audited year to 30 September 2020 £'000 (Loss) / profit for the period (608) 102 (20) Other comprehensive income: Currency translation differences Other comprehensive income for the period (163) (163) 4 4 (38) (38) Total comprehensive (loss) / profit for the period (771) 106 (58) Loss after finance costs Gain on disposal of subsidiary Share of results of associate and joint ventures (Loss) / profit before tax 3 Basic and diluted earnings per share for profit/(loss) attributable to the ordinary equity holders of the Company: From continuing operations Total (loss) / profit per share 5 Consolidated statement of comprehensive income For the six months ended 31 March 2021 Total comprehensive profit / (loss) is attributable to: Owners of Aukett Swanke Group Plc Non-controlling interests (762) (9) 100 6 (33) (25) Total comprehensive (loss) / profit for the period (771) 106 (58) Unaudited at 31 March 2021 £'000 Unaudited at 31 March 2020 £'000 Audited at 30 September 2020 £'000 Non current assets Goodwill Other intangible assets Property, plant and equipment Right-of-use assets Investment in associate and joint ventures Deferred tax Total non current assets 2,349 593 205 2,737 779 259 6,922 2,403 714 314 2,882 1,009 155 7,477 2,392 653 272 2,929 1,244 214 7,704 Current assets Trade and other receivables Contract assets Current tax Cash at bank and in hand 4,303 911 362 591 5,157 716 315 3,527 628 992 Total current assets 6,167 6,188 5,147 Total assets 13,089 13,665 12,851 Current liabilities Trade and other payables Contract liabilities Borrowings Lease liabilities (4,249) (797) (390) (539) (3,194) (1,012) (326) (537) (3,333) (606) (155) (539) Total current liabilities (5,975) (5,069) (4,633) Non current liabilities Lease liabilities Deferred tax Provisions Total non current liabilities (2,578) (44) (889) (3,511) (3,099) (48) (865) (4,012) (2,805) (47) (992) (3,844) Total liabilities (9,486) (9,081) (8,477) Consolidated statement of financial position At 31 March 2021 Note 7 7 Net assets 3,603 4,584 4,374 Capital and reserves Share capital Merger reserve Foreign currency translation reserve Retained earnings Other distributable reserve Total equity attributable to equity holders of the Company 1,652 1,176 (175) (562) 1,494 1,652 1,176 26 97 1,494 1,652 1,176 (16) 41 1,494 3,585 4,445 4,347 Non-controlling interests Total equity 18 3,603 139 4,584 27 4,374 Unaudited six months to 31 March 2021 £'000 Unaudited six months to 31 March 2020 £'000 Audited year to 30 September 2020 £'000 (659) (49) (1) (836) (15) 218 151 (9) 218 (709) (633) 360 Cash flows from investing activities Purchase of property, plant and equipment Sale of property, plant and equipment Payment for acquisition of subsidiary Dividends received (2) (100) 472 (214) 86 (245) 16 211 Net cash received / (paid) in investing activities 370 (128) (18) Net cash (outflow) / inflow before financing activities (339) (761) 342 Consolidated statement of cash flows For the six months ended 31 March 2021 Note Cash flows from operating activities Cash (expended by) / generated from operations Interest paid Income taxes credits (paid) / received Net cash (outflow) / inflow from operating activities Cash flows from financing activities 6 Payments of lease liabilities Repayment of bank loans (226) (97) (34) (123) (314) (154) Net cash outflow from financing activities (323) (157) (468) Net change in cash and cash equivalents (662) (918) (126) 992 1,145 (44) 1,145 (27) 259 183 992 Cash and cash equivalents are comprised of: Cash at bank and in hand Secured bank overdrafts 591 (332) 315 (132) 992 - Cash and cash equivalents at end of year 259 183 992 Merger reserve Total Non controlling interests Total equity Cash and cash equivalents at start of period Currency translation differences (71) Cash and cash equivalents at end of period 7 Consolidated statement of changes in equity For the six months ended 31 March 2021 Share capital Retained earnings £'000 Foreign currency translation reserve £'000 £'000 £'000 £'000 £'000 1,652 (16) 41 1,494 1,176 4,347 27 4,374 Loss for the period Other comprehensive income - - (603) - - (603) (5) (608) - (159) - - - (159) (4) (163) Total comprehensive loss - (159) - - (762) (9) (771) 1,652 (175) (562) 1,494 1,176 3,585 18 3,603 Retained earnings Other distributable reserve Merger reserve Total Non controlling interests Total equity £'000 Foreign currency translation reserve £'000 £'000 £'000 £'000 £'000 1,652 22 37 1,494 1,176 4,381 133 4,514 - - (36) - - (36) - (36) 1,652 22 1 1,494 1,176 4,345 133 4,478 At 1 October 2020 At 31 March 2021 £'000 Other distributable reserve £'000 (603) For the six months ended 31 March 2020 Share capital Balance at 30 September 2019 as originally presented Effect of adoption of IFRS16 * Restated total equity at 1 October 2019 £'000 £'000 Profit for the period Other comprehensive income Total comprehensive profit At 31 March 2020 - - 96 - - 96 6 102 - 4 - - - 4 - 4 - 4 - - 100 6 106 1,652 26 1,494 1,176 4,445 139 4,584 96 97 Consolidated statement of changes in equity (continued) For the year ended 30 September 2020 Share capital Merger reserve Total Non controlling interests Total equity £'000 £'000 £'000 £'000 1,494 1,176 4,381 133 4,514 (1) - - (1) - (1) 22 36 1,494 1,176 4,380 133 4,513 - - 5 - - - 5 - (25) (81) (20) (81) - (38) - - - (38) - (38) Total comprehensive profit - (38) - - (33) (106) (139) At 30 September 2020 1,652 (16) 1,494 1,176 4,347 27 4,374 Balance at 30 September 2019 as originally presented Effect of adoption of IFRS16 * Restated total equity at 1 October 2019 Profit for the period Acquisition of minority interest Other comprehensive income Retained earnings £'000 Foreign currency translation reserve £'000 1,652 22 37 - - 1,652 £'000 5 41 Other distributable reserve £'000 * Effect of adoption of IFRS16: The restatement of retained earnings on adoption of IFRS16 being (£36k) per the interim statements as at 31 March 2020 was revised down to (£1k) on completion of the 30 September 2020 audited financial statements. This was due to a change in the assumption of the Groups' incremental borrowing rate at the date of initial application. Notes to the Interim Report 1 Basis of preparation The financial information presented in this Interim Report has been prepared in accordance with the recognition and measurement principles of international accounting standards in conformity with the requirements of the Companies Act 2006 that are expected to be applicable to the financial statements for the year ending 30 September 2021 and on the basis of the accounting policies expected to be used in those financial statements. 2 New accounting standards, amendments and interpretations applied A number of new or amended standards and interpretations to existing standards became applicable for the current reporting period. The Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these standards. 3 Operating segments The Group comprises a single business segment and three separately reportable geographical segments (together with a Group costs segment). Geographical segments are based on the location of the operation undertaking each project. Turkey (and Russia in the comparative periods) are included within Continental Europe together with Germany and the Czech Republic. Segment revenue Unaudited six months to 31 March 2021 £'000 Unaudited six months to 31 March 2020 £'000 United Kingdom Middle East Continental Europe 3,441 1,581 258 4,093 3,135 147 Audited year to 30 September 2020 £'000 7,106 4,823 237 Total 5,280 7,375 12,166 Unaudited six months to 31 March 2021 £'000 Unaudited six months to 31 March 2020 £'000 United Kingdom Middle East Continental Europe 2,591 1,352 196 4,086 2,627 147 Audited year to 30 September 2020 £'000 6,990 4,122 224 Total 4,139 6,860 11,336 Unaudited six months to 31 March 2021 £'000 Unaudited six months to 31 March 2020 £'000 Audited year to 30 September 2020 £'000 United Kingdom Middle East Continental Europe Group costs (837) (280) 121 (21) 41 (165) 179 81 (282) (472) 511 Total (loss)/profit (1,017) 136 Segment revenue less sub consultant costs Segment result before tax 197 (46) Segment result before tax (before reallocation of group management charges) Unaudited six months to 31 March 2021 £'000 Unaudited six months to 31 March 2020 £'000 Audited year to 30 September 2020 £'000 United Kingdom Middle East Continental Europe Group costs (567) (79) 227 (598) 311 103 247 (525) 214 (23) 657 (894) Total (loss)/profit (1,017) 136 (46) Unaudited six months to 31 March 2021 £'000 Unaudited six months to 31 March 2020 £'000 Audited year to 30 September 2020 £'000 79 65 78 54 148 4 Other operating income Property rental income Management charges to associate and joint ventures Government grants (UK furlough scheme) Licence fee income Other sundry income Total other operating income 5 42 2 2 190 122 158 27 455 1 9 142 Earnings per share The calculations of basic and diluted earnings per share are based on the following data: Earnings (Loss) / profit for the period Number of shares Weighted average number of shares Effect of dilutive options Unaudited six months to 31 March 2021 £'000 Unaudited six months to 31 March 2020 £'000 Audited year to 30 September 2020 £'000 (603) 96 5 Unaudited six months to 31 March 2021 '000 Unaudited six months to 31 March 2020 '000 Audited year to 30 September 2020 '000 165,214 - 165,214 - 165,214 - Diluted weighted average number of shares 165,214 165,214 Unaudited six months to 31 March 2021 £'000 Unaudited six months to 31 March 2020 £'000 Audited year to 30 September 2020 £'000 (1,017) 49 (71) 32 63 192 (1) (976) 1,207 (52) (85) 136 78 (106) 40 24 135 (2) (500) (605) (38) 2 (46) 112 (442) 79 74 340 989 (794) (79) (82) (659) (836) 151 Unaudited at 31 March 2021 £'000 Unaudited at 31 March 2020 £'000 Audited at 30 September 2020 £'000 Cash at bank and in hand Secured bank overdrafts 591 (332) 315 (132) 992 - Cash and cash equivalents 259 183 992 Secured bank loan Net funds/(debt) (58) 201 (194) (11) (155) 837 6 165,214 Reconciliation of profit before tax to net cash from operations (Loss) / profit before tax - continuing operations Finance costs Share of results of associate and joint ventures Intangible amortisation Depreciation Amortisation of right-of-use assets Profit on disposal of property, plant and equipment (Increase) / decrease in trade and other receivables Increase / (decrease) in trade and other payables Change in provisions Unrealised foreign exchange differences Net cash (expended operations 7 8 by) / generated from Analysis of net funds Status of Interim Report The Interim Report covers the six months ended 31 March 2021 and was approved by the Board of Directors on 28 June 2021. The Interim Report is unaudited. The interim condensed set of consolidated financial statements in the Interim Report are not statutory accounts as defined by Section 434 of the Companies Act 2006. Comparative figures for the year ended 30 September 2020 have been extracted from the statutory accounts of the Group for that period. The statutory accounts for the year ended 30 September 2020 have been reported on by the Group's auditors and delivered to the Registrar of Companies. The audit report thereon was unqualified, did not include references to matters to which the auditors drew attention by way of emphasis without qualifying the report, and did not contain a statement under Section 498 of the Companies Act 2006. The audit report did draw attention to the Directors' assessment of going concern, indicating that a material uncertainty exists that may cast significant doubt on the Group's and parent company's ability to continue as a going concern. The audit report was not modified in respect of this matter. 9 Further information An electronic version of the Interim Report will be available on the Group's website (www.aukettswankeplc.com). This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com. RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy. END IR QVLFLFQLZBBX