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 |
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Year ended 30 September 2005 |
2005 |
2004 (as restated) |
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Turnover |
£12.28m |
£11.69m |
Group work done |
£12.61m |
£11.90m |
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Operating profit/(loss) |
£236,000 |
(£1,223,000) |
Profit/(loss) before tax |
£159,000 |
(£1,327,000) |
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|
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Basic and diluted earnings/(loss) per share |
0.02p |
(1.63p) |
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Dividends per share |
£nil |
£nil |
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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.”
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 |
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.
Chief Executive Officer
27 January 2006
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Notes |
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2005 £000 |
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2004 (as restated) £000 |
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Group turnover |
1 |
|
12,284 |
|
11,690 |
|
Movement in amounts Recoverable on contracts |
1 |
|
327 |
214 |
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Group work done |
1 |
|
12,611 |
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11,904 |
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|
|
|
|
|
|
|
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|
|
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Existing Operations |
|
10,158 |
|
11,904 |
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Acquisitions |
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2,453 |
|
- |
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Group Work Done |
|
12,611 |
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11,904 |
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Group operating profit/(loss) |
2 |
|
236 |
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(1,223) |
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|
|
|
|
|
|
Existing Operations |
|
(114) |
|
(1,223) |
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|
Acquisitions |
|
350 |
|
- |
|
|
Operating profit/(loss) |
|
236 |
|
(1,223) |
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|
|
|
|
|
|
|
|
|
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Share of operating profit/(loss) in joint ventures and associate |
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25 |
|
31 |
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Exceptional items: Profit on disposal of joint ventures |
3 |
|
23 |
|
- |
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Profit/(loss) on ordinary activities before interest and tax |
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|
284 |
|
(1,192) |
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Net interest payable |
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(125) |
|
(135) |
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Profit/(loss) on ordinary activities before tax |
4 |
|
159 |
|
(1,327) |
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Tax (charge)/credit on profit/(loss) on ordinary activities |
|
(136) |
|
143 |
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Profit/(loss) on ordinary activities after tax |
|
|
23 |
|
(1,184) |
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Dividends |
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|
- |
|
- |
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Retained profit/(loss) for the year |
|
23 |
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(1,184) |
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Basic and diluted earnings/(loss) per share |
5 |
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