2014 AUKETT SWANKE GROUP PLC Annual & Report Accounts Aukett Swanke provides design services, focusing on architecture, master planning, space planning and interior design The practice designs and delivers commercial projects throughout Europe, Russia and the Middle East 30 Berkeley Square, W1 Front cover / inside front cover: 30 Berkeley Square, London W1 - new London headquarters for Phillips, contemporary art auctioneers Our clients include . . . A B D e v e l o p m e n t s / A d n a m s / A l d a r / A l H a m r a / A l l c o n / A M P A s s e t M a n a g e m e n t / A r u p / A s c o t U n d e r w r i t i n g / A s d a / A v a y a / A v i v a / A X A S u n L i f e / B A M / B a n k o f A m e r i c a M e r r i l l L y n c h / B a n k o f M o s c o w / B a r c l a y s G r o u p P r o p e r t y S e r v i c e s / B e l l H a m m e r / B e n c h m a r k / B e r m u d a H o s p i t a l s B o a r d / B l a c k s t o n e / B N P P a r i b a s R e a l E s t a t e / B N Y M e l l o n / B o v i s L e n d L e a s e / B o w m e r & K i r k l a n d / B r i t i s h E n e r g y / B r i t i s h L a n d / B r u n s w i c k / B S k y B / B T / B u n d e s d r u c k e r e i / B u r o H a p p o l d / C a m b r i d g e U n i v e r s i t y H o s p i t a l s N H S Tr u s t / Ca n d y & C a n d y / C a p i t a l S h o p p i n g C e n t r e s / C a r i l l i o n / C a r l t o n C l u b / C B R E / C e n g i z H o l d i n g / C e n t r o s / C h e l m s f o r d C a t h e d r a l / C I N L a S a l l e / C I S / C i s c o / C i t y o f L o n d o n C o r p o r a t i o n / C o m m e r c i a l E s t a t e s G r o u p / C o r i n t h i a G r o u p / C o s t a i n / C o u n t r y s i d e P r o p e r t i e s / C r e d i t S u i s s e / C r e s t N i c h o l s o n / C r o s s r a i l / C r o w n e P l a z a H o t e l s / D a i m l e r C h r y s l e r / D e l o i t t e / D e u t s c h e B a n k / D e v e l o p m e n t S e c u r i t i e s / D G V C o n s u l t i n g / D i a g e o / D r e s d n e r B a n k / D T C d e B e e r s / D T Z D e b e n h a m T i e L e u n g / D u b l i n D o c k l a n d s D e v e l o p m e n t A u t h o r i t y / D u n h i l l / DV L A / E d e & R a v e n s c r o f t / E l e c t r i c i t y S u p p l y N o m i n e e s / E l i L i l l y / E m l a k K o n u t / E n d s l e i g h I n s u r a n c e / E n g l i s h P a r t n e r s h i p s / E q u a B a n k / E r n s t & Yo u n g / E R Ya t a r i m Tu r i z m I n s a a t / E u r o f i n a n c e B a n k / E u r o p e a n M e d i c i n e s A g e n c y / E x x o n M o b i l / F e n w i c k / F I B A G r o u p / F i r o k a / F i r s t B a n k / F l e m i n g s B a n k / F o r e i g n & C o m m o n w e a l t h O f f i c e / F u j i t s u / G E C a p i t a l / G e r t l e r / G o l d m a n S a c h s / G o o d m a n / G o o g l e / G o v e r n m e n t o f S i n g a p o r e / G r e a t P o r t l a n d E s t a t e s / G r o s v e n o r / G r o u p M / G S K / H e l i c a l B a r / H e r o n P r o p e r t y / H e x a l P h a r m a c e u t i c a l s / H i l t o n I n t e r n a t i o n a l / H o c h t i e f / H o l y Tr i n i t y B r o m p t o n / H o m e O f f i c e I N D / H o m e r t o n U n i v e r s i t y H o s p i t a l N H S Tr u s t / H o n e y w e l l / H o w a r d d e Wa l d e n E s t a t e s / H S B C / I n f o s y s / I m p e r i a l C o l l e g e / I N G R e a l E s t a t e / I n s t i t u t e o f P h y s i c s / I n t e r r o s / I n t e r s e r v e / I P C C / I r a u s a U K / I r i s h R a i l / I S G / J a r r o l d & S o n s / J o d y S c h e c k t e r / J o h n s o n C o n t r o l s / J o n e s L a n g L a S a l l e / J P M o r g a n / K f W B a n k / K i e r / K n i g h t D r a g o n / Ko r i n e P r o p e r t y P a r t n e r s / K o r t r o s / K P M G / L a n d S e c u r i t i e s / L a S a l l e I n v e s t m e n t M a n a g e m e n t / L e M e r i d i e n / L e e Va l l e y R e g i o n a l P a r k A u t h o r i t y / L i n d e n H o m e s / L o n d o n & R e g i o n a l / L o n d o n E l e c t r i c i t y / L o n d o n U n d e r g r o u n d / L o n g Te r m C r e d i t B a n k o f J a p a n / M & G / M a c q u a r i e G r o u p / M a r k s & S p e n c e r / M e r c u r y / M e r k u r D e v e l o p m e n t / M i c r o s o f t / M i d l a n d D e v e l o p m e n t / M o D / M o o d y ’s I n v e s t o r S e r v i c e s / M o r g a n s H o t e l G r o u p / M o u c h e l / N a p p P h a r m a c e u t i c a l s / N a t i o n a l A s s e m b l y f o r Wa l e s / N a t i o n a l G r i d / N a t i o n s B a n k / N AT S / N e t w o r k R a i l / N i c h o l s o n E s t a t e s / N I DA I n s a a t / N i k k o E u r o p e / N o r t h e r n R o c k / N o t t i n g h a m s h i r e H e a l t h c a r e N H S Tr u s t / n p o w e r / O D P M / O p i n G r o u p / O r b i s I n v e s t m e n t A d v i s o r y / O r c h a r d S t r e e t I n v e s t m e n t M a n a g e m e n t / P a l e s t r a / P e r e s v e t R e g i o n / P f i z e r / P h o e n i x D e v e l o p m e n t / P I K D e v e l o p m e n t s / P i l l a r P r o p e r t y I n v e s t m e n t s / P l y s u / P o l k o m t e l / P o r t m a n B u i l d i n g S o c i e t y / P r o l o g i s / P r o v i d e n c e R o w / P S N P r o p e r t i e s / Q u i n t a i n / R a b o b a n k / R a d i s s o n B l u E d w a r d i a n / R a i l t r a c k / R a i l w a y P e n s i o n N o m i n e e s / R a l p h Tr u s t e e s / R a m b o l l / R e a d i n g F C / R e d e v c o / R e n o v a G r o u p / R e u t e r s / R i c h e m o n t / R i o T i n t o / R o b i n O i l / R o c c o F o r t e / R o y a l B a n k o f S c o t l a n d / R S P B / S a a t c h i & S a a t c h i B a t e s / S A B M i l l e r / S a v i l l s / S b e r b a n k / S C J o h n s o n / S c a l a / S c o t t i s h D e v e l o p m e n t A g e n c y / S c o t t i s h W i d o w s / S e g r o / S h e f f i e l d Te a c h i n g H o s p i t a l s / S i e m e n s / S i r R o b e r t M c A l p i n e / S i s t e m a H a l s / S k a n s k a / S k y p e / S p i l l e r s / S o u t h a m p t o n S o l e n t U n i v e r s i t y / S t a n d a r d L i f e I n v e s t m e n t s / S t A l p h a g e C h u r c h / S t A n d r e w ' s U R C , C a n t e r b u r y / S t M a r t i n ' s P r o p e r t y / S t e p h e n s o n H a r w o o d / S u n M i c r o s y s t e m s / S U S E L i n u x / S y n g e n t a I n t e r n a t i o n a l / Ta h i n c i o g l u R e a l E s t a t e / Tay l o r W i m p e y / Te n k h o f f P r o p e r t i e s / Te s c o / T h e L o n d o n C l i n i c / T h e M e r c e r s ’ C o m p a n y / T h e R o y a l C o l l e g e o f S u r g e o n s o f E n g l a n d / T i s h m a n S p e y e r / To n s t a t e / Tr a n s p o r t f o r L o n d o n / Tr i n i t y H a l l / Tu b e L i n e s / U n i v e r s i t y o f C a m b r i d g e / U r a l s i b D e v e l o p m e n t / U s a d b a C e n t e r / Ve s t a s / V M w a r e / Vo d a f o n e / V o r e d a / V T B B a n k / Wa t e s / We l b e c k L a n d / We l l c o m e Tr u s t / We s t m i n s t e r C i t y C o u n c i l / We s t p a c / W i l l i s G r o u p / Wo r s h i p f u l C o m p a n y o f C o r d w a i n e r s / Wo r s h i p f u l C o m p a n y o f G r o c e r s Contents C h a i r m a n ’ s s t a t e m e n t 2 0 F i n a n c i a l h i g h l i g h t s 2 1 F i v e y e a r s u m m a r y 2 2 C o r p o r a t e i n f o r m a t i o n 2 2 S t r a t e g i c r e p o r t 2 3 D i r e c t o r s ’ r e p o r t 3 2 S t a t e m e n t o f d i r e c t o r s ’ r e s p o n s i b i l i t i e s 3 6 I n d e p e n d e n t a u d i t o r ’ s r e p o r t 3 7 / / F i n a n c i a l s tat e m e n t s / / C o n s o l i d a t e d i n c o m e s t a t e m e n t 3 8 C o n s o l i d a t e d s t a t e m e n t o f c o m p r e h e n s i v e i n c o m e 3 9 C o n s o l i d a t e d s t a t e m e n t o f f i n a n c i a l p o s i t i o n 4 0 C o m p a n y s t a t e m e n t o f f i n a n c i a l p o s i t i o n 4 1 C o n s o l i d a t e d s t a t e m e n t o f c a s h f l o w s 4 2 C o m p a n y s t a t e m e n t o f c a s h f l o w s 4 3 C o n s o l i d a t e d s t a t e m e n t o f c h a n g e s i n e q u i t y 4 4 C o m p a n y s t a t e m e n t o f c h a n g e s i n e q u i t y 4 4 N o t e s t o t h e f i n a n c i a l s t a t e m e n t s 4 5 N o t i c e o f m e e t i n g 7 5 S h a r e h o l d e r i n f o r m a t i o n 7 6 2 Back to Contents Back to Contents 3 Aukett Swanke Group Plc | annual report and accounts 2014Aukett Swanke Group Plc | annual report and accounts 2014 Our pedigree goes back more than 100 years 1955 Fitzroy robinson 1906 WAlker & Gillette 1972 Aukett 2005 Aukett Fitzroy Robinson Group Plc 2005 Mbo - Swanke Hayden Connell Europe 2013 Aukett Swanke Group Plc Our people Russia 27 UK 197 Continental Europe 91 Turkey 22 UAE 8 South America 12 14 We have 14 studios studios in8 countries O u r S t u d i o s 36-40 York Way L o n d o n N1 9AB United Kingdom +44 (0)20 7843 3000 london@aukettswanke.com 25 Christopher Street L o n d o n EC2A 2BS United Kingdom +44 (0)20 7843 3000 london@aukettswanke.com We are Gutleutstrasse 163 F r a n k f u r t a m M a i n 60327 Germany +49 (0)69 76 806 0 mail@aukett-heese-frankfurt.de Kore Sehitleri 34/2 Deniz Is Hani 34394 Zincirlikuyu I s t a n b u l Turkey +90 212 318 0400 istanbul@aukettswanke.com Mosenka Park Towers Taganskaya Street 17-23 M o s c o w 109147 Russia +7 (495) 258 5522 moscow@aukettswanke.com Janackovo Nabrezi 471/49 P r a g u e 5 - 150 00 Czech Republic +420 224 220 025 aukett@aukett.cz 4 Joiner Street S h e f f i e l d S3 8GW United Kingdom + 44 (0)870 010 8030 sheffield@aukettswanke.com Bin Arar Tower, Building 521, Fatima Bint Mubarak St. (Najda Street) A b u D h a b i 38764 United Arab Emirates +971 (0)2 495 2731 abudhabi@aukettswanke.com Budapester Strasse 43 B e r l i n 10787 Germany +49 30 230994 0 mail@aukett-heese.de Al Habtoor Business Tower Dubai Marina D u b a i United Arab Emirates +971 (0)4 453 2826 dubai@aukettswanke.com A s s o c i at e d S t u d i o s Calle 122 No. 15-09-Oficina 504 Santa Barbara B o g o t á Colombia +57 1 620-3263 gustavo.rios@gravitearquitectos.com Rua Francisco da Cunha, 392 / sala 105 R e c i f e - Boa Viagem - PE Brazil CEP 51020-041 +55 81 9615 9620 ana@amplusprojetos.com.br Queen Charlotte Studio 53 Queen Charlotte Street B r i s t o l BS1 4HQ United Kingdom +44 (0)117 929 9285 info@coda-architects.co.uk Latimer House 5-7 Cumberland Place S o u t h a m p t o n SO15 2BH United Kingdom +44 (0)2380 224292 studio@afr-southampton.co.uk With a total of 357 people London Abu Dhabi Dubai Moscow Sheffield Istanbul Berlin Frankfurt Prague Bogota Bristol Recife Southampton 4 Back to Contents Back to Contents 5 Aukett Swanke Group Plc | annual report and accounts 2014Aukett Swanke Group Plc | annual report and accounts 2014 Recent & current projects 1. 125 Wood Street, London EC2 2. 125 Wood Street, London EC2 3. The Adelphi Building, London WC2 4. Gade Zone Regeneration, Hemel Hempstead 5. Al Hamra Fort Hotel, Ras Al Khaimah 3 5 7 2 4 6 8 9 11 9. Residential development, London 10. King Edward VII Memorial Hospital, Bermuda 11. Eastside Locks, Birmingham 12. Proposal for a Gallery Complex, London 13. Group M, Istanbul 14. Serebryney bor townhouses, Moscow 15. Verde SW1, London SW1 10 12 13 16. Imperial West competition, London W12 14 15 6. Symantec, Reading 7. Avast, Prague 8. 10 Trinity Square, London EC3 Back to Contents Back to Contents 7 Aukett Swanke Group Plc | annual report and accounts 2014 62 Buckingham Gate London SW1 20. Pantechnicon, London SW1 B U C K I N G H A M G A T E V i c t o r i a S t r e e t 17 22 18 19 21 23 24 17. Cofunds, Essex 18. Competition, Moscow 19. Harwell Campus 21. Fit Out, London 22. Monet Apartments, Moscow 23. Lancome, Prague 24. Fit Out, Berlin 25. Hotel de Rome, Berlin 25 26. Arcus III, Moscow With 38,000sqm of office and retail space this 12 storey building provides a light, airy and inspirational working environment. It meets the technical requirements of the most demanding occupier. The building envelope is composed of a series of folding planes that either tilt forward or fold backwards; responding to the contextual demands of the site and building volume. Designed to achieve an optimum energy balance, the facade incorporates high performance solar control glass delivering a high light transmission whilst minimising heat gain. The building has impressive entrances to the office space together with a public amenity space, a superior retail environment, and restaurants under a coloured glass canopy. The building has been rated BREEAM ‘Excellent’. New breeam ‘excellent’ building delivered for land securities in victoria 8 Back to Contents Back to Contents 9 Aukett Swanke Group Plc | annual report and accounts 2014Aukett Swanke Group Plc | annual report and accounts 2014 Spotlight on Istanbul “Merhaba” from Istanbul! • a city with a population of 14 million • the only city that bridges two continents • and a great place to live 4. Palladium Tower 5 Burçu Senparlak General Manager Nick Birchall Director Istanbul has a rich and inspiring cultural, architectural and business heritage which creates many opportunities for designers. Ships form part of the architecture, traffic is a challenge, public transport is struggling to keep pace with population growth and walking is sometimes the quickest way of seeing the City. We have been contributing to the urban skyline of Istanbul since 1996. We designed two office towers around 2000, IsBank Towers and Tekfen Tower, which remain the international symbols for the business success of Turkey. Since 2005, and working is close collaboration with the London team, we have transformed our design profile and abilities to be one of the most respected design studios in the City. International thinking implemented locally. 1 3 our studios are here 2. Microsoft Mea We have over 20 staff in the studio, a highly enthusiastic environment housed in our new office space in Zincirlikuyu on the European side, only a short stroll to the central business district in Levent. Burçu Senparlak leads the studio as General Manager and the local Directors Özge Saka, Zeynep Orberk and Bülent Dündar design and lead our projects. Nick Birchall keeps our feet on the ground as the Director in charge of the office (and brings us chocolates on each monthly visit) and Steve Brown inspires creatively with design direction. We design commercial offices, residential developments, office fitouts, master planning, hotels and datacentres for leaders in the development community - Tahincioglu Group, Extensa, FIBA, Cengiz Holding, ER Yatirim, Polatyol Yapi and companies - Google, Microsoft, KPMG, Vodafone, Allianz, British Council, HBO Law. We currently have three other office buildings under construction in Atasehir, Istanbul and Konya, Southern Turkey. Our current designs include two major residential settlements, a major fitout for an international insurance company, and two mixed use developments. Özge Saka, Bülent Dündar and Zeynep Orberk Our Team! We celebrate 20 years in Istanbul in 2016 and, 13 years after completing Tekfen Tower, our 46 storey Palladium Tower was opened for Tahincioğlu Group last year. Our physical contribution to the city continues. 6 7 8 IsBank Towers 1. 3. Offices for Google 10 Back to Contents 5. Apartaman Bomonti 6. offices for Group M 7. Extensa Bomonti Modern Palas 8. Offices for Vodafone Back to Contents 11 Aukett Swanke Group Plc | annual report and accounts 2014Aukett Swanke Group Plc | annual report and accounts 2014 si e d d a k C l a H Palladium Tower Istanbul A new tower with views across the Bosphorus On a prominent site on the Asian side of Istanbul, we have completed the Palladium Tower which has panoramic views across the city and the sea. A landscaped drop-off area leads to a double height reception lobby connecting to meeting rooms, fitness, sauna, spa and cafeteria areas. Parking is below ground. With direct access from the Bosporus Bridge and on the cross roads of the E5 and TEM highways in the Kozyatagi business district of Istanbul, the 1.7Ha site makes a highly visible location for the new tower. The tower has been split by naturally ventilated landscaped atria zones into a composition of elegant stacked forms, working with orthogonal geometry to ensure floorplate efficiency and overall building economy. The building provides 49,500sqm of efficiently planned and flexible Grade A office space around a central core, with floorplates of between 900 and 1100sqm suitable for single or multiple tenancies. Coloured glass spandrels at high levels add interest and expression to the building and external illumination emphasises the building’s composition at night. Back to Contents Back to Contents 13 Aukett Swanke Group Plc | annual report and accounts 2014 40 Studio news Advancing the profession Moving up the rankings Annual Berlin cycle tour In the 2015 World Architecture 100, which is published by Building Design, Aukett Swanke is this year ranked 53rd (up 18 places from 2014) which makes us the 5th largest UK practice by international measurement. We are also pleased to report that in the latest Building magazine UK Business Barometer we have continued to be ranked in the top five architects by contract value. We returned to the index in December 2014 ranked 1st, and this month we have continued to retain a high place having been ranked 3rd. This top three ranking is testament to the commitment of our talented staff to delivering high end projects for our blue chip client base. The full listing and basis of the index compilation can be seen here: www.building.co.uk/business-barometer/tables/top- architects We’ve been Listed! One of our earlier buildings in the City of London has been included in the 14 post-war office buildings recently listed by the Secretary of State for Culture, Media and Sport. Founders Court is in Lothbury, EC2 and has been Grade 2 Listed. It was designed for Brown Shipley and was completed in 1975; the same company is still in occupation 40 years later. The listing notes that it is one of our ‘. . . most distinguished works, successfully combining a rational monumentality with a humane scale’. Golf - in London and Frankfurt Two summer golf days were enjoyed by the Frankfurt and London studios: Frankfurt on a miniature golf course followed by lunch and a local cultural visit, and London on a larger course followed by an award ceremony and local hospitality. two from approach Actively developing the next generation of architects is a key part of our studio succession plan and, we believe, supports the wider development of the profession. We several this perspectives, but fundamental aspects are the provision of exciting and appropriate project experience alongside enabling access to the best training programmes on offer. Key aspects of our programme to to support our people architectural include improving knowledge sharing, providing financial support and paid study leave as well as formal and informal mentoring. registration through This year we have 18 people, including our internationally qualified architects, completing or undertaking the final part of their professional RIBA qualification, following which they can register under the ARB as an Architect. They are supported by a strong studio learning culture supplemented by in house CPD sessions on fees, contracts and specific projects which put formal education into a real life context. Pictured above are three of our recently qualified architects: Emily Willig, Robert Symonds and Steven Kok New Aukett Swanke website goes live Our new website was launched in 2014, a lively, image-focused site which is a powerful showcase allowing our clients, partners and visitors to discover the wide variety of work that we undertake across the studios, and the people that produce it. It can be found at : www.aukettswanke.com Partners in AJ Women in Architecture Programme Journal on This year we have partnered with the Architect’s their Women in Architecture campaign for a second time. This underscores the studio’s commitment to the idea that encouraging diversity in our studio provides a great source of talent and knowledge which greatly contributes to the success of the business. We strongly believe that diversity builds a rewarding place to work within a stronger profession; that a diverse management board makes better strategic decisions, and that a diverse team fosters excellence in design. Some of our Berlin studio pictured taking a well-earned rest during their annual cycle tour in July. 60 people with 60 bikes set off in 30ºC heat for a 40 kilometer ride. The day included a guided tour of the Olympic Stadium and finished with a team dinner. Lutz Heese awarded honour Dipl.-Ing. Lutz Heese (on right of picture) head of Heese Architects in Munich, our German JV partner and president of the Bavarian Chamber of Architects, has been awarded the Cross of the Order of Merit of the Federal Republic of Germany. The award was presented by Joachim Herrmann, Minister of State for the Interior, Building and Transport in the Bavarian Chamber of Architects in Munich. Dragon Boat Racing - in Istanbul and London In May 2014, our Istanbul studio entered a team in the 5th Istanbul Dragon Boat Festival. More than 5,000 competitors from 220 teams from all over the country entered the event, which had thousands of spectators. Our intrepid team trained over four weeks before the event, and Duygu Gulaydin kept the rhythm as ‘drum-master’. The event took place on the Golden Horn river which flows into the world famous Bosphorus - the real reason why no one wanted to fall in - but it was a great alternative view of the City. Meanwhile, the London studios were invited to take part as a team in Grosvenor’s annual Dragon Boat Regatta on a lake in the grounds of a hotel close to London. With a team built for architecture, not speed, with little to no practice behind them and a power to weight ratio which failed to factor in the boat itself, they took the intelligent decision to maximise their networking opportunities by retiring to the bar after the initial rounds. Dry, warm and comfortably mid-table, it was a good end to a great day. New Chair of Moscow Construction and Fitout Association Appointed Margarita Serova, Business Development Manager in our Moscow studio has recently been elected Chairperson of the Moscow Construction and Fit Out Association. The Steering Committee cited her energy and enthusiasm for the aims of the Association as critical in raising standards in the design and construction industry in the Russian Federation. Walk for Maggie’s Centres A nine-strong Aukett Swanke team took part in a 15 mile architectural sponsored walk, raising funds for Maggie’s Centres. Starting at Embankment Gardens, London SW1 at 6.30pm, the walk charted a route which took in locations such as the Serpentine Sackler Gallery, Maggie’s Centre in Hammersmith and Foster & Partners’ offices amongst other architectural showpieces. The team crossed Westminster Bridge to the chimes of Big Ben at 2am to arrive at the finish line at the Royal Festival Hall fifteen minutes later. We exceeded our fundraising target by 18%, raising more than £2,500 for the charity, boosted by other internal fundraising events such as cook and share lunches, hosting masterclasses, sale of handcrafted items and a bake-off competition. New UK directors Two new directors have been appointed: James Atha as director of Veretec and Tom Alexander in the London studio. See also pages 16 and 17. New Plc board members We are delighted to welcome two new members to the Plc board of directors. Beverley Wright joins us as Group Finance Director and Company Secretary, and John Bullough joins us as Non-executive Director. Each brings considerable past experience to the practice. Full details of all members of the board can be found on pages 18 and 19. 14 Back to Contents Back to Contents 15 Aukett Swanke Group Plc | annual report and accounts 2014Aukett Swanke Group Plc | annual report and accounts 2014 Key staff UK Studios Luke Schuberth Managing Director - UK Sharon Turner Managing Director - UK Suzette Vela Burkett Managing Director - UK Robert Fry Managing Director - International Neil Tullis Finance Director - International Abu Dhabi / Dubai Stephen Embley Managing Director - Middle East Colin Hobart Director James Atha Director - Veretec Keith Morgan Managing Director - Veretec Nick Birchall Director Peter Eaton Director Steve Brown Director Tom Alexander Director Tom Nugent General Director Alex Nikulshkin Chief Architect Burçu Senparlak General Manager Istanbul Moscow Lutz Heese Managing Director - aukett + heese JV Partner - Germany Andrew Henning Jones Director Marcus Dietzsch Director Berlin Frankfurt Studio Principals Design Principals Interiors Principals Technical Principals Andrew Webster Daniel Winters Gordon McQuade Abi Van Hoorebeek Senior Associate - Sheffield Associate Offices Prague Jana Lehotska Director Tomas Vorel Director Elias Niazi Maurice van Eijs Sam Castling Tim Pettigrew Senior Associate Bristol Stephen Atkinson Director Ronnie Rennoldson Director Craig Bennett Director Christian Morris Director Southampton Angela Sasso Bob Bissett Diana Monkhouse Mukthir Sian UK Financial Controller Alex Rimmer Calvin Grant David Allen Freddie Cottis Group Head of IT Raúl Curiel Director South America Recife Gustavo Ríos Truque Director Bogota Ana Amélia Velloso Director Gisele Melo de Carvalho Director Roberta Pessoa de Melo Martins Director 16 Back to Contents Back to Contents 17 Aukett Swanke Group Plc | annual report and accounts 2014Aukett Swanke Group Plc | annual report and accounts 2014 Board of Directors Anthony Simmonds Non Executive Chairman *+ # BA(Hons) FCA FCCA Aged 70 Anthony joined Aukett Swanke as a non executive director in 2009 and was appointed Non Executive Chairman in March 2012. He is a qualified chartered accountant and former senior partner of a top 50 accountancy practice. He has had many years’ experience in dealing with quoted public companies on a professional basis including advising on corporate finance, M&A, due diligence, as well as initial introductions to the market. He has held a number of executive and non executive positions and is experienced in the strategic development of businesses and the management of financial risk. Nicholas Thompson Chief Executive Officer # BSc(Hons) MBA Aged 60 Nicholas is Aukett Swanke’s CEO having originally joined Fitzroy Robinson as its Finance Director in 1994. He holds a Masters Degree in Business Administration from City University and currently sits on the Cass MBA Advisory Board. He is a qualified accountant and has a degree from Bath University. Recently he has been proposed for election to the Board of the Wren Insurance Association Limited. Nicholas is responsible for the Group’s strategic growth plans and has wide experience in this area. During his career he led the finance team of Bernard Thorpe, a major UK surveying practice, to create what later became DTZ; and, followed this with a reverse takeover of Aukett Group Plc by Fitzroy Robinson Limited. In 2013 he led the negotiations to acquire Swanke Hayden Connell Europe Limited and established a new international brand: Aukett Swanke. Beverley Wright Group Finance Director & Company Secretary BA(Hons) FCA Aged 56 Beverley joined Aukett Swanke in September 2014 as Group Finance Director. She is a qualified Chartered Accountant and has over 25 years of experience with construction and engineering firms and has significant experience in senior financial roles for international companies. Following 16 years at Mowlem Plc, Beverley joined Midas Group in 2005 as Group Finance Director. In 2006 she took over as Commercial and Financial Director Europe and Middle East at CH2M HILL, becoming International Commercial Director in 2012. Her roles have covered a very broad spectrum including tax, treasury, corporate finance, M&A and structuring, as well as commercial and financial management, analysis, control and governance. John Bullough Non Executive Director + FRICS Aged 64 John joined Aukett Swanke as a non executive director in June 2014. He has over 40 years of international experience in property development and investment. Following 18 years with Grosvenor, John joined Aldar Properties PJSC in Abu Dhabi and was their Chief Executive until November 2010. He is a Fellow of the Royal Institution of Chartered Surveyors and is a Past President of the British Council of Shopping Centres. David Hughes Executive Deputy Chairman BA DipArch RIBA Aged 60 David was appointed to the Board in December 2013 upon the acquisition of Swanke Hayden Connell Europe Limited, where he was Chief Executive. He managed their geographical expansion in Europe, adding studios in Istanbul, Sheffield and Moscow and expanded their design base to include healthcare, education and residential design. David graduated from Sheffield University and is an architect with broad experience in a range of building types. His career includes the restoration and redevelopment of Alexandra Palace in London and the technical coordination of several buildings within the prestigious Broadgate development in London for Rosehaugh Stanhope. David has managed both new build projects and fit outs and is recognised for his experience and expertise with his opinion often sought as an expert witness. Andrew Murdoch Executive Director # MA RIBA Aged 65 Andrew is a qualified architect who joined Fitzroy Robinson in 1984. He was Chairman of Fitzroy Robinson in the 1990’s, and was appointed to the board in December 2013. He is architect to a number of significant buildings in London’s West End and the UK regions, and has a strong and enduring client following. His work includes the flagship Fenwick store in Bond Street, the Home of Alfred Dunhill in Mayfair, and the refurbishment of the Royal Exchange in the City. Andrew sat on the board of management of the British Council of Offices for 12 years and regularly chairs design reviews of recent office buildings for them. Nick Pell Executive Director BA(Hons) Aged 53 Nick was appointed to the Board in December 2013 upon the acquisition of Swanke Hayden Connell Europe Limited and is International Interior Design Director. He has over 20 years of experience designing interiors projects across Europe having graduated from Kingston Polytechnic. Nick has established a reputation for designing creative interior solutions for a wide range of project types; hotels, restaurants, retail banks, residential, leisure facilities and commercial office space and he has led the design direction of several award winning projects. His projects are wide ranging, including the British Council for Offices award winning VISA HQ fit out, and an experimental hotel pilot project. Board Committees * Member of the Audit Committee chaired by Anthony Simmonds + Member of the Remuneration Committee chaired by John Bullough # Member of the Nomination Committee chaired by Anthony Simmonds 18 Back to Contents Back to Contents 19 Aukett Swanke Group Plc | annual report and accounts 2014Aukett Swanke Group Plc | annual report and accounts 2014 Chairman’s Statement Financial highlights I t i s a p l e a s u r e t o r e p o r t o n a h i g h l y s u c c e s s f u l y e a r f o r y o u r C o m p a n y . D u r i n g t h e y e a r e n d e d 3 0 S e p t e m b e r 2 0 1 4 p r o f i t b e f o r e t a x i n c r e a s e d b y 1 5 5 % t o £ 1 . 4 m ( 2 0 1 3 : £ 5 5 0 k ) w h i l s t r e v e n u e m o r e t h a n d o u b l e d t o £ 1 7 . 3 m ( 2 0 1 3 : £ 8 . 4 m ) . E a r n i n g s p e r s h a r e c o n t i n u e t o g r o w a n d n o w s t a n d a t 0 . 6 5 p e n c e p e r s h a r e ( 2 0 1 3 : 0 . 2 6 p e n c e p e r s h a r e ) . In accordance with the Company’s previously stated policy, the Company intends to resume a regular pattern of dividend payments. Two payments were made during the year, one of which was in respect of the prior year. A further dividend payment was also made after the year end relating to the year ending September 2014. Our net funds have continued to increase and stood at £1.8m by the year end. This was achieved notwithstanding that our acquisition of Swanke Hayden Connell Europe Limited (‘SHCE’) was, in part, cash funded. At the time of writing the Group is free of debt. As noted above, in December 2013 we acquired SHCE. Much of 2014 involved integrating SHCE and consolidating our enlarged Group’s operations. We anticipate the full benefit of this will begin to be enjoyed in 2015. The year also saw some changes to the Board. Beverley Wright has joined us as the new Group Finance Director bringing with her experience and expertise from a successful career with major companies in the construction arena including Mowlem Plc and CH2M HILL. John Bullough has joined as a Non Executive Director and chairs the Remuneration Committee. He brings with him a vast knowledge of the commercial property sector through his senior level management experience within Grosvenor and ALDAR in the Middle East. The only negative aspect to report upon has been the unfolding events in Russia which have tempered this year’s performance. I am confident that 2015 will again reflect a further overall improvement on current year performance with respect to revenues, profits, cash and dividends. It is gratifying to report results ahead of our original forecasts, in no small measure due to the excellence of our offering to our clients and the enthusiasm, loyalty and diligence of our staff. I would like to convey my thanks to all our staff for their hard work during the year in achieving these results which, yet again, provide a stronger platform for the year ahead. I am confident about your Company’s future. “ I am confident about your Company’s future Anthony Simmonds Non Executive Chairman 28 January 2015 £8,406,000 2013 £17,326,000 2014 revenue up 106% 0.65p per share Eps up 150% 0.26p per share 2013 2104 £3,029,000 2013 £5,053,000 2014 Net Assets up £2,024,000 2013 £550,000 2013 £1,400,000 2014 Profit before tax up 155% £1,080,000 2013 £1,778,000 2014 Net Funding up £698,000 2014 Return to 2 annual dividends 20 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 21 Aukett Swanke Group Plc | annual report and accounts 2014 Five year summary Strategic report Years ending 30 September Continuing operations 2014 £’000 2013 £’000 2012 £’000 2011 £’000 2010 £’000 Revenue 17,326 8,406 9,150 8,617 6,618 Revenue less sub consultant costs 14,732 7,116 6,744 5,934 5,998 Profit / (loss) before tax 1,400 550 210 (1,205) (789) The directors present their Strategic Report on the Group for the year ended 30 September 2014. Strategic objectives The Group has two main objectives. The first is to create shareholder value in the context of a longer term scenario reflecting the cyclical nature of our market place. The second is design excellence in all that we do. Strategy Our aim for 2014, as outlined in the previous financial report, comprised five goals. Four were financial in nature and one encompassed a strategic objective: Top line revenue £17.3m ACHIEVED +15% Basic earnings / (losses) per share (p) 0.65 0.26 0.08 (0.64) (0.40) £10m TARGET £15m TARGET Dividends per share (p) 0.18 - - - - 5,053 3,029 2,652 2,689 3,804 Net assets Net funds 1,778 1,080 326 318 139 Sustainable pre-tax profit of above £1m. This year we achieved £1.4m. 40% over target. £1.4m ACHIEVED +40% Sustainable pre-tax profit £1m TARGET 0.1p & 0.11p Maintain dividend Two dividends have been paid of 0.1 pence and 0.11 pence per share in 2014. Achieved target. Frankfurt JOiNT VENTURE Berlin JOiNT VENTURE Return all operations to a sustainable size. This has been achieved in the UK and Russia through the acquisition of SHCE; whilst in Turkey we have gained a new office. Top line revenue to remain above £10m and £15m by 2014. We have achieved the 2014 objective with revenue of £17.3m. 15% over target. 5p 8p ACHIEVED +60% Share price above 5p. Since September 2013 the share price has been above 5p and at the year end stood at 8p. 60% over target. i e c r P e r a h S SEPT 2013 SEPT 2014 Russia UK Prague JOiNT VENTURE Uae Turkey NEW OFFiCE Both the Berlin and Frankfurt joint ventures have grown. However, neither our Czech JV nor our operation in the Middle East has grown this year. Corporate information Company secretary Beverley Wright cosec@aukettswanke.com Registered number England & Wales 2155571 Share registrars Equiniti www.equiniti.com 0121 415 7047 Auditors BDO www.bdo.co.uk Financial public relations Hermes Financial Public Relations www.hermesfinancialpr.co.uk Registered office 36-40 York Way London N1 9AB Website www.aukettswanke.com Nominated adviser and broker finnCap www.finncap.com 020 7220 0500 Bankers Coutts & Co www.coutts.com Solicitors Fox Williams www.foxwilliams.com 22 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 23 For the year ahead, 2015, our goals are: To grow top line revenue towards £20m Ensure all operations are PROFITABLE Establish BENCHMARKS to evaluate our DESIGN PERFORMANCE To retain a twice yearly DIVIDEND To move sustainable pre-tax profits above £1.5m Retain our CORE TEAMS and SKILL SETS Business model We continue to concentrate on a business model that focuses on client markets in specific geographies. We have offices in the UK, Russia, Turkey, the Middle East, Germany and the Czech Republic as well as a licenced operation in South America. in the past year we have seen an improvement in our client markets in both the UK.Turkey and Germany but a static situation in Turkey, the Czech Republic and the Middle East. At present our Russian client market is shrinking as the country enters a recessionary cycle. Swanke Hayden Connell Europe Limited integration During the past nine months significant progress has been made to integrate SHCE into our business model. Both iT platforms and software systems have been aligned and we have co located our joint offices in London and Moscow. This has resulted in a significant capital spend in iT infrastructure and property refurbishment, but brings identified cost savings that should materialise downstream. Additionally we have been able to commence joint working on new projects in order to yield longer term synergies and maximise our combined expertise on project delivery. Little of this benefit (but all of the cost) has been seen in these results. However, our end of year reviews have highlighted little or no further capital expenditure requirements in 2014/15 for either iT or property (other than volume expansion) and budgets reflect an ongoing underlying cost saving profile in these areas. We are pleased to report that the merger will bring the expected longer term benefits not only in critical mass and brand quality, but in greater efficiency from our underlying overhead. Business review Summary of overall Group financial performance Revenues in the year increased to £17.3m (2013: £8.4m), with revenue less sub consultants at £14.7m (2013: £7.1m). Profit before tax by comparison rose 155% to £1.4m (2013: £550k). This result provides 3.6 times dividend cover. Net funds continued to climb at £1.8m (2013: £1.1m) leaving the Group virtually debt free. Post year end the small residual outstanding bank loan was repaid. The result would have been significantly better had our pre acquisition Russian operation not continued to under perform, and the former SHCE business not suffered from a number of project delays in both Russia and the UK in the final quarter. Architectural and interior design success is highlighted with three awards, two for 62 Buckingham Gate and one for M&S Cheshire Oaks. The acquisition of SHCE and organic growth in the year has substantially bolstered our rankings. in the 2015 World Architecture 100 listings, published by Building Design, Aukett Swanke Group Plc (‘Aukett Swanke’) is ranked 53rd (2014: 71st), making us the 5th (2014: 8th) largest UK practice by international measurement. Segmental analysis of financial performance The key performance indicators used within the Group for assessing financial performance are: • • revenue less sub consultant costs which reflects the revenue generated by our own technical staff but excludes the revenue attributable to sub consultants; the revenue less sub consultant costs being generated per full time equivalent (‘FTE’) technical member of 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 • profit before taxation. The numbers of full time equivalent technical members of staff differs from the employee numbers disclosed in note 7 to the financial statements since the Group uses some non employed workers through agencies and freelance contracts. Also staff work part time or have been on maternity leave. M&S Cheshire Oaks and 62 Buckingham Gate have both won awards 24 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 25 United Kingdom Revenue less sub consultant costs FTE technical staff (number) Per FTE technical staff Operating costs Profit before tax 2014 £’000 12,779 131 98 (10,964) 1,815 2013 £’000 6,083 56 109 (5,122) 961 2012 £’000 5,034 53 95 (4,996) 38 The UK has had an excellent year with revenue less sub consultant costs rising 110% to £12.8m (2013: £6.1m). SHCE contributed 58% of this increase with organic growth accounting for 42%. We gained an additional 42 technical staff with SHCE and added 33 more through direct recruitment in a tightening labour market. The need to recruit in advance of project conversion through the various work stages along with an unexpected delay in two projects in the fourth quarter, restricted the profit rise, however we are able to report a profit rise of 90% at £1.8m (2013: £961k). Nine major projects were either in the site phase or moved into construction during the year including Verde SW1 in Victoria for Tishman Speyer, imperial West Phase 2 for imperial College in West London, 10 Trinity Square in the City, two stores for Fenwick, the Adelphi building for Blackstone, Forbury Place in Reading for M&G, 125 Wood Street for Orchard Street investment Management and Uxbridge Business Park for Goodman. Veretec, our Executive architecture division, had its best year with revenue less sub consultant costs of over £3.3m for the first time. Five schemes represented approximately 70% of its revenue including clients such as Sir Robert McAlpine, McLaren Construction, Candy & Candy, and the Qatari Foundation. Our interior design offer was substantially augmented by the addition of SHCE’s client base including projects with Ascot Underwriting, BNP Paribas, European Medicines Agency and Symantec. Significantly, the UK out of town portfolio has returned through our existing client base with schemes in Birmingham, Bristol, Cambourne, Cambridge, Farnham, Harwell near Oxford, Hemel Hempstead and Sheffield. The UK studio approaches 2015 with renewed optimism. Russia Revenue less sub consultant costs FTE technical staff (number) Per FTE technical staff Operating costs Profit / (loss) before tax (before impairment) 2014 £’000 774 20 39 (1,124) (350) 2013 £’000 781 18 43 (1,051) (270) 2012 £’000 1,314 28 47 (1,256) 58 Despite a fillip from the addition of a new office and our teams’ joint efforts post acquisition, the final result for the year is a loss of £350k. We expected to avoid any losses in the second half in the pre acquisition operation and this was achieved with a small profit of £19k, reducing its annual loss to £304k (2013: £270k). Unfortunately, the SHCE branch suffered a project delay, in tandem with the UK operation in the final quarter, which reversed the first half profit and returned a loss of £46k. The Board is mindful of this important market and the time taken to establish our credentials in it. However, such losses are unsustainable and we have given ourselves a short period in which to rectify the situation or consider alternative solutions. This process is further exacerbated by the recent troubles in the Russian financial markets brought about by Russian foreign policy and the collapse in the oil price. in the short term management’s strategy is to concentrate on local Russian commissions where there is limited exposure to third party sub consultant costs and hard currency liabilities. Given the continuing losses the remaining goodwill balance of £125,000 relating to the pre acquisition Russian operation, ZAO Aukett Fitzroy Vostok, has been impaired. Turkey Revenue less sub consultant costs Operating costs Profit before tax 2014 £’000 687 (597) 90 This is a new operation to the Aukett Swanke Group and has performed well in the period. During the year we moved to slightly larger premises in order to provide a base for continued growth. With a profit of £90k on revenues of £687k this has been the best performer from the SHCE portfolio of offices. The office primarily works for local Turkish clients including: Tahincioglu Real Estate A.S., NiDA insaat, FiBA Group, Cengiz Holding A.S, ER Yaterim Turizm insaat A.S. and Vodafone. During the year the office successfully completed the 42 storey Palladium commercial office building in istanbul. Our business plan assumes reasonable growth in this market. Middle East Revenue less sub consultant costs Operating costs Profit/ (loss) before tax 2014 £’000 492 (478) 14 2013 £’000 252 (384) (132) 2012 £’000 396 (352) 44 Revenues have almost doubled in the year at £492k (2013: £252k) enabling the operation to return a small profit of £14k (2013: loss £132k). The key project won with Majid Al Futtaim at the end of last year continued throughout the period to provide much needed local stability. During the year we have seen the number of enquiries rise as the region returns to a more active market. However, critical mass remains a challenge to achieving our growth strategy. A number of independent potential solutions have now been identified, which we are considering. This operation could easily double or treble its size. Continental Europe As joint ventures or associates, the results of these operations are included in the financial statements as our share of after tax profits. However in order to provide a more insightful view of the true size and scale of each operation the figures shown below are 100% values. Berlin 100% figures in which the Group has a 25% share Revenue less sub consultant costs FTE technical staff (number) Per FTE technical staff Operating costs Profit before tax 2014 £’000 4,330 51 85 (2,873) 1,457 2013 £’000 4,096 48 85 (2,756) 1,340 2012 £’000 3,436 44 78 (2,376) 1,060 A veritable jewel in the crown. For a fourth successive year this operation has returned an improved performance based on its leading position in the Berlin market. The studio is one of the few “go to” practices for working drawing expertise. Pre tax profits rose by 8.7% to £1.5m (2013: £1.3m) on revenue less sub consultants up 5.6% at £4.3m (2013: £4.1m). Our net share (post tax) amounted to £254k (2013: £234k) Major projects during the year included assistance on the Berlin Airport, Elbphilharmonie working drawings in Hamburg, KfW Bank refurbishment works in Berlin, Siemens office in Forchheim, Spindlershof refurbishment in Berlin, the shopping mall Gropius Passagen for the developer mfi and the Kaiserstrand Hotel in Bansin. 26 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 27 Frankfurt 100% figures in which the Group has a 50% share Revenue less sub consultant costs Operating costs Profit / (loss) before tax 2014 £’000 909 (617) 292 2013 £’000 496 (438) 58 2012 £’000 348 (376) (28) A successful bid for Deutsche Bank provided the studio with a turnaround performance in the year and much needed revenue visibility. Revenues grew by 83% to £909k (2013: £496k) and profits up five fold to £292k (2013: £58k). The office retains a high calibre client portfolio including: The Bank of New York Mellon, JP Morgan, Microsoft, Morgan Stanley and Tishman Speyer. Prague 100% figures in which the Group now has a 50% share Revenue less sub consultant costs Operating costs Profit / (loss) before tax 2014 £’000 304 (305) (1) 2013 £’000 308 (296) 12 2012 £’000 313 (321) (8) The market for services in the Czech Republic is depressed and achieving a breakeven result has been a considerable achievement. The Group’s decision to move to a JV arrangement has been vindicated by recent results. As the studio has considerable design skills, the Group will remain committed to its continuation as part of the Group until the economy recovers. Group costs Group costs rose to £398k (2013: £144k). The increase comprises one off costs in respect of corporate finance and legal work and the acquisition of SHCE. it also reflects the impacts of salary reinstatements, the addition of a new non executive director and an enhanced Head Office team to support the enlarged Group, together with recruitment fees for those individuals. Financial position in monitoring the financial position of the Group the directors look principally at the net investment in project working capital together with the financing available to the business through capital and reserves, and cash and debt facilities. Project working capital Project working capital comprises unpaid amounts invoiced to clients for progress billings plus / less amounts due from / received from clients for contract work. Amounts due from / received from clients for contract work reflect the extent to which revenue recognised exceeds or falls short of progress billings. Net trade receivables Amounts due from customers for contract work Advances received from customers for contract work Project working capital 2014 £’000 4,258 581 (2,472) 2,367 2013 £’000 2,668 277 (2,065) 880 2012 £’000 1,645 389 (912) 1,122 The project payment arrangements under which the Group operates vary significantly by geographical location: 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 amounts due from customers for contract work; in Russia it is usual for the project to be divided into contractual work stages. At the start of each stage a deposit is received from the client but no further amounts are received until the stage, or sub stage, is fully completed; 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 amounts due from customers for contract work; 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. Our project working capital has increased compared to the previous year, both as a result of the acquisition of SHCE as well as organic growth in the original business. it is also of a higher quality and more robust in nature and this is reflected in the improved net cash position at year end of £1.8m (2013: £1.1m), as revenue growth exceeded the increase in trade receivables. Commensurately receivable days improved from 116 to 90. Financing At the year end the Group had total equity of £5.1m and net funds of £1.8m (2013: £3.0m and £1.1m respectively). The increase of £2.1m in net equity comprises £1.4m of new shares issued in respect of the acquisition of SHCE together with retained earnings for the year of £1.1m, net of dividends paid of £0.3m and foreign exchange revaluation losses, principally in respect of the Russian Rouble’s devaluation, of £0.1m. The net cash position of £1.8m comprises cash and cash equivalents of £1.9m less short term borrowings of £0.1m (2013: £1.1m, £1.3m and £0.2m respectively). As explained in Note 21, the short term borrowing was repayable within one year of the balance sheet date. This outstanding balance was paid off in October 2014, leaving the Group free of debt. The Group also enjoys the benefit of a secured overdraft facility from our bankers Coutts & Co. No drawings have been made under that facility, but it provides additional headroom in support of the Group’s increasingly strong financial position. The Group has a strong focus on cash management which is common across all of its businesses. it is a requirement that all businesses are cash generative or at least cash neutral. All excess funds are remitted to the Group’s head office on a regular basis and any loans or short term funding are subject to formal approval. Net funds Total equity Net gearing 2014 £’000 1,778 5,053 Nil 2013 £’000 1,080 3,029 Nil 2012 £’000 326 2,652 Nil There were no changes in the objectives, policies or processes for managing capital during the year. However the Group’s head office is increasingly acting as the Group’s internal banker, as explained above. 28 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 29 Outlook The pipeline of future work has now risen to 51%. This is a small increase compared to the beginning of the previous year at 48%, however the percentage now applies to the enlarged order book of the Group incorporating SHCE and is therefore of a higher base quantum. Percentage of budgeted workload secured at the start of the financial year 2015 51% 2014 48% 2013 28% 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, and investment into the property sector. Not all of this information is available in each market place and so 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 covenants so 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 during projects and deferrals of projects. Operational gearing and funding in common with other professional services businesses, the Group has a relatively high level of operational gearing, through staffing and property costs, which makes it difficult to reduce costs sufficiently quickly to avoid losses and associated cash outflows, when faced by sharp falls in revenue. The directors seek to ensure that the Group retains appropriate headroom within its funding arrangements and regularly monitors expected future headroom through the Group’s annual budgeting and quarterly forecasting processes. The Group’s principal bankers have been supportive during the economic downturn and in January 2015 renewed the Group’s facilities for a further year. Where possible, the Group deploys three strategies to help reduce operational gearing: First, the Group has a well developed staffing plan which flexes the total number of staff using a combination of permanent employees, temporary employees, agency staff, and freelance staff as applicable to each legal jurisdiction; and in so doing matches resources to fee paying work as closely as possible, sometimes linking staff retention directly to specific projects. Second, the Group can sublet or licence occupation of part of its property space to other property related professional services businesses to offset some of the total occupancy cost. Lastly the Group seeks flexible contract terms with major suppliers such that certain costs can be suspended during times of economic difficulty. 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 conducts external surveys to ensure that salaries and benefits are appropriate and comparable to market levels and endeavours to provide a pleasant working environment for staff. We provide staff training programmes and education assistance, including helping our professionally qualified staff comply with their CPD 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 operating our quality assurance systems which have many facets. These systems include identified individuals whose roles include focusing on maintaining quality assurance standards and spreading best practice. The Group’s principal 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 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 wide spectrum of available suppliers to each project. This pressure is increased if activity levels are low such as in the recent economic downturn 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. This has proved to have been a sensible approach in the recent downturn as the recession lasted much longer than most commentators expected. Additionally, 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. Overseas diversification The Group continues to derive 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 locations when compared to the UK which 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 and, where applicable joint venture partners, to monitor and review the businesses. There is regular, comprehensive management reporting and KPis are used to review both contract pricing issues and staffing efficiency. The Group seeks to work for the larger and more established domestic property developers who themselves often have significant international experience or for international clients. When acting as general designer for projects located outside the UK the Group always seeks to appoint sub consultants with an established and successful track record on similar projects; and 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. in addition as far as possible foreign currency flows are matched to minimise any impact of exchange rate movements and significant exposures are hedged. Summary The 2014 results reflect a considerable improvement in our underlying performance and the executive directors are confident that this performance can be maintained as the markets in which we operate also improve. By order of the Board Nicholas Thompson Chief Executive Officer 28 January 2015 Beverley Wright Group Finance Director “ The 2014 results reflect a considerable improvement in our underlying performance and the executive directors are confident that this performance can be maintained as the markets in which we operate also improve 30 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 31 Directors’ report The directors present their report for the year ended 30 September 2014. Corporate governance The UK Corporate Governance Code issued in September 2012 by the Financial Reporting Council sets out standards of good practice in relation to board leadership and effectiveness, remuneration, accountability and relations with shareholders. Although under the rules of the Alternative investment Market, the Company is not required to comply with the Code nor state any areas in which it does not comply, the Board has sought to take into account the provisions of the Code in so far as it considers them to be appropriate and practicable for a company of this size. in doing this the Board has considered the Corporate Governance Guidelines for Small and Mid-Size Quoted Companies published in 2013 by the Quoted Companies Alliance. 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 five executive directors and two non executive directors who bring a wide range of experience and skills to the Company. The Board considers Anthony Simmonds and John Bullough 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 financial information published by the Group about its financial performance and position. it does this 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 their 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 Anthony Simmonds and he reports to the Board on matters discussed at the Committee meetings. Remuneration Committee The Remuneration Committee meets as and when appropriate during the year and is responsible for determining all aspects of the executive directors’ remuneration, including share options and the terms and conditions of their service contracts. Where appropriate the Committee consults the Chief Executive Officer about its proposals. The Remuneration Committee comprises Anthony Simmonds and John Bullough, with John Bullough as Chairman. No director plays a part in any discussion about their 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 is chaired by Anthony Simmonds with the other members being Nicholas Thompson and Andrew Murdoch. Internal controls The directors acknowledge that they are responsible for the Group’s system of internal controls and for reviewing its effectiveness (excluding joint ventures and associates). The directors review all controls including operational, compliance and risk management, as well as financial controls. Risk management and internal control are considered by the directors at Board meetings. Any such system of control is designed to manage risk and can only provide reasonable and not absolute assurance against material misstatement or loss. Directors Anthony Simmonds, Duncan Harper and Nicholas Thompson served as Directors of the Company throughout the year ended 30 September 2014. Andrew Murdoch was appointed to the Board on 10 December 2013 whilst David Hughes and Nick Pell were appointed to the Board on 18 December 2013. John Bullough was appointed on the 2 June 2014 and Beverley Wright was appointed to the Board on the 15 September 2014. John Vincent retired as director on the 25 March 2014 and Duncan Harper resigned as director on the 10 October 2014. Biographical details of the current Directors are set out on pages 18 and 19. Resolutions to elect Beverley Wright and John Bullough, as directors of the Company and to re elect Nicholas Thompson will be proposed at the Annual General Meeting. The Company maintains directors and officers liability insurance. Directors’ interests Directors’ interests in the shares of the Company were as follows: Number of ordinary shares Anthony Simmonds Nicholas Thompson Andrew Murdoch* David Hughes* Nick Pell* Beverley Wright* John Bullough* 30 September 2014 400,000 1 October 2013 400,000 16,602,411 16,102,411 13,478,486 3,058,933 2,226,700 - - - - - - - Duncan Harper was granted the following options in respect of ordinary shares on 11 April 2011: Exercisable between Exercise Price At 1 October 2013 Granted Exercised At 30 September 2014 12/04/2013 – 11/04/2017 5.00p 500,000 - - 500,000 The 500,000 share options initially granted lapsed and are no longer exercisable. 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 and Andrew Murdoch have rolling service contracts with the Company which are subject to twelve months’ notice of termination by either party. David Hughes, Nick Pell and Beverley Wright 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, car allowance (except David Hughes and Nick Pell), contributions to defined contribution pension arrangements, annual bonus 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. *Not a Director at the beginning of the year. 32 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 33 Substantial shareholdings At 28 January 2015 the Company had been informed of the following notifiable interests of three per cent or more in its share capital. Number of ordinary shares Percentage of ordinary shares Shareholder Notes Nicholas Thompson Director of the Company Andrew Murdoch Director of the Company Jeremy Blake Former employee of the Group Begonia 365 SL Controlled by a former Director of the Company Raul Curiel Former Director of the Company Stephen Atkinson Employee of the Group River & Mercantile Long Term Recovery Fund 16,602,411 13,478,486 13,030,638 9,515,192 9,240,018 8,260,712 8,150,000 John Vincent Former Director of the Company 5,791,394 10.05% 8.16% 7.89% 5.76% 5.59% 5.00% 4.93% 3.51% Share price The mid market closing price of the shares of the Company at 30 September 2014 was 8.12 pence and the range of mid market closing prices of the shares during the year was between 5.0 pence and 9.75 pence. Share capital During the year as part of the business combination the Company issued 19,594,959 new ordinary shares at a price of 7.00 pence per share (note 35). The Board is seeking from shareholders at the Annual General Meeting renewal of its authority to allot equity securities. The authority would allow the board to allot securities up to a maximum aggregate nominal value of £826,068 representing 50% of the issued share capital of the Company. A resolution will also be put to the Annual General Meeting in respect of the issue of equity securities for cash up to an aggregate nominal amount of £165,214 representing 10% of the issued share capital, without first offering such shares to shareholders. The directors consider this authority desirable as it will give them the flexibility to make small issues of ordinary shares for cash if suitable opportunities arise without the necessity of first seeking shareholders’ approval. The renewed authorities will expire at the conclusion of the next Annual General Meeting of the Company when it is intended that the directors will again seek their renewal. 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 well being 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 57 ‘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 1 LEED (Leadership in Energy and Environmental Design) ‘Gold’ award and 1 ‘Silver’ award. 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 applications 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 established 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. 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. 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 As reported last year, following the improvement in the Group’s financial performance and position, dividend payments recommenced with the payment in December 2013 of a dividend of 0.1p per share in respect of the year ended 30 September 2013. Subsequent to that, on 28 July 2014, an interim dividend of 0.1p per share was paid in respect of the year ended 30 September 2014. On 2 December 2014, a second interim dividend of 0.11p per share was also paid in respect of the year ended 30 September 2014. it is the Board’s intention to bring the timing of any future dividends into line with market practice, declaring final and interim dividends at the time of our final and interim results, respectively. By order of the Board Beverley Wright Company Secretary Aukett Swanke Group Plc Registered number 2155571 28 January 2015 34 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 35 Statement of directors’ responsibilities Directors’ responsibilities The directors are responsible for preparing the strategic report, the directors’ report and the 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 international Financial Reporting Standards (iFRSs) as adopted by the European Union. 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 the Alternative investment Market. 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 applicable IFRSs as adopted by the European Union have been followed, 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 con- tinue 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 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 We have audited the financial statements of Aukett Swanke Group Plc for the year ended 30 September 2014 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and Company statement of financial position, the consolidated and Company statement of cash flows, the consolidated and Company statement of changes in equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and international Financial Reporting Standards (iFRSs) as adopted by the European Union and, as regards the parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. 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 so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and international Standards on Auditing (UK and ireland). Those standards require us to comply with the Financial Reporting Council’s (“FRC’s”) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc.org.uk/auditscopeukprivate. Opinion on financial statements in our opinion: • • • • the financial statements give a true and fair view of the state of the Group’s and the parent Company’s affairs as at 30 September 2014 and of the Group’s profit for the year then ended; the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union 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. Opinion on other matters prescribed by the Companies Act 2006 in our opinion the information given in the strategic report and directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception 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. Nicholas Carter-Pegg (senior statutory auditor) For and on behalf of BDO LLP, statutory auditor London United Kingdom 28 January 2015 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). 36 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 37 Consolidated statement of comprehensive income For the year ended 30 September 2014 Profit for the year Other comprehensive income: Currency translation differences Currency translation differences recycled on discontinued operations Other comprehensive income for the year Total comprehensive income for the year attributable to equity holders of the Company 2014 £’000 1,046 (103) - (103) 943 2013 £’000 374 (2) 1 (1) 373 Consolidated income statement For the year ended 30 September 2014 Revenue Sub consultant costs Revenue less sub consultant costs Personnel related costs Property related costs Other operating expenses Other operating income Operating profit Finance income Finance costs Profit after finance costs Share of results of associate and joint ventures Profit before tax Tax charge Profit from continuing operations Profit for the year attributable to equity holders of the Company Basic and diluted earnings per share From continuing operations Total earnings per share Note 3 3 4 5 10 11 2014 £’000 17,326 (2,594) 14,732 (9,868) (2,343) (1,861) 404 1,064 - (18) 1,046 354 1,400 (354) 1,046 1,046 0.65p 0.65p 2013 £’000 8,406 (1,290) 7,116 (4,751) (1,256) (1,027) 217 299 1 (14) 286 264 550 (176) 374 374 0.26p 0.26p 38 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 39 Consolidated statement of financial position Company statement of financial position Non current assets investments Trade and other receivables Total non current assets Current assets Trade and other receivables Cash and cash equivalents Total current assets Total assets Current liabilities Trade and other payables Total current liabilities Total liabilities Net assets Capital and reserves Share capital Retained earnings Merger reserve Other distributable reserve Total equity attributable to equity holders of the Company Note 15 18 18 19 25 At 30 September 2014 2013 £’000 2,351 942 3,293 17 414 431 3,724 (1,855) (1,855) (1,855) 1,869 1,456 (2,029) - 2,442 1,869 2014 £’000 3,467 378 3,845 33 916 949 4,794 (1,681) (1,681) (1,681) 3,113 1,652 (1,866) 1,176 2,151 3,113 The financial statements on pages 38 to 74 were approved and authorised for issue by the Board of Directors on 28 January 2015 and were signed on its behalf by: Nicholas Thompson Chief Executive Officer Beverley Wright Group Finance Director At 30 September 2014 Non current assets Goodwill Other intangible assets Property, plant and equipment investment in associate investments in joint ventures Deferred tax Total non current assets Current assets Trade and other receivables Current tax Cash and cash equivalents Total current assets Total assets Current liabilities Trade and other payables Current tax Short term borrowings Provisions Total current liabilities Non current liabilities Long term borrowings Deferred tax Total non current liabilities Total liabilities Net assets 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 Note 12 13 14 16 17 23 18 19 20 24 20 23 25 2014 £’000 1,835 594 648 244 131 290 3,742 6,379 - 1,891 8,270 12,012 (6,540) (131) (113) (104) (6,888) - (71) (71) (6,959) 5,053 1,652 1,176 (74) 148 2,151 5,053 2013 £’000 1,369 - 326 190 39 454 2,378 3,515 117 1,343 4,975 7,353 (4,005) - (150) (50) (4,205) (113) (6) (119) (4,324) 3,029 1,456 - 29 (898) 2,442 3,029 The financial statements on pages 38 to 74 were approved and authorised for issue by the Board of Directors on 28 January 2015 and were signed on its behalf by: Nicholas Thompson Chief Executive Officer Beverley Wright Group Finance Director 40 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 41 Consolidated statement of cash flows For the year ended 30 September 2014 Company statement of cash flows For the year ended 30 September 2014 Note 27 Cash flows from operating activities Cash generated from operations interest paid income taxes received Net cash inflow from operating activities Cash flows from investing activities Purchase of property, plant and equipment Sale of property, plant and equipment Acquisition of subsidiary, net of cash acquired interest received Dividends received Net cash generated (used in) / from investing activities Net cash inflow before financing activities Cash flows from financing activities Repayment of bank loans Payment of asset finance liabilities Dividends paid Net cash used in financing activities Net change in cash, cash equivalents and bank overdraft Cash and cash equivalents and bank overdraft at start of year Currency translation differences Cash, cash equivalents and bank overdraft at end of year 22 2014 £’000 1,360 (18) 70 1,412 (523) 4 (57) - 184 (392) 1,020 (150) - (291) (441) 579 1,343 (31) 1,891 2013 £’000 646 (14) 61 693 (157) 4 - 1 210 58 751 (150) - - (150) 601 739 3 1,343 Note 27 Cash flows from operating activities Cash generated (used in) / from operations income taxes paid Net cash (outflow) / inflow from operating activities Cash flows from investing activities Purchase of subsidiaries Dividends received Net cash generated from investing activities Net cash flow before financing activities Cash flows from financing activities Dividends paid Net cash used in financing activities Net change in cash, cash equivalents and bank overdraft Cash, cash equivalents and bank overdraft at start of year Cash, cash equivalents and bank overdraft at end of year 2014 £’000 (164) - (164) (209) 1,166 957 793 (291) (291) 502 414 916 2013 £’000 814 - 814 (814) 210 (604) 210 - - 210 204 414 42 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 43 Consolidated statement of changes in equity For the year ended 30 September 2014 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 the business combination in the year representing the issue of 19,594,959 new Ordinary Shares at a price of 7.00 pence per share. All amounts are attributable to the equity holders of the Company. At 30 September 2012 Profit for the year Other comprehensive income Share based payment value of employee services Share capital £’000 1,456 - - - At 30 September 2013 1,456 Profit for the year Other comprehensive income Share based payment value of employee services issue of ordinary shares in relation to business combination Dividends paid At 30 September 2014 - - - 196 - 1,652 Foreign currency translation reserve £’000 30 - (1) - 29 - (103) - - - Retained earnings £’000 (1,276) 374 - 4 Other distributable reserve £’000 2,442 - - - (898) 2,442 1,046 - - - - - - - - (291) 2,151 Merger reserve £’000 - - - - - - - - 1,176 - 1,176 Total £’000 2,652 374 (1) 4 3,029 1,046 (103) - 1,372 (291) 5,053 (74) 148 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 the business combination in the year representing the issue of 19,594,959 new Ordinary Shares at a price of 7.00 pence per share. All amounts are attributable to the equity holders of the Company. Company statement of changes in equity For the year ended 30 September 2014 At 30 September 2012 Loss for the year Share based payment value of employee services Share capital £’000 1,456 - - Retained earnings £’000 (1,446) (587) 4 Other distributable reserve £’000 2,442 - - At 30 September 2013 1,456 (2,029) 2,442 Profit for the year Share based payment value of employee services issue of ordinary shares in relation to business combination Dividends paid At 30 September 2014 - - 196 - 163 - - - 1,652 (1,866) - - - (291) 2,151 Merger reserve £’000 - - - - - - 1,176 - 1,176 Total £’000 2,452 (587) 4 1,869 163 - 1,372 (291) 3,113 Notes to the financial statements Summary of significant accounting policies 1 The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated. Basis of preparation The financial statements have been prepared in accordance with international Financial Reporting Standards as adopted by the European Union (‘iFRS’) and the Companies Act 2006 as applicable to companies reporting under iFRS. The financial statements have been prepared under the historical cost convention and on a going concern basis. New accounting standards, amendments and interpretations applied No new accounting standards, amendments or interpretations have required any amendments to this year’s financial statements. New accounting standards, amendments and interpretations not yet applied A review has been undertaken of new accounting standards, amendments and interpretations to existing standards which have been issued but have an effective date making them applicable to future financial statements. The following standards are effective for accounting periods beginning on or after 1 January 2014 and have not yet been adopted by the Group. i) ii) iFRS 12 ‘Disclosure of interests in other entities’. Requires disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, interests in other entities and the effects of those interests on its financial position, financial performance and cash flows. iFRS 15 ‘Revenues from contracts with customers’. The standard provides a single, principles based five-step model to be applied to all contracts with customers. The Group has yet to assess the full impact of this accounting standard. There are no other iFRSs or iFRiC interpretations that are not yet effective that would be expected to have a material impact on the Group. Going concern The Group’s business activities, the principal risks and uncertainties facing the Group, and the financial position of the Group are described in the strategic report. The liquidity risks faced by the Group are further described in note 32. The Group currently meets its day to day working capital requirements through its cash balances. it maintains its overdraft facility for additional financial flexibility and foreign currency hedging purposes. This overdraft facility was renewed for a further year in January 2015. The processes the directors have undertaken, and the reasons for the conclusions they have reached, regarding the applicability of a going concern basis are explained below. in undertaking their assessment the directors have followed the guidance issued in 2009 by the Financial Reporting Council entitled Going Concern and Liquidity Risk. Although the financial performance of the Group has improved significantly, the directors continue to use the Group’s pipeline of secure and potential future work to monitor on a continual basis likely forward demand for the Group’s services. Forecasts for the Group have been prepared on a monthly basis which comprise detailed income statements, statements of financial position and cash flow statements for each of the Group’s operations. The base forecasts and projections show the Group should be able to comfortably operate within its currently available facilities and the directors believe this to be the case. The Group’s principal banker is Coutts & Co, with whom the Group has an excellent long term relationship extending through previous business cycles. Coutts & Co have been supportive of the Group in recent difficult economic times and have recently again renewed the Group’s facility as described in note 32. All of the directors, and most members of the Group’s senior management, have experience of managing businesses through challenging economic circumstances, in most cases over a number of business cycles. The Board, after making the enquiries described above, has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason the Board considers it appropriate to prepare the financial statements on a going concern basis. 44 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 45 Basis of consolidation The consolidated financial statements incorporate those of the Company and its subsidiaries. Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies. intra group transactions, balances and any unrealised gains and losses on transactions between Group companies are eliminated on consolidation. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given and equity instruments issued. identifiable assets acquired and liabilities assumed in an acquisition are measured initially at their fair values at the acquisition date, irrespective of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. The consolidated financial statements also include the Group’s share of the results and reserves of its associates and joint ventures. Where the Group exercises control over the investment jointly with another party it is classified as a joint venture. Other investments where the Group exercises significant influence are classified as associates. Both associates and joint ventures are accounted for using the equity method. Borrowings Borrowings are initially recognised at fair value, net of any transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of any transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. Goodwill Goodwill arising on acquisitions represents the excess of the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired. Goodwill is tested annually for impairment and an impairment loss would be recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment At the date of each Statement of Financial Position, a review of property, plant and equipment and intangible assets (excluding goodwill) is carried out to determine whether there is any indication that those assets have suffered any impairment. if any such indications exist, the recoverable amount of the asset is estimated in order to determine the extent of any impairment. Where the asset does not generate cash flows that are independent from other assets, the recoverable amount of the cash generating unit to which the asset belongs is estimated. Other intangibles assets intangible assets acquired in a business combination are recognised at fair value at the acquisition date. Subsequently the intangible assets are carried at cost less accumulated amortisation and accumulated impairment. Amortisation is charged on straight line basis with the useful economic lives attributed as follows: Cash and cash equivalents Cash and cash equivalents includes cash in hand, bank current accounts held at call, bank deposits with very short maturity terms and bank overdrafts. Any bank overdrafts are shown within borrowings in current liabilities in the Statement of Financial Position. Trade name Customer relationships Order book - 25 years - 7 years - 3 months Company income statement The Company has taken advantage of the exemption provided by section 408 of the Companies Act 2006 not to present its income statement for the year. The profit of the Company for the year was £163,000 (2013: Loss of £587,000). Investments investments in subsidiaries, associates and joint ventures are held in the Statement of Financial Position of the Company at historic cost less any allowance for impairment. Deferred taxation Deferred income tax is provided in full, using the Statement of Financial Position liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amount in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the date of the Statement of Financial Position and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax liabilities are recognised in respect of the unremitted earnings of overseas operations where they are expected to be remitted to the United Kingdom in the foreseeable future. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be generated against which the temporary differences can be utilised. Dividends Dividend payments are recognised as liabilities once they are no longer at the discretion of the Company. Dividend income from investments is recognised in the income statement when the shareholders’ rights to receive payment have been established. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Financial instruments Financial assets and financial liabilities are recognised in the Statement of Financial Position when the Group or Company has become a party to the contractual provisions of the instrument. Financial instruments are initially recognised at fair value. Foreign currency Transactions in currencies other than the functional currency of each operation are recorded at the rates of exchange prevailing on the dates of the transactions. At the date of each Statement of Financial Position, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at the date of the Statement of Financial Position. Gains and losses arising on retranslation are included in the income statement for the year. On consolidation, the assets and liabilities of the Group’s overseas operations are translated from their functional currencies at exchange rates prevailing at the date of the Statement of Financial Position. income and expense items are translated from their functional currencies at the average exchange rates for the year. Exchange differences arising are recognised directly in equity and transferred to the Group’s foreign currency translation reserve. if an overseas operation is disposed of then the cumulative translation differences are recognised as income or as an expense in the year disposal occurs. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rate. The Group has elected to treat goodwill and fair value adjustments arising on acquisitions before the date of transition to iFRS as sterling denominated assets and liabilities. Leases and asset finance arrangements Where asset finance arrangements result in substantially all the risks and rewards of ownership resting with the Group, the arrangement is treated as a finance lease with the assets included in the Statement of Financial Position. Such assets are initially measured at the present value of the minimum asset finance payments and the present value of future payments is shown as a liability. The interest element of these arrangements is charged to the income statement over the period of the arrangement in proportion to the balance of capital payments outstanding. All other lease arrangements are treated as operating leases and the annual rentals are charged to income statement on a straight line basis over the lease term. Where a rent free period is received in respect of a property lease the incentive is considered an integral part of the agreement and the cost of the lease net of the incentive is charged to the income statement on a straight line basis over the lease term. Operating segments The Group’s reportable operating segments are based on the geographical areas in which its studios are located. These are primarily identified by the different economic characteristics of these locations. internally the Group prepares discrete financial information for each of its geographical segments. Each reportable operating segment provides the same type of service to clients, namely integrated professional design services for the built environment and internally the Group does not sub divide its business by type of service. Other operating expenses Other operating expenses include legal and professional costs, professional indemnity insurance premiums, marketing expenses and other general expenses. Property, plant and equipment All property, plant and equipment is stated at historical cost of acquisition less depreciation and any impairment provisions. Historical cost of acquisition includes expenditure that is directly attributable to the acquisition of the items. Depreciation of property, plant and equipment is calculated to write off the cost of acquisition over the expected useful economic lives using the straight line method and over the following number of years: Leasehold improvements - Unexpired term of lease Office furniture Office equipment Computer equipment - 4 years - 4 years - 2 years Ownership of property, plant and equipment held under asset finance arrangement reverts to the Group at the end of the arrangement and therefore such assets are depreciated over the same useful economic lives as assets not held under such arrangements. 48 46 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 47 Aukett Swanke Group Plc | annual report and accounts 2014 Provisions Provisions are recognised when a present obligation has arisen as a result of a past event which it is probable will result in an outflow of economic benefits that can be reliably estimated. Where the effect of the time value of money is material, the provision is based on the present value of future outflows, discounted at the pre tax discount rate that reflects the risks specific to the liability. Post retirement benefits Costs in respect of defined contribution pension arrangements are charged to the income statement on an accruals basis in line with the amounts payable in respect of the accounting period. The Group has no defined benefit pension arrangements. Revenue recognition Revenue represents the value of services performed for customers under contract (excluding value added taxes). Revenue from contracts is assessed on an individual basis with revenue earned being ascertained based on the stage of completion of the contract which is estimated using a combination of the milestones in the contract and the proportion of total time expected to be required to undertake the contract which had been performed. The amount by which revenue exceeds progress billings is classified as amounts due from customers for contract work and included in trade and other receivables. To the extent progress billings exceed relevant revenue, the excess is classified as advances received from customers for contract work and included in trade and other payables. Revenue is only recognised when there is a contractual right to consideration and any revenue earned can be estimated reliably. Variations in contract work, claims and incentive payments are only recognised when it is probable they will result in revenue and they are capable of being measured reliably. Share based payments The Group has issued share options to certain employees, in return for which the Group receives services from those employees. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted including any market performance conditions (for example the Company’s share price) but excluding the impact of any service or non market performance vesting conditions (for example the requirement of the grantee to remain an employee of the Group). Non market vesting conditions are included in the assumptions regarding the number of options that are expected to vest. The total expense is recognised over the vesting period. At the end of each period the Group revises its estimates of the number of options expected to vest based on the non market vesting conditions. it recognises the impact of any revision in the income statement with a corresponding adjustment to equity. The grant by the Company of options over its shares to employees of subsidiary undertakings is treated as a capital contribution. The fair value of employee services received is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity. Trade receivables Trade receivables are amounts due from clients for services provided in the ordinary course of business and are stated net of any provision for impairment. An allowance for impairment of trade receivables is established when there are indicators suggesting that it is uncertain whether all the amounts due will be collectable. Known significant financial difficulties of the client and lengthy delinquency in receipt of payments are considered indicators that a trade receivable may be impaired. Where a trade receivable is considered impaired the carrying amount is reduced using an allowance and the amount of the loss is recognised in the income statement within other operating expenses. 2 Accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. in preparing the financial statements, the directors make estimates and assumptions concerning the future. The resulting accounting estimates, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are considered to be: Recognition of contractual revenue Revenue from contracts is assessed on an individual basis with revenue earned being ascertained based on the stage of completion of the contract which is estimated using a combination of the milestones in the contract and the proportion of total time expected to be required to undertake the contract which had been performed. Estimates of the total time expected to be required to undertake the contracts are made on a regular basis and subject to management review. These estimates may differ from the actual results due to a variety of factors such as efficiency of working, accuracy of assessment of progress to date and client decision making. The amount by which revenue exceeds progress billing is shown as amounts due from customers for contract work in note 18. The amount by which progress billing exceeds revenue is shown as advances received from customers for contract work in note 19. impairment of trade receivables The Group provides architectural, interior design and related services to a wide variety of clients including property developers, owner occupiers and governmental organisations, both in the United Kingdom and overseas. The Group endeavours to undertake work only for clients who have the financial strength to complete projects but even so, much property development is financed by funds not unconditionally committed at the commencement of the project. Problems with financing can on occasion unfortunately lead to clients being unable to pay their debts either on a temporary or more permanent basis. The Group monitors receipts from clients closely and undertakes a range of actions if there are indications a client is experiencing funding problems. The Group makes impairment allowances if it is considered there is a significant risk of non payment. The factors assessed when considering an impairment allowance include the ownership of the development site, the general financial strength of the client, likely use / demand for the completed project, and the length of time likely to be necessary to resolve the funding problems. The Group strives to maintain good relations with clients, but on occasions disputes do arise with clients requiring litigation to recover outstanding monies. in such circumstances, the directors carefully consider the individual facts relating to each case (such as strength of the legal arguments and financial strength of the client) when deciding the level of any impairment allowance. Further quantitative information concerning trade receivables is shown in note 30. Impairment of goodwill Details of the impairment reviews undertaken in respect of the carrying value of goodwill are given in note 12. Recoverability of deferred tax assets As shown in note 23, the Group has recognised some deferred tax assets as recoverable, principally in the United Kingdom relating to historic trading losses. These trading losses arose during the three years ended 30 September 2011 as a result of the impact of the difficult economic environment on the business. As part of the business combination as shown in note 23 further tax losses were acquired in the United Kingdom. These trading losses arose during the years ended 31 December 2011 and 31 December 2012. As shown in note 3, the United Kingdom operation has returned to profitability and generated significant profits in 2013 and 2014 which has already led to the recovery of a large proportion of the deferred tax assets in the pre acquisition, former Aukett Fitzroy Robinson UK, operations. it is expected with further underlying cost savings emerging as a result of the merger that the acquired losses will be utilised in the near future The length of time taken to generate sufficient taxable profits to fully utilise these trading losses is primarily dependent on the profile of the recovery of the property development market. in combination with the goodwill impairment review described in note 12, forecasts have been prepared of the projected utilisation of these trading losses. Historically the property development market has both declined more swiftly and recovered more sharply than the economy as a whole, however for the purposes of these forecasts the directors have prudently assumed that further recovery is slower and steadier than past property cycles. Based on these forecasts the directors believe that it is probable that the remaining recognised deferred tax assets will be recoverable. Potential deferred tax assets in jurisdictions where the directors believe that it is not probable that they will be recoverable through future taxable profits have not been recognised. As noted in note 23, the directors have prudently not recognised any deferred tax assets in the pre acquisition Russian operation. Recognition of fee claim revenue The nature of the project work undertaken by the Group means sometimes the scale and scope of a project increases after work has commenced. Subsequent changes to the scale and scope of the work may require negotiation with the clients for variations. Advance agreement of the quantum of variation fees is not always possible, in particular when the timescale for project completion is changing or where the cost of variations cannot be determined until the work has been undertaken. in such circumstances the revenue recognised is limited to the amounts considered both probably recoverable, and capable of reliable measurement, taking into account all the relevant circumstances of the individual project and client. 48 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 49 3 Operating segments The Group comprises a single business segment and five separately reportable geographical segments (together with a Group costs segment). Geographical segments are based on the location of the operation undertaking each project. The Group’s associate and joint ventures are all based in Continental Europe. Income statement segment information Segment revenue United Kingdom Russia Turkey Middle East Continental Europe Revenue Segment revenue less sub consultant costs United Kingdom Russia Turkey Middle East Continental Europe Revenue less sub consultant costs 2014 £’000 13,882 1,598 853 993 - 17,326 2014 £’000 12,779 774 687 492 - 14,732 All of the Group’s revenue relates to the value of services performed for customers under construction type contracts. Segment net finance expense United Kingdom Russia Turkey Middle East Continental Europe Group costs Net finance expense Segment depreciation United Kingdom Russia Turkey Middle East Continental Europe Depreciation 2014 £’000 (17) - - - - (1) (18) 2014 £’000 226 19 12 2 - 259 2013 £’000 6,160 1,875 - 371 - 8,406 2013 £’000 6,083 781 - 252 - 7,116 2013 £’000 (12) - - - - (1) (13) 2013 £’000 138 10 - 1 - 149 Segment amortisation United Kingdom Russia Turkey Middle East Continental Europe Amortisation 2014 Segment result United Kingdom Russia Turkey Middle East Continental Europe Group costs Profit before tax 2013 Segment result United Kingdom Russia Middle East Continental Europe Group costs Profit before tax Statement of financial position segment information Segment assets United Kingdom Russia Turkey Middle East Continental Europe Trade receivables and amounts due from customers for contract work Other current assets Non current assets Total assets 2014 £’000 20 1 61 - - 82 Goodwill impairment £’000 - (125) - - - - (125) Before goodwill impairment £’000 1,815 (350) 90 14 354 (398) 1,525 Before goodwill impairment £’000 Goodwill impairment £’000 961 (270) (132) 260 (144) 675 - (125) - - - (125) 2014 £’000 4,073 236 194 336 - 4,839 3,431 3,742 12,012 2013 £’000 - - - - - - Total £’000 1,815 (475) 90 14 354 (398) 1,400 Total £’000 961 (395) (132) 260 (144) 550 2013 £’000 2,399 396 - 150 - 2,945 2,030 2,378 7,353 50 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 51 Geographical areas Revenue United Kingdom Country of domicile Russia Turkey United Arab Emirates Foreign countries Revenue Non current assets United Kingdom Country of domicile Russia Czech Republic Germany Turkey United Arab Emirates Foreign countries Non current assets excluding deferred tax Deferred tax Non current assets 2014 £’000 13,882 13,882 1,598 853 993 3,444 17,326 2014 £’000 2,675 2,675 64 7 368 336 2 777 3,452 290 3,742 Major clients During the year ended 30 September 2014 the Group derived 10% or more of its revenues from 1 (2013: 1) client. Largest client revenues 2014 £’000 2,346 2013 £’000 6,160 6,160 1,875 - 371 2,246 8,406 2013 £’000 1,554 1,554 139 8 221 - 2 370 1,924 454 2,378 2013 £’000 1,400 The largest client revenues for 2014 relate to the United Kingdom operating segment and for 2013 related to the Russian operating segment. Revenue by project site The geographical split of revenue based on the location of project sites was: United Kingdom Russia Turkey Middle East Continental Europe Rest of the World Revenue 2014 £’000 12,267 1,921 884 1,744 183 327 17,326 2013 £’000 6,114 1,875 - 408 9 - 8,406 4 Finance income Receivable on bank deposits Other finance income Total finance income 5 Finance costs Payable on bank loans and overdrafts Other finance costs Total finance costs 2014 £’000 - - - 2014 £’000 21 (3) 18 2013 £’000 - 1 1 2013 £’000 11 3 14 6 Auditor remuneration During the year the Group incurred the following costs in relation to the Company’s auditor and associates of the Company’s auditor: Fees payable to the Company’s auditor for the audit of the Company’s annual accounts Fees payable to the Company’s auditor and its associates for other services Audit of the Company’s subsidiaries pursuant to legislation Non audit services – corporate finance advisory 2014 £’000 37 91 30 2013 £’000 24 50 - The figures presented above are for Aukett Swanke Group Plc and its subsidiaries as if they were a single entity. Aukett Swanke Group Plc has taken the exemption permitted by United Kingdom Statutory instrument 2008/489 to omit information about its individual accounts. 7 Employee information The average number of persons employed by the Group during the year was as follows: Technical Administrative Total 2014 Number 173 45 218 2013 Number 81 23 104 in addition to the number of staff disclosed above, the Group’s associate and joint ventures employed an average of 71 persons (2013: 60 persons). The costs of the persons employed by the Group during the year were: Wages and salaries Social security costs Contributions to defined contribution pension arrangements Total including discontinued operation The wages and salaries costs above include £9,000 of restructuring costs (2013: £52,000). 2014 £’000 7,336 842 267 8,445 2013 £’000 3,707 407 87 4,201 52 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 53 The Group contributes to defined contribution pension arrangements for its employees both in the UK and overseas. The assets of these arrangements are held by financial institutions entirely separately from those of the Group. The Group’s Turkish subsidiary is required to pay termination indemnities to each employee who completes one year of service and whose employment is terminated upon causes that qualify the employees to receive termination indemnity payments. 8 Operating leases The operating lease payments recognised as an expense during the year were: Property Plant and equipment Total 2014 £’000 1,109 22 1,131 2013 £’000 622 12 634 9 Directors’ emoluments Under the terms of the acquisition one director waived salary during the year of £4,000. in the prior year three directors waived salary in response to market conditions totalling £68,000. 2014 Andrew Murdoch Anthony Simmonds Beverley Wright David Hughes Duncan Harper John Bullough John Vincent Nicholas Thompson Nick Pell Total Aggregate emoluments £’000 Pension contributions £’000 Total received £’000 Waived £’000 Total entitlement £’000 117 37 7 133 110 10 40 223 84 761 13 - 1 1 15 - 4 28 1 63 130 37 8 134 125 10 44 251 85 824 - - - - - - - - 4 4 130 37 8 134 125 10 44 251 89 828 Beverley Wright was appointed 15 September 2014 Duncan Harper resigned on 10 October 2014 John Vincent retired on 27 March 2014 John Bullough was appointed 2 June 2014 David Hughes and Nick Pell were appointed 18 December 2013 Andrew Murdoch was appointed 10 December 2013 2013 Anthony Simmonds Duncan Harper John Vincent Nicholas Thompson Total Aggregate emoluments £’000 Pension contributions £’000 Total received £’000 Waived £’000 Total entitlement £’000 30 88 52 164 334 - 25 3 7 35 30 113 55 171 369 - 23 13 32 68 30 136 68 203 437 Aggregate emoluments include bonuses awarded. Benefits were accruing to seven executive directors (2013: three executive directors) under defined contribution pension arrangements. The aggregate emoluments of the highest paid director were £223,000 (2013: £164,000). 10 Tax charge Current tax Adjustment in respect of previous years Total current tax Origination and reversal of temporary differences Changes in tax rates Total deferred tax (note 23) Total tax charge 2014 £’000 100 - 100 275 (21) 254 354 2013 £’000 (29) - (29) 147 58 205 176 The standard rate of corporation tax in the United Kingdom reduced from 24% to 23% in April 2013 and from 23% to 21% in April 2014. it will reduce further to 20% in April 2015. The tax assessed for the year differs from the United Kingdom standard rate as explained below: Profit before tax Profit before tax multiplied by the standard rate of corporation tax in the United Kingdom of 22% (2013: 23.5%) Effects of: Non tax deductible goodwill impairment Other non tax deductible expenses Differences in overseas tax rates Associate and joint ventures reported net of tax impact on deferred tax of change in UK tax rate Tax losses not recognised Utilisation of previously unrecognised tax losses Current tax adjustment in respect of previous years Deferred tax adjustment in respect of previous years Total tax charge 11 Earnings per share The calculations of basic and diluted earnings per share are based on the following data: Earnings Continuing operations Profit for the year Number of shares Weighted average of Ordinary Shares in issue Effect of dilutive options Diluted weighted average of ordinary shares in issue 2014 £’000 1,400 308 28 72 (4) (78) (20) 77 (29) - - 354 2014 £’000 1,046 1,046 2013 £’000 550 129 29 29 (7) (62) 58 - - - - 176 2013 £’000 374 374 2014 Number 161,026,436 463,370 161,489,806 2013 Number 145,618,693 - 145,618,693 As explained in note 26 the Company has granted options over 1,500,000 of its Ordinary Shares. These have been included above as the average share price was above the exercise price in 2014 and they therefore have a dilutive effect. 54 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 55 in these circumstances an indicator of impairment was present and the directors duly recognised an impairment charge of £125,000 representing the remaining 50% of the goodwill previously allocated to the Group’s pre acquisition Russian operation. The goodwill allocated to the pre acquisition Russian operation is now fully impaired. The residual goodwill in Russia arose on the acquisition of SHCE in the year. A 22% discount rate (2013: 22%) has been used in the impairment test reflecting the inherently higher risks considered to affect the Russian operation. This impairment charge is included within other operating expenses in the income statement. 13 Other intangible assets Group Cost At 30 September 2012 Additions Exchange differences At 30 September 2013 Acquisition of subsidiary (note 35) Exchange differences At 30 September 2014 Amortisation At 30 September 2012 Charge Exchange differences At 30 September 2013 Charge Exchange differences At 30 September 2014 Net book value At 30 September 2014 At 30 September 2013 At 30 September 2012 Trade name £’000 Customer relationships £’000 Order book £’000 Total £’000 - - - - - 415 (13) 402 - - - - 13 - 13 389 - - - - - - - 249 (15) 234 - - - - 29 - 29 205 - - - - - - - 40 (4) 36 - - - - 40 (4) 36 - - - - - - - - 704 (32) 672 - - - - 82 (4) 78 594 - - Amortisation is included in other operating charges in the consolidated income statement. 12 Goodwill Group Cost At 1 October 2012 At 30 September 2013 Acquisition of subsidiary (note 35) Exchange differences At 30 September 2014 impairment At 30 September 2013 Charge At 30 September 2014 Net book value At 30 September 2014 At 30 September 2013 At 30 September 2012 The net book value of goodwill is allocated to the Group’s cash generating units as follows: At 30 September 2012 Additions impairment At 30 September 2013 Acquisition of subsidiary impairment At 30 September 2014 United Kingdom £’000 1,244 - - 1,244 496 - 1,740 Russia £’000 250 - (125) 125 25 (125) 25 Turkey £’000 - - - - 70 - 70 £’000 1,494 1,494 605 (14) 2,085 125 125 250 1,835 1,369 1,494 Total £’000 1,494 - (125) 1,369 591 (125) 1,835 The goodwill allocated to each cash generating unit is tested annually for impairment. The recoverable amount of a cash generating unit is determined based on value in use calculations. These calculations use pre tax cash flow projections based on financial budgets and forecasts covering a five year period. Cash flows beyond the five year period are extrapolated using long term average growth rates. The carrying value of goodwill allocated to the United Kingdom is significant in comparison with the total carrying value of goodwill but the carrying value of goodwill allocated to Russia and Turkey is not. The key assumptions in the discounted cash flow projections for the United Kingdom operation are: • • • • The future level of revenue - which is based on knowledge of past property development cycles and external forecasts such as the construction forecasts published by Experian. Historically the property development market has both declined more swiftly and recovered more sharply than the economy as a whole. The future level of costs – which is based on the expected variability with revenue of the various types of expenditure incurred, and in particularly the average revenue earning capacity of members of staff. These assumptions are based on historical experience and an assessment of the current cost base; Long term growth rate – which has been assumed to be 2.4% per annum based on the average historical growth in gross domestic product in the United Kingdom over the past fifty years; and The discount rate – which is the Group’s pre tax weighted average cost of capital and has been assessed at 19% (2013: 16%). This is considered appropriate as the United Kingdom operation produces the majority of the Group’s revenue less sub consultant costs. As explained in the strategic report, the recent financial performance of the Group’s Russian operation has been below management expectations. The operation has been unable to secure sufficient work for the past year to cover its operating costs. The acquisition of Swanke Hayden Connell’s Russian segment and the merger of the two studios into one single studio at the end of the year ended 30 September 2014 is, however, expected to produce significant cost savings. 56 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 57 14 Property, plant and equipment Group Cost At 30 September 2012 Additions Disposal of subsidiary Other disposals Exchange differences At 30 September 2013 Additions Acquisition of subsidiary (note 35) Disposals Exchange differences At 30 September 2014 Depreciation At 30 September 2012 Charge Disposal of subsidiary Other disposals Exchange differences At 30 September 2013 Charge Disposals Exchange differences At 30 September 2014 Net book value At 30 September 2014 At 30 September 2013 At 30 September 2012 Leasehold improvements £’000 Furniture and equipment £’000 317 - - - - 317 241 16 (184) (8) 382 129 32 - - - 161 67 (177) (11) 40 342 156 188 746 157 - (84) (3) 816 282 53 (231) (47) 873 615 117 - (84) (2) 646 192 (231) (40) 567 306 170 131 Total £’000 1,063 157 - (84) (3) 1,133 523 69 (415) (55) 1,255 744 149 - (84) (2) 807 259 (408) (51) 607 648 326 319 15 Investments Company Cost At 30 September 2012 Additions Disposals At 30 September 2013 Additions Disposals At 30 September 2014 Provisions At 30 September 2012 Charge At 30 September 2013 Charge At 30 September 2014 Net book value At 30 September 2014 At 30 September 2013 At 30 September 2012 Subsidiaries £’000 Joint ventures £’000 Associate £’000 4,532 818 - 5,350 1,581 - 6,931 2,872 160 3,032 465 3,497 3,434 2,318 1,660 21 - - 21 - - 21 - - - - - 21 21 21 12 - - 12 - - 12 - - - - - 12 12 12 Total £’000 4,565 818 - 5,383 1,581 - 6,964 2,872 160 3,032 465 3,497 3,467 2,351 1,693 The impairment charge of £465,000 recognised during the year relates to the Company’s investment in ZAO Aukett Fitzroy Vostok where, as a result of the matters described in note 12, the value of that subsidiary is considered to have suffered a permanent diminution. Principal operations The principal operations at 30 September 2014, all of whom provide architectural and design services, were as follows: Name Subsidiaries Aukett Fitzroy Robinson Limited Fitzroy Robinson Limited Aukett Fitzroy Robinson international Limited Veretec Limited ZAO Aukett Fitzroy Vostok Swanke Hayden Connell Europe Limited Swanke Hayden Connell international Limited Swanke Hayden Connell Mimarlik AS Joint ventures Aukett + Heese Frankfurt GmbH Aukett sro Associate Aukett + Heese GmbH Country of Incorporation Class and proportion of shares held England & Wales England & Wales England & Wales England & Wales Russia England & Wales England & Wales Turkey Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Germany Czech Republic Ordinary 50% Ordinary 50% Germany Ordinary 25% 58 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 59 All the principal operations other than Swanke Hayden Connell international Limited and Swanke Hayden Connell Mimarlik A.S. are owned directly by the Company. Although Aukett Fitzroy Robinson international Limited is incorporated in England & Wales, it operates principally through its Middle East branch which is registered in the Abu Dhabi Emirate of the United Arab Emirates. Investments in joint ventures 17 Frankfurt As disclosed in note 15, the Group owns 50% of Aukett + Heese Frankfurt GmbH which is based in Frankfurt. Investment in associate 16 As disclosed in note 15, the Group owns 25% of Aukett + Heese GmbH which is based in Berlin. At 30 September 2012 Share of profits Dividends paid Exchange differences At 30 September 2013 Share of profits Dividends paid Exchange differences At 30 September 2014 £’000 157 234 (210) 9 190 254 (184) (16) 244 The following amounts represent the Group’s 25% share of the assets and liabilities, and revenue and profits of Aukett + Heese GmbH. Assets Liabilities Net assets Revenue Sub consultant costs Revenue less sub consultant costs Operating costs Profit before tax Taxation Profit after tax 2014 £’000 625 (381) 244 2014 £’000 1,473 (389) 1,084 (720) 364 (110) 254 2013 £’000 560 (370) 190 2013 £’000 1,355 (331) 1,024 (689) 335 (101) 234 At 1 October 2012 Share of profits Exchange differences At 30 September 2013 Share of profits Exchange differences At 30 September 2014 £’000 7 24 - 31 101 (8) 124 The following amounts represent the Group’s 50% share of the assets and liabilities, and revenue and expenses of Aukett + Heese Frankfurt GmbH. Assets Non current assets Current assets Total assets Liabilities Current liabilities Non current liabilities Total liabilities Net assets Revenue Sub consultant costs Revenue less sub consultant costs Operating costs Profit before tax Taxation Profit after tax 2014 £’000 15 360 375 (251) - (251) 124 2014 £’000 718 (263) 455 (309) 146 (45) 101 2013 £’000 3 153 156 (125) - (125) 31 2013 £’000 261 (13) 248 (219) 29 (5) 24 60 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 61 Prague As disclosed in note 15, the Group owns 50% of Aukett sro which is based in Prague. At 1 October 2012 Share of profits Exchange differences At 30 September 2013 Share of profits Exchange differences At 30 September 2014 £’000 2 6 - 8 (1) - 7 The following amounts represent the Group’s 50% share of the assets and liabilities of Aukett sro. 2014 £’000 2013 £’000 Assets Non current assets Current assets Total assets Liabilities Current liabilities Non current liabilities Total liabilities Net assets Revenue Sub consultant costs Revenue less sub consultant costs Operating costs Profit before tax Taxation Profit after tax 1 58 59 (52) - (52) 7 2014 £’000 206 (55) 151 (152) (1) - (1) - 94 94 (86) - (86) 8 2013 £’000 209 (55) 154 (148) 6 - 6 18 Trade and other receivables Group Gross trade receivables impairment allowances Net trade receivables Amounts due from customers for contract work Amounts owed by associate and joint ventures Other receivables Prepayments Total Company Amounts due after more than one year Amounts owed by subsidiaries Amounts owed by associate and joint ventures Total amounts due after more than one year Amounts due within one year Other receivables Prepayments Total amounts due within one year Total 2014 £’000 4,302 (44) 4,258 581 48 685 807 6,379 2014 £’000 330 48 378 10 23 33 411 2013 £’000 3,310 (642) 2,668 277 113 211 246 3,515 2013 £’000 829 113 942 10 7 17 959 The amounts owed by subsidiaries were secured in January 2013 by debentures over all the assets of the relevant subsidiaries. These debentures rank after the debentures securing the bank loan and overdraft. 19 Trade and other payables Group Trade payables Advances received from customers for contract work Amounts due to associate and joint ventures Other taxation and social security Other payables Accruals Deferred income Total Company Trade payables Amounts owed to subsidiaries Other payables Accruals Total 2014 £’000 808 2,472 31 921 207 2,101 - 6,540 2014 £’000 22 1,497 2 160 1,681 2013 £’000 361 2,065 - 614 32 933 - 4,005 2013 £’000 9 1,740 1 105 1,855 62 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 63 20 Borrowings Group Short term borrowings Secured bank overdraft Secured bank loan (note 21) Total The secured bank overdraft is repayable on demand. Long term borrowings Secured bank loan (note 21) Total 21 Secured bank loan Group instalments repayable within one year Current liability instalments repayable between one and two years instalments repayable between two and five years Non current liability Total 2014 £’000 - 113 113 2014 £’000 - - 2014 £’000 113 113 - - - 113 2013 £’000 - 150 150 2013 £’000 113 113 2013 £’000 150 150 113 - 113 263 The bank loan and overdraft are secured by debentures over all the assets of the Company and certain of its United Kingdom subsidiaries. The bank loan and overdraft carry interest at 2.5% above the United Kingdom bank base rate. 22 Analysis of net funds Group Cash and cash equivalents Secured bank overdraft Cash, cash equivalents and bank overdraft Secured bank loan (note 21) Net funds 2014 £’000 1,891 - 1,891 (113) 1,778 2013 £’000 1,343 - 1,343 (263) 1,080 23 Deferred tax Group At 30 September 2012 income statement Exchange differences At 30 September 2013 Acquisition of subsidiary income statement Exchange differences At 30 September 2014 Group Deferred tax assets Deferred tax liabilities Net deferred tax balance Tax depreciation on plant and equipment £’000 Trading losses £’000 Unremitted overseas earnings £’000 Other temporary differences £’000 31 16 - 47 83 (65) - 65 586 (227) (2) 357 64 (190) (6) 225 (19) 13 - (6) - 6 - - 57 (7) - 50 (120) (5) 4 (71) 2014 £’000 290 (71) 219 Total £’000 655 (205) (2) 448 27 (254) (2) 219 2013 £’000 454 (6) 448 Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets of £77,000 (2013: £Nil) in respect of losses amounting to £385,000 (2013: £Nil) that can be carried forward against future taxable income in its pre acquisition Russian operation. Further information regarding the assessment of the recoverability of deferred tax assets is given in note 2. The Company has no deferred tax assets or liabilities. 24 Provisions Group At 1 October 2012 Utilised Released Provided Exchange differences At 30 September 2013 On acquisition of subsidiary Utilised Released Provided Exchange differences At 30 September 2014 Redundancy provision £’000 Property lease provision £’000 Employee benefit obligations £’000 21 (6) (15) - - - - - - 7 - 7 300 (300) - 50 - 50 259 (246) (11) - - 52 - - - - - - 33 - - 12 - 45 Total £’000 321 (306) (15) 50 - 50 292 (246) (11) 19 - 104 Redundancy provision The redundancy provision relates to the expected costs of reducing staff numbers to better match staffing resources with projected workload. The provision arises from obligations contained in employment contracts and statutory obligations. 64 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 65 Property lease provision During 2012 one of the Group’s subsidiaries received a claim from its former landlord in respect of former leased premises. This claim comprised a number of separate, but related and potentially interdependent elements, including various repairs and replacements (dilapidations), professional fees, loss of rent, interest and costs. in March 2013 the subsidiary reached a court approved full and final settlement with its former landlord of £350,000. Of this settlement amount £50,000 was deferred and paid in October 2013. The provision arises from obligations contained in former property lease agreements. During the year, on the acquisition of SHCE, refurbishment work was undertaken in respect of the subsidiaries’ occupation of the second floor of their London premises. This resulted in the utilisation of the brought forward provision for this floor of £196,000, with the remainder of the provision of £11,000 recognised for the second floor released to the profit and loss statement. The provision carried forward at 30 September 2014 is the future estimated cost of work to be performed after seeking appropriate external professional advice for the ground and first floor of its London premises, on obligations arising under the lease. Employee benefit obligations The Group’s Turkish subsidiary is required to pay termination indemnities to each employee who completes one year of service and whose employment is terminated upon causes that qualify the employees to receive termination indemnity. The liability has been measured in line with iAS 19. 25 Share capital Group and Company Allocated, called up and fully paid 165,213,652 (2013: 145,618,693) Ordinary Shares of 1p each 2014 £’000 1,652 At 1 October 2012 No changes At 30 September 2013 issue of Ordinary Shares related to business combination At 30 September 2014 The objectives, policies and processes for managing capital are outlined in the strategic report. 26 Share options The Company has granted options over its Ordinary Shares to Group employees as follows: 2013 £’000 1,456 Number 145,618,693 - 145,618,693 19,594,959 165,213,652 Granted 11 April 2011 Total At 1 October 2013 Number 1,500,000 1,500,000 At 30 September 2014 Number 1,500,000 1,500,000 Granted Number - - Exercise price Pence Earliest exercisable date Latest exercisable date 5.00 12 April 2013 11 April 2017 The share options were granted on 11 April 2011 and vest after two years’ service. They are exercisable between two and six years after grant. Of the 1,500,000 options granted, 500,000 relate to Duncan Harper who resigned as a Director on 10 October 2014. The 500,000 share options initially granted lapsed and are no longer exercisable. The fair value of these share options has been estimated at £14,000 using the Black-Scholes option pricing models model with the following inputs: Input Share price at date of grant Exercise price Expected option life Expected volatility Expected dividends Risk free interest rate The expected volatility was estimated based on the historical volatility over the three years prior to grant. 27 Cash generated from operations Group Profit before tax – continuing operations Currency translation differences recycled Share based payment value of employee services Finance income Finance costs Share of results of associate and joint ventures Goodwill impairment provision / write off intangible amortisation Depreciation Profit on disposal of property, plant and equipment Change in trade and other receivables Change in trade and other payables Change in provisions Net cash generated from operations Company Profit / (loss) before income tax Dividends received Provision against investment in subsidiary Change in trade and other receivables Change in trade and other payables Net cash generated (used by) / from operations 2014 £’000 1,400 - - - 18 (354) 125 82 259 (4) (604) 676 (238) 1,360 2014 £’000 163 (1,166) 465 270 104 (164) Value 3.00 pence 5.00 pence 4 years 55% Nil 2.65% 2013 £’000 550 1 4 (1) 14 (264) 125 - 149 (4) (1,022) 1,365 (271) 646 2013 £’000 (587) (210) 160 728 723 814 66 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 67 28 Financial instruments Risk management The Company and the Group hold financial instruments principally to finance their operations or as a direct consequence of their business activities. The principal risks considered to arise from financial instruments are foreign currency risk and interest rate risk (market risks), counterparty risk (credit risk) and liquidity risk. Neither the Company nor the Group trade in financial instruments. Categories of financial assets and liabilities Group Trade receivables Amounts due from customers for contract work Amounts owed by associate and joint ventures Other receivables Cash and cash equivalents Loans and receivables Trade payables Other payables Amounts due to associate and joint ventures Accruals Secured bank loan Provisions Financial liabilities measured at amortised cost Net financial instruments Company Amounts owed by subsidiaries Amount owed by associate & joint ventures Other receivables Cash and cash equivalents Loans and receivables Trade payables Amounts owed to subsidiaries Other payables Accruals Financial liabilities measured at amortised cost Net financial instruments 2014 £’000 4,258 581 48 685 1,891 7,463 (808) (207) (31) (2,010) (113) (104) (3,273) 4,190 2014 £’000 330 48 10 916 1,304 (22) (1,497) (2) (160) (1,681) (377) 2013 £’000 2,668 277 113 211 1,343 4,612 (361) (32) - (933) (263) (50) (1,639) 2,973 2013 £’000 829 113 10 414 1,366 (9) (1,740) (1) (105) (1,855) (489) The directors consider that there were no material differences between the carrying values and the fair values of all the Company’s and all the Group’s financial assets and financial liabilities at each year end based on the expected future cash flows. Collateral As disclosed in note 21 the bank loan and overdraft are secured by a debenture over all the present and future assets of the Company and certain of its United Kingdom subsidiaries. The carrying amount of the financial assets covered by this debenture were: Group Company 2014 £’000 13,011 1,625 2013 £’000 7,019 1,417 Other receivables in the consolidated Statement of Financial Position include a £148,000 rent security deposit (2013: £148,000) in respect of one of the Group’s London studio premises and a £44,000 rent deposit (2013: £31,000) in respect of the Group’s Moscow studio premises. 29 Foreign currency risk The Group’s operations seek to contract with customers and suppliers in their own functional currencies to minimise exposure to foreign currency risk, however, for commercial reasons contracts are occasionally entered into in foreign currencies. Where contracts are denominated in other currencies the Group usually seeks to minimise net foreign currency exposure from recognised project related assets and liabilities by using foreign currency denominated overdrafts. The Group does not hedge future revenues from contracts denominated in other currencies due to the rights of clients to suspend or cancel projects. The Board has taken a decision not to hedge the net assets of the Group’s overseas operations. The denomination of financial instruments by currency was: Group Czech Koruna EU Euro Polish Zloty Russian Rouble UAE Dirham UK Sterling US Dollar Turkish Lira Other Net financial instruments Company Czech Koruna EU Euro UK Sterling US Dollar Net financial instruments 2014 £’000 48 (6) (25) 244 461 3,580 (151) 39 - 4,190 2014 £’000 48 18 (403) (40) (377) 2013 £’000 67 (4) (33) 180 101 2,436 226 - - 2,973 2013 £’000 67 (2) (556) 2 (489) A 10% weakening of UK sterling against all currencies at 30 September would have increased / (decreased) equity by the amounts shown below. This analysis is applied currency by currency in isolation (i.e. ignoring the impact of currency correlation and assumes that all other variables, in particular interest rates, remain consistent). A 10% strengthening of UK sterling against all currencies would have an equal but opposite effect. Group Company Profit £’000 56 3 2014 Equity £’000 13 - Profit £’000 49 7 2013 Equity £’000 3 - The following foreign exchange (losses) / gains arising from financial assets and financial liabilities have been recognised in the income statement: Group Company 2014 £’000 (13) (10) 2013 £’000 (6) 7 The Group’s exchange loss of 13,000 (2013: loss of £6,000) includes cumulative exchange reserve losses of £Nil (2013: gains £1,000) recycled through the income statement on discontinued operations. 68 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 69 30 Counterparty risk Group No collateral is held in respect of any financial assets and therefore the maximum exposure to credit risk at the date of the statement of financial position is the carrying value of financial assets shown in note 28. Counterparty risk is only considered significant in relation to trade receivables, amounts due from customers for contract work, other receivables and cash and cash equivalents. The ageing of trade receivables against which no impairment allowance has been made, as the directors consider their recovery is probable, was: Not overdue Between 0 and 30 days overdue Between 30 and 60 days overdue Greater than 60 days overdue Total The movement on impairment allowances for trade receivables was as follows: 2014 £’000 2,259 776 353 870 4,258 At 1 October 2012 Release to the income statement Allowance utilised Exchange differences At 30 September 2013 Acquisition of subsidiary Release to the income statement Allowance utilised Exchange differences At 30 September 2014 2013 £’000 1,495 559 427 187 2,668 £’000 654 (11) - (1) 642 3 (57) (541) (3) 44 All of the trade receivables considered to be impaired were greater than 90 days overdue. The processes undertaken when considering whether a trade receivable may be impaired are set out in note 2. All amounts overdue have been individually considered for any indications of impairment and provision for impairment made where considered appropriate. The concentration of counterparty risk within the £4,839,000 (2013: £2,945,000) of trade receivables and amounts due from customers for contract work is illustrated in the table below showing the three largest exposures to individual clients at 30 September. Largest exposure Second largest exposure Third largest exposure 2014 £’000 932 612 309 2013 £’000 493 352 240 The Group’s principal banker is Coutts & Co, a member of the Royal Bank of Scotland group. At 30 September 2014 the largest exposure to a single financial institution represented 69% (2013: 88%) of the Group’s cash and cash equivalents. Company The Company does not have any trade receivables or amounts due from customers for contract work. The amounts owed by subsidiaries were secured in January 2013 by debentures over all the assets of the relevant subsidiaries. These debentures rank after the debentures securing the bank loan and overdraft. Prior to this all amounts owed by subsidiaries and by associate and joint ventures were unsecured. The amounts owed by associate and joint ventures remain unsecured. All of the Company’s cash and cash equivalents are held by Coutts & Co. The Company is exposed to counterparty risk though the guarantees set out in note 33. 31 Interest rate risk Group Amounts due from associate and joint ventures Other receivables Secured bank loan interest bearing financial instruments Company Amounts due from associate and joint ventures Secured bank overdraft interest bearing financial instruments 2014 £’000 - 148 (113) 35 2014 £’000 - (43) (43) 2013 £’000 46 148 (263) (69) 2013 £’000 46 (48) (2) The amounts due from associate and joint ventures earn interest at 0.5%. The property rent deposit earns variable rates of interest based on short term inter bank lending rates. Due to the current low levels of worldwide interest rates and Group treasury management requirements, the cash and cash equivalents are in practice currently not interest bearing, and therefore have not been included in interest bearing financial instruments disclosures. The bank loan and overdraft carry interest at 2.5% above the United Kingdom bank base rate. A 1% rise in worldwide interest rates would have the following impact on profit, assuming that all other variables, in particular the interest bearing balance remain constant. A 1% fall in worldwide interest rates would have an equal but opposite effect. Group Company 2014 £’000 1 (1) 2013 £’000 (1) - 32 Liquidity risk All of the Group’s and the Company’s financial liabilities mature within one year except for the ten year amortising bank loan which is used to provide long term funding. The maturity profile of the bank loan is shown in note 21. The Group’s cash balances are held at call or on deposit with very short maturity terms. At 30 September 2014 the Group had £750,000 (2013: £750,000) of undrawn borrowing facility under its £750,000 (2013: 750,000) United Kingdom bank overdraft facility. in January 2015 Coutts & Co renewed the £750,000 overdraft facility which is now next due for review in December 2015. The Group repaid its gross borrowing shown below on the 1 October 2014. The maturity analysis of borrowings, including contractual payments of floating rate interest is as shown below: Gross borrowings instalments repayable within one year instalments repayable between one and two years instalments repayable between two and five years Total gross borrowings Expected future finance charges Total net borrowings 2014 £’000 113 - - 113 - 113 2013 £’000 152 118 - 270 (7) 263 33 Guarantees, contingent liabilities and other commitments A cross guarantee and offset agreement is in place between the Company and certain of its United Kingdom subsidiaries in respect of the United Kingdom bank loan and overdraft facility. Details of the UK bank loan are disclosed in note 21. At 30 September 2014 the overdrafts of its United Kingdom subsidiaries guaranteed by the Company totalled £276,000 (2013: £189,000). 70 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 71 The Company and certain of its United Kingdom subsidiaries are members of a group for Value Added Tax (‘VAT’) purposes. At 30 September 2014 the net VAT payable balance of those subsidiaries was £452,000 (2013: £459,000). in common with other firms providing professional services, the Group is subject to the risk of claims of professional negligence from clients. The Group maintains professional indemnity insurance in respect of these risks but is exposed to the cost of excess deductibles on any successful claims. The directors assess each claim and make accruals for excess deductibles where, on the basis of professional advice received, it is considered that a liability is probable. The Group had the following aggregate commitments under operating leases. Not later than one year Later than one year and not later than five years Later than five years Total 2014 £’000 1,137 2,355 - 3,492 2013 £’000 576 1,785 - 2,361 The Group’s most significant lease relates to its two London studio premises which comprises £3,144,000 (2013: £2,254,000) of the amounts shown in the table above. The lease of its York Way studio does not contain any break clauses, expires in July 2018 and had an upwards only rent review in July 2013 which has been agreed post year end. The lease of its Christopher Street studio expires in September 2017. The Company has no operating lease commitments (2013: £Nil). At both 30 September 2014 and 2013 neither the Group nor the Company had any capital commitments in respect of property, plant and equipment. 34 Related party transactions Key management personnel compensation The key management personnel of the Group comprise the Directors of the Company together with the managing directors of the United Kingdom and international operations. Group Short term employee benefits Post employment benefits Total The key management personnel of the Company comprise its Directors. Company Short term employee benefits Post employment benefits Total 2014 £’000 1,403 103 1,506 2014 £’000 862 62 924 2013 £’000 708 41 749 2013 £’000 375 35 410 Transactions and balances with associate and joint ventures The amount owed to the Group by Aukett + Heese Frankfurt GmbH at 30 September 2014 was £Nil (2013: £46,000) relating to loans previously advanced and management charges formerly raised. The movement in the balance during the year relates to payments made to the Group, interest charged and exchange rate movements. The amount owed by the Group from Aukett + Heese Frankfurt GmbH in respect of services rendered was £31,000 (2013: £Nil). The Group makes management charges to Aukett + Heese GmbH. invoices issued by the Group during the year in respect of these services amounted to £60,000 (2013: £60,000). The amount owed to the Group by Aukett + Heese GmbH at 30 September 2014 in respect of these management charges was £Nil (2013: £Nil). As disclosed in note 15, the Group owns 50% of Aukett + Heese Frankfurt GmbH and 25% of Aukett + Heese GmbH. The remaining 50% of Aukett + Heese Frankfurt GmbH and 75% of Aukett + Heese GmbH are owned by Lutz Heese, a former director of the Company. The amount owed to the Group and to the Company by Aukett sro at 30 September 2014 was £48,000 (2013: £67,000) relating to previously declared but not yet paid dividends and name licence charges. The movement in the balance during the year relates to payments made to the Group by Aukett sro together with the name licence charge and exchange rate movements. None of the balances with the associate or joint ventures are secured. Transactions and balances with subsidiaries The names of the Company’s principal subsidiaries are set out in note 15. The Company made management charges to its subsidiaries for management services of £399,000 (2013: £312,000) and paid charges to its subsidiaries for office accommodation and other related services of £60,000 (2013: £60,000). The treasury activities of the Company and its United Kingdom subsidiaries were managed on a consolidated basis by one of those subsidiaries, with funds being transferred to and from that subsidiary as required. At 30 September 2014 the Company was owed £330,000 (2013: £829,000) by its subsidiaries and owed £1,497,000 (2013: £1,740,000) to its subsidiaries. These balances arose through various past transactions including treasury management and management charges. The amounts owed by subsidiaries were secured in January 2013 by debentures over all the assets of the relevant subsidiaries. These debentures rank after the debentures securing the bank loan and overdraft. Prior to this all amounts owed by subsidiaries were unsecured. 35 Business Combination On 18 December 2013 the Group acquired the entire issued share capital of Swanke Hayden Connell Europe Limited, a major group of architects and interior designers with studios in the U.K, Russia and Turkey. The total consideration for the acquisition was £1.6m comprising a cash payment of £209,053 and the balance satisfied by the issue of 19,594,959 new Ordinary Shares at a price of 7.00 pence per share. This acquisition has provided revenue enhancing opportunities in a wider market place and significantly improved the Group’s market position in London and Moscow, as well as affording access to the Turkish market. The goodwill acquired on the acquisition represents the knowledge and experience of the assembled workforce in addition to expected integration savings and economies of scale. The goodwill is not considered deductible for income tax purposes. The below table summarises the consideration paid for Swanke Hayden Connell Europe Limited, the fair value of assets acquired and liabilities assumed at the acquisition date. Consideration at 18 December 2013 Cash Equity instruments (19,594,959 ordinary shares) Total consideration transferred indemnification asset Total consideration Recognised amounts of identifiable assets acquired and liabilities assumed Cash and cash equivalents Property, Plant and Equipment (note 14) Tradename (included in other intangible assets) (note 13) Customer relationships (included in other intangible assets) (note 13) Order book (included in other intangible assets) (note 13) Amounts recoverable on contracts Trade and other receivables Deferred tax assets (note 23) Trade and other payables Provision for liabilities (note 24) Contingent liabilities Deferred tax liabilities (note 23) Total identifiable net assets Goodwill Total £’000 209 1,372 1,581 (110) 1,471 152 69 415 249 40 470 1,863 172 (2,017) (292) (110) (145) 866 605 1,471 72 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 73 Acquisition costs of £91,000 have been charged to other operating charges in the consolidated income statement for the year ended 30 September 2014. A contingent liability of £110,000 has been recognised on acquisition following the Russian tax authorities commencing an audit of the Swanke Hayden Connell international Limited Moscow Branch for the period between January 2010 and December 2012. The tax authorities presented their findings which included a claim for unpaid tax, interest and penalties of RUB5.87m. This claim has been finalised and settled in full in December 2014. The fair value of the liability has changed from the acquisition date only in respect of foreign exchange differences on its revaluation into Sterling. As at 30 September 2014 the liability was £91,000 and has been included in accruals. The selling shareholders of Swanke Hayden Connell Europe Limited have contractually agreed to indemnify Aukett Swanke Group Plc for the above mentioned tax claim. The indemnification asset is deducted from the consideration transferred for the business combination. The fair value of the asset has changed from the acquisition date only in respect of foreign exchange differences on its revaluation into Sterling. The fair values of the acquired identifiable intangibles are based on finalised valuations. The revenue included in the consolidated income statement since 18 December 2013 contributed by Swanke Hayden Connell Europe Limited and subsidiaries was £6,459,755. The revenue less sub consultant costs contributed by Swanke Hayden Connell Europe Limited and subsidiaries over the same period was £4,708,370. The loss before tax contributed over the same period was £15,526. Had Swanke Hayden Connell Europe Limited and subsidiaries been consolidated from 1 October 2013 the consolidated income statement would show pro-forma revenue of £8,182,000 and profit before tax of £48,000. 36 Corporate information General corporate information regarding the Company is shown on page 22. The addresses of the Group’s principal operations are shown on page 5. A description of the Group’s operations and principal activities is given within the Strategic Report. Notice of meeting Notice is hereby given that the Annual General Meeting of the Company will be held at 10:00am on Thursday 26 March 2015 at 25 Christopher Street, London, EC2A 2BS for the following purposes: Ordinary business 1 To receive and adopt the annual report for the year ended 30 September 2014. 2 3 4 5 To re elect Nicholas Thompson as a director. Nicholas Thompson retires by rotation. To elect Beverley Wright as a director. Beverley Wright was appointed after the last Annual General Meeting. To elect John Bullough as a director. John Bullough was appointed after the last Annual General Meeting. To re-appoint BDO LLP as auditors of the Company to hold office, from the conclusion of this meeting until the conclusion of the next general meeting at which accounts are laid before the Company, at a remuneration to be fixed by the directors. Special business 6 That the directors be and are hereby generally and unconditionally authorised for the purposes of section 551 of the Compa- nies Act 2006 (the ‘Act’) to exercise all powers of the Company to allot shares in the Company up to an aggregate nominal amount of £826,068 to such persons and upon such conditions as the directors may determine, such authority to expire at the conclusion of the next annual general meeting of the Company save that the Company may before such expiry make an offer or agreement which would or might require shares in the Company to be allotted after such expiry and the directors may allot shares in the Company in pursuance of such an offer or agreement as if the authority conferred hereby had not expired. 7 That the directors be and are hereby empowered pursuant to section 570 of the Act to allot shares in the Company up to an aggregate nominal amount of £165,214 for cash pursuant to the authority conferred by resolution 6 above as if section 561 of the Act did not apply to such allotment, such authority to expire at the conclusion of the next Annual General Meeting of the Company save that the Company may before such expiry make an offer or agreement which would or might require shares in the Company to be allotted after such expiry and the directors may allot shares in the Company in pursuance of such an offer or agreement as if the authority conferred hereby had not expired. By order of the Board Beverley Wright Company Secretary 28 January 2015 Registered office: 36-40 York Way, London N1 9AB Notes 1 2 Any member entitled to attend and vote at the meeting may appoint another person, whether a member or not, as their proxy to attend and, on a poll, to vote instead of them. A form of proxy is enclosed for this purpose and to be valid must be lodged with the Company’s registrars together with any power of attorney or other authority under which it is signed, not less than 48 hours before the time appointed for the meeting. Completion and return of the form of proxy will not preclude a member from attending and voting at the meeting. in accordance with regulation 41 of Uncertificated Securities Regulations 2001, the Company gives notice that only those shareholders entered on the register of members at 6pm on Tuesday 24 March 2015 (the ‘Specified Time’) will be entitled to attend or vote at the meeting in respect of the number of shares registered in their name at that time. Changes to entries on the register after the Specified Time will be disregarded in determining the rights of any person to attend or vote at that meet- ing. Should the meeting be adjourned to a time not more than 48 hours after the Specified Time, that time will also apply for the purpose of determining the entitlement of members to attend and vote (and for the purpose of determining the number of votes they may cast) at the adjourned meeting. Should the meeting be adjourned for a longer period then to be so entitled members must be entered on the register at the time which is 48 hours before the time fixed for the adjourned meeting or, if the Company gives notice of the adjourned meeting, at the time specified in the notice. 74 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Aukett Swanke Group Plc | annual report and accounts 2014 75 30 Berkeley Square, W1 “ Aukett Swanke created a world class space for art at Phillips’ new London headquarters in Berkeley Square, taking on the challenges of the original building and transforming it into an inspiring landmark Sean Cleary Chief Operating Officer Phillips Shareholder information Listing information The shares of Aukett Swanke Group Plc are listed on the Alternative investment Market (AiM) of the London Stock Exchange. Tradable instrument Display Mnemonic (TiDM formerly EPiC): AUK Stock Exchange Daily Official List (SEDOL) code: 0061795 international Securities identification Number (iSiN): GB0000617950 Share price The Company’s share price is available from the website of the London Stock Exchange (www.londonstockexchange.co.uk). The Company’s mid market share price is published daily in The Times, The Financial Times and The London Evening Standard newspapers. Registrars Enquiries relating to matters such as loss of a share certificate, dividend payments or notification of a change of address should be directed to Equiniti who are the Company’s registrars at Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DD - 0871 384 2030 (calls to this number are charged at 8p a minute plus network extras. Lines are open 8.30am to 5.30pm, Monday to Friday). Callers from outside the UK should dial +44 (0)121 415 7047 - www.equiniti.com Equiniti also provide a website which enables shareholders to view up to date information about their shareholding in the Company at www.shareview.co.uk Investor relations in accordance with AiM Rule 26 regarding Company information disclosure, various investor orientated information is available on our web site at www.aukettswanke.com. The Company Secretary can be contacted by email at cosec@aukettswanke.com Donate your shares The Company supports ShareGift, the charity share donation scheme administered by The Orr Mackintosh Foundation (registered charity number 1052686). Through ShareGift, shareholders who have only a very small number of shares which might be considered uneconomic to sell are able to donate them to charity. Donated shares are aggregated and sold by ShareGift, the proceeds being passed onto a wide range of UK charities. Donating shares to charity gives rise neither to a gain or loss for UK capital gains tax purposes and UK taxpayers may also be able to claim income tax relief on such gifts of shares. Further details about ShareGift can be obtained from ShareGift, 17 Carlton House Terrace, London SW1Y 5AH - 020 7930 3737 - www.sharegift.org 76 Aukett Swanke Group Plc | annual report and accounts 2014 Back to Contents Back to Contents Back cover / inside back cover: 30 Berkeley Square, London W1 - new London headquarters for Phillips, contemporary art auctioneers Designed and produced by Aukett Swanke Graphics | © Copyright 2015 Aukett Swanke Group Plc www.aukettswanke.com Back to Contents