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2023 Reportwww.aukettswanke.com ANNUAL REPORT &ACCOUNTS 2016 AUKETT SWANKE GROUP PLC Aukett Swanke provides design services, focusing on architecture, master planning, and interior design with specialisms in executive architecture and associated engineering services The practice designs and delivers commercial projects throughout the United Kingdom, Continental Europe and the Middle East Aukett Swanke is an award-winning architecture and interior design practice. Its talented and international teams act as custodians for a sustainable built environment, working on grand heritage projects as well as bold new additions to urban and rural landscapes. Encompassing over 60 years of professional experience, Aukett Swanke has a network of more than 400 staff in 14 offices across 6 countries: UK, Germany, Russia, Turkey, UAE and Czech Republic. The studios' expertise includes work in mixed-use, commercial office, hotel, retail, residential, education and healthcare sectors as well as workplace consulting. FRONT COVER: TOP: MOLECULAR SCIENCES RESEARCH HUB, IMPERIAL WEST, LONDON W12 BOTTOM LEFT: BOTANICA RESIDENTIAL DEVELOPMENT, DUBAI BOTTOM RIGHT: MONET APARTMENTS, MOSCOW OUR CLIENTS INCLUDE . . . AB Development / ABN Amro Bank / Absolut Development / Abu Dhabi Tourism and Culture Authority / Acred / ADNH (Abu Dhabi National Hotels) / ADNOC (Abu Dhabi National Oil Corporation) / ADWEA / AEG Europe / Ahred Real Estate / Alarko Real Estate / ALDAR / Al-Futtaim Group Real Estate / Al Hamra Real Estate Development / Allen & Overy / Allianz Insurance / Allied World Assurance / Arup / Ascot Underwriting / Avgur Estate / Aviva Baker McKenzie / Bank of America Merrill Lynch / Bank of Moscow / BAT-Russia C+T Group / Batıkent Yapi Sanayi ve Ticaret / Bautek A.S / BCM McAlpine / Bell Hammer / BioIstanbul / BioMed Realty / Blackstone Group / Bloomberg / BNP Paribas Fortis / BNY Mellon / Bovis Lendlease / Bristows / Bundesdruckerei / Buro Happold / Buwog Cambridge University Hospitals NHS Trust / Canadian Embassy, Moscow / Candy & Candy / CAPCO / Carillion / CBRE / Cedar Capital / Cengiz Holding / Central Properties / CIN LaSalle / Cisco / City of London Academy / Cofunds / Comstrin / Commercial Estates / Commerzbank / Corinthia Hotel Group / Corporation of London / Cornerstone Investment & Real Estate / Costain / Countryside Properties / CPI / CR City / CR Office / Credit Suisse / Crest Nicholson / Crowne Plaza Hotels Dacorum Borough Council / Daimler Chrysler / Damac / DB Schenker / Decathlon / Deloitte / Deutsche Bank / Development Securities / Diageo / DGV Consulting / Doğuş GYO / Donstroy / DTC de Beers / du / Dunhill Eastman Group / E C Harris / Ede & Ravenscroft / Eli Lilly / Emaar Hospitality Group LLC / Emlak Konut / Endurance Estates / EO Engineers Office (Dubai) / Equa Bank / Ernst & Young / Er Yatırım / Etisalat / Eurofinance Bank / European Medicines Agency / Extensa / Exxon Mobil F&C Reit / Fenwick / Fiba Gayrimenkul / FIM Group / Firoka / First Bank Gazprom / Gazpromstroyinvest / GD Investments / GE Capital / Gertler / GLAV UPDK / Glavstroy / GSK / GMO Group / Goldman Sachs / Goodman / Google / Great Portland Estates / GroupM / Grosvenor Estates / GTN Global Properties / GUM / Güneri Insaat A.S Halk GYO / Hammer AG / Helical Bar / Henderson Global Investors / Hexal / Hilton International / Hochtief / Homerton University Hospital / Honeywell / Horus Capital / HSBC ICAP / ICKM / ICT Istroconti / IFFCO / IKEA / Imperial College / Ince & Co / Infosys / ING Real Estate / Intellectcom / Intercontinental Hotels Group / Investa / Irausa UK / ISG / IşGYO / Italian Embassy, Czech Republic / ITAR TASS News Agency J&T Global / Jarrold & Son / John Martin Gallery / Johnson Controls / Jones Lang LaSalle / JP Morgan / JTI Russia Kalinka Realty / KfW Bank / Khansaheb / Kier Build / Kiler Holding / Knight Dragon / Knight Frank / Knight Harwood / Koray Inşaat / Korine Property Partners / KORTROS / KPMG / KR Properties / Kuznetsky Most Development Laing O’Rourke Middle East Holdings / Lakhta Centre St.Petersburg / La Meridien / Lambert Smith Hampton / Land Securities / LaSalle Investment / Lawyers Enterprise / Legion Development / Lendlease / Lenovo / L’Oréal / Loughborough University M&G Investments / Macquarie Bank / MAN Group / Marks & Spencer / Mars, Wrigley, Royal Canin / Marsan AS / Marriott / McLaren / Mercury / Merkur Development / MFI / MICEX / Microsoft / Millhouse Capital / Miral / Mirax Group / Mobile TeleSystems (MTS) / Moodys Eastern Europe / Moody’s Investor Services / Molson Coors / Morgans Hotel Group / Mott Macdonald / Mouchel / MR Group Napp Pharmaceuticals / National Grid / Nations Bank / NATS / NDA / Network Rail / Nextra / Nicholson Estates / NIDA Insaat / Nike / Nurol GYO Oceanic Estates / Open University / Opin Group / Optima Corporation / Oracle / Orchard Homes / Orchard Street Investments / Oxford Properties Palestra / Park City / Pera Gayrimenkul / Peresvet Region Kuban / Pfizer / Phillips / Phoenix Development / Pilsner Urquel / PIK / Premier Inn / Procter & Gamble / PSN / Princeton Holdings / Prologis / Protos / PwC Quantum Homes / Qatar Foundation / Quintain RAK Properties / R&R Industrial SAS / Radisson Edwardian / Radisson Blu / Ralph Trustees / Railway Pension Nominees / Ramboll / Red Engineering / Redevco / Reignwood Investment UK / Renaissance Capital / Renova Stroy Group / Reuters / Rezidor / Richemont / Rio Tinto / Robin Oil / Rocco Forte Hotels / Rodrigo Hidalgo / Rönesans Gayrimenkul Yatırım / Rovner Investment Group / Royal Bank of Scotland / Royal Exchange / Rublevo-Arkhangelskoye / Rushydro / RWE npower SAB Miller / SAP / Savills / Sberbank / Second Watch Factory Slava / Servotel / Scarborough Borough Council / Schlumberger / Scottish Development Agency / Scottish Widows / Segro / Sellar Group / Seniats / Severn Trent Water / Shell / Sibneft / Sibneftegaz / Siemens / Sir Robert McAlpine / Sistema Hals / Skanska / Skype / SMBC Nikko Capital Markets / Sminex / Southampton City Council / Southampton Solent University / Soyak Inşaat / Standard Life Investments / St Martin’s Property / Staropramen Breweries / Stephenson Harwood / Stolny Grad Development / Stone Brewing / South Cambridgeshire District Council / Sumitomo Mitsui Banking Corporation (SMBC) / Sun Microsystems / Suse Linux / Swan Operations / Symantec / Syngenta International Tahincioğlu Gayrimenkul / Talan / TAT Immobilen / Taylor Wimpey / TDIC (Tourism Development and Investment Company) / TechInvest / Tekar / Tekfen Emlak / Tenkhoff Properties / The London Clinic / The Mercers’ Company / The Royal College of Surgeons of England / Tiffany s.r.o. / Tishman Speyer / Tonstate / Transport for London / Trinity Hall / Türkiye Finans Katılım Bankasi UGMK Holding / University of Cambridge / University of Sheffield Vesper / Vestas / Vinci Construction / VMWare / Vodafone / Voreda / VTB Capital Bank / Vysota Wates / Welbeck Land / Westminster City Council / White & Case / Willis Group Zurich Insurance Group Chairman’s statement and corporate governance Five year summary Corporate information Strategic report Directors’ report Statement of directors’ responsibilities Independent auditor’s report FINANCIAL STATEMENTS Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of financial position Company statement of financial position Consolidated statement of cash flows Company statement of cash flows Consolidated statement of changes in equity Company statement of changes in equity 36 40 40 41 - 49 50 - 53 54 55 56 57 58 59 60 61 62 63 Notes to the financial statements 64 - 99 SHAREHOLDER INFORMATION 100 2 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 3 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 OUR STUDIOS AND LOCATIONS 135 UNITED KINGDOM 425 TOTAL 175 CONTINENTAL EUROPE 115 MIDDLE EAST 425 people 14 studios 6 countries london istanbul moscow abu dhabi al ain dubai ras al khaimah berlin frankfurt prague bristol 36-40 York Way LONDON N1 9AB United Kingdom T +44 (0)20 7843 3000 london@aukettswanke.com 25 Christopher Street LONDON EC2A 2BS United Kingdom T +44 (0)20 7454 8200 london@aukettswanke.com 18 Prospekt Andropova bld. 7, Floor 11, Office 5 MOSCOW 115432 Russia T +7 (499) 683 0145 moscow@aukettswanke.com Kore Sehitleri 34/2 Deniz Is Hani 34394 Zincirlikuyu ISTANBUL Turkey T +90 212 318 0400 istanbul@aukettswanke.com Al Goze Building Office 2, 1st Floor Sheik Zayed Road Al Quoz DUBAI United Arab Emirates T +971 (0)4 338 0144 info@shanklandcox.com PO Box 31043 Humaid Bin Drai Building Office 103, 13th Street Umm Ramool DUBAI United Arab Emirates T +971 (0)4 286 2831 dubai@johnrharris.com 1st Floor Mohd Hasan Abdulla Omran Bldg PO Box 36800 RAS AL KHAIMAH United Arab Emirates T +971 (0)4 338 0144 Budapester Strasse 43 10787 BERLIN Germany T +49 30 230994 0 mail@aukett-heese.de Gutleutstrasse 163 60327 FRANKFURT AM MAIN Germany T +49 (0)69 76806 0 mail@aukett-heese-frankfurt.de Janackovo Nabrezi 471/49 150 00 PRAGUE 5 Czech Republic T +420 224 220 025 aukett@aukett.cz LICENSED OFFICE Queen Charlotte Studio 53 Queen Charlotte Street BRISTOL BS1 5HQ United Kingdom T +44 (0)117 929 9285 info@coda-architects.co.uk MOLECULAR SCIENCES RESEARCH HUB IMPERIAL WEST, LONDON W12 Bin Arar Tower, Building 168 Najda Street (6th Street) ABU DHABI United Arab Emirates T +971 (0)2 495 2731 abudhabi@aukettswanke.com Sheikh Hamdan Bin Mohammed Street ABU DHABI United Arab Emirates T +971 (0)2 671 5411 info@shanklandcox.com Main Street AL AIN United Arab Emirates T +971 (0)3 766 9334 info@shanklandcox.com 4 4 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 HIGHLIGHTS AND AWARDS We are delighted that Veretec, our Executive Architect arm, was named as the AJ100 Executive Architect of the Year in 2016. The (cid:77)udges commented: Veretec is an independent arm of Aukett Swanke, dedicated to project delivery. It has worked on high-profile projects with award-winning practices, and is the epitome of a professional executive architect. Its members understand and respect the original design, and work to resolve and deliver it to the satisfaction of client and architect. They also respect the intention of the design, and work to produce details in a manner that is visually in keeping. They build excellent relationships with manufacturers and understand every part of the construction process. The judges were impressed that they brought a brick to the interview. KEITH MORGAN Managing Director - Veretec JAMES ATHA Director - Veretec Two of our recently completed UK projects have been shortlisted for BCO (British Council for Offices) Awards in their respective regions: One Forbury Place in Reading and the Joseph Priestley Building at Eastside Locks, Birmingham Our UK awards this year include the Office Agents Society Award for Adelphi, winner of the Best West End Development category and also for One Forbury Place, Reading which was winner of the Award for Best Office Development outside of Central London. Internationally, our interior design for (cid:45)TI, Moscow was winner of the 2016 Best Office Award at the Office Next Awards, and Bomonti Modern Palas residential pro(cid:77)ect in Istanbul was winner of the 2016 Best Architectural Design in the Completed Buildings category in the Sign of the City Awards Tom Alexander discusses his recent research into the future workplace . . . see page 24 p24 Aukett Swanke is ranked 48th in Building Design's 2017 World Architecture 100. The practice is the 5th largest practice in the UK by international measurement and in the top 50 in the world for the first time Our recent acquisition of Shankland Cox Ltd which, added to our previous acquisition of John R Harris & Partners, increased our UAE presence. Bob Fry has developed a strategy to assess talent recognition . . . see page 30 p30 Marcus Dietzsch talks about the Frankfurt studio and how he thinks Brexit may in(cid:565)uence the local market . . . see page 12 p20 Aukett Swanke were one of five international design studios invited to design and build a concept hotel room at the 2016 Sleep Event hotel show in London. Nicholas de Klerk explains the ideas behind our entry, and how we created it . . . see page 20 p12 7 6 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 RECENT AND CURRENT PROJECTS IN THE UK STAINES CENTRAL DEVELOPMENT JOHN BRADFIELD CENTRE, CAMBRIDGE SCIENCE PARK FENWICK DEPARTMENT STORE, COLCHESTER INCE & CO, LONDON GRANTA PARK, CAMBRIDGE (cid:45)OSEPH PRIESTLEY BUILDING, EASTSIDE LOCKS, BIRMINGHAM VERDE SW1, LONDON SW1 UXBRIDGE BUSINESS PARK BOUTIQUE HOTEL, CENTRAL LONDON ONE WELBECK STREET, LONDON W1 ONE FORBURY PLACE, READING TEN TRINITY S(cid:52)UARE, LONDON EC3 HIGH PROFILE OFFICE DE(cid:57)ELOPMENT, WEMBLEY 8 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 9 TEN TRINITY SQUARE LONDON EC3 The first part of our sensitive restoration and redevelopment of the former Port of London Authority building, opposite the Tower of London, has been completed. The landmark Grade II* listed building has now opened as the Four Seasons Hotel London at Ten Trinity Square. We have taken a considered, sensitively detailed response to bringing this listed building back into use. While it was important that the original design intent of the building was respected, we were careful to avoid a pastiche replication of elements Suzette Vela Burkett Managing Director - UK 10 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 11 FRANKFURT - FOCUS ON AN INTERNATIONAL PLACE by MARCUS DIETZSCH Marcus Dietzsch, Office Director - Aukett + Heese Frankfurt studio, describes how the Frankfurt (cid:77)oint venture office applies international experience and awareness locally and abroad - and to what extent Brexit may in(cid:565)uence the Frankfurt market over the next few years AUKETT + HEESE Frankfurt GmbH is a lean and flexible office allowing it to adapt quickly to market conditions and challenges. We work regionally and internationally in the heart of Frankfurt, one of the most international cities in Germany. Despite the constant change and dynamic growth, Frankfurt remains a compact and manageable city. The implementation of Brexit, however, will be a test for the entire EU but in particular for Frankfurt. It is yet to be seen just how many of Britain's banks will relocate operations from London to the German financial capital city. Now that Prime Minister May has announced a 'hard' Brexit, the preparations for a major move have become apparent, and rumors have been circulating... In this climate, Frankfurt becomes increasingly attractive for a number of reasons: stability and strength of the German economy, the headquarter of the ECB is located here, the international airport as a major transportation node, relatively low lease rates for office space, and a high quality of living. However, Paris, Dublin, Luxemburg, and Amsterdam are all serious contenders in this regard. In light of Frankfurt's prominent position in the European financial structure, chances are good that a significant portion of the jobs in the financial sector will be relocated from the Thames to the Main river in the course of the upcoming restructuring. Frankfurt is now faced with the challenge of providing the proper preconditions to allow for such a major migration (for example, the housing market). Conservatively estimated, there will be roughly 8000 long-term jobs coming to Frankfurt in the next several years. However, the industry will not wait for the finalisation of negotiations and legislation. Therefore, it is expected that more than 2000 jobs will be relocated to Frankfurt by the end of 2018. On the other hand, the consolidation within the local banking industry will, to a greater degree, counteract the Brexit induced influx of jobs, such that the net variation in jobs within the financial sector will be relatively minor. It is estimated that there will be approximately 62,000 bankers in the German financial capital at the end of 2018. Employees of the major banks in Frankfurt (Commerzbank, Deutsche Bank, etc.) unemployed due to down-scaling can be hopeful about finding other work within the financial sector. The current international and local media reports that the financial market is in motion: For example, the American investment bank Goldman Sachs has denied that they will reduce the London operation by half and will establish a European bank in Frankfurt. “We have not yet made a decision and we continue to monitor the situation.” At the world economic forum in Davos, the president of HSBC Stuart Gulliver, said that about 20 percent of commercial transactions will be relocated to Paris, and that about 1,000 employees will most likely have to be relocated from London. The president of the board of directors at UBS, Axel Weber, announced that roughly 1,000 jobs will have to be relocated if Great Britain were to lose access to the EU domestic market. At the moment we will have await the results of the Brexit deal, but one must plan for all eventualities. 12 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 Also Barclays CEO Jes Staley announced that his bank would be able to do some of its business from Germany or Ireland. “We will have to relocate certain activities” said Staley in a BBC interview. The majority of the activities will remain in Great Britain but Germany and Ireland are “the options we're looking at”. Commerzbank has dramatically reduced investment banking in London and CitiGroup is looking to relocate hundreds of jobs to Dublin. Aside from Frankfurt and Paris, Madrid and Amsterdam are being considered as possible locations for banks within the EU. “As Brexit gains clarity, companies are increasingly reviewing and calculating where there is enough suitable office space within Germany”, said Michael Voigtländer, real-estate expert at the German Economic Institute (IW). “Downstream there will be an increased demand for housing in the second half of the year”. The focus was primarily on Frankfurt “the demand for prime real-estate in Frankfurt will probably increase and drive pricing”. If that’s the case Frankfurt says “Willkommen” - and we would like to help everyone who's interested to help guide them through this dynamic change. As noted, the real estate and construction industry in Frankfurt is a closely knit group of players, and we are a part of this group that know and trust one another. We have often been referred to clients looking for a local partner with international experience. DATA CENTRE CONVERTED TO BANK OFFICE > page 14 < page 13 We have found our particular niche within the market. We are the locally connected and internationally networked architectural practice, with qualifications and experience in developing and delivering trend setting, innovative and communicative workplace concepts. We are also familiar with the specific constraints and advantages of working within Frankfurt’s high-rise buildings, an uncommon building type in Germany. Our office has been successfully creating exiting projects in Frankfurt and throughout Germany, and internationally for over 16 years. This has been made possible by our qualified employees, who not only have the necessary technical skills and knowledge, but are also able to communicate and interact multi-culturally. The many repeat clients and framework agreements with international banks, insurance and IT companies is proof of customer satisfaction. Besides delivering typical architects work in best quality, our clients appreciate that we are also able to deliver comprehensive services to international standards such as LEED certification. Thus we were glad to support Bank of New York Mellon achieving LEED Gold for their Frankfurt headquarter as well as for two follow-up projects the bank carried out in Poland. For that our LEED AP being qualified in the US could act jointly with our polish colleague, together forming a successful team. I also bring my personal experience and skillset to the table. I took over responsibility for the Frankfurt office over 7 years ago, after serving for many years in another award winning design practice with uncompromising design and quality standards. I have adopted the same high standard and couple this with our desire to prioritise the client’s requirements, and to successfully and economically run the office in the face of myriad challenges. Working from this point we have been able to expand our expertise to additional areas. We have taken on the detailed design and construction documentation for complex and large scale projects. For example, we were contracted by Hochtief for the 27,000sqm office and laboratory building for Agilent, which is now nearing completion. IT GROUP, GENEVA AGILENT TECHNOLOGIES, WALDBRONN We have also branched out into the areas of renovation and refurbishment in regards to fire protection, energy efficiency and defensive maintenance. We are currently working on such projects in high-rise buildings in Duisburg and within the Frankfurt metropolitan area. At the same time we have expanded our expertise in project management and consulting, acting on behalf of a developer for tenant improvements; taking projects from inception to execution and hand-over. We have also taken on the role of coordinating and constructive implementation of CI-Design for a large insurance group for their new headquarters. INSURANCE GROUP, COLOGNE Our office has become known for quality, design, economy and client satisfaction. And, we are well positioned to take on the new challenges arising out of a fast-paced and ever-changing market 14 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 15 RECENT AND CURRENT INTERNATIONAL PROJECTS ALLIANZ OPERATIONS CENTRE, IZMIR MONET APARTMENTS, MOSCOW PERM RESIDENTIAL TOWERS, SIBERIA MANAR MALL, RAS AL KHAIMAH BAKER MCKENZIE, PRAGUE MIRDIF COMMUNITY MALL, DUBAI NEW HOTEL PROJECT, ABU DHABI AB DEVELOPMENT, ARCUS III, MOSCOW VODAFONE, ISTANBUL CUBUKLU RESIDENTIAL PRO(cid:45)ECT, TURKEY IT GROUP, BERLIN KURSO(cid:57)OY APARTMENTS, MOSCOW FONTENAY HOTEL, HAMBURG STONE BREWING, BERLIN NIDAKULE KU(cid:61)EY, ISTANBUL 16 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 17 JTI MERCURY CITY TOWER, MOSCOW JTI’s new, modern headquarters in Moscow has extensive client hospitality amenities and a progressive workplace. The design is tailored to strengthen their corporate brand expression and culture. Concept design was by SOM. Our close collaboration through the client engagement process and technical compliance within Russian regulations, developed the design through subsequent work stages and through construction to completion. The project was Winner of Best Office Award 2016 at the Office Next Awards, Moscow and winner of the Best Office of 5,000 - 10,000sqm Award 2016 at the MCFO (Moscow Construction and Fit-Out Association) Awards. 18 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 19 EXPERIENCING TOMORROW by Nicholas de Klerk Our concept hotel room – named ‘Bivouac’ – was designed and built for the 2016 Sleep Event hotel design show, which took place at the Business Design Centre in Islington, London. We were one of five international design studios invited to take part. This was an opportunity for the Aukett Swanke Hotels team to test ideas in a full scale mock-up which responded to an unusual brief without the usual constraints that designing an actual hotel room brings. This gave us the freedom to experiment with concepts, materials and processes, challenging the very idea of what a hotel room could be. Nicholas de Klerk, Associate - Aukett Swanke, explains the design, construction and possible future applications of Aukett Swanke’s ‘Sensation-Oriented’ concept hotel room, built for the 2016 London-based Sleep Hotel Design Event The brief we were given was based on new market segmentation research by German research company, the Sinus Institute, which examines market segments, defined as ‘tribes’, based on lifestyle and values as opposed to age and income alone. Five of the so-called tribes were chosen and allocated to a designer to conceptualise a hotel room for that particular group. Alongside the Established, Performer, Digital Avant-garde and the Intellectual groups, Aukett Swanke was asked to design a room for the ‘Sensation-Oriented’ Tribe. This is a largely youth-oriented segment, a group of people who consider their life on holiday to be their real life, in contrast to their everyday life. They also travel in groups, with friends and peers, to festivals and event-based experiences and often identify with social subcultures. 20 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 Our Concept As a consequence, we felt that the room we designed had to embrace both a social element and somehow match the intensity with which our tribe experienced their stay. Our departure point was to consider how people come together in public places for both formal and informal events and how they adapt landscapes for the purpose, creating stepped theatres, spaces for play, entertainment and performance. In addition to the sleeping area and bathroom set out in the brief, the ‘third space’ within our room is a social space where the sensation-oriented guest can gather with friends and peers. A series of steps creates a transition between the social space and the more intimate sleeping area behind. The desk was designed as an extension of this landscape, creating a false perspective within the room. A range of surface types and depths, from deep, soft and diffuse, to flat, hard and reflective modulated the visual, tactile and acoustic character of the room. All of the elements play with your spatial and sensory perception of the space, making you hyper aware of your experience in it. > page 20 < page 21 Innovations and Future Applications Our approach to the brief, as well as the time and space constraints that we were presented with, prompted a series of conceptual, material and process-driven innovations. Conceptually, within hotel design, architecture and interior design are often quite separate processes. We fused the architecture and interior design of the room, using the structure as a spatial device and the depth of the wall surface to integrate lighting and modulate the acoustic qualities of the space. This turned the experience of the room into a constantly changing and responsive one as you move around within it. The incorporation of a social space within a standard sized individual room, using both furniture and level changes, is a fairly radical reimagining of the type. It opens up the room to a far wider user group and makes its use much more flexible as both a leisure and work space. This is something we will explore further in future projects. Given that this was designed for a temporary installation, we used relatively cost-effective and readily available materials to generate an immersive effect. The white fibreglass mesh both reflected and let light through it and created a visually and acoustically soft interior. Having prototyped the effect, we can now explore it further with other materials perhaps more suited to hotel use. The room had to be built under challenging time constraints and in a relatively difficult-to-access area within the larger exhibition area, so we designed it as a series of demountable cassette units that were preassembled off-site. This was then disassembled and rebuilt on- site, allowing us to build a very complex space relatively quickly, while leaving time for commissioning and sequencing of the integrated lighting system which made use of new and as yet untested technology. This also required a great deal of iterative design documentation to be produced very quickly which we achieved using an automated three dimensional design software. These are all processes which we can take forward into guestroom design and construction – from the use of prefabrication to produce complex surfaces with integrated technology, which would otherwise be cost and time prohibitive to build using traditional methods, to the potential to rethink the whole idea of soft-refurbishment of hotel rooms. Hotel rooms need to be updated on a regular basis, to keep the offer fresh and maintain the quality of the interior, but also to keep pace with rapidly changing technology. The process we have developed imagines a high- concept, componentised room which can be updated in whole or in part, with as much off-site fabrication as possible. This will improve build quality and minimise site based works and programme. It also allows for a much more sustainable approach to guestroom design and fitout, in which elements can potentially be reused, refurbished or repurposed and then recycled at the end of their useful life. Finally, we speculated on how multiples of this room might be brought together to create a community of social spaces. These would be on a spectrum varying from emergency housing and disaster relief, through to festivals and camps, and indeed a new kind of ‘sensation-oriented’ hotel. The flexibility of the process and the design approach is such that we think it can be adapted for all of these situations, offering some fresh, innovative thinking which is firmly grounded in the history and culture of hospitality itself 22 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 23 The concept is simple and agile, being a structural and services chassis composed as a tower, mid or low rise design, and either as a new build or inside an existing form VISUALISING TOMORROW by TOM ALEXANDER We are living in a digital data storm fed by disruptive technology. This phenomenon, combined with a greater focus on people’s needs and choices, has to have a major impact on space and its architectural enclosures - prompting debate and ideas that are challenging the traditions of how we design for learning and working. The traditional office floor plate is highly efficient and can be an exemplary place to work, stacked up to create ever higher towers in urban centres but, in the increasing war for talent, employee attraction and retention, progressive organisations are recognising that this talent has new spatial demands to enable and balance their productivity and wellbeing. Tom Alexander, Director - Design, discusses our recent explorations into the offices of the future . . . The traditional office floorplate often echoes the rigidity of a factory production floor and is measured in square feet or square metres, considering only the space around our shoes. This valuation of a property forgets the whole person, yet when we think about the space we actually individually occupy it is liberating. It considers the light, air, height, views, health, movement and acoustics around them, as well as its fiscal value which could then be considered in cubic feet or cubic metres (see below). Our R+D propositions have initiated a market debate around this notion of designing for people’s spatial needs and choices in balance with the commercial models for workplace development. There is also a critical relationship between education spaces and the workplace. Over the last 20 years or so education institutions have been learning from tech workplaces like Google and Facebook, and more recently from a wave of smaller urban start up habitats, introducing choices for teaching and learning spaces that enabled students to in part self-learn, more like adult workers with responsibilities for their own timetables and subject plans. > page 26 24 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 The property agents are actually saying our design propositions need to be developed out now to meet this spatial demand, either in new or existing buildings, so we’re looking forward to an adventurous evolution with our Work / Learn / Live / Play chassis < page 24 Looser fit, higher ceilings, fresh air, breakout spaces and shared atriums are some of the physical benefits students and tutors enjoy for greater creativity and productivity. This is evident in schools and universities, inspiring a generation that is now taking a hold in the workplace. It is this generation that demands something more healthy, spatially agile and enjoyable to drive their working lives, but the current cohort of workplace tenants are now also sitting up from their desks and saying I want some of that. All generations want interesting places to meet and work, and of course this is then not limited to the tech sector, as all professions and workplace industries want and deserve something that will inevitably benefit their employers. The workplace is changing as a result, popular existing character buildings changing from say industrial to agile workplace is the norm but also limited in number, so new buildings have to re-think the rigid stacked floorplate approach whilst questioning the leasing models so as to match evolving and sometimes volatile business behaviours. This is true of SMEs but also of the larger corporates who are aware of the evolution and starting to drive some of these spatial, Value by Volume changes in their own spaces as they compete with the tech giants for the global talent pool. Amongst other ideas, we are looking at industrial type portfolio leases, hotel operating models and even renting by volume for the spatial variety illustrated in our designs on these pages. For example a tenant could take a volume lease in a building of 150,000cuft at say £5/cuft, equivalent to two typical floors at £50-60/sqft. This would secure them a variety of spaces in the building from a meeting box in the ground floor Big Lounge, a couple of quiet zone floor plates and say two of the unique double height volumes in which they have the freedom to add and remove platforms as well as walls. These spaces have elastic adjacencies to each other meaning they can fit into an existing building or in the new sustainable chassis we have created that allows for a singular use, different cohabiting uses and change of use. We have been invited to present and discuss the research and ideas at conferences in London, Moscow and at the World Architecture Festival in Berlin. Developers, agents, specialist consultants and tenants have all been highly supportive and keen to explore the possibilities of providing workplace choice and spatial variety for start-ups and established businesses within the same building. The traditional and digital media outlets have also been interested with articles and interviews on Reuters TV, Blueprint, Architect’s Journal, New London Architecture, Estates Gazette, OnOffice and Property Week. 26 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 MOLECULAR SCIENCES RESEARCH HUB IMPERIAL WEST, LONDON W12 Our shell and core design for the new Molecular Sciences Research Hub for Imperial College is now complete, and the fitout is in progress. The building forms a centrepiece to the northern half of the Imperial West campus. The project was won following a design competition, and has evolved to include high specification laboratory and technical areas clustered around a full height atrium. The main façade incorporates an elegant composition of stone and perforated bronze cladding which creates a dynamic frontage to the new Imperial Square. The building establishes a positive transparency, revealing its inner workings and encouraging the physical and visual connectivity fundamental to innovative research. Flexibility, adaptability and sustainability are core features of the design, which also incorporates an Energy Centre with links to future development phases of the campus. 28 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 29 EVALUATING TALENT - UNLOCKING OPPORTUNITY by ROBERT FRY The acquisition of the John R Harris & Partners Limited and Shankland Cox Limited in June 2015 and February 2016, respectively, expanded the Aukett Swanke talent pool in the Middle East region tenfold in just 8 months as a part of longer term strategy to create a significant service offer and presence in the region. Having participated in the due diligence process during the acquisition stage and as a UK based architect with some experience of the Middle East in the past, Bob was ideally placed to independently assess the operational capability and creative potential of the overall organisation from an architectural and engineering services viewpoint. Robert Fry, Managing Director – International, discusses how Aukett Swanke have capitalised upon two Middle East acquisitions by developing a strategy to assess talent recognition to secure future growth and presence in the region during the stagnation of the UK economy and ongoing political uncertainty in Europe. 3 Entities, 6 Offices, Operating In 4 Locations During September 2015 as a part of the Shankland Cox Limited due diligence process a series of risk assessments, reviews of project agreements and team resources were undertaken across what was to be the largest addition to the Group’s capability since the Aukett Fitzroy Robinson and Swanke Hayden Connell merger in 2013. This process facilitated a greater understanding of the nature of the combined architectural and engineering capabilities available, the geographic spread of workload and the nature of the talent pool, enabling some fine tuning of the organisation ahead of the completion of the acquisition. A strategy was developed following this last acquisition in February 2016 to undertake an independent review of all the key technical staff below the current Director level within the three entities forming the operation. John R Harris & Partners DUBAI Shankland Cox RAS AL KHAIMAH Shankland Cox DUBAI Aukett Fitzroy Robinson International ABU DHABI Shankland Cox AL AIN Shankland Cox ABU DHABI Operational Review The review was undertaken between May and September 2016 and assessed the skills and talents of all key personnel and identified those capable of further development, alongside which a form of organisational diagram was developed to facilitate integration, succession and growth of the business in the longer term. The process involved the development of a tailored questionnaire aimed at each key staff member to capture skill sets, qualifications, personal ambitions, attitudes towards succession and promotion together with other observations or topics relevant to the exercise. This was undertaken ahead of one to one interviews that followed and explored each individual’s competencies in relation to client relationships, business development, commercial awareness, design talent, quality management, knowledge transfer, teamwork, mentoring, creativity, innovation and technical skills. The various capabilities of each employee were then mapped onto a series of charts to show comparative strengths of skills sets relative to four key areas of experience within the business including sectors, projects, disciplines and commercial attributes. Qualitative Skills Mapping and Gap Analysis This qualitative mapping of skills and attributes on a firm wide basis revealed a rich tapestry of highly valuable skills and talents within the group, but it also revealed some hitherto suspected gaps which the process brought into significant sharp focus and requiring attention. A series of key recommendations accompanied by other observations were made in a presentation to the Directors in July 2016. These covered an overall assessment of the firm’s capabilities including the gap analysis, succession planning and the identification of which staff might evolve into key role holders within a proposed organisational diagram for the future. This significant first step of the review was wholly and positively endorsed by the Directors. Emerging from it came a desire to explore how the ‘qualitative’ nature of these outcomes could be developed into a ‘quantitative’ assessment of the skills and potential roles available with a more SUCCESSION specific idea of what type of organisational model might best exploit these assets. P E O P L E ASPIRATION K L L S S I E L P O E P S S E N K A E W S S E N K A E W H T G N E R T S S S E N K A E W 30 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 POTENTIAL HIGH ACHIEVER S K I L L S POTENTIAL HIGH PERFORMER NON SUCCESSION > page 32 31 < page 31 Quantitative Analysis Two overall goals were defined. These were to ‘quantitatively’ identify which individuals could become key role holders, and to formalise an optimum organisational structure for the group. This would then be developed to create a timeline for execution. All of the participants interviewed and evaluated independently by Bob allowed for the detailed analysis that followed to be carried out as a relative assessment across the group and not an absolute one that focussed solely on particular individuals. The scoring mechanism that he developed placed the relative talents of individuals quantitatively in relation to their roles, disciplines, years of experience and other competencies. The comparative values of individuals and groups that were established then gave us flexibility to consider how potential key role holders and groups of individuals could form business units intended to optimise geographical and market priorities operationally. A most fascinating aspect of this process was observing how individuals from the three previously separate entities could be complimentarily matched into teams and groupings that were not visible at the outset, providing us with a much clearer definition of the potential business unit arrangements that we were seeking. D E S I G N A N D T E C H N I C A L 271 387 554 394 101 S U P P O R T S E R V I C E S ORGANISATION STRUCTURE SCORING CHART As this transformation of our organisation continues to evolve we are improving the implementation of our ongoing workload and crucially securing more significant bid opportunities. We look forward to developing our capability and service offer to support existing and new clientele in the region during 2017 and beyond. Strategy Succession Planning 3 0 j a n u a ry 2 0 1 7 & GROUP MANAGEMENT UNITED KINGDOM LUKE SCHUBERTH Managing Director - UK ‡ SUZETTE VELA BURKETT Managing Director - UK ‡ STEPHEN EMBLEY Managing Director - Middle East ‡ ROBERT FRY Managing Director - International ‡ DAVID HUGHES Director ‡ JAMES ATHA Director - Veretec KEITH MORGAN Managing Director - Veretec OUR KEY PEOPLE NICK BIRCHALL Director MIDDLE EAST PETER EATON Director TOM ALEXANDER Director STEPHEN ATKINSON Director PHILIP LOGAN Chairman - Middle East Shankland Cox Ltd PAULA MCKEON Finance Director - Middle East FRANK NOWACKI Director John R Harris & Partners BOB PUNCHARD Director John R Harris & Partners STAN TURKINGTON Director Shankland Cox Ltd CONTINENTAL EUROPE JV PARTNERS LARISA LIGAY Director Moscow TOM NUGENT Director Moscow BURÇU SENPARLAK General Manager Istanbul LUTZ HEESE Managing Director Aukett + Heese ANDREW HENNING JONES Director Aukett + Heese MARCUS DIETZSCH Director Aukett + Heese JANA LEHOTSKA Director Aukett sro TOMAS VOREL Director Aukett sro 32 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 ‡ Group Management Board AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 33 BOARD OF DIRECTORS ANTHONY SIMMONDS Non Executive Chairman *+ #^ MA FCA FCCA Aged 72 JOHN BULLOUGH Non Executive Director +*# FRICS Aged 66 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(cid:9)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. (cid:45)ohn (cid:77)oined(cid:98)Aukett(cid:98)Swanke(cid:98)as a non executive director in (cid:45)une 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. NICHOLAS THOMPSON Chief Executive Officer (cid:6)(cid:65) BSc(Hons) MBA Aged 62 ANDREW MURDOCH Executive Director MA RIBA Aged 67 Nicholas is Aukett Swanke’s CEO and has over 30 years of experience in the property and consulting sector. He originally joined Fitzroy Robinson as its Finance Director in 1994 and was promoted to Managing Director in 2002. In 2005 he became CEO of the newly merged ‘Aukett Fitzroy Robinson’ following a reverse takeover. He holds a Master’s Degree in Business Administration from City University and currently sits on the Cass MBA Advisory Board. He is also a qualified accountant and has a degree from Bath University. In 2015 he became a non executive director of the Wren Insurance Association Limited, a mutual insurer for architectural practices, which is regulated by the Financial Conduct Authority and Prudential Regulation Authority. Nicholas is responsible for the Group’s strategic growth plans. Andrew is a qualified architect who (cid:77)oined Fit(cid:93)roy Robinson in 1984. He was Chairman of Fit(cid:93)roy Robinson in the 1990s, and was appointed to the board in December 2013. He is architect to a number of significant buildings in central London and the UK regions, and has a strong and enduring client following. His work includes the (cid:565)agship Fenwick store in Bond Street, the Home of Alfred Dunhill in Mayfair, and the refurbishment of the Royal Exchange in the City, and he is currently working on a number of prestigious pro(cid:77)ects in the West End. Andrew sat on the board of management of the British Council of Offices for 12 years. BEVERLEY WRIGHT Chief Financial Officer (cid:9) Company Secretary (cid:65) BA(Hons) FCA Aged 58 NICK PELL Executive Director BA(Hons) Aged 55 Beverley (cid:77)oined Aukett Swanke in September 2014. She is a qualified Chartered Accountant and has over 25 years of experience with construction and engineering firms including significant experience in senior financial roles for international companies. She spent 16 years with Mowlem Plc in a variety of roles, then in 2006 she took over as Commercial and Financial Director Europe and Middle East at CH2M, becoming International Commercial Director in 2012. Her roles have covered a very broad spectrum including tax, treasury, corporate finance, M(cid:9)A and structuring, as well as commercial and financial management, analysis, control and governance. Since joining Aukett Swanke, in addition to ensuring good day to day financial management, Beverley has worked on both commercial and strategic matters. Much of her focus has been on the future shape of the Group and on the integration of the recent acquisitions. 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 pro(cid:77)ects. His pro(cid:77)ects are wide ranging, including the British Council for Offices award winning (cid:57)ISA H(cid:52) fit out, and an experimental hotel pilot pro(cid:77)ect. 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 ^ Member of the Internal Controls and Risk Committee chaired by Anthony Simmonds 34 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 35 CHAIRMAN'S STATEMENT AND CORPORATE GOVERNANCE Anthony Simmonds Non Executive Chairman 11 January 2017 I am responsible for overseeing the effectiveness and composition of your Board and report on the overall performance of the Company. Financial highlights Encouragingly this year revenues have continued to climb and now stand at £20.8m (2015: £18.7m) achieving our stated strategy. This improvement re(cid:565)ects new earnings (cid:565)owing through from the recent acquisitions in the Middle East o(cid:909)setting a slowdown in the United Kingdom and Russian operations. This growth in our revenue has enabled us to enlarge our business footprint. The year turned out to be more difficult in achieving our profit target. Profit before tax at (cid:101)0.93m (2015: (cid:101)1.87m) was the result of a number of matters that are more specifically described in the Strategic Report on page 41. After tax, our EPS was 0.47p (2015: 1.00p) and our cash funds were equivalent to the prior year at £1.84m (2015: £1.87m). During the year the Company recorded two dividends totalling 0.18 pence per share. We declared a slightly lower interim dividend at 0.07 pence per share as a re(cid:565)ection of market conditions. Corporate Governance In addition to being non executive Chairman of the Company, I chair the Nomination, Audit and Risk Committees. The Nomination Committee is responsible for reviewing the e(cid:909)ectiveness and composition of your Board. The Audit Committee is responsible for ensuring that the Company operates with appropriate corporate governance and financial controls(cid:30) and the Risk Committee which is a sub committee of the Audit Committee, is charged with identifying and assessing strategic and other Company risks and in so doing to provide ways of mitigating, avoiding or eliminating such risks. All Committees report to the Board. Your Board comprises six members. Nicholas Thompson is the CEO and the CFO is Beverley Wright. Both have considerable experience in managing a services and construction orientated business. John Bullough, my fellow non executive Director together with myself, provide an independent oversight drawn from both professional and support services industries along with client side and development activities. Andrew Murdoch and Nick Pell represent the skills of architecture and interior design. At this stage in our development we are able to use our collective skills to oversee the Group’s activities. However, our business activities are becoming broader and more diverse and in the longer term your Board will consider whether changes are required to better re(cid:565)ect the enhanced activities that we undertake. As part of this process the Board Committees, covering remuneration and nominations, are meeting on a more regular basis with a full agenda of matters to be reviewed and debated under our current strategy. John Bullough and I will expand on these areas in future reports. As always I wish to acknowledge the contribution of the sta(cid:909) in our business as well as my colleagues on the Board who continually respond positively to the challenges and opportunities that our organisation presents. To them, I o(cid:909)er my personal thanks for their individual contributions. 1906 Walker & Gillette 1949 John R Harris 1955 Fitzroy Robinson 1972 Aukett 1975 Swanke Hayden Connell 2005 Aukett Fitzroy Robinson 1962 Shankland Cox 2013 Aukett Swanke 2015 Aukett Swanke 2016 Aukett Swanke We have made considerable progress with our strategic growth plans for the Group by making a further acquisition in the Middle East. 2017 will see a period of consolidation of our recent additions in order to benefit the Group over the longer term. Nicholas Thompson Chief Executive Officer 36 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 37 OPERATIONAL HIGHLIGHTS ONE FORBURY PLACE READING • • Successfully completed the acquisition of a major second business in the Middle East to further diversify revenue streams and increase resource capability A difficult year in the UK as uncertainties around Brexit led to a substantial weakness in the market requiring some downsizing • Middle East integration progressing well with our larger operation attracting a higher level of enquiries • Continental Europe making good progress, strong performance in Germany and Turkey where we see scope for growth; Russia continues to be very weak • Won six Industry Awards in the UK, Russia and Turkey 38 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 FIVE YEAR SUMMARY Years ending 30 September Continuing operations 2016 £’000 2015 £’000 2014 £’000 Revenue 20,841 18,668 17,326 Revenue less sub consultant costs 18,410 16,886 14,732 Profit (cid:18) (loss) before tax Basic earnings (cid:18) (losses) per share (p) Dividends per share (p) Net assets Cash and cash equivalents Net funds(cid:13) 927 0.47 0.18 7,189 1,839 790 1,870 1,400 1.00 0.22 6,251 1,873 1,873 0.65 0.18 5,053 1,891 1,778 (cid:13)Net funds include cash and cash equivalents less bank loans and overdrafts (see note 22) 2013 £’000 8,406 7,116 550 0.26 - 3,029 1,343 1,080 2012 £’000 9,150 6,744 210 0.08 - 2,652 739 326 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 LLP www.bdo.co.uk Investor (cid:18) Media enquiries Ben Alexander 07926 054 111 Registered office 36-40 York Way London N1 9AB Website www.aukettswanke.com Nominated adviser and broker finnCap www.finncap.com Bankers Coutts & Co www.coutts.com Solicitors Fox Williams www.foxwilliams.com STRATEGIC REPORT The Directors present their Strategic Report on the Group for the year ended 30 September 2016. STRATEGY We are a professional services group that principally provides architectural design services along with specialisms in master planning, interior design, executive architecture and associated engineering services. Our business operations are focused in the United Kingdom (“UK”), Germany and the Middle East along with smaller operations in Russia, Turkey and the Czech Republic. Our strategic objective is to provide a range of high quality design orientated solutions to our clients that allow us to create shareholder value over the longer term and at the same time create a pleasant and rewarding working environment for our sta(cid:909). The cyclical nature of the markets in which we operate gives rise to peaks and troughs in our financial performance, and management is cognisant that our business model needs to re(cid:565)ect this variable factor in both its decision making and expectation of future performance. In order to create a more resilient operating trading platform we embarked on an acquisition strategy to strengthen our UK and Middle East operations in 2013. The objective being to mitigate as far as possible reliance on any one geographical market and at the same time to balance the economic and political risks that property development activity faces in cyclical markets. A further beneficial aspect of this strategy has been to spread our currency exposure which has been particularly beneficial in the post Brexit period where our primary currency, the pound Sterling, was heavily devalued. Our recent acquisitions have enabled us to establish three similarly si(cid:93)ed operations when measured by sta(cid:909) numbers. They are: the United Kingdom with 135 sta(cid:909) (including licensees)(cid:30) the Middle East with 115 sta(cid:909)(cid:30) and, our wider Continental European operation, which includes Germany, Russia, Turkey and the C(cid:93)ech Republic, encompassing a variety of business structures, totalling 175 sta(cid:909). This structure now creates an organisation with some 425 sta(cid:909). The enlarged qualified sta(cid:909) contingent has lifted the Group to 48th in the 2017 Building Design World Architecture 100 rankings. We were 51st in 2016. With this more robust services platform now in place our aim is to reinforce our position in the three regional operations through local investment into our skills and service o(cid:909)er to the extent that each of the local markets allow. The immediate ob(cid:77)ectives are to provide a high quality design service and, at the same time, create a sustainable business model. Beyond this we will continue to grow organically or by specific acquisition if deemed appropriate, although our longer term growth strategy will be to focus more on diversifying our services o(cid:909)er to areas with a less transactional revenue profile. Shankland Cox Limited (“SCL”) In February 2016 we acquired 100(cid:8) of the equity in SCL, an architecture and engineering practice comprising 100 sta(cid:909) and operating across four offices in the United Arab Emirates ((cid:522)UAE(cid:523)). The practice was acquired to provide a greater resource and skill base for our growing activities in the region. In the immediate post acquisition period we significantly reduced the si(cid:93)e of one office (cid:514) rather more than originally planned, and right sized another due to falling revenues. This resulted in excess costs in the second half. However, the overall result of the acquisition should be beneficial to the Group in the longer term as the Middle East market and particularly the UAE continues to develop and presents more commercial property development opportunities. BUSINESS MODEL, SER(cid:57)ICES OFFERED AND MANAGEMENT Our business model is founded on the creation of three regional operations (or Hubs) and for which we have developed a reporting structure that allows for individual accountability at local office level based upon a series of Key Performance Indicators ((cid:522)KPIs(cid:523)) and common reporting formats. This format is derived from the three Hubs having a di(cid:909)erent make-up in terms of service o(cid:909)er structure and type of operating entities. In the United Kingdom there are specialist architectural and interior design skills that combine into a single reporting entity. In the Middle East we have a number of offices that are separately licensed profit centres but come together as a single operating segment. Continental Europe is a collection of individual business entities in di(cid:909)erent countries that are accounted for separately due to their divergent ownership structures but are reported within a single operating segment. We often act as Lead Consultant or General Planner, in which case we engage the wider design team directly. The financial e(cid:909)ect of this is to increase our reported revenues and introduce a sub consultant line prior to reporting the net revenues attributable to our own services. This is the preferred contractual route outside of the UK. Internally we describe revenue less sub consultant costs as ‘net earnings’. 40 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 41 The services o(cid:909)ered by the Group are covered by commercial architecture and interior design with some limited site orientated engineering services. The sectors and skills covered by the operations are: Office headquarters and business parks, Hospitality and mixed use leisure, Retail shopping malls and bespoke retail, Education and healthcare, Residential including individual houses or villas and apartments, Industrial warehousing and Telecoms industry. Most offices work in their home markets but do work with other offices on pro(cid:77)ects where skills are transferrable. Our senior management structure below Plc board level follows this regional format with four managing directors along with the CEO and CFO forming a Group Management Board ((cid:522)GMB(cid:523)) where oversight of the whole business entity takes place. The GMB reviews and compares KPI performance, agrees operating strategies, considers cross border investment such as IT and communications. Accounting, HR and PR are all dealt with at local office level. All offices have a lead director plus support directors within their Hub. GROUP ACTI(cid:57)ITIES With the enlarged regional format, and following the recent acquisitions, our revenues have risen above £20m and they rise to over £30m if we include 100(cid:8) of the gross revenues of our (cid:77)oint ventures, associates and licensee. It is against the latter number that we report our sta(cid:909) numbers in the World Architecture top 100 ranking tables and which totalled 239 qualified fee earning professionals for 2017. Our profitability has fallen during the year to around half of the result in 2015. Three main factors have contributed to this result. Firstly, the United Kingdom continued to see lower volumes as we entered the current financial year and immediately before the EU referendum(cid:30) then in the post Brexit period there has been a marked delay in decision making and new enquiries have fallen. We encountered more restructuring cost and less revenue in one of the two Middle East acquisitions than had been anticipated in our original valuation although reduced through the release of negative goodwill arising on acquisition(cid:30) and finally, Russia continued to incur losses despite a significant and progressive reduction in its cost base. The management team is now focused on eliminating, reversing or ad(cid:77)usting for these factors in the new financial period in order to balance our business model. Bradfield Centre for Cambridge University, the (cid:101)20m Biomed Realty building at Granta Park pre let to Heptares and a further phase on the iconic Adelphi building o(cid:909) the Strand. One of our largest projects was in the City with a major new hotel and apartments at Ten Trinity Square opposite the Tower of London for a Chinese developer. (cid:57)eretec was also very active on a variety of pro(cid:77)ects in Beak Street, Bishopsgate, Chelsea, Hanover Terrace, a school in Wimbledon and a high quality residential scheme for Sir Robert McAlpine in Lillie Square. This year Aukett Swanke are placed at 19th in the A100 survey, which ranks of the largest architectural practices in the UK, measured by the number of qualified architects employed However, slightly fewer pro(cid:77)ects were in the planning phase (cid:514) a (cid:101)39m H(cid:52) in Bristol, two sites in Birmingham for Goodman, Radio House in Cambridge, the Flowers building at Granta Park, and a (cid:101)72m residential and office scheme in Staines. We completed a range of interiors pro(cid:77)ects for (cid:45)PMorgan Chase, Schlumberger, SMBC Nikko, Ince (cid:9) Co, Lutron, KPMG, and various private residences in Moscow. Awards (cid:514) the UK had a number of successes this year. During the year (cid:57)eretec won the 2016 inaugural (cid:518)Executive Architect of the Year’ as awarded by the Architects (cid:45)ournal. At the Office Agents Society Awards the Adelphi won the Best West End Development category and Forbury Place, Reading won the award for Best Office Development outside of Central London. The next year will prove challenging in the first half as we seek to generate revenue from current enquiries rather than from existing pro(cid:77)ects. Encouragingly since the end of the year the enquiry level has stabilised with 24 new project registrations which compares with 30 for the same period last year. United Kingdom As we highlighted in the Interim Announcement, the operation was impacted by a general slowdown in construction activity in the first half but more so in the second half as a result of Brexit. Whilst we saw new enquiries in the second half these did not result in any material increase in short term revenues other than in our executive delivery group, (cid:57)eretec. As a result net revenues for the year are 16(cid:8) down on prior year and 22% in the second half alone, compared to the same period in the prior year. After the year end we reduced our staffing levels consistent with anticipated income but are cognisant that we need to maintain our core skill base which carries with it an excess cost in the short term. In terms of projects a number of schemes were at or nearing completion by the year end: two office pro(cid:77)ects in Uxbridge for Goodman, the PS(cid:52) H(cid:52) in Hemel Hempstead, Pro(cid:77)ect (cid:57)erde for Tishman Speyer in (cid:57)ictoria, a (cid:101)104m science building for Imperial College, a new store for Fenwick in Colchester, and a number of projects where our specialist group (cid:57)eretec delivered pro(cid:77)ects designed by other architects. We continued to deliver a number of projects during the site phase in London, Cambridge and Reading. This included phase 2 at Forbury Place for M(cid:9)G, the (cid:57)ERDE SW1 MIRDIF COMMUNITY SHOPPING MALL, DUBAI Middle East Net earnings in the region more than quadrupled to over (cid:101)5m following the acquisition of SCL and with a full year’s contribution from John R Harris (acquired in June 2015). The three companies in this region are gradually being integrated. We anticipate this process being completed during the next twelve months. In the year a sta(cid:909) succession exercise was undertaken by the GMB to review all senior sta(cid:909) below director level. This project will form the basis for future promotions and development of the region’s management structure. The local companies undertake work for a wide range of clients including: a three year du (telecoms) framework, ADNEC, Etisalat retail stores and data centres, Etihad, a new Mall hotel for ALDAR, a private villa for a Sheikh, Abu Dhabi National Hotels, the new Manar Mall retail shopping centre and Mirdif Community shopping mall, projects for contractors Khansaheb and international consultants WSP, villas on the Palm (cid:45)umeirah, the Bvlgari hotel and a residential site in Al Barari. Refurbishment of the Address Dubai Mall hotel for Emaar, the guestrooms of an iconic 5(cid:13) hotel on the Palm (cid:45)umeirah and the 5(cid:13) Kempinski Mall of the Emirates hotel on the Sheikh (cid:61)ayed Road for MAF, along with a large number of smaller projects. We believe that our enhanced scale will provide more opportunities for us to bid on ma(cid:77)or pro(cid:77)ects (cid:514) and this is now being evidenced in new enquiries. As such management attention is now focused on strengthening the succession structure through existing design and delivery skills along with achieving operating efficiencies across the businesses. Continental Europe Our reported net earnings, for the wholly owned businesses in this Hub, are under £1m, whilst this sum is (cid:101)8.4m if 100(cid:8) of the associate and (cid:77)oint venture revenue is included. This creates an undertaking similar in size to the other two Hubs. The wholly owned Turkish operation returned to profit and eliminated its prior year deficit. This performance is credible given the Coup attempt in (cid:45)une and the continuing State of Emergency in the country. The office’s Bomonti Modern Palas pro(cid:77)ect (for Extensa) was awarded the 2016 Best Architectural Design under the Completed Buildings category in Sign of the City Awards (held by the national real estate organisation). The office is a little under the optimal si(cid:93)e at the moment and we shall be seeking to grow our market share. U(cid:59)BRIDGE BUSINESS PARK 42 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 43 BOMONTI MODERN PALAS RESIDENTIAL TOWER, ISTANBUL The headline financial results of the Group were: Revenue Revenue less sub consultant Net operating expenses Net finance costs Share of results of associates and joint ventures Profit before tax Tax charge Profit for the year FINANCIAL REVIEW 2016 £’000 20,841 18,410 2015 £’000 18,668 16,886 (17,730) (15,283) (20) 267 927 (106) 821 (10) 277 1,870 (215) 1,655 Revenues for the year were (cid:101)20.8m, an increase of 11.2(cid:8) on the previous year (2015: (cid:101)18.7m). Revenues less sub consultants also rose to (cid:101)18.4m (2015: (cid:101)16.9m), a 8.9(cid:8) increase. However our profitability has fallen during the year with profit before tax at (cid:101)0.9m compared to (cid:101)1.9m in 2015. Whilst lower than the previous year, the result re(cid:565)ects a solid performance after taking account of the challenges which the Group has faced including volatility in the UK market, particularly in the light of Brexit(cid:30) the geopolitical challenges in Russia(cid:30) and integration in the Middle East following our second acquisition there in eight months. The results for the second half show a slightly improved position when compared with the first half. Revenues, including SCL, improved by 8(cid:8) whilst profit before tax at (cid:101)510k was 22(cid:8) higher compared to (cid:101)417k at March 2016. Our tax charge for the year is (cid:101)106k (2015: (cid:101)215k), representing an e(cid:909)ective tax rate of 11(cid:8) (2015: 11(cid:8)). This is fully explained in note 11 but is due to zero taxes in the Middle East combined with the use of tax losses in other jurisdictions, whilst the joint venture income is reported net of tax within the trading results. Re(cid:565)ecting this low e(cid:909)ective tax rate, our profit after tax at (cid:101)0.8m gives an EPS of 0.47 pence per share (2015: 1.00 pence per share). United Kingdom The general slowdown in construction activity in the first half continued in the second half following the Brexit vote. As a result net earnings for the year at (cid:101)12.1m are 16(cid:8) down on prior year (2015: (cid:101)14.4m). Profits are down by half as fixed costs and sta(cid:909) reductions do not immediately follow in tandem. The second half profit was similar to the first half. Looking forward the UK is likely to see a further reduction in revenues in the first part of the new year before the position stabilises. Therefore we do not expect any contribution in profit terms from the UK until the second half. We also anticipate reducing our space requirements by the half year in order that the operation can perform at a new staffing level. Middle East In terms of delivering our strategy of growing this Hub, to complement and counter balance the UK and Continental Europe, we have had a successful year in the Middle East. Our revenues at (cid:101)7.4m, compare well with (cid:101)2.1m last year, and re(cid:565)ect a full year’s trading in (cid:45)ohn R Harris and Partners (2015: 3 months), and (cid:77)ust over seven months of Shankland Cox Limited, which was acquired in February 2016. Due to planned integration initiatives, intangible amortisation of (cid:101)112k and also right si(cid:93)ing of the cost base, we have reported a modest profit before tax for the twelve months to September 2016 of (cid:101)41k (2015: £47k) after release of negative goodwill arising on acquisition totalling £160k. JTI, MOSCOW The Russian operation, also wholly owned, has now been reduced to a minimum operating level and works on a limited number of projects re(cid:565)ecting its current scale. We expect this operation to remain at this level for the foreseeable future and until the local market improves. This office continues to be a successful design studio with our interior design for (cid:45)apan Tobacco International winning the Best Office Award at the Office Next Awards and for the second consecutive year our Arcus III project has been recognised. Berlin, in which we have a 25(cid:8) stake, continues to be significant contributor to the Group’s result. After a slow first half a series of ma(cid:77)or wins in the second half lifted its performance to prior year levels. The office and its team continue to expand and reached 125 sta(cid:909) by the year end. Pro(cid:77)ects include site work at Berlin’s new airport, a new facility in Berlin for Stone Brewing of the USA, Phase 2 Gropius Passagen for mfi-Unibail-Rodamco, a 5(cid:13) hotel, The Fontenay, in Hamburg, an office tower in Frankfurt, a new development in Berlin for Hines, and the Anschut(cid:93) Mercedes Plat(cid:93) with Hochtief. The office is a significant player in the local market and has a strong repeat client following. Frankfurt has continued to improve its year on year performance with a longer term order book including an office relocation of 3,600 sta(cid:909) for an international insurance company and regular work for Microsoft. We are also Tishman Speyer’s retained architect for Blackstone’s (cid:522)MesseTurm(cid:523) office tower in the city of Frankfurt. Interestingly we have not seen any early evidence of financial services’ relocation to the city in the aftermath of Brexit. This may in part be a function of German office regulations that adversely impact occupancy densities when compared to the City of London. We are 50% owners. Prague, where we also own 50(cid:8), has achieved a small profit this year based on the provision of drawing services to both the London and Berlin offices. Local commissions have been at low ebb over the past few years but with the recent rise in GDP we have already seen a marked increase in both architectural and fit out commissions. The office may soon start to grow again. Work during the year included office fit outs for Allen (cid:9) Overy, Tieto, warehouse extensions for Semily and Schenker along with further work at Riverside School. SUMMARY, GROUP PROSPECTS AND SHAREHOLDER (cid:57)ALUE Whilst we had hoped for a better outcome in 2016, we remain encouraged by the progress that we have made in developing our business model and that this will ultimately generate both the results and cash (cid:565)ow that we have anticipated. In the short term we expect the United Kingdom to experience a further downturn in revenues against which we are rebasing our fixed costs through a reduced property requirement(cid:30) which will be o(cid:909)set in part by a rapidly improving Middle East contribution. Our ob(cid:77)ective is to provide shareholders with a sustainable business model that can positively respond to business cycles and deliver long term returns in both cash and profits generation and dividend (cid:565)ow. On behalf of the Board Nicholas Thompson Chief Executive Officer 11 January 2017 44 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 45 Continental Europe Consolidated revenues, as represented by Russia and Turkey, at (cid:101)1.3m are an 38(cid:8) lower than the prior year ((cid:101)2.1m)(cid:30) whilst profit before tax, also including the (cid:77)oint venture and associate in Germany and the (cid:77)oint venture in the C(cid:93)ech Republic, was maintained at (cid:101)95k (2015: (cid:101)88k). Continental Europe’s result is a mix of performances across the businesses where the greatest challenge within its portfolio during the year was Russia. As previously reported, we have progressively restructured and downsized this business to what is now its minimum level. Despite reporting a negative result in the Interim results, Turkey has had a strong second half and reported full year profits before tax. This is a successful performance particularly as Turkey was under a State of Emergency during a large part of the second half. Our Berlin (cid:77)oint venture, of which we own 25(cid:8), remains the best performer. It has maintained its previous strong performance which is particularly pleasing as its result is after investment for growth. Frankfurt has improved on its prior year performance with our 50(cid:8) share of its profit after tax increasing compared to 2015. During the year this business has consolidated its market position and strengthened its order book. The Prague (cid:77)oint venture made a small contribution to the overall result ((cid:101)8k being our 50(cid:8) share (2015: breakeven)) despite a lack of activity in the local market. Financing Our total equity is now (cid:101)7.2m, an increase of (cid:101)0.9m over the prior year (2015: (cid:101)6.3m) and re(cid:565)ects the net trading results for the year, together with £0.4m of foreign currency translation gains recognised through the consolidated statement of comprehensive income. Net funds (see note 22) at year end were (cid:101)0.8m, comprising cash of (cid:101)1.8m and the loan taken out in respect of the acquisition of Shankland Cox Limited, which now stands at (cid:101)1.0m. Excluding any balances and financing costs in respect of Shankland Cox Limited our net funds have been maintained at the same level of the previous year (£1.9m). However, given the increased footprint in the Middle East and the need for regulatory and banking collateral, in the short term there is less available free cash than previously. As set out in in note 21 the loan to acquire Shankland Cox Limited was taken out in February 2016 for the principal sum of USD 1.6m representing AED 6m. It is being repaid in equal quarterly instalments of USD 80k over five years. Other than this loan there were no other borrowings at year end, although the Group has the benefit of a net (cid:93)ero overdraft facility from its bankers Coutts (cid:9) Co. This facility is used by the Group to hedge foreign exchange exposures. The Group has a strong focus on cash management and visibility of its liquidity position as well as future (cid:565)ows. The Plc acts as the Group’s central banker, and whilst it may, subject to formal approval, advance short term working capital support, all businesses are required to be cash generative or as a minimum cash neutral. Future work Tracking and keeping an accurate record of the pipeline of future work is key to understanding the business and its future shape and portfolio. It is also essential in order to a(cid:909)ord the directors time to manage and react to any changes. With the distribution of the business across the three Hubs, there are now di(cid:909)ering workload profiles: (cid:527) (cid:527) (cid:527) The UK has a lower level of assured work than previously, but has the benefit of a growing order book within the (cid:57)eretec business(cid:30) The Middle East is building strength with many larger, longer term pro(cid:77)ects underpinning the growth strategy(cid:30) and Continental Europe is mixed across the portfolio, led by the strength of Berlin, with Frankfurt, the C(cid:93)ech Republic and Turkey gaining greater long term visibility and only Russia having intermittent instructions as a consequence of its local market. Key Performance Indicators ((cid:522)KPIs(cid:523)) The key performance indicators used within the Group for assessing financial performance are: (cid:527) (cid:527) (cid:527) revenue less sub consultant costs which re(cid:565)ects the revenue generated by our own technical sta(cid:909) but excludes the revenue attributable to sub consultants(cid:30) the revenue less sub consultant costs being generated per full time equivalent (FTE) technical member of sta(cid:909). 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(cid:30) and profit before taxation. Segmental analysis of revenue less sub consultant costs and profit before taxation is given in note 3 (page 70). Pro(cid:77)ect Working Capital Pro(cid:77)ect working capital comprises net trade receivables(cid:30) amounts due from customers for contract work and advances received from customers for contract work. The pro(cid:77)ect payment arrangements under which the Group operates vary significantly by geographical location: • • • (cid:527) 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(cid:30) 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(cid:30) 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(cid:30) and 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. Payment also tends to take longer in the Middle East. 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 pro(cid:77)ects 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 (cid:565)ow 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 covenant so that 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. Geo political factors Political events and decisions, or lack thereof, can seriously a(cid:909)ect the markets in which the Group operates, leading to a lack of decisions by government bodies and also by clients. In turn this directly impacts workload and can even delay committed projects. Diversification of operations in multiple unrelated geographies provides the Group greater resilience in respect of this risk. Maintaining a (cid:565)exible workforce, sub(cid:77)ect to working practices in local markets, additionally a(cid:909)ords greater ability to react quickly to such events. Share price volatility A strong share price and higher market capitalisation attract new investors and provide the Group with greater (cid:565)exibility when considering how to fund and pay for acquisitions. 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 immediately avoid losses and associated cash out(cid:565)ows when faced with sharp and unpredicted falls in revenue. Approximately one third of the Group’s operations are now based in the Middle East where payment terms are usually longer than in the UK. This introduces additional liquidity risk as some corresponding costs may be required to be paid before the collection of trade receivables. The directors seek to ensure that the Group retains appropriate funding arrangements and regularly monitors expected future requirements through the Group’s annual budgeting, quarterly forecasting and monthly cash (cid:565)ow reporting processes in order to react to a required change with maximum (cid:565)exibility. The Group’s principal bankers remain supportive and in (cid:45)anuary 2017 renewed the Group’s overdraft facility until November 2017. In February 2016 a USD 1.6m loan was also o(cid:909)ered and drawn down with respect to the acquisition of Shankland Cox Limited. Where possible, the Group deploys three strategies to help reduce operational gearing: First, the Group has a well developed staffing plan which (cid:565)exes the total number of sta(cid:909) using a combination of permanent employees, temporary employees, agency sta(cid:909), and freelance sta(cid:909) as applicable to each legal (cid:77)urisdiction(cid:30) and in doing so matches resources to fee paying work as closely as possible, sometimes linking sta(cid:909) retention directly to specific pro(cid:77)ects. 46 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 47 • (cid:527) • • (cid:527) 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, to monitor and review the businesses. There is regular, comprehensive reporting and KPIs are used extensively(cid:30) the Group seeks to work for multinational or the larger and more established domestic clients who themselves often have significant international experience(cid:30) 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 pro(cid:77)ects(cid:30) 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(cid:30) and As far as possible foreign currency (cid:565)ows are matched to minimise any impact of exchange rate movements and significant exposures are hedged. On behalf of the Board Beverley Wright Chief Financial Officer 11 January 2017 Second, the Group can sublet or licence occupation of part of its property space to other professional services businesses to o(cid:909)set some of the total occupancy cost. Lastly the Group seeks (cid:565)exible contract terms with ma(cid:77)or suppliers such that certain costs can be suspended during times of economic difficulty. Sta(cid:909) skills and retention Our business model relies upon a certain standard and number of skilled individuals based on qualifications and pro(cid:77)ect track record. Failure to retain such skills makes the strategies of the Group difficult to achieve. The Group aims to ensure that knowledge is shared and that particular skills are not unique to just one individual. 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 sta(cid:909). Sta(cid:909) training programmes, career appraisals and education assistance are provided, including helping our professionally qualified sta(cid:909) comply with their continuing professional development obligations. Training programmes take various forms including external courses and external speakers. (cid:52)uality of technical delivery In common with other firms providing professional services, the Group is sub(cid:77)ect to the risk of claims of professional negligence from clients. The Group seeks to minimise these risks by retaining skilled professionals at all levels and operating quality assurance systems which have many facets. These systems include identifying specific 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 re(cid:565)ects 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 part of the 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 the 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 pro(cid:77)ect or retain sufficient qualified sta(cid:909) to complete the pro(cid:77)ect 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. 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. Poor acquisitions The acquisition of businesses for too high a price or which do not trade as expected can have a material negative impact on the Group, a(cid:909)ecting results and cash, as well as absorbing excessive management time. The Group invests senior management time and Group resources into both pre and post acquisition work. Pre acquisition there is a due diligence process and price modelling based on several criteria. Agreements entered into are sub(cid:77)ect to commercial and legal review. Post acquisition there is structured implementation planning and ongoing monitoring and review. Overseas diversification The Group continues to derive a proportion of its revenues from pro(cid:77)ects located outside the UK. This o(cid:909)ers 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 di(cid:909)er in these overseas businesses when compared to the UK and these may significantly increase the risks to the Group. To mitigate these risks: 48 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 MONET APARTMENTS, MOSCOW 49 DIRECTORS’ REPORT The directors present their report for the year ended 30 September 2016. Corporate governance The UK Corporate Governance Code issued in April 2016 by the Financial Reporting Council sets out standards of good practice in relation to board leadership and e(cid:909)ectiveness, 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 with 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 si(cid:93)e. In doing this the Board has considered the Corporate Governance Guidelines for Small and Mid-Si(cid:93)e (cid:52)uoted Companies published in 2013 by the (cid:52)uoted 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 four 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 (cid:45)ohn 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 information published by the Group about its financial performance and position. It does this keeping under review the adequacy and e(cid:909)ectiveness 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 its 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, as Chairman, and (cid:45)ohn Bullough and they report 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 (cid:45)ohn Bullough, with (cid:45)ohn 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 si(cid:93)e, 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 (cid:45)ohn Bullough. Internal Controls and Risk Committee The Directors acknowledge that they are responsible for the Group’s system of internal controls and for reviewing its e(cid:909)ectiveness (excluding joint ventures and associate). The Directors, supported by the Risk Committee, 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. The Internal Controls and Risk Committee is chaired by Anthony Simmonds. Nicholas Thompson and Beverley Wright are also members. Directors Anthony Simmonds, (cid:45)ohn Bullough, Nicholas Thompson, Andrew Murdoch, Nick Pell and Beverley Wright served as directors of the Company throughout the year ended 30 September 2016. David Hughes resigned as director on 22 December 2015. Biographical details of the current directors are set out on pages 34 and 35. 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 Beverley Wright (cid:45)ohn Bullough Andrew Murdoch Nick Pell David Hughes (resigned 22 December 2015) 30 September 2016 30 September 2015 1,000,000 16,702,411 100,000 500,000 12,478,486 1,826,700 2,753,967 1,000,000 16,602,411 - 500,000 12,478,486 1,826,700 2,963,446 Directors’ service contracts The Company’s policy is to o(cid:909)er 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. Nick Pell and Beverley Wright have rolling service contracts with the Company which are sub(cid:77)ect to six months’ notice of termination by either party. The remuneration packages of executive directors comprise basic salary, contributions to defined contribution pension arrangements, discretionary annual bonus, discretionary share options 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. 50 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 51 Substantial shareholdings At 11 (cid:45)anuary 2017 the Company had been informed of the following notifiable interests of three per cent or more in its share capital. Shareholder Notes Number of ordinary shares Percentage of ordinary shares Nicholas Thompson Director of the Company (cid:45)eremy Blake Former employee of the Group Andrew Murdoch Director of the Company Begonia 365 SL Raul Curiel Controlled by a former director of the Company Former director of the Company River & Mercantile Long Term Recovery Fund Stephen Atkinson Employee of the Group (cid:45)ohn (cid:57)incent Former director of the Company Broadwalk Asset Management 16,702,411 13,030,638 12,478,486 9,515,192 9,240,018 8,150,000 7,649,436 5,791,394 5,317,000 10.11% 7.89(cid:8) 7.56% 5.76% 5.59% 4.93% 4.63% 3.51% 3.22% Share price The mid market closing price of the shares of the Company at 30 September 2016 was 4.00 pence and the range of mid market closing prices of the shares during the year was between 3.88 pence and 7.25 pence. Share capital 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 (cid:101)826,068 representing 50(cid:8) 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 (cid:101)165,214 representing 10(cid:8) of the issued share capital, without first o(cid:909)ering such shares to shareholders. The directors consider this authority desirable as it will give them the (cid:565)exibility 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 subsequent 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 pro(cid:77)ect. We design innovative solutions and focus on: (cid:527) (cid:527) (cid:527) (cid:527) • incorporating passive design principles that mitigate solar gain and heat loss from the outset(cid:30) reducing energy demand through active and passive renewable energy sources(cid:30) the use of energy and resource efficient materials, methods, and forms(cid:30) the re use of existing buildings and materials and (cid:565)exibility for future change(cid:30) and importantly the careful consideration of the experience and wellbeing 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 65 ‘Excellent’ or (cid:518)(cid:57)ery 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 3 LEED (Leadership in Energy and Environmental Design) ‘Gold’ award and 5 ‘Silver’ awards. Employees As a professional services business, the Group’s ability to achieve its commercial ob(cid:77)ectives and to service the needs of its clients in a profitable and e(cid:909)ective manner depends upon the contribution of its employees. The Group seeks to keep its employees informed on all material aspects of the business a(cid:909)ecting them through the operation of a structured management system, sta(cid:909) 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 sta(cid:909). It is the Group’s policy to give fair consideration to application for employment for disabled persons wherever practicable and, where existing employees become disabled, e(cid:909)orts 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 (a member of the Group Management Board), 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: (cid:527) • so far as they are aware, there is no relevant audit information of which the auditor is unaware(cid:30) 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 Whilst the Group is still confident of its long term position, given the slowdown in the UK and the funding requirements in the UAE, the Board has resolved to defer the decision regarding a dividend until the AGM which will take place in March 2017. Annual General Meeting Notice of the annual general meeting will be issued in due course and no later than 21 days before the Meeting is due to be held. By order of the Board Beverley Wright Company Secretary Aukett Swanke Group Plc Registered number 2155571 11 January 2017 52 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 53 STATEMENT OF DIRECTORS’ RESPONSIBILITIES INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AUKETT SWANKE GROUP PLC 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 a(cid:909)airs 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: (cid:527) select suitable accounting policies and then apply them consistently(cid:30) (cid:527) make (cid:77)udgments and accounting estimates that are reasonable and prudent(cid:30) • state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements(cid:30) (cid:527) prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue 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. We have audited the financial statements of Aukett Swanke Group Plc for the year ended 30 September 2016 which comprise the consolidated income statement, the consolidated and company statements of comprehensive income, the consolidated and company statements of financial position, the consolidated and company statements of cash (cid:565)ows, the consolidated and company statements of changes in equity and the related notes. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in preparation of the parent company financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, 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(cid:18)auditscopeukprivate. Opinion on financial statements In our opinion: (cid:527) the financial statements give a true and fair view of the state of the group’s and the parent company’s a(cid:909)airs as at 30 September 2016 and of the group’s profit for the year then ended(cid:30) the group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union(cid:30) the parent company’s financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006(cid:30) and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. (cid:527) (cid:527) (cid:527) 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(cid:30) or the parent company financial statements are not in agreement with the accounting records and returns(cid:30) or certain disclosures of directors’ remuneration specified by law are not made(cid:30) or we have not received all the information and explanations we require for our audit. (cid:527) (cid:527) • AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 55 Tim Neathercoat (senior statutory auditor) For and on behalf of BDO LLP, statutory auditor London, United Kingdom 11 January 2017 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). STAINES CENTRAL MASTERPLAN 54 For the year ended 30 September 2016 Profit for the year Other comprehensive income: Currency translation di(cid:909)erences Other comprehensive income for the year Total comprehensive income for the year Total comprehensive income for the year is attributable to: Owners of Aukett Swanke Group Plc Non controlling interests CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 2016 £’000 821 424 424 1,245 1,158 87 1,245 2015 £’000 1,655 (201) (201) 1,454 1,451 3 1,454 CONSOLIDATED INCOME STATEMENT For the year ended 30 September 2016 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 Profit attributable to: Owners of Aukett Swanke Group Plc Non controlling interests Basic and diluted earnings per share for profit attributable to the ordinary equity holders of the Company: From continuing operations Total earnings per share Note 3 3 4 5 6 11 12 2016 £’000 20,841 (2,431) 18,410 (13,929) (2,632) (1,901) 732 680 8 (28) 660 267 927 (106) 821 821 772 49 821 0.47p 0.47p 2015 £’000 18,668 (1,782) 16,886 (11,464) (2,730) (1,715) 626 1,603 3 (13) 1,593 277 1,870 (215) 1,655 1,655 1,653 2 1,655 1.00p 1.00p 56 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 U(cid:59)BRIDGE BUSINESS PARK 57 CONSOLIDATED STATEMENT OF FINANCIAL POSITION COMPANY STATEMENT OF FINANCIAL POSITION At 30 September 2016 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 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 Provisions 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 Non controlling interests Total equity Note 13 14 15 17 18 23 19 20 21 24 21 23 24 25 2016 £’000 2,409 1,056 506 529 181 219 4,900 9,227 1,839 11,066 15,966 (6,553) (12) (247) (90) (6,902) (802) (100) (973) (1,875) (8,777) 7,189 1,652 1,176 110 2,573 1,494 7,005 184 7,189 2015 £’000 2,283 818 563 254 100 288 4,306 6,430 1,873 8,303 12,609 (5,833) (117) - - (5,950) - (54) (354) (408) (6,358) 6,251 1,652 1,176 (276) 1,801 1,791 6,144 107 6,251 At 30 September 2016 Non current assets Investments Trade and other receivables Total non current assets Current assets Trade and other receivables Cash and cash equivalents Deferred tax Total current assets Total assets Current liabilities Trade and other payables Short term borrowings Total current liabilities Non current liabilities Long term borrowings Total non 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 16 19 19 23 20 21 21 25 2016 £’000 6,463 49 6,512 1,311 596 - 1,907 8,419 (3,619) (247) (3,866) (802) (802) (4,668) 3,751 1,652 (571) 1,176 1,494 3,751 2015 £’000 4,321 48 4,369 432 1,007 2 1,441 5,810 (2,300) - (2,300) - - (2,300) 3,510 1,652 (1,109) 1,176 1,791 3,510 The financial statements on pages 56 to 99 were approved and authorised for issue by the Board of Directors on 11 (cid:45)anuary 2017 and were signed on its behalf by: Nicholas Thompson Chief Executive Officer Beverley Wright Chief Financial Officer The financial statements on pages 56 to 99 were approved and authorised for issue by the Board of Directors on 11 (cid:45)anuary 2017 and were signed on its behalf by: Nicholas Thompson Chief Executive Officer 58 Beverley Wright Chief Financial Officer AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 59 CONSOLIDATED STATEMENT OF CASH FLOWS COMPANY STATEMENT OF CASH FLOWS For the year ended 30 September 2016 For the year ended 30 September 2016 Note 27 Cash (cid:565)ows from operating activities Cash generated from operations Interest paid Income taxes paid Net cash (out(cid:565)ow) (cid:18) in(cid:565)ow from operating activities Cash (cid:565)ows 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 used in investing activities Net cash (out(cid:565)ow) (cid:18) in(cid:565)ow before financing activities Cash (cid:565)ows from financing activities Proceeds from bank loans Repayment of bank loans Dividends paid Net cash in(cid:565)ow (cid:18) (out(cid:565)ow) from financing activities Net change in cash, cash equivalents and bank overdraft Cash and cash equivalents and bank overdraft at start of year Currency translation di(cid:909)erences Cash, cash equivalents and bank overdraft at end of year 22 2016 £’000 104 (29) (99) (24) (147) 4 (761) 8 - (896) (920) 1,123 (175) (181) 767 (153) 1,873 119 1,839 2015 £’000 1,443 (13) (238) 1,192 (163) 2 (824) 3 278 (704) 488 - (113) (360) (473) 15 1,891 (33) 1,873 Cash (cid:565)ows from operating activities Cash (used by) (cid:18) generated from operations Interest paid Income taxes paid Net cash (out(cid:565)ow) (cid:18) in(cid:565)ow from operating activities Cash (cid:565)ows from investing activities Purchase of subsidiaries Dividends received Net cash (used in) (cid:18) generated from investing activities Net cash (out(cid:565)ow) (cid:18) in(cid:565)ow before financing activities Cash (cid:565)ows from financing activities Proceeds from bank loans Repayment of bank loans Dividends paid Net cash in(cid:565)ow (cid:18) (out(cid:565)ow) from financing activities Net change in cash, cash equivalents and bank overdraft Cash, cash equivalents and bank overdraft at start of year Currency translation di(cid:909)erences Cash, cash equivalents and bank overdraft at end of year Note 27 2016 £’000 (846) (23) (3) (872) (1,126) 820 (306) (1,178) 1,123 (175) (181) 767 (411) 1,007 - 596 2015 £’000 70 - (1) 69 (897) 1,279 382 451 - - (360) (360) 91 916 - 1,007 AL SERKAL, DUBAI 60 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 61 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY COMPANY STATEMENT OF CHANGES IN EQUITY For the year ended 30 September 2016 For the year ended 30 September 2016 Foreign currency translation reserve Retained earnings Other distributable reserve Share capital £’000 1,652 - - - - At 30 September 2014 Profit for the year Other comprehensive income Non controlling interest arising on business combination Dividends paid £’000 (74) - (202) - - £’000 148 1,653 - - - At 30 September 2015 1,652 (276) 1,801 Profit for the year Other comprehensive income Other adjustments Dividends paid - - - - - 386 - - 772 - - - At 30 September 2016 1,652 110 2,573 Merger reserve £’000 1,176 - - - - 1,176 - - - - 1,176 Non controlling interests £’000 - 2 1 104 - 107 49 38 (10) - 184 Total £’000 5,053 1,653 (202) - (360) 6,144 772 386 - (297) 7,005 Total Equity £’000 5,053 1,655 (201) 104 (360) 6,251 821 424 (10) (297) 7,189 Share capital £’000 1,652 - - Retained earnings £’000 (1,866) 757 - At 30 September 2014 Profit for the year Dividends paid At 30 September 2015 1,652 (1,109) Profit for the year Dividends paid At 30 September 2016 - - 1,652 538 - (571) Other distributable reserve Merger reserve £’000 2,151 - (360) 1,791 - (297) 1,494 £’000 1,176 - - 1,176 - - 1,176 Total £’000 3,113 757 (360) 3,510 538 (297) 3,751 The other distributable reserve was created in September 2007 during a court and shareholder approved process to reduce the capital of the Company. All amounts are attributable to the equity holders of the Company. £’000 2,151 - - - (360) 1,791 - - - (297) 1,494 The other distributable reserve was created in September 2007 during a court and shareholder approved process to reduce the capital of the Company. GRANTA PARK, CAMBRIDGE 62 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 GRANTA PARK, CAMBRIDGE 63 NOTES TO THE FINANCIAL STATEMENTS 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 for the Group and parent have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the Companies Act 2006 as applicable to companies reporting under IFRSs. The financial statements have been prepared under the historical cost convention and on a going concern basis. New accounting standards, amendments and interpretations applied There were no new accounting standards which required additional disclosures 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 e(cid:909)ective date making them applicable to future financial statements. The following standards are e(cid:909)ective for accounting periods beginning on or after 1 (cid:45)anuary 2018 and have not yet been adopted by the Group: i) ii) iii) IFRS 15 (cid:518)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. This standard is e(cid:909)ective for accounting periods beginning on or after 1 (cid:45)anuary 2018. IFRS 9 (cid:518)Financial instruments’. The standard provides a single classification and measurement model for financial assets and replaces the existing IAS 39. The Group has yet to assess the full impact of this accounting standard. This standard is e(cid:909)ective for accounting periods beginning on or after 1 (cid:45)anuary 2018. IFRS 16 ‘Leases’. The standard will require almost all leases to be on the balance sheet of lessees and introduces a single income statement model which e(cid:909)ectively brings the ma(cid:77)ority leases onto the balance sheet. The full impact of this accounting standard is currently unknown because the most significant leases are due to expire before the standard is e(cid:909)ective. This standard is e(cid:909)ective for accounting periods beginning on or after 1 January 2019. There are no other IFRSs or International Financial Reporting Interpretations Committee interpretations that are not yet e(cid:909)ective 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 net overdraft facility for additional financial (cid:565)exibility and foreign currency hedging purposes. This overdraft facility was renewed for a further ten months in (cid:45)anuary 2017. 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 2016 by the Financial Reporting Council entitled ‘Guidance on the going concern basis of accounting and reporting on solvency and liquidity risks’. Forecasts for the Group have been prepared on a monthly basis which comprise detailed income statements, statements of financial position and cash (cid:565)ow statements for each of the Group’s operations. The forecasts and projections show the Group should be able to 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 again renewed the Group’s facility as described in note 32 and above. 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. Basis of consolidation and equity accounting The consolidated financial statements incorporate those of the Company and its subsidiaries. Subsidiaries are all entities over which the Group has control. The Group controls an entity when it is exposed to variable returns from the investee, in addition to the ability to direct the investee and a(cid:909)ect those returns through exercising its power. Intra group transactions, balances and any unrealised gains and losses on transactions between Group companies are eliminated on consolidation. Non controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement, statement of comprehensive income, statement of changes in equity and balance sheet respectively. 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 non controlling 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 associate and (cid:77)oint ventures. Associates Associates are entities for which the Group has significant in(cid:565)uence but not control or (cid:77)oint control. This is the case where the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for under the equity method. Joint ventures Under IFRS 11 (cid:518)(cid:45)oint arrangements’ investments in (cid:77)oint arrangements are classified as either (cid:77)oint operations or (cid:77)oint ventures. This classification depends on the contractual rights and obligations of the investor rather than the legal structure. The Group has joint ventures in Frankfurt and the Czech Republic where ownership is contractual and the agreements require unanimous consent from all parties for relevant activities. The entities are considered joint ventures. Joint ventures are accounted for under 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 di(cid:909)erence 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 e(cid:909)ective interest method. 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. 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 (cid:101)538,000 (2015: (cid:101)757,000). Deferred taxation Deferred income tax is provided in full, using the statement of financial position liability method, on temporary di(cid:909)erences 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 profits will be generated against which the temporary di(cid:909)erences can be utilised. 64 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 65 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. Investments Investments in subsidiaries, associates and (cid:77)oint ventures are held in the statement of financial position of the Company at historic cost less any allowance for impairment. 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 di(cid:909)erences 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 di(cid:909)erences are recognised as realised income or 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. 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. Where the net fair value of the identifiable assets and liabilities of the acquiree is in excess of the consideration paid, negative goodwill is recognised immediately in the income statement. 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 su(cid:909)ered 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 (cid:565)ows that are independent from other assets, the recoverable amount of the cash generating unit to which the asset belongs is estimated. Other intangible 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 a straight line basis with the useful economic lives attributed as follows: Trade name (cid:514) 25 years Trade licence (cid:514) 10 years Customer relationships (cid:514) 7 to 10 years Order book (cid:514) Over the life of the contracts Amortisation is charged to other operating expenses within the consolidated income statement. 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 the 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. 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 o(cid:909) the cost of acquisition over the expected useful economic lives using the straight line method and over the following number of years: Leasehold improvements (cid:514) Unexpired term of lease Office furniture (cid:514) 4 years Office equipment (cid:514) 4 years Computer equipment (cid:514) 2 years Ownership of property, plant and equipment held under an 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. 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 out(cid:565)ow of economic benefits that can be reliably estimated. Where the e(cid:909)ect of the time value of money is material, the provision is based on the present value of future out(cid:565)ows, discounted at the pre tax discount rate that re(cid:565)ects the risks specific to the liability. In those geographies where it is a legal requirement, provision is also made for end of service benefit ((cid:518)EOSB’), being amounts payable to employees when their contract with the group ends (see note 24). 66 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 67 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. (cid:57)ariations 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 (cid:45)UDGEMENTS 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 ad(cid:77)ustment 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 di(cid:909)er 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 19. The amount by which progress billing exceeds revenue is shown as advances received from customers for contract work in note 20. 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 pro(cid:77)ects but even so, much property development is financed by funds not unconditionally committed at the commencement of the pro(cid:77)ect. 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 (cid:18) 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 13. 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 Swanke Hayden Connell Europe Limited business combination in 2013 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 been profitable and generated significant profits in the period 2014-2016 which has already led to the recovery of a large proportion of the deferred tax assets. The length of time taken to generate sufficient taxable profits to fully utilise these trading losses is primarily dependent on the strength of the property development market. In combination with the goodwill impairment review described in note 13, 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 (cid:77)urisdictions 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 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. 68 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 69 3 OPERATING SEGMENTS The Group comprises a single business segment and three separately reportable geographical segments (Hubs), together with a group costs segment. Geographical segments are based on the location of the operation undertaking each project. During the period, the Group changed its operating segments as management now considers the business is based on geographic area, rather than by individual country. Accordingly, the Group’s operating segments now consist of the United Kingdom, the Middle East and Continental Europe. Turkey and Russia are no longer reported as separate reporting operating segments, but are included within Continental Europe together with Germany and the C(cid:93)ech Republic. All comparatives have been restated to re(cid:565)ect these changes. Income statement segment information Segment revenue United Kingdom Middle East Continental Europe Revenue Segment revenue less sub consultant costs United Kingdom Middle East Continental Europe Revenue less sub consultant costs 2016 £’000 12,142 7,383 1,316 20,841 2016 £’000 12,080 5,424 906 18,410 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 Middle East Continental Europe Group costs Net finance expense Segment depreciation United Kingdom Middle East Continental Europe Depreciation Segment amortisation United Kingdom Middle East Continental Europe Amortisation 2016 £’000 - - 8 (28) (20) 2016 £’000 254 72 33 359 2016 £’000 27 112 38 177 2015 £’000 14,488 2,129 2,051 18,668 2015 £’000 14,368 1,306 1,212 16,886 2015 £’000 (5) - 3 (8) (10) 2015 £’000 303 10 32 345 2015 £’000 27 32 21 80 2016 Segment result United Kingdom Middle East Continental Europe Group costs Profit before tax 2015 Segment result United Kingdom Middle East Continental Europe Group costs Profit before tax Before goodwill impairment £’000 Release of negative goodwill £’000 Goodwill impairment £’000 1,052 (119) 112 (261) 784 - 160 - - 160 - - (17) - (17) Before goodwill impairment £’000 Release of negative goodwill £’000 Goodwill impairment £’000 1,993 47 88 (258) 1,870 - - - - - Statement of financial position segment information Segment assets United Kingdom Middle East Continental Europe Trade receivables and amounts due from customers for contract work Other current assets Non current assets(cid:13) Total assets (cid:13)Non current assets include investments in associates and (cid:77)oint ventures. Segment liabilities United Kingdom Middle East Continental Europe Trade payables, advances received for contract work and accruals Other current liabilities Non current liabilities Total liabilities Total £’000 1,052 41 95 (261) 927 Total £’000 1,993 47 88 (258) 1,870 2015 £’000 3,443 1,307 470 5,220 3,083 4,306 - - - - - 2016 £’000 2,633 4,918 374 7,925 3,141 4,900 15,966 12,609 2016 £’000 2,502 1,860 147 4,509 2,393 1,875 8,777 2015 £’000 3,809 760 320 4,889 1,061 408 6,358 70 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 71 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 2016 £’000 12,142 12,142 448 868 7,383 8,699 20,841 2016 £’000 2,347 2,347 11 17 693 239 1,374 2,334 4,681 219 4,900 Major clients During the year ended 30 September 2016, the Group derived 10(cid:8) or more of its revenues from one (2015: one) client. Largest client revenues The largest client revenues for 2016 and 2015 relate to the United Kingdom operating segment. 2016 £’000 2,252 2015 £’000 14,488 14,488 1,283 768 2,129 4,180 18,668 2015 £’000 2,518 2,518 43 7 347 237 866 1,500 4,018 288 4,306 2015 £’000 2,309 Revenue by project site The geographical split of revenue based on the location of pro(cid:77)ect sites was: United Kingdom Middle East Continental Europe Rest of the World Revenue 4 OTHER OPERATING INCOME Property rental income Management charges to joint ventures and associates License fee income Other sundry income Release of negative goodwill on acquisition (note 35) Total other operating income 5 FINANCE INCOME Receivable on bank deposits Other finance income Total finance income 6 FINANCE COSTS Payable on bank loans and overdrafts Other finance costs Total finance costs 2016 £’000 12,014 7,349 1,396 82 20,841 2016 £’000 432 104 5 31 160 732 2016 £’000 8 - 8 2016 £’000 28 - 28 2015 £’000 14,262 2,311 2,085 10 18,668 2015 £’000 433 94 10 89 - 626 2015 £’000 - 3 3 2015 £’000 12 1 13 RADIO HOUSE, CAMBRIDGE 72 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 73 7 AUDITOR REMUNERATION 9 OPERATING LEASES During the year the Group incurred the following costs in relation to the Company’s auditor and associates of the Company’s auditor: The operating lease payments recognised as an expense during the year were: 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 - tax compliance services Non audit services (cid:514) audit related assurance services 2016 £’000 30 64 1 3 2015 £’000 36 69 3 - 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(cid:18)489 to omit information about its individual accounts. 8 EMPLOYEE INFORMATION The average number of persons employed by the Group during the year was as follows: Technical Administrative Total 2016 Number 220 47 267 2015 Number 201 43 244 In addition to the number of sta(cid:909) disclosed above, the Group’s associate and (cid:77)oint ventures employed an average of 121 persons (2015: 105 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 2016 £’000 11,254 853 359 12,466 2015 £’000 8,783 895 347 10,025 The wages and salaries costs above include (cid:101)10,000 of restructuring costs (2015: (cid:101)151,000). 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. The Group’s Middle East subsidiaries are required to pay termination indemnities to each employee who completes one year of service as stipulated by UAE labour laws. Further details of this can be found in note 24. Property Plant (cid:9) equipment Total 10 DIRECTORS’ EMOLUMENTS 2016 £’000 1,141 32 1,173 2015 £’000 1,144 33 1,177 2016 Anthony Simmonds Nicholas Thompson Beverley Wright (cid:45)ohn Bullough Andrew Murdoch Nick Pell David Hughes Total 2015 Anthony Simmonds Nicholas Thompson Beverley Wright (cid:45)ohn Bullough Andrew Murdoch Nick Pell David Hughes Duncan Harper Total Aggregate emoluments £’000 Pension contributions £’000 Total received £’000 Waived £’000 Total entitlement £’000 45 206 153 30 113 113 25 685 - 30 21 - 21 3 9 84 45 236 174 30 134 116 34 769 - - - - - - - - 45 236 174 30 134 116 34 769 Aggregate emoluments £’000 Pension contributions £’000 Total received £’000 Waived £’000 Total entitlement £’000 45 241 167 30 135 118 174 11 921 - 29 21 - 16 3 5 1 75 45 270 188 30 151 121 179 12 996 - - - - - 1 - - 1 45 270 188 30 151 122 179 12 997 Duncan Harper resigned from the Group on 10 October 2014. David Hughes resigned as a Director on 22 December 2015. Aggregate emoluments include bonuses awarded. Benefits were accruing to five Directors (2015: six Directors) under defined contribution pension arrangements. The aggregate emoluments of the highest paid Director were (cid:101)206,000 (2015: (cid:101)241,000). 74 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 75 11 TAX CHARGE Current tax Adjustment in respect of previous years Total current tax Origination and reversal of temporary di(cid:909)erences Changes in tax rates Total deferred tax (note 23) Total tax charge 2016 £’000 13 (20) (7) 89 24 113 106 The standard rate of corporation tax in the United Kingdom is applicable for the financial year was 20(cid:8) (2015: 20.5(cid:8)) The tax assessed for the year di(cid:909)ers 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 20(cid:8) (2015: 20.5(cid:8)) E(cid:909)ects of: non tax deductible goodwill impairment other non tax deductible expenses di(cid:909)erences 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 income not taxable Total tax charge 2016 £’000 927 185 3 54 3 (53) 24 35 - (20) (125) 106 2015 £’000 261 (26) 235 (19) (1) (20) 215 2015 £’000 1,870 383 - 69 (1) (57) (1) - (80) (26) (72) 215 12 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 E(cid:909)ect of dilutive options Diluted weighted average of ordinary shares in issue 2016 £’000 772 772 2016 Number 2015 £’000 1,653 1,653 2015 Number 165,213,652 165,213,652 153,916 305,482 165,367,568 165,519,134 As explained in note 26 the Company has granted options over 1,000,000 of its Ordinary Shares. These have been included above as the average share price was above the exercise price in 2016 and they therefore have a dilutive e(cid:909)ect. 13 GOODWILL Group Cost At 1 October 2014 Acquisition of subsidiary Exchange di(cid:909)erences At 30 September 2015 Other adjustments Exchange di(cid:909)erences At 30 September 2016 Impairment At 1 October 2014 Impairment Exchange di(cid:909)erences At 30 September 2015 Charge Exchange di(cid:909)erences At 30 September 2016 Net book value At 30 September 2016 At 30 September 2015 At 30 September 2014 £’000 2,085 481 (33) 2,533 45 101 2,679 250 - - 250 17 3 270 2,409 2,283 1,835 76 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 77 The net book value of goodwill is allocated to the Group’s cash generating units as follows: At 30 September 2014 Acquisition of subsidiary Impairment Exchange di(cid:909)erences At 30 September 2015 Acquisition of subsidiary Other adjustments Impairment Exchange di(cid:909)erences At 30 September 2016 United Kingdom £’000 1,740 - - - 1,740 - - - 1,740 Russia £’000 Turkey £’000 25 - - (9) 16 - (17) 1 - 70 - - (14) 56 - - 10 66 Middle East £’000 - 481 - (10) 471 - 45 - 87 603 Total £’000 1,835 481 - (33) 2,283 - 45 (17) 98 2,409 The other ad(cid:77)ustment of (cid:101)45,000 (2015: (cid:101)nil) to the Middle East CGU is in respect of a measurement period ad(cid:77)ustment relating the acquisition of (cid:45)ohn R Harris (cid:9) Partners Limited in (cid:45)une 2015 to re(cid:565)ect new information obtained within one year about facts and circumstances that were in existence at the acquisition date. 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 (cid:565)ow pro(cid:77)ections based on financial budgets and forecasts covering a five year period. Cash (cid:565)ows beyond the five year period are extrapolated using long term average growth rates. The carrying value of goodwill allocated to the United Kingdom and the Middle East is significant in comparison with the total carrying value of goodwill but the carrying value of goodwill allocated to Turkey is not. During the year, goodwill allocated to Russia has been impaired in full. The key assumptions in the discounted cash (cid:565)ow pro(cid:77)ections for the United Kingdom operation are: (cid:527) (cid:527) (cid:527) (cid:527) 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(cid:30) the future level of costs - which is based on the expected variability with revenue of the various types of expenditure incurred, and in particular the average revenue earning capacity of members of sta(cid:909). These assumptions are based on historical experience and an assessment of the current cost base(cid:30) long term growth rate - which has been assumed to be 2.4(cid:8) per annum based on the average historical growth in gross domestic product in the United Kingdom over the past fifty years(cid:30) and the discount rate - which is the Group’s pre tax weighted average cost of capital and has been assessed at 14.5(cid:8) (2015: 19(cid:8)). This is considered appropriate as the United Kingdom operation produces the majority of the Group’s revenue less sub consultant costs. A 6% fall in all future forecast revenues without a corresponding reduction in costs in the UK CGU would result in carrying amounts exceeding their recoverable amount. The key assumptions in the discounted cash (cid:565)ow pro(cid:77)ections for the Middle East operation are: (cid:527) (cid:527) (cid:527) (cid:527) the future level of revenue - which is based on knowledge of the current and expected level of construction activity in the Middle East, in particular in the build up to the World Expo 2020(cid:30) the future collection of trade receivables - which is based on management’s best estimates of recoverability in a geography where it is common to have high levels of over 60 days trade receivables(cid:30) the future level of costs - which is based on the expected variability with revenue of the various types of expenditure incurred, and in particular the average revenue earning capacity of members of sta(cid:909). These assumptions are based on historical experience and an assessment of the current cost base(cid:30) long term growth rate - which has been assumed to be 5.1(cid:8) per annum based on the average historical growth in gross domestic product in the Middle East over the past forty years(cid:30) and (cid:527) the discount rate - the pre tax cost of capital has been assessed at 13.6(cid:8) (2015: 16.0(cid:8)). This is considered appropriate as the Middle East operation does not su(cid:909)er corporation tax. A 10% fall in all future forecast revenues without a corresponding reduction in costs in the Middle East CGU would result in carrying amounts exceeding their recoverable amount. 14 OTHER INTANGIBLE ASSETS Group Cost At 30 September 2014 Acquisition of subsidiary Exchange di(cid:909)erences At 30 September 2015 Acquisition of subsidiary (note 35) Exchange di(cid:909)erences At 30 September 2016 Amortisation At 30 September 2014 Charge Exchange di(cid:909)erences At 30 September 2015 Charge Exchange di(cid:909)erences At 30 September 2016 Net book value At 30 September 2016 At 30 September 2015 At 30 September 2014 Trade name £’000 Customer relationships £’000 Order book £’000 Trade licence £’000 402 - (23) 379 282 46 707 13 15 (1) 27 41 5 73 634 352 389 234 158 (23) 369 28 51 448 29 37 (6) 60 50 4 114 334 309 205 36 117 (4) 149 - 26 175 36 26 (7) 55 79 19 153 22 94 - - 63 2 65 - 11 76 - 2 - 2 7 1 10 66 63 - Total £’000 672 338 (48) 962 310 134 1,406 78 80 (14) 144 177 29 350 1,056 818 594 Amortisation is included in other operating charges in the consolidated income statement. Trade name The trade name was acquired as part of the acquisition of Swanke Hayden Connell Europe Limited (“SHC”) in December 2013 and also on the acquisition of Shankland Cox Limited ((cid:522)SCL(cid:523)) in February 2016. The SHC trade name re(cid:565)ects the inclusion of the Swanke name in the enlarged Group. Trade names are amortised on a straight line basis over a 25 year period from the acquisition date. Customer relationships The customer relationships were acquired as part of the acquisition of SHC in December 2013, on the acquisition of (cid:45)ohn R Harris (cid:9) Partners Limited ((cid:522)(cid:45)RHP(cid:523)) in (cid:45)une 2015 and on the acquisition of SCL in February 2016. This represents the value attributed to clients who provided repeat business to the Group on the strength of these relationships. Customer relationships are amortised on a straight line basis over a 7-10 year period from the acquisition dates. 78 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 79 16 IN(cid:57)ESTMENTS Company Cost At 30 September 2014 Additions Disposals Change in value of indemnification asset At 30 September 2015 Additions Disposals At 30 September 2016 Provisions At 30 September 2014 Charge At 30 September 2015 Charge At 30 September 2016 Net book value At 30 September 2016 At 30 September 2015 At 30 September 2014 Subsidiaries £’000 Joint ventures £’000 Associate £’000 6,931 897 - (43) 7,785 2,142 - 9,927 3,497 - 3,497 - 3,497 6,430 4,288 3,434 21 - - - 21 - - 21 - - - - - 21 21 21 12 - - - 12 - - 12 - - - - - 12 12 12 Total £’000 6,964 897 - (43) 7,818 2,142 - 9,960 3,497 - 3,497 - 3,497 6,463 4,321 3,467 Order book The net book value of the order book was acquired as part of the acquisition of (cid:45)RHP in (cid:45)une 2015. This represents the value of on going contracts acquired at the acquisition date. The amortisation of the order book is over the period to completion of the contracts. Trade licence The trade licence was acquired as part of the acquisition of (cid:45)RHP in (cid:45)une 2015. This represents the value of licences granted to (cid:45)RHP for architectural activities in the regions in which it operates. The licence is amortised on a straight line basis over a 10 year period from the acquisition date. 15 PROPERTY, PLANT (cid:9) E(cid:52)UIPMENT Group Cost At 30 September 2014 Additions Acquisition of subsidiary Disposals Exchange di(cid:909)erences At 30 September 2015 Additions Acquisition of subsidiary (note 35) Disposals Exchange di(cid:909)erences At 30 September 2016 Depreciation At 30 September 2014 Charge Disposals Exchange di(cid:909)erences At 30 September 2015 Charge Disposals Exchange di(cid:909)erences At 30 September 2016 Net book value At 30 September 2016 At 30 September 2015 At 30 September 2014 Leasehold improvements £’000 Furniture & equipment £’000 569 - - - (11) 558 - - (7) 6 557 227 106 - (5) 328 103 (7) 3 427 130 230 342 1,025 209 75 (25) (34) 1,250 151 132 (92) 53 1,494 719 239 (19) (22) 917 256 (75) 20 1,118 376 333 306 Total £’000 1,594 209 75 (25) (45) 1,808 151 132 (99) 59 2,051 946 345 (19) (27) 1,245 359 (82) 23 1,545 506 563 648 80 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 81 Subsidiary operations The following are the subsidiary undertakings at 30 September 2016: Name Subsidiaries Country of Incorporation Class and proportion of ordinary equity held 2016 2015 Nature of business Aukett Swanke Limited England & Wales Aukett Fitzroy Robinson International Limited England & Wales (cid:57)eretec Limited England & Wales Aukett Swanke OOO (formerly (cid:61)AO Aukett Fit(cid:93)roy (cid:57)ostok) Russia Swanke Hayden Connell International Limited England & Wales Swanke Hayden Connell Mimarlik AS (cid:45)ohn R Harris (cid:9) Partners Limited Turkey Cyprus Shankland Cox Limited England & Wales Swanke Hayden Connell Europe Limited England & Wales Aukett Fit(cid:93)roy Robinson Sp (cid:61)oo Poland Fitzroy Robinson Limited Swanke Limited (cid:45)ohn R Harris (cid:9) Partners Limited Aukett Fitzroy Robinson Limited Thomas Nugent Architects Limited England & Wales England & Wales England & Wales England & Wales England & Wales Aukett Fitzroy Robinson Europe Limited England & Wales Aukett Limited Aukett (UK) Limited Aukett Group Limited England & Wales England & Wales England & Wales Fitzroy Robinson West & Midlands Limited England & Wales 100% 100% 100% 100% 100% 100% 80(cid:8) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Architecture & design Architecture & design Architecture & design 100% Architecture & design 100% 100% 80(cid:8) Architecture & design Architecture & design Architecture & design - Architecture & Engineering 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Non trading Non trading Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Aukett Fitzroy Robinson International Limited is incorporated in England & Wales, but operates principally through its Middle East branch which is registered in the Abu Dhabi emirate of the United Arab Emirates. (cid:45)ohn R Harris (cid:9) Partners Limited is incorporated in Cyprus and operates principally in the Middle East. It is also the only subsidiary for which there is a non controlling interest. The proportion of equity and voting rights held by the non controlling interests is 20%. Shankland Cox Limited is incorporated in England & Wales, but operates principally through its Middle East branches registered in emirates of the United Arab Emirates including Abu Dhabi, Dubai, Al Ain and Ras Al Khaimah. Interest in associate and joint ventures Set out below are the associate and joint ventures of the Group as at 30 September 2016. The entities listed below have share capital consisting solely of ordinary shares, held directly by the Group. The country of incorporation is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held. Name of entity Country of incorporation % of ownership interest Nature of relationship Measurement method Aukett + Heese Frankfurt GmbH Germany Aukett sro Czech Republic Aukett + Heese GmbH Germany 2016 50% 50% 25% 2015 50% 50% 25% (cid:45)oint (cid:57)enture (cid:45)oint (cid:57)enture Associate Equity Equity Equity All joint venture and associate entities provide architectural and design services. There are no contingent liabilities or commitments in relation to the joint ventures or associates. 17 IN(cid:57)ESTMENT IN ASSOCIATE As disclosed in note 16, the Group owns 25(cid:8) of Aukett + Heese GmbH which is based in Berlin, Germany. The table below provides summarised financial information for Aukett + Heese GmbH as it is material to the Group. The information disclosed re(cid:565)ects Aukett + Heese GmbH’s relevant financial statements and not the Group’s share of those amounts. They have been amended to re(cid:565)ect ad(cid:77)ustments made by the Group when using the equity method. Summarised balance sheet Assets Non current assets Current assets Total assets Liabilities Current liabilities Non current liabilities Total liabilities Net assets Reconciliation to carrying amounts: Opening net assets at 1 October Profit for the period Other comprehensive income Dividends paid Closing net assets Group’s share in % Group’s share in £’000 Carrying amount 2016 £’000 372 3,116 3,488 (1,372) - (1,372) 2,116 1,017 840 259 - 2,116 25% 529 529 2015 £’000 233 1,991 2,224 (1,207) - (1,207) 1,017 976 1,055 (49) (965) 1,017 25% 254 254 82 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 83 Summarised statement of comprehensive income Revenue Sub consultant costs Revenue less sub consultant costs Operating costs Profit before tax Taxation Profit for the period from continuing operations Other comprehensive income Total comprehensive income 2016 £’000 8,254 (1,807) 6,447 (5,244) 1,203 (363) 840 259 1,099 2015 £’000 7,713 (2,215) 5,498 (3,986) 1,512 (457) 1,055 (49) 1,006 The Group received dividends of (cid:101)nil (2015: (cid:101)241,000) from Aukett + Heese GmbH. The principal risks and uncertainties associated with Aukett + Heese GmbH are the same as those detailed within the Group’s Strategic Report. 18 IN(cid:57)ESTMENTS IN (cid:45)OINT (cid:57)ENTURES Frankfurt As disclosed in note 16, the Group owns 50% of Aukett + Heese Frankfurt GmbH which is based in Frankfurt. At 30 September 2014 Share of profits Dividends paid Exchange di(cid:909)erences At 30 September 2015 Share of profits Dividends paid Exchange di(cid:909)erences At 30 September 2016 £’000 124 13 (37) (6) 94 50 - 20 164 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 2016 £’000 8 308 316 (152) - (152) 164 2015 £’000 9 186 195 (101) - (101) 94 Revenue Sub consultant costs Revenue less sub consultant costs Operating costs Profit before tax Taxation Profit after tax Prague As disclosed in note 16, the Group owns 50(cid:8) of Aukett sro which is based in Prague. At 30 September 2014 Share of profits Exchange di(cid:909)erences At 30 September 2015 Share of profits Exchange di(cid:909)erences At 30 September 2016 The following amounts represent the Group’s 50% share of the assets and liabilities of Aukett sro. Assets Non current assets Current assets Total assets Liabilities Current liabilities Non current liabilities Total liabilities Net assets 2016 £’000 474 (92) 382 (323) 59 (9) 50 2016 £’000 1 71 72 (55) - (55) 17 2015 £’000 443 (147) 296 (277) 19 (6) 13 £’000 7 - (1) 6 8 3 17 2015 £’000 1 64 65 (59) - (59) 6 84 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 85 Revenue Sub consultant costs Revenue less sub consultant costs Operating costs Profit before tax Taxation Profit after tax 19 TRADE AND OTHER RECEI(cid:57)ABLES Group Gross trade receivables Impairment allowances Net trade receivables Amounts due from customers for contract work Amounts owed by associates and joint ventures Other receivables Prepayments Total Company Amounts due after more than one year Amounts owed by associate and joint ventures Total amounts due after more than one year Amounts due within one year Amounts owed by subsidiaries Amounts owed by associate and joint ventures Other receivables Prepayments Total amounts due within one year Total 2016 £’000 168 (10) 158 (150) 8 - 8 2016 £’000 7,334 (1,276) 6,058 1,867 49 435 818 9,227 2016 £’000 49 49 1,270 - 35 6 1,311 1,360 2015 £’000 143 (22) 121 (121) - - - 2015 £’000 4,498 (357) 4,141 1,079 70 425 715 6,430 2015 £’000 48 48 382 22 16 12 432 480 20 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 Dividends payable Accruals Total Company Trade payables Amounts owed to subsidiaries Other payables Dividends payable Accruals Total See note 34 for further details of the amounts due to subsidiaries. 21 SECURED BANK LOAN Group and Company 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 2016 £’000 1,089 1,616 - 626 1,302 116 1,804 6,553 2016 £’000 22 3,421 1 116 59 3,619 2016 £’000 247 247 247 555 802 1,049 2015 £’000 881 2,572 4 704 236 - 1,436 5,833 2015 £’000 4 2,157 2 - 137 2,300 2015 £’000 - - - - - - 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(cid:8) above the London Interbank O(cid:909)er Rate (LIBOR) in the relevant currency. 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. 86 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 87 22 ANALYSIS OF NET FUNDS Group Cash and cash equivalents Cash and cash equivalents Secured bank loan (note 21) Net funds 23 DEFERRED TAX Group At 30 September 2014 Income statement Exchange di(cid:909)erences At 30 September 2015 Income statement Exchange di(cid:909)erences At 30 September 2016 Group Deferred tax assets Deferred tax liabilities Net deferred tax balance Tax depreciation on plant and equipment £’000 65 (5) - 60 (4) - 56 Trading losses £’000 225 15 (12) 228 (73) 1 156 2016 £’000 1,839 1,839 (1,049) 790 Other temporary di(cid:909)erences £’000 (71) 10 7 (54) (36) (3) (93) 2016 £’000 219 (100) 119 2015 £’000 1,873 1,873 - 1,873 Total £’000 219 20 (5) 234 (113) (2) 119 2015 £’000 288 (54) 234 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 in respect of losses that can be carried forward against future taxable income in its Russian operation. The Group also did not recognise deferred income tax in respect of taxable losses carried forward against future taxable income of certain of its subsidiaries which are incorporated in the UK but operate wholly through permanent establishments in the Middle East and future profits are therefore anticipated to be non taxable. Further information regarding the assessment of the recoverability of deferred tax assets is given in note 2. The Company has a deferred tax asset of (cid:101)nil (2015: (cid:101)2,000) recognised in respect of other temporary di(cid:909)erences. 24 PRO(cid:57)ISIONS Group At 30 September 2014 On acquisition of subsidiary Utilised Released Provided Exchange di(cid:909)erences At 30 September 2015 On acquisition of subsidiary Utilised Released Provided Exchange di(cid:909)erences At 30 September 2016 Redundancy provision £’000 Property lease provision £’000 Employee benefit obligations £’000 7 - (3) (1) - (3) - - - - - - - 52 - - - 95 - 147 - - - 45 - 192 45 164 (15) - 18 (5) 207 589 (124) - 97 102 871 Total £’000 104 164 (18) (1) 113 (8) 354 589 (124) - 142 102 1,063 Redundancy provision The redundancy provision at 30 September 2014 related to the expected costs of reducing sta(cid:909) numbers to better match staffing resources with projected workload. The provision arose from obligations contained in employment contracts and statutory obligations. Property lease provision The provision carried forward at 30 September 2016 is the future estimated cost of work to be performed after seeking appropriate external professional advice for the Group’s two London premises, on obligations arising under its lease. Employee benefit obligations The Group’s Middle East subsidiaries are required to pay termination indemnities to each employee who completes one year of service as stipulated by UAE labour laws. The net charge to the income statement comprises the service cost and the interest on the liability and is included in personnel related expenses. The obligation has been measured at the reporting date using the projected unit credit method in accordance with IAS 19 and is funded from working capital. The key actuarial assumptions used in the calculation are detailed below: Combined average length of service 5 years Discount rate Salary growth rate 2.125% 2.7% The Group determined discount rates on the basis of current yields on 5 year government bonds in the same currency as the liabilities. Forecast consumer price in(cid:565)ation (CPI) in the region has been used as a proxy for forecast salary growth. The sensitivity of the employee benefit obligation to changes in assumptions is set out below. The e(cid:909)ects of a change in assumption are weighted proportionally to the total plan obligations to determine the total impact for each assumption presented. 88 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 89 Impact on employee benefit obligation 27 CASH GENERATED FROM OPERATIONS Change in assumption Increase in assumption Decrease in assumption Group Combined average length of service Salary growth rate Discount rate 1 year 1% 1% 2.1% 0.6% (0.6)% (8.7)(cid:8) (0.6)% 0.6% 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 employee to receive termination indemnity. The liability has been measured in line with IAS 19 and is funded from working capital. 25 SHARE CAPITAL Group and Company Allocated, called up and fully paid 165,213,652 (2015: 165,213,652) ordinary shares of 1p each At 1 October 2014 No changes At 30 September 2015 No changes At 30 September 2016 2016 £’000 1,652 2015 £’000 1,652 Number 165,213,652 - 165,213,652 - 165,213,652 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: At 1 October 2015 Number 1,000,000 1,000,000 Granted 11 April 2011 Total Granted Number Lapsed Number - - - - At 30 September 2016 Number 1,000,000 1,000,000 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. Profit before tax (cid:514) continuing operations Finance income Finance costs Share of results of associate and joint ventures Goodwill impairment provision Intangible amortisation Depreciation Loss(cid:18)(profit) on disposal of property, plant (cid:9) equipment Change in trade and other receivables Change in trade and other payables Change in provisions Negative goodwill Unrealised foreign exchange di(cid:909)erences Net cash generated from operations Company Profit before income tax Dividends received Finance costs Change in trade and other receivables Change in trade and other payables Unrealised foreign exchange di(cid:909)erences Net cash (used by) (cid:18) generated from operations 2016 £’000 927 (8) 28 (267) 17 177 359 10 628 2015 £’000 1,870 (3) 14 (277) - 80 345 (2) 597 (1,583) (1,273) 16 (160) (40) 104 2016 £’000 543 (820) 23 (879) 70 217 (846) 92 - - 1,443 2015 £’000 757 (1,279) 2 (26) 616 - 70 90 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 91 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 and joint ventures Other receivables Cash and cash equivalents Loans and receivables Trade payables Amounts owed to subsidiaries Other payables Accruals Secured bank loan Financial liabilities measured at amortised cost Net financial instruments 2016 £’000 6,058 1,867 49 434 1,839 10,247 (1,089) (1,419) - (1,804) (1,049) (1,063) (6,424) 3,823 2016 £’000 1,271 49 - 596 1,916 (22) (3,422) (117) (59) (1,049) (4,669) (2,753) 2015 £’000 4,141 1,079 70 425 1,873 7,588 (881) (236) (4) (1,436) - (354) (2,911) 4,677 2015 £’000 382 70 16 1,007 1,475 (4) (2,157) (2) (137) - (2,300) (825) 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 2016 £’000 5,930 1,010 2015 £’000 10,959 1,551 Other receivables in the consolidated statement of financial position include a (cid:101)148,000 rent security deposit (2015: (cid:101)148,000) in respect of one of the Group’s London studio premises and a (cid:101)6,000 rent deposit (2015: (cid:101)10,000) 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 pro(cid:77)ects. 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 (cid:61)loty Russian Rouble UAE Dirham UK Sterling US Dollar Turkish Lira Net financial instruments Company Czech Koruna EU Euro UK Sterling US Dollar UAE Dirham Turkish Lira Net financial instruments 2016 £’000 48 78 2 100 2,210 1,773 (653) 265 3,823 2016 £’000 49 80 (1,332) (906) (650) 6 (2,753) 2015 £’000 48 63 (9) 408 512 3,961 (324) 18 4,677 2015 £’000 48 62 (929) (74) 68 - (825) The Directors consider that there were no material di(cid:909)erences 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 (cid:565)ows. A 10(cid:8) percent weakening of UK Sterling against all currencies at 30 September would have increased (cid:18) (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(cid:8) strengthening of UK Sterling against all currencies would have an equal but opposite e(cid:909)ect. 92 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 93 Group Company 2016 Profit £’000 100 (142) Equity £’000 105 - 2015 Profit £’000 45 10 Equity £’000 35 - The following foreign exchange gains (cid:18) (losses) arising from financial assets and financial liabilities have been recognised in the income statement: 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 (cid:101)8,102,000 (2015: (cid:101)5,220,000) 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. 2016 £’000 623 429 329 2015 £’000 445 292 175 Group Company 2016 £’000 26 (190) 2015 £’000 (1) (12) Largest exposure Second largest exposure Third largest exposure The Group’s exchange loss of (cid:101)26,000 (2015: loss of (cid:101)1,000) includes cumulative exchange reserve losses of (cid:101)nil (2015: (cid:101)nil) recycled through the income statement on discontinued operations. 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: The Group’s principal banker is Coutts (cid:9) Co, a member of the Royal Bank of Scotland group. At 30 September 2016 the largest exposure to a single financial institution represented 60(cid:8) (2015: 87(cid:8)) 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 United Kingdom 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 United Kingdom 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. 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: 2016 £’000 2,170 929 408 2,551 6,058 At 30 September 2014 Acquisition of subsidiary Release to the income statement Allowance utilised Exchange di(cid:909)erences At 30 September 2015 Acquisition of subsidiary Release to the income statement Allowance utilised Exchange di(cid:909)erences At 30 September 2016 2015 £’000 1,978 753 510 900 4,141 £’000 44 321 (11) - 3 357 696 155 (80) 148 1,276 31 INTEREST RATE RISK Group Rent deposit Secured bank loan Interest bearing financial instruments Company Secured bank loans and overdrafts Interest bearing financial instruments 2016 £’000 148 (1,049) (901) 2016 £’000 (1,049) (1,049) 2015 £’000 148 - 148 2015 £’000 (77) (77) 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(cid:8) above the London Interbank O(cid:909)er Rate (LIBOR) of the relevant currency. A 1(cid:8) point 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(cid:8) fall in worldwide interest rates would have an equal but opposite e(cid:909)ect. 94 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 95 2016 £’000 (9) (10) 2015 £’000 2 (1) The lease of its York Way studio does not contain any break clauses and expires in (cid:45)uly 2018. The lease of its Christopher Street studio expires in September 2017. At both 30 September 2016 and 2015 neither the Group nor the Company had any capital commitments in respect of property, plant and equipment. The Group also acts as a lessor through the sub let of the ground and first (cid:565)oors at its Christopher Street studio. The following is the aggregate receivables under these operating leases. Group Company 32 LI(cid:52)UIDITY RISK The Group’s cash balances are held at call or in deposits with very short maturity terms. At 30 September 2016 the Group had (cid:101)850,000 (2015: (cid:101)850,000) of gross borrowing facility under its United Kingdom gross bank overdraft facility. In January 2017 Coutts & Co renewed the gross overdraft facility which is now next due for review in December 2017. The Group and Company had outstanding borrowings of (cid:101)1,049,000 (2015: (cid:101)nil) at 30 September 2016. The maturity analysis of borrowings, including contractual payments of (cid:565)oating 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 2016 £’000 274 270 579 1,123 (74) 1,049 2015 £’000 - - - - - - 33 GUARANTEES, CONTINGENT LIABILITIES AND OTHER COMMITMENTS A cross guarantee and o(cid:909)set 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 2016 the overdrafts of its United Kingdom subsidiaries guaranteed by the Company totalled (cid:101)nil (2015: (cid:101)205,000). The Company and certain of its United Kingdom subsidiaries are members of a Group for (cid:57)alue Added Tax ((cid:57)AT) purposes. At 30 September 2016 the net (cid:57)AT payable balance of those subsidiaries was (cid:101)321,000 (2014: (cid:101)356,000). At the year end, one of the Group’s Middle East subsidiaries had outstanding letter of guarantees totalling (cid:101)166,000 (2015: (cid:101)nil). In common with other firms providing professional services, the Group is sub(cid:77)ect 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 2016 £’000 1,016 392 - 1,408 2015 £’000 1,012 1,345 - 2,357 The Group’s most significant lease relates to its two London studio premises which comprises (cid:101)1,350,000 (2015: (cid:101)2,228,000) of the amounts shown in the table above. Not later than one year Later than one year and not later than five years Later than five years Total 34 RELATED PARTY TRANSACTIONS 2016 £’000 260 - - 260 2015 £’000 346 258 - 604 Key management personnel compensation The key management personnel of the Group comprise the directors of the Company together with the managing and financial directors of the United Kingdom and international operations. During the year the key management of the business has been rationalised. 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 2016 £’000 1,553 136 1,689 2016 £’000 774 84 858 2015 £’000 2,065 132 2,197 2015 £’000 1,035 76 1,111 Transactions and balances with associate and joint ventures The amount owed to the Group by Aukett + Heese Frankfurt GmbH at 30 September 2016 was (cid:101)22,000 (2015: (cid:101)22,000) relating to accrued management charges. Invoices issued by the Group in respect of these services amounted to (cid:101)45,000 (2015: (cid:101)18,000). The Group makes management charges to Aukett + Heese GmbH. Invoices issued by the Group during the year in respect of these services amounted to (cid:101)55,000 (2015: (cid:101)60,000). The amount owed to the Group by Aukett + Heese GmbH at 30 September 2016 in respect of these management charges was (cid:101)nil (2015: (cid:101)nil). As disclosed in note 16, 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 2016 was (cid:101)49,000 (2015: (cid:101)48,000) relating to previously declared but not yet paid dividends and name licence charges. During the year, management charges of (cid:101)5,000 (2015: (cid:101)nil) were made to Aukett sro. None of the balances with the associate or (cid:77)oint ventures are secured. 96 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 97 Transactions and balances with subsidiaries The names of the Company’s subsidiaries are set out in note 16. The Company made management charges to its subsidiaries for management services of (cid:101)800,000 (2015: (cid:101)782,000) and paid charges to its subsidiaries for office accommodation and other related services of (cid:101)90,000 (2015: (cid:101)390,000). At 30 September 2016 the Company was owed (cid:101)1,271,000 (2015: (cid:101)382,000) by its subsidiaries and owed (cid:101)3,421,000 (2015: (cid:101)2,157,000) to its subsidiaries. These balances arose through various past transactions including working capital advances, treasury management and management charges. The amounts owed at the year end are non interest bearing and repayable on demand. The amounts owed by United Kingdom 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 10 February 2016 the Group acquired 100% of the issued share capital of Shankland Cox Limited (‘SCL’), a company incorporated in England and Wales but operating through 4 branches in the United Arab Emirates. The total consideration, all to be paid in cash, was structured as follows: • • AED 4.5m on completion. AED 1.5m upon release of banking guarantees, paid after the acquisition date. (cid:527) Maximum deferred consideration of AED 9.8m dependant on the collection of trade receivables and work in progress from the agreed Balance Sheet within 2 years from the completion date. The deferred consideration up to a maximum of AED 9.8m had a fair value of AED 5.4m at acquisition. The minimum amount currently payable in respect of this deferred consideration is AED1.3m, representing receivables which have been collected. The maximum amount payable is currently AED 8.7m, which is contingent on the collection of all acquired trade receivables before 10 February 2018. Of the AED 11.4m fair value of consideration transferred, AED 6.0m cash consideration has been paid and the full deferred consideration remains outstanding at the balance sheet date. At the year end, the fair value of deferred consideration has been estimated to be AED 4.8m. The acquisition considerably improves our market position and o(cid:909)ering in the Middle East. The table below summarises the consideration paid for SCL, the fair value of assets acquired and liabilities assumed at the acquisition date. Negative goodwill of (cid:101)160,000 has arisen on acquisition following recognition of the intangible assets noted above. This credit to the income statement compensates for short term costs incurred to restructure the business. Acquisition costs of (cid:101)58,220 have been included in other operating charges in the consolidated income statement for the year ended 30 September 2016. The fair value of trade and other receivables is £2,530,000 and includes trade receivables with a fair value of £2,146,000. The gross contractual amount for trade receivables due is (cid:101)2,842,000, of which (cid:101)696,000 is expected to be uncollectable. The fair values of the acquired identifiable intangibles are based on finalised valuations. The revenue included in the consolidated income statement since 10 February 2016 contributed by SCL was £2,275,000. The revenue less sub consultant costs contributed over the same period was £2,067,000. The loss before tax, amortisation and gain on bargain purchase during the period since acquisition was £557,000. Had SCL been consolidated from 1 October 2015, the consolidated income statement would show pro-forma revenue of (cid:101)22,608,000 and profit before tax of £709,000. 36 CORPORATE INFORMATION General corporate information regarding the Company is shown on page 40. The addresses of the Group’s principal operations are shown on page 4. A description of the Group’s operations and principal activities is given within the Strategic Report. Consideration at 10 February 2016 Cash Fair value of deferred consideration at acquisition Total consideration transferred at acquisition Recognised amounts of identifiable assets acquired and liabilities assumed Cash and cash equivalents Property, Plant and Equipment (note 15) Brand Name (note 14) Customer relationships (note 14) Amounts recoverable on contracts Trade and other receivables Trade and other payables Provision for liabilities (note 24) Total identifiable net assets Release of negative goodwill on acquisition Total 98 £’000 1,126 1,015 2,141 365 132 282 28 401 2,530 (848) (589) 2,301 (160) 2,141 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 ONE FORBURY PLACE, READING 99 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 - 0371 384 2030 (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 100 AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016 125 WOOD STREET, LONDON EC2 Imperial College London is proud of Aukett Swanke’s design for the Molecular Sciences Research Hub at our new White City Campus. The building’s inherent flexibility is highlighted through our fitout of complex and pioneering new research facilities within the elegant shell and core structure. Our vision to provide a multi-functional building that can support a modern, collaborative approach to world-class science within the context of Aukett Swanke’s original master plan has been truly realised with this impressive building. The scheme anchors the main central square in the northern half of the Campus, sitting well with partner buildings, and will be a key part of our longer-term vision for the site. John Anderson Director of Financial Strategy Imperial College London www.aukettswanke.com Designed and produced by Aukett Swanke Graphics | © Copyright 2017 Aukett Swanke Group Plc
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