&ANNUAL
REPORT
ACCOUNTS
2017
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
ABOUT US
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 13
offices across 6 countries: UK, Germany, Russia, Turkey, the
UAE and the 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: THE BRADFIELD CENTRE, CAMBRIDGE SCIENCE PARK
OUR CLIENTS
INCLUDE . . .
AB Development / ABN Amro Bank / Aberdeen Standard /
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 / CBRE
/ Cedar Capital / Cengiz Holding / Central Properties / Chrome
Hearts / CIN LaSalle / Cisco / City of London Academy / Cofunds /
Comstrin / Commercial Estates Group / 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 / Danfoss
/ DB Schenker / Decathlon / Deloitte / Deutsche Bank / Diageo
/ Dimension Data / 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
/ Freight 1 Gazprom / Gazpromstroyinvest / GD Investments
/ GE Capital / Gertler / GLAV UPDK / Glavstroy / Global Stream
/ GMO Group / Goldman Sachs / Goodman / Google / Great
Portland Estates / GroupM / Grosvenor / GSK / GTN Global
Properties / GUM / Güneri Insaat A.S Halk GYO / Hammer AG
/ Helical Bar / Henderson Global Investors / Heptares / Hexal /
Hilton International / Hochtief / Homerton University Hospital /
Honeywell / Horus Capital / HSBC / Huishan Zhang 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 /
Jesus College, Cambridge / 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
/ Landsec / 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 / Novartis /
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 / PPF Real Estate / 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 / Sminex / Sotheby’s / Southampton City
Council / Southampton Solent University / South Cambridgeshire
District Council / Soyak Inşaat / Standard Life Investments / St
John’s College, Cambridge / St Martin’s Property / Staropramen
Breweries / Stephenson Harwood / Stolny Grad Development /
Stone Brewing / Strelka / Sumitomo Mitsui Banking Corporation
(SMBC) / Sun Microsystems / Suse Linux / Swan Operations /
Symantec / Syngenta International Tahincioğlu Gayrimenkul
/ Talan / Takeda / TAT Immobilen / Taylor Wimpey / TDIC /
TechInvest / Tekar / Tekfen Emlak / Tenkhoff Properties / The
London Clinic / The Mercers’ Company / The Royal College of
Surgeons of England / The Royal St George’s Golf Club / Tiffany
s.r.o. / Tishman Speyer / Tonstate / Transport for London / Trinity
College, Cambridge / Trinity Hall / Türkiye Finans Katılım Bankasi
UGMK Holding / U+I / University of Cambridge / University
of Sheffield Vakifbank / Vakifbank / Vesper / Vestas / Vinci
Construction / VMWare / Vodafone / Voreda / VTB Capital Bank
/ Vysota Wates / Welbeck Land / Westminster City Council /
White & Case / Willis Group Zamania / Zurich Insurance Group
2
FORBURY PLACE PHASE 2, READING
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 London
Frankfurt
Berlin
Prague
Moscow
Istanbul
UK 100 PEOPLE
CONTINENTAL EUROPE 200 PEOPLE
UAE 115 PEOPLE
TOTAL 415 PEOPLE
Dubai
Abu Dhabi
Ras Al Khaimah
Al Ain
OUR STUDIOS
AND LOCATIONS
36-40 York Way
LONDON N1 9AB
United Kingdom
T +44 (0)20 7843 3000
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 34/6
Deniz Is Hani
34394 Zincirlikuyu
ISTANBUL
Turkey
T +90 212 318 0400
istanbul@aukettswanke.com
415 people
13 studios
6 countries
4
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 St
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
1308 Sidra Tower
Sheikh Zayed Road
PO Box 616
DUBAI
United Arab Emirates
T +971 (0) 4 369 7197
dubai@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 St, Umm Ramool
DUBAI
United Arab Emirates
T +971 (0) 4 286 2831
dubai@johnrharris.com
Mohd Hasan Abdulla Omran Bld.
PO Box 36800
RAS AL KHAIMAH
United Arab Emirates
T +970 (0)4 338 0144
info@shanklandcox.com
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
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
30
31
31
32 - 40
41 - 44
45
46 - 49
50
51
52
53
54
55
56
57
Notes to the financial statements
58 - 95
SHAREHOLDER INFORMATION
96
PROJECT SAPPHIRE, GRANTA PARK, CAMBRIDGE
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
5
This year we are proud to have four projects shortlisted
in the UK British Council for Offices (BCO) Awards in their
respective regions:
Verde SW1, London SW1; Adelphi, London WC2;
The Bradfield Centre, Cambridge Science Park, Cambridge
and Project Sapphire, Granta Park, Cambridge.
PROJECT SAPPHIRE, GRANTA PARK, CAMBRIDGE
VERDE SW1, LONDON SW1
p12
Winning the double: how Veretec won the
AJ100 Executive Architect of the Year Award
for two years running
Keith Morgan, Managing Director - Veretec
ADELPHI, LONDON WC2
HIGHLIGHTS
& AWARDS
We are pleased to announce the appointment of two
new directors in our UAE studios - Omid Rouhani and
Subraya Kalkura.
THE BRADFIELD CENTRE, CAMBRIDGE SCIENCE PARK
Aukett Swanke have been placed 43rd
in the Building Design 2018 World
Architecture 100 League Table, up five
places from last year’s position.
This also places us as the fifth largest UK
registered practice on the table.
We have also appointed two new directors in the UK
- Jason Bagge as a director of Aukett Swanke, and
Gordon McQuade as a director of Veretec.
The Spa and Mei Ume
Restaurant in the Four Seasons
Hotel at Ten Trinity Square
were shortlisted in the Spa
& Wellness and Restaurant
categories respectively in the
Ahead Europe Awards 2017.
We are very pleased to have been placed 23rd
in the Architect’s Journal 2017 AJ100 league table,
which is based on UK staffing levels.
Ten Trinity Square was also runner
up in the City of London Building of
the Year Awards.
This award is presented by the
Worshipful Company of Chartered
Architects in order to highlight the
contribution that architecture makes
to the townscape of the Square
Mile, as well as the Corporation
of London’s policies to create a
business environment suitable for
the world’s financial capital.
p16
Verde SW1 and its successes: Three industry awards
and 100% commercial letting
Luke Schuberth, Managing Director - UK
p20
Size really does matter: how we have
achieved our strategic goals since 2015
Stephen Embley, Managing Director -
Middle East
p22
The Cambridge hotspots:
our involvement
Peter Eaton, Director - UK
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AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
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AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 FORBURY PLACE PHASE 2, READING
LUTRON SHOWROOMS, LONDON EC2
RECENT
PROJECTS
IN THE UK
HUISHAN ZHANG, MAYFAIR, LONDON W1
CENTRAL SQUARE - CONCEPT STUDY
INDUSTRIAL R&D PROJECT
CONVERSION OF INDUSTRIAL BUILDING TO WORKPLACE / R+D / EDUCATION / LEISURE OPTIONS
10 QUEEN STREET PLACE, LONDON EC4
WHITE COLLAR FACTORY, LONDON EC1 -
EXECUTIVE ARCHITECT
THE BRADFIELD CENTRE, CAMBRIDGE SCIENCE PARK
MEI UME RESTAURANT, FOUR SEASONS AT TEN TRINITY SQUARE, LONDON EC3
PROJECT SAPPHIRE, GRANTA PARK, CAMBRIDGE
8
ADELPHI, LONDON WC2
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
9
BOUTIQUE HOTEL, CENTRAL LONDON
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 INTERIOR FOR INVESTMENT COMPANY
NIDAKULE GUNEY DEVELOPMENT, ISTANBUL
SPINDLERSHOF, BERLIN
WOORI BANK, BERLIN
DIMENSION DATA, PRAGUE
ZOOM RETAIL, BERLIN
RECENT
INTERNATIONAL
PROJECTS
SCREEN DETAIL, MIRDIFF RETAIL, DUBAI
ALLIANZ HEADQUARTERS, ISTANBUL
MEDITERRANEAN VILLA - CONCEPT STUDY
BVLGARI HOTEL AND RESIDENCES, DUBAI - AS ARCHITECT OF RECORD
DIMC BOAT STORAGE FACILITY, DUBAI MARINA
RESIDENCE CHURCHILL, PRAGUE
GROPIUS PASSAGEN, BERLIN
ROCKWELL AUTOMATION, PRAGUE
CONFERENCE SPACE, RUSSIA
ALLIANZ CAMPUS, BERLIN
10
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
11
ABU DHABI UNIVERSITY – START AD
WINNING THE DOUBLE: HOW VERETEC WON
THE AJ100 EXECUTIVE ARCHITECT OF THE YEAR AWARD
FOR TWO YEARS RUNNING
BY KEITH MORGAN
It is excellent that the AJ100 recognised Executive Architecture
as a separate award category for the first time in 2016, and
we are especially proud that Veretec has been awarded this
for two consecutive years in 2016 and 2017.
Keith Morgan
Managing Director - Veretec,
based in the London studio
Based on responses we received from the judges we have been
able to demonstrate our commitment to collaboration and a
perceptive technical focus; to preserve the original design intent
during the delivery of a project resonated with the AJ100 judges
- many of whom are leading design architects that recognise the
value true executive architects bring.
We are delighted to have been able to communicate our
passion for quality and experience over four different projects,
and are proud that Veretec has been the only practice to be
consistently shortlisted to date.
One judge noted that ‘if someone else is to take over one of
our projects – who would we want it to be? - Veretec’, and by
showcasing our leading collaborative approach to the design
and construction process we believe that these awards are a
culmination of the dedication, hard work and commitment that
our studio has developed over the last 15 years since Veretec
was formed in 2002.
2016
Our projects entries in 2016 were two new build schemes for Derwent: Turnmill, London EC1
- by Piercy&Co, and Corner House, London W1 - by DSDHA. In each case we were appointed
directly by the Contractor (McLaren and Knight Harwood respectively).
Both projects incorporated complex brickwork facades using
hand-made Petersen ‘roman module’ bricks. Our role focused
heavily on preserving the intricate façade detailing during the
construction phase and included researching handmade brick
manufacturing techniques; this culminated in a factory visit to
Denmark to produce our very own Petersen bricks.
This attention to detail was recognised by the judges who stated:
“(Veretec) 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 . . . “
Turnmill is an award
winning, 97,200sqft
high quality new
build development
floors,
over seven
prominent
on
a
corner site
the
in
Clerkenwell Green
Conservation Area.
12
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
13
The Corner House also had very complex zinc cassette covered
roof pavilions which were very challenging to fabricate and
construct as well as trying to meet tight budgets.
Across both projects our teams worked diligently at developing
and maintaining excellent working relationships with Piercy&Co
and DSDHA, to help overcome design and communication issues
that often transpire between design architect and contractor.
2017
In 2017, we selected two very different projects: One Love Lane, London EC2 - by Stiff+Trevillion - and
The Passage, London SW1 - by Buckley Gray Yeoman. Both were challenging refurbishment and remodelling
projects delivered within challenging programmes and limited construction budgets. On each project
Veretec created innovative strategies to adapt construction detailing to meet the fluctuating demands
inherent with fast track refurbishments which allowed the contractors adaptable construction philosophies
to meet their respective programmes.
Our involvement on the The Passage, a rehabilitation charity
for the homeless, was particularly rewarding as we had to
develop efficient ways of working with the contractor and its
supply chain to avoid delays inherent in waiting for survey
results to deliver phased completions, whilst allowing the
charity to remain operational and continue to provide shelter
for homeless at all times.
One Love Lane is a prominent seven storey, 1980s office building
located in the heart of the City of London, overlooking St. Mary
Aldermanbury Garden.
The refurbishment
facade
involved enhancing
treatment with remodelled bays and new glazing, and substantial
improvements to the ground floor reception and office areas to
improve the building’s floor plate efficiency.
the external
Our underlying philosophy and passion on the importance of
quality in design, and working in close collaboration with the
client and consultant team to unlock the original design aspiration
was recognised by the judges who stated:
“These projects could not have
been done without a deep level of
trust and coordination”
We pride ourselves on nurturing strong
relationships with other architects to draw
out the true essence of collaboration, and
as a testament to this we often receive quite
inspirational feedback:
“Very good. Delivered an extremely challenging project very well
and to our satisfaction. We enjoyed what was a very successful working
relationship and are very proud of the end result”
- Henry Humphrey, Director Piercy&Co
“You guys do just get it!”
- Deborah Saunt, Director DSDHA
“Veretec go beyond ‘delivery’ through their integrated
and collaborative approach which adds to the quality and success of
the completed project”
- Dan Campbell, Director Stiff + Trevillion
“Veretec were the perfect partner in delivering
The Passage project. Their understanding and appreciation of our
design aspirations made working with them a true pleasure”
- Matt Yeoman, Director Buckley Gray Yeoman
14
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
Already in 2018, we
are working on some
fantastic projects and
look set to broaden
our impressive range
of interesting and
innovative contracts
even further.
Detail matters.
15
SUCCESS AT VERDE SW1:
THREE INDUSTRY AWARDS AND
100% COMMERCIAL LETTING
BY LUKE SCHUBERTH
We have recently completed
the total refurbishment
of this 1990s building for
our client Tishman Speyer.
The building is the result
of a complex and exacting
redesign and redevelopment
of the former Eland House
to meet contemporary
office requirements, as
well as meeting ambitious
environmental targets.
Luke Schuberth
Managing Director - UK
and based in Aukett Swanke’s
London studio
We had to do an early sectional completion of Verde because the letting was proving so strong. Pret a Manger wanted to get their
new headquarters into the first floor, and also to have one of their new generation coffee shops at ground floor, but needed to start
their fitout before we’d completed the building.
And the lettings have continued; in a market where Brexit curbs enthusiasm, this building has outperformed its peers. Major
refurbishments of offices in Victoria, and in the West End more widely, are a large part of our portfolio and so seeing their
transformation materialise into vibrant occupied places of work is great reward.
The industry has also given it accolades: Verde has won
three awards to date. The 2017 International Property Awards
gave it two, for Best Office Architecture in London, and Best
Office Development in the UK. It was also a winner in the BALI
National Landscape Awards, Green Roof Installations and Roof
Gardens category, for the roof terraces, a particular feature of
the building. With three more awards entered, expectation
runs high.
Located within 150 metres of a new entrance to Victoria Station,
one of London’s busiest transportation hubs, Verde features
282,000sqft of grade ‘A’ office space across ten floors, and six
expansive roof gardens totalling more than 20,000sqft.
The large sky garden is open to all users and affords a panorama
across London that rivals buildings twice its height.
16
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AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 The whole ground floor has been given to active use,
designed to interact with the street surroundings at every
point. Retail use has been introduced, and the triple height
office reception faces south, north and east to gain multiple
access.
The artwork, flower shop, and café give a calm buzz upon
arrival that sets a scene for a place people want to work in.
PRET A MANGER
TRAINING
CYCLE ENTRANCE
OFFICE
RECEPTION
H2 ENTRANCE
FLORIST
WAITROSE
OFFICE RECEPTION
PRET A MANGER
SHOT ESPRESSO
18
“A key choice of Verde was
the first impression our staff and
guests receive on entering a building.
The general feel and look of the
entrance was important to us, this
combined with the focus on lifestyle
and wellbeing which the roof terraces
and gym facilities provide; Verde SW1
struck the balance of promoting a
welcoming and inspiring experience”
Graham W Wood, BSc MRICS
Property Director - Pret A Manger
The more active user may arrive on their bike and whizz straight
through an automatic door onto a winding ramp into the basement
where a gym, showers, and changing await.
Sustainability
Eighty per cent of existing structure was retained with over
11,600 tonnes of carbon saved. This is equivalent to an average
car travelling 16 million miles, or 650 times around the equator.
But it looks, performs and feels like a new building.
We extended it, changed the entire façade (100% of the glass was
recycled) and remodelled the roof, but it is a sophisticated strong
and simple architectural response to a lively street context.
Dan Nicholson, Managing Director of Tishman Speyer UK, said:
“We are absolutely delighted that
Verde SW1 has won two such prestigious awards.
This accolade is recognition of the role Verde SW1
is playing in transforming Victoria”
The result is a new building in Victoria that
marks its presence with a surety that tenants
want to be part of.
We wanted to design a building that allows its
users to identify with it, a place where they can
work and create and its success suggests that
we might have just done that.
19
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
SIZE REALLY DOES MATTER:
HOW WE HAVE ACHIEVED OUR STRATEGIC GOALS
SINCE 2015
BY STEPHEN EMBLEY
In 2015, we were three years into our five-year UAE business expansion
plan, when we published my article in our Annual Report explaining
the characteristics of the UAE market, its economy and our strategy to
address these. The article’s title “Size really matters . . .” was intended
as a statement of intent, not a question.
Two years on, we have completed the first stage of our ongoing journey
and have done what we said we would do and the second stage of our
plan is underway. In planning the second stage we took stock of the
decisions and actions we had taken in the first stage in meeting our
goals of growth, high quality design and client service while delivering
on our brand promise. We also considered how the direction of the
current market and economy would help us to shape this second stage.
Stephen Embley
Managing Director - Middle East
and based in Aukett Swanke’s
Dubai studio
The headline goals outlined
included a
balance scorecard of objectives encompassing personal, local
operational and corporate Aukett Swanke Group objectives.
in 2015 article
In 2015 John R Harris & Partners, a respected Dubai practice
since the 1960s with an unlimited Dubai Municipality licence,
had just joined the Group increasing the staff numbers to over
forty. Our research at the time led us to believe the optimum size
of architectural practices in the UAE was around one hundred for
the market we operated in. Informed by this research and as
part of our growth strategy, in 2016 we acquired Shankland Cox
the UAE wide architectural and engineering practice, with whom
we had cooperated on select projects in the previous eight years.
As a result, the UAE operation now totals over 100 staff.
This increased size, multiple trade licences throughout the
UAE, and the resulting sound and proven delivery platform
complementing the international design skills of the locally
based Aukett Swanke operation, soon resulted in an increased
number of larger and more prestigious enquiries, a good
proportion of which were converted into full commissions.
Restructuring parts of the UAE operation along with improved
management and controls combined with access to new markets
KEMPINSKI HOTEL, MALL OF THE EMIRATES, DUBAI
and projects has, from a corporate Group perspective, achieved
two key objectives. Firstly, creating three balanced and self-
sufficient Geo hub operations of similar size servicing the
Middle East, Continental Europe including Russia and Turkey,
and the United Kingdom.
Secondly, providing the foundations in the Middle for the
creation of sustainable profits and cash generation, while
maintaining and improving our design quality and service
levels, allowing us to deliver on our Group brand promise.
Market conditions
The UAE market is still challenging and competitive, but the
economy has stabilised with oil doubling its price from the
$30 2015 level, IMF GDP predictions remain steady at 3.4% for
2018. The predicted overheating of the real estate markets due
to the 2020 Dubai Expo and 2022 Qatar World Cup are yet to
be experienced.
NEW HOTEL, ABU DHABI
THE MATRIX TOWER, DUBAI
the
following
flip side,
the negative predictions
On
the
introduction of 5% VAT are yet to be felt. Ongoing diversification
away from oil and gas revenues solely supporting fiscal policy
and the possible increase in VAT, introduction of Corporation Tax
and other forms of stealth and personal taxes could both push
efficiencies through businesses and increase fees while changing
demographics which along with Emiratisation could see changes
to the shape and composition of the employment market.
Our strategy
One of our initial stage two actions was to form a new company
in Dubai; Aukett Swanke Architectural Design, amalgamating
our Aukett Swanke Dubai operation with Omid Rouhani
Architectural Design (ORAD) where
leading
award-winning Emirati national, architect and lecturer, is both
the sponsor and an operational director. In parallel and where
possible we strive to promote and develop staff from within the
Company, reinforced by strategic outside appointments where
necessary. This succession planning and investment is ongoing
and forms a key part of our second stage plan.
its founder, a
Research and development and IT investment will form part
of our stage two plan in the UAE, where we believe informed
latest cutting edge technology
decisions and use of the
and intelligence will improve the quality of our design and
production information.
What next?
We are excited about the next part of our journey and the
opportunities the UAE can offer. There are sound foundations
in place, but we face different decisions and priorities. We have
considered continued growth and how to optimise size without
sacrificing the quality of our design and client service levels.
The aspirations of our staff and the operational and financial
efficiency of our model are all based on core values that have
allowed us to create a brand which we intend to continue to
strengthen and promote at every opportunity.
We envisage the second stage of plan to be more of a period of
consolidation and sustainable organic growth, investing in our
staff, R&D, systems and IT to improve what we offer to clients.
At the time of the 2015 article we had just started
the new journey with our clients and colleagues;
it’s been fun and exciting, our future currently has
challenges but still appears bright especially in
anticipation of what a future in the UAE could hold.
As in all our other Global operations, one of our goals is to
be a long-term player. Decisions taken today are not always
intended to produce short-term returns as we operate to be a
sustainable long-term business, so we can contribute and be
part of the social and economic fabric of where our Geo bases
are located.
20
21
THE CAMBRIDGE HOTSPOTS:
OUR INVOLVEMENT
BY PETER EATON
Cambridge has been home to the University of Cambridge since 1209
and was an important trading centre as early as Roman and Viking times.
The city has embraced scientific research and innovative thinking since
the University’s formative years over 800 years ago, and Isaac Newton
and Stephen Hawkins are perhaps the University’s most famous alumni
in the field of scientific discovery.
The city has grown significantly over the last decade with a population
now exceeding 135,000. Its world-wide reputation as a seat of academic
brilliance, consistently ranked in the top three global universities, and as
a go-to location for over 1500 technology companies has accelerated this
rapid growth.
Peter Eaton,
UK Director in Aukett Swanke’s
London studio
Cambridge has been highly successful in attracting multinational
office and laboratory occupiers and has now firmly establishing
itself as the key UK hub for biosciences, pharmaceutical
businesses and research organisations. Growth has been so
dramatic in recent years that the University has instigated a
major new settlement area in North West Cambridge to allow
expansion from the historic medieval city core and provide
urgently needed new residential accommodation. A new station,
Cambridge North was opened last year and a new Cambridge to
Oxford rail link has Government approval.
Aukett Swanke has been involved in many of these high profile
developments, playing a key role in creating a range of new
buildings accommodating initial start-up companies at one end
of the scale to major new facilities for global pharmaceutical
businesses at the other.
The speed of delivery of these projects from inception to
occupation has been a particular feature of these schemes,
reflecting the demand and acceleration of Cambridge’s status
learning and the commercial
and reputation
application of innovation in life-sciences, medicine, space
exploration engineering and astronomy.
in scientific
• Venture capital investment has reached over
£790m since 2012, with over £270m in the first
seven months of 2017, a good indicator of future
intentions - 37% more than its nearest global
competitor, Boston USA
• Cambridge is the Pinnacle of the Golden Triangle
and leading life-science cluster in the UK
• Technology companies in and around Cambridge
employ some 54,000 people creating in excess of
£13bn/year
• The University has backed 300 ‘hi-tech’ companies
and 200 computer-based companies
• 68,000 new homes are in the long-term pipeline
on sites within a 20 mile radius of Cambridge
Pioneering science continues apace in and around Cambridge,
and since the emergence of Trinity College’s Cambridge Science
Park, initiated in the late 1970s and early 1980s, other centres
of research and innovation have emerged including the Biomed
Campus at Addenbrookes, Granta Park, the Babraham Institute,
The Wellcome Genome Campus, St. John’s Innovation Park,
Cambourne Business Park, and several other key locations.
A14 TO A1
CAMBOURNE BUSINESS PARK
ST JOHN’S INNOVATION PARK
CAMBRIDGE SCIENCE PARK
A14
A14
3B
J14
J13
M11
J12
A10 TO KING’S LYNN
NATIONAL RAIL TO KINGS LYNN
AND PETERBOROUGH
WATERBEACH
R iv e r C a m
CAMBRIDGE NORTH
N
A14
RADIO HOUSE
HILLS ROAD
CAMBRIDGE
NATIONAL RAIL TO NEWMARKET,
BURY ST EDMUNDS & ISPWICH
ADDENBROOKES HOSPITAL MASTERPLAN
/ CAMBRIDGE BIOMEDICAL CAMPUS
ADDENBROOKE’S
(possible future station)
J11
CAMBRIDGE SOUTH MASTERPLAN
SHELFORD
River Granta
A11 TO NORWICH
A11
A10
M11
River Cam
GRANTA PARK
NATIONAL RAIL TO STEVENAGE
AND LONDON
A10 TO LONDON
AUKETT SWANKE PROJECTS IN CAMBRIDGE AREA
OTHER MAJOR COMMERCIAL / RESIDENTIAL DEVELOPMENTS
A11 TO LONDON
M11 TO LONDON
NATIONAL RAIL TO LONDON
‘’I do indeed love the building and am convinced, when the history of the
Science Park is eventually written, it will be one of the pivotal moments - the combination
of its architecture and its use, which are inseparable”
- John Tweddle, Partner - Bidwells / Head of Fund Management
22
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
23
The Bradfield Centre, Cambridge Science Park for Trinity College CambridgeOur scheme for Trinity College on the Cambridge Science Park has involved the recycling of one of the first-generation building plots at the heart of the Park and the creation of the Bradfield Centre. This building, named after the Bursar who was instrumental in instigating the Science Park, exploits its location alongside one of the Park’s lakes, and its unique distinctive arc-shaped plan form provides a hub for start-up businesses and companies seeking to collaborate and mix with existing science based businesses in the Park.Aukett Swanke has worked closely with the College’s property and project management advisors Bidwells to help crystalise the brief and develop the concept for the scheme. This Hub building will be managed by Central Working and provides space under a membership arrangement where individuals can simply use the space and facilities or where larger groups of 4/6/8 and upwards can take a dedicated ‘private pod’ space, all sharing the common facilities.Within the three storey, 4850sqm design, these facilities include a large ground floor café / restaurant open to occupiers and all Park tenants, an auditorium, bookable meeting rooms, informal ‘apartment’ break-out areas, private telephone pods, centralised shower rooms, a yoga room and a pavilion ‘beach-bar’ / informal meeting space outside the building. The concept of the scheme seeks to attract entrepreneurial start-ups and act as a hub for the Park where existing businesses, occupiers and visitors can mingle and where the atmosphere and internal environment encourage and engender serendipitous meeting and interaction.AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 This fast-track delivery has been made possible through a highly
collaborative and proactive approach to the design process with
the developer and the tenant team, legal agreements, tender
process and construction methodology.
The design provides a simple elegant rectangular layout with
central spine atrium linked by an impressive feature staircase.
The façade treatment employs a repetitive cladding system
to allow rapid installation fixed back to the partially pre-cast
superstructure.
is
for
full
scheme
future-proofed
The
laboratory use
incorporating generous ceiling and floor service voids, slab
knock-out panels, drainage riser stacks/runs and the space
for plant level provisions for extensive laboratory and fume
cupboard installations. The scheme has been delivered at
£23.80/m including a large deck level car park – and circa
£189.00/sqft (excl. fitout).
Doug Cuff, Client Director for BioMed Realty said:
‘’The entire team displayed an uncanny
ability to think critically, act practically, openly
the client. A
test assumptions and
truly outstanding group of sincere, focused and
passionate professionals who take ownership not
just of the design but of the entire project’s success.
listen
to
Outstanding”
As a direct consequence of Gilead’s new tenancy agreement
to remain on the Park and move from their smaller existing
facilities, a new opportunity arose for BioMed Realty to offer its
vacated building to new tenants. This very quickly led to Aukett
Swanke exploring the options to convert Gilead’s former two
storey office building for science-based occupiers aiming at
mid-scale life science companies of circa 1500 – 3000sqm.
Following our initial option studies the client engaged in
tenancy negotiations with Heptares Therapeutics who had out-
grown their existing accommodation in Welwyn and wished
to both expand and improve their laboratory and technical
research facilities. Conversion and fitout of the scheme will be
completed in July 2018
BioMed Realty, Granta Park,
Cambridge
for Gilead Pharmaceuticals
At the other end of scale Aukett Swanke has also recently
completed a major new facility for BioMed Realty and pre-let
tenants Gilead Pharmaceuticals on the Granta Park campus
in south east Cambridge. This scheme comprises 11,700sqm
over a three storey development for one of the largest global
pharmaceutical companies and accommodates their rapidly
expanding UK and European activities. The programme to
satisfy Gilead’s occupation requirements led to a challenging
delivery scenario.
The scheme commenced in early June 2015 when Aukett Swanke
was invited to assist BioMed Realty bid to secure Gilead as a
pre-let tenant, moving from its existing premises on the Park.
The shell and core scheme completed on schedule in December
2016. Early access was provided in October in the same year
for the tenant’s fitout, with occupation achieved successfully in
July 2017.
NAPP PHARMACEUTICALS, CAMBRIDGE SCIENCE PARK
Other Cambridge Projects
Aukett Swanke has now built up an enviable portfolio of
projects in and around the Cambridge region which includes
earlier award winning schemes at Cambourne Business Park,
our masterplan consent for the Addenbrookes BioMed Campus,
and our BCO award-winning scheme for Napp Pharmaceuticals.
Recent designs also include the redevelopment of the old Pye
Building (now known as Radio House), with its unique wave-
form, column free concrete roof structure for Orchard Street
Investment Management Ltd.
Our very latest commissions include a new development for
Trinity Hall / Roebuck Merchants on Plot 420 at Cambridge
Science Park comprising an exciting 4625sqm Smart Lab aimed
to attract a range of small to medium enterprises requiring
between 500-1500sqm in a flexible, agile design able to
accommodate up to six sub-tenancies over three floors. This
project recently received detailed Planning Consent.
Following the successful opening of The Bradfield Centre we
are now preparing Masterplan designs for a new Hub area on
the Science Park incorporating new offices, research space and
a new 153 bed business hotel by The Village which provides
restaurant, gym and conference facilities.
Our masterplan designs for Cambridge South are longer term
proposals for an extensive 162Ha mixed-use development
alongside the M11, J11 which is being promoted for inclusion
in the Local Plan providing a significant new growth area for
west Cambridge.
RADIO HOUSE, CAMBRIDGE
24
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
25
PLOT 420, CAMBRIDGE SCIENCE PARK
Our schemes have contributed to the evolution and growth of science-based
companies and facilities in and around Cambridge, delivering a wide spectrum
of accommodation for companies varying from individual start-ups to mid-scale,
growth businesses, and extending further to larger, more mature major global
players such as Gilead and Napp, Takeda and Heptares.
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 OUR KEY PEOPLE
GROUP
MANAGEMENT
LUKE SCHUBERTH
Managing Director -
UK ‡
SUZETTE VELA BURKETT
Managing Director -
UK ‡
STEPHEN EMBLEY
Managing Director -
Middle East ‡
ROBERT FRY
Managing Director -
International ‡
UNITED
KINGDOM
GORDON MCQUADE
Director - Veretec
JAMES ATHA
Director - Veretec
JASON BAGGE
Director - UK
KEITH MORGAN
Managing Director -
Veretec
PETER EATON
Director - UK
STEPHEN ATKINSON
Director - UK
TOM ALEXANDER
Director - UK
MIDDLE EAST
OMID ROUHANI
Director
Aukett Swanke Architectural Design
PAULA MCKEON
Finance Director -
Middle East
FRANK NOWACKI
Director
John R Harris & Partners
BOB PUNCHARD
Director
John R Harris & Partners
SUBRAYA KALKURA
Director
John R Harris & Partners
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
1906
Walker &
Gillette
(USA)
1972
Aukett
1975
Swanke Hayden
Connell
(Europe)
1949
John R
Harris
(Dubai)
1962
Shankland
Cox
(UAE)
1955
Fitzroy
Robinson
2003
Veretec
2005
Aukett
Fitzroy Robinson
2013
Aukett
Swanke
2015
Aukett
Swanke
2016
Aukett
Swanke
OUR HERITAGE
26
27
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 BOARD OF
DIRECTORS
ANTHONY SIMMONDS
Non Executive Chairman *+ #^
MA FCA FCCA Aged 73
NICHOLAS THOMPSON
Chief Executive Officer #^
BSc(Hons) MBA Aged 63
Anthony joined Aukett Swanke as a
non-executive director in 2009 and was
appointed Non-Executive Chairman in
March 2012.
He is a qualified chartered accountant
and former senior partner of a top 50
accountancy practice. He has had many
years’ experience in dealing with quoted
public companies on a professional
basis including advising on corporate
finance, M&A, due diligence, as well as
initial introductions to the market.
He has held a number of executive
and non-executive positions
and
is
strategic
in
development of businesses and the
management of financial risk.
experienced
the
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.
‘Aukett
In 2005 he became CEO of the newly
Fitzroy Robinson’
merged
takeover. He
reverse
following a
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
Insurance
the Wren
Association Limited, a mutual insurer
for architectural practices.
Nicholas is responsible for the Group’s
strategic growth plans.
BEVERLEY WRIGHT
Chief Financial Officer &
Company Secretary ^
BA(Hons) FCA Aged 59
joined Aukett Swanke
in
Beverley
September 2014. She is a qualified
Chartered Accountant and has more
than 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.
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.
JOHN BULLOUGH
Non Executive Director +*#
FRICS Aged 67
ANDREW MURDOCH
Executive Director
MA RIBA Aged 68
NICK PELL
Executive Director
BA(Hons) Aged 56
John joined Aukett Swanke as a non-
executive director in June 2014. He
has over 40 years of
international
experience in property development
and investment.
Following 18 years with Grosvenor,
John joined ALDAR Properties PJSC in
Abu Dhabi and was their Chief Executive
until November 2010.
He is a Fellow of the Royal Institution
of Chartered Surveyors and is a Past
President of the British Council of
Shopping Centres.
BOARD COMMITTEES
* Member of the Audit Committee chaired
Andrew is a qualified architect who
joined Fitzroy Robinson in 1984. He
was Chairman of Fitzroy 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
flagship 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
projects in the West End.
sat on
Andrew
the board of
management of the British Council of
Offices for 12 years.
Nick was appointed to the Board in
December 2013 upon the acquisition of
Swanke Hayden Connell Europe Limited
and
is International Interior Design
Director.
He has over 20 years of experience
designing
interiors projects across
Europe having graduated from Kingston
Polytechnic. Nick has established
a reputation for designing creative
interior solutions for a wide range of
project types; hotels, restaurants, retail
banks, residential, leisure facilities and
commercial office space and he has led
the design direction of several award
winning projects.
His projects are wide ranging, including
the British Council for Offices award
winning VISA HQ fitout, and an
experimental hotel pilot project.
by Anthony Simmonds
the
+ Member
of
Remuneration
28
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
29
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
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 CHAIRMAN’S STATEMENT
AND CORPORATE GOVERNANCE
FIVE YEAR SUMMARY
Years ending 30 September
Continuing operations
2017
£’000
2016
£’000
2015
£’000
2014
£’000
2013
£’000
Total revenues under management 1
34,583
30,379
27,553
25,066
14,776
I am responsible for overseeing the effectiveness and composition of your Board
and report on the overall performance of the Company.
Revenue
18,395
20,841
18,668
17,326
Revenue less sub consultant costs 1
16,070
18,410
16,886
14,732
Anthony Simmonds
Chairman
10 January 2018
Financial highlights
As previously indicated, the year to 30 September 2017 was another difficult one for the Company as we experienced
a variety of adverse conditions in each of our markets.
In the UK we suffered from the ‘wait and see’ climate for businesses, especially developers of commercial property,
created by the continuing uncertainties over the outcome of ‘Brexit’. Whilst developments which had previously
been started were completed, new starts were few. In the UK revenues were consequently down 27%. This situation
impacted adversely on the results for the year contributing to a reduction in overall revenue of 11.7%. We believe it
will take the UK more than one year to recover its previous profitability at reduced revenue levels.
An improvement in the Company’s UAE operations culminated in a major contract award for the development of
a substantial retail mall in Dubai which was formally signed just after the year end. The financial benefits of these
activities in the UAE should be seen over the next two years.
Meanwhile our hub in Continental Europe also suffered from a number of adverse factors. Turnover in both Russia
and Turkey fell sharply, affected by well publicised domestic political upheavals. Whilst our joint ventures/associate
in Germany and the Czech Republic produced a profit, this was marginally down on the previous year and not
enough to offset the losses in Russia and Turkey*.
Revenue for the year amounted to £18.40m (2016: £20.84m) resulting in a small loss before tax of £325k (2016:
profit before tax of £927k). Our EPS is a loss of 0.20 pence per share (2016: 0.47p (profit)). However, cash and
cash equivalents at the year end remained positive at £960k (2016: £1.84m). I am encouraged that our diversified
and enlarged business footprint established over the last few years should provide financial rewards in the not too
distant future. However given the uncertainty with respect to near-term trading, the Board will review the position
regarding dividend payments in the second half of the 2018 financial year.
Corporate Governance
Reports on the activities of the Audit, Nomination, Remuneration and Internal Controls and Risk Committees during
the financial year are more fully set out on pages 38 to 42 in the Directors’ and Strategic Reports together with
information on the Principal Risks and Uncertainties relating to the Company’s business. All Committees have
been active during the year. The Remuneration Committee under the chairmanship of my fellow non-executive
Director, John Bullough, has considered levels of Directors’ remuneration and the introduction of an appropriate
incentive scheme whilst the Nomination Committee chaired by myself has considered the make-up of the Board,
the appointment of a third non-executive Director and succession. The Audit Committee, also chaired by myself,
increased its number of meetings to review financial strategy, working capital requirements and budgets, in addition
to its other business. The Risk Committee updated and reviewed strategic risks in the light of changing economic
and regulatory situations.
As always, I would like to thank our talented staff as well as my colleagues on the Board, who continually respond
positively to the challenges and opportunities that our organisation faces.
* Revenues from the joint ventures and associate are not included in Group revenues
8,406
7,116
550
0.26
-
3,029
1,343
(263)
1,080
(Loss) / profit before tax
Basic (losses) / earnings per share (p)
Dividends per share (p)
Net assets
Cash and cash equivalents 2
Secured bank loans
Net funds 3
(325)
(0.20)
-
6,761
960
927
0.47
0.18
7,189
1,839
(776)
(1,049)
1,870
1,400
1.00
0.22
6,251
1,873
-
0.65
0.18
5,053
1,891
(113)
1,778
184
790
1,873
1 Alternative performance measures, refer to page 37 for definition
2 Cash and cash equivalents includes cash at bank and in hand less bank overdrafts
3 Net funds includes cash at bank and in hand less bank loans and overdrafts (see note 21)
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 / 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.co
Bankers
Coutts & Co
www.coutts.com
Solicitors
Fox Williams
www.foxwilliams.com
30
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2016
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
31
STRATEGIC REPORT
The Directors present their Strategic Report on the Group for the year ended 30 September 2017.
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 strategic objective is to provide a range of high quality design
orientated solutions to our clients that allows us to create shareholder
value over the longer term and at the same time provides a pleasant
and rewarding working environment for our staff. The cyclical nature
of the markets in which we operate gives rise to peaks and troughs in
our financial performance. Management is cognisant that our business
model needs to reflect this variable factor in both our decision making
and expectation of future performance.
Over the past four years we have acquired a number of strategically
located practices to reinforce our business model which we anticipate
will provide a blended result over time. In the short term and since these
acquisitions were completed some of our markets have been the subject
of some significant economic or political changes which we had not
expected and which have negatively impacted on our performance. This
has very much been the case in these results for 2017.
Business Model
We operate through a three hub structure covering: the United Kingdom
with our office in London; the Middle East with seven office locations
in the United Arab Emirates; and Continental Europe with five offices
in Berlin, Frankfurt, Istanbul, Moscow and Prague (operated through
subsidiaries, joint ventures and associated entities).
The United Kingdom hub comprises three principal service offers:
comprehensive architectural design including master planning, interior
design and fit out capability and an executive architectural delivery
service under the ‘Veretec’ brand.
Our Middle East business comprises
four separately registered
operations which are gradually being marketed under a common brand
‘Aukett Swanke’. The service offers within the region include architectural
and interior design, post contract delivery services including architect
of record and engineering design and site services. Increasingly these
separate activities are being combined as a single multidisciplinary
service as demanded by this market and we are now better placed to
offer such a ‘one-stop shop’ service.
Our Continental European operations are all separately managed by local
Directors. The services offered are consistent with the other two hubs.
Group Activities
Performance in the current year has declined with revenues falling to
£18.40m (2016: £20.84m) and the Group loss before tax improving
slightly from the first half deficit of £358k to £325k (2016: profit before
tax of £927k). This situation is a continuation of the decline that we saw in
2016 (from 2015) and in the Interim results. In this context our net funds
reduced to £184k (2016: £790k) within which cash net of overdrafts was
£960k (2016: £1.84m).
Total revenues under management (which includes 100% of our joint
venture and associates revenue) totalled £34.58m (2016: £30.38m). The
principle reason for the increase was a number of large General Planner
led contracts from the Berlin office. Around 160 of our staff are employed
by our joint ventures and associate and as non subsidiaries the income
attributable to them is not shown in the consolidated revenue lines.
More detailed financial information is given on pages 35 to 36.
United Kingdom
Revenue fell by 27% to £8.92m in 2017 and resulted in a small profit.
Whilst this decline in revenue appears as a poor performance it does
reflect the UK operation completing a large number of projects in the
current cycle and less progress being made with the conversion of
new commissions as a result of the general atmosphere of economic
uncertainty following a prolonged Brexit period and a parliamentary
election. The UK operation had originally budgeted for a reduction in
revenue and a loss was the result at the halfway stage.
There have been a number of high points in the year. A 282,000
square feet office project in Victoria for Tishman Speyer won a double
award at the Property Awards: Best Office Architecture and Best Office
Development – an accolade indeed; and our new hotel for Four Seasons
was runner up in the City of London Awards. In addition the 326,000
square feet Adelphi building for Blackstone along the Thames became
fully let to prestigious tenants this year.
During the second half of the year we completed the second building at
our office development site in Reading for M&G; the Flowers Building at
Granta Park; and a large private dwelling in West London. In addition
The Bradfield Centre for Trinity College Cambridge and the Molecular
Sciences Research Hub for Imperial College London both completed. The
Four Seasons hotel at Ten Trinity Square and an Embassy in West London
were in the final stages. Work continued on a £9m City refurbishment in
Queen Street Place. In September we won the feasibility stage for a large
mixed-use project in Maidenhead for Royal London.
Management of the group operations is delegated to members of the
Group Management Board (‘GMB’) which comprises both the CEO
and CFO along with four Managing Directors. The GMB meets on a
regular basis to review topics relating to operations and discuss future
architectural and related strategic issues.
Outside the UK the 18 storey Mone luxury residential tower in Moscow
which was designed by the London studio reached completion. Also
in Russia, in the city of Perm in Siberia the studio designed three 25
storey residential towers under phased construction which are due for
completion in 2018.
As a Group we now have a total staff of over 400 throughout our
organisation including both wholly owned and joint venture operations.
We are ranked by professional staff in the WA 100 2018 at number
43 (2017: 48) and in 2017 our UK subsidiary Veretec was voted No. 1
Executive Architect for the second year running.
A number of projects are currently on hold including a series of
commercial buildings in Birmingham; a large HQ building in Bristol; a
number of mid tech buildings requiring pre-lets; a residential scheme in
Hemel Hempstead; and a building at Cambridge Science Park.
The converted order book for 2018 has continued to decline and this
operation will need to reflect this in its cost structure going forward. Our
UK operation works primarily in the commercial development market
which is currently in the downward part of the property cycle. Our lease
expiry in July 2018 should alleviate part of our fixed cost base and provide
an opportunity to reduce longer term cash outflows.
Middle East
This operation now comprises a total of 115 staff which is a considerable
increase from its status pre-acquisition of 8 staff. Our acquisition of John
R Harris & Partners (‘JRHP’) has been a success with the original purchase
price being recovered in net profit terms in under three years. However,
our more recent acquisition of Shankland Cox Limited (‘SCL’) (for net book
value) has proved to be problematic and it has sustained a significant
loss during the rationalisation period. Trading fell far short of the pre-
acquisition forecasts, so that we needed to restructure the operation and
management team and absorb significant losses. However, an amicable
vendor settlement to recover our trading losses reduced the impact of
what would have been a sizeable trading loss in the current year (see
notes 3 and 4 for further detail).
Over the course of the year our enlarged technical resource base has
enabled us to win our first major retail mall comprising 1.26m square
TEN TRINTY SQUARE, LONDON EC3
RESIDENTIAL TOWER, SIBERIA
feet for a large Chinese client, which we announced shortly after the year
end. In addition a number of other projects were instructed including the
completion of the services for a hotel on Yas Island (home of the Formula
1 circuit) for an established client ALDAR. In terms of current workload
the 5-star hotel refurbishments of Atlantis the Palm and The Address
Dubai Mall continue with further areas being added to our scope. JRHP
were also part of the team that successfully delivered the recently opened
Bvlgari resort and phase 1 of the Al Qasr hotel refurbishment, both in
Dubai. Requests for proposals continue to be received for a number
of high quality and prestigious projects which, if we are successful, will
reinforce the existing project pipeline in the short to medium term.
The hub generated revenues of £8.63m which is virtually the same as the
UK. It establishes this geography as a key platform for the future and fits
with our strategy to balance our operational performance. A small profit
of £13,000 resulted (a reduction compared to the profit of the first half).
This is disappointing as we expected a better second half performance
which would have been achieved had we not had to restructure SCL for
a second time after the vendor settlement due to additional provisions
against contract losses. This cumulative restructuring has two key effects:
one positive and the other negative. The first effect being to improve our
productivity over the longer term and the second to crystallise additional
large End of Service Benefit cash payments which has contributed to the
decreased in our group cash position in this period.
At the end of the financial year we established Aukett Swanke Architectural
Design as a newly licensed entity in the market with an award winning
Emirati architect as our sponsor. The ability to market under our
international brand along with our recent wins should see our operation
grow in both revenue and profit terms in 2018.
Continental Europe
This operation comprises two joint ventures and an associate plus two
wholly-owned subsidiaries. The businesses had very mixed results in
2017. Revenue for the partly-owned entities is not included in revenue
in the Consolidated Income Statement; in line with the use of the equity
method only the after tax result is included in the results.
Revenue for the hub, (ie. the Russian and Turkish wholly owned
subsidiaries only), declined by 35% to £849k and both of these operations
made a loss. Economic and political issues dominated both countries.
As part of our ongoing strategy we are committed to converting both
the Russian and Turkish businesses into joint ventures such that there is
more local management ownership for these small operations which will
secure the future succession and at the same time reduces the Group’s
exposure to these markets. We remain confident that these operations
can add value in a different ownership format.
Russia’s revenue fell dramatically and was insufficient to cover its fixed
operating costs and much of the year was spent deferring or avoiding
expenditure. However, the office did continue working on a large luxury
apartment block in Vernadskogo, Moscow along with some smaller
projects including a VIP office floor for Freight 1, a major Russian
transport company.
In addition, development activity appears to be recovering with a
number of developers returning to the local market. This is reflected
in the number of front end design instructions that have been received
including a Masterplan Concept of a town for 30,000 inhabitants at
the Russian Far East in Vladivostok, a design concept for a 66,000 sqm
residential development near Skolkovo Inograd, Moscow and also a
concept for a training centre in Siberia for a major Russian oil refining
company.
32
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
33
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 Turkey has not recovered from the continuation of the self-imposed State
of Emergency. Many developers are not active and our workload relies
upon short term interior design and fit out projects. Whilst work has
come from major clients such as Allianz, Cengiz, KPMG, Vodafone and
more recently Vakifbank, the projects are not of sufficient size to maintain
the operation and, as with Russia, expenditure mitigation has continued
to be a key focus. Once the political situation returns to normal we would
expect historic projects to be reinstructed.
In December the office won a major fit out project in Bulgaria and the first
stages of the Bio City master plan project which, with other work, should
enable the office to at least break even in the next financial year.
Losses in these two operations have been funded from existing local
resources and the Group has provided only a small amount of additional
working capital – under £40k.
Frankfurt, our 50% JV in Germany, was the best performing office and
contributed over £100k in after tax profits; its best year ever. The office
worked with industry heavyweights: Hochtief, Zurich, Commerzbank,
Deutsche Bank, Blackstone / Office First on the MesseTurm building and
Tishman Speyer on the TaunusTurm.
Berlin also had a successful year but with a lower return as growth in
the local market absorbed more staff resources than expected. The
office now totals over 150 staff and has a full order pipeline. Key projects
include Tacheles a large mixed use development in Berlin, Mercedes
Platz with Hochtief, Berlin Airport, work for KfW bank, Siemens, Spindlers
Hof, Commerzbank, a tower in Frankfurt, Google, East Side Tower with
BIG, and a fit out for Howego plus numerous other projects.
The Czech operation adjusted to reduced market activity by supporting
the workload in the Abu Dhabi, Berlin and London offices. Direct
appointments came from a retained residential client at Churchill Square;
the Riverside School Arts Centre; an Allen & Overy fit out; and a number
of local clients: Tieto, Matějovský, Dimension Data and Business Lease.
Summary, Group Prospects and Shareholder Value
With such a varied set of results we have to be thoughtful about the
outlook for 2018. However, we believe that we have turned the corner
in the Middle East and this operation should generate a reasonable
return in both profit and cash terms thereby justifying the investment
that we have made. Continental Europe has now reached the bottom
of the current cycle in Russia and Turkey and the overall result for this
hub in 2018 should be positive as we expect Berlin to be profitable and
Frankfurt to continue its current performance levels. The only operation
lacking significant clarity is the UK. Whilst we continue to receive new
enquires these are almost certainly for the next cycle which we believe
may commence in 2019. Our ongoing work in implementing a structure
of three geographical hubs should benefit the Group during 2018 by
providing balance in performance.
Considering all of the exogenous economic and political issues facing the
Group, and particularly in the UK, the Board feels that the overall Group
outcome is unlikely to be profitable in the 2018 financial year.
Nicholas Thompson
Chief Executive Officer
10 January 2018
CENGIZ GROUP OFFICES, TURKEY
ALLIANZ HEADQUARTERS, ISTANBUL
RESIDENCE CHURCHILL, PRAGUE
SPINDLERSHOF, BERLIN
The headline financial results of the Group were:
Total revenues under management 1
Revenue
Revenue less sub consultant costs 1
Net operating expenses
Net finance costs
Share of results of associates and joint ventures
(Loss) / profit before tax
Tax credit / (charge)
(Loss) / profit for the year
1 Alternative performance measures, refer to page 37 for definition
FINANCIAL REVIEW
2017
£’000
34,583
18,395
16,070
2016
£’000
30,379
20,841
18,410
(16,614)
(17,730)
(34)
253
(325)
21
(304)
(20)
267
927
(106)
821
Revenues for the year were £18.40m, a decrease of 11.7% on the previous year (2016: £20.84m), as a result of the smaller UK business and the
challenges in Continental Europe, offset by growth in the Middle East, which includes a full year’s contribution from SCL. Similarly revenues less sub
consultants also fell to £16.07m (2016: £18.41m), a 12.7% decrease.
The result before tax was a loss of £325k (2016: £927k profit), reflecting the year on year changes in the revenues. However the second half was stronger
than the first half and resulted in a small profit of £33k compared to a first half loss of £358k. There was an improvement in all businesses, other than
the Middle East which reported losses due to historic debt provisions.
Taking account of a £21k tax credit, our loss after tax at £304k gives an EPS loss of 0.20 pence per share (2016: 0.47 pence per share (profit)).
United Kingdom
Revenue
Revenue less sub consultant costs 1
FTE technical staff1
Net revenue per FTE technical staff 1
Profit before tax
2017
£’000
8,915
8,765
82
107
19
2016
£’000
12,142
12,080
121
100
1,052
1 Alternative performance measures, refer to page 37 for definition
As expected in the Interim results, the lower volumes reported in the first half continued into the second half with full year revenues of £8.92m, 26.6%
lower than 2016 (£12.14m). Whilst this is disappointing, profitability improved with a second half profit of £230k, compared to a first half loss of £211k.
This brings the year end position to an overall profit of £19k (2016 £1.05m profit); where the improvement was due to improved productivity and
increased earnings per FTE.
34
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
35
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 The trend towards lower revenues is expected to continue until the latter months of the new year, such that a return to profitability is not expected until
2019.
Other than staff, the principal operating expense is property costs. These were cut during 2017 as all operations were brought together in one location
and these costs should reduce further in 2018 when the studio relocates in the third quarter of the financial year.
Middle East
Revenue
Revenue less sub consultant costs 1
FTE technical staff 1
Net revenue per FTE technical staff 1
Profit before tax
2017
£’000
8,631
6,833
95
72
13
2016
£’000
7,383
5,424
80
67
41
1 Alternative performance measures, refer to page 37 for definition
With the first full year of trading for all three of our businesses, revenues grew 17% from £7.38m to £8.63m and demonstrate the realisation of our
strategy of growing a UAE hub to counterbalance and complement the businesses in the UK and Continental Europe.
After taking account of a gain of £572k on the settlement of the SCL acquisition, and a fair value adjustment of £128k with respect to pre-acquisition
debtors, the first of which was reported at the half year, we reported a small profit of £13k (2016: £41k). This is after continuing integration and right-
sizing costs in SCL, which was also adversely affected by provisions on pre-acquisition debtors.
Having recently announced the Lesso Mall award, the order book and forecast revenues for this hub are stronger than ever before.
Continental Europe
Revenue
Revenue less sub consultant costs 1
FTE technical staff 1
Net revenue per FTE technical staff 1
(Loss) / profit before tax
Including 100% of joint ventures & associate
Total revenues under management 1
Revenue less sub consultant costs 1
FTE technical staff 1
Net revenue per FTE technical staff 1
1 Alternative performance measures, refer to page 37 for definition
36
2017
£’000
849
472
17
27
(136)
17,037
10,349
162
64
2016
£’000
1,316
906
22
41
95
10,854
8,433
140
60
Reported revenues, comprising the two Continental European subsidiaries, Russia and Turkey, were at £849k, 35% lower than the prior year (£1.32m).
The result before tax, also including the joint venture and associate in Germany and the joint venture in the Czech Republic, was a loss of £136k (2016:
£95k profit).
Continental Europe’s result continues to comprise a mix of performances across the businesses. Russia and Turkey have continued to suffer from the
economic and political pressures of their local environments. As previously reported, both have been downsized to minimum levels. Berlin and Frankfurt
remain strong and Frankfurt reported its best year to date. Prague is again in a break-even position in a quiet local market.
Whilst apparently lower than the other hubs, the net revenue per FTE technical staff is 7% higher than in the previous year and represents a blend of
the differing economic rates across the four geographies and five businesses.
Encouragingly, all Continental European businesses other than the Czech Republic reported stronger results in the second half than in the first.
Financing
Taking account of the year’s result, total equity is now £6.76m (2016: £7.19m).
Net funds (see note 21) at year end were £184k (2016: £790k), comprising cash of £1.19m (2016: £1.84m), overdrafts of £228k (2016: £nil) and the
loan taken out in respect of the acquisition of SCL, which now stands at £776k (2016: £1.05m). Despite the more challenging trading conditions, and
notwithstanding two large client balances owed in the UK, the Group has maintained a position of positive overall cash. Had the UK received the
amounts owed before year end, balances would have been as strong as in the prior year.
The loan set out in note 20 to acquire SCL 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. This facility is also used by the Group to hedge foreign exchange exposures.
The Group previously had the benefit of an overdraft facility from its bankers Coutts & Co. which applied to individual accounts but was required to net to
zero. During the year, in order to provide working capital flexibility and to support the UK business, this was converted to an overall overdraft of £250k.
After the year end, in October 2017, the limit was increased to £500k, but reduces back to £250k on 31 March 2018 (see note 31).
In the light of weaker trading, the strong focus on cash management and liquidity forecasts has been intensified. The Plc continues to act as the Group’s
central banker, and whilst it may, subject to formal approval, advance short term working capital support or small funding loans, all businesses are
required to be cash generative or as a minimum cash neutral. During the year, a small facility of USD 50k was provided to the Russian Business. This is
being repaid in tranches.
Future work
Tracking and keeping an accurate record of the pipeline of future work is key to understanding the business and managing its future shape and portfolio.
It is also essential in order to afford the directors time to react to any changes.
With the distribution of the business across the three hubs, there are differing workload profiles:
•
•
•
The UK has a lower level of assured work than previously, which will require a reduction of staff numbers, mainly by natural attrition, as well an
office move to less expensive premises, which is in progress;
The Middle East continues to build strength with the aim of larger, longer-term projects underpinning the growth strategy; and
Continental Europe remains mixed across the portfolio. The German businesses are strongest and have visible longer-term order books, while
Turkey, Russia and the Czech Republic, continue to try and build strength.
Key Performance Indicators (‘KPIs’)
The key performance indicators used within the Group for assessing financial performance are:
•
•
•
•
•
total revenues under management. This includes 100% of the revenues generated by our joint ventures in Prague and Frankfurt and associate in
Berlin. This is used as a measurement of the overall size and reach of the group and to track performance against the strategic objective of creating
a diversified and balanced business across the three regional hubs;
revenue less sub consultant costs which reflects the revenue generated by our own technical staff but excludes the revenue attributable to sub
consultants, which are mainly passed through at cost. This is the key driver of profitability for our business;
revenue less sub consultant costs being generated per full time equivalent (FTE) technical member of staff. For our larger operations this provides
a barometer of near term efficiency and financial health. This figure when compared to the movement in total costs provides an insight into the
likely direction of profitability and is a key measure of productivity. This KPI is only analysed on a segmental basis and calculations for each segment
can be found on pages 35 to 36;
profit before taxation; and
cash at bank and in hand and net funds / (debt)
37
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 Where possible, the Group deploys three strategies to help reduce operational gearing:
First, the Group has a well developed staffing plan which flexes the total number of staff using a combination of permanent employees, temporary
employees, agency staff and freelance staff as applicable to each legal jurisdiction; and in doing so matches resources to fee paying work as closely as
possible, sometimes linking staff retention directly to specific projects.
Second, the Group can sub-let or licence occupation of part of its property space to other professional services businesses to offset some of the total
occupancy cost.
Lastly the Group seeks flexible contract terms with major suppliers such that certain costs can be suspended during times of economic difficulty.
Staff skills and retention
Our business model relies upon a certain standard and number of skilled individuals based on qualifications and project track record. Failure to retain
such skills makes the strategies of the Group difficult to achieve.
The Group 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 staff.
Staff training programmes, career appraisals and education assistance are provided, including helping our professionally qualified staff comply with
their continuing professional development obligations. Training programmes take various forms including external courses and external speakers.
Quality of technical delivery
In common with other firms providing professional services, the Group is subject to the risk of claims of professional negligence from clients.
The Group seeks to minimise these risks by 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 reflects the quality of the internal systems under which we work. As part of these
registrations an external assessor undertakes regular compliance reviews. In addition, as part of its service to members, the Mutual, which provides
professional indemnity insurance to the UK and 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 economic downturns and global recession. Additionally architects may be under pressure to work
without fees (for a time) in order to win a project or retain sufficient qualified staff to complete the project if won. The Group mitigates this risk by
focusing on markets where it has clear skills that are well above average, or avoids it by not lowering prices, thus risking the loss of such work.
THE FONTENAY HOTEL, HAMBURG
The numbers of full time equivalent technical members of staff differs from the employee numbers disclosed in note 7 as, at times, the Group uses
some non-employed workers through agencies and freelance contracts. Staff working on a part time basis, or on long term leave, are also pro-rated in
the number of full time equivalent staff number, which differs from the method of calculating the average number of employees for the year under the
Companies Act 2006 as disclosed in note 7. Full time equivalent technical members of staff are given for each hub on pages 35 to 36.
Project Working Capital
Project working capital comprises net trade receivables; amounts due from customers for contract work and advances received from customers for
contract work. The project payment arrangements under which the Group operates vary significantly by geographical location:
•
•
•
•
in the United Kingdom it is usual to agree in advance with the client at the start of a project a monthly billing schedule which generally leads to
relatively low levels of amounts due from customers for contract work;
in Russia it is usual for the project to be divided into contractual work stages. At the start of each stage a deposit is received from the client but no
further amounts are received until the stage, or sub stage, is fully completed;
in 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; 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 projects that are available. These changes can be identified by rises and
falls in overall GDP, construction output, planning application submissions, construction tenders and starts, investment in the property sector and
numbers of new clients. Not all of this information is available in each market place and so we have to adapt to the information flow that is available.
In addressing this risk the Group considers which markets and which clients to focus upon based on the strength of their financial 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 and deferrals of projects.
Geo political factors
Political events and decisions, or the lack thereof, can seriously affect the markets and economies 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, as well as the ability to transfer between sectors, provides the Group greater resilience
in respect of this risk. Maintaining a flexible workforce, subject to working practices in local markets, additionally affords 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 flexibility when considering M&A activity.
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 outflows when faced with sharp and
unpredicted falls in revenue.
An increasing proportion 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.
In addition the decrease in the size of the UK business means that there is less free cash available to remit to the Plc.
The directors seek to ensure that the Group retains appropriate funding arrangements and regularly and stringently monitor expected future
requirements through the Group’s annual budgeting, quarterly forecasting, monthly cash flow and daily cash reporting processes in order to react to a
required change with maximum flexibility.
The Group’s principal bankers remain supportive and in October 2017 renewed the Group’s overdraft facility until November 2018, increasing the value
until March 2018. In February 2016 a USD 1.6m loan was also offered and drawn down with respect to the acquisition of Shankland Cox Limited, the
current value of which is USD1.0m.
38
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
39
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 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, affecting 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 subject to commercial and legal review. Post-acquisition there is
structured implementation planning and ongoing monitoring and review.
Overseas diversification
The Group continues to derive an increasing proportion of its revenues from projects located outside the UK. This offers some protection for the Group
by providing diversification but in turn exposes the Group to the economic environments and currencies of those locations. Building regulations,
working practices and contractual arrangements often differ in these overseas businesses when compared to the UK and these may significantly increase
the risks to the Group. To mitigate these risks:
•
•
•
•
•
the overseas operations are managed by nationals, or highly experienced expatriates, with oversight from senior Group management. All offices
are regularly visited by senior Group management, to monitor and review the businesses. There is regular, comprehensive reporting and KPIs are
used extensively;
the Group seeks to work for multinational or the larger and more established domestic clients who themselves often have significant international
experience;
when acting as general designer for projects located outside the UK the Group always seeks to appoint sub consultants with an established and
successful track record on similar projects;
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; and
as far as possible foreign currency flows are matched to minimise any impact of exchange rate movements and significant exposures are hedged.
The Strategic Report was approved by the Board on 10 January 2018 and signed on its behalf by
Beverley Wright
Chief Financial Officer
DIRECTORS’ REPORT
The Directors present their report for the year ended 30 September 2017.
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 effectiveness, remuneration, accountability and relations with shareholders.
Although under the rules of the Alternative Investment Market, the Company is not required to comply with the Code nor state any areas 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 size. In doing this the Board has considered the Corporate Governance Guidelines for Small and Mid-Size Quoted Companies
published by the Quoted Companies Alliance.
Board of Directors
The Group is headed by a Board of Directors which leads and controls the Group and which is accountable to shareholders for good corporate
governance of the Group.
The Board currently comprises four executive directors and two independent non-executive directors who bring a wide range of experience and skills
to the Company.
The Board considers Anthony Simmonds and John Bullough to be independent non-executive directors.
The Board meets regularly to determine the policy and business strategy of the Group and has adopted a schedule of matters that are reserved as
responsibilities of the Board. The Board has delegated certain authorities to Board committees, each with formal terms of reference.
Audit Committee
The main role and responsibility of the Audit Committee is to monitor the integrity of the information published by the Group about its financial
performance and position. It does this keeping under review the adequacy and effectiveness of the internal financial controls and by reviewing and
challenging the selection and application of important accounting policies, the key judgements and estimates made in the preparation of the financial
information and the adequacy of the accompanying narrative reporting.
The Audit Committee is also responsible for overseeing the relationship with the external auditor which includes considering 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 John Bullough and they report to the Board on matters discussed at
the Committee meetings.
During the year the Committee met on three occasions to review, in addition to the above, budgets, monthly management accounts and working
capital requirements by reference to the Company’s financial strategy. It also reviewed through a sub-committee the management of risk inherent in
the business.
Remuneration Committee
The Remuneration Committee convenes not less than twice a year, ordinarily on a six monthly basis, and during the year it met on three occasions. The
Committee comprises Anthony Simmonds and John Bullough, with John Bullough as Chairman. It is responsible for determining remuneration policy
and all aspects of the Executive Directors’ remuneration and incentive packages including pension arrangements, bonus provisions, discretionary share
options, relevant performance targets and the broader terms and conditions of their service contracts.
In fulfilling its duties the Committee initiates research as appropriate into market remuneration comparables, appointing third party advisors as
required. In liaison with the Nomination Committee it has regard to succession planning and makes recommendations to the Board in relation to
proposed remuneration packages for any proposed new Executive and Non-executive appointments.
Where appropriate the Committee consults the Chief Executive Officer regarding its proposals. No Director plays a part in any discussion regarding his
or her own remuneration.
40
41
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 Nomination Committee
The Nomination Committee is responsible for keeping under regular review the size, structure and composition (including the skills, knowledge,
experience and diversity) of the Board. This includes considering succession planning for the senior management of the Group, taking into account the
skills and expertise expected to be needed in the future.
It is responsible for nominating new candidates for the Board, for which selection criteria are agreed in advance of any new appointment.
Substantial shareholdings
At 10 January 2018 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
The Nomination Committee is chaired by Anthony Simmonds with the other members being Nicholas Thompson and John Bullough.
Nicholas Thompson
Director of the Company
During the year the Committee made recommendations with respect to succession and the appointment of an additional non-executive director.
Jeremy Blake
Former employee of the Group
Internal Controls and Risk Committee
The Directors acknowledge that they are responsible for the Group’s system of internal controls and for reviewing its effectiveness (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 internal 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, John Bullough, Nicholas Thompson, Andrew Murdoch, Beverley Wright and Nick Pell served as Directors of the Company throughout
the year ended 30 September 2017.
Andrew Murdoch
Director of the Company
Begonia 365 SL
Controlled by a former director of the Company
Raul Curiel
Former director of the Company
River & Mercantile Long Term
Recovery Fund
Stephen Atkinson
Employee of the Group
John Vincent
Former director of the Company
Broadwalk Asset Management
16,602,411
13,030,638
12,478,486
9,515,192
9,240,018
8,150,000
7,649,436
5,791,394
5,317,000
10.05%
7.89%
7.56%
5.76%
5.59%
4.93%
4.63%
3.51%
3.22%
Biographical details of the current Directors are set out on pages 28 to 29.
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
John Bullough
Andrew Murdoch
Nick Pell
30 September
2017
30 September
2016
1,000,000
16,602,411
100,000
500,000
12,478,486
1,826,700
1,000,000
16,702,411
100,000
500,000
12,478,486
1,826,700
Directors’ service contracts
The Company’s policy is to offer service agreements to executive directors with notice periods of not more than twelve months. Nicholas Thompson and
Andrew Murdoch have rolling service contracts with the Company which are subject to twelve months’ notice of termination by either party. Nick Pell and
Beverley Wright have rolling service contracts with the Company which are subject to six months’ notice of termination by either party.
The remuneration packages of executive directors comprise basic salary, 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.
Share price
The mid-market closing price of the shares of the Company at 30 September 2017 was 2.13 pence and the range of mid-market closing prices of the
shares during the year was between 2.13 pence and 4.13 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 £826,068 representing 50% of the issued share capital of the Company.
A resolution will also be put to the Annual General Meeting in respect of the issue of equity securities for cash up to an aggregate nominal amount of
£165,214 representing 10% of the issued share capital, without first offering such shares to shareholders. The directors consider this authority desirable
as it will give them the flexibility to make small issues of ordinary shares for cash if suitable opportunities arise without the necessity of first seeking
shareholders’ approval.
The renewed authorities will expire at the conclusion of the 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 project. We design innovative solutions and focus on:
•
•
•
•
•
incorporating passive design principles that mitigate solar gain and heat loss from the outset;
reducing energy demand through active and passive renewable energy sources;
the use of energy and resource efficient materials, methods and forms;
the re-use of existing buildings and materials and flexibility for future change;
and importantly the careful consideration of the experience and 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 68 ‘Excellent’ or
‘Very Good’ BREEAM (Building Research Establishment Environmental Assessment Method) ratings awarded to buildings designed by the Group. We
have also achieved 1 Ska ‘Gold’ and 2 Ska ‘Silver’ environmental assessment ratings and 2 LEED (Leadership in Energy and Environmental Design) ‘Gold’
award and 5 ‘Silver’ awards.
42
43
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 Employees
As a professional services business, the Group’s ability to achieve its commercial objectives and to service the needs of its clients in a profitable and
effective manner depends upon the contribution of its employees. The Group seeks to keep its employees informed on all material aspects of the
business affecting them through the operation of a structured management system, staff presentations and an intranet site.
The Group’s employment policies do not discriminate between employees, or potential employees, on the grounds of age, gender, sexual orientation,
ethnic origin or religious belief. The sole criterion for selection or promotion is the suitability of any applicant for the job.
It is the policy of the Group to encourage and facilitate the continuing professional development of our employees to ensure that they are equipped to
undertake the tasks for which they are employed, and to provide the opportunity for career development equally and without discrimination. Training
and development is provided and is available to all levels and categories of staff.
It is the Group’s policy to give fair consideration to application for employment for disabled persons wherever practicable and, where existing employees
become disabled, efforts are made to find suitable positions for them.
Health and safety
The Group seeks to promote all aspects of health and safety at work throughout its operations in the interests of employees and visitors.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
Directors’ responsibilities
The Directors are responsible for preparing the annual report and financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the
Group and Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the profit or loss of the Group for that period. The Directors are also required to prepare financial statements
in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.
In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgments and accounting estimates that are reasonable and prudent;
•
state whether 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;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
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:
•
•
so far as they are aware, there is no relevant audit information of which the auditor is unaware; and
they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and
to establish that the Company’s auditor is aware of that information.
Future developments
An indication of likely future developments in the business of the Group is contained in the Strategic Report.
Financial instruments
Information concerning the use of financial instruments by the Group is given in notes 27 to 31 of the financial statements.
Dividends
Given the uncertainty with respect to near-term trading, the Board will review the position regarding dividend payments in the second half of the 2018
financial year.
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.
The Directors’ report was approved by the board on 10 January 2018 and signed on its behalf by
Beverley Wright
Company Secretary
Aukett Swanke Group Plc
Registered number 2155571
44
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.
45
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 INDEPENDENT AUDITOR’S REPORT TO
THE MEMBERS OF AUKETT SWANKE GROUP PLC
Matter
How we addressed the matter in our audit
Opinion
We have audited the financial statements of Aukett Swanke Group Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 30
September 2017 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and
company statements of financial position , the consolidated and company statements of cash flows, the consolidated and company statements of
changes in equity and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 September 2017 and of the
group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied
in accordance with the provisions of the Companies Act 2006; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of
the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group’s or
the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when
the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had
the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. This matter
was addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on this matter.
Recognition of contractual revenue, margin and
related receivables and liabilities
As explained in the Group Revenue Recognition accounting policy on
page 62 and accounting estimates and judgements – Recognition of
contractual revenue on page 63, the Group recognises revenue based
on the stage of completion of contracts for services by reference to
the proportion of costs incurred to the balance sheet date compared
with the estimated final costs of the contract at completion. Variation
to expected revenue is assessed and recognised on a contract-by-
contract basis when the Group believes it is probable they will result
in revenue and they are capable of being measured reliably.
A high degree of judgement therefore exists in the Directors’
assessment in the stage of completion of individual contracts for
services at the balance sheet date and the completeness of total cost
and revenues to be included within individual contracts. Changes
to the total contract cost and / or revenue estimates could give rise
to material variances in the amount of revenue and margin to be
recognised at a reporting period.
Goodwill impairment assessment of the UK and
Middle East CGUs
As explained in the Group Goodwill accounting policy on page 61
and assumptions included within value in use calculations on pages
72 to 73, the Group’s balance sheet includes goodwill, principally
arising from past acquisitions totalling £2.4m as at 30 September
2017, significantly comprising £1.7m within the UK Cash Generating
Unit (‘CGU’) and £0.6m within the Middle East CGU. There is a risk
that goodwill allocated to CGU’s is not recoverable and should be
impaired. An impairment assessment has therefore been carried out
by management at the balance sheet date.
This assessment includes a number of estimates and assumptions
for future performance that determine the net present value of
future cashflows, including but not limited to, the discount rate, long
term growth rate, and operating profitability of the group.
Due to the inherent uncertainty involved in forecasting and
discounting future cash flows, which are the basis of the assessment
of recoverability, this is one of the key judgemental areas affecting
the level of direction and strategy of our audit and the use of our
resources.
We evaluated the design and implementation of controls of the
Group to monitor amounts recorded as revenue at each balance
sheet date.
We selected a sample of contracts to test, from a population of all
contracts.
The following procedures were performed in respect of the sample
selected:
• We assessed the key judgements adopted by management in
relation to the revenue recognition, and in particular, judgements
with respect to the percentage completion by obtaining an
understanding from the project managers of how they estimated
involved challenging assumptions made,
these costs. This
evaluating the outturn of previous estimates and agreeing the
actual costs incurred after the year end to the forecasted costs for
the period.
• We tested the allocation of costs by contract through timesheet
authorisation and manual journals testing, where we checked
that there were no material transfers of work in progress
between contracts.
• We traced total anticipated revenue to supporting documentation
such as original contract, amendments to contracts (where
applicable eg. due to agreed variations) and checked that
contractual milestones had been reached. Further to this, we
traced a sample of revenue transactions during the year to
invoices raised and subsequent cash receipt.
Our procedures included critically assessing the key assumptions
applied by the Group in determining the recoverable amounts of
each CGU. In particular, we:
• considered the consistency and appropriateness of the allocation
of businesses and related goodwill balances into CGUs;
• considered the underlying assumptions in determining the
cash flows and growth assumptions applied with reference to
historical forecasting accuracy and wider macro environment
conditions;
• challenged the assumptions used in the calculation of the
discount rates used by the Group, including comparisons with
external data sources;
• assessed whether the Group’s disclosures about the sensitivity
of the outcome of the impairment assessment to changes in key
assumptions appropriately reflected the risks inherent in the
valuation of goodwill; and
• performed our own sensitivity analysis which
included
consideration of the effect of a possible reduction in assumed
growth rates and cash flows.
46
47
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 Our application of materiality
Materiality for the Group financial statements as a whole was set at £235,000 (2016: £250,000) which represents approximately 1.5% of net earnings
for the year.
We report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £11,750 (2016: £12,500) in addition to other
misstatements that warranted reporting on qualitative grounds.
The audit of the company-only financial statements of Aukett Swanke Group Plc was performed at a level of £83,000 (2016: £80,000) which represents
approximately 3% of net assets at the year-end.
An overview of the scope of our audit
The audit of the Group financial statements comprised full scope audits performed on the consolidated group headed up by Aukett Swanke Group
Plc (in addition to its standalone parent entity financial statements), along with a full scope audit on its six UK-domiciled subsidiaries as required by
statutory regulations in the UK. Full scope audits were also performed by a separate independent audit firm within the United Arab Emirates (‘UAE’)
on the subsidiary John R Harris & Partners, along with the Group’s UAE-domiciled branches of Shankland Cox Limited and Aukett Fitzroy Robinson
International Limited. Where the work was performed by component auditors, we determined the level of involvement needed in order to be able to
conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the group financial statements as a whole.
Specific procedures were performed around certain elements of the Berlin and Frankfurt joint ventures given their size and significance to the overall
group and other unaudited entities within the group were reviewed analytically by reference to their expected financial performance and position.
We planned our audit by undertaking an evaluation of the systems and controls in place on the group’s core transactional cycles and the controls in place
designed to capture and record information for financial statement disclosures. Our testing was performed using a combination of tests of operating
effectiveness of controls and for those areas where this would be perceived as being ineffective, substantive analytical procedures and other substantive
procedures such as verification of transactions or samples from populations to underlying evidence.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the
financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have
not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches
not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
•
•
•
•
48
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 45, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend
to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
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.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Tim Neathercoat (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
United Kingdom
10 January 2018
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
49
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 CONSOLIDATED INCOME STATEMENT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2017
For the year ended 30 September 2017
(Loss) / profit for the year
Currency translation differences
Other comprehensive (loss) / income for the year
Total comprehensive (loss) / income for the year
Total comprehensive (loss) / income for the year is attributable to:
Owners of Aukett Swanke Group Plc
Non-controlling interests
2017
£’000
(304)
(124)
(124)
(428)
(425)
(3)
(428)
2016
£’000
821
424
424
1,245
1,158
87
1,245
Revenue
Sub consultant costs
Revenue less sub consultant costs
Personnel related costs
Property related costs
Other operating expenses
Other operating income
Operating (loss) / profit
Finance income
Finance costs
(Loss) / profit after finance costs
Share of results of associate and joint ventures
(Loss) / profit before tax
Tax credit / (charge)
(Loss) / profit from continuing operations
(Loss) / profit for the year
(Loss) / profit attributable to:
Owners of Aukett Swanke Group Plc
Non-controlling interests
Basic and diluted earnings per share for (loss) / profit attributable to the
ordinary equity holders of the Company:
From continuing operations
Total (loss) / earnings per share
Note
3
3
4
5
10
11
2017
£’000
18,395
(2,325)
16,070
(13,114)
(2,360)
(2,229)
1,089
(544)
-
(34)
(578)
253
(325)
21
(304)
(304)
(323)
19
(304)
(0.20)p
(0.20)p
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
50
51
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
COMPANY STATEMENT OF FINANCIAL POSITION
At 30 September 2017
At 30 September 2017
Note
12
13
14
16
17
22
18
19
20
23
20
22
23
24
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 at bank and in hand
Total current assets
Total assets
Current liabilities
Trade and other payables
Current tax
Borrowings
Provisions
Total current liabilities
Non current liabilities
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
2017
£’000
2,377
908
210
530
233
213
4,471
7,931
1,188
9,119
13,590
(4,723)
-
(467)
(151)
(5,341)
(537)
(71)
(880)
(1,488)
(6,829)
6,761
1,652
1,176
8
2,250
1,494
6,580
181
6,761
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
The financial statements on pages 50 to 95 were approved and authorised for issue by the Board of Directors on 10 January 2018 and were signed on
its behalf by:
Nicholas Thompson
Chief Executive Officer
52
Beverley Wright
Chief Financial Officer
Note
15
18
18
19
20
20
24
Non current assets
Investments
Trade and other receivables
Total non current assets
Current assets
Trade and other receivables
Cash at bank and in hand
Total current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Total current liabilities
Non current liabilities
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
2017
£’000
5,514
26
5,540
1,311
623
1,934
7,474
(2,536)
(239)
(2,775)
(537)
(537)
(3,312)
4,162
1,652
(160)
1,176
1,494
4,162
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
The result for the year contained within the parent company’s income statement is £411,000 (2016: £538,000).
The financial statements on pages 50 to 95 were approved and authorised for issue by the Board of Directors on 10 January 2018 and were signed on
its behalf by:
Nicholas Thompson
Chief Executive Officer
Beverley Wright
Chief Financial Officer
53
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 CONSOLIDATED STATEMENT OF CASH FLOWS
COMPANY STATEMENT OF CASH FLOWS
For the year ended 30 September 2017
For the year ended 30 September 2017
Note
26
Cash flows from operating activities
Cash (expended) / generated from operations
Interest paid
Income taxes paid
Net cash outflow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Sale of property, plant and equipment
Acquisition of subsidiary, net of cash acquired
Interest received
Dividends received
Net cash received / (used) in investing activities
Net cash outflow before financing activities
Cash flows from financing activities
Proceeds from bank loans
Repayment of bank loans
Dividends paid
Net cash (outflow) / inflow from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at start of year
Currency translation differences
Cash and cash equivalents at end of year
21
Cash and cash equivalents are comprised of:
Cash at bank and in hand
Secured bank overdrafts
Cash and cash equivalents at end of year
2017
£’000
(746)
(34)
(8)
(788)
(27)
2
-
-
215
190
(598)
-
(250)
-
(250)
(848)
1,839
(31)
960
1,188
(228)
960
2016
£’000
104
(29)
(99)
(24)
(147)
4
(761)
8
-
(896)
(920)
1,123
(175)
(181)
767
(153)
1,873
119
1,839
1,839
-
1,839
Note
26
Cash flows from operating activities
Cash generated / (expended) from operations
Interest paid
Income taxes paid
Net cash inflow / (outflow) from operating activities
Cash flows from investing activities
Purchase of subsidiaries
Dividends received
Net cash generated from / (used in) investing activities
Net cash inflow / (outflow) before financing activities
Cash flows from financing activities
Proceeds from bank loans
Repayment of bank loans
Dividends paid
Net cash (outflow) / inflow from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at start of year
Currency translation differences
Cash and cash equivalents at end of year
Cash and cash equivalents are comprised of:
Cash at bank and in hand
Cash and cash equivalents at end of year
2017
£’000
96
(34)
-
62
-
215
215
277
-
(250)
-
(250)
27
596
-
623
623
623
2016
£’000
(846)
(23)
(3)
(872)
(1,126)
820
(306)
(1,178)
1,123
(175)
(181)
767
(411)
1,007
-
596
596
596
54
55
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2017
For the year ended 30 September 2017
Foreign
currency
translation
reserve
£’000
Retained
earnings
£’000
Other
distributable
reserve
£’000
(276)
1,801
1,791
Share
capital
£’000
1,652
Merger
reserve
£’000
1,176
At 30 September 2015
Profit for the year
Other comprehensive
income
Total comprehensive income
Other adjustments
Dividends paid
-
-
-
-
-
At 30 September 2016
1,652
Loss for the year
Other comprehensive loss
Total comprehensive income
-
-
-
-
386
386
-
-
110
-
(102)
(102)
772
-
772
-
-
2,573
(323)
-
(323)
Total
£’000
6,144
772
386
1,158
-
(297)
-
-
-
-
(297)
-
-
-
-
-
1,494
1,176
7,005
-
-
-
-
-
-
(323)
(102)
(425)
Non-
controlling
interests
£’000
107
49
38
87
(10)
-
184
19
(22)
(3)
181
Total
equity
£’000
6,251
821
424
1,245
(10)
(297)
7,189
(304)
(124)
(428)
6,761
Share capital
£’000
1,652
-
-
1,652
-
1,652
Retained
earnings
£’000
(1,109)
538
-
(571)
411
(160)
Other
distributable
reserve
£’000
Merger reserve
£’000
1,791
-
(297)
1,494
-
1,494
1,176
-
-
1,176
-
1,176
Total
Equity
£’000
3,510
538
(297)
3,751
411
4,162
At 30 September 2015
Profit for the year
Dividends paid
At 30 September 2016
Profit for the year
At 30 September 2017
The other distributable reserve was created in September 2007 during a court and shareholder approved process to reduce the capital of the Company.
The merger reserve was created through a business combination in December 2013 representing the issue of 19,594,959 new ordinary shares at a price
of 7.00 pence per share.
At 30 September 2017
1,652
8
2,250
1,494
1,176
6,580
The other distributable reserve was created in September 2007 during a court and shareholder approved process to reduce the capital of the Company.
The merger reserve was created through a business combination in December 2013 representing the issue of 19,594,959 new ordinary shares at a price
of 7.00 pence per share.
CONVERSION OF INDUSTRIAL BUILDING TO WORKPLACE / R+D / EDUCATION / LEISURE OPTIONS
56
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
57
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 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.
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.
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 effective date making them applicable to future financial statements. The following standards are effective for accounting periods beginning on or
after 1 January 2018 and have not yet been adopted by the Group:
i)
IFRS 15 ‘Revenues from contracts with customers’ (see below).
ii)
IFRS 9 ‘Financial instruments’. The standard provides a single classification and measurement model for financial assets and replaces the
existing IAS 39. The standard introduces new requirements for the classification and measurement of financial liabilities; a new model for
recognising provisions based on expected credit losses and simplifies hedge accounting compared to IAS 39. New disclosure requirements
will also be introduced upon adoption of the standard.
The most significant part of the new requirements is anticipated to be the need to apply an expected credit loss model when calculating
impairment losses on the Group’s trade and other receivables. In applying IFRS 9, the Group must consider the probability of default
occurring over the contractual life of its trade receivables and contract asset balances on initial recognition of those assets. This is likely to
result in earlier recognition of impairment provisions and greater judgement will be required due to the need to factor in forward looking
information when estimating the appropriate amount of provisions.
On review of the financial instruments of the Group, it is expected that there will be little change to the measurement basis of financial assets
and financial liabilities given the intentions of management in respect of the business model of the financial instruments held and the fact
that most of the Group’s financial instruments generate cash flows solely through the payment of principal and interest. As such, it is expected
that the financial instruments of the Group will continue to be accounted for at amortised cost.
The group is yet to assess the full impact of implementing IFRS 9 and expects to report a more detailed qualitative analysis in the interim
financial statements for the six months ending 31 March 2018 and an estimate of the financial impact in the financial statements for the year
ending 30 September 2018.
The group expects to adopt this standard for its accounting period beginning on 1 October 2018.
iii) 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 effectively brings the majority 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 effective.
This standard is effective for accounting periods beginning on or after 1 January 2019 and the group expects to adopt this standard for its
accounting period beginning on 1 October 2019.
There are no other IFRSs or International Financial Reporting Interpretations Committee interpretations that are not yet effective that would be expected
to have a material impact on the Group.
IFRS 15 Revenues from contracts with customers:
IFRS 15 is the new revenue standard which replaces existing standards and guidance including IAS 18 Revenue and IAS 11 Construction
Contracts. Applying IFRS 15, an entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
To recognise revenue under IFRS 15, an entity applies the following five steps:
Step 1:
Identify the contract(s) with a customer;
Step 2:
Identify the performance obligations in the contract. Performance obligations are promises in a contract to transfer to a customer
goods or services that are distinct;
Step 3:
Step 4:
Step 5:
Determine the transaction price. The transaction price is the amount of consideration to which an entity expects to be entitled in
exchange for transferring promised goods or services to a customer. If the consideration promised in a contract includes a
variable amount, an entity must estimate the amount of consideration to which it expects to be entitled in exchange for transferring
the promised goods or services to a customer;
Allocate the transaction price to each performance obligation on the basis of the relative stand-alone selling prices of each
distinct good or service promised in the contract; and
Recognise revenue when a performance obligation is satisfied by transferring a promised good or service to a customer. A
performance obligation may be satisfied at a point in time or over time. For a performance obligation satisfied over time, an entity
would select an appropriate measure of progress to determine how much revenue should be recognised as the performance
obligation is satisfied.
The group expects to apply IFRS 15 for its accounting period beginning on 1 October 2018. There will be no impact on cash flows with collection
remaining in line with contractual terms.
It is anticipated that the group will to be in a position to provide more detailed qualitative disclosures describing the likely impact of transition to IFRS
15 in the interim financial statements for the six months ending 31 March 2018.
There remains a significant amount of work to be performed in order to quantify the full potential impact of IFRS 15 on revenue, costs and profit and
the group anticipates to provide an estimate of this in the financial statements for the year ended 30 September 2018.
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 31.
The Group currently meets its day to day working capital requirements through its cash balances. It maintains its net overdraft facility for additional
financial flexibility and foreign currency hedging purposes. This overdraft facility was renewed for a further 12 months in October 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
flow 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 31 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 affect
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 joint ventures.
58
59
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
Associates
Associates are entities for which the Group has significant influence but not control or joint control. This is presumed to be the case where the Group
holds between 20% and 50% of the voting rights, but consideration is given to the substance of the contractual governance agreements in place.
Investments in associates are accounted for under the equity method.
Joint ventures
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
difference between the proceeds (net of any transaction costs) and the redemption value is recognised in the income statement over the period of the
borrowings using the effective interest method.
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
where these form an integral part of the group’s cash management process, for the purposes of the statement of cash flows.
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 company’s result is disclosed at the foot of the company’s statement of financial position.
Deferred taxation
Deferred income tax is provided in full, using the statement of financial position liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amount in the financial statements, and measured at an undiscounted basis.
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
differences can be utilised.
Dividends
Dividend payments are recognised as liabilities once they are no longer at the discretion of the Company.
Dividend income from investments is recognised in the income statement when the shareholders’ rights to receive payment have been established.
Equity instruments
Equity instruments issued by the Company are recorded as 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
consolidated 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, which are materially consistent with the spot rates observed in the year for those entities. Exchange differences arising are recognised
directly in equity and transferred to the Group’s foreign currency translation reserve. If an overseas operation is disposed of then the cumulative
translation differences are recognised as 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 suffered any impairment. If any such indications exist, the recoverable amount of
the asset is estimated in order to determine the extent of any impairment.
Where the asset does not generate cash flows that are independent from other assets, the recoverable amount of the cash generating unit to which the
asset belongs is estimated.
Other 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 – 25 years
Trade licence – 10 years
Customer relationships – 7 to 10 years
Order book – Over the life of the contracts
Amortisation is charged to other operating expenses within the consolidated income statement.
Investments
Investments in subsidiaries, associates and joint ventures are held in the statement of financial position of the Company at historical cost less any
allowance for impairment.
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. 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.
60
61
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 Depreciation of property, plant and equipment is calculated to write off the cost of acquisition over the expected useful economic lives using the straight
line method and over the following number of years:
Leasehold improvements – Unexpired term of lease
Office furniture – 4 years
Office equipment – 4 years
Computer equipment – 2 years
Provisions
Provisions are recognised when a present obligation has arisen as a result of a past event which it is probable will result in an outflow of economic
benefits that can be reliably estimated.
Where the effect of the time value of money is material, the provision is based on the present value of future outflows, discounted at the pre-tax discount
rate that reflects the risks specific to the liability.
In those geographies where it is a legal requirement, provision is also made for end of service benefit (‘EOSB’), being amounts payable to employees
when their contract with the group ends (see note 23).
Post retirement benefits
Costs in respect of defined contribution pension arrangements are charged to the income statement on an accruals basis in line with the amounts
payable in respect of the accounting period. The Group has no defined benefit pension arrangements.
Revenue recognition
Revenue represents the value of services performed for customers under contract (excluding value added taxes). Revenue from contracts is assessed on
an individual basis with revenue earned being ascertained based on the stage of completion of the contract which is estimated using a combination of
the milestones in the contract and the proportion of total time expected to be required to undertake the contract which had been performed.
The amount by which revenue exceeds progress billings is classified as amounts due from customers for contract work and included in trade and other
receivables. To the extent progress billings exceed relevant revenue, the excess is classified as advances received from customers for contract work and
included in trade and other payables.
Revenue is only recognised when there is a contractual right to consideration and any revenue earned can be estimated reliably. Variations in contract
work, claims and incentive payments are only recognised when it is probable they will result in revenue and they are capable of being measured reliably.
Share based payments
The Group has issued share options to certain employees, in return for which the Group receives services from those employees. The fair value of the
employee services received in exchange for the grant of the options is recognised as an expense other than where management perceive the fair value
to be immaterial.
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).
The fair value of the options granted is estimated by management by utilising a Black-Scholes option pricing model with reference to expected volatility,
vesting period, exercise price, and market share price at the time of grant.
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 the specific debtor balance in question have
been impaired. Known significant financial difficulties of the client and lengthy delinquency in receipt of payments are considered indicators that a trade
receivable may be impaired. Where a trade receivable is considered impaired the carrying amount is reduced using an allowance and the amount of
the loss is recognised in the income statement within other operating expenses.
2 ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances.
Accounting estimates
In preparing the financial statements, the directors make estimates and assumptions concerning the future. The resulting accounting estimates, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are considered to be:
Recognition of contractual revenue
Revenue from contracts is assessed on an individual basis with revenue earned being ascertained based on the stage of completion of the contract which
is estimated using a combination of the milestones in the contract and the proportion of total time expected to be required to undertake the contract
which had been performed.
Estimates of the total time expected to be required to undertake the contracts are made on a regular basis and subject to management review. These
estimates may differ from the actual results due to a variety of factors such as efficiency of working, accuracy of assessment of progress to date and client
decision making.
The amount by which revenue exceeds progress billing is shown as amounts due from customers for contract work in note 18. The amount by which
progress billing exceeds revenue is shown as advances received from customers for contract work in note 19.
A change of 16% (2016: 13%) as a percentage of total amounts due from customers for contract work or a change of 25% (2016: 15%) as a percentage
of amounts received from customers for contract work would cause a material adjustment to revenue.
Impairment of trade receivables
The Group provides architectural, interior design and related services to a wide variety of clients including property developers, owner occupiers and
governmental organisations, both in the United Kingdom and overseas.
The Group endeavours to undertake work only for clients who have the financial strength to complete projects but even so, much property development
is financed by funds not unconditionally committed at the commencement of the project. Problems with financing can on occasion unfortunately lead
to clients being unable to pay their debts either on a temporary or more permanent basis.
The Group monitors receipts from clients closely and undertakes a range of actions if there are indications a client is experiencing funding problems. The
Group makes impairment allowances if it is considered there is a significant risk of non-payment. The factors assessed when considering an impairment
allowance include the ownership of the development site, the general financial strength and financial difficulties of the client, likely use / demand for
the completed project, and the length of time likely to be necessary to resolve the funding problems.
The Group strives to maintain good relations with clients, but on occasions disputes do arise with clients requiring litigation to recover outstanding
monies. In such circumstances, the directors carefully consider the individual facts relating to each case (such as strength of the legal arguments and
financial strength of the client) when deciding the level of any impairment allowance.
An increase of 4% (2016: 3.4%) as a percentage of total trade receivables would lead to a material bad debt exposure. Further quantitative information
concerning trade receivables is shown in note 29.
Impairment of goodwill
Details of the impairment reviews undertaken in respect of the carrying value of goodwill are given in note 12.
Impairment of investments in subsidiaries, associates and joint ventures
The company’s investment in subsidiaries, associates and joint ventures are reviewed annually for impairment. The recoverable amount is determined
based on value in use calculations. These calculations use pre-tax cash flow projections based on financial budgets and forecasts covering a five year
period. Cash flows beyond the five year period are extrapolated using long term average growth rates.
The key assumptions made in these projections are the same as those given in relation to impairment of goodwill in note 12.
Critical accounting judgements
Critical judgements represent key decisions made by management in the application of the Group’s accounting policies. Where a significant risk of
materially different outcomes exists due to management assumptions, this will represent a critical accounting judgement. Accounting judgements are
continually reviewed in light of new information and are based on historical experience and other factors, including expectations of future events that
are believed to be reasonable under the circumstances. The judgements which have a significant risk of causing a material adjustment to the carrying
amount of assets and liabilities are considered to be:
62
63
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 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.
3 OPERATING SEGMENTS
The Group comprises 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.
The Group’s operating segments consist of the United Kingdom, the Middle East and Continental Europe. Turkey and Russia are included within
Continental Europe together with Germany and the Czech Republic.
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
2017
£’000
8,915
8,631
849
18,395
2017
£’000
8,765
6,833
472
16,070
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
2017
£’000
-
-
-
(34)
(34)
2016
£’000
12,142
7,383
1,316
20,841
2016
£’000
12,080
5,424
906
18,410
2016
£’000
-
-
8
(28)
(20)
Segment depreciation
United Kingdom
Middle East
Continental Europe
Depreciation
Segment amortisation
United Kingdom
Middle East
Continental Europe
Amortisation
2017 Segment result
United Kingdom
Middle East
Continental Europe
Group costs
Loss before tax
2016 Segment result
United Kingdom
Middle East
Continental Europe
Group costs
Profit / (Loss) before tax
2017
£’000
164
95
29
288
2017
£’000
27
65
18
110
Fair value gains
on deferred
consideration
and acquisition
settlement
£’000
Goodwill
Impairment and
release of negative
goodwill
£’000
Before goodwill
and acquisition
adjustments
£’000
19
(687)
(136)
(221)
(1,025)
-
700
-
-
700
-
-
-
-
-
Fair value gains
on deferred
consideration
and acquisition
settlement
£’000
Goodwill
Impairment and
release of negative
goodwill
£’000
Before goodwill
and acquisition
adjustments
£’000
1,052
(119)
112
(261)
784
-
-
-
-
-
-
160
(17)
-
143
2016
£’000
254
72
33
359
2016
£’000
27
112
38
177
Total
£’000
19
13
(136)
(221)
(325)
Total
£’000
1,052
41
95
(261)
927
The Group’s share of results from joint ventures and associate included within the Continental Europe segment result are shown in notes 16 and 17.
64
65
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 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*
Total assets
*Non current assets include investments in associates and joint 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
Geographical areas
Revenue
United Kingdom
Country of domicile
Russia
Turkey
United Arab Emirates
Foreign countries
Revenue
2017
£’000
2,564
3,971
241
6,776
2,343
4,471
2016
£’000
2,633
4,918
374
7,925
3,141
4,900
13,590
15,966
2017
£’000
1,656
1,762
225
3,643
1,698
1,488
6,829
2017
£’000
8,915
8,915
367
482
8,631
9,480
18,395
2016
£’000
2,502
1,860
147
4,509
2,393
1,875
8,777
2016
£’000
12,142
12,142
448
868
7,383
8,699
20,841
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
2017
£’000
2,138
2,138
25
17
747
139
1,192
2,120
4,258
213
4,471
Major clients
During the year ended 30 September 2017, the Group did not derive 10% or more of its revenues from any client (2016: one client).
Largest client revenues
2017
£’000
1,121
The largest client revenues for 2017 relate to the Middle East operating segment (2016: United Kingdom operating segment)
Revenue by project site
The geographical split of revenue based on the location of project sites was:
United Kingdom
Middle East
Continental Europe
Rest of the world
Revenue
2017
£’000
8,107
9,032
1,119
137
18,395
2016
£’000
2,347
2,347
11
17
693
239
1,374
2,334
4,681
219
4,900
2016
£’000
2,252
2016
£’000
12,014
7,349
1,396
82
20,841
66
67
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 4 OTHER OPERATING INCOME
Property rental income
Management charges to joint ventures and associates
Licence fee income
Other sundry income
Release of negative goodwill on acquisition
Fair value gain on the reduction of deferred consideration
Gain recognised on acquisition settlement
Total other operating income
2017
£’000
238
109
3
39
-
128
572
1,089
2016
£’000
432
104
5
31
160
-
-
732
The gain recognised on acquisition settlement of £572,000 (2016: £nil) relates to an amicable settlement on deferred consideration with the vendor of
Shankland Cox Limited in respect of contract losses which were not known at the date of acquisition.
5
FINANCE COSTS
Payable on bank loans and overdrafts
Total finance costs
6
AUDITOR REMUNERATION
2017
£’000
34
34
During the year the Group incurred the following costs in relation to the Company’s auditor and associates of the Company’s auditor:
Fees payable to the Company’s auditor for the audit of the
Company’s annual accounts
Fees payable to the Company’s auditor and its associates
for other services
Audit of the Company’s subsidiaries pursuant to legislation
Non audit services - tax compliance services
Non audit services - audit related assurance services
2017
£’000
36
62
-
-
2016
£’000
28
28
2016
£’000
30
64
1
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 2008/489 to omit information about its individual accounts.
7
EMPLOYEE INFORMATION
The average number of persons employed by the Group and Company during the year was as follows:
Technical
Administrative
Total
Group
2017
Number
203
43
246
2016
Number
220
47
267
Company
2017
Number
-
8
8
2016
Number
-
6
6
In addition to the number of staff disclosed above, the Group’s associate and joint ventures employed an average of 156 persons (2016: 121 persons).
The costs of the persons employed by the Group and Company during the year were:
Group
Company
Wages and salaries
Social security costs
Contributions to defined contribution pension
arrangements
2017
£’000
10,733
643
335
2016
£’000
11,254
853
359
Total
11,711
12,466
2017
£’000
697
87
78
862
2016
£’000
510
64
55
629
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 benefits 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 benefits to each employee who completes one year of service as stipulated by UAE
labour laws. Further details of this can be found in note 23.
8 OPERATING LEASES
The operating lease payments recognised as an expense during the year were:
Property
Plant & equipment
Total
2017
£’000
944
25
969
2016
£’000
1,141
32
1,173
68
69
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 10
TAX CHARGE
Current tax
Adjustment in respect of previous years
Total current tax
Origination and reversal of temporary differences
Changes in tax rates
Total deferred tax (note 22)
Total tax credit / (charge)
2017
£’000
2
2
4
17
-
17
21
9 DIRECTORS’ EMOLUMENTS
Directors with operational roles in the UK business waived part of their emoluments in the year to reflect difficult trading conditions. The total amounts
waived were £22,000 (2016: £nil).
The standard rate of corporation tax in the United Kingdom is applicable for the financial year was 19% (2016: 20%)
The tax assessed for the year differs from the United Kingdom standard rate as explained below:
2017
Anthony Simmonds
Nicholas Thompson
Beverley Wright
John Bullough
Andrew Murdoch
Nick Pell
Total
2016
Anthony Simmonds
Nicholas Thompson
Beverley Wright
John Bullough
Andrew Murdoch
Nick Pell
David Hughes
Total
Aggregate
emoluments
£’000
Pension
contributions
£’000
Total
received
£’000
Waived
£’000
Total
entitlement
£’000
45
198
156
30
104
105
638
-
31
23
-
18
-
72
45
229
179
30
122
105
710
-
-
-
-
11
11
22
45
229
179
30
133
116
732
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
David Hughes resigned as a Director on 22 December 2015.
Aggregate emoluments include bonuses awarded.
Benefits were accruing to three Directors (2016: five Directors) under defined contribution pension arrangements.
The aggregate emoluments of the highest paid Director were £198,000 (2016: £206,000) together with pension contributions of £31,000 (2016: £30,000).
70
(Loss) / profit before tax
(Loss) / profit before tax multiplied by the standard rate of
corporation tax in the United Kingdom of 19% (2016: 20%)
Effects of:
non tax deductible goodwill impairment
other non tax deductible expenses
differences in overseas tax rates
associate and joint ventures reported net of tax
impact on deferred tax of change in UK tax rate
tax losses not recognised
current tax adjustment in respect of previous years
income not taxable
Total tax (credit) / charge
11 EARNINGS PER SHARE
The calculations of basic and diluted earnings per share are based on the following data:
Earnings
Continuing operations
(Loss) / profit for the year
2017
£’000
(325)
(62)
-
43
-
(48)
-
60
(2)
(12)
(21)
2017
£’000
(323)
(323)
2016
£’000
(13)
20
7
(89)
(24)
(113)
(106)
2016
£’000
927
185
3
54
3
(53)
24
35
(20)
(125)
106
2016
£’000
772
772
71
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 Number of shares
Weighted average of ordinary shares in issue
Effect of dilutive options
Diluted weighted average of ordinary shares in issue
2017
Number
165,213,652
-
165,213,652
2016
Number
165,213,652
153,916
165,367,568
As explained in note 25 the Company has granted options over 500,000 of its ordinary shares. These have not been included above as the average share
price was below the exercise price in 2017 and they therefore do not have a dilutive effect.
12 GOODWILL
Group
Cost
At 1 October 2015
Other adjustments
Exchange differences
At 30 September 2016
Exchange differences
At 30 September 2017
Impairment
At 1 October 2015
Charge
Exchange differences
At 30 September 2016
Charge
Exchange differences
At 30 September 2017
Net book value
At 30 September 2017
At 30 September 2016
At 30 September 2015
£’000
2,533
45
101
2,679
(31)
2,648
250
17
3
270
-
1
271
2,377
2,409
2,283
The net book value of goodwill is allocated to the Group’s cash generating units (“CGU”) as follows:
At 30 September 2015
Other adjustments
Impairment
Exchange differences
At 30 September 2016
Exchange differences
At 30 September 2017
United Kingdom
£’000
1,740
-
-
-
1,740
-
1,740
Russia
£’000
16
-
(17)
1
-
-
-
Turkey
£’000
56
-
-
10
66
(12)
54
Middle East
£’000
471
45
-
87
603
(20)
583
Total
£’000
2,283
45
(17)
98
2,409
(32)
2,377
The other adjustment of £45,000 to the Middle East CGU in 2016 is in respect of a measurement period adjustment relating to the acquisition of John
R Harris & Partners Limited in June 2015 to reflect 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 flow projections
based on financial budgets and forecasts covering a five year period. Cash flows beyond the five year period are extrapolated using long-term average
growth rates.
The carrying value of goodwill allocated to the United Kingdom 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 ended 30 September 2016, goodwill allocated to Russia was impaired in full.
The key assumptions in the discounted cash flow projections for the United Kingdom operation are:
•
•
•
•
the future level of revenue - which is based on knowledge of past property development cycles and external forecasts such as the construction
forecasts published by Experian. Historically the property development market has both declined more swiftly and recovered more sharply than
the economy as a whole. Management also consider the level of future secured revenues at the point of drawing up these calculations;
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 staff. These assumptions are based on historical experience and an assessment of the current
cost base;
long-term growth rate - which has been assumed to be 2.4% per annum based on the average historical growth in gross domestic product in the
United Kingdom over the past fifty years; and
the discount rate - which is the Group’s pre-tax weighted average cost of capital and has been assessed at 14.9% (2016: 14.5%). This is considered
appropriate as the United Kingdom operation produces more than half of the Group’s revenue less sub consultant costs.
Based on the discounted cash flow projections, the recoverable amount of the UK CGU is estimated to exceed carrying values by at least £400,000. A
3% fall in all future forecast revenues without a corresponding reduction in costs in the UK CGU, or an increase in the discount rate by 150 basis points,
would result in carrying amounts exceeding their recoverable amount. Management believes that the carrying value of goodwill remains recoverable
despite this sensitivity given the conservative nature of the underlying forecasts prepared.
The key assumptions in the discounted cash flow projections for the Middle East operation are:
•
•
•
•
•
the future level of revenue - which is based on knowledge of the current and expected level of construction activity in the Middle East;
working capital requirements - which is based on management’s best in a geography where it is common to have high levels of trade receivables;
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 staff. These assumptions are based on historical experience and an assessment of the current
cost base;
long term growth rate - which has been assumed to be 5.1% per annum based on the average historical growth in gross domestic product in the
Middle East over the past forty years; and
the discount rate - the pre-tax cost of capital has been assessed at 14.0% (2016: 13.6%). This is considered appropriate as the Middle East
operation does not suffer corporation tax.
Based on the discounted cash flow projections, the recoverable amount of the Middle East CGU is estimated to exceed carrying values by at least
£900,000. A 4% fall in all future forecast revenues without a corresponding reduction in costs in the Middle East CGU, or an increase in the discount
rate by 350 basis points, would result in carrying amounts exceeding their recoverable amount. Management believe that the carrying value of goodwill
remains recoverable despite this sensitivity given the conservative nature of the underlying forecasts prepared.
72
73
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 13 OTHER INTANGIBLE ASSETS
Group
Cost
At 30 September 2015
Acquisition of subsidiary
Exchange differences
At 30 September 2016
Exchange differences
At 30 September 2017
Amortisation
At 30 September 2015
Charge
Exchange differences
At 30 September 2016
Charge
Exchange differences
At 30 September 2017
Net book value
At 30 September 2017
At 30 September 2016
At 30 September 2015
Trade name
£’000
Customer
relationships
£’000
Order book
£’000
Trade
licence
£’000
379
282
46
707
(18)
689
27
41
5
73
27
-
100
589
634
352
369
28
51
448
(31)
417
60
50
4
114
53
(12)
155
262
334
309
149
-
26
175
(11)
164
55
79
19
153
22
(11)
164
-
22
94
65
-
11
76
(3)
73
2
7
1
10
8
(2)
16
57
66
63
Total
£’000
962
310
134
1,406
(63)
1,343
144
177
29
350
110
(25)
435
908
1,056
818
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 (“SCL”) in February 2016. The SHC trade name reflects 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 and have remaining amortisation periods of 21 and 23 years,
respectively.
Customer relationships
The customer relationships were acquired as part of the acquisition of SHC in December 2013, on the acquisition of John R Harris & Partners Limited
(“JRHP”) in June 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. The customer relationships acquired in December 2013 have a remaining amortisation period of 3 years. The customer relationships acquired in
December 2015 and February 2016 both have remaining amortisation periods of 8 years.
Order book
The net book value of the order book was acquired as part of the acquisition of JRHP in June 2015. This represents the value of ongoing contracts
acquired at the acquisition date. The amortisation of the order book is over the period to completion of the contracts, all of which had been completed
by 30 September 2017.
Trade licence
The trade licence was acquired as part of the acquisition of JRHP in June 2015. This represents the value of licences granted to JRHP 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 and has a
remaining amortisation period of 8 years.
14 PROPERTY, PLANT & EQUIPMENT
Group
Cost
At 30 September 2015
Additions
Acquisition of subsidiary
Disposals
Exchange differences
At 30 September 2016
Additions
Disposals
Exchange differences
At 30 September 2017
Depreciation
At 30 September 2015
Charge
Disposals
Exchange differences
At 30 September 2016
Charge
Disposals
Exchange differences
At 30 September 2017
Net book value
At 30 September 2017
At 30 September 2016
At 30 September 2015
Leasehold
improvements
£’000
Furniture &
equipment
£’000
558
-
-
(7)
6
557
-
(204)
(7)
346
328
103
(7)
3
427
74
(178)
(7)
316
30
130
230
1,250
151
132
(92)
53
1,494
27
(45)
(20)
1,456
917
256
(75)
20
1,118
214
(45)
(11)
1,276
180
376
333
Total
£’000
1,808
151
132
(99)
59
2,051
27
(249)
(27)
1,802
1,245
359
(82)
23
1,545
288
(223)
(18)
1,592
210
506
563
74
75
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
Subsidiaries
£’000
Joint
ventures
£’000
Associate
£’000
7,785
2,142
-
9,927
150
-
10,077
3,497
-
3,497
150
949
4,596
5,481
6,430
4,288
21
-
-
21
-
-
21
-
-
-
-
-
-
21
21
21
12
-
-
12
-
-
12
-
-
-
-
-
-
12
12
12
Total
£’000
7,818
2,142
-
9,960
150
-
10,110
3,497
-
3,497
150
949
4,596
5,514
6,463
4,321
15
INVESTMENTS
Company
Cost
At 30 September 2015
Additions
Disposals
At 30 September 2016
Conversion of debt
Disposals
At 30 September 2017
Provisions
At 30 September 2015
Charge
At 30 September 2016
Conversion of debt
Charge
At 30 September 2017
Net book value
At 30 September 2017
At 30 September 2016
At 30 September 2015
The increase in cost of £150,000 during the year
relates to converting amounts due from Aukett Fitzroy
Robinson Sp Zoo into ordinary share capital before
the commencement of liquidation proceedings. The
original loan balance due had been impaired in
previous accounting periods and therefore, there is
no effect on the results of the Company arising from
this transaction.
investment
the Company’s
A provision for impairment has also been made
against
in Swanke
Hayden Connell Europe Limited as the Company’s
only trading subsidiary, Swanke Hayden Connell
International Limited, is no longer generating new
revenue and is expected to become dormant within
the next 12 months and therefore the recoverable
amount is forecast to be lower than the original cost
of this investment.
Subsidiary operations
The following are the subsidiary undertakings at 30 September 2017:
Name
Subsidiaries
Aukett Swanke Limited
Aukett Fitzroy Robinson International Limited
Veretec Limited
Aukett Swanke OOO
Swanke Hayden Connell International Limited
Swanke Hayden Connell Mimarlik AS
John R Harris & Partners Limited
Shankland Cox Limited
Aukett Swanke Architectural Design Limited
Swanke Hayden Connell Europe Limited
Aukett Fitzroy Robinson Sp Zoo
Fitzroy Robinson Limited
Swanke Limited
John R Harris & Partners Limited
Aukett Fitzroy Robinson Limited
Thomas Nugent Architects Limited
Aukett Fitzroy Robinson Europe Limited
Aukett Limited
Aukett (UK) Limited
Aukett Group Limited
Fitzroy Robinson West & Midlands Limited
Country of
incorporation and
registered office address
(see table below)
Proportion
of ordinary equity held
2017
2016
Nature of business
(A)
(A)
(A)
(B)
(A)
(C)
(D)
(A)
(A)
(A)
(E)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
100%
100%
100%
100%
100%
100%
80%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
100%
Architecture & design
Architecture & design
Architecture & design
Architecture & design
Architecture & design
Architecture & design
Architecture & design
Architecture & Engineering
-
Architecture & design
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Non trading
In liquidation
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.
John R Harris & 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.
Aukett Swanke Architectural Design Limited is incorporated in England & Wales, but operates principally in the United Arab Emirates.
76
77
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 Interest in associate and joint ventures
Set out below are the associate and joint ventures of the Group as at 30 September 2017. 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 and
registered office address
(see below)
Aukett + Heese Frankfurt GmbH
Aukett sro
Aukett + Heese GmbH
(F)
(G)
(H)
Proportion of ordinary equity
held
Nature of
relationship
Measurement
method
2017
50%
50%
25%
2016
50%
50%
25%
Joint venture
Equity
Joint venture
Equity
Associate
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.
Country of incorporation and registered office addresses
Ref
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
Country of Incorporation
Registered office address
England & Wales
Russia
Turkey
Cyprus
Poland
Germany
Czech Republic
Germany
36-40 York Way, London, N1 9AB, United Kingdom
10 Letnikovskaya str, bld.4, Moscow, 115114, Russia
Kore Sehitleri 34, Deniz Is Hani, 34394 Zincirlikuyu, Istanbul, Turkey
17-19 Themistokli Dervi street, The City House, 1066 Nicosia, Cyprus
ul Emilii Plater 18, 00-688 Warszawa, Poland
Gutleutstrasse 163, 60327 Frankfurt am Main, Germany
Janackovo Nabrezi 471/49, 150 00 Prague 5 , Czech Republic
Budapester Strasse 43, 10787 Berlin, Germany
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
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
2017
£’000
2,116
569
41
(605)
2,121
25%
530
530
2017
£’000
14,310
(5,885)
8,425
(7,610)
815
(246)
569
41
610
2016
£’000
1,017
840
259
-
2,116
25%
529
529
2016
£’000
8,254
(1,807)
6,447
(5,244)
1,203
(363)
840
259
1,099
16
INVESTMENT IN ASSOCIATE
As disclosed in note 15, the Group owns 25% 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 reflects Aukett + Heese GmbH’s relevant financial
statements and not the Group’s share of those amounts. They have been amended to reflect adjustments made by the Group when using the equity
method.
The Group received dividends of £151,000 (2016: £nil) 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.
MERCEDES PLATZ, BERLIN
Summarised balance sheet
Assets
Non current assets
Current assets
Total assets
Liabilities
Current liabilities
Non current liabilities
Total liabilities
Net assets
78
2017
£’000
270
3,428
3,698
(1,577)
-
(1,577)
2,121
2016
£’000
372
3,116
3,488
(1,372)
-
(1,372)
2,116
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
79
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 17
INVESTMENTS IN JOINT VENTURES
Frankfurt
As disclosed in note 15, the Group owns 50% of Aukett + Heese Frankfurt GmbH which is based in Frankfurt.
Prague
As disclosed in note 15, the Group owns 50% of Aukett sro which is based in Prague.
At 30 September 2015
Share of profits
Dividends paid
Exchange differences
At 30 September 2016
Share of profits
Dividends paid
Exchange differences
At 30 September 2017
£’000
94
50
-
20
164
112
(65)
5
216
At 30 September 2015
Share of profits
Exchange differences
At 30 September 2016
Share of profits
Exchange differences
At 30 September 2017
The following amounts represent the Group’s 50% share of the assets and liabilities of Aukett sro.
The Group received dividends of £65,000 (2016: £nil) from Aukett + Heese GmbH. The following amounts represent the Group’s 50% share of the assets
and liabilities, and revenue and expenses of Aukett + Heese Frankfurt GmbH.
Assets
Non current assets
Current assets
Total assets
Liabilities
Current liabilities
Non current liabilities
Total liabilities
Net assets
Revenue
Sub consultant costs
Revenue less sub consultant costs
Operating costs
Profit before tax
Taxation
Profit after tax
2017
£’000
9
453
462
(246)
-
(246)
216
2017
£’000
684
(128)
556
(406)
150
(38)
112
2016
£’000
8
308
316
(152)
-
(152)
164
2016
£’000
474
(92)
382
(323)
59
(9)
50
The principal risks and uncertainties associated with Aukett + Heese Frankfurt GmbH are the same as those detailed within the Group’s Strategic Report.
80
Assets
Non current assets
Current assets
Total assets
Liabilities
Current liabilities
Non current liabilities
Total liabilities
Net assets
Revenue
Sub consultant costs
Revenue less sub consultant costs
Operating costs
(Loss) / profit before tax
Taxation
(Loss) / profit after tax
£’000
6
8
3
17
(1)
1
17
2016
£’000
1
71
72
(55)
-
(55)
17
2016
£’000
168
(10)
158
(150)
8
-
8
81
2017
£’000
-
117
117
(100)
-
(100)
17
2017
£’000
255
(85)
170
(171)
(1)
-
(1)
The principal risks and uncertainties associated with Aukett Sro are the same as those detailed within the Group’s Strategic Report.
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 18 TRADE AND OTHER RECEIVABLES
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
2017
£’000
5,945
(685)
5,260
1,516
29
590
536
7,931
2017
£’000
-
26
26
1,268
3
10
30
1,311
1,337
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
The amounts owed by subsidiaries were secured in January 2013 by debentures over all the assets of the relevant subsidiaries. These debentures rank
after the debentures securing the bank loan and overdraft.
19 TRADE AND OTHER PAYABLES
Group
Trade payables
Advances received from customers for contract work
Other taxation and social security
Other payables
Dividends payable
Accruals
Total
82
2017
£’000
1,282
663
625
455
-
1,698
4,723
2016
£’000
1,089
1,616
626
1,302
116
1,804
6,553
Company
Trade payables
Amounts owed to subsidiaries
Other payables
Dividends payable
Accruals
Total
See note 33 for further details of the amounts due to subsidiaries.
20 BORROWINGS
Group
Secured bank overdrafts
Secured bank loan
Total borrowings
Amounts due for settlement within 12 months
Current liability
Amounts due for settlement between one and two years
Amounts due for settlement between two and five years
Non current liability
Total borrowings
Company
Secured bank loan
Total borrowings
Instalments due within 12 months
Current liability
Instalments due between one and two years
Instalments due between two and five years
Non current liability
Total borrowings
2017
£’000
34
2,422
3
-
77
2,536
2017
£’000
228
776
1,004
467
467
239
298
537
1,004
2017
£’000
776
776
239
239
239
298
537
776
2016
£’000
22
3,421
1
116
59
3,619
2016
£’000
-
1,049
1,049
247
247
247
555
802
1,049
2016
£’000
1,049
1,049
247
247
247
555
802
1,049
The bank loan and overdraft are secured by debentures over all the assets of the Company and certain of its United Kingdom subsidiaries. The bank loan
and overdraft carry interest at 2.5% above the London Interbank Offer Rate (LIBOR) for the relevant currency.
83
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 21 ANALYSIS OF NET FUNDS
Group
Cash at bank and in hand
Secured bank overdrafts (note 20)
Cash and cash equivalents
Secured bank loan (note 20)
Net funds
22 DEFERRED TAX
Group
At 30 September 2015
Income statement
Exchange differences
At 30 September 2016
Income statement
Exchange differences
At 30 September 2017
Group
Deferred tax assets
Deferred tax liabilities
Net deferred tax balance
2017
£’000
1,188
(228)
960
(776)
184
Other
temporary
differences
£’000
(54)
(36)
(3)
(93)
25
6
(62)
2017
£’000
213
(71)
142
2016
£’000
1,839
-
1,839
(1,049)
790
Total
£’000
234
(113)
(2)
119
17
6
142
2016
£’000
219
(100)
119
Tax depreciation
on plant and
equipment
£’000
60
(4)
-
56
33
-
89
Trading
losses
£’000
228
(73)
1
156
(41)
-
115
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 has not recognised 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.
23 PROVISIONS
Group
At 30 September 2015
On acquisition of subsidiary
Utilised
Charged to the income statement
Exchange differences
At 30 September 2016
Utilised
Charged to the income statement
Exchange differences
At 30 September 2017
Property lease
provision
£’000
Employee benefit
obligations
£’000
147
-
-
45
-
192
(65)
24
-
151
207
589
(124)
97
102
871
(163)
206
(34)
880
Total
£’000
354
589
(124)
142
102
1,063
(228)
230
(34)
1,031
Property lease provision
During the year the group vacated one of the two London properties and utilised most of the provision that had been provided in respect of obligations
arising under the lease.
The provision carried forward at 30 September 2017 is the future estimated cost of work to be performed after seeking appropriate external professional
advice for the Group’s 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 applicable labour laws currently require a percentage of final salary to be paid upon resignation or termination. The percentage
is determined by reference to the number of years of continuous employment and cannot exceed two years’ salary.
The 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
Discount rate
Salary growth rate
2017
5 years
2.15%
3.7%
2016
5 years
2.13%
2.7%
The Group determined discount rates on the basis of current yields on 5 year high quality corporate bonds in the same currency as the liabilities.
Forecast consumer price inflation (“CPI”) in the region has been used as a proxy for forecast salary growth.
84
85
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 The sensitivity of the employee benefit obligation to changes in assumptions is set out below. The effects of a change in assumption are weighted
proportionally to the total plan obligations to determine the total impact for each assumption presented.
Impact on employee benefit obligation
26 CASH GENERATED FROM OPERATIONS
Group
Change in assumption
Increase in assumption
Decrease in assumption
(Loss) / profit before tax – continuing operations
Combined average length of service
Salary growth rate
Discount rate
1 year
1%
1%
2.53%
0.51%
(0.51)%
(9.48)%
(0.51)%
0.53%
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.
24 SHARE CAPITAL
Group and Company
Allocated, called up and fully paid
165,213,652 (2016: 165,213,652) ordinary shares of 1p each
At 1 October 2015
No changes
At 30 September 2016
No changes
At 30 September 2017
2017
£’000
1,652
2016
£’000
1,652
Number
165,213,652
-
165,213,652
-
165,213,652
The Company’s issued ordinary share capital comprised a single class of ordinary share. Each share carries the right to one vote at general meetings of
the Company.
The objectives, policies and processes for managing capital are outlined in the strategic report.
25 SHARE OPTIONS
The Company has granted options over its Ordinary Shares to Group employees as follows:
At 1 October
2016
Number
1,000,000
Granted
Number
Lapsed
Number
-
(1,000,000)
-
500,000
-
Granted
11 April 2011
6 March 2017
Total
1,000,000
500,000
(1,000,000)
At 30
September
2017
Number
-
500,000
500,000
Exercise
price
Pence
5.00
4.25
Earliest
exercisable
date
Latest
exercisable
date
12 April 2013
11 April 2017
6 March 2019
6 March 2023
The share options granted on 11 April 2011 lapsed during the year and are no longer exercisable.
The 500,000 share options granted on 6 March 2017 relate to Beverley Wright, a Director of the Company. These share options vest after 2 years’ service
and are exercisable between 2 and 6 years after grant. The fair value of these options is not considered to be material. Further details of transactions
with related parties can be found in note 33.
86
Finance income
Finance costs
Share of results of associate and joint ventures
Goodwill impairment provision
Intangible amortisation
Depreciation
Loss on disposal of property, plant & equipment
Decrease in trade and other receivables
Decrease in trade and other payables
Change in provisions
Negative goodwill
Unrealised foreign exchange differences
Net cash (expended by) / generated from operations
Company
Profit before income tax
Dividends receivable
Finance costs
Decrease / (increase) in trade and other receivables
(Decrease) / increase in trade and other payables
Fixed asset impairment
Unrealised foreign exchange differences
Net cash generated from / (expended by) operations
27 FINANCIAL INSTRUMENTS
2017
£’000
(325)
-
34
(253)
-
110
288
23
913
2016
£’000
927
(8)
28
(267)
17
177
359
10
628
(1,485)
(1,583)
3
-
(54)
(746)
2017
£’000
411
(715)
34
23
(583)
949
(23)
96
16
(160)
(40)
104
2016
£’000
543
(820)
23
(879)
70
-
217
(846)
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.
87
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 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 at bank and in hand
Loans and receivables
Trade payables
Other payables
Accruals
Secured bank loans and overdrafts
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 at bank and in hand
Loans and receivables
Trade payables
Amounts owed to subsidiaries
Other payables
Accruals
Secured bank loan
Financial liabilities measured at amortised cost
Net financial instruments
2017
£’000
5,260
1,516
29
590
1,188
8,583
(1,282)
(455)
(1,698)
(1,004)
(1,031)
(5,470)
3,113
2017
£’000
1,268
29
10
623
1,930
(34)
(2,422)
(3)
(77)
(776)
(3,312)
(1,382)
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)
The Directors consider that there were no material differences between the carrying values and the fair values of all the Company’s and all the Group’s
financial assets and financial liabilities at each year end based on the expected future cash flows.
Collateral
As disclosed in note 20 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
2017
£’000
2,832
1,072
2016
£’000
5,930
1,010
Other receivables in the consolidated statement of financial position include a £148,000 rent security deposit (2016: £148,000) in respect of the Group’s
London studio premises.
28 FOREIGN CURRENCY RISK
The Group’s operations seek to contract with customers and suppliers in their own functional currencies to minimise exposure to foreign currency risk,
however, for commercial reasons contracts are occasionally entered into in foreign currencies.
Where contracts are denominated in other currencies the Group usually seeks to minimise net foreign currency exposure from recognised project
related assets and liabilities by using foreign currency denominated overdrafts.
The Group does not hedge future revenues from contracts denominated in other currencies due to the rights of clients to suspend or cancel projects.
The Board has taken a decision not to hedge the net assets of the Group’s overseas operations.
Financial instruments which are denominated in a currency other than the functional currency of the entity by which they are held are as follows:
Group
Czech Koruna
EU Euro
Polish Zloty
Russian Rouble
UAE Dirham
UK Sterling
US Dollar
Turkish Lira
Net financial instruments held in foreign currencies
Company
Czech Koruna
EU Euro
Russian Rouble
US Dollar
UAE Dirham
Turkish Lira
Net financial instruments held in foreign currencies
2017
£’000
29
97
-
714
938
(32)
(130)
42
1,658
2017
£’000
29
97
25
(768)
67
42
(508)
2016
£’000
49
76
-
636
504
-
(653)
7
619
2016
£’000
49
80
-
(906)
(650)
6
(1,421)
88
A 10% percent weakening of UK Sterling against all currencies at 30 September would have increased / (decreased) equity by the amounts shown
below. This analysis is applied currency by currency in isolation (i.e. ignoring the impact of currency correlation and assumes that all other variables, in
particular interest rates, remain consistent). A 10% strengthening of UK Sterling against all currencies would have an equal but opposite effect.
89
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 Group
Company
2017
Profit
£’000
130
(51)
Equity
£’000
67
-
2016
Profit
£’000
100
(142)
Equity
£’000
105
-
The following foreign exchange gains / (losses) arising from financial assets and financial liabilities have been recognised in the income statement:
Group
Company
2017
£’000
(31)
(2)
2016
£’000
26
(190)
The Group’s exchange loss of £31,000 (2016: gain of £26,000) includes cumulative exchange reserve losses of £nil (2016: £nil) recycled through the
income statement on discontinued operations.
29 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 27.
Counterparty risk is only considered significant in relation to trade receivables, amounts due from customers for contract work, other receivables and
cash and cash equivalents.
The ageing of trade receivables against which no impairment allowance has been made, as the directors consider their recovery is probable, was:
Not overdue
Between 0 and 30 days overdue
Between 30 and 60 days overdue
Greater than 60 days overdue
Total
2017
£’000
2,013
638
728
1,881
5,260
2016
£’000
2,170
929
408
2,551
6,058
The movement on impairment allowances for trade receivables was as follows:
At 30 September 2015
Acquisition of subsidiary
Charged to the income statement
Allowance utilised
Exchange differences
At 30 September 2016
Charged to the income statement
Allowance utilised
Exchange differences
At 30 September 2017
£’000
357
696
155
(80)
148
1,276
213
(788)
(16)
685
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 £6,776,000 (2016: £7,925,000) of trade receivables and amounts due from customers for contract work
is illustrated in the table below showing the three largest exposures to individual clients at 30 September.
Largest exposure
Second largest exposure
Third largest exposure
2017
£’000
666
418
402
2016
£’000
623
429
329
The Group’s principal banker is Coutts & Co, a member of the Royal Bank of Scotland group.
At 30 September 2017 the largest exposure to a single financial institution represented 41% (2016: 60%) 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 32.
90
91
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 30
INTEREST RATE RISK
Group
Rent deposit
Secured bank loans
Secured bank overdrafts
Interest bearing financial instruments
Company
Secured bank loans
Interest bearing financial instruments
2017
£’000
148
(776)
(228)
(856)
2017
£’000
(776)
(776)
2016
£’000
148
(1,049)
-
(901)
2016
£’000
(1,049)
(1,049)
The property rent deposit earns variable rates of interest based on short-term interbank lending rates.
Due to the current low levels of worldwide interest rates, and Group treasury management requirements, the cash and cash equivalents are in practice
currently not interest bearing, and therefore have not been included in interest bearing financial instruments disclosures.
The bank loan and overdraft carry interest at 2.5% above the London Interbank Offer Rate (LIBOR) of the relevant currency.
A 1% rise in worldwide interest rates would have the following impact on profit, assuming that all other variables, in particular the interest bearing
balance, remain constant. A 1% fall in worldwide interest rates would have an equal but opposite effect.
Group
Company
31 LIQUIDITY RISK
2017
£’000
(9)
(8)
2016
£’000
(9)
(10)
The Group’s cash balances are held at call or in deposits with very short maturity terms.
At 30 September 2017 the Group had £850,000 (2016: £850,000) of gross borrowing facility and £250,000 net borrowing facility (2016: £nil) under its
United Kingdom bank overdraft facility. In October 2017 Coutts & Co renewed the overdraft facility, temporarily increasing it to £500,000, which is now
next due for review in November 2018, with an interim review in March 2018 and a reduction at that point to £250,000.
Timing of cashflows
Within one year
Between one and two years
Between two and five years
Expected future charges through the income statement
Financial liabilities at 30 September 2017
Company
Timing of cashflows
Within one year
Between one and two years
Between two and five years
Expected future charges through the income statement
Financial liabilities at 30 September 2016
Timing of cashflows
Within one year
Between one and two years
Between two and five years
Expected future charges through the income statement
Financial liabilities at 30 September 2017
Borrowings
Provisions
Other financial
liabilities
£’000
489
256
307
1,052
(48)
1,004
£’000
981
98
370
1,449
(418)
1,031
£’000
3,435
-
-
3,435
-
3,435
Borrowings
Provisions
Other financial
liabilities
£’000
274
270
579
1,123
(74)
1,049
261
256
307
824
(48)
776
£’000
-
-
-
-
-
-
-
-
-
-
-
-
£’000
3,620
-
-
3,620
-
3,620
2,536
-
-
2,536
-
2,536
Total
£’000
4,905
354
677
5,936
(466)
5,470
Total
£’000
3,894
270
579
4,743
(74)
4,669
2,797
256
307
3,360
(48)
3,312
The maturity analysis of financial liabilities, including expected future charges through the Income Statement is as shown below.
32 GUARANTEES, CONTINGENT LIABILITIES AND OTHER COMMITMENTS
The timing and amount of cashflows in respect of provisions reflect management estimates based on the assumptions described in note 23, rather than
contractual maturity dates and amounts.
Group
Timing of cashflows
Within one year
Between one and two years
Between two and five years
Expected future charges through the income statement
Financial liabilities at 30 September 2016
92
Borrowings
Provisions
Other financial
liabilities
£’000
274
270
579
1,123
(74)
1,049
£’000
827
271
404
1,502
(439)
1,063
£’000
4,312
-
-
4,312
-
4,312
Total
£’000
5,413
541
983
6,937
(513)
6,424
A cross guarantee and offset agreement is in place between the Company and certain of its United Kingdom subsidiaries in respect of the United
Kingdom bank loan and overdraft facility. Details of the UK bank loan are disclosed in note 20. At 30 September 2017 the overdrafts of its United
Kingdom subsidiaries guaranteed by the Company totalled £228,000 (2016: £nil).
The Company and certain of its United Kingdom subsidiaries are members of a group for Value Added Tax (VAT) purposes. At 30 September 2017 the
net VAT payable balance of those subsidiaries was £284,000 (2016: £321,000).
At the year end, one of the Group’s Middle East subsidiaries had outstanding letters of guarantee totalling £165,000 (2016: £166,000). These guarantees
are secured by matching cash on deposit, which is included within trade and other receivables.
In common with other firms providing professional services, the Group is subject to the risk of claims of professional negligence from clients. The Group
maintains professional indemnity insurance in respect of these risks but is exposed to the cost of excess deductibles on any successful claims. The
directors assess each claim and make accruals for excess deductibles where, on the basis of professional advice received, it is considered that a liability
is probable.
93
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 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
2017
£’000
549
1
-
550
2016
£’000
1,016
392
-
1,408
The Group’s most significant lease relates to its London studio premises which comprises £403,000 (2016: £1,350,000) of the amounts shown in the
table above. The lease of its York Way studio does not contain any break clauses and expires in July 2018. The lease of its Christopher Street studio was
concluded during the year.
At 30 September 2017 the Company had entered into a forward contract to purchase 80,000 US Dollars at a predetermined exchange rate on or before
10 November 2017. The total outstanding commitment payable under this contract as at the balance sheet date was £57,000. Management does not
consider the fair value of this forward contract to be material.
The Group has contractual commitments totalling £150,000 per annum in respect of software maintenance plans, expiring in December 2019. The total
future commitments arising under these contracts as at the balance sheet date amount to £339,000.
At both 30 September 2017 and 2016 neither the Group nor the Company had any capital commitments in respect of property, plant and equipment.
The Group previously acted as a lessor through the sub-let of the ground and first floors at its Christopher Street studio. The following is the aggregate
minimum future receivables under these operating leases.
During the year the Company granted 500,000 options over its ordinary shares to Beverley Wright, a director of the Company. The fair value of these
share options is not considered to be material.
Transactions and balances with associate and joint ventures
The Group makes management charges to Aukett + Heese Frankfurt GmbH. The amount charged during the year in respect of these services amounted
to £47,000 (2016: £45,000). Aukett + Heese Frankfurt charged the Group £7,000 (2016: £nil) for architectural services. Dividends of £65,000 (2016: £nil)
were received from Aukett + Heese Frankfurt GmbH during the year. The amount owed to the Group by Aukett + Heese Frankfurt GmbH at the balance
sheet date was £nil (2016: £nil).
The Group makes management charges to Aukett + Heese GmbH. The amount charged by the Group during the year in respect of these services
amounted to £62,000 (2016: £55,000). The Group also charged Aukett + Heese GmbH £50,000 for architectural services. Dividends of £150,000 were
received from Aukett + Heese GmbH during the year. The amount owed to the Group by Aukett + Heese GmbH at 30 September 2017 was £1,000 (2016:
£nil).
As disclosed in note 15, the Group owns 50% of Aukett + Heese Frankfurt GmbH and 25% of Aukett + Heese GmbH. The remaining 50% of Aukett + Heese
Frankfurt GmbH and 75% of Aukett + Heese GmbH are owned by Lutz Heese, a former director of the Company.
The Group charges name licence fees and management fees to Aukett sro, a joint venture in which the Group has a 50% interest. During the year,
charges of £3,000 (2016: £5,000) were made to Aukett sro in respect of these services. The Group was also charged £29,000 for architectural services
provided by Aukett sro during the year. The amount owed to the Group and to the Company by Aukett sro at 30 September 2017 was £29,000 (2016:
£49,000) relating to previously declared but not yet paid dividends and name licence charges.
None of the balances with the associate or joint ventures are secured.
Transactions and balances with subsidiaries
The names of the Company’s subsidiaries are set out in note 15.
2017
£’000
-
-
-
-
2016
£’000
260
-
-
260
The Company made management charges to its subsidiaries for management services of £1,191,000 (2016: £800,000) and paid charges to its subsidiaries
for office accommodation and other related services of £90,000 (2016: £90,000).
At 30 September 2017 the Company was owed £1,268,000 (2016: £1,271,000) by its subsidiaries and owed £2,422,000 (2016: £3,421,000) 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.
Not later than one year
Later than one year and not later than five years
Later than five years
Total
33 RELATED PARTY TRANSACTIONS
Key management personnel compensation
The key management personnel of the Group comprises the Directors of the Company together with the managing and financial directors of the United
Kingdom and international operations.
Group
Short term employee benefits
Post employment benefits
Total
The key management personnel of the Company comprises its Directors.
Company
Short term employee benefits
Post employment benefits
Total
94
2017
£’000
1,472
114
1,586
2017
£’000
719
73
791
2016
£’000
1,553
136
1,689
2016
£’000
774
84
858
34 CORPORATE INFORMATION
General corporate information regarding the Company is shown on page 31. 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.
WORK / LEARN / LIVE / PLAY CHASSIS
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
95
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017 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 and The Financial Times 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 6DA - 0371 384 2030 (lines are open 8.30am to 5.30pm,
Monday to Friday excluding public holidays in England and Wales). Callers from outside the UK should dial +44 (0)121 415 7047.
The website is: www.equiniti.com
Equiniti also provides 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 website 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, 67/68 Jermyn Street, London SW1Y 6NY - 020 7930 3737 - www.sharegift.org
4
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2017
‘’Following the curve of the lake, the building nestles into
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That makes The Bradfield Centre a very special place”
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