&annual
report
accounts
2019
A U K E T T S WA N K E G R O U P P L C
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
the
commercial projects
United Kingdom, Continental Europe and
the Middle East.
throughout
We are an award-winning architecture
and interior design practice. Our 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.
With over 60 years of professional
experience, we have a network of more
than 400 staff in 13 studios 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.
Cover: No2 Forbury Place, Reading
WInner of BCO Regional Award for Best Commercial Workplace 2019
Key international people
GROUP MANAGEMENT
LUKE SCHUBERTH
Managing Director -
UK ‡
SUZETTE VELA BURKETT
Managing Director -
UK ‡
STEPHEN EMBLEY
Managing Director -
Middle East ‡
BEVERLEY WRIGHT
Director of Corporate
Finance & Strategy
UNITED KINGDOM
GORDON MCQUADE
Director
Veretec
JAMES ATHA
Director
Veretec
KEITH MORGAN
Managing Director
Veretec
NICK PELL
Interior Design Director -
International
TOM ALEXANDER
Director
Aukett Swanke
MIDDLE EAST
OMID ROUHANI
Director
Aukett Swanke
Architectural Design
PAULA MCKEON
Finance Director
Middle East
SUBRAYA KALKURA
Director
John R Harris & Partners
YOUSSEF FAKACH
Director
Shankland Cox
CONTINENTAL EUROPE
A
I
S
S
U
R
BURÇU SENPARLAK
General Manager
Istanbul
ZEYNEP ORBERK
Director
Istanbul
LARISA LIGAY
General Director
Moscow
MAXIM NERETIN
Director - Aurora
Moscow
TOM NUGENT
Director
Moscow
JV PARTNERS
C
I
L
B
U
P
E
R
H
C
E
Z
C
LUTZ HEESE
Managing Director -
Aukett + Heese
ANDREW HENNING JONES
Director
Aukett + Heese
MARCUS DIETZSCH
Director
Aukett + Heese Frankfurt
JANA LEHOTSKA
Director
Aukett sro
TOMAS VOREL
Director
Aukett sro
Y
E
K
R
U
T
Y
N
A
M
R
E
G
london
abu dhabi
al ain
berlin
dubai
frankfurt
istanbul
moscow
prague
ras al khaimah
10 Bonhill Street
LONDON EC2A 4PE
United Kingdom
T +44 (0) 20 7843 3000
london@aukettswanke.com
Al Salman Tower, Office No 1402
Hamdan Street
PO Box 38764
ABU DHABI
United Arab Emirates
T +971 (0) 2 622 6788
abudhabi@aukettswanke.com
Al Salman Tower, Office No 1407
Hamdan Street
PO Box 44936
ABU DHABI
United Arab Emirates
T +971 (0) 671 5411
abudhabi@shanklandcox.com
ADNIC Building, Office No M03
Zayed Bin Sultan Street
PO Box 80670
AL AIN
United Arab Emirates
T +971 (0)3 766 9334
abudhabi@shanklandcox.com
Sidra Tower, Office No 1301
Sheik Zayed Road
PO Box 37133
DUBAI
United Arab Emirates
T +971 (0)4 338 0144
dubai@shanklandcox.com
Sidra Tower, Office No 1308
Sheik Zayed Road
PO Box 31043
DUBAI
United Arab Emirates
T +971 (0) 4 286 2831
dubai@johnrharris.com
Sidra Tower, Office No 1405
Sheikh Zayed Road
PO Box 616
DUBAI
United Arab Emirates
T +971 (0) 4 3697197
dubai@aukettswanke.com
Esentepe Mahallesi Kore Şehitleri
Caddesi 34/6
Deniz Is Hani
34394 Zincirlikuyu
ISTANBUL
Turkey
T +90 212 318 0400
istanbul@aukettswanke.com
1st Floor, Mohd Hasan Abdulla Omran Bld.
PO Box 36800
RAS AL KHAIMAH
United Arab Emirates
T +970 (0)4 671 5411
dubai@shanklandcox.com
Our studios
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
3 Malaya Polyanka Street
MOSCOW 119180
Russia
T +7 (499) 238 37 29
moscow@aukettswanke.ru
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AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019
3
AB Development / 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 / Al Ain Museum / ALDAR / Al-Futtaim Group Real
Estate / Al Hamra Real Estate Development / Allen & Overy / Allianz
Insurance / Allied World Assurance / Al Qudra Broadcasting / Arup
/ Ascot Underwriting / Avgur Estate / Aviva / AXA / Azzedine Alaia
Baker McKenzie / Bank of America Merrill Lynch / Bank of Moscow
Our clients include . . .
/ BAT-Russia C+T Group / Batıkent Yapi Sanayi ve Ticaret / Bautek
A.S / BCM McAlpine / Bell Hammer / BioIstanbul / BioMed Realty
/ Birmingham City University / Blackstone Group / Bloomberg
/ BNP Paribas / 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 / CEG / Commerzbank / Corinthia
Hotel Group / Corporation of London / Cornerstone Investment &
Real Estate / Costain / Countryside Properties / CPI / CR City / CR
Office / Credit Suisse / Crowne Plaza Hotels Dacorum Borough
Council / Daimler Chrysler / Damac / Danfoss / DB Schenker /
Decathlon / Deloitte / Deutsche Bank / Dimension Data / DGV
Consulting / Doğuş GYO / Donstroy / DTC de Beers / du / Dunhill
Eastman Group / Ede & Ravenscroft / Emaar Hospitality Group LLC
/ Emlak Konut / Endurance Estates / EO Engineers Office (Dubai) /
Equa Bank / Ernst & Young / Er Yatırım / Ethical Property Company
/ Etisalat / Eurofinance Bank / Extensa / Exxon Mobil F&C Reit
/ Fenwick / Fiba Gayrimenkul / FIM Group / Firoka / First Bank /
Freight 1 Gazprom / Gazpromstroyinvest / GD Investments /
GE Capital / Generali / Gertler / GLAV UPDK / Glavstroy / Global
Stream / GMO Group / Goldman Sachs / Goodman / Google /
Great Portland Estates / GroupM / Grosvenor / GSK / GTN Global
Properties / Güneri Insaat A.S Halk GYO / Hammer AG / Helical
Bar / Henderson Global Investors / Henderson Land / Heptares
/ Hexal / Hilton International / Hochtief / Homerton University
Hospital / Honeywell / HOWOGE / HSBC / Huishan Zhang ICAP /
ICKM / ICT Istroconti / IFFCO / IKEA / Imperial College / Ince & Co /
Infosys / ING Bank / 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 KaDeWe /
Kalinka Realty / KfW Bank / Khansaheb / Kier Build / Kiler Holding
/ Knight Frank / Knight Harwood / Koray Inşaat / Korine Property
Partners / KORTROS / KPMG / KR Properties / KSA / Kuznetsky
Most Development Laing O’Rourke Middle East Holdings /
Lakhta Centre St.Petersburg / La Meridien / Landsec / LaSalle
Investment / Legion Development / Lendlease / Lenovo / Lesso /
Lidl / 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) / Moody’s / Molson
Coors / Morgans Hotel Group / Mott Macdonald / Mouchel / MR
Group / Multiplex Napp Pharmaceuticals / National Grid /
Nations Bank / Native Land / NATS / NDA / Network Rail / Nextra
/ New York University / 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 /
Panavto / Park City / Pera Gayrimenkul / Peresvet Region Kuban
/ Pfizer / Phillips / Phoenix Development / Pilsner Urquel / PIK
/ PPF Real Estate / Premier Inn / Procter & Gamble / Princeton
Holdings / Prologis / Protos / PwC Quantum Homes / Qatar
Foundation / Quintain RAK Properties / R&R Industrial SAS /
Radisson Edwardian / Radisson Blu / 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 / Royal London
/ Rublevo-Arkhangelskoye / Rushydro / RWE npower SAB Miller
/ Safestore / SAP / Savills / Sberbank / Second Watch Factory
Slava / Servotel / Schlumberger / Scottish Development Agency /
Scottish Widows / Segro / Sellar Group / Seniats / Shell / Sibneft
/ Sibneftegaz / Siemens / Sir Robert McAlpine / Sistema Hals /
Skanska / Skype / Sotheby’s / Southampton Solent University
/ South Cambridgeshire District Council / Soyak Inşaat / Sparda
Bank / Standard Life Investments / St John’s College, Cambridge
/ 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 / UK Expo Pavilion 2020 / University of
Cambridge / University of Sheffield Vakifbank / Vesper / Vestas
/ Vinci Construction / VMWare / Vodafone / Voreda / VTB Capital
Bank / Vysota Wates / Welbeck Land / Westminster City Council
/ White & Case / Willis Group / WPP Zamania / Züblin / Zurich
Insurance Group
Chairman’s statement and corporate governance
Directors
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
Notes to the financial statements
SHAREHOLDER INFORMATION
27
28 - 29
30
30
31 - 40
41 - 44
45
46 - 50
51
52
53
54
55
56
57
58
59 - 99
100
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AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019
5
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 CHANGES TO PLC BOARD
This year has seen some changes to the Plc Board. Tony
Simmonds has retired as non-Executive Chairman, a position
he held from 2012-2019 through some very challenging
conditions. Raúl Curiel, a former director of the practice and
a former Plc Board Member, has now been appointed non-
Executive Chairman.
Antony Barkwith joined the practice, and the Plc Board,
in 2019 as Group Finance Director & Company Secretary;
Beverley Wright has stepped down from the Plc Board and
has taken the role of Director of Corporate Finance & Strategy.
Clive Carver has joined the Board as non-Executive Director.
We thank Tony and Beverley for their hard work and welcome
Raúl, Antony and Clive to the Board.
Details of the current Plc Board can be seen on pages 28-29.
News and highlights
p18
BCO AWARD FOR NO2 FORBURY PLACE
We are delighted that No2 Forbury Place,
Reading was announced winner of the BCO
(British Council for Offices) Regional Award for
Best Commercial Workplace (South of England
& South Wales) in May 2019.
The 230,000sqft building, for owners M&G and
development manager Bell Hammer, is the
final part of our award-winning new landmark
office development in the Thames Valley that
brings Central London quality to Reading.
Tom Alexander and the studio
have been progressing our R+D into
hybrid industrial and residential
developments, with projects across
London and the south east creating
opportunities for employment, homes
and value, and gaining support from a
range of landowners, developers and
local authorities . . . see page 18
HERITAGE AWARD FOR TEN TRINITY SQUARE
In July 2019, our project at Ten Trinity Square, developed by the Reignwood Group,
was announced as the winner of London’s prestigious annual City Heritage Award.
The award, jointly nominated by the City Heritage Society and The Worshipful
Company of Painter-Stainers is given to the best Conservation or Refurbishment
project in the City of London.
Aukett Swanke has won the City Heritage Award on three previous occasions,
making the practice the most awarded since the scheme started in 1978. In 1980,
for the Union Discount Company on Cornhill and in 1992 for the restoration of
the Royal Exchange (to which we are still architect today) - on both occasions as
Fitzroy Robinson and Partners, one of our founding practices. In 2002 Swanke
Hayden Connell’s (also a founding practice) new headquarters for Merrill Lynch on
Newgate Street was the recipient.
We are proud that our approach to active conservation and the custodianship of a
number of significant heritage sites and projects in London and beyond has been
recognised in this way yet again.
Aukett Swanke have been placed 64th
in the Building Design 2020 World Architecture
100 League Table, up three places from 2019.
This also places us as the sixth largest
UK registered practice on the table.
Aukett Swanke were placed in 59th
position in the 2019 Architect’s Journal AJ100
League Table, based on UK staffing levels.
This demonstrates the studio’s resilience and
creativity in navigating challenging market
conditions, and we look forward to improving
on this position in the years to come!
p14
In October 2019, Aukett Swanke Moscow was sold to Maxim Neretin, a
Russian national and owner of Aurora Group (another Moscow based
architectural practice), and with whom the Group has previously co-operated
on design projects. The sale will result in inter-company loans being repaid to
the Group and, under the terms of a licence arrangement, enables AS Moscow
to continue to trade as Aukett Swanke.
Robert Fry, Managing Director - International explains how this will allow the
Group’s brand to endure in this important market . . . see page 14
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AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 AM TACHELES MASTERPLAN, BERLIN
On September 19th pwr development and guests
including the past mayor of Berlin, Klaus Wowereit,
celebrated laying the foundation stone for the new
Am Tacheles city quarter with apartments, offices,
shops, restaurants and a place for art and culture,
which is due for completion by the end of 2022.
AUKETT + HEESE and Herzog & de Meuron are
partner architects.
The heritage listed Kunsthaus Tacheles building is
being renovated and rebuilt for cultural uses by
AUKETT + HEESE as general planner, with Herzog &
de Meuron. Owner is Aermont Capital.
Successful planning consents have been
achieved for the refurbishment and extension
to the Asticus Building in London SW1, for
AXA Investments; the STEAMhouse project for
Birmingham City University - a hub for creative
start-ups, and for a new Village Hotel
at Cambridge Science Park.
This year, Aukett Swanke was ranked 87th
in Building’s 2019 Top 150 Consultants, and at 29th
in the Top 50 Architects list
A HAT TRICK OF AWARDS FOR VERETEC PROJECTS
Three of Veretec’s projects, for which they were Executive Architects, have won
prestigious awards recently.
In November 2019, their project with Hopkins Architects for the new King’s College
Music School, Wimbledon was announced winner at the 2019 AJ Architecture Awards
for the Best School Project; two days earlier, their refurbishment of the Grade II Listed
Langley Park Hotel & Spa, Buckinghamshire (with Dennis Irvine Studio) was awarded
Best Hotel Conversion at the AHEAD Europe Hospitality Awards.
In September, The Green House, London E2 scooped the AJ Retrofit Award for Offices
(5,000sqm and over). Veretec worked alongside Waugh Thistleton Architects for
the redevelopment of a 1960s office building for the Ethical Property Company. The
building is part refurbishment and part mass timber extension, built in line with
the Ethical Properties’ sustainability policy. It was designed and delivered to reduce
negative impact upon the environment by maximising the use of natural resources
and renewable energies.
ALAIA SHORTLISTED IN INTERNATIONAL INTERIORS AWARDS
Our flagship store for Azzadine Alaia at 139 New Bond Street, London W1
was shortlisted in the 2019 FX International Interior Design Awards in the
Retail Space category.
The store, for client Richemont, is designed as a showcase for the
renowned couturier’s fashion and merchandise. An elegant new timber
shopfront is set into the retained and restored granite arch on the New
Bond Street facade, and the restrained and minimal interior is populated
by a series of bold sculptural interventions including a dramatic steel
spiral staircase with a clear glass balustrade which links all three principal
retail levels and is the primary visual focus as you enter the store.
p22
Nicholas de Klerk, one of our hotel specialists, was recently
invited by New London Architecture (NLA) to contribute to
their annual research report on London’s hotels, ‘London
Hotels : Expanding Social Spaces’, which looks at current
trends and challenges that the industry faces, concentrating
on public spaces within hotels and how they ‘contribute to
the city as a whole’.
His article deals with the conversion of heritage properties
into hotels, focusing on our work at the Four Seasons Hotel
at Ten Trinity Square . . . see page 22
ANDREW MURDOCH RETIRES
A long serving director of the practice
retired in 2019.
Andrew Murdoch joined the practice
in 1984, first working in our Cambridge
studio which he later came to lead,
and then moving to the London studio
where he became Chairman of Fitzroy
Robinson in 1993. He was an Executive Director of the Plc Board
from 2013-2017.
He had extensive experience in retail and heritage design of all
types and contexts, and a passion for large, mixed-use urban
regeneration projects, working on a number of significant
buildings in London’s West End and the UK regions, including
the flagship Fenwick store in Bond Street, Alfred Dunhill in
Mayfair, and the refurbishment of the Grade I Listed Royal
Exchange in the City of London. His considerable experience
in negotiating valuable planning consents in sensitive locations
made for some very successful outcomes.
During his career, he had a strong and enduring client following,
many of whom he had known and worked with for decades, and
was known for operating as an in-house champion of the clients’
interests, understanding their commercial needs.
Andrew sat on the board of management of the British Council
of Offices for 12 years.
We wish him a long and happy retirement!
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AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 Recent and current
UK projects
1
2
3
4
5
6
10
7
8
9
10
12
13
11
14
Baltic Wharf, Paddington Basin, London
1
The Featherstone Building, London EC1 (Veretec)
2
Village Hotel, Cambridge Science Park
3
CRL Building, Brighton (Veretec)
4
5
The Green House, London E2 (Veretec)
6 Mixed use Masterplan, Thames Valley
7
Social Hub, West London
8 Office Development, Bristol
9
Science Park Reinvention
10 Forbury Place, Reading
11 STEAMhouse, Eastside Locks, Birmingham
12 Reception Study, London SW1
13 Residential / Industrial Hybrid
14 Edward Street Quarter, Brighton (Veretec)
11
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 Residential Development, Middle East
Verti Music Hall, Mercedes Platz, Berlin
1
2 Umspannwerk, Kreuzberg
3
4 OC Repy Retail Centre, Prague
Gropius Passagen, Berlin
5
6
Residential Development ‘Klokovo’, Moscow
7 Hotel, Mercedes Platz, Berlin
8
Samanea Mall, Dubai
9 Hilton DoubleTree Hotel, Omsk
10 Quartier 52o Nord, Berlin-Grűnau
11 Shindagha Museum, Dubai
12 Living Lyon Residential, Frankfurt
13 Sanofi, Istanbul
14 VMWare, Sofia
2
1
3
4
5
6
7
8
Recent and current
international projects
9
12
10
11
13
14
12
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AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 A Russian Epic:
1989-2019
BY ROBERT FRY
MANAGING DIRECTOR -
INTERNATIONAL
The first thirty years of our history of working in the Russian Federation contain all the
elements of a Tolstoy epic; a meeting of political leaders in 1989 that began the practice,
turbulent ‘Wild East’ years of the 1990s, a boom then a bust in the noughties followed in the
last decade by a merger of two great companies amidst an economic collapse, oil price crash
and US / EU sanctions.
The end of the decade finally saw a period of relative stability, through which our survival in
this important market has enabled us to plan and secure a long term future for our Russian
operation in the next chapter of this story
BEGINNINGS AND LANDMARKS
The unbuilt British & Soviet Trade Centre, the brainchild of Mikhail Gorbachov and Mrs Thatcher,
designed by Mikhail Mandrigin in 1989 led to the setting up of our first studio in Moscow in 1994.
This office completed landmark projects such as the refurbishment of the historic GUM department
store in Moscow and the award winning Corinthia Nevsky Palace Hotel in St Petersburg, after which
time the studio became Aukett Fitzroy Vostok (AFV).
BRITISH & SOVIET TRADE CENTRE
ARCUS III, MOSCOW
On a parallel track Swanke Hayden Connell International (SHCIL)
began designing apartments and remodeling country houses for
the new wealthy Russian elite both in Moscow and the UK from
the mid-1990s setting up its first office in Moscow in late 2004.
Many award winning commercial architecture and interiors projects
followed including the Arcus III Business Centre, the exclusive ‘Mone’
Residential tower and ground breaking fit-outs for British American
Tobacco, Renaissance Capital and RusHydro, the state water company.
The Aukett Fitzroy Robinson and Swanke Hayden Connell International
(AFR/SHCIL) merger in December 2013 was swiftly followed by the
Crimea crisis in 2014 and led to huge exchange rate fluctuations, US /
EU economic sanctions and a recession in the economy compounded
later by the unexpected worldwide collapse of the oil price.
During these turbulent years we launched the ‘Aukett Swanke’ brand
in 2015 culminating in the creation of ‘Aukett Swanke OOO’, a fully
Russian entity superseding both the AFV ZAO and SHCIL branch entities
in 2016.
RUSHYDRO, MOSCOW
MONE RESIDENTIAL TOWER, MOSCOW
1989
BRITISH & SOVIET TRADE CENTRE -
FITZROY ROBINSON
1994
FITZROY ROBINSON OPENS STUDIO IN MOSCOW
2004
SWANKE HAYDEN CONNELL INTERNATIONAL
OPENS STUDIO IN MOSCOW
2013
MERGER OF AUKETT FITZROY ROBINSON AND
SWANKE HAYDEN CONNELL INTERNATIONAL
2015
LAUNCH OF AUKETT SWANKE OOO -
KNOWN AS AUKETT SWANKE MOSCOW
2019
SALE OF AUKETT SWANKE MOSCOW TO AURORA
GUM, MOSCOW
CORINTHIA NEVSKY PALACE HOTEL, ST PETERSBURG
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AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019
The next chapter of this epic endeavour therefore sprang into
existence on 11th October 2019 when ASG sold AS Moscow to Maxim
Neretin under the terms of a licence arrangement. This enabled AS
Moscow to continue to trade as a leading international architectural
design firm whilst being co-located within Aurora Group’s premises
alongside their professional teams.
This transition also safeguarded our senior management and design
team including Tom Nugent and Larisa Ligay with whom our UK
business is collaborating on several current enquiries.
Current projects undertaken by both Aurora and AS Moscow include
the master plan and design of a science and technology campus in
Surgut and a commercial office park in Klokovo in south west Moscow.
The fulfilment of this strategy has enabled us to endure in this
important market and provide a means of offering our clientele in the
Russia Federation a full range of project design and delivery services
in future, a model that ASG has successfully developed and offered in
the UK, UAE and Europe over many years.
ROBERT FRY AND MAXIM NERETIN, WITH TOM NUGENT AND LARISA LIGAY
TECHNOLOGY CAMPUS, SURGUT
ITAR-TASS, MOSCOW
‘. . . combined the potential of an established
international brand in Aukett Swanke
with Aurora’s successful 100 strong multi-disciplinary
architecture, engineering and project
management platform . . .’
JTI, MOSCOW
Even in such an adverse economic environment the new studio
completed the master planning and design of the ‘Azimut’ 5000
room resort hotel development in Sochi in time for the 2014 Winter
Olympics, the Vavilova 4 residential complex and the JTI HQ interiors at
the Moscow City development.
As international investment stalled until the end of the decade our
strategy turned to establishing our international profile in regional
cities and through collaborations with other architects.
Projects for a major residential tower project in Perm, Siberia, master
planning and design concepts for projects in Omsk, Toblosk, Tumen
and Sakhalin Island raised our presence in the local market and
significant collaborations included the refurbishment of parts of the
historic 1970s Russian News Agency’s ITAR-TASS building with the
Aurora Group and the completion of the exclusive Kosygina luxury
apartment complex with Mikhail Belov.
AZIMUT HOTEL, SOCHI
2020 - A NEW FUTURE
As the new decade beckoned and with Russia experiencing a period of
relative stability and slowly improving economic fortunes our strategy
during 2019 turned to finding a more certain future for AS Moscow
and the local team. Our Board was of the view that the operation
would perform better under local ownership and so we sought a
suitable partner.
Having previously co-operated successfully on design projects with
Maxim Neretin, a Russian national and owner of the Aurora Group,
we entered into discussion regarding a new collaborative future
and both found what we believed to be a perfect opportunity. This
combined the potential of an established international brand in
Aukett Swanke with Aurora’s successful 100 strong multi-disciplinary
architecture, engineering and project management platform which
proved irresistible.
16
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019
17
The Rise of
the Hybrids
“Could you have a think about mixing industrial and
residential?” we were asked by a development contact of ours.
As an innovative and entrepreneurial studio we were immediately
curious and naturally challenged by the concept, and put our
minds to the question and started to sketch out the issues to be
addressed. Noise, pollution, access and perception emerged quickly
and obviously; but so too did the realisation that the idea could
create multi levels of real estate, new aerial plots over existing
ones - essentially to address the growing needs to save a city’s
service buildings whilst adding to its provision of places to live. This
opportunity therefore aligns exactly with London’s ambitions at both
central government and council level, whilst also revealing new levels
of value to existing urban sites.
The industrial sector is booming in the UK and internationally in its
traditional forms, by adding multi level industrial buildings to the
market, and with a keen interest in urban sites which are either saved
or made available by a Hybrid approach.
So for the last three years, we have been exploring and developing
urban intensification master plans and mixed use buildings across
London and beyond, starting with existing industrial sites and
redesigning them to retain the same type of employment businesses,
but then adding residential and other commercial uses.
These different typologies are blended through careful public realm
design, with rigorous infrastructure strategies to keep conflicting
elements apart.
Key to the innovative approach we have developed is not to
compromise on the industrial design facilities or the residential
experience, both needing to be as good as if not better than general
market standards, with the public realm integrating the mixed
inhabitants with the wider local community. This design process
takes the form of a three-dimensional and intellectually rigorous
exploration of the site, brief and multi use multi level ideas testing.
BY TOM ALEXANDER
DIRECTOR
MID TECH, ALCONBURY
The reason we were asked the initial question about mixing uses
came from the market’s knowledge of our experience of both
industrial and residential architectural design. Our residential
experience is extensive both in the UK and internationally, and our
industrial projects include the highly sustainable reinvention of the
retail shed for M&S in Cheshire, and a Distribution Centre for Adnams
in Suffolk with the largest green roof in the UK on completion.
ADNAMS DISTRIBUTION CENTRE, SOUTHWOLD
M&S FLAGSHIP STORE, CHESHIRE OAKS
Refreshing the traditional shed into a Mid Tech was a highly significant
design experience for us when looking at urban industrial sites to
integrate them into newly blended areas that include residential
communities. The process ignited our passion, expertise and insights
into the industrial building sector and its significant potential.
The question of mixing residential and industrial led to an invitation
to work with Segro on the concepts of urban hybrids, including multi
level industrial and combinations of both at master planning and
building scales. Our approach not to compromise on the industrial
or residential designs but rather to blend their best market attributes
with existing and new public realms, appealed to Segro and potential
residential stakeholders.
This phase of work included developing strategies and designs on a
number of large existing industrial sites, including one with Network
Rail in Battersea, exploring and unlocking railway sidings, arches, bus
depots, relocating batching plants and creating multi level industrial
additions, and ultimately integrating new residential clusters with vital
public realm routes and amenities at ground floor and podium levels.
We call this 3D master planning.
“ . . . integrating this agile and more outward looking
industrial building type into urban communities
becomes positively feasible”
Following these projects we were asked to refresh the traditional
industrial shed typology by Urban + Civic in Alconbury,
Cambridgeshire. We did this by retaining the primary and highly
efficient building elements of a shed and strictly adhering to the
industrial tenant’s specifications, whilst improving the people
experience inside and around them, integrating them more with the
wider community.
Often hidden behind screens and landscape forms, we opened up
the front facades to the communal spaces, putting their front doors
onto the village green, whilst segregating their service routes and
yards away and out of sight.
An enhanced industrial building today is like a biosphere, able to
accommodate most building typologies and planning classifications.
We have designed them for high and mid tech industrial uses,
contemporary workplaces, education institutions, a fire department
HQ and a multi use 3D Village, always providing visibility of parts of
the activities inside and views out for the tenants, directly connecting
the business with its community. So integrating this agile, and more
outward looking, industrial building type into urban communities
becomes positively feasible.
18
RESIDENTIAL / INDUSTRIAL HYBRID
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019
19
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019
RESIDENTIAL / INDUSTRIAL HYBRID
As our hybrid design experience in London has grown we have also
been invited to consider out of town sites for co-location of industrial
and residential, the reinvention of science parks to include labs,
workplace, industrial uses and residential provision, and recently a
self-powering hydroport in Wales with vast public recreational water
facilities and a landscape driven industrial region.
We believe that our design approach is exemplary and uniquely
advanced for this new area of urban intensification, supported by
many of London’s key stakeholders.
So the answer to the question was a resounding yes, we will consider
Hybrid Design, we did and we keep exploring and developing the
designs in London and the UK.
The design approach is also naturally exportable so we are open to
exploring the value and enhancement of previously unseen potential
on international sites.
MULTI USE EXPLORATIONS : PADDINGTON BASIN
We have now explored hybrid or intensification designs for over 20
sites across north, south, east and west London, each with different
scales, characteristics and requirements, but all retaining the
equivalent industrial employment levels whilst adding considerable
levels of living, hotel, retail, workplace and / or additional multi level
industrial accommodation. Again this is driven and blended with the
public realm.
One of our more innovative project wins, near Heathrow Airport, is
designing a hybrid of three million square feet of industrial use below
ground with a public park above. These two communities, industrial
and recreational, will be integrated to enhance and inspire each other,
creating a new type of urban landscape and subterranean dwelling.
We have also been working on Wharf sites to retain their safeguarded
status as working river served businesses, and are currently the
Hybrid Architect on Orchard Wharf in Tower Hamlets. Our clients for
these industrial intensification hybrids include Segro, Marcol/Isec,
Royal London Asset Management, London Borough of Southwark,
Network Rail, LBS, Regal London, Freshwater, Formal Investments,
CBRE Global Investment, Iron Mountain, GMI, Travis Perkins and
Safestore, along with a range of independent landowners.
We have also worked with a range of highly specialist consultants
and contractors to challenge and test the thinking, in turn refining
the design approach for key developers and landowners of both
industrial and residential property.
20
INDUSTRIAL AND RECREATIONAL PARK HYBRID
PUBLIC REALM BLENDING HYBRID FRONT DOORS
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 A living heritage:
Ten Trinity Square
Broadly speaking, there are two approaches to working
with historic buildings. That which embraces John Ruskin’s
thinking on conservation - the ‘stabilised ruin’ - which brooks
no interference with the remains of a structure that might alter
its inherent tectonic or material qualities, and that which his
French contemporary Eugène Viollet-le-Duc argued for; the
full restoration of a structure to a putative and idealised state
of completion that may never have existed at any point in the
building’s existence until then.
Our conversion of the Grade-II Listed former Port of London Authority
building at Ten Trinity Square into a new Four Seasons luxury hotel
falls firmly into the latter category. The original building was designed
by Sir Edwin Cooper and completed in 1922, and is, according to
the Historic England listing citation, a ‘large, detached monumental
building of Portland stone’ with an imposing four columned entrance
portico overlooking Trinity Square Gardens and addressing the Tower
Hill World Heritage Site directly opposite.
Prior to the recent development, the building had already been
substantially altered in its lifetime. It was subject to significant bomb
damage during the Second World War in which the courtyard rotunda
- formerly a grand rates hall - was completely destroyed, while a main
stair core had to be rebuilt after the war. Despite this, the building
retains its grandeur and several of the fine interior spaces survive,
such as the UN Ballroom - so named as it hosted the reception
following the inaugural meeting of that organisation in 1946 - and two
wings of timber panelled management suites which were all restored
as part of the redevelopment.
‘The building retains its grandeur and
several of the fine interior spaces survive’
22
BY NICHOLAS DE KLERK
ASSOCIATE ARCHITECT
This article was an invited contribution to the NLA
(New London Architecture) Hotels Insight Study
- ‘London Hotels : Expanding Social Spaces’ -
published in December 2019. In it, Nicholas
explains our approach to creating a new hotel,
fit for the desires of the 21st century traveller,
within the walls of a heritage building.
The paper forms part of NLA’s year-round Hotels
programme which explores London’s most
innovative responses within the sector.
When we were appointed to the project in early 2014, shell and core
works had already been substantially completed for a previous owner
to create new guestroom accommodation lining the original courtyard,
four levels of rooftop apartments designed for modular construction,
as well as a new structure in the courtyard that would eventually
house the rotunda lobby bar with a new function room above. We
redesigned the hotel for our client Reignwood within the building as
we found it but went through a process of auditing and reconsidering
previous assumptions. We reduced the number of guestrooms that
had previously been provided for, restoring those within the five
metre high ground floor spaces to their original proportions. This
enabled us to deliver spaces and accommodation much more in
keeping with the historic building.
The individual aspirations and requirements of a complex stakeholder
body, including client, developer and hotel operator have to be
carefully balanced in a project such as this. Undertaking this task in
the context of a Grade II listed building brings a whole set of other
constraints that need to be addressed. The wide variety of uses that
hotels tend to accommodate - sleeping accommodation, restaurants,
workspace and leisure environments - tends to demand large and
sometimes unwieldy consultant teams which brings a particular
dynamic to a project.
Clear leadership and sensitive diplomacy might seem to contradict
one another, but deployed hand in hand, are fundamental to the
successful design and delivery of a project such as this.
page 24 >
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019
<
page 22
GUESTROOM
VIEW UP FROM NEW PANORAMIC LIFT
Interior design is a crucial element of a hotel scheme, given how
fundamental it is to the guest experience. This can be a double
handed issue in hotels converted from historic buildings, which
routinely have space of a character and a quality that can be
challenging to replicate today. This character lends the sought-after
quality of authenticity prized by landmark hotels, but is one which
comes with attendant risks for the hotel interior. If the scheme is too
timid, it risks being underwhelming and insipid viewed alongside
its host building; too strong and it risks competing with the historic
space and devaluing both.
The approach to interior design here is best understood as one of
emphasis, of light and shade, understanding the spaces in which
the design needs to work harder and where it needs to hold back.
Ten Trinity Square had six international interior designers working
on different areas of the building and in addition to acting as lead
architect; Aukett Swanke also delivered the interior schemes. This
enabled us to ensure parity with Four Seasons operational and
design standards across the hotel, carefully integrating them with the
architecture and the required services, in careful cooperation with
City of London planners and conservation officers.
24
‘Clear leadership and sensitive diplomacy . . .
are fundamental to the successful design and
delivery of a project such as this’
ROTUNDA LOBBY BAR
Standout spaces include the rotunda lobby bar with its plaster frieze,
handcrafted in one-metre-wide sections in a Paris garret, and the
Latour Room in the club which blends the atmosphere of the historic
panelled interior with the sparse drama which characterises the wine
cellars of its namesake.
The conversion of the former Port of London Authority building into
a new Four Seasons Hotel is a large and complex project which
has successfully extended the useful life of what was essentially a
commercial office building. This was only achieved with the support
of a committed client, a skilled and experienced design team working
alongside equally skilled specialist and general contractors, artisans
and suppliers.
Dialogue and collaboration have enabled the evolution of a dramatic
and historic building from one that owes its existence to London’s
historic trade links into one that speaks to how those links have
evolved in twenty first century London.
MEI UME RESTAURANT
THE LATOUR ROOM
25
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 ‘These results are a testament to the
positive attitude of all our staff as we
have emerged from a difficult trading
environment; the Board is grateful to
all concerned for their resilience.
The strong second half performance
augurs well for the next financial
year, particularly so, given the recent
resolution of electoral and Brexit
related uncertainty.
With a leaner and more stream-lined
group now in place, after last year’s
focus on costs and the disposal of the
loss-making Moscow operation, we
look forward to improving fortunes for
the Group in 2020’
Nicholas Thompson
Chief Executive Officer
Financial highlights
• Major financial turnaround
• Profit before tax restored at £292,000
(2018: Loss £2.54m)
• Introduction of new segmental reporting
• All three geographic hubs in profit before central
cost allocation
• Revenue up 7.7% to £15.49m (2018: £14.38m)
• Net funds grew to £820,000 (2018: £157,000)
• Profit after tax rose to £332,000 (2018: loss £2.37m)
• EPS returned to positive at 0.21p (2018: loss 1.42p)
Operational highlights
• BCO award for Best Commercial Workplace
• Veretec projects’ win: Best School project (King’s College Music
School), Best Hotel conversion (Langley Park Hotel & Spa) at AHEAD
Europe awards, AJ100 Retrofit Award (‘The Green House’, E2)
• Flagship store ‘Alaia’ in New Bond Street for Richemont
shortlisted 2019 FX Interior Design Awards
• Return to continuing instructions in the UK office market
• Successful sale of Moscow operations - post year end
Chairman’s Statement &
Corporate Governance
Raúl Curiel
Chairman
29 January 2020
I am delighted to report to you in my first year as Non-Executive Chairman, particularly as I
believe the results set out in this report mark a turning point in our recent fortunes.
For the benefit of shareholders not familiar with me I am by training and inclination an architect,
having spent 40 years in the profession of which 36 were with our Company. I also hold 5.6% of the
Company’s equity.
I am therefore focused not only in maintaining the high quality of the services that we provide to our
clients but also, to have that quality reflected in the Company’s share price; something I do not believe
is the case today.
As you will see as you read through the Report, our management team led by Nicholas Thompson, has
performed strongly in difficult market conditions to restore the Group to profitability. I am confident of
further positive progress under his leadership.
In addition to a turnaround in profitability from a loss of £2.54m in 2018 to a profit of £0.29m this year,
we have also improved our cash management, ending the year with a healthy balance of £0.82m in net
funds. While it is too soon to restore dividend payments, this remains a high priority for the Board.
Since the last Annual Report there have been several Board changes in addition to mine. The first was
the retirement of my predecessor, Anthony Simmonds and, I would like to take this opportunity to pay
tribute to his many years of service.
Secondly, I wish to welcome our new Group Finance Director Antony Barkwith to the Board. Tony has
been with the Company for 15 months now and I am pleased to report that he has made a strong start.
Finally, I also welcome Clive Carver, who joined the Board in May 2019, as a Non-Executive Director.
The prime focus of the new Board is to work to make sure the Company’s many positive attributes are
reflected in its valuation.
While our fortunes will always be subject to market conditions, I look forward to the remainder of 2020
and beyond with renewed confidence.
‘ . . . our management team led by Nicholas Thompson,
has performed strongly in difficult market conditions
to restore the Group to profitability’
26
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019
27
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 Board of Directors
Raúl Curiel
Non Executive Chairman *+ #
BA(Hons) MArch Aged 73
Nicholas Thompson
Chief Executive Officer #
BSc(Hons) MBA Aged 65
Antony Barkwith
Group Finance Director &
Company Secretary ^
ACA MPhys(Hons) Aged 39
retirement
Raúl’s extensive career as a professional
architect spanned some 40 years before
his
from Aukett Fitzroy
Robinson in 2015. During this period,
he delivered over 300,000sqm of space
in Central London, throughout the rest
of UK and internationally, specialising
in the design of large-scale Corporate
Offices, Business Parks and Master
Planning.
As well as a practising architect, he has
been Chairman of Fitzroy Robinson,
its
European Managing Director of
successor Aukett Fitzroy Robinson, and
subsequently a non-executive director
of the Group until 2010.
Nicholas became Group CEO in 2005
and has 35 years of experience in
property and consulting organisations;
twenty-five of these with Aukett Swanke.
During his career with Aukett Swanke he
has held the position of Finance Director
moving on to become Managing Director
in 2002.
He holds a master’s degree in Business
Administration
from City University
and currently sits on the Cass MBA
Advisory Board. He is also a qualified
accountant. In 2015 he became a non-
executive director of the Wren Insurance
Association Limited, a mutual Insurer for
architectural practices.
He was appointed Non-executive Group
Chairman in 2019.
Nicholas is responsible for the Group’s
strategic direction.
Tony is the Group Finance Director of
Aukett Swanke Group Plc. He joined
the Group in November 2018 as Group
Financial Controller, was promoted to
Group Finance Director (non-Board)
in April 2019, and was subsequently
appointed to the Board on 9th July 2019.
Tony is a Chartered Accountant, having
qualified with BDO LLP, and has a
master’s degree from the University of
Warwick.
He was previously Group Financial
for Advanced Power, an
Controller
international
generation
power
developer, owner and asset manager,
working there from 2010 until 2018.
Robert Fry
Executive Director &
Managing Director - International ^
BA(Hons) DipArch MA RIBA Int’l AIA
Aged 63
Robert was appointed to the Aukett
Swanke Group Plc Board in March 2018,
retaining the role of Managing Director
– International. He graduated with a
Diploma in Architecture from Sheffield
University becoming a qualified Architect
during his 6 year career with Milton
Keynes Development Corporation.
In 1987 Robert became a founding
member of Swanke Hayden Connell’s
London office joining its Board in 2002,
becoming Managing Director of the UK
and Europe group in 2005. His 35 years
of property and construction experience
covers many sectors in the disciplines of
master planning, architecture, interior
design and workplace consulting. In
recent years he has participated in the
evaluation of the ASG businesses and
senior management teams, mergers and
acquisitions and corporate governance
initiatives
geographic
locations.
across
all
28
He currently has a strategic role working
closely with the CEO and GFD in the
development of the Group’s operational
strategy.
John Bullough
Non Executive Director +*#
FRICS Aged 69
Clive Carver
Non Executive Director +*#^
FCA FCT Aged 59
John joined Aukett Swanke as a non-
executive director in June 2014. He
has over 45 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.
Clive joined the board in May 2019. He
is the Executive Chairman of AIM listed
Caspian Sunrise PLC and non-executive
chairman of unlisted Airnow PLC.
He is an experienced AIM non-executive
director who spent 15 years as a
Qualified Executive with a number of
City broking firms and was until 2011
Head of Corporate Finance at finnCap.
He qualified as a Chartered Accountant
with Coopers & Lybrand and has worked
in the corporate finance departments of
Kleinwort Benson, Price Waterhouse,
Williams de Broe and Seymour Pierce.
He
is also a qualified Corporate
Treasurer.
BOARD COMMITTEES
* Member of the Audit Committee chaired
by Clive Carver
+ Member of the Remuneration Committee
chaired by John Bullough
# Member of the Nomination Committee
chaired by Raúl Curiel
^ Member of the Internal Controls and Risk
Committee chaired by Clive Carver
29
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 Five year summary
Strategic report
The Directors present their Strategic Report on the Group for the year ended 30 September 2019.
Years ending 30 September
2019
£’000
2018
£’000
2017
£’000
2016
£’000
2015
£’000
Total revenues under management1
31,505
31,950
34,583
30,379
27,553
Revenue
15,492
14,380
18,395
20,841
18,668
Revenue less sub consultant costs1
13,711
13,094
16,070
18,410
16,886
Profit / (loss) before tax
Basic earnings / (losses) per share (p)
Dividends per share (p)
Net assets (as restated)
Cash and cash equivalents2
Secured bank loans
Net funds3
292
0.21
-
4,514
1,145
(325)
820
(2,544)
(1.42)
-
4,136
710
(553)
157
(325)
(0.20)
-
6,761
960
927
0.47
0.18
7,189
1,839
(776)
(1,049)
1,870
1.00
0.22
6,251
1,873
-
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
Antony Barkwith
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
Chris Steele 07979 604687
30
Registered office
10 Bonhill Street
London EC2A 4PE
Website
www.aukettswanke.com
Nominated adviser and broker
finnCap
www.finncap.com
Bankers
Coutts & Co
www.coutts.com
Solicitors
Fox Williams
www.foxwilliams.com
t 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 allow us to create shareholder
value over the longer term. At the same time we aim to provide an
enjoyable 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 its decision-
making and expectation of future performance.
In both 2017 and 2018, the markets in which we operate were subject
to some significant challenges, including: the onset of Brexit and the
uncertainty created around decision-making; a number of competition
losses; a one-off property cost due to our UK office move and; finally
significant bad debt provisions in our Middle East operation the effect
of which resulted in losses in both years. Consequentially our strategy in
the short term has been to mitigate the impact of such challenges and
not to pursue any new acquisitions which, in part, had contributed to
some of the losses previously sustained.
The strategy in the next period is to consolidate the improvements that
we have made to our operations and optimise our current platform with
consideration being given to the value added by each entity.
t Business Model
We operate through a three hub geographical structure covering: the
United Kingdom with our head office in London; the Middle East (United
Arab Emirates) with offices in Dubai, Abu Dhabi, Al Ain and Ras Al
Khaimah; and Continental Europe with four offices in Berlin, Frankfurt,
Istanbul and Prague. Our former operation in Moscow was sold after
the year end.
UK
Continental
Europe
Middle East
We are primarily focused in the mixed-use commercial property markets
including offices, hotels, retail shops and malls, specialist industrial and
larger residential schemes. Our Clients, therefore, are: Institutional
Investors such as large insurance companies and finance houses; private
development companies who are the upper tier in the markets in which
we operate and; construction companies who require our services
during the site phases of project delivery.
The United Kingdom hub comprises three principal service offers:
comprehensive architectural design including master planning; along
with interior design and fit-out capability and; an executive architectural
delivery service operating under the ‘Veretec’ brand.
Our Middle East business comprises a number of registered companies
which are now 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 well placed to offer such
a ‘one-stop shop’ service. Additionally, we can tailor our services to
different pricing points as a result of our varied staff profile, offering
services from high design through to site inspection.
The Continental European operations are all separately managed
by local directors (with main board oversight), operating through
wholly owned subsidiaries, associates, joint ventures and, a Licensee
structure. The services offered are consistent with the other two hubs.
Entities within this hub provide additional drawing services to the larger
operations in order to optimise both local and group resources.
All operations cover new buildings, refurbishments and historical
properties for conversion or repurposing.
As a Group we now have a total average full time equivalent (“FTE”) staff
contingent of 305 (2018: 330). We are ranked by professional staff in the
2020 World Architecture 100 at number 64 (2018: 67).
In order to provide greater transparency of our underlying trading
performance the new segmental analysis separates out Central Costs
from operating subsidiary results to show underlying trading pre
management charges and, to highlight the full cost of running the
Group. Under the previous disclosure Central Costs were weighted
towards wholly owned operations, with smaller management charges
borne by joint ventures and associates and on whom the Group relied
for their contribution in the form of dividend income to cover their
associated central cost.
The Board believes that this revised approach to segmental reporting
provides shareholders with greater understanding of the relative
performances of the geographies that make up the Group and removes
inconsistencies in overhead reporting and recovery from each operation.
Therefore all profits figures referred to under Group activities reflect
operating profit before management charges, except where noted and
not, profit before or after tax.
3131
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 t Group Activities and performance
Performance in the period shows revenue growing by 7.7% to £15.49m
(2018: £14.38m) and revenue before sub consultants rising by £613k
to £13.71m (2018: £13.09m). However, costs fell significantly and we
achieved a profit of £292k following the loss in 2018 of £2.54m. The
segmental analysis shows that each geographic hub either reversed a
loss or increased a profit with Central Costs falling in the same period. A
financial success all round.
Cost reductions were achieved across expenditure lines. A reduction
in our headcount saved £600k during the year and our property
costs fell by nearly £500k much of which was due to one-off property
relocation costs in the UK in 2018. Finally, we saw a large reduction
in other operating expenses following a £440k reduction in bad debt
provisions plus £80k of favourable exchange rate gains primarily due
to the movement of the GBP:AED exchange rate on intercompany loan
balances denominated in AED.
Post tax profit has benefited from a £218k tax credit arising from an
R&D tax claim for the two previous years (2016/17 and 2017/18) in the
United Kingdom; with the resulting cash being received after the year
end. Whilst future tax credits have yet to be established we believe that
similar tax credits should be available in the future.
As such our EPS has returned 0.21 pence per share compared to a loss
in 2018 of 1.42.
As mentioned earlier, cash improved dramatically by the year end and
stood at £1.15m (2018: £710k) which, with the reduction in the long
term acquisition loan of a further £228k, resulted in net funds standing
at an impressive improvement of £820k (2018: £157k). A large portion
of this improvement came from our more systematic collection regime
in the Middle East and from general cost savings around the Group.
Total revenues under management were £31.50m (which includes 100%
of our joint ventures and associate’s revenue) (2018: £31.95m). Of the
305 FTE staff (2018: 330) some 115 FTE staff (2018: 126) are employed
by our joint ventures and associate so the income and costs attributable
to them are not reflected in the consolidated revenue or expense lines.
More detailed financial information is given on page 35.
t United Kingdom
For the first time in three years revenues rose and ended the year
10.5% higher at £7.45m (2018: £6.74m). This reflects a fairly difficult
opening six months but then a gradual improvement as we progressed
through the year; with our client portfolio beginning to become more
active again. Interestingly, many developers started to shrug off the
uncertainty of Brexit and returned to the speculative development
market as underlying demand once again outstripped supply, especially
in Grade A office space. This trend augurs well for the current year and,
of course, represents a good commercial decision with the benefit of
hindsight given the UK election result in December 2019. This point is
exemplified by the first of our projects to be cancelled (on Friday 17 June
2016) which has now been fully re-instructed as a £50m regional office
HQ with planning submitted in early December, before the UK election.
This revenue improvement has been mirrored at the bottom line with
the hub’s contribution to Group profit reversing a 2018 loss of £965k to
a profit of £451k – a £1.42m turnaround in one year. This turnaround
figure comprises not only an increase in revenue of £710k but also cost
reductions of £706k and reflects our expectation, as reported in the
2018 results, that the lower operating base would only require a small
amount of revenue improvement to achieve a profit.
32
MIXED USE MASTERPLAN, THAMES VALLEY
VILLAGE HOTEL, CAMBRIDGE SCIENCE PARK
Given the back drop of a decline in revenue in 2018 the projects in 2019
reflected a recovery through much increased levels of new enquiries
and an accelerated activity on continuing instructions. Continuing
instructions included projects such as Statesman House in Maidenhead
for Royal London, a mixed use masterplan; 111 Victoria Street in Bristol
for CEG, a 250,000 sq ft speculative office; a number of projects at
Cambridge Science Park for Trinity College and a hotel for Village Hotels;
Steamhouse at Eastside Locks in Birmingham for Goodman, a faculty
building for Birmingham City University, that combines undergraduates,
post graduates, entrepreneur start-ups and SME businesses.
Newer commissions included the refurbishment of Asticus building in
London’s Mayfair for AXA; strategic building studies for Astrea around
Berkeley Square in London; Orchard Wharf in East London, a Hybrid
architect role for Regal London, a large number of Hybrid feasibilities
including studies for Royal London, Travis Perkins, Freshwater, CBRE
Global Investment, and others - “beds on sheds” by another name,
all around the London boroughs. Interiors enjoyed a number of wins
across the capital, including a major West End occupier commercial fit-
out shortly after the year end.
Elsewhere our Veretec service offer to other architects and contractors
continued to grow with commissions from Multiplex, Skanska, Sir
Robert MacAlpine, and the delivery of designs by Stiff & Trevellion,
Buckley Grey Yeoman, DSDHA and EDS Avantgarde. In addition we were
commissioned by Land Securities, Derwent, and Native Land.
Lastly and, perhaps the most novel and exciting, was a commission by
Miral to design and deliver a new ‘Viewing Walkway and Zipwire ride’
that will traverse the Ferrari World site on Yas Island Abu Dhabi at over
25m above ground and pass thrillingly through the roller coaster – this
project will be completed by Spring 2020.
In a more stable market environment, with electoral related uncertainty
now resolved, and the Brexit process progressing, we expect the UK
market to enter a new development cycle from which we’d expect to
benefit.
t Middle East
Revenue rose in the Middle East by £700k (10%) from £6.82m to £7.52m
in the period, and costs fell by £410k resulting in an operating profit of
£525k (2018: loss £585k). The cost reductions came from all expenditure
lines reflecting a concerted effort to streamline the operations, remove
duplicate overhead costs and proactively manage the debtor book. This
has all been very successful.
The three operations (Aukett Swanke, John R Harris and Shankland Cox)
all had a good order book positions at the outset of the year but they
were all impacted by project delays of one sort or another throughout
the year. Only when the very large new Samanea Mall in Dubai was
finally given the green light was the operation able to start to recover
the losses that it incurred in the first half as this project’s services of
architecture and engineering were spread across all operations.
Major contributors to revenue this year were varied in their type,
geographical spread and scale, reflecting the expertise and diverse
nature of our Middle Eastern business.
Retail sector commissions included the design and delivery of the
110,000 sq m new build Samanea Market concept for home furnishings
in Dubai for the Chinese conglomerate Lesso and, the delivery of
a 75,000 sq m Sports Society Mall in Dubai which will be the largest
sports mall in the world on completion for Leader. We are continuing
the refurbishment of the Al Ain Mall and the extension of another major
Shopping Mall in Ras Al Khaimah. Our specialist Hotel skills were further
utilised on the refurbishment of the Mercure hotel Dubai - the largest of
its brand in the Middle East; continuing work on the 1,555 guestrooms,
signature suites and Imperial Club Lounge at Atlantis, The Palm; as well
as completing a major refurbishment of the Kempinski Hotel ‘Mall of the
Emirates’ Dubai for Majid Al Futtaim.
Under Client Frameworks were included a number data, technical and
retail projects for Du telecom & Etisalat.
The Group has held a long association with cultural and heritage projects
in the UAE, such as the World Trade Centre Dubai, and has continued
with involvement in the preservation of Sheikh Mohamed Bin Khalifa
House and Al Ain Museum in Al Ain and, in Abu Dhabi with the Sir Bani
Yas Island Pavilion gateway to the unique nature-based destination alive
with wildlife and adventure activities. We have undertaken detailed
design, Architect of Record and delivery Services on Shindagha Perfume
House a recent addition to the 25 hectare Shindagha Historic District
beside Dubai Creek, originally the historic centre of Dubai where the
ruling Sheikhs & famous traders lived. Aldar also commissioned the
concept designs for several buildings in Abu Dhabi on a site flanked
by the Zayed National Museum, Guggenheim and the Louvre. We have
been active in varied aspects of design, delivery, Architect of Record and
technical evaluation for several pavilions including the UK, USA, KSA and
Australia as well as other support facilities for the Expo Dubai 2020.
With the Middle East market experiencing a tightening of the purse
strings we can foresee 2020 being more competitive than 2019, albeit
many consultants have shifted their emphasis to Saudi Arabia where
there are a number of mega projects. This shift of resources should
dilute the price competition that might otherwise ensue.
The outlook for this region remains cautious but we are budgeting an
increase in our revenue in the year ahead. Cost management will remain
a key focus.
t Continental Europe
This operation comprises one wholly owned subsidiary, two joint
ventures and an associate plus a former wholly owned subsidiary in
Russia which was wholly owned throughout the year, and post year end
operates under a licensee arrangement following its disposal to a local
shareholder. Revenue and costs for the partly-owned entities are not
included in revenue or costs in the Consolidated Income Statement; in
line with the use of the equity method of accounting only the after-tax
result is included in Group income statement.
Revenue for the hub (i.e. the Russian and Turkish wholly owned
subsidiaries only), declined again, this time by 37% to £516k (2018:
£817k). However, the region benefits from total revenues under
management of £16.529m (2018: £18.387m) and the hub has built on
this greater sum by increasing profitability and making an increased
contribution to the Group in the year of £495k (2018: profit £284k).
Whilst staff numbers reduced from 132 to 116 the net revenue per FTE
technical staff increased by 14.5% to £87k (2018: £76k).
SAMANEA MALL, DUBAI
33
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 Project completions this year by the Berlin office included the
refurbishment and conversion of the Kaufhaus Jandorf in Berlin-Mitte
to offices for Mercedes-Benz R&D, the Zoom mixed-use building next
to Berlin-Zoo, the Allianz HQ in Berlin-Adlershof and the WinX office
tower in Frankfurt, where we were the Executive Architect on all four
projects. Other completions include a Premier Inn Hotel in Hamburg
and in August 2019 the Campus in a listed heritage electrical sub-station
building in Berlin-Kreuzberg sponsored by Google.
In Frankfurt the first phases of the refurbishment of the iconic Messeturm
building were completed including some tenant fit-outs, along with
a banking sector data centre and the Living Lyon residential building.
Other completions include a major insurance group fit-out in Cologne
and a rollout of branch offices for Commerzbank in Korbach.
In Prague significant projects are under way including the refurbishment
of the Trikaya OC Repy shopping centre, the first phases of the WPP
Bubenska HQ and a logistics building extension for DB Schenker which
will continue into 2020. New projects are in early design stages for a
shopping centre and major office fit-out in Prague, a logistics centre in
Ostrava and data centre projects in Romania.
In Turkey a large number of fit-out completions occurred in Istanbul this
year for Sanofi, Credit Suisse, Nike, 3M, KPMG and for VM Ware’s HQ
Project in Sofia, Bulgaria where further expansion phases continue into
2020. Work also started on an architectural project for a large private
house in Istanbul.
The Moscow office completed a 20,000 sq m luxury Kosygina
residential development, interiors projects for a luxury apartment
in Moscow, a Training Centre for Sibur in Tobolsk and a residential
complex masterplan for a 40 ha site near Tyumen for Embaevo. The
Moscow operation was co-located and transferred into new ownership
in October to a Russian National who also owns the Aurora Group, a
significant and renowned 100 person strong project management,
architecture and engineering practice.
t Group Expenditure
The Group continued to carefully manage the operational costs of the Plc
Company during the current year and, as a result, saved around £100k
year on year. £80k of this saving came from an advantageous foreign
exchange gain, due to the movement of the GBP:AED exchange rate on
intercompany loan balances denominated in AED.
t Shareholder base
For a small cap company our shareholder register is large with around
2,200 individual shareholders, many with extremely small holdings.
This results in disproportionate costs whenever we need to convene
shareholder meetings.
Around 50% (1,100) of the shareholder register, by number, hold, in
aggregate, under 2% (c.3m shares) of the total equity which, at the
current market price of 1.95 pence per share has a value of c. £65,000,
an average value of just £59 each.
For some time the Board has been considering a capital reorganisation
to make the register more manageable and to rebase the share price at
new level. At an appropriate moment the Board will put proposals to
shareholders to implement such action.
CREDIT SUISSE, ISTANBUL
INSURANCE GROUP, COLOGNE
t Summary, Group Prospects and Shareholder Value
The action we have taken over the past two years to reduce costs and
focus on known income streams in each operation has borne fruit in this
set of results. This has especially been the case in the Middle East and
the UK. As a result 2019 was a far better year than 2018. Looking forward
we can see greater stability in all of our operations, despite the vagaries
of both the political and economic environment in which we operate.
We hope to build on our current recovery and expect to grow our profit
level in 2020.
On behalf of the Board
Nicholas Thompson
Chief Executive Officer
29 January 2020
The headline financial results of the Group were:
Total revenues under management1
Revenue
Revenue less sub consultant costs1
Net operating expenses (as restated)
Other operating income
Net finance costs (as restated)
Share of results of associate and joint ventures
Profit / (loss) before tax
Tax credit
Profit / (loss) for the year
Financial review
2019
£’000
31,505
15,492
13,711
2018
£’000
31,950
14,380
13,094
(14,130)
(16,006)
371
(42)
382
292
40
332
287
(40)
121
(2,544)
171
(2,373)
1 Alternative performance measures, refer to page 37 for definition
Revenues for the year were £15.49m, an increase of 7.7% on the previous year (2018: £14.38m), marking an improvement in performance in both the
Group’s major hubs, the UK and the Middle East. Similarly, revenues less sub consultants increased to £13.71m (2018: £13.09m), a 4.7% increase.
Subconsultant costs increased from £1.29m last year to £1.78m. Most of the increase was in the Middle East.
Operating expenses in the year were also reduced by £1.87m, of which £0.6m related to technical staff, which was almost entirely within the UAE
reflecting the reduction in technical staff to right size with the volume of work. £0.5m related to property costs primarily in the UK following a full year
in the new London office, with the prior year including moving costs, overlap of rent across two sites, and final dilapidation settlement. Other operating
expenses reduced £0.9m mainly due to a reduction in bad debt provisions in the UAE, supported by further cost reductions in the UK.
The result before tax was a profit of £292k (2018: £2,544k loss). This reflected significant improvements in the result from Continental Europe driven
primarily by an improvement in the performance of the associate in Berlin, and the turnaround in the UK and Middle East which both report significant
profits before tax (excluding Group management charges) and reduced their losses before tax (including Group management charges) down to almost
breakeven in the current year.
Taking account of a £40k tax credit, our profit after tax at £332k gives an EPS profit of 0.21 pence per share (2018: 1.42 pence per share (loss)).
t United Kingdom
Revenue
Revenue less sub consultant costs1
FTE technical staff1
Net revenue per FTE technical staff1
Profit/(loss) before tax (excluding Group management charges)
Loss before tax (including Group management charges)
1 Alternative performance measures, refer to page 37 for definition
2019
£’000
7,454
7,379
73
101
451
(89)
2018
£’000
6,744
6,610
72
91
(965)
(1,505)
The UK’s revenue increased 10.5% year on year driven by growth in the Veretec executive architecture offering. Staff numbers were maintained, and
productivity improved (net revenue per FTE) on the back of a more continuous stream of fee earning work and reduced speculative bid and competition
work. Property costs were significantly reduced, as the prior year included one-off costs of £375k.
The combined effects of these improvements and cost reductions resulted in a year on year improvement on the result before tax of over £1.4m.
34
35
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 t Middle East
Revenue
Revenue less sub consultant costs1
FTE technical staff1
Net revenue per FTE technical staff1
Profit/(loss) before tax (excluding Group management charges)
Loss before tax (including Group management charges)
1 Alternative performance measures, refer to page 37 for definition
2019
£’000
7,522
5,900
70
84
525
(69)
2018
£’000
6,819
5,852
83
70
(585)
(1,209)
Revenues increased 10.3% from £6.82m to £7.52m in the year, due to the effect of a start up of some of the large projects which had been delayed from
the prior year, combined with new work won, however further delays and projects put on hold restricted further improvements in the performance of the
region. Profit/(loss) before tax (excluding Group management charges) improved by £1.1m to £525k, whilst the first half loss (excluding management
charges) of £141k was largely negated by an improved profit of £666k in the second half.
Staff numbers were reduced further to align with the forecast order book, resulting in an significant improvement in productivity at £84k net revenue
per FTE technical staff.
t Continental Europe
Revenue
Revenue less sub consultant costs1
FTE technical staff1
Net revenue per FTE technical staff1
Profit before tax (excluding Group management charges)
Profit before tax (including Group management charges)
Including 100% of associate & joint ventures
Total revenues under management1
Revenue less sub consultant costs1
FTE technical staff1
Net revenue per FTE technical staff1
1 Alternative performance measures, refer to page 37 for definition
2019
£’000
516
432
13
33
495
351
16,529
10,140
116
87
2018
£’000
817
632
15
42
284
131
18,387
9,990
132
76
Reported revenues, comprising the two Continental European subsidiaries, Russia and Turkey, were at £516k, 36.8% lower than the prior year (£817k).
The result before tax (excluding Group management charges), also including the joint venture and associate in Germany and the joint venture in the
Czech Republic, was a profit of £495k (2018: £284k).
Continental Europe’s result is driven through the investments in Berlin and Frankfurt, which remain strong and profitable, together contributing £382k
profit (including Group management charges), to the Continental Europe result. Turkey suffered from reduced earnings, however still managed to
achieve a small profit. Russia and the Czech Republic both reported small negative results.
While revenues less sub consultant costs (including 100% of the associate and joint ventures) increased marginally year on year, total revenues under
management decreased by £1,858k. The movement was primarily due to the changing mix of requirements for sub-consultants on a variety of projects,
however it was dominated in 2018 by one project in which the concept architect is contracted to our Berlin associate as a sub-consultant. The concept
architect fee on this project alone was £4.15m in the prior year, reducing down to £1.63m in the current year.
Staff numbers reduced to 116 from 132 due to moderate down-sizing in Berlin, which enabled this associate to operate significantly more efficiently and
profitably. As a result, earnings per FTE technical staff were significantly improved at £87k (2018: £76k).
t Financing
Taking account of the year’s result, total equity is now £4.51m (2018: as restated £4.14m).
Net funds (see note 21) at year end were significantly improved, being £820k (2018: £157k), comprising cash of £1,145k (2018: £710k), and the loan
taken out in respect of the acquisition of Shankland Cox Limited (“SCL”), which now stands at £325k (2018: £553k).
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’s overdraft facility from its bankers Coutts & Co was maintained at £500k throughout the year, continuing to provide working capital flexibility
and to support the UK business. This is renewable annually and currently remains in place until November 2020, with a review in May 2020.
As further explained in note 35, Management identified that 3 finance leases taken out by Aukett Swanke Limited to fund the purchase of fit out costs
of the new London office in June 2018, should have been capitalised as a tangible fixed asset and finance lease liabilities, and have restated the prior
year balances to reflect this. A further lease in November 2018 was also taken out in the current year. The lease liability as at 30 September 2019 was
£278k (2018: £314k).
Throughout the year there has continued to be a very strong focus on cash management, liquidity forecasts and covenant compliance. Although nothing
was drawn at year end, use was made of the overdraft throughout the year. Going forward and from the second half of the 2020 financial year,
utilisation of the facility is expected to reduce.
The Plc continues to act as the Group’s central banker and it has sought to optimise the Group’s position by maximising cash flows and flexibility across
geographies. The overdraft is effectively assigned to the UK businesses. All other businesses are required to be cash generative or as a minimum cash
neutral. Subject to formal approval, short term working capital advances or small funding loans may be made.
t 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 profiles:
•
•
•
The UK trades as 2 businesses: Veretec and Aukett Swanke Limited. Veretec is continuing to grow and increasing revenues and commensurately
staff numbers. Following prior year reductions in staffing levels Aukett Swanke Limited maintained a core stable team through much of the year
with a small growth in Q4 as work levels improved.
The Middle East continues the strategy of Aukett Swanke Architectural Design Limited winning larger, longer-term projects which underpin its
workload and in part that of SCL. John R Harris & Partners Limited (“JRHP”) and SCL also pursue and win smaller projects which they deliver
individually.
Continental Europe remains mixed across the portfolio. The German businesses are strongest and Berlin and Frankfurt have strong forward order
books continuing their levels of profitability. Turkey and the Czech Republic continue to try and build strength, with both enhancing their capability
to support other businesses in the Group. The Russian business was sold after the year end.
t 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, and is disclosed on pages 35 and 36. As total revenues under management
includes revenue derived from subconsultants, this figure can vary significantly year on year depending on the nature of external expertise
required on individual projects as described on page 36. Consolidated Group revenue can be reconciled to total revenues under management by
adding i) the revenue of the associate disclosed in note 16; and ii) double the share of revenue in joint ventures disclosed in note 17;
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, and is discussed by segment on pages
35 and 36;
Revenue less sub consultant costs being generated per full time equivalent (FTE) technical member of staff (‘net revenue per FTE technical 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 and 36;
Result before taxation (excluding Group management charges), and result before taxation (including Group management charges), which are
further assessed on pages 35 and 36;
Cash at bank and in hand and net funds / (debt), which is assessed further on page 32.
36
37
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 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 and 36.
t 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. Whilst we now
appear to have progress in the Brexit process, there still remains uncertainty in predicting the end result, and therefore quantifying its impact for the UK
business, albeit as we note on page 32 we expect the UK market to enter a new development cycle from which we’d expect to benefit.
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.
Conversely a weaker share price affords the Group less flexibility.
Operational gearing and funding
In common with other professional services’ businesses, the Group has a relatively high level of operational gearing, through staffing, IT 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.
The UK continues to benefit from a rent free period which expires in May 2020, however includes the option to further extend the rent free period a
further 4 months subject to landlord approved installation of specific property improvements. Action was taken to reduce property costs in the UAE
through a process of property rationalisation which has now been completed. The UK has also rebalanced the mix of permanent vs. contract and agency
staff to give improved flexibility to respond to falls in revenue.
The project payment arrangements under which the Group operates vary significantly by geographical location. Payment terms by jurisdiction are
typically:
•
•
•
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 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.
Growth in revenue in the UK and the Middle East in the year, combined with improved cash collection in the Middle East improved the free cash
available to be remitted to the Plc in the year.
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 weekly and daily cash reporting processes in order
to react immediately to a required change with maximum flexibility. Covenant compliance is also strictly monitored.
The Group’s principal bankers remain supportive and in December 2019 renewed the Group’s overdraft facility until November 2020, at the existing
£500k level. 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 as at 29 January 2020 of which is USD 320k.
38
Where possible, the Group deploys four 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;
Third, the Group maximises the benefit of different payment terms in varying
geographies, mainly the UK and UAE, to take advantage of the flexibility
between the businesses; and
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 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
in respect of
professional negligence claims but is exposed to the cost of excess deductibles
on any successful claims.
indemnity
insurance
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.
FORBURY PLACE, READING
39
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 Directors’ report
The Directors present their report for the year ended 30 September 2019.
t Corporate governance
In accordance with AIM Rule 26 the Company is required to apply a recognised corporate code. The Board continued to adopt the QCA Corporate
Governance Code (2018) published by the Quoted Companies Alliance.
The QCA Corporate Governance Code (2018) comprises 10 Principles. We set out our compliance with these Principles on the Group’s website. This
includes a matrix (‘the QCA Matrix’). This lists the Principles as well as related considerations and requirements, all of which have been assigned a sub-
number within each Principle.
t 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 three executive directors and three independent non-executive directors who bring a wide range of experience and skills
to the Company.
The Board considers John Bullough, Clive Carver and Raúl Curiel 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.
t 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 Clive Carver, as Chairman, John Bullough and Raúl Curiel, 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.
t 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 two occasions. The
Committee comprises John Bullough, Clive Carver and Raúl Curiel 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.
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 29 January 2020 and signed on its behalf by
Antony Barkwith
Group Finance Director
40
41
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 t Nomination Committee
The Nomination Committee is responsible for keeping under regular review the size, structure and composition (including the skills, knowledge,
experience and diversity) of the Board. This includes considering succession planning for the senior management of the Group, taking into account the
skills and expertise expected to be needed in the future.
It is responsible for nominating new candidates for the Board, for which selection criteria are agreed in advance of any new appointment.
The Nomination Committee is chaired by Raúl Curiel with the other members being Nicholas Thompson, John Bullough and Clive Carver.
During the year the Committee made recommendations with respect to succession planning and evaluation of the board effectiveness, the appointment
of additional non-executive directors and an executive director and met on four separate occasions.
t 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 Clive Carver. Antony Barkwith and Robert Fry are also members.
t Directors
John Bullough, Nicholas Thompson and Robert Fry served as Directors of the Company throughout the year ended 30 September 2019. On 12 February
2019 Raúl Curiel was appointed as a Director of the Company. On 28 March 2019 Beverley Wright and Anthony Simmonds resigned as Directors of the
Company. Raúl Curiel was appointed as Chairman of the Company following the departure of Anthony Simmonds. On 10 May 2019 Clive Carver was
appointed and on the 9 July 2019 Antony Barkwith was appointed as Directors of the Company.
Biographical details of the current Directors are set out on pages 28 and 29.
The Company maintains directors’ and officers’ liability insurance.
Attendance at board meetings by members of the Board were as follows:
Number of meetings while in office
Number of meetings attended
Executive Directors
Nicholas Thompson
Beverley Wright
Robert Fry
Antony Barkwith
Non-executive Directors
Anthony Simmonds
John Bullough
Raúl Curiel
Clive Carver
14
7
14
3
7
14
9
6
14
7
14
3
7
13
9
6
t Directors’ interests
Directors’ interests in the shares of the Company were as follows:
Number of ordinary shares
30 September 2019
30 September 2018
Anthony Simmonds
Nicholas Thompson
Beverley Wright
John Bullough
Raúl Curiel
Clive Carver
Antony Barkwith
Robert Fry
42
1,000,000
16,802,411
100,000
500,000
9,240,018
-
-
2,150,000
1,000,000
16,802,411
100,000
500,000
9,240,018
-
-
2,150,000
t 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 has a
rolling service contract with the Company which is subject to twelve months’ notice of termination by either party. Antony Barkwith and Robert Fry 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.
t Substantial shareholdings
At 29 January 2020 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
Nicholas Thompson
Jeremy Blake
Andrew Murdoch
Begonia 365 SL
Raúl Curiel
Stephen Atkinson
John Vincent
Broadwalk Asset Management
Director of the Company
Former employee of the Group
Former director of the Company
Controlled by a former director of the Company
Non-Executive Director of the Company
Former employee of the Group
Former director of the Company
Fund Manager
16,802,411
13,030,638
12,478,486
9,515,192
9,240,018
7,638,913
5,791,394
5,317,000
Percentage of
ordinary shares
10.17%
7.89%
7.56%
5.76%
5.59%
4.62%
3.51%
3.22%
t Share price
The mid-market closing price of the shares of the Company at 30 September 2019 was 1.475 pence and the range of mid-market closing prices of the
shares during the year was between 1.09 pence and 1.90 pence.
t 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.
t 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 72 ‘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 9 LEED (Leadership in Energy and Environmental Design) ‘Gold’
award and 5 ‘Silver’ awards.
43
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019
t 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.
t Health and safety
The Group seeks to promote all aspects of health and safety at work throughout its operations in the interests of employees and visitors.
The Group has a Health and Safety Steering Committee, chaired by Robert Fry, to guide the Group’s health and safety policies and activities. Health and
safety is included on the agenda of each board meeting. Antony Barkwith is also a member of the Committee, and Beverley Wright was a member of the
Committee for the period up to 28 March 2019.
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.
t 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.
t Future developments
An indication of likely future developments in the business of the Group is contained in the Strategic Report.
t Financial instruments
Information concerning the use of financial instruments by the Group is given in notes 27 to 31 of the financial statements.
t 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 2020
financial year.
t 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 29 January 2020 and signed on its behalf by
Antony Barkwith
Company Secretary
Aukett Swanke Group Plc
Registered number 2155571
44
Statement of directors’ responsibilities
t 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 AIM.
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 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.
t 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.
VERTI MUSIC HALL, BERLIN
45
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 Independent auditor’s report
to the members of Aukett Swanke Group Plc
t 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 2019 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 2019 and of
the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as
applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
t 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 and the Parent Company 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.
t 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.
t 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. These
matters were 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 these matters.
Matter
How we addressed the matter in our audit
t Recognition of contractual revenue, margin and
related receivables and liabilities
Refer to the revenue recognition accounting policies on pages 62-63 and
the accounting estimates and judgements recognition of contractual
revenue policy on page 64 for a description of how the Group
recognises its revenue under IFRS 15.
The stage of completion of contracts for services is calculated by
reference to the proportion of costs incurred to the statement of
financial position date compared with the estimated final costs of the
contract at completion. Variations to expected revenue are 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
statement of financial position 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 in the
reporting period.
We considered the design and implementation of controls to monitor
amounts recorded as revenue at the statement of financial position
date and performed testing over the approval of sales invoices. This
included review of the processes and controls under which information
flows from key revenue documents (contracts, timecards, resourcing
budgets and sales invoices) into the revenue model and ultimately the
accounting system.
We, or where appropriate the component auditors, 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 traced total anticipated revenue on the sampled projects (as
listed on the revenue recognition spreadsheet) to supporting
documentation including the original contract and/or amendments
to contracts (where applicable e.g. due to agreed variations).
- We agreed the chargeable time costs incurred to date for our sample
of projects noted in the stage of the completion calculations to
reports from the timekeeping system and tested a sample back to
submitted time cards, including checking of the core charge out rate
applied to ensure consistency with the firm’s charge out rates on the
given individuals.
- For the UK entities, the accuracy of sales invoices raised to
date against the sampled projects and the completeness of the
information source with regard to bills raised against those projects
were audited by testing the underlying controls. The component
auditor’s work in this area involved agreeing the bills recorded to the
physical sales invoices.
- We assessed the key judgements adopted by management in
relation to the revenue recognition, in particular, judgements
with respect to the percentage of completion by obtaining an
understanding from the project managers of how they estimated the
final expected project costs. This involved challenging assumptions
made around expected ongoing team costs and the timing of future
events against post-year-end time costs and the occurrence of those
events, evaluating the outturn of the projects against budget since
inception and agreeing the actual costs incurred after the year-end
to the forecasted costs for the project as at the year-end to determine
the accuracy with which the project was proceeding by reference to
its budget.
- The underlying calculations for each of the sampled projects was
checked on the basis of the above information to check its compliance
with the relevant accounting standard.
- Further to this, we traced a sample of year-end trade receivables to
invoices and subsequent post year-end cash receipt.
− We considered management’s judgements around the recognition
(or non-recognition) of material fee claims as at the statement of
financial position date to determine the validity of the circumstances
the revenue recognised on such claims and
surrounding
challenged management through review of key documentation and
consideration of the underlying facts.
Key observation:
-
Based on our procedures performed, we consider that the as-
sumptions made in recognition of revenue on part-completed
contracts are reasonable.
46
47
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019
Matter
How we addressed the matter in our audit
t 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 72-73
(note 12), the Group’s balance sheet includes goodwill, principally
arising from past acquisitions totalling £2.4m as at 30 September 2019.
This comprising primarily of £1.7m within the UK Cash Generating
Unit (‘CGU’) and £0.6m within the Middle East CGUs. There is a risk
that goodwill allocated to each CGU 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 cash
flows, 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, notably revenue less sub consultant costs 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.
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;
- audited the Value in Use schedules of the Group to check that they
were mathematically accurate (agreeing the input net assets of the
CGU to the audited consolidation and agreeing the accuracy of cash
flow measures included by reference to the relevant accounting
standards);
- reviewed the revenue less sub consultant costs budgeted for the
year ended 30 September 2020 in the context of the degree of
work secured, including examination of supporting contracts and
consideration of the pipeline activity given the sensitivity of the value
in use models to the revenue less sub consultant costs assumption;
- 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
possible impairment of CGUs; and
- performed our own sensitivity analysis, notably on net earnings
which included consideration of the effect of a possible reduction
in assumed growth rates and cash flows, given reasonably possible
variations in operating cash flows (such as net earnings shortfall
against budget) in the context of the above work.
Key observation:
- Based on our audit work performed, we are satisfied that
management’s assumptions used in preparing the value in use
calculations are reasonable and supportive of the fact that no
impairment has been recorded in the year.
t Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality
to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the
basis of the financial statements.
Materiality for the Group financial statements as a whole was set at £205,000 (2018: £210,000) which represents approximately 1.5% of revenue less
sub-consultant costs for the year. This benchmark was considered to be most appropriate as the level of revenue less sub-consultant costs reflects the
activity of the Group and its presence in the market as a whole.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance
materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as
we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the
financial statements as a whole. The performance materiality level applied to the Group was £143,000 (2018: £157,000).
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £7,000 (2018: £10,000) 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 £141,000 (2018: £129,000) which represents
approximately 3% of net assets at the year-end. This benchmark was considered to be most appropriate as it represents the principal purpose of the
company as a holding entity to the subsidiaries of the Group. The performance materiality level applied to the company-only audit was £98,700 (2018:
£96,000).
Component materiality ranged from £14,000 to £66,000, based on 1.5% of revenue less sub-consultant costs as noted above. In the audit of each
component, we further applied performance materiality levels of 70% of the component materiality to our testing to ensure that the risk of errors
exceeding component materiality was appropriately mitigated.
t An overview of the scope of our audit
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. We also addressed the risk of management override of internal
controls, including assessing whether there was evidence of bias by the directors that may have represented a risk of material misstatement due to
fraud. 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.
The audit of the Group financial statements comprised full scope audits performed on the consolidated group headed up by Aukett Swanke Group Plc,
the standalone parent entity financial statements and its seven UK-domiciled subsidiaries as required by statutory regulations in the UK. The significant
components to the Group were determined to be Aukett Swanke Limited, Veretec Limited, John R Harris & Partners and Shankland Cox Limited.
The full scope audit of Aukett Swanke Limited and Veretec Limited was conducted by the group audit team, while the full scope audits of John R Harris
& Partners and Shankland Cox Limited were performed by the non-BDO component audit firm in Dubai. .
The component auditor’s work resulted in them auditing the following percentages of the Group (the balance being audited by BDO UK):
•
•
•
Revenue less sub-consultant costs: 43%
Result before taxation (normalised): 49%
Gross assets: 53%
For the work 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. The level of involvement by BDO
UK in the component audit work performed was as follows:
•
•
•
•
•
Direction of planning activities and expected areas of audit focus including the materiality, anticipated risk areas and approach to audit work to
be adopted;
Planning meeting between component auditor and BDO UK to establish understanding of terms and instructions;
Detailed onsite review of audit files produced by UAE component auditor by the Group Engagement Partner;
Attendance at the clearance meeting between UAE local management and UAE component auditor; and
Direction and supervision of clearance of core audit areas relevant to the Group.
Whilst not considered significant components, specific procedures were performed around certain elements of the Berlin Associate and Frankfurt joint
venture due to their contribution to the Group’s result before tax. All entities within the group not subject to a full scope audit were reviewed analytically
by reference to their expected financial performance and position. These procedures were performed by the group audit team.
t 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.
48
49
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 t 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.
t 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.
t Responsibilities of directors
As explained more fully in the statement of Directors’ responsibilities 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.
t Auditor’s responsibilities for the audit of the financial statements
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.
Revenue
Sub consultant costs
Revenue less sub consultant costs
Personnel related costs
Property related costs
Other operating expenses
Other operating income
Operating loss
Finance costs
Loss after finance costs
Share of results of associate and joint ventures
Profit / (loss) before tax
Tax credit
Profit / (loss) for the year
Profit / (loss) attributable to:
Owners of Aukett Swanke Group Plc
Non-controlling interests
t Use of our report
This report is made solely to the Parent 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 Parent 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 Parent
Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Basic and diluted earnings per share for loss attributable to
the ordinary equity holders of the Company:
From continuing operations
Total profit / (loss) per share
Tim Neathercoat (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
United Kingdom
Date: 29 January 2020
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Consolidated income statement
For the year ended 30 September 2019
Note
3
3
4
5
10
11
2019
£’000
15,492
(1,781)
13,711
(11,294)
(1,542)
(1,294)
371
(48)
(42)
(90)
382
292
40
332
346
(14)
332
0.21p
0.21p
As restated (note 35)
2018
£’000
14,380
(1,286)
13,094
(11,915)
(2,029)
(2,062)
287
(2,625)
(40)
(2,665)
121
(2,544)
171
(2,373)
(2,345)
(28)
(2,373)
(1.42)p
(1.42)p
50
51
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 Consolidated statement of comprehensive income
For the year ended 30 September 2019
Profit / (loss) for the year
Currency translation differences
Other comprehensive profit /(loss) for the year
Total comprehensive profit/(loss) for the year
Total comprehensive profit/(loss) for the year is attributable to:
Owners of Aukett Swanke Group Plc
Non-controlling interests
2019
£’000
332
46
46
378
392
(14)
378
2018
£’000
(2,373)
(31)
(31)
(2,404)
(2,370)
(34)
(2,404)
The prior period misstatement noted on page 99 (note 35) has no net impact on the consolidated statement of comprehensive income.
Consolidated statement of financial position
Note
12
13
14
16
17
22
18
3
19
3
20
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
Contract assets (2018: IAS 18 accrued income)
Cash at bank and in hand
Total current assets
Total assets
Current liabilities
Trade and other payables
Contract liabilities (2018: IAS 18 deferred income)
Current tax
Borrowings
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
At 30 September 2019
As restated (note 35)
2018
£’000
2,372
810
434
545
248
377
4,786
4,554
1,220
710
6,484
11,270
(4,392)
(886)
(1)
(308)
(5,587)
(559)
(61)
(927)
(1,547)
(7,134)
4,136
1,652
1,176
(24)
(309)
1,494
3,989
147
4,136
2019
£’000
2,412
762
590
711
277
193
4,945
4,904
663
1,145
6,712
11,657
(4,528)
(836)
-
(331)
(5,695)
(272)
(53)
(1,123)
(1,448)
(7,143)
4,514
1,652
1,176
22
37
1,494
4,381
133
4,514
52
The financial statements on pages 51 to 99 were approved and authorised for issue by the Board of Directors on 29 January 2020 and were signed on
its behalf by:
Nicholas Thompson
Chief Executive Officer
Antony Barkwith
Group Financial Director
53
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 Company statement of financial position
At 30 September 2019
Consolidated statement of cash flows
For the year ended 30 September 2019
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
2019
£’000
5,514
27
5,541
2,096
88
2,184
7,725
(2,692)
(260)
(2,952)
(65)
(65)
(3,017)
4,708
1,652
386
1,176
1,494
4,708
2018
£’000
5,514
27
5,541
1,475
166
1,641
7,182
(2,256)
(246)
(2,502)
(307)
(307)
(2,809)
4,373
1,652
51
1,176
1,494
4,373
The result for the year contained within the parent company’s income statement is £335,000 (2018: £211,000).
The financial statements on pages 51 to 99 were approved and authorised for issue by the Board of Directors on 29 January 2020 and were signed on
its behalf by:
Nicholas Thompson
Chief Executive Officer
Antony Barkwith
Group Financial Director
Note
26
Cash flows from operating activities
Cash generated from operations
Interest paid
Income taxes paid
Net cash inflow / (outflow) from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Sale of property, plant and equipment
Dividends received
Net cash received in investing activities
Net cash inflow before financing activities
Cash flows from financing activities
Payments of lease liabilities
Repayment of bank loans
Net cash outflow 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
Cash and cash equivalents at end of year
2019
£’000
647
(42)
(1)
604
(90)
2
186
98
702
(36)
(250)
(286)
416
710
19
1,145
1,145
1,145
As restated (note 35)
2018
£’000
10
(40)
-
(30)
(79)
26
99
46
16
(17)
(236)
(253)
(237)
960
(13)
710
710
710
54
55
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 Company statement of cash flows
For the year ended 30 September 2019
Consolidated statement of changes in equity
For the year ended 30 September 2019
Cash flows from operating activities
Cash generated from / (expended by) operations
Interest paid
Net cash outflow from operating activities
Cash flows from investing activities
Dividends received
Net cash generated from investing activities
Net cash inflow / (outflow) before financing activities
Cash flows from financing activities
Repayment of bank loans
Net cash outflow from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at start of year
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
EXPO PAVILION 2020, DUBAI
Note
26
2019
£’000
10
(24)
(14)
186
186
172
(250)
(250)
(78)
166
88
88
88
2018
£’000
(292)
(28)
(320)
99
99
(221)
(236)
(236)
(457)
623
166
166
166
Foreign
currency
translation
reserve
£’000
8
-
Share
capital
£’000
1,652
-
-
-
Retained
earnings
£’000
Other
distributable
reserve
£’000
2,250
1,494
Merger
reserve
£’000
1,176
(2,345)
(25)
-
(25)
(2,345)
-
-
-
-
-
-
Non-
controlling
interests
£’000
181
(28)
(6)
Total
£’000
6,580
(2,345)
(25)
Total
equity
£’000
6,761
(2,373)
(31)
(2,370)
(34)
(2,404)
1,652
(17)
(95)
1,494
1,176
4,210
147
4,357
-
(7)
(214)
-
-
(221)
-
(221)
1,652
(24)
(309)
1,494
1,176
3,989
147
4,136
-
-
-
-
46
46
22
346
-
346
37
-
-
-
-
-
-
346
46
392
(14)
-
(14)
332
46
378
1,494
1,176
4,381
133
4,514
At 30 September 2017
Loss for the year
Other comprehensive
income
Total comprehensive
income
Balance at 30 September
2018 as originally
presented
Changes in accounting
policy (note 34)
Restated total equity at
1 October 2018
Profit for the year
Other comprehensive
income
Total comprehensive
income
At 30 September 2019
1,652
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.
The prior period misstatement noted on page 99 (note 35) has no net impact on the consolidated statement of comprehensive income, and so no effect
is shown here.
56
57
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 Company statement of changes in equity
For the year ended 30 September 2019
At 30 September 2017
Profit and total comprehensive income for the year
At 30 September 2018
Profit and total comprehensive income for the year
At 30 September 2019
Share capital
£’000
1,652
-
1,652
-
1,652
Retained
earnings
£’000
(160)
211
51
335
386
Other
distributable
reserve
£’000
1,494
-
Merger
reserve
£’000
1,176
-
1,494
1,176
-
-
1,494
1,176
Total Equity
£’000
4,162
211
4,373
335
4,708
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.
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.
t 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.
t New accounting standards, amendments and interpretations applied
For the year ended 30 September 2019, a number of new or amended standards became applicable and the Group had to change its accounting
policies to correctly reflect the requirements of the following standards:
-
-
IFRS 9 Financial Instruments, and
IFRS 15 Revenue from Contracts with Customers.
The impact of the adoption of these standards and the new accounting policies are disclosed in note 34.
t 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 2019 and have not yet been adopted by the Group:
i)
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 of leases onto the balance sheet.
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. The Group presently plan to adopt the full retrospective approach to IFRS 16.
Given the concentration of the long-term property lease arrangements in the UK, and the short-term rolling annual contracts within the
UAE, it is envisaged that the material impact of adopting IFRS 16 will be within the UK figures and will lead to the creation of a material
“right of use asset” within the property, plant and equipment note, in addition to a material lease liability reflecting the present value of
the future operating costs on the statement of financial position.
Since no specific transition work has yet been performed on this new standard by the Group, it is not possible to presently identify the
financial impact but the Group will present this in the 31 March 2020 interim financial statements.
ii)
IFRIC 23 ‘Uncertainty over income tax treatments’ requires an entity to determine whether any of its tax treatments would be accepted, or
not accepted, by the relevant tax authorities.
At present the Group has not analysed the impact of IFRIC 23 on the financial statements, but will provide an assessment of the estimated
impact in the 31 March 2020 financial statements
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.
t 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. These factors are all considered when assessing the Group’s
ability to operate as a going concern.
The Group currently meets its day to day working capital requirements through its cash balances. It maintains its overdraft facility for additional financial
flexibility and foreign currency hedging purposes. This overdraft facility is renewed annually and was renewed for a further 12 months in December
2019, with a review in May 2020.
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, as well as an assessment of covenant tests.
At times, the flows rely on receipt of specific large amounts, but by managing balances across geographies 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.
58
59
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019
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 has again renewed the Group’s overdraft facility as described in note 31 and above.
All 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 applying the processes and 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.
t 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.
Associates
The associate in Berlin is the entity 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.
t 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.
t 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.
t 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.
t Current Taxation
Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or
substantially enacted by the statement of financial position date.
t 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 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.
t 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.
t Equity instruments
Equity instruments issued by the Company are recorded as the proceeds received, net of direct issue costs.
t 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.
t 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.
t 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.
t 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.
t 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.
t 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.
60
61
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 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.
t 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.
t Other operating expenses
Other operating expenses include legal and professional costs, professional indemnity insurance premiums, marketing expenses and other general
expenses.
t Property, plant and equipment
All property, plant and equipment is stated at historical cost of acquisition less depreciation and any impairment provisions. Historical cost of acquisition
includes expenditure that is directly attributable to the acquisition of the items.
Depreciation of property, plant and equipment is calculated to write off the cost of acquisition over the expected useful economic lives using the straight
line method and over the following number of years:
Leasehold improvements – Unexpired term of lease
Office furniture – 4 years
Office equipment – 4 years
Computer equipment – 2 years
t Provisions
Provisions are recognised when a present obligation has arisen as a result of a past event which 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.
Employee benefits
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).
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.
t 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.
t 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 each performance
obligation within the contract and the proportion of total time expected to be required to undertake each performance obligation which had been or
is being performed.
Step 1) Identification of the contract
Contracts with clients are mostly on a fixed basis with the consideration generally being stipulated based on a percentage of the build cost.
Contract variations are treated as variations to a specific performance obligation, with any additional fees associated with that variation,
and the time and cost required to fulfil the variations, included within the overall assessment to time required to complete the overall
performance obligation. This is on the basis that those variations are normally not distinct in themselves (modifications to existing elements
of the obligations) and therefore are repriced as if they were part of the original contract.
Step 2) Identification of performance obligations
Whilst the nature of performance obligations may vary from project to project, they are generally split by identification of Royal Institute
of British Architects (‘RIBA’) work stages (delivered as either an individual work stage or a group of work stages depending on the exact
nature of the contract). which constitute individual and distinctive promises within the contract. These are capable of being delivered
independently. Local equivalents of RIBA apply depending on the jurisdiction of the contract, and may be identified.
Step 3) Identify the consideration
Consideration is generally fixed and agreed within the contract for services between Aukett Swanke Group Plc and the client, subject to
modifications as noted above in step 1.
Step 4) Allocate the transaction price
The performance obligations within the contract are billed on the basis of a fee allocated to each element of the project, however revenue
is allocated to the performance obligations based on the total expected time cost and contract cost expected to be required to undertake
each performance obligation within the contract. This leads to recognition of revenue being reallocated between work stages where
Management assess that the billing milestones associated to specific stages as stated in the contract do not fairly reflect the total time and
cost required to complete those tasks.
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.
Step 5) Recognition of revenue
For all contracts undertaken by Management, the measurement of revenues follows an “over time” pattern, and therefore is no different in
nature to the previous recognition pattern under IAS 18.
The basis on which this is the case is that the work performed by the Group has no alternative use and the contracts contain
provisions by which consideration can be recovered for part-performance of obligations in the event that a contract is terminated.
The revenue recoverable in such an instance would approximate to compensating the Group for the selling price of the services rendered
to date.
The amount by which revenue exceeds progress billings is classified as amounts due from customers for contract work and included in contract assets.
To the extent progress billings exceed relevant revenue, the excess is classified as advances received from customers for contract work and included in
contract liabilities.
The impact of adoption of IFRS 15 ‘revenue from contracts with customers’, and the methodology applied under this standard are detailed further in
note 34.
t 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.
Following the adoption of IFRS 9, the Group followed the simplified approach and so makes an expected credit loss allowance using lifetime expected
credit losses for all trade receivables and contract assets. The estimates and judgements applied are detailed further in notes 18 and 34.
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 further loss allowances if it is considered that there is a significant risk of non-payment. The factors assessed when considering a loss
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 further impairment allowance.
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:
62
63
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019
t 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.
An increase of 6% (2018: 5%) as a percentage of total trade receivables would lead to a material bad debt exposure. Based on the combination of credit
loss allowances and specifically identified further provisions, there is a £1.0m, (2018: £1.1m) trade receivables provision primarily against Middle East
trade receivables. Given the nature of these, there remains the potential to collect these in future years. Further quantitative information concerning
trade receivables is shown in notes 18, 29 and 34.
t Impairment of goodwill
Details of the impairment reviews undertaken in respect of the carrying value of goodwill are given in note 12.
t Impairment of investments in subsidiaries, associate and joint ventures
The company’s investment in subsidiaries, associate and joint ventures is 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:
t 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.
The Group have limited numbers of situations where we are entitled to a fee claim, on which estimation of the amount we would be entitled to in such a
claim is considered on a case by case basis, and only recognised when it is highly probable that there will not be a subsequent reversal of the estimated
revenues of a probable outcome under the requirements of IFRS 15 for variable consideration.
In the current year and at the transitional date to IFRS 15, no material fee claim revenue has been recognised at 30 September 2019.
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.
t Income statement segment information
Segment revenue
United Kingdom
Middle East
Continental Europe
Revenue
64
2019
£’000
7,454
7,522
516
15,492
2018
£’000
6,744
6,819
817
14,380
Segment revenue less sub consultant costs
United Kingdom
Middle East
Continental Europe
Revenue less sub consultant costs
2019
£’000
7,379
5,900
432
13,711
2018
£’000
6,610
5,852
632
13,094
All of the Group’s revenue relates to the value of services performed for customers under construction type contracts. These contracts are generally fixed
price and take place over a long term basis.
No segmentation of timing of revenue recognition is provided as all services continue to be provided on an ‘over time’ basis.
All impairment losses recognised in note 18 are in respect of the Group’s contracts with customers.
Segment net finance expense
United Kingdom
Middle East
Continental Europe
Group costs
Net finance expense
Segment depreciation
United Kingdom
Middle East
Continental Europe
Depreciation
Segment amortisation
United Kingdom
Middle East
Continental Europe
Amortisation
2019
Segment result
United Kingdom
Middle East
Continental Europe
Group costs
Profit before tax
2019
£’000
(18)
-
-
(24)
(42)
2019
£’000
101
48
1
150
2019
£’000
27
43
11
81
Before goodwill
and acquisition
adjustments
£’000
Fair value gains
on deferred
consideration
and acquisition
settlement
£’000
(89)
(123)
351
99
238
-
54
-
-
54
Reallocation
of group
management
charges
£’000
540
594
144
(1,278)
-
Sub-total
£’000
(89)
(69)
351
99
292
As restated (note 35)
2018
£’000
(12)
-
-
(28)
(40)
As restated (note 35)
2018
£’000
98
61
19
178
2018
£’000
27
40
13
80
Total
£’000
451
525
495
(1,179)
292
65
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 2018
Segment result
United Kingdom
Middle East
Continental Europe
Group costs
Loss before tax
Before goodwill
and acquisition
adjustments
£’000
(1,505)
(1,336)
131
39
(2,671)
Fair value gains
on deferred
consideration
and acquisition
settlement
£’000
-
127
-
-
127
Reallocation
of group
management
charges
£’000
540
624
153
(1,317)
-
Sub-total
£’000
(1,505)
(1,209)
131
39
(2,544)
Total
£’000
(965)
(585)
284
(1,278)
(2,544)
The Group’s share of results from associate and joint ventures included within the Continental Europe segment result are shown in notes 16 and 17.
t Revenue from contracts with customers
Assets and liabilities related to contracts with customers
The group has recognised the following assets and liabilities related to contracts with customers:
Current contract assets relating to professional services contracts
Loss allowance
Total contract assets
Contract liabilities relating to professional services contracts
Total contract liabilities
2019
£’000
680
(17)
663
836
836
As restated
2018
£’000
1,261
(41)
1,220
886
886
Significant changes in contract asset and liabilities
Contract assets have decreased as the Group has provided fewer services ahead of the agreed payment schedules for contracts. Most of the contract
assets are derived from contracts in the Middle East operating segment. The Group also recognised a loss allowance for contract assets following the
adoption of IFRS 9, see note 34 for further information.
There were no significant changes in Contract liabilities as the timing of invoicing for services ahead of providing services remained largely unchanged.
Contract liabilities are derived primarily from contracts in the UK operating segment.
Revenue recognised in relation to contract liabilities
The following table shows how much of the revenue recognised in the current reporting period relates to carried-forward contract liabilities and how
much relates to performance obligations that were satisfied in a prior year:
Total contract liabilities as at 1 October 2018 (as restated)
Revenue recognised that was included in the contract liability balance at the beginning of the period
Credits issued relating to the contract liability balance at the beginning of the year, previously invoiced but not
recognised as revenue.
Cash received in advance of performance and not recognised as revenue in the period
Total contract liabilities as at 30 September 2019
£’000
(886)
797
89
(836)
(836)
The Group did not recognise any revenue in the reporting period from performance obligations satisfied (or partially satisfied) in previous periods.
t Statement of financial position segment information
Segment assets
United Kingdom
Middle East
Continental Europe
Trade receivables and contract assets
Other current assets
Non current assets*
Total assets
*Non current assets include investments in associate and joint ventures.
Segment liabilities
United Kingdom
Middle East
Continental Europe
Trade payables, contract liabilities and accruals
Other current liabilities
Non current liabilities
Total liabilities
t Geographical areas
Revenue
United Kingdom
Country of domicile
Russia
Turkey
United Arab Emirates
Foreign countries
Revenue
2019
£’000
1,488
2,565
91
4,144
2,568
4,945
11,657
2019
£’000
2,989
1,594
85
4,668
1,027
1,448
7,143
2019
£’000
7,454
7,454
254
262
7,522
8,038
As restated (note 35)
2018
£’000
1,798
2,821
84
4,703
1,781
4,786
11,270
As restated (note 35)
2018
£’000
2,776
1,577
90
4,443
1,144
1,547
7,134
2018
£’000
6,744
6,744
311
506
6,819
7,636
15,492
14,380
66
67
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 As restated (note 35)
2018
£’000
Non current assets
United Kingdom
Country of domicile
Russia
Germany
Turkey
United Arab Emirates
Foreign countries
Non current assets excluding deferred tax
Deferred tax
Non current assets
2019
£’000
2,479
2,479
-
988
75
1,210
2,273
4,752
193
4,945
t Major clients
During the year ended 30 September 2019, the Group did not derive 10% or more of its revenues from any client (2018: no client).
Largest client revenues
2019
£’000
940
The largest client revenues for 2019 relate to the Middle East operating segment (2018: Middle East operating segment).
t 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
4 OTHER OPERATING INCOME
Property rental income
Management charges to joint ventures and associates
Other sundry income
Fair value gain on the reduction of deferred consideration
Total other operating income
68
2019
£’000
6,900
7,827
589
176
15,492
2019
£’000
170
114
33
54
371
2,351
2,351
1
793
75
1,189
2,058
4,409
377
4,786
2018
£’000
1,219
2018
£’000
6,200
6,954
998
228
14,380
2018
£’000
28
115
17
127
287
As restated (note 35)
2018
£’000
5
FINANCE COSTS
Payable on bank loans and overdrafts
Finance lease interest payable
Total finance costs
6
AUDITOR REMUNERATION
2019
£’000
28
14
42
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
2019
£’000
42
65
-
-
36
4
40
2018
£’000
42
58
-
-
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
2019
Number
152
36
188
2018
Number
174
39
213
Company
2019
Number
2018
Number
-
7
7
-
7
7
In addition to the number of staff disclosed above, the Group’s associate and joint ventures employed an average of 126 persons (2018: 122 persons).
The costs of the persons employed by the Group and Company during the year were:
Wages and salaries
Social security costs
Contributions to defined contribution pension
arrangements
Total
Group
Company
2019
£’000
8,254
517
259
9,030
2018
£’000
9,447
594
308
10,349
2019
£’000
647
75
38
760
2018
£’000
630
84
79
793
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.
69
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 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 employee to receive termination indemnity payments.
10 TAX CHARGE
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
9 DIRECTORS’ EMOLUMENTS
2019
£’000
600
14
614
2018
£’000
830
40
870
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
Directors with operational roles in the UK business, and The Executive Directors of Aukett Swanke Group (“ASG”) Plc, waived part of their emoluments
in the prior year to reflect difficult trading conditions. The total amounts waived were 2019: £nil (2018: £14,000).
2019
Anthony Simmonds
Nicholas Thompson
Beverley Wright
John Bullough
Robert Fry
Clive Carver
Raúl Curiel
Antony Barkwith
Total
2018
Anthony Simmonds
Nicholas Thompson
Beverley Wright
John Bullough
Andrew Murdoch
Nick Pell
Robert Fry
Total
Aggregate
emoluments
£’000
Pension
contributions
£’000
Total
received
£’000
23
210
81
30
123
12
19
25
523
-
21
17
-
17
-
-
3
58
23
231
98
30
140
12
19
28
581
Aggregate
emoluments
£’000
Pension
contributions
£’000
Total
received
£’000
45
198
156
30
60
57
61
607
-
24
18
-
9
2
7
60
45
222
174
30
69
59
68
667
Waived
£’000
-
7
5
-
-
-
2
14
Total
entitlement
£’000
23
231
98
30
140
12
19
28
581
Total
entitlement
£’000
45
229
179
30
69
59
70
681
Raúl Curiel was appointed as a Director on 12 February 2019.
Beverley Wright and Anthony Simmonds resigned as Directors on 28 March 2019.
Clive Carver was appointed as a Director on 10 May 2019.
Antony Barkwith was appointed as a Director on 9 July 2019.
Benefits were accruing to five Directors (2018: five Directors) under defined contribution pension arrangements.
The aggregate emoluments of the highest paid Director were £210,000 (2018: £198,000) together with pension contributions of £21,000 (2018: £24,000).
70
2019
£’000
1
(218)
(217)
83
94
177
(40)
2018
£’000
1
-
1
(172)
-
(172)
(171)
2018
£’000
(2,544)
(483)
59
(23)
279
-
(3)
(171)
2018
£’000
(2,345)
(2,345)
2018
Number
-
The standard rate of corporation tax in the United Kingdom is applicable for the financial year was 19% (2018: 19%)
The tax assessed for the year differs from the United Kingdom standard rate as explained below:
Profit/(loss) before tax
Profit/(loss) before tax multiplied by the standard rate of corporation tax
in the United Kingdom of 19% (2018: 19%)
Effects of:
Other non tax deductible expenses
Associate and joint ventures reported net of tax
Tax losses not recognised
Current tax adjustment in respect of previous years
Deferred tax adjustment in respect of previous years
Income not taxable
Total tax credit
11 EARNINGS PER SHARE
The calculations of basic and diluted earnings per share are based on the following data:
Earnings
Continuing operations
Profit / (loss) for the year
Number of shares
2019
£’000
292
55
8
(73)
105
(218)
94
(11)
(40)
2019
£’000
346
346
2019
Number
Weighted average of ordinary shares in issue
Effect of dilutive options
165,213,652
165,213,652
-
-
Diluted weighted average of ordinary shares in issue
165,213,652
165,213,652
71
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 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 2019 and they therefore do not have a dilutive effect.
12 GOODWILL
Group
Cost
At 1 October 2017
Exchange differences
At 30 September 2018
Exchange differences
At 30 September 2019
Impairment
At 1 October 2017
Exchange differences
At 30 September 2018
Exchange differences
At 30 September 2019
Net book value
At 30 September 2019
At 30 September 2018
At 30 September 2017
The net book value of goodwill is allocated to the Group’s cash generating units (“CGU”) as follows:
At 30 September 2017
Exchange differences
At 30 September 2018
Exchange differences
At 30 September 2019
United Kingdom
£’000
1,740
-
1,740
-
1,740
Turkey
£’000
54
(22)
32
5
37
Middle East
£’000
583
17
600
35
635
£’000
2,648
(7)
2,641
42
2,683
271
(2)
269
2
271
2,412
2,372
2,377
Total
£’000
2,377
(5)
2,372
40
2,412
The key assumptions in the discounted cash flow projections for the United Kingdom operation are:
•
•
•
the future level of revenue, set at a compound growth rate of 5.5% over the next five years - 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 considers the level of future secured
revenues at the point of drawing up these calculations;
long term growth rate - which has been assumed to be 2.1% (2018: 2.3%) 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 UK segment’s pre-tax weighted average cost of capital and has been assessed at 13.3% (2018: 13.1%).
Based on the discounted cash flow projections, the recoverable amount of the UK CGU is estimated to exceed carrying values by £6,318k (460%). An
8% fall in all future forecast revenues without a corresponding reduction in costs in the UK CGU, or an increase in the discount rate to over 49%, would
result in carrying amounts exceeding their recoverable amount. A decrease in the effective compound growth rate of revenue to 4.2% instead of the
5.5% noted above, without a corresponding reduction in costs in the UK CGU, 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, set at a compound growth rate of 6.1% over the next five years - 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;
long term growth rate - which has been assumed to be 3.5% 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 – which is the Middle East segment’s pre-tax weighted average cost of capital has been assessed at 11.9% (2018: 11.6%).
Based on the discounted cash flow projections, the recoverable amount of the Middle East CGU is estimated to exceed carrying values by at least £3.6m
(150%). A decrease in the effective compound growth rate of revenue to 4.9% instead of the 6.1% noted above, without a corresponding reduction in
costs in the Middle Eastern CGU, would result in carrying amounts exceeding their recoverable amount. A 5% fall in all future forecast revenues without
a corresponding reduction in costs in the Middle East CGU, or an increase in the discount rate to 25.9%, 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.
UMSPANNWERK, KREUZBERG
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 material. The total carrying value of goodwill allocated to Turkey
is not.
72
73
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 13 OTHER INTANGIBLE ASSETS
14 PROPERTY, PLANT & EQUIPMENT
Group
Cost
At 30 September 2017
Exchange differences
At 30 September 2018
Disposal
Exchange differences
At 30 September 2019
Amortisation
At 30 September 2017
Charge
Exchange differences
At 30 September 2018
Disposal
Charge
Exchange differences
At 30 September 2019
Net book value
At 30 September 2019
At 30 September 2018
At 30 September 2017
Trade name
£’000
Customer
relationships
£’000
Order book
£’000
Trade licence
£’000
689
(12)
677
-
24
701
100
26
(5)
121
-
26
5
152
549
556
589
417
(34)
383
-
21
404
155
47
(22)
180
-
47
10
237
167
203
262
164
(7)
157
(157)
-
-
164
-
(7)
157
(157)
-
-
-
-
-
-
73
2
75
-
5
80
16
7
1
24
-
8
2
34
46
51
57
Total
£’000
1,343
(51)
1,292
(157)
50
1,185
435
80
(33)
482
(157)
81
17
423
762
810
908
Amortisation is included in other operating expenses in the consolidated income statement.
t 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 19 and 21 years,
respectively.
t 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 1 year. The customer relationships acquired in
June 2015 and February 2016 both have remaining amortisation periods of 6 years.
t 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 6 years.
Group
Cost
At 30 September 2017
Additions (as restated)
Disposals
Exchange differences
At 30 September 2018 (as restated)
Additions
Disposals
Exchange differences
At 30 September 2019
Depreciation
At 30 September 2017
Charge (as restated)
Disposals
Exchange differences
At 30 September 2018 (as restated)
Charge
Disposals
Exchange differences
At 30 September 2019
Net book value
At 30 September 2019
At 30 September 2018 (as restated)
At 30 September 2017
15 INVESTMENTS
Company
Cost
At 30 September 2017, 2018 and 2019
Provisions
At 30 September 2017, 2018 and 2019
Net book value
At 30 September 2017, 2018 and 2019
Leasehold improvements
£’000
Furniture & equipment
£’000
346
337
-
(12)
671
241
(317)
2
597
316
45
-
(10)
351
95
(317)
2
131
466
320
30
1,456
79
(86)
(23)
1,426
59
(35)
23
1,473
1,276
133
(75)
(22)
1,312
55
(35)
17
1,349
124
114
180
Subsidiaries
£’000
Joint ventures
£’000
Associate
£’000
10,077
4,596
5,481
21
-
21
12
-
12
Total
£’000
1,802
416
(86)
(35)
2,097
300
(352)
25
2,070
1,592
178
(75)
(32)
1,663
150
(352)
19
1,480
590
434
210
Total
£’000
10,110
4,596
5,514
74
75
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019
The current net book values of the investments in subsidiaries is £5,481k, which is larger than the net assets of the consolidated statement of financial
position of £4,514k (2018: £4,136k). The net book values are supported by the value in use calculations detailed further in note 12.
t Subsidiary operations
The following are the subsidiary undertakings at 30 September 2019:
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
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
2019
2018
Nature of business
(A)
(A)
(A)
(B)
(A)
(C)
(D)
(A)
(A)
(A)
(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%
80%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Architecture & design
Architecture & design
Architecture & design
Architecture & design
Architecture & design
Architecture & design
Architecture & design
Architecture & Engineering
Architecture & design
Non-trading
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Aukett Fitzroy Robinson International Limited is incorporated in England & Wales, but operates principally through its Middle East branch which is
registered in the Abu Dhabi emirate of the United Arab Emirates.
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.
The UAE domiciled branches are consolidated in to the Group principally based on profit sharing agreements in place.
76
t Interest in associate and joint ventures
Set out below are the associate and joint ventures of the Group as at 30 September 2019. 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
(E)
(F)
(G)
Proportion
of ordinary equity held
Nature of
relationship
Measurement
method
2019
50%
50%
25%
2018
50%
50%
25%
Joint venture
Joint venture
Associate
Equity
Equity
Equity
All joint venture and associate entities provide architectural and design services. There are no contingent liabilities or commitments in relation to the
joint ventures or associates.
Country of incorporation and registered office addresses
Ref
(A)
(B)
(C)
(D)
(E)
(F)
(G)
Country of Incorporation
Registered office address
England & Wales
10 Bonhill Street, London, EC2A 4PE, United Kingdom
Russia
Turkey
Cyprus
Germany
18 Prospekt Andropova, bld.7, office E 11 POM XVI K 1 O 5, Moscow, 115432, Russia
Esentepe Mahallesi Kore Şehitleri Caddesi 34, Deniz İş Hanı K.6 34394 Zincirlikuyu, Istanbul, Turkey
17-19 Themistokli Dervi street, The City House, 1066 Nicosia, Cyprus
Gutleutstrasse 163, 60327 Frankfurt am Main, Germany
Czech Republic
Janackovo Nabrezi 471/49, 150 00 Prague 5 , Czech Republic
Germany
Budapester Strasse 43, 10787 Berlin, Germany
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.
Summarised balance sheet
Assets
Non current assets
Current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Net assets
2019
£’000
170
4,568
4,738
(1,896)
(1,896)
2,842
2018
£’000
146
3,151
3,297
(1,118)
(1,118)
2,179
77
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 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
2019
£’000
2,179
1,065
(4)
(398)
2,842
25%
711
711
2019
£’000
13,425
(5,372)
8,053
(6,525)
1,528
(463)
1,065
(4)
1,061
2018
£’000
2,121
170
21
(133)
2,179
25%
545
545
2018
£’000
15,729
(7,773)
7,956
(7,712)
244
(74)
170
21
191
The Group received dividends of £100,000 (2018: £33,000) from Aukett + Heese GmbH. The principal risks and uncertainties associated with Aukett +
Heese GmbH are the same as those detailed within the Group’s Strategic Report.
17 INVESTMENTS IN JOINT VENTURES
t Frankfurt
As disclosed in note 15, the Group owns 50% of Aukett + Heese Frankfurt GmbH which is based in Frankfurt, Germany.
At 30 September 2017
Share of profits
Dividends paid
Exchange differences
At 30 September 2018
Share of profits
Dividends paid
Exchange differences
At 30 September 2019
£’000
216
96
(66)
2
248
117
(86)
(2)
277
The Group received dividends of £86,000 (2018: £66,000) from Aukett + Heese Frankfurt 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
Total liabilities
Net assets
Revenue
Sub consultant costs
Revenue less sub consultant costs
Operating costs
Profit before tax
Taxation
Profit after tax
2019
£’000
12
580
592
(315)
(315)
277
2019
£’000
1,030
(343)
687
(516)
171
(54)
117
2018
£’000
14
444
458
(210)
(210)
248
2018
£’000
754
(186)
568
(428)
140
(44)
96
78
2 - 4 C I T Y R O A D
0
1
2
3
4
5
79
The principal risks and uncertainties associated with Aukett + Heese Frankfurt GmbH are the same as those detailed within the Group’s Strategic Report.
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 t Prague
As disclosed in note 15, the Group owns 50% of Aukett sro which is based in Prague, Czech Republic.
At 30 September 2017
Share of losses
Exchange differences
At 30 September 2018
Share of losses
Exchange differences
At 30 September 2019
The following amounts represent the Group’s 50% share of the assets and liabilities of Aukett sro.
Assets
Current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Net (liabilities) / assets
£’000
17
(17)
-
-
-
-
-
2018
£’000
46
46
(46)
(46)
-
2019
£’000
88
88
(93)
(95)
(5)
Aukett sro has net liabilities as at the balance sheet date, however the Group’s share of losses is limited to the share in the Group’s investment as no
shareholder is required to make good those losses on winding up.
Revenue
Sub consultant costs
Revenue less sub consultant costs
Operating costs
Loss before tax
Loss after tax
2019
£’000
265
(124)
141
(146)
(5)
(5)
2018
£’000
166
(33)
133
(150)
(17)
(17)
The principal risks and uncertainties associated with Aukett sro are the same as those detailed within the Group’s Strategic Report.
18 TRADE AND OTHER RECEIVABLES
Group
Gross trade receivables
Impairment allowances
Net trade receivables
Other financial assets at amortised cost
Amounts owed by associates and joint ventures
Corporate tax asset
Other current assets
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 financial assets at amortised cost
Other current assets
Total amounts due within one year
Total
2019
£’000
4,503
(1,022)
3,481
510
37
218
658
4,904
2019
£’000
-
27
27
2,045
10
4
37
2,096
2,123
2018
£’000
4,578
(1,095)
3,483
233
27
-
811
4,554
2018
£’000
-
27
27
1,422
-
9
44
1,475
1,502
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.
t Impairment allowances
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade
receivables and contract assets.
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the
days past due. The contract assets relate to unbilled work in progress and project retentions, and have substantially the same risk characteristics as the
trade receivables for the same types of contracts. The Group has therefore concluded that the expected loss rates for trade receivables are a reasonable
approximation of the loss rates for the contract assets.
The Group engages with clients who are creditworthy, liquid developers. Management identified that the loss allowances should be calculated and
applied separately based on geographic segments of the Group, and more specifically to each country in which the Group has operations. Whilst the
specific terms each contract the Group engages in may be different, certain common characteristics can be applied.
Provisions on bad and doubtful debts in the UK, Turkey and Russia have been immaterial in the historical period reviewed in order to establish the
expected loss rate at 30 September 2019. In the UK and Russia the Group generally builds up advances for contract work recognised as a credit to
the balance sheet which reduces the impact of potential bad debts. Amounts due for contract work not yet billed are generally not material. No loss
allowance provision has been made for trade receivables and contracts assets owed to Group entities operating in these countries.
Amounts due for contract work in the Middle East segment are material, with contracts in the Middle East often billed in arrears. Sizeable write offs in
prior years have informed the overall rate calculated for the provisioning matrix.
80
81
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 The loss allowance for the Middle East operating segment as at 30 September 2019 (excluding additional loss allowances measured on a case by case
basis) was determined as follows for both trade receivables and contract assets:
The movement on impairment allowances for trade receivables was as follows:
30 September 2019
Expected loss rate (%)
Gross carrying amount (£’000)
Loss allowance (£’000)
through CSOFP
Current
3%
1,955
67
1-30 days
past due
More than 30
days past due
More than 60
days past due
More than 90
days past due
4%
100
4
8%
193
16
15%
105
15
20%
399
78
Total
2,752
180
The loss allowance for the Middle East operating segment as at 30 September 2019 was determined as follows for both trade receivables and contract
assets:
The loss allowance was initially calculated in United Arab Emirate Dirhams (AED) being the functional currency of the Group entities in the Middle
East operating segment. On conversion to GBP in the Group consolidation, the carried forward loss allowance is converted at the balance sheet rate,
whereas the movement in the loss allowance in the year is converted at the average rate in the statement of comprehensive income. A foreign exchange
difference of £10k arises which is taken through the foreign currency translation reserve.
The reconciliation of loss allowances for trade receivables and contract assets as at 30 September 2018 to the opening loss allowances on 1 October
2018 are provided in note 34:
Opening loss allowance provision as at 1 October 2018
Loss allowance provision
Amounts restated through opening Foreign Currency translation reserve
Loss allowance calculated based on ECL loss matrices
Additional provisions identified on a case by case basis
Total loss allowance as at 30 September 2019 -
calculated under IFRS 9
Contract assets
£’000
Trade receivables
£’000
41
(26)
2
17
-
17
180
(25)
8
163
859
1,022
The loss allowances decreased by £17k to £163k for trade receivables and by £24k to £17k for contract assets during the year to 30 September 2019.
A further allowance for impairment of trade receivables and contract assets is established on a case by case basis (amounting to £859k at 30 September
2019 and £915k at 30 September 2018 when there are indicators suggesting that the specific debtor balance in question has experienced a significant
deterioration in credit worthiness. 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 or contract asset 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.
At 30 September 2017
Charged to the income statement based on additional case by case provisions
Allowance utilised
Exchange differences
At 30 September 2018 as originally presented
On adoption of IFRS 9
At 30 September 2018 as restated
Loss allowance provision
Charged to the income statement based on additional case by case provisions
Allowance utilised
Exchange differences
At 30 September 2019
19 TRADE AND OTHER PAYABLES
Group
Trade payables
Other taxation and social security
Other payables*
Accruals
Total
Company
Trade payables
Amounts owed to subsidiaries
Other payables
Accruals
Total
* See note 35 for further detail on the prior period adjustment to other payables.
See note 33 for further details of the amounts due to subsidiaries.
£’000
685
374
(169)
25
915
180
1,095
(25)
137
(243)
58
1,022
2018
£’000
1,493
525
310
2,064
4,392
2018
£’000
44
1,910
11
291
2,256
2019
£’000
1,760
573
123
2,072
4,528
2019
£’000
26
2,389
4
273
2,692
82
83
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 20 BORROWINGS
Group
Secured bank loan
Finance lease liabilities
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
2019
£’000
325
278
603
331
331
136
136
272
603
2019
£’000
325
325
260
260
65
-
65
325
As restated (note 35)
2018
£’000
553
314
867
308
308
308
251
559
867
2018
£’000
553
553
246
246
246
61
307
553
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.
21 ANALYSIS OF NET FUNDS
Group
Cash at bank and in hand
Cash and cash equivalents
Secured bank loan (note 20)
Net funds
84
2019
£’000
1,145
1,145
(325)
820
2018
£’000
710
710
(553)
157
22 DEFERRED TAX
Group
At 30 September 2017
Income statement
Exchange differences
At 30 September 2018
Income statement
Exchange differences
At 30 September 2019
Group
Deferred tax assets
Deferred tax liabilities
Net deferred tax balance
Tax depreciation
on plant and equipment
£’000
Trading
losses
£’000
Other
temporary differences
£’000
89
-
-
89
(5)
-
84
115
165
-
280
(163)
-
117
(62)
7
2
(53)
(9)
1
(61)
2019
£’000
193
(53)
140
Total
£’000
142
172
2
316
(177)
1
140
2018
£’000
377
(61)
316
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 2017
Utilised
Charged to the income statement
Exchange differences
At 30 September 2018
Utilised
Recorded in property, plant and equipment (note 15)
Charged to the income statement
Exchange differences
At 30 September 2019
Property lease
provision
£’000
Employee benefit
obligations
£’000
151
(151)
-
-
-
-
210
-
-
210
880
(156)
191
12
927
(232)
-
163
55
913
Total
£’000
1,031
(307)
191
12
927
(232)
210
163
55
1,123
85
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 Property lease provision
The provision arose from lease obligations in respect of the Company’s leased London premises.
There are uncertainties around the provision due to the fact that costs may increase over the period to maturity and the eventual outturn will be
dependent on the level of negotiation over settlement of proposals with the Company’s landlord.
The provision payable in greater than five years reflects the future estimated cost of work to be performed.
The effect of time value is not considered material, having been assessed by Management as a risk free rate of 10 year UK government bonds.
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 key actuarial assumptions used in the calculation are detailed below:
Combined average length of service
Discount rate
Salary growth rate
2019
5 years
1.98%
1.2%
2018
5 years
3.09%
4.2%
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.
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.
Combined average length of service
Salary growth rate
Discount rate
Impact on employee benefit obligation
Change in assumption
Increase in assumption
Decrease in assumption
1 year
1%
1%
1.56%
0.37%
(0.36)%
(6.6)%
(0.36)%
0.37%
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 (2018: 165,213,652) ordinary shares of 1p each
At 1 October 2017
No changes
At 30 September 2018
No changes
At 30 September 2019
2019
£’000
1,652
2018
£’000
1,652
Number
165,213,652
-
165,213,652
-
165,213,652
The Company’s issued ordinary share capital comprises 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.
86
25 SHARE OPTIONS
The Company has granted options over its Ordinary Shares to Group employees as follows:
At 1 October
2018
Number
-
-
Granted
Number
500,000
500,000
Lapsed
Number
-
-
Granted
6 March 2017
Total
At 30
September
2019
Number
500,000
500,000
Exercise
price
Pence
Earliest
exercisable
date
Latest
exercisable
date
4.25
6 March 2019
6 March 2023
The 500,000 share options granted on 6 March 2017 relate to Beverley Wright, a former Director of the Company. These share options vested 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.
26 CASH GENERATED FROM OPERATIONS
Group
Profit / (loss) before tax – continuing operations
Finance costs
Share of results of associate and joint ventures
Intangible amortisation
Depreciation
Profit on disposal of property, plant & equipment
Decrease in trade and other receivables
Increase in trade and other payables
Change in provisions
Unrealised foreign exchange differences
Net cash generated from operations
Company
Profit before income tax
Dividends receivable
Finance costs
Increase in trade and other receivables
Increase / (decrease) in trade and other payables
Unrealised foreign exchange differences
Net cash generated from / (expended by) operations
2019
£’000
292
42
(382)
81
150
(3)
425
86
(68)
24
647
2019
£’000
335
(186)
24
(580)
395
22
10
As restated (note 35)
2018
£’000
(2,544)
40
(121)
80
178
(14)
1,952
586
(117)
(30)
10
2018
£’000
211
(99)
28
(164)
(280)
12
(292)
87
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 t Changes in liabilities arising from financing activities including changes arising from cash flows and non-cash changes
27 FINANCIAL INSTRUMENTS
Group
At 1 October 2018 (as restated)
Cash flows
- Repayment of borrowings
- Payment of interest
Non-cash flows
- Effects of foreign exchange
- Loans and borrowings classified as non-current
at 30 September 2019
- Interest accrued in period
At 30 September 2019
Company
At 1 October 2018
Cash flows
- Repayment of borrowings
- Payment of interest
Non-cash flows
- Effects of foreign exchange
- Loans and borrowings classified as non-current
at 30 September 2019
- Interest accrued in period
At 30 September 2019
Non- current loans and
borrowings
£’000
Current loans and
borrowings
£’000
559
-
-
18
(305)
-
272
308
(286)
(38)
4
305
38
331
Non- current loans and
borrowings
£’000
Current loans and
borrowings
£’000
307
-
-
18
(260)
-
65
246
(250)
(24)
4
260
24
260
Total
£’000
867
(286)
(38)
22
-
38
603
Total
£’000
553
(250)
(24)
22
-
24
325
t 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.
t Categories of financial assets and liabilities
Group
Net trade receivables
Contract assets
Other financial assets at amortised cost
Amounts owed by associate and joint ventures
Cash at bank and in hand
Loans and receivables measured at amortised cost
Trade payables
Other payables
Accruals
Finance lease liabilities
Secured bank loans and overdrafts
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 measured at amortised cost
Trade payables
Amounts owed to subsidiaries
Other payables
Accruals
Secured bank loan
Financial liabilities measured at amortised cost
Net financial instruments
2019
£’000
3,481
663
510
37
1,145
5,836
(1,760)
(123)
(2,072)
(278)
(325)
(4,558)
1,278
2019
£’000
2,045
37
4
88
2,174
(26)
(2,389)
(4)
(273)
(325)
(3,017)
(843)
As restated (note 35)
2018
£’000
3,483
1,220
233
27
710
5,673
(1,493)
(310)
(2,064)
(314)
(553)
(4,734)
939
2018
£’000
1,422
27
9
166
1,624
(44)
(1,910)
(11)
(291)
(553)
(2,809)
(1,185)
88
89
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.
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 t Collateral
As disclosed in note 20 the bank loan and overdraft (undrawn at 2018 and 2019 year ends) 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
2019
£’000
3,464
1,044
2018
£’000
1,941
745
Other receivables in the consolidated statement of financial position include a £279k rent security deposit (2018: £nil) 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
Russian Rouble
UAE Dirham
UK Sterling
US Dollar
Net financial instruments held in foreign currencies
Company
Czech Koruna
EU Euro
Russian Rouble
US Dollar
UAE Dirham
Net financial instruments held in foreign currencies
2019
£’000
37
18
719
1,993
(46)
(252)
2,469
2019
£’000
37
18
40
(252)
945
788
2018
£’000
27
32
642
1,220
(51)
(547)
1,323
2018
£’000
27
32
13
(547)
373
(102)
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.
The following foreign exchange gains / (losses) arising from financial assets and financial liabilities have been recognised in the income statement:
Group
Company
29 COUNTERPARTY RISK
2019
£’000
(17)
18
2018
£’000
2
(25)
t 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 an impairment loss allowance following adoption of IFRS 9 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
Not overdue
Between 0 and 30 days overdue
Between 30 and 60 days overdue
Greater than 60 days overdue
Total
Receivables
pre-allowance
2019
£’000
2,206
508
336
594
3,644
Receivables
pre-allowance
2018
£’000
1,555
635
332
1,141
3,663
Loss
allowance
£’000
(49)
(5)
(16)
(93)
(163)
Loss
allowance
£’000
(30)
(24)
(9)
(117)
(180)
Receivables
post-allowance
2019
£’000
2,157
503
320
501
3,481
Receivables
post-allowance
2018
£’000
1,525
611
323
1,024
3,483
The processes undertaken when considering whether a trade receivable may be impaired are set out in notes 2, 18 and 34.
All amounts overdue have been individually considered for any indications of impairment and specific provision for impairment made where considered
appropriate. All of the trade receivables specifically considered to be impaired were greater than 90 days overdue.
An additional expected loss allowance provision has then been applied to the residual trade receivables as detailed in note 34.
The concentration of counterparty risk within the £4,139,000 (2018: £4,854,000) 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.
Group
Company
90
2019
Profit
£’000
1
79
Equity
£’000
203
-
2018
Profit
£’000
(28)
(10)
Equity
£’000
168
-
Largest exposure
Second largest exposure
Third largest exposure
2019
£’000
759
304
203
2018
£’000
637
332
286
91
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 The Group’s principal banker is Coutts & Co, a member of the Royal Bank of Scotland group.
At 30 September 2019 the largest exposure to a single financial institution represented 73% of the Group’s cash and cash equivalents held by Shankland
Cox Limited with Emirates NBD Bank PJSC, a Dubai government-owned bank (2018: 50% held with Coutts & Co.).
31 LIQUIDITY RISK
The Group’s cash balances are held at call or in deposits with very short maturity terms.
t 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.
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
2019
£’000
278
(325)
-
(47)
2019
£’000
(325)
(325)
2018
£’000
-
(553)
-
(553)
2018
£’000
(553)
(553)
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.
2019
£’000
-
(3)
2018
£’000
(6)
(6)
Group
Company
92
At 30 September 2019 the Group had £850,000 (2018: £850,000) of gross borrowing facility and £500,000 net borrowing facility (2018: £500,000) under
its United Kingdom bank overdraft facility. In December 2019 Coutts & Co renewed the overdraft facility, maintaining it at £500,000, which is now next
due for review in November 2020, with an interim review in May 2020.
The maturity analysis of financial liabilities, including expected future charges through the Income Statement is as shown below.
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 2018
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 2019
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 2018
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 2019
As restated
Borrowings
£’000
Other financial liabilities
£’000
As restated
Total
£’000
353
344
273
970
(65)
905
362
160
141
663
(34)
629
3,861
-
-
3,861
-
3,861
3,955
-
-
3,955
-
3,955
Borrowings
£’000
Other financial liabilities
£’000
265
256
62
583
(30)
553
2,256
-
-
2,256
-
2,256
Borrowings
£’000
Other financial liabilities
£’000
268
66
-
334
(9)
325
2,692
-
-
2,692
-
2,692
4,214
344
273
4,831
(65)
4,766
4,317
160
141
4,618
(34)
4,584
Total
£’000
2,521
256
62
2,839
(30)
2,809
Total
£’000
2,960
66
-
3,026
(9)
3,017
93
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 32 GUARANTEES, CONTINGENT LIABILITIES AND OTHER COMMITMENTS
A cross guarantee and offset agreement is in place between the Company and certain of its United Kingdom subsidiaries in respect of the United
Kingdom bank loan and overdraft facility. Details of the UK bank loan are disclosed in note 20. At 30 September 2019 the overdrafts of its United
Kingdom subsidiaries guaranteed by the Company totalled £75,000 (2018: £nil).
The Company and certain of its United Kingdom subsidiaries are members of a group for Value Added Tax (VAT) purposes. At 30 September 2019 the
net VAT payable balance of those subsidiaries was £251,000 (2018: £243,000).
At the year end, one of the Group’s Middle East subsidiaries had outstanding letters of guarantee totalling £95,000 (2018: £108,000). 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.
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
2019
£’000
110
1,863
1,664
3,637
2018
£’000
131
1,406
2,129
3,666
The Group’s most significant lease relates to its London studio premises which comprises £3,522,000 (2018: £3,522,000) of the amounts shown in the
table above. The lease of its Bonhill Street studio includes an upward rent review after 5 years, does not contain any break clauses and expires in May
2028. The lease of its York Way studio was concluded during the prior year.
The Group has contractual commitments totalling £40,000 (2018: £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 £40,000 (2018: £190,000).
The Group has contractual commitments totalling £3,000 (2018: £nil) per annum in respect of an IT hardware plan, expiring in December 2021. The total
future commitments arising under this contract as at the balance sheet date amount to £7,000 (2018: £nil).
The Group acts as a lessor through the sub-let of part of the third floor at its Bonhill Street studio. The following is the aggregate minimum future
receivables under these operating leases.
Not later than one year
Later than one year and not later than five years
Later than five years
Total
94
2019
£’000
68
-
-
68
2018
£’000
149
68
-
217
33 RELATED PARTY TRANSACTIONS
t 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
2019
£’000
1,349
120
1,469
2019
£’000
589
58
647
2018
£’000
1,513
104
1,617
2018
£’000
690
60
750
t 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 £48,000 (2018: £48,000). Aukett + Heese Frankfurt GmbH charged the Group £nil (2018: £4,000) for architectural services. Dividends of £86,000
(2018: £66,000) 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 (2018: £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 £64,000 (2018: £64,000). Dividends of £100,000 (2018: £33,000) were received from Aukett + Heese GmbH during the year. The amount
owed to the Group by Aukett + Heese GmbH at 30 September 2019 was £nil (2018: £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 £5,000 (2018: £3,000) were made to Aukett sro in respect of these services. The Group was also charged £2,000 (2018: £32,000) for architectural
services provided by Aukett sro during the year, of which £nil (2018: £14,000) was owed by the Group at the balance sheet date. Separately, Aukett sro
owed the Group and the Company £37,000 as at 30 September 2019 (2018: £27,000) 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.
t Transactions and balances with subsidiaries
The names of the Company’s subsidiaries are set out in note 15.
The Company made management charges to its subsidiaries for management services of £1,164,000 (2018: £1,315,000) and paid charges to its
subsidiaries for office accommodation and other related services of £90,000 (2018: £90,000).
At 30 September 2019 the Company was owed £2,045,000 (2018: £1,421,000) by its subsidiaries and owed £2,389,000 (2018: £1,910,000) 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.
Under IFRS9, the Company has recorded no allowance for expected credit losses, as all subsidiaries owing funds to the Company are in a position to
repay the amounts owed in line with the payment terms stipulated by the Company.
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.
95
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 34 CHANGES IN ACCOUNTING POLICIES
This note explains the impact of the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on the Group’s financial
statements and also discloses the new accounting policies that have been applied from 1 October 2018, where they are different to those applied in
prior periods.
t Impact on the financial Statements
The following table shows the adjustments recognised for each individual line item. Line items that were not affected by the changes have not been
included. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided.
30 Sep 2018
as originally
presented
£’000
5,995
-
6,705
11,491
(5,278)
-
4,357
(17)
(95)
4,210
4,357
1 October 2018
as restated
(before IFRS 9)
£’000
IFRS 9
£’000
1 October 2018
as restated
£’000
4,734
1,261
6,705
11,491
(4,392)
(886)
4,357
(17)
(95)
4,210
4,357
(180)
(41)
(221)
(221)
-
-
(221)
(7)
(214)
(221)
(221)
4,554
1,220
6,484
11,270
(4,392)
(886)
4,136
(24)
(309)
3,989
4,136
IFRS 15
£’000
(1,261)
1,261
-
-
886
(886)
-
-
-
-
-
Current assets
Trade (and other) receivables
Contract assets
Total current assets
Total assets *
Current liabilities
Trade and other payables
Contract liabilities
Net assets
Foreign currency translation reserve
Retained Earnings
Total equity attributable to
equity holders of the Company
Total equity
* After restatement of the prior year figures for the adjustments made in note 35.
t IRFS 9 Financial Instruments – Impact of adoption
IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and financial liabilities,
derecognition of financial instruments, impairment of financial assets and hedge accounting.
The adoption of IFRS 9 Financial Instruments from 1 October 2018 resulted in changes in accounting policies and adjustments to the amounts recognised
in the financial statements. The new accounting policies are set out in below. In accordance with the transitional provisions in IFRS 9 7.2.15) and
(7.2.26), comparative figures have not been restated.
Closing retained earnings 30 September 2018 – IAS 39/IAS 18
Increase in provision for trade receivables and contract assets
Adjustment to retained earnings from adoption of IFRS 9 on 1 October 2018
Opening retained earnings 1 October 2018 – IFRS 9
£’000
(95)
(214)
(214)
(309)
t Impairment of financial assets
The Group has identified the following types of financial assets that are subject to IFRS 9’s new expected credit loss model:
-
-
-
Trade receivables;
Contract assets relating to unbilled work in progress and project retentions; and
Other financial assets at amortised cost.
Trade receivables and contract assets
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade
receivables and contract assets.
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the
days past due. The contract assets relate to unbilled work in progress and project retentions, and have substantially the same risk characteristics as the
trade receivables for the same types of contracts. The Group has therefore concluded that the expected loss rates for trade receivables are a reasonable
approximation of the loss rates for the contract assets.
The Group engages with clients who are creditworthy, liquid developers. Management identified that the loss allowances should be calculated and
applied separately based on geographic segments of the Group, and more specifically to each country in which the Group has operations. Whilst the
specific terms each contract the Group engages in may be different, certain common characteristics can be applied.
Provisions on bad and doubtful debts in the UK, Turkey and Russia have been immaterial in the historical period reviewed in order to establish the
expected loss rate at 1 October 2018. In the UK and Russia the Group generally builds up advances for contract work recognised as a credit to the balance
sheet which reduces the impact of potential bad debts. Amounts due for contract work not yet billed are generally not material. No material expected
loss provision has been recognised for trade receivables and contracts assets owed to Group entities operating in these countries.
Amounts due for contract work in the Middle East segment are material, with contracts in the Middle East often billed in arrears. Sizeable write offs in
prior years have informed the overall rate calculated for the provisioning matrix.
The loss allowance for the Middle East operating segment as at 1 October 2018 was determined as follows for both trade receivables and contract assets:
1 October 2018
Expected loss rate (%)
Gross carrying amount (£’000)
Loss allowance (£’000)
through CSOFP
Loss allowance (£’000)
through retained earnings
Current
4%
1,590
71
69
1-30 days
past due
More than 30
days past due
More than 60
days past due
More than 90
days past due
5%
463
24
23
8%
115
9
9
13%
180
23
22
17%
566
94
91
Total
2,914
221
214
The loss allowance was initially calculated in United Arab Emirate Dirhams (AED) being the functional currency of the Group entities in the Middle East
operating segment. On conversion to GBP in the Group consolidation a foreign exchange difference of £7k arises which is taken through the foreign
currency translation reserve.
The loss allowances for trade receivables and contract assets as at 30 September 2018 reconcile to the opening loss allowances on 1 October 2018 as
follows:
At 30 September 2018 – calculated under IAS 39
Amounts restated through opening retained earnings
Amounts restated through opening foreign currency translation reserve
Opening total loss allowance as at 1 October 2018 -
calculated under IFRS 9
Contract assets
£’000
Trade receivables
£’000
-
40
1
41
915
174
6
1,095
A further allowance for impairment of trade receivables and contract assets is established on a case by case basis when there are indicators suggesting
that the specific debtor balance in question has experienced a significant deterioration in credit worthiness. 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
or contract asset 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.
96
97
AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 Other financial assets at amortised cost
Other financial assets at amortised cost include rent deposits, letters of guarantee secured by matching cash on deposit and other receivables. No
material expected credit loss provision has been applied to these balances as the Group has concluded that this risk is not material.
t IFRS 15 Revenue from Contracts with Customers – Impact of adoption
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.
A full description of the 5 step approach to adoption of IFRS 15 has been given on pages 62 to 63.
The Group has applied the new standard using the modified retrospective method, with the cumulative effect of applying the standard recorded
as an adjustment to retained earnings on the date of initial application, being the 1 October 2018. Our decision to adopt this method rather than
retrospectively restate prior periods depends on a number of factors including time, cost and available resources compared to the benefits to the users
of the financial statements.
Management has performed a review of the impact of adopting IFRS 15 to the Group’s financial statements. The review demonstrated that the
measurement of revenues for contracts still follows an “over time” pattern as previously recognised under IAS 18, for the reasons given under step 5 of
the accounting policy given on pages 62 to 63.
35 PRIOR YEAR RESTATEMENT
However management believes that the financial impact of adjustments to revenue recognition following the adoption of IFRS 15 cumulatively as at
30 September 2018 are immaterial, and has therefore not made an adjustment to the opening reserves for the period commencing 1 October 2018.
In preparing this year’s financial statements, Management identified 3 finance leases which had been taken out to fund the purchase of fit out costs
on the new lease at the office in London, in June 2018. These leases were taken out by Aukett Swanke Limited, the Group’s wholly owned subsidiary.
Presentation of contract assets and contract liabilities
Aukett Swanke Group Plc has voluntarily changed the presentation of certain amounts in the balance sheet to reflect the terminology of IFRS 15 and
IFRS 9:
Contract assets recognised in relation to amounts due on contract work and project retentions were previously presented as part of trade and other
receivables.
Contract liabilities in relation to advances from contract work were previously included in trade and other payables.
The net cost of discharging these finance leases was previously accounted for as an expense to the consolidated statement of comprehensive income,
the impact of which was not material to these financial statements.
However, Management have noted that the omitted tangible fixed assets (note 14) and the omitted finance lease liabilities (note 20) are material to the
financial prior period financial statements and have posted a prior year adjustment to reflect this.
Consolidated income statement
No net impact has been recorded on the statement of profit and loss and other comprehensive income since this is immaterial, however reclassification
of costs within the statement of profit and loss and other comprehensive income have been made as follows:
Other operating expenses
Interest payable
Consolidated statement of financial position
Property, plant and equipment
Borrowings (current)
Borrowings (non-current)
Other payables
2018
As originally stated
£’000
(2,066)
(36)
Restatement for
finance leases
£’000
4
(4)
2018
As originally stated
£’000
Restatement for
finance leases
£’000
114
(246)
(307)
(304)
320
(62)
(252)
(6)
2018
As restated
£’000
(2,062)
(40)
2018
As restated
£’000
434
(308)
(559)
(310)
Based on the above, there is not considered to be any impact on the consolidated statement of changes in equity.
There is also no material change to the consolidated statement of cash flows since the finance lease and asset purchase transactions are non-cash.
36 CORPORATE INFORMATION
General corporate information regarding the Company is shown on page 30. The addresses of the Group’s principal operations are shown on page 3.
A description of the Group’s operations and principal activities is given within the Strategic Report.
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AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019AUKETT SWANKE GROUP PLC / ANNUAL REPORT AND ACCOUNTS 2019 Shareholder information
t 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
t 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.
t 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
t Investor relations
In accordance with AIM Rule 26 regarding company information disclosure, various investor orientated information is available on our web site at www.
aukettswanke.com
The Company Secretary can be contacted by email at cosec@aukettswanke.com
t 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
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